<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 16, 1996
REGISTRATION NO. 333-10267
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
PAXSON COMMUNICATIONS CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 59-3212788
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
</TABLE>
---------------------
SEE TABLE OF ADDITIONAL REGISTRANTS
---------------------
601 CLEARWATER PARK ROAD
WEST PALM BEACH, FLORIDA 33401
(561) 659-4122
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
ANTHONY L. MORRISON, ESQ.
SECRETARY, VICE PRESIDENT, AND GENERAL COUNSEL
PAXSON COMMUNICATIONS CORPORATION
601 CLEARWATER PARK ROAD
WEST PALM BEACH, FLORIDA 33401
(561) 659-4122
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
<TABLE>
<S> <C>
MICHAEL L. JAMIESON, ESQ. ROGER MELTZER, ESQ.
HOLLAND & KNIGHT CAHILL GORDON & REINDEL
400 NORTH ASHLEY DRIVE, SUITE 2050 80 PINE STREET
TAMPA, FLORIDA 33602 NEW YORK, NEW YORK 10005
(813) 227-8500 (212) 701-3000
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
STATE OR
OTHER PRIMARY
JURISDICTION STANDARD I.R.S.
OF INDUSTRIAL EMPLOYER
INCORPORATION/ CLASSIFICATION IDENTIFICATION
NAME FORMATION NUMBER NUMBER
- --------------------------------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
PAXSON COMMUNICATIONS OF FLORIDA, INC. .................. Florida 4832.1 59-3212231
PAXSON COMMUNICATIONS LP, INC. .......................... Florida 4832.1 59-3212236
PAXSON COMMUNICATIONS MANAGEMENT COMPANY................. Florida 4832.1 59-3212233
PAXSON COMMUNICATIONS MARKETING, INC. ................... Florida 4832.1 59-3212234
PAXSON COMMUNICATIONS NETWORKS, INC. .................... Florida 4832.1 59-3212235
EXCEL MARKETING ENTERPRISES, INC. ....................... Florida 7313 59-2907133
PAXSON OUTDOOR, INC. .................................... Florida 7312 59-3202387
PAXSON NETWORKS, INC. ................................... Florida 4832.1 59-3212238
PAXSON COMMUNICATIONS TELEVISION, INC. .................. Florida 4832.1 59-3283729
PAXSON BROADCASTING OF JACKSONVILLE, LIMITED
PARTNERSHIP............................................ Florida 4832 59-3075827
PAXSON BROADCASTING OF MIAMI, LIMITED PARTNERSHIP........ Florida 4832 59-3095656
PAXSON BROADCASTING OF ORLANDO, LIMITED PARTNERSHIP...... Florida 4832 59-3095659
PAXSON BROADCASTING OF TAMPA, LIMITED PARTNERSHIP........ Florida 4832 59-3075825
PAXSON TAMPA LICENSE LIMITED PARTNERSHIP................. Florida 4832 59-3291861
PAXSON JACKSONVILLE LICENSE LIMITED PARTNERSHIP.......... Florida 4832 59-3291869
PAXSON MIAMI LICENSE LIMITED
PARTNERSHIP............................................ Florida 4832 59-3291871
PAXSON ORLANDO LICENSE LIMITED
PARTNERSHIP............................................ Florida 4832 59-3291865
PAXSON COMMUNICATIONS OF ATLANTA-14, INC. ............... Florida 4833 59-3235962
PAXSON ATLANTA LICENSE, INC. ............................ Florida 4833 59-3291854
PAXSON COMMUNICATIONS OF BOSTON-60, INC. ................ Florida 4833 59-3283737
PAXSON BOSTON LICENSE, INC. ............................. Florida 4833 59-3283741
PAXSON COMMUNICATIONS OF DALLAS-68, INC. ................ Florida 4833 59-3283742
PAXSON DALLAS LICENSE, INC. ............................. Florida 4833 59-3283743
PAXSON COMMUNICATIONS OF NEW LONDON-26, INC. ............ Florida 4833 59-3283739
PAXSON NEW LONDON LICENSE, INC. ......................... Florida 4833 59-3283736
PAXSON COMMUNICATIONS OF PHILADELPHIA-61, INC. .......... Florida 4833 59-3283731
PAXSON PHILADELPHIA LICENSE, INC. ....................... Florida 4833 59-3283730
PAXSON COMMUNICATIONS OF MIAMI-35, INC. ................. Florida 4833 65-0471066
PAXSON COMMUNICATIONS OF SAN JOSE-65, INC. .............. Florida 4833 59-3283735
PAXSON SAN JOSE LICENSE, INC. ........................... Florida 4833 59-3283733
PAXSON COMMUNICATIONS OF TAMPA-66, INC. ................. Florida 4833 59-3227558
PAXSON COMMUNICATIONS OF WEST PALM BEACH-25, INC. ....... Florida 4833 59-3236008
PAXSON WEST PALM BEACH LICENSE, INC. .................... Florida 4833 59-3291836
PAXSON COMMUNICATIONS OF LOS ANGELES-30, INC. ........... Florida 4833 59-3295991
PAXSON LOS ANGELES LICENSE, INC. ........................ Florida 4833 59-3295992
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
STATE OR
OTHER PRIMARY
JURISDICTION STANDARD I.R.S.
OF INDUSTRIAL EMPLOYER
INCORPORATION/ CLASSIFICATION IDENTIFICATION
NAME FORMATION NUMBER NUMBER
- --------------------------------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
PAXSON COMMUNICATIONS OF MINNEAPOLIS-41, INC. ........... Florida 4833 59-3295983
PAXSON COMMUNICATIONS OF ST. LOUIS-13, INC. ............. Florida 4833 59-3295985
PAXSON MINNEAPOLIS LICENSE, INC. ........................ Florida 4833 59-3295988
PAXSON COMMUNICATIONS OF COOKEVILLE, INC. ............... Florida 4832 62-1593701
PAXSON COOKEVILLE LICENSE, INC. ......................... Florida 4832 59-3348143
PAXSON COMMUNICATIONS OF FT. PIERCE-34
INC. .................................................. Florida 4833 65-0587768
PAXSON COMMUNICATIONS OF ORLANDO-56,
INC. .................................................. Florida 4833 59-3297996
PAXSON COMMUNICATIONS OF HOUSTON-49
INC. .................................................. Florida 4833 76-0461679
PAXSON HOUSTON LICENSE, INC. ............................ Florida 4833 76-0461475
THE INFOMALL TV NETWORK, INC. ........................... Delaware 7313 59-3298735
PAXSON ST. LOUIS LICENSE, INC. .......................... Florida 4833 59-3319717
THE INFOMALL CABLE NETWORK, INC. ........................ Delaware 7313 59-3319718
PAXSON COMMUNICATIONS OF CLEVELAND-67,
INC. .................................................. Florida 4833 59-3319725
PAXSON COMMUNICATIONS OF WASHINGTON-60, INC. ............ Florida 4833 59-3319720
PAXSON WASHINGTON LICENSE, INC. ......................... Florida 4833 59-3319719
PAXSON COMMUNICATIONS OF PHOENIX-13, INC. ............... Florida 4833 59-3295991
PAXSON PHOENIX LICENSE, INC. ............................ Florida 4833 65-0625873
INFOMALL LOS ANGELES, INC. .............................. Florida 7313 58-2217093
PAXSON COMMUNICATIONS OF MILWAUKEE-55
INC. .................................................. Florida 4833 65-0625874
PAXSON COMMUNICATIONS OF DENVER-59, INC. ................ Florida 4833 65-0603895
PAXSON COMMUNICATIONS OF NEW YORK-43
INC. .................................................. Florida 4833 65-0611723
PAXSON NEW YORK LICENSE, INC. ........................... Florida 4833 65-0611721
PAXSON COMMUNICATIONS OF AKRON-23, INC. ................. Florida 4833 65-0611718
PAXSON AKRON LICENSE, INC. .............................. Florida 4833 65-0611729
PAXSON COMMUNICATIONS OF DAYTON-26, INC. ................ Florida 4833 31-1446001
PAXSON COMMUNICATIONS OF BATTLE CREEK-43, INC. .......... Florida 4833 65-0628620
PAXSON COMMUNICATIONS OF ALBANY-55, INC. ................ Florida 4833 65-0628627
PAXSON COMMUNICATIONS OF RALEIGH
DURHAM-47, INC. ....................................... Florida 4833 65-0628624
PAXSON COMMUNICATIONS L.P.T.V., INC. .................... Florida 4833 65-0641981
PAXSON DAYTON LICENSE, INC. ............................. Florida 4833 65-0645190
PAXSON DENVER LICENSE, INC. ............................. Florida 4833 65-0645191
PAXSON COMMUNICATIONS OF PROVIDENCE-69, INC. ............ Florida 4833 65-0643775
PAXSON COMMUNICATIONS OF SALT LAKE CITY-16, INC. ........ Florida 4833 65-0653902
PAXSON COMMUNICATIONS OF GREENSBORO-16, INC. ............ Florida 4833 65-0653894
PAXSON GREENSBORO LICENSE, INC. ......................... Florida 4833 65-0653901
PAXSON COMMUNICATIONS OF TULSA-44, INC. ................. Florida 4833 65-0653898
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
STATE OR
OTHER PRIMARY
JURISDICTION STANDARD I.R.S.
OF INDUSTRIAL EMPLOYER
INCORPORATION/ CLASSIFICATION IDENTIFICATION
NAME FORMATION NUMBER NUMBER
- --------------------------------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
PAXSON COMMUNICATIONS OF TALLAHASSEE
INC. .................................................. Florida 4833 65-0653906
PAXSON TALLAHASSEE LICENSE, INC. ........................ Florida 4832 65-0682179
PAX JAX, INC. ........................................... Florida 4833 65-0653909
PAXSON SPORTS VENTURES COMPANY........................... Florida 7313 65-0684001
PCC DIRECT, INC. ........................................ Florida 7313 65-0684251
PAXSON COMMUNICATIONS OF OKLAHOMA CITY-62, INC. ......... Florida 4833 65-0682182
PAXSON/R&R NETWORK, INC. ................................ Florida 4833 65-0677971
PAXSON ALBANY LICENSE, INC. ............................. Florida 4833 *
PAXSON COMMUNICATIONS OF SACRAMENTO-29, INC. ............ Florida 4833 *
PAXSON SACRAMENTO LICENSE, INC. ......................... Florida 4833 *
PAXSON COMMUNICATIONS OF SEATTLE-24, INC. ............... Florida 4833 65-0686130
PAXSON SEATTLE LICENSE, INC. ............................ Florida 4833 65-0686136
PAXSON SPORTS OF MIAMI, INC. ............................ Florida 4833 59-3227303
PAXSON COMMUNICATIONS OF SAN JUAN, INC. ................. Florida 4833 58-2219553
PAXSON COMMUNICATIONS OF BOSTON-46, INC. ................ Florida 4833 65-0686132
PAXSON COMMUNICATIONS OF PHOENIX-51, INC. ............... Florida 4833 *
PAXSON COMMUNICATIONS OF LITTLE ROCK-42, INC. ........... Florida 4833 65-0688715
PAXSON LITTLE ROCK LICENSE, INC. ........................ Florida 4833 65-0688718
PAXSON COMMUNICATIONS OF BIRMINGHAM-44, INC. ............ Florida 4833 65-0688713
PAXSON BIRMINGHAM LICENSE, INC. ......................... Florida 4833 65-0688716
</TABLE>
- ---------------
* Applied for.
<PAGE> 5
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 16, 1996
PROSPECTUS
150,000 SHARES
[LOGO] PAXSON COMMUNICATIONS CORPORATION
% CUMULATIVE EXCHANGEABLE PREFERRED STOCK
---------------------
Paxson Communications Corporation (the "Company") is offering (the
"Offering") 150,000 shares of % Cumulative Exchangeable Preferred Stock, par
value $.001 per share (the "New Preferred Stock").
Dividends on the New Preferred Stock will accrue from its date of issuance
and will be payable semi-annually commencing April 30, 1997, at a rate per annum
of % of the liquidation preference per share. Dividends may be paid, at the
Company's option, on any dividend payment date occurring on or prior to October
31, 2002 either in cash or by the issuance of additional shares of New Preferred
Stock (and payment of cash in lieu of fractional shares) having an aggregate
liquidation preference equal to the amount of such dividends. The liquidation
preference of the New Preferred Stock will be $1,000 per share. The New
Preferred Stock is redeemable at the Company's option, in whole or in part, at
any time on or after October 31, 2001, at the redemption prices set forth
herein, plus, without duplication, accumulated and unpaid dividends to the date
of redemption. In addition, prior to October 31, 1999, the Company may, at its
option, redeem up to an aggregate of 35% of the shares of New Preferred Stock
(whether initially issued or issued in lieu of cash dividends) with the net
proceeds from one or more Public Equity Offerings (as defined) or Major Asset
Sales (as defined), at the redemption prices set forth herein, plus, without
duplication, accumulated and unpaid dividends to the redemption date; provided,
however, that after any such redemption there is at least $75 million aggregate
liquidation preference of the New Preferred Stock outstanding. The Company is
required, subject to certain conditions, to redeem all of the New Preferred
Stock outstanding on October 31, 2006, at a redemption price equal to 100% of
the liquidation preference thereof, plus, without duplication, accumulated and
unpaid dividends to the date of redemption. Upon the occurrence of a Change of
Control (as defined), the Company will, subject to certain conditions, offer to
purchase all of the then outstanding shares of New Preferred Stock at a price
equal to 101% of the liquidation preference thereof, plus, without duplication,
accumulated and unpaid dividends to the date of purchase. The New Preferred
Stock ranks junior to the Company's outstanding preferred stock with respect to
dividend rights and rights on liquidation of the Company. The Company's
outstanding preferred stock restricts the payment of dividends on capital stock
ranking junior to such preferred stock. On a pro forma basis, after giving
effect to the Proposed Acquisitions (as defined) and the Offering, as though
such transactions had occurred on June 30, 1996, there would have been
outstanding the Indebtedness referred to below and $39.4 million of existing
preferred stock (including accumulated but unpaid dividends thereon) ranking
senior to the New Preferred Stock.
Subject to certain conditions, the New Preferred Stock is exchangeable in
whole or in part on a pro rata basis, at the option of the Company, on any
dividend payment date, for the Company's % Exchange Debentures due 2006
(including any such securities paid in lieu of cash interest, as described
herein, the "Exchange Debentures"); provided, that immediately after giving
effect to any partial exchange, there shall be outstanding shares of New
Preferred Stock with an aggregate liquidation preference of not less than $75
million and not less than $75 million in aggregate principal amount of Exchange
Debentures. Interest on the Exchange Debentures will be payable at a rate of
% per annum and will accrue from the date of issuance thereof. Interest on
the Exchange Debentures will be payable semi-annually in cash or, at the option
of the Company, on or prior to October 31, 2002 in additional Exchange
Debentures, in arrears on each April 30 and October 31, commencing on the first
such date after the exchange of the New Preferred Stock for the Exchange
Debentures. The Exchange Debentures mature on October 31, 2006 and are
redeemable, at the option of the Company, in whole or part, on or after October
31, 2001, at the redemption prices set forth herein, plus accrued and unpaid
interest to the date of redemption. In addition, prior to October 31, 1999, the
Company may, at its option, redeem up to an aggregate of 35% of the aggregate
principal amount of Exchange Debentures (whether issued in exchange for New
Preferred Stock or in lieu of cash interest payments) with the net proceeds from
one or more Public Equity Offerings or Major Asset Sales at the redemption
prices set forth herein, plus, without duplication, accrued and unpaid interest
to the redemption date; provided, however, that after any such redemption the
aggregate principal amount of the Exchange Debentures then outstanding is at
least $75 million.
The Exchange Debentures will be subordinated to all existing and future
Senior Debt (as defined) of the Company and will rank pari passu with the
Company's 11 5/8% Senior Subordinated Notes due 2002 (the "Notes") and will rank
pari passu with or senior to all future Indebtedness (as defined) of the Company
that expressly provides that it ranks pari passu with or junior to the Exchange
Debentures, as the case may be. The Exchange Debentures will be unconditionally
guaranteed, jointly and severally, on a senior subordinated basis, by each of
the Company's subsidiaries (the "Guarantors"). On a pro forma basis, after
giving effect to the Proposed Acquisitions and the Offering as though such
transactions had occurred on June 30, 1996, there would have been $104.3 million
of Senior Debt of the Company outstanding, and $227.5 million of Indebtedness
ranking pari passu with the Exchange Debentures.
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN RISK
FACTORS THAT SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................................... $ $ $
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Total............................................. $ $ $
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</TABLE>
(1) Plus accumulated dividends, if any, from , 1996.
(2) The Company and the Guarantors have agreed to indemnify the Underwriters (as
defined) against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(3) Before deducting expenses payable by the Company, estimated at $ .
---------------------
The New Preferred Stock is offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and subject
to approval of certain legal matters by counsel. It is expected that delivery of
the New Preferred Stock will be made on or about ,1996, at the offices
of BT Securities Corporation, One Bankers Trust Plaza, New York, New York.
---------------------
BT SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
FIRST UNION CAPITAL MARKETS CORP.
AS ADVISOR
---------------------
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE> 6
PROSPECTUS INSIDE FRONT COVER
Depiction of various Company radio station, television station and network logos
or service marks shown.
TWO PAGE FOLD-OUT OF PROSPECTUS INSIDE COVER
Map of the United States and Puerto Rico, with separate enlarged map of
Florida, identifying locations of the Company's owned, operated or affiliated
television and radio stations, as well as the Company's radio networks and areas
of billboard concentration.
---------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NEW PREFERRED STOCK OF THE
COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
i
<PAGE> 7
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities offered
by this Prospectus. For the purposes hereof, the term "Registration Statement"
means the original Registration Statement and any and all amendments thereto,
including the schedules and exhibits to such Registration Statement or any such
amendment. This Prospectus, which forms a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
to which reference is hereby made. Each statement made in this Prospectus
concerning a document filed as an exhibit to the Registration Statement is
qualified in its entirety by reference to such exhibit for a complete statement
of its provisions.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as
well as the following Regional Offices: 7 World Trade Center, Suite 1300, New
York, New York 10007; and Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies can be obtained by mail from
the Commission's Public Reference Section, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. The Commission maintains a web
site that contains reports, proxy and information statements and other
information regarding the Company, the address of which is http://www.sec.gov.
The Company's Class A Common Stock is listed on the American Stock Exchange and
material filed by the Company can be inspected at the offices of the American
Stock Exchange at 86 Trinity Place, New York, New York 10006.
---------------------
THIS PROSPECTUS AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN CONTAIN
FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE,
BUT ARE NOT LIMITED TO, FLUCTUATIONS IN THE COMPANY'S QUARTERLY ACTIVITIES AND
RESULTS OF OPERATIONS, THE RISKS INHERENT IN THE COMPANY'S BUSINESS AND OTHER
FACTORS DISCUSSED IN THIS PROSPECTUS UNDER THE HEADING "RISK FACTORS" OR IN THE
DOCUMENTS INCORPORATED BY REFERENCE HEREIN.
FOR CALIFORNIA RESIDENTS
WITH RESPECT TO SALES OF THE NEW PREFERRED STOCK BEING OFFERED HEREBY TO
CALIFORNIA RESIDENTS, AS OF THE DATE OF THIS PROSPECTUS, SUCH NEW PREFERRED
STOCK MAY BE SOLD ONLY TO: (1) "ACCREDITED INVESTORS" WITHIN THE MEANING OF
REGULATION D UNDER THE SECURITIES ACT OF 1933, (2) BANKS, SAVINGS AND LOAN
ASSOCIATIONS, TRUST COMPANIES, INSURANCE COMPANIES, INVESTMENT COMPANIES
REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, PENSION AND PROFIT-SHARING
TRUSTS, CORPORATIONS OR OTHER ENTITIES WHICH, TOGETHER WITH THE CORPORATION'S OR
OTHER ENTITY'S AFFILIATES, HAVE A NET WORTH ON A CONSOLIDATED BASIS ACCORDING TO
THEIR MOST RECENT REGULARLY PREPARED FINANCIAL STATEMENTS (WHICH SHALL HAVE BEEN
REVIEWED, BUT NOT NECESSARILY AUDITED, BY OUTSIDE ACCOUNTANTS) OF NOT LESS THAN
$14,000,000 AND SUBSIDIARIES OF THE FOREGOING, (3) ANY PERSON (OTHER THAN A
PERSON FORMED FOR THE SOLE PURPOSE OF PURCHASING THE NEW PREFERRED STOCK BEING
OFFERED HEREBY) WHO PURCHASES AT LEAST $1,000,000 AGGREGATE AMOUNT OF THE NEW
PREFERRED STOCK BEING OFFERED HEREBY OR (4) ANY PERSON WHO (A) HAS AN INCOME OF
$65,000 AND A NET WORTH OF $250,000, OR (B) HAS A NET WORTH OF $500,000 (IN EACH
CASE, EXCLUDING HOME, HOME FURNISHINGS AND PERSONAL AUTOMOBILES).
ii
<PAGE> 8
CERTAIN DEFINITIONS AND MARKET AND INDUSTRY DATA
The terms "EBITDA," "operating cash flow," "segment operating profit" and
"Adjusted EBITDA" are referred to in various places in this Prospectus. "EBITDA"
is defined as net income (loss) before (i) extraordinary item and cumulative
effect of a change in accounting principle, (ii) benefit (provision) for income
taxes, (iii) other income (expense), net, (iv) interest expense, net, (v) time
brokerage fees relating to financing of stations which the Company has an
agreement or option to acquire, (vi) depreciation and amortization, including
amortization of broadcast rights, (vii) option plan compensation and (viii)
non-recurring items including terminated operations, less scheduled broadcast
rights payments. "Operating cash flow" is defined as net income excluding
non-cash items, nonrecurring items including terminated operations, interest,
other income, income taxes and time brokerage fees, less scheduled program
rights payments. Although EBITDA and operating cash flow are not measures of
performance under United States generally accepted accounting principles
("GAAP"), the terms are often used in the broadcast industry as a measure of a
broadcasting company's financial performance. "Segment operating profit" is
defined as segment EBITDA before corporate overhead allocations. "Adjusted
EBITDA" is defined as EBITDA for the latest twelve months ended June 30, 1996,
less (i) segment operating profit for the Infomall TV Network for such period
plus (ii) four times such segment's operating profit for the quarter ended June
30, 1996. Neither EBITDA, operating cash flow, segment operating profit nor
Adjusted EBITDA should be considered in isolation or as a substitute for net
income, cash flows from operating activities and other income or cash flow
statement data prepared in accordance with GAAP, or as a measure of
profitability or liquidity, and are being shown to provide an understanding of
calculations required under certain covenants in the certificate of designation
governing the New Preferred Stock and the indenture governing the Exchange
Debentures.
The term "time brokerage agreement" (also known in the broadcast industry as
a "local marketing agreement"), generally refers to an agreement under which a
radio or television programmer agrees to purchase from a broadcast station
licensee substantially all of the broadcast time on a station, provides
programming and sells advertising during the purchased time, receives all the
revenue derived from advertising sold during the purchased time, pays certain
expenses of the station and performs other functions, with the licensee
retaining responsibility for ultimate control of the station in accordance with
FCC policies. Time brokerage agreements are more fully described in
"Business -- Federal Regulation of Broadcasting." The term "joint sales
agreement" (a "JSA") refers to an agreement under which a broadcast station
agrees to provide sales and marketing services for another broadcast station
while the owner of such broadcast station provides the programming for such
other broadcast station.
Radio market rank information has been obtained from BIA Publications, Inc.
("BIA") and represents rankings as of Spring 1996 for the indicated markets.
Radio audience share ratings for the indicated radio station or group of radio
stations have been obtained from surveys of persons aged 25-54 listening
Monday-Sunday, 6:00 a.m. to 12:00 midnight, as reported by Arbitron, Radio
Market Report for Spring 1996, The Arbitron Company ("Arbitron"), except that a
preliminary Spring 1996 survey has been used for Panama City and Tallahassee,
Florida, and the Cookeville, Tennessee figures are based on 12+ surveys
contained in Arbitron's 1996 County by County Ratings conducted during 1995.
Audience share data is expressed as the local average quarter-hour share for
each indicated radio station. A radio station's audience share is derived by
comparing the radio station's average quarter-hour share to the total average
quarter-hour share for all radio stations listed as inside the Metro Survey Area
by Arbitron. Average quarter-hour share is a percentage of the estimated number
of persons who listen to a given radio station for a minimum of five minutes
within a quarter-hour compared to the total number of persons who listen to
radio in the market within such quarter-hour.
Market radio advertising revenue for 1995 and combined revenue share at June
30, 1996 for the radio stations owned and proposed to be acquired by the Company
in Miami, Tampa, Orlando and Jacksonville, Florida, have been obtained from the
December 1995 and June 1996 issues of the Miller, Kaplan Market Revenue Report,
a monthly publication of Miller, Kaplan, Arase & Co., Certified Public
Accountants ("Miller Kaplan"). Market radio advertising revenue for 1995 and
combined revenue share at December 31, 1995 for the radio stations to be
acquired by the Company in Tallahassee, Pensacola and Panama City, Florida have
been prepared by BIA based upon revenue estimates from November 1995 surveys
(the "BIA Survey") of radio station general managers and owners for the year
ended December 31, 1995. Combined radio station market revenue rankings have
been obtained from the BIA Survey, except that the ranking for Cookeville is
based upon Company estimates. Arbitron, BIA and Miller Kaplan compile their
audience share, revenue share, revenue ranking and other statistical data under
procedures and methodologies that are described, and that have the limitations
provided, in their respective reports. All such information provided herein is
subject to those limitations. The Company does not assume responsibility for the
accuracy or completeness of such published data.
All television station audience share ratings in this Prospectus have been
obtained from the Nielsen Station Index Viewers and Profile of May 1996, a
publication of A.C. Nielsen Co. ("Nielsen"). All market rank, total market
television household data and total market cable television household data has
been obtained from U.S. Television Household Estimates for May 1996, as prepared
by Nielsen for each designated market area ("DMA"), except that television and
cable household data for San Juan has been obtained from J. Walter Thompson
Latin America, as of June 1995. The Company does not assume responsibility for
the accuracy or completeness of such published data. Revenue data for the West
Palm Beach television market has been obtained from the local office of Ernst &
Young LLP. Data indicating the number of cable television households reached by
inTV in a DMA is as of May 15, 1996, and has been provided to the Company by the
local cable system operators in each DMA, unless otherwise indicated.
iii
<PAGE> 9
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements contained elsewhere in this Prospectus and in the documents
incorporated by reference herein. Except as otherwise indicated by the context,
references in this Prospectus to the "Company" include Paxson Communications
Corporation and its direct and indirect wholly-owned subsidiaries. Capitalized
terms used without definition in the following summary are defined elsewhere in
this Prospectus.
THE COMPANY
Paxson Communications Corporation (the "Company" or "Paxson
Communications") is a diversified broadcasting company whose principal
businesses consist of a nationwide network of television stations (the "Infomall
TV Network" or "inTV") dedicated to the airing of long form paid programming,
consisting mainly of infomercials ("inTV programming"), and a major radio
station group operating primarily in Florida. In addition to the Infomall TV
Network, the Company's television operations include ownership of an ABC network
affiliated television station and the operation of a UPN/WB network affiliated
television station pursuant to a time brokerage agreement, each of which
operates in the West Palm Beach television market. The Company also owns and
operates radio networks and billboards which complement its Florida radio
broadcasting business.
The Company was founded in 1991 by Lowell W. "Bud" Paxson who personally
financed the Company's early growth and continues to lead the Company as its
majority stockholder and chief executive. Mr. Paxson has been at the forefront
of several innovative broadcasting concepts over the last decade, including his
leadership role in the creation and early growth of electronic retailing as the
creator and co-founder of Home Shopping Network, Inc. and Silver King
Communications, Inc., and was one of the first radio operators to take advantage
of duopoly radio station ownership. In April 1996, the Company raised over $150
million of new equity capital through the public sale of shares of its Class A
Common Stock, which trades on the American Stock Exchange under the symbol
"PXN."
INFOMALL TV NETWORK
The Company introduced its Infomall TV Network in January 1995 in order to
capitalize on what the Company believes to be a rapidly growing industry. inTV
has since expanded rapidly through increasing cable carriage of its existing
stations and acquiring additional stations, and currently consists of 29 owned,
time brokered or affiliated television stations. Broadcasting and Cable magazine
recently ranked the Company as the seventh largest television broadcaster in the
United States, based on the number of television households in each DMA in which
a broadcaster owns a station (i.e., excluding stations operated pursuant to time
brokerage agreements or affiliated stations) and counting only 50% of the
households in those DMAs which a broadcaster serves via a UHF frequency. Upon
completion of the Proposed inTV Acquisitions (as defined) and pending
affiliation agreements, the Infomall TV Network will consist of a total of 42
television stations operating in 37 television markets, including 22 of the 30
largest television markets in the United States.
The Company believes that its inTV stations comprise the only national
network of television stations dedicated to the airing of infomercial
programming, and that its inTV stations represent a valuable national television
broadcasting distribution infrastructure that would be difficult and expensive
to replicate. The Company believes that the Infomall TV Network is the only
group of broadcast television stations in the United States offering long form
paid programmers and infomercial advertisers significant national, regional and
local distribution capability and airtime during each of the popular morning,
daytime and prime time viewing hours.
The television stations converted by the Company to inTV stations are
typically non-network-affiliated stations with marginal operating results that
can be acquired at a relatively low cost compared to network-affiliated
stations. Certain of these stations are licensed to communities outside the
center of major television markets, but within such markets' DMA, and by virtue
of the FCC's "must carry" rules are thus generally
1
<PAGE> 10
entitled to carriage on cable systems within such DMA. Through the exercise of
"must carry" rights and the improvement of its stations' over-the-air signals,
the Company attempts to maximize its cable household coverage within its
markets. While the Company's cable household coverage for its owned or operated
inTV stations was in the aggregate 57.1% of the total cable households in its
markets as of May 1996, the Company's goal is to reach approximately 85% of the
cable homes in its markets. In general, the Company has been successful in
improving its stations' cable household coverage over time, as demonstrated by
the aggregate cable household coverage of the four inTV stations (WCTD-TV,
Miami, WTLK-TV, Atlanta, WFCT-TV, Tampa and WIRB-TV, Orlando) with which the
Company launched the Infomall TV Network (the "Original inTV Stations"), which
improved from 73.2% as of January 1995 to 92.6% as of June 1996. There can be no
assurance that the Company will be able to achieve its goal of reaching 85% of
cable households in its markets, or that the Company's experience in this regard
with the Original inTV Stations is or will be representative of the results of
the Infomall TV Network as a whole. The Company believes that it also reaches a
significant number of over-the-air television households that do not receive
cable television. Upon completion of the Proposed inTV Acquisitions, the
Infomall TV Network will serve DMAs currently containing approximately 49.7
million television households, of which 31.9 million households are served by
cable television. The Company continues to evaluate the acquisition of or
affiliation with additional television stations to further extend the national
reach of its Infomall TV Network.
The Company's inTV strategy is to continue to maximize revenues and
operating cash flow through improved performance of its existing inTV stations
and continued expansion of the Infomall TV Network. Shortly after the Company
acquires a television station or commences operating a television station
pursuant to a time brokerage agreement, the Company adds such station to the
Infomall TV Network and replaces substantially all of the existing programming
with inTV programming, which, unlike traditional television programming, is paid
for by the advertiser as opposed to the broadcaster. The introduction of inTV
programming allows the Company to eliminate substantially all programming
expenses and achieve significant reductions in other operating expenses. The
Company's inTV stations are operated by an average of 15 people, compared to
network and independent stations which average over 100 and 60 people,
respectively, in markets of similar size to the Company's. To date, virtually
all of the inTV stations owned or operated by the Company have contributed
rapidly to operating cash flow, typically within two months after commencing
inTV operations.
Once a station is part of the Infomall TV Network and expenses have been
reduced, the Company focuses on maximizing such station's revenues. The
Company's revenue strategies include increasing its cable household coverage
through broadcast signal improvements and the exercise of "must carry" rights,
and creating increased demand for its inventory by focusing on local sales as
well as targeting additional long form programming formats such as religious and
ethnic programming to allow rate increases. The Company has been successful in
implementing its revenue enhancing strategies, as evidenced by the 13.7%
increase in the average half hour rate per hundred thousand cable television
households reached and the 21.2% increase in cable television households reached
for the Original inTV Stations, calculated as of June 30, 1996 compared to the
comparable period or date in the prior year.
PAXSON RADIO
The Company has assembled a substantial statewide radio broadcasting group
with operations in Florida's largest markets, which the Company believes to be
among the most attractive and fastest growing in the nation. Upon completion of
the Proposed Radio Acquisitions (as defined), Paxson Communications will own and
operate 40 radio stations (26 FM and 14 AM stations), with more radio stations
in Florida than any other broadcaster. The Company believes that the addition of
the Proposed Radio Acquisitions will enable the Company to build or strengthen
its radio duopolies (two FM or two AM stations in a market) or "super-duopolies"
(more than two FM or two AM stations in a market) in its Florida radio markets,
and will result in the Company's radio group ranking number one in combined
revenue share in three of its seven Florida markets.
The Florida radio markets in which the Company operates continue to
experience substantial concentration of station ownership among large radio
group owners. The Company believes that concentration of station
2
<PAGE> 11
ownership will result in a more stable radio marketplace and more predictable
cash flow for owners of station groups in such markets. The Company believes
that its established position among the leading radio broadcast groups in each
of its Florida markets differentiates it from its competitors and makes the
Company attractive to regional and national advertisers.
The Company's radio expansion strategy is to acquire additional stations to
enhance its position in its current markets and to selectively enter new
markets, primarily in Florida, building upon its multiple radio station
ownership strategy in each of its markets and taking advantage of relaxed
multiple radio station ownership limitations implemented by recent changes in
federal telecommunications law. In addition to its Florida stations, the Company
owns and operates two AM and two FM stations in Cookeville, Tennessee. The
Company also operates six radio networks with 346 affiliated radio stations in
the eastern and southeastern United States and controls 185 billboard locations
(455 faces) in the Tampa and Orlando markets that support the Company's radio
station operations and provide advertising revenue.
The Company's radio operating strategy, which is implemented by the
Company's highly experienced management team, is to capitalize on the revenue
enhancing and cost saving opportunities of operating multiple FM and AM stations
in geographically proximate markets. The principal elements of the Company's
operating strategy include: (i) extensive market research, (ii) aggressive
marketing and promotion and (iii) strict cost controls facilitated in part by
news and other programming for all stations being largely centrally produced.
PAXSON NETWORK-AFFILIATED TELEVISION
Paxson Communications owns and operates an ABC-TV affiliate, WPBF-TV, in
the West Palm Beach market. Pursuant to a time brokerage agreement, the Company
provides programming and markets commercial time for a second television
station, WTVX-TV (a combined United Paramount Network and Warner Brothers
Network affiliate), which is also in the West Palm Beach market. The West Palm
Beach television market is one of the fastest growing markets in the country as
evidenced by its increased market ranking from 65th in 1985 to 45th in 1995.
The Company acquired WPBF-TV in July 1994 for approximately $32.5 million
and began operating WTVX-TV under a time brokerage agreement in August 1995. The
Company has a long-term assignable option to acquire WTVX-TV for approximately
$19 million. The network-affiliated television broadcasting industry is
currently undergoing significant consolidation as a result of the relaxation of
multiple ownership rules in the newly enacted Telecommunications Act of 1996.
The Company has not been successful in locating traditional television stations
at attractive prices to expand its network-affiliated television station group.
As the Company believes that the current consolidation will place small station
group operators at a significant disadvantage versus larger group operators, and
that the Company could benefit from redeploying its investment in its
network-affiliated television operations to its core inTV and radio group
businesses, it is considering the sale or exchange for other broadcast assets of
its network-affiliated television operations. The Company has engaged an
investment banking firm to advise it with respect to such a sale or exchange and
assist it in locating potential purchasers, and has received several offers to
acquire its network-affiliated television operations. The Company has not
accepted any of such offers, and there can be no assurance that any offers will
be received which will be acceptable to the Company.
3
<PAGE> 12
BROADCAST PROPERTY OVERVIEW
INFOMALL TV NETWORK
The following table lists those inTV properties that the Company owns,
operates or is affiliated with, and those properties which the Company has
agreements to acquire or operate, as identified under "Proposed inTV Stations"
below. (Television and cable households in thousands.)
<TABLE>
<CAPTION>
ACTUAL OR INTV CABLE
NATIONAL ANTICIPATED CARRIAGE
TV COMMENCE- AT CURRENT TOTAL CURRENT TOTAL
MARKET MENT OF COMMENCE- INTV CABLE MARKET CABLE INTV CABLE MARKET TV
MARKET(1) RANK STATION OPERATIONS MENT(2) CARRIAGE(3) HOUSEHOLDS CARRIAGE(3) HOUSEHOLDS
- ---------------------------- -------- ----------------- --------- ---------- ----------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Owned or Operated
New York, NY................ 1 WHAI-TV 3/96 626 783 4,529 17.3% 6,695
Los Angeles, CA............. 2 KZKI-TV 5/95 1,453 2,183 2,997 72.8 4,918
Philadelphia, PA............ 4 WTGI-TV 2/95 1,225 1,489 1,961 76.0 2,646
San Francisco, CA........... 5 KLXV-TV 6/95 650 861 1,578 54.6 2,257
Boston, MA.................. 6 WGOT-TV 5/95 604 846 1,625 52.1 2,122
Washington, DC.............. 7 WYVN-TV 9/96 0 0 1,238 0.0 1,884
Atlanta, GA................. 10 WTLK-TV 4/94 300 944 1,015 93.0 1,584
Atlanta, GA*................ 10 WNGM-TV 4/96 182 183 1,015 18.0 1,584
Houston, TX................. 11 KTFH-TV 3/95 647 793 867 91.5 1,574
Cleveland, OH*.............. 13 WOAC-TV 10/95 332 336 966 34.8 1,452
Cleveland, OH............... 13 WAKC-TV 3/96 560 560 966 58.0 1,452
Tampa, FL*.................. 15 WFCT-TV 8/94 0 864 976 88.5 1,395
Miami, FL*.................. 16 WCTD-TV 4/94 396 883 922 95.8 1,341
Phoenix, AZ................. 17 KWBF-TV 3/96 23 26 661 3.9 1,170
Denver, CO.................. 18 KUBD-TV 8/95 430 426 699 60.9 1,160
St. Louis, MO............... 20 WCEE-TV 1/96 23 24 569 4.2 1,108
Orlando, FL*................ 22 WIRB-TV(5) 12/94 468 687 741 92.7 998
Hartford, CT*............... 26 WTWS-TV(6) 3/95 661 721 770 93.6 911
Milwaukee, WI*.............. 29 WHKE-TV 7/96 257 276 438 63.0 783
Raleigh, NC*................ 32 WRMY-TV(7) 6/96 0 29 481 6.0 792
Greensboro, NC.............. 48 WAAP-TV 7/96 323 323 345 93.7 553
Birmingham, AL*............. 51 WNAL-TV(8) 9/96 31 31 338 9.3 525
Albany, NY.................. 52 WOCD-TV 5/96 251 251 357 70.5 507
Dayton, OH.................. 53 WTJC-TV 10/95 298 315 341 92.3 501
San Juan, PR................ NR WSJN-TV(9) 2/96 285 285 298 95.6 1,064
------ ------ ------ ------
Total Owned or
Operated(10)...... 10,024 14,119 24,711 57.1% 37,939
====== ====== ====== ======
Affiliates
Sacramento, CA*............. 21 KCMY-TV(8) 7/95 624 644 688 93.7% 1,101
Indianapolis, IN............ 24 WIIB-TV 1/96 401 417 580 71.9 925
Norfolk, VA................. 40 WJCB-TV 8/95 343 362 446 81.2 619
Fresno, CA.................. 57 KGMC-TV 1/96 179 164 256 64.1 482
------ ------ ------ ------
Total Affiliates.... 1,546 1,587 1,969 80.6% 3,127
====== ====== ====== ======
Total Owned,
Operated and
Affiliates(10).... 11,570 15,706 26,680 58.9% 41,066
====== ====== ====== ======
Proposed inTV Stations
Philadelphia, PA............ 4 WTVE-TV(11) 10/96 1,961 2,646
Dallas, TX.................. 8 Channel 68(4) 12/96 924 1,822
Seattle, WA................. 12 KBCB-TV(4) 6/97 1,040 1,464
Minneapolis, MN............. 14 KXLI-TV 10/96 702 1,412
Phoenix, AZ*................ 17 KAJW-TV(4) 1/97 661 1,170
Salt Lake City, UT*......... 37 KZAR-TV(4)(12) 12/96 359 656
Salt Lake City, UT.......... 37 KOOG-TV 3/97 359 656
Grand Rapids, MI*........... 38 WJUE-TV(4)(13) 10/96 390 637
Oklahoma City, OK........... 43 KMNZ-TV 2/97 353 585
West Palm Beach, FL......... 45 WHBI-TV(4)(11) 2/97 468 576
Providence, RI.............. 46 WOST-TV(4)(14) 12/96 412 557
Little Rock, AR............. 58 KVUT-TV(4) 6/97 284 473
Tulsa, OK................... 59 KGLB-TV(4) 2/97 287 459
------ ------
Total Proposed inTV
Stations(10)...... 5,219 8,641
====== ======
Total inTV
Network(10)....... 31,900 49,707
====== ======
</TABLE>
(see footnotes on the following page)
4
<PAGE> 13
* Operated or to be operated pursuant to a time brokerage agreement; except
as noted, the Company has an option to acquire a 100% ownership interest.
(1) Each station is licensed by the FCC to serve a specific community, which is
included in the listed market.
(2) Cable households reached at commencement of station's operations.
(3) Cable households reached at 5/96, and as a percentage of the total market
cable households.
(4) Station is currently under construction or not operating.
(5) No option to acquire any ownership interest.
(6) To be operated pursuant to a time brokerage agreement upon completion of an
FCC-required restructuring of the Company's investment in such station in
connection with the Company's acquisition of WHAI-TV.
(7) Option to acquire 40% ownership interest.
(8) The Company has agreed to acquire these stations. See "Proposed
Acquisitions."
(9) 50% ownership interest.
(10) Figures represent total cable and television households in each market only
and are not necessarily indicative of the number of households reached by
each station in its market; totals do not double count markets where the
Company has more than one station.
(11) Pending inTV affiliate.
(12) Option to acquire a 50% ownership interest.
(13) 70% ownership interest to be acquired.
(14) 50% ownership interest to be acquired.
PAXSON RADIO
<TABLE>
<CAPTION>
AUDIENCE
SHARE
(PERSONS
25-54)
MARKET ----------- REVENUE REVENUE
MARKET(1) RANK FORMAT 1995 1996 SHARE RANK
- ---------------------------------------- ------ -------------------------- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Miami/Ft. Lauderdale, FL 11
WLVE-FM............................... Smooth Jazz 3.9 % 3.8%
WZTA-FM............................... Active Rock 2.8 4.4
WINZ-AM............................... News 1.4 0.6
WFTL-AM............................... Hot Talk 0.4 0.4
WPLL-FM(2)(3)......................... Modern Adult Contemporary 2.8
WSRF-AM(2)(3)......................... Block/Long-Form n/r
WIOD-AM(2)............................ Talk/Sports/Entertainment 3.9
----
Total Market*.................. 15.9% 20.5% 1
Tampa/St. Petersburg, FL 21
WHPT-FM............................... Rock Adult Contemporary 5.9 % 5.4%
WSJT-FM............................... Smooth Jazz 0.2 5.1
WHNZ-AM............................... News 1.0 0.6
WZTM-AM............................... Sports 0.2 0.4
WKES-FM(2)............................ To be determined
Total Market................... 11.5% 12.0% 5
Orlando, FL 39
WMGF-FM............................... Soft Adult Contemporary 7.3 % 7.7%
WJRR-FM............................... Active Rock 4.9 3.9
WWNZ-AM............................... News 1.5 0.5
WQTM-AM............................... Sports 0.8 1.0
WTKS-FM(2)(3)......................... Hot Talk 7.9
WDIZ-FM(2)(3)......................... Modern Adult Contemporary 4.3
----
Total Market*.................. 25.3% 27.9% 3
Jacksonville, FL 53
WROO-FM............................... Country 7.5 % 5.2%
WPLA-FM............................... Rock Alternative 2.0 4.4
WFSJ-FM............................... Smooth Jazz 4.7 3.9
WNZS-AM............................... Sports 1.4 1.9
WZNZ-AM............................... News 0.5 0.1
WPVJ-FM(2)(4)......................... To be determined
----
Total Market................... 15.5% 17.6% 3
Pensacola, FL 125
WOWW-FM............................... Rock Alternative 3.2%
WTKX-FM............................... Album Oriented Rock 5.6
----
Total Market................... 8.8% 21.7% 3
</TABLE>
5
<PAGE> 14
<TABLE>
<CAPTION>
AUDIENCE
SHARE
(PERSONS
MARKET 25-54) REVENUE REVENUE
MARKET(1) RANK FORMAT 1995 1996 SHARE RANK
- ---------------------------------------- ---- -------------------------- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Tallahassee, FL 167
WSNI-FM............................... Oldies 7.4%
WXSR-FM............................... Active Rock 4.2
WTPS-FM............................... Hot Adult Contemporary 2.1
WTNT-FM............................... Country 6.3
WNLS-AM............................... Sports 1.1
----
Total Market................... 21.1% 40.3% 1
Panama City, FL 224
WPBH-FM............................... Soft Adult Contemporary 3.5%
WPAP-FM............................... Country 10.5
WFSY-FM............................... Hot Adult Contemporary 8.8
WEBZ-FM............................... Big Band 4.4
WGNE-AM............................... Smooth Jazz n/r
----
Total Market................... 27.2% 46.4% 1
Cookeville, TN n/c
WGSQ-FM............................... Country 27.0%
WPTN-AM............................... Talk 4.1
WHUB-FM............................... Adult Contemporary 14.9
WHUB-AM............................... Country 4.1
----
Total Market................... 50.1% n/a 1
</TABLE>
<TABLE>
<CAPTION>
COMMENCEMENT
AFFILIATE OF
RADIO NETWORKS STATIONS FORMAT OPERATIONS
- ------------------------------------------------------------------------ --------- ------- ------------
<S> <C> <C> <C>
Alabama Radio Network................................................... 74 News 1/95
Florida Radio Network................................................... 56 News 3/93
Tennessee Radio Network................................................. 87 News 4/94
University of Florida Sports Network.................................... 53 Sports 4/94
University of Miami Sports Network...................................... 25 Sports 4/95
Penn State Sports Network............................................... 51 Sports 4/94
</TABLE>
PAXSON NETWORK-AFFILIATED TELEVISION
<TABLE>
<CAPTION>
COMMENCEMENT
NATIONAL TV OF
TV MARKET(1) MARKET RANK STATION NETWORK AFFILIATION OPERATIONS
- -------------------------------------------- ----------- ------- ------------------- ------------
<S> <C> <C> <C> <C>
West Palm Beach, FL......................... 45 WPBF-TV ABC 7/94
WTVX-TV(3) Warner/UPN 8/95
</TABLE>
- ---------------
* Pro forma for the Proposed Radio Acquisitions.
(1) Each station is licensed by the FCC to serve a specific community, which is
included in the listed market.
(2) Included in Proposed Radio Acquisitions.
(3) Operated pursuant to a time brokerage agreement.
(4) Station is currently not operating.
n/a Revenue not independently reported.
n/c Market not covered by Arbitron.
n/r Not rated.
6
<PAGE> 15
THE OFFERING
Securities Offered......... 150,000 shares (the "Shares") of % Cumulative
Exchangeable Preferred Stock, par value $.001 per
share, plus any additional shares of such stock
issued from time to time in lieu of cash dividends
(the "New Preferred Stock").
Issue Price................ $ per share, plus accumulated and unpaid
dividends, if any, from , 1996 (the
"Issue Date").
Liquidation Preference..... $1,000 per share, plus accumulated and unpaid
dividends.
Optional Redemption........ The New Preferred Stock is redeemable, at the
option of the Company, in whole or in part, at any
time on or after October 31, 2001 at the redemption
prices set forth herein, plus, without duplication,
accumulated and unpaid dividends to the date of
redemption. In addition, prior to October 31, 1999,
the Company may, at its option, use the net
proceeds of one or more Public Equity Offerings or
Major Asset Sales to redeem up to an aggregate of
35% of the shares of New Preferred Stock (whether
initially issued or issued in lieu of cash
dividends) at the redemption prices set forth
herein, plus, without duplication, accumulated and
unpaid dividends to the date of redemption;
provided, however, that after any such redemption,
there is at least $75 million aggregate liquidation
preference of the New Preferred Stock outstanding
and that such redemption occurs within 90 days
following the closing of such Public Equity
Offering or Major Asset Sale.
Mandatory Redemption....... The Company is required, subject to certain
conditions, to redeem all of the New Preferred
Stock outstanding on October 31, 2006 at a
redemption price equal to 100% of the liquidation
preference thereof, plus, without duplication,
accumulated and unpaid dividends to the date of
redemption.
Dividends.................. At a rate equal to % per annum of the
liquidation preference per share, payable
semi-annually beginning April 30, 1997 and
accumulating from the Issue Date. The Company, at
its option, may pay dividends on any dividend
payment date occurring on or before October 31,
2002 either in cash or by the issuance of
additional shares of New Preferred Stock having an
aggregate liquidation preference equal to the
amount of such dividends.
Dividend Payment Dates..... April 30 and October 31, commencing April 30, 1997.
Voting..................... The New Preferred Stock will be non-voting, except
as otherwise required by law and except in certain
circumstances described herein, including (i)
amending certain rights of the holders of the New
Preferred Stock and (ii) the issuance of any class
of equity securities that ranks on a parity with or
senior to the New Preferred Stock, other than
certain additional shares of New Preferred Stock or
parity securities issued to finance the redemption
by the Company of its Existing Preferred Stock (as
defined). In addition, if the Company (i) after
October 31, 2002, fails to pay cash dividends in
respect of three or more semi-annual dividend
periods in the aggregate, (ii) fails to make a
mandatory redemption or a Change of Control Offer
(as defined) or (iii) fails to comply with certain
covenants or make certain payments on its
Indebtedness or Existing Preferred Stock, holders
of a majority of the outstanding shares of New
Preferred Stock, voting as a class, will be
7
<PAGE> 16
entitled to elect the lesser of two directors or
that number of directors constituting at least 25%
of the Company's board of directors.
Exchange Provisions........ Exchangeable into the Exchange Debentures, at the
Company's option, subject to certain conditions in
whole or in part, on a pro rata basis, on any
scheduled dividend payment date; provided that
immediately after giving effect to any such partial
exchange, there shall be outstanding shares of New
Preferred Stock (whether initially issued or issued
in lieu of cash dividends) with an aggregate
liquidation preference of not less than $75 million
and not less than $75 million of aggregate
principal amount of Exchange Debentures.
Ranking.................... The New Preferred Stock will, with respect to
dividend rights and rights on liquidation,
winding-up and dissolution of the Company, rank
senior to all classes of common stock and junior to
all other classes of preferred stock of the Company
outstanding upon consummation of the Offering.
Change of Control.......... In the event of a Change of Control, the Company
will, subject to certain conditions, offer to
purchase all outstanding shares of New Preferred
Stock at a purchase price equal to 101% of the
liquidation preference thereof, plus, without
duplication, accumulated and unpaid dividends to
the date of purchase. There can be no assurance
that the Company will have sufficient funds to
purchase all of the New Preferred Stock in the
event of a Change of Control or that the Company
would be able to obtain financing for such purpose
on favorable terms, if at all.
Certain Restrictive
Provisions................. The Certificate of Designation will contain certain
restrictive provisions that, among other things,
limit the ability of the Company and its
subsidiaries to incur additional Indebtedness,
issue additional preferred stock ranking senior to
or pari passu with the New Preferred Stock, pay
dividends or make certain other restricted
payments, or merge or consolidate with or sell all
or substantially all of their assets to any other
person.
THE EXCHANGE DEBENTURES
Issue...................... % Exchange Debentures due 2006 issuable in
exchange for the New Preferred Stock in an
aggregate principal amount equal to the liquidation
preference of the New Preferred Stock so exchanged,
plus, without duplication, accumulated and unpaid
dividends to the date fixed for the exchange
thereof (the "Exchange Date"), plus any additional
Exchange Debentures issued from time to time in
lieu of cash interest.
Maturity................... October 31, 2006
Interest Rate and Payment
Dates.................... The Exchange Debentures will bear interest at a
rate of % per annum. Interest will accrue from
the date of issuance or from the most recent
interest payment date to which interest has been
paid or provided for or, if no interest has been
paid or provided for, from the Exchange Date.
Interest will be payable semi-annually in cash (or,
at the option of the Company, on or prior to
October 31, 2002, in additional Exchange
Debentures) in arrears on each April 30 and October
31, commencing with the first such date after the
Exchange Date.
Optional Redemption........ The Exchange Debentures are redeemable, at the
option of the Company, in whole or in part, at any
time on or after October 31, 2001 at the
8
<PAGE> 17
redemption prices set forth herein, plus accrued
and unpaid interest to the date of redemption. In
addition, prior to October 31, 1999, the Company
may, at its option, use the net proceeds of one or
more Public Equity Offerings or Major Asset Sales
to redeem up to 35% of the aggregate principal
amount of the Exchange Debentures (whether issued
in exchange for New Preferred Stock or in lieu of
cash interest payments), at the redemption prices
set forth herein, plus accrued and unpaid interest
to the date of redemption; provided, however, that
after any such redemption, the aggregate principal
amount of the Exchange Debentures outstanding must
equal at least $75 million and that such redemption
occurs within 90 days following the closing of such
Public Equity Offering or Major Asset Sale.
Ranking.................... The Exchange Debentures will be subordinated to all
existing and future Senior Debt of the Company. In
addition, the Exchange Debentures will be
effectively subordinated to all existing and future
Indebtedness of the Company's subsidiaries. The
Exchange Debentures will rank pari passu with the
Notes and will rank pari passu or senior to any
class or series of Indebtedness that expressly
provides that it ranks pari passu or subordinate to
the Exchange Debentures, as the case may be.
Guarantees................. The Exchange Debentures will be unconditionally
guaranteed, jointly and severally, on a senior
subordinated basis by each of the Guarantors (the
"Guarantees"). The Guarantees will be general
unsecured obligations of the Guarantors and will be
subordinated in right of payment to all existing
and future Senior Debt of the Guarantors.
Change of Control.......... In the event of a Change of Control, the Company
will, subject to certain conditions, be required to
offer to purchase all outstanding Exchange
Debentures at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid
interest to the date of purchase. There can be no
assurance that the Company will have sufficient
funds to purchase all the Exchange Debentures in
the event of a Change of Control or that the
Company would be able to obtain financing for such
purpose on favorable terms, if at all. See "Risk
Factors -- Change of Control" and "Description of
the New Preferred Stock and Exchange
Debentures -- Exchange Debentures -- Change of
Control."
Certain Covenants.......... The indenture governing the Exchange Debentures
(the "Exchange Indenture") will contain certain
covenants that, among other things, limit the
ability of the Company and its subsidiaries to
incur additional Indebtedness, pay dividends or
make certain other restricted payments, sell
assets, enter into certain transactions with
affiliates or merge or consolidate with or sell all
or substantially all of their assets to any other
person.
9
<PAGE> 18
USE OF PROCEEDS
The net proceeds from the Offering, together with borrowings under the
Credit Facility (as defined) and existing working capital, will be used to
redeem the Company's 15% Cumulative Compounding Redeemable Preferred Stock and
Series B 15% Cumulative Compounding Redeemable Preferred Stock (together, the
"Senior Preferred Stock"), and to fund the Proposed Acquisitions and expected
capital expenditures. See "Use of Proceeds."
RISK FACTORS
An investment in the New Preferred Stock involves certain risks that a
prospective investor should carefully consider. See "Risk Factors."
10
<PAGE> 19
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following summary historical and pro forma financial data, insofar as
it relates to each of the five years ended December 31, 1995, has been derived
from Company prepared financial information and should be read in conjunction
with the audited financial statements, including the consolidated balance sheets
at December 31, 1994 and 1995 and the related consolidated statements of
operations and of cash flows for each of the years in the three year period
ended December 31, 1995 and the notes thereto appearing elsewhere herein and
incorporated herein by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995. The summary historical and pro forma financial
data for the twelve months ended December 31, 1995, and as of and for the six
months and twelve months ended June 30, 1996 has been derived from unaudited
financial statements also appearing herein and which, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the unaudited
interim periods. Results for the six months ended June 30, 1996 are not
necessarily indicative of results that may be expected for the entire year. The
summary historical and pro forma financial data should be read in conjunction
with the information contained in the Company's consolidated financial
statements and the notes thereto, the financial statements and notes thereto
related to certain of the Proposed Acquisitions, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Pro Forma Financial
Information" and "Selected Historical and Pro Forma Financial Data" included
elsewhere herein.
The following unaudited summary pro forma statement of operations data and
other data give effect to (i) the consummation of the Offering; (ii) the
significant business acquisitions of KZKI-TV, WGOT-TV and WTVX-TV in 1995; (iii)
the proposed significant business acquisition of the Fort Lauderdale radio
stations (WPLL-FM and WSRF-AM); (iv) the business acquisitions of Todd
Communications, Inc. (WFSJ-FM), WHUB, Inc. (WHUB-FM and WHUB-AM) and Southern
Broadcasting Companies, Inc. (WSNI-FM, WPAP-FM and WPBH-FM) and the proposed
business acquisitions of WDIZ-FM, WTKS-FM, WIOD-AM, KXLI-TV and Ponce Nicasio
Broadcasting Ltd. (KCMY-TV); (v) the sale of 10,300,000 shares of the Company's
Class A Common Stock effective April 3, 1996, and the related exercise of
certain common stock purchase warrants (the "Equity Offering"); (vi) the
termination of the put rights of the holders of Class A and Class B Common Stock
warrants; (vii) the issuance of the Notes; and (viii) the redemption of the
Senior Preferred Stock, as if such events had occurred on January 1, 1995. Other
Proposed Acquisitions are asset acquisitions or are immaterial both individually
and in the aggregate and therefore are not included in the pro forma financial
information. Where necessary, prior operators' fiscal years have been conformed
to the Company's December 31 year end. In addition, depreciation and
amortization expense and interest expense have been increased for each of the
periods presented to reflect the purchase of all stations included in the
Proposed Acquisitions and acquisitions which have closed subsequent to June 30,
1996. The following unaudited summary pro forma balance sheet data gives effect
to (i) the consummation of the Offering; (ii) the Proposed Acquisitions and
related capital expenditures; (iii) capital expenditures on existing properties;
(iv) acquisitions which have closed subsequent to June 30, 1996; and (v) the
redemption of the Senior Preferred Stock, as if such events had occurred on June
30, 1996. Certain management assumptions and adjustments are described in the
accompanying notes hereto. The pro forma information should be read in
conjunction with the Company's consolidated financial statements and the notes
thereto and the financial statements and notes thereto related to certain of the
Proposed Acquisitions included elsewhere in this Prospectus. See "Pro Forma
Financial Information" appearing elsewhere in this Prospectus. This pro forma
information is not necessarily indicative of the Company's actual or future
operating results or financial position.
11
<PAGE> 20
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED PRO FORMA
YEAR ENDED DECEMBER 31, JUNE 30, 1996 FOR TWELVE
------------------------------------------------------------- ------------------- MONTHS ENDED
PRO FORMA PRO JUNE 30,
1991 1992 1993 1994 1995 1995(A) ACTUAL FORMA(A) 1996(A)
------- ------- -------- ------- -------- --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenue........... $ 830 $17,062 $ 32,062 $62,067 $103,074 $ 138,296 $ 69,370 $ 82,208 $157,056
Operating expenses,
excluding depreciation,
amortization and option
plan compensation...... 1,719 17,922 28,872 51,225 82,103 110,228 51,724 61,728 119,750
Option plan
compensation(b)........ -- -- -- -- 10,803 10,803 2,292 2,292 3,691
Depreciation and
amortization........... 497 5,977 9,351 12,404 18,719 46,474 11,737 25,281 49,491
------- ------- -------- ------- -------- --------- -------- -------- --------
Income (loss) from
operations............. (1,386) (6,837) (6,161) (1,562) (8,551) (29,209) 3,617 (7,093) (15,876)
Interest expense........ (52) (1,262) (2,052) (5,210) (16,303) (38,966) (15,098) (19,483) (38,966)
Interest income......... -- -- 113 335 1,709 1,701 4,035 2,737 3,867
Other income (expense),
net.................... 10 134 108 (5) (982) (1,177) (559) (720) (1,976)
Benefit (provision) for
income taxes........... -- -- (2,960) 1,680 1,280 1,280 -- -- 640
Extraordinary item and
cumulative effect of a
change in accounting
principle(c)........... -- 110 (457) -- (10,626) (10,626) -- -- (10,626)
------- ------- -------- ------- -------- --------- -------- -------- --------
Net loss................ $(1,428) $(7,855) (11,409) (4,762) (33,473) (76,997) (8,005) (24,559) (62,937)
======= =======
Dividends and accretion
on preferred stock and
common stock
warrants(d)............ (151) (3,386) (13,297) (23,351) (7,414) (11,870) (23,550)
-------- ------- -------- --------- -------- -------- --------
Net loss attributable to
common stock........... $(11,560) $(8,148) $(46,770) $(100,348) $(15,419) $(36,429) $(86,487)
======== ======= ======== ========= ======== ======== ========
Net loss per share(e)... $ (0.36) $ (0.14) $ (0.97) $ (1.62) $ (0.20) $ (0.51) $ (1.32)
Net loss per share
attributable to common
stock(e)............... (0.37) (0.24) (1.36) (2.11) (0.38) (0.76) (1.81)
Weighted average shares
outstanding -- primary
and fully diluted(f)... 31,582 33,430 34,430 47,611 40,567 47,803 47,722
Cash dividends
declared............... -- -- -- -- -- -- -- -- --
OTHER DATA:
EBITDA(g)............... $ (796) $ (162) $ 4,522 $11,790 $ 24,582 $ 31,184 $ 20,380 $ 23,214 $ 40,953
Capital
expenditures(h)........ $ 60 $ 1,273 $ 1,963 $ 5,917 $ 25,017 $ 25,017 $ 13,936 $ 13,936 $ 29,364
Adjusted EBITDA(i)...... $ 47,406
Ratio of earnings to
combined fixed charges
and preferred stock
dividends(j)........... -- -- -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
-----------------------
ACTUAL PRO FORMA(A)
-------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................................................. $115,577 $ 434
Working capital............................................................................ 123,194 8,051
Total assets............................................................................... 437,449 663,774
Total debt................................................................................. 231,843 331,843
Redeemable preferred stock................................................................. 55,473 34,090
Redeemable exchangeable preferred stock ($150,000 initial liquidation preference).......... -- 143,750
</TABLE>
(see footnotes on the following page)
12
<PAGE> 21
NOTES TO SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS)
(a) Pro forma statement of operations data and other data for the six
months and twelve months ended June 30, 1996 and the year ended December 31,
1995 give effect to (i) the consummation of the Offering; (ii) the significant
business acquisitions of KZKI-TV, WGOT-TV and WTVX-TV in 1995; (iii) the
proposed significant business acquisition of the Fort Lauderdale radio stations
(WPLL-FM and WSRF-AM); (iv) the business acquisitions of Todd Communications,
Inc. (WFSJ-FM), WHUB, Inc. (WHUB-FM and WHUB-AM), and Southern Broadcasting
Companies, Inc. (WSNI-FM, WPAP-FM and WPBH-FM) and the proposed business
acquisitions of WDIZ-FM, WTKS-FM, WIOD-AM, KXLI-TV and Ponce Nicasio
Broadcasting Ltd. (KCMY-TV); (v) the Equity Offering; (vi) the termination of
the put rights of the holders of Class A and Class B Common Stock warrants;
(vii) the issuance of the Notes; and (viii) the redemption of the Senior
Preferred Stock, as if such events had occurred on January 1, 1995. Other
Proposed Acquisitions are asset acquisitions or are immaterial both individually
and in the aggregate and therefore are not included in the pro forma financial
information. Where necessary, prior operators' fiscal years have been conformed
to the Company's December 31 year end. In addition, depreciation and
amortization expense and interest expense have been increased for each of the
periods presented to reflect the purchase of all stations included in the
Proposed Acquisitions and acquisitions which have closed subsequent to June 30,
1996. The pro forma balance sheet data as of June 30, 1996 gives effect to: (i)
the consummation of the Offering; (ii) the Proposed Acquisitions and related
capital expenditures; (iii) capital expenditures on existing properties; (iv)
acquisitions which have closed subsequent to June 30, 1996; and (v) the
redemption of the Senior Preferred Stock, as if such events had occurred on June
30, 1996.
(b) Option plan compensation represents a non-cash charge associated with
the granting of common stock options to employees under the Company's Stock
Incentive Plan. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Results of Operations" and "Management -- Stock
Incentive Plan."
(c) Extraordinary item and cumulative effect of a change in accounting
principle reflects a gain of $110 in 1992 as a result of a change in the method
of calculating depreciation and an extraordinary loss of $457 and $10,626 in
1993 and 1995, respectively, associated with the write-off of capitalized
financing costs on debt retired.
(d) Dividends and accretion on preferred stock and common stock warrants
for the years ended December 31, 1993, 1994 and 1995 and the six months ended
June 30, 1996 represent the Senior Preferred Stock (15% dividend rate),
redeemable Class A and Class B common stock warrants and Existing Preferred
Stock (12% dividend rate). Such capital stock is mandatorily redeemable and
certain issues accrete. See "Description of Capital Stock."
(e) Loss per share data for the years ended December 31, 1993 and 1994 give
retroactive effect to (i) the Company's amended capital structure related to the
merger with ANG; and (ii) a stock dividend on common shares outstanding on
January 1, 1995. For periods prior to January 1, 1993, loss per share data was
not computed as such amounts were not relevant.
(f) Weighted average shares outstanding for the years ended December 31,
1993 and 1994 give retroactive effect to an increase in the weighted average
number of shares outstanding relating to (i) the merger with ANG of 21,055 and
22,287 shares, respectively; and (ii) a stock dividend on common shares
outstanding on January 1, 1995 of 10,527 and 11,143 shares, respectively. For
periods prior to January 1, 1993, weighted average shares outstanding was not
computed as such amounts were not relevant.
(g) EBITDA is defined as net income (loss) before (i) extraordinary item
and cumulative effect of a change in accounting principle; (ii) benefit
(provision) for income taxes; (iii) other income (expense), net; (iv) interest
expense, net, (v) time brokerage fees relating to financing of stations which
the Company has an agreement or option to acquire; (vi) depreciation and
amortization, including amortization of broadcast rights; (vii) option plan
compensation; and (viii) non-recurring items including terminated operations,
less scheduled broadcast rights payments. See "Certain Definitions and Market
and Industry Data."
13
<PAGE> 22
(h) Includes all capital expenditures including expenditures associated
with the upgrade and conversion of acquired and operated television stations to
the inTV format. Pro forma capital expenditures exclude $73,028 of capital
expenditures associated with the Proposed Acquisitions ($45,607) and additional
capital expenditures on existing properties ($27,421). These pro forma capital
expenditures have been included as uses of funds for purposes of calculating pro
forma total debt.
(i) Adjusted EBITDA is defined as EBITDA for the twelve month period ended
June 30, 1996, less (i) segment operating profit for the Infomall TV Network for
such period plus (ii) four times such segment's operating profit for the quarter
ended June 30, 1996. Adjusted EBITDA is calculated on a basis consistent with
calculations under the Exchange Indenture and the certificate of designation of
the New Preferred Stock. See "Certain Definitions and Market and Industry Data."
(j) For purposes of this calculation, earnings are defined as net loss
before income taxes, extraordinary items, the cumulative effect of a change in
accounting principle and fixed charges. Fixed charges consist of interest
expense, amortization of deferred financing costs and the component of operating
lease expense which management believes represents an appropriate interest
factor. Earnings were inadequate to cover combined fixed charges and preferred
stock dividends by approximately $1.4 million, $8.0 million, $8.1 million, $9.0
million, $32.7 million, and $12.8 million, for the years ended December 31,
1991, 1992, 1993, 1994 and 1995 and for the six-month period ended June 30,
1996, respectively. On a pro forma basis, earnings were insufficient to cover
combined fixed charges and preferred stock dividends by approximately $36.4
million, $76.5 million and $91.0 million for the six month and twelve month
periods ended June 30, 1996, and the year ended December 31, 1995, respectively.
14
<PAGE> 23
RISK FACTORS
Prospective investors should consider carefully the following risk factors
in addition to the other information set forth in or incorporated by reference
in this Prospectus before purchasing the New Preferred Stock.
HIGH LEVEL OF INDEBTEDNESS; ABILITY TO SERVICE INDEBTEDNESS AND SATISFY
PREFERRED STOCK DIVIDEND REQUIREMENTS
The Company is highly leveraged. At June 30, 1996, on a pro forma basis,
after giving effect to this Offering, the Proposed Acquisitions and related
capital expenditures, estimated capital expenditures on existing properties and
acquisitions which have closed subsequent to June 30, 1996, the Company would
have had $331.8 million of total debt and $189.4 million of redeemable preferred
stock inclusive of accumulated and unpaid dividends, including the New Preferred
Stock. In addition, subject to restrictions in the indenture governing the Notes
(the "Indenture"), the Company's $100 million senior secured revolving credit
facility (the "Credit Facility"), and the terms of the Company's Junior
Cumulative Compounding Redeemable Preferred Stock (the "Existing Preferred
Stock") and the New Preferred Stock, the Company may incur additional
indebtedness and issue additional shares of preferred stock from time to time to
finance acquisitions or capital expenditures or for other corporate purposes.
Interest expense for the years ended December 31, 1993, 1994 and 1995 was $2.1
million, $5.2 million and $16.3 million, respectively, and was $15.1 million for
the six months ended June 30, 1996.
The level of the Company's indebtedness could have important consequences
to holders of the New Preferred Stock, including: (i) a significant portion of
the Company's cash flow from operations must be dedicated to debt service and
will not be available for other purposes; (ii) the Company's ability to obtain
additional financing in the future, if needed, may be limited; (iii) the
Company's leveraged position and covenants contained in the Indenture and the
Credit Facility (or any replacement thereof) could limit its ability to expand
and make capital improvements and acquisitions; (iv) the Indenture and the
Credit Facility contain certain restrictive covenants, including covenants that
restrict or prohibit the payment of dividends or other distributions by the
Company to its stockholders; and (v) the Company's level of indebtedness could
make it more vulnerable to economic downturns, limit its ability to withstand
competitive pressures and limit its flexibility in reacting to changes in its
industry and economic conditions generally. Certain of the Company's competitors
currently operate on a less leveraged basis and may have significantly greater
operating and financing flexibility than the Company.
The Company also has substantial dividend and redemption obligations under
the Existing Preferred Stock. Dividends accrue on the Existing Preferred Stock
at an annual rate of 12% of the liquidation price thereof. Until December 22,
1999, the Company has the option to defer cash payment of accrued dividends, in
which case all dividends which have accrued as of January 1 and July 1 of each
year are added to the liquidation price of the Existing Preferred Stock. To
date, the Company has paid no cash dividends on the Existing Preferred Stock,
and as of June 30, 1996, there was an aggregate of $6,419,822 in accrued and
unpaid dividends thereon. The Company is obligated to redeem on December 22,
2003, out of unrestricted funds legally available therefor, all the shares of
the Existing Preferred Stock then outstanding, at a redemption price equal to
the liquidation price for such shares, as of the redemption date, plus the
amount of all accrued and unpaid dividends thereon, payable in cash. Holders of
shares of the Existing Preferred Stock are entitled to require the Company to
redeem their shares of Existing Preferred Stock upon the occurrence of a
bankruptcy or similar event relating to the Company or the default by the
Company under the terms of the Stockholders Agreement. Failure or inability of
the Company to pay amounts which become payable with respect to the Existing
Preferred Stock could have adverse consequences to the holders of the New
Preferred Stock. See "Description of Capital Stock -- Existing Preferred Stock."
The Company's ability to pay cash dividends on, and satisfy its redemption
obligations in respect of, the New Preferred Stock and to satisfy its debt
obligations and its dividend and redemption obligations with respect to the
Existing Preferred Stock will depend upon its future operating performance,
which will be affected by prevailing economic conditions and financial, business
and other factors, many of which are beyond
15
<PAGE> 24
its control. The Company expects that its operating cash flow will be sufficient
to meet its operating expenses, service its debt and fund payment of any cash
dividend requirements on the Preferred Stock as such obligations become due. If
the Company is unable to service its indebtedness or make required cash payments
with respect to its Preferred Stock, it will be forced to adopt an alternative
strategy that may include actions such as reducing or delaying capital
expenditures, selling assets, restructuring or refinancing its indebtedness or
seeking additional equity capital. There can be no assurance that any of these
strategies could be effected on satisfactory terms, if at all, and the
implementation of any of these alternative strategies could have a negative
impact on the value of the New Preferred Stock. In the event of a liquidation of
the Company, the New Preferred Stock would be subordinate in right of payment to
the Company's debt instruments and its Existing Preferred Stock, as well as
other indebtedness incurred and any preferred stock which the Company may issue
ranking senior to the New Preferred Stock. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
HISTORY OF NET LOSSES; INSUFFICIENCY OF EARNINGS TO COVER FIXED CHARGES
The Company has incurred net losses in each of its fiscal years since
inception. Net losses for the fiscal years ended December 31, 1993, 1994 and
1995 were $11.4 million, $4.8 million and $33.5 million, respectively, and for
the six months ended June 30, 1996, the Company incurred a net loss of $8.0
million. As a result of the foregoing, for the year ended December 31, 1995 and
on a pro forma basis for the six months ended June 30, 1996, the Company's
earnings would have been insufficient to cover combined fixed charges and
preferred stock dividend requirements by approximately $32.7 million and $36.4
million, respectively. The Company expects to continue to experience net losses
in the foreseeable future, principally as a result of non-cash charges for
depreciation and amortization expense related to fixed assets and goodwill
relating to acquisitions, including the Proposed Acquisitions, which may be
greater than the net losses experienced by the Company in the past.
LIMITATIONS ON ABILITY TO PAY DIVIDENDS
The Credit Facility prohibits the payment of cash dividends on the New
Preferred Stock through the maturity of the borrowings under the Credit Facility
in 2002. For all dividend payment dates through and including October, 2001, the
Company may, at its option, pay dividends by issuing additional shares of New
Preferred Stock with an aggregate liquidation preference equal to the amount of
such dividends. After October 31, 2002, if the Company is in arrears in the
payment of dividends for three or more semi-annual dividend periods, the holders
of the New Preferred Stock will be permitted to elect the lesser of two
directors or that number of directors constituting 25% of the board of directors
of the Company.
The terms of the Existing Preferred Stock provide that the Company may not
declare or pay any cash dividends or make any cash distributions in respect of
the New Preferred Stock until all accrued and unpaid dividends on the Existing
Preferred Stock have been declared and paid and, in the event the Company is
required to redeem the Existing Preferred Stock, monies sufficient for such
purpose have been set aside. The Indenture also limits the ability of the
Company to pay cash dividends to holders of its capital stock.
In addition to the limitations imposed on the payment of dividends by the
Credit Facility, the Indenture and the terms of the Existing Preferred Stock,
under Delaware law the Company is permitted to pay dividends on its capital
stock, including the New Preferred Stock, only out of its surplus or, in the
event that it has no surplus, out its net profits for the year in which a
dividend is declared or for the immediately preceding fiscal year. Surplus is
defined as the excess of a company's total assets over the sum of its total
liabilities plus the par value of its outstanding capital stock. In order to pay
dividends in cash, the Company must have surplus or net profits equal to the
full amount of the cash dividend at the time such dividend is declared. In
determining the Company's ability to pay dividends, Delaware law permits the
board of directors of the Company to revalue the Company's assets and
liabilities from time to time to their fair market values in order to create
surplus. The Company cannot predict what the value of its assets or the amount
of its liabilities will be in the future and, accordingly, there can be no
assurance that the Company will be able to pay cash dividends on the New
Preferred Stock.
16
<PAGE> 25
RANKING OF THE NEW PREFERRED STOCK; SUBORDINATION OF EXCHANGE DEBENTURES
The New Preferred Stock will rank junior in right of payment upon
liquidation to all existing and future indebtedness of the Company and to all
shares of preferred stock of the Company (including the Existing Preferred
Stock) other than preferred stock which by its terms ranks on a parity with or
junior to the New Preferred Stock. The New Preferred Stock will rank senior in
right of payment upon liquidation to the Common Stock (as defined). The payment
of principal, premium, if any, and interest on, and any other amounts owing in
respect of, the Exchange Debentures, if issued, will be subordinated to the
prior payment in full of all existing and future Senior Debt of the Company. As
of June 30, 1996, on a pro forma basis after giving effect to the Proposed
Acquisitions and the Offering and the application of the net proceeds therefrom,
approximately $104.3 million of Senior Debt would have been outstanding
(represented by secured borrowings and borrowings under the Credit Facility) and
the Company would have had no further borrowing availability under the Credit
Facility. The Company is negotiating with its lenders to increase the aggregate
commitment of the Credit Facility. The Indenture, the Credit Facility and the
Exchange Indenture limit the incurrence by the Company of additional
indebtedness. In the event of the bankruptcy, liquidation, dissolution,
reorganization or other winding up of the Company, the assets of the Company
will be available to pay obligations on the Exchange Debentures only after all
Senior Debt has been paid in full, and there may not be sufficient assets
remaining to pay amounts due on any or all of the Exchange Debentures. In
addition, under certain circumstances, the Company may not pay principal of,
premium, if any, or interest on, or any other amounts owing in respect of, the
Exchange Debentures, or purchase, redeem or otherwise retire the Exchange
Debentures, if a payment default or a non-payment default exists with respect to
certain Senior Debt, including Senior Debt under the Indenture and the Credit
Facility. See "Description of the New Preferred Stock and Exchange
Debentures -- The Exchange Debentures -- Subordination."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Credit Facility and the Indenture each contain certain covenants that
restrict, among other things, the Company's ability to incur additional
indebtedness, incur liens, make investments, pay dividends or make certain other
restricted payments, consummate certain asset sales, consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company. The Indenture may limit the
ability of the Company to pay interest on the Exchange Debentures by issuing
additional Exchange Debentures in lieu of cash interest. In addition, the Credit
Facility also requires the Company to comply with certain financial ratios and
tests, under which the Company is required to achieve certain financial and
operating results. The Company's ability to meet these financial ratios and
tests may be affected by events beyond its control, and there can be no
assurance that they will be met. In the event of such a default under the Credit
Facility, the lenders thereunder may terminate their lending commitments and
declare the indebtedness under the Credit Facility immediately due and payable,
which would result in a default under the Notes. There can be no assurance that
the Company would have sufficient assets to pay indebtedness then outstanding
under the Credit Facility and the Notes. Any refinancing of the Credit Facility
is likely to contain similar restrictive covenants.
RESTRICTIONS IMPOSED BY TERMS OF EXISTING PREFERRED STOCK
The terms of the Existing Preferred Stock provide that the Company may not
declare or pay any cash dividends or make any cash distributions in respect of
the New Preferred Stock until all accrued and unpaid dividends on the Existing
Preferred Stock have been declared and paid and, in the event the Company is
required to redeem the Existing Preferred Stock, monies sufficient for such
purpose have been set aside. So long as any shares of Existing Preferred Stock
remain outstanding, the Company may not directly or indirectly purchase, redeem,
exchange or otherwise acquire the New Preferred Stock or any Common Stock,
including the exchange of the New Preferred Stock for the Exchange Debentures.
The dividend rate on the Existing Preferred Stock will increase to an annual
rate of 30% (i) upon the occurrence of certain bankruptcy events, (ii) upon a
change of control of the Company, as defined in the Stockholders Agreement (as
defined), (iii) upon the failure to choose a successor to Mr. Paxson in the
event of his death or incapacity as provided in the Stockholders Agreement, (iv)
if the Company incurs indebtedness in excess of that permitted by certain
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<PAGE> 26
financial leverage ratios, (v) upon the failure to pay cash dividends on or
after December 22, 2000, equal to the amount of dividends payable in any twelve
month period or (vi) if the Existing Preferred Stock remains outstanding after
December 22, 2003. Such increased dividend rate shall remain in effect for so
long as any such event continues and will increase by 5% on each anniversary of
such event or, in the case of a bankruptcy event, upon the failure of the
Company to redeem the Existing Preferred Stock at the request of the holders
thereof. See "Description of Capital Stock -- Existing Preferred Stock."
DEPENDENCE ON KEY PERSONNEL
The Company's business depends upon the efforts, abilities and expertise of
its executive officers and other key employees, including Lowell W. Paxson. If
certain of these executive officers were to leave the Company, the Company's
operating results could be adversely affected. In addition, in the event of Mr.
Paxson's death, the Company may be required, in certain circumstances, to make
an offer to repurchase the Notes and to redeem its Existing Preferred Stock. See
"Certain Transactions -- Stockholders Agreement." There can be no assurance that
if such an event were to occur, the Company would have, or would have access to,
sufficient funds to satisfy such repurchase or redemption obligations. The
Company maintains insurance on Mr. Paxson's life in the amount of five million
dollars. Mr. Paxson has an employment agreement that expires on December 31,
1999, unless terminated sooner as permitted therein. See "Management --
Employment Agreements."
"MUST CARRY" REGULATIONS
The Company believes that its growth and success depend in part upon access
to households served by cable television systems. Pursuant to the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act"), each broadcaster is required to elect, every three years, to exercise
either certain "must carry" or retransmission consent rights in connection with
carriage of their signals by cable systems in their local market. By electing
the "must carry" rights, a broadcaster can demand carriage on a specified
channel on cable systems within its area of dominant influence, as defined by
Arbitron ("ADI"), provided the broadcaster's television signal can be delivered
to the cable system operator's cable head end at a specified strength. These
"must carry" rights are not absolute, and their exercise depends on variables
such as the number of activated channels on a cable system, the location and
size of a cable system, and the amount of duplicative programming on a broadcast
station. Therefore, under certain circumstances, a cable system can decline to
carry a given station. Alternatively, if a broadcaster chooses to exercise
retransmission consent rights, it can prohibit cable systems from carrying its
signal or grant the appropriate cable system the authority to retransmit the
broadcast signal for a fee or other consideration. The Company's television
stations have elected the "must carry" alternative. The Company's elections of
retransmission or "must carry" status will continue until the next required
election date of October 1, 1996, which elections will govern the period January
1, 1997 to December 31, 1999.
The "must carry" rules have been subject to judicial scrutiny. In April
1993, the United States District Court for the District of Columbia upheld the
constitutionality of the "must carry" provisions. In June 1994, the Supreme
Court ruled that the "must carry" provisions were content-neutral, and thus not
subject to strict scrutiny, but remanded the case to the lower federal court
with instructions to hold further proceedings with respect to evidence that lack
of the "must carry" requirements would harm local broadcasting. On December 12,
1995, the District Court again upheld the constitutionality of the "must carry"
provisions. The District Court's most recent decision has been appealed to the
Supreme Court and management cannot predict the final outcome of the Supreme
Court case or the extent to which, in the absence of any "must carry"
obligation, its television stations might lose viewers because of the deletion
or repositioning of its signal on cable television systems or the Company might
have to seek to enter into agreements requiring it to make payments in order to
obtain carriage of its signal. See "Business -- Federal Regulation of
Broadcasting."
GOVERNMENT REGULATION
Each of the Company's radio and television stations operates pursuant to
one or more licenses issued by the Federal Communications Commission (the "FCC")
that expire at different times, commencing in October 1996. The Company may
apply to renew those licenses, and third parties may challenge those
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<PAGE> 27
applications. Although the Company has no reason to believe that its licenses
will not be renewed in the ordinary course, there can be no assurance that the
licenses will be renewed.
The radio and television broadcasting industries are subject to extensive
and changing regulation. Among other things, the Communications Act of 1934, as
amended (the "Communications Act"), and FCC rules and policies require FCC
consent to assignments of FCC licenses and transfers of control of corporations
or other entities holding broadcast licenses. Congress and the FCC currently
have under consideration and may in the future adopt new laws and regulations
and policies regarding a wide variety of matters which could, directly or
indirectly, adversely affect the ownership and operation of the Company's
broadcast properties, as well as the Company's business strategies. In addition,
relaxation of the existing multiple ownership and cross-ownership rules and
policies by the FCC, as provided in the newly-enacted Telecommunications Act of
1996 (the "1996 Act"), removes certain restrictions on larger media,
entertainment and telecommunications companies, with greater access to capital
and resources than the Company, from competing with the Company for the
acquisition of media properties and the negotiation of programming arrangements.
Changes in the FCC's rules following passage of the 1996 Act, such as
elimination of restrictions on the offering of multiple network services by the
existing major television networks, the relaxation of restrictions on the
participation by the regional Bell holding companies in cable television and
other direct-to-home video technologies, the removal of nationwide restrictions
and the relaxation of local restrictions on radio broadcast ownership and the
relaxation of restrictions on nationwide broadcast television ownership could
accelerate the existing trend toward vertical integration in the
telecommunications, media and home entertainment industries and cause the
Company to face more formidable competition in the future. See
"Business -- Federal Regulation of Broadcasting."
MULTIPLE OWNERSHIP RULES; TIME BROKERAGE AGREEMENTS
Current FCC rules prohibit ownership interests in two or more television
stations with overlapping service areas. The FCC generally applies its ownership
limits to attributable interests held by an individual, corporation, partnership
or other entity. In the case of corporations holding broadcast licenses, the
interests of officers, directors and those who directly or indirectly have the
right to vote 5% or more of the corporation's voting stock (or 10% or more of
such stock in the case of insurance companies, certain regulated investment
companies and bank trust departments) are generally deemed to be attributable,
as are the interests of officers and directors of a corporate parent of a
broadcast licensee. Changes in the rule for attributing the ownership of media
interests for purposes of the FCC's multiple ownership and cross-ownership rules
could require that the Company restructure or divest itself of some existing
broadcast interests.
The 1996 Act eliminated the existing restrictions on the number of
television stations that a single entity may own nationwide and increased the
nationwide ceiling for national television audience reach to 35% of the
television households, with UHF stations counting only 50% of their respective
market television households. Congress also has directed the FCC to institute a
proceeding to review its present rules to determine whether to retain, modify or
eliminate its present restrictions on the number of television stations in which
a single entity may hold an attributable interest within a single market.
Prior to passage of the 1996 Act, the FCC initiated rule making proceedings
to consider proposals to modify its television ownership restrictions, including
rule makings that may permit ownership, in some circumstances, of two television
stations with overlapping service areas, and these rule making procedures may be
incorporated in the proceedings required by the 1996 Act. The FCC also is
considering in these proceedings whether to adopt restrictions on television
time brokerage agreements. The television duopoly and one-to-a-market rules
currently prevent the Company from acquiring the FCC licenses of television
stations with which it has time brokerage agreements in those markets where the
Company owns a television or radio station. In addition, if the FCC were to
decide that the provider of programming services under time brokerage agreements
should be treated as having an attributable ownership in the television station
it programs, and if it did not relax the corresponding duopoly rules, or if the
FCC were to adopt restrictions on time brokerage agreements without
grandfathering existing time brokerage agreements, the Company could be required
to renegotiate or terminate certain of its time brokerage agreements. The 1996
Act specifies, however, that none of the provisions relating to broadcast
ownership shall be construed to prohibit the origination, continuation or
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<PAGE> 28
renewal of any television time brokerage agreement that is in compliance with
the regulations of the FCC. The Committee Report accompanying the 1996 Act notes
that the Act grandfathers time brokerage agreements in existence upon enactment
of the act and allows time brokerage agreements in the future, consistent with
the FCC's rules. Nevertheless, if in individual cases the FCC were to find that
the licensee of a station with which the Company has a time brokerage agreement
failed to maintain control over its operations as required by FCC rules and
policies, the licensee of the time brokerage agreement and/or the Company could
be fined or could be set for hearing, the outcome of which could be a fine or,
under certain circumstances, loss of the applicable FCC license. The Company is
unable to predict the ultimate outcome of possible changes to these FCC rules
and the impact such FCC rules may have on its broadcasting operations. See
"Business -- Federal Regulation of Broadcasting."
NEW INDUSTRY
inTV operates in a relatively new industry with a limited operating
history. Potential investors should be aware of the difficulties and uncertainty
that are normally associated with new industries, including a lack of consumer
and advertiser acceptance, difficulty in obtaining financing, increasing
competition, advances in technology, and changes in law and regulations. There
can be no assurance that this new industry will develop and continue as a viable
industry. The failure of this industry to develop could require the Company to
sell its owned inTV stations or convert them to other uses that are less
profitable than expected. Growth in revenue from the Company's inTV business
depends on increasing consumer awareness and acceptance of infomercial
programming and growing demand by infomercial advertisers. See "Business --
Infomall TV Network."
CHANGE OF CONTROL
Upon a Change of Control, the Company will be required to offer to purchase
all of the shares of New Preferred Stock then outstanding at 101% of the then
effective liquidation preference plus, without duplication, accumulated and
unpaid dividends to the repurchase date. There can be no assurance that, were a
Change of Control to occur, the Company would have sufficient funds to pay the
purchase price for all the shares of New Preferred Stock which the Company might
be required to purchase. In such event, the Company could be required to seek
third party financing to the extent it did not have sufficient available funds
to meet its purchase obligations, and there can be no assurance that the Company
would be able to obtain such financing on favorable terms, if at all. Further,
the Credit Facility, the Indenture and the terms of the Existing Preferred Stock
restrict the Company's ability to repurchase shares of New Preferred Stock,
including upon a Change of Control.
A "change of control" (as defined in the Credit Facility) constitutes an
event of default under the Credit Facility. In the event of a "change of
control" (as defined in the Indenture), the Company will be required to offer to
repurchase all of the outstanding Notes at a price equal to 101% of the
principal amount thereof plus any accrued and unpaid interest thereon to the
date of the purchase. A "change of control" (as defined with respect to the
Existing Preferred Stock) will require the Company to pay a significantly higher
dividend on the Existing Preferred Stock, unless it is redeemed. The repurchase
by the Company of the Notes upon a change of control could also cause a default
under the Credit Facility. There can be no assurance that in the event of any
such change of control, the Company will have, or will have access to,
sufficient funds or will be contractually permitted under the terms of
outstanding indebtedness to repay its indebtedness under the Credit Facility,
pay the required purchase price for all Notes or shares of New Preferred Stock
tendered by holders upon a change of control, repay other outstanding
indebtedness or redeem Existing Preferred Stock, and it is unlikely that in such
event the Company would be able to repurchase shares of New Preferred Stock. See
"Description of Capital Stock."
CERTAIN TAX CONSIDERATIONS
Distributions on the New Preferred Stock, whether paid in cash or in
additional shares of New Preferred Stock, will be taxable as ordinary dividend
income to the extent of the Company's current and accumulated earnings and
profits. A holder's initial tax basis in any additional shares of New Preferred
Stock distributed by the Company in lieu of cash dividend payments on the New
Preferred Stock ("Dividend Shares") will equal
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<PAGE> 29
the fair market value of such Dividend Shares on their date of distribution. In
addition, depending on the fair market value of shares of New Preferred Stock on
the date of their issuance, holders may be required to include additional
amounts of income based on the difference between (x) the fair market value of
such shares on the date of their issuance and (y) the amount payable in
redemption of such shares, unless the difference is de minimis under the
applicable standard (such difference being referred to as "Preferred Stock
Discount"). See "Certain Federal Income Tax Considerations -- Preferred Stock
Discount." If shares of New Preferred Stock (including Dividend Shares) bear
Preferred Stock Discount, such shares generally will have different tax
characteristics from other shares of New Preferred Stock and might trade
separately, which might adversely affect the liquidity of such shares.
Upon an exchange of New Preferred Stock for Exchange Debentures, the holder
generally should have capital gain or loss equal to the difference between the
issue price of the Exchange Debentures received and the holder's adjusted basis
in the New Preferred Stock redeemed. For a discussion of how to determine the
issue price of the Exchange Debentures, see "Certain Federal Income Tax
Considerations -- Redemption and Exchange of New Preferred Stock." Holders
should also note that if shares of New Preferred Stock are exchanged for
Exchange Debentures and the stated redemption price at maturity of such Exchange
Debentures exceeds their issue price by more than a de minimis amount, the
Exchange Debentures will be treated as having original issue discount ("OID")
equal to the entire amount of such excess.
For a discussion of these and other relevant tax issues, see "Certain
Federal Income Tax Considerations."
DISCRETION OF MANAGEMENT CONCERNING USE OF PROCEEDS
A portion of the net proceeds of this Offering is anticipated to be used to
fund the Proposed Acquisitions and expected capital expenditures. It is
anticipated that pending such use, such proceeds will be invested in certain
short-term investments. The Company is also negotiating to increase the
aggregate commitment under the Credit Facility and is considering the sale of
its network-affiliated television operations. The proceeds of this Offering,
together with the Company's existing working capital and funds which may become
available to the Company if the aggregate commitment under the Credit Facility
is increased or if it completes a sale of its network-affiliated television
operations, or if any of the Proposed Acquisitions is abandoned, could
constitute a significant amount of funds available to the Company, over the
application of which management will have substantial discretion, including
funding additional broadcast and non-broadcast acquisition opportunities that
may arise that are not included in the Proposed Acquisitions. There can be no
assurance the Company will deploy such funds in a manner that will enhance the
financial condition of the Company. See "Use of Proceeds."
FRAUDULENT CONVEYANCE
Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be utilized by a court to subordinate or avoid the Exchange
Debentures in favor of other existing or future creditors of the Company. If a
court in a lawsuit on behalf of any unpaid creditor of the Company or a
representative of the Company's creditors were to find that, at the time the
Company issued the Exchange Debentures, the Company (x) intended to hinder,
delay or defraud any existing or future creditor or contemplated insolvency with
a design to prefer one or more creditors to the exclusion in whole or in part of
others or (y) did not receive fair consideration or reasonably equivalent value
for issuing such Exchange Debentures and the Company (i) was insolvent, (ii) was
rendered insolvent by reason of such issuance, (iii) was engaged or about to
engage in a business or transaction for which its remaining assets constituted
unreasonably small capital to carry on its business or (iv) intended to incur,
or believed that it would incur, debts beyond its ability to pay such debts as
they matured, such court could void the Company's obligations under the Exchange
Debentures and void such transactions. Alternatively, in such event, claims of
the holders of such Exchange Debentures could be subordinated to claims of the
other creditors of the Company.
ABILITY TO MANAGE GROWTH
Since inception, the Company has experienced rapid growth, primarily
through acquisitions. Rapidly growing businesses frequently encounter unforeseen
expenses and delays in completing acquisitions, as well as difficulties and
complications in integrating acquired operations without disruption to overall
operations. In
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<PAGE> 30
addition, such rapid growth may adversely affect the Company's operating results
because of many factors, including capital requirements, transitional management
and operating adjustments, and interest costs associated with acquisition debt.
There can be no assurance that the Company will successfully integrate recently
acquired and future acquired operations or successfully manage the costs often
associated with rapid growth. While the Company has no probable or pending
significant acquisitions other than the Proposed Acquisitions, the Company
continuously evaluates the acquisition or operation of additional television and
radio stations.
TIME BROKERAGE AGREEMENTS -- RIGHTS OF PREEMPTION AND TERMINATION
The Company operates ten television stations pursuant to time brokerage
agreements, which stations are not owned by the Company. All of the Company's
time brokerage agreements allow, in accordance with FCC rules, regulations and
policies, preemption of the Company's programming by the FCC licensee of each
station with which the Company has a time brokerage agreement. In addition, each
time brokerage agreement provides that under certain limited circumstances it
may be terminated by the FCC licensee. Accordingly, there can be no assurance
that the Company will be able to air all the programming expected to be aired on
those stations with which it has a time brokerage agreement or that the Company
will receive the expected advertising revenue from the sale of advertising in
such programming. Although the Company believes that the terms and conditions of
each of its time brokerage agreements should enable the Company to air and
utilize the programming and other non-broadcast license assets of the respective
stations, there can be no assurance that early terminations of the time
brokerage agreements or unexpected preemptions of all or a significant part of
the programming by the FCC licensee of such stations will not occur. An early
termination of the Company's time brokerage agreements or repeated and material
preemptions of programming could adversely affect the Company's operations. In
addition, the Company's time brokerage agreements generally have expiration
dates ranging from seven to ten years. The Company expects its future time
brokerage agreements to have terms of not more than ten years. There can be no
assurance that the Company will be able to negotiate extensions of its time
brokerage agreements on terms satisfactory to the Company.
INDUSTRY AND ECONOMIC CONDITIONS; SEASONALITY
The profitability of the Company's radio and television stations is subject
to various factors that influence the radio and television broadcasting
industries as a whole. The Company's radio and television stations may be
affected by numerous factors, including changes in audience tastes, priorities
of advertisers, new laws and governmental regulations and policies, changes in
broadcast technical requirements, technological changes, proposals to eliminate
the tax deductibility of expenses incurred by advertisers and changes in the
willingness of financial institutions and other lenders to finance radio and
television station acquisitions and operations. The Company cannot predict
which, if any, of these or other factors might have a significant impact on the
radio and television broadcasting industry in the future, nor can it predict
what impact, if any, the occurrence of these or other events might have on the
Company's operations. Generally, advertising tends to decline during economic
recession or downturn. Consequently, the Company's broadcasting revenue is
likely to be adversely affected by a recession or downturn in the United States
economy or other events or circumstances that adversely affect advertising
activity. In addition, the Company's operating results in individual geographic
markets could be adversely affected by local regional economic downturns,
particularly in Florida. Seasonal revenue fluctuations are common in the radio
and television broadcasting industry and result primarily from fluctuations in
advertising expenditures by local retailers. Paxson Radio and Paxson
Network-Affiliated Television generally experience their lowest revenue for the
year in the first quarter, whereas their highest revenue generally occurs in the
fourth quarter. Because of the short operating history of inTV, the Company's
ability to assess the effects of seasonality on inTV is limited. It appears,
however, that inTV may experience its highest revenues in the first and fourth
quarters.
COMPETITION
The Company's radio and network-affiliated television stations are located
in highly competitive markets. The financial success of each of the Company's
radio and network-affiliated television stations depends, to a significant
degree, upon its audience ratings, its share of the overall radio (or television
as applicable) sales
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<PAGE> 31
within its geographic market, the economic health of the market and the
popularity of its programming. The audience ratings and advertising of such
individual stations are subject to change and any adverse change in a particular
market could have a material adverse effect on the revenue and operating cash
flow of the Company. Paxson Radio stations compete for audience share and
advertising revenue directly with other FM and AM radio stations and with other
media within their respective markets. Although Paxson Radio competes with other
radio stations with comparable programming formats in most of its markets, if
another station in the market were to convert its programming format to a format
similar to one of the Company's radio stations, if a new radio station were to
adopt a competitive format or if an existing competitor were to strengthen its
operations, the Company's stations could suffer a reduction in ratings or
advertising revenue and could require increased promotional and other expenses.
Paxson Network-Affiliated Television stations face similar competitive forces.
In addition, to the extent that certain of the Company's competitors have, or
may in the future obtain, greater resources than the Company, its ability to
compete successfully in its broadcasting markets may be impeded. There can be no
assurance that the Company will be able to maintain or increase its current
audience ratings and advertising revenue. See "Business -- Competition."
The Company's owned and operated inTV stations face significant competition
from various broadcasting stations and broadcasting and cable networks that air
both traditional and long-form paid programming in varied amounts, as well as
local cable operators and their agents that sell blocks of time to long-form
advertisers and could encounter competition from developments in technology that
may be subsequently commercialized. To the extent that the Infomall TV Network
is successful, it is likely that the Company will face additional competition
from new market entrants, which may have greater financial resources than the
Company. See "Business -- Competition."
TECHNOLOGY CHANGES
Radio and television broadcasting are also subject to competition with new
media technologies that are being developed or have been introduced, such as,
for radio, the delivery of audio programming through cable television, telephone
or electrical wires or the introduction of digital audio broadcasting ("DAB")
and, for television, direct satellite-to-home video programming and so-called
video dialtone in which telephone or other companies provide broad-band wire
links for delivery of video programming to homes by independent program
suppliers. DAB may provide a medium for the delivery by satellite or terrestrial
means of multiple audio programming formats to local and national audiences.
Further, the Company may be subject to other changes in technology and the
manner in which businesses and individual households adopt such technologies and
embrace new communication and distribution channels available via the Internet,
World Wide Web, and other such broadband networks. Prospective technology
enhancements may allow for increased economic, distribution and communication
efficiencies which may impact the Company. The Company cannot predict the
effect, if any, that these or other new technologies may have on the industries
in which the Company operates, or on the Company. See "Business -- Federal
Regulation of Broadcasting."
LACK OF ESTABLISHED MARKET FOR THE NEW PREFERRED STOCK
Prior to the Offering, there has been no market for the New Preferred
Stock. The Company does not intend to list the New Preferred Stock on any
securities exchange, and there can be no assurance that a trading market for the
New Preferred Stock will develop and continue after the Offering. The
Underwriters have advised the Company that they currently intend to make a
market in the New Preferred Stock, but they are not obligated to do so and may
discontinue market making activities at any time. If a market for the New
Preferred Stock were to develop, the New Preferred Stock could trade at prices
that may be lower than the initial offering price and could be subject to
significant fluctuations in response to quarterly and annual operating results
of the Company, announcements of technological improvements or new products by
the Company or its competitors, changes in financial estimates by securities
analysts, changes in general conditions in the economy, the financial markets,
or the broadcasting, advertising or television retail shopping industries, or
other developments affecting the Company, its customers or its competitors, some
of which may be unrelated to the Company's performance and beyond the Company's
control.
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<PAGE> 32
THE PROPOSED ACQUISITIONS AND CAPITAL EXPENDITURES
The Company currently has agreements, subject to various conditions
including the receipt of regulatory approvals, to acquire, invest in, purchase
the assets of or, as indicated below, finance the acquisition of assets of, and
enter into time brokerage agreements (or in the case of WHBI-TV, an affiliation
agreement) with respect to, the following television stations (the "Proposed
inTV Acquisitions") and radio stations (the "Proposed Radio Acquisitions" and,
collectively with the Proposed inTV Acquisitions, the "Proposed Acquisitions")
(dollars in thousands):
<TABLE>
<CAPTION>
ACTUAL OR
ANTICIPATED
COMMENCEMENT
OF PURCHASE
MARKET(1) STATION OPERATIONS PRICE
------------------------------------------ --------------- ------------ --------
<S> <C> <C> <C>
TELEVISION
Dallas, TX.............................. Channel 68 12/96 $ 3,000
Minneapolis, MN......................... KXLI-TV 10/96 12,000
Phoenix, AZ............................. KAJW-TV 1/97 12,000
Salt Lake City, UT...................... KOOG-TV 3/97 7,700
Grand Rapids, MI........................ WJUE-TV(2) 10/96 1,000
Oklahoma City, OK....................... KMNZ-TV 2/97 6,500
West Palm Beach, FL..................... WHBI-TV(3) 2/97 3,000
Providence, RI.......................... WOST-TV(4) 12/96 1,000
Tulsa, OK............................... KGLB-TV 2/97 825
Birmingham, AL.......................... WNAL-TV 9/96 10,000
Seattle, WA............................. KBCB-TV 6/97 8,000
Little Rock, AR......................... KVUT-TV 6/97 2,500
Sacramento, CA.......................... KCMY-TV 7/95 17,000
RADIO
Miami/Ft. Lauderdale, FL................ WPLL-FM and
WSRF-AM(5) 5/96 57,500
WIOD-AM 10/96 13,000
Tampa, FL............................... WKES-FM 2/97 35,323
Jacksonville, FL........................ WPVJ-FM(6) 12/96 4,000
Orlando, FL............................. WDIZ-FM(5) 6/96 22,000
WTKS-FM(5) 6/96 25,000
Expected Capital Expenditures(7).......... 73,028
Less Deposits and Other Amounts Paid as of
June 30, 1996........................... (20,503)
Less Common Stock to be Issued............ (11,000)
--------
Proposed Acquisitions and
Expected
Capital Expenditures.......... $282,873
========
</TABLE>
- ---------------
(1) Each station is licensed by the FCC to serve a specific community which is
included in the listed market.
(2) 70% ownership interest to be acquired.
(3) Pending inTV affiliate; see "Business -- Time Brokerage Agreements and Other
Interests in Broadcast Stations."
(4) 50% ownership interest to be acquired. See "Business -- Time Brokerage
Agreements and Other Interests in Broadcast Stations."
(5) Operated pursuant to a time brokerage agreement pending completion of
acquisition.
(6) Station not currently operating.
(7) Includes $45.6 million of capital expenditures associated with the Proposed
Acquisitions and $27.4 million of capital expenditures for existing
properties.
The Company regularly considers the acquisition of broadcasting and other
properties and businesses, and at any given time is in various stages of
considering such opportunities. Typically, consummation of potential
acquisitions is subject to various contingencies, including various regulatory
approvals. Consummation of potential acquisition opportunities other than the
Proposed Acquisitions may also be subject to, among other
24
<PAGE> 33
things, the Company obtaining additional financing and waivers or consents from
its lenders and holders of the Existing Preferred Stock. There can be no
assurance that the Company could obtain any such needed consents or waivers or
additional financing on terms acceptable to it, nor can there be any assurance
that the Company will consummate all of the Proposed Acquisitions or other
potential acquisition opportunities that may arise.
Company investments in broadcast properties (including certain of the
Proposed Acquisitions as noted above) involve arrangements with third parties,
including time brokerage agreements, as well as the co-ownership of certain
television stations and radio stations. These investments in broadcast
properties permit the Company to have a presence in additional markets and to
enjoy many, but not all, of the benefits of ownership while at the same time
remaining in compliance with FCC regulations. For a description of the Company's
relationships with these companies, see "Business -- Time Brokerage Agreements
and Other Interests in Broadcast Stations." The Company has structured its
relationships with these companies in a manner designed to ensure strict
compliance with the FCC's rules and regulations governing television station
ownership.
USE OF PROCEEDS
The net proceeds to the Company from the Offering (estimated to be
approximately $143.8 million) together with working capital of $67.5 million and
borrowings of $100 million under the Credit Facility will be used to fund (i)
the redemption of the Senior Preferred Stock ($28.4 million) and (ii) the
Proposed Acquisitions and expected capital expenditures ($282.9 million). Should
any of the Proposed Acquisitions not be completed, proceeds from the Offering
designated for such Proposed Acquisitions would be available to the Company for
general corporate purposes, including but not limited to possible additional
acquisitions. Pending the use of proceeds described above, the net proceeds will
be invested in Cash Equivalents (as defined).
25
<PAGE> 34
CAPITALIZATION
The following table sets forth the actual and pro forma cash and
capitalization of the Company as of June 30, 1996. Pro forma capitalization
gives effect to (i) the consummation of the Offering (providing $143.8 million
of cash); (ii) the Proposed Acquisitions, related capital expenditures and
capital expenditures on existing properties (utilizing $282.9 million of cash);
(iii) acquisitions which have closed subsequent to June 30, 1996 (utilizing
$47.6 million of cash); and (iv) the redemption of the Senior Preferred Stock,
(utilizing $28.4 million of cash), as if such events had occurred on June 30,
1996. This table should be read in conjunction with the information contained in
"Pro Forma Financial Information" and the Company's consolidated financial
statements and notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
--------------------
ACTUAL PRO FORMA
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................................ $115,577 $ 434
Long-term debt (including current maturities):
Credit Facility........................................................ $ -- $ 100,000
11 5/8 Senior Subordinated Notes due 2002(1)........................... 227,508 227,508
Other debt............................................................. 4,335 4,335
-------- --------
231,843 331,843
Redeemable senior preferred stock(2)..................................... 18,393 --
Redeemable Series B preferred stock(2)................................... 2,990 --
Redeemable junior preferred stock(2)..................................... 34,090 34,090
Redeemable Exchangeable Preferred Stock(3)............................... -- 143,750
Class A Common Stock(2).................................................. 39 40
Class B Common Stock(2).................................................. 8 8
Class C Common Stock(2).................................................. -- --
Class A and B Common Stock Warrants(2)................................... 6,863 6,863
Class C common stock warrants(2)......................................... 4,282 4,282
Stock subscription notes receivable...................................... (17) (17)
Additional paid-in capital............................................... 197,425 208,424
Deferred option plan compensation(4)..................................... (1,950) (1,950)
Accumulated deficit...................................................... (71,114) (78,156)
-------- --------
Total capitalization........................................... $422,852 $ 649,177
======== ========
</TABLE>
- ---------------
(1) Net of issue discount.
(2) See "Description of Capital Stock."
(3) The $150.0 million initial liquidation preference of the Redeemable
Exchangeable Preferred Stock has been reduced to its carrying value by $6.25
million of estimated transaction costs and discounts.
(4) See "Management -- Stock Incentive Plan."
26
<PAGE> 35
THE COMPANY
The Company was organized in December 1993, as the successor to businesses
formed in 1991 primarily for the purpose of owning and operating radio and
television broadcasting stations and networks. The Company's principal executive
offices are located at 601 Clearwater Park Road, West Palm Beach, Florida 33401
and its telephone number is (561) 659-4122.
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following selected historical and pro forma financial data, insofar as
it relates to each of the five years ended December 31, 1995, has been derived
from Company prepared financial information and should be read in conjunction
with the audited financial statements, including the consolidated balance sheets
at December 31, 1994 and 1995 and the related consolidated statements of
operations and cash flows for each of the years in the three year period ended
December 31, 1995 and the notes thereto appearing elsewhere herein and
incorporated herein by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995. The selected historical and pro forma
financial data for the twelve months ended December 31, 1995, and as of and for
the six months and twelve months ended June 30, 1996 has been derived from
unaudited financial statements also appearing herein and which, in the opinion
of management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the unaudited
interim periods. Results for the six months ended June 30, 1996 are not
necessarily indicative of results that may be expected for the entire year. The
selected historical and pro forma financial data should be read in conjunction
with the information contained in the Company's consolidated financial
statements and notes thereto, the financial statements and notes thereto related
to certain of the Proposed Acquisitions, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Pro Forma Financial
Information" included elsewhere herein.
The following unaudited summary pro forma statement of operations data and
other data give effect to (i) the consummation of the Offering; (ii) the
significant business acquisitions of KZKI-TV, WGOT-TV and WTVX-TV in 1995; (iii)
the proposed significant business acquisition of the Fort Lauderdale radio
stations (WPLL-FM and WSRF-AM); (iv) the business acquisitions of Todd
Communications, Inc. (WFSJ-FM), WHUB, Inc. (WHUB-FM and WHUB-AM) and Southern
Broadcasting Companies, Inc. (WSNI-FM, WPAP-FM and WPBH-FM), and the proposed
acquisitions of WDIZ-FM, WTKS-FM, WIOD-AM, KXLI-TV and Ponce Nicasio
Broadcasting Ltd. (KCMY-TV); (v) the Equity Offering; (vi) the termination of
the put rights of the holders of Class A and Class B Common Stock warrants;
(vii) the issuance of the Notes; and (viii) the redemption of the Senior
Preferred Stock, as if such events had occurred on January 1, 1995. Other
Proposed Acquisitions are asset acquisitions or are immaterial both individually
and in the aggregate and therefore are not included in the pro forma financial
information. Where necessary, prior operators' fiscal years have been conformed
to the Company's December 31 year end. In addition, depreciation and
amortization expense and interest expense have been increased for each of the
periods presented to reflect the purchase of all stations included in the
Proposed Acquisitions and acquisitions which have closed subsequent to June 30,
1996. The following unaudited summary pro forma balance sheet data gives effect
to (i) the consummation of the Offering; (ii) the proposed acquisitions and
related capital expenditures; (iii) capital expenditures on existing properties;
(iv) acquisitions which have closed subsequent to June 30, 1996; and (v) the
redemption of the Senior Preferred Stock, as if such events had occurred on June
30, 1996. Certain management assumptions and adjustments are described in the
accompanying notes hereto. The pro forma information should be read in
conjunction with the Company's consolidated financial statements and the notes
thereto and the financial statements and notes thereto related to certain of the
Proposed Acquisitions included elsewhere in this Prospectus. See "Pro Forma
Financial Information" appearing elsewhere in this Prospectus. This pro forma
information is not necessarily indicative of the Company's actual or future
operating results or financial position.
27
<PAGE> 36
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
FOR
SIX MONTHS ENDED TWELVE
YEAR ENDED DECEMBER 31, JUNE 30, 1996 MONTHS
------------------------------------------------------------- ------------------- ENDED
PRO FORMA PRO JUNE 30,
1991 1992 1993 1994 1995 1995(A) ACTUAL FORMA(A) 1996(A)
------- ------- -------- ------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenue.............. $ 830 $17,062 $ 32,062 $62,067 $103,074 $ 138,296 $ 69,370 $ 82,208 $ 157,056
Operating expenses,
excluding depreciation,
amortization and option
plan compensation........ 1,719 17,922 28,872 51,225 82,103 110,228 51,724 61,728 119,750
Option plan
compensation(b).......... -- -- -- -- 10,803 10,803 2,292 2,292 3,691
Depreciation and
amortization............. 497 5,977 9,351 12,404 18,719 46,474 11,737 25,281 49,491
------- ------- -------- ------- -------- -------- -------- -------- --------
Income (loss) from
operations............... (1,386) (6,837) (6,161) (1,562) (8,551) (29,209) 3,617 (7,093) (15,876)
Interest expense........... (52) (1,262) (2,052) (5,210) (16,303) (38,966) (15,098) (19,483) (38,966)
Interest income............ -- -- 113 335 1,709 1,701 4,035 2,737 3,867
Other income (expense),
net...................... 10 134 108 (5) (982) (1,177) (559) (720) (1,976)
Benefit (provision) for
income
taxes.................... -- -- (2,960) 1,680 1,280 1,280 -- -- 640
Extraordinary item and
cumulative effect of a
change in accounting
principle(c)............. -- 110 (457) -- (10,626) (10,626) -- -- (10,626)
------- ------- -------- ------- -------- -------- -------- -------- --------
Net loss................... $(1,428) $(7,855) (11,409) (4,762) (33,473) (76,997) (8,005) (24,559) (62,937)
======= =======
Dividends and accretion on
preferred stock and
common stock
warrants(d).............. (151) (3,386) (13,297) (23,351) (7,414) (11,870) (23,550)
-------- ------- -------- -------- -------- -------- --------
Net loss attributable to
common stock............. $(11,560) $(8,148) $(46,770) $(100,348) $(15,419) $(36,429) $ (86,487)
======== ======= ======== ======== ======== ======== ========
Net loss per share(e)...... $ (0.36) $ (0.14) $ (0.97) $ (1.62) $ (0.20) $ (0.51) $ (1.32)
Net loss per share
attributable to common
stock(e)................. (0.37) (0.24) (1.36) (2.11) (0.38) (0.76) (1.81)
Weighted average shares
outstanding -- primary
and fully diluted(f)..... 31,582 33,430 34,430 47,611 40,567 47,803 47,722
Cash dividends declared.... -- -- -- -- -- -- -- -- --
OTHER DATA:
EBITDA(g).................. $ (796) $ (162) $ 4,522 $11,790 $ 24,582 $ 31,184 $ 20,380 $ 23,214 $ 40,953
Capital expenditures(h).... $ 60 $ 1,273 $ 1,963 $ 5,917 $ 25,017 $ 25,017 $ 13,936 $ 13,936 $ 29,364
Adjusted EBITDA(i)......... $ 47,406
Ratio of earnings to
combined fixed charges
and preferred stock
dividends(j)............. -- -- -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
-----------------------
ACTUAL PRO FORMA(A)
-------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................................................. $115,577 $ 434
Working capital............................................................................ 123,194 8,051
Total assets............................................................................... 437,449 663,774
Total debt................................................................................. 231,843 331,843
Redeemable preferred stock................................................................. 55,473 34,090
Redeemable exchangeable preferred stock ($150,000 initial liquidation preference).......... -- 143,750
</TABLE>
(see footnotes on the following page)
28
<PAGE> 37
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS)
(a) Pro forma statement of operations data and other data for the six
months and twelve months ended June 30, 1996 and the year ended December 31,
1995 give effect to (i) the consummation of the Offering; (ii) the significant
business acquisitions of KZKI-TV, WGOT-TV and WTVX-TV in 1995; (iii) the
proposed significant business acquisition of the Fort Lauderdale radio stations
(WPLL-FM and WSRF-AM); (iv) the business acquisitions of Todd Communications,
Inc. (WFSJ-FM), WHUB, Inc. (WHUB-FM and WHUB-AM) and Southern Broadcasting
Companies, Inc. (WSNI-FM, WPAP-FM and WPBH-FM), and the proposed business
acquisitions of WDIZ-FM, WTKS-FM, WIOD-AM, KXLI-TV and Ponce Nicasio
Broadcasting Ltd. (KCMY-TV); (v) the Equity Offering; (vi) the termination of
the put rights of the holders of Class A and Class B Common Stock warrants;
(vii) the issuance of the Notes; and (viii) the redemption of the Senior
Preferred Stock, as if such events had occurred on January 1, 1995. Other
Proposed Acquisitions are asset acquisitions or are immaterial both individually
and in the aggregate and therefore are not included in the pro forma financial
information. Where necessary, prior operators' fiscal years have been conformed
to the Company's December 31 year end. In addition, depreciation and
amortization expense and interest expense have been increased for each of the
periods presented to reflect the purchase of all stations included in the
Proposed Acquisitions and acquisitions which have closed subsequent to June 30,
1996. The pro forma balance sheet data as of June 30, 1996 gives effect to: (i)
the consummation of the Offering; (ii) the Proposed Acquisitions and related
capital expenditures; (iii) capital expenditures on existing properties; (iv)
acquisitions which have closed subsequent to June 30, 1996; and (v) the
redemption of the Senior Preferred Stock, as if such events had occurred on June
30, 1996.
(b) Option plan compensation represents a non-cash charge associated with
the granting of common stock options to employees under the Company's Stock
Incentive Plan. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Results of Operations" and "Management -- Stock
Incentive Plan."
(c) Extraordinary item and cumulative effect of a change in accounting
principle reflects a gain of $110 in 1992 as a result of a change in the method
of calculating depreciation and an extraordinary loss of $457 and $10,626 in
1993 and 1995, respectively, associated with the write-off of capitalized
financing costs on debt retired.
(d) Dividends and accretion on preferred stock and common stock warrants
for the years ended December 31, 1993, 1994 and 1995 and the six months ended
June 30, 1996 represent the Senior Preferred Stock (15% dividend rate),
redeemable Class A and Class B common stock warrants and Existing Preferred
Stock (12% dividend rate). Such capital stock is mandatorily redeemable and
certain issues accrete. See "Description of Capital Stock."
(e) Loss per share data for the years ended December 31, 1993 and 1994 give
retroactive effect to (i) the Company's amended capital structure related to the
merger with ANG; and (ii) a stock dividend on common shares outstanding on
January 1, 1995. For periods prior to January 1, 1993, loss per share data was
not computed as such amounts were not relevant.
(f) Weighted average shares outstanding for the years ended December 31,
1993 and 1994 give retroactive effect to an increase in the weighted average
number of shares outstanding relating to (i) the merger with ANG of 21,055 and
22,287 shares, respectively; and (ii) a stock dividend on common shares
outstanding on January 1, 1995 of 10,527 and 11,143 shares, respectively. For
periods prior to January 1, 1993, weighted average shares outstanding was not
computed as such amounts were not relevant.
(g) EBITDA is defined as net income (loss) before (i) extraordinary item
and cumulative effect of a change in accounting principle; (ii) benefit
(provision) for income taxes; (iii) other income (expense), net; (iv) interest
expense, net, (v) time brokerage fees relating to financing of stations which
the Company has an agreement or option to acquire; (vi) depreciation and
amortization, including amortization of broadcast rights; (vii) option plan
compensation; and (viii) non-recurring items including terminated operations,
less scheduled broadcast rights payments. See "Certain Definitions and Market
and Industry Data."
29
<PAGE> 38
(h) Includes all capital expenditures including expenditures associated
with the upgrade and conversion of acquired and operated television stations to
the inTV format. Pro forma capital expenditures exclude $73,028 of capital
expenditures associated with the Proposed Acquisitions ($45,607) and additional
capital expenditures on existing properties ($27,421). These pro forma capital
expenditures have been included as uses of funds for purposes of calculating pro
forma total debt.
(i) Adjusted EBITDA is defined as EBITDA for the twelve month period ended
June 30, 1996, less (i) segment operating profit for the Infomall TV Network for
such period plus (ii) four times such segment's operating profit for the quarter
ended June 30, 1996. Adjusted EBITDA is calculated on a basis consistent with
calculations under the Exchange Indenture and the certificate of designation of
the New Preferred Stock. See "Certain Definitions and Market and Industry Data."
(j) For purposes of this calculation, earnings are defined as net loss
before income taxes, extraordinary items, the cumulative effect of a change in
accounting principle and fixed charges. Fixed charges consist of interest
expense, amortization of deferred financing costs and the component of operating
lease expense which management believes represents an appropriate interest
factor. Earnings were inadequate to cover combined fixed charges and preferred
stock dividends by approximately $1.4 million, $8.0 million, $8.1 million, $9.0
million, $32.7 million, and $12.8 million, for the years ended December 31,
1991, 1992, 1993, 1994 and 1995 and for the six-month period ended June 30,
1996, respectively. On a pro forma basis, earnings were insufficient to cover
combined fixed charges and preferred stock dividends by approximately $36.4
million, $76.5 million and $91.0 million for the six month and twelve month
periods ended June 30, 1996, and the year ended December 31, 1995, respectively.
30
<PAGE> 39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Since its inception in 1991, the Company has grown primarily through the
acquisition or management of radio and television broadcast stations and radio
networks, as well as subsequent improvement in the operation of these
properties. Certain of the Company's radio and television stations were and
continue to be operated under time brokerage agreements for various periods.
Under time brokerage agreements, the stations' operating revenues and expenses
are controlled by the Company and are included in its consolidated statements of
operations. The Company operates three business segments: (1) the Infomall TV
Network ("inTV"), a nationwide network of owned, operated or affiliated
television stations dedicated to the airing of long form paid programming,
consisting primarily of infomercials; (2) Paxson Radio, consisting of radio
broadcasting stations, radio news and sports networks and billboard operations;
and (3) Paxson Network-Affiliated Television, consisting of network-affiliated
television broadcasting stations in West Palm Beach, Florida.
The Company's operating data throughout the periods discussed have been
impacted significantly by the timing and mix of radio, television and inTV
acquisitions throughout such periods. Operating revenues are derived from the
sale of advertising to local and national advertisers. The Company's primary
operating expenses involved in owning and operating Paxson Radio and Paxson
Network-Affiliated Television are syndicated program rights fees, commissions on
revenues, employee salaries, news gathering, promotion and administrative
expenses. Comparatively, operation of an inTV station involves low operating
expenses relative to traditional network or independent television station
operation. As a result, the Company's inTV stations usually contribute to
operating profit within a short time frame. The costs of operating an inTV
station do not vary significantly with revenue, with the exception of costs
associated with sales commissions and agency fees. As such, upon obtaining a
certain level of revenue sufficient to cover fixed costs, additional revenue
levels have a significant impact on the operating results of an individual inTV
station.
The Company currently expects to continue acquiring additional stations
which may have similar effects on the comparability of revenues, operating
expenses, interest expense and operating cash flow as those described below.
The Company's past results are not necessarily indicative of future
performance due to various risks and uncertainties which may significantly
reduce revenues and increase operating expenses. For example, a reduction in
expenditures by radio and television advertisers in the Company's markets may
result in lower revenues. The Company may be unable to reduce expenses,
including certain variable expenses, in an amount sufficient in the short term
to offset lost revenues caused by poor market conditions. The Company's
television stations are dependent upon "must carry" regulations for carriage on
cable systems in each market. The constitutionality of "must carry" regulations
is currently being litigated in the U.S. Supreme Court and if such regulations
were invalidated, the Company could suffer decreased revenues or increased
carriage expenses if the Company's stations lose cable carriage or are forced to
pay cable systems for carriage. The broadcasting industry continues to undergo
rapid technological change which may increase competition within the Company's
markets as new delivery systems, such as direct broadcast satellite and computer
networks, attract customers. The changing nature of audience tastes and viewing
and listening habits may affect the continued attractiveness of the Company's
broadcasting stations to advertisers, upon whom the Company is dependent for its
revenue.
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount (contingent or otherwise) of assets and liabilities
at the date of the financial statements and the reported amount of revenues and
expenses during the reporting period. The fair value of the Company's
investments in broadcast properties and programming rights payable were based
upon the net present value of applicable estimated future cash flows using a
discounted rate approximating market rates. The fair values of the Company's
long-term debt and the Notes were estimated based on market rates and
instruments with similar risks and maturities. The fair value
31
<PAGE> 40
estimates presented are based on pertinent information available to management
as of June 30, 1996. As a result of the foregoing, the estimates presented in
the Company's financial statements are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. Although management
is not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of the Company's financial statements.
The Company's operations as a public company commenced in November 1994 as
a result of the Company's merger with ANG, a company primarily involved in the
operation of radio networks. The former operations of ANG are no longer material
to the Company.
This Prospectus contains forward-looking statements which involve risks and
uncertainties and are made pursuant to the safe harbor provisions of the
Securities Litigation Reform Act of 1995. The Company's actual results may
differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in this Prospectus under the heading "Risk Factors."
RESULTS OF OPERATIONS
Six Months Ended June 30, 1996 and 1995
Consolidated revenues for the six months ended June 30, 1996 increased 56%
(or $25.0 million) to $69.4 million from $44.4 million for the six months ended
June 30, 1995. This increase was primarily due to new television station
acquisitions and time brokerage operations ($14.0 million), new radio stations
($3.5 million) and increased revenues from existing television stations ($5.0
million) and radio stations ($3.6 million).
Operating expenses for the six months ended June 30, 1996 increased 19% (or
$10.7 million) to $65.8 million from $55.1 million for the six months ended June
30, 1995. The increase was due to higher direct expenses such as commissions
which rise in proportion to revenues ($3.9 million), other non-direct costs of
operating new television stations ($3.4 million) and radio stations ($1.8
million) increased non-direct costs of network-affiliated television operations
($1.3 million) which is primarily due to the addition of WTVX, higher
depreciation and amortization related to assets acquired ($3.7 million), and
increased time brokerage agreement fees ($2.5 million), all of which were
partially offset by lower option plan compensation costs ($7.1 million).
Operating cash flow for the six months ended June 30, 1996 increased 127%
(or $11.4 million) to $20.4 million, from $9.0 million for the six months ended
June 30, 1995. The increase in operating cash flow was a direct result of
television station acquisitions and improved performance of the existing
television and radio properties.
Interest expense for the six months ended June 30, 1996 increased to $15.1
million from $4.9 million for the six months ended June 30, 1995, an increase of
208% primarily due to a greater level of debt throughout the period and higher
borrowing rates. As a result of acquisitions, at June 30, 1996, total long-term
debt and senior subordinated notes were $231.8 million, or 75% higher than the
$132.3 million outstanding a year prior.
Interest income for the six months ended June 30, 1996 increased to $4.0
million from $0.6 million, primarily due to greater levels of cash and cash
equivalents invested throughout the period primarily as a result of the receipt
of the proceeds of the Equity Offering.
Three Months Ended June 30, 1996 and 1995
Consolidated revenues for the three months ended June 30, 1996 increased
57% (or $13.5 million) to $37.2 million from $23.7 million for the three months
ended June 30, 1995. This increase was primarily due to new television station
acquisitions and time brokerage operations ($7.1 million), new radio stations
($2.4 million) and increased revenues from existing television stations ($2.1
million) and radio stations ($2.1 million).
Operating expenses for the three months ended June 30, 1996 increased 4%
(or $1.2 million) to $33.8 million from $32.6 million for the three months ended
June 30, 1995. The increase was due to higher direct
32
<PAGE> 41
expenses such as commissions which rise in proportion to revenues ($2.5
million), other non-direct costs of operating new television stations ($1.5
million) and radio stations ($1.1 million), increased non-direct costs of
network-affiliated television operations ($0.9 million) which is primarily due
to the addition of WTVX, higher depreciation and amortization related to assets
acquired ($1.8 million), and increased time brokerage agreement fees ($1.7
million) all of which were partially offset by lower option plan compensation
costs ($8.9 million).
Operating cash flow for the three months ended June 30, 1996 increased 93%
(or $5.7 million) to $11.8 million, from $6.1 million for the three months ended
June 30, 1995. The increase in operating cash flow was a direct result of
television station acquisitions and improved performance of the radio
properties.
Interest expense for the three months ended June 30, 1996 increased to $7.4
million from $2.8 million for the three months ended June 30, 1995, an increase
of 164% primarily due to a greater level of debt throughout the period and
higher borrowing rates. As a result of acquisitions, at June 30, 1996, total
long-term debt and senior subordinated notes were $231.8 million, or 75% higher
than the $132.3 million outstanding a year prior.
Interest income for the three months ended June 30, 1996 increased to $3.2
million from $0.3 million, primarily due to greater levels of cash and cash
equivalents invested throughout the period primarily as a result of the receipt
of the proceeds of the Equity Offering.
The following table sets forth, for the periods indicated, selected
information for the Company's business segments:
<TABLE>
<CAPTION>
AS OF AND FOR AS OF AND FOR
THE SIX MONTHS THE THREE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INFOMALL TV NETWORK
Total revenue................... $ 27,327,040 $ 10,725,592 $ 14,611,120 $ 6,822,598
Operating expenses, less
depreciation, amortization and
option plan compensation...... 14,482,609 6,216,319 7,848,987 3,765,974
Depreciation and amortization... 4,438,053 2,074,228 2,367,123 1,236,922
Option plan compensation........ 7,238 -- 3,675 --
------------ ----------- ------------ -----------
Income (loss) from operations... $ 8,399,140 $ 2,435,145 $ 4,391,335 $ 1,819,702
============ =========== ============ ===========
Operating cash flow........... $ 13,988,000 $ 5,018,000 $ 7,463,000 $ 3,367,000
============ =========== ============ ===========
Total identifiable assets..... $173,354,366 $ 74,506,976 $173,354,366 $ 74,506,976
============ =========== ============ ===========
Capital expenditures............ $ 6,537,552 $ 885,369 $ 5,016,886 $ 536,704
============ =========== ============ ===========
PAXSON RADIO
Total revenue................... $ 31,626,945 $ 25,121,812 $ 17,091,255 $ 12,816,094
Operating expenses, less
depreciation, amortization and
option plan compensation...... 25,084,027 21,425,930 12,968,931 10,248,871
Depreciation and amortization... 5,299,811 4,135,204 2,710,785 2,095,254
Option plan compensation........ 254,251 1,561,000 220,847 1,561,000
------------ ----------- ------------ -----------
Income (loss) from operations... $ 988,856 $ (2,000,322) $ 1,190,692 $ (1,089,031)
============ =========== ============ ===========
Operating cash flow........... $ 7,012,000 $ 4,208,000 $ 4,666,000 $ 2,753,000
============ =========== ============ ===========
Total identifiable assets..... $ 84,284,513 $ 66,742,444 $ 84,284,513 $ 66,742,444
============ =========== ============ ===========
Capital expenditures............ $ 1,445,034 $ 4,091,180 $ 701,677 $ 2,375,462
============ =========== ============ ===========
</TABLE>
33
<PAGE> 42
<TABLE>
<CAPTION>
AS OF AND FOR AS OF AND FOR
THE SIX MONTHS THE THREE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1996 1995 1996 1995
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
PAXSON NETWORK-AFFILIATED
TELEVISION
Total revenue................... $ 9,696,270 $ 7,306,968 $ 5,155,602 $ 3,721,971
Operating expenses, less
depreciation, amortization and
option plan compensation...... 8,092,005 5,258,401 4,226,926 2,706,693
Depreciation and amortization... 1,465,120 1,572,113 718,129 785,451
Option plan compensation........ -- -- -- --
------------ ----------- ------------ -----------
Income (loss) from operations... $ 139,145 $ 476,374 $ 210,547 $ 229,827
============ =========== ============ ===========
Operating cash flow............. $ 2,722,000 $ 2,340,000 $ 1,494,000 $ 1,180,000
============ =========== ============ ===========
Total identifiable assets....... $ 37,930,692 $ 38,062,872 $ 37,930,692 $ 38,062,872
============ =========== ============ ===========
Capital expenditures............ $ 881,759 $ 1,523,408 $ 761,818 $ 1,039,109
============ =========== ============ ===========
CORPORATE AND OTHER
Total revenue................... $ 720,011 $ 1,201,876 $ 383,522 $ 375,982
Operating expenses, less
depreciation, amortization and
option plan compensation...... 4,065,590 4,744,537 2,212,590 2,242,195
Depreciation and amortization... 533,945 272,711 269,150 152,000
Option plan compensation........ 2,030,428 7,843,129 309,027 7,843,129
------------ ----------- ------------ -----------
Income (loss) from operations... $ (5,909,952) $(11,658,501) $ (2,407,245) $ (9,861,342)
============ =========== ============ ===========
Operating cash flow............. $ (3,346,000) $ (2,602,000) $ (1,829,000) $ (1,175,000)
============ =========== ============ ===========
Total identifiable assets....... $141,879,080 $ 15,651,339 $141,879,080 $ 15,651,339
============ =========== ============ ===========
Capital expenditures............ $ 5,071,759 $ 3,089,520 $ 4,816,340 $ 558,710
============ =========== ============ ===========
CONSOLIDATED
Total revenue................... $ 69,370,260 $ 44,356,348 $ 37,241,499 $ 23,736,645
Operating expenses, less
depreciation, amortization and
option plan compensation...... 51,724,231 37,645,267 27,257,434 18,963,733
Depreciation and amortization... 11,736,929 8,054,256 6,065,187 4,269,627
Option plan compensation........ 2,291,917 9,404,129 533,549 9,404,129
------------ ----------- ------------ -----------
Income (loss) from operations... $ 3,617,189 $(10,747,304) $ 3,385,329 $ (8,900,844)
============ =========== ============ ===========
Operating cash flow............. $ 20,376,000 $ 8,964,000 $ 11,794,000 $ 6,125,000
============ =========== ============ ===========
Total identifiable assets....... $437,448,651 $194,963,631 $437,448,651 $194,963,631
============ =========== ============ ===========
Capital expenditures............ $ 13,936,104 $ 9,589,477 $ 11,296,721 $ 4,509,985
============ =========== ============ ===========
</TABLE>
"Operating cash flow" is defined as net income excluding non-cash items,
non-recurring items including terminated operations, interest, other income,
income taxes and time brokerage fees, less scheduled program rights payments.
The Company has included operating cash flow data because the financial
performance of broadcast companies is frequently evaluated based on some measure
of cash flow from operations and such data may assist investors in measuring the
Company's ability to service debt. Operating cash flow is not, and should not be
used as an indicator or alternative to operating income, net income or cash flow
as reflected in the Consolidated Financial Statements as it is not a measure of
financial performance under generally accepted accounting principles.
34
<PAGE> 43
Years Ended December 31, 1995 and 1994
Consolidated revenues for 1995 increased 66% (or $41.0 million) to $103.1
million from $62.1 million for 1994. This increase was primarily due to the new
television station acquisitions and time brokerage operations ($19.2 million),
acquisition of WPBF-TV on July 1, 1994 ($7.1 million) and increased revenues
from existing television stations ($9.1 million).
Operating expenses for 1995 increased 75% (or $48.0 million) to $111.6
million from $63.6 million in 1994. The increase was primarily due to higher
direct expenses such as commissions which rise in proportion to revenues ($8.1
million), other non-direct costs of operating newly acquired and operated
television stations ($5.5 million), higher corporate overhead ($6.3 million),
option plan compensation ($10.8 million), higher depreciation and amortization
related to assets acquired ($6.3 million), and increased expenses from a full
year of operating existing television stations ($1.6 million).
Interest expense for 1995 increased to $16.3 million from $5.2 million for
1994, an increase of 213%, primarily due to a greater level of long-term debt
throughout the period and higher borrowing rates. As a result of acquisitions,
at December 31, 1995, total long-term debt, including the Notes, was $240.0
million, or 191% higher than the $82.4 million outstanding a year prior.
The Company has accumulated $35.7 million of taxable losses. The Company
recognized $1.3 million of income tax benefit which resulted primarily from the
1995 net loss and reversal of deferred taxes associated with the 1993 tax
provision resulting from the change in tax status.
Operating cash flow for 1995 increased 108% (or $15.6 million) to $30.0
million, from $14.4 million for 1994. The increase in operating cash flow was a
direct result of new television station acquisitions and time brokerage
operations ($9.1 million), acquisition of WPBF-TV on July 1, 1994 ($1.7
million), and improved performance of existing television properties ($5.5
million).
Years Ended December 31, 1994 and 1993
Consolidated revenues for 1994 increased 93% (or $30.0 million) to $62.1
million from $32.1 million in 1993. This increase was primarily due to the
acquisition of WPBF-TV on July 1, 1994 ($7.5 million), revenue received under
the time brokerage agreement for WTLK-TV beginning April 4, 1994 ($2.2 million)
and the subsequent purchase thereof on July 13, 1994, the consolidation of the
ANG operations beginning April 14, 1994 ($8.4 million), and improved market
conditions and better sales management within the Company's existing properties
($10.8 million). In addition, revenue increased because of the time brokerages
of WCTD-TV beginning April 1, 1994 and WFCT-TV beginning August 1, 1994
(totalling $1.1 million).
Operating expenses for 1994 increased 66% (or $25.4 million) to $63.6
million from $38.2 million in 1993. The increase was primarily due to direct
expenses such as commissions which rise in proportion to revenue ($7.3 million),
other non-direct costs of operating WPBF-TV and WTLK-TV ($4.1 million), the
consolidation of ANG ($6.3 million), higher costs for the Company's existing
properties ($3.4 million), and higher depreciation and amortization related to
assets acquired ($3.0 million). In addition, operating expenses increased
because of the time brokerages of WCTD-TV and WFCT-TV and related fees ($1.3
million).
Interest expense increased to $5.2 million from $2.1 million, an increase
of 148%, primarily due to a greater level of long-term debt throughout the year
and higher borrowing rates. As a result of acquisitions, at December 31, 1994,
long-term debt was $82.4 million, or 153% higher than the $32.6 million
outstanding a year prior.
The Company recognized $1.7 million of income tax benefit which resulted
primarily from the 1994 net loss and related reversal of deferred taxes
associated with the 1993 tax provision.
Operating cash flow for 1994 increased 112% (or $7.6 million) to $14.4
million, from $6.8 million in 1993. The increase in operating cash flow was a
direct result of acquisitions, revenue growth and continued expense controls.
35
<PAGE> 44
LIQUIDITY AND CAPITAL RESOURCES
On April 3, 1996, the Company completed the Equity Offering, resulting in
gross proceeds of $164.8 million before transaction costs. Estimated total
issuance costs (including those prepaid) of approximately $10 million resulted
in net proceeds of approximately $154.8 million. A portion of the Equity
Offering proceeds was used by the Company to repay the outstanding balances
under the Credit Facility aggregating approximately $27.7 million, to complete
acquisitions and fund capital expenditures and for general corporate purposes.
The remaining proceeds from the Equity Offering will be utilized to fund a
portion of the Proposed Acquisitions and related capital requirements, along
with borrowings under the Credit Facility and the proceeds of this Offering. The
completion of each of the Proposed Acquisitions is subject to a variety of
factors and to the satisfaction of various conditions, and there can be no
assurance that any of the Proposed Acquisitions will be completed.
The Company's working capital at June 30, 1996 and December 31, 1995 was
$123.2 million and $74.3 million, respectively, and the ratio of current assets
to current liabilities was 9.27:1 and 6.37:1 on such dates, respectively.
Working capital increased primarily due to the Equity Offering.
Cash provided by (used in) operations of $3.4 million and ($0.2) million
for the six months ended June 30, 1996 and 1995, respectively, reflects the
improvement in operating results of existing properties, acquisitions and time
brokerage properties net of increased interest expense and increases in other
assets. Cash used in investing activities of $100.3 million primarily reflects
the completion of acquisitions and investments and purchases of equipment for
acquired and existing properties. Cash provided by financing activities of
$144.4 million primarily reflects the proceeds of the Equity Offering and
long-term debt borrowings net of debt repayments. In addition, the Company has
advanced $900,000 to The Christian Network, Inc. ("CNI") during the six months
ended June 30, 1996 under a demand note bearing interest at the prime rate
(currently 8.25%). At June 30, 1996, the Company had total advances to CNI
outstanding of approximately $2.1 million, which has been included in
investments in broadcast properties. Non-cash activity relates to option plan
compensation, stock issued for the WFSJ-FM acquisition, a note payable incurred
with the WOCD-TV acquisition, reciprocal trade and barter advertising revenue
and expense and accretion of discount on the Notes, as well as dividends and
accretion on the redeemable preferred stock and common stock warrants.
The Company's primary capital requirements are for the acquisition of
broadcasting properties and related capital expenditures and interest and
principal payments on indebtedness. The Notes require semi-annual interest
payments at a fixed rate. The Company presently has no outstanding borrowings
under the Credit Facility. Borrowings under the Credit Facility bear interest at
floating rates and require interest payments on varying dates depending on the
interest rate option selected by the Company. In addition to debt service, the
Company's principal cash requirements will be for capital expenditures and, if
appropriate opportunities arise, the acquisition of additional broadcasting
stations or assets. The Company estimates that, in addition to the $45.6 million
of capital expenditures associated with the Proposed Acquisitions, it will spend
approximately $27.4 million for property and equipment for its existing
operations.
The Company believes that the proceeds of the Offering, cash flow from
operations, existing cash balances and available borrowings under the Credit
Facility will be sufficient to consummate the Proposed Acquisitions (including
the expected capital expenditures associated therewith) and to meet its
anticipated short term and long term working capital requirements for its
existing properties and those to be acquired upon completion of the Proposed
Acquisitions. While on a pro forma basis for the Proposed Acquisitions and
expected Capital expenditures, the Company's $100 million Credit Facility would
be fully drawn, in light of the anticipated timing of the consummation of the
Proposed Acquisitions and funding of expected capital expenditures and cash flow
generated from operations, the Company currently does not anticipate fully
drawing down the Credit Facility. Nonetheless, the Company is in discussions
with its existing bank lenders to increase the aggregate commitment amount of
the Credit Facility and to obtain lower borrowing costs and liberalized
financial covenants. There can be no assurance that the Company will be
successful in its negotiations or obtain any such increase. To the extent that
the Company pursues future acquisitions or requires additional working capital,
the Company may be required to obtain additional financing. There can be no
assurance that the Company will be able to obtain such financing on terms
acceptable to it. The failure to
36
<PAGE> 45
raise funds necessary to finance the Company's future cash requirements could
adversely affect the Company's ability to pursue its business strategy. In
addition, should the Company suffer a significant impairment to its cash flow
from operations due to the occurrence of one or more adverse events, including
those set forth under "Risk Factors," its liquidity could become insufficient on
a short term basis due to diminished borrowing capacity under the Credit
Facility and on a long term basis, the Company could have insufficient resources
to repay indebtedness under the Credit Facility, the Notes or the Exchange
Debentures when due or to complete any required redemption of the New Preferred
Stock or the Existing Preferred Stock.
37
<PAGE> 46
BUSINESS
GENERAL
Paxson Communications Corporation is a diversified broadcasting company
whose principal businesses consist of the Infomall TV Network, a nationwide
network of television stations dedicated to the airing of long form paid
programming, consisting mainly of infomercials, and a major radio station group
operating primarily in Florida. In addition to the Infomall TV Network, the
Company's television operations include ownership of an ABC network affiliated
television station and the operation of a UPN/WB network affiliated television
station pursuant to a time brokerage agreement, each of which operates in the
West Palm Beach television market. The Company also owns and operates radio
networks and billboards which complement its Florida radio broadcasting
business.
The Company was founded in 1991 by Lowell W. "Bud" Paxson who personally
financed the Company's early growth and continues to lead the Company as its
majority stockholder and chief executive. Mr. Paxson has been at the forefront
of several innovative broadcasting concepts over the last decade, including his
leadership role in the creation and early growth of electronic retailing as the
creator and co-founder of Home Shopping Network, Inc. and Silver King
Communications, Inc., and was one of the first radio operators to take advantage
of duopoly radio station ownership. In April 1996, the Company raised over $150
million of new equity capital through the public sale of shares of its Class A
Common Stock, which trades on the American Stock Exchange under the symbol
"PXN."
SEGMENT DATA (1)
The following table sets forth certain data for each of the Company's
segments:
<TABLE>
<CAPTION>
FOR THE PRO FORMA
FOR THE THREE MONTHS ENDED TWELVE FOR THE
-------------------------------------------------------------------------- MONTHS ENDED TWELVE
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, JUNE 30, MONTHS ENDED
1995 1995 1995 1995 1996 1996 1996 JUNE 30, 1996(2)
--------- -------- ------------- ------------ --------- -------- ------------ ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SEGMENT REVENUE
Infomall TV
Network........... $ 3,903 $ 6,823 $ 8,330 $ 10,598 $12,716 $ 14,611 $ 46,255 $ 50,083
Paxson Radio........ 12,306 12,816 14,405 15,226 14,536 17,091 61,258 85,917
Paxson
Network-Affiliated
Television........ 3,585 3,722 3,929 5,301 4,541 5,156 18,927 19,408
Corporate and
Other(3).......... 826 376 503 425 336 384 1,648 1,648
------- ------- ------- ------- ------- ------- -------- --------
Total Segment
Revenue....... $20,620 $ 23,737 $27,167 $ 31,550 $32,129 $ 37,242 $128,088 $157,056
======= ======= ======= ======= ======= ======= ======== ========
SEGMENT INCOME
(LOSS) FROM
OPERATIONS
Infomall TV
Network........... $ 615 $ 1,820 $ 2,762 $ 3,607 $ 4,008 $ 4,391 $ 14,768 $ 475
Paxson Radio........ (911) (1,089) 327 89 (202) 1,191 1,405 (6,116)
Paxson
Network-Affiliated
Television........ 247 230 (204) 1,368 (71) 211 1,304 1,429
Corporate and
Other(3).......... (1,797) (9,861) (2,480) (3,274) (3,503) (2,407) (11,664) (11,664)
------- ------- ------- ------- ------- ------- -------- --------
Total Segment
Income (Loss)
from
Operations.... $(1,846) $ (8,900) $ 405 $ 1,790 $ 232 $ 3,385 $ 5,813 $(15,876)
======= ======= ======= ======= ======= ======= ======== ========
</TABLE>
38
<PAGE> 47
<TABLE>
<CAPTION>
FOR THE PRO FORMA
FOR THE THREE MONTHS ENDED TWELVE FOR THE
-------------------------- MONTHS ENDED TWELVE
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, JUNE 30, MONTHS ENDED
1995 1995 1995 1995 1996 1996 1996 JUNE 30, 1996(2)
------- ------- ------- ------- ------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA
Segment Operating
Profit
Infomall TV
Network......... $ 1,659 $ 3,347 $ 4,056 $ 5,196 $ 6,408 $ 7,372 $ 23,032 $ 24,182
Paxson Radio...... 1,594 2,748 3,148 3,895 2,485 4,804 14,332 18,209
Paxson Network-
Affiliated
Television...... 1,166 1,221 1,121 1,868 1,194 1,464 5,647 5,743
Corporate and
Other(3)........ (1,427) (1,175) (1,723) (2,112) (1,517) (1,829) (7,181) (7,181)
------- ------- ------- ------- ------- ------- -------- --------
Total
EBITDA(4)..... $ 2,992 $ 6,141 $ 6,602 $ 8,847 $ 8,570 $ 11,811 $ 35,830 $ 40,953
======= ======= ======= ======= ======= ======= ======== ========
Adjusted
EBITDA(5)......... $ 47,406
========
</TABLE>
- ---------------
(1) Segment financial data present business operations for Paxson Radio, Paxson
Network-Affiliated Television and the Infomall TV Network.
(2) Pro forma segment data give effect to the Proposed Acquisitions as if such
events had occurred on January 1, 1995. Prior operators' fiscal years have
been conformed to the Company's December 31, 1995 year end.
(3) Corporate and other represents corporate overhead expenses, including
management expenses which are not allocated to the individual segments and
expenses associated with non-broadcast activities.
(4) EBITDA is defined as net income (loss) before (i) extraordinary item and
cumulative effect of a change in accounting principle; (ii) benefit
(provision) for income taxes; (iii) other income (expense), net; (iv)
interest expense, net, and time brokerage fees relating to financing of
stations which the Company has an agreement or option to acquire; (v)
depreciation and amortization, including amortization of broadcast rights;
(vi) option plan compensation; and (vii) non-recurring items including
terminated operations, less scheduled broadcast rights payments.
(5) Adjusted EBITDA is defined as EBITDA for the period, less (i) segment
operating profit for the Infomall TV Network for such period plus (ii) four
times such segment's operating profit for the most recently completed
quarter prior to the measuring date.
INFOMALL TV NETWORK
The Company introduced its Infomall TV Network in January 1995 in order to
capitalize on what the Company believes to be a rapidly growing industry. inTV
has since expanded rapidly through increasing cable carriage of its existing
stations and acquiring additional stations, and currently consists of 29 owned,
time brokered or affiliated television stations. Broadcasting and Cable magazine
recently ranked the Company as the seventh largest television broadcaster in the
United States, based on the number of television households in each DMA in which
a broadcaster owns a station (i.e., excluding stations operated pursuant to time
brokerage agreements or affiliated stations) and counting only 50% of the
households in those DMAs which a broadcaster serves via a UHF frequency. Upon
completion of the Proposed inTV Acquisitions and pending affiliation agreements,
the Infomall TV Network will consist of a total of 42 television stations
operating in 37 television markets, including 22 of the 30 largest television
markets in the United States.
The Company believes that its inTV stations comprise the only national
network of television stations dedicated to the airing of infomercial
programming, and that its inTV stations represent a valuable national television
broadcasting distribution infrastructure that would be difficult and expensive
to replicate. The Company believes that the Infomall TV Network is the only
group of broadcast television stations in the United States offering long form
paid programmers and infomercial advertisers significant national, regional and
local distribution capability and airtime during each of the popular morning,
daytime and prime time viewing hours.
The television stations converted by the Company to inTV stations are
typically non-network-affiliated stations with marginal operating results that
can be acquired at a relatively low cost compared to network-affiliated
stations. Certain of these stations are licensed to communities outside the
center of major television markets, but within such markets' DMA, and by virtue
of the FCC's "must carry" rules are thus generally
39
<PAGE> 48
entitled to carriage on cable systems within such DMA. Through the exercise of
"must carry" rights and the improvement of its stations' over-the-air signals,
the Company attempts to maximize its cable household coverage within its
markets. While the Company's cable household coverage for its owned or operated
inTV stations was in the aggregate 57.1% of the total cable households in its
markets as of May 1996, the Company's goal is to reach approximately 85% of the
cable homes in its markets. In general, the Company has been successful in
improving its stations' cable household coverage over time, as demonstrated by
the aggregate cable household coverage of the Original inTV Stations, which
improved from 73.2% as of January 1995 to 92.6% as of June 1996. There can be no
assurance that the Company will be able to achieve its goal of reaching 85% of
cable households in its markets, or that the Company's experience in this regard
with the Original inTV Stations is or will be representative of the results of
the Infomall TV Network as a whole. The Company believes that it also reaches a
significant number of over-the-air television households that do not receive
cable television. Upon completion of the Proposed inTV Acquisitions, the
Infomall TV Network will serve DMAs currently containing approximately 49.7
million television households, of which 31.9 million households are served by
cable television. The Company continues to evaluate the acquisition of or
affiliation with additional television stations to further extend the national
reach of its Infomall TV Network.
In 1995, its initial year of operations, inTV achieved segment revenue of
$29.7 million, segment income from operations of $8.8 million and segment
operating profit of $14.3 million. Segment revenue increased from $10.7 million
during the first six months of 1995 to $27.3 million during the first six months
of 1996. Segment income from operations increased from $2.4 million during the
first six months of 1995 to $8.4 million during the first six months of 1996.
Segment operating profit increased from $5.0 million during the first six months
of 1995 to $13.8 million during the first six months of 1996.
The following table sets forth certain information with respect to the
results of operations of the Original inTV Stations. Because of the limited
operating history of the Infomall TV Network and the relatively small number of
the Company's inTV stations which are included in the table, the results shown
should not be considered to be representative of the results of the Company's
inTV operations as a whole.
ORIGINAL INTV STATION COMBINED OPERATING INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
INTV CABLE
HOUSEHOLDS SIX MONTHS SIX MONTHS
AT ENDED ENDED PERCENT CHANGE
COMMENCEMENT 6/30/95 6/30/96 1995 VS 1996
------------ ---------- ---------- --------------
<S> <C> <C> <C> <C>
Markets' Cable Television Households........... 3,520(1) 3,585(1) 3,650
Cable Households Reached(2).................... 1,164 2,789 3,379 21.2%
% Reached...................................... 33.1% 77.8% 92.6%
Average Rate(3)................................ $40.15 $45.65 13.7%
Revenue........................................ $5,960 $7,942 33.3%
Operating Cash Flow............................ $2,777 $4,364 57.1%
Margin......................................... 46.6% 54.9%
</TABLE>
- ---------------
(1) Management estimate.
(2) Number of cable households reached as of the indicated date.
(3) Average advertising rate per one-half hour per 100,000 cable households,
based on average number of cable households served during the period shown
of 2,726 for the six months ended June 30, 1995 (data for the first four
months of 1995 are based on management estimates), and 3,195 for the six
months ended June 30, 1996, assuming an average of 30 half-hours of
programming per day and 363 programming days per year. Actual half-hours of
programming broadcast per day may have been different.
The Original inTV Stations listed above are the Company's only inTV
stations which commenced operations in the inTV format on or prior to January 1,
1995, and thus represent the Company's most mature inTV stations. The Original
inTV Stations increased the number of cable homes reached as of June 30, 1996 by
21.2% over the number reached as of June 30, 1995, and increased their average
revenue rate received per half hour per 100,000 cable homes reached by 13.7% for
the six months ended June 30, 1996 over the same period in the prior year. This
growth enabled the Original inTV Stations to increase revenues by $2.0 million,
40
<PAGE> 49
or 33.3%, for the six month period ended June 30, 1996, over the same period in
the prior year. Reflecting the largely fixed cost nature of inTV operations,
operating cash flow of the Original inTV Stations for the six month period ended
June 30, 1996 increased $1.6 million, or 57.1%, over the same period in the
prior year, increasing the operating cash flow margin from 46.6% to 54.9%.
Industry Background
During recent years, advertisers have evaluated the benefits of television
and cable advertising, with many sophisticated consumer product and service
advertisers now recognizing the effectiveness and reasonable cost of long-form
programming, or infomercials. An infomercial is an advertisement, usually
approximately one half-hour in length and often produced in an entertainment
format, that is paid for by the advertiser on the basis of airtime, market size
and in certain cases past results from airing on a particular television
station. Regardless of the presentation format, the viewers are provided
information that can be used to make informed purchasing decisions from the
comfort of their home without the pressure of a salesperson or the inconvenience
of a shopping mall.
Increasingly, advertisers are recognizing the benefits of infomercials as a
powerful marketing tool. Infomercials provide advertisers with a cost-effective
medium through which to deliver sales messages, product introductions or
demonstrations to an interested target audience. Advertisers are recognizing
that infomercials can increase a company's or product's brand awareness and
loyalty while educating potential new customers. The viewer or potential
consumer is provided information that can be used to make informed purchasing
decisions. Unlike most traditional television advertising, the direct response
nature of many infomercials affords advertisers the ability to evaluate the
effectiveness of their advertising expenditures on an immediate basis.
The Company believes that the infomercial industry has grown rapidly during
the past several years. Historically, and to a large extent currently, long-form
informational programming occupied time slots that were less profitable for
broadcasters. Increasingly, infomercials are being placed in more expensive and
attractive time periods such as daytime, early fringe and prime time, and the
infomercial is becoming a more widely accepted form of advertising. Infomercials
have been used to promote major consumer brandnames, such as those listed below:
<TABLE>
<S> <C> <C> <C>
Apple Computers Coca-Cola Lexus Nissan
AT&T Compaq Magnavox Philips Consumer Electronics
Avon Products DIRECTV Mastercard/Visa Procter & Gamble
Bank of America E.I. duPont Mattel Royal Caribbean Cruise Line
Bayliner Boats Estee Lauder Mercedes Benz Sears Roebuck
Bell Atlantic Fidelity Investments MGM Sega of America
Black & Decker Ford Microsoft Toyota
Braun General Motors Motorola Volvo
Bristol Meyers GTE NBC Warner Music
</TABLE>
The production quality of infomercial programming by major advertisers has
also brought increased credibility to the infomercial industry. In addition,
infomercials have recently been successfully utilized to promote newly
introduced network television series and full length feature movies. The Company
believes that as the benefits of infomercial programming become more widely
understood, the number of advertisers and the volume of infomercial programming
will continue to grow. In terms of demand for airtime, major corporate
advertisers who use long-form programming, or image building programs rather
than direct selling messages may ultimately surpass infomercial programmers who
rely on immediate sales to viewers via telephone response. Currently, the funds
spent on advertorials by major corporations are a relatively small part of their
overall advertising budget. The Company believes that such advertorial
expenditures will continue to increase.
Infomercials are one type of long-form paid programming. Other types
include religious, ethnic and political paid programming. In certain of the
Company's markets, such as Los Angeles and Miami, the demand for airtime by
foreign language ethnic programmers has steadily increased. With regard to
political
41
<PAGE> 50
long-form paid programming, Ross Perot and others have utilized this method of
reaching voters. In general, religious, ethnic and political paid programs have
produced revenues for particular time periods (e.g., Sundays for religious
programming and weekday mornings for certain ethnic programming) which are
higher than otherwise available from infomercial advertisers during such time
periods.
Operating Strategy
By purchasing independent television stations, entering into time brokerage
agreements, signing affiliate stations, and extending its stations' broadcast
reach on cable via "must carry" requirements, the Company has created a
television network dedicated to providing long-form, paid entertainment and
information programming. Expansion of the Infomall TV Network continues through
increased cable carriage of existing inTV stations and the purchase, operation
or affiliation with independent television stations in major United States
television markets. The DMAs to be served by the Company's inTV stations upon
completion of the Proposed inTV Acquisitions currently contain approximately
49.7 million television households of which 31.9 million households are served
by cable television.
The Company's inTV operating strategy is to maximize revenues and operating
cash flow through improved performance of its inTV stations. Shortly after the
Company acquires a television station or commences operating a television
station pursuant to a time brokerage agreement, the Company adds such station to
the Infomall TV Network and replaces substantially all of the existing
programming with inTV programming, which, unlike traditional television
programming, is paid for by the advertiser as opposed to the broadcaster. The
introduction of inTV programming allows the Company to eliminate substantially
all programming expenses and achieve significant reductions in other operating
expenses. The Company's inTV stations are operated by an average of 15 people,
compared to network and independent stations which average over 100 and 60
people, respectively, in markets of similar size to the Company's. To date,
virtually all of the inTV stations owned or operated by the Company have
contributed rapidly to operating cash flow, typically within two months after
commencing inTV operations.
inTV programming time is sold on a local, national and network basis. Local
programming time is sold by each station's local sales force and is offered to
merchants and businesses operating within a station's local market, including
retailers, insurance companies, medical clinics, automobile and marine dealers,
financial services providers and general merchandisers. National and network
programming time is sold by national advertising placement agencies and the
Company's own in-house national and network sales force. National and network
programming times appeal to advertisers who desire to reach viewers in targeted
inTV markets and all inTV markets. Currently, the Company maintains national
sales offices in New York, Los Angeles, Chicago, and at the Company's
headquarters in West Palm Beach. Support and administration of the Infomall TV
Network is also centralized at the Company's West Palm Beach headquarters,
including most accounting and personnel functions as well as administration of
the inTV programming traffic scheduling systems.
The benefits of the Infomall TV Network are being realized as inTV makes
accessible relatively more desirable broadcast time periods (e.g. "prime-time")
which are generally unavailable to infomercial and other paid programmers at
reasonable rates on traditional television stations. The Company believes that
attractive rates and further growth of inTV's audience reach should continue to
attract a greater breadth of advertising clients. Moreover, as infomercial
scheduling information and promotional support (through radio, television and
print advertising as well as other media) become more available, the Company
believes that the viewing population will further increase.
The Company seeks to increase the percentage of time sold to local
infomercial and other long-form paid programmers. Such local advertisers and
paid programmers have the potential to be consistent, long-term clients in each
of the Company's inTV markets. Because such advertising can be complementary to
local retailing outlets and professional businesses, and may result in increased
store traffic as well as immediate sales via telephone, the Company believes
that the rates paid by such advertisers have the potential to exceed those paid
by national direct marketers who lack a local store presence.
When the Company commences operation of an inTV station, revenues are
derived primarily from national infomercial advertisers. Such revenues enable
new inTV stations to quickly cover operating costs. As
42
<PAGE> 51
the Company's inTV stations mature, however, a local sales staff is developed,
generally consisting of two sales persons and a manager. The Company's
experience with its more mature inTV stations is that local sales can be
increased to generate significant revenue. The Company seeks to have local
advertising revenue represent 45% of total station revenues and is approaching
this goal in several of its markets. Increased local advertising revenues
generally result in greater absorption of the Company's inventory of programming
time, increasing the overall demand for air time and thereby enabling the
Company to achieve higher average advertising rates and to increase its
revenues.
Expansion Strategy
The Company assembled its Infomall TV Network through the conversion of
independent television stations to inTV stations. In most cases, those stations
were non-network-affiliated stations with marginal operating results. Certain
stations are licensed to communities outside the center of major television
markets, but within such markets' DMA, and by virtue of the FCC's "must carry"
rules, are therefore generally entitled to carriage on cable systems within such
DMA, provided the broadcaster's television signal can be delivered to the cable
system operator's head end at a specified strength. The Company's inTV stations
subsequently extend their reach to a substantial percentage of such DMA's cable
households through the exercise of federal "must carry" rights. See
"Business -- Federal Regulation of Broadcasting -- "Must Carry"/Retransmission
Consent."
In order to increase cable household penetration by its existing and
proposed stations, the Company currently employs and continues to study the
employment of various distribution-enhancing technologies. Such technologies
include signal transmission through fiber optic lines either alone or along with
microwave transmission, as well as low power television ("LPTV") broadcast
signal transmission and television signal compression and satellite technology.
The Company envisions that implementation of one or more of these technologies
could significantly increase the households reached in several of its largest
inTV markets, including New York, Los Angeles, San Francisco, Boston,
Washington, D.C., and St. Louis.
The Company may also selectively consider joint venture or other
relationships with established members of the infomercial and electronic
retailing industries with whom the Company can further exploit both its
infomercial distribution system and its knowledge of the infomercial and
telemarketing industries generally to identify products and services which are
suited to exploiting advantages of long-form advertising, develop marketing
strategies and infomercials for such products and services, including the airing
of infomercials for such products and services on the Infomall TV Network, and
participate in the revenues and profits from sales of such products and
services.
The Company has recently launched its Infomall Netsite at www.paxson.com.
The Company's presence on the World Wide Web through the Infomall Netsite will
provide both the Company and Infomall TV Network advertisers with a
complimentary outlet to provide additional product or service information to a
growing audience to augment their inTV infomercial sales. It is envisioned that
infomercials aired on the Company's Infomall TV Network stations will promote
and guide viewers and customers to the Infomall Netsite. Information with regard
to the Infomall Netsite may be provided on inTV infomercials.
Infomall Properties
The stations included in the Company's Infomall TV Network are either (i)
owned by the Company, (ii) operated by the Company pursuant to time brokerage
agreements entered into with the FCC licensee, or (iii) owned by independent
television station operators that enter into affiliation agreements with the
Company. Upon completion of the Proposed inTV Acquisitions and pending
affiliation agreements, the Company will own or operate 37 inTV stations and
have affiliation agreements with five independently owned and operated stations
that are or will be dedicated to inTV.
43
<PAGE> 52
INFOMALL TV NETWORK
The following table lists those inTV properties that the Company owns,
operates or is affiliated with, and those properties which the Company has
agreements to acquire or operate, as identified under "Proposed inTV Stations"
below. (Television and cable households in thousands.)
<TABLE>
<CAPTION>
INTV
ACTUAL OR CABLE
NATIONAL ANTICIPATED CARRIAGE TOTAL
TV COMMENCE- AT CURRENT MARKET CURRENT TOTAL
MARKET MENT OF COMMENCE- INTV CABLE CABLE INTV CABLE MARKET TV
MARKET(1) RANK STATION OPERATIONS MENT(2) CARRIAGE(3) HOUSEHOLDS CARRIAGE(3) HOUSEHOLDS
- ------------------------ -------- --------------- --------- --------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Owned or Operated
New York, NY............ 1 WHAI-TV 3/96 626 783 4,529 17.3% 6,695
Los Angeles, CA......... 2 KZKI-TV 5/95 1,453 2,183 2,997 72.8 4,918
Philadelphia, PA........ 4 WTGI-TV 2/95 1,225 1,489 1,961 76.0 2,646
San Francisco, CA....... 5 KLXV-TV 6/95 650 861 1,578 54.6 2,257
Boston, MA.............. 6 WGOT-TV 5/95 604 846 1,625 52.1 2,122
Washington, DC.......... 7 WYVN-TV 9/96 0 0 1,238 0.0 1,884
Atlanta, GA............. 10 WTLK-TV 4/94 300 944 1,015 93.0 1,584
Atlanta, GA*............ 10 WNGM-TV 4/96 182 183 1,015 18.0 1,584
Houston, TX............. 11 KTFH-TV 3/95 647 793 867 91.5 1,574
Cleveland, OH*.......... 13 WOAC-TV 10/95 332 336 966 34.8 1,452
Cleveland, OH........... 13 WAKC-TV 3/96 560 560 966 58.0 1,452
Tampa, FL*.............. 15 WFCT-TV 8/94 0 864 976 88.5 1,395
Miami, FL*.............. 16 WCTD-TV 4/94 396 883 922 95.8 1,341
Phoenix, AZ............. 17 KWBF-TV 3/96 23 26 661 3.9 1,170
Denver, CO.............. 18 KUBD-TV 8/95 430 426 699 60.9 1,160
St. Louis, MO........... 20 WCEE-TV 1/96 23 24 569 4.2 1,108
Orlando, FL*............ 22 WIRB-TV(5) 12/94 468 687 741 92.7 998
Hartford, CT*........... 26 WTWS-TV(6) 3/95 661 721 770 93.6 911
Milwaukee, WI*.......... 29 WHKE-TV 7/96 257 276 438 63.0 783
Raleigh, NC*............ 32 WRMY-TV(7) 6/96 0 29 481 6.0 792
Greensboro, NC.......... 48 WAAP-TV 7/96 323 323 345 93.7 553
Birmingham, AL*......... 51 WNAL-TV(8) 9/96 31 31 338 9.3 525
Albany, NY.............. 52 WOCD-TV 5/96 251 251 357 70.5 507
Dayton, OH.............. 53 WTJC-TV 10/95 298 315 341 92.3 501
San Juan, PR............ NR WSJN-TV(9) 2/96 285 285 298 95.6 1,064
------ ------ ------ ------
Total Owned or
Operated(10)...... 10,024 14,119 24,711 57.1% 37,939
------ ------ ------ ------
Affiliates
Sacramento, CA*......... 21 KCMY-TV(8) 7/95 624 644 688 93.7% 1,101
Indianapolis, IN........ 24 WIIB-TV 1/96 401 417 580 71.9 925
Norfolk, VA............. 40 WJCB-TV 8/95 343 362 446 81.2 619
Fresno, CA.............. 57 KGMC-TV 1/96 179 164 256 64.1 482
------ ------ ------ ------
Total Affiliates.... 1,546 1,587 1,969 80.6% 3,127
====== ====== ====== ======
Total Owned,
Operated and
Affiliates(10).... 11,570 15,706 26,680 58.9% 41,066
====== ====== ====== ======
Proposed inTV Stations
Philadelphia, PA........ 4 WTVE-TV(11) 10/96 1,961 2,646
Dallas, TX.............. 8 Channel 68(4) 12/96 924 1,822
Seattle, WA............. 12 KBCB-TV(4) 6/97 1,040 1,464
Minneapolis, MN......... 14 KXLI-TV 10/96 702 1,412
Phoenix, AZ*............ 17 KAJW-TV(4) 1/97 661 1,170
Salt Lake City, UT*..... 37 KZAR-TV(4)(12) 12/96 359 656
Salt Lake City, UT...... 37 KOOG-TV 3/97 359 656
Grand Rapids, MI*....... 38 WJUE-TV(4)(13) 10/96 390 637
Oklahoma City, OK....... 43 KMNZ-TV 2/97 353 585
West Palm Beach, FL..... 45 WHBI-TV(4)(11) 2/97 468 576
Providence, RI.......... 46 WOST-TV(4)(14) 12/96 412 557
Little Rock, AR......... 58 KVUT-TV(4) 6/97 284 473
Tulsa, OK............... 59 KGLB-TV(4) 2/97 287 459
------ ------
Total Proposed inTV
Stations(10)...... 5,219 8,641
TOTAL inTV
NETWORK(10)....... 31,900 49,707
====== ======
</TABLE>
44
<PAGE> 53
- ---------------
* Operated or to be operated pursuant to a time brokerage agreement; except
as noted, the Company has an option to acquire a 100% ownership interest.
(1) Each station is licensed by the FCC to serve a specific community, which is
included in the listed market.
(2) Cable households reached at commencement of station's operations.
(3) Cable households reached at 5/96, and as a percentage of the total market
cable households.
(4) Station is currently under construction or not operating.
(5) No option to acquire any ownership interest.
(6) To be operated pursuant to a time brokerage agreement upon completion of an
FCC-required restructuring of the Company's investment in such station in
connection with the Company's acquisition of WHAI-TV.
(7) Option to acquire 40% ownership interest.
(8) The Company has agreed to acquire these stations. See "Proposed
Acquisitions."
(9) 50% ownership interest.
(10) Figures represent total cable and television households in each market only
and are not necessarily indicative of the number of households reached by
each station in its market; totals do not double count markets where the
Company has more than one station.
(11) Pending inTV affiliate.
(12) Option to acquire a 50% ownership interest.
(13) 70% ownership interest to be acquired.
(14) 50% ownership interest to be acquired.
PAXSON RADIO
The Company has assembled a substantial statewide radio broadcasting group
with operations in Florida's largest markets, which the Company believes to be
among the most attractive and fastest growing in the nation. Upon completion of
the Proposed Radio Acquisitions (as defined), Paxson Communications will own and
operate 40 radio stations (26 FM and 14 AM stations), with more radio stations
in Florida than any other broadcaster. The Company believes that the addition of
the Proposed Radio Acquisitions will enable the Company to build or strengthen
its radio duopolies (two FM or two AM stations in a market) or "super-duopolies"
(more than two FM or two AM stations in a market) in its Florida radio markets,
and will result in the Company's radio group ranking number one in combined
revenue share in three of its seven Florida markets.
The Florida radio markets in which the Company operates continue to
experience substantial concentration of station ownership among large radio
group owners. The Company believes that concentration of station ownership will
result in a more stable radio marketplace and more predictable cash flow for
owners of station groups in such markets. The Company believes that its
established position among the leading radio broadcast groups in each of its
Florida markets differentiates it from its competitors and makes the Company
attractive to regional and national advertisers.
The Company's radio expansion strategy is to acquire additional stations to
enhance its position in its current markets and to selectively enter new
markets, primarily in Florida, building upon its multiple radio station
ownership strategy in each of its markets and taking advantage of relaxed
multiple radio station ownership limitations implemented by recent changes in
federal telecommunications law. In addition to its Florida stations, the Company
also owns and operates two AM and two FM stations in Cookeville, Tennessee. The
Company operates six radio networks with 346 affiliated radio stations in the
eastern and southeastern United States and controls 185 billboard locations (455
faces) in the Tampa and Orlando markets that support the Company's radio station
operations and provide advertising revenue.
In 1995, Paxson Radio operations generated segment revenue, segment loss
from operations, and segment operating profit of $54.8 million, $1.6 million and
$11.4 million, respectively. Segment income (loss) from operations increased
from ($2.0) million during the first six months of 1995 to $1.0 million during
the first six months of 1996. Segment operating profit increased from $4.3
million during the first six months of 1995 to $7.3 million during the first six
months of 1996.
Radio Broadcasting
The Company was one of the first radio broadcasters to capitalize on
changes in federal regulations permitting radio market duopolies, and
subsequently assembled eight duopolies, two in each of Florida's four most
populous cities, in addition to AM/FM combinations in Cookeville, Tennessee. The
Company initially pursued a strategy of entering into time brokerage agreements
with, and concurrently obtaining an option to
45
<PAGE> 54
purchase, stations in markets in which the Company already owns a station in the
same radio service (AM or FM), and following changes in the FCC's rules
regarding multiple ownership of radio stations in September 1992, the Company
was able to exercise such purchase options. Further liberalization of the
multiple station ownership restrictions pursuant to the 1996 Act has enabled the
Company to enter into agreements to acquire additional stations in its Florida
markets. The Company will continue to consider additional radio acquisition
opportunities.
During the latter part of 1995, several changes were instituted by
management of Paxson Radio to strengthen performance, which resulted generally
in improved audience share, revenues and cash flow during 1996. These changes
included a new sales approach whereby each sales person is part of a team which
sells time on no more than two stations which are demographically compatible to
more effectively capture advertising revenue and provide better customer
service, and programming format changes based on market research.
Operating Strategy
The Company believes that its radio properties are well positioned in
attractive and growing markets, and seeks to continue to improve cash flow
growth through the integration of recent duopoly acquisitions and enhanced
station performance. The Company believes that the geographic proximity of its
FM and AM duopolies throughout Florida give it the ability to realize certain
revenue opportunities and cost efficiencies. The Company's group of Florida
stations enables an advertiser to cover an entire geographic region, while
effectively reaching targeted demographic groups. Various cross-market
promotional opportunities exist, such as the ability to provide listeners with
tickets to another market's major sporting events, concerts or local
entertainment attractions. Personnel and technical costs can be minimized by
virtue of the ability to service markets in close proximity to one another. The
stations' geographic concentration allows management to more easily and rapidly
respond to market developments.
The Company believes that its experienced management team is one of its
strongest assets. Local managers are responsible for the day-to-day operations
of their respective stations. The Company believes that the autonomy of its
station management and its incentive-based compensation enable it to attract and
retain skilled and experienced managers capable of implementing the Company's
programming research, revenue and aggressive marketing and promotion strategy.
Local managers have incentive compensation linked to the station's operating
cash flow performance.
Corporate management is responsible for long-range planning, establishment
of primary policies and procedures, resource allocation, accounting and
auditing, regulatory and legal compliance, license renewals and the evaluation
of potential acquisitions. Corporate management reviews sales and sales pacing
reports from each station on a daily basis. In addition, members of senior
management visit the Company's stations on a regular basis to review performance
and to assist local management with its programming, sales and recruiting
efforts, as well as to develop overall station operating and marketing
strategies.
The principal elements of the Company's operating strategy include:
Targeted Programming and Extensive Market Research. The Company
provides programming designed to appeal to targeted demographic groups, and
seeks to convert its rating shares into disproportionately large shares of
each market's advertising dollars. The Company believes that effective
programming is a key element in sustaining and improving audience shares
within its targeted demographic groups, and uses extensive ongoing research
to refine each station's programming. For example, the Company decided to
operate News and Sports formats in all four of its Florida markets
following extensive research demonstrating the popularity of each format
with an upscale male audience. Similarly, after conducting extensive
programming research, last year Miami's WZTA-FM altered its Classic Rock
format to broadcast a more contemporary Active Rock format appealing to a
more focused adult 25-54 demographic. Since then, WZTA-FM's market revenue
rank has increased to 8th with a 5% share from 16th with a 3.5% share. Its
corresponding audience share in this demographic has also increased from
2.7% to 4.4%. More recently, the Company's Jacksonville station, WAIA-FM,
changed its call letters to WPLA-FM and its format from Classic Rock to
Alternative Rock. With this change came
46
<PAGE> 55
an increase in market revenue share to 4% from 2.5% with a corresponding
increase in its share of the 25-54 audience to 4.4% from 2%. The Company
will continue to identify and refine programming to enhance its stations'
audience and advertiser appeal.
Aggressive Marketing and Promotion. The Company believes that
effective marketing and promotion play a significant role in maximizing
each station's performance. The Company utilizes local television,
newspapers, direct mail, outbound telemarketing and billboards to promote
its stations. In the Orlando and Tampa markets, the Company's unsold
billboard locations are used to promote its stations. The Company also
believes that community involvement is particularly important in creating
public awareness and its stations participate in numerous community
programs and activities.
Strict Cost Controls. Management believes that it is critical to
maintain the lowest possible cost structure compatible with its operating
strategy. Strict financial reporting standards and cost control measures
are implemented to ensure a focus on improvements in operating results
throughout Paxson Radio. Management regularly receives operating reports
that track station performance, thereby enabling better monitoring by
management and establishing greater accountability throughout the station
group. In addition, since local management incentive programs are tied to
increasing operating cash flow, local managers are focused on minimizing
costs and exceeding budgeted cash flow results.
Radio Properties
The following table sets forth certain information about the radio stations
the Company owns or proposes to acquire:
<TABLE>
<CAPTION>
AUDIENCE
SHARE
(PERSONS
25-54)
MARKET ----------- REVENUE REVENUE
MARKET(1) RANK FORMAT 1995 1996 SHARE RANK
-------------------------------- ------ ------------------------- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Miami/Ft. Lauderdale, FL........ 11
WLVE-FM....................... Smooth Jazz 3.9 % 3.8%
WZTA-FM....................... Active Rock 2.8 4.4
WINZ-AM....................... News 1.4 0.6
WFTL-AM....................... Hot Talk 0.4 0.4
WPLL-FM(2)(3)................. Modern Adult Contemporary 2.8
WSRF-AM(2)(3)................. Block/Long-Form n/r
WIOD-AM(2).................... Talk/Sports/Entertainment 3.9
----
Total Market*.......... 15.9% 20.5% 1
Tampa/St. Petersburg, FL........ 21
WHPT-FM....................... Rock Adult Contemporary 5.9 % 5.4%
WSJT-FM....................... Smooth Jazz 0.2 5.1
WHNZ-AM....................... News 1.0 0.6
WZTM-AM....................... Sports 0.2 0.4
WKES-FM(2).................... To be determined
----
Total Market........... 11.5% 12.0% 5
Orlando, FL..................... 39
WMGF-FM....................... Soft Adult Contemporary 7.3 % 7.7%
WJRR-FM....................... Active Rock 4.9 3.9
WWNZ-AM....................... News 1.5 0.5
WQTM-AM....................... Sports 0.8 1.0
WTKS-FM(2)(3)................. Hot Talk 7.9
WDIZ-FM(2)(3)................. Modern Adult Contemporary 4.3
----
Total Market*.......... 25.3% 27.9% 3
</TABLE>
47
<PAGE> 56
<TABLE>
<CAPTION>
AUDIENCE
SHARE
(PERSONS
MARKET 25-54) REVENUE REVENUE
MARKET(1) RANK FORMAT 1995 1996 SHARE RANK
-------------------------------- ---- ------------------------- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Jacksonville, FL................ 53
WROO-FM....................... Country 7.5 % 5.2%
WPLA-FM....................... Rock Alternative 2.0 4.4
WFSJ-FM....................... Smooth Jazz 4.7 3.9
WNZS-AM....................... Sports 1.4 1.9
WZNZ-AM....................... News 0.5 0.1
WPVJ-FM (2)(4)................ To be determined
----
Total Market........... 15.5% 17.6% 3
Pensacola, FL................... 125
WOWW-FM....................... Rock Alternative 3.2%
WTKX-FM....................... Album Oriented Rock 5.6
----
Total Market........... 8.8% 21.7% 3
Tallahassee, FL................. 167
WSNI-FM....................... Oldies 7.4%
WXSR-FM....................... Active Rock 4.2
WTPS-FM....................... Hot Adult Contemporary 2.1
WTNT-FM....................... Country 6.3
WNLS-AM....................... Sports 1.1
----
Total Market........... 21.1% 40.3% 1
Panama City, FL................. 224
WPBH-FM....................... Soft Adult Contemporary 3.5%
WPAP-FM....................... Country 10.5
WFSY-FM....................... Hot Adult Contemporary 8.8
WEBZ-FM....................... Big Band 4.4
WGNE-AM....................... Smooth Jazz n/r
----
Total Market........... 27.2% 46.4% 1
Cookeville, TN.................. n/c
WGSQ-FM....................... Country 27.0%
WPTN-AM....................... Talk 4.1
WHUB-FM....................... Adult Contemporary 14.9
WHUB-AM....................... Country 4.1
----
Total Market........... 50.1% n/a 1
</TABLE>
- ---------------
* Pro forma for the Proposed Radio Acquisitions.
(1) Each station is licensed by the FCC to serve a specific community, which is
included in the listed market.
(2) Included in Proposed Radio Acquisitions.
(3) Operated pursuant to a time brokerage agreement.
(4) Station is not currently operating.
n/a Revenue not independently reported.
n/c Market not covered by Arbitron.
n/r Not rated.
Market Overviews
Miami/Ft. Lauderdale, FL. The Company owns and operates radio stations
WLVE-FM, WZTA-FM, WINZ-AM and WFTL-AM in the Miami/Ft. Lauderdale radio market,
the 11th largest radio market in the United States, and is operating WPLL-FM and
WSRF-AM under time brokerage agreements pending consummation of the acquisition
of such stations, and has agreed to acquire WIOD-AM in this market. The
Miami/Ft. Lauderdale radio market had advertising revenue of $136.3 million in
1995, a 9.9% increase over 1994. Including the Proposed Radio Acquisitions, the
Company's Miami/ Ft. Lauderdale radio stations have a 15.9% combined audience
share in the 25-54 year old demographic category and a 20.5% combined market
revenue share, ranking first in the market on a combined basis.
WLVE-FM is the only station in the market programmed in a Smooth Jazz
format, playing a blend of smooth contemporary jazz and selected Adult
Contemporary vocals targeting the upscale 25-54 year old male
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<PAGE> 57
and female audience. WZTA-FM is the market's only rock station, targeting 18-34
year olds but also rating well with 25-54 year old men. WPLL-FM (formerly
operating as WSHE-FM) switched to the Modern Adult Contemporary format on May 1
and targets females 25-54 years old. WINZ-AM is the market's only News/Talk
format and carries sports programming with broadcast rights to the Miami Heat
NBA basketball team and the University of Miami football games. WFTL-AM is
located in Broward County and serves the market with a talk radio format and
simulcasts Miami Heat games. WIOD-AM is the premier personality talk station in
South Florida. Long-time area personality Neil Rogers leads the lineup, and
typically achieves the top ratings among 25-54 year olds in his midday time
slot.
Tampa/St. Petersburg, FL. The Company owns and operates radio stations
WHPT-FM, WSJT-FM, WHNZ-AM and WZTM-AM in the Tampa/St. Petersburg radio market,
the 21st largest radio market in the United States, and has agreed to acquire
station WKES-FM in this market. The Tampa/St. Petersburg radio market had
advertising revenue of $77.4 million in 1995, a 9.8% increase over 1994. The
Company's Tampa/St. Petersburg stations have an 11.5% combined audience share in
the 25-54 year old demographic category and a 12.0% combined market revenue
share.
WHPT-FM is formatted with a distinctive blend of adult rock music targeted
toward white-collar, adult listeners. WSJT-FM, which went on the air in July
1995, is a Smooth Jazz station targeted to adults 25-54 years old. WHPT-FM and
WSJT-FM have two of the most powerful signals in Florida. WHNZ-AM is an all news
station during daytime hours, with sports talk and play-by-play sports
programming at night, including University of Florida football and basketball
games. WZTM-AM is an all sports station, specializing in sports talk and
including play-by-play coverage of Florida State football and basketball games.
In addition, WZTM-AM achieves economies by utilizing satellite programming.
WKES-FM currently broadcasts religious programming. The Company intends to
change this station to a commercial format upon completion of the acquisition.
Orlando, FL. The Company owns and operates radio stations WMGF-FM,
WJRR-FM, WWNZ-AM and WQTM-AM in Orlando, the 39th largest radio market in the
United States, and has agreed to acquire stations WDIZ-FM and WTKS-FM in this
market, which it is operating pursuant to time brokerage agreements pending
consummation of such acquisitions. The Orlando radio market had advertising
revenue of $63.5 million in 1995, a 10.7% increase over 1994. Including the
Proposed Radio Acquisitions, the Company's Orlando radio stations have a 25.3%
combined audience share in the 25-54 year old demographic category and a 27.9%
combined market revenue share, ranking third in the market on a combined revenue
basis.
WMGF-FM is a Soft Adult Contemporary format appealing to 25-54 year old
females. WJRR-FM, the only Album Oriented Rock station in the market,
complements WMGF-FM by appealing primarily to the 25-54 year old male audience.
WDIZ-FM is the only station in the Orlando market programmed in a modern AC
format. WTKS-FM is a successful personality talk station. WWNZ-AM is the only
station in the market with an all news format. WQTM-AM is the only all sports
radio station in the Orlando market, and includes play-by-play programming and
sports talk shows. Cost savings are obtained through the utilization of
satellite programming.
Jacksonville, FL. The Company owns and operates radio stations WROO-FM,
WPLA-FM, WFSJ-FM, WNZS-AM and WZNZ-AM in Jacksonville, the 53rd largest radio
market in the United States, and has agreed to acquire WPVJ-FM in this market.
The Jacksonville radio market had advertising revenue of $34.7 million in 1995,
an 8.4% increase over 1994. The Company's radio stations have a 15.5% combined
audience share in the 25-54 year old demographic category and a 17.6% combined
market revenue share, ranking third in the market on a combined revenue basis.
WROO-FM broadcasts a Young Country format that appeals to the 18-49 year
old demographic category. WPLA-FM was recently reformatted as an Alternative
Rock radio station, targeted to the 18-34 year old audience. WFSJ-FM is a Smooth
Jazz station targeted to adults 24-54 years old. WNZS-AM is the market's only
all sports station, utilizing several well-known sports personalities as
anchors, and carries play-by-play sports broadcasts, including Florida State
University football and basketball games. WZNZ-AM has an all news format
consisting of satellite-delivered CNN Headline News programming. WPVJ-FM is not
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currently on the air. The Company intends to program this station with a format
to be determined upon completion of its market research.
Pensacola, FL. The Company has created a duopoly through its recent
acquisitions of radio stations WOWW-FM and WTKX-FM in Pensacola, the 125th
largest radio market in the United States. The Pensacola radio market had
advertising revenue of $8.8 million in 1995. These stations collectively have an
8.8% combined audience share in the 25-54 year old demographic category and a
21.7% combined market revenue share, ranking third in the market on a combined
revenue basis. WOWW-FM is a Modern Rock station, targeted to adults 18-49 years
old and WTKX-FM is an Album Oriented Rock station, targeted toward men 25-54
years old.
Tallahassee, FL. The Company has created a "super-duopoly" through its
recent acquisitions of radio stations WSNI-FM, WTNT-FM, WTPS-FM, WXSR-FM and
WNLS-AM in Tallahassee, the 167th largest radio market in the United States. The
Tallahassee radio market had advertising revenue of $8.8 million in 1995. These
stations collectively have a 21.1% combined audience share in the 25-54 year old
demographic category and a 40.3% combined market revenue share, ranking first in
the market on a combined revenue basis. WTNT-FM is the leading Country station
in the market, appealing to adults 25-54 years old. WTPS-FM has recently signed
on-air as a Hot Adult Contemporary station formatted for young adults 25-54
years old. WSNI-FM is a 60's or Oldies station, designed to appeal to adults
35-54 years old. WXSR-FM is an Alternative Rock station, targeted to 18-34 year
olds. WNLS-AM is an all sports station and the flagship station of the Florida
State University Seminoles.
Panama City, FL. The Company has created a "super-duopoly" through its
recent acquisitions of radio stations WPAP-FM, WPBH-FM, WEBZ-FM, WFSY-FM and
WGNE-AM in Panama City, the 223rd largest radio market in the United States. The
Panama City radio market had advertising revenue of $6.5 million in 1995. These
stations collectively have a 27.2% combined audience share in the 25-54 year old
demographic category and a 46.4% combined market revenue share, ranking first in
the market on a combined revenue basis. WPAP-FM is the oldest Country station in
Florida, and has enjoyed a significant ratings lead over the rest of the market.
WEBZ-FM is a Big Band formatted station, targeted to adults 45-64 years old.
WPBH-FM is a Soft Adult Contemporary station, appealing to females 35-54 years
old, WFSY-FM is an Adult Contemporary station targeting adults 25-54 years old,
and WGNE-AM is a Smooth Jazz radio station appealing to adults 25-54 years old.
Cookeville, TN. The Company owns and operates WGSQ-FM, WPTN-AM, WHUB-FM
and WHUB-AM in the Cookeville, Tennessee radio market, serving the Upper
Cumberland region between Nashville and Knoxville (ranked the 45th and 70th
largest markets, respectively). WGSQ-FM is a Country formatted station which has
a significant lead in audience share in the market. WHUB-FM is an Adult
Contemporary station formatted to adults 25-54 years old, and the number two
rated station in the market. WPTN-FM is programmed all talk, featuring a unique
mix of local and nationally known talk personalities. WHUB-AM is a Country
formatted station. These stations collectively have a 50.1% combined audience
share in the 12+ year old demographic category and rank first in the market in
combined revenue share, according to Company estimates.
Radio Networks
The Company operates six radio networks, comprised of three state news and
information networks and three sports programming networks, that serve
approximately 346 affiliates. The Company believes that each of its state news
and sports networks are attractive to advertisers because they provide an
economical opportunity to advertise simultaneously on multiple stations
throughout the state or region. The Alabama Radio Network, the Florida Radio
Network and the Tennessee Radio Network produce and distribute news,
informational, business and agricultural programming of interest to affiliates
and listeners in their respective states. In addition to providing radio
programming, these networks offer affiliates printed script for news, sports and
weather information which the Company generates internally, gathers from wire
and other sources or, as is the case with the Florida Radio Network, gathers
from (and distributes to) the radio groups in each of its Florida radio markets.
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The Company also operates the sports radio networks of the University of
Florida Gators, the University of Miami Hurricanes and the Penn State Nittany
Lions. Each of these sports networks produces sports play-by-play programming
and coaches talk shows for each university's football and basketball, and in
some cases, baseball programs. The Company distributes this programming to its
affiliates state-wide, including many of its own stations in each of its Florida
radio markets.
The Company has recently completed the technical upgrade of each of its
state news networks by installing digital equipment at each of its affiliates
and broadcast studios. This advanced technology allows each network to provide
its affiliates more tailored news, sports and long form programming in any
length at any time. The digitization of the signal distributed allows each
network to deliver a high quality signal to FM radio stations in addition to the
AM radio stations which were receiving the previously distributed analog signal.
The Company believes that the investment necessary to provide a digitized signal
to its expanded affiliate base creates a significant competitive barrier to
other potential radio network programmers.
Billboard Properties
The Company currently owns 185 billboard locations, including 57 billboards
with 115 faces in the Tampa market, and 128 billboard locations with 340 faces
in the Orlando market. While the Company sells the use of the billboards to a
broad group of advertisers, the Company takes advantage of the relationships it
has with its radio advertisers to broaden its billboard client base, as well as
expand the Company's share of the advertiser's media purchases within a market.
In addition, as broadcasters are major users of billboard advertising campaigns,
the Company can control its own billboard promotional expenditures through the
use of its unsold billboards, as well as assure full use of all its owned
billboards. As opportunities are presented to the Company, it will consider the
acquisition of additional billboards in markets in which it owns broadcasting
properties.
PAXSON NETWORK-AFFILIATED TELEVISION
Paxson Communications owns and operates an ABC-TV affiliate, WPBF-TV, in
the West Palm Beach market. Pursuant to a time brokerage agreement, the Company
provides programming and markets commercial time for a second television
station, WTVX-TV (a combined United Paramount Network and Warner Brothers
Network affiliate), which is also in the West Palm Beach market. The West Palm
Beach television market is one of the fastest growing markets in the country, as
evidenced by its increased market ranking from 65th in 1985 to 45th in 1995.
Television advertising expenditures in the West Palm Beach market totalled $88.2
million in 1995, an increase of 2.6%.
The Company acquired WPBF-TV in July 1994 for approximately $32.5 million
and began operating WTVX-TV under a time brokerage agreement in August 1995. The
Company has a long-term assignable option to acquire WTVX-TV for approximately
$19 million.
The network-affiliated television broadcasting industry is currently
undergoing significant consolidation as a result of the relaxation of multiple
ownership rules in the newly enacted Telecommunications Act of 1996. The Company
has not been successful in locating traditional television stations at
attractive prices to expand its network-affiliated television station group. As
the Company believes that the current consolidation will place small station
group operators at a significant disadvantage versus larger group operators, and
that the Company could benefit from redeploying its investment in its
network-affiliated television operations to its core inTV and radio group
businesses, it is considering the sale or exchange for other broadcast assets of
its network-affiliated television operations. The Company has engaged an
investment banking firm to advise it with respect to such a sale or exchange and
assist it in locating potential purchasers, and has received several offers to
acquire its network-affiliated television operations. The Company has not
accepted any of such offers, and there can be no assurance that any offers will
be received which will be acceptable to the Company.
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Operating Strategy
The Company's television operating strategy is similar to its radio
operating strategy as the Company seeks to capitalize on the revenue enhancing
and cost saving opportunities from operating two television stations in one
market from a single studio facility.
WPBF-TV (channel 25) is the ABC-TV affiliate in the West Palm Beach,
Florida market. The station achieved a nine share of household audience in the
most recent Nielsen ratings survey, tied for third place in the market. WTVX-TV
achieved a three share of household audience in the most recent Nielsen ratings,
ranking fifth in the market. WPBF airs local news programming and a variety of
syndicated shows in addition to the ABC lineup. WTVX carries syndicated
programming and is a leading provider of children's programming in its market.
Both stations carry Southeastern Conference and Atlantic Coast Conference
college football games, featuring among other teams the University of Florida
Gators and the Florida State University Seminoles.
ADVERTISING
Virtually all the Company's broadcasting revenue is derived from local,
regional and national advertising. Advertising rates charged by radio and
network television stations are based on a station's ability to attract
audiences in the demographic groups that advertisers wish to reach, and the
number of stations competing in the market area. A station's audience is
reflected in rating surveys of the number of listeners tuned to the station and
the time spent listening. The Company believes that its regional presence in
Florida's most populous markets and its targeted demographic groups in those
markets make it attractive to national, regional and local radio and television
advertisers. The Company strives to maximize radio revenue by constantly
managing the number of commercials available and all broadcast revenue by
adjusting prices based upon demand by advertisers to reach the Company's
stations' target demographic groups. In addition to the sales of advertising
time for cash, stations typically exchange advertising time for goods or
services that can be used by the station in its business operations, including
radio, television and billboard advertising and such items as travel and
entertainment services. The Company generally limits the use of such trade
transactions to promotional items or services for which the Company would
otherwise have paid cash. In addition, it is the Company's general policy not to
preempt advertising spots paid for in cash with advertising spots paid for in
trade.
inTV advertising rates are primarily based on the number of cable
households reached, the effectiveness of infomercials, the nature of the
advertiser, the nature of the advertisement (local, national or network), and
ultimately the demand for available infomercial time. The Company attempts to
maximize revenue by increasing the number of cable homes reached, thereby
providing advertisers with increased viewership. The Company seeks to increase
its local advertising sales in order to absorb its inventory of programming time
and thereby increase the overall demand for air time, enabling the Company to
achieve higher average advertising rates. The Company increases the number of
cable households reached both by increasing the reach of each of its stations
through the exercise of "must carry" rights and by acquiring broadcast stations
in additional markets. In addition, most advertisers can measure the success of
an infomercial program almost immediately after a show is broadcast. The Company
believes the success of infomercials with viewers continues to drive advertisers
to use infomercials. As such, the demand for infomercials continues to increase.
COMPETITION
The Company's radio and television stations compete with the other radio
and television broadcasting stations in their respective market areas, as well
as with other advertising media, including newspapers, television, magazines,
outdoor advertising, transit advertising and direct mail marketing. Competition
within the radio and television broadcasting industries occurs primarily in
individual market areas, so a station in one market does not generally compete
with stations in other market areas. In each of its markets, the Company's radio
and television stations face competition from other stations with substantial
financial resources, including, in certain instances, stations whose programming
is directed to the same demographic groups. In addition to management
experience, factors that are material to competitive positions include a
station's rank
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in its market, authorized power, assigned frequency or station (as applicable),
audience characteristics, local program acceptance and the programming
characteristics of other stations in the market area. The Company attempts to
improve its radio station's competitive position with extensive research and
promotional campaigns aimed at the demographic groups targeted by its stations,
and through sales efforts designed to attract advertisers, including those who
have done little or no radio advertising, by emphasizing the effectiveness of
radio advertising in increasing the advertisers' revenue. Recent changes in the
FCC's policies and rules permit increased joint ownership and joint operation of
local radio stations. Broadcasters with multiple stations in a local market,
such as the Company, which take advantage of these joint arrangements may in
certain instances have lower operating costs and may be able to offer
advertisers more attractive rates and services, and to employ counter
programming in order to maximize combined audience and market revenue shares.
The Company attempts to improve its television stations' competitive positions
with local tie-in promotions and strong local news segments. Although the
Company believes that each of the Company's radio and television stations can
compete effectively in its market, there can be no assurance that any of the
Company's radio or television stations will be able to maintain or increase its
current audience rating or advertising revenue market share.
Although the radio and television broadcasting industries are highly
competitive, some barriers to entry exist. The operation of a radio or
television broadcasting station requires a license from the FCC, and the number
of radio and television stations that can operate in a given market is limited
by the availability of the FM and AM radio frequencies or station (as
applicable) that the FCC will license in that market. The radio and television
broadcasting industries historically have grown in terms of total revenue,
despite the introduction of new technologies for the delivery of entertainment
and information, such as cable, audio tapes and compact discs. The Company
believes that radio's portability makes it less vulnerable than other media to
competition from new methods of distribution or other technological advances.
There can be no assurance, however, that the involvement or introduction in the
future of any new media technology will not have an adverse effect on the radio
or television broadcasting industries.
The Company's development of inTV and creation of a national long-form paid
programming distribution system is a relatively new concept, and there can be no
assurance of its success. The concept is subject to competition from several
sources. The Company's inTV stations face significant competition from
established broadcasting stations and cable television. Various television
networks carry blocks of infomercials and local cable operators also sell blocks
of time to long-form advertisers. To the extent that the Infomall TV Network is
successful, it is likely that the Company will face competition from new market
entrants, some of which could have significantly greater financial resources
than the Company. In addition, the Company could encounter competition as a
result of technological developments. The Company believes, however, that it can
compete on a favorable basis because it has the only group of television
stations in the United States that currently offers infomercial advertisers both
significant national and regional distribution capabilities and inventory
availability during popular morning, daytime and prime time hours.
TIME BROKERAGE AGREEMENTS AND OTHER INTERESTS IN BROADCAST STATIONS
The Company has made certain investments in broadcast properties with third
parties consisting of time brokerage agreements and joint sales agreements, as
well as the co-ownership of certain television stations. These investments in
broadcast properties permit the Company to have a presence in additional markets
and to enjoy many, but not all, of the benefits of ownership while at the same
time remaining in compliance with FCC regulations.
Time Brokerage Agreements. The Company has entered into time brokerage
agreements with third parties pursuant to which the Company enjoys many, but not
all, of the benefits of operating a radio or television station while not owning
such station. The Company may in the future enter into other time brokerage
agreements to operate stations prior to their acquisition or to enable the
Company to operate additional stations that it might not be able to own itself
under current FCC multiple station ownership restrictions. The Company is
currently operating radio stations WPLL-FM, WSRF-AM, WDIZ-FM and WTKS-FM and
inTV station WNAL-TV pursuant to time brokerage agreements pending consummation
of the Company's acquisition of such stations. In addition, the Company intends
to operate inTV stations
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KCMY-TV, WJUE-TV and KAJW-TV pursuant to time brokerage agreements pending
consummation of the Company's acquisition of such stations.
The Company also operates or intends to operate certain stations pursuant
to time brokerage agreements other than in anticipation of the acquisition of
such stations. The Company currently operates each of WTVX-TV, WOAC-TV, WNGM-TV,
WCTD-TV, WFCT-TV, WHKE-TV, WIRB-TV and WRMY-TV under time brokerage agreements.
Three of such stations (WTVX-TV, WOAC-TV and WNGM-TV) are operated pursuant to
time brokerage agreements with entities owned or controlled by Eddie Whitehead
(collectively, "Whitehead Media"), four (WCTD-TV, WFCT-TV, WHKE-TV and WIRB-TV)
are operated pursuant to time brokerage agreements with subsidiaries of CNI and
one (WRMY-TV) is operated pursuant to a time brokerage agreement with Roberts
Broadcasting, as defined below (each of Whitehead Media, the subsidiaries of CNI
and Roberts Broadcasting which are parties to time brokerage agreements with the
Company are referred to herein as "TBA Licensees"). In connection with the
Company's acquisition of WHAI-TV, the Company was required by the FCC to
restructure its investment in WTWS-TV within six months of its acquisition of
WHAI-TV, in order to divest itself of an attributable interest, for FCC multiple
station ownership purposes, in WTWS-TV. The Company intends that, upon the
consummation of such restructured investment, WTWS-TV will be owned by Roberts
Broadcasting Company of Hartford, LLC, a limited liability corporation owned by
Steven Roberts and Michael Roberts (each of the entities owned or controlled by
Steven Roberts and Michael Roberts jointly and with which the Company has an
agreement is referred to herein as "Roberts Broadcasting"), and the Company will
operate WTWS-TV pursuant to a time brokerage agreement with an option to acquire
the station. In addition, after completing its investment in KZAR-TV, as
described below, the Company will operate the station pursuant to a time
brokerage agreement with a Roberts Broadcasting entity and will have an option
to acquire a 50% interest in the station.
With certain limited exceptions, the time brokerage agreements of the
Company entered into other than in anticipation of the consummation of an
acquisition involve a basic transaction structure. The Company (i) finances or
arranges (and typically guarantees) third party financing for the acquisition by
the TBA Licensee of some or all of the assets of the brokered stations and
secures such financing by encumbering such assets including, to the extent
permitted under FCC rules and regulations, the FCC license and all of the
capital stock of the acquiring company; and (ii) enters into a time brokerage
agreement with such TBA Licensee which allows the Company to operate the
brokered station, in accordance with FCC guidelines. In general, payments made
to the TBA Licensee under the time brokerage agreement are established, and
renegotiated from time to time, based upon increases in expenses for which the
TBA Licensee must, in accordance with FCC regulations, remain primarily liable,
including servicing the indebtedness owed by such TBA Licensee to the Company or
to third parties. In certain circumstances, the Company may acquire certain
tangible assets useful in the construction or operation of the brokered station
and lease such assets to the brokered station. In addition, unless prohibited by
FCC rules and regulations, the TBA Licensee also grants to the Company an option
to purchase the station for an amount payable in cash together with the
forgiveness of all outstanding indebtedness. Of the ten stations operated or to
be operated pursuant to time brokerage agreements other than in anticipation of
the consummation of an acquisition, the Company has or will have options to
purchase six of such stations (WTVX-TV, WOAC-TV, WNGM-TV, WCTD-TV, WFCT-TV,
WHKE-TV and WTWS-TV) and options to purchase partial ownership in two of such
stations (WRMY-TV and KZAR-TV). If the Company were to sell its
network-affiliated television operations, such sale would likely include an
assignment of its time brokerage agreement for WTVX-TV. The Company has no
ownership interest in Whitehead Media, CNI or Roberts Broadcasting.
Other Investments in Television Properties. The Company is currently
operating station WRMY-TV pursuant to a time brokerage agreement and has also
agreed to lend to Roberts Broadcasting Company of Raleigh-Durham, L.P., a
limited partnership which is the licensee of the station and of which Roberts
Broadcasting is the sole general partner, up to $4,000,000 to relocate and
upgrade the station's transmitter facilities. The Company has an option to
convert a portion of its investment in WRMY-TV into a 40% limited partnership
interest, with Roberts Broadcasting holding the remaining 60% partnership
interest. The limited partnership agreement that governs the Company's
partnership interest in WRMY-TV provides the Company the right to approve
substantially all of the programming to be aired on the station and to
participate in certain
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fundamental decisions concerning the operation and management of the station,
including, for example, the approval of station budgets.
The Company owns an option to acquire a 50% interest in the Roberts
Broadcasting entity which will be the licensee of KZAR-TV, and has agreed to
lend the station up to $3.7 million to relocate and upgrade its transmitter
facilities and to operate the station pursuant to a time brokerage agreement.
Similarly, the Company has agreed to acquire for $1,000,000 a 50% interest in
Offshore Television Company, L.L.C., a Delaware limited liability company which
will be the licensee of WOST-TV and of which Offshore Broadcasting Corporation
will be the sole other member, and to loan the station up to $2,500,000 to
relocate and upgrade its transmitter facilities. The business of WOST-TV and,
upon the Company's exercise of its option to acquire a 50% interest, KZAR-TV
will be managed under the terms of an operating agreement between the Company
and, respectively, Offshore Broadcasting Corporation and Roberts Broadcasting
which the Company expects will provide it and the other member of such limited
liability company the right to approve programming and other decisions
concerning the operation of the station.
The loan and security documents governing the terms and conditions of the
loans extended by the Company to each of WRMY-TV, KZAR-TV and WOST-TV contain
customary negative and affirmative covenants made for the benefit of the Company
as a lender to such stations, including limitations on the incurrence of
indebtedness, restrictions on liens, prohibitions on sales of assets and the
Company's prior approval of significant contracts and agreements.
The Company has also extended financing to Cocola Media Corporation of
Florida ("Cocola"), which has in turn financed the construction by WPB
Communications, Inc. of television station WHBI-TV, which is licensed to
Hispanic Broadcasting, Inc. WPB Communications, Inc. is the holder of an option
to acquire WHBI-TV from Hispanic Broadcasting, Inc. after the station commences
broadcast operations. After the consummation of the acquisition by WPB
Communications, Inc., Cocola has an option to acquire the station and, pending
the consummation of such option acquisition, the right to operate WHBI-TV
pursuant to a time brokerage agreement. The Company expects to enter an
affiliation agreement with Cocola after Cocola acquires WHBI-TV, pursuant to
which WHBI-TV would air inTV programming. The Company does not have any
ownership interest in Cocola, WPB Communications, Inc. or Hispanic Broadcasting,
Inc.
FEDERAL REGULATION OF BROADCASTING
The FCC regulates radio and television broadcast stations pursuant to the
Communications Act. The Communications Act permits the operation of radio and
television broadcast stations only in accordance with a license issued by the
FCC upon a finding that the grant of such license would serve the public
interest, convenience and necessity. The Communications Act provides for the FCC
to exercise its licensing authority to provide a fair, efficient and equitable
distribution of broadcast service throughout the United States.
The Communications Act empowers the FCC, among other things, to determine
the frequencies, location and power of broadcast stations; to issue, modify,
renew and revoke station licenses; to approve the assignment or transfer of
control of broadcast licenses; to regulate the equipment used by stations; to
impose fees for processing applications; to adopt regulations to implement the
provisions of the Communications Act; and to impose penalties for violations of
the Communications Act or FCC regulations. The FCC may revoke licenses for,
among other things, false statements made to the FCC or willful or repeated
violations of the Communications Act or of FCC rules. Legislation has been
introduced from time to time to amend the Communications Act in various respects
and the FCC from time to time considers new regulations or amendments to its
existing regulations. On February 8, 1996, the President signed into law the
Telecommunications Act of 1996 (the "1996 Act"). The 1996 Act changed many
provisions of the Communications Act and required the FCC to change its existing
rules and adopt new rules in several areas affecting broadcasting. The Company
cannot predict whether Congress will enact any further such legislation, the
extent to which the FCC will adopt new or amend existing regulations (although
the 1996 Act requires the FCC to institute rule making proceedings to amend
aspects of its broadcast rules), or what the effect of such actions may be on
the Company.
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The following is a brief summary of certain provisions of the
Communications Act and the rules of the FCC. Reference should be made to the
Communications Act and the rules, orders, decisions and published policies of
the FCC for further information on FCC regulation of television and radio
broadcast stations.
License Renewal. The Communications Act provides that a broadcast station
license may be granted to an applicant if the public interest, convenience and
necessity will be served thereby, subject to certain limitations. In making
licensing determinations, the FCC considers an applicant's legal, technical,
financial and other qualifications. Broadcast station licenses are granted for
specific, limited periods, and, upon application, are renewable for additional
terms. Prior to recent amendments to the Communications Act in the 1996 Act, the
Communications Act provided for radio broadcast station licenses to be granted
for a maximum term of seven years, and television station licenses to be granted
for a maximum term of five years. The 1996 Act extends the maximum permissible
license term for both television and radio broadcast stations to eight years.
The FCC has begun a rule making proceeding in which it has proposed to extend
the term for radio and television broadcast stations (other than experimental
stations) to the full eight year term permitted by the statute. In addition, the
1996 Act provides that, if a broadcast station fails to transmit broadcast
signals for any period of 12 consecutive months, the station license expires
automatically, without further FCC action, at the end of that 12-month period,
without regard to the stated term of the license. The FCC has interpreted this
provision as applying to failures to transmit after the passage of the 1996 Act.
The Company's current licenses and the licenses of stations with which the
Company has time brokerage agreements expire on the following dates:
<TABLE>
<CAPTION>
RADIO STATIONS(A) MARKET(B) LICENSE EXPIRATION
------------------------------- ------------------------------- -------------------
<S> <C> <C>
WLVE-FM........................ Miami/Ft. Lauderdale February 1, 2003
WPLL-FM........................ Miami/Ft. Lauderdale February 1, 2003
WZTA-FM........................ Miami/Ft. Lauderdale February 1, 2003
WSRF-AM........................ Miami-Ft. Lauderdale February 1, 2003
WINZ-AM........................ Miami/Ft. Lauderdale February 1, 2003
WFTL-AM........................ Miami/Ft. Lauderdale February 1, 2003
WHPT-FM........................ Tampa/St. Petersburg February 1, 2003
WSJT-FM........................ Tampa/St. Petersburg February 1, 2003
WZTM-AM*....................... Tampa/St. Petersburg February 1, 2003
WHNZ-AM........................ Tampa/St. Petersburg February 1, 2003
WJRR-FM........................ Orlando February 1, 2003
WTKS-FM........................ Orlando February 1, 2003
WMGF-FM........................ Orlando February 1, 2003
WDIZ-FM........................ Orlando February 1, 2003
WWNZ-AM*....................... Orlando February 1, 2003
WQTM-AM........................ Orlando February 1, 2003
WPLA-FM........................ Jacksonville February 1, 2003
WROO-FM........................ Jacksonville February 1, 2003
WNZS-AM........................ Jacksonville February 1, 2003
WFSJ-FM........................ Jacksonville February 1, 2003
WZNZ-AM........................ Jacksonville February 1, 2003
WOWW-FM........................ Pensacola February 1, 2003
WTKX-FM........................ Pensacola February 1, 2003
WSNI-FM........................ Tallahassee February 1, 2003
WXSR-FM........................ Tallahassee February 1, 2003
WTPS-FM........................ Tallahassee February 1, 2003
WTNT-FM........................ Tallahassee February 1, 2003
WNLS-AM........................ Tallahassee February 1, 2003
WPBH-FM........................ Panama City February 1, 2003
WPAP-FM........................ Panama City February 1, 2003
WFSY-FM........................ Panama City February 1, 2003
</TABLE>
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<TABLE>
<CAPTION>
RADIO STATIONS(A) MARKET(B) LICENSE EXPIRATION
------------------------------- ------------------------------- -------------------
<S> <C> <C>
WEBZ-FM........................ Panama City February 1, 2003
WGNE-AM........................ Panama City February 1, 2003
WPTN-AM........................ Cookeville August 1, 2003
WGSQ-FM........................ Cookeville August 1, 2003
WHUB-FM........................ Cookeville August 1, 2003
WHUB-AM........................ Cookeville August 1, 2003
<CAPTION>
OWNED TELEVISION STATIONS MARKET LICENSE EXPIRATION
------------------------------- ------------------------------- -------------------
<S> <C> <C>
WHAI........................... New York April 1, 1999
KZKI........................... Los Angeles December 1, 1998
WTGI........................... Philadelphia August 1, 1999
KLXV........................... San Francisco December 1, 1998
WGOT........................... Boston April 1, 1999
WYVN(c)........................ Washington, D.C. October 1, 2003
WTLK........................... Atlanta April 1, 1997
KTFH........................... Houston August 1, 1998
WAKC........................... Cleveland October 1, 1997
KUBD........................... Denver April 1, 1998
KWBF........................... Phoenix October 1, 1998
WCEE........................... St. Louis December 1, 1997
WTWS........................... Hartford/New Haven April 1, 1999
WPBF........................... West Palm Beach February 1, 1997
WAAP........................... Greensboro December 1, 1996
WOCD........................... Albany June 1, 1999
WTJC........................... Dayton October 1, 1997
WSJN........................... San Juan February 1, 1997
<CAPTION>
TIME BROKERAGE
TELEVISION STATIONS MARKET LICENSE EXPIRATION
------------------------------- ------------------------------- -------------------
<S> <C> <C>
WNGM........................... Atlanta April 1, 1997
WOAC........................... Cleveland October 1, 1997
WFCT........................... Tampa/St. Petersburg February 1, 1997
WCTD........................... Miami/Ft. Lauderdale February 1, 1997
WIRB........................... Orlando February 1, 1997
WHKE........................... Milwaukee December 1, 1997
WRMY........................... Raleigh December 1, 1996
WNAL........................... Birmingham April 1, 1997
WTVX........................... West Palm Beach February 1, 1997
</TABLE>
- ---------------
* License renewal pending.
(a) The formal call sign assigned by the FCC does not include the "-AM" suffix
and does not necessarily include the "-FM" suffixes.
(b) Each station is licensed by the FCC to serve a specific community which is
included in the listed market.
(c) License application pending.
Generally, the FCC renews licenses without a hearing. The Communications
Act authorizes the filing of petitions to deny against license renewal
applications during specified periods after the renewal applications have been
filed. Interested parties, including members of the public, may file petitions
to deny as a means to raise issues concerning the renewal applicant's
qualifications. The 1996 Act removed the opportunity for the filing of competing
applications against an incumbent licensee at renewal time. Instead, the FCC
will renew a broadcast license if, during the previous license term, the
incumbent licensee has met three requirements: (1) the station has served the
public interest, convenience and necessity; (2) the licensee has not seriously
violated the Communications Act or the FCC's rules; and (3) there have been no
other violations, which, taken together, would constitute a pattern of abuse. If
an applicant for renewal fails to satisfy this tripartite standard, the FCC
nevertheless may renew the license on appropriate terms and conditions,
including renewal
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<PAGE> 66
for less than a full license term. The FCC may not consider applications for the
channel by other parties until it first has decided to deny any form of renewal
to the incumbent licensee. Before denying renewal to an incumbent licensee, the
FCC first must allow the licensee a hearing on the licensee's alleged failure to
satisfy the statutory standard. The Communications Act, as amended, now
prohibits the FCC from considering whether another licensee would be preferable
until it first has determined that the incumbent does not qualify for renewal.
In recent years, there have been a number of petitions to deny filed with
respect to broadcast license renewal applications, but in the vast majority of
cases the FCC has renewed incumbent operators' station licenses.
Ownership Matters. The Communications Act requires the prior approval of
the FCC for the assignment of a broadcast license or the transfer of control of
a corporation or other entity holding a license. In determining whether to
approve an assignment of a radio or television broadcast license or the transfer
of control of a corporation or other entity holding a broadcast license, the FCC
considers, among other things, the financial and legal qualifications of the
prospective assignee or transferee, including compliance with FCC restrictions
on alien ownership and control, compliance with rules limiting the common
ownership of certain "attributable" interests in broadcast, cable and newspaper
properties, and the character qualifications of the transferee or assignee and
the individuals or entities holding attributable interests in them.
The FCC generally applies its ownership limits to attributable interests
held by an individual, corporation, partnership, or other association or entity.
In the case of corporations holding broadcast licenses, the interests of
officers, directors, and those who, directly or indirectly, have the right to
vote five percent or more of the corporation's stock are generally attributable,
as are the interests of an officer or director of a corporate parent of a
broadcast licensee. The FCC treats all partnership interests as attributable,
except for those limited partnership interests that are insulated under FCC
policies. For certain regulated investment companies, insurance companies and
banks holding stock through their trust departments in trust accounts, such
interests become attributable with the direct or indirect ownership of ten
percent or more of the stock of the corporation holding broadcast licenses. The
FCC's rules specify exceptions to the general principles for attribution. For
example, in a corporation with a single majority shareholder, such as the
Company, no other shareholder is deemed to hold an attributable interest.
The 1996 Act substantially relaxed and restructured ownership rules
applicable to broadcast entities by removing restrictions on the number of
television stations a single entity may own or control nationwide and increasing
the nationwide audience reach ceiling for television ownership. Under the new
rules, an entity will be able to hold an attributable interest in television
stations reaching up to 35% of the United States television households. The 1996
Act also removed entirely the nationwide limits on the number of radio broadcast
stations in which a single entity may hold an attributable interest. In
addition, the 1996 Act mandated that the FCC change its local radio ownership
rules to increase the number of radio stations a single entity may own in a
single market.
The FCC also limits the number of co-located television broadcast stations
in which a single entity may own an attributable interest. Generally, no single
entity may hold an attributable interest in television stations with overlapping
Grade B service contours. The Grade B contour is a predicted signal strength
contour that generally approximates the area within which a viewer can receive
off-the-air a signal adequate for normal viewing. The 1996 Act directs the FCC
to conduct a rule making proceeding to determine whether these rules should be
retained or modified.
The local ownership restrictions for radio broadcast stations vary based on
market size:
In a market with fourteen or fewer commercial radio stations, a single
entity may own as many as five stations and three same-service stations
(that is, AM or FM), except that a single entity may not own, operate or
control more than 50% of the stations in the market;
In a market with between fifteen and twenty-nine commercial radio
stations, a single entity may own or control six stations and four stations
in the same service;
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<PAGE> 67
In a market with thirty to forty-four commercial radio stations, a
single entity may own or control a total of seven stations and four
same-service stations; and
In a market of forty-five or more commercial radio stations, a single
entity may own or control a total of eight stations with up to five
same-service stations.
Under local radio ownership rules, an entity with an attributable interest
in one radio station also is considered to have an attributable interest in any
other radio station in the same market for which the first radio station
provides the programming for more than 15% of the broadcast time, on a weekly
basis. As a result, such programming arrangements may not be entered into by
radio station combinations that could not be commonly owned under FCC rules.
The FCC's cross-ownership rules prohibit the common ownership of
attributable interests in certain combinations of media outlets serving the same
geographic area. Under these rules, a single entity may not have an attributable
interest in: (i) both a radio station and a television station that serve
specified overlapping areas; (ii) a daily newspaper and either a radio station
or a television station that serve specified overlapping areas; or (iii) a
television station and a cable television system that serve specified
overlapping areas. (The 1996 Act deleted the statutory prohibition on a single
entity owning both a television station and a cable television system in the
same market, but did not require the FCC to change its rule that imposes this
restriction.) The FCC has established a liberal waiver policy to permit common
ownership of a radio station and a television station in any of the nation's 25
largest markets. The 1996 Act extends this liberal waiver policy to the top 50
markets. The FCC also may grant waivers in some circumstances involving failed
stations and in other situations where more stringent waiver standards can be
met. In addition, legislative proposals have been made from time to time to
liberalize or strengthen these prohibitions. See "Proposed Changes."
In cases involving competing media in the same market, FCC policy in
certain instances prohibits common interests and relationships under its
cross-interest policy, even if the interests involved are non-voting or other
non-attributable interests not specifically forbidden under the FCC's
cross-ownership rules, such as non-voting equity interests, joint ventures and
key employees. The FCC has initiated proceedings to inquire whether it should
change or eliminate this policy. The policy does not necessarily prohibit these
interests, but may require that the FCC consider whether these relationships
could have a significant adverse affect on programming diversity and competition
in the market. See "Proposed Changes."
In cases where one person or entity (such as Mr. Paxson in the case of the
Company) holds more than 50% of the combined voting power of the stock of a
broadcasting corporation, a minority shareholder that is not an officer or
director of the corporation generally would not acquire an attributable interest
in the corporation. Any attributable interest by any shareholder in another
broadcast station or daily newspaper in a market where such a corporation owns
or seeks to acquire a station may still be subject to review by the FCC under
its cross-interest policy, and could result in the Company's being unable to
obtain from the FCC one or more authorizations needed to acquire other broadcast
stations. Furthermore, if a majority shareholder of a company (such as Mr.
Paxson in the case of the Company) were no longer to hold more than 50% of the
combined voting power of the common stock of the Company, the interests of
minority shareholders that had theretofore been considered non-attributable
could become attributable, with the result that any other media interests held
by such shareholders would be combined with the media interests of such company
for purposes of determining the shareholders' compliance with FCC ownership
rules. In the event of any noncompliance, steps required to achieve compliance
could include divestitures by either the shareholder or the affected company.
Furthermore, other media interests of shareholders having or acquiring an
attributable interest in such a company could result in the company's being
unable to obtain FCC consents for future acquisitions. Conversely, the Company's
media interests could operate to restrict other media investments by
shareholders having or acquiring an interest in the Company.
Under the Communications Act, no FCC broadcast license may be held by a
corporation of which more than one-fifth of its capital stock is owned of record
or voted by aliens or their representatives or by a foreign government or
representative thereof, or by any corporation organized under the laws of a
foreign country (collectively "Aliens"). Furthermore, the Communications Act
provides that no FCC broadcast license may be granted to any corporation
directly or indirectly controlled by any other corporation of which more than
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<PAGE> 68
one-fourth of its capital stock is owned of record or voted by Aliens if the FCC
should find that the public interest would be served by the refusal of such
license. Restrictions on alien ownership also apply, in modified form, to other
types of business organizations, including partnerships.
Programming and Operation. The Communications Act requires broadcasters to
serve the public interest. Since the late 1970's, the FCC gradually has relaxed
or eliminated many of the more formalized procedures it developed to promote the
broadcast of certain types of programming responsive to the needs of a station's
community of license. Nevertheless, broadcast licensees continue to be required
to present programming that responds to community problems, needs and interests
and to maintain certain records demonstrating such responsiveness. Complaints
from listeners or viewers about a broadcast station's programming often will be
considered by the FCC when it evaluates renewal applications of a licensee,
although such complaints may be filed at any time.
Broadcast of obscene or indecent material is regulated by the FCC as well
as by state and federal law. Stations also must follow various rules promulgated
under the Communications Act that regulate, among other things, political
advertising, sponsorship identifications, the advertising of contests and
lotteries, and technical operations, including limits on human exposure to radio
frequency energy. In addition, licensees must develop and implement affirmative
action programs designed to promote equal employment opportunities, and must
submit reports to the FCC with respect to these matters on an annual basis and
in connection with a renewal application. Pursuant to the Children's Television
Act of 1990, the FCC has adopted rules limiting advertising in children's
television programming and requiring that television broadcast stations serve
the educational and informational needs of children. The Children's Television
Act specifically requires the FCC to consider compliance with these obligations
in deciding whether to renew a television broadcast license.
Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
short term renewals or, for particularly egregious violations, the denial of a
license renewal application or the revocation of a license.
Time Brokerage Agreements. Over the past several years a significant
number of radio and television broadcast licensees, including certain of the
Company's subsidiaries, have entered into time brokerage agreements with
separately owned and licensed radio or television stations. These arrangements
are subject to compliance with the antitrust laws and with the FCC's rules and
policies requiring that the licensee of each station maintain independent
control over the programming and station operations of its own station.
Typically, a time brokerage agreement is a programming agreement between
two separately owned broadcast stations serving a common service area, whereby
the licensee of one station programs substantial parts of the broadcast day on
the other licensee's station, subject to ultimate editorial and other controls
being exercised by the licensee of the brokered station. The broker then sells
advertising time during such program segments for its own account. Such
arrangements are an extension of the concept of traditional time brokerage,
under which a licensee of a station sells the right to broadcast blocks of time
on its station to an entity or entities which program the blocks of time and
sell their own commercial advertising for their own account during the time
periods in question.
The FCC has determined that issues of joint advertising sales should be
left to antitrust enforcement. In addition, it has specifically exempted time
brokerage agreements from its cross-interest policy. Furthermore, the FCC and
the staff of the FCC's Mass Media Bureau have held that time brokerage
agreements do not per se constitute a transfer of control and are not contrary
to the Communications Act, provided that the licensee of the station maintains
ultimate responsibility for and control over operations of its broadcast station
(including, specifically, control over station finances, licensee personnel and
programming) and complies with applicable FCC rules and with antitrust laws.
Thus far, the FCC has not considered what relevance, if any, a time brokerage
agreement may have upon its evaluation of a licensee's performance at renewal
time.
Under certain circumstances, the FCC will consider a station brokering time
on another radio station serving the same market to have an attributable
ownership interest in the brokered station for purposes of the FCC's radio local
ownership rules. In particular, a radio broadcast station is not permitted to
enter into a time
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brokerage agreement giving it the right to program more than 15% of the
broadcast time, on a weekly basis, of another local station that it could not
own under the FCC's revised local radio multiple ownership rules. Nevertheless,
radio time brokerage agreements entered into before September 16, 1992, are
generally grandfathered. The FCC has no present rules on the attribution of
television time brokerage agreements as it does with radio time brokerage
agreements. The FCC has adopted an interim policy on the grant of transfer and
assignment applications that include television time brokerage agreements and
the FCC is now considering whether to adopt rules governing television time
brokerage agreements. The 1996 Act included a provision stating that the
broadcast ownership section of the 1996 Act is not to be construed to prohibit
the origination, continuation or renewal of any television time brokerage
agreement that complies with FCC regulations. See "Proposed Changes."
The FCC rules also prohibit a radio broadcast licensee from simulcasting
more than 25% of its programming on another station in the same radio broadcast
service (that is, AM-AM or FM-FM), whether it owns both stations or operates
both through a time brokerage agreement, if the brokered and brokering stations
serve substantially the same geographic area.
"Must Carry"/Retransmission Consent. Some provisions of the 1992 Cable Act
and the implementing rules adopted by the FCC, such as signal and carriage and
equal employment opportunity requirements, directly affect television
broadcasting. Other provisions, although focused exclusively on the regulation
of cable television, may indirectly affect the Company because of the
competition between over-the-air television stations and cable systems.
The 1992 Cable Act contains broadcast signal carriage requirements that
allow local commercial television broadcast stations the option once every three
years to elect to require a cable system to carry the station on certain
designated cable channels subject to certain exceptions, or to negotiate for
retransmission consent to carry the station. A cable system generally is
required to devote up to one-third of its activated channel capacity for the
mandatory carriage of local commercial television stations. Local non-commercial
television stations also are given mandatory carriage rights; however, such
stations are not given the option to negotiate retransmission consent for the
carriage of their signals by cable systems. Additionally, cable systems are
required to obtain retransmission consent for all distant commercial television
stations (except for commercial satellite-delivered independent superstations
such as WTBS), commercial radio stations and certain low power television
stations carried by such systems after October 6, 1993.
On April 8, 1993, a special three-judge federal district court issued a
decision upholding the constitutional validity of the mandatory signal carriage
requirements. In June 1994, the United States Supreme Court vacated this
decision and remanded it to the district court to determine, among other
matters, whether the statutory carriage requirements are necessary to preserve
the economic viability of the broadcast industry. On December 12, 1995, a
three-judge federal district court panel again upheld the constitutional
validity of the mandatory signal carriage requirements, ruling that reasonable
evidence supported Congress' conclusion that "must carry" rules are necessary to
preserve the economic validity of the broadcast industry. The district court's
decision has been appealed to the Supreme Court, but the mandatory broadcast
signal carriage requirements will remain in effect pending the outcome of the
further proceedings. The Supreme Court has set oral argument for October 7,
1996. The Company cannot predict whether the Supreme Court will ultimately
uphold or strike down the mandatory signal carriage requirements. If a station
is not carried by a cable system in its area or is shifted to an undesirable
channel on such cable system, the station could experience a decline in
viewership that could adversely affect its revenue, particularly revenue from
stations carried on a cable system solely to comply with the "must carry" law
(for example, if the Infomall programming competes with the cable system's own,
similar non-broadcast offering).
The 1996 Act allows for local telephone exchange carriers and other
entities to provide video programming over "Open Video Systems." The FCC is
required to adopt regulations mandating must carry for commercial and
noncommercial stations and retransmission consent for these systems.
The 1996 Act modified the way in which markets for carriage will be
determined for purposes of the must-carry rules. The 1996 Act provides that,
instead of using markets previously defined by the Arbitron ratings service, the
FCC may determine a broadcast station's market by using commercial publications
that
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delineate television markets based on viewing patterns. The FCC is authorized to
entertain requests for expansion or other modification of television station
markets, and is now required to resolve any market modification request within
120 days after the request is filed. The grant of such requests by a television
licensee to extend its "must carry" rights into another ADI may fractionalize
the viewing audience of other television stations already classified as entitled
to "must carry" rights within the ADI.
The 1996 Act directed the FCC to adopt regulations to allow local exchange
telephone companies to provide video programming either as cable operators or
under the newly-established category of "Open Video Systems." If a local
exchange telephone company decides to provide video programming as a cable
operator, it will be subject to the same must-carry/retransmission consent
requirements as a cable operator. The 1996 Act also directed the FCC to adopt
rules requiring operators of Open Video Systems to be subject to regulations
regarding "must carry" for commercial and noncommercial broadcast stations,
network nonduplication, syndicated exclusivity protection and retransmission
consent options. Operators of Open Video Systems will be required to carry
identification of broadcast stations on any navigational device, guide, or menu
that they have on their System.
Equal Employment Opportunity Requirements. The 1992 Cable Act also
codified the FCC's existing equal employment opportunity ("EEO") regulations and
reporting forms used by television broadcast stations. In addition, as required
by the 1992 Cable Act, the FCC has adopted rules providing for a review of the
EEO performance of each television station at the mid-point in its license term
(in addition to an examination at renewal time) and for the FCC to inform the
licensee of any improvements in recruiting practices that may be needed as a
result of the review. The FCC recently proposed rules that would reduce the EEO
recordkeeping and filing requirements for certain categories of broadcast
stations. The FCC also has proposed to give broadcasters credit for using the
recruiting resources of a central source, such as a state broadcast association,
and has proposed to adopt guidelines for imposing forfeitures for EEO
violations.
Syndicated Exclusivity/Territorial Exclusivity The FCC has imposed on
cable operators syndicated exclusivity rules and has expanded existing network
non-duplication rules. These syndicated exclusivity rules allow local broadcast
stations to require that cable operators black out certain syndicated
non-network programming carried on distant signals (that is, signals of
broadcast stations, including so-called super stations, which serve areas
substantially removed from the cable system's local community). The network
non-duplication rules allow local broadcast network affiliates to require that
cable operators black out duplicating network broadcast programming carried on
more distant signals that are not significantly viewed over the air.
Prime Time Access Rules. The FCC's recently terminated prime time access
rule placed programming restrictions on affiliates of major national television
networks. In the past, this rule generally restricted affiliates of networks in
the 50 largest television markets (as defined by the rule) generally to no more
than three hours of network programming during the four hours of prime time.
Recently, the FCC changed its definition of network to include those entities
that deliver more than 15 hours of prime time programming (a term defined in
those rules) to affiliates reaching 75% of the nation's television homes. Under
this definition, certain national television networks are not subject to the
prime time access rule. In July 1995, the FCC issued an order repealing the
prime time access rules, subject to a one-year transition period during which
the rules will continue in effect. The prime time access rules terminated on
August 30, 1996. The Company cannot predict what effect the repeal of the rules
may have on the operation of its network-affiliated television stations or the
market for syndicated television programming.
V-Chip. The 1996 Act encourages the broadcast television industry to
establish a ratings system for video programming. If the industry fails to
establish such a ratings system within one year, the FCC is directed to appoint
a Committee to recommend a ratings system. The 1996 Act also requires the
inclusion of an electronic device (the "V-Chip") in new television sets, which
will enable parents to block programming that contains a certain rating.
Television and radio broadcast stations also may be subject to a number of
other federal, state and local regulation, including regulations of the Federal
Aviation Administration affecting tower height and marking,
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and federal, state and local environmental and land use restrictions and general
business regulation, and a variety of local regulatory concerns.
Children's Television. Pursuant to the Children's Television Act of 1990,
the FCC has adopted rules limiting advertising in children's television
programming and requiring that television broadcast stations serve the
educational and informational needs of children. The Children's Television Act
specifically requires the FCC to consider compliance with these obligations in
deciding whether to renew a television broadcast license. On August 8, 1996, the
FCC adopted new rules on the enforcement of the Children's Television Act. Among
other measures, the FCC has specified a definition of "core programming" to be
considered in assessing whether a licensee has met its obligations to educate
and inform children. In general, "core programming" must be regularly scheduled
weekly programming of at least 30 minutes in length, aired between 7:00 a.m. and
10:00 p.m., a significant purpose of which is to serve the educational and
informational needs of children. Licensees will be required to identify "core
programming" in the information provided to television guides, at the time the
programming is aired, and in reports placed in the broadcaster's public file.
Licensees who air at least three hours of children's programming per week or the
equivalent will be eligible to have their licenses renewed by action of the
FCC's staff. Licensees who do not meet this processing standard will have their
renewal applications considered by the FCC Commissioners. The new rules
regarding on-air identification, program guides, public file, and reporting
requirements become effective January 2, 1997.
Proposed Changes. The Congress and the FCC have under consideration, and
in the future may consider and adopt, new laws, regulations and policies
involving a wide variety of matters that could affect, directly or indirectly,
the operation, ownership and profitability of the Company's broadcast stations,
result in the loss of audience and advertising revenue for the Company's
broadcast stations and affect the ability of the Company to acquire additional
broadcast stations or finance such acquisitions.
Implementation of Amendments to the Communications Act. Since the
enactment of the 1996 Act in February 1996, the FCC has begun a number of
rule making proceedings to conform its rules to the new statute, to review
certain aspects of its rules as directed by the new statute or to provide
guidance and clarification on how the FCC will apply certain provisions of
the new statute. The 1996 Act is one of the most significant changes to the
Communications Act since its adoption in 1934. Although the focus of the
1996 Act is on telephony, the 1996 Act will result in changes to several
provisions of the law relating to broadcasters. The 1996 Act expressly
requires the FCC to change its rules in many significant respects, and
additional rule making proceedings may be required to adapt present FCC
requirements to the new law. As the 1996 Act only recently has been passed
and become law and the FCC has not yet completed all of the proceedings
that the 1996 Act requires, it remains to be seen how the FCC will
interpret certain provisions of the 1996 Act.
FCC Proceedings to Revise Broadcast Ownership Rules. The FCC has
several pending rule making proceedings to consider aspects of its
ownership rules affecting broadcasting that predate the enactment of the
1996 Act. The passage of the 1996 Act will affect the outcome of these
proceedings, and the FCC may initiate new or further proceedings to
consider some of these matters. In January 1995, the FCC issued a further
notice of proposed rule making which proposed the following changes in
regulations governing television broadcasting: (i) modifying the reach
discount as it applies to UHF stations; (ii) narrowing the geographic area
where common ownership restrictions would be triggered by limiting it to
overlapping Grade A contours rather than Grade B contours and by permitting
(or granting waivers in particular cases or markets) certain UHF/UHF or
UHF/VHF overlaps; (iii) relaxing the rules prohibiting cross-ownership of
radio and television stations in the same market to allow certain
combinations where there remain alternative outlets and suppliers to ensure
diversity; and (iv) treating television time brokerage agreements the same
as radio time brokerage agreements which would preclude certain television
time brokerage agreements presently in effect, where the programmer owns or
has an attributable interest in another television station in the same
market. In June 1995, the FCC announced an interim policy for processing
television transfer and assignment applications that include time brokerage
agreements. Pending the adoption of new rules, the FCC has stated that it
will not grant applications that propose a time brokerage arrangement if
the arrangement also includes both debt financing by the time broker and an
option for the time broker to purchase the brokered station. The FCC
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has stated that it will continue to grant applications with time-brokerage
arrangements if they include only one of those elements (that is, either
debt financing by the broker or an option of the time broker to purchase).
Adoption of the most restrictive proposals in the FCC's television
ownership proceeding could limit the Company's alternatives for entering
into new time brokerage agreements and making new broadcast acquisitions
and, if existing arrangements are not grandfathered, could require the
Company to modify or terminate certain of its time brokerage agreements.
In January 1995, the FCC issued a further notice of proposed rule
making that combined several long-pending proceedings to consider changes
in its ownership rules and policies. In the proceeding, the FCC is
considering, among other things, (i) whether to make non-voting stock
interests attributable; (ii) whether to change attribution thresholds;
(iii) how to treat limited liability companies for purposes of attribution;
(iv) whether to extend the cross-interest policy to require review of
multi-layered business relationships, including debt relationships, that
now are not subject to scrutiny; and (v) whether to retain the so-called
"single majority shareholder" exception to attribution under which no
minority stock interest is attributable in a corporation with a single
shareholder voting more than a fifty percent interest; and (vi) whether to
change the insulation standards for non-attribution of limited partnership
interests. Adoption of the most restrictive alternatives available to the
FCC could require that the Company, in assessing acquisition and compliance
strategies, take into account additional interests of itself and its
principals that are now exempt from FCC ownership regulation, and
potentially divest or restructure some interests.
In a second notice of proposed rule making the FCC is seeking comment
on whether the FCC should relax attribution and other rules to facilitate
greater minority and female media ownership.
The 1996 Act directs the FCC to conduct a biennial review of its
broadcast ownership rules, to determine whether the rules continue to serve
the public interest, and to repeal or modify regulations found to no longer
serve the public interest.
FCC Inquiry on Broadcast of Commercial Matter. The FCC also has
initiated a notice of inquiry proceeding seeking comment on whether the
public interest would be served by establishing limits on the amount of
commercial matter broadcast by television stations. No prediction can be
made at this time as to whether the FCC will propose any limits on
commercial advertising at the conclusion of its deliberation or the effect
the imposition of limits on the commercial matter broadcast by television
stations would have upon the Company's operations.
Digital Audio Broadcasting. The FCC recently has allocated spectrum
to a new technology, digital audio broadcasting ("DAB"), to deliver
satellite-based audio programming to a national or regional audience and is
considering rules for a DAB service. DAB may provide a medium for the
delivery by satellite or terrestrial means of multiple new audio
programming formats with compact disc quality sound to local and national
audiences. It is not known at this time whether this technology also may be
used in the future by existing radio broadcast stations either on existing
or alternate broadcasting frequencies. In addition, applications by several
entities currently are pending at the FCC for authority to offer multiple
channels of digital, satellite-delivered S-Band aural services that could
compete with conventional terrestrial radio broadcasting. These satellite
radio services use technology that may permit higher sound quality than is
possible with conventional AM and FM terrestrial radio broadcasting. Thus
far, the FCC has not granted the pending requests for authorizations to
offer satellite radio, nor has it adopted rules for the proposed satellite
radio service. Implementation of DAB would provide an additional audio
programming service that could compete with the Company's radio stations
for listeners, but the effect upon the Company cannot be predicted.
Advanced High Definition Television System. The FCC has also begun to
adopt rules for implementing advanced (high definition) television ("ATV")
also known as digital television, or DTV, in the United States.
Implementation of ATV service should improve the technical quality of
television broadcasts. In anticipation of the implementation of ATV
operations, the 1996 Act directed the FCC to adopt ATV technical standards
and other rules necessary to protect the public interest. The FCC is
authorized (but not required) to establish minimum hours of ATV operation.
The 1996 Act also provides
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for the FCC to limit the eligibility for ATV licenses to existing
television licensees and permittees. The FCC is directed to condition ATV
licenses on recapture of either the new ATV spectrum or television
licensees' current spectrum channel, but neither the timetable nor the
subsequent use of recaptured spectrum is specified. Ten years after it
first issues ATV licenses, however, the FCC must evaluate its regulation
and public acceptance of ATV, including possible alternative uses of and
reduction in ATV spectrum.
The FCC is required to adopt rules permitting ATV licensees to offer
"ancillary or supplementary services" on newly-available ATV spectrum, so
long as such services are consistent with the FCC's ATV standards; do not
derogate required ATV services, including high definition television; and
are regulated in the same manner as similar non-ATV services. Ancillary or
supplementary services will not have must-carry rights on cable television
systems. All services using ATV spectrum must be consistent with the public
interest and renewal applicants will be required to establish that all
conventional and ATV program services are in the public interest. Failure
to comply with FCC requirements governing ancillary or supplementary ATV
services will reflect adversely on renewal qualifications.
Licensees which use ATV frequencies to provide ancillary or
supplementary services on a subscription or similar paid basis
(commercially-supported non-subscription broadcasting is excluded) will be
required to pay annual fees, based on the amount of spectrum being used and
the time it is used for ancillary and supplementary services. The fee is
not to exceed the amount which would have been received had the spectrum
been auctioned for similar uses.
The FCC has decided to set aside specific new channel allotments for
ATV service. Initial eligibility for these channels will be limited to
existing television licensees. The FCC has not yet adopted a new technical
standard for ATV, nor has it adopted a new Table of Allotments for ATV
channels.
Under the FCC's current plan for phasing in ATV service, each
television station would be able to continue to provide conventional
television service on its regular channel until ATV has become the
prevalent medium. In August 1995, the FCC issued its Fourth Further Notice
of Proposed Rulemaking and Third Notice of Inquiry in its ATV proceeding.
The notice and inquiry requested public comment on a number of issues in
connection with the establishment of ATV television broadcasting,
including: (i) procedures and timetables for existing broadcasters to move
to ATV channels and relinquish their present spectrum; (ii) restrictions on
the use of ATV channels during the transition period; (iii) the effect of
conversion to digital transmission on a broadcaster's public interest
obligations; (iv) incentives for the rapid adoption of ATV transmission
technologies by broadcasters and by the public, and (v) the impact of ATV
on cable television carriage or retransmission consent. Fifteen years after
the start date, television broadcasters would be required to surrender
their conventional television licenses. In May 1996, the FCC issued its
Fifth Further Notice of Proposed Rulemaking in the ATV proceeding. The
notice proposed to adopt a fixed technical standard for ATV transmission.
On July 25, 1996, the FCC adopted its Sixth Further Notice of Proposed
Rule Making in its ATV proceeding. In the notice, the FCC proposed to seek
to provide a second channel for ATV service for all eligible television
broadcasters, to replicate broadcasters' present service areas, and to
minimize interference without preference to either conventional or ATV
service. The FCC also proposed an ATV allotment plan using the spectrum
occupied by existing channels 7-51 for ATV allotments to permit the
possible early recovery of spectrum. The FCC asked for comment on alternate
approaches to minimize the impact upon low power television and television
translator stations. The FCC will continue to accept applications for
modification of the facilities of existing television stations, but will
condition grants on the outcome of the ATV allotment proceeding.
Implementation of ATV service is likely to impose additional costs on
television stations providing new service due to increased equipment costs.
While the Company believes the FCC will authorize ATV, the Company cannot
predict when such authorization might be given or the effect such
authorization might have on the Company's business.
Other Changes that may result from matters under consideration by the
FCC or the Congress include: (i) spectrum use or other fees on FCC
licensees; (ii) the FCC's EEO rules and other matters relating to female or
minority involvement in the broadcasting industry; (iii) rules relating to
political
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<PAGE> 74
broadcasting; (iv) technical and frequency allocation matters; (v) changes
in the FCC's cross-interest, multiple ownership and cross-ownership rules
and policies; (vi) changes in the tax deductibility of advertising
expenses; (vii) changes in standards governing violent or indecent
programming, the evaluation and regulation of television programming
directed towards children, and the presentation of television programming
directed at the informational and educational needs of children, including
the quantitative guidelines on the minimum amount of such programming to be
provided; and (viii) changes in regulation of the relationship between
major television networks and their affiliates.
The foregoing is only a brief summary of certain provisions of the
Communications Act and of specific FCC and other regulations. Reference is made
to the Communications Act, FCC regulations, and the public notices and rulings
of the FCC for further information concerning the nature and extent of federal
regulation of broadcast stations.
EMPLOYEES
As of June 30, 1996, the Company had approximately 873 full-time employees
and approximately 252 part-time employees, for a total of 1,125 employees. None
of its employees is represented by a labor union. The Company considers its
relations with its employees to be good.
SEASONALITY
Seasonal revenue fluctuations are common within the radio and television
broadcasting industry and result primarily from fluctuations in advertising
expenditures by local retailers. Paxson Radio and Paxson Network-Affiliated
Television generally experience their lowest revenue for the year in the first
quarter, whereas the highest revenue for the year generally occurs in the fourth
quarter. Because of the short operating history of inTV, the Company's ability
to assess the effects of seasonality on inTV is limited. It appears, however,
that inTV may experience its highest revenues during the first and fourth
quarters.
PATENTS AND TRADEMARKS
The Company has 23 registered trademarks and 17 trademark registrations
pending relating to its business. It does not own any patents or patent
applications. The Company does not believe that any of its trademarks are
material to its business or operations.
PROPERTIES AND FACILITIES
The following table sets forth information with respect to the Company's
offices and the studio and broadcast tower locations of its owned radio and
television stations. Management believes that the Company's properties are in
good condition and are suitable for its operations.
<TABLE>
<CAPTION>
LEASE
PROPERTY OWNED/LEASED EXPIRATION
------------------------- ------------ --------------
<S> <C> <C> <C>
RADIO MARKET(A)
- ---------------
Miami, FL.......................... Studio/Offices Owned
WLVE-FM Tower Leased January 2000
WZTA-FM Tower Leased April 2007
WINZ-AM Tower Owned
Tampa, FL.......................... Studio/Offices Leased May 1998
WHNZ-AM Tower Owned
WHPT-FM Tower Owned
WNZE-AM Tower Owned
WSJT-FM Tower Owned
</TABLE>
66
<PAGE> 75
<TABLE>
<CAPTION>
LEASE
PROPERTY OWNED/LEASED EXPIRATION
------------------------- ------------ --------------
<S> <C> <C> <C>
Orlando, FL........................ Studio/Offices Leased March 2002
WJRR-FM Tower Leased April 2000
WMGF-FM Tower Leased February 2001
WWNZ-AM Tower Owned
WWZN-AM Tower Owned
Jacksonville, FL................... Studio/Offices Leased February 1999
WROO-FM Tower Leased March 1999
WPLA-FM Tower Owned
WNZS-AM Tower Leased Perpetual
WZNZ-AM Tower Owned
WFSJ-FM Tower
Pensacola, FL...................... WOWW-FM Studio/Offices Leased December 1996
WOWW-FM Tower Owned
WTKX-FM Studio/Offices Owned
WTKX-FM Tower Leased March 2018
Tallahassee, FL.................... WSNI-FM Studio/Offices Leased December 1998
WSNI-FM Tower Leased March 2005
WXSR-FM Studio/Offices Leased December 1998
WXSR-FM Tower Leased April 1998
WTPS-FM Studio/Offices Leased December 1998
WTPS-FM Tower Leased August 2000
WTNT-FM Studio/Offices Leased December 1999
WTNT-FM Tower Owned
WNLS-AM Studio/Offices Leased December 1999
WNLS-AM Tower Owned
Panama City, FL.................... WPBH-FM Studio/Offices Leased March 1999
WPBH-FM Tower Leased March 1999
WPAP-FM Studio/Offices Leased Annual
WPAP-FM Tower Leased March 2011
WFSY-FM, WEBZ-FM and
WGNE-AM Studio/Offices Owned
WFSY-FM Tower Leased July 2115
WEBZ-FM Tower Leased July 2113
WGNE-AM Tower Owned
Cookeville, TN..................... Studio/Offices Leased December 1998
WGSQ-FM Tower Leased July 2007
WPTN-AM Tower Owned
WHUB-AM/FM Studio/Offices Leased October 1998
WHUB-AM/FM Tower Owned
TELEVISION MARKET(A)
- ------------------
New York, NY....................... Studio Leased March 2001
Tower Leased March 2006
Los Angeles, CA.................... Studio/Offices Leased October 1998
Tower Leased June 2005
Sales Office Leased July 1998
Philadelphia, PA................... Studio Leased September 2000
Tower Owned
</TABLE>
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<PAGE> 76
<TABLE>
<CAPTION>
LEASE
PROPERTY OWNED/LEASED EXPIRATION
------------------------- ------------ --------------
<S> <C> <C> <C>
San Francisco, CA.................. Studio/Offices Leased June 2005
Tower Leased June 2020
Boston, MA......................... Studio/Offices Leased February 2006
Tower Leased June 2026
Washington, D.C.................... Studio Owned
Tower Owned
Atlanta, GA........................ Studio/Offices Leased June 2001
Tower Leased October 2015
Houston, TX........................ Studio/Offices Leased October 1998
KTFH-TV Tower Owned
K33DB Tower Leased January 1997
Cleveland, OH...................... Studio Owned
Tower Owned
Hartford, CT....................... Studio Leased October 1999
Tower Leased October 2035
West Palm Beach, FL................ Studio/Offices Leased October 1998
Tower Owned
Headquarters Owned
Greensboro, NC..................... Studio Owned
Tower Owned
Albany, NY......................... Studio Leased May 1998
Tower Owned
Dayton, OH......................... Studio Owned
Tower Owned
</TABLE>
- ---------------
(a) Market listed may differ from actual location.
LEGAL PROCEEDINGS
The Company is involved in litigation from time to time in the ordinary
course of its business. In the opinion of management, no material legal
proceedings are pending to which the Company, or any of its property, is
subject.
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<PAGE> 77
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information concerning the Company's directors
and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Lowell W. Paxson........................... 61 Chairman of the Board, Chief Executive
Officer and Director
James B. Bocock............................ 52 President, Chief Operating Officer and
Director
Dean M. Goodman............................ 49 President, inTV and Paxson
Network-Affiliated Television
Jon Jay Hoker.............................. 57 President, Paxson Radio
Arthur D. Tek.............................. 47 Vice President, Treasurer, Chief Financial
Officer and Director
Anthony L. Morrison........................ 35 Vice President, Secretary and General
Counsel
Michael J. Marocco*........................ 37 Director
John A. Kornreich*......................... 50 Director
J. Patrick Michaels, Jr.................... 52 Director
S. William Scott........................... 62 Director
Bruce L. Burnham........................... 62 Director
James L. Greenwald......................... 68 Director
</TABLE>
- ---------------
* Messrs. Kornreich and Marocco are expected to resign upon redemption of the
Senior Preferred Stock, which is to be effected with a portion of the proceeds
of this Offering.
Lowell W. Paxson has been Chairman of the Board, Chief Executive Officer
and a Director of the Company since its inception. Mr. Paxson was the creator,
co-founder and president of Home Shopping Network, Inc. ("HSN"), a position he
held from HSN's inception in May 1985 to December 1990. He remained a consultant
to HSN through 1994. Mr. Paxson was a pioneer in the home shopping concept on
radio beginning in 1977, which he later transferred to television through HSN.
Mr. Paxson has been involved in radio for over 40 years, during which time he
owned a majority interest in a number of radio stations. At HSN, in which he was
a major initial stockholder, he was actively involved in the acquisition and
operation of ten television stations which were later spun-off by HSN as Silver
King Communications, Inc. Mr. Paxson earned his Bachelor's degree from Syracuse
University in 1956. Mr. Paxson holds memberships in the National Cable
Television Association and the National Association of Broadcasters.
James B. Bocock has been President and Chief Operating Officer of the
Company since July 1991 and has been a Director since January 1994. Mr. Bocock
was Vice President -- Broadcast Affiliations for HSN from September 1986 to June
1991. While at HSN, Mr. Bocock negotiated HSN's acquisition of several full and
low power television stations. Mr. Bocock, a former radio station owner, has
been involved in broadcasting since 1962, including service as the general
manager of a number of radio stations throughout the United States.
Dean M. Goodman has been President of inTV and Paxson Network-Affiliated
Television since January 1995. Mr. Goodman joined the Company in 1993 and prior
to becoming President of Paxson Communications Television, Inc., was the General
Manager of the Company's Miami radio group. Prior to joining the Company in
1993, Mr. Goodman was Executive Vice President of the television and radio
broadcast group of Gilmore Broadcasting Corp. Prior to joining Gilmore
Broadcasting Corp., Mr. Goodman was Vice President and General Manager of
Southwest Radio, Inc. and Community Service Broadcasters, Inc. Since 1993, Mr.
Goodman has served as chairman of the Florida Association of Broadcasters, and
has been a director of the National Association of Broadcasting since January
1995.
Jon Jay Hoker has been the President of Paxson Radio since January 1995.
From April 1994 to January 1995 he was President of Paxson Networks, Inc. Mr.
Hoker is a former radio group owner, having formed Hoker Broadcasting in 1985.
Prior to forming his own group, Mr. Hoker was a vice president with Belo
69
<PAGE> 78
Broadcasting from 1982 to 1985. Mr. Hoker was responsible for overall operations
of radio stations in Dallas and Denver as well as overseeing all radio
acquisitions. Mr. Hoker began his broadcast career with ABC, where he was Vice
President and General Manager of ABC's Detroit and Houston radio stations. Mr.
Hoker is a past President of the Houston Association of Broadcasters and the
Dallas-Ft. Worth Association of Broadcasters from 1971 to 1981.
Arthur D. Tek has been Vice President and Chief Financial Officer of the
Company since December 1992. He has been Treasurer and a Director of the Company
since January 1994. Prior to joining the Company, Mr. Tek was Chief Financial
Officer and Controller of Chase Communications, Inc., a television and radio
broadcasting firm, from February 1990 to December 1992. Mr. Tek was Vice
President -- Finance for SunGroup, Inc., a radio station group, from November
1986 to February 1990. Mr. Tek has been a director of the Broadcast Cable
Financial Management Association since June 1995.
Anthony L. Morrison has been Vice President, Secretary and General Counsel
since February 1995. He was an attorney in the New York office of the law firm
of O'Melveny & Myers from June 1990 to February 1995, with a practice consisting
of banking, finance, and general corporate matters. Mr. Morrison was an attorney
with the New York office of White & Case from November 1987 to June 1990.
Michael J. Marocco has served as a Director since December 1993. He joined
Sandler Capital Management in 1989 and is a general partner of Sandler
Associates and, through affiliates, a general partner of the Sandler Media
Partnerships, Sandler Mezzanine Partnerships, and the 21st Century
Communications Partnerships. The Sandler Mezzanine Partnerships hold an equity
interest in the Company. See "Principal and Selling Stockholders." He was a Vice
President at Morgan Stanley & Co. Inc., serving in its communications group,
from 1984 to 1989. Mr. Marocco is a director of YES Entertainment, Inc.
John A. Kornreich has served as a Director since December 1993. He joined
Sandler Capital Management in 1988 and is a general partner of Sandler
Associates and, through affiliates, a general partner of the Sandler Media
Partnerships, Sandler Mezzanine Partnerships, and the 21st Century
Communications Partnerships. The Sandler Mezzanine Partnerships hold an equity
interest in the Company. See "Principal and Selling Stockholders." In 1986, Mr.
Kornreich formed J.K. Media, L.P., a private investment partnership funded
primarily by communications industry executives, for which Mr. Kornreich serves
as the sole general partner.
J. Patrick Michaels, Jr. has been serving as a Director since February
1995. Mr. Michaels founded and since 1973 has been the Chairman of the Board of
Directors and Chief Executive Officer of Communications Equity Associates, Inc.
("CEA"), a firm that specializes in providing financial services to a variety of
organizations in the media, communications and entertainment industries. During
1973, Mr. Michaels was Vice President of Cable Funding Corporation, a
specialized finance company lending to the cable television industry. From
October 1968 through December 1972, Mr. Michaels served as one of the original
employees and Vice President of TM Communications, the cable subsidiary of The
Times Mirror Company. Mr. Michaels holds equity interests in a number of media
companies, some of which may be deemed competitive with the Company. Mr.
Michaels is the Vice Chairman of the Board of Directors, Acting President and
Acting Chief Operating Officer of Video Jukebox Network, Inc.
S. William Scott has been serving as a Director since February 1995. From
1983 to 1987, Mr. Scott was Executive Vice President, Westinghouse Broadcasting
Television Group. From 1981 through the end of 1983, Mr. Scott served as
President and Chief Operating Officer of a Westinghouse Broadcasting/American
Broadcasting Company joint venture for cable television known as the Satellite
News Channels. Currently, Mr. Scott provides consulting services to various
media companies, including the Company.
Bruce L. Burnham has been serving as a director since February 1996. Mr.
Burnham has been President of The Burnham Group, a retail consulting and
marketing firm, since 1993. From 1981 to 1984, Mr. Burnham was Chairman and
Chief Executive Officer of Dayton's Department Stores, headquartered in
Minneapolis, and from 1979 to 1980 was President and Chief Executive Officer of
Bonwit Teller in New York City. Mr. Burnham is currently a director of Financial
Benefit Group, Inc. and J.B. Rudolph, Inc.
James L. Greenwald has been serving as a director since April 1996. From
1975 to 1994, Mr. Greenwald was Chairman and Chief Executive Officer of Katz
Communications, Inc., a broadcast advertising representa-
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<PAGE> 79
tive sales firm; since 1994, Mr. Greenwald has been Chairman Emeritus of that
firm. Mr. Greenwald is a director of Granite Broadcasting Company and Source
Media, Inc.
All officers are elected until the next annual meeting of the Board of
Directors or until their respective successors are chosen and qualified.
Directors serve for a one-year term or until their successors are elected.
EXECUTIVE COMPENSATION
The following table presents certain information concerning the
compensation received or accrued for services rendered during the fiscal years
ended December 31, 1995, 1994 and 1993 for the Company's Chief Executive Officer
and four highest paid executive officers (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------
ANNUAL COMPENSATION NUMBER OF
-------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) OPTIONS COMPENSATION
- ------------------------------- ---- --------- -------- --------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Lowell W. Paxson............... 1995 $ 350,000 $ -0- $ -0- -0- $ -0-
Chairman and Chief Executive 1994 -0- -0- -0- -0- -0-
Officer(3) 1993 -0- -0- -0- -0- -0-
James B. Bocock................ 1995 225,000 -0- 164,325 850,000 -0-
President and Chief Operating 1994 160,000 -0- -0- -0- -0-
Officer 1993 125,000 -0- -0- -0- -0-
Dean M. Goodman................ 1995 200,000 75,000 229,625 223,361 -0-
President -- Paxson 1994 183,750 207,057 -0- -0- -0-
Television 1993 126,562 53,665 -0- -0- -0-
Jon Jay Hoker.................. 1995 200,000 50,000 182,688 150,000 -0-
President -- Paxson Radio(4) 1994 140,000 51,043 -0- -0- -0-
1993 -0- -0- -0- -0- -0-
Arthur D. Tek.................. 1995 150,000 -0- -0- 150,000 3,000(5)
Vice President, Treasurer, 1994 112,500 -0- -0- -0- -0-
and 1993 100,000 -0- -0- -0- -0-
Chief Financial Officer
</TABLE>
- ---------------
(1) Includes amount Named Executive Officer elected to defer pursuant to the
Company's Profit Sharing Plan.
(2) Represents the difference between the price paid by the Named Executive
Officer upon the exercise of certain of his options granted under the Stock
Incentive Plan and the fair market value of such securities at the time of
exercise.
(3) Mr. Paxson has entered into a five and one-half year employment agreement
that commenced on June 30, 1994. See "Employment Agreements."
(4) Mr. Hoker was employed by the Company commencing in January 1994.
(5) Represents relocation allowance in excess of general allowance under
Company's relocation plan.
OPTION GRANTS IN 1995
The following table sets forth certain information relating to option
grants pursuant to the Stock Incentive Plan in the year ended December 31, 1995
to the individuals named in the Summary Compensation Table above.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUES AT ASSUMED
NUMBER OF SHARES ANNUAL RATES OF STOCK PRICE
OF COMMON STOCK % OF TOTAL OPTIONS EXERCISE APPRECIATION FOR OPTION TERM(2)
UNDERLYING OPTIONS GRANTED TO EMPLOYEES PRICE PER EXPIRATION --------------------------------------
NAME GRANTED(1) IN FISCAL YEAR SHARE DATE 0%(3) 5% 10%
- -------------------- ------------------ -------------------- --------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Lowell W. Paxson.... -0- -0-% N/A N/A $ -0- $ -0- $ -0-
James B. Bocock..... 850,000 46.1% $3.42 2/12/2005 5,593,000 11,628,000 21,343,500
Dean M. Goodman..... 223,361 12.1% 3.42 2/12/2005 1,469,715 3,055,579 5,608,595
</TABLE>
71
<PAGE> 80
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUES AT ASSUMED
NUMBER OF SHARES ANNUAL RATES OF STOCK PRICE
OF COMMON STOCK % OF TOTAL OPTIONS EXERCISE APPRECIATION FOR OPTION TERM(2)
UNDERLYING OPTIONS GRANTED TO EMPLOYEES PRICE PER EXPIRATION --------------------------------------
NAME GRANTED(1) IN FISCAL YEAR SHARE DATE 0%(3) 5% 10%
- -------------------- ------------------ -------------------- --------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Jon Jay Hoker....... 150,000 8.1% 3.42 2/12/2005 987,000 2,052,000 3,766,500
Arthur D. Tek....... 150,000 8.1% 3.42 2/12/2005 987,000 2,052,000 3,766,500
</TABLE>
- ---------------
(1) All options granted to the named executive officers were granted pursuant to
the Stock Incentive Plan. The options were granted pursuant to a five year
vesting schedule retroactive to the executive's date of employment. All
options are for Class A Common Stock.
(2) Potential realizable value is based on the assumed growth rates for the
option term. The actual value, if any, an executive may realize will depend
on the excess of the stock price over the exercise price on the date the
option is exercised, therefore, there is no assurance the value realized by
an executive will be at or near the amounts reflected in this table.
(3) Denotes realizable value at the date of grant which reflected a market value
of $10.00 per share.
AGGREGATE OPTION EXERCISES IN 1995
The following table sets forth certain information with respect to the
unexercised options to purchase Class A Common Stock granted under the Stock
Incentive Plan to the individuals named in the Summary Compensation Table above.
AGGREGATE OPTIONS EXERCISED IN 1995 AND DECEMBER 31, 1995 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT DECEMBER 31, 1995 AT DECEMBER 31, 1995(1)
ACQUIRED ON VALUE ------------------------------ ------------------------------
NAME EXERCISE REALIZED EXERCISABLE NONEXERCISABLE EXERCISABLE NONEXERCISABLE
- ---------------------- ----------- -------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Lowell W. Paxson...... -0- $ -0- -0- -0- $ -0- $ -0-
James B. Bocock....... 15,000 164,325 665,000 170,000 7,866,950 2,011,100
Dean M. Goodman....... 20,000 229,625 113,361 90,000 1,341,061 1,064,700
Jon Jay Hoker......... 15,000 182,688 15,000 120,000 177,450 1,419,600
Arthur D. Tek......... -0- -0- 90,000 60,000 1,054,700 709,800
</TABLE>
- ---------------
(1) Based on the public trading price of the Class A Common Stock of $15.25 on
December 29, 1995.
STOCK INCENTIVE PLAN
The Company established its Stock Incentive Plan (the "Stock Incentive
Plan") in November 1994 to provide incentives to officers and other employees
who contribute significantly to the strategic and long-term performance
objectives and growth of the Company. The Stock Incentive Plan is administered
by the Compensation Committee of the Company's Board of Directors, and an
aggregate of 2,143,575 shares of Class A Common Stock are available for issuance
thereunder. In May 1996, the shareholders of the Company approved the adoption
of the Company's 1996 Stock Incentive Plan (the "1996 Plan", and collectively
with the Stock Incentive Plan, the "Stock Incentive Plans"), under which an
additional 2,000,000 shares of Class A Common Stock have been made available for
issuance. The Stock Incentive Plans are substantially identical except that the
class of persons eligible to receive awards under the 1996 Plan has been
expanded to include all persons performing services for the Company or any of
its subsidiaries and all persons who have in the past performed such services
(whether or not such persons are officers or employees of the Company or any
such subsidiary), and all persons performing services relating to the Company in
their capacity as an employee or independent contractor of a corporation or
other entity providing services to the Company.
The Stock Incentive Plans provide for the issuance of options, in the form
of incentive stock options or non-qualified stock options, and awards of
restricted stock to eligible persons selected by the Compensation Committee. The
exercise price per share of Class A Common Stock deliverable upon the exercise
of each stock option is determined by the Compensation Committee at the date the
stock option is granted and as provided in the terms of the Stock Incentive
Plans. Stock options are exercisable in whole or in part on such
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<PAGE> 81
date or dates as are determined by the Compensation Committee at the date of the
grant. The Compensation Committee may, in its sole discretion, accelerate the
time at which any stock option may be exercised. Stock options expire on the
date or dates determined by the Compensation Committee at the time the stock
options are granted. Holders of more than 10% of the combined voting power of
the capital stock of the Company may be granted stock options, provided that if
any of such options are intended to be incentive stock options, the exercise
price must be at least 110% of the fair market value of Class A Common Stock as
of the date of the grant and the term of the option may not exceed five years.
Options granted under the Stock Incentive Plans may be exercised by the
participant to whom granted or by his or her legal representative. If a
participant's employment is terminated for cause, each option which has not been
exercised shall terminate.
Restricted stock consists of shares of Class A Common Stock which are
subject to forfeiture in whole or in part if the recipient's employment with the
Company is terminated prior to the end of the restrictive period. Recipients do
not become 100% vested in their restricted stock until five years after the
effective date of the award. During the restricted period prior to vesting, the
participant may transfer the restricted stock to a trust for the benefit of the
participant or an immediate family member, but may not otherwise sell, assign,
transfer, give or otherwise dispose of, mortgage, pledge or encumber such
restricted stock. The Compensation Committee may, in its discretion, provide
that a participant shall be vested in whole or with respect to any portion of
the participant's award not previously vested if the participant's employment
with the Company is terminated because of death, disability or retirement.
PROFIT SHARING PLAN
The Company has a profit sharing plan under Section 401(k) of the Internal
Revenue Code (the "Profit Sharing Plan"). The Profit Sharing Plan provides that
employees of the Company must complete one year of service in order to be
eligible to defer salary and, if available, receive matching contributions under
the Section 401(k) portion of the Profit Sharing Plan. Participants may elect to
defer a specified percentage of their compensation into the Profit Sharing Plan
on a pre-tax basis. The Company may, at its sole discretion, make matching
contributions based on a percentage of deferred salary contributions at a
percentage rate to be determined by the Board of Directors of the Company, which
matching contributions may be in Company stock. In addition, the Company may
make supplemental profit sharing contributions in such amounts as the Board of
Directors of the Company may determine. Participants earn a vested right to
their profit sharing contribution in increasing amounts over a period of five
years. After five years of service, the participant's right to his or her profit
sharing contribution vests 100%. Thereafter the participant may receive a
distribution of the entire value of his or her account at age 55, 62 or 65 or
upon termination of employment, death or disability.
EMPLOYMENT AGREEMENTS
Mr. Paxson is employed as Chairman and Chief Executive Officer of the
Company under an employment agreement. The agreement provides that Mr. Paxson
will be employed for a five and one-half year period commencing on June 30,
1994, unless sooner terminated. Mr. Paxson began receiving an annual base salary
of $350,000 commencing on January 1, 1995. Mr. Paxson's salary will be $385,000
in 1996, $423,500 in 1997, $465,850 in 1998 and $500,000 in 1999. In addition to
the base salary, Mr. Paxson may receive an annual bonus at the discretion and in
an amount set by members of the Compensation Committee that are not employees of
the Company. Mr. Paxson's employment agreement is renewable for successive
one-year terms, subject to good faith negotiation of its terms. Under the terms
of the agreement, Mr. Paxson is eligible to participate in all employee benefit
plans and arrangements that are generally available to other senior executives,
and is entitled to vacation days in an amount determined annually by the Board
of Directors after good faith negotiation. Mr. Paxson is reimbursed for all
reasonable expenses incurred by him in the discharge of his duties, including
entertainment and travel. Mr. Paxson's employment agreement is terminable by the
Board of Directors before expiration for good cause, as defined in the
agreement, or by Mr. Paxson for good reason, as defined in the agreement. In the
event of Mr. Paxson's permanent disability or death, the Company will pay Mr.
Paxson, or his estate, as the case may be, his then existing salary for the
remaining term of the agreement, in the case of disability, or one year, in the
case of death.
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In addition, Mr. Paxson is a party to a noncompete agreement with the
Company for a period ending on December 31, 1999 or the date of a change of
control (as defined with respect thereto) of the Company. See "Certain
Transactions -- Home Shopping Network, Inc."
CERTAIN TRANSACTIONS
Mr. Paxson is the Chairman and Chief Executive Officer of the Company.
Messrs. Marocco and Kornreich are directors of the Company and principals of the
Sandler Partnerships, which are significant stockholders of the Company. Mr.
Michaels is a director of the Company and the owner of CEA. Mr. Scott is a
director of the Company and provides it certain consulting services. Set forth
below is a description of certain transactions and relationships between Mr.
Paxson, his affiliates and others and the Company, between the Sandler
Partnerships and the Company, CEA and the Company and Mr. Scott and the Company.
WFCT-TV Transactions. On December 17, 1993, BBTC entered into an agreement
whereby CNI, a Section 501(c)(3) Florida non-profit corporation to which Mr.
Paxson was a substantial contributor and of which he was a director, would make
available to BBTC up to $3,120,000 for certain expenses in connection with the
redemption of a limited partnership interest in BBTC and the construction of
television station WFCT-TV, Bradenton, Florida (the "BBTC Loan Agreement"). In
connection with the loan, BBTC granted to CNI an irrevocable, exclusive option
to purchase the assets owned by BBTC that are used or useful in the construction
or operation of WFCT-TV, including the licenses issued by the FCC for WFCT-TV,
subject to the satisfaction of certain conditions and the receipt of necessary
regulatory approvals. CNI's option may be exercised, subject to the prior
approval of the FCC, at any time during the 10-year period beginning August 2,
1995. The price payable to BBTC upon exercise of the option is $91,000 in cash
and the forgiveness of all outstanding indebtedness under the BBTC Loan
Agreement, in the amount of $1,120,000 as of December 31, 1995. WFCT-TV
commenced broadcasting operations on August 1, 1994.
BBTC also entered into an agreement with a wholly-owned subsidiary of the
Company as of December 17, 1993, under which the Company provides certain
specified services relating to the construction and installation of WFCT-TV
facilities. Pursuant to a time brokerage agreement, BBTC makes air-time
available to CNI on WFCT-TV. In exchange for certain specified payments, BBTC
has broadcast programming and commercial announcements produced by CNI.
In connection with the foregoing transactions, Mr. Paxson agreed to lend
CNI up to $3,120,000 to fund the loan to BBTC. On June 15, 1994, CNI and BBTC
revised the BBTC Loan Agreement to reduce the maximum amount of the loan from
$3,120,000 to $1,400,000, and to provide that BBTC lease rather than purchase
the equipment and related tangible personal property required to construct
WFCT-TV from the Company.
Mr. Paxson assigned his rights and interests in the CNI loan to the Company
in the amount of $1,120,000 (representing the then outstanding principal balance
owed by CNI), and CNI agreed that the maximum principal amount of the loan would
be reduced from $3,120,000 to $1,400,000. On June 15, 1994, CNI granted the
Company the option to acquire the WFCT-TV assets from CNI for $191,000 after CNI
exercises its option to purchase such assets from BBTC. On June 15, 1994, CNI
assigned to the Company its rights and interests under the time brokerage
agreement to provide up to 12 hours per day of programming on WFCT-TV. On May
31, 1996, the Company assigned its option to acquire the WFCT-TV assets to CNI
and agreed to finance or arrange financing for CNI in connection with CNI's
acquisition of such assets, in exchange for CNI's agreement to permit the
Company to operate the station pursuant to a time brokerage agreement after
CNI's acquisition and an option to acquire the station from CNI. CNI exercised
its option to acquire the station on July 17, 1996.
Worship Channel Studio. On January 1, 1993, Mr. Paxson agreed to lend CNI
up to $2,500,000 to fund CNI's acquisition of certain equipment and related
tangible property used in the production of television programming. Mr. Paxson
assigned his rights and interests under the loan to the Company in consideration
for the Company's promissory note in the principal amount of $2,500,000, which
the Company subsequently repaid. In accordance with the terms of an agreement
dated as of June 15, 1994, CNI sold to the Company CNI's production assets in
consideration for the cancellation of CNI's $2,500,000 promissory note held by
the Company. CNI and the Company have also contracted, effective as of August 1,
1994, for the Company to
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lease CNI's television production and distribution facility for the purpose of
producing television programming for the Infomall TV Network.
Christian Network, Inc. The Company and CNI entered into an agreement in
May 1994 (the "CNI Agreement") under which the Company agreed that, if the tax
exempt status of CNI were jeopardized by virtue of its relationships with the
Company and its subsidiaries, the Company would take certain actions to try and
ensure that CNI's tax exempt status would no longer be so jeopardized. Such
steps could include, but not be limited to, rescission of one or more
transactions or payment of additional funds by the Company. The Company believes
that all of its agreements with CNI have been on terms at least as favorable to
CNI as it would obtain in arm's length transactions. The Company intends any
future agreements with CNI to be at least as favorable to CNI as CNI would
obtain in arm's length transactions. Accordingly, if the Company's activities
with CNI are consistent with the terms governing their relationship, the Company
believes that it will not be required to take any action under the CNI
Agreement. However, there can be no assurance that the Company will not be
required to take any actions under the CNI Agreement at a material cost to the
Company. At June 30, 1996, the Company had made loans to CNI and its
subsidiaries in an aggregate amount of $26.3 million to finance station
acquisitions and related capital expenditures, $15 million of which was forgiven
upon the purchase by the Company of four of these stations from CNI on July 1,
1996.
Stockholders Agreement. On December 15, 1993, in connection with the
issuance of the Company's Initial Senior Preferred Stock and warrants to
purchase shares of Class A Common Stock and Class B Common Stock, the Company
entered into a stockholders agreement with two entities controlled by Lowell W.
Paxson (collectively, "Management Investors"), and the four purchasers of the
Initial Senior Preferred Stock (the "Sandler Group"), three of which are
affiliates of Michael J. Marocco and John A. Kornreich, two directors of the
Company. On December 22, 1994, in connection with the issuance of the Existing
Preferred Stock and Series B Preferred Stock, the purchasers of the Existing
Preferred Stock and warrants to purchase Class C Common Stock became parties to
the stockholders agreement, which was amended and restated (as amended, the
"Stockholders Agreement"). The parties to the Stockholders Agreement further
amended certain provisions thereof on March 26, 1996 in anticipation of, and
primarily conditioned upon the consummation of, the Equity Offering. Such
agreement, among other things, terminated the right of the holders of the Class
A and Class B warrants ("Warrant Shares") to require the Company to purchase
such Warrant Shares, permitted the Company to issue 2,000,000 additional shares
of stock (or options to purchase the same), permitted the Company to issue
125,000 shares of Common Stock (or options to purchase the same) at an exercise
price of $3.42 per share, deleted certain restrictions on the Company's ability
to acquire businesses in consideration for stock of the Company and modified
certain rights of the parties to register Common Stock of the Company.
The Stockholders Agreement, among other things, grants the parties thereto
a right of first refusal to purchase certain securities issued by the Company,
as well as certain registration rights. In connection with this Offering, the
Company has entered into an additional agreement with the parties to the
Stockholders Agreement dated September 16, 1996, that, among other things,
provides for the redemption of the Initial Senior Preferred Stock and Series B
Preferred Stock and the waiver of the parties' right of first refusal and
registration rights with respect to this Offering. In addition, such agreement
eliminates certain rights of the Sandler Group under the Stockholders Agreement
and provides for the termination of certain rights thereunder of the holders of
the Existing Preferred Stock effective upon the future redemption of the
Existing Preferred Stock by the Company.
Home Shopping Network, Inc. In connection with the departure in 1990 of
Mr. Paxson from HSN, he executed a consulting agreement containing various
restrictions upon activities by him that might be considered competitive with
HSN, including activities as an investor in competitive and other enterprises.
Although Mr. Paxson's consulting services to HSN terminated in 1994, certain of
the restrictions survived. As the Company's business evolved, the possible
effect of the consulting agreement upon Mr. Paxson's role as the Company's chief
executive officer and controlling stockholder became unclear. The Company
considered it advisable to eliminate doubts concerning, among other matters, Mr.
Paxson's role as a chief executive officer and controlling stockholder as the
Company's business developed, and the scope of HSN's rights under the consulting
agreement. Accordingly, on August 25, 1995, the Company and Mr. Paxson agreed
with HSN to,
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among other things, terminate HSN's rights under the consulting agreement in
consideration of a payment to HSN by the Company of $1,200,000. In conjunction
with this transaction Mr. Paxson advanced $1,200,000 to the Company in the form
of a note bearing interest at 6%. The Company repaid the note in October 1995.
Shortly before the transaction with HSN, Mr. Paxson agreed with the Company
that upon termination of HSN's rights under the consulting agreement, he will
not compete with the Company for a period ending on December 31, 1999 (the date
that the HSN consulting agreement would have otherwise terminated) or the date
of a change of control (as defined with respect thereto) of the Company. An
intangible asset has been recorded for $1,200,000 which will be amortized
through maturity of the agreement.
Todd Communications, Inc. In 1993, Mr. Paxson contributed a demand note
receivable in the amount of $1,750,000 from Todd Communications, Inc., a company
which owns WFSJ-FM (St. Augustine, Florida) and is beneficially owned by a
member of Mr. Paxson's family. The note receivable accrued interest at the
short-term annual applicable federal rate prescribed by the Internal Revenue
Service with the balance of principal and interest due upon demand. The Company
also performed limited sales support and administrative functions for Todd
Communications, Inc., under a joint sales agreement. Todd Communications also
had a note outstanding to Mr. Paxson in the principal amount of $1,643,000.
During June 1996, the Company acquired Todd Communications for aggregate
consideration of $5 million, consisting of the cancellation of Todd's note held
by the Company in the principal amount of $1,822,000, assumption and immediate
repayment by the Company of the note to Mr. Paxson and the issuance of shares of
Class A Common Stock valued at $1,535,000.
Whitehead Media. The Company initially financed the acquisition by
Whitehead Media of each of WTVX-TV and WOAC-TV. Whitehead Media subsequently
obtained refinancing from Banque Paribas, an affiliate of a holder of Existing
Preferred Stock and warrants to acquire Class C Common Stock, and Canadian
Imperial Bank of Commerce, the proceeds of which were used to repay the debt
owed by Whitehead Media to the Company and to fund Whitehead Media's acquisition
of WNGM-TV. The third party financing provided to Whitehead Media is
unconditionally guaranteed by Mr. Paxson and Second Crystal Diamond, Limited
Partnership ("Second Crystal"), an affiliate controlled by Mr. Paxson and
through which he beneficially owns and controls a substantial portion of the
Company's Class A Common Stock and Class B Common Stock. Such guarantees are
secured by a pledge of a significant portion of Second Crystal's Class A Common
Stock. The Company is permitted to operate stations WTVX-TV and WOAC-TV pursuant
to time brokerage agreements and as a result of the third party financing to
Whitehead Media has an option to purchase each of such stations, which options
to purchase would otherwise be prohibited under FCC rules and regulations
because each of such stations serves a market in which the Company has or will
own another television station which also serves the same market.
KLDT-TV. In connection with CNI securing the rights to acquire television
station KLDT-TV in Dallas, Texas and, prior to such acquisition, operate the
station pursuant to a time brokerage agreement, Mr. Paxson initially loaned CNI
$1,000,000 to make a deposit with respect to such acquisition and guaranteed the
obligations of CNI under the purchase agreement and the time brokerage
agreement. On January 9, 1996, the Company purchased such note from Mr. Paxson
at its face value.
World Travelers Network. Effective January 1, 1996, Mr. Paxson purchased
certain assets of World Travelers Network, Inc. ("WTN"), a wholly-owned
subsidiary of the Company. WTN's business was unprofitable and the Company had
determined to discontinue its operations. Mr. Paxson purchased all of the assets
of WTN except for its accounts receivable for $70,322 in cash, which price was
equal to the book value of such assets. WTN retained its accounts receivable and
accounts payable.
South Carolina Radio Network. Effective January 1, 1996, Mr. Paxson
purchased from the Company certain assets of the Company's South Carolina Radio
Network, an unprofitable business segment which the Company had determined to
discontinue. Mr. Paxson purchased all of the assets of the South Carolina Radio
Network other than cash and accounts receivable for $45,413 in cash paid to the
Company, which price was equal to the book value of such assets. The Company
retained the cash, accounts receivable and accounts payable of the South
Carolina Radio Network operation. The parties agreed that if Mr. Paxson resold
such assets at a profit prior to April 1, 1996, the amount of any profit would
be paid to the Company. Mr. Paxson
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subsequently sold such assets to a third party for $150,000, with the excess
over $45,413 being paid to the Company.
Transfer of Partnership Interest. On January 26, 1996, the Company
acquired certain interests in a partnership with a view to securing programming
for its broadcast stations, and substantially concurrently with its acquisition,
transferred a portion of its interest to Mr. Paxson for approximately $900,000,
which amount equalled the consideration paid by the Company for its interests in
the partnership.
Communications Equity Associates, Inc. J. Patrick Michaels, Jr. is
Chairman of the Board and Chief Executive Officer of CEA. Prior to his becoming
a Director in February 1995, the Company engaged CEA as a financial advisor in
connection with the private placements of the Senior Preferred Stock and
Existing Preferred Stock, as well as with the Company's various lending
relationships and other financing transactions. CEA continues to provide
advisory services to the Company, and management of the Company believes that
its arrangements with CEA have been, and will continue to be, on terms
comparable to those generally available from unaffiliated third parties.
S. William Scott, Consulting. S. William Scott has an arrangement with the
Company pursuant to which he provides consulting services to the Company with
respect to the development of its news programming for its radio and television
broadcast business and its radio network business. During 1993, 1994 and 1995,
Mr. Scott was paid $84,000, $84,000 and $80,000 respectively, for such services.
Mr. Scott has been providing such services since before he became a Director.
DESCRIPTION OF NEW PREFERRED STOCK AND EXCHANGE DEBENTURES
THE NEW PREFERRED STOCK
The summary contained herein of certain provisions of the New Preferred
Stock to be issued by the Company in the Offering does not purport to be
complete and is qualified in its entirety by reference to the provisions of the
Certificate of Designation relating thereto, the form of which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part, to
which exhibit reference is hereby made. The definitions of certain capitalized
terms used in the following summary are set forth under "-- Certain Definitions"
below. Other capitalized terms used herein and not otherwise defined under
"-- Certain Definitions" below are defined in the Certificate of Designation.
GENERAL
The Company is authorized to issue 1,000,000 shares of preferred stock,
$0.001 par value per share. As of the date of this Prospectus, 33,000 shares of
Existing Preferred Stock are outstanding. The Certificate of Incorporation of
the Company authorizes the Board of Directors, without stockholder approval, to
issue classes of preferred stock from time to time in one or more series, with
such designations, preferences and relative, participating, optional or other
special rights, qualifications, limitations or restrictions as may be determined
by the Board of Directors. The Board of Directors of the Company has adopted
resolutions creating a maximum of shares of New Preferred Stock and has
filed a Certificate of Designation with respect thereto with the Secretary of
State of the State of Delaware as required by Delaware law. Of the
authorized shares of New Preferred Stock, 150,000 shares will be issued in this
Offering and the remainder will be reserved for issuance as dividends in the
event the Company elects to pay dividends on the New Preferred Stock by issuing
additional shares of New Preferred Stock. See "-- Dividends" below. Subject to
certain conditions, the New Preferred Stock is exchangeable for Exchange
Debentures at the option of the Company on any dividend payment date. The New
Preferred Stock, when issued and paid for by the Underwriters in accordance with
the terms of the Underwriting Agreement, will be fully paid and nonassessable,
and the holders thereof will not have any subscription or preemptive rights.
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RANKING
The New Preferred Stock will, with respect to dividend distributions and
distributions upon the liquidation, winding-up or dissolution of the Company,
rank (i) senior to all classes of common stock of the Company, and to each other
class of capital stock or series of preferred stock established after the date
of this Prospectus by the Board of Directors of the Company the terms of which
do not expressly provide that it ranks senior to or on a parity with the New
Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up or dissolution of the Company (collectively referred to
with the common stock of the Company as "Junior Securities"); (ii) subject to
certain conditions, on a parity with any class of capital stock or series of
preferred stock issued by the Company established after the date of this
Prospectus by the Board of Directors of the Company the terms of which expressly
provide that such class will rank on a parity with the New Preferred Stock as to
dividend distributions and distributions upon the liquidation, winding-up or
dissolution of the Company (collectively referred to as "Parity Securities");
and (iii) junior to the Existing Preferred Stock and to each other class of
capital stock or series of preferred stock issued by the Company established
after the date of this Prospectus by the Board of Directors of the Company the
terms of which expressly provide that such class or series will rank senior to
the New Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up or dissolution of the Company (collectively referred to
as "Senior Securities"). The New Preferred Stock will be subject to the issuance
of series of Junior Securities, Parity Securities and Senior Securities;
provided that the Company may not issue any new class of Parity Securities or
Senior Securities (or amend the provisions of any existing class of capital
stock to make such class of capital stock Parity Securities or Senior
Securities) without the approval of the holders of at least a majority of the
shares of New Preferred Stock then outstanding, voting or consenting, as the
case may be, together as one class; provided, however, that the Company can
either: (i) issue additional shares of New Preferred Stock, or (ii) issue shares
of Parity Securities, which Parity Securities require cash dividends at a time
and in an amount not in excess of one percentage point greater than the dividend
rate borne by the Existing Preferred Stock (as existing on the Issue Date) and
which does not prevent either the payment of cash dividends on the New Preferred
Stock or the exchange of the New Preferred Stock for the Exchange Debentures, in
each case, in an amount sufficient to acquire the Existing Preferred Stock in
accordance with its terms on the Issue Date (including any premium required to
be paid), plus the amount of reasonable expenses incurred by the Company in
acquiring such Existing Preferred Stock and issuing such additional New
Preferred Stock or Parity Securities (as the case may be); with in either case
such shares being issued no sooner than the date the Company repurchases,
redeems or otherwise retires the Existing Preferred Stock.
DIVIDENDS
Holders of the New Preferred Stock will be entitled to receive, when, as
and if declared by the Board of Directors of the Company, out of funds legally
available therefor, dividends on the New Preferred Stock at a rate per annum
equal to % of the liquidation preference per share of New Preferred Stock,
payable semi-annually. All dividends will be cumulative whether or not earned or
declared on a daily basis from the Issue Date and will be payable semi-annually
in arrears on April 30 and October 31 of each year, commencing on April 30,
1997, to holders of record on the April 15 and October 15 immediately preceding
the relevant dividend payment date. Dividends may be paid, at the Company's
option, on any dividend payment date occurring on or prior to October 31, 2002
either in cash or by the issuance of additional shares of New Preferred Stock
(including fractional shares) having an aggregate liquidation preference equal
to the amount of such dividends. In the event that on or prior to October 31,
2002 dividends are declared and paid through the issuance of additional shares
of New Preferred Stock, as provided in the previous sentence, such dividends
shall be deemed paid in full and will not accumulate. The Credit Agreement, the
Indenture and the Existing Preferred Stock restrict the Company's ability to pay
cash dividends on its Capital Stock and will prohibit such payments in certain
instances and other future agreements may provide the same. See "Description of
Indebtedness" and "Description of Capital Stock -- Existing Preferred Stock."
Unpaid dividends accruing after October 31, 2002 on the New Preferred Stock
for any past dividend period and dividends in connection with any optional
redemption may be declared and paid at any time,
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without reference to any regular Dividend Payment Date, to holders of record on
such date, not more than forty-five (45) days prior to the payment thereof, as
may be fixed by the Board of Directors of the Company.
OPTIONAL REDEMPTION
The New Preferred Stock may be redeemed (subject to contractual and other
restrictions with respect thereto and to the legal availability of funds
therefor) at any time on or after October 31, 2001, in whole or in part, at the
option of the Company, at the redemption prices (expressed as a percentage of
liquidation preference) set forth below, plus, without duplication, an amount in
cash equal to all accumulated and unpaid dividends (including an amount in cash
equal to a prorated dividend for the period from the Dividend Payment Date
immediately prior to the redemption date to the redemption date) if redeemed
during the 12-month period beginning October 31 of each of the years set forth
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
--------------------------------------------------------------- ----------
<S> <C>
2001........................................................... %
2002........................................................... %
2003........................................................... %
2004 and thereafter............................................ 100%
</TABLE>
In addition, on or prior to October 31, 1999, the Company may, at its
option, use the Net Proceeds of either or both of one or more Public Equity
Offerings or Major Asset Sales to redeem for cash up to an aggregate of 35% of
the shares of New Preferred Stock (whether initially issued or issued as a
dividend payment) at a redemption price equal to % of the liquidation
preference thereof if redeemed during the 12-month period commencing on October
31, 1996, % of the liquidation preference thereof if redeemed during the
12-month period commencing on October 31, 1997 and % of the liquidation
preference thereof if redeemed during the 12-month period commencing on October
31, 1998, plus, in each case, without duplication, an amount in cash equal to
all accumulated and unpaid dividends (including an amount in cash equal to a
prorated dividend for the period from the Dividend Payment Date immediately
prior to the redemption date to the redemption date); provided, however, that
after any such redemption, there is at least $75 million in aggregate
liquidation preference of the New Preferred Stock outstanding. Any such
redemption will be required to occur on or prior to 90 days after the receipt by
the Company of the proceeds of each Public Equity Offering or Major Asset Sale.
In the event of partial redemptions of New Preferred Stock, the shares to
be redeemed will be determined pro rata, except that the Company may redeem all
shares held by any holders of fewer than 10 shares (or shares held by holders
who would hold less than 10 shares as a result of such redemption), as may be
determined by the Company. No optional redemption may be authorized or made
unless prior thereto all accumulated and unpaid dividends shall have been paid
in cash or a sum set apart for such payment on the New Preferred Stock.
The certificate of designation governing the Existing Preferred Stock
prohibits the redemption of the New Preferred Stock so long as any shares of
Existing Preferred Stock are outstanding. The Credit Agreement and the Indenture
also restrict the ability of the Company to redeem the New Preferred Stock. See
"Description of Indebtedness" and "Description of Capital Stock -- Existing
Preferred Stock."
MANDATORY REDEMPTION
The New Preferred Stock will also be subject to mandatory redemption
(subject to contractual and other restrictions with respect thereto and to the
legal availability of funds therefor) in whole on October 31, 2006 at a price
equal to the liquidation preference thereof, plus, without duplication, all
accumulated and unpaid dividends to the date of redemption. The certificate of
designation governing the Existing Preferred Stock prohibits the redemption of
the New Preferred Stock so long as any shares of Existing Preferred Stock are
outstanding. The Indenture and the Credit Agreement also restrict the ability of
the Company to redeem the New Preferred Stock and will prohibit any such
redemption in certain instances and other future agreements or certificates of
designation with respect to Senior Securities or Parity Securities may contain
similar
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restrictions and/or prohibitions. See "Description of Indebtedness" and
"Description of Capital Stock -- Existing Preferred Stock."
PROCEDURE FOR REDEMPTION
On and after a redemption date, unless the Company defaults in the payment
of the applicable redemption price, dividends will cease to accrue on shares of
New Preferred Stock called for redemption and all rights of holders of such
shares will terminate except for the right to receive the redemption price,
without interest. If a notice of redemption shall have been given as provided in
the succeeding sentence and the funds necessary for redemption (including an
amount in respect of all dividends that will accrue to the redemption date)
shall have been segregated and irrevocably set apart by the Company, in trust
for the benefit of the holders of the shares called for redemption, then
dividends shall cease to accumulate on the redemption date on the shares to be
redeemed and, at the close of business on the day when such funds are segregated
and set apart, the holders of the shares to be redeemed shall cease to be
stockholders of the Company and shall be entitled only to receive the redemption
price for such shares. The Company will send a written notice of redemption by
first class mail to each holder of record of shares of New Preferred Stock, not
less than 30 days nor more than 60 days prior to the date fixed for such
redemption. Shares of New Preferred Stock issued and reacquired will, upon
compliance with the applicable requirements of Delaware law, have the status of
authorized but unissued shares of preferred stock of the Company undesignated as
to series and may with any and all other authorized but unissued shares of
preferred stock of the Company be designated or redesignated and issued or
reissued, as the case may be, as part of any series of preferred stock of the
Company.
EXCHANGE
The Company may at its option from time to time on any Dividend Payment
Date exchange, in whole or in part, on a pro rata basis, the then outstanding
shares of New Preferred Stock for Exchange Debentures; provided that immediately
after giving effect to any partial exchange, there shall be outstanding shares
of New Preferred Stock with an aggregate liquidation preference of not less than
$75 million and not less than $75 million aggregate principal amount of Exchange
Debentures; and provided, further, that (i) on the date of such exchange there
are no accumulated and unpaid dividends on the New Preferred Stock (including
the dividend payable on such date) or other contractual impediments to such
exchange; (ii) there shall be legally available funds sufficient therefor; (iii)
such exchange would be permitted under the terms of the Existing Preferred
Stock, to the extent then outstanding, and immediately after giving effect to
such exchange, no Default or Event of Default (each as defined in the Exchange
Indenture) would exist under the Exchange Indenture, no default or event of
default would exist under the Credit Agreement or the Existing Indenture and no
default or event of default under any other material instrument governing
Indebtedness outstanding at the time would be caused thereby; (iv) the Exchange
Indenture has been qualified under the Trust Indenture Act, if such
qualification is required at the time of exchange; and (v) the Company shall
have delivered a written opinion to the effect that all conditions to be
satisfied prior to such exchange have been satisfied. The Company intends to
comply with the provisions of Rule 13e-4 promulgated pursuant to the Exchange
Act in connection with the exchange, to the extent applicable. The certificate
of designation governing the Existing Preferred Stock prohibits the Company from
exchanging the New Preferred Stock so long as any shares of Existing Preferred
Stock are outstanding. The Credit Agreement, the Indenture and the Existing
Preferred Stock currently prohibit the exchange of the New Preferred Stock and
may restrict the Company's ability to exchange the New Preferred Stock in the
future. See "Description of Indebtedness" and "Description of Capital
Stock -- Existing Preferred Stock."
The holders of outstanding shares of New Preferred Stock will be entitled
to receive, subject to the second succeeding sentence, $1.00 principal amount of
Exchange Debentures for each $1.00 liquidation preference of New Preferred Stock
held by them. The Exchange Debentures will be issued in registered form, without
coupons. Exchange Debentures issued in exchange for New Preferred Stock will be
issued in principal amounts of $1,000 and integral multiples thereof to the
extent possible, and will also be issued in principal amounts less than $1,000
so that each holder of New Preferred Stock will receive certificates
representing the entire amount of Exchange Debentures to which such holder's
shares of New Preferred Stock entitle such
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holder; provided that the Company may pay cash in lieu of issuing an Exchange
Debenture in a principal amount less than $1,000. The Company will send a
written notice of exchange by mail to each holder of record of shares of New
Preferred Stock not less than 30 nor more than 60 days before the date fixed for
such exchange. On and after the exchange date, dividends will cease to accrue on
the outstanding shares of New Preferred Stock that are to be exchanged, and all
rights of the holders of New Preferred Stock that is to be exchanged (except the
right to receive the Exchange Debentures, an amount in cash equal to the accrued
and unpaid dividends to the exchange date and, if the Company so elects, cash in
lieu of any Exchange Debenture which is in an amount that is not an integral
multiple of $1,000) will terminate. The Person entitled to receive the Exchange
Debentures issuable upon such exchange will be treated for all purposes as the
registered holder of such Exchange Debentures. See "-- The Exchange Debentures."
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Company, holders of the New Preferred Stock will initially be entitled to be
paid, out of the assets of the Company available for distribution, $1,000 per
share, plus an amount in cash equal to accumulated and unpaid dividends thereon
to the date fixed for liquidation, dissolution or winding-up (including an
amount equal to a prorated dividend for the period from the last Dividend
Payment Date to the date fixed for liquidation, dissolution or winding-up),
before any distribution is made on any Junior Securities, including, without
limitation, common stock of the Company. If upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the amounts payable with
respect to the New Preferred Stock and all other Parity Securities are not paid
in full, the holders of the New Preferred Stock and the Parity Securities will
share equally and ratably in any distribution of assets of the Company first in
proportion to the full liquidation preference to which each is entitled until
such preferences are paid in full, and then in proportion to their respective
amounts of accumulated but unpaid dividends. After payment of the full amount of
the liquidation preferences and accumulated and unpaid dividends to which they
are entitled, the holders of shares of New Preferred Stock will not be entitled
to any further participation in any distribution of assets of the Company.
However, neither the sale, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
property or assets of the Company nor the consolidation or merger of the Company
with one or more entities shall be deemed to be a liquidation, dissolution or
winding-up of the Company.
The Certificate of Designation for the New Preferred Stock does not contain
any provision requiring funds to be set aside to protect the liquidation
preference of the New Preferred Stock, although such liquidation preference will
be substantially in excess of the par value of such shares of New Preferred
Stock. In addition, the Company is not aware of any provision of Delaware law or
any controlling decision of the courts of the State of Delaware (the state of
incorporation of the Company) that requires a restriction upon the surplus of
the Company solely because the liquidation preference of the New Preferred Stock
will exceed its par value. Consequently, there will be no restriction upon the
surplus of the Company solely because the liquidation preference of the New
Preferred Stock will exceed the par value and there will be no remedies
available to holders of the New Preferred Stock before or after the payment of
any dividend, other than in connection with the liquidation of the Company,
solely by reason of the fact that such dividend would reduce the surplus of the
Company to an amount less than the difference between the liquidation preference
of the New Preferred Stock and its par value.
VOTING RIGHTS
Holders of the New Preferred Stock will have no voting rights with respect
to general corporate matters except as provided by Delaware law or as set forth
in the Certificate of Designation. The Certificate of Designation provides that
if (i) after October 31, 2002, dividends on the New Preferred Stock required to
be paid in cash are in arrears and unpaid for three (3) or more semi-annual
dividend periods (whether or not consecutive) or (ii) the Company fails to
redeem the New Preferred Stock on or before October 31, 2006 or fails to
discharge any redemption obligation with respect to the New Preferred Stock or
(iii) the Company fails to make a Change of Control Offer if such an offer is
required by the provisions set forth under "-- Change of Control" below or fails
to purchase shares of New Preferred Stock from holders who elect to
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have such shares purchased pursuant to the Change of Control Offer or (iv) a
breach or violation of any of the provisions described under the caption
"-- Certain Covenants" below occurs and the breach or violation continues for a
period of 60 days or more after the Company receives notice thereof specifying
the default from the holders of at least 25% of the shares of New Preferred
Stock then outstanding or (v) the Company fails to pay at the final stated
maturity (giving effect to any extensions thereof) the principal amount of any
Indebtedness of the Company or any Restricted Subsidiary of the Company, or the
final stated maturity of any such Indebtedness is accelerated, if the aggregate
principal amount of such Indebtedness, together with the aggregate principal
amount of any other such Indebtedness in default for failure to pay principal at
the final stated maturity (giving effect to any extensions thereof) or which has
been accelerated, aggregates $10,000,000 or more at any time, in each case,
after a 20-day period during which such default shall not have been cured or
such acceleration rescinded, or (vi) any event occurs or condition exists which
results in an increase in the dividend rate borne by the Existing Preferred
Stock in accordance with the terms thereof, then the number of directors
constituting the Board of Directors will be adjusted to permit the holders of a
majority of the then outstanding shares of New Preferred Stock, voting
separately and as a class, to elect the lesser of two directors and that number
of directors constituting 25% of the members of the Board of Directors of the
Company. Such voting rights will continue until such time as, in the case of a
dividend default, all accumulated and unpaid dividends on the New Preferred
Stock are paid in full in cash and, in all other cases, any failure, breach or
default giving rise to such voting rights is remedied, cured (including, but not
limited to, in the case of clause (v) through the issuance of Refinancing
Indebtedness or the waiver of any breach or default by the holder of such
Indebtedness) or waived by the holders of at least a majority of the shares of
New Preferred Stock then outstanding, at which time the term of any directors
elected pursuant to the provisions of this paragraph shall terminate. Each such
event described in clauses (i) through (vi) above is referred to herein as a
"Voting Rights Triggering Event." The voting rights provided herein shall be the
holder's exclusive remedy at law or in equity.
In addition, the Certificate of Designation provides that except as stated
above under "-- Ranking," the Company will not authorize any additional shares
of New Preferred Stock or any class of Senior Securities or Parity Securities
without the affirmative vote or consent of holders of at least a majority of the
shares of New Preferred Stock of the Company then outstanding which are entitled
to vote thereon, voting or consenting, as the case may be, as one class. The
Certificate of Designation also provides that the Company may not amend the
Certificate of Designation so as to affect materially and adversely the
specified rights, preferences, privileges or voting rights of the holders of
shares of New Preferred Stock, or authorize the issuance of any additional
shares of New Preferred Stock (other than shares of New Preferred Stock issued
as a dividend on shares of New Preferred Stock), without the affirmative vote or
consent of the holders of at least a majority of the then outstanding shares of
New Preferred Stock which are entitled to vote thereon, voting or consenting, as
the case may be, as one class. The Certificate of Designation also provides
that, except as set forth above, (a) the creation, authorization or issuance of
any shares of Junior Securities, Parity Securities or Senior Securities or (b)
the increase or decrease in the amount of authorized capital stock of any class,
including any preferred stock, shall not require the consent of the holders of
New Preferred Stock and shall not be deemed to affect adversely the rights,
preferences, privileges or voting rights of holders of shares of New Preferred
Stock.
Under Delaware law, holders of New Preferred Stock are entitled to vote as
a class upon a proposed amendment to the certificate of incorporation of the
Company, whether or not entitled to vote thereon by the certificate of
incorporation, if the amendment would increase or decrease the par value of the
shares of such class, or alter or change the powers, preferences, or special
rights of the shares of such class so as to affect them adversely.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of the New
Preferred Stock will have the right to require that the Company redeem all or a
portion of such holder's New Preferred Stock pursuant to the offer described
below (the "Change of Control Offer"), at a redemption price equal to 101% of
the liquidation preference thereof, plus, without duplication, an amount in cash
equal to all accumulated and unpaid dividends per share, if any, to the Change
of Control Payment Date (as defined herein) (including an amount
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in cash equal to a prorated dividend for the period from the Dividend Payment
Date immediately prior to the Change of Control Payment Date to the Change of
Control Payment Date).
Prior to the mailing of the notice referred to below, but in any event
within 30 days following the date on which a Change of Control occurs, the
Company covenants that, if the purchase of the New Preferred Stock would violate
or constitute a default or be prohibited under the Credit Agreement, any then
outstanding Senior Debt, the Indenture or the Existing Preferred Stock, then the
Company will, to the extent needed to permit such purchase of New Preferred
Stock, either (i) repay in full all Indebtedness under the Credit Agreement,
such Senior Debt and the Existing Notes and, in the case of the Credit Agreement
or other Senior Debt, terminate all commitments thereunder and effect the
termination of any such prohibition under the Existing Preferred Stock or (ii)
obtain the requisite consents under the Credit Agreement, the instruments
governing such Senior Debt, the Indenture and the certificates of designation
governing the Existing Preferred Stock to permit the redemption of the New
Preferred Stock as provided below. The Company will first comply with the
covenant in the preceding sentence before it will be required to redeem New
Preferred Stock pursuant to the provisions described below.
Within 30 days following the date upon which a Change of Control occurs,
the Company must send, by first class mail, a notice to each holder of record of
the New Preferred Stock, with a copy to the Transfer Agent, which notice shall
govern the terms of the Change of Control Offer. Such notice will state, among
other things, the redemption date, which must be no earlier than 30 days nor
later than 45 days from the date such notice is mailed, other than as may be
required by law (the "Change of Control Payment Date"). Holders electing to have
New Preferred Stock redeemed pursuant to a Change of Control Offer will be
required to surrender the New Preferred Stock properly endorsed for transfer
together with such other customary documents as the Company may reasonably
request to the address specified in the notice prior to the close of business on
the business day prior to the Change of Control Payment Date.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
redemption of the Preferred Stock pursuant to a Change of Control Offer.
This "Change of Control" covenant will not apply in the event of (a)
changes in a majority of the Board of Directors of the Company in certain
instances as contemplated by the definition of "Change of Control" and (b)
certain transactions with Permitted Holders. In addition, this covenant is not
intended to afford holders of shares of New Preferred Stock protection in the
event of certain highly leveraged transactions, reorganizations, restructurings,
mergers and other similar transactions that might adversely affect the holders
of shares of New Preferred Stock but would not constitute a Change of Control.
The Company could, in the future, enter into certain transactions, including
certain recapitalizations of the Company, that would not constitute a Change of
Control, but would increase the amount of Indebtedness outstanding at such time.
If a Change of Control were to occur, there can be no assurance that the Company
would have sufficient funds to pay the redemption price for all the New
Preferred Stock that the Company might be required to redeem. Moreover, as of
the date of this Prospectus, after giving effect to the sale of the New
Preferred Stock and the application of the proceeds therefrom, the Company would
not have sufficient funds available to redeem all the New Preferred Stock
pursuant to a Change of Control Offer. In the event that the Company is required
to redeem the New Preferred Stock pursuant to a Change of Control Offer, the
Company expects that it would need to seek third-party financing to the extent
it does not have available funds to meet its redemption obligations. However,
there can be no assurance that the Company would be able to obtain such
financing on favorable terms, if at all. In addition, the Credit Agreement, the
Indenture and the Existing Preferred Stock restrict the Company's ability to
redeem the New Preferred Stock, including pursuant to a Change of Control Offer.
See "Description of Indebtedness" and "Description of Capital Stock -- Existing
Preferred Stock."
None of the provisions in the Certificate of Designation relating to a
repurchase upon a Change of Control is waivable by the Board of Directors of the
Company.
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CERTAIN COVENANTS
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any Restricted Subsidiary of the Company to, directly or
indirectly, incur any Indebtedness (including Acquired Indebtedness) other than
Permitted Indebtedness. Notwithstanding the foregoing limitation, the Company
and its Restricted Subsidiaries may incur Indebtedness if on the date of the
incurrence of such Indebtedness (i) no Voting Rights Triggering Event shall have
occurred and be continuing or shall occur as a consequence thereof and (ii)
after giving effect to the incurrence of such Indebtedness and the receipt and
application of the proceeds thereof, the ratio of the Company's total
Indebtedness to the Company's Adjusted EBITDA (determined on a pro forma basis
for the last four full fiscal quarters of the Company for which financial
statements are available at the date of determination) is less than 7.0 to 1;
provided, however, that if the Indebtedness which is the subject of a
determination under this provision is Acquired Indebtedness, or Indebtedness
incurred in connection with the simultaneous acquisition of any Person,
business, property or assets, then such ratio shall be determined by giving
effect (on a pro forma basis, as if the transaction had occurred at the
beginning of the four quarter period) to both the incurrence or assumption of
such Acquired Indebtedness or such other Indebtedness by the Company and the
inclusion in the Company's Adjusted EBITDA of the Consolidated EBITDA of the
acquired Person, business, property or assets; and provided, further, that in
the event that the Consolidated EBITDA of the acquired Person, business,
property or assets reflects an operating loss, no amounts shall be deducted from
the Company's Adjusted EBITDA in making the determinations described above.
Limitation on Restricted Payments. (a) The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, make any
Restricted Payment if at the time of such Restricted Payment and immediately
after giving effect thereto:
(i) any Voting Rights Triggering Event shall have occurred and be
continuing; or
(ii) the Company could not incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with the "Limitation on
Incurrence of Additional Indebtedness" covenant; or
(iii) the aggregate amount of Restricted Payments declared or made
after the Issue Date (the amount expended for such purposes, if other than
in cash, being the fair market value of such property as determined by the
Board of Directors of the Company in good faith) exceeds the sum of (a)
100% of the Company's Cumulative Consolidated EBITDA minus 1.4 times the
Company's Cumulative Consolidated Interest Expense, plus (b) 100% of the
aggregate Net Proceeds and the fair market value of securities or other
property received by the Company from the issue or sale, after the Issue
Date, of Capital Stock (other than Disqualified Capital Stock of the
Company or Capital Stock of the Company issued to any Restricted Subsidiary
of the Company) of the Company or any Indebtedness or other securities of
the Company convertible into or exercisable or exchangeable for Capital
Stock (other than Disqualified Stock) of the Company which have been so
converted or exercised or exchanged, as the case may be, plus (c)
$10,000,000.
(b) Notwithstanding the foregoing, these provisions will not prohibit: (1)
the payment of any dividend or the making of any distribution within 60 days
after the date of its declaration if such dividend or distribution would have
been permitted on the date of declaration; (2) the purchase, redemption or other
acquisition or retirement of any Capital Stock of the Company or any warrants,
options or other rights to acquire shares of any class of such Capital Stock (x)
solely in exchange for shares of Qualified Capital Stock or other rights to
acquire Qualified Capital Stock, (y) through the application of the Net Proceeds
of a substantially concurrent sale for cash (other than to a Restricted
Subsidiary of the Company) of shares of Qualified Capital Stock or warrants,
options or other rights to acquire Qualified Capital Stock or (z) in the case of
Disqualified Capital Stock, solely in exchange for, or through the application
of the Net Proceeds of a substantially concurrent sale for cash (other than to a
Restricted Subsidiary of the Company) of, Disqualified Capital Stock that has a
redemption date no earlier than, is issued by the Company or the same Person as
and requires the payment of current dividends or distributions in cash no
earlier than, in each case, the Disqualified Capital Stock being purchased,
redeemed or otherwise acquired or retired and which Disqualified Capital Stock
does not prohibit cash dividends on the New Preferred Stock or the exchange
thereof for Exchange Debentures.
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Limitations on Transactions with Affiliates. The Company will not, and
will not cause or permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into or suffer to exist any transaction or series of related
transactions (including, without limitation, the sale, purchase, exchange or
lease of assets, property or services) with any Affiliate (including entities in
which the Company or any of its Restricted Subsidiaries owns a minority
interest) or holder of 10% or more of the Company's Common Stock (an "Affiliate
Transaction") or extend, renew, waive or otherwise modify the terms of any
Affiliate Transaction entered into prior to the Issue Date unless (i) such
Affiliate Transaction is between or among the Company and its Wholly-Owned
Subsidiaries; or (ii) the terms of such Affiliate Transaction are fair and
reasonable to the Company or such Restricted Subsidiary, as the case may be, and
the terms of such Affiliate Transaction are at least as favorable as the terms
which could be obtained by the Company or such Restricted Subsidiary, as the
case may be, in a comparable transaction made on an arm's-length basis between
unaffiliated parties. In any Affiliate Transaction involving an amount or having
a value in excess of $1 million which is not permitted under clause (i) above,
the Company must obtain a Board Resolution certifying that such Affiliate
Transaction complies with clause (ii) above. In transactions with a value in
excess of $5 million which are not permitted under clause (i) above, the Company
must obtain a written opinion as to the fairness of such a transaction from an
independent investment banking firm.
The foregoing provisions will not apply to (i) any Restricted Payment that
is not prohibited by the provisions described under "-- Limitation on Restricted
Payments" contained herein, (ii) any transaction approved by the Board of
Directors of the Company with an officer or director of the Company or of any
Subsidiary in his or her capacity as officer or director entered into in the
ordinary course of business, including compensation and employee benefit
arrangements with any officer or director of the Company or of any Subsidiary
that are customary for public companies in the broadcasting industry, or (iii)
modifications of the Existing Preferred Stock.
Merger, Consolidation and Sale of Assets. Without the affirmative vote of
the holders of a majority of the issued and outstanding shares of New Preferred
Stock, voting or consenting, as the case may be, as a separate class, the
Company will not, in a single transaction or a series of related transactions,
consolidate with or merge with or into, or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its assets to, another
Person or adopt a plan of liquidation unless (i) either (1) the Company is the
surviving or continuing Person or (2) the Person (if other than the Company)
formed by such consolidation or into which the Company is merged or the Person
that acquires by conveyance, transfer or lease the properties and assets of the
Company substantially as an entirety or, in the case of a plan of liquidation,
the Person to which assets of the Company have been transferred shall be a
corporation, partnership or trust organized and existing under the laws of the
United States or any State thereof or the District of Columbia; (ii) the New
Preferred Stock shall be converted into or exchanged for and shall become shares
of such successor, transferee or resulting Person, having in respect of such
successor, transferee or resulting Person the same powers, preferences and
relative participating, optional or other special rights and the qualifications,
limitations or restrictions thereon, that the New Preferred Stock had
immediately prior to such transaction; (iii) immediately after giving effect to
such transaction and the use of the proceeds therefrom (on a pro forma basis,
including giving effect to any Indebtedness incurred or anticipated to be
incurred in connection with such transaction), the Company (in the case of
clause (1) of the foregoing clause (i)) or such Person (in the case of clause
(2) of the foregoing clause (i)) shall be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant; (iv) immediately
after giving effect to such transactions, no Voting Rights Triggering Event
shall have occurred or be continuing; and (v) the Company shall have delivered
to the Transfer Agent for the New Preferred Stock prior to the consummation of
the proposed transaction an officers' certificate and an opinion of counsel,
each stating that such consolidation, merger or transfer complies with the
Certificate of Designation and that all conditions precedent in the Certificate
of Designation relating to such transaction have been satisfied. For purposes of
the foregoing, the transfer (by lease, assignment, sale or otherwise, in a
single transaction or series of related transactions) of all or substantially
all of the properties and assets of one or more Subsidiaries, the Capital Stock
of which constitutes all or substantially all of the properties or assets of the
Company, will be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
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Limitation on Preferred Stock of Restricted Subsidiaries. The Company will
not permit any Restricted Subsidiary to issue any Preferred Stock (except to the
Company or to a Restricted Subsidiary) or permit any Person (other than the
Company or a Restricted Subsidiary) to hold any such Preferred Stock unless the
Company or such Restricted Subsidiary would be entitled to incur or assume
Indebtedness in compliance with the "Limitation on Incurrence of Additional
Indebtedness" covenant in an aggregate principal amount equal to the aggregate
liquidation value of the Preferred Stock to be issued.
Transfer Agent and Registrar. First Union National Bank, Charlotte, North
Carolina, is the transfer agent (the "Transfer Agent") and registrar for the New
Preferred Stock.
Reports. The Company will provide to the holders of New Preferred Stock,
within 15 days after it files them with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may by rules and regulations
prescribe) which the Company files with the Commission pursuant to Section 13 or
15(d) of the Exchange Act. In the event that the Company is no longer required
to furnish such reports to its securityholders pursuant to the Exchange Act, the
Company will cause its consolidated financial statements, comparable to those
that would have been required to appear in annual or quarterly reports, to be
delivered to the holders of New Preferred Stock.
THE EXCHANGE DEBENTURES
The Exchange Debentures, if issued, will be issued under an Exchange
Indenture (the "Exchange Indenture"), to be dated as of , 1996
between the Company, the Guarantors and The Bank of New York, as Trustee (the
"Trustee"). A copy of the form of Exchange Indenture has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
following summary of certain provisions of the Exchange Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Trust Indenture Act of 1939, as amended, as in effect on the
date of the Exchange Indenture (the "TIA"), and to all of the provisions of the
Exchange Indenture, including the definitions of certain terms therein and those
terms made a part of the Exchange Indenture by reference to the TIA as in effect
on the date of the Exchange Indenture. The definitions of certain capitalized
terms used in the following summary are set forth under "-- Certain Definitions"
below. The Credit Agreement, the Indenture and the Existing Preferred Stock
restrict the Company's ability to issue the Exchange Debentures. See
"Description of Indebtedness" and "Description of Capital Stock -- Existing
Preferred Stock."
The Exchange Debentures will be general unsecured obligations of the
Company and will be limited in aggregate principal amount to the liquidation
preference of the New Preferred Stock, plus, without duplication, accumulated
and unpaid dividends, on the date or dates on which it is exchanged for Exchange
Debentures of the New Preferred Stock into Exchange Debentures (plus any
additional Exchange Debentures issued in lieu of cash interest as described
herein). The Exchange Debentures will be issued in fully registered form only,
in denominations of $1,000 and integral multiples thereof (other than as
described in "-- The New Preferred Stock -- Exchange" or with respect to
additional Exchange Debentures issued in lieu of cash interest as described
herein). The Exchange Debentures will be subordinated to all existing and future
Senior Debt of the Company and will rank pari passu with the Company's Existing
Notes.
Principal of, premium, if any, and interest on the Exchange Debentures will
be payable, and the Exchange Debentures may be presented for registration of
transfer or exchange at the office of the Paying Agent and Registrar. At the
Company's option, interest, to the extent paid in cash, may be paid by check
mailed to the registered address of holders of the Exchange Debentures as shown
on the register for the Exchange Debentures. The Trustee will initially act as
Paying Agent and Registrar. The Company may change any Paying Agent and
Registrar without prior notice to holders of the Exchange Debentures. Holders of
the Exchange Debentures must surrender Exchange Debentures to the Paying Agent
to collect principal payments.
The Exchange Debentures will mature on October 31, 2006. Each Exchange
Debenture will bear interest at the rate of % per annum from the Exchange
Date or from the most recent interest payment date to which interest has been
paid or provided for or, if no interest has been paid or provided for, from the
Exchange
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Date. Interest will be payable semi-annually in cash (or, on or prior to October
31, 2002, in additional Exchange Debentures, at the option of the Company) in
arrears on each April 30 and October 31, commencing with the first such date
after the Exchange Date. Interest on the Exchange Debentures will be computed on
the basis of a 360-day year comprised of twelve 30-day months and the actual
number of days elapsed.
OPTIONAL REDEMPTION
The Exchange Debentures will be redeemable, at the Company's option, in
whole at any time or in part from time to time, on and after October 31, 2001 at
the following redemption prices (expressed as percentages of the principal
amount) if redeemed during the twelve-month period commencing on October 31 of
the year set forth below, plus, in each case, accrued interest thereon to the
date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
--------------------------------------------------------------- ----------
<S> <C>
2001........................................................... %
2002........................................................... %
2003........................................................... %
2004 and thereafter............................................ 100%
</TABLE>
In addition, on or prior to October 31, 1999, the Company may, at its
option, use the Net Proceeds of either or both of one or more Public Equity
Offerings or Major Asset Sales to redeem for cash up to an aggregate of 35% of
the aggregate principal amount of the Exchange Debentures whether initially
issued or issued in payment of interest obligations thereon at a redemption
price equal to % of the aggregate principal amount so redeemed during the
12-month period commencing on October 31, 1996, % of the aggregate
principal amount so redeemed during the 12-month period commencing on October
31, 1997 and % of the aggregate principal amount so redeemed during the
12-month period commencing on October 31, 1998, plus, in each case, accrued
interest to the redemption date; provided, however, that after any such
redemption, the aggregate principal amount of Exchange Debentures outstanding
must equal at least $75 million. Any such redemption will be required to occur
on or prior to 90 days after the receipt by the Company of the proceeds of each
Public Equity Offering or Major Asset Sale.
The Credit Agreement restricts the Company's ability to optionally redeem
the Exchange Debentures. See "Description of Indebtedness."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder will have the right
to require that the Company repurchase all or a portion of such holder's
Exchange Debentures pursuant to the offer described below (the "Change of
Control Offer"), at a purchase price equal to 101% of the principal amount
thereof plus accrued interest, if any, to the Change of Control Payment Date.
The Exchange Indenture will provide that, prior to the mailing of the
notice referred to below, but in any event within 30 days following the date on
which a Change of Control occurs, the Company covenants that if the purchase of
the Exchange Debentures would violate or constitute a default under the Credit
Agreement or any other then outstanding Senior Debt, then the Company will, to
the extent needed to permit such purchase of Exchange Debentures, either (i)
repay in full all Indebtedness under the Credit Agreement and such Senior Debt
(and terminate all commitments thereunder) or (ii) obtain the requisite consents
under the Credit Agreement and the instrument governing such Senior Debt to
permit the repurchase of the Exchange Debentures as provided below. The Company
will first comply with the covenant in the preceding sentence before it will be
required to repurchase Exchange Debentures pursuant to the provisions described
below; provided that the Company's failure to comply with the covenant described
in the preceding sentence will constitute an Event of Default described in
clause (iii) under "Events of Default" below.
Within 30 days following the date upon which a Change of Control occurs,
the Company must send, by first class mail, a notice to each holder of record of
the Exchange Debentures, with a copy to the Trustee, which notice shall govern
the terms of the Change of Control Offer. Such notice will state, among other
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things, the purchase date, which must be no earlier than 30 days nor later than
45 days from the date such notice is mailed, other than as may be required by
law (the "Change of Control Payment Date"). Holders electing to have an Exchange
Debenture purchased pursuant to a Change of Control Offer will be required to
surrender the Exchange Debenture, properly endorsed for transfer together with
such other customary documents as the Company may reasonably request, to the
Paying Agent at the address specified in the notice prior to the close of
business on the business day prior to the Change of Control Payment Date.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Exchange Debentures pursuant to a Change of Control Offer.
This "Change of Control" covenant will not apply in the event of (a)
changes in a majority of the Board of Directors of the Company in certain
instances as contemplated by the definition of "Change of Control" and (b)
certain transactions with Permitted Holders. In addition, this covenant is not
intended to afford holders of Exchange Debentures protection in the event of
certain highly leveraged transactions, reorganizations, restructurings, mergers
and other similar transactions that might adversely affect the holders of
Exchange Debentures, but would not constitute a Change of Control. The Company
could, in the future, enter into certain transactions, including certain
recapitalizations of the Company, that would not constitute a Change of Control,
but would increase the amount of Indebtedness outstanding at such time. If a
Change of Control were to occur, there can be no assurance that the Company
would have sufficient funds to pay the purchase price for all Exchange
Debentures and Existing Notes that the Company might be required to purchase.
Moreover, as of the date of this Prospectus, after giving effect to the sale of
the New Preferred Stock and the application of the proceeds therefrom, the
Company would not have sufficient funds available to purchase all the Exchange
Debentures, assuming they had been issued, pursuant to a Change of Control
Offer. In the event that the Company were required to purchase Exchange
Debentures pursuant to a Change of Control Offer, the Company expects that it
would need to seek third-party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can no
assurance that the Company would be able to obtain such financing on favorable
terms, if at all. In addition, the Credit Agreement restricts the Company's
ability to repurchase the Exchange Debentures, including pursuant to a Change of
Control Offer. See "Description of Indebtedness."
None of the provisions in the Exchange Indenture relating to a repurchase
upon a Change of Control is waivable by the Board of Directors of the Company.
In addition, the Trustee may not waive the right of any holder of the Exchange
Debentures to redeem its Exchange Debentures upon a Change of Control, except to
the extent the Trustee is acting at the direction of the holders of the Exchange
Debentures then outstanding.
SUBORDINATION
The Obligations represented by the Exchange Debentures are, to the extent
and in the manner provided in the Exchange Indenture, subordinated in right of
payment to the prior indefeasible payment and satisfaction in full of all
existing and future Senior Debt of the Company.
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, arrangement, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, whether voluntary or involuntary, or any liquidation,
dissolution or other winding-up of the Company, whether voluntary or involuntary
and whether or not involving insolvency or bankruptcy, or any general assignment
for the benefit of creditors or other marshalling of assets or liabilities of
the Company (except in connection with the merger or consolidation of the
Company or its liquidation or dissolution following the transfer of
substantially all of its assets, upon the terms and conditions permitted under
the circumstances described under "-- Merger, Consolidation and Sale of Assets")
(all of the foregoing referred to herein individually as a "Bankruptcy
Proceeding" and collectively as "Bankruptcy Proceedings"), the holders of Senior
Debt of the Company will be entitled to receive payment and satisfaction in full
of all amounts due on or in respect of all Senior Debt of the Company before the
holders of the Exchange Debentures are entitled to receive or retain any payment
or distribution of any kind on account of the Exchange Debentures. In the event
that, notwithstanding the foregoing, the Trustee or any
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holder of Exchange Debentures receives any payment or distribution of assets of
the Company of any kind, whether in cash, property or securities, including,
without limitation, by way of set-off or otherwise, in respect of the Exchange
Debentures before all Senior Debt of the Company is paid and satisfied in full,
then such payment or distribution will be held by the recipient in trust for the
benefit of holders of Senior Debt and will be immediately paid over or delivered
to the holders of Senior Debt or their representative or representatives to the
extent necessary to make payment in full of all Senior Debt remaining unpaid,
after giving effect to any concurrent payment or distribution, or provision
therefor, to or for the holders of Senior Debt. By reason of such subordination,
in the event of liquidation or insolvency, creditors of the Company who are
holders of Senior Debt may recover more, ratably, than other creditors of the
Company, and creditors of the Company who are not holders of Senior Debt or of
the Exchange Debentures may recover more, ratably, than the holders of the
Exchange Debentures.
No payment or distribution of any assets or securities of the Company or
any Restricted Subsidiary of any kind or character (including, without
limitation, cash, property and any payment or distribution which may be payable
or deliverable by reason of the payment of any other Indebtedness of the Company
being subordinated to the payment of the Exchange Debentures by the Company) may
be made by or on behalf of the Company or any Restricted Subsidiary, including,
without limitation, by way of set-off or otherwise, for or on account of the
Exchange Debentures, or for or on account of the purchase, redemption or other
acquisition of the Exchange Debentures, and neither the Trustee nor any holder
or owner of any Exchange Debentures shall take or receive from the Company or
any Restricted Subsidiary, directly or indirectly in any manner, payment in
respect of all or any portion of Exchange Debentures following the delivery by
the representative of the holders of Designated Senior Debt (the
"Representative") to the Trustee of written notice of the occurrence of a
Payment Default, and in any such event, such prohibition shall continue until
such Payment Default is cured, waived in writing or ceases to exist. At such
time as the prohibition set forth in the preceding sentence shall no longer be
in effect, subject to the provisions of the following paragraph, the Company
shall resume making any and all required payments in respect of the Exchange
Debentures, including any missed payments.
Upon the occurrence of a Non-Payment Event of Default on Designated Senior
Debt, no payment or distribution of any assets of the Company of any kind may be
made by the Company, including, without limitation, by way of set-off or
otherwise, on account of the Exchange Debentures, or on account of the purchase
or redemption or other acquisition of Exchange Debentures, for a period (a
"Payment Blockage Period") commencing on the date of receipt by the Trustee of
written notice from the Representative of such Non-Payment Event of Default
unless and until (subject to any blockage of payments that may then be in effect
under the preceding paragraph) the earliest of (w) more than 179 days shall have
elapsed since receipt of such written notice by the Trustee, (x) such
Non-Payment Event of Default shall have been cured or waived in writing or shall
have ceased to exist, (y) such Designated Senior Debt shall have been paid in
full or (z) such Payment Blockage Period shall have been terminated by written
notice to the Company or the Trustee from such Representative, after which, in
the case of clause (w), (x), (y) or (z), the Company shall resume making any and
all required payments in respect of the Exchange Debentures, including any
missed payments. Notwithstanding any other provision of the Exchange Indenture,
in no event shall a Payment Blockage Period commenced in accordance with the
provisions of the Exchange Indenture described in this paragraph extend beyond
179 days from the date of the receipt by the Trustee of the notice referred to
above (such period, an "Initial Blockage Period"). Any number of additional
Payment Blockage Periods may be commenced during the Initial Blockage Period;
provided, however, that no such additional Payment Blockage Period shall extend
beyond the Initial Blockage Period. After the expiration of the Initial Blockage
Period, no Payment Blockage Period may be commenced until at least 180
consecutive days have elapsed from the last day of the Initial Blockage Period.
Notwithstanding any other provision of the Exchange Indenture, no Non-Payment
Event of Default with respect to Designated Senior Debt which existed or was
continuing on the date of the commencement of any Payment Blockage Period
initiated by the Representative shall be, or be made, the basis for the
commencement of a second Payment Blockage Period initiated by the
Representative, whether or not within the Initial Blockage Period, unless such
Non-Payment Event of Default shall have been waived for a period of not less
than 90 consecutive days.
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Each Guarantee will, to the extent set forth in the Exchange Indenture, be
subordinated in right of payment to the prior payment in full of all Senior Debt
of the respective Guarantor, including obligations of such Guarantor with
respect to the Credit Agreement (including any guarantee thereof) to the extent
then existing, and will be subject to the rights of holders of Designated Senior
Debt of such Guarantor to initiate blockage periods, upon terms substantially
comparable to the subordination of the Exchange Debentures to all Senior Debt of
the Company.
If the Company or any Guarantor fails to make any payment on the Exchange
Debentures or any Guarantee, as the case may be, when due or within any
applicable grace period, whether or not on account of payment blockage
provisions, such failure would constitute an Event of Default under the Exchange
Indenture and would enable the holders of the Exchange Debentures to accelerate
the maturity thereof. See "-- Events of Default."
A holder of Exchange Debentures by his acceptance of Exchange Debentures
agrees to be bound by such provisions and authorizes and expressly directs the
Trustee, on his behalf, to take such action as may be necessary or appropriate
to effectuate the subordination provided for in the Indenture and appoints the
Trustee his attorney-in-fact for such purpose.
GUARANTEES
The Exchange Debentures are guaranteed on a senior subordinated basis by
the Guarantors. All payments pursuant to the Guarantees by the Guarantors are
subordinated in right of payment to the prior payment in full of all Senior Debt
of the Guarantor, to the same extent and in the same manner that all payments
pursuant to the Exchange Debentures are subordinated in right of payment to the
prior payment in full of all Senior Debt of the Company.
The obligations of each Guarantor are limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor (including, without limitation, any guarantees of Senior Debt) and
after giving effect to any collections from or payments make by or on behalf of
any other Guarantor in respect of the obligations of such other Guarantor under
its Guarantee or pursuant to its contribution obligations under the Exchange
Indenture, result in the obligations of such Guarantor under the Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Guarantor that makes a payment or distribution under a Guarantee
shall be entitled to contribution from each other Guarantor in a pro rata amount
based on the Adjusted Net Assets of each Guarantor.
A Guarantor shall be released from all of its obligations under its
Guarantee if all or substantially all of its assets are sold or all of its
Capital Sock is sold, in each case in a transaction in compliance with the
covenant described under "-- Limitation on Certain Asset Sales," or the
Guarantor merges with or into or consolidates with, or transfers all or
substantially all of its assets to, the Company or another Guarantor in a
transaction in compliance with "-- Merger, Consolidation and Sale of Assets,"
and such Guarantor has delivered to the Trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent herein provided
for relating to such transaction have been complied with.
CERTAIN COVENANTS
The Exchange Indenture will contain, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Company will
not, and will not permit any Restricted Subsidiary of the Company to,
directly or indirectly incur any Indebtedness (including Acquired
Indebtedness) other than Permitted Indebtedness. Notwithstanding the
foregoing limitations, the Company and its Restricted Subsidiaries may
incur Indebtedness if (a) after giving effect to the incurrence of such
Indebtedness and the receipt and application of the proceeds thereof, the
ratio of the Company's total Indebtedness to the Company's Adjusted EBITDA
(determined on a pro forma basis for the last four full fiscal quarters of
the Company for which financial statements are available at the date of
determination) is less than 7.0 to 1; provided, however, that if the
Indebtedness which is the subject of a determination under this provision
is Acquired Indebtedness, or Indebtedness incurred in connection
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with the simultaneous acquisition of any Person, business, property or
assets, then such ratio shall be determined by giving effect (on a pro
forma basis, as if the transaction had occurred at the beginning of the
four quarter period) to both the incurrence or assumption of such Acquired
Indebtedness or such other Indebtedness by the Company and the inclusion in
the Company's Adjusted EBITDA of the Consolidated EBITDA of the acquired
Person, business, property or assets; and provided, further, that in the
event that the Consolidated EBITDA of the acquired Person, business,
property or assets reflects an operating loss, no amounts shall be deducted
from the Company's Adjusted EBITDA in making the determinations described
above and (b) no Default or Event of Default shall have occurred and be
continuing at the time or as a consequence of the incurrence of such
Indebtedness.
Limitation on Restricted Payments. (a) The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly,
make any Restricted Payment if at the time of such Restricted Payment and
immediately after giving effect thereto:
(i) any Default or Event of Default shall have occurred and be
continuing; or
(ii) the Company could not incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with the "Limitation
on Incurrence of Additional Indebtedness" covenant; or
(iii) the aggregate amount of Restricted Payments declared or made
after the Issue Date (the amount expended for such purposes, if other
than in cash, being the fair market value of such property as determined
by the Board of Directors of the Company in good faith) exceeds the sum
of (a) 100% of the Company's Cumulative Consolidated EBITDA minus 1.4
times the Company's Cumulative Consolidated Interest Expense, plus (b)
100% of the aggregate Net Proceeds and the fair market value of
securities or other property received by the Company from the issue or
sale, after the Issue Date, of Capital Stock (other than Disqualified
Capital Stock of the Company or Capital Stock of the Company issued to
any Restricted Subsidiary of the Company) of the Company or any
Indebtedness or other securities of the Company convertible into or
exercisable or exchangeable for Capital Stock (other than Disqualified
Stock) of the Company which have been so converted or exercised or
exchanged, as the case may be, plus (c) $10,000,000.
(b) Notwithstanding the foregoing, these provisions will not prohibit:
(1) the payment of any dividend or the making of any distribution within 60
days after the date of its declaration if such dividend or distribution
would have been permitted on the date of declaration; (2) the purchase,
redemption or other acquisition or retirement of any Capital Stock of the
Company or any warrants, options or other rights to acquire shares of any
class of such Capital Stock either (x) solely in exchange for shares of
Qualified Capital Stock or other rights to acquire Qualified Capital Stock
or (y) through the application of the Net Proceeds of a substantially
concurrent sale for cash (other than to a Restricted Subsidiary of the
Company) of shares of Qualified Capital Stock or warrants, options or other
rights to acquire Qualified Capital Stock; (3) the acquisition of
Indebtedness of the Company that is subordinate or junior in right of
payment to the Exchange Debentures either (x) solely in exchange for shares
of Qualified Capital Stock (or warrants, options or other rights to acquire
Qualified Capital Stock) or for Indebtedness of the Company that is
subordinate or junior in right of payment to the Exchange Debentures, at
least to the extent that the Indebtedness being acquired is subordinated to
the Exchange Debentures and has a Weighted Average Life to Maturity no less
than that of the Indebtedness being acquired or (y) through the application
of the Net Proceeds of a substantially concurrent sale for cash (other than
to a Restricted Subsidiary of the Company) of shares of Qualified Capital
Stock (or warrants, options or other rights to acquire Qualified Capital
Stock) or Indebtedness of the Company which is subordinate or junior in
right of payment to the Exchange Debentures, at least to the extent that
the Indebtedness being acquired is subordinated to the Exchange Debentures
and has a Weighted Average Life to Maturity no less than that of the
Indebtedness being refinanced; (4) the retirement of the New Preferred
Stock in accordance with the optional and mandatory redemption and put
provisions as in effect on the Issue Date and the payment of cash dividends
on the New Preferred Stock; or (5) as long as no Default or Event of
Default shall have occurred and be continuing, the payment of cash
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dividends on the Existing Preferred Stock or the redemption thereof at
times and in amounts no less favorable to holders of the Exchange
Debentures than such provisions as are in effect in the related certificate
of designations on the Issue Date; provided, however, that any cash
dividends or cash redemptions or premiums in respect thereof paid with
respect to the Existing Preferred Stock shall reduce amounts otherwise
available for Restricted Payments.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an officers' certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "Limitation on Restricted Payments"
were computed, which calculations may be based upon the Company's latest
available financial statements, and that no Default or Event of Default
exists and is continuing and no Default or Event of Default will occur
immediately after giving effect to any Restricted Payments.
Limitations on Transactions with Affiliates. The Company will not,
and will not cause or permit any or its Restricted Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or
series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, property or services) with any
Affiliate (including entities in which the Company or any of its Restricted
Subsidiaries own a minority interest) or holder of 10% or more of the
Company's Common Stock (an "Affiliate Transaction") or extend, renew, waive
or otherwise modify the terms of any Affiliate Transaction entered into
prior to the Issue Date unless (i) such Affiliate Transaction is between or
among the Company and its Wholly-Owned Subsidiaries; or (ii) the terms of
such Affiliate Transaction is fair and reasonable to the Company or such
Restricted Subsidiaries, as the case may be, and the terms of such
Affiliate Transaction are at least as favorable as the terms which could be
obtained by the Company or such Restricted Subsidiary, as the case may be,
in a comparable transaction made on an arm's-length basis between
unaffiliated parties. In any Affiliate Transaction involving an amount or
having a value in excess of $1 million which is not permitted under clause
(i) above, the Company must obtain a resolution of the board of directors
certifying that such Affiliate Transaction complies with clause (ii) above.
In transactions with a value in excess of $5 million which are not
permitted under clause (i) above, the Company must obtain a written opinion
as to the fairness of such a transaction from an independent investment
banking firm.
The foregoing provisions will not apply to (i) any Restricted Payment
that is not prohibited by the provisions described under "-- Limitation on
Restricted Payments" contained herein, (ii) any transaction, approved by
the board of directors of the Company, with an officer or director of the
Company or of any Subsidiary in his or her capacity as officer of director
entered into in the ordinary course of business, including compensation and
employee benefit arrangements with any officer or director of the Company
or of any Subsidiary that are customary for public companies in the
broadcasting industry or (iii) modifications of the Existing Preferred
Stock.
Limitation on Certain Asset Sales. The Company will not, and will not
cause or permit any of its Restricted Subsidiaries to, consummate an Asset
Sale unless (i) the Company or such Restricted Subsidiary, as the case may
be, receives consideration at least equal to the fair market value thereof
on the date the Company or Restricted Subsidiary (as applicable) entered
into the agreement to consummate such Asset Sale (as determined in good
faith by the Company's Board of Directors, and evidenced by a Board
Resolution); (ii) not less than 75% of the consideration received by the
Company or its Subsidiaries, as the case may be, is in the form of cash or
Cash Equivalents, other than in the case where the Company is exchanging
all or substantially all of the assets of one or more media properties
operated by the Company (including by way of the transfer of capital stock)
for all or substantially all of the assets (including by way of the
transfer of capital stock) constituting one or more media properties
operated by another Person, provided that at least 75% of the consideration
received by the Company in such exchange, other than the media properties,
is in the form of cash or Cash Equivalents; and (iii) the Asset Sale
Proceeds received by the Company or such Restricted Subsidiary are applied
(a) first, to the extent the Company elects, or is required, to prepay,
repay or purchase Indebtedness under any then existing Senior Debt of the
Company or any Restricted Subsidiary within 180 days following the receipt
of the Asset Sale Proceeds from any Asset Sale; (b) second, to the extent
of the balance of Asset Sale
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Proceeds after application as described above, to the extent the Company
elects, to make an Investment in assets (including Capital Stock or other
securities purchased in connection with the acquisition of Capital Stock or
property of another Person) used or useful in businesses similar or
ancillary to the business of the Company or Restricted Subsidiary as
conducted at the time of such Asset Sale, provided that such Investment
occurs or the Company or a Restricted Subsidiary enters into contractual
commitments to make such investment, subject only to customary conditions
(other than the obtaining of financing), on or prior to the 181st day
following receipt of such Asset Sale Proceeds (the "Reinvestment Date") and
Asset Sale Proceeds contractually committed are so applied within 360 days
following the receipt of such Asset Sale Proceeds; (c) third, to make any
required Excess Proceeds Offer (as defined in the Existing Indenture) to
holders of the Existing Notes in accordance with the terms of the
Indenture; and (d) fourth, to make an offer for the Exchange Debentures as
described under "-- Optional Redemption" above following a Major Asset Sale
or, if on the Reinvestment Date with respect to any Asset Sale, the
Available Asset Sale Proceeds exceed $10 million, the Company shall apply
an amount equal to such Available Asset Sale Proceeds to an offer to
repurchase the Exchange Debentures, at a purchase price in cash equal to
100% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of repurchase (an "Excess Proceeds Offer"). If an Excess
Proceeds Offer is not fully subscribed, the Company may retain the portion
of the Available Asset Sale Proceeds not required to repurchase Exchange
Debentures.
If the Company is required to make an Excess Proceeds Offer, the
Company shall mail, within 30 days following the Reinvestment Date, a
notice to the registered holders stating, among other things: (1) that such
holders have the right to require the Company to apply the Available Asset
Sale Proceeds to repurchase such Exchange Debentures at a purchase price in
cash equal to 100% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase; (2) the purchase date, which
shall be no earlier than 30 days and not later than 60 days from the date
such notice is mailed; (3) the instructions, determined by the Company,
that each holder must follow in order to have such Exchange Debentures
repurchased; and (4) the calculations used in determining the amount of
Available Asset Sale Proceeds to be applied to the repurchase of such
Exchange Debentures.
Limitation on Other Senior Subordinated Debt. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, incur, contingently or otherwise, any Indebtedness that is both
(i) subordinate in right of payment to any Senior Debt of the Company or
its Restricted Subsidiaries, as the case may be, and (ii) senior in right
of payment to the Exchange Debentures and the Guarantees, as the case may
be. For purposes of this covenant, Indebtedness is deemed to be senior in
right of payment to the Exchange Debentures and the Guarantees, as the case
may be, if it is not explicitly subordinate in right of payment to Senior
Debt at least to the same extent as the Exchange Debentures and the
Guarantees, as the case may be, are subordinate to Senior Debt.
Limitation on Preferred Stock of Restricted Subsidiaries. The Company
will not permit any Restricted Subsidiary to issue any Preferred Stock
(except to the Company or to a Restricted Subsidiary) or permit any Person
(other than the Company or a Restricted Subsidiary) to hold any such
Preferred Stock unless the Company or such Restricted Subsidiary would be
entitled to incur or assume Indebtedness in compliance with the "Limitation
on Incurrence of Additional Indebtedness" covenant in an aggregate
principal amount equal to the aggregate liquidation value of the Preferred
Stock to be issued.
Limitation on Creation of Subsidiaries. The Company shall not create
or acquire, nor permit any of its Restricted Subsidiaries to create or
acquire, any Subsidiary other than (i) a Restricted Subsidiary existing as
of the date of the Exchange Indenture, (ii) a Restricted Subsidiary that is
acquired or created after the date hereof, or (iii) an Unrestricted
Subsidiary; provided, however, that each Restricted Subsidiary acquired or
created pursuant to clause (ii) shall at the time it has either assets or
stockholder's equity in excess of $5,000 execute a guarantee, satisfactory
in form and substance to the Trustee (and with such documentation relating
thereto as the Trustee shall require, including, without limitation a
supplement or amendment to the Exchange Indenture and opinions of counsel
as to the enforceability of
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such guarantee), pursuant to which such Restricted Subsidiary shall become
a Guarantor. As of the Issue Date, the Company will have no Subsidiaries,
other than the Guarantors.
Merger, Consolidation and Sale of Assets. The Company will not and
will not cause or permit any Guarantor to, in a single transaction or
series of related transactions, consolidate with or merge with or into, or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets to, another Person or adopt a plan of
liquidation unless (i) either (1) the Company or the Guarantor, as the case
may be, is the survivor of such merger or consolidation or (2) the
surviving or transferee Person is a corporation, partnership or trust
organized and existing under the laws of the United States, any state
thereof or the District of Columbia and such surviving or transferee Person
expressly assumes by supplemental indenture all the obligations of the
Company or the Guarantor, as the case may be, under the Exchange Debentures
and the Exchange Indenture; (ii) immediately after giving effect to such
transaction and the use of proceeds therefrom (on a pro forma basis,
including any Indebtedness incurred or anticipated to be incurred in
connection with such transaction), the Company or the surviving or
transferee Person is able to incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with the "Limitation on
Incurrence of Additional Indebtedness" covenant; (iii) immediately after
giving effect to such transaction (including any Indebtedness incurred or
anticipated to be incurred in connection with the transaction) no Default
or Event of Default has occurred and is continuing; and (iv) the Company
has delivered to the Trustee an officers' certificate and opinion of
counsel, each stating that such consolidation, merger or transfer complies
with the Exchange Indenture, that the surviving Person agrees by
supplemental indenture to be bound thereby, and that all conditions
precedent in the Exchange Indenture relating to such transaction have been
satisfied. For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of related
transactions) of all or substantially all of the properties and assets of
one or more Subsidiaries the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company will be
deemed to be the transfer of all or substantially all of the properties and
assets of the Company.
EVENTS OF DEFAULT
The following events are defined in the Exchange Indenture as "Events of
Default": (i) the failure to pay interest on any Exchange Debentures when the
same becomes due and payable and the Default continues for a period of 30 days
(whether or not such payment is prohibited by the subordination provisions of
the Exchange Indenture); (ii) the failure to pay the principal, or premium, if
any, on any Exchange Debentures, when such principal becomes due and payable, at
maturity, upon redemption or otherwise (whether or not such payment is
prohibited by the subordination provisions of the Exchange Indenture); (iii) a
default in the observance or performance of any other covenant or agreement
contained in the Exchange Debentures or the Exchange Indenture which default
continues for a period of 60 days after the Company receives written notice
thereof specifying the default from the Trustee or holders of at least 25% in
aggregate principal amount of outstanding Exchange Debentures; (iv) default in
the payment at final maturity of principal in an aggregate amount of $10,000,000
or more with respect to any Indebtedness of the Company or any Restricted
Subsidiary thereof which default shall not be cured, waived or postponed
pursuant to an agreement with the holders of such Indebtedness within 60 days
after written notice, or the acceleration of any such Indebtedness aggregating
$10,000,000 or more which acceleration shall not be rescinded or annulled within
20 days after written notice as provided in the Exchange Indenture; (v) any
final judgment or judgments which can no longer be appealed for the payment of
money in excess of $10,000,000 shall be rendered against the Company or any
Restricted Subsidiary thereof, and shall not be discharged for any period of 60
consecutive days during which a stay of enforcement shall not be in effect; and
(vi) certain events of bankruptcy, insolvency or reorganization affecting
Company or any of its Restricted Subsidiaries.
Upon the happening of any Event of Default specified in the Exchange
Indenture, the Trustee may, and the Trustee upon the request of 25% in principal
amount of the Exchange Debentures shall or the holders of at least 25% in
aggregate principal amount of outstanding Exchange Debentures may, declare the
principal of and accrued but unpaid interest, if any, on all the Exchange
Debentures to be due and payable by notice in
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writing to the Company and the Trustee specifying the respective Event of
Default and that it is a "notice of acceleration" (the "Acceleration Notice"),
and the same (i) shall become immediately due and payable or (ii) if there are
any amounts outstanding under the Credit Agreement, will become due and payable
upon the first to occur of an acceleration under the Credit Agreement or 5
Business Days after receipt by the Company and the Representative under the
Credit Agreement of such Acceleration Notice (unless all Events of Default
specified in such Acceleration Notice have been cured or waived). If an Event of
Default with respect to bankruptcy proceedings occurs and is continuing, then
such amount will ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any holder of
Exchange Debentures.
The Exchange Indenture will provide that, at any time after a declaration
of acceleration with respect to the Exchange Debentures as described in the
preceding paragraph, the holders of a majority in principal amount of the
Exchange Debentures then outstanding (by notice to the Trustee) may rescind and
cancel such declaration and its consequences if (i) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction, (ii)
all existing Events of Default have been cured or waived except nonpayment of
principal or interest on the Exchange Debentures that has become due solely by
such declaration of acceleration, (iii) to the extent the payment of such
interest is lawful, interest (at the same rate specified in the Exchange
Debentures) on overdue installments of interest and overdue principal which has
become due otherwise than by such declaration of acceleration, has been paid,
(iv) the Company has paid the Trustee its reasonable compensation and reimbursed
the Trustee for its expenses, disbursements and advances and (v) in the event of
the cure or waiver of a Default or Event of Default of the type described in
clause (vi) of the description above of Events of Default, the Trustee has
received an officers' certificate and an opinion of counsel that such Default or
Event of Default has been cured or waived. The holders of a majority in
principal amount of the Exchange Debentures may waive any existing Default or
Event of Default under the Exchange Indenture, and its consequences, except a
default in the payment of the principal of or interest on any Exchange
Debentures.
The Company will deliver to the Trustee, on or before 100 days after the
end of the Company's fiscal year and on or before 50 days after the end of the
first, second and third fiscal quarters of such years, a certificate indicating
whether the signing officers know of any Default or Event of Default that
occurred during the previous year or quarter, as the case may be, and whether
the Company has complied with its obligations under the Exchange Indenture. In
addition, the Company will be required to notify the Trustee of the occurrence
and continuation of any Default or Event of Default within five business days
after the Company becomes aware of the same.
Subject to the provisions of the Exchange Indenture relating to the duties
of the Trustee in case an Event of Default thereunder should occur and be
continuing, the Trustee will be under no obligation to exercise any of the
rights or powers under the Exchange Indenture at the request or direction of any
of the holders of the Exchange Debentures unless such holders have offered to
the Trustee reasonable indemnity or security against any loss, liability or
expense. Subject to such provision for security or indemnification and certain
limitations contained in the Exchange Indenture, the holders of a majority in
principal amount of the outstanding Exchange Debentures have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee.
SATISFACTION AND DISCHARGE OF EXCHANGE INDENTURE; DEFEASANCE
The Exchange Indenture provides the Company may elect either (a) to defease
and be discharged from any and all obligations with respect to the Exchange
Debentures (except for the obligations to register the transfer or exchange of
such Exchange Debentures, to replace temporary or mutilated, destroyed, lost or
stolen Exchange Debentures, to maintain an office or agency in respect of the
Exchange Debentures and to hold monies for payment in trust) ("defeasance") or
(b) to be released from their obligations with respect to the Exchange
Debentures under certain covenants contained in the Exchange Indenture and
described above under "-- Certain Covenants" ("covenant defeasance"), upon the
deposit with the Trustee (or other qualifying trustee), in trust for such
purpose, of money and/or U.S. Government Obligations which through the payment
of principal and interest in accordance with their terms will provide money, in
an amount
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sufficient to pay the principal of, premium, if any, and interest on the
Exchange Debentures on the scheduled due dates therefor or on a selected date of
redemption in accordance with the terms of the Exchange Indenture. Such a trust
may only be established if, among other things, the Company had delivered to the
Trustee an opinion of counsel (as specified in the Exchange Indenture) (i) to
the effect that neither the trust nor the Trustee will be required to register
as an investment company under the Investment Company Act of 1940, as amended,
and (ii) to the effect that holders of the Exchange Debentures or persons in
their positions will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit, defeasance and discharge and will be
subject to federal income tax on the same amount and in the same amount and in
the same manner and at the same times, as would have been the case if such
deposit, defeasance and discharge had not occurred which, in the case of a
defeasance only, must be based upon a private ruling concerning the Exchange
Debentures, a published ruling of the Internal Revenue Service or a change in
applicable federal income tax law.
REPORTS TO HOLDERS
The Company will file with the Trustee and provide to the holders of
Exchange Debentures, within 15 days after it files them with the Commission,
copies of the annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the Commission may by
rules and regulations prescribe) which the Company files with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. In the event the Company is
no longer required to furnish such reports to its securityholders pursuant to
Exchange Act, the Company will cause its consolidated financial statements,
comparable to those which would have been required to appear in annual or
quarterly reports, to be delivered to the holders of the Exchange Debentures.
MODIFICATION OF THE EXCHANGE INDENTURE
From time to time, the Company, the Guarantors and the Trustee may, without
the consent of the holders of the Exchange Debentures, amend the Exchange
Indenture or the Exchange Debentures or supplement the Exchange Indenture for
certain specified purposes, including curing any ambiguity, defect or
inconsistency or making any change that does not materially and adversely affect
the rights of any of the holders. The Exchange Indenture contains provisions
permitting the Company, the Guarantors and the Trustee, with the consent of the
holders of a majority in principal amount of the outstanding Exchange
Debentures, to modify or supplement the Exchange Indenture and the Exchange
Debentures except that, without the consent of each holder of the Exchange
Debentures affected thereby, no such modification shall: (i) reduce the amount
of Exchange Debentures whose holders must consent to an amendment, supplement or
waiver to the Exchange Indenture or the Exchange Debentures; (ii) reduce the
rate of or change the time for payment of, interest on any Exchange Debentures;
(iii) reduce the principal of or premium on or change the stated maturity of any
Exchange Debenture; (iv) make any Exchange Debentures payable in money other
than that stated in the Exchange Debentures or change the place of payment from
New York, New York; (v) change the amount or time of any payment required by the
Exchange Debentures or reduce the premium payable upon any redemption of
Exchange Debentures or change the time before which no redemption may be made;
(vi) waive a default in the payment of principal of interest on, or redemption
payment with respect to any Exchange Debentures; or (vii) take any other action
otherwise prohibited by the Exchange Indenture to be taken without the consent
of each holder affected thereby. In addition, as long as any Shares of New
Preferred Stock remain outstanding, the holders of New Preferred Stock will have
the right to vote together with the holders of Exchange Debentures with respect
to amendments and modifications of the Exchange Indenture.
The consent of holders is not necessary to approve the particular form of
any proposed amendment. It is sufficient if such consent approves the substance
of the proposed amendment.
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CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Certificate of Designation and the Exchange Indenture. Reference is made to the
Certificate of Designation and the Exchange Indenture for the full definition of
all such terms, as well as any other terms used herein for which no definition
is provided.
"Acquired Indebtedness" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person.
"Adjusted EBITDA" means, for any Person, prior to the date specified by the
Company in a written notice delivered to the Trustee of the Company's election
of its one time right to change the calculation of Adjusted EBITDA (the
"Calculation Change Notice"), the sum of (a) Consolidated EBITDA of such Person
and its Restricted Subsidiaries for the four most recent fiscal quarters for
which internal financial statements are available, minus inTV EBITDA for the
most recent four fiscal quarter period and (b) inTV EBITDA for the most recent
quarterly period, multiplied by four and, subsequent to the effective date
specified by the Company in its Calculation Change Notice, the Consolidated
EBITDA of such Person and its Restricted Subsidiaries for the four most recent
fiscal quarters for which internal financial statements are available.
"Adjusted Net Asset" of a Guarantor at any date shall mean the lesser of
the amount by which (x) the fair value of the property of such Guarantor exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities),
but excluding liabilities under the Guarantee, of such Guarantor at such date
and (y) the present fair ratable value of the assets of such Guarantor at such
date exceeds the amount that will be required to pay the probable liability of
such Guarantor on its debts (after giving effect to all other fixed and
contingent liabilities and after giving effect to any collection from any
Subsidiary of such Guarantor in respect of the obligations of such Subsidiary
under the Guarantee), excluding Indebtedness in respect of the Guarantee, as
they become absolute and matured.
"Affiliate" means, for any Person, a Person who, directly or indirectly,
through one or more intermediaries controls, or is controlled by, or is under
common control with, such other Person. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. With respect to the Company, Affiliate
will also include any Permitted Holders or Persons controlled by the Permitted
Holders.
"Asset Sale" means the sale, transfer or other disposition (other than to
the Company or any of its Restricted Subsidiaries) in any single transaction or
series of related transactions involving assets with a fair market value in
excess of $2,000,000 of (a) any Capital Stock of or other equity interest in any
Restricted Subsidiary of the Company other than in a transaction where the
Company or a Restricted Subsidiary receives therefor one or more media
properties with a fair market value equal to the fair market value of the
Capital Stock issued, transferred or disposed of by the Company or the
Restricted Subsidiary (with such fair market values being determined by the
board of directors of the Company), (b) all or substantially all of the assets
of the Company or of any Restricted Subsidiary thereof, (c) real property or (d)
all or substantially all of the assets of any media property, or part thereof,
owned by the Company or any Restricted Subsidiary thereof, or a division, line
of business or comparable business segment of the Company or any Restricted
Subsidiary thereof; provided that Asset Sales shall not include sales, leases,
conveyances, transfers or other dispositions to the Company or to a Restricted
Subsidiary or to any other Person if after giving effect to such sale, lease,
conveyance, transfer or other disposition such other Person becomes a Restricted
Subsidiary, or the sale of all or substantially all of the assets of the Company
or a Restricted Subsidiary in a transaction complying with the "Merger
Consolidation and Sale of Assets" covenant, in which case only the assets not so
sold shall be deemed an Asset Sale.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Company or any Restricted Subsidiary from such Asset Sale
(including cash received as consideration for the assumption of
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liabilities incurred in connection with or in anticipation of such Asset Sale),
after (a) provision for all income or other taxes measured by or resulting from
such Asset Sale, (b) payment of all brokerage commissions, underwriting,
accounting, legal and other fees and expenses related to such Asset Sale, (c)
provision for minority interest holders in any Restricted Subsidiary as a result
of such Asset Sale and (d) deduction of appropriate amounts to be provided by
the Company or a Restricted Subsidiary as a reserve, in accordance with GAAP,
against any liabilities associated with the assets sold or disposed of in such
Asset Sale and retained by the Company or a Restricted Subsidiary after such
Asset Sale, including, without limitation, pension and other post-employment
benefit liabilities and liabilities related to environmental matters or against
any indemnification obligations associated with the assets sold or disposed of
in such Asset Sale, and (ii) promissory notes and other non-cash consideration
received by the Company or any Restricted Subsidiary from such Asset Sale or
other disposition upon the liquidation or conversion of such notes or non-cash
consideration into cash.
"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sales that have not been applied
in accordance with clause (iii)(a), (b) or (c) and which has not yet been the
subject of an Excess Proceeds Offer in accordance with clause (iii)(d) of the
first paragraph of "-- Exchange Debentures -- Certain Covenants -- Limitation on
Certain Asset Sales."
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated) of capital stock, including each class of common stock and preferred
stock of such Person and (ii) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligation of
such Person to pay rent or other amounts under a lease to which such Person is a
party that is required to be classified and accounted for as capital lease
obligations under GAAP and, for purposes of this definition, the amount of such
obligations at any date shall be the capitalized amount of such obligations at
such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any commercial bank organized under
the laws of the United States of America or any state thereof or the District of
Columbia or any U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $250,000,000; (v)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (iv) above; and (vi) investments
in money market funds which invest substantially all their assets in securities
of the types described in clauses (i) through (v) above.
A "Change of Control" of the Company will be deemed to have occurred at
such time as (i) any Person (including a Person's Affiliates), other than a
Permitted Holder, becomes the beneficial owner (as defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of 50% or
more of the total voting power of the Company's Common Stock, (ii) any Person
(including a Person's Affiliates), other than a Permitted Holder, becomes the
beneficial owner of more than 33 1/3% of the total voting power of the Company's
Common Stock, and the Permitted Holders beneficially own, in the aggregate, a
lesser percentage of the total voting power of the Common Stock of the Company
than such other Person and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the Board
of Directors of the Company, (iii) there shall be consummated any consolidation
or merger of the
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Company in which the Company is not the continuing or surviving corporation or
pursuant to which the Common Stock of the Company would be converted into cash,
securities or other property, other than a merger or consolidation of the
Company in which the holders of the Common Stock of the Company outstanding
immediately prior to the consolidation or merger hold, directly or indirectly,
at least a majority of the voting power of the Common Stock of the surviving
corporation immediately after such consolidation or merger, (iv) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Company has been approved by a majority of
the directors then still in office who either were directors at the beginning of
such period or whose election or recommendation for election was previously so
approved) cease to constitute a majority of the Board of Directors of the
Company or (v) any "change in control" occurs (as defined at such time) with
respect to the Existing Preferred Stock or any issue of Disqualified Capital
Stock.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of, such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, for any Person, for any period, an amount
equal to (a) the sum of Consolidated Net Income for such period, plus, to the
extent deducted from the revenues of such Person in determining Consolidated Net
Income, (i) the provision for taxes for such period based on income or profits
and any provision for taxes utilized in computing a loss in Consolidated Net
Income above, plus (ii) Consolidated Interest Expense, net of interest income
earned on cash or Cash Equivalents for such period, (including, for this
purpose, dividends on the Existing Preferred Stock outstanding on the Issue Date
and the New Preferred Stock and any Redeemable Dividends in each case only to
the extent that such dividends were deducted in determining Consolidated Net
Income), plus (iii) depreciation for such period on a consolidated basis, plus
(iv) amortization of intangibles and broadcast program licenses for such period
on a consolidated basis, minus (b) scheduled payments relating to broadcast
program license liabilities, except that with respect to the Company each of the
foregoing items shall be determined on a consolidated basis with respect to the
Company and its Restricted Subsidiaries only; provided, however, that, for
purposes of calculating Consolidated EBITDA during any fiscal quarter, cash
income from a particular Investment of such Person shall be included only if
cash income has been received by such Person as a result of the operation of the
business in which such Investment has been made in the ordinary course without
giving effect to any extraordinary unusual and non-recurring gains.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like caption on an
income statement for such Person and its Subsidiaries on a consolidated basis,
including, but not limited to, Redeemable Dividends, whether paid or accrued, on
Subsidiary Preferred Stock, imputed interest included in Capitalized Lease
Obligations, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, the net costs
associated with hedging obligations, amortization of other financing fees and
expenses, the interest portion of any deferred payment obligation, amortization
of discount or premium, if any, and all other non-cash interest expense (other
than interest amortized to cost of sales) plus, without duplication, all net
capitalized interest for such period and all interest incurred or paid under any
guarantee of Indebtedness (including a guarantee of principal, interest or any
combination thereof) of any Person, all time brokerage fees relating to
financing of radio or television stations which the Company has an agreement or
option to acquire, plus the amount of all dividends or distributions paid on
Disqualified Capital Stock (other than dividends paid or payable in shares of
Capital Stock of the Company).
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the net income (or loss) of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that (a) the net income of any Person (the "other
Person") in which the Person in question or any of its Subsidiaries has less
than a 100% interest (which interest does not cause the net income of such other
Person to be consolidated into the net income of the Person in question in
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accordance with GAAP) shall be included only to the extent of the amount of
dividends or distributions paid to the Person in question or to the Subsidiary,
(b) the net income of any Subsidiary of the Person in question that is subject
to any restriction or limitation on the payment of dividends or the making of
other distributions (other than pursuant to the Exchange Debentures or the
Notes) shall be excluded to the extent of such restriction or limitation, (c)
(i) the net income of any Person acquired in a pooling of interests transaction
for any period prior to the date of such acquisition and (ii) any net gain (but
not loss) resulting from an Asset Sale by the Person in question or any of its
Subsidiaries other than in the ordinary course of business shall be excluded,
(d) extraordinary, unusual and non-recurring gains and losses shall be excluded,
(e) expenses incurred in 1995 relating to the relocation of the Company's
headquarters shall be excluded, (f) losses associated with discontinued and
terminated operations in an amount not to exceed $1,000,000 per annum shall be
excluded and (g) all non-cash items (including, without limitation, cumulative
effects of changes in GAAP and equity entitlements granted to employees of the
Company and its Restricted Subsidiaries) increasing and decreasing Consolidated
Net Income and not otherwise included in the definition of Consolidated EBITDA
shall be excluded.
"Credit Agreement" means the Credit Agreement dated as of December 19,
1995, among the Company, the financial institutions party thereto in their
capacities as lenders thereunder and Union Bank, as agent, as the same may be
amended from time to time, and any one or more agreements evidencing the
refinancing, modification, replacement, renewal, restatement, refunding,
deferral, extension, substitution, supplement, reissuance or resale thereof.
"Cumulative Consolidated EBITDA" means, with respect to any Person, as of
any date of determination, Consolidated EBITDA from , 1996 to the end
of the Company's most recently ended full fiscal quarter prior to such date,
taken as a single accounting period.
"Cumulative Consolidated Interest Expense" means, with respect to any
Person, as of any date of determination, Consolidated Interest Expense plus, for
purposes of the Certificate of Designation, any cash dividends paid on Senior
Securities or Parity Securities not already reflected in Consolidated Interest
Expense that do not require the approval of the holders of a majority of the
shares of New Preferred Stock outstanding to be issued, in each case from
, 1996 to the end of the Company's most recently ended full fiscal
quarter prior to such date, taken as a single accounting period.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Credit Agreement and (ii) any other Indebtedness constituting Senior Debt which,
at the time of determination, has an aggregate principal amount of at least
$25,000,000 (or accreted value in the case of Indebtedness issued at a discount)
and is specifically designated in the instrument evidencing such Senior Debt as
"Designated Senior Debt" by the Company.
"Disqualified Capital Stock" means any Capital Stock which, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof, in whole or in part, on
or prior to (i) the mandatory redemption date of the New Preferred Stock, in the
case of the New Preferred Stock or (ii) the final maturity date of the Exchange
Debentures, in the case of the Exchange Debentures. Without limitation of the
foregoing, Disqualified Capital Stock shall be deemed to include (i) any
Preferred Stock of a Restricted Subsidiary of the Company, (ii) any Preferred
Stock of the Company, with respect to either of which, under the terms of such
Preferred Stock, by agreement or otherwise, such Restricted Subsidiary or the
Company is obligated to pay current dividends or distributions in cash during
the period prior to the redemption date of the New Preferred Stock or the
maturity date of the Exchange Debentures; and (iii) as long as the New Preferred
Stock remains outstanding, Senior Securities and Parity Securities; provided,
however, that Preferred Stock of the Company or any Restricted Subsidiary
thereof that is issued with the benefit of provision requiring a change of
control offer to be made for such Preferred Stock in the event of a change of
control of the Company or Restricted Subsidiary, which
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provisions have substantially the same effect as the provisions of the
Certificate of Designations and Exchange Indenture described under "Change of
Control," shall not be deemed to be Disqualified Capital Stock solely by virtue
of such provisions; and provided, further, that the New Preferred Stock and the
Existing Preferred Stock in effect on the Issue Date shall not be considered
Disqualified Capital Stock.
"Exchange Date" means the date of original issuance of the Exchange
Debentures.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
"Guarantor" means (i) each of the Company's Subsidiaries in existence on
the Issue Date and (ii) each of the Company's Restricted Subsidiaries that in
the future executes a supplemental indenture in which such Restricted Subsidiary
agrees to be bound by the terms of the Exchange Indenture as a Guarantor;
provided that any Person constituting a Guarantor as described above shall cease
to constitute a Guarantor when its respective Guarantee is released in
accordance with the terms of the Exchange Indenture.
"inTV EBITDA" means Consolidated EBITDA for the Infomall TV Network
determined on a basis consistent with the Company's internal financial
statements, generated by stations declared by the Board of Directors as inTV
properties.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such Person (and
"incurrence," "incurred," "incurrable" and "incurring" shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof) or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables and other accrued liabilities arising in the ordinary
course of business, including, without limitation, any and all programming
broadcast obligations) if and to the extent any of the foregoing indebtedness
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, and shall also include, to the extent not otherwise
included, (i) any Capitalized Lease Obligations, (ii) obligations secured by a
Lien to which the property or assets owned or held by such Person are subject,
whether or not the obligation or obligations secured thereby shall have been
assumed (provided, however, that if such obligation or obligations shall not
have been assumed, the amount of such Indebtedness shall be deemed to be the
lesser of the principal amount of the obligation or the fair market value of the
pledged property or assets), (iii) guarantees of items of other Persons which
would be included within this definition for such other Persons (whether or not
such items would appear upon the balance sheet of the guarantor), (iv) all
obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (v) in the case of the
Company, Disqualified Capital Stock of the Company or any Restricted Subsidiary
thereof and (vi) obligations of any such Person under any Interest Rate
Agreement applicable to any of the foregoing (if and to the extent such Interest
Rate Agreement obligations would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP). The amount of Indebtedness of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the contingency giving
rise to the obligation, provided that (i) the amount outstanding at any time of
any Indebtedness issued with original issue discount is the principal amount of
such Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with GAAP
and (ii) Indebtedness shall not include any liability for federal, state, local
or other taxes. Notwithstanding any other provision of the foregoing definition,
any trade payable arising from the purchase of goods or materials or for
services obtained in the ordinary course of business or
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contingent obligations arising out of customary indemnification agreements with
respect to the sale of assets or securities shall not be deemed to be
"Indebtedness" of the Company or any Restricted Subsidiaries for purposes of
this definition. Furthermore, guarantees of (or obligations with respect to
letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Investment" means, directly or indirectly, any advance, account receivable
(other than an account receivable arising in the ordinary course of business),
loan or capital contribution to (by means of transfers of property to others,
payments for property or services for the account or use of others or
otherwise), the purchase of any stock, bonds, notes, debentures, partnership or
joint venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in any Person. Investments shall exclude extensions of trade credit
on commercially reasonable terms in accordance with normal trade practices and
repurchases or redemptions of the Notes, the Exchange Debentures, the Existing
Preferred Stock or the New Preferred Stock by the Company.
"Issue Date" means the date of original issuance of the New Preferred Stock
or the Exchange Debentures, as the case may be.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Major Asset Sale" means an Asset Sale or series of related Asset Sales
involving assets with a fair market value in excess of $25,000,000.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by the
Company, an Asset Sale or a Major Asset Sale, the aggregate net proceeds
received by the Company, after payment of expenses, commissions and the like
incurred in connection therewith, whether such proceeds are in cash or in
property (valued at the fair market value thereof, as determined in good faith
by the board of directors, at the time of receipt) and (b) in the case of any
exchange, exercise, conversion or surrender of outstanding securities of any
kind for or into shares of Capital Stock of the Company which is not
Disqualified Capital Stock, the net book value of such outstanding securities on
the date of such exchange, exercise, conversion or surrender (plus any
additional amount required to be paid by the holder to the Company upon such
exchange, exercise, conversion or surrender, less any and all payments made to
the holders, e.g., on account of fractional shares and less all expenses
incurred by the Company in connection therewith).
"Non-Payment Event of Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate the
maturity of any Designated Senior Debt.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing, or otherwise relating to, any
Indebtedness.
"Payment Default" means any default, whether or not any requirement for the
giving of notice, the lapse of time or both, or any other condition to such
default becoming an event of default has occurred, in the payment of principal
of (or premium, if any) or interest on or any other amount payable in connection
with Designated Senior Debt.
"Permitted Holders" means collectively Lowell W. Paxson, his spouse,
children or other lineal descendants (whether adoptive or biological) and any
revocable or irrevocable inter vivos or testamentary trust or the probate estate
of any such individual, so long as one or more of the foregoing individuals is
the principal beneficiary of such trust or probate estate.
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"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Exchange Debentures and the Guarantees,
including any Exchange Debentures issued in accordance with the Exchange
Indenture as payment of interest on the Exchange Debentures;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed
$25,000,000;
(iii) all other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date, including, without limitation,
the Existing Notes, reduced by the amount of any scheduled amortization
payments or mandatory prepayments when actually paid or permanent
reductions thereon;
(iv) Obligations under Interest Rate Agreements of the Company
covering Indebtedness of the Company or any of its Restricted Subsidiaries;
provided, however, that such Interest Rate Agreements are entered into to
protect the Company and its Restricted Subsidiaries from fluctuations in
interest rates on Indebtedness incurred in accordance with the Certificate
of Designation or the Exchange Indenture to the extent the notional
principal amount of such Interest Rate Agreement does not exceed the
principal amount of the Indebtedness to which such Interest Rate Agreement
relates;
(v) Indebtedness of a Restricted Subsidiary of the Company to the
Company or to a Restricted Subsidiary of the Company for so long as such
Indebtedness is held by the Company or a Restricted Subsidiary of the
Company, in each case subject to no Lien held by a Person other than the
Company or a Restricted Subsidiary of the Company; provided that if as of
any date any Person other than the Company or a Restricted Subsidiary of
the Company owns or holds any such Indebtedness or holds a Lien in respect
of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the issuer of such
Indebtedness;
(vi) Indebtedness of the Company to a Restricted Subsidiary of the
Company for so long as such Indebtedness is held by a Restricted Subsidiary
of the Company, in each case subject to no Lien; provided that (a) any
Indebtedness of the Company to any Restricted Subsidiary of the Company is
unsecured and subordinated, pursuant to a written agreement, to the
Company's Obligations under the Exchange Indenture and the Exchange
Debentures and (b) if as of any date any Person other than a Restricted
Subsidiary of the Company owns or holds any such Indebtedness or any Person
holds a Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by the
Company;
(vii) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which
Indebtedness and Capitalized Lease Obligations do not in the aggregate
exceed 5% of the Company's consolidated total assets at any one time;
(viii) Refinancing Indebtedness; and
(ix) additional Indebtedness of the Company in an aggregate principal
amount not to exceed $10,000,000 at any one time outstanding.
"Permitted Investments" means, for any Person, Investments made on or after
the Issue Date consisting of:
(i) Investments by the Company, or by a Restricted Subsidiary thereof,
in the Company or a Restricted Subsidiary;
(ii) Cash Equivalents;
(iii) Investments by the Company, or by a Restricted Subsidiary
thereof, in a Person (or in all or substantially all of the business or
assets of a Person) if as a result of such Investment (a) such Person
becomes a Restricted Subsidiary of the Company, (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the
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Company or a Restricted Subsidiary thereof or (c) such business or assets
are owned by the Company or a Restricted Subsidiary;
(iv) reasonable and customary loans made to employees not to exceed
$500,000 to any employee, and not to exceed $5,000,000 in the aggregate at
any one time outstanding;
(v) an Investment that is made by the Company or a Restricted
Subsidiary thereof in the form of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities that are issued
by a third party to the Company or a Restricted Subsidiary solely as
partial consideration for the consummation of an Asset Sale that is
otherwise permitted under the covenant described under "-- Limitation on
Certain Asset Sales";
(vi) time brokerage and other similar agreements under which
separately owned and licensed broadcast properties enter into cooperative
arrangements and which may include an option to acquire the broadcast
property at a future date;
(vii) accounts receivable of the Company and its Restricted
Subsidiaries generated in the ordinary course of business;
(viii) loans and guarantees of loans by third-party lenders to third
parties in connection with the acquisition of media properties, secured by
substantially all of such Person's assets (to the extent permitted by FCC
rules), which are made in conjunction with the execution of a time
brokerage agreement;
(ix) options on media properties having an exercise price of an amount
not in excess of $100,000 plus the forgiveness of any loan referred to in
clause (viii) above entered into in connection with the execution of time
brokerage agreements; and
(x) additional Investments of the Company and its Restricted
Subsidiaries from time to time of an amount not to exceed $75 million.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemption or upon liquidation.
"Public Equity Offering" means a public offering by the Company of shares
of its Common Stock (however designated and whether voting or non-voting) and
any and all rights, warrants or options to acquire such Common Stock.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Redeemable Dividend" means, for any dividend or distribution with regard
to Disqualified Capital Stock, the quotient of the dividend or distribution
divided by the difference between one and the maximum statutory federal income
tax rate (expressed as a decimal number between 1 and 0) then applicable to the
issuer of such Disqualified Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant, in each case
that does not (1) result in an increase in the aggregate principal amount
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of Indebtedness of such Person as of the date of such proposed Refinancing (plus
the amount of any premium required to be paid under the terms of the instrument
governing such Indebtedness and plus the amount of reasonable expenses incurred
by the Company in connection with such Refinancing) or (2) create Indebtedness
with (A) a Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Indebtedness being Refinanced or (B) a final
maturity earlier than the final maturity of the Indebtedness being Refinanced;
provided that (x) if such Indebtedness being Refinanced is Indebtedness of the
Company, then such Refinancing Indebtedness shall be Indebtedness solely of the
Company and (y) if such Indebtedness being Refinanced is subordinate or junior
to the Exchange Debentures, then such Refinancing Indebtedness shall be
subordinate to the Exchange Debentures at least to the same extent and in the
same manner as the Indebtedness being Refinanced.
"Restricted Payment" means the following:
(A) For purposes of the Exchange Indenture, (i) the declaration or
payment of any dividend or the making of any other distribution (other than
dividends or distributions payable in Qualified Capital Stock) on shares of
the Company's Capital Stock other than the New Preferred Stock, (ii) the
purchase, redemption, retirement or other acquisition for value of any
Capital Stock of the Company, or any warrants, rights or options to acquire
shares of Capital Stock of the Company, other than the exchange of shares
of New Preferred Stock for the Exchange Debentures or through the exchange
of such Capital Stock or any warrants, rights or options to acquire shares
of any class of such Capital Stock for Qualified Capital Stock or warrants,
rights or options to acquire Qualified Capital Stock, (iii) the making of
any principal payment on, or the purchase, defeasance, redemption,
prepayment, decrease or other acquisition or retirement for value, prior to
any scheduled final maturity, scheduled repayment or scheduled sinking fund
payment, of, any Indebtedness of the Company or its Subsidiaries that is
subordinated or junior in right of payment to the Exchange Debentures, (iv)
the making of any Investment (other than a Permitted Investment), (v) any
designation of a Restricted Subsidiary as an Unrestricted Subsidiary on the
basis of the fair market value of such Subsidiary utilizing standard
valuation methodologies and approved by the Board of Directors or (vi)
forgiveness of any Indebtedness of an Affiliate of the Company to the
Company or a Restricted Subsidiary.
(B) For purposes of the Certificate of Designation, (i) the
declaration or payment of any dividend or the making of any other
distribution (other than dividends or distributions payable in Qualified
Capital Stock) on shares of the Company's Parity Securities or Junior
Securities, (ii) any purchase, redemption, retirement or other acquisition
for value of any Parity Securities or Junior Securities of the Company, or
any warrants, rights or options to acquire shares of Parity Securities or
Junior Securities of the Company, other than through the exchange of such
Parity Securities or Junior Securities or any warrants, rights or options
to acquire shares of any class of such Parity Securities or Junior
Securities for Qualified Capital Stock or warrants, rights or options to
acquire Qualified Capital Stock, (iii) the making of any Investment (other
than a Permitted Investment), (iv) any designation of a Restricted
Subsidiary as an Unrestricted Subsidiary on the basis of the fair market
value of such Subsidiary utilizing standard valuation methodologies and
approved by the Board of Directors and (v) forgiveness of any Indebtedness
of an Affiliate of the Company to the Company or a Restricted Subsidiary.
"Restricted Subsidiary" means a Subsidiary of the Company other than an
Unrestricted Subsidiary and includes all of the Subsidiaries of the Company
existing as of the Issue Date. The Board of Directors of the Company may
designate any Unrestricted Subsidiary or any Person that is to become a
Subsidiary as a Restricted Subsidiary if immediately after giving effect to such
action (and treating any Acquired Indebtedness as having been incurred at the
time of such action), the Company could have incurred at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
"Limitation on Additional Indebtedness" covenant.
"Senior Debt" means, the principal of and premium, if any, and interest
(including, without limitation, interest accruing or that would have accrued but
for the filing of a bankruptcy, reorganization or other insolvency proceeding
whether or not such interest constitutes an allowed claim in such proceeding)
on, and any and all other fees, expense reimbursement obligations, indemnities
and other amounts due pursuant to
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their terms of all agreements, documents and instruments providing for,
creating, securing or evidencing or otherwise entered into in connection with
(a) all Indebtedness of the Company owed to lenders under the Credit Agreement,
(b) all obligations of the Company with respect to any Interest Rate Agreement,
(c) all obligations of the Company to reimburse any bank or other person in
respect of amounts paid under letters of credit, acceptances or other similar
instruments, (d) all other Indebtedness of the Company which does not provide
that it is to rank pari passu with or subordinate to the Exchange Debentures and
(e) all deferrals, renewals, extensions and refundings of, and amendments,
modifications and supplements to, any of the Senior Debt described above.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will not
include (i) Indebtedness of the Company to any of its Subsidiaries, (ii)
Indebtedness represented by the Exchange Debentures, (iii) any Indebtedness
which by the express terms of the agreement or instrument creating, evidencing
or governing the same is junior or subordinate in right of payment to any item
of Senior Debt, (iv) any trade payable arising from the purchase of goods or
materials or for services obtained in the ordinary course of business or (v)
Indebtedness incurred in violation of the Exchange Indenture except if such
Indebtedness was incurred under the Credit Agreement based on financial
information and certificates provided by responsible officers of the Company and
relied on in good faith by the lenders thereunder in which event such
Indebtedness shall be deemed to have been incurred in compliance with the
Exchange Indenture and constitute Senior Debt.
"Subsidiary", with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Company which is classified after the
Issue Date as an Unrestricted Subsidiary by a resolution adopted by the Board of
Directors of the Company; provided that a Subsidiary organized or acquired after
the Issue Date may be so classified as an Unrestricted Subsidiary only if such
classification is in compliance with the covenant set forth under "Limitation on
Restricted Payments." The Trustee shall be given prompt notice by the Company of
each resolution adopted by the Board of Directors of the Company under this
provision, together with a copy of each such resolution adopted.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary all of the
outstanding voting securities (other than directors' qualifying shares) of which
are owned, directly or indirectly, by the Company.
DESCRIPTION OF INDEBTEDNESS
CREDIT FACILITY
On December 19, 1995 the Company entered into a credit agreement and
related documents (the "Credit Facility Loan Documents") with certain lenders
named therein and Union Bank, as agent on behalf of the lenders, which
established a senior secured revolving line of credit in an aggregate principal
amount of $100 million as the Credit Facility. The following summary of the
Credit Facility is based upon the terms of the Credit Facility Loan Documents.
The following summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the terms and conditions of the Credit
Facility Loan Documents.
The aggregate available commitment under the Credit Facility will be
reduced incrementally on a quarterly basis, beginning December 31, 1997. The
Credit Facility matures on June 30, 2002, unless previously
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terminated. Prior to receiving any advance under the Credit Facility, the
Company is required to be in compliance with all financial and operating
covenants. Certain acquisitions to be funded under the Credit Facility are
expected to require approval by 66 2/3% of the lenders thereunder. The lenders
under the Credit Facility are paid a commitment fee at the rate of 0.5% per
annum on unused commitments, payable quarterly. In addition, the agent
thereunder receives other customary fees.
Borrowings under the Credit Facility bear interest at a rate equal to, at
the option of the Company, either (i) the Base Rate (which is defined as the
higher of 1/2% plus the Federal Funds rate or the prime rate most recently
announced by the agent under the Credit Facility), or (ii) LIBOR, in each case
plus an applicable margin determined by reference to the ratio of total debt to
cash flow (as defined) of the Company.
The obligations of the Company under the Credit Facility are
unconditionally guaranteed, jointly and severally, by all material subsidiaries
of the Company. The obligations of the Company and such guarantors under the
Credit Facility are secured primarily by a first priority pledge of the stock of
all material subsidiaries of the Company and a first priority lien on all the
assets of the Company and such guarantors, with the exception of certain real
estate assets, which are subject to a negative pledge. The Lenders have the
right to require the Company and the guarantors to secure their obligations
under the Credit Facility by granting a first priority lien on all real estate
assets of the Company and the guarantors.
The Credit Facility contains customary conditions precedent to borrowings
thereunder, including, among other things, the absence of any adverse change in
the business, assets, operations, prospects, conditions, (financial or
otherwise), or material agreements of the Company and its subsidiaries, taken as
a whole. The Credit Facility also contains customary representations, warranties
and indemnities.
The Credit Facility contains, among other things, covenants restricting the
ability of the Company and its subsidiaries to dispose of assets, pay dividends,
repurchase or redeem capital stock and indebtedness, create liens, make capital
expenditures, make certain investments or acquisitions, enter into transactions
with affiliates and otherwise restrict corporate activities. The Credit Facility
also contains the following financial covenants: maximum ratio of total debt to
operating cash flow, minimum permitted interest coverage and a minimum permitted
fixed charge coverage ratio.
Events of default under the Credit Facility include those usual and
customary for transactions of this type, including, among other things, default
in the payment of principal or interest in respect of material amounts of
indebtedness of the Company or its subsidiaries, any non-payment default on such
indebtedness and a change of control, any material breach of the covenants or
representations and warranties included in the Credit Facility and related
documents, the institution of any bankruptcy proceedings and the failure of any
security agreement related to the Credit Facility or lien granted thereunder to
be valid and enforceable. Upon the occurrence and continuance of an event of
default under the Credit Facility, the lenders may terminate their commitments
to lend and declare the then outstanding loans due and payable.
SENIOR SUBORDINATED NOTES
The following summary is based upon the terms of the Notes and the
Indenture. This summary does not purport to be a complete description of the
Notes or the Indenture and is subject to and qualified in its entirety by
reference to the terms of the Notes and the Indenture (including the definitions
contained therein), copies of which are available from the Company upon request.
The Notes are limited in aggregate principal amount to $230,000,000. The
Notes are general unsecured obligations of the Company, subordinated in right of
payment to Senior Indebtedness (as defined in the Indenture) of the Company and
senior in right of payment to any current or future indebtedness of the Company
subordinated thereto.
The Notes are fully and unconditionally guaranteed, on a senior
subordinated basis, as to payment of principal, premium, if any, and interest,
jointly and severally (the "Guarantees"), by all of the direct and indirect
subsidiaries of the Company (the "Guarantors"). The Guarantees are subordinated
to all Senior Indebtedness of the respective Guarantors.
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The Notes will mature on October 1, 2002. The Notes bear interest at a rate
of 11 5/8% per annum from the date of original issuance until maturity. Interest
is payable semi-annually in arrears on April 1 and October 1, commencing April
1, 1996, to holders of record of the Notes at the close of business on the
immediately preceding March 15, and September 15, respectively.
The Notes are redeemable at the option of the Company, in whole or in part,
at any time on or after October 1, 1999 at a redemption price equal to 104% of
the principal amount thereof during the twelve-month period beginning on October
1, 1999, 102% of the principal amount thereof during the twelve-month period
beginning on October 1, 2000, and 100% of the principal amount thereof on or
after October 1, 2001, together with accrued and unpaid interest to the
redemption date. In addition, the Company, at its option, may redeem in the
aggregate up to 25% of the original principal amount of the Notes at any time
prior to October 1, 1998, at a redemption price equal to 110% of the principal
amount thereof plus accrued interest to the redemption date with the Net
Proceeds of one or more Public Equity Offerings or Major Asset Sales (each as
defined in the Indenture); provided, however, that at least $172,500,000
aggregate principal amount of Notes remains outstanding and that such redemption
occurs within 90 days following the closing of any such Public Equity Offering
or Major Asset Sale. The Company elected not to redeem any of the Notes with the
proceeds of the Equity Offering.
In the event of a Change of Control (as defined in the Indenture) of the
Company, the Company will be required to make an offer to purchase all
outstanding Notes at a price equal to 101% of the principal amount thereof plus
accrued and unpaid interest to the date of repurchase.
The Indenture contains covenants for the benefit of the holders of the
Notes that, among other things, and subject to certain exceptions, restrict the
ability of the Company and its Restricted Subsidiaries (as defined in the
Indenture) to: (i) incur additional indebtedness; (ii) pay dividends and make
distributions; (iii) issue stock of subsidiaries; (iv) make certain investments;
(v) repurchase stock; (vi) create liens; (vii) enter into transactions with
affiliates; (viii) enter into sale and leaseback transactions; (ix) merge or
consolidate the Company or the Guarantors; and (x) transfer and sell assets.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 197,500,000 shares of
common stock with a par value of $.001 per share, and 1,000,000 shares of
preferred stock with a par value of $.001 per share. Of the 197,500,000 shares
of common stock that the Company is authorized to issue: (a) 150,000,000 shares
are designated as Class A Common Stock, (b) 35,000,000 shares are designated as
Class B common stock (the "Class B Common Stock"), and (c) 12,500,000 shares are
designated as Class C non-voting common stock (the "Class C Common Stock" and
with the Class A Common Stock and Class B Common Stock, collectively, the
"Common Stock"). Of the 1,000,000 shares of preferred stock that the Company is
authorized to issue: (a) 33,000 shares have been designated as Junior Cumulative
Compounding Redeemable Preferred Stock (the "Existing Preferred Stock,") and (b)
effective upon consummation of the Offering, [300,000] shares have been
designated as % Cumulative Exchangeable Preferred Stock. The Senior
Preferred Stock is to be redeemed from the proceeds of this Offering and is
treated as no longer outstanding for purposes of the discussion below. As of
June 30, 1996, 38,665,509 shares of Class A Common Stock, 8,311,639 shares of
Class B Common Stock, no shares of Class C Common Stock, and 33,000 shares of
Existing Preferred Stock are outstanding. In addition, 18,907,086 shares of
Class A Common Stock are reserved for issuance with respect to: (a) the
conversion of shares of Class B Common Stock to Class A Common Stock, (b) the
conversion of shares of Class C Common Stock to Class A Common Stock, (c) the
exercise of warrants issued in connection with the issuance of the Existing
Preferred Stock, and (d) the exercise of certain rights under the Company's
Stock Incentive Plans.
COMMON STOCK
Dividends. Subject to the Preferred Stock's prior right to dividends,
holders of record of shares of Class A Common Stock, Class B Common Stock and
Class C Common Stock on the record date are entitled to receive such dividends
as may be declared by the Company's board of directors out of funds legally
available for such purpose. No dividends may be declared or paid in cash or
property on any share of any class of the Common Stock, however, unless
simultaneously the same dividend is declared or paid on each share of the other
classes of Common Stock. In the case of any stock dividend, holders of Class A
Common Stock are entitled to receive the same percentage dividend (payable in
shares of Class A Common Stock) as holders of Class B Common Stock receive
(payable in shares of Class B Common Stock) and holders of Class C Common Stock
receive (payable in shares of Class C Common Stock). So long as any Existing
Preferred Stock is outstanding, the Company cannot declare dividends on its
Common Stock, except under certain limited circumstances.
Voting Rights. Holders of shares of Class A Common Stock and Class B
Common Stock will vote as a single class on all matters submitted to a vote of
the stockholders of the Company, with each share of Class A Common Stock
entitled to one vote and each share of Class B Common Stock entitled to ten
votes, except as otherwise provided by law. Holders of Class C Common Stock have
no right to vote on any matter voted on by the stockholders of the Company,
except as may be provided by law or as provided in limited circumstances in the
Company's certificate of incorporation.
Liquidation Rights. Upon liquidation, dissolution, or winding-up of the
Company, the holders of the Common Stock are entitled to share pro rata in all
assets available for distribution after payment in full to creditors and payment
in full to any holders of Preferred Stock then outstanding of any amount
required to be paid under the terms of such Preferred Stock.
Other Provisions. Each share of Class B Common Stock and Class C Common
Stock is generally convertible or exchangeable at the option of its holder into
one share of Class A Common Stock at any time, subject to certain restrictions
in the case of the conversion or exchange of Class C Common Stock. Holders of
Common Stock do not have preemptive rights, although holders of Existing
Preferred Stock have limited preemptive rights under the Stockholders Agreement.
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EXISTING PREFERRED STOCK
Dividends. The holders of the Existing Preferred Stock are entitled under
the Company's certificate of incorporation to cumulative dividends on a basis
preferential to the holders of Common Stock and the New Preferred Stock. The
Company may not declare or pay any dividends, whether in cash, property or
otherwise or make any distributions in respect of the New Preferred Stock until
all accrued and unpaid dividends on the Existing Preferred Stock have been
declared and paid and, in the event the Company is required to redeem the
Existing Preferred Stock, monies sufficient for such purpose have been set
aside. Until December 22, 2001, the holders of Existing Preferred Stock are
entitled to receive cumulative dividends from the Company on each share of
Existing Preferred Stock at the per annum rate of 12% of the liquidation price
of such share ($1,000) plus all accrued and unpaid dividends with respect to
such share, including any deferred dividends as described below and any
dividends thereon. For each year thereafter, the per annum rate shall increase
by 1%. The dividend rate on the Existing Preferred Stock will increase to an
annual rate of 30% (i) upon the occurrence of certain bankruptcy events, (ii)
upon a change of control (as defined in the Stockholders Agreement) of the
Company, (iii) upon the failure to choose a successor to Mr. Paxson in the event
of his death or incapacity as provided in the Stockholders Agreement, (iv) if
the Company incurs indebtedness in excess of that permitted by certain financial
leverage ratios, (v) upon the failure to pay dividends on or after December 22,
2000 equal to the amount of dividends payable in any twelve month period or (vi)
if the Existing Preferred Stock remains outstanding after December 22, 2003.
Such increased dividend rate shall remain in effect for so long as any such
event continues and will increase by 5% on each anniversary of such event or, in
the case of a bankruptcy event, upon the failure of the Company to redeem the
Existing Preferred Stock at the request of the holders thereof.
Accrued dividends on the Existing Preferred Stock are payable semi-annually
to the holders of record of the Existing Preferred Stock as of the close of
business on the applicable record date. Until December 22, 1999, the Company may
at its option defer the payment of accrued dividends until the earlier of the
date the Existing Preferred Stock is redeemed or the liquidation, dissolution or
winding up of the Company. On January 1 and July 1 of each year, all dividends
that have accrued on each share of Existing Preferred Stock and that have not
theretofore been accumulated shall, to the extent not paid for any reason, be
accumulated, and dividends will accrue on such accumulation until such
accumulated dividends are paid. As of June 30, 1996, the Company has not paid
any cash dividends on the Existing Preferred Stock, and there were $6,419,822 in
accrued and unpaid dividends on the Existing Preferred Stock.
Voting Rights. The affirmative vote or written consent of the holders of a
majority of the outstanding shares of Existing Preferred Stock is required in
order for the Company to take the following actions: amend, alter or repeal any
of the provisions of the certificate of incorporation or any resolution of the
Company's board of directors or any other instrument establishing and
designating the Existing Preferred Stock or any other capital stock of the
Company so as to adversely affect the rights, privileges, preferences or powers
of the Existing Preferred Stock; create or designate any stock on a parity with
or senior to the Existing Preferred Stock; enter into an agreement that would
prevent the Company from performing its obligations with respect to the Existing
Preferred Stock; or pay dividends to the holders of, or redeem, securities of
the Company or its subsidiaries junior to the Existing Preferred Stock, except
as specifically provided therein.
Liquidation Rights. Upon liquidation, dissolution or winding-up of the
Company, the holders of Existing Preferred Stock are entitled to a preference of
$1,000 per share, plus accrued and unpaid dividends, over all classes and series
of junior stock, including the Common Stock, with respect to the assets
available for distribution after payment in full of creditors.
Redemption Rights; Priorities. So long as any shares of Existing Preferred
Stock remain outstanding, the Company may not directly or indirectly purchase,
redeem, exchange or otherwise acquire the New Preferred Stock or any Common
Stock. All the shares of Existing Preferred Stock are redeemable, at the option
of the Company, in whole at any time, at a redemption price equal to the
liquidation price for such shares, plus the amount of all accrued and unpaid
dividends thereon, as of the redemption date, payable in cash. The Company is
obligated to redeem on December 22, 2003, out of unrestricted funds legally
available therefor, all the shares of the Existing Preferred Stock then
outstanding, at a redemption price equal to the
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liquidation price for such shares, as of the redemption date (plus a 2% premium
if redeemed between December 23, 1997, and December 22, 1998), plus the amount
of all accrued and unpaid dividends thereon, payable in cash. Holders of shares
of the Existing Preferred Stock are entitled to require the Company to redeem
their shares of Existing Preferred Stock upon the occurrence of a bankruptcy or
similar event relating to the Company or the default by the Company under the
terms of the Stockholders Agreement.
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
Limitation of Liability and Indemnification. As permitted by the Delaware
General Corporation Law, the Company's Certificate of Incorporation provides
that directors of the Company shall not be personally liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for
any transaction from which the director derives an improper personal benefit. In
addition, the Company's Bylaws provide that the Company shall, to the fullest
extent authorized by Section 145 of the Delaware General Corporation Law, as
amended from time to time, indemnify all director and officers and all persons
serving at the request of the company as director, trustee, officer, employee or
agent of another corporation or of a partnership, trust or other enterprise.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that, in the opinion
of the Commission, such indemnification is against public policy as expressed in
the Securities Act and, therefore, is unenforceable.
Delaware Business Combination Statute. Section 203 of the Delaware General
Corporation Law (Section 203) provides that, subject to certain exceptions
specified therein, an interested stockholder of a Delaware corporation shall not
engage in any business combination with the corporation for a three-year period
following the date that such stockholder becomes an interested stockholder
unless (i) prior to such date, the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder, (ii) upon consummation of
the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced (excluding
certain shares) or (iii) on or subsequent to such date, the business combination
is approved by the board of directors of the corporation and authorized at an
annual or special meeting of stockholders by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. Except as otherwise specified in Section 203, an interested
stockholder is defined to include (x) any person that is the owner of 15% or
more of the outstanding voting stock of the corporation, or is an affiliate or
associate of the corporation and was the owner of 15% or more of the outstanding
voting stock of the corporation at any time within three years immediately prior
to the relevant date and (y) the affiliates and associates of any such person.
Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period, although the
stockholders may elect to exclude a corporation from the restrictions imposed
thereunder. The certificate of incorporation does not exclude the Company from
the restrictions imposed under Section 203. The provisions of Section 203 may
encourage companies interested in acquiring the Company to negotiate in advance
with the Company's board of directors because the stockholder approval
requirement would be avoided if a majority of the directors then in office
approve either the business combination or the transaction which results in the
stockholder becoming an interested stockholder. Such provisions also may have
the effect of preventing changes in the management of the Company. It is
possible that such provisions could make it more difficult to accomplish
transactions which stockholders may otherwise deem to be in their best
interests.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Class A Common Stock is First
Union National Bank, Charlotte, North Carolina.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material federal income tax
considerations generally applicable to holders acquiring the New Preferred Stock
offered hereby on original issue, but does not purport to be a complete analysis
of all potential tax consequences. The discussion is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, Internal
Revenue Service ("IRS") rulings and pronouncements and judicial decisions now in
effect, all of which are subject to change at any time by legislative, judicial
or administrative action. Any such changes may be applied retroactively in a
manner that could adversely affect a holder of the New Preferred Stock and the
Exchange Debentures (jointly, the "Securities").
The discussion assumes that the holders of the Securities will hold them as
"capital assets" within the meaning of section 1221 of the Code. Although the
matter is not entirely free from doubt, the Company intends to treat the New
Preferred Stock as equity and the Exchange Debentures as indebtedness for
federal income tax purposes, and the balance of the discussion is based on the
assumption that such treatment will be respected. The discussion is not binding
on the IRS or the courts. The Company has not sought and will not seek any
rulings from the IRS with respect to the positions of the Company discussed
herein, and there can be no assurance that the IRS will not take a different
position concerning the tax consequences of the purchase, ownership or
disposition of the Securities or that any such position would not be sustained.
The tax treatment of a holder of the Securities may vary depending on his
particular situation or status. Certain holders (including S corporations,
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers and taxpayers subject to alternative minimum tax) may be subject
to special rules not discussed below. The following discussion is limited to the
United States federal income tax consequences relevant to a holder of the
Securities that is a citizen or resident of the United States or any state
thereof, or a corporation or other entity created or organized under the laws of
the United States or any political subdivision thereof, or an estate or trust
the income of which is subject to United States federal income tax regardless of
source or that is otherwise subject to United States federal income tax on a net
income basis in respect of the Securities. The following discussion does not
consider all aspects of United States federal income tax that may be relevant to
the purchase, ownership, and disposition of the Securities by such holder in
light of his personal circumstances. In addition, the description does not
consider the effect of any applicable foreign, state, local or other tax laws or
estate or gift tax considerations.
DISTRIBUTIONS ON NEW PREFERRED STOCK
Distributions on the New Preferred Stock, whether paid in cash or in
additional shares of New Preferred Stock ("Dividend Shares"), will be taxable to
the holder as ordinary dividend income to the extent that the cash amount or
fair market value of the New Preferred Stock on the date of distribution does
not exceed the Company's current and accumulated earnings and profits (as
determined for federal income tax purposes). The amount of the Company's
earnings and profits at any particular time depends on the future actions and
financial performance of the Company.
To the extent that the amount of any distribution on the outstanding New
Preferred Stock exceeds the Company's current and accumulated earnings and
profits (as determined for federal income tax purposes), the distribution will
be treated as a return of capital, thus reducing the holder's adjusted tax basis
in such outstanding New Preferred Stock. The amount of any such excess
distribution that is greater than the holder's adjusted tax basis in the
outstanding New Preferred Stock will be taxed as capital gain and will be
long-term capital gain if the holder's holding period for such outstanding New
Preferred Stock exceeds one year. A holder's initial tax basis in any Dividend
Shares distributed by the Company generally will equal the fair market value of
such Dividend Shares on their date of distribution. The holding period for such
Dividend Shares will commence with their distribution, and will not include the
holder's holding period for outstanding shares of New Preferred Stock with
respect to which such Dividend Shares were distributed. For purposes of the
remainder of this discussion, the term "dividend" refers to a distribution paid
out of allocable earnings and profits, unless the context indicates otherwise.
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To the extent that dividends are treated as ordinary income, dividends
received by corporate holders generally will be eligible for the 70%
dividends-received deduction under section 243 of the Code. There are, however,
many exceptions and restrictions relating to the availability of such
dividends-received deduction, such as restrictions relating to (i) the holding
period of the stock on which the dividends are sought to be deducted, (ii)
debt-financed portfolio stock, (iii) dividends treated as "extraordinary
dividends" for purposes of section 1059 of the Code, and (iv) taxpayers that pay
alternative minimum tax. Corporate stockholders should consult their own tax
advisor regarding the extent, if any, to which such exceptions and restrictions
may apply to their particular factual situations. In addition, on March 19,
1996, President Clinton proposed certain tax law changes that would, among other
things, (i) reduce the 70% dividends received deduction to 50% and (ii) require
a corporate holder to satisfy a separate 46-day holding period requirement with
respect to each dividend in order to be eligible for such dividends received
deduction. Both proposals are proposed to be effective for dividends received or
accrued more than 30 days after the enactment of the proposals. Subsequently, in
August 1996, President Clinton announced an intention to seek legislation that
would eliminate the dividends received deduction for certain types of preferred
stock. The Treasury Department's description of President Clinton's most recent
proposal, which may be in lieu of the March proposal, suggests that the New
Preferred Stock would be the type of stock to which the new limitations on the
dividends received deduction would apply. According to the Treasury's
description, the most recent proposal would only apply to preferred stock issued
after the date of enactment, which could include shares of New Preferred Stock
issued in lieu of cash dividends. It is not clear whether any proposals
ultimately will be enacted or, if enacted, will be enacted in the form proposed.
Under Section 1059 of the Code, the tax basis of New Preferred Stock that
has been held by a corporate shareholder for two years or less (ending on the
earliest of the date on which the Company declares, announces or agrees to the
payment of an actual or constructive dividend) is reduced (but not below zero)
by the non-taxed portion of an "extraordinary dividend" for which a dividends
received deduction is allowed. To the extent that a corporate holder's tax basis
in its New Preferred Stock would have been reduced below zero but for the
foregoing limitation, such holder must increase the amount of gain recognized on
the ultimate sale or exchange of such New Preferred Stock. Generally, an
"extraordinary dividend" is a dividend that (i) equals or exceeds 5% of the
holder's basis in the New Preferred Stock (treating all dividends having
ex-dividend dates within an 85-day period as a single dividend) or (ii) exceeds
20% of the holder's adjusted basis in the New Preferred Stock (treating all
dividends having ex-dividend dates within a 365-day period as a single
dividend). If an election is made by the holder, under certain circumstances the
fair market value of the New Preferred Stock as of the day before the
ex-dividend date may be substituted for the holder's basis in applying these
tests. Proposed legislation would require immediate recognition of gain under
Section 1059 of the Code to the extent a corporate holder's tax basis would
otherwise be reduced below zero, instead of deferring such gain until the sale
or exchange of such stock; such changes are proposed to take effect
retroactively. It is not clear whether such proposed legislation ultimately will
be enacted or, if enacted, will be enacted in the form proposed.
Special rules exist with respect to extraordinary dividends for "qualified
preferred dividends," which are any fixed dividends payable with respect to any
share of stock which (i) provides for fixed preferred dividends payable not less
frequently than annually and (ii) is not in arrears as to dividends at the time
the holder acquires such stock. A qualified preferred dividend does not include
any dividend payable with respect to any share if the actual rate of return of
such stock for the period the stock has been held by the holder receiving the
dividend exceeds 15%. CORPORATE STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX
ADVISORS WITH RESPECT TO THE POSSIBLE APPLICATION OF SECTION 1059 OF THE CODE TO
THEIR OWNERSHIP AND DISPOSITION OF NEW PREFERRED STOCK.
PREFERRED STOCK DISCOUNT
The New Preferred Stock is subject to mandatory redemption on October 31,
2006 (the "Mandatory Redemption"). In addition, on or after October 31, 2001 and
subject to certain restrictions, the New Preferred Stock is redeemable at any
time at the option of the Company at specified redemption prices (the "Optional
Redemption"). See "Description of New Preferred Stock and Exchange
Debentures -- The New Preferred
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Stock -- Optional Redemption" and "-- Mandatory Redemption." Pursuant to Section
305(c) of the Code, holders of New Preferred Stock may be required to treat a
portion of the difference between the New Preferred Stock's issue price and its
redemption price as constructive distributions of property includible in income
on a periodic basis. For purposes of determining whether such constructive
distribution treatment applies, the Mandatory Redemption and the Optional
Redemption are tested separately. Constructive distribution treatment is
required if either (or both) of these tests is satisfied.
Section 305(c) of the Code provides that the entire amount of a redemption
premium with respect to preferred stock that is subject to mandatory redemption
is treated as being distributed to the holders of such preferred stock on an
economic accrual basis. Preferred stock generally is considered to have
redemption premium for this purpose if the price at which it must be redeemed
(the "Redemption Price") exceeds its issue price (its fair market value on the
date of its issuance) by more than a de minimis amount. For this purpose, such
excess (the "Preferred Stock Discount") will be treated as zero if it is less
than 1/4 of 1% of the Redemption Price multiplied by the number of complete
years from the date of issuance of the stock until the stock must be redeemed.
Preferred Stock Discount is taxable as a constructive distribution to the holder
(treated as a dividend to the extent of the Company's current and accumulated
earnings and profits and otherwise subject to the treatment described above for
distributions) over the term of the preferred stock using a constant interest
rate method similar to that described below for accruing original issue discount
("OID"). See "-- Original Issue Discount" below.
Under recently issued regulations (the "Regulations"), Preferred Stock
Discount will arise due to the Optional Redemption feature only if, based on all
of the facts and circumstances as of the date the New Preferred Stock is issued,
redemption pursuant to the Optional Redemption is more likely than not to occur.
Even if redemption were more likely than not to occur, however, constructive
distribution treatment would not result if the redemption premium were solely in
the nature of a penalty for premature redemption. For this purpose, a penalty
for premature redemption is a premium paid as a result of changes in economic or
market conditions over which neither the issuer nor the holder has legal or
practical control, such as changes in prevailing dividend rates. The Regulations
provide a safe harbor pursuant to which constructive distribution treatment will
not result from an issuer call right if (i) the issuer and the holder are
unrelated, (ii) there are no arrangements that effectively require the issuer to
redeem the stock and (iii) exercise of the option to redeem would not reduce the
yield of the stock. The Company does not believe that the Optional Redemption
would be treated as more likely than not to be exercised under these rules. If
the Optional Redemption were treated as more likely than not to be exercised,
Preferred Stock Discount could arise on Dividend Shares.
Dividend Shares received by holders of the New Preferred Stock may bear
Preferred Stock Discount depending upon the issue price of such shares (i.e.,
the fair market value of the Dividend Shares on the date of their issuance). If
shares of New Preferred Stock (including Dividend Shares) bear Preferred Stock
Discount, such shares generally will have different tax characteristics from
other shares of New Preferred Stock and might trade separately, which might
adversely affect the liquidity of such shares.
SALE, REDEMPTION AND EXCHANGE OF NEW PREFERRED STOCK
A redemption of shares of New Preferred Stock for cash or in exchange for
Exchange Debentures would be a taxable event.
A redemption of shares of New Preferred Stock for cash will generally be
treated as a sale or exchange if the holder does not own, actually or
constructively within the meaning of section 318 of the Code, any stock of the
Company other than the redeemed New Preferred Stock. If a holder does own,
actually or constructively, other stock of the Company, a redemption of New
Preferred Stock may be treated as a dividend to the extent of the Company's
current and accumulated earnings and profits (as determined for federal income
tax purposes). Such dividend treatment would not be applied if the redemption is
"not essentially equivalent to a dividend" with respect to the holder under
section 302(b)(1) of the Code. A distribution to a holder will be "not
essentially equivalent to a dividend" if it results in a "meaningful reduction"
in the holder's stock interest in the Company. For this purpose, a redemption of
New Preferred Stock that results in a reduction in the proportionate interest in
the Company (taking into account any actual ownership of common stock of the
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Company and any stock constructively owned) of a holder whose relative stock
interest in the Company is minimal and who exercises no control over corporate
affairs should be regarded as a meaningful reduction in the holder's stock
interest in the Company.
If the redemption of the New Preferred Stock for cash is not treated as a
distribution taxable as a dividend, the redemption would result in capital gain
or loss equal to the difference between the amount of cash received and the
holder's adjusted tax basis in the New Preferred Stock redeemed, except to the
extent that the redemption price includes dividends which have been declared by
the Board of Directors of the Company prior to the redemption. Similarly, upon
the sale of the New Preferred Stock (other than in a redemption or in exchange
of the Exchange Debentures), the difference between the sum of the amount of
cash and the fair market value of other property received and the holder's
adjusted basis in the New Preferred Stock would result in capital gain or loss.
This gain or loss would be long-term capital gain or loss if the holder's
holding period for the New Preferred Stock exceeds one year. Under current law,
capital gains recognized by corporations are taxed at a maximum rate of 35% and
the maximum rate on net capital gains in the case of individuals is 28%.
A redemption of New Preferred Stock in exchange for Exchange Debentures
will be subject to the same general rules as a redemption for cash, except that
the holder would have capital gain or loss equal to the difference between the
issue price of the Exchange Debentures received (as determined for purposes of
computing the original issue discount on such Exchange Debentures). See the
discussion below under "Original Issue Discount." Additionally, any such gain
may be eligible for deferral under the installment sale method as long as
neither the Exchange Debentures nor the New Preferred Stock are readily traded
in an established securities market.
If a redemption of New Preferred Stock is treated as a distribution that is
taxable as a dividend, the amount of the distribution will be measured by the
amount of cash or the issue price of the Exchange Debentures, as the case may
be, received by the holder. The holder's adjusted tax basis in the redeemed New
Preferred Stock will be transferred to any remaining stock holdings in the
Company. If the holder does not retain any actual stock ownership in the Company
(only having a stock interest constructively), the holder may lose such basis
entirely. Under the "extraordinary dividend" provision of Section 1059 of the
Code, a corporate holder may, under certain circumstances, be required to reduce
its basis in its remaining shares of stock of the Company (and possibly
recognize gain upon a disposition of such shares) to the extent the holder
claims the 70% dividends received deduction with respect to the dividend. See
the discussion above under "-- Distributions on New Preferred Stock."
Depending upon a holder's particular circumstances, the tax consequences of
holding Exchange Debentures may be less advantageous than the tax consequences
of holding New Preferred Stock because, for example, payments of interest on the
Exchange Debentures will not be eligible for any dividends received deduction
that may be available to corporate holders.
ORIGINAL ISSUE DISCOUNT
In the event that the New Preferred Stock is exchanged for Exchange
Debentures and the "stated redemption price at maturity" of the Exchange
Debentures exceeds their "issue price" by more than a de minimis amount, the
Exchange Debentures will be treated as having original issue discount ("OID")
equal to the entire amount of such excess.
If the Exchange Debentures are traded on an established securities market
within the sixty-day period ending thirty days after the exchange date, the
issue price of the Exchange Debentures will be their fair market value as of
their issue date. Subject to certain limitations described in the Treasury
Regulations, the Exchange Debentures will be deemed to be traded on an
established securities market if, among other things, price quotations will be
readily available from dealers, brokers, or traders. If the New Preferred Stock,
but not the Exchange Debentures issued and exchanged therefor, is traded on an
established securities market within the sixty-day period ending thirty days
after the exchange, then the issue price of each Exchange Debenture should be
the fair market value of the New Preferred Stock exchanged therefor at the time
of the exchange. The New Preferred Stock generally will be deemed to be traded
on an established securities market if it
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appears on a system of general circulation that provides a reasonable basis to
determine fair market value based either on recent price quotations or recent
sales transactions. In the event that neither the New Preferred Stock nor the
Exchange Debentures are traded on an established securities market within the
applicable period, the issue price of the Exchange Debentures will be their
stated principal amount -- namely, their face value -- unless either (i) the
Exchange Debentures do not bear "adequate stated interest" within the meaning of
section 1274 of the Code, which is unlikely, or (ii) the Exchange Debentures are
issued in a so-called "potentially abusive situation" as defined in the Treasury
Regulations under section 1274 of the Code (including a situation involving a
recent sales transaction), in which case the issue price of such Exchange
Debentures generally will be the fair market value of the New Preferred Stock
surrendered in exchange therefor.
The "stated redemption price at maturity" of the Exchange Debentures should
equal the total of all payments under the Exchange Debentures, other than
payments of "qualified stated interest." "Qualified stated interest" generally
is stated interest that is unconditionally payable in cash or other property
(other than Exchange Debentures) at least annually at a single fixed rate.
Exchange Debentures that are issued when the Company has the option to pay
interest for certain periods in additional Exchange Debentures should be treated
as having been issued without any qualified stated interest. Accordingly, the
sum of all interest payable pursuant to the stated interest rate on such
Exchange Debentures over the entire term should be included (along with stated
principal) in the stated redemption price at maturity of such Exchange
Debentures. On the other hand, if the Exchange Debentures are issued after the
period for paying interest in additional Exchange Debentures has passed, then
stated interest would appear to qualify as qualified stated interest and none of
such stated interest would be included in the stated redemption price at
maturity of the Exchange Debentures.
TAXATION OF STATED INTEREST AND ORIGINAL ISSUE DISCOUNT ON EXCHANGE DEBENTURES
Each holder of an Exchange Debenture with OID will be required to include
in gross income an amount equal to the sum of the "daily portions" of the OID
for all days during the taxable year in which such holder holds the Exchange
Debenture. The daily portions of OID required to be included in a holder's gross
income in a taxable year will be determined under a constant yield method by
allocating to each day during the taxable year in which the holder holds the
Exchange Debenture a pro rata portion of the OID thereon which is attributable
to the "accrual period" in which such day is included. The amount of the OID
attributable to each accrual period will be the product of the "adjusted issue
price" of the Exchange Debenture at the beginning of such accrual period
multiplied by the "yield to maturity" of the Exchange Debenture (properly
adjusted for the length of the accrual period). The adjusted issue price of an
Exchange Debenture at the beginning of an accrual period is the original issue
price of the Exchange Debenture plus the aggregate amount of OID that accrued in
all prior accrual periods, and less any cash payments -- other than qualified
stated interest payments (which only would apply if the Exchange Debentures were
issued after October , 2001) on the Exchange Debenture. The "yield to
maturity" is the discount rate that, when used in computing the present value of
all principal and interest payments to be made under the Exchange Debenture,
produces an amount equal to the issue price of the Exchange Debenture. An
"accrual period" may be of any length and may vary in length over the term of
the debt instrument, provided that each accrual period is no longer than one
year and each scheduled payment of principal or interest occurs either on the
final day or the first day of an accrual period.
An additional Exchange Debenture (a "Secondary Debenture") issued in
payment of interest with respect to an initially issued Exchange Debenture (an
"Initial Debenture") will not be considered as a payment made on the Initial
Debenture and will be aggregated with the Initial Debenture for purposes of
computing and accruing OID on the Initial Debenture. As between the Initial
Debenture and the Secondary Debenture, the adjusted issue price of the Initial
Debenture would be allocated between the Initial Debenture and the Secondary
Debenture in proportion to their respective principal amounts. That is, upon the
issuance of a Secondary Debenture with respect to an Initial Debenture, the
Initial Debenture and the Secondary Debenture derived from the Initial Debenture
are treated as initially having the same adjusted issue price and inherent
amount of OID per dollar of principal amount. The Initial Debenture and the
Secondary Debenture
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derived therefrom would be treated as having the same yield to maturity. Similar
treatment would be applied when additional Exchange Debentures are issued on
Secondary Debentures.
In the event that the Exchange Debentures are not issued with OID, because
they are issued after October 30, 2002, when the Company does not have the
option to pay interest thereon in additional Exchange Debentures and the
redemption price of the Exchange Debentures does not exceed their issue price by
more than a de minimis amount, stated interest would be included in income by a
holder in accordance with such holder's usual method of accounting. In all other
cases, all stated interest will be treated as payments on the Exchange
Debentures under the rules discussed above.
BOND PREMIUM ON EXCHANGE DEBENTURES
If New Preferred Stock is exchanged for Exchange Debentures that are not
treated as having OID, and the issue price of such Exchange Debentures exceeds
the amount payable at the maturity date (or earlier call date, if appropriate),
such excess will be deductible by the holder of the Exchange Debentures as
amortizable bond premium over the term of the Exchange Debentures (taking into
account earlier call dates, as appropriate), under a yield-to-maturity formula,
if an election by the holder under section 171 of the Code is made or is already
in effect. An election under section 171 of the Code is available only if the
Exchange Debentures are held as capital assets. This election is revocable only
with the consent of the IRS and applies to all obligations owned or acquired by
the holder on or after the first day of the taxable year to which the election
applies. To the extent the excess is deducted as amortizable bond premium, the
holder's adjusted tax basis in the Exchange Debentures will be reduced. Except
as may otherwise be provided in future Treasury Regulations, the amortizable
bond premium will be treated as an offset to interest income on the Exchange
Debentures rather than as a separate deduction item.
ACQUISITION PREMIUM ON EXCHANGE DEBENTURES
A holder of an Exchange Debenture issued with OID who purchases such
Exchange Debenture for an amount that is greater than its then adjusted issue
price but equal to or less than the sum of all amounts payable on the Exchange
Debenture after the purchase date (other than payments, if any, of qualified
stated interest) will be considered to have purchased such Exchange Debenture at
an "acquisition premium." Under the acquisition premium rules, the amount of OID
which such holder must include in income with respect to such Exchange Debenture
for any taxable year will be reduced by the portion of such acquisition premium
properly allocable to such year.
MARKET DISCOUNT ON EXCHANGE DEBENTURES
Purchasers of New Preferred Stock should be aware that the disposition of
Exchange Debentures may be affected by the market discount provisions of the
Code. The market discount rules generally provide, if a holder of a debt
instrument purchases it at a "market discount" and thereafter realizes gain upon
a disposition or a retirement of the debt instrument, the lesser of such gain or
the portion of the market discount that has accrued on a straight-line basis (or
on a constant interest rate basis, if such alternative rate of accrual has been
elected by the holder under section 1276(b) of the Code) while the debt
instrument was held by such holder will be taxed as ordinary income at the time
of such disposition. "Market discount" with respect to the Exchange Debentures
will be the amount,if any, by which the "revised issue price" of an Exchange
Debenture (or its stated redemption price at maturity of the exchange Debenture
has no OID) exceeds the holders basis in the Exchange Debenture immediately
after such holder's acquisition, subject to a de minimis exception. The "revised
issue price" of an Exchange Debenture is its issue price increased by the
portion of OID previously includible in the gross income of prior holders for
periods prior to the acquisition of the Exchange Debenture by the holder
(without regard to any acquisition premium exclusion) and reduced by prior
payments other than payments of qualified stated interest.
A holder who acquires an Exchange Debenture at a market discount also may
be required to defer a portion of any interest expense that otherwise may be
deductible on any indebtedness incurred or maintained to purchase or carry such
Exchange Debenture until the holder disposes of the Exchange Debenture in a
117
<PAGE> 126
taxable transaction. Moreover, to the extent of any accrued market discount on
such Exchange Debentures, any partial principal payment with respect to Exchange
Debentures will be includible as ordinary income upon receipt, as will the
Exchange Debenture's fair market value on certain otherwise non-taxable
transfers (such as gifts).
A holder of Exchange Debentures acquired at a market discount may elect for
federal income tax purposes to include market discount in a gross income as the
discount accrues, either on a straight-line basis or on a constant interest rate
basis. This current inclusion election, once made, applies to all market
discount obligations acquired on or after the first day of the first taxable
year to which the election applies, and may not be revoked without the consent
of the IRS. If a holder of Exchange Debentures makes such an election, the
foregoing rules with respect to the recognition of ordinary income on sales and
other dispositions of such debt instruments, and with respect to the deferral of
interest deductions on indebtedness incurred or maintained to purchase or carry
such debt instruments, would not apply.
The Company will furnish annually to the IRS and to record holders of the
Exchange Debentures information relating to the OID, if any, accruing during the
calendar year. Such information will be based on the amount of OID that would
have accrued to a holder who acquired the Exchange Debenture on original issue.
Accordingly, other holders will be required to determine for themselves whether
they are eligible to report a reduced amount of OID for federal income tax
purposes.
REDEMPTION OR SALE OF EXCHANGE DEBENTURES
Generally, any redemption or sale of Exchange Debentures by a holder would
result in taxable gain or loss equal to the difference between the sum of amount
of cash and the fair market value of other property received (except to the
extent that cash received is attributable to accrued, but previously untaxed,
qualified stated interest, which portion of the consideration would be taxed as
ordinary income) and the holder's adjusted tax basis in the Exchange Debentures.
The adjusted tax basis of a holder who receives an Exchange Debenture in
exchange for New Preferred Stock will generally be equal to the issue price of
the Exchange Debenture increased by any OID with respect to the Exchange
Debenture included in the holder's income prior to sale or redemption of the
Exchange Debenture, reduced by any amortizable bond premium applied against the
holder's income prior to sale or redemption of the Exchange Debenture, reduced
by any amortizable bond premium applied against the holder's income prior to
sale or redemption of the Exchange Debenture and by payments other than payments
of qualified stated interest. Except to the extent that an intention to call the
Exchange Debentures prior to their maturity existed at the time of their
original issue as an agreement or understanding between the Company and the
original holders of a substantial amount of the Exchange Debentures (which is
unlikely), and subject to the above discussion of market discount, such gain or
loss would be long-term capital gain or loss if the holder's holding period for
the Exchange Debentures exceeded one year.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND TO CORPORATE HOLDERS
Pursuant to section 163 of the Code and in the event that the Exchange
Debentures are "applicable high yield discount obligations" ("AHYDOs"), a
portion of the OID (if any) accruing on the Exchange Debentures may be treated
as a dividend generally eligible for the dividends-received deduction in the
case of corporate holders, and the company would not be entitled to deduct the
"disqualified portion of the OID accruing on the Exchange Debentures and would
be allowed to deduct the remainder of the OID only when paid in cash.
The Exchange Debentures will constitute AHYDOs if they (i) have a term of
more than five years, (ii) have a yield to maturity equal to or greater than the
sum of the applicable federal rate at the time of issuance of the Exchange
Debentures (the "AFR") plus five percentage points, and (iii) have "significant"
OID. A debt instrument is treated as having "significant" OID if the aggregate
amount that would be includible in gross income with respect to such debt
instrument for periods before the close of any accrual period ending after the
date five years after the date of issue exceeds the sum of (i) the aggregate
amount of interest to be paid in cash under the debt instrument before the close
of such accrual period and (ii) the
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<PAGE> 127
product of the initial issue price of such debt instrument and its yield to
maturity. Because the amount of OID, if any, attributable to the Exchange
Debentures will be determined at the time such Exchange Debentures are issued
and the AFR at that point in time is not predictable, it is impossible currently
to determine whether Exchange Debentures will be treated as AHYDOs.
If an Exchange Debenture is treated as an AHYDO, a holder would be treated
as receiving dividend income to the extent of the lesser of (i) the Company's
current and accumulated earnings and profits, and (ii) the "disqualified
portion" of the OID of such AHYDO. The "disqualified portion" of the OID is
equal to the lesser of (i) the amount of OID or (ii) the portion of the "total
return" (i.e., the excess of all payments to be made with respect to the
Exchange Debenture over its issue price) in excess of the AFR plus six
percentage points.
BACKUP WITHHOLDING
A holder of a Security may be subject to back withholding at the rate of 31
percent with respect to dividends on the New Preferred Stock, interest on the
Exchange Debentures or sales proceeds thereof, unless such Holder (a) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates to exemption or (b) provides a correct taxpayer identification
number, certifies as to no loss of exemption from backup withholding and
otherwise complies with applicable requirements of the backup withholding rules.
A holder of a Security who does not provide the holder's correct taxpayer
identification number upon request may be subject to penalties imposed by the
IRS. Any amount paid as backup withholding would be creditable against the
holder's federal income tax liability.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSIDERATIONS DOES
NOT CONSIDER THE FACTS AND CIRCUMSTANCES OF ANY PARTICULAR PROSPECTIVE
PURCHASER'S SITUATION OR STATUS. ACCORDINGLY, EACH PURCHASER OF NEW PREFERRED
STOCK SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO
IT, INCLUDING THOSE UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
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<PAGE> 128
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement (the
"Underwriting Agreement") among the Company and BT Securities Corporation and
Goldman, Sachs & Co. (collectively, the "Underwriters"), the Underwriters have
agreed to purchase, and the Company has agreed to sell to the Underwriters, all
of the shares of New Preferred Stock offered hereby.
The Underwriting Agreement provides that the obligation of the Underwriters
to pay for and accept delivery of the New Preferred Stock is subject to the
approval of certain legal matters by counsel and to various other conditions.
The nature of each Underwriter's obligation is such that each is severally
committed to purchase the number of shares of New Preferred Stock set forth
opposite its name if it purchases any.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- -------------------------------------------------------------------------------- -----------
<S> <C>
BT Securities Corporation.......................................................
Goldman, Sachs & Co.............................................................
---------
Total................................................................. 150,000
=========
</TABLE>
The Underwriters propose to offer the shares of New Preferred Stock
directly to the public at the public offering price set forth on the cover page
hereof, and to certain dealers at such price less a concession not in excess of
$ per share. The Underwriters may allow and such dealers may reallow a
concession not in excess of $ per share. After the initial public offering
of the New Preferred Stock, the public offering price and other selling terms
may be changed. In addition, First Union Capital Markets Corp. will be paid a
fee of $150,000 for services rendered in connection with the sale of the New
Preferred Stock, which will be paid from the underwriting discounts set forth on
the cover page of this Prospectus. First Union Capital Markets Corp. is not an
Underwriter with respect to any of the New Preferred Stock offered hereby.
The Company does not intend to apply for listing of the New Preferred Stock
on a national securities exchange, but has been advised by each of the
Underwriters that it presently intends to make a market in the New Preferred
Stock, as permitted by applicable laws and regulations. The Underwriters are not
obligated, however, to make a market in the New Preferred Stock, and any such
market making may be discontinued at any time by one or all of the Underwriters
at the sole discretion of such Underwriters. There can be no assurance that an
active public market for the New Preferred Stock will develop.
The Company and the Guarantors have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act, or
to contribute to payments the Underwriters may be required to make in respect
thereof.
The Company has been informed by the Underwriters that they will not
confirm sales to any account over which they exercise discretionary authority
without prior specific written consent.
Under the Conduct Rules of the National Association of Securities Dealers,
Inc. (the "NASD"), no member of the NASD or an affiliate of such member may
participate in the distribution of a public offering of equity securities issued
by a company if the member and/or its affiliates have a conflict of interest (as
defined) unless the price at which such equity securities are to be distributed
to the public is no higher than that recommended by a "qualified independent
underwriter" meeting certain standards. As defined by the NASD, a "conflict of
interest" exists when, among other things, a member and/or its affiliates in the
aggregate beneficially own 10% or more of the preferred equity of a company. BT
Investment Partners, Inc., an affiliate of BT Securities Corporation, is the
holder of in excess of 10% of the Company's Existing Preferred Stock, as well as
the holder of warrants to purchase shares of the Company's Class C Common Stock.
First Union Capital Partners, Inc., an affiliate of First Union Capital Markets
Corp., holds warrants to purchase shares of the Company's Class C Common Stock.
Goldman, Sachs & Co. has agreed to act as a qualified independent
underwriter in connection with the Offering. The price at which the New
Preferred Stock will be distributed to the public will be no more than that
recommended by Goldman, Sachs & Co. Goldman, Sachs & Co., acting as qualified
independent underwriter, has participated in the preparation of this Prospectus
and the Registration Statement of which
120
<PAGE> 129
this Prospectus is a part and has exercised the usual standards of due diligence
with respect thereto and will receive a fee of $10,000 in connection with its
services as qualified independent underwriter. The Company and the Guarantors
have agreed to indemnify Goldman, Sachs & Co. as qualified independent
underwriter against certain liabilities, including liabilities under the
Securities Act.
Bankers Trust Company, an affiliate of BT Securities Corporation and BT
Investment Partners, Inc., has in the past provided commercial banking services
for an affiliate of the Company, for which Bankers Trust Company has received
customary compensation. BT Securities Corporation and its affiliates have
provided and may provide other financial, advisory or commercial or investment
banking services to the Company or its affiliates in the future, for which they
have received and will receive customary compensation.
LEGAL MATTERS
Certain legal matters with respect to the issuance of New Preferred Stock
will be passed upon for the Company by Holland & Knight (a partnership including
professional associations), and for the Underwriters by Cahill Gordon & Reindel
(a partnership including a professional corporation). Certain legal matters
under the Communications Act and the rules and regulations promulgated
thereunder by the FCC will be passed upon for the Company and the Underwriters
by Dow, Lohnes & Albertson (a professional limited liability company).
EXPERTS
The financial statements included herein and incorporated in this
Prospectus by reference to Paxson Communications Corporation's Annual Report on
Form 10-K for the year ended December 31, 1995, the financial statements of
WHUB, Inc., WTKS-FM (a division of Press Broadcasting Company), Todd
Communications, Inc. (WFSJ-FM) and Southern Broadcasting Companies, Inc. each as
of and for the year ended December 31, 1995 and the financial statements of
Ponce Nicasio Broadcasting Ltd. (KCMY-TV) as of and for the year ended April 30,
1996, included in this Prospectus, have been so incorporated and included in
reliance on the reports of Price Waterhouse LLP, independent certified public
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of the Fort Lauderdale Radio Stations (a division
of T.K. Communications, L.C.) for the year ended December 31, 1995 included in
this Prospectus have been so included in reliance on the report of Mathieson
Aitken Jemison, LLP, independent certified public accountants, given on the
authority of said firm as experts in auditing and accounting.
The financial statements of Radio Station WDIZ-FM (a division of Shamrock
Communications, Inc.) as of and for the year ended December 31, 1995 included in
this Prospectus have been so included in reliance on the report of Robert Rossi
& Co., independent certified public accountants, given on the authority of said
firm as experts in auditing and accounting.
The financial statements of KXLI (a division of KX Acquisition Limited
Partnership) as of and for the year ended December 31, 1995 included in this
Prospectus have been so included in reliance on the report of Schweitzer Rubin
Karon & Bremer, independent certified public accountants, given on the authority
of said firm as experts in auditing and accounting.
The special purpose financial statements of WIOD-AM (a division of WIOD,
Inc.) as of and for the year ended December 31, 1995 included in this Prospectus
have been so included in reliance on the report of Deloitte & Touche LLP,
independent auditors, given upon the authority of said firm as experts in
auditing and accounting.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
Company's Annual Report on Form 10-K for the year ended December 31, 1995, the
Company's Quarterly Reports on Form 10-Q for the
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<PAGE> 130
quarters ended March 31, 1996 and June 30, 1996, and the Company's Proxy
Statement, dated April 26, 1996, for the Company's 1996 Annual Meeting of
Shareholders as heretofore filed by the Company with the Commission pursuant to
the Exchange Act.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this Offering shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing of such
documents.
The information relating to the Company contained in this Prospectus does
not purport to be comprehensive and must be read together with the information
contained in the documents listed above, which have been incorporated by
reference. Any information contained in a document incorporated by reference or
deemed to be incorporated by reference herein shall be modified or superseded,
for purposes of this Prospectus, to the extent that a statement contained herein
or in any subsequently filed document that is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any document incorporated by reference in this Prospectus, other than exhibits
to any such document not specifically described above. Requests for such
documents should be directed to Paxson Communications Corporation, 601
Clearwater Park Road, West Palm Beach, Florida 33401, Attention: Director of
Finance (telephone number (561) 659-4122).
122
<PAGE> 131
INDEX TO PRO FORMA FINANCIAL INFORMATION
<TABLE>
<S> <C>
Pro Forma Financial Information....................................................... P-2
Unaudited Pro Forma Consolidated Balance Sheet:
At June 30, 1996.................................................................... P-3
Notes to Unaudited Pro Forma Consolidated Balance Sheet............................. P-4
Unaudited Pro Forma Consolidated Statements of Operations:
For the Six Months Ended June 30, 1996.............................................. P-5
For the Year Ended December 31, 1995................................................ P-6
Notes to Unaudited Pro Forma Consolidated Statements of Operations For the Year
Ended December 31, 1995 and the Six Months Ended June 30, 1996................... P-7
For the Twelve Months Ended June 30, 1996........................................... P-9
Notes to Unaudited Pro Forma Consolidated Statement of Operations For the Twelve
Months Ended June 30, 1996....................................................... P-10
</TABLE>
P-1
<PAGE> 132
PRO FORMA FINANCIAL INFORMATION
The following unaudited summary pro forma statement of operations data and
other data give effect to (i) the consummation of the Offering; (ii) the
significant business acquisitions of KZKI-TV, WGOT-TV and WTVX-TV during 1995;
(iii) the proposed significant business acquisition of the Fort Lauderdale Radio
Stations (WPLL-FM and WSRF-AM); (iv) the business acquisitions of Todd
Communications, Inc. (WFSJ-FM), WHUB Inc. (WHUB-FM and WHUB-AM) and Southern
Broadcasting Companies, Inc. (WSNI-FM, WPAP-FM, and WPBH-FM) and the proposed
business acquisitions of WDIZ-FM, WTKS-FM, WIOD-AM, KXLI-TV and Ponce Nicasio
Broadcasting Ltd. (KCMY-TV) (the Other Acquisitions); (v) the Equity Offering;
(vi) the termination of the put rights of the holders of the Class A and B
Common Stock Warrants; and (vii) the issuance of the Notes, as if such events
had occurred on January 1, 1995. Other Proposed Acquisitions are asset
acquisitions or are immaterial both individually and in the aggregate and
therefore are not included in the pro forma financial information. Where
necessary, prior operators' fiscal years have been conformed to the Company's
December 31 year end. In addition, depreciation and amortization expense as well
as interest has been increased for each of the periods presented to reflect the
purchase of all stations included in the Proposed Acquisitions and acquisitions
which have closed subsequent to June 30, 1996. The following unaudited summary
pro forma balance sheet data gives effect to (i) the consummation of the
Offering; (ii) the Proposed Acquisitions and related capital expenditures; (iii)
capital expenditures on existing properties; and (iv) acquisitions which have
closed subsequent to June 30, 1996, as if such events had occurred on June 30,
1996.
The Proposed Acquisitions will be accounted for using the purchase method
of accounting. The total cost of the Proposed Acquisitions will be allocated to
the tangible and intangible assets acquired and liabilities assumed based upon
their respective fair values. The allocation of the respective purchase prices
included in the pro forma financial information is preliminary. The Company does
not expect that the final allocation of the purchase prices will materially
differ from the preliminary allocation.
The pro forma adjustments are based upon available information and certain
assumptions that the Company believes are reasonable under the circumstances.
The pro forma consolidated financial information should be read in conjunction
with the Company's consolidated financial statements and notes thereto and the
financial statements and notes thereto related to the Other Acquisitions
appearing elsewhere in this Prospectus. The unaudited pro forma statement of
operations data are not necessarily indicative of the results that would have
occurred if the Offering and acquisitions had occurred on the dates indicated,
nor are they indicative of the Company's future results of operations. There can
be no assurance whether or when the Proposed Acquisitions will be consummated.
P-2
<PAGE> 133
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
AT JUNE 30, 1996
-----------------------------------------------------------
TRANSACTIONS
SUBSEQUENT TO PRO FORMA
COMPANY JUNE 30, 1996(B) ADJUSTMENTS PRO FORMA(A)
-------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............... $115,577 $(47,595) $ (27,421)(f) $ 434
(255,452)(d)
143,750(c)
(28,425)(e)
100,000(h)
Accounts receivable, net................ 19,354 19,354
Prepaid expenses and other current
assets............................... 2,488 2,488
Current program rights.................. 665 665
-------- -------- --------- --------
Total current assets............ 138,084 (47,595) (67,548) 22,941
Property and equipment, net............... 110,430 24,130 24,440(f) 205,666
46,666(d)
Intangible assets, net.................... 121,301 37,130 240,289(d) 401,701
2,981(f)
Other assets, net......................... 28,480 (2,180) (11,195)(d) 15,105
Investments in broadcast properties....... 38,887 (14,985) (9,308)(d) 18,094
3,500
Program rights, net....................... 267 267
-------- -------- --------- --------
Total assets......................... $437,449 $ -- $ 226,325 $663,774
======== ======== ========= ========
LIABILITIES, REDEEMABLE SECURITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable other and accrued
liabilities.......................... $ 6,948 $ 6,948
Accrued interest........................ 6,730 6,730
Current portion of program rights
payable.............................. 642 642
Current portion of long-term debt....... 570 570
-------- -------- --------- --------
Total current liabilities....... 14,890 -- -- 14,890
Program rights payable.................... 277 277
Long-term debt............................ 3,765 $ 100,000(h) 103,765
Senior subordinated notes, net (g)........ 227,508 227,508
Redeemable Senior preferred stock......... 18,393 (18,393)(e) --
Redeemable Series B preferred stock....... 2,990 (2,990)(e) --
Redeemable Junior preferred stock......... 34,090 34,090
Redeemable Exchangeable preferred stock... -- 150,000(c) 143,750
(6,250)(c)
Class A Common Stock...................... 39 1(d) 40
Class B Common Stock...................... 8 8
Class C Common Stock...................... -- --
Class A and B common stock warrants....... 6,863 6,863
Class C common stock warrants............. 4,282 4,282
Stock subscription notes receivable....... (17) (17)
Additional paid-in capital................ 197,425 10,999(d) 208,424
Deferred option plan compensation......... (1,950) (1,950)
Accumulated deficit....................... (71,114) (7,042)(e) (78,156)
-------- -------- --------- --------
Total liabilities, redeemable
securities and common
stockholders' equity.......... $437,449 $ -- $ 226,325 $663,774
======== ======== ========= ========
</TABLE>
P-3
<PAGE> 134
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(DOLLARS IN THOUSANDS)
(a) The pro forma balance sheet at June 30, 1996 gives effect to: (i) the
consummation of the Offering; (ii) the Proposed Acquisitions and related capital
expenditures; (iii) capital expenditures on existing properties; and (iv)
acquisitions which have closed subsequent to June 30, 1996.
(b) To reflect the use of cash for acquisitions subsequent to June 30,
1996, including the exercise of options to purchase WTJC-TV, KUBD-TV, WCEE-TV,
KWBF-TV and other acquisitions as well as the financing of $3,500 in connection
with CNI's acquisition of WHKE-TV, preliminary purchase accounting allocations
for such acquisitions and related capital expenditures. Use of cash is net of
$2,180 of funds escrowed at June 30, 1996 and notes receivable of $14,985
previously recorded as investments in broadcast properties. Use of cash for
acquisitions closed subsequent to June 30, 1996 is detailed as follows:
<TABLE>
<S> <C>
Property and equipment.................................................... $ 24,130
Intangible assets......................................................... 37,130
Other assets.............................................................. (2,180)
Investments in broadcast properties....................................... 3,500
Application of previous investments in broadcast properties............... (14,985)
--------
Cash used for acquisitions.............................................. $ 47,595
========
</TABLE>
(c) To reflect the proceeds from the Offering of $150,000, net of
underwriting discounts and commissions and estimated offering expenses of
$6,250.
(d) To reflect the use of proceeds for the Proposed Acquisitions and
related capital expenditures, preliminary purchase accounting allocations for
such acquisitions and related capital expenditures. Use of proceeds is net of
$11,195 of funds escrowed and advanced which are included in other assets, notes
receivable of $9,308 previously recorded as investments in broadcast properties
and the issuance of $11,000 of the Company's Class A Common Stock in connection
with the proposed acquisition of WSHE-FM and WSRF-AM and the options to acquire
WOAC-TV, WNGM-TV and WTVX-TV. Use of proceeds for Proposed Acquisitions and
related capital expenditures are detailed as follows:
<TABLE>
<S> <C>
Property and equipment.................................................... $ 46,666
Intangible assets......................................................... 240,289
Other assets.............................................................. (11,195)
Application of previous investments in broadcast properties............... (9,308)
Common Stock and additional paid-in capital............................... (11,000)
--------
Proceeds used for Proposed Acquisitions and related capital
expenditures......................................................... $255,452
========
</TABLE>
(e) To reflect the redemption of the Senior Preferred Stock including $950
of redemption premiums and approximately $6,527 of accretion and accrued
dividends from June 30, 1996 through December 15, 1996, the initial date at
which the Senior Preferred Stock can be redeemed by the Company. The redemption
value and accrued dividends of the Senior Preferred Stock at December 15, 1996
has been discounted by $435 at 7.3% to reflect the Company's anticipated
redemption date of October 1, 1996, in accordance with the revised terms of the
Senior Preferred Stock.
(f) To reflect the use of proceeds for capital expenditures on existing
properties.
(g) $230,000 Senior Subordinated Notes issued on September 28, 1995, net of
$2,700 original issue discount, due 2002.
(h) To reflect the Pro Forma borrowings under the Company's $100 million
Credit Facility in order to complete the Proposed Acquisitions and related
capital expenditures.
For additional information with respect to specific prices and capital
expenditures for each Proposed Acquisition, see "The Proposed Acquisitions."
P-4
<PAGE> 135
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1996
-----------------------------------------------------------------------
WSHE-FM OTHER PRO FORMA
COMPANY(A) WSRF-AM ACQUISITIONS(B) ADJUSTMENTS PRO FORMA(C)
---------- ------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Total revenues................. $ 69,370 $1,826 $10,367 $ 645(n) $ 82,208
Operating expenses, excluding
depreciation, amortization
and option plan
compensation................. 51,724 1,953 8,448 (789)(e) 61,728
392(n)
Option plan compensation(f).... 2,292 2,292
Depreciation and
amortization................. 11,737 66 677 12,801(g) 25,281
-------- ------ ------ -------- --------
Income (loss) from
operations................... 3,617 (193 ) 1,242 (11,759) (7,093)
Interest expense............... (15,098) (457 ) (123) (3,805)(h) (19,483)
Interest income................ 4,035 4 (1,302)(i) 2,737
Other income (expense), net.... (559) 2 (224) 61(j) (720)
-------- ------ ------ -------- --------
Net income (loss).............. (8,005) $ (648 ) $ 899 (16,805) (24,559)
====== ======
Dividends and accretion on
preferred stock and common
stock warrants(k)............ (7,414) (4,456)(l) (11,870)
-------- -------- --------
Net loss attributable to common
stock(n)..................... $(15,419) $ (21,261) $(36,429)
======== ======== ========
Loss per share data:
Net loss..................... $ (0.20) $ (0.51)
Net loss attributable to
common stock.............. $ (0.38) $ (0.76)
Weighted average shares
outstanding.................. 40,567 7,236(m) 47,803
======== ======== ========
</TABLE>
P-5
<PAGE> 136
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------------------------------------------------------
LOS
ANGELES BOSTON WEST PALM WSHE-FM
(KZKI- (WGOT- BEACH WSRF- OTHER PRO FORMA PRO
COMPANY(A) TV)(B) TV)(B) (WTVX-TV)(B) AM(B) ACQUISITIONS(B) ADJUSTMENTS FORMA(C)
-------- --------- --------- ------------ --------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues....... $103,074 $ 1,019 $ 600 $3,124 $ 7,684 $22,699 $ 289(d) $ 138,296
(193)(n)
Operating expenses,
excluding
depreciation,
amortization and
option plan
compensation........ 82,103 351 583 2,682 5,329 22,438 (3,477)(e) 110,228
155(d)
64(n)
Option plan
compensation(f)..... 10,803 10,803
Depreciation and
amortization........ 18,719 279 128 294 527 1,461 25,066(g) 46,474
-------- ------ ----- ------ ------- ------- -------- --------
Income (loss) from
operations.......... (8,551) 389 (111) 148 1,828 (1,200) (21,712) (29,209)
Interest expense..... (16,303) (271) (174) (532) (1,116) (293) (20,277)(h) (38,966)
Interest income...... 1,709 6 (14)(i) 1,701
Other income
(expense), net...... (982) (10) (88) 5 72 (174)(j) (1,177)
Benefit for income
taxes............... 1,280 1,280
Extraordinary item... (10,626) (10,626)
-------- ------ ----- ------ ------- ------- -------- --------
Net income (loss).... (33,473) $ 118 $(295) $ (472) $ 717 $(1,415) (42,177) (76,997)
====== ===== ====== ======= =======
Dividends and
accretion on
preferred stock and
common stock
warrants(k)......... (13,297) (10,054)(l) (23,351)
-------- -------- --------
Net loss attributable
to common
stock(n)............ $(46,770) $ (52,231) $(100,348)
======== ======== ========
Loss per share data:
Net loss............ $ (0.97) $ (1.62)
Net loss
attributable to
common
stock............. $ (1.36) $ (2.11)
Weighted average
shares
outstanding....... 34,430 13,181(m) 47,611
======== ======== ========
</TABLE>
P-6
<PAGE> 137
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
(a) Reflect the results of operations during the year ended December 31,
1995 and the six months ended June 30, 1996 for (i) significant business
acquisitions of KZKI-TV, WGOT-TV and WTVX-TV since their respective dates of
acquisition in 1995; (ii) asset acquisitions and insignificant business
acquisitions since their dates of acquisition; (iii) operations pursuant to time
brokerage agreements ("TBAs") since their respective dates of commencement; and
(iv) insignificant terminated operations until such time of termination.
(b) Reflects prior operator results.
(c) Pro forma statements of operations for the year ended December 31, 1995
and the six months ended June 30, 1996, give effect to (i) the consummation of
the Offering; (ii) the significant business acquisitions of KZKI-TV, WGOT-TV and
WTVX-TV in 1995; (iii) the proposed significant business acquisition of the Fort
Lauderdale Radio Stations (WPLL-FM and WSRF-AM); (iv) the Other Acquisitions;
(v) the Equity Offering; (vi) the termination of the put rights of the holders
of the Class A and B Common Stock Warrants; and (vii) the issuance of the Notes,
on September 28, 1995, as if such events had occurred on January 1, 1995. Other
Proposed Acquisitions are asset acquisitions or are immaterial both individually
and in the aggregate and are therefore not included in the pro forma financial
information. Where necessary, prior operators' fiscal years have been conformed
to the Company's December 31 year end. In addition, depreciation and
amortization expense and interest expense have been increased for each of the
periods presented to reflect the purchase of all stations and other capital
expenditures included in the Proposed Acquisitions and acquisitions which have
closed subsequent to June 30, 1996.
(d) Reflects KZKI's operations from January 1, 1995 to January 31, 1995.
(e) To reflect for the year ended December 31, 1995 (i) the elimination of
$372 of general and administrative costs which represent redundant facilities
and staff for WTVX-TV; (ii) the elimination of $495 which represents TBA fees
paid by the Company to prior licensees of stations acquired; (iii) the
elimination of stockholder salaries of $300 incurred by WHUB, Inc.; (iv) the
elimination of redundant operating expenses of $375 incurred by Todd
Communications, Inc.; (v) the elimination of $736 of redundant corporate
overhead of WPLL-FM and WSRF-AM; (vi) the increase in time brokerage expense of
$104 for TBA fees for WTVX-TV, to reflect amounts payable had the TBA been
entered into on January 1, 1995; (vii) the elimination of $214 of general and
administrative costs which represent redundant operating expenses for WIOD-AM;
and (viii) the elimination of $1,089 of legal settlement costs for KCMY-TV.
To reflect for the six months ended June 30, 1996 (i) the elimination of
stockholder salaries of $144 incurred by WHUB, Inc.; (ii) the elimination of
redundant operating expenses of $77 incurred by Todd Communications, Inc.; (iii)
the elimination of $499 of redundant corporate overhead of WPLL-FM and WSRF-AM
and (iv) the elimination of $69 of general and administrative costs which
represent redundant operating expenses for WIOD-AM.
(f) Option plan compensation represents a non-cash charge associated with
the granting of common stock options to employees under the Company's Stock
Incentive Plan. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Results of Operations" and "Management -- Stock
Incentive Plan."
P-7
<PAGE> 138
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS -- (CONTINUED)
(g) To reflect the increase in depreciation and amortization expense for
purchase accounting allocations made for the acquisitions which have closed
since January 1, 1995, the Proposed Acquisitions and acquisitions closed
subsequent to June 30, 1996 as follows:
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ ----------------
<S> <C> <C>
Pro forma depreciation................................... $ 26,292 $ 14,540
Pro forma amortization................................... 20,182 10,741
-------- --------
Total pro forma depreciation and
amortization................................. 46,474 25,281
Less: amounts as reported................................ (21,408) (12,480)
-------- --------
Total.......................................... $ 25,066 $ 12,801
======== ========
</TABLE>
(h) Adjustment necessary to reflect interest expense associated with the
$230,000 Senior Subordinated Notes issued on September 28, 1995 and other debt
outstanding at June 30, 1996, as if such debt had been outstanding since January
1, 1995, and the effect of the reduction in outstanding short term borrowings as
a result of the Equity Offering, as follows:
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED FOR THE
DECEMBER 31, SIX MONTHS ENDED
1995 JUNE 30, 1996
------------ ----------------
<S> <C> <C>
11% Senior Subordinated Notes due 2002................... $ 26,999 $ 13,499
Other debt............................................... 10,434 5,217
Amortization of loan costs............................... 1,533 767
-------- --------
Total pro forma interest expense............... 38,966 19,483
Less: amounts as reported................................ (18,689) (15,678)
-------- --------
Total.......................................... $ 20,277 $ 3,805
======== ========
</TABLE>
(i) To reflect the elimination of interest income earned on investments in
broadcast properties of $1,302 for the six months ended June 30, 1996 and $14
for the year ended December 31, 1995 as such investments are assumed to have
been applied towards the purchase price of certain acquisitions and proposed
acquisitions as of January 1, 1995.
(j) To reflect (i) the elimination of $272 of marketing fees from
affiliates earned by Southern Broadcasting Companies, Inc. during 1995 ($37 of
marketing expenses to affiliates for the six months ended June 30, 1996); (ii)
the elimination of $24 for the six months ended June 30, 1996 in non-recurring
expenses incurred by KXLI relating to a joint operations agreement; and (iii)
the elimination of $98 of non-recurring expenses for the year ended December 31,
1995 relating to the bankruptcy reorganization of WTVX-TV.
(k) Dividends and accretion on preferred stock and common stock warrants
represent such amount for the Senior Preferred Stock (15% dividend rate),
redeemable Class A and B common stock warrants and Junior Preferred Stock (12%
dividend rate). Such capital stock is mandatorily redeemable and certain issues
accrete. See "Description of Capital Stock."
(l) To reflect the redemption of the Senior Preferred Stock and the
issuance of the Redeemable Cumulative Exchangeable Preferred Stock and the net
pro forma effect on dividends and accretion on preferred stock, assuming a
dividend rate of 12% on the Redeemable Cumulative Exchangeable preferred stock.
(m) To reflect an increase in the weighted average shares outstanding as a
result of the Equity Offering, 139 shares in connection with the acquisition of
Todd Communications, Inc. (WFSJ-FM) and 888 shares of Class A Common Stock in
connection with certain Proposed Acquisitions as if such events had taken place
on January 1, 1995.
(n) To conform KCMY-TV's April 30 fiscal year end to the Company's December
31 year end.
P-8
<PAGE> 139
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE TWELVE MONTHS ENDED JUNE 30, 1996
----------------------------------------------------------------------------------------
WEST PALM
BEACH WSHE-FM OTHER PRO FORMA
COMPANY(A) (WTVX-TV)(B) WSRF-AM(B) ACQUISITIONS(B) ADJUSTMENTS PRO FORMA(C)
---------- ------------ ------------ -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues....... $128,088 $ 482 $ 5,369 $ 23,117 $157,056
Operating expenses,
excluding
depreciation,
amortization and
option plan
compensation....... 96,182 491 4,600 21,596 $ (3,119)(d) 119,750
Option plan
compensation(e).... 3,691 3,691
Depreciation and
amortization....... 22,402 42 330 1,414 25,303(f) 49,491
-------- ----- ----- ------- ------- --------
Income (loss) from
operations......... 5,813 (51) 439 107 (22,184) (15,876)
Interest expense..... (26,514) (85) (1,181) (317) (10,869)(g) (38,966)
Interest income...... 5,166 10 (1,309)(h) 3,867
Other income
(expense), net..... (1,527) (22) 10 (411) (26)(i) (1,976)
Benefit for income
taxes.............. 640 640
Extraordinary item... (10,626) (10,626)
-------- ----- ----- ------- ------- --------
Net income (loss).... (27,048) $ (158) $ (732) $ (611) (34,388) (62,937)
===== ===== =======
Dividends and
accretion on
preferred stock and
common stock
warrants(j)........ (14,847) (8,703)(k) (23,550)
------- --------
Net loss attributable
to common stock.... $(41,895) $ (43,091) $(86,487)
======== ======= ========
Loss per share data:
Net loss........... $ (0.67) $ (1.32)
Net loss
attributable to
common stock..... $ (1.03) $ (1.81)
Weighted average
shares
outstanding...... 40,567 7,155(l) 47,722
======== ======= ========
</TABLE>
P-9
<PAGE> 140
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
(a) Reflects the results of operations for the twelve months ended June 30,
1996 for the Company, as previously reported.
(b) Reflects prior operator results, during the twelve months ended June
30, 1996.
(c) Pro forma statement of operations data for the twelve months ended June
30, 1996, give effect to (i) the consummation of the Offering; (ii) the
significant business acquisition of WTVX-TV in 1995; (iii) the proposed
significant business acquisition of the Fort Lauderdale Radio Stations (WPLL-FM
and WSRF-AM); (iv) the Other Acquisitions; (v) the Equity Offering; (vi) the
termination of the put rights of the holders of the Class A and B Common Stock
Warrants; and (vii) the issuance of the Notes, as if such events had occurred on
July 1, 1995. Other Proposed Acquisitions are asset acquisitions or are
immaterial both individually and in the aggregate and are therefore not included
in the pro forma financial information. In addition, depreciation and
amortization expense and interest expense have been increased for the period
presented to reflect the purchase of all stations and other capital expenditures
included in the Proposed Acquisitions and acquisitions which have closed
subsequent to June 30, 1996.
(d) To reflect for the twelve months ended June 30, 1996 (i) the
elimination of $186 of general and administrative costs which represent
redundant facilities and staff for WTVX-TV; (ii) the elimination of $247 which
represents TBA fees paid by the Company to prior licensees of stations acquired;
(iii) the elimination of stockholder salaries of $294 incurred by WHUB, Inc.;
(iv) the elimination of redundant operating expenses of $265 incurred by Todd
Communications, Inc.; (v) the elimination of $867 of redundant corporate
overhead of WPLL-FM and WSRF-AM; and (vi) the increase in time brokerage expense
of $52 for TBA fees for WTVX-TV, to reflect amounts payable had the TBA been
entered into on January 1, 1995; (vii) the elimination of $223 of general and
administrative costs which represent redundant expenses for WIOD-AM; and (viii)
the elimination of $1,089 of legal settlement costs for KCMY-TV.
(e) Option plan compensation represents a non-cash charge associated with
the granting of common stock options to employees under the Company's Stock
Incentive Plan. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Results of Operations" and "Management -- Stock
Incentive Plan."
(f) To reflect the increase in depreciation and amortization expense for
purchase accounting allocations made for the acquisitions which have closed
since July 1, 1995, the Proposed Acquisitions and acquisitions closed subsequent
to June 30, 1996 as follows:
<TABLE>
<CAPTION>
FOR THE
TWELVE MONTHS
ENDED
JUNE 30, 1996
-------------
<S> <C>
Pro forma depreciation................................................. $ 27,968
Pro forma amortization................................................. 21,523
--------
Total pro forma depreciation and amortization.......................... 49,491
Less: amounts as reported.............................................. (24,188)
--------
Total........................................................ $ 25,303
========
</TABLE>
P-10
<PAGE> 141
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS -- (CONTINUED)
(g) Adjustment necessary to reflect interest expense associated with the
$230,000 Senior Subordinated Notes issued on September 28, 1995 and other debt,
actual and pro forma, outstanding at June 30, 1996, as if such debt had been
outstanding since July 1, 1995, and the effect of the reduction in outstanding
short term borrowings as a result of the Equity Offering, as follows:
<TABLE>
<CAPTION>
FOR THE
TWELVE MONTHS
ENDED
JUNE 30, 1996
-------------
<S> <C>
11% Senior Subordinated Notes due 2002................................. $ 26,999
Other debt............................................................. 10,434
Amortization of loan costs............................................. 1,533
--------
Total pro forma interest expense............................. 38,966
Less: amounts as reported.............................................. (28,097)
--------
Total........................................................ $ 10,869
========
</TABLE>
(h) To reflect the elimination of interest income earned on investments in
broadcast properties of $1,309 for the twelve months ended June 30, 1996 as such
investments are assumed to have been applied towards the purchase price of
certain acquisitions and proposed acquisitions as of July 1, 1995.
(i) To reflect for the twelve months ended June 30, 1996 (i) the
elimination of $49 of non-recurring expenses relating to the bankruptcy
reorganization of WTVX-TV; (ii) the elimination of $99 of net marketing fees
from affiliates earned by Southern Broadcasting Companies, Inc.; and (iii) the
elimination of $24 in non-recurring expenses incurred by KXLI relating to a
joint operations agreement.
(j) Dividends and accretion on preferred stock and common stock warrants
represent such amount for the Senior Preferred Stock (15% dividend rate),
redeemable Class A and B common stock warrants and Junior Preferred Stock (12%
dividend rate). Such capital stock is mandatorily redeemable and certain issues
accrete. See "Description of Capital Stock."
(k) To reflect the redemption of the Senior Preferred Stock and the
issuance of the Redeemable Cumulative Exchangeable Preferred Stock and the net
pro forma effect on dividends and accretion on preferred stock, assuming a
dividend rate of 12% on the Redeemable Cumulative Exchangeable preferred stock.
(l) To reflect an increase in the weighted average shares outstanding as a
result of the Equity Offering, 139 shares in connection with the acquisition of
Todd Communications, Inc. (WFSJ-FM) and 888 shares of Class A Common Stock in
connection with certain Proposed Acquisitions as if such events had taken place
on July 1, 1995.
P-11
<PAGE> 142
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 143
PAXSON COMMUNICATIONS CORPORATION
INDEX OF FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
PAXSON COMMUNICATIONS CORPORATION
Consolidated Financial Statements -- December 31, 1995, 1994, and 1993
Report of Independent Certified Public Accountants.......................................................... F-3
Consolidated Balance Sheets................................................................................. F-4
Consolidated Statements of Operations....................................................................... F-5
Consolidated Statements of Changes in Common Stockholders' Equity........................................... F-6
Consolidated Statements of Cash Flows....................................................................... F-7
Notes to Consolidated Financial Statements.................................................................. F-8
PAXSON COMMUNICATIONS CORPORATION
Unaudited Interim Consolidated Financial Statements -- June 30, 1996 and 1995
Consolidated Balance Sheets June 30, 1996 and December 31, 1995............................................. F-35
Consolidated Statements of Operations for the Six Months Ended.............................................. F-36
Consolidated Statements of Operations for the Three Months Ended............................................ F-37
Consolidated Statements of Changes in Common Stockholders' Equity........................................... F-38
Consolidated Statements of Cash Flows....................................................................... F-39
Notes to Consolidated Financial Statements.................................................................. F-40
WTKS-FM (A DIVISION OF PRESS BROADCASTING COMPANY)
Financial Statements -- December 31, 1995
Report of Independent Certified Public Accountants.......................................................... F-41
Balance Sheet............................................................................................... F-42
Statement of Operations and Divisional Deficit.............................................................. F-43
Statement of Cash Flows..................................................................................... F-44
Notes to Financial Statements............................................................................... F-45
WHUB, INC.
Financial Statements -- December 31, 1995
Report of Independent Certified Public Accountants.......................................................... F-49
Balance Sheet............................................................................................... F-50
Statement of Operations..................................................................................... F-51
Statement of Changes in Stockholders' Equity................................................................ F-52
Statement of Cash Flows..................................................................................... F-53
Notes to Financial Statements............................................................................... F-54
TODD COMMUNICATIONS, INC. (WFSJ-FM)
Financial Statements -- December 31, 1995
Report of Independent Certified Public Accountants.......................................................... F-56
Balance Sheet............................................................................................... F-57
Statement of Operations..................................................................................... F-58
Statement of Changes in Stockholders' Deficit............................................................... F-59
Statement of Cash Flows..................................................................................... F-60
Notes to Financial Statements............................................................................... F-61
</TABLE>
F-1
<PAGE> 144
PAXSON COMMUNICATIONS CORPORATION
INDEX OF FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
SOUTHERN BROADCASTING COMPANIES, INC.
Combined Financial Statements -- December 31, 1995
Report of Independent Certified Public Accountants.......................................................... F-64
Balance Sheet............................................................................................... F-65
Statement of Operations..................................................................................... F-66
Statement of Changes in Shareholders' Equity................................................................ F-67
Statement of Cash Flows..................................................................................... F-68
Notes to Financial Statements............................................................................... F-69
FORT LAUDERDALE RADIO STATIONS (A DIVISION OF T.K. COMMUNICATIONS, L.C.)
Financial Statements -- December 31, 1995
Independent Auditors' Report................................................................................ F-72
Balance Sheets.............................................................................................. F-73
Statements of Income........................................................................................ F-74
Statements of Divisional Equity (Deficit)................................................................... F-75
Statements of Cash Flows.................................................................................... F-76
Notes to Financial Statements............................................................................... F-77
RADIO STATION WDIZ-FM (A DIVISION OF SHAMROCK COMMUNICATIONS, INC.)
Financial Statements -- December 31, 1995
Independent Auditor's Report................................................................................ F-83
Balance Sheet............................................................................................... F-84
Statement of Income and Expenses............................................................................ F-85
Statement of Divisional Equity.............................................................................. F-86
Statement of Cash Flows..................................................................................... F-87
Notes to Financial Statements............................................................................... F-88
KXLI (A DIVISION OF KX ACQUISITION LIMITED PARTNERSHIP)
Financial Statements -- December 31, 1995
Independent Auditors' Report................................................................................ F-91
Balance Sheet............................................................................................... F-92
Statement of Income......................................................................................... F-93
Statement of Partners' Capital.............................................................................. F-94
Statement of Cash Flows..................................................................................... F-95
Notes to Financial Statements............................................................................... F-96
RADIO STATION WIOD-AM (A DIVISION OF WIOD, INC.)
Financial Statements -- December 31, 1995
Independent Auditors' Report................................................................................ F-103
Special-Purpose Statements of Net Assets.................................................................... F-104
Special-Purpose Statements of Operations.................................................................... F-105
Notes to Special-Purpose Financial Statements............................................................... F-106
PONCE NICASIO BROADCASTING
Financial Statements -- April 30, 1996
Report of Independent Certified Public Accountants.......................................................... F-109
Balance Sheet............................................................................................... F-110
Statement of Operations..................................................................................... F-111
Statement of Changes in Partners' Deficit................................................................... F-112
Statement of Cash Flows..................................................................................... F-113
Notes to Financial Statements............................................................................... F-114
</TABLE>
F-2
<PAGE> 145
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
of Paxson Communications Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in common
stockholders' equity and of cash flows present fairly, in all material respects,
the financial position of Paxson Communications Corporation and its subsidiaries
(the "Company") at December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
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
- ---------------------------------------------------------
PRICE WATERHOUSE LLP
Fort Lauderdale, Florida
February 28, 1996
F-3
<PAGE> 146
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................. $ 68,070,990 $ 21,571,658
Accounts receivable, less allowance for doubtful accounts of $909,713 and $556,950,
respectively........................................................................ 17,726,415 13,569,198
Prepaid expenses and other current assets............................................. 971,363 1,579,954
Current deferred income taxes......................................................... -- 194,940
Current program rights................................................................ 1,412,544 1,980,000
------------ ------------
Total current assets............................................................ 88,181,312 38,895,750
Property and equipment, net............................................................. 79,859,080 45,350,430
Intangible assets, net.................................................................. 84,318,147 53,350,967
Other assets, net....................................................................... 19,896,694 13,078,346
Investments in broadcast properties..................................................... 21,192,030 1,750,000
Program rights, net..................................................................... 384,814 244,888
------------ ------------
Total assets.................................................................... $293,832,077 $152,670,381
=========== ===========
LIABILITIES, REDEEMABLE SECURITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities........................................ $ 5,030,692 $ 4,899,163
Accrued interest...................................................................... 6,932,342 224,528
Current portion of program rights payable............................................. 1,449,602 986,562
Current portion of long-term debt..................................................... 430,590 6,393,415
------------ ------------
Total current liabilities....................................................... 13,843,226 12,503,668
Program rights payable.................................................................. 432,750 562,770
Deferred income taxes................................................................... -- 1,474,940
Long-term debt.......................................................................... 12,484,024 76,013,542
Senior subordinated notes, net.......................................................... 227,374,911 --
Minority interest....................................................................... -- 1,217,314
Redeemable Cumulative Compounding Senior preferred stock, $0.001 par value; 15% dividend
rate per annum, 2,000 shares authorized, issued and outstanding....................... 16,824,082 14,060,054
Redeemable Class A & B common stock warrants............................................ 6,465,317 1,735,979
Redeemable Cumulative Compounding Series B preferred stock, $0.001 par value; 15%
dividend rate per annum, 714.286 shares authorized, issued and outstanding............ 2,352,654 1,274,671
Redeemable Cumulative Compounding Junior preferred stock, $0.001 par value; 12% dividend
rate per annum, 33,000 shares authorized, issued and outstanding...................... 31,533,910 26,808,053
Class A common stock, $0.001 par value; one vote per share; 150,000,000 shares
authorized, 26,226,826 and 26,042,561 shares issued and outstanding in 1995 and 1994,
respectively.......................................................................... 26,227 26,042
Class B common stock, $0.001 par value; ten votes per share; 35,000,000 shares
authorized and 8,311,639 shares issued and outstanding................................ 8,312 8,312
Class C common stock, $0.001 par value; non-voting; 12,500,000 shares authorized; no
shares issued and outstanding......................................................... -- --
Class C common stock warrants........................................................... 5,338,952 5,338,952
Stock subscription notes receivable..................................................... (115,714) (77,666)
Additional paid-in capital.............................................................. 34,342,086 20,647,647
Deferred option plan compensation....................................................... (1,384,267) --
Accumulated deficit..................................................................... (55,694,393) (8,923,897)
Commitments and contingencies (Note 17)
------------ ------------
Total liabilities, redeemable securities and common stockholders' equity........ $293,832,077 $152,670,381
=========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
F-4
<PAGE> 147
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
------------ ----------- ------------
<S> <C> <C> <C>
Revenues:
Local and national advertising............................................ $ 94,653,514 $56,668,983 $ 29,405,559
Retail and other.......................................................... 5,352,044 2,779,215 1,655,155
Trade and barter.......................................................... 3,068,354 2,619,245 1,001,317
------------ ----------- ------------
Total revenues...................................................... 103,073,912 62,067,443 32,062,031
------------ ----------- ------------
Operating expenses:
Direct.................................................................... 24,921,653 16,789,757 9,479,408
Programming............................................................... 12,822,813 8,750,624 5,291,237
Sales and promotion....................................................... 9,093,769 5,753,025 3,507,480
Technical................................................................. 4,955,588 2,113,117 1,543,583
General and administrative................................................ 22,138,236 11,689,343 7,323,352
Trade and barter.......................................................... 2,604,950 2,426,118 1,029,105
Time brokerage agreement fees............................................. 993,893 503,698 698,463
Sports rights fees........................................................ 2,806,121 2,379,516 --
Option plan compensation.................................................. 10,803,241 -- --
Program rights amortization............................................... 1,765,942 820,754 --
Depreciation and amortization............................................. 18,719,109 12,403,528 9,350,633
------------ ----------- ------------
Total operating expenses............................................ 111,625,315 63,629,480 38,223,261
------------ ----------- ------------
Loss from operations........................................................ (8,551,403) (1,562,037) (6,161,230)
Other income (expense):
Interest expense.......................................................... (16,302,641) (5,210,148) (2,052,406)
Interest income........................................................... 1,708,942 335,438 112,719
Gain on sale of radio broadcasting station................................ -- 28,105 427,397
Other income (expense), net............................................... (982,461) (33,432) (318,333)
------------ ----------- ------------
Loss before benefit (provision) for income taxes and extraordinary item..... (24,127,563) (6,442,074) (7,991,853)
Benefit (provision) for income taxes........................................ 1,280,000 1,680,000 (2,960,000)
------------ ----------- ------------
Loss before extraordinary item.............................................. (22,847,563) (4,762,074) (10,951,853)
Extraordinary item.......................................................... (10,625,727) -- (457,147)
------------ ----------- ------------
Net loss.................................................................... (33,473,290) (4,762,074) (11,409,000)
Dividends and accretion on preferred stock and common stock warrants........ (13,297,206) (3,385,456) (151,367)
------------ ----------- ------------
Net loss attributable to common stock....................................... $(46,770,496) $(8,147,530) $(11,560,367)
=========== ========== ===========
Per share data (Note 1):
Loss before extraordinary item............................................ $ (0.66) $ (0.14) $ (0.35)
Extraordinary item........................................................ (0.31) -- (0.01)
------------ ----------- ------------
Net loss.................................................................. (0.97) (0.14) (0.36)
Dividends and accretion on preferred stock and common stock warrants...... (0.39) (0.10) (0.01)
------------ ----------- ------------
Net loss attributable to common stock....................................... $ (1.36) $ (0.24) $ (0.37)
=========== ========== ===========
Weighted average shares outstanding -- primary & fully diluted.............. 34,429,517 33,430,116 31,581,948
=========== ========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
F-5
<PAGE> 148
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS C STOCK
COMMON STOCK COMMON SUBSCRIPTION ADDITIONAL DEFERRED
--------------------------- COMMON STOCK NOTES PAID-IN OPTION PLAN ACCUMULATED
CLASS A CLASS B CLASS C STOCK WARRANTS RECEIVABLE CAPITAL COMPENSATION DEFICIT
------- ------- ------- ------ ---------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1992............. $1 $23,611,002 $(9,283,047 )
Stockholder
capital
contributions.... 13,351,668
Net loss prior to
reorganization on
December 15,
1993............. (10,784,000 )
Reclassification
of undistributed
deficit prior to
reorganization... (20,067,047) 20,067,047
Dividends on
redeemable
preferred
stock............ (97,808 )
Accretion on
Senior redeemable
preferred
stock............ (15,144 )
Accretion on Class
A & B common
stock warrants... (38,415 )
Net loss
subsequent to
reorganization on
December 15,
1993............. (625,000 )
-- --
------- ------- ---------- ------------ ----------- ------------- ------------
Balance at
December 31,
1993............. -- -- -- 1 -- -- 16,895,623 -- (776,367 )
Recapitalization
of common stock.. $15,791 $5,264 (1) (21,054)
Stock issued for
ANG acquisition.. 1,570 277 $ (77,666) 3,784,530
Net proceeds from
issuance of
common stock
warrants......... $5,338,952
Dividends on
redeemable
preferred
stock............ (2,216,137 )
Accretion on
Senior redeemable
preferred
stock............ (325,147 )
Accretion on
Series B
preferred
stock............ (7,968 )
Accretion on
Junior preferred
stock............ (15,648 )
Accretion on Class
A & B common
stock warrants... (820,556 )
Net loss.......... (4,762,074 )
Stock dividend.... 8,681 2,771 (11,452)
-- --
------- ------- ---------- ------------ ----------- ------------- ------------
Balance at
December 31,
1994............. 26,042 8,312 -- -- 5,338,952 (77,666) 20,647,647 -- (8,923,897 )
Stock issued for
Cookeville
acquisition...... 95 1,199,905
Deferred option
plan
compensation..... 12,187,508 $(12,187,508)
Option plan
compensation..... 10,803,241
Stock options
exercised........ 90 307,026
Increase in stock
subscription
receivable....... (48,029)
Repayments of
stock
subscription
receivable....... 9,981
Dividends on
redeemable
preferred
stock............ (7,275,516 )
Accretion on
Senior redeemable
preferred
stock............ (332,156 )
Accretion on
Series B
preferred
stock............ (325,208 )
Accretion on
Junior preferred
stock............ (634,988 )
Accretion on Class
A & B common
stock warrants... (4,729,338 )
Net loss.......... (33,473,290 )
-- --
------- ------- ---------- ------------ ----------- ------------ ------------
Balance at
December 31,
1995............. $26,227 $8,312 $-- $-- $5,338,952 $ (115,714) $34,342,086 $(1,384,267 ) $(55,694,393)
======== ======== ======== ========= =========== ============= ============ ============== =============
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
F-6
<PAGE> 149
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................................ $ (33,473,290) $ (4,762,074) $(11,409,000)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization......................................... 18,719,109 12,403,528 9,350,633
Option plan compensation.............................................. 10,803,241 -- --
Program rights amortization........................................... 1,765,942 820,754 --
Provision for doubtful accounts....................................... 1,098,181 344,706 89,681
Deferred income taxes................................................. (1,280,000) (1,680,000) 2,960,000
(Gain) loss on sale of assets......................................... 145,857 (28,105) (427,397)
Loss on extinguishment of long-term debt.............................. 10,625,727 -- 457,147
Decrease (increase) in accounts receivable............................ (5,255,398) (1,683,664) 470,942
Decrease in prepaid expenses and other current assets................. 608,591 234,301 1,308,404
Decrease (increase) in intangible assets.............................. (1,200,000) -- 175,452
Decrease (increase) in other assets................................... 1,564,822 (392,504) (20,731)
(Decrease) increase in accounts payable and other accrued
liabilities......................................................... 131,529 (313,225) (138,259)
Increase in accrued interest.......................................... 6,707,814 135,683 28,768
------------- ------------ ------------
Net cash provided by operating activities......................... 10,962,125 5,079,400 2,845,640
------------- ------------ ------------
Cash flows from investing activities:
Acquisitions of broadcasting properties................................. (58,510,509) (56,143,061) (32,145,000)
Increase in investments in broadcast properties......................... (19,442,030) -- (1,750,000)
Deposits on broadcasting properties..................................... (2,381,619) (4,291,241) --
Purchases of property and equipment..................................... (25,016,816) (5,916,512) (1,962,553)
Deposits on buildings and equipment..................................... (735,074) (642,890) --
Proceeds from sale of radio broadcasting station........................ -- 200,000 5,010,000
Proceeds from sale of fixed assets...................................... 466,820 -- --
------------- ------------ ------------
Net cash used in investing activities............................. (105,619,228) (66,793,704) (30,847,553)
------------- ------------ ------------
Cash flows from financing activities:
Proceeds from long-term debt, net....................................... 327,539,000 50,000,000 38,100,000
Payments of long-term debt.............................................. (169,722,340) (401,500) (27,001,362)
Accretion of discount on senior subordinated notes...................... 65,911 -- --
Payments of loan origination costs...................................... (15,896,473) (5,030,352) (3,730,836)
Payments for program rights............................................. (1,098,731) (335,646) --
Net proceeds from issuance of redeemable preferred stock................ -- 26,694,761 11,521,955
Net proceeds from issuance of common stock warrants..................... -- 5,338,952 2,125,218
Net stockholder capital contributions................................... -- -- 13,351,668
Proceeds from exercise of common stock options.......................... 307,116 -- --
Increase in stock subscription notes receivable......................... (48,029) -- --
Repayments of stock subscription notes receivable....................... 9,981 -- --
------------- ------------ ------------
Net cash provided by financing activities......................... 141,156,435 76,266,215 34,366,643
------------- ------------ ------------
Increase in cash and cash equivalents..................................... 46,499,332 14,551,911 6,364,730
Cash and cash equivalents at beginning of year............................ 21,571,658 7,019,747 655,017
------------- ------------ ------------
Cash and cash equivalents at end of year.................................. $ 68,070,990 $ 21,571,658 $ 7,019,747
============ =========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest.................................................. $ 8,292,274 $ 4,765,800 $ 2,321,400
============ =========== ===========
Cash paid for income taxes.............................................. $ -- $ -- $ --
============ =========== ===========
Non-cash operating and financing activities:
Issuance of common stock in connection with the merger with ANG......... $ -- $ 3,786,377 $ --
============ =========== ===========
Issuance of common stock for Cookeville acquisition..................... $ 1,200,000 $ -- $ --
============ =========== ===========
Dividends accreted on redeemable preferred stock........................ $ 7,275,516 $ 2,216,137 $ 97,808
============ =========== ===========
Accretion on redeemable securities...................................... $ 6,021,690 $ 1,169,319 $ 53,559
============ =========== ===========
Issuance of Series B preferred stock.................................... $ -- $ 1,248,209 $ --
============ =========== ===========
Trade and barter revenue................................................ $ 3,068,354 $ 2,619,245 $ 1,001,317
============ =========== ===========
Trade and barter expense................................................ $ 2,604,950 $ 2,426,118 $ 1,029,105
============ =========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
F-7
<PAGE> 150
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
Paxson Communications Corporation (the "Company"), a Delaware corporation,
was organized in December 1993 for the purpose of owning and operating radio and
television broadcasting stations and networks. In January 1995, the Company
began operating its Infomall Television Network (the "Infomall TV Network" or
"inTV"). The radio broadcasting activities were previously operated by
businesses under common control of Mr. Lowell W. Paxson which were reorganized
into the Company on December 15, 1993, in exchange for Company common stock. The
reorganization was accounted for in a manner similar to the pooling of interests
accounting method which included the operating results prior to December 15,
1993 because the transactions took place among entities under common control.
On April 14, 1994, the Company acquired 68.1% of the common voting stock of
The American Network Group, Inc. ("ANG"), a Nasdaq Small-Cap Market traded
company. The Company has consolidated the financial results of ANG since that
time. On November 4, 1994, ANG stockholders approved the merger of ANG into the
Company through an exchange of common stock, which resulted in the Company's
Class A common stock becoming publicly-held. In connection with the merger with
ANG, the Company amended its capital structure to provide two classes of common
voting stock, Class A common stock and Class B common stock. The per share pro
forma effect of the merger and recapitalization has been presented on the
Company's statement of operations for the two years ended December 31, 1994
based on the weighted average common shares outstanding (Note 15).
Operations
The Company operates three business segments: (1) the Infomall TV Network
is a nationwide network of owned, operated and affiliated television stations
dedicated to the airing of long form paid programming, consisting primarily of
infomercials; (2) Paxson Radio consists of radio broadcasting stations, radio
news and sports networks and billboard operations; and (3) Paxson
Network-Affiliated Television includes network-affiliated television
broadcasting stations in West Palm Beach, Florida. See Note 18 for a listing of
stations which the Company began operating subsequent to year end. At December
31, 1995, operations were comprised of the following stations:
<TABLE>
<CAPTION>
INFOMALL TV NETWORK
COMMENCEMENT
OF
TV MARKET SERVED(1) STATION OPERATIONS OWNERSHIP
------------------------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Owned or TBA Operated:
Los Angeles, CA........ KZKI-TV 1995 Owned
Philadelphia, PA....... WTGI-TV 1995 Owned
San Francisco, CA...... KLXV-TV 1995 Owned
Boston, MA............. WGOT-TV 1995 Owned
Washington, D.C........ WYVN-TV 1996 Owned
Atlanta, GA............ WTLK-TV 1994 Owned
Houston, TX............ KTFH-TV 1995 Owned
Cleveland, OH.......... WOAC-TV 1995 Time Brokerage
Tampa, FL.............. WFCT-TV 1994 Time Brokerage
Miami, FL.............. WCTD-TV 1994 Time Brokerage
Denver, CO............. KUBD-TV 1995 Time Brokerage
</TABLE>
F-8
<PAGE> 151
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
INFOMALL TV NETWORK
COMMENCEMENT
OF
TV MARKET SERVED(1) STATION OPERATIONS OWNERSHIP
------------------------- -------- ------------ ---------------
<S> <C> <C> <C>
Orlando, FL............ WIRB-TV 1994 Time Brokerage
Hartford, CT........... WTWS-TV 1995 Owned
Dayton, OH............. WTJC-TV 1995 Time Brokerage
Affiliated:
Sacramento, CA......... KCMY-TV 1995 Affiliate
Norfolk, VA............ WJCB-TV 1995 Affiliate
<CAPTION>
PAXSON RADIO
RADIO MARKET SERVED(1) FORMAT
<S> <C> <C> <C> <C>
Miami, FL................ WLVE-FM Smooth Jazz 1993 Owned
WZTA-FM Modern Rock 1992 Owned
WINZ-AM News/Sports 1992 Owned
WFTL-AM Talk/Sports 1995 Owned
Tampa, FL................ WHPT-FM Rock AC 1991 Owned
WSJT-FM Smooth Jazz 1995 Owned
WHNZ-AM News/Sports 1991 Owned
WNZE-AM Sports 1994 Owned
Orlando, FL.............. WMGF-FM Soft AC 1992 Owned
WJRR-FM Modern Rock 1992 Owned
WWNZ-AM News 1992 Owned
WWZN-AM Sports 1994 Owned
Jacksonville, FL......... WROO-FM Young Country 1991 Owned
WPLA-FM Alternative Rock 1992 Owned
WNZS-AM Sports 1993 Owned
WZNZ-AM News 1992 Owned
Cookeville, TN........... WGSQ-FM Country 1994 Owned
WPTN-AM Talk 1994 Owned
RADIO NETWORK
Alabama Radio Network.... News 1995 Owned
Florida Radio Network.... News 1993 Owned
South Carolina Radio
Network(2)............. News 1994 Owned
Tennessee Radio
Network................ News 1994 Owned
University of Florida
Sports Network......... Sports 1994 Owned
Miami Sports Network..... Sports 1995 Owned
Penn State Sports
Network................ Sports 1994 Owned
Virginia Tech Sports
Network(2)............. Sports 1994 Owned
</TABLE>
F-9
<PAGE> 152
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
PAXSON NETWORK-AFFILIATED
TELEVISION
TV MARKET SERVED(1) AFFILIATION
------------------------- -----------------
<S> <C> <C> <C> <C>
Owned or TBA Operated:
West Palm Beach, FL...... WPBF-TV ABC 1994 Owned
West Palm Beach, FL...... WTVX-TV Warner/UPN 1995 Time Brokerage
</TABLE>
- ---------------
(1) Each station is licensed by the Federal Communications Commission to serve a
specific community, which is included in the listed market.
(2) The Company sold the South Carolina Radio Network in January 1996 and will
not renew the rights to Virginia Tech Sports Network which will expire in
March 1996.
Principles of Consolidation
The consolidated financial statements include accounts of the Company and
its wholly-owned subsidiaries. All intercompany balances and transactions have
been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
On January 1, 1995, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", the effect of which was immaterial. At December 31, 1995,
approximately $58 million of debt securities, all classified as held to maturity
and consisting of money market accounts, commercial paper and overnight
repurchase agreements, were included in cash and cash equivalents because they
had original maturities of three months or less.
Property and Equipment
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on a straight-line basis over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Broadcasting towers and equipment..................................... 6-13 years
Office furniture and equipment........................................ 6-10 years
Buildings and building improvements................................... 40 years
Leasehold improvements................................................ Term of lease
Vehicles and other.................................................... 5 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
Intangible Assets
The excess of cost over the fair value of acquired net assets has been
capitalized as goodwill. Intangible assets are being amortized using the
straight-line method over their estimated useful lives as follows (Note 5):
<TABLE>
<S> <C>
FCC licenses.......................................................... 25 years
Covenants not to compete.............................................. Contract term
Favorable lease and other contracts................................... Contract term
Goodwill.............................................................. 25 years
</TABLE>
F-10
<PAGE> 153
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Investments in Broadcast Properties
Investments in broadcast properties represent the Company's financing of
television and radio station acquisitions by third parties. The Company has
entered into time brokerage agreements ("TBAs") with such third parties for the
television station operations and has written options to purchase certain of the
related station assets and Federal Communications Commission ("FCC") licenses at
various amounts and terms (Notes 7 and 18).
Program Rights
The Company obtains licenses for program rights which allow the Company to
broadcast program material in accordance with contractual agreements. Pursuant
to a licensing agreement, an asset is recorded for the program rights acquired
and a liability is recorded for the obligation incurred, at the gross amount of
the liability when available to air. Program rights are amortized on a method
that approximates the straight-line basis over the related term. Program rights
which will not be aired are charged to expense. Current program rights represent
programs which will be amortized during the next year; current liabilities
represent program rights which will be paid within the next year under
contractual arrangements (Note 8).
Other Assets
Loan origination costs are stated at cost and are amortized to interest
expense over the life of the loan or agreement using the effective interest
method. Escrow funds represent funds held in escrow on acquisitions pending FCC
approval. Other assets are stated at cost (Note 6).
SFAS 121 Impairment of Long-Lived Assets and Identifiable Intangibles
On January 1, 1995, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of", the effect of which was immaterial. The
Company reviews long-lived assets, identifiable intangibles and goodwill and
will reserve for impairment whenever events or changes in circumstances indicate
the carrying amount of the assets may not be fully recoverable.
Minority Interest
Minority interest at December 31, 1994 represented the third party's
limited partner's interest in the radio broadcasting stations located in
Cookeville, Tennessee. The Company purchased this minority interest in 1995
(Note 2).
Stock Subscription Notes Receivable
Stock subscription notes receivable were assumed in conjunction with the
merger with ANG. Stock subscription notes receivable also include employee
receivables issued upon exercise of stock options in conjunction with the
Company's stock incentive plan (Note 12).
Revenue Recognition
Revenue is recognized as advertising air time is broadcast.
Trade and Barter Agreements
The Company enters into trade and barter agreements which give rise to
sales of advertising air time in exchange for products, services and
programming. Sales from trade and barter agreements are recognized at the fair
market value of products, services or programs received as the related
advertising air time is broadcast.
F-11
<PAGE> 154
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Products, services and programs received are expensed when used or when programs
are broadcast. If the Company uses trade products or services before advertising
air time is provided, a trade liability is recognized. At times, the Company
trades air time for property and equipment.
Time Brokerage Agreements
The Company operates certain stations under a time brokerage agreement
("TBA") whereby the Company has agreed to purchase from the broadcast station
licensee certain broadcast time on the station and to provide programming to and
sell advertising on the station during the purchased time. Accordingly, the
Company receives all the revenue derived from the advertising sold during the
purchased time, pays certain expenses of the station and performs other
functions. The broadcast station licensee retains responsibility for ultimate
control of the station in accordance with FCC policies. At December 31, 1995,
the Company operated seven stations under TBAs which expire from April 1999
through October 2005.
Stock Based Compensation
The Company will adopt Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" ("SFAS 123") during 1996. Upon
adoption of SFAS 123, the Company intends to retain the intrinsic value method
of accounting for stock based compensation and disclose pro forma net loss and
loss per share amounts.
Income Taxes
Provisions are made to record deferred income taxes for items reported in
different periods for financial reporting purposes than for federal and state
income tax purposes. The Company records deferred income taxes using the
liability method in accordance with Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes".
Extraordinary Item
The extraordinary item for the years ended December 31, 1995 and 1993
relates to the write-off of loan origination costs associated with the
extinguishment of certain debt agreements. See a description of the tax effect
in Note 11.
Per Share Data
Per share data for the years ended December 31, 1994 and 1993 give a pro
forma effect to the Company's amended capital structure related to the merger
with ANG and the stock dividend on common shares outstanding on January 1, 1995
(Note 15). Due to net losses, the effect of stock options and warrants is anti-
dilutive and therefore these common stock equivalents are not included in the
calculation of weighted average shares outstanding.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-12
<PAGE> 155
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Reclassifications
Certain reclassifications have been made to the prior years' financial
statements to conform with the 1995 presentation.
2. ACQUISITIONS, INVESTMENTS AND DISPOSITIONS:
Acquisitions and investments:
During 1995 and 1994, the Company acquired the assets of certain broadcast
properties. Purchases were accounted for using the purchase method of accounting
and the financial results of TBA operated stations have been included in the
Company's statement of operations since the commencement of the TBA.
Acquisitions and investments closed subsequent to December 31, 1995 are outlined
in Note 18. Acquisitions, investments and dispositions during 1995 and 1994 are
as follows:
<TABLE>
<CAPTION>
ACQUISITION PRICE/
STATION/ INVESTMENT
ACQUISITION/TBA DATE NETWORK MARKET (1) AMOUNT(2)
- -------------------- ------------------------------------ -------------------- ------------------
<S> <C> <C> <C>
Owned:
October 1995 WYVN-TV(3) Washington, D.C. $ 1,900,000
June 1995 KLXV-TV San Francisco, CA 5,000,000
June 1995 WFTL-AM Miami, FL 2,000,000
May 1995 KZKI-TV Los Angeles, CA 18,000,000
May 1995 WGOT-TV Boston, MA 3,050,000
July/March 1995 KTFH-TV Houston, TX 7,900,000
March 1995 WTWS-TV Hartford, CT 2,700,000
March/February 1995 WSJT-FM Tampa, FL 4,675,000
February 1995 WTGI-TV Philadelphia, PA 10,200,000
January 1995 Alabama Radio Network Alabama 750,000
August 1994 WNZE-AM Tampa, FL 1,100,000
December 1994 WWZN-AM Orlando, FL 1,550,000
July 1994 WPBF-TV West Palm Beach, FL 32,500,000
July/April 1994 WTLK-TV Atlanta, GA 9,500,000
April 1994 WGSQ-FM(4) Cookeville, TN --
April 1994 WPTN-AM(4) Cookeville, TN --
April 1994 Florida Sports Network(5) Florida --
April 1994 Tennessee Radio Network(5) Tennessee --
April 1994 South Carolina Radio Network(5)(6) South Carolina --
April 1994 Penn State Sports Network(5) Pennsylvania --
April 1994 Virginia Tech Sports Network(5)(6) Virginia --
April 1994 Georgia Sports Network(5) Georgia --
TBA Operated:
October 1995 WOAC-TV(7) Cleveland, OH --
October 1995 WTJC-TV(7) Dayton, OH 3,500,000
August 1995 KUBD-TV(7) Denver, CO 6,500,000
</TABLE>
F-13
<PAGE> 156
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
ACQUISITION PRICE/
STATION/ INVESTMENT
ACQUISITION/TBA DATE NETWORK MARKET (1) AMOUNT(2)
- -------------------- ------------------------------------ -------------------- ------------------
<S> <C> <C> <C>
August 1995 WTVX-TV(7) West Palm Beach, FL --
December 1994 WIRB-TV Orlando, FL 3,800,000
August 1994 WFCT-TV(7) Tampa, FL 1,120,000
April 1994 WCTD-TV(7)(8) Miami, FL 3,300,000
</TABLE>
- ---------------
(1) Each station is licensed by the FCC to serve a specific community, which is
included in the listed market.
(2) Represents the purchase price paid by the Company for owned stations or the
initial amount of financing provided to the broadcast station licensee for
TBA operated stations with outstanding financings at December 31, 1995. The
outstanding financings at December 31, 1995 are reflected in investments in
broadcast properties (Note 7).
(3) Station is not currently on the air.
(4) A minority interest was acquired in connection with the merger with ANG
(Note 1). The remaining interest was purchased during 1995 for
approximately $3.4 million which consisted of cash paid, stock issued and
the forgiveness of outstanding debt.
(5) Acquired in conjunction with the merger with ANG (Note 1).
(6) The Company sold the South Carolina Radio Network in January 1996 and will
not renew the rights to Virginia Tech Sports Network which will expire in
March 1996. (Note 3)
(7) The Company currently holds an option to purchase the station from the
licensee (Note 7).
(8) Investment amount reflects the price paid by the Company for fixed assets
acquired.
Dispositions:
During 1995, the Company abandoned certain ancillary operations and did not
renew the rights to the Georgia Sports Network. The Company included the results
of operations of an aggregate net loss of $799,000 in the consolidated statement
of operations for such abandoned operations. During 1994, the Company disposed
of the assets of WWZN-AM for $300,000, resulting in a gain on disposition of
approximately $28,000. During 1993, the Company disposed of the assets of
WWNZ-FM for $5,010,000, resulting in a gain on disposition of approximately
$427,000.
Pro Forma (unaudited):
The Company's results of operations for the years ended December 31, 1995
and 1994 include the results of operations for acquisitions and investments in
broadcast properties from their respective dates of commencement. The following
unaudited pro forma statement of operations data give effect to significant
business acquisitions, investments or dispositions since January 1, 1994 as if
they had occurred on January 1, 1994. In addition, depreciation and amortization
has been increased each period to reflect initial purchase
F-14
<PAGE> 157
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
price allocation on all acquisitions and investments (whether businesses or
assets), and interest expense on associated debt financing as if such
transactions and debt had occurred on January 1, 1994.
<TABLE>
<CAPTION>
PRO FORMA
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1995 1994
------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenues.......................................................... $108,106,000 $ 79,595,000
=========== ===========
Loss from operations.............................................. $ (7,612,000) $ (6,054,000)
=========== ===========
Loss before extraordinary item.................................... $(35,289,000) $(34,052,000)
=========== ===========
Net loss attributable to common stock............................. $(59,212,000) $(57,143,000)
=========== ===========
Net loss per share attributable to common stock................... $ (1.72) $ (1.71)
=========== ===========
Pro forma weighted average shares outstanding..................... 34,429,517 33,430,116
=========== ===========
</TABLE>
3. CERTAIN TRANSACTIONS:
The Company enters into and maintains certain operating and financing
transactions with related parties as described below.
Christian Network, Inc.
The Company has entered into several agreements with The Christian Network,
Inc. and certain of its for profit subsidiaries (individually and collectively
referred to herein as "CNI"). The Christian Network, Inc. is a section 501(c)(3)
not-for-profit corporation to which Mr. Paxson was a substantial contributor and
was a director.
Investment in Broadcast Properties. At December 31, 1995, the Company had
investments in broadcast properties of $16,481,345 related to the Company's
financing of certain broadcasting acquisitions for CNI. In conjunction with
these financings, the Company has obtained TBAs with these stations and has
obtained options to purchase certain of these stations (Note 7).
KLDT-TV. During 1995, in connection with CNI securing the rights to
acquire television station KLDT-TV in Dallas, Texas and, prior to such
acquisition, operate the station pursuant to a TBA, Mr. Paxson initially loaned
CNI $1,000,000 to make a deposit in respect to such acquisition and guaranteed
the obligations of CNI under the purchase agreement and the TBA. On January 9,
1996, the Company purchased such note from Mr. Paxson at its face value.
CNI Agreement. The Company and CNI entered into an agreement in May 1994
(the "CNI Agreement") under which the Company agreed that, if the tax exempt
status of CNI were jeopardized by virtue of its relationships with the Company
and its subsidiaries, the Company would take certain actions to try and ensure
that CNI's tax exempt status would no longer be so jeopardized. Such steps could
include, but not be limited to, rescission of one or more transactions or
payment of additional funds by the Company. The Company believes that all of its
agreements with CNI have been on terms at least as favorable to CNI as it would
obtain in arm's length transactions. The Company intends any future agreements
with CNI to be at least as favorable to CNI as CNI would obtain in arm's length
transactions. Accordingly, if the Company's activities with CNI are consistent
with the terms governing their relationship, the Company believes that it will
not be required to take any actions under the CNI Agreement. However, there can
be no assurance that the Company will not be required to take any actions under
the CNI Agreement at a material cost to the Company.
F-15
<PAGE> 158
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
WFCT-TV Transactions. On December 17, 1993, Bradenton Broadcast
Television, Ltd. ("BBTC") entered into an agreement whereby CNI would make
available to BBTC up to $3,120,000 for certain expenses in connection with the
redemption of a limited partnership interest in BBTC and the construction of
television station WFCT-TV, Bradenton, Florida (the "BBTC Loan Agreement"). In
connection with the loan, BBTC granted to CNI an irrevocable, exclusive option
to purchase the assets owned by BBTC that are used or useful in the construction
or operation of WFCT-TV, including the license issued by the FCC for WFCT-TV,
subject to the satisfaction of certain conditions and the receipt of necessary
regulatory approvals. CNI's option may be exercised, subject to the prior
approval of the FCC, at any time during the ten year period beginning on the
first anniversary of the completion of construction of WFCT-TV. The price
payable to BBTC upon exercise of the option is $91,000 in cash and the
forgiveness of all outstanding indebtedness under the loan of $1,120,000.
WFCT-TV commenced broadcasting operations on August 1, 1994. The Company leases
certain broadcasting assets to BBTC for fees of $60,000 per annum. Additionally,
the Company entered into a partial TBA with BBTC and CNI, whereby the Company
purchases up to twelve hours per day of broadcasting time from BBTC for a
monthly fee of approximately $3,500. In connection with the foregoing
transactions, Mr. Paxson agreed to lend CNI up to $3,120,000 to fund the loan to
BBTC. On June 15, 1994, CNI and BBTC revised the BBTC Loan Agreement to reduce
the maximum amount of the loan from $3,120,000 to $1,400,000, and to provide
that BBTC lease rather than purchase the equipment and related tangible personal
property required to construct WFCT-TV from the Company. Mr. Paxson assigned his
rights and interests in the CNI loan to the Company in the amount of $1,120,000
(representing the then outstanding principal balance owed by CNI), and CNI
agreed that the maximum principal amount of the loan would be reduced from
$3,120,000 to $1,400,000. On June 15, 1994, CNI assigned to the Company the
option to acquire the WFCT-TV assets from CNI for $191,000 after CNI exercises
its option to purchase such assets from BBTC. On June 15, 1994, CNI assigned to
the Company its rights and interests under the TBA to provide up to twelve hours
per day of programming on WFCT-TV.
Worship Channel Studio. On January 1, 1993, Mr. Paxson agreed to lend CNI
up to $2,500,000 to fund CNI's acquisition of certain equipment and related
tangible property used in the production of television programming. Mr. Paxson
assigned his rights and interests under the loan to the Company, in
consideration for the Company's promissory note in the principal amount of
$2,500,000, which the Company subsequently repaid. In accordance with the terms
of an agreement dated as of June 15, 1994, CNI sold to the Company CNI's
production assets in consideration for the cancellation of CNI's $2,500,000
promissory note held by the Company. CNI and the Company have also contracted,
effective as of August 1, 1994, for Paxson-66 to lease CNI's television
production and distribution facility to the Company for the purpose of producing
television programming for the Infomall TV Network.
Airplane
During 1994, the Company purchased an aircraft for $250,000 from a company
controlled by Mr. Paxson. The Company believes that the terms of such
transaction were at least as favorable as they would have been if obtained in an
arm's length transaction with an unaffiliated third party.
Whitehead Media, Inc.
The Company initially financed the acquisition by Whitehead Media, Inc.
("Whitehead Media") of WTVX-TV and WOAC-TV. Whitehead Media subsequently
obtained financing from Banque Paribas, an affiliate of a holder of the
Company's Junior preferred stock, the proceeds of which were used to repay the
debt owed by Whitehead Media to the Company and will be used to fund Whitehead
Media's acquisition of WNGM-TV. The third party financing provided to Whitehead
Media is unconditionally guaranteed by Mr. Paxson and Second Crystal Diamond,
Limited Partnership ("Second Crystal") an affiliate controlled by Mr. Paxson and
through which he beneficially owns and controls a substantial portion of the
Company's Class A common stock and Class B common stock. Such guarantees are
secured by a pledge of a significant
F-16
<PAGE> 159
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
portion of Second Crystal's Class A common stock. The Company is permitted to
operate stations WTVX-TV and WOAC-TV pursuant to TBAs and as a result of the
third party financing to Whitehead Media has an option to purchase each of such
stations, which options to purchase would otherwise be prohibited under FCC
rules and regulations because each of such stations serves a market in which the
Company has or will own another television station.
Home Shopping Network, Inc.
In connection with the departure in 1990 of Mr. Paxson from Home Shopping
Network, Inc. ("HSN"), he executed a consulting agreement containing various
restrictions upon activities by him that might be considered competitive with
HSN, including activities as an investor in competitive and other enterprises.
Although Mr. Paxson's consulting services to HSN terminated in 1994, certain of
the restrictions survived. As the Company's business evolved, the possible
effect of the consulting agreement upon Mr. Paxson's role as the Company's chief
executive officer and controlling stockholder became unclear. The Company
considered it advisable to eliminate doubts concerning, among other matters, Mr.
Paxson's role as a chief executive officer and controlling stockholder as the
Company's business developed, and the scope of HSN's rights under the consulting
agreement. Accordingly, on August 25, 1995, the Company and Mr. Paxson agreed
with HSN to, among other things, terminate HSN's rights under the consulting
agreement in consideration of a payment to HSN by the Company of $1,200,000. In
conjunction with this transaction Mr. Paxson advanced $1,200,000 to the Company
in the form of a note bearing interest at 6%. The Company repaid the note in
October 1995. Shortly before the transaction with HSN, Mr. Paxson agreed with
the Company that upon termination of HSN's rights under the consulting
agreement, he will not compete with the Company for a period ending on December
31, 1999 (the date that the HSN consulting agreement would have otherwise
terminated) or the date of a change in control (as defined with respect thereto)
of the Company. An intangible asset has been recorded for $1,200,000 which will
be amortized through maturity of the agreement.
Todd Communications, Inc.
In 1993, Mr. Paxson contributed to the Company, a demand note receivable in
the amount of $1,750,000 from Todd Communications, Inc. ("Todd Communications"),
a company which owns WFSJ-FM (St. Augustine, Florida) and is beneficially owned
by a member of Mr. Paxson's family. The note receivable accrues interest at the
short-term annual applicable federal rate prescribed by the Internal Revenue
Service with the balance of principal and interest due upon demand. Interest
income recognized related to the note aggregated approximately $110,000, $70,900
and $6,560 for the years ended December 31, 1995, 1994 and 1993, respectively.
The Company also performs limited sales support and administrative functions for
Todd Communications under a joint sales agreement. Todd Communications is billed
for efforts expended on terms comparable to those generally available from
unaffiliated third parties (Note 18).
World Travelers Network
On January 1, 1996, Mr. Paxson purchased the assets of the World Travelers
Network from the Company at their net book value of approximately $70,000.
South Carolina Radio Network
Effective January 1, 1996, Mr. Paxson purchased the assets of the South
Carolina Radio Network from the Company at their net book value of approximately
$45,000. Mr. Paxson subsequently sold such assets to a third party for $150,000,
with the excess over $45,000 being paid to the Company in accordance with the
parties' agreement.
Board of Directors
The Company has entered into transactions with certain members of its Board
of Directors.
F-17
<PAGE> 160
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Communications Equity Associates, Inc. ("CEA"). The Chairman of the Board
and Chief Executive Officer of CEA has been a director of the Company since
February 1995. The Company engaged CEA as a financial advisor in connection with
certain private placements and various other lending relationships. Fees paid to
CEA for these services totaled approximately $1,300,000, $1,855,000 and
$1,060,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
Stockholder Agreements. Certain redeemable preferred stock and common
stock warrants are held by entities controlled by Mr. Paxson and entities which
are affiliates of two directors of the Company (Notes 13 and 14).
S. William Scott. S. William Scott, a director of the Company since
February 1995, has an arrangement with the Company to provide consulting
services to the Company with respect to the development of its news programming
for its radio and television broadcast business and its radio network business.
Mr. Scott was paid approximately $80,000, $84,000 and $84,000 for such services
during the years ended December 31, 1995, 1994 and 1993, respectively.
Additionally, Mr. Scott received benefits under the Company's health and
benefits plan and was granted options to purchase 10,000 shares of stock under
the Company's stock incentive plan.
4. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
Broadcasting towers and equipment......................... $ 70,179,364 $ 39,445,071
Office furniture and equipment............................ 8,370,232 5,075,412
Buildings and leasehold improvements...................... 9,447,395 4,302,476
Land and land improvements................................ 7,418,039 3,142,532
Vehicles and other........................................ 4,851,576 3,877,851
------------ ------------
100,266,606 55,843,342
Accumulated depreciation.................................. (20,407,526) (10,492,912)
------------ ------------
Property and equipment, net............................... $ 79,859,080 $ 45,350,430
=========== ===========
</TABLE>
Depreciation expense aggregated $10,083,135, $5,433,038 and $2,804,157 for
the years ended December 31, 1995, 1994 and 1993, respectively.
5. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
FCC licenses.............................................. $ 76,313,074 $ 42,332,125
Covenants not to compete.................................. 14,502,375 11,811,375
Favorable lease and other contracts....................... 6,801,433 6,514,507
Goodwill.................................................. 9,444,500 7,819,778
------------ ------------
107,061,382 68,477,785
Accumulated amortization.................................. (22,743,235) (15,126,818)
------------ ------------
Intangible assets, net.................................... $ 84,318,147 $ 53,350,967
=========== ===========
</TABLE>
F-18
<PAGE> 161
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Amortization expense related to intangible assets aggregated $7,621,848,
$5,940,575 and $5,927,744 for the years ended December 31, 1995, 1994 and 1993,
respectively.
6. OTHER ASSETS:
Other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
----------- -----------
<S> <C> <C>
Loan origination costs...................................... $10,722,939 $ 7,739,288
Escrow funds for station acquisitions....................... 6,672,860 4,291,241
Deposits on building and equipment.......................... 1,377,964 642,890
Organization costs.......................................... 768,307 407,672
Other assets................................................ 917,361 1,708,638
----------- -----------
20,459,431 14,789,729
Accumulated amortization.................................... (562,737) (1,711,383)
----------- -----------
Other assets, net........................................... $19,896,694 $13,078,346
========== ==========
</TABLE>
Amortization expense related to other assets aggregated $1,014,126,
$1,029,915 and $618,732 for the years ended December 31, 1995, 1994 and 1993,
respectively.
Loan origination costs of $10,625,727 associated with debt extinguished
through proceeds from the senior subordinated notes are reflected in the 1995
statement of operations as an extraordinary item.
7. INVESTMENTS IN BROADCAST PROPERTIES:
Investments in broadcast properties represent the Company's financing of
broadcasting asset acquisitions by third party licensees, including CNI and Todd
Communications (Note 3). In conjunction with the financings, the Company has
obtained the right to provide programming for the related stations pursuant to
TBAs and has obtained options to purchase certain stations. Interest rates range
from LIBOR plus 1/2% (6.18% at December 31, 1995) to 12 1/8% with loans
maturing in five to seven years. Unpaid principal balances will be applied
toward the acquisition cost upon exercise of purchase options. The Company
records interest on certain investments as received. Investments in broadcast
properties at December 31, 1995 consist of:
<TABLE>
<CAPTION>
INVESTMENT OPTION OPTION
INVESTMENT TO/STATION AMOUNT EXPIRATION PRICE
----------------------------------------------- ----------- ------------- --------
<S> <C> <C> <C>
CNI: $16,481,345
WTJC-TV(1)*.................................. October 2005 $100,000
WFCT-TV(1)*.................................. December 2003 191,000
WCTD-TV(1)(2)*............................... April 1999 100,000
KUBD-TV(1)*.................................. August 2005 100,000
WCEE-TV(1)(3)*............................... January 2006 100,000
WIRB-TV...................................... -- --
WHITEHEAD MEDIA:
WOAC-TV(4)................................... December 2000 1,000
WTVX-TV(4)................................... December 2000 1,000
TODD COMMUNICATIONS: 1,750,000
WFSJ-FM...................................... -- --
</TABLE>
F-19
<PAGE> 162
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
INVESTMENT OPTION OPTION
INVESTMENT TO/STATION AMOUNT EXPIRATION PRICE
----------------------------------------------- ----------- ------------- --------
<S> <C> <C> <C>
OTHER: 2,960,685
WRMY-TV(5)................................... -- --
WHBI-TV(6)................................... -- --
WACC-AM(7)................................... -- --
-----------
$21,192,030
==========
</TABLE>
- ---------------
(1) Upon exercise of the option, the Company will apply the unpaid principal
balance towards the acquisition price.
(2) Upon exercise of the option, the Company will repay the remaining principal
balance on a third party note payable (Note 3).
(3) Purchase transaction consummated in 1996. Investment at December 31, 1995
represents initial advances.
(4) The Company initially financed the acquisition which was subsequently repaid
(Note 3). In addition to the option price, the Company will pay Whitehead
Media $500,000 for each station, plus the value of the station based upon
certain calculations.
(5) Investment represents financings for the construction of the station in
1996. Upon consummation of the transaction, the Company will have acquired a
40% interest in the station for $1,500,000.
(6) The station is not currently on the air. The investment relates to financed
expenditures for the build-out of the station.
(7) The Company has an option to purchase a 49% interest in exchange for its
initial advance to this station.
* The Company intends to exercise these options which became permissible with
the recent enactment of the Telecommunications Act of 1996.
8. PROGRAM RIGHTS:
Program rights relate to the broadcast operations of Paxson
Network-Affiliated Television stations as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
----------- -----------
<S> <C> <C>
Program rights.............................................. $ 4,290,715 $ 3,045,642
Accumulated amortization.................................... (2,493,357) (820,754)
----------- -----------
1,797,358 2,224,888
Less current program rights................................. (1,412,544) (1,980,000)
----------- -----------
Program Rights, net......................................... $ 384,814 $ 244,888
========== ==========
</TABLE>
Program rights amortization expense aggregated $1,765,942, $820,754 and $0
for the years ended December 31, 1995, 1994 and 1993, respectively.
Program rights payable represent the obligation incurred to secure the
right to broadcast program material in accordance with related contractual
agreements. Future minimum annual payments under these contractual agreements as
of December 31, 1995, are as follows:
<TABLE>
<CAPTION>
BROADCAST RIGHTS BARTER RIGHTS TOTAL
PAYMENTS EXPIRATION RIGHTS
---------------- ------------- ----------
<S> <C> <C> <C>
1996............................................ $1,139,402 $ 310,200 $1,449,602
1997............................................ 235,853 -- 235,853
1998............................................ 196,897 -- 196,897
---------------- ------------- ----------
$1,572,152 $ 310,200 $1,882,352
============ ========== =========
</TABLE>
F-20
<PAGE> 163
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
----------- -----------
<S> <C> <C>
Revolving credit loans, total commitment of $150,000,000,
interest at LIBOR plus 2.75%, extinguished in September
1995...................................................... $ -- $82,000,000
Revolving credit facility, total commitment of $100,000,000,
interest at LIBOR plus 3.25% (8.93% at December 31,
1995)..................................................... 10,000,000 --
Mortgage note payable, $200,055 principal, interest at 10%,
principal and interest payment of $3,000 due monthly
through April 1999, remaining balance due April 1999...... 184,705 200,055
Mortgage note payable, $825,000 principal, interest at
8.83%, principal and interest payment of $8,284 due
monthly from June 1995 to May 2010........................ 812,083 --
Notes payable, $2,155,000 aggregate principal, interest at
8% to 9.325%, aggregate principal and interest payments of
$41,646 due monthly, maturing at varying dates through
April 2001, secured by purchased assets................... $ 1,917,826 --
Mortgage note payable, $211,000 principal, interest at
9.75%, extinguished in August 1995........................ -- $ 206,902
----------- -----------
12,914,614 82,406,957
Less current portion........................................ (430,590) (6,393,415)
----------- -----------
$12,484,024 $76,013,542
========== ==========
</TABLE>
In September 1995, the Company extinguished its $150,000,000 revolving
credit agreement utilizing proceeds from the issuance of senior subordinated
notes. Additionally during 1995, the Company executed and subsequently
extinguished a $75,000,000 revolving credit agreement utilizing proceeds from
the issuance of senior subordinated notes (Note 10).
On December 19, 1995, the Company executed a $100,000,000 senior secured
revolving credit facility. The aggregate revolving commitment under the credit
facility will decrease by $10 million on December 31, 1997 and by $3.75 million
to $7.5 million each subsequent quarter thereafter until the termination of the
credit facility on June 30, 2002. Borrowings under the revolving credit facility
will bear interest at a rate equal to, at the option of the Company, either (i)
the base rate (which is defined as the higher of 1/2% plus the Federal Funds
rate or the prime rate most recently announced by the agent under the credit
facility) or (ii) LIBOR, in each case plus an applicable margin determined by
reference to the ratio of total debt to cash flow of the Company. Interest on
the current amounts drawn under the facility accrues at an initial rate of LIBOR
plus 3.25%. This revolving credit facility is secured by substantially all of
the Company's assets (as well as a negative pledge on all real property
interests) and subsidiary guarantees.
The reducing revolving credit facility contains a number of covenants that
restrict, among other things, the Company's ability to incur additional
indebtedness, incur liens, make investments, pay dividends or make other
restricted payments, consummate certain asset sales, consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of
substantially all of the assets of the Company. Prior to making any advance
under the new credit facility, the Company will be required to be in compliance
with all financial and operating covenants. Certain acquisitions to be funded
under the new credit facility are expected to require approval by 66 2/3% of the
lenders thereunder. The lenders under the new credit facility will be paid a
commitment fee at the rate of 0.5% per year on unused commitments, payable
quarterly.
F-21
<PAGE> 164
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate maturities of long-term debt at December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996........................................................ $ 430,590
1997........................................................ 482,952
1998........................................................ 503,993
1999........................................................ 636,785
2000........................................................ 220,372
Thereafter.................................................. 10,639,922
-----------
$12,914,614
==========
</TABLE>
10. SENIOR SUBORDINATED NOTES:
On September 28, 1995, the Company issued $230,000,000 of senior
subordinated notes (the "Notes") at a discount, netting proceeds of $227,309,000
to the Company. The Company accretes the original issue discount over the term
of the Notes using the effective interest method. At December 31, 1995, the
discount was $2,625,089. Interest on the Notes accrues at 11.625% to yield an
effective rate of 11.875%. Interest payments are payable semiannually on each
April 1 and October 1, commencing on April 1, 1996. The principal balance is due
at maturity on October 1, 2002. As part of the Note agreement, the Company filed
a registration statement relating to the Notes with the Securities and Exchange
Commission (the "SEC"), and commenced an offer to exchange the registered notes
for the Notes beginning January 24, 1996.
The Notes contain certain covenants which, among other things, restrict
additional indebtedness, payment of dividends, stock issuance of subsidiaries,
certain investments and transfers or sales of assets, and provide for the
repurchase of the Notes in the event of a change in control of the Company. The
Notes are general unsecured obligations of the Company subordinate in right of
payment to all existing and future senior indebtedness of the Company and senior
in right to all future subordinated indebtedness of the Company.
The Notes become redeemable at the option of the Company on October 1,
1999, 2000 and 2001 at a redemption price of 104%, 102% and 100%, respectively,
of the outstanding principal amount, plus accrued interest. Additionally, the
Company may redeem up to 25% of the original principal amount of the Notes with
proceeds from certain sales of Company stock or assets at any time prior to
October 1, 1998 at a redemption price of 110% of the outstanding principal
amount, plus accrued interest. There are no mandatory redemption requirements.
11. INCOME TAXES:
Prior to the reorganization and consolidation on December 15, 1993, the
Company's businesses operated in the form of partnerships and S corporations for
federal and state income tax purposes. Therefore, all income and losses prior to
that date were taxed at the partner and stockholder level and no provision for
income taxes was recorded.
As a result of the reorganization and consolidation on December 15, 1993,
the tax status of the Company changed to a taxable entity. Reflected in the 1993
tax provision for continuing operations is the cumulative
F-22
<PAGE> 165
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
difference between the tax bases and book bases of assets and liabilities
arising prior to this date. Significant components of the (benefit) provision
for income taxes are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
Current tax expense
Federal.................................... $ -- $ -- $ --
State...................................... -- -- --
----------- ----------- ----------
Total current...................... -- -- --
----------- ----------- ----------
Deferred tax (benefit) expense
Federal.................................... (1,152,000) (1,503,200) 2,674,000
State...................................... (128,000) (176,800) 286,000
----------- ----------- ----------
Total deferred..................... (1,280,000) (1,680,000) 2,960,000
----------- ----------- ----------
Total (benefit) provision.......... $(1,280,000) $(1,680,000) $2,960,000
========== ========== =========
</TABLE>
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:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1994
------------ -----------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts........................ $ 385,000 $ 194,940
Net operating loss carryforwards....................... 13,599,000 4,126,507
Deferred compensation.................................. 3,725,000 --
------------ -----------
17,709,000 4,321,447
Deferred tax asset valuation allowance for net
operating loss carryforwards and deferred
compensation........................................ (15,009,000) (4,126,507)
------------ -----------
Deferred tax assets, net............................... 2,700,000 194,940
Deferred tax liabilities:
Tax over book depreciation and amortization............ (2,700,000) (1,474,940)
------------ -----------
Total.......................................... $ -- $(1,280,000)
=========== ==========
</TABLE>
A valuation allowance has been provided when management believes it is more
likely than not that a portion of the deferred tax asset will not be realized. A
portion of the net operating losses were acquired in the acquisition of ANG.
Future recognition of the benefit from these acquired losses will be applied
first to reduce goodwill related to the acquisition, then to reduce other
non-current intangible assets related to the acquisition and then to reduce
income tax expense.
The Company and its subsidiaries have filed consolidated tax returns for
all periods subsequent to December 15, 1993.
A pro forma provision for income taxes to reflect the effect on the
statement of operations for the year ended December 31, 1993 had the Company's
business operations filed a consolidated income tax return for 1993, prior to
December 15, 1993, would result in a tax benefit of approximately $3,159,000 for
net operating losses and a corresponding valuation allowance resulting in no pro
forma provision for income taxes.
F-23
<PAGE> 166
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The reconciliation of income tax benefit attributable to continuing
operations, computed at U.S. Federal Statutory tax rates, to the provision for
income taxes is:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------------
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
Tax benefit at U.S. Federal Statutory tax
rates........................................ $(11,417,000) $(2,190,305) $(2,717,230)
State income tax benefit, net of federal tax... (1,343,000) (257,682) (290,104)
Tax benefits attributable to losses recognized
for book purposes in periods that the Company
operated as non-taxable entities............. -- -- 3,397,783
Deferred taxes attributable to income
recognized on accrual basis for book
purposes, in period that the Company operated
as non-taxable entities, but recognized for
tax purposes after reorganization............ -- -- 2,334,364
Non-deductible items........................... 597,000 83,000 --
Valuation allowance............................ 10,883,000 684,987 235,187
------------ ----------- -----------
(Benefit) provision for income taxes........... $ (1,280,000) $(1,680,000) $ 2,960,000
=========== ========== ==========
</TABLE>
The extraordinary items relate to debt retirements. The 1993 retirements
occurred in the period before the Company reorganized on December 15, 1993, were
taxable at the stockholder level and, accordingly, are not tax affected. No tax
effect has been included related to the 1995 debt retirement as the
extraordinary item is included in the Company's net operating loss carryforward
for which a valuation allowance has been provided.
The Company has net operating loss carryforwards for income tax purposes
subject to certain carryforward limitations of approximately $35,700,000 at
December 31, 1995 expiring through 2010. A portion of the net operating losses
relate to ANG and are limited to annual utilization as a result of the change in
ownership.
12. EMPLOYEE BENEFIT PLANS AND EMPLOYMENT AGREEMENTS:
Savings and Profit Sharing Plan
The Company has retirement savings and cafeteria plans pursuant to Sections
401(k) and 125 of the Internal Revenue Code which cover substantially all of the
Company's employees. Employer contributions to the retirement savings plan are
discretionary. The Company elected not to make retirement savings contributions
for the three plan years ended December 31, 1995. Under the cafeteria plan,
employees may elect to participate in health, dental, life and disability
insurance benefit plans funded through employee payroll deductions.
Stock Incentive Plan
In November 1994, the Company established the Stock Incentive Plan (the
"Plan") to provide incentives to officers and other employees through the
issuance of options and restricted stock. The number of options, exercise prices
and exercise dates granted under the Plan are at the discretion of the Company's
Compensation Committee and may be in the form of either incentive or
non-qualified stock options or awards of restricted stock. At December 31, 1995,
301,370 shares of Class A common stock were available for issuance under the
Plan. When options are granted, a non-cash charge representing the difference
between the exercise price and the fair market value of the vested options on
the date of grant is recorded as option plan compensation expense. For the year
ended December 31, 1995, the Company recognized approximately $10,800,000 of
option plan compensation expense and expects to recognize approximately an
additional $1,400,000 of expense over the next five years as such options vest.
F-24
<PAGE> 167
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1995, 49 employees had been granted options under the Plan
pursuant to a five-year vesting cycle commencing retroactively to the employee's
date of employment or exercisable in full at the date of grant. At December 31,
1995, approximately 1,100,000 shares were vested and fully exercisable. In
January 1996, 10,000 options were granted at $3.42 per option and 8,928 were
granted at $0.01 per option. All options granted expire over a ten year period.
Transactions under the Plan are as follows:
<TABLE>
<CAPTION>
NUMBER OF PRICE PER
OPTIONS OPTION
--------- ---------
<S> <C> <C>
Outstanding, December 31, 1994........................................... -- --
Granted.................................................................. 1,847,005 $3.42
Forfeited................................................................ (4,800) 3.42
Exercised................................................................ (89,800) 3.42
---------
Outstanding, December 31, 1995........................................... 1,752,405
========
</TABLE>
Employment Agreements
Mr. Paxson is employed under an employment agreement providing for him to
be employed through December 31, 1999, unless sooner terminated. The agreement
provides that Mr. Paxson's salary will be $385,000 in 1996, $423,500 in 1997,
$465,850 in 1998 and $500,000 in 1999. In addition to his base salary, Mr.
Paxson may receive an annual bonus at the discretion and in an amount set by
members of the Compensation Committee that are not employees of the Company.
The Company has other employment agreements with individuals under which
the individuals are paid a base salary and may receive annual incentives based
on revenue amounts and stock options based on the cash flow of the stations they
manage.
13. REDEEMABLE PREFERRED STOCK:
Redeemable Senior Preferred Stock
Redeemable Senior preferred stock was originally issued with 225 detachable
redeemable common stock purchase warrants on December 15, 1993 in exchange for
$14,000,000. The holder of preferred stock is entitled to preferential
cumulative dividends at a rate of 15% of the liquidation price, per annum,
payable quarterly commencing on December 31, 1993. On January 1 of each year,
accrued and unpaid dividends are added to the liquidation price of the stock.
The holders of the Senior preferred stock, voting as a class, are entitled to
elect 25% of the Company's Board of Directors.
The Senior preferred stock is redeemable, at the option of the holder, on
or after the seventh anniversary of the issue date (December 15, 2000) at $7,000
per share plus accrued and unpaid dividends to date. The shares may also be
redeemed, at the option of the Company, on or after the fourth anniversary of
the issue date (December 15, 1997) at $7,000 per share plus accrued and unpaid
dividends to date. The shares also provide redemption features in the event of
certain changes in ownership control of the Company, bankruptcy, and twelve
month dividend arrearages after the fifth anniversary of the issue date
(December 15, 1998).
Cumulative preferred dividends in arrears aggregated $4,644,352 and
$2,197,808 at December 31, 1995 and 1994, respectively.
Redeemable Series B Preferred Stock
Redeemable Series B preferred stock was issued on December 22, 1994 as a
result of the exercise of 94.6223 detachable redeemable common stock purchase
warrants into 1,310,779 shares of Class A common stock and 436,926 shares of
Class B common stock which were then surrendered for Series B preferred stock.
The holder of Series B preferred stock is entitled to cumulative dividends at a
per annum rate of 15% per
F-25
<PAGE> 168
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
share, payable quarterly commencing on December 31, 1994. On January 1 of each
year, accrued and unpaid dividends are added to the liquidation price of the
stock. Series B preferred stock ranks prior to all classes of Junior preferred
stock.
The Series B preferred shares are redeemable, at the option of the holder,
on or after December 15, 2000 at $7,000 per share plus accrued and unpaid
dividends to date. The shares may also be redeemed at the option of the Company,
on or after December 15, 1997 at $7,000 per share plus accrued and unpaid
dividends to date.
Cumulative Series B preferred dividends in arrears aggregated $771,269 and
$18,493 at December 31, 1995 and 1994, respectively.
Redeemable Junior Preferred Stock
Redeemable Junior preferred stock was issued with 4,853,628 detachable
Class C common stock warrants (after giving effect to the stock dividend during
January 1995) on December 22, 1994 in exchange for $33,000,000. The holder of
Junior preferred stock is entitled to cumulative dividends at a rate of 12% per
annum prior to the seventh anniversary of the issue date (December 22, 2001),
13% per annum from the seventh through the eighth anniversary of the issue date
(December 22, 2002), and 14% per annum after the eighth anniversary of the issue
date. Semi-annual dividend payments are required commencing December 31, 1999.
The Junior preferred shares are redeemable, at the option of the Company,
at $1,030 plus unpaid, deferred, and accrued dividends prior to the third
anniversary of the issue date (December 22, 1997), $1,020 plus unpaid, deferred,
and accrued dividends after the third and prior to the fourth anniversary of the
issue date (December 22, 1998), and $1,000 plus unpaid, deferred, and accrued
dividends per share on or after the fourth anniversary of the issue date. A
mandatory redemption is scheduled on the ninth anniversary of the issue date
(December 22, 2003).
Cumulative Junior preferred dividends in arrears aggregated $4,188,512 and
$97,644 at December 31, 1995 and 1994, respectively.
Redemption Features of Preferred Stock
The following table presents the redemption value of the three classes of
preferred stock should each be redeemed in the indicated year, assuming no
dividends are paid prior to redemption, unless required:
<TABLE>
<CAPTION>
SENIOR SERIES B JUNIOR
PREFERRED(1) PREFERRED(1) PREFERRED(2)
------------ ------------ ------------
<S> <C> <C> <C>
1996............................................ $ 42,775,013
1997............................................ $ 24,657,155 $ 7,632,502 47,939,640
1998............................................ 28,355,728 8,777,377 53,412,616
1999............................................ 32,609,087 10,093,984 59,102,420
2000............................................ 37,500,450 11,608,082 59,102,420
</TABLE>
- ---------------
(1) Redeemable at the option of the Company on or after December 15, 1997 and at
the option of the holder on or after December 15, 2000.
(2) Mandatorily redeemable on the ninth anniversary (December 22, 2003),
redeemable by the Company prior to that date.
F-26
<PAGE> 169
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. COMMON STOCK WARRANTS:
Redeemable Common Stock Warrants
In connection with the 1993 Redeemable Senior preferred stock issuance, the
Company issued 225 detachable redeemable common stock purchase warrants
entitling the holder to purchase one common share per warrant at an exercise
price of $0.01 per share. On December 22, 1994, 94.6223 of the warrants were
exercised for 1,310,779 shares of Class A common stock and 436,926 shares of
Class B common stock and were then surrendered for the redeemable Series B
preferred stock. The remaining 130.3777 redeemable common stock purchase
warrants entitle the holders to purchase 2,709,129 Class A common shares and
903,043 Class B common shares (after giving effect to the stock dividend).
The stock purchase warrants include a put provision requiring the Company
to repurchase any warrants, at the option of the holder, at the fair market
value per share on or after the seventh anniversary of issue date (December 15,
2000). At December 31, 1995, using the fair value of the underlying stock, the
stock purchase warrants would accrete to approximately $49,600,000 at their
mandatory redemption date of December 15, 2000. The holders of the warrants are
entitled to demand registration rights and piggyback registration rights
following certain offerings of shares to the public.
Class C Common Stock Warrants
In connection with the Redeemable Junior preferred stock issuance on
December 22, 1994, the Company issued 4,853,628 detachable Class C common stock
purchase warrants (after giving effect to the stock dividend), entitling the
holder to purchase one Class C common share per warrant at an exercise price of
$0.001 per share. Certain holders of these purchase warrants are entitled to
demand registration rights subsequent to the third anniversary of the issuance
date and piggyback registration rights six months following certain offerings of
shares to the public.
15. COMMON STOCK:
On December 15, 1993, in connection with the reorganization and
consolidation of its radio broadcasting activities, the Company authorized 1,500
shares and issued 1,200 shares of unclassified common stock.
In November 1994, in connection with the merger with ANG, the Company
amended its capital structure to provide two classes of common voting stock,
Class A common stock (45,000,000 shares authorized) and Class B common stock
(7,000,000 shares authorized). Upon consummation of the recapitalization, the
Company's unclassified common stock outstanding was converted into 15,790,974
shares of Class A common stock and 5,263,658 shares of Class B common stock.
Upon consummation of the merger, the holders of ANG common stock received Class
A common stock in exchange for ANG common stock outstanding and such shares of
Class A common stock which where exchanged for the ANG common stock were listed
on the Nasdaq Small-Cap Market.
On December 22, 1994, the Company further amended its capital structure to
increase authorized shares of Class A common stock to 150,000,000 shares and
Class B common stock to 35,000,000 shares, and to designate a third class of
non-voting common stock, Class C common stock, 12,500,000 shares authorized.
On January 1, 1995, the Company announced a stock dividend for its common
stock of an additional one-half share for each common share outstanding for
holders of record on January 1, 1995. Weighted average shares outstanding for
the years ended December 31, 1994 and 1993 give effect to the Company's amended
capital structure related to the merger with ANG, and the stock dividend on
common shares outstanding on January 1, 1995.
F-27
<PAGE> 170
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On July 10, 1995, the Company's Class A common stock was listed on the
American Stock Exchange under the symbol of PXN. These publicly traded shares
represent approximately 5% of Class A common shares outstanding at December 31,
1995 and less than 2% of the Company's voting power.
Voting rights allow the voting common stockholders to elect up to 75% of
the Company's Board of Directors, but do not allow the common stockholders to
change the rights and privileges of the preferred stockholders without a
majority affirmative vote of the preferred stockholders. Class A common stock
and Class B common stock will vote as a single class in all matters submitted to
a vote of the stockholders with each share of Class A common stock entitled to
one vote and each share of Class B common stock entitled to ten votes; Class C
common stock is nonvoting. Each share of Class B common stock is convertible, at
the option of its holder, into one share of Class A common stock at any time,
and under certain circumstances, Class C common stock may be converted, at the
option of the holder, into Class A common stock.
16. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair value of financial instruments has been determined by
the Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting data
to develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The fair value estimates presented herein
are based on pertinent information available to management as of December 31,
1995. Although management is not aware of any factors that would significantly
affect the estimated fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements since that
date and current estimates of fair value may differ significantly from the
amounts presented herein. The following methods and assumptions were used to
estimate the fair value of each class of financial instruments:
Cash and cash equivalents, accounts receivable, accounts payable and
accrued expenses. The fair values approximate the carrying values due to
their short term nature.
Investments in broadcast properties. The fair value of investments in
broadcast properties is estimated based on the net present value of the
future cash flows using a discount rate approximating current market rates.
The fair value approximates the carrying value.
Interest rate caps. The Company's interest rate cap agreements were
originally entered into to meet covenants under variable rate revolving
credit loan agreements outstanding in prior periods, which were
extinguished during the year ended December 31, 1995, and currently do not
serve as a hedging vehicle. As a result, interest rate cap agreements
previously amortized to interest expense have been marked to market and net
losses of approximately $800,000 were recognized during the year ended
December 31, 1995 which are reflected in the consolidated statement of
operations as other income (expense). The Company has interest rate cap
agreements outstanding at December 31, 1995 with notional amounts totaling
$75 million. Variable rate debt outstanding at December 31, 1995 totaled
approximately $10 million. The interest rate cap agreements have
termination dates of March 1996 through December 1997 and result in the
Company receiving payments when the LIBOR rate exceeds between 5% and
7 1/4%.
Program rights payable. The fair value of program rights payable is
estimated based on the net present value of the future cash flows using a
discount rate approximating current market rates. The fair value
approximates the carrying value.
Long-term debt and Senior subordinated notes. The fair values of
long-term debt and senior subordinated notes are estimated based on current
market rates and instruments with the same risk and maturities. The fair
values approximate the carrying value.
F-28
<PAGE> 171
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Mandatorily redeemable securities. Redeemable preferred stock
(Senior, Series B and Junior) is being accreted to its respective
redemption values and redeemable common stock warrants (Class A and B) are
accreted to the estimated fair value of the underlying common stock upon
redemption. Estimated fair value at redemption is reviewed on a quarterly
basis to reflect changes in the underlying stock value.
17. COMMITMENTS AND CONTINGENCIES:
The Company incurred total expenses of approximately $5,334,000, $2,406,000
and $1,218,000 for the years ended December 31, 1995, 1994 and 1993,
respectively, under operating leases for broadcasting facilities and equipment
and for employment agreements. Future minimum annual payments under these non-
cancelable operating leases and agreements, as of December 31, 1995, are as
follows:
<TABLE>
<S> <C>
1996........................................................ $ 5,151,000
1997........................................................ 3,941,000
1998........................................................ 3,234,000
1999........................................................ 2,189,000
2000........................................................ 1,127,000
Thereafter.................................................. 7,150,000
-----------
$22,792,000
==========
</TABLE>
The Company has entered into commitments for radio broadcast rights related
to sporting events that are not currently available for broadcast and are
therefore not included in the financial statements. The Company incurred total
rights expenses of approximately $2,806,000 for the year ended December 31, 1995
and had total commitments of approximately $3,503,000 as of December 31, 1995.
As of December 31, 1995, the Company had entered into TBAs with seven FCC
licensees which require monthly TBA payments ranging from $3,500 to $35,000 and
have termination dates ranging from seven to ten years.
As of December 31, 1995, the Company has agreements to purchase significant
assets of, provide financing for, or enter into time brokerage arrangements with
the following television stations, all of which are subject to various
conditions, including the receipt of regulatory approvals:
<TABLE>
<CAPTION>
PURCHASE PRICE/
STATION MARKET SERVED(1) INVESTMENT AMOUNT
--------------------------------------------- -------------------- -----------------
<S> <C> <C>
Channel 68................................... Dallas, TX $ 3,000,000
WNGM-TV(2)................................... Atlanta, GA --
WHKE-TV(2)................................... Milwaukee, WI 4,000,000
WJUE-TV(3)................................... Grand Rapids, MI 1,000,000
WHBI-TV(4)................................... West Palm Beach, FL 6,300,000
WOCD-TV...................................... Albany, NY 2,500,000
WSJN-TV(5)................................... San Juan, PR 4,000,000
</TABLE>
- ---------------
(1) Each station is licensed by the FCC to serve a specific community which is
included in the listed market.
(2) To be operated pursuant to a TBA.
(3) 70% ownership interest to be acquired.
(4) The Company financed certain build-out costs of the station prior to
December 31, 1995 (Note 7). The Company expects to enter into an
affiliation agreement after the construction of the station.
(5) 50% ownership interest to be acquired; station signal will be satellite
simulcast in the San Juan area on WKPV-TV and WJWN-TV, stations in which
the Company is also acquiring a 50% interest. This station is currently
being operated pursuant to a TBA.
F-29
<PAGE> 172
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Affiliation Agreements
During 1995, the Company entered into inTV affiliation agreements with two
television licensees. Under the agreements, the licensees agree to broadcast
programming provided by inTV during certain times of the day and are compensated
based on the monthly advertising collected and the number of cable homes covered
by the licensees. inTV may terminate these agreements with a ninety day written
notice. The minimum amounts due under these agreements at December 31, 1995
totals approximately $531,000.
Legal Proceedings
The Company is involved in litigation from time to time in the ordinary
course of its business. In the opinion of management, the ultimate resolution of
these matters will not have a material effect on the Company's consolidated
financial position or results of operations and cash flows.
18. SUBSEQUENT EVENTS:
Investments in Broadcast Properties:
Subsequent to year end, the Company made the following investments in
broadcast properties through the financing of third party purchases of
television broadcasting stations. Concurrent with these transactions, the
Company executed TBAs and option purchase agreements (Note 7).
<TABLE>
<CAPTION>
STATION MARKET SERVED(1) INVESTMENT AMOUNT
- -------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
WRMY-TV(3).............................................. Raleigh, NC $ 5,500,000
KWBF-TV(2).............................................. Phoenix, AZ 1,400,000
WCEE-TV(2).............................................. St. Louis, MO 3,200,000
</TABLE>
- ---------------
(1) Each station is licensed by the FCC to serve a specific community, which is
included in the listed market.
(2) The Company currently holds an option to purchase the station from the
licensee.
(3) Investment amount consists of a $1,500,000 option to purchase a 40% interest
in the station and construction financing, of which approximately $600,000
was outstanding at December 31, 1995.
Purchases:
Subsequent to December 31, 1995, the Company entered into agreements to
purchase significant assets of or acquire ownership in the following television
and radio stations, all of which are subject to various conditions, including
receipt of regulatory approvals:
<TABLE>
<CAPTION>
PURCHASE
PRICE/
INVESTMENT
STATION MARKET SERVED(1) AMOUNT
-------------------------------------------------- -------------------- --------------
<S> <C> <C>
WOST-TV(2)........................................ Providence, RI $ 1,000,000
KZAR-TV(2)........................................ Salt Lake City, UT 850,000
WHUB-FM,WHUB-AM(3)................................ Cookeville, TN 3,800,000
WFSJ-FM(4)........................................ Jacksonville, FL 5,000,000
WRMA-FM,WXDJ-FM(5)................................ Miami, FL 115,000,000
Channel 23(6)..................................... New York, NY 2,000,000
Channel-38(6)..................................... New York, NY 1,500,000
</TABLE>
- ---------------
(1) Each station is licensed by the FCC to serve a specific community, which is
included in the listed market.
(2) The Company will acquire 50% ownership interest pursuant to a management
agreement. The station is currently under construction.
F-30
<PAGE> 173
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) The Company will acquire both the FM and AM stations.
(4) The Company will issue stock valued at approximately $1.70 million, apply
the note receivable from Todd Communications and assume the Todd
Communications note payable to Mr. Paxson of approximately $1.55 million to
acquire the station.
(5) The Company will acquire these stations simultaneously for either a cash
payment of $107,500,000 or cash of $92 million and approximately 1.3 million
shares of Company common stock at the option of the seller.
(6) The Company will acquire these "low power" stations, the signals of which
will be augmented by simulcasting the signal of WHAI-TV, a station currently
owned by the Company.
Subsequent to year end the Company purchased substantially all of the
assets of WHAI-TV, New York, NY and WAKC-TV, Cleveland, OH for approximately $22
million and $18 million, respectively.
Public Offering:
The Company intends to file a registration statement with the SEC for the
proposed sale of 11.5 million shares of its Class A common stock, 10.3 million
of which will be sold by the Company. The Company intends to use the net
proceeds to acquire or enter into TBAs with television and radio stations, make
capital expenditures and for other general corporate purposes.
Telecommunications Reform:
On February 8, 1996, new telecommunications regulations were enacted into
law, allowing, among other things, an expanded number of radio and television
stations under common ownership. As a result, the Company has exercised options
to acquire television stations WTJC-TV, KUBD-TV, WCEE-TV and KWBF-TV from CNI
(Note 7).
Other Transactions
On January 9, 1996, the Company purchased from Mr. Paxson, at its face
value, a $1 million note related to CNI's acquisition of KLDT-TV.
Subsequent to December 31, 1995, the Company entered into a joint venture
agreement with L.L. Knickerbocker Company, Inc. for the purpose of identifying
products and services for long-form advertising and developing marketing
strategies and infomercials for such products and services.
Subsequent to year end, the Company entered into two inTV affiliation
agreements with station licensees. inTV may terminate these agreements with a
ninety day written notice. The minimum amounts due under these agreements at
December 31, 1995 totals approximately $380,000.
Subsequent to December 31, 1995, the Company entered into a limited
partnership agreement as a general partner for the Bobcats, an Arena football
franchise in South Florida. Additionally, Mr. Paxson acquired a portion of the
Company's limited partnership interest in the same partnership.
19. SEGMENT DATA:
The Company operates three business segments: (1) the Infomall TV Network
is a nationwide network of owned, operated and affiliated television stations
dedicated to the airing of long form paid programming consisting primarily of
infomercials; (2) Paxson Radio consists of radio broadcasting stations, radio
news and sports networks and billboard operations; and (3) Paxson
Network-Affiliated Television includes network-affiliated television
broadcasting stations in West Palm Beach, Florida. In January 1995, four
stations which had previously aired long form paid programming were reclassified
as inTV stations. The financial information related to these four stations prior
to January 1, 1995 has been reclassified to conform with the 1995
F-31
<PAGE> 174
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
presentation. Corporate and other operations represent revenue earned through
commissions, non-broadcast activities, expenses incurred for such activities,
and corporate overhead expenses, including management expenses which are not
allocated to the individual segments.
Selected financial information for these segments follows:
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------------------
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
INFOMALL TV NETWORK
Total revenue......................................... $ 29,653,278 $ 3,287,285 $ --
Operating expenses, less depreciation, amortization
and option plan compensation........................ 16,266,563 3,401,328 --
Depreciation and amortization......................... 4,545,683 1,344,986 --
Option plan compensation.............................. 37,506 -- --
------------ ------------ -----------
Income (loss) from operations......................... $ 8,803,526 $ (1,459,029) $ --
=========== =========== ==========
Total identifiable assets............................. $104,106,341 $ 16,212,828 $ --
=========== =========== ==========
Capital expenditures.................................. $ 7,703,973 $ 2,527,903 $ --
=========== =========== ==========
PAXSON RADIO
Total revenue......................................... $ 54,752,191 $ 50,363,294 $31,058,472
Operating expenses, less depreciation, amortization
and option plan compensation........................ 44,227,935 39,002,002 25,012,435
Depreciation and amortization......................... 10,357,042 9,124,969 9,128,847
Option plan compensation.............................. 1,751,238 -- --
------------ ------------ -----------
Income (loss) from operations......................... $ (1,584,024) $ 2,236,323 $(3,082,810)
=========== =========== ==========
Total identifiable assets............................. $ 68,886,153 $ 67,201,401 $61,686,096
=========== =========== ==========
Capital expenditures.................................. $ 9,610,186 $ 2,491,959 $ 1,962,553
=========== =========== ==========
PAXSON NETWORK-AFFILIATED TELEVISION
Total revenue......................................... $ 16,537,406 $ 7,477,508 $ --
Operating expenses, less depreciation and
amortization........................................ 11,793,824 5,003,272 --
Depreciation and amortization......................... 3,102,665 1,542,286 --
------------ ------------ -----------
Income from operations................................ $ 1,640,917 $ 931,950 $ --
=========== =========== ==========
Total identifiable assets............................. $ 37,421,642 $ 39,409,693 $ --
=========== =========== ==========
Capital expenditures.................................. $ 2,825,249 $ 657,375 $ --
=========== =========== ==========
CORPORATE AND OTHER
Total revenue......................................... $ 2,131,037 $ 939,356 $ 1,003,559
Operating expenses, less depreciation, amortization
and option plan compensation........................ 9,814,643 3,819,350 3,860,193
Depreciation and amortization......................... 713,719 391,287 221,786
Option plan compensation.............................. 9,014,497 -- --
------------ ------------ -----------
Loss from operations.................................. $(17,411,822) $ (3,271,281) $(3,078,420)
=========== =========== ==========
Total identifiable assets............................. $ 83,417,941 $ 29,846,459 $ 4,888,512
=========== =========== ==========
Capital expenditures.................................. $ 4,877,408 $ 239,275 $ --
=========== =========== ==========
</TABLE>
F-32
<PAGE> 175
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------------------
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
CONSOLIDATED
Total revenue......................................... $103,073,912 $ 62,067,443 $32,062,031
Operating expenses, less depreciation, amortization
and option plan compensation........................ 82,102,965 51,225,952 28,872,628
Depreciation and amortization......................... 18,719,109 12,403,528 9,350,633
Option plan compensation.............................. 10,803,241 -- --
------------ ------------ -----------
Loss from operations.................................. $ (8,551,403) $ (1,562,037) $(6,161,230)
=========== =========== ==========
Total identifiable assets............................. $293,832,077 $152,670,381 $66,574,608
=========== =========== ==========
Capital expenditures.................................. $ 25,016,816 $ 5,916,512 $ 1,962,553
=========== =========== ==========
</TABLE>
20. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE 1995 QUARTERS ENDED
---------------------------------------------------------
DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
------------ ------------- ------------ -----------
<S> <C> <C> <C> <C>
Total revenue............................. $ 31,550,195 $ 27,167,369 $ 23,736,645 $20,619,703
Operating expenses, less depreciation,
amortization and option plan
compensation............................ 23,124,962 21,332,736 18,963,733 18,681,534
Depreciation and amortization............. 5,640,068 5,024,785 4,269,627 3,784,629
Option plan compensation.................. 994,136 404,976 9,404,129 --
------------ ------------- ------------ -----------
Income (loss) from operations............. $ 1,791,029 $ 404,872 $ (8,900,844) $(1,846,460)
========== =========== =========== ==========
Loss before extraordinary item............ $ (5,566,169) $ (2,851,681) $(11,176,729) $(3,252,984)
Extraordinary item(1)..................... -- (10,625,727) -- --
------------ ------------- ------------ -----------
Net loss.................................. $ (5,566,169) $ (13,477,408) $(11,176,729) $(3,252,984)
========== =========== =========== ==========
Net loss attributable to common stock..... $ (9,741,895) $ (16,734,727) $(14,849,938) $(5,443,936)
========== =========== =========== ==========
Per share data:
Loss before extraordinary item.......... $ (0.16) $ (0.08) $ (0.32) $ (0.09)
Net loss................................ $ (0.16) $ (0.39) $ (0.32) $ (0.09)
Net loss attributable to common stock... $ (0.28) $ (0.49) $ (0.43) $ (0.16)
Weighted average common shares
outstanding............................. 34,503,666 34,458,766 34,448,665 34,354,201
========== =========== =========== ==========
Stock price(2):
High.................................... $ 16 3/8 $ 15 3/4 $ 14 $ 12 5/8
Low..................................... $ 11 1/2 $ 12 $ 8 $ 9
</TABLE>
- ---------------
(1) Extraordinary item relates to the write-off of loan origination costs
associated with the extinguishment of certain debt agreements during the
third quarter (Note 9).
(2) The Company's Class A common stock is listed on the American Stock Exchange
under the symbol PXN. Prior to July 10, 1995, the Company's Class A common
stock was listed on the NASDAQ Small-Cap Market.
F-33
<PAGE> 176
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE 1994 QUARTERS ENDED
---------------------------------------------------------
DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
------------ ------------- ------------ -----------
<S> <C> <C> <C> <C>
Total revenue............................. $ 22,226,226 $ 18,327,456 $ 12,148,603 $ 9,365,158
Operating expenses, less depreciation and
amortization............................ 18,413,022 14,219,712 10,268,884 8,324,334
Depreciation and amortization............. 3,845,370 3,292,245 2,855,767 2,410,146
------------ ------------- ------------ -----------
Income (loss) from operations............. $ (32,166) $ 815,499 $ (976,048) $(1,369,322)
========== =========== =========== ==========
Loss before extraordinary item............ $ (1,972,628) $ (672,445) $ (318,376) $(1,798,625)
========== =========== =========== ==========
Net loss.................................. $ (1,972,628) $ (672,445) $ (318,376) $(1,798,625)
========== =========== =========== ==========
Net loss attributable to common stock..... $ (2,950,626) $ (1,492,845) $ (1,121,630) $(2,582,429)
========== =========== =========== ==========
Pro forma per share data (Note 1):
Pro forma loss before extraordinary
item................................. $ (0.06) $ (0.02) $ (0.01) $ (0.06)
Pro forma net loss...................... $ (0.06) $ (0.02) $ (0.01) $ (0.06)
Pro forma net loss attributable to
common stock......................... $ (0.09) $ (0.04) $ (0.03) $ (0.08)
Pro forma weighted average common shares
outstanding............................. 33,430,116 33,430,116 32,506,032 31,581,948
========== =========== =========== ==========
Stock price (1):
High(2)................................. $ 16 $ -- $ -- $ --
Low(2).................................. $ 10 5/8 $ -- $ -- $ --
</TABLE>
- ---------------
(1) The Company's Class A common stock is listed on the American Stock Exchange
under the symbol PXN. Prior to July 10, 1995, the Company's Class A common
stock was listed on the NASDAQ Small-Cap Market.
(2) Stock price after giving effect to the January 1, 1995 stock dividend (Note
15).
F-34
<PAGE> 177
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................ $115,577,129 $ 68,070,990
Accounts receivable, less allowance for doubtful accounts of $1,037,349
and $909,713 respectively............................................. 19,354,203 17,726,415
Prepaid expenses and other current assets................................ 2,487,528 971,363
Current program rights................................................... 664,830 1,412,544
------------ ------------
Total current assets............................................. 138,083,690 88,181,312
Property and equipment, net................................................ 110,429,710 79,859,080
Intangible assets, net..................................................... 121,300,867 84,318,147
Other assets, net.......................................................... 28,480,440 19,896,694
Investments in broadcast properties........................................ 38,887,393 21,192,030
Program rights, net........................................................ 266,551 384,814
------------ ------------
Total assets..................................................... $437,448,651 $293,832,077
=========== ===========
LIABILITIES, REDEEMABLE SECURITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities................................. $ 6,948,343 $ 5,030,692
Accrued interest......................................................... 6,730,050 6,932,342
Current portion of program rights payable................................ 642,229 1,449,602
Current portion of long-term debt........................................ 569,766 430,590
------------ ------------
Total current liabilities........................................ 14,890,388 13,843,226
Program rights payable..................................................... 277,242 432,750
Long-term debt............................................................. 3,764,578 12,484,024
Senior subordinated notes, net............................................. 227,507,455 227,374,911
Redeemable Cumulative Compounding Senior preferred stock, $0.001 par value;
15% dividend rate per annum, 2,000 shares authorized, issued and
outstanding.............................................................. 18,393,136 16,824,082
Redeemable Class A & B common stock warrants............................... -- 6,465,317
Redeemable Cumulative Compounding Series B preferred stock, $0.001 par
value;
15% dividend rate per annum, 714.286 shares authorized, issued and
outstanding.............................................................. 2,990,200 2,352,654
Redeemable Cumulative Compounding Junior preferred stock, $0.001 par value;
12% dividend rate per annum, 33,000 shares authorized, issued and
outstanding.............................................................. 34,090,262 31,533,910
Class A common stock, $0.001 par value; one vote per share; 150,000,000
shares authorized, 38,665,509 shares issued and outstanding.............. 38,665 26,227
Class B common stock, $0.001 par value; ten votes per share, 35,000,000
shares authorized, 8,311,639 shares issued and outstanding............... 8,312 8,312
Class C common stock, $0.001 par value; non-voting; 12,500,000 shares
authorized, no shares issued and outstanding............................. -- --
Class A & B common stock warrants.......................................... 6,862,647 --
Class C common stock warrants.............................................. 4,281,852 5,338,952
Stock subscription notes receivable........................................ (17,500) (115,714)
Additional paid-in capital................................................. 197,424,842 34,342,086
Deferred option plan compensation.......................................... (1,949,672) (1,384,267)
Accumulated deficit........................................................ (71,113,756) (55,694,393)
Commitments and contingencies
------------ ------------
Total liabilities, redeemable securities and common stockholders'
equity.......................................................... $437,448,651 $293,832,077
=========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
F-35
<PAGE> 178
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
---------------------------
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
Revenue:
Local and national advertising...................................................... $ 65,004,033 $ 40,454,900
Other............................................................................... 2,598,240 2,497,723
Trade and barter.................................................................... 1,767,993 1,403,725
------------ ------------
Total revenue................................................................. 69,370,266 44,356,348
Operating expenses:
Direct.............................................................................. 15,438,517 11,554,850
Programming......................................................................... 7,498,374 5,940,066
Sales and promotion................................................................. 5,497,070 4,473,186
Technical........................................................................... 3,321,787 2,147,289
General and administrative.......................................................... 14,083,120 9,989,674
Trade and barter.................................................................... 1,357,018 1,193,843
Time brokerage agreement fees....................................................... 3,040,383 549,947
Sports rights fees.................................................................. 766,160 1,019,355
Option plan compensation............................................................ 2,291,917 9,404,129
Program rights amortization......................................................... 721,802 777,057
Depreciation and amortization....................................................... 11,736,929 8,054,256
------------ ------------
Total operating expenses...................................................... 65,753,077 55,103,652
------------ ------------
Income (loss) from operations......................................................... 3,617,189 (10,747,304)
Other income (expense):
Interest expense.................................................................... (15,098,141) (4,887,226)
Interest income..................................................................... 4,034,676 578,580
Other expense, net.................................................................. (559,053) (13,763)
------------ ------------
Loss before income tax benefit........................................................ (8,005,329) (15,069,713)
Income tax benefit.................................................................... -- 640,000
------------ ------------
Net loss.............................................................................. (8,005,329) (14,429,713)
Dividends and accretion on preferred stock and common stock warrants.................. (7,414,034) (5,864,161)
------------ ------------
Net loss attributable to common stock and common stock equivalents.................... $(15,419,363) $(20,293,874)
============ ============
Net loss per share.................................................................... (.20) (.42)
Dividends and accretion on preferred stock and common stock warrants per share........ (.18) (.17)
------------ ------------
Net loss attributable to common stock and common stock equivalents per share.......... $ (.38) $ (.59)
============ ============
Weighted average shares outstanding primary and fully diluted......................... 40,566,865 34,401,282
============ ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
F-36
<PAGE> 179
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JUNE 30,
--------------------------
1996 1995
---------- -----------
(UNAUDITED)
<S> <C> <C>
Revenue:
Local and national advertising........................................... $34,890,219 $21,971,676
Other.................................................................... 1,418,749 1,006,757
Trade and barter......................................................... 932,531 758,212
----------- ------------
Total revenue..................................................... 37,241,499 23,736,645
Operating expenses:
Direct................................................................... 8,380,789 5,920,695
Programming.............................................................. 3,592,045 2,813,262
Sales and promotion...................................................... 2,915,404 2,293,673
Technical................................................................ 1,796,175 1,168,083
General and administrative............................................... 7,469,972 5,331,824
Trade and barter......................................................... 712,039 722,302
Time brokerage agreement fees............................................ 2,048,680 310,899
Sports rights fees....................................................... 7,199 (22,227)
Option plan compensation................................................. 533,549 9,404,129
Program rights amortization.............................................. 335,131 425,222
Depreciation and amortization............................................ 6,065,187 4,269,627
----------- ------------
Total operating expenses.......................................... 33,856,170 32,637,489
----------- ------------
Income (loss) from operations.............................................. 3,385,329 (8,900,844)
Other income (expense):
Interest expense......................................................... (7,373,363) (2,794,867)
Interest income.......................................................... 3,203,604 280,380
Other expense, net....................................................... (602,239) (81,398)
----------- ------------
Loss before income tax benefit............................................. (1,386,669) (11,496,729)
Income tax benefit......................................................... -- 320,000
----------- ------------
Net loss................................................................... (1,386,669) (11,176,729)
Dividends and accretion on preferred stock and common stock warrants....... (2,466,085) (3,673,209)
----------- ------------
Net loss attributable to common stock and common stock equivalents......... $(3,852,754) $(14,849,938)
=========== ============
Net loss per share......................................................... $ (.03) $ (.32)
Dividends and accretion on preferred stock and common stock warrants per
share.................................................................... (.05) (.11)
----------- ------------
Net loss attributable to common stock and common stock equivalents per
share.................................................................... $ (.08) $ (.43)
=========== ============
Weighted average shares outstanding primary and fully diluted.............. 46,570,794 34,448,665
=========== ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
F-37
<PAGE> 180
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS CLASS
COMMON STOCK A & B C STOCK DEFERRED
------------------------ COMMON COMMON SUBSCRIPTION ADDITIONAL OPTION
CLASS CLASS CLASS STOCK STOCK NOTES PAID-IN PLAN ACCUMULATED
A B C WARRANTS WARRANTS RECEIVABLE CAPITAL COMPENSATION DEFICIT
------- ------ ----- --------- --------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1994........... $26,042 $8,312 $ 0 $ 0 $5,338,952 $(77,666) $20,647,647 $ 0 $(8,923,897)
Stock issued for
Cookeville
acquisition........ 95 1,199,905
Deferred option plan
compensation....... 12,187,508 (12,187,508)
Option plan
compensation....... 10,803,241
Stock options
exercised.......... 90 307,026
Increase in stock
subscription
receivable......... (48,029)
Note repayments...... 9,981
Dividends on
redeemable
preferred stock.... (7,275,516)
Accretion on Senior
redeemable
preferred stock.... (332,156)
Accretion on Series B
preferred stock.... (325,208)
Accretion on Junior
preferred stock.... (634,988)
Accretion on Class A
& B common stock
warrants........... (4,729,338)
Net loss............. (33,473,290)
------- ------ ----- --------- --------- ------------ ----------- ----------- ----------
Balance at December
31, 1995........... 26,227 8,312 -- -- 5,338,952 (115,714) 34,342,086 (1,384,267) (55,694,393)
Release of Put on
Class A & B common
stock warrants
(unaudited)........ 9,116,399
Issuance of common
stock, net of
issuance costs of
$10,000,000
(unaudited)........ 10,300 154,789,700
Exercise of Class A,
B & C common stock
warrants
(unaudited)........ 1,854 (2,253,752) (1,057,100) 3,308,999
Stock issued for Todd
Communications
acquisition
(unaudited)........ 139 1,534,967
Deferred option plan
compensation
(unaudited)........ 2,857,322 (2,857,322)
Option plan
compensation(unaudited)... 2,291,917
Stock options
exercised
(unaudited)........ 145 591,768
Note repayments
(unaudited)........ 98,214
Dividends on
redeemable
preferred stock
(unaudited)........ (4,062,482)
Accretion on Senior
redeemable
preferred stock
(unaudited)........ (170,728)
Accretion on Series B
preferred stock
(unaudited)........ (204,700)
Accretion on Junior
preferred stock
(unaudited)........ (325,042)
Accretion on Class A
& B common stock
warrants
(unaudited)........ (2,651,082)
Net loss
(unaudited)........ (8,005,329)
------- ------ ----- --------- --------- ------------ ----------- ------------ ----------
Balance at June 30,
1996 (unaudited)... $38,665 $8,312 $ 0 $6,862,647 $4,281,852 $(17,500) $197,424,842 $(1,949,672) $(71,113,756)
======= ====== ===== ========= ========= =========== =========== ============ ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
F-38
<PAGE> 181
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE
30,
------------------------------
1996 1995
------------- ------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss......................................................................... $ (8,005,329) $(14,429,713)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization.................................................. 11,736,929 8,054,256
Option plan compensation....................................................... 2,291,917 9,404,129
Program rights amortization.................................................... 721,802 777,057
Provision for doubtful accounts................................................ 427,256 325,294
Deferred income taxes.......................................................... -- (640,000)
Loss on sale of assets......................................................... 13,651 --
(Increase) decrease in accounts receivable..................................... (2,055,044) 232,653
Decrease (increase) in prepaid expenses and other current assets............... (1,516,165) 187,121
Increase in other assets....................................................... (1,863,879) (2,454,459)
Increase (decrease) in accounts payable and accrued liabilities................ 1,806,130 (2,247,724)
(Decrease) increase in accrued interest........................................ (202,292) 582,194
------------ ------------
Net cash provided by (used in) operating activities....................... 3,354,976 (209,192)
------------ ------------
Cash flows from investing activities:
Acquisitions of broadcast properties............................................. (61,965,301) (45,110,012)
Increase in deposits on broadcast properties..................................... (6,907,000) (2,392,000)
Proceeds from sale of fixed assets............................................... 228,279 --
Increase in investments in broadcast properties.................................. (17,695,363) (500,000)
Purchase of property and equipment............................................... (13,936,104) (9,589,477)
------------ ------------
Net cash used in investing activities..................................... (100,275,489) (57,591,489)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock........................................... 164,800,000 --
Issuance expenses of common stock sale........................................... (9,888,479) --
Proceeds from long-term debt..................................................... 17,700,000 49,980,000
Payments of long-term debt....................................................... (27,930,270) (109,129)
Payments of loan origination costs............................................... -- (5,002,634)
Proceeds from exercise of common stock options................................... 465,893 --
Repayments of stock subscription notes receivable................................ 98,214 --
Payments for program rights...................................................... (818,706) (230,027)
------------ ------------
Net cash provided by financing activities................................. 144,426,652 44,638,210
------------ ------------
Increase (decrease) in cash and cash equivalents................................... 47,506,139 (13,162,471)
------------ ------------
Cash and cash equivalents at beginning of period................................... 68,070,990 21,571,658
Cash and cash equivalents at end of period......................................... $ 115,577,129 $ 8,409,187
============ ============
Supplemental disclosures of cash flow information:
Cash paid for interest........................................................... $ 14,478,551 $ 4,249,482
============ ============
Cash paid for income taxes....................................................... $ -- $ --
============ ============
Non-cash operating and financing activities:
Accretion of discount on senior subordinated notes............................... $ 132,544 $ --
============ ============
Issuance of common stock for Cookeville partner buyout........................... $ -- $ 1,200,000
============ ============
Issuance of common stock for Todd Communications acquisition..................... $ 1,535,106 $ --
============ ============
Note payable incurred for WOCD acquisition....................................... $ 1,650,000 $ --
============ ============
Dividends accreted on redeemable preferred stock................................. $ 4,062,482 $ 3,465,829
============ ============
Accretion on redeemable securities............................................... $ 3,351,552 $ 2,398,332
============ ============
Trade and barter revenue......................................................... $ 1,767,993 $ 1,403,725
============ ============
Trade and barter expense......................................................... $ 1,357,018 $ 1,193,843
============ ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of the consolidated financial statements.
F-39
<PAGE> 182
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
Paxson Communications Corporation's (the "Company") financial information
contained in the financial statements and notes thereto as of June 30, 1996 and
for the six and three month periods ended June 30, 1996 and 1995, are unaudited.
In the opinion of management, all adjustments necessary for the fair
presentation of such financial information have been included. These adjustments
are of a normal recurring nature. There have been no changes in accounting
policies since the period ended December 31, 1995. The composition of accounts
has changed to reflect the sale of Class A common stock and the operations of
certain acquisitions.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These financial statements, footnotes, and
discussions should be read in conjunction with the December 31, 1995 financial
statements and related footnotes and discussions contained in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995,
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996, and the
definitive proxy statement for the annual meeting of stockholders held May 16,
1996, all of which were filed with the United States Securities and Exchange
Commission. Also, in connection with the April 3, 1996 sale of 13.5 million
shares of Class A common stock by the Company and others, the Company filed a
Registration Statement on Form S-1 with the Securities and Exchange Commission
on January 26, 1996 which, as amended, was declared effective March 28, 1996.
The Company has engaged the services of an investment banking firm to
advise it on strategic alternatives with regard to its network-affiliated
television operations in the West Palm Beach, Florida market. Such alternatives
may include the possible sale or exchange of these assets.
F-40
<PAGE> 183
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders of
Press Broadcasting Company
In our opinion, the accompanying balance sheet and the related statements
of operations and divisional deficit and of cash flows present fairly, in all
material respects, the financial position of WTKS-FM (a division of Press
Broadcasting Company) (the "Station") at December 31, 1995 and the results of
its operations and its cash flows for the year in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Station's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
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 audit provides a
reasonable basis for the opinion expressed above.
The Station is a member of a group of affiliated companies and, as
disclosed in the financial statements, has extensive transactions and
relationships with members of the group. Because of these relationships, it is
possible that the terms of these transactions are not the same as those that
would result from transactions among wholly unrelated parties.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Fort Lauderdale, Florida
July 26, 1996
F-41
<PAGE> 184
WTKS-FM
(A DIVISION OF PRESS BROADCASTING COMPANY)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER
JUNE 16, 31,
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents....................................... $ 209,808 $ 153,295
Accounts receivable (net of allowance for doubtful accounts of
$20,000 (unaudited) and $20,000, respectively)............... 906,307 798,964
Due from affiliates, net........................................ 401,583 324,140
Prepaid expenses and other assets............................... 3,226 3,259
Current program rights.......................................... 343,750 --
----------- -----------
Total current assets.................................... 1,864,674 1,279,658
Property and equipment, net....................................... 509,604 628,196
Deferred tax asset................................................ 340,404 340,404
Intangible assets, net............................................ 2,508,656 2,614,658
Program rights, net............................................... 2,360,417 --
----------- -----------
Total assets............................................ $ 7,583,755 $ 4,862,916
========== ==========
LIABILITIES AND DIVISIONAL DEFICIT
Current liabilities:
Accounts payable and accrued liabilities........................ $ 119,034 $ 397,988
Current portion of program rights payable....................... 312,500 --
----------- -----------
Total current liabilities............................... 431,534 397,988
Program rights payable............................................ 2,395,833 --
Due to affiliates, long term...................................... 7,254,181 7,151,848
----------- -----------
Total liabilities....................................... 10,081,548 7,549,836
Divisional deficit................................................ (2,497,793) (2,686,920)
----------- -----------
Commitments and contingencies (see Note 7)........................ -- --
----------- -----------
Total liabilities and divisional deficit................ $ 7,583,755 $ 4,862,916
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE> 185
WTKS-FM
(A DIVISION OF PRESS BROADCASTING COMPANY)
STATEMENT OF OPERATIONS AND DIVISIONAL DEFICIT
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD YEAR ENDED
ENDED DECEMBER
JUNE 16, 31,
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
Revenue:
Local and national advertising.................................. $ 2,156,365 $ 3,501,082
Trade........................................................... 71,116 287,036
Other........................................................... 119,113 160,311
----------- -----------
Total revenue........................................... 2,346,594 3,948,429
----------- -----------
Operating expenses:
Technical....................................................... 75,223 180,399
Direct.......................................................... 550,975 883,299
Sales and promotions............................................ 367,743 863,686
Programming..................................................... 581,166 1,572,783
General and administrative...................................... 214,458 555,043
Depreciation and amortization................................... 270,427 446,507
----------- -----------
Total operating expenses................................ 2,059,992 4,501,717
----------- -----------
Income (loss) from operations..................................... 286,602 (553,288)
Provision for income taxes -- affiliate........................... 97,475 42,278
----------- -----------
Net income (loss)................................................. 189,127 (595,566)
Divisional deficit at beginning of period......................... (2,686,920) (2,091,354)
----------- -----------
Divisional deficit at end of period............................... $(2,497,793) $(2,686,920)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-43
<PAGE> 186
WTKS-FM
(A DIVISION OF PRESS BROADCASTING COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD ENDED YEAR ENDED
JUNE 16, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................ $189,127 $ (595,566)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.................................... 270,427 446,507
Increase in accounts receivable.................................. (107,343) (222,624)
Increase in amounts due from affiliates.......................... (77,443) (267,053)
Decrease in prepaid expenses and other assets.................... 33 33,415
(Decrease) increase in accounts payable and accrued
liabilities................................................... (278,954) 73,617
--------- ---------
Net cash (used in) operating activities....................... (4,153) (531,704)
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment.............................. -- (80,614)
--------- ---------
Cash flows from financing activities:
Advances from affiliates, long term.............................. 302,333 876,225
Payments to affiliates, long term................................ (200,000) (175,860)
Payments for program rights...................................... (41,667) --
--------- ---------
Net cash received for financing activities.................... 60,666 700,365
--------- ---------
Increase in cash and cash equivalents.............................. 56,513 88,047
Cash and cash equivalents at beginning of period................... 153,295 65,248
--------- ---------
Cash and cash equivalents at end of period......................... $209,808 $ 153,295
========= =========
Noncash operating activities:
Trade revenue.................................................... $ 71,116 $ 287,036
========= =========
Trade expense.................................................... $ 32,939 $ 305,061
========= =========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITY:
On May 6, 1996, the Station entered into a Program License Agreement
expiring May 15, 2001. Total payments under this agreement through 2001 are
$2,750,000.
The accompanying notes are an integral part of these financial statements.
F-44
<PAGE> 187
WTKS-FM
(A DIVISION OF PRESS BROADCASTING COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION, PRINCIPAL BUSINESS ACTIVITIES AND BASIS OF PRESENTATION:
Organization and Principal Business Activities
WTKS-FM (the "Station"), a division of Press Broadcasting Company (a
wholly-owned subsidiary of New Jersey Press, Inc.), is an FM radio station
operating on frequency 104.1, in Cocoa Beach, Florida pursuant to licenses
issued by the Federal Communications Commission ("FCC"). Revenues are earned
from the sale of commercial time.
Basis of Presentation
The accompanying financial statements have been prepared as if the Station
had operated as an independent stand alone entity for all periods presented,
except there has been no allocation of New Jersey Press, Inc.'s consolidated
borrowings and interest expense. Certain costs and expenses totaling
approximately $139,000 for 1995 represent allocations of the Stations' share of
the total cost of Press Broadcasting Company for management, accounting and
other support services. Accordingly, the financial information included herein
is not necessarily indicative of the financial position, results of operations
and cash flows of the Station in the future or indicative of the results that
would have been reported if the Station had operated as an unaffiliated
enterprise. Management believes the statement of operations and divisional
deficit includes a reasonable allocation of costs incurred by Press Broadcasting
Company which benefit the Station.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and cash equivalents
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less. Cash and cash equivalents are recorded at
fair value.
Property and equipment
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on a straight-line basis over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Broadcasting equipment..................................... 5 years
Leasehold improvements -- Building......................... 14 years
Leasehold improvements -- Tower............................ 3 years
Office furniture and equipment............................. 5 years
Transmission package....................................... 5 years
</TABLE>
Maintenance, repairs, and minor replacements of the items above are charged
to expense as incurred.
Intangible assets
Intangible assets consists of the FCC license which is stated at cost and
is being amortized using the straight-line method over the estimated useful life
of 15 years.
Revenue recognition
Revenue is recognized as advertising air time is broadcast.
Fair value of financial instruments
The fair values of cash and cash equivalents, accounts receivable, due from
affiliates, accounts payable and accrued liabilities approximate the carrying
values due to their short term nature.
F-45
<PAGE> 188
WTKS-FM
(A DIVISION OF PRESS BROADCASTING COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
SFAS 121 Impairment of Long-Lived Assets and Identifiable Intangibles
On January 1, 1995, the Station adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," the effect of which was immaterial. The
Station reviews long-lived assets, identifiable intangibles and goodwill and
will reserve for impairment whenever events or changes in circumstances indicate
the carrying amount of the assets may not be fully recoverable.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income taxes
The Station's operating results have been included in the tax return filed
by New Jersey Press, Inc. A provision for intercompany income taxes, which
approximates the income tax provision calculated for the Station on a standalone
basis was calculated to be $42,278 for the year ended December 31, 1995. The
provision for income taxes on the net loss incurred in 1995 is due to
Alternative Minimum Tax calculation consequences.
Interim financial data
The interim financial data of the Station is unaudited; however, in the
opinion of Station management, the interim financial data includes all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair statement of results of the interim periods. The results of operations for
the period ended June 16, 1996 are not necessarily indicative of the results
that could be expected for the entire fiscal year ending December 31, 1996.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Broadcasting equipment........................................ $ 488,407
Leasehold improvements........................................ 122,224
Office furniture and equipment................................ 83,325
Transmission package.......................................... 541,695
Accumulated depreciation...................................... (607,455)
---------
Property and equipment, net................................... $ 628,196
=========
Depreciation expense for the year............................. $ 234,503
=========
</TABLE>
F-46
<PAGE> 189
WTKS-FM
(A DIVISION OF PRESS BROADCASTING COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
4. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER
31,
1995
----------
<S> <C>
FCC licenses and other intangible assets......................... $3,180,000
Accumulated amortization......................................... (565,342)
----------
Intangible assets, net........................................... $2,614,658
=========
Amortization expense for the year................................ $ 212,004
=========
</TABLE>
5. INCOME TAXES:
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets:
Intangible assets............................................... $353,555
Deferred tax liabilities:
Fixed assets.................................................... (13,151)
--------
Net deferred tax asset.................................. $340,404
========
</TABLE>
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. Due to the fact that the
deferred tax asset is expected to be realized, a valuation allowance was not
provided for the deferred tax asset.
6. RELATED PARTY TRANSACTIONS:
Press Broadcasting Company purchased the assets of the Station in 1993
utilizing funds borrowed by an affiliate, Asbury Park Press, Inc. The cost of
the assets purchased was recorded by the Station as an intercompany liability in
the amount of $5,010,000. Additionally, in the normal course of business,
affiliates fund expenses incurred by the Station, the majority of which are
payroll related. At December 31, 1995 the Station's total long term liability to
such affiliates was $7,254,181. The Station does not accrue interest on this
liability. Interest was charged to other affiliates during 1995 at the effective
rate of 7.1%. Had interest been accrued by the Station for 1995, the net loss
would have been approximately ($1,100,000).
The Station also shares resources and office space with 18WKCF, an
affiliated television station. As a result, certain shared expenses are funded
by the television station and reimbursed on a current basis. All such expenses
have been appropriately reflected in the Station's financial statements. At
December 31, 1995, the Station reported a liability in the amount of $66,630 due
to the television station for such types of expenses.
The Station is included in the tax return filed by New Jersey Press, Inc.
At December 31, 1995, the Station had a $390,770 income tax receivable from New
Jersey Press, Inc.
The Station enters into trade agreements with 18WKCF. Rates and terms for
these spots are similar to those offered to other customers. For the year ended
December 31, 1995, these spots amounted to $82,305 of trade revenue.
F-47
<PAGE> 190
WTKS-FM
(A DIVISION OF PRESS BROADCASTING COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
7. COMMITMENTS AND CONTINGENCIES:
The Company incurred expenses of $583,938 for the year ended December 31,
1995 under non-cancelable operating leases and other agreements for office
equipment, office space, sales surveys and on-air talent. Future minimum annual
payments under these non-cancelable operating leases as of December 31, 1995 are
as follows:
<TABLE>
<S> <C>
1996............................................................. $ 194,956
1997............................................................. 159,442
1998............................................................. 104,494
1999............................................................. 62,019
2000............................................................. 73,060
Subsequent to 2000............................................... 836,938
----------
$1,430,909
=========
</TABLE>
In May 1996, the Station entered into a Program License Agreement which
will expire in May 2001. Total contractual payments under this agreement through
2001 total $2,750,000.
8. SUBSEQUENT EVENTS:
On June 17, 1996, the Station's assets were sold to Paxson Communications
Corporation (Purchaser) for $25,000,000. Concurrently, the Station entered into
a Time Brokerage Agreement with the Purchaser effective June 17, 1996, whereby
the Station has agreed to lease the broadcast time of the Station until the
above-mentioned sale is finalized. The sale and the assignment of the FCC
license, in conjunction with the sale, is subject to approval by the FCC.
F-48
<PAGE> 191
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
of WHUB, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of WHUB, Inc. at
December 31, 1995 and the results of its operations and its cash flows for the
year 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 audit. We conducted our audit 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 audit provides a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
- ---------------------------------------------------------
PRICE WATERHOUSE LLP
Fort Lauderdale, Florida
July 22, 1996
F-49
<PAGE> 192
WHUB, INC.
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................... $ 520,729 $492,051
Accounts receivable, net of allowance for doubtful accounts
of $8,134 (unaudited) and $5,506, respectively............ 123,248 224,137
Prepaid expenses and other assets............................ 458 3,208
----------- ------------
Total current assets................................. 644,435 719,396
Property and equipment, net.................................... 91,551 101,524
----------- ------------
Total assets......................................... $ 735,986 $820,920
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities................. $ 3,697 $ 16,073
----------- ------------
Total current liabilities............................ 3,697 16,073
----------- ------------
Common stock, $100 par value, 100 shares authorized,
issued and outstanding....................................... 10,000 10,000
Retained earnings.............................................. 722,289 794,847
----------- ------------
Total stockholders' equity........................... 732,289 804,847
----------- ------------
Total liabilities and stockholders' equity........... $ 735,986 $820,920
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-50
<PAGE> 193
WHUB, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
Revenue:
Local advertising........................................... $475,412 $1,211,951
------------ ------------
Total revenue....................................... 475,412 1,211,951
------------ ------------
Operating expenses:
Direct...................................................... 36,521 183,488
Programming................................................. 54,935 138,091
Sales and Promotions........................................ 53,864 105,525
News department............................................. 19,042 43,932
Engineering department...................................... 22,497 39,169
General and administrative.................................. 102,243 195,077
Corporate management fee.................................... 221,950 462,329
Depreciation and amortization............................... 13,979 29,700
------------ ------------
Total operating expenses............................ 525,031 1,197,311
------------ ------------
(Loss) income from operations................................. (49,619) 14,640
Interest income............................................... 3,506 5,957
------------ ------------
Net (loss) income................................... $(46,113) $ 20,597
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-51
<PAGE> 194
WHUB, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY
---------------------------------
COMMON RETAINED
STOCK EARNINGS TOTAL
------- -------- --------
<S> <C> <C> <C>
Balance at December 31, 1994................................ $10,000 $823,354 $833,354
Net income.................................................. 20,597 20,597
Dividends................................................... (49,104) (49,104)
------- -------- --------
Balance at December 31, 1995................................ 10,000 794,847 804,847
Net loss through June 30, 1996 (unaudited).................. (46,113) (46,113)
Dividends (unaudited)....................................... (26,445) (26,445)
------- -------- --------
Balance at June 30, 1996 (unaudited)........................ $10,000 $722,289 $732,289
======= ======== ========
</TABLE>
The accompanying rates are an integral part of these financial statements.
F-52
<PAGE> 195
WHUB, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income................................................ $(46,113) $ 20,597
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization.................................... 13,979 29,700
Decrease (increase) in accounts receivable....................... 100,889 (5,929)
Decrease (increase) in prepaid expenses and other assets......... 2,750 (3,208)
(Decrease) increase in accounts payable and accrued
liabilities................................................... (12,376) 12,623
-------- --------
Net cash provided by operating activities................ 59,129 53,783
-------- --------
Cash flows from investing activities:
Purchases of property and equipment.............................. (4,006) (10,245)
-------- --------
Net cash used in investing activities.................... (4,006) (10,245)
-------- --------
Cash flows from financing activities:
Payment of dividends............................................. (26,445) (49,104)
-------- --------
Net cash used in financing activities.................... (26,445) (49,104)
-------- --------
Increase (decrease) in cash and cash equivalents................... 28,678 (5,566)
Cash and cash equivalents, beginning of period..................... 492,051 497,617
-------- --------
Cash and cash equivalents, end of period........................... $520,729 $492,051
======== ========
</TABLE>
The accompanying rates are an integral part of these financial statements.
F-53
<PAGE> 196
WHUB, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
WHUB, Inc. (the "Company"), is engaged in the operation of radio stations,
WHUB-FM and WHUB-AM in the Cookeville, Tennessee market. The Company operates
the radio stations under licenses granted by the Federal Communications
Commission.
Cash and cash equivalents
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
Property and equipment
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated using the straight-line method over their estimated useful lives
as follows:
<TABLE>
<S> <C>
Broadcasting tower and equipment......................... 5-10 years
Office furniture and equipment........................... 5 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
Revenue recognition
Revenue is recognized as advertising air time is broadcast.
Trade agreements
The Company enters into trade agreements which give rise to advertising air
time in exchange for products and services. Sales from trade agreements are
recognized at the fair market value of products or services received as
advertising air time is broadcast. Products and services received are expensed
when used in the broadcast operations. If the Company uses exchanged products or
services before advertising air time is provided, a trade liability is
recognized.
Income taxes
The stockholders of the Company have elected to have the Company treated as
an S corporation for federal income tax purposes. Accordingly, no provision for
income taxes is reflected in the Company's financial statements since the
stockholders, not the Company, are liable for such taxes on corporate income.
Tax credits, if available, are passed through to the stockholders.
Interim financial data
The interim financial data of the Company is unaudited; however, in the
opinion of the Company's management, the interim financial data includes all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair statement of results of the interim periods. The results of operations for
the six month period ended June 30, 1996 are not necessarily indicative of the
results that could be expected for the entire fiscal year ending December 31,
1996.
Accounting Estimates
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements, disclosure of contingent liabilities at financial
statement date and reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
F-54
<PAGE> 197
WHUB, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Broadcasting tower and equipment................................ $ 128,059
Office furniture and equipment.................................. 257,202
Automobile...................................................... 12,000
Land............................................................ 4,510
Accumulated depreciation........................................ (300,247)
---------
Property and equipment, net..................................... $ 101,524
=========
Depreciation expense for the year............................... $ 29,700
=========
</TABLE>
3. TRADE TRANSACTIONS:
For the year ended December 31, 1995, trade revenue and expense
approximated $14,300 and $8,572, respectively. Included in accounts receivable
at December 31, 1995 are trade accounts receivable (services due to the Station)
of approximately $4,900.
4. RELATED PARTY TRANSACTIONS:
The Company leases the building which houses its station operations and
corporate offices in Cookeville, Tennessee from a related party. Rental expense
for this facility incurred during the year ended December 31, 1995 totaled
$5,000.
5. COMMITMENTS AND CONTINGENCIES:
The Company has entered into two broadcast agreements for the broadcast of
university sports programs. One agreement represents a continuing five-year
contract of which three years remain as of December 31, 1995. The second
agreement will commence in July of 1996 and end June 30, 1997. These commitments
total approximately $20,996 of which $9,905 will be incurred during the 1996-97
sports season.
6. SUBSEQUENT EVENT:
On March 29, 1996, the Company signed an asset purchase agreement with
Paxson Communications Corporation (Paxson) pursuant to which all of the Company
assets will be sold to Paxson for approximately $3,800,000. The Company is
currently awaiting FCC approval of this sale.
F-55
<PAGE> 198
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
Todd Communications, Inc. (WFSJ-FM)
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in stockholders' deficit and of cash flows present
fairly, in all material respects, the financial position of Todd Communications,
Inc. (operating as station WFSJ-FM) at December 31, 1995, and the results of its
operations and its cash flows for the year 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 audit. We conducted our audit 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 audit provides a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------------
PRICE WATERHOUSE LLP
Fort Lauderdale, Florida
July 26, 1996
F-56
<PAGE> 199
TODD COMMUNICATIONS, INC. (WFSJ-FM)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
JUNE 28, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents....................................... $ 66,623 $ 31,906
Accounts receivable, less allowance for doubtful accounts of 114,705 130,261
$19,005 (unaudited) and $20,828, respectively................
Prepaid expenses and other assets................................. 21,879 23,112
----------- -----------
Total current assets.................................... 203,207 185,279
Property and equipment, net....................................... 464,075 512,320
Intangible assets, net............................................ 1,123,739 1,150,239
----------- -----------
Total assets............................................ $ 1,791,021 $ 1,847,838
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities........................ $ 26,857 $ 55,740
Due to affiliates............................................... 616,535 457,000
Notes payable to related parties................................ 3,154,661 3,154,661
----------- -----------
Total current liabilities............................... 3,798,053 3,667,401
----------- -----------
Stockholders' Deficit:
Common stock, $1.00 par, 1,000 shares authorized, issued and 1,000 1,000
outstanding..................................................
Additional paid-in capital...................................... 299,980 299,980
Accumulated deficit............................................. (2,308,012) (2,120,543)
----------- -----------
Total stockholders' deficit.................................. (2,007,032) (1,819,563)
----------- -----------
Commitments and contingencies..................................... -- --
Total liabilities and stockholders' deficit............. $ 1,791,021 $ 1,847,838
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
F-57
<PAGE> 200
TODD COMMUNICATIONS, INC. (WFSJ-FM)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
Revenue:
Local and national advertising.............................. $ 428,772 $ 553,562
Trade....................................................... 76,914 100,219
Other....................................................... 27,793 41,758
------------ ------------
Total revenue....................................... 533,479 695,539
------------ ------------
Operating expenses:
Direct...................................................... 182,622 210,724
Technical................................................... 21,251 41,424
Sales and promotions........................................ 38,354 161,194
Programming................................................. 122,707 156,957
General and administrative.................................. 112,305 195,026
Depreciation and amortization............................... 74,744 138,433
Trade expense............................................... 76,914 163,949
------------ ------------
Total operating expenses............................ 628,897 1,067,707
------------ ------------
Loss from operations.......................................... (95,418) (372,168)
Interest expense.............................................. (92,051) (166,886)
------------ ------------
Net loss...................................................... $ (187,469) $ (539,054)
============ ============
</TABLE>
The accompanying Notes to Financial Statements are an integral part of to these
financial statements.
F-58
<PAGE> 201
TODD COMMUNICATIONS, INC. (WFSJ-FM)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
----- ------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
December 31, 1994................... 1,000 $1,000 $299,980 $(1,581,489) $(1,280,509)
Net loss............................ (539,054) (539,054)
----- ------ -------- ----------- -----------
December 31, 1995................... 1,000 1,000 299,980 (2,120,543) (1,819,563)
Net loss (unaudited)................ (187,469) (187,469)
----- ------ -------- ----------- -----------
June 28, 1996 (unaudited)........... 1,000 $1,000 $299,980 $(2,308,012) $(2,007,032)
===== ====== ======== ========== ==========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of to these
financial statements.
F-59
<PAGE> 202
TODD COMMUNICATIONS, INC. (WFSJ-FM)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD ENDED YEAR ENDED
JUNE 28, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss......................................................... $ (187,469) $ (539,054)
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:
Depreciation and amortization................................. 74,744 138,433
Decrease (increase) in accounts receivable.................... 15,556 (2,756)
Decrease in prepaid expenses and other assets................. 1,233 1,201
Decrease in accounts payable and accrued liabilities.......... (28,882) (45,610)
Increase in due to affiliates................................. 159,535 409,755
--------- ---------
Net cash provided by (used in) operating activities...... 34,717 (38,031)
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment.............................. -- (17,664)
--------- ---------
Cash flows from financing activities:
Proceeds from related party note payable......................... -- 65,000
Payments of related party note payable........................... -- (180,000)
--------- ---------
Net cash used in financing activities.................... -- (115,000)
--------- ---------
Increase (decrease) in cash and cash equivalents................... 34,717 (170,695)
Cash and cash equivalents at beginning of year..................... 31,906 202,601
--------- ---------
Cash and cash equivalents at end of period......................... $ 66,623 $ 31,906
========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest........................................... $ 44,256 $ 63,865
========= =========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
F-60
<PAGE> 203
TODD COMMUNICATIONS, INC. (WFSJ-FM)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Todd Communications, Inc. (the Company) owns and operates WFSJ, an FM radio
station broadcasting to the Jacksonville, Florida market with transmitting
facilities located in St. Augustine, Florida.
Cash and cash equivalents
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
Property and equipment
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on a straight-line basis over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Land improvements, building and improvements............... 15 - 31.5 years
Office furniture and equipment............................. 1 - 7 years
Broadcasting tower and equipment........................... 5 - 15 years
</TABLE>
Maintenance, repairs, and minor replacements of the above items are charged
to expense as incurred.
Intangible assets
Intangible assets consist of the FCC license which is stated at cost and is
being amortized using the straight-line method over the estimated useful life of
30 years.
Trade agreements
The Company enters into trade agreements which give rise to advertising air
time in exchange for products and services. Sales from trade agreements are
recognized at the fair market value of products or services received as
advertising air time is broadcast. Products and services received are expensed
when used in the broadcast operations. If the Company uses exchanged products or
services before advertising air time is provided, a trade liability is
recognized.
Revenue recognition
Revenue is recognized as advertising air time is broadcast.
Fair value of financial instruments
Cash and cash equivalents, accounts receivable, accounts payable, and
accrued liabilities. The fair values approximate the carrying values due to
their short term nature.
SFAS 121 Impairment of Long-Lived Assets and Identifiable Intangibles
On January 1, 1995, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of", the effect of which was immaterial. The
Company reviews long-lived assets, identifiable intangibles and goodwill and
will reserve for impairment whenever events or changes in circumstances indicate
the carrying amount of the assets may not to be fully recoverable.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-61
<PAGE> 204
TODD COMMUNICATIONS, INC. (WFSJ-FM)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
Income taxes
Provisions are made to record deferred income taxes in recognition of items
reported differently for financial reporting purposes than for federal and state
income tax purposes. The Company records deferred income taxes using the
liability method in accordance with Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes". Due to the cumulative net losses
experienced by the Company, no provision for income taxes has been provided for
the year ended December 31, 1995 and a full valuation allowance has been
established for the Company's deferred tax asset which consists principally of
net operating losses at December 31, 1995.
Interim financial data
The interim financial data of the Company is unaudited; however, in the
opinion of Station management, the interim financial data includes all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair statement of results of the interim periods. The results of operations for
the period ended June 28, 1996 are not necessarily indicative of the results
that could be expected for the entire fiscal year ending December 31, 1996.
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER
31,
1995
---------
<S> <C>
Land, building and improvements.................................. $ 361,234
Office furniture and equipment................................... 75,435
Broadcasting tower and equipment................................. 379,533
---------
816,202
Accumulated depreciation......................................... (303,882)
---------
Property and equipment, net...................................... $ 512,320
=========
Depreciation expense for the year................................ $ 94,271
=========
</TABLE>
3. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER
31,
1995
----------
<S> <C>
FCC license...................................................... $1,325,000
Accumulated amortization......................................... (174,761)
----------
Intangible assets, net........................................... $1,150,239
=========
Amortization expense for the year................................ $ 44,162
=========
</TABLE>
F-62
<PAGE> 205
TODD COMMUNICATIONS, INC. (WFSJ-FM)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
4. RELATED PARTY NOTES PAYABLE:
Related party notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER
31,
1995
----------
<S> <C>
Note payable to related party; interest at 4.00%; interest
payable monthly and principal due on demand.................... $1,404,661
Note payable to related party; interest accrues at the short-term
annual applicable federal rate prescribed by the Internal
Revenue Service with the balance of principal and interest due
upon demand.................................................... 1,750,000
----------
$3,154,661
=========
</TABLE>
At December 31, 1995, accrued interest payable was $161,300.
5. RELATED PARTY TRANSACTIONS:
In the normal course of business, various related stations fund the
day-to-day operations of the Company and the Company shares resources and office
space with Paxson Communications Corporation (Paxson) stations. Management
believes the accompanying financial statements include a reasonable allocation
of costs incurred by Paxson which benefit the Company of approximately $211,300.
At December 31, 1995, the Company's liability to these related stations was
$295,700.
6. SUBSEQUENT EVENTS:
On June 28, 1996, the Company was merged with Paxson in exchange for Paxson
stock valued at $1,535,000, cancellation of Paxson's note receivable and accrued
interest of $1,822,000 and satisfaction of the Company's note payable and
accrued interest to Lowell "Bud" Paxson of $1,643,000.
F-63
<PAGE> 206
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of
Southern Broadcasting Companies, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in shareholders' equity and of cash flows present
fairly, in all material respects, the financial position of Southern
Broadcasting Companies, Inc. at December 31, 1995 and the results of its
operations and its cash flows for the year 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 audit. We conducted our audit 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 audit provides a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Fort Lauderdale, Florida
August 2, 1996
F-64
<PAGE> 207
SOUTHERN BROADCASTING COMPANIES, INC.
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1995
JUNE 30, ------------
1996
-----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................ $ 228,393 $ 251,263
Accounts receivable, less allowance for doubtful accounts of 270,384 274,950
$68,470 (unaudited) and $64,703, respectively.................
Accounts receivable, other....................................... 24,871 52,642
Other assets..................................................... 5,108 5,108
----------- -----------
Total current assets..................................... 528,756 583,963
Property and equipment, net........................................ 725,060 774,068
Intangible assets, net............................................. 22,353 23,550
----------- -----------
Total assets............................................. $ 1,276,169 $1,381,581
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities......................... $ 159,125 $ 154,892
Due to affiliated companies...................................... 88,374 25,000
Advances from shareholders....................................... 643,268 842,937
----------- -----------
Total current liabilities................................ 890,767 1,022,829
----------- -----------
Capital stock, $1 par value, 10,000 shares authorized, issued and 10,000 10,000
outstanding......................................................
Retained earnings.................................................. 375,402 348,752
----------- -----------
Total shareholders' equity............................... 385,402 358,752
----------- -----------
Commitments and contingencies (see Note 5)......................... -- --
Total liabilities and shareholders' equity............... $ 1,276,169 $1,381,581
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
financial statements.
F-65
<PAGE> 208
SOUTHERN BROADCASTING COMPANIES, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995
---------------- ------------
(UNAUDITED)
<S> <C> <C>
Revenue:
Local and national advertising............................... $ 942,482 $2,635,586
Trade........................................................ 40,506 87,166
Other........................................................ 47,898 117,432
---------------- ------------
Total revenue........................................ 1,030,886 2,840,184
---------------- ------------
Operating expenses:
Direct....................................................... 49,411 170,238
News......................................................... 9,092 19,332
Programming.................................................. 277,043 536,231
Sales........................................................ 249,766 561,322
Technical.................................................... 38,900 78,688
General and administrative................................... 175,036 507,581
Trade........................................................ 49,801 72,272
Depreciation and amortization................................ 56,171 228,076
---------------- ------------
Total operating expenses............................. 905,220 2,173,740
---------------- ------------
Income from operations......................................... 125,666 666,444
Other income (expense):
Interest income (expense), net............................... 499 (10,029)
Loss on sale of assets....................................... -- (75,551)
Marketing fees received from affiliate....................... -- 271,500
Marketing fees paid to affiliate............................. (37,200) --
Other expense, net........................................... (62,315) (82,674)
---------------- ------------
Net income..................................................... $ 26,650 $ 769,690
============= ==========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
financial statements.
F-66
<PAGE> 209
SOUTHERN BROADCASTING COMPANIES, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
-------------------------------
CAPITAL RETAINED
STOCK EARNINGS TOTAL
------- -------- --------
<S> <C> <C> <C>
Balance at December 31, 1994.................................. $10,000 $ 70,115 $ 80,115
Net income.................................................... 769,690 769,690
Distributions to shareholders................................. (491,053) (491,053)
------- -------- --------
Balance at December 31, 1995.................................. 10,000 348,752 358,752
Net income through June 30, 1996 (unaudited).................. 26,650 26,650
------- -------- --------
Balance at June 30, 1996 (unaudited).......................... $10,000 $375,402 $385,402
======= ======== ========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
financial statements.
F-67
<PAGE> 210
SOUTHERN BROADCASTING COMPANIES, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995
---------------- ------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................... $ 26,650 $ 769,690
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 56,171 228,076
Decrease in receivables................................... 32,337 25,155
Increase (decrease) in accounts payable and accrued 4,233 (8,347)
liabilities.............................................
Increase in due to affiliated companies................... 63,374 761,500
Loss on sale of fixed assets.............................. -- 75,551
---------- ----------
Net cash provided by operating activities............ 182,765 1,851,625
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment.......................... (5,966) (1,656)
Proceeds from sale of property and equipment................. -- 131,500
Repayments of advances from shareholders..................... (199,669) (1,226,985)
---------- ----------
Net cash used in investing activities................ (205,635) (1,097,141)
Cash flows from financing activities:
Payments on note payable..................................... -- (105,136)
Distributions to shareholders................................ -- (491,053)
---------- ----------
Net cash used for financing activities............... -- (596,189)
---------- ----------
(Decrease) increase in cash and cash equivalents............... (22,870) 158,295
Cash and cash equivalents at beginning of period............... 251,263 92,968
---------- ----------
Cash and cash equivalents at end of period..................... $ 228,393 $ 251,263
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest....................................... $ 468 $ 15,692
========== ==========
Non-cash operating activities:
Trade revenue................................................ $ 40,506 $ 87,166
========== ==========
Trade expense................................................ $ 49,801 $ 72,272
========== ==========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
financial statements.
F-68
<PAGE> 211
SOUTHERN BROADCASTING COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Southern Broadcasting Companies, Inc. (the "Company"), owns and operates
the following radio stations: WSNI-FM in Tallahassee, Florida; and WPAP-FM and
WPBH-FM in Panama City, Florida. The Company operates the radio stations
pursuant to licenses issued by the Federal Communications Commission ("FCC").
Revenues are earned from the sale of commercial time.
Cash and Cash Equivalents
At December 31, 1995, cash and cash equivalents consist solely of money
market investments.
Property and equipment
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on a straight-line basis over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Broadcasting tower and equipment....................... 5 - 7 years
Buildings.............................................. 31.5 years
Leasehold improvements................................. 7 - 15 years
Office furniture and equipment......................... 5 - 7 years
Vehicles............................................... 5 years
</TABLE>
Maintenance, repairs, and minor replacements of the items above are charged
to expense as incurred.
Intangible assets
Intangible assets consist of the FCC license for WPAP which is stated at
cost and is being amortized using the straight-line method over the estimated
useful life of 15 years.
Revenue recognition
Revenue is recognized as advertising air time is broadcast.
Trade Agreements
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as the related advertising air time is broadcast. Products and services
received are expensed when used in the broadcast operations. If the Company uses
trade products or services before advertising air time is provided, a trade
liability is recognized.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents, accounts receivable, accounts payable, and
accrued liabilities. The fair values approximate the carrying values due to
their short term nature.
SFAS 121 Impairment of Long-Lived Assets and Identifiable Intangibles
On January 1, 1995, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," the effect of which was immaterial. The
Company reviews long-lived assets, identifiable intangibles and goodwill and
will reserve for impairment.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
F-69
<PAGE> 212
SOUTHERN BROADCASTING COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Income taxes
The shareholders of the Company have elected to have the Company treated as
an S Corporation for federal income tax purposes. Accordingly, no provision for
income taxes is reflected in the Company's financial statements since the
shareholders, not the Company, are liable for such taxes on corporate income.
Tax credits, if available, are passed through to the shareholders.
Interim financial data
The interim financial data of the Company is unaudited; however, in the
opinion of Company management, the interim financial data includes all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair statement of results of the interim periods. The results of operations for
the period ended June 30, 1996 are not necessarily indicative of the results
that could be expected for the entire fiscal year ending December 31, 1996.
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Land............................................................ $ 40,000
Broadcasting tower and equipment................................ 980,606
Building and leasehold improvements -- building................. 352,145
Office furniture and equipment.................................. 62,932
Vehicles........................................................ 36,468
------------
1,472,151
Accumulated depreciation........................................ (698,083)
------------
Property and equipment, net..................................... $ 774,068
==========
Depreciation expense for the year............................... $ 225,681
==========
</TABLE>
3. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
FCC license..................................................... $ 35,924
Accumulated amortization........................................ (12,374)
------------
Intangible assets, net.......................................... $ 23,550
==========
Amortization expense for the year............................... $ 2,395
==========
</TABLE>
4. RELATED PARTY TRANSACTIONS:
Station WSNI-FM leases a portion of the office space which houses its
station operations in Tallahassee, Florida to a related party. The related party
paid its portion of the rent expense (which totaled $10,860 in 1995) directly to
the lessor.
F-70
<PAGE> 213
SOUTHERN BROADCASTING COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
The Company charges marketing fees to related parties for marketing and
related services provided to these companies. The marketing fee income
recognized in 1995 is $271,500.
At December 31, 1995, the amount due to affiliated companies represents
cash funded to the Company.
5. COMMITMENTS AND CONTINGENCIES:
In December 1994, the Company and a related party, as co-borrowers, entered
into a loan agreement to borrow $4 million to finance the broadcasting assets of
a television station in Tallahassee, Florida. The assets of the Company serve as
security for the payment of the loan. At December 31, 1995, the Company and the
co-borrower are not in compliance with the financial requirements per the loan
agreement.
The Company incurred expenses of $80,932 for the year ended December 31,
1995, under non-cancelable operating leases for office space and towers. Future
minimum annual payments under these non-cancelable leases as of December 31,
1995 are as follows:
<TABLE>
<S> <C>
1996...................................................... $ 94,001
1997...................................................... 106,651
1998...................................................... 108,699
1999...................................................... 42,123
2000...................................................... 40,389
Subsequent to 2000........................................ 417,086
--------
$808,949
========
</TABLE>
6. SUBSEQUENT EVENTS:
In 1996, the Company entered into an agreement with a related party to pay
marketing fees in exchange for marketing and related services provided to the
Company.
On April 19, 1996, the Company entered into an asset purchase agreement to
sell the Company's assets, as specified in the related asset purchase agreement,
to Paxson Communications Corporation. This sale is pending FCC approval.
On May 1, 1996, the Company entered into a lease agreement to renew the
lease of the office space which houses the Company's operations for station
WSNI-FM in Tallahassee, Florida. The term of the lease is May 1, 1996 through
December 31, 1998.
In June 1996, the shareholders of the Company entered into a loan agreement
to borrow $2,250,000. The loan is personally guaranteed by the shareholders, as
well as by the Company.
F-71
<PAGE> 214
INDEPENDENT AUDITORS' REPORT
To the Members and Board of Directors
Fort Lauderdale Radio Stations
(A Division of T. K. Communications, L. C.)
Ft. Lauderdale, Florida
We have audited the accompanying balance sheet of FORT LAUDERDALE RADIO
STATIONS (A DIVISION OF T. K. COMMUNICATIONS, L. C.) as of December 31, 1995,
and related statements of income and divisional equity (deficit) and cash flows
for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly,
in all material respects, the financial position of Fort Lauderdale Radio
Stations (a division of T. K. Communications, L. C.) as of December 31, 1995,
and the results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
Our audit was for the purpose of forming an opinion on the basic 1995
financial statements taken as a whole. The financial statements for the four
months ended April 30, 1996 is presented for the purposes of additional analysis
and is not required part of the basic financial statements. Such information has
not been subjected to the auditing procedures applied in the audit of the basic
financial statements, and accordingly, we express no opinion on it.
/s/ Mathieson Aitken Jemison, LLP
- ---------------------------------------------------------
MATHIESON AITKEN JEMISON, LLP
Blue Bell, Pennsylvania
February 9, 1996, except for Notes 2 and 7
as to which the date is July 22, 1996
F-72
<PAGE> 215
FORT LAUDERDALE RADIO STATIONS
(A DIVISION OF T. K. COMMUNICATIONS, L. C.)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
APRIL 30, DECEMBER 31,
1996 1995
----------- ------------
<S> <C> <C>
(UNAUDITED)
CURRENT ASSETS
Cash and cash equivalents....................................... $ 89,594 $ 306,172
Accounts receivable............................................. 960,348 1,065,376
Allowance for doubtful accounts................................. (133,786) (106,118)
Note receivable -- noncompete agreement......................... 100,000 100,000
Prepaid expenses................................................ 13,948 8,590
----------- -----------
TOTAL CURRENT ASSETS.................................... 1,030,104 1,374,020
PROPERTY AND EQUIPMENT............................................ 3,024,211 2,930,372
Less, accumulated depreciation.................................. 2,505,420 2,470,353
----------- -----------
PROPERTY AND EQUIPMENT, NET............................. 518,791 460,019
OTHER ASSETS, NET................................................. 1,735,677 1,618,416
NOTES RECEIVABLE -- NONCOMPETE AGREEMENT.......................... 300,000 300,000
----------- -----------
$ 3,584,572 $ 3,752,455
=========== ===========
LIABILITIES AND DIVISIONAL EQUITY (DEFICIT)
CURRENT LIABILITIES
Notes payable, bank............................................. $15,950,000 --
Treasury stock redemption notes................................. 1,829,430 $ 1,829,430
Accounts payable................................................ 13,753 77,986
Accrued commissions and management incentives................... 144,051 149,241
Accrued expenses................................................ 148,191 122,064
----------- -----------
TOTAL CURRENT LIABILITIES............................... 18,085,425 2,178,721
LONG-TERM DEBT
Notes payable, bank............................................. -- 13,300,000
Treasury stock redemption notes................................. 240,000 240,000
Stockholder loan................................................ 1,453,755 3,580,000
----------- -----------
TOTAL LONG-TERM DEBT.................................... 1,693,755 17,120,000
----------- -----------
TOTAL LIABILITIES....................................... 19,779,180 19,298,721
DIVISIONAL EQUITY (DEFICIT)....................................... (16,194,608) (15,546,266)
----------- -----------
$ 3,584,572 $ 3,752,455
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-73
<PAGE> 216
FORT LAUDERDALE RADIO STATIONS
(A DIVISION OF T. K. COMMUNICATIONS, L. C.)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOUR
MONTHS YEAR ENDED DECEMBER 31, 1995
ENDED --------------------------------------
APRIL 30, WSHE WSRF
1996 (FM) (AM) TOTAL
---------- ----------- --------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Sales....................................... $1,825,621 $ 7,381,190 $ 303,174 $ 7,684,364
Less
Commissions............................ 229,352 1,107,357 2,765 1,110,122
Trade sales............................ 226,940 449,792 449,792
--------- ----------- ----------- -----------
Net Sales......................... 1,369,329 5,824,041 300,409 6,124,450
OPERATING EXPENSES
Programming............................... 328,308 787,763 9,084 796,847
General and administrative................ 892,703 1,671,319 110,726 1,782,045
Sales..................................... 231,760 1,055,429 16,989 1,072,418
Technical................................. 42,609 118,415 118,415
Depreciation.............................. 35,067 108,647 915 109,562
Amortization.............................. 31,436 400,552 16,452 417,004
--------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES.......... 1,561,883 4,142,125 154,166 4,296,291
--------- ----------- ----------- -----------
OPERATING INCOME (LOSS)........... (192,554) 1,681,916 146,243 1,828,159
--------- ----------- ----------- -----------
OTHER INCOME................................ 1,654 5,413 5,413
INTEREST EXPENSE............................ (457,442) (1,072,585) (44,055) (1,116,640)
--------- ----------- ----------- -----------
NET INCOME (LOSS)................. $ (648,342) $ 614,744 $ 102,188 $ 716,932
========= =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-74
<PAGE> 217
FORT LAUDERDALE RADIO STATIONS
(A DIVISION OF T. K. COMMUNICATIONS, L. C.)
STATEMENTS OF DIVISIONAL EQUITY (DEFICIT)
<TABLE>
<S> <C>
DIVISIONAL EQUITY (DEFICIT), JANUARY 1, 1995.................................. $ (23,564,722)
NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1995............................... 716,932
TRANSFER OF EQUITY FROM DIVISIONAL SALE....................................... 58,923,984
DISTRIBUTIONS TO STOCKHOLDERS................................................. (31,953,030)
REDEMPTION OF TREASURY STOCK.................................................. (19,669,430)
------------
BALANCE, DECEMBER 31, 1995.................................................... (15,546,266)
NET LOSS FOR THE FOUR MONTHS ENDED APRIL 30, 1996 (UNAUDITED)................. (648,342)
------------
DIVISIONAL EQUITY (DEFICIT), APRIL 30, 1996 (UNAUDITED)....................... $ (16,194,608)
============
</TABLE>
See accompanying notes to financial statements.
F-75
<PAGE> 218
FORT LAUDERDALE RADIO STATIONS
(A DIVISION OF T. K. COMMUNICATIONS, L. C.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOUR MONTHS YEAR ENDED
ENDED DECEMBER 31,
APRIL 30, 1996 1995
-------------- ------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)........................................................ $ (648,342) $ 716,932
Adjustments to reconcile net income (loss) to net cash provided (used) by
operating activities
Depreciation and amortization......................................... 66,503 526,566
(Increase) decrease in Accounts receivable............................ 132,696 227,320
Prepaid expenses...................................................... (5,358) 144,389
Increase (decrease) in Accounts payable............................... (64,233) (34,093)
Accrued commissions and management incentives......................... (5,190) 79,959
Accrued interest and expenses......................................... 26,127 (877,794)
--------- ------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES................. (497,797) 783,279
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment....................................... (93,839) (160,378)
Acquisition of other assets.............................................. (148,697) (234,305)
Net transfers from divisions............................................. -- 58,599,361
--------- ------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES................. (242,536) 58,204,678
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term borrowings, bank......................... -- (9,041,666)
Principal payments of stockholders' notes................................ -- (1,115,000)
Principal payments of subordinated debentures, stockholders'............. -- (1,500,000)
Principal payments on subordinated notes, stockholders'.................. -- (1,000,000)
Proceeds from notes payable, bank........................................ 2,650,000 --
Proceeds from stockholder loan........................................... -- 3,580,000
Purchase of treasury stock............................................... -- (17,600,000)
Distribution to shareholders............................................. -- (31,953,030)
Principal payments of stockholder loan................................... (2,126,245) --
--------- ------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES................. 523,755 (58,629,696)
--------- ------------
NET INCREASE (DECREASE) IN CASH.................................. (216,578) 358,261
CASH AND CASH EQUIVALENTS (OVERDRAFT), BEGINNING OF YEAR................... 306,172 (52,089)
--------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................... $ 89,594 $ 306,172
========= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for Interest -- all divisions (see Note 1)....... $ 448,590 $ 2,539,321
SUPPLEMENTAL NONCASH FINANCING ACTIVITIES
Notes issued in treasury stock redemption.................................. $ -- $ 2,069,430
========= ============
</TABLE>
See accompanying notes to financial statements.
F-76
<PAGE> 219
FORT LAUDERDALE RADIO STATIONS
(A DIVISION OF T. K. COMMUNICATIONS, L. C.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Effective December 29, 1995, the remaining shareholder of T. K.
Communication, Inc. liquidated and reorganized as a limited liability company,
T. K. Communications, L.C.
Method of Presentation
The financial statements present the financial position and related results
of operations and cash flows of the Fort Lauderdale Radio Stations (a division
of T. K. Communication, L. C.). Historically, the Fort Lauderdale Radio Stations
Division's balance sheet has reflected all long-term debt and the accumulation
of all stockholders transactions of the entity.
In 1995, T. K. Communications, Inc. closed on the sales of the divisions of
the Dallas radio station and the Orlando radio stations, and the divisional
equity of these divisions were transferred to the Fort Lauderdale Radio Stations
Division. As of December 31, 1995, the Fort Lauderdale Radio Stations Division
was the only remaining division of T. K. Communications, L. C. and represents
the financial position in its entirety of T. K. Communications, L. C.
Allocation of Corporate Expense
T. K. Communications, Inc. allocated eighty-six percent (86%) of corporate
expenses (included in general and administrative expenses) and sixty-six percent
(66%) of interest expense to the Fort Lauderdale Radio Stations Division for the
year ended December 31, 1995. In the opinion of the Company's management, the
methods of the allocations used are reasonable. Interest paid by the Fort
Lauderdale Radio Stations Division was one hundred percent (100%) of the
interest paid by T. K. Communications, Inc. for the year ended December 31,
1995.
Allocation of Operating Expenses -- WSHE (FM) and WSRF (AM)
The Fort Lauderdale division income has been presented reflecting the
component stations WSHE (FM) and WSRF (AM). Operating expenses are allocated on
a percentage of radio station square footage and other analyses. Certain other
expenses are presented on an allocation basis as a percentage of gross sales.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
Income Taxes
Both entities, T. K. Communications L. C. (a Florida limited liability
company) and T. K. Communications, Inc. (an S Corporation) are not tax-paying
entities for purposes of Federal and Florida income taxes, and thus, no income
taxes for Federal and Florida have been recorded in the statements. In lieu
F-77
<PAGE> 220
FORT LAUDERDALE RADIO STATIONS
(A DIVISION OF T. K. COMMUNICATIONS, L. C.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
of these corporate taxes the members of the limited liability company and the
stockholders of the S Corporation are taxed on their proportionate share of the
entities' taxable income.
Property and Equipment and Depreciation
Property and equipment are recorded at cost. For financial statement
purposes, depreciation is provided on the straight-line method over the
estimated useful lives of the assets.
The estimated useful lives used in computing depreciation are as follows:
<TABLE>
<S> <C>
Towers, antennas, and ground systems.......................... 5 - 10 years
Transmitting equipment........................................ 5 - 10 years
Studio, supporting and office equipment....................... 5 - 10 years
Building and improvements..................................... 10 - 40 years
</TABLE>
Maintenance and repairs are charged to expense as incurred; major renewals
and betterments are capitalized. When items of property or equipment are sold or
retired, the related cost and accumulated depreciation are removed from the
accounts and any gain or loss is included in income.
Trade -- Sales
All trade sales and related expenses are recorded at the value of the
merchandise received. All capital equipment received via trade is capitalized
and depreciated over its estimated useful life.
Other Assets and Amortization
The costs of other assets are amortized over their respective useful lives
or benefit periods. The methods and period of amortization by the type of asset
are disclosed in Note 6.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 107, Disclosures about Fair Value of Financial
Instruments, which requires the Company to disclose the fair value of financial
instruments, both assets and liabilities recognized and not recognized in the
balance sheet. The value of cash and cash equivalents, accounts receivable,
accounts payable and debt recorded on the balance sheet approximates fair value.
Interim Financial Data
The interim financial data of the Company is unaudited; however, in the
opinion of the Company's management, the interim data includes all adjustments,
consisting of only normal recurring adjustments, necessary for a fair statement
of results for the interim period. The results of operations for the four months
ended April 30, 1996 are not necessarily indicative of the results that can be
expected for the entire fiscal year ending December 31, 1996.
NOTE 2. LONG-TERM DEBT
On December 27, 1995, to facilitate the reorganization to T.K.
Communications, L.C., the company amended and restated the Credit Agreement
dated July 18, 1995 with Bank One. The loan commitment totaled $16,250,000 which
included a non-conversion portion of the revolving loan of $1,000,000, a
conversion portion of the revolving loan of $3,000,000, a term loan of
$8,750,000 and a term loan of $3,500,000. Interest was payable monthly, at the
bank's prime rate plus an increment ranging to one and a quarter percent
determined by the ratio of funded debt to operating cash flow.
F-78
<PAGE> 221
FORT LAUDERDALE RADIO STATIONS
(A DIVISION OF T. K. COMMUNICATIONS, L. C.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As discussed in Note 7, subsequent events, T.K. Communications, L.C.
entered into the First Amendment to the Amended and Restated Credit Agreement
dated December 27, 1995 with Bank One, Indianapolis, National Association. This
First Amendment dated July 22, 1996 was agreed upon to enact certain
modifications in conjunction with the anticipated closing on the sale of the
Fort Lauderdale, Radio Stations (the "Paxson Acquisition") scheduled to occur on
January 17, 1997.
Under the First Amendment the term loans available are in place as follows:
<TABLE>
<CAPTION>
TERM LOAN I TERM LOAN II TERM LOAN III
----------- ------------ -------------
<S> <C> <C> <C>
Amount:................................................. $12,750,000 $3,500,000 $ 3,000,000
Interest Rate: (Payable Monthly)........................ Prime Prime Prime
Rate plus Rate plus Rate plus
1- 1/4% 2.0% 3.0%
</TABLE>
Repayment Date: For all three terms loans the entire principal balance
shall be repayable together with all accrued but unpaid interest on January 17,
1997.
All the Bank One loans are collateralized by a security interest in all
present and future assets of the Company, a pledge of the outstanding stock of
the Company, an assignment of an insurance policy on the life of John F.
Tenaglia for $5,000,000 and collateral assignment of the escrow agreement under
which Paxson has deposited $2,000,000. All indebtedness of the Company to the
stockholders and former stockholders of the Company is subordinated to the
indebtedness of Bank One under the credit agreements.
Under the credit agreements with Bank One, the Company is required to
adhere to certain restrictive covenants.
NOTE 3. REDEMPTION AGREEMENT AND RELATED PARTY DEBT
On March 1, 1995, subsequent to entering into sales agreements to sell the
operating assets of the Dallas Station and the Orlando Stations eighty percent
of the stockholders agreed to have their stock redeemed by the Company.
Under the redemption agreement the net proceeds from the sale of the Dallas
and Orlando radio stations were deposited into an escrow account. The Company,
from the escrow account, repaid all subordinated stockholder debt and accrued
interest on the debt totalling $4,436,936 and paid down the Bank One debt from
$23,000,000 to $13,500,000. On May 1, 1995, settlement was made on the
redemption agreement. Under the redemption agreement, the redeeming stockholders
surrendered their Company's stock and in return received distributions for their
pro rata share of the sum of the escrow account, after estimated expenses, and
$22,000,000 for the Fort Lauderdale radio stations. In accordance with the
agreement, the redeeming stockholders received subordinated notes representing
eighty percent of the Fort Lauderdale radio stations calculated working capital
totalling $1,749,430 and subordinated notes for eighty percent of the
outstanding monies due on the Orlando radio stations noncompete agreement
totalling $320,000. The revised due date for the working capital notes is the
earlier of the closing date of the sale of the Fort Lauderdale Radio Stations or
April 30, 1997. The working capital notes were non-interest bearing through
April 30, 1996, and thereafter interest is payable at nine percent per annum and
due at the repayment of the principal. After the annual receipt by the Company
of the noncompete payments, the Company shall immediately pay the former
stockholders their pro rata share.
On May 19, 1994, the stockholders loaned the Company $1,000,000 from the
escrow account which was established under credit agreements dated June 30, 1992
with FUNB and MONY. The notes were payable on or before June 30, 2001 as
permitted by the Bank One credit agreement dated May 19, 1994. Interest was
payable quarterly at a fixed rate of 7% per year.
F-79
<PAGE> 222
FORT LAUDERDALE RADIO STATIONS
(A DIVISION OF T. K. COMMUNICATIONS, L. C.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Company converted $115,000 of accrued interest on subordinated
debentures to notes payable. The notes were non-interest bearing.
In December 1988, a stockholder of the Company loaned the Company
$1,000,000. The note was originally payable on demand with interest payable
monthly at prime rate.
Subordinated debenture notes represent subordinated notes to common
stockholders due June 16, 1998, with interest at 8%. No payment of principal was
allowed unless senior indebtedness had been retired.
In May 1995, proceeds from the escrow account were used to repay all
outstanding debt to redeeming stockholders and former stockholder including the
stockholders' notes, subordinated debentures and notes, stockholder advance and
the accrued interest to date totalling $821,936.
As of December 31, 1995, the outstanding balance on a non-interest bearing
subordinated loan to the nonredeeming stockholder amounted to $3,580,000.
NOTE 4. OPERATING LEASE COMMITMENTS
Effective January 1992, the Company agreed to a ten year lease for the
radio station office with a monthly base rent of $7,030 with annual consumer
price index adjustment. The Company leases tower space for an antenna under a
15-year lease agreement through December 31, 2000. The agreement calls for an
annual lease amount of $60,000 for the first five years, $75,000 for the next
five years, and $93,750 for the final five years. The Company leases tower space
for an auxiliary FM antenna at an annual amount of $11,544 plus an annual
adjustment for Consumer Price Index increases. The contract extends to February
28, 2023.
The Company made a buy out settlement for its lease term for its corporate
office space through August 31, 1996 in the amount of $68,158.
The total rent expense for 1995 for the Fort Lauderdale Radio Stations was
$247,539.
The aggregate minimum lease payments are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
----------------------------------------------------------------- ----------
<S> <C>
1996............................................................. $ 172,463
1997............................................................. 189,651
1998............................................................. 189,651
1999............................................................. 189,651
2000 and thereafter.............................................. 424,606
----------
$1,166,022
==========
</TABLE>
NOTE 5. PROPERTY AND EQUIPMENT
Major classifications of property, equipment and depreciation are
summarized as follows:
<TABLE>
<CAPTION>
ACCUMULATED BOOK
ASSETS DEPRECIATION VALUE
---------- ---------- --------
<S> <C> <C> <C>
Towers, antennas, and ground systems............ $ 518,587 $ 516,976 $ 1,611
Transmitting equipment.......................... 311,744 295,785 15,959
Studio, supporting and office equipment......... 1,071,430 870,571 200,859
Building and improvements....................... 1,028,611 787,021 241,590
---------- ---------- --------
$2,930,372 $2,470,353 $460,019
========== ========== ========
</TABLE>
F-80
<PAGE> 223
FORT LAUDERDALE RADIO STATIONS
(A DIVISION OF T. K. COMMUNICATIONS, L. C.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
RECONCILIATION
<TABLE>
<CAPTION>
ACCUMULATED
COST DEPRECIATION
---------- ----------
<S> <C> <C>
BALANCE, DECEMBER 31, 1994.......................... $2,769,994 $2,360,791
ADDITIONS
Towers, antennas and ground systems............... -- 1,239
Transmitting equipment............................ 2,640 16,212
Studio, supporting and office equipment........... 56,873 79,566
Building and improvements......................... 100,865 12,545
---------- ----------
160,378 109,562
---------- ----------
BALANCE, DECEMBER 31, 1995.......................... $2,930,372 $2,470,353
========== ==========
</TABLE>
NOTE 6. OTHER ASSETS
As of December 31, 1995 other assets and accumulated amortization are as
follows:
<TABLE>
<CAPTION>
ACCUMULATED
COST AMORTIZATION NET
---------- -------- ----------
<S> <C> <C> <C>
Goodwill and licenses................... $2,299,760 $919,906 $1,379,854
Patents and trademarks.................. 14,029 13,840 189
Loan procurement costs.................. 161,747 14,464 147,283
Organization expense.................... 68,346 9,113 59,233
Deposits................................ 31,857 -- 31,857
---------- -------- ----------
$2,575,739 $957,323 $1,618,416
========== ======== ==========
</TABLE>
Organization Expense
The costs to reorganize to a limited liability company have been
capitalized and are being amortized over 60 months.
Transmitter Site Leasehold Interest
The cost of the lease is being amortized over the life of the lease.
Goodwill and Licenses
Goodwill and licenses represent the excess of acquisition cost over the
fair value of net tangible assets at the date of purchase. Management has
elected to amortize these costs over forty years.
Patents and Trademarks
These costs are amortized over 17 years.
Loan Procurement Costs
These costs are amortized over the term of the financing. In 1995,
amortization expense of $322,291 of the total $417,004 resulted from a write-off
of unamortized prior loans' procurement costs.
F-81
<PAGE> 224
FORT LAUDERDALE RADIO STATIONS
(A DIVISION OF T. K. COMMUNICATIONS, L. C.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. SUBSEQUENT EVENTS
In March 1996, Paxson Broadcasting of Miami, Limited Partnership agreed to
purchase all assets used in the operation of the Company's Fort Lauderdale Radio
Stations WSHE (FM) and WSRF (AM) for $57,500,000. At settlement, the Company
will receive $47,500,000 in cash and $10,000,000 in unregistered stock valued at
the registration price of the future public offering of Paxson Communications
Corporation. If the registration price is less than the average of the closing
market price of the following thirty days after settlement, additional
unregistered shares will be issued to the Company for the difference.
After FCC consent is received, the Company has the election to postpone the
settlement until January 12, 1997. In conjunction with the purchase agreement,
the parties agreed to a time brokerage agreement whereby the parties defined the
operations and management of the stations to the eventual closing date.
On July 22, 1996, T. K. Communications, L. C. entered into the First
Amendment to the Amended and Restated Credit Agreement dated December 27, 1995
with Bank One, Indianapolis, National Association, See Note 2 for additional
details.
F-82
<PAGE> 225
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders'
of Shamrock Communications, Inc.
(An "S" Corporation)
We have audited the accompanying balance sheet of Radio Station WDIZ, FM, a
division of Shamrock Communications, Inc., (An "S" Corporation), as of December
31, 1995 and the related statements of income and expenses, divisional equity,
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance that the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairy,
in all material respects, the financial position of Radio Station -- WDIZ, FM, a
division of Shamrock Communications, Inc., (An "S" Corporation), as of December
31, 1995 and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
As explained in Note 3 to the financial statements, Shamrock
Communications, Inc., (An "S" Corporation) is part of an affiliated group of
companies and has entered into transactions with the group members.
/s/ Robert Rossi & Co.
- ---------------------------------------------------------
ROBERT ROSSI & CO.
Olyphant, Pennsylvania
July 24, 1996
F-83
<PAGE> 226
RADIO STATION WDIZ -- FM
A DIVISION OF
SHAMROCK COMMUNICATIONS, INC.
(AN "S" CORPORATION)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER
MAY 31, 31,
1996 1995
--------- ---------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash............................................................... $ 85,158 $ 101,574
Accounts Receivable less allowance for doubtful accounts of $66,932
and $47,179, respectively....................................... 414,489 434,237
Other Current Assets............................................... 19,127 396
--------- ---------
TOTAL CURRENT ASSETS....................................... 518,774 536,207
PROPERTY AND EQUIPMENT
Leasehold Improvements............................................. 67,412 67,412
Furniture and Fixtures............................................. 89,240 89,240
Radio Equipment.................................................... 353,008 353,008
Tower and Antenna Equipment........................................ 350,943 346,268
--------- ---------
Total...................................................... 860,603 855,928
Less: Accumulated Depreciation....................................... (802,048) (790,798)
--------- ---------
NET PROPERTY & EQUIPMENT............................................. 58,555 65,130
OTHER ASSETS
FCC Licenses, Net (Note 2)......................................... 25,290 26,186
--------- ---------
TOTAL ASSETS............................................... $ 602,619 $ 627,523
========= =========
LIABILITIES AND DIVISIONAL EQUITY
CURRENT LIABILITIES
Accounts Payable................................................... $ 37,189 $ 14,956
Accrued Expenses................................................... 83,901 63,217
Due to Affiliated Companies (Note 3)............................... 40,093 22,237
--------- ---------
TOTAL CURRENT LIABILITIES.................................. 161,183 100,410
COMMITMENTS AND CONTINGENCIES (Note 4)
DIVISIONAL EQUITY.................................................... 441,436 527,113
--------- ---------
TOTAL LIABILITIES AND DIVISIONAL EQUITY.................... $ 602,619 $ 627,523
========= =========
</TABLE>
See accompanying notes and independent auditor's report.
F-84
<PAGE> 227
RADIO STATION WDIZ -- FM
A DIVISION OF
SHAMROCK COMMUNICATIONS, INC.
(AN "S" CORPORATION)
STATEMENT OF INCOME AND EXPENSES
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
MAY 31, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
REVENUES........................................................... $1,190,259 $2,935,860
------------ ------------
EXPENSES
Direct........................................................... 414,546 1,073,691
Technical........................................................ 44,381 81,449
Program.......................................................... 127,087 286,746
Selling.......................................................... 87,756 234,221
Administrative and General....................................... 250,707 582,225
Depreciation and Amortization.................................... 12,146 35,496
------------ ------------
TOTAL EXPENSES........................................... 936,623 2,293,828
------------ ------------
NET INCOME (Note 6)................................................ $ 253,636 $ 642,032
========== ==========
</TABLE>
See accompanying notes and independent auditor's report.
F-85
<PAGE> 228
RADIO STATION WDIZ -- FM
A DIVISION OF
SHAMROCK COMMUNICATIONS, INC.
(AN "S" CORPORATION)
STATEMENT OF DIVISIONAL EQUITY
<TABLE>
<CAPTION>
YEAR ENDED
PERIOD ENDED DECEMBER
MAY 31, 31,
1996 1995
------------ -----------
(UNAUDITED)
<S> <C> <C>
Divisional Equity, Beginning of Year.............................. $ 527,113 $ 1,172,425
Add:
Net Income...................................................... 253,636 642,032
Less:
Corporate Expenses Paid by WDIZ (Note 1)........................ (339,313) (1,287,344)
------------ -----------
Divisional Equity, End of Year/Period............................. $ 441,436 $ 527,113
========== ==========
</TABLE>
See accompanying notes and independent auditor's report.
F-86
<PAGE> 229
RADIO STATION WDIZ -- FM
A DIVISION OF
SHAMROCK COMMUNICATIONS, INC.
(AN "S" CORPORATION)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
MAY 31, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income........................................................ $ 253,636 $ 642,032
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation and Amortization................................... 12,146 35,496
Decrease in Accounts Receivable................................. 19,748 77,149
(Increase) Decrease in Other Current Assets..................... (18,731) 38,190
Increase in Due to Affiliated Corporation....................... 17,857 22,237
Increase (Decrease) in Accounts Payable......................... 22,233 (13,012)
Increase (Decrease) in Accrued Expenses......................... 20,684 (4,809)
-------- ----------
NET CASH PROVIDED FROM OPERATING ACTIVITIES............. 327,573 797,283
-------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment.............................. (4,676) (31,385)
-------- ----------
NET CASH USED IN INVESTING ACTIVITIES................... (4,676) (31,385)
-------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Corporate Expenses Paid......................................... (339,313) (1,287,344)
-------- ----------
NET CASH USED IN FINANCING ACTIVITIES................... (339,313) (1,287,344)
-------- ----------
Net Decrease in Cash.............................................. (16,416) (521,446)
Cash at Beginning of Year......................................... 101,574 623,020
-------- ----------
CASH AT END OF YEAR............................................... $ 85,158 $ 101,574
======== ==========
Supplemental Cash Flow Disclosures Cash Paid During the Year for:
Interest (Corporate)............................................ $ 164,829 $ 447,775
Income Taxes.................................................... $ -- $ --
Non-Cash Operating Activities
Trade Revenue................................................... $ 117,244 $ 195,356
Trade Expenses.................................................. $ 117,244 $ 195,356
</TABLE>
See accompanying notes and independent auditor's report.
F-87
<PAGE> 230
RADIO STATION WDIZ -- FM
A DIVISION OF
SHAMROCK COMMUNICATIONS, INC.
(AN "S" CORPORATION)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business: WDIZ FM is a commercial class C -- FM radio station
licensed by the FCC to Orlando, Florida with its studio and business office
located in Longwood, Florida, serving the metropolitan area of Orlando, Florida.
Presented below is a Summary of Significant Accounting Policies followed in
the preparation of the accompanying financial statements:
Cash and Cash Equivalents: Cash and cash equivalents are highly liquid
investments with original maturities of three months or less.
Property and Equipment: Property and Equipment are carried at cost.
Deprecation is provided using straight line and accelerated methods over their
estimated useful lives as follows:
<TABLE>
<CAPTION>
TERM OF
LEASEHOLD IMPROVEMENTS LEASE
--------------------------------------------------------------- ------------
<S> <C>
Furniture and Fixtures......................................... 5 - 7 years
Radio Equipment................................................ 5 - 7 years
Tower and Antenna Equipment.................................... 5 - 15 years
</TABLE>
Income Taxes: Income Taxes are provided for according to the Internal
Revenue Code and Regulations relative to "S" Corporations as discussed in Note
6.
Intangible Assets: FCC Licenses are amortized using the straight line
method over the estimated useful life of 40 years.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Interim Financial Data: The interim financial data of the Station is
unaudited; however, in the opinion of Station management, the interim financial
data includes all adjustments, consisting of only normal recurring adjustments,
necessary for a fair statement of results of the interim periods. The income and
expenses for the period ended May 31, 1996 are not necessarily indicative of the
results that could be expected for the entire year ending December 31, 1996. All
information presented in the notes to financial statements as of and for the
period ended May 31, 1996 is unaudited.
Divisional Equity: Radio Station WDIZ -- FM is responsible for paying any
corporate expenses that arise for Shamrock Communications, Inc. Therefore,
divisional equity contains WDIZ's equity less any corporate expenses that were
paid by the Station. Such expenses are not reflected in WDIZ's statement of
income and expenses.
NOTE 2. FCC LICENSES
FCC Licenses are carried at original cost less accumulated amortization.
FCC Licenses represent the cost in excess of fair value of the net assets of
companies acquired in purchase transactions and is being amortized under the
straight line method over a term of 40 years. Amortization expense charged to
expense for the year ended December 31, 1995 and the period ended May 31, 1996
was $2,149 and $896 respectively.
F-88
<PAGE> 231
RADIO STATION WDIZ -- FM
A DIVISION OF
SHAMROCK COMMUNICATIONS, INC.
(AN "S" CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. RELATED PARTIES
Shamrock Communications, Inc.'s shareholders also control other companies
in the radio broadcasting and newspaper publishing business. The Station was
charged $60,710 in management and accounting fees from such companies and also
is billed by these companies for any expense that arises in the ordinary course
of business that they may share. There is no interest assessed on such charges
from affiliated companies and the balance due to affiliates are paid as funds
become available. The balance due to affiliated companies is as follows:
<TABLE>
<CAPTION>
MAY 31, DECEMBER 31,
1996 1995
------- ------------
<S> <C> <C>
Due to Scranton Times, L.P. .......................... $40,093 $ 22,237
======= ==========
</TABLE>
NOTE 4. COMMITMENTS AND CONTINGENCIES
Leases: The Station is obligated under an office operating lease and a
tower operating lease. The leases, which contain options to renew, expire for
the office in 2001 and for the tower in 1997. Certain of these leases require
the Station to pay a pro-rata share of various costs relating to the specific
properties. Total rent expense for the year ended December 31, 1995 and the
period ended May 31, 1996 amounted to $116,901 and $24,582 respectively.
The Station is also obligated under various vehicle leases with terms less
than one year. The total lease expense for the year ended December 31, 1995 and
the period ended May 31, 1996 amounted to $45,250 and $72,506 respectively.
Minimum future lease payments under operating leases for each of the next
five years and in the aggregate are:
<TABLE>
<CAPTION>
MAY 31, DECEMBER 31,
-------- ------------
<S> <C> <C>
1996................................................. $ 0 $106,141
1997................................................. 108,687 107,923
1998................................................. 65,001 66,124
1999................................................. 66,950 68,107
2000................................................. 68,959 70,151
2001................................................. 71,027 72,255
</TABLE>
Concentration of Credit Risk: At December 31, 1995 a concentration of
credit risk existed due to deposits in a financial institution in excess of the
Federal Deposit Insurance Corporation (FDIC) insured limit of $100,000.
The Station encounters, in the normal course of business, exposure to
concentrations of credit risk with respect to accounts receivable.
Concentrations of credit risk with respect to accounts receivable are limited
due to the Station's customer base and its geographic dispersion. Ongoing credit
evaluation of customers' financial condition are performed and, generally, no
collateral is required.
NOTE 5. EXCHANGE OF GOODS AND SERVICES
In the normal course of operations, and in accordance with industry custom,
the Station trades its advertising air time with some of its customers for goods
and services used in everyday operations. These
F-89
<PAGE> 232
RADIO STATION WDIZ -- FM
A DIVISION OF
SHAMROCK COMMUNICATIONS, INC.
(AN "S" CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
transactions are recorded at their estimated fair values when the goods and
services are received. Amounts included in sales and expenses for the year ended
December 31, 1995 and the period ended May 31, 1996 resulting from bartered
transactions are $195,356 and $117,244, respectively.
NOTE 6. INCOME TAXES
Shamrock Communications, Inc. has elected to be subject to the Internal
Revenue Code and Regulations pertaining to "S" Corporations for federal and
state tax purposes, and, as such, the income is passed through and reported on
the stockholders' federal and state income tax returns together with other
taxable income or deductions of the stockholders'; therefore, there is no
current provision for federal and state income taxes.
If the corporation does not comply with certain provisions of the Internal
Revenue Code with regard to "S" Corporations, there exists a possibility that
Shamrock Communications, Inc.'s election would be revoked involuntarily and
Shamrock Communications, Inc.'s earnings for the year would be subject to
federal and state income tax at the corporate level. Such requirements appear to
be complied with; therefore, a provision for federal or state income tax is not
considered necessary.
NOTE 7. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
Cash: Cash includes cash on hand, demand deposits and money market
accounts. The carrying amount is a reasonable estimate of fair value.
The Estimated Fair Value of the Company's Financial Instruments are as
follows:
<TABLE>
<CAPTION>
MAY, 31, 1996 DECEMBER 31, 1995
--------------------------- ---------------------------
CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE
-------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Financial Assets:
Cash.......................................... $ 85,158 $ 85,158 $101,574 $ 101,574
</TABLE>
NOTE 8. SUBSEQUENT EVENT
On April 26, 1996, Shamrock Communications, Inc. entered into an agreement
for the sale of the Property and Equipment and FCC License and rights of radio
station WDIZ for a purchase price of $22,000,000. The sale is pending, however,
the FCC has approved the assignment of the FCC license to radio station
WDIZ -- FM to Paxson Broadcasting of Orlando, a limited partnership, the
purchaser under the aforementioned asset purchase agreement. The closing date of
the sale has not yet been set.
Also, a Time Brokerage Agreement was entered into with the purchaser of
such station, whereby, the Station has agreed to lease the broadcast time of
WDIZ until the above mentioned sale is finalized. The lessee is entitled to all
advertising revenues of WDIZ and is responsible for all costs incurred in
broadcasting programming and other operating costs of the facility. Such lease
payments which will commence June 1, 1996 amount to $123,000 per month plus
reimbursement of all expenses paid by Shamrock Communications, Inc. for the
benefit of station WDIZ.
F-90
<PAGE> 233
INDEPENDENT AUDITOR'S REPORT
To the Partners
KXLI, A Division of KX Acquisition Limited Partnership
Big Lake, MN
We have audited the accompanying balance sheet of KXLI, A Division of KX
Acquisition Limited Partnership, as of December 31, 1995, and the related
statements of income, partners' capital and cash flows for the year then ended.
These financial statements are the responsibility of KXLI's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of KXLI, A Division of KX
Acquisition Limited Partnership, as of December 31, 1995, and the results of its
operations and cash flows for the year then ended in conformity with generally
accepted accounting principles.
/s/ Schweitzer Rubin Karon & Bremer
- ---------------------------------------------------------
SCHWEITZER RUBIN KARON & BREMER
Certified Public Accountants
Minneapolis, Minnesota
March 25, 1996 except for Notes 7 and 12,
as to which the date is May 17, 1996
F-91
<PAGE> 234
KXLI
(A DIVISION OF KX ACQUISITION LIMITED PARTNERSHIP)
BALANCE SHEET
SEE ACCOUNTANT'S REPORT
<TABLE>
<CAPTION>
JUNE 30, DECEMBER
1996 31,
(UNAUDITED) 1995
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................................... $ 511,602 $ 52,515
Trade receivables, less allowance for doubtful accounts, $50,000
and $25,000, respectively...................................... 223,924 268,759
Other current assets.............................................. 16,219 8,543
Due from related party............................................ 17,155 0
---------- ----------
Total current assets...................................... 768,900 329,817
Property and Equipment (Note 2)..................................... 1,949,527 1,992,816
Intangibles and Other Assets (Note 3)............................... 1,121,249 1,146,461
---------- ----------
Total assets.............................................. $3,839,676 $3,469,094
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Current maturities of long-term debt (Note 6)..................... $ 60,000 $ 56,705
Programming obligations, current (Note 10)........................ 37,000 37,000
Accounts payable (Note 9)......................................... 60,567 96,012
Accrued expenses.................................................. 16,904 19,835
Deferred income................................................... 11,549 16,306
Earnest deposits received (Note 12)............................... 350,000 0
Due to limited partner (Note 4)................................... 450,961 450,961
Due to related party (Note 8)..................................... 0 67,268
---------- ----------
Total current liabilities................................. 986,981 744,087
Programming Obligations, Long-Term (Note 10)........................ 63,970 71,831
Long-Term Debt, less current maturities (Note 6).................... 158,090 192,496
Commitments and Contingencies (Notes 7, 10 and 12)
Partners' Capital................................................... 2,630,635 2,460,680
---------- ----------
Total liabilities and partners' capital................... $3,839,676 $3,469,094
========== ==========
</TABLE>
See Notes to Financial Statements.
F-92
<PAGE> 235
KXLI
(A DIVISION OF KX ACQUISITION LIMITED PARTNERSHIP)
STATEMENT OF INCOME
SEE ACCOUNTANT'S REPORT
<TABLE>
<CAPTION>
YEAR
SIX-MONTH PERIOD ENDED,
ENDED DECEMBER
JUNE 30, 1996 31,
(UNAUDITED) 1995
---------------- ----------
<S> <C> <C>
Revenue:
Entertainment hours........................................... $ 886,972 $1,208,191
Sponsor spots................................................. 105,608 185,874
Trade revenue................................................. 78,239 82,381
Tower space rental............................................ 15,240 28,546
Other revenues................................................ 1,550 6,601
---------- ----------
Total revenue......................................... 1,087,609 1,511,593
Operating and general and administrative expenses............... 861,127 1,326,472
---------- ----------
Operating income (loss)......................................... 226,482 185,121
Nonoperating income (expense):
Interest expense.............................................. (12,807) (32,741)
Gain (loss) on disposal of property and equipment............. (4,177) 0
Income (expense) under joint operations agreement with KVBM
Television, Inc. (Note 12)................................. (23,969) 0
---------- ----------
Net income (loss)............................................... $ 185,529 $ 152,380
========== ==========
</TABLE>
See Notes to Financial Statements.
F-93
<PAGE> 236
KXLI
(A DIVISION OF KX ACQUISITION LIMITED PARTNERSHIP)
STATEMENT OF PARTNERS' CAPITAL
SEE ACCOUNTANT'S REPORT
<TABLE>
<CAPTION>
GENERAL LIMITED TOTAL
PARTNER PARTNER CAPITAL
------- ---------- ----------
<S> <C> <C> <C>
Balance, January 1, 1995................................. $(9,434) $2,355,332 $2,345,898
Net income (loss)...................................... 1,524 150,856 152,380
Distributions.......................................... (376) (37,222) (37,598)
------- ---------- ----------
Balance, December 31, 1995............................... (8,286) 2,468,966 2,460,680
Net income (loss)...................................... 1,855 183,674 185,529
Distributions.......................................... (156) (15,418) (15,574)
------- ---------- ----------
Balance, June 30, 1996 (unaudited)....................... $(6,587) $2,637,222 $2,630,635
======= ========= =========
</TABLE>
See Notes to Financial Statements.
F-94
<PAGE> 237
KXLI
(A DIVISION OF KX ACQUISITION LIMITED PARTNERSHIP)
STATEMENT OF CASH FLOWS
SEE ACCOUNTANT'S REPORT
<TABLE>
<CAPTION>
SIX-MONTH PERIOD
ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------- -----------------
(UNAUDITED)
<S> <C> <C>
Cash Flows from Operating Activities:
Cash received from customers.............................. $1,119,826 $ 1,385,137
Cash paid to suppliers and employees...................... (795,820) (1,108,874)
Interest paid............................................. (12,807) (32,741)
---------------- -----------------
Net cash provided by (used in) operating activities......... 311,199 243,522
---------------- -----------------
Cash Flows from Investing Activities:
Purchases of property and equipment....................... (23,135) (47,336)
Payments for intangible and other assets.................. (23,900) (1,637)
Deposits received......................................... 350,000 0
---------------- -----------------
Net cash provided by (used in) investing activities......... 302,965 (48,973)
---------------- -----------------
Cash Flows from Financing Activities:
Net advances (to) from related party...................... (108,392) (22,087)
Net borrowings (payments) on revolving credit
agreements............................................. 0 (50,000)
Principal payments on long-term borrowings................ (31,111) (37,799)
Distributions to partners................................. (15,574) (37,598)
---------------- -----------------
Net cash provided by (used in) financing activities......... (155,077) (147,484)
---------------- -----------------
Net increase (decrease) in cash............................. 459,087 47,065
Cash:
Beginning................................................. 52,515 5,450
---------------- -----------------
Ending.................................................... $ 511,602 $ 52,515
---------------- -----------------
Reconciliation of Net (Income) Loss to Net Cash Provided by
Operating Activities:
Net income (loss)......................................... $ 185,529 $ 152,380
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 111,359 239,530
(Gain) Loss on disposal of property and equipment...... 4,177 0
(Increase) decrease in:
Trade receivables.................................... 44,835 (121,921)
Other current assets................................. (7,676) (1,324)
(Decrease) increase in:
Accounts payable..................................... (35,445) (22,427)
Accrued expenses and other current liabilities....... (2,931) 1,819
Deferred income...................................... (4,757) (3,366)
Programming obligations.............................. (7,861) (1,169)
Due to related party................................. 23,969 0
---------------- -----------------
Net cash provided by (used in) operating activities......... $ 311,199 $ 243,522
============= =============
</TABLE>
See Notes to Financial Statements.
F-95
<PAGE> 238
KXLI
(A DIVISION OF KX ACQUISITION LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
SEE ACCOUNTANT'S REPORT
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business:
KXLI is a division of KX Acquisition Limited Partnership. KX Acquisition
Limited Partnership was formed in May 1990 to own and operate two television
broadcasting stations: KXLI, Channel 41 in Big Lake, MN and KXLT, Channel 47 in
Rochester, MN. All assets and expenses directly attributable to KXLT are not
reflected in these KXLI divisional financial statements. All indirect and shared
assets and expenses are reflected therein.
KXLI's customers are primarily located within the Channel 41 viewing area.
KXLI constructed new office and broadcasting facilities during 1994 and,
beginning in June 1994, changed the programming format of KXLI, Channel 41, from
a home shopping channel to a "TV Heaven" concept. This concept entails the
broadcasting of children's programming, programs with an outdoor theme, and
other similar shows, with an emphasis on classic TV programs. The HSN
affiliation arrangement previously held by KXLI was transferred to KVBM
Television, Inc. (KVBM), see Note 7.
KXLI also leases space on its television tower at Big Lake to several other
communications companies.
KXLI has entered into a Development Loan and Option Agreement and a Joint
Operations Agreement with KVBM. See Notes 7, 8 and 12 for additional information
about these agreements.
SIGNIFICANT ACCOUNTING POLICIES OF KXLI ARE SUMMARIZED BELOW:
Basis of accounting:
Broadcasting revenue is recognized as air time is utilized by the customer.
Rental income is recognized according to the terms outlined in the lease
agreements.
Personal assets and liabilities and partners' salaries:
In accordance with the generally accepted method of presenting partnership
financial statements, the financial statements do not include the personal
assets and liabilities of the partners, their rights to refunds on its net loss,
nor any provision for an income tax refund.
Cash and cash equivalents:
KXLI maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. KXLI has not experienced any losses on such
accounts. KXLI believes it is not exposed to any significant credit risk on
cash.
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Property and equipment:
Property and equipment contributed by the limited partner to KXLI has been
recorded at estimated fair market value. Property and equipment purchased by
KXLI is recorded at cost. Expenditures for renewals and betterment's are
capitalized. Repairs and maintenance costs are charged to expense. When items
are disposed
F-96
<PAGE> 239
KXLI
(A DIVISION OF KX ACQUISITION LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEE ACCOUNTANT'S REPORT
of, the cost and accumulated depreciation are eliminated from the accounts, and
any gain or loss is reflected in the results of operations.
Depreciation and amortization:
Property and equipment is depreciated on the straight-line method over the
following periods:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Buildings and improvements............................31.5
Television broadcast towers.............................25
Microwave, transmitters and other equipment...........5-15
Furniture...............................................10
</TABLE>
Intangibles are amortized on the straight-line method over the following
periods:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
FCC licenses............................................25
Organization and start-up costs..........................5
Loan cost......................................Life of the
related loan
Development option.......................................5
Films and tapes..........................................5
</TABLE>
The cost and related amortization on intangible assets are eliminated when
the asset has been fully amortized.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Fair value of financial instruments:
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
DUE TO LIMITED PARTNER:
The estimated fair value of amounts due to limited partner is
estimated based on the market for similar instruments. Fair value is
estimated to be $305,000 at December 31, 1995 and $322,000 at June 30,
1996; carrying amount at both dates is $450,961.
LONG-TERM DEBT:
The fair value of the KXLI's long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered to KXLI for debt of the same remaining maturities with similar
collateral requirements. At December 31, 1995 and June 30, 1996 the
principal balance on the long-term debt approximates the fair value of the
debt.
F-97
<PAGE> 240
KXLI
(A DIVISION OF KX ACQUISITION LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEE ACCOUNTANT'S REPORT
Interim financial information:
The accompanying financial statements as of June 30, 1996 and for the
six-month period ended June 30, 1996 are unaudited. In the opinion of the
management of KXLI, these financial statements reflect all adjustments,
consisting only of normal and recurring adjustments necessary for a fair
presentation of the financial statements. The results of operations for the
six-month period ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the full year ending December 31, 1996.
The June 30, 1996 information included in the Notes is unaudited.
NOTE 2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER
JUNE 30, 31,
1996 1995
---------- ----------
<S> <C> <C>
Towers.............................................. $1,364,736 $1,364,736
Transmitters........................................ 158,913 158,913
Buildings........................................... 288,997 288,170
Equipment........................................... 397,626 382,918
Furniture........................................... 48,647 42,658
Land................................................ 265,594 265,594
Vehicles............................................ 0 6,963
Leasehold improvements.............................. 27,965 26,354
---------- ----------
2,552,478 2,536,306
Less accumulated depreciation....................... 602,951 543,490
---------- ----------
Net property and equipment.......................... $1,949,527 $1,992,816
========== ==========
</TABLE>
Depreciation expense for 1995 and the six-month period ending June 30, 1996
was $145,046 and $62,247, respectively.
NOTE 3. INTANGIBLES AND OTHER ASSETS
Intangibles and other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER
JUNE 30, 31,
1996 1995
---------- ----------
<S> <C> <C>
FCC licenses........................................ $1,283,782 $1,283,782
Organization and start-up costs..................... 40,000 40,000
Loan fees........................................... 47,872 47,872
Development option.................................. 110,000 110,000
Films and tapes..................................... 64,134 40,234
---------- ----------
1,545,788 1,521,888
Less accumulated amortization....................... 424,539 375,427
---------- ----------
Net intangibles and other assets.................... $1,121,249 $1,146,461
========== ==========
</TABLE>
Amortization expense for 1995, and the six-month period ending June 30,
1996 was $94,483 and $49,112, respectively.
F-98
<PAGE> 241
KXLI
(A DIVISION OF KX ACQUISITION LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEE ACCOUNTANT'S REPORT
NOTE 4. DUE TO LIMITED PARTNER
Amount due to limited partner consists of cash advances from the limited
partner. Interest is not accrued or paid on the advances. The amount due to the
limited partner is subordinated to the January 1994 loan from Richfield Bank and
Trust. See Note 6.
NOTE 5. NOTE PAYABLE, BANK
KXLI, jointly with KVBM, has a line of credit under which up to $150,000
may be borrowed. No amounts were outstanding under the line of credit at
December 31, 1995.
NOTE 6. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER
JUNE 30, 31,
1996 1995
-------- -----------
<S> <C> <C>
Note payable to the bank, maturing August 1999, with
interest payable monthly at 2.5% over the prime
rate (effective rate of 11% at December 31, 1995),
secured by substantially all of KXLI's and KVBM's
assets and assignment of all rents and leases, and
the personal guarantee of the limited partner...... $218,090 $ 249,201
Less current maturities.............................. 60,000 56,705
-------- --------
Total long-term maturities........................... $158,090 $ 192,496
======== ========
</TABLE>
In connection with the note payable, KXLI and KVBM have agreed to comply
with various financial and non-financial covenants, including but not limited to
minimum debt service coverages and net worth.
The total outstanding note payable at December 31, 1995, including the
portion allocated to KVBM for which KXLI is jointly and severally liable, was
$1,425,008.
The estimated future maturities of long-term debt at December 31, 1995 are
as follows:
<TABLE>
<CAPTION>
YEAR KXLI KVBM TOTAL
- ----------------------------------- -------- ---------- ----------
<S> <C> <C> <C>
1996............................... $ 56,705 $ 267,508 $ 324,213
1997............................... 65,701 309,949 375,650
1998............................... 73,304 345,816 419,120
1999............................... 53,491 252,534 306,025
-------- ---------- ----------
Total.............................. $249,201 $1,175,807 $1,425,008
======== ========== ==========
</TABLE>
NOTE 7. DEVELOPMENT LOAN AND OPTION AGREEMENT WITH KVBM
KXLI entered into an agreement with KVBM during 1993 to facilitate securing
financing for the benefit of both parties. KXLI also granted the shareholder of
KVBM an option to purchase a limited partnership interest equal to 50% of the
net capital of KXLI, exercisable if and when KXLI enters into a contract to sell
all, or substantially all, of its assets. The purchase price for the option is
$500. KVBM granted an option to purchase 50% of its stock to KXLI. Under the
terms and conditions specified in an amendment to this agreement dated May 17,
1996, the option may be transferred to KXLI's limited partner. The amendment
also specified certain rights upon exercise of this option.
F-99
<PAGE> 242
KXLI
(A DIVISION OF KX ACQUISITION LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEE ACCOUNTANT'S REPORT
In the event of a sale of all or substantially all of the assets of KXLI,
the limited partner has been granted the right to receive a payment of
$2,000,000, provided sufficient funds are available after payment of KXLI's
creditors. KVBM and its shareholder have granted a similar right to the limited
partner upon the sale of all or substantially all of the assets of KVBM, or upon
the sale of KVBM stock by the shareholder. Any remaining proceeds will be
distributed to all partners and the shareholders of KVBM.
If KXLI has not entered into a legally binding contract to sell its assets
by the sixth anniversary of the development loan and option agreement, KXLI has
agreed to sell its assets for the highest bona fide offer which is equal to or
greater than the average of two appraised values.
The agreement also stipulates that, for as long as the limited partner is
personally liable as the guarantor of the bank loan (Note 6), he will have an
option to exchange the FCC Licenses of KXLI and KXLT for the FCC License of
KVBM. In the event this option is exercised, all the operating assets of KXLI
and KXLT would be exchanged for the operating assets of KVBM, and other
provisions as described in the agreement would take effect.
NOTE 8. JOINT OPERATIONS AGREEMENT WITH KVBM
Joint administrative, personnel and overhead costs:
In connection with, but not directly related to the agreement described in
Note 7, KLXI entered into an agreement with KVBM to share certain joint
administrative, personnel, and overhead costs. Beginning July 1, 1994, these
costs were allocated two-thirds to KVBM and one-third to KXLI. See Note 12
regarding the amendment to this agreement which was effective April 1, 1996.
The most significant of the joint costs allocated for the year ending
December 31, 1995 and the six-month period ending June 30, 1996, are as follows:
<TABLE>
<CAPTION>
KXLI KVBM TOTAL
--------- --------- ---------
<S> <C> <C> <C>
Year Ending December 31, 1995:
Salaries............................... $ 222,000 $ 439,000 $ 661,000
Payroll taxes.......................... 18,000 37,000 55,000
Employee benefits...................... 22,000 39,000 61,000
Six-Month Period Ending June 30, 1996:
Salaries............................... $ 32,000 $ 126,000 $ 158,000
Payroll taxes.......................... 3,000 11,000 14,000
Employee benefits...................... 5,000 18,000 23,000
</TABLE>
Interest expense and loan costs were allocated to the two entities based
upon loan proceeds received. For the year ending December 31, 1995 and the
six-month period ending June 30, 1996, these costs were allocated as follows:
<TABLE>
<CAPTION>
KXLI KVBM TOTAL
-------- --------- ---------
<S> <C> <C> <C>
Year Ending December 31, 1995:
Interest expense.......................... $ 32,741 $ 154,306 $ 187,047
Six-Month Period Ending June 30, 1996:
Interest expense.......................... $ 12,807 $ 60,794 $ 73,601
</TABLE>
At December 31, 1995, the total amount due to KVBM by KXLI was $67,268. At
June 30, 1996, KXLI assets include $17,155 in amounts due from KVBM.
F-100
<PAGE> 243
KXLI
(A DIVISION OF KX ACQUISITION LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEE ACCOUNTANT'S REPORT
Joint Operations Charge:
Under the terms of the Joint Operations Agreement KVBM and KXLI were to
each pay 50% of their net operating income to the other party.
The Joint Operations Agreement was amended subsequent to December 31, 1995
(see Note 12).
NOTE 9. RELATED PARTY TRANSACTIONS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
<S> <C> <C>
Amounts due to related parties included in accounts
payable $ 0 $9,263
</TABLE>
NOTE 10. PROGRAMMING OBLIGATIONS
KVBM entered into an agreement in 1993 to repurchase all of its issued and
outstanding non-voting common shares, and other direct and indirect interests in
KVBM. In conjunction with that agreement KVBM agreed to air a pre-determined
number of commercial spots during the first five years of KVBM's on-air
operations, or until the number of spots specified in the agreement has been
attained. In exchange for an option to acquire shares of KVBM, KXLI has agreed
to air 60% of the spots on Channel 41 (KXLI); the remaining 40% will be aired on
Channel 45 (KVBM). KXLI recorded an obligation in the amount of $110,000 in
conjunction with this matter. This amount is the present value of the estimated
fair value of KXLI's programming obligation. KXLI also recorded a corresponding
asset for $110,000 and has classified this amount as a development option.
Programming obligations consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
<S> <C> <C>
Programming obligations................................ $100,970 $108,831
Less estimated current maturities...................... 37,000 37,000
-------- --------
Total long-term maturities............................. $ 63,970 $ 71,831
======== ========
</TABLE>
NOTE 11. TOWER SPACE LEASES
KXLI leases space on the towers in Big Lake and Hader to various
communications companies with remaining terms ranging from 3 to 50 years.
Several of the leases are cancelable by either party with six months notice.
Minimum lease payments to be received as of December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---------------------------------------------------------- --------
<S> <C>
1996...................................................... $ 28,500
1997...................................................... 29,000
1998...................................................... 29,500
1999...................................................... 22,500
2000...................................................... 23,000
-------
Total minimum lease payments to be received............... $132,500
=======
</TABLE>
F-101
<PAGE> 244
KXLI
(A DIVISION OF KX ACQUISITION LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEE ACCOUNTANT'S REPORT
NOTE 12. SUBSEQUENT EVENTS
Amendment to Joint Operations Agreement with KVBM:
On May 17, 1996, KXLI and KVBM agreed to an amendment to the original Joint
Operations Agreement. The amendment redefines the calculation of the
compensation that each party is obligated to pay to the other. Each party agrees
to pay to the other 50% of its 'tax adjusted cash flow' on a quarterly basis
which is defined as operating income minus the sum of i) payments of principal
and interest on the bank loans, ii) cash expenditures for capital equipment
purchases and iii) assumed income tax payments calculated using an effective
rate of 46%, divided by 1 minus the effective rate. The amendment also provides
for the allocation of joint administrative, personnel and overhead to each party
on a fifty-fifty basis.
The provisions of the amendment which redefine compensation between the
parties are effective April 1, 1996. In addition, KXLI and KVBM each agreed to
release any and all claims arising on or before March 31, 1996 under the
Development Agreement and Option Agreement and the Joint Operations Agreement
and accordingly, the December 31, 1995 financial statements do not reflect the
joint operations charge as contemplated in the original agreement. The June 30,
1996 financial statements reflect a net expense of $23,967 as calculated
according to the provisions of the amended agreement for the period April 1
through June 30, 1996.
On May 17, 1996, KLXI entered into a letter of agreement in conjunction
with the Amendment to Development Agreement and Option Agreement which provides
for a distribution of $132,000 to KLXI's limited partner. This distribution
remains unpaid at June 30, 1996.
KLXI has agreed to maintain a cash reserve of $75,000 to be held in common
for the benefit of KLXI and KVBM to maintain adequate operations for both
parties. Cash in excess of $75,000 is available for distribution to KLXI's
limited partner.
Sale of Assets:
On June 11, 1996, KX Acquisition Limited Partnership entered into an
agreement to sell substantially all the assets of KXLI to Paxson Communications
of Minneapolis-41, Inc. for $12,000,000. An earnest money deposit of $350,000
was received prior to June 30, 1996. This sale, and the assignment of the FCC
license in conjunction with the sale, is subject to approval by the FCC.
The Joint Operations Agreement referred to above is between KX Acquisition
Limited Partnership and KVBM Television, Inc. Paxson Communications is not a
party to this agreement.
F-102
<PAGE> 245
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Cox Enterprises, Inc.:
We have audited the accompanying special-purpose statement of net assets of
WIOD-AM (a division of WIOD, Inc.) as of December 31, 1995, and the related
special-purpose statement of operations for the year then ended. These
special-purpose financial statements are the responsibility of WIOD-AM's
management. Our responsibility is to express an opinion on these special-purpose
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the special-purpose financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the special-purpose financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying special-purpose financial statements were prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Registration Statement on Form S-3 of
Paxson Communications Corporation and, as described in Note 1 to the special-
purpose financial statements, do not and are not intended to present the
financial position and results of operations of a separate, independent
operating entity.
In our opinion, the special-purpose financial statements referred to above
present fairly, in all material respects, the net assets of WIOD-AM at December
31, 1995 and its operations for the year then ended, in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- ---------------------------------------------------------
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
August 8, 1996
F-103
<PAGE> 246
WIOD-AM
(A DIVISION OF WIOD, INC.)
SPECIAL-PURPOSE STATEMENTS OF NET ASSETS
DECEMBER 31, 1995 AND JUNE 30, 1996
<TABLE>
<CAPTION>
DECEMBER
31, JUNE 30,
1995 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Accounts receivable, less an allowance for doubtful accounts of
$46,284 and $45,736, respectively............................ $ 2,674,090 $ 1,510,365
Prepaid expenses and other current assets....................... 2,131,442 2,495,125
----------- -----------
Total current assets.................................... 4,805,532 4,005,490
Net plant and equipment......................................... 2,135,296 2,108,375
Broadcast rights, net........................................... 5,951,250 5,847,500
Other assets.................................................... 56,698 57,799
----------- -----------
Total assets............................................ $12,948,776 $12,019,164
=========== ===========
LIABILITIES
Current Liabilities:
Accounts payable................................................ $ 2,385,993 $ 386,174
Accrued expenses................................................ 190,017 148,888
----------- -----------
Total current liabilities............................... 2,576,010 535,062
----------- -----------
Net Assets.............................................. $10,372,766 $11,484,102
=========== ===========
</TABLE>
See accompanying notes to special-purpose financial statements.
F-104
<PAGE> 247
WIOD-AM
(A DIVISION OF WIOD, INC.)
SPECIAL-PURPOSE STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995 AND SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
SIX MONTHS
DECEMBER 31, ENDED
1995 JUNE 30, 1996
------------ -------------
(UNAUDITED)
<S> <C> <C>
REVENUES:
Local............................................................. $ 5,519,809 $ 2,477,455
National.......................................................... 2,139,012 907,835
Other............................................................. 63,864 229
----------- ----------
Total revenues............................................ $ 7,722,685 $ 3,385,519
----------- ----------
EXPENSES:
Operating......................................................... 5,435,231 1,419,625
Selling, general, and administrative.............................. 3,268,585 1,348,830
Depreciation and amortization..................................... 284,659 128,476
Other -- net...................................................... 31,281 --
----------- ----------
Total expenses............................................ 9,019,756 2,896,931
----------- ----------
OPERATING INCOME (LOSS)............................................. $ (1,297,071) $ 488,588
=========== ==========
</TABLE>
See accompanying notes to special-purpose financial statements.
F-105
<PAGE> 248
WIOD-AM
(A DIVISION OF WIOD, INC.)
NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 IS UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
WIOD-AM is one of three affiliated radio stations which are operating
divisions of WIOD, Inc., a wholly-owned subsidiary of Cox Radio, Inc., which is
a wholly-owned subsidiary of Cox Enterprises, Inc. ("Cox"). WIOD-AM and its two
affiliated radio stations are located in and broadcast from the South Florida
area.
The three affiliated radio stations operate from the same broadcast site
and facilities and share certain common equipment. Consequently, certain
operating costs are shared between the three affiliated radio stations. In
addition, certain other costs and expenses are negotiated and provided for by
Cox, for which Cox allocates related charges to WIOD-AM and its two affiliated
stations.
Pursuant to an Asset Purchase Agreement dated as of April 26, 1996 by and
between Paxson Broadcasting of Miami Limited Partnership ("Paxson LP") and WIOD,
Inc., Paxson LP agreed to purchase WIOD-AM's broadcast site, certain equipment,
licenses and certain contracts.
The accompanying special-purpose statements of net assets present the
separately identifiable assets and liabilities relating to the operations of
WIOD-AM, together with the historical carrying amounts of the net plant and
equipment to be acquired by Paxson LP in accordance with the Asset Purchase
Agreement described above. The accompanying special-purpose statements of
operations reflect the revenues and separately identifiable operating costs of
WIOD-AM, together with the allocations of certain shared costs incurred with its
two affiliated radio stations and certain charges for other costs incurred by
Cox on behalf of WIOD-AM and its two affiliated stations. As a consequence of
the integral operating relationships between WIOD-AM, its affiliate radio
stations and Cox, the accompanying special-purpose financial statements do not
include a statement of cash flows and are not intended to present the financial
position and results of operations of a separate, independent operating entity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Revenue Recognition -- Revenue is recognized as advertising air time is
broadcast.
Plant and Equipment -- Plant and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method at rates based upon estimated useful lives of 10 to 25 years for
building, tower, and antennas, 5 to 15 years for broadcast equipment, and 3 to
10 years for furniture, fixtures and other assets.
Broadcast Rights -- Broadcast rights are stated at cost less accumulated
amortization. Amortization is computed using the straight-line method based on a
30-year amortization period.
Recently Issued Accounting Pronouncements -- In March 1995, Statement of
Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment
of Long-lived Assets and Long-lived Assets to be Disposed Of, was issued. SFAS
No. 121 requires that long-lived assets and certain intangibles be reviewed for
impairment when events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable, with any impairment losses being
reported in the period in which the recognition criteria are
F-106
<PAGE> 249
WIOD-AM
(A DIVISION OF WIOD, INC.)
NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENTS -- (CONTINUED)
first applied based on the fair value of the asset. Long-lived assets and
certain intangibles to be disposed of are required to be reported at the lower
of carrying amount or fair value less cost to sell. The adoption of SFAS No. 121
did not have a material impact on WIOD-AM's special-purpose financial
statements.
Unaudited Interim Special-Purpose Financial Statements -- The unaudited
special-purpose financial statements as of and for the six months ended June 30,
1996 include all adjustments, consisting of only normal recurring adjustments,
which in the opinion of management are necessary for a fair presentation.
Operating results for the six months ended June 30, 1996 are not necessarily
indicative of the results that may by expected for the entire year.
3. CASH MANAGEMENT SYSTEM
WIOD-AM participates in Cox's cash management system, whereby the bank
sends daily notification of WIOD-AM's checks presented for payment. Cox
transfers funds from other sources to cover WIOD-AM's checks presented for
payment. A book overdraft of $2.2 million existed at December 31, 1995, as a
result of WIOD-AM's checks outstanding. This book overdraft was reclassified as
accounts payable on WIOD-AM's special-purpose financial statements.
4. PLANT AND EQUIPMENT
Plant and equipment are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
(UNAUDITED)
<S> <C> <C>
Land..................................................... $ 1,825,000 $ 1,825,000
Buildings and building improvements...................... 808,658 808,658
Broadcast equipment...................................... 338,223 338,223
Furniture, fixtures, and other equipment................. 24,104 24,104
---------- ----------
2,995,985 2,995,985
Less: accumulated depreciation........................... (860,689) (887,610)
---------- ----------
Net plant and equipment.................................. $ 2,135,296 $ 2,108,375
========== ==========
</TABLE>
5. RETIREMENT PLAN
WIOD-AM sponsors a defined contribution 401(k) savings plan for its
full-time employees through Cox. Neither WIOD-AM nor Cox match employees'
contributions. WIOD-AM's employees also participate in the funded,
non-contributory defined benefit plan of Cox for which a cost is allocated to
WIOD-AM.
6. UNIT APPRECIATION PLANS
Certain of the executives of WIOD-AM participate in certain Cox Unit
Appreciation Plans ("UAP") that provide for payment of benefits in the form of
shares of Cox common stock, cash, or both, generally five years after the date
of award. Unit benefits are based on the excess, if any, over a base amount
(value of award), of the fair value of a share of Cox common stock five years
after the effective date of award. Fair values are determined by independent
appraisal. The plans provide for a maximum unit benefit of 150% of the base
amount and benefits vest over the five year period following the date of award.
The cost of awards made under the plans are allocated to WIOD-AM by Cox over the
applicable vesting periods and are charged to general and administrative
expenses. Amounts charged to expense for WIOD-AM employees for the year ended
December 31, 1995 was $54,614.
F-107
<PAGE> 250
WIOD-AM
(A DIVISION OF WIOD, INC.)
NOTES TO SPECIAL-PURPOSE FINANCIAL STATEMENTS -- (CONTINUED)
7. TRANSACTIONS WITH AFFILIATED COMPANIES
WIOD-AM and its two affiliated radio stations operate from the same
broadcast site and facilities and share certain common equipment. Certain
operating costs are shared between the three affiliated radio stations, which
costs are generally allocated on a pro rata basis. In addition, Cox incurs
various costs (such as insurance, certain employee benefits, and general and
administrative expenses) on behalf of WIOD-AM and its two affiliated radio
stations, which costs are generally allocated to the three affiliated radio
stations on a pro rata basis. Cox also charges WIOD-AM a general and
administrative expense allocation equal to 2.5% of WIOD-AM's total expenses. The
amounts included in the accompanying special-purpose financial statements
relating to these allocated costs are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Operating expenses............................................ $369,696 $ 196,223
======== ========
General and administrative expenses........................... $866,508 $ 586,646
======== ========
</TABLE>
These amounts allocated to WIOD-AM are not necessarily indicative of the
amounts that WIOD-AM would have incurred as a separate, independent entity.
8. COMMITMENTS AND CONTINGENCIES
WIOD-AM leases towers and other equipment under noncancellable operating
leases. Rental expense under operating leases amounted to $12,000 in 1995. In
addition, WIOD-AM has future commitments relating to employment contracts with
certain radio personalities and broadcasting contracts. Future minimum
commitments as of December 31, 1995 for all noncancellable contracts and
operating leases are as follows:
<TABLE>
<CAPTION>
LEASES CONTRACTS TOTAL
------- ---------- ----------
<S> <C> <C> <C>
1996................................................. $17,700 $3,606,563 $3,624,263
1997................................................. 12,525 1,833,030 1,845,555
1998................................................. 4,900 562,709 567,609
1999................................................. 466,667 466,667
</TABLE>
9. LEGAL MATTERS
WIOD-AM is the defendant in two legal actions resulting from comments made
during certain radio broadcasts, each of which seek damages for slander and
other claims. The radio station's insurance provides coverage for 80% of any
potential liability resulting from these claims.
WIOD-AM is also the defendant in a claim alleging age discrimination by a
former talk show host.
Management believes that the ultimate outcome of these matters will not
result in any material liabilities to WIOD-AM.
F-108
<PAGE> 251
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Partners of Ponce Nicasio
Broadcasting Ltd. (KCMY-TV)
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in partners' deficit and of cash flows present fairly,
in all material respects, the financial position of Ponce Nicasio Broadcasting
Ltd. (KCMY-TV) (the "Station") at April 30, 1996 and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Partnership's management; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our
audit 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
audit provides a reasonable basis for the opinion expressed above.
As disclosed in Notes 4 and 5, the Station has extensive transactions with
individuals related to or affiliated with partners of the Partnership. Because
of these relationships, it is possible that the terms of these transactions are
not the same as those that would result from transactions among wholly unrelated
parties.
/s/ Price Waterhouse LLP
- ---------------------------------------------------------
PRICE WATERHOUSE LLP
Ft. Lauderdale, Florida
September 12, 1996
F-109
<PAGE> 252
PONCE NICASIO BROADCASTING LTD. (KCMY-TV)
BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, APRIL 30,
1996 1996
----------- ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 73,090 $ 125,650
Accounts receivable............................................. 63,367 50,024
Prepaid expenses and other assets............................... 46,330 41,715
---------- ----------
Total current assets.................................... 182,787 217,389
Property and equipment, net....................................... 306,526 316,914
Intangible assets, net............................................ 51,446 52,114
---------- ----------
Total assets............................................ $ 540,759 $ 586,417
========== ==========
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities........................ $ 32,019 $ 37,930
Capital lease obligation........................................ 82,863 91,651
Related party payables:
Accrued interest............................................. 181,139 170,033
Demand notes payable -- affiliates........................... 787,054 787,054
Current portion of term note payable......................... 125,000 125,000
---------- ----------
Total current liabilities............................... 1,208,075 1,211,668
---------- ----------
Non-current liabilities:
Capital lease obligation........................................ 58,975 66,908
Related party term note payable................................. 62,500 83,333
---------- ----------
121,475 150,241
---------- ----------
Partners' deficit................................................. (788,791) (775,492)
---------- ----------
Commitments and contingencies
---------- ----------
Total liabilities and partners' deficit................. $ 540,759 $ 586,417
========== ==========
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
F-110
<PAGE> 253
PONCE NICASIO BROADCASTING LTD. (KCMY-TV)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE TWO FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, APRIL 30,
1996 1996
------------ ----------
(UNAUDITED)
<S> <C> <C>
Revenue:
Network programming $312,833 $1,728,070
Paid programming and other 3,890 103,508
-------- ----------
Total revenue......................................... 316,723 1,831,578
-------- ----------
Operating expenses:
Technical..................................................... 66,959 357,355
Sales and promotion........................................... 30,956 160,080
Programming................................................... 27,825 132,212
General and administrative.................................... 175,115 522,565
Depreciation and amortization................................. 11,056 57,163
Legal settlement.............................................. -- 1,088,805
-------- ----------
Total operating expenses.............................. 311,911 2,318,180
-------- ----------
Income (loss) from operations................................... 4,812 (486,602)
Interest expense................................................ (18,111) (82,598)
-------- ----------
Net loss.............................................. $(13,299) $ (569,200)
======== ==========
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
F-111
<PAGE> 254
PONCE NICASIO BROADCASTING LTD. (KCMY-TV)
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
<TABLE>
<S> <C>
Balance at May 1, 1995........................................................... $(206,292)
Net loss......................................................................... (569,200)
---------
Balance at April 30, 1996........................................................ (775,492)
Net loss -- May 1, 1996 through June 30, 1996 (unaudited)........................ (13,299)
---------
Balance at June 30, 1996 (unaudited)............................................. $(788,791)
=========
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
F-112
<PAGE> 255
PONCE NICASIO BROADCASTING LTD. (KCMY-TV)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE
TWO MONTHS ENDED YEAR ENDED
JUNE 30, APRIL 30,
1996 1996
---------------- ----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss....................................................... $(13,299) $ (569,200)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization............................... 11,056 57,163
Decrease (increase) in accounts receivable.................. (13,343) 47,626
Decrease (increase) in prepaid expenses and other assets.... (4,615) 759
Decrease in accounts payable and accrued liabilities........ (5,911) (7,755)
Increase in related party accrued interest.................. 11,106 46,544
-------- ---------
Net cash used in operating activities.................. (15,006) (424,863)
-------- ---------
Cash flows from investing activities:
Purchases of property and equipment............................ -- (15,112)
-------- ---------
Cash flows from financing activities:
Proceeds from related party notes payable...................... -- 740,000
Payments on related party notes payable........................ (20,833) (231,667)
Payments on capital lease obligation........................... (16,721) (80,625)
-------- ---------
Net cash provided by (used in) financing activities.... (37,554) 427,708
-------- ---------
Decrease in cash and cash equivalents............................ (52,560) (12,267)
Cash and cash equivalents at beginning of year................... 125,650 137,917
-------- ---------
Cash and cash equivalents at end of period....................... $ 73,090 $ 125,650
======== =========
Supplemental disclosure of cash flow information:
Cash paid for interest......................................... $ 8,436 $ 44,134
======== =========
Supplemental disclosure of non-cash investing and financing
activities -- Capital lease obligation issued for property and
equipment...................................................... $ -- $ 153,177
======== =========
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
F-113
<PAGE> 256
PONCE NICASIO BROADCASTING LTD. (KCMY-TV)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ponce Nicasio Broadcasting Ltd. (KCMY-TV) (the "Partnership"), is engaged
in the operation of a television broadcasting station in the Sacramento,
California market. The Partnership operates the television station under a
license granted by the Federal Communications Commission. The Partnership
derives substantially all of its revenues from a broadcasting affiliation
agreement with Paxson Communications Corporation ("Paxson"). Under the
agreement, Paxson secures advertisements and the Partnership broadcasts the ads
for a fee.
On September 6, 1996, the Partnership entered into a time brokerage
agreement commencing October 1, 1996 and an asset purchase option agreement with
Paxson (see Note 8).
Financial statement presentation
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
Property and equipment
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on a straight-line basis over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Broadcasting equipment......................................... 5-7 years
Office furniture and equipment................................. 5-7 years
</TABLE>
Assets under capital leases are amortized over the shorter of the estimated
useful lives or the lease term. Maintenance, repairs, and minor replacements of
these items are charged to expense as incurred.
Intangible assets
Intangible assets consist of the FCC license which is stated at cost and is
being amortized using the straight-line method over the estimated useful life of
25 years.
Revenue recognition
Revenue is recognized as advertising air time is broadcast.
Income taxes
The Partnership is not directly subject to income taxes. Taxable income or
loss from the Partnership's operations is recognized in the tax returns of its
partners. Accordingly, income taxes are not provided for in the accompanying
financial statements.
F-114
<PAGE> 257
PONCE NICASIO BROADCASTING LTD. (KCMY-TV)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Interim financial data
The interim financial data of the Partnership is unaudited; however, in the
opinion of Partnership management, the interim financial data includes all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair statement of results of the interim period. The results of operations for
the two months ended June 30, 1996 are not necessarily indicative of the results
that could be expected for the entire fiscal year ending April 30, 1997.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
APRIL 30,
1996
---------
<S> <C>
Broadcasting equipment.................................................... $ 108,305
Equipment under capital leases............................................ 299,310
Office furniture and equipment............................................ 5,081
--------
412,696
Accumulated depreciation and amortization................................. (95,782)
--------
Property and equipment, net............................................... $ 316,914
========
</TABLE>
Depreciation expense totaled $20,444 for the year ended April 30, 1996.
Amortization expense for equipment under capital leases totaled $32,719 for the
year ended April 30, 1996.
3. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
1996
---------
<S> <C>
FCC Licenses.............................................................. $ 100,000
Accumulated amortization.................................................. (47,886)
--------
Property and equipment, net............................................... $ 52,114
========
</TABLE>
Amortization expense totaled $4,000 for the year ended April 30, 1996.
4. RELATED PARTY NOTES PAYABLE
Demand notes payable to affiliates consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
1996
---------
<S> <C>
Note payable, 7% interest compounded annually, interest and principal due
on demand............................................................... $ 490,000
Non-interest bearing demand note payable -- limited partner............... 177,000
Note payable, 10% interest compounded annually, interest and principal due
on demand............................................................... 70,579
Note payable, 10% interest compounded annually, interest and principal due
on demand............................................................... 49,475
--------
$ 787,054
========
</TABLE>
F-115
<PAGE> 258
PONCE NICASIO BROADCASTING LTD. (KCMY-TV)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In September 1990, the Partnership entered into several related party note
payable agreements in order to begin operations. The Partnership borrowed
$261,865 from a family member of a partner ("Affiliate"). The note accrues
interest at 10% and is due on demand. The Partnership also borrowed $70,777 from
a consulting firm owned by Affiliate. The note accrues interest at 10% and is
due on demand. At April 30, 1996, principal repayments on these notes totaled
$212,588 and accrued interest payable totaled $152,883. Additionally, the
Partnership borrowed $300,000 from a limited partner. The note is non-interest
bearing and is due on demand. At April 30, 1996, principal repayments on note
totaled $123,000.
In October 1995, the Partnership borrowed $490,000 from Affiliate in the
form of a demand note payable in order to pay a legal judgment resulting from a
suit filed by an equipment vendor (see Note 7). The note accrues interest at 7%
and is due on demand. At April 30, 1996, accrued interest payable on the note
was $17,150; no interest or principal repayments have been made to date.
In addition to the demand note, the Partnership borrowed $250,000 under a
term note issued to Affiliate for payment of the judgment. The note bears
interest at the Union Bank reference rate plus 1.75%( 10% at April 30, 1996) and
is payable in monthly principal instalments of $10,417 plus accrued interest.
The note is due in December 1997. In order to advance funds to the Partnership,
Affiliate obtained a $250,000 note payable from a bank which is guaranteed by
certain equipment of the Partnership.
Based on the borrowing rates currently available to the Partnership for
notes payable with similar terms and maturities, the carrying value of the note
payable to Affiliate at April 30, 1996 is considered to approximate fair value.
Based on the lack of definitive terms, it is not practical to determine the fair
value of related party demand notes payable at April 30, 1996.
5. RELATED PARTY TRANSACTIONS
The Partnership has entered into several agreements with Affiliate. As
discussed in Note 4, the Partnership also has significant outstanding notes and
accrued interest payable to Affiliate. Additionally, The Partnership leases
equipment from Affiliate under capital and operating leases ranging from three
to five years (see Note 6). Affiliate also provides consulting services to the
Partnership for a monthly fee, a portion of which is based on the operating
results of the Partnership. Consulting fees paid to Affiliate during the year
ended April 30, 1996 totaled $166,937.
6. COMMITMENTS AND CONTINGENCIES
Future minimum payments at April 30, 1996 under capital and operating
leases for equipment and office space, substantially all of which are payable to
affiliates, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING CAPITAL OPERATING
APRIL 30, LEASES LEASES
----------------------------------------------------------------- -------- ---------
<S> <C> <C>
1997........................................................... $ 95,628 $ 72,102
1998........................................................... 58,452 72,887
1999........................................................... 19,484 66,607
2000........................................................... -- 11,514
-------- --------
Total minimum payments........................................... 173,564 $ 223,110
========
Less imputed interest............................................ (15,005)
--------
Present value of payments under capital leases................... 158,559
Less current portion............................................. (91,651)
--------
Long-term lease commitments...................................... $ 66,908
========
</TABLE>
F-116
<PAGE> 259
PONCE NICASIO BROADCASTING LTD. (KCMY-TV)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Rent expense under operating leases for the year ended April 30, 1996
totaled $98,753, of which $60,124 was paid to Affiliate.
7. LITIGATION
In 1990, the Partnership leased a transmitter from Affiliate. The
Partnership was not satisfied with the performance of the transmitter. Affiliate
withheld a portion of the payment for the transmitter and filed a Declaratory
Relief action against the vendor to determine the amount owed. The vendor
subsequently filed a countersuit against Affiliate for nonpayment. The
Partnership had previously entered into an indemnification agreement with
Affiliate whereby the Partnership agreed to pay all legal costs associated with
the litigation and any judgment made against Affiliate related to this matter.
On December 10, 1993, Affiliate lost the suit and was ordered to pay
approximately $383,000 to the vendor for the purchase of the transmitter and
legal costs incurred. Affiliate subsequently filed an appeal. At the time of the
original judgment, management of the Partnership and Affiliate were of the
opinion that any loss ultimately resulting from this matter would not be
material and, therefore, no accrual was recorded. On November 8, 1995, Affiliate
lost the appeal and a final judgment of $1,088,805( which represented the
original judgment plus interest and additional legal fees) was entered against
Affiliate. Pursuant to the indemnification agreement, the Partnership paid the
judgment.
8. SUBSEQUENT EVENT
The Partnership has entered into a time brokerage agreement with Paxson
dated as of September 6, 1996. Under the terms of the agreement, which becomes
effective October 1, 1996, the affiliation agreement under which the Partnership
currently operates (see Note 1) will be terminated and Paxson will program
substantially all air time broadcast by the Partnership's station.
In addition to the time brokerage agreement, the Partnership also entered
into an Option Agreement dated as of September 6, 1996 providing for a sale of
the assets, including the FCC licenses, of the Partnership to Paxson for
approximately $17,000,000. Under the terms of the Option Agreement, the
Partnership has the option to sell its assets to Paxson at any time prior to May
31, 1998. Paxson has the option to purchase the Partnership's assets during the
period of June 1, 1998 through June 30, 1998.
F-117
<PAGE> 260
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 261
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 262
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 263
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE NEW PREFERRED STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE NEW
PREFERRED STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. ii
Certain Definitions and Market and
Industry Data....................... iii
Prospectus Summary.................... 1
Risk Factors.......................... 15
The Proposed Acquisitions and Capital
Expenditures........................ 24
Use of Proceeds....................... 25
Capitalization........................ 26
The Company........................... 27
Selected Historical and Pro Forma
Financial Data...................... 27
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 31
Business.............................. 38
Management............................ 69
Certain Transactions.................. 74
Description of New Preferred Stock and
Exchange Debentures................. 77
Description of Indebtedness........... 106
Description of Capital Stock.......... 109
Certain Federal Income Tax
Considerations...................... 112
Underwriting.......................... 120
Legal Matters......................... 121
Experts............................... 121
Incorporation of Certain Documents by
Reference........................... 121
Pro Forma Financial Information....... P-1
Index of Financial Statements......... F-1
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
--------------------
PROSPECTUS
--------------------
[PAXSON LOGO]
PAXSON
COMMUNICATIONS
CORPORATION
150,000 SHARES
% CUMULATIVE EXCHANGEABLE
PREFERRED STOCK
BT SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
FIRST UNION
CAPITAL MARKETS CORP.
AS ADVISOR
, 1996
------------------------------------------------------
------------------------------------------------------
<PAGE> 264
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Registration fees -- Securities and Exchange Commission.......................... $ 51,724
NASD Filing Fee.................................................................. 15,500
Legal fees and expenses*.........................................................
Accounting fees and expenses*....................................................
Printing and engraving expenses*.................................................
Blue Sky fees and expenses*......................................................
Transfer Agent's fees and expenses*..............................................
Miscellaneous*...................................................................
----------
Total.................................................................. $
==========
</TABLE>
- ---------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Delaware corporation. The Company's Certificate of
Incorporation and Bylaws provide for the mandatory indemnification of the
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law. Reference is made to the Delaware General Corporation Law and
to Section 145 thereof, which permits, and in some cases requires,
indemnification of directors, officers, employees and agents of the Company
under certain circumstances, subject to certain limitations.
The Delaware general corporation law permits the indemnification by a
Delaware corporation of its directors, officers, employees and other agents
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement in connection with specified actions, suits or proceedings,
whether civil, criminal, administrative or investigative (other than derivative
actions that are by or in the right of the corporation) if they acted in good
faith and in a manner they reasonably believe to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceedings, had no reasonable cause to believe their conduct was illegal. A
similar standard of care is applicable in the case of derivative actions, except
that indemnification extends only to expenses (including attorneys' fees)
incurred in connection with defense or settlement of such an action, and court
approval is required before there can be any indemnification if the person
seeking indemnification has been found liable to the corporation.
The underwriters also will agree to indemnify the directors and officers of
the Company against certain liabilities as set forth in Section 8 of the
Underwriting Agreement (see Exhibit 1 hereof).
The Company has purchased insurance with respect to, among other things,
any liabilities that may arise under the statutory provisions referred to above.
II-1
<PAGE> 265
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -------------------------------------------------------------------------------------
<S> <C> <C>
1 -- Underwriting Agreement
3.1 -- Certificate of Designation
3.2.1 -- Articles of Incorporation of Paxson Communications of Florida, Inc.*
3.2.2 -- Bylaws of Paxson Communications of Florida, Inc.*
3.3.1 -- Articles of Incorporation of Paxson Communications LP, Inc.*
3.3.2 -- Bylaws of Paxson Communications LP, Inc.*
3.4.1 -- Articles of Incorporation of Paxson Communications Management Company*
3.4.2 -- Bylaws of Paxson Communications Management Company*
3.5.1 -- Articles of Incorporation of Paxson Communications Marketing, Inc.*
3.5.2 -- Bylaws of Paxson Communications Marketing, Inc.*
3.6.1 -- Articles of Incorporation of Paxson Communications Networks, Inc.*
3.6.2 -- Bylaws of Paxson Communications Networks, Inc.*
3.7.1 -- Articles of Incorporation of Excel Marketing Enterprises, Inc.*
3.7.2 -- Bylaws of Excel Marketing Enterprises, Inc.*
3.8.1 -- Articles of Incorporation of Paxson Outdoor, Inc.*
3.8.2 -- Bylaws of Paxson Outdoor, Inc.*
3.9.1 -- Articles of Incorporation of Paxson Networks, Inc.*
3.9.2 -- Bylaws of Paxson Networks, Inc.*
3.10.1 -- Articles of Incorporation of Paxson Communications Television, Inc.*
3.10.2 -- Bylaws of Paxson Communications Television, Inc.*
3.11.1 -- Limited Partnership Agreement of Paxson Broadcasting of Jacksonville, Limited
Partnership*
3.11.2 -- Certificate of Limited Partnership of Paxson Broadcasting of Jacksonville,
Limited Partnership*
3.12.1 -- Limited Partnership Agreement of Paxson Broadcasting of Miami, Limited
Partnership*
3.12.2 -- Certificate of Limited Partnership of Paxson Broadcasting of Miami, Limited
Partnership*
3.13.1 -- Limited Partnership Agreement of Paxson Broadcasting of Orlando, Limited
Partnership*
3.13.2 -- Certificate of Limited Partnership of Paxson Broadcasting of Orlando, Limited
Partnership*
3.14.1 -- Limited Partnership Agreement of Paxson Broadcasting of Tampa, Limited
Partnership*
3.14.2 -- Certificate of Limited Partnership of Paxson Broadcasting of Tampa, Limited
Partnership*
3.15.1 -- Limited Partnership Agreement of Paxson Tampa License Limited Partnership*
3.15.2 -- Certificate of Limited Partnership of Paxson Tampa License Limited Partnership*
3.16.1 -- Limited Partnership Agreement of Paxson Jacksonville License Limited
Partnership*
3.16.2 -- Certificate of Limited Partnership of Paxson Jacksonville License Limited
Partnership*
3.17.1 -- Limited Partnership Agreement of Paxson Miami License Limited Partnership*
3.17.2 -- Certificate of Limited Partnership of Paxson Miami License Limited Partnership*
3.18.1 -- Limited Partnership Agreement of Paxson Orlando License Limited Partnership*
3.18.2 -- Certificate of Limited Partnership of Paxson Orlando License Limited
Partnership*
3.19.1 -- Limited Partnership Agreement of Paxson Communications of Atlanta-14, Inc.*
3.19.2 -- Certificate of Limited Partnership of Paxson Communications of Atlanta-14, Inc.*
3.20.1 -- Articles of Incorporation of Paxson Atlanta License, Inc.*
3.20.2 -- Bylaws of Paxson Atlanta License, Inc.*
3.21.1 -- Articles of Incorporation of Paxson Communications of Boston-60, Inc.*
3.21.2 -- Bylaws of Paxson Communications of Boston-60, Inc.*
3.22.1 -- Articles of Incorporation of Paxson Boston License, Inc.*
3.22.2 -- Bylaws of Paxson Boston License, Inc.*
3.23.1 -- Articles of Incorporation of Paxson Communications of Dallas-68, Inc.*
3.23.2 -- Bylaws of Paxson Communications of Dallas-68, Inc.*
3.24.1 -- Articles of Incorporation of Paxson Dallas License, Inc.*
</TABLE>
II-2
<PAGE> 266
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -------------------------------------------------------------------------------------
<S> <C> <C>
3.24.2 -- Bylaws of Paxson Dallas License, Inc.*
3.25.1 -- Articles of Incorporation of Paxson Communications of New London-26, Inc.*
3.25.2 -- Bylaws of Paxson Communications of New London-26, Inc.*
3.26.1 -- Articles of Incorporation of Paxson New London License, Inc.*
3.26.2 -- Bylaws of Paxson New London License, Inc.*
3.27.1 -- Articles of Incorporation of Paxson Communications of Philadelphia-61, Inc.*
3.27.2 -- Bylaws of Paxson Communications of Philadelphia-61, Inc.*
3.28.1 -- Articles of Incorporation of Paxson Philadelphia License, Inc.*
3.28.2 -- Bylaws of Paxson Philadelphia License, Inc.*
3.29.1 -- Articles of Incorporation of Paxson Communications of Miami-35, Inc.*
3.29.2 -- Bylaws of Paxson Communications of Miami-35, Inc.*
3.30.1 -- Articles of Incorporation of Paxson Communications of San Jose-65, Inc.*
3.30.2 -- Bylaws of Paxson Communications of San Jose-65, Inc.*
3.31.1 -- Articles of Incorporation of Paxson San Jose License, Inc.*
3.31.2 -- Bylaws of Paxson San Jose License, Inc.*
3.32.1 -- Articles of Incorporation of Paxson Communications of Tampa-66, Inc.*
3.32.2 -- Bylaws of Paxson Communications of Tampa-66, Inc.*
3.33.1 -- Articles of Incorporation of Paxson Communications of West Palm Beach-25, Inc.*
3.33.2 -- Bylaws of Paxson Communications of West Palm Beach-25, Inc.*
3.34.1 -- Articles of Incorporation of Paxson West Palm Beach License, Inc.*
3.34.2 -- Bylaws of Paxson West Palm Beach License, Inc.*
3.35.1 -- Articles of Incorporation of Paxson Communications of Los Angeles-30, Inc.*
3.35.2 -- Bylaws of Paxson Communications of Los Angeles-30, Inc.*
3.36.1 -- Articles of Incorporation of Paxson Los Angeles License, Inc.*
3.36.2 -- Bylaws of Paxson Los Angeles License, Inc.*
3.37.1 -- Articles of Incorporation of Paxson Communications of Minneapolis-41, Inc.*
3.37.2 -- Bylaws of Paxson Communications of Minneapolis-41, Inc.*
3.38.1 -- Articles of Incorporation of Paxson Communications of St. Louis-13, Inc.*
3.38.2 -- Bylaws of Paxson Communications of St. Louis-13, Inc.*
3.39.1 -- Articles of Incorporation of Paxson Minneapolis License, Inc.*
3.39.2 -- Bylaws of Paxson Minneapolis License, Inc.*
3.40.1 -- Articles of Incorporation of Paxson Communications of Cookeville, Inc.*
3.40.2 -- Bylaws of Paxson Communications of Cookeville, Inc.*
3.41.1 -- Articles of Incorporation of Paxson Cookeville License, Inc.*
3.41.2 -- Bylaws of Paxson Cookeville License, Inc.*
3.42.1 -- Articles of Incorporation of Paxson Communications of Ft. Pierce-34, Inc.*
3.42.2 -- Bylaws of Paxson Communications of Ft. Pierce-34, Inc.*
3.43.1 -- Articles of Incorporation of Paxson Communications of Orlando-56, Inc.*
3.43.2 -- Bylaws of Paxson Communications of Orlando-56, Inc.*
3.44.1 -- Articles of Incorporation of Paxson Communications of Houston-49, Inc.*
3.44.2 -- Bylaws of Paxson Communications of Houston-49, Inc.*
3.45.1 -- Articles of Incorporation of Paxson Houston License, Inc.*
3.45.2 -- Bylaws of Paxson Houston License, Inc.*
3.46.1 -- Articles of Incorporation of Infomall TV Network, Inc.*
3.46.2 -- Bylaws of Infomall TV Network, Inc.*
3.47.1 -- Articles of Incorporation of Paxson St. Louis License, Inc.*
3.47.2 -- Bylaws of Paxson St. Louis License, Inc.*
3.48.1 -- Articles of Incorporation of Infomall Cable Network, Inc.*
3.48.2 -- Bylaws of Infomall Cable Network, Inc.*
3.49.1 -- Articles of Incorporation of Paxson Communications of Cleveland-67, Inc.*
3.49.2 -- Bylaws of Paxson Communications of Cleveland-67, Inc.*
</TABLE>
II-3
<PAGE> 267
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -------------------------------------------------------------------------------------
<S> <C> <C>
3.50.1 -- Articles of Incorporation of Paxson Communications of Washington-60, Inc.*
3.50.2 -- Bylaws of Paxson Communications of Washington-60, Inc.*
3.51.1 -- Articles of Incorporation of Paxson Washington License, Inc.*
3.51.2 -- Bylaws of Paxson Washington License, Inc.*
3.52.1 -- Articles of Incorporation of Paxson Communications of Phoenix-13, Inc.*
3.52.2 -- Bylaws of Paxson Communications of Phoenix-13, Inc.*
3.53.1 -- Articles of Incorporation of Paxson Phoenix License, Inc.*
3.53.2 -- Bylaws of Paxson Phoenix License, Inc.*
3.54.1 -- Articles of Incorporation of Infomall Los Angeles, Inc.*
3.54.2 -- Bylaws of Infomall Los Angeles, Inc.*
3.55.1 -- Articles of Incorporation of Paxson Communications of Milwaukee-55, Inc.*
3.55.2 -- Bylaws of Paxson Communications of Milwaukee-55, Inc.*
3.56.1 -- Articles of Incorporation of Paxson Communications of Denver-59, Inc.*
3.56.2 -- Bylaws of Paxson Communications of Denver-59, Inc.*
3.57.1 -- Articles of Incorporation of Paxson Communications of New York-43, Inc.*
3.57.2 -- Bylaws of Paxson Communications of New York-43, Inc.*
3.58.1 -- Articles of Incorporation of Paxson New York License, Inc.*
3.58.2 -- Bylaws of Paxson New York License, Inc.*
3.59.1 -- Articles of Incorporation of Paxson Communications of Akron-23, Inc.*
3.59.2 -- Bylaws of Paxson Communications of Akron-23, Inc.*
3.60.1 -- Articles of Incorporation of Paxson Akron License, Inc.*
3.60.2 -- Bylaws of Paxson Akron License, Inc.*
3.61.1 -- Articles of Incorporation of Paxson Communications of Dayton-26, Inc.*
3.61.2 -- Bylaws of Paxson Communications of Dayton-26, Inc.*
3.62.1 -- Articles of Incorporation of Paxson Sports of Miami, Inc.**
3.62.2 -- Bylaws of Paxson Sports of Miami, Inc.**
3.63.1 -- Articles of Incorporation of Paxson Communications of San Juan, Inc.**
3.63.2 -- Bylaws of Paxson Communications of San Juan, Inc.**
3.64.1 -- Articles of Incorporation of Paxson Communications of Battle Creek-43, Inc.**
3.64.2 -- Bylaws of Paxson Communications of Battle Creek-43, Inc.**
3.65.1 -- Articles of Incorporation of Paxson Communications of Albany-55, Inc.**
3.65.2 -- Bylaws of Paxson Communications of Albany-55, Inc.**
3.66.1 -- Articles of Incorporation of Paxson Albany License, Inc.**
3.66.2 -- Bylaws of Paxson Albany License, Inc.**
3.67.1 -- Articles of Incorporation of Paxson Communications of Raleigh Durham-47, Inc.**
3.67.2 -- Bylaws of Paxson Communications of Raleigh Durham-47, Inc.**
3.68.1 -- Articles of Incorporation of Paxson Communications L.P.T.V., Inc.**
3.68.2 -- Bylaws of Paxson Communications L.P.T.V., Inc.**
3.69.1 -- Articles of Incorporation of Paxson Dayton License, Inc.**
3.69.2 -- Bylaws of Paxson Dayton License, Inc.**
3.70.1 -- Articles of Incorporation of Paxson Denver License, Inc.**
3.70.2 -- Bylaws of Paxson Denver License, Inc.**
3.71.1 -- Articles of Incorporation of Paxson Communications of Providence-69, Inc.**
3.71.2 -- Bylaws of Paxson Communications of Providence-69, Inc.**
3.72.1 -- Articles of Incorporation of Paxson Communications of Salt Lake City-16, Inc.**
3.72.2 -- Bylaws of Paxson Communications of Salt Lake City-16, Inc.**
3.73.1 -- Articles of Incorporation of Paxson Communications of Greensboro-16, Inc.**
3.73.2 -- Bylaws of Paxson Communications of Greensboro-16, Inc.**
3.74.1 -- Articles of Incorporation of Paxson Greensboro License, Inc.**
3.74.2 -- Bylaws of Paxson Greensboro License, Inc.**
3.75.1 -- Articles of Incorporation of Paxson Communications of Tulsa-44, Inc.**
</TABLE>
II-4
<PAGE> 268
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -------------------------------------------------------------------------------------
<S> <C> <C>
3.75.2 -- Bylaws of Paxson Communications of Tulsa-44, Inc.**
3.76.1 -- Articles of Incorporation of Paxson Communications of Tallahassee, Inc.**
3.76.2 -- Bylaws of Paxson Communications of Tallahassee, Inc.**
3.77.1 -- Articles of Incorporation of Paxson Tallahassee License, Inc.**
3.77.2 -- Bylaws of Paxson Tallahassee License, Inc.**
3.78.1 -- Articles of Incorporation of Pax Jax, Inc.**
3.78.2 -- Bylaws of Pax Jax, Inc.**
3.79.1 -- Articles of Incorporation of Paxson Sports Ventures Company**
3.79.2 -- Bylaws of Paxson Sports Ventures Company**
3.80.1 -- Articles of Incorporation of PCC Direct, Inc.**
3.81.2 -- Bylaws of PCC Direct, Inc.**
3.83.1 -- Articles of Incorporation of Paxson Communications of Oklahoma City-62, Inc.**
3.83.2 -- Bylaws of Paxson Communications of Oklahoma City-62, Inc.**
3.84.1 -- Articles of Incorporation of Paxson/R&R Network, Inc.**
3.84.2 -- Bylaws of Paxson/R&R Network, Inc.**
3.85.1 -- Articles of Incorporation of Paxson Communications of Sacramento-29, Inc.**
3.85.2 -- Bylaws of Paxson Communications of Sacramento-29, Inc.**
3.86.1 -- Articles of Incorporation of Paxson Sacramento License, Inc.**
3.86.2 -- Bylaws of Paxson Sacramento License, Inc.**
3.87.1 -- Articles of Incorporation of Paxson Communications of Seattle-24, Inc.**
3.87.2 -- Bylaws of Paxson Communications of Seattle-24, Inc.**
3.88.1 -- Articles of Incorporation of Paxson Seattle License, Inc.**
3.88.2 -- Bylaws of Paxson Seattle License, Inc.**
3.89.1 -- Articles of Incorporation of Paxson Communications of Boston-46, Inc.**
3.89.2 -- Bylaws of Paxson Communications of Boston-46, Inc.**
3.90.1 -- Articles of Incorporation of Paxson Communications of Little Rock-42, Inc.**
3.90.2 -- Bylaws of Paxson Communications of Little Rock-42, Inc.**
3.91.1 -- Articles of Incorporation of Paxson Little Rock License, Inc.**
3.91.2 -- Bylaws of Paxson Little Rock License, Inc.**
3.92.1 -- Articles of Incorporation of Paxson Communications of Phoenix-51, Inc.**
3.92.2 -- Bylaws of Paxson Communications of Phoenix-51, Inc.**
3.93.1 -- Articles of Incorporation of Paxson Communications of Birmingham-44, Inc.**
3.93.2 -- Bylaws of Paxson Communications of Birmingham-44, Inc.**
3.94.1 -- Articles of Incorporation of Paxson Birmingham License, Inc.**
3.94.2 -- Bylaws of Paxson Birmingham License, Inc.**
4.1 -- Old Indenture*
4.2 -- Indenture dated as of , 1996 by and between Paxson Communications
Corporation, the guarantors named therein and The Bank of New York, as Trustee,
with respect to the Exchange Debentures.
5.1 -- Opinion of Holland & Knight regarding the legality of the New Preferred Stock,
including consent.+
7.1 -- Opinion of Holland & Knight regarding liquidation preference matters, including
consent.+
12 -- Calculation of ratio of earnings to combined fixed charges and preferred stock
dividends.**
23.1 -- Consent of Price Waterhouse LLP
23.2 -- Consent of Holland & Knight (exhibit 5.1).+
23.3 -- Consent of Holland & Knight (exhibit 7.1).+
23.4 -- Consent of Dow, Lohnes & Albertson+
23.5 -- Consent of Mathieson Aitken Jemison, LLP
23.6 -- Consent of Robert Rossi & Company
23.7 -- Consent of Schweitzer Rubin Karon & Premier
23.8 -- Consent of Deloitte & Touche LLP
</TABLE>
II-5
<PAGE> 269
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -------------------------------------------------------------------------------------
<S> <C> <C>
24.1 -- Powers of Attorney (included on signature pages to Registration Statement).**
25.1 -- Statement of Eligibility of Trustee on Form T-1 dated , 1996
relating to Exchange Debentures (No. 22- ).+
</TABLE>
- ---------------
+ To be filed by amendment.
* Filed with the Company's Registration Statement on Form S-4, as amended,
dated January 23, 1996 (Registration No. 33-63765, incorporated herein by
reference).
** Filed with the Company's Registration Statement on Form S-3, filed August 15,
1996.
(b) Financial Statement Schedules
All financial statement schedules are omitted because they are either
not applicable or the required information is included in the financial
statements or notes thereto appearing elsewhere in this Registration
Statement.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in said act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 270
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, PAXSON
COMMUNICATIONS CORPORATION, a Delaware corporation, has duly caused this
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of West Palm Beach, State of
Florida, on September 16, 1996.
PAXSON COMMUNICATIONS
CORPORATION
By: /s/ ANTHONY L. MORRISON
-----------------------------------
Anthony L. Morrison
Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- ---------------------------- -------------------
<C> <S> <C>
* Chairman of the Board, Chief September 16, 1996
- --------------------------------------------- Executive Officer, and
Lowell W. Paxson Director (Principal
Executive Officer)
* Vice President, Chief September 16, 1996
- --------------------------------------------- Financial Officer, and
Arthur D. Tek Director (Principal
Financial Officer)
* Controller (Principal September 16, 1996
- --------------------------------------------- Accounting Officer)
Kenneth M. Gamache
* President, Chief Operating September 16, 1996
- --------------------------------------------- Officer, and Director
James B. Bocock
* Director September 16, 1996
- ---------------------------------------------
Bruce L. Burnham
* Director September 16, 1996
- ---------------------------------------------
James L. Greenwald
* Director September 16, 1996
- ---------------------------------------------
John A. Kornreich
* Director September 16, 1996
- ---------------------------------------------
Michael J. Marocco
* Director September 16, 1996
- ---------------------------------------------
J. Patrick Michaels, Jr.
Director September 16, 1996
- ---------------------------------------------
S. William Scott
*By: /s/ ANTHONY L. MORRISON
- ---------------------------------------------
Anthony L. Morrison
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 271
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Registrants listed directly below has duly caused this Amendment No. 1 to the
Registration Statement to be signed on its behalf, respectively, by the
undersigned, thereunto duly authorized, in the City of West Palm Beach, State of
Florida, on September 16, 1996.
GUARANTORS:
PAXSON COMMUNICATIONS OF FLORIDA, INC.,
a Florida corporation
PAXSON COMMUNICATIONS LP, INC.,
a Florida corporation
PAXSON COMMUNICATIONS MANAGEMENT COMPANY,
a Florida corporation
PAXSON COMMUNICATIONS MARKETING, INC.,
a Florida corporation
PAXSON COMMUNICATIONS NETWORKS, INC.,
a Florida corporation
EXCEL MARKETING ENTERPRISES, INC.,
a Florida corporation
PAXSON OUTDOOR, INC.,
a Florida corporation
PAXSON NETWORKS, INC.,
a Florida corporation
PAXSON COMMUNICATIONS TELEVISION, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF ATLANTA-14, INC.,
a Florida corporation
PAXSON ATLANTA LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF BOSTON-60, INC.,
a Florida corporation
PAXSON BOSTON LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF DALLAS-68, INC.,
a Florida corporation
PAXSON DALLAS LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF NEW LONDON-26, INC.,
a Florida corporation
PAXSON NEW LONDON LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF PHILADELPHIA-61,
INC.,
a Florida corporation
PAXSON PHILADELPHIA LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF MIAMI-35, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF SAN JOSE-65, INC.,
a Florida corporation
PAXSON SAN JOSE LICENSE, INC.,
a Florida corporation
II-8
<PAGE> 272
PAXSON COMMUNICATIONS OF TAMPA-66, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF WEST PALM BEACH-25,
INC.,
a Florida corporation
PAXSON WEST PALM BEACH LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF LOS ANGELES-30, INC.,
a Florida corporation
PAXSON LOS ANGELES LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF MINNEAPOLIS-41, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF ST. LOUIS-13, INC.,
a Florida corporation
PAXSON MINNEAPOLIS LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF COOKEVILLE, INC.,
a Florida corporation
PAXSON COOKEVILLE LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF FT. PIERCE-34, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF ORLANDO-56, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF HOUSTON-49, INC.,
a Florida corporation
PAXSON HOUSTON LICENSE, INC.,
a Florida corporation
INFOMALL TV NETWORK, INC.,
a Delaware corporation
PAXSON ST. LOUIS LICENSE, INC.,
a Florida corporation
INFOMALL CABLE NETWORK, INC.,
a Delaware corporation
PAXSON COMMUNICATIONS OF CLEVELAND-67, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF WASHINGTON-60, INC.,
a Florida corporation
PAXSON WASHINGTON LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF PHOENIX-13, INC.,
a Florida corporation
PAXSON PHOENIX LICENSE, INC.,
a Florida corporation
INFOMALL LOS ANGELES, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF MILWAUKEE-55, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF DENVER-59, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF NEW YORK-43, INC.,
a Florida corporation
II-9
<PAGE> 273
PAXSON NEW YORK LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF AKRON-23, INC.,
a Florida corporation
PAXSON AKRON LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF DAYTON-26, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF BATTLE CREEK-43,
INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF ALBANY-55, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF RALEIGH DURHAM-47,
INC.,
a Florida corporation
PAXSON COMMUNICATIONS L.P.T.V., INC.,
a Florida corporation
PAXSON DAYTON LICENSE, INC.,
a Florida corporation
PAXSON DENVER LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF PROVIDENCE-69, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF SALT LAKE CITY-16,
INC.,
a Florida corporation
PAXSON SPORTS OF MIAMI, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF SAN JUAN, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF BOSTON-46, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF PHOENIX-51, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF LITTLE ROCK-42, INC.,
a Florida corporation
PAXSON LITTLE ROCK LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF BIRMINGHAM-44, INC.,
a Florida corporation
PAXSON BIRMINGHAM LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF GREENSBORO-16, INC.,
a Florida corporation
PAXSON GREENSBORO LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF TULSA-44, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF TALLAHASSEE, INC.,
a Florida corporation
PAX JAX, INC.,
a Florida corporation
PAXSON SPORTS VENTURES COMPANY,
a Florida corporation
II-10
<PAGE> 274
PCC DIRECT, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF OKLAHOMA CITY-62,
INC.,
a Florida corporation
PAXSON TALLAHASSEE LICENSE, INC.,
a Florida corporation
PAXSON/R&R NETWORK, INC.,
a Florida corporation
PAXSON ALBANY LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF SACRAMENTO-29, INC.,
a Florida corporation
PAXSON SACRAMENTO LICENSE, INC.,
a Florida corporation
PAXSON COMMUNICATIONS OF SEATTLE-24, INC.,
a Florida corporation
PAXSON SEATTLE LICENSE, INC.,
a Florida corporation
By: /s/ ANTHONY L. MORRISON
-------------------------------------------
Name: Anthony L. Morrison
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- --------------------------- -------------------
<C> <S> <C>
* Chairman and Director September 16, 1996
- --------------------------------------------- (Principal Executive
Lowell W. Paxson Officer)
* Vice President and Chief September 16, 1996
- --------------------------------------------- Financial Officer
Arthur D. Tek (Principal Financial
Officer)
*By: /s/ ANTHONY L. MORRISON
- ---------------------------------------------
Anthony L. Morrison
Attorney-in-Fact
</TABLE>
II-11
<PAGE> 275
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Registrants listed directly below has duly caused this Amendment No. 1 to the
Registration Statement to be signed on its behalf, respectively, by the
undersigned, thereunto duly authorized, in the City of West Palm Beach, State of
Florida, on September 16, 1996.
PAXSON BROADCASTING OF JACKSONVILLE, LIMITED
PARTNERSHIP,
a Florida limited partnership
PAXSON BROADCASTING OF MIAMI, LIMITED
PARTNERSHIP,
a Florida limited partnership
PAXSON BROADCASTING OF ORLANDO, LIMITED
PARTNERSHIP,
a Florida limited partnership
PAXSON BROADCASTING OF TAMPA, LIMITED
PARTNERSHIP,
a Florida limited partnership
PAXSON TAMPA LICENSE LIMITED PARTNERSHIP,
a Florida limited partnership
PAXSON JACKSONVILLE LICENSE LIMITED
PARTNERSHIP,
a Florida limited partnership
PAXSON MIAMI LICENSE LIMITED PARTNERSHIP,
a Florida limited partnership
PAXSON ORLANDO LICENSE LIMITED PARTNERSHIP,
a Florida limited partnership
By: Paxson Communications of Florida, Inc.,
the general partner of each of the entities
listed above
By: /s/ ANTHONY L. MORRISON
-------------------------------------------
Name: Anthony L. Morrison
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following person in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- --------------------------- -------------------
<C> <S> <C>
* Chairman and sole Director September 16, 1996
- --------------------------------------------- of Paxson Communications
Lowell W. Paxson of Florida, Inc.
*By: /s/ ANTHONY L. MORRISON
- ---------------------------------------------
Anthony L. Morrison
Attorney-in-Fact
</TABLE>
II-12
<PAGE> 276
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -------------------------------------------------------------------------------------
<S> <C> <C>
1 -- Underwriting Agreement
3.1 -- Certificate of Designation
3.2.1 -- Articles of Incorporation of Paxson Communications of Florida, Inc.*
3.2.2 -- Bylaws of Paxson Communications of Florida, Inc.*
3.3.1 -- Articles of Incorporation of Paxson Communications LP, Inc.*
3.3.2 -- Bylaws of Paxson Communications LP, Inc.*
3.4.1 -- Articles of Incorporation of Paxson Communications Management Company*
3.4.2 -- Bylaws of Paxson Communications Management Company*
3.5.1 -- Articles of Incorporation of Paxson Communications Marketing, Inc.*
3.5.2 -- Bylaws of Paxson Communications Marketing, Inc.*
3.6.1 -- Articles of Incorporation of Paxson Communications Networks, Inc.*
3.6.2 -- Bylaws of Paxson Communications Networks, Inc.*
3.7.1 -- Articles of Incorporation of Excel Marketing Enterprises, Inc.*
3.7.2 -- Bylaws of Excel Marketing Enterprises, Inc.*
3.8.1 -- Articles of Incorporation of Paxson Outdoor, Inc.*
3.8.2 -- Bylaws of Paxson Outdoor, Inc.*
3.9.1 -- Articles of Incorporation of Paxson Networks, Inc.*
3.9.2 -- Bylaws of Paxson Networks, Inc.*
3.10.1 -- Articles of Incorporation of Paxson Communications Television, Inc.*
3.10.2 -- Bylaws of Paxson Communications Television, Inc.*
3.11.1 -- Limited Partnership Agreement of Paxson Broadcasting of Jacksonville, Limited
Partnership*
3.11.2 -- Certificate of Limited Partnership of Paxson Broadcasting of Jacksonville,
Limited Partnership*
3.12.1 -- Limited Partnership Agreement of Paxson Broadcasting of Miami, Limited
Partnership*
3.12.2 -- Certificate of Limited Partnership of Paxson Broadcasting of Miami, Limited
Partnership*
3.13.1 -- Limited Partnership Agreement of Paxson Broadcasting of Orlando, Limited
Partnership*
3.13.2 -- Certificate of Limited Partnership of Paxson Broadcasting of Orlando, Limited
Partnership*
3.14.1 -- Limited Partnership Agreement of Paxson Broadcasting of Tampa, Limited
Partnership*
3.14.2 -- Certificate of Limited Partnership of Paxson Broadcasting of Tampa, Limited
Partnership*
3.15.1 -- Limited Partnership Agreement of Paxson Tampa License Limited Partnership*
3.15.2 -- Certificate of Limited Partnership of Paxson Tampa License Limited Partnership*
3.16.1 -- Limited Partnership Agreement of Paxson Jacksonville License Limited
Partnership*
3.16.2 -- Certificate of Limited Partnership of Paxson Jacksonville License Limited
Partnership*
3.17.1 -- Limited Partnership Agreement of Paxson Miami License Limited Partnership*
3.17.2 -- Certificate of Limited Partnership of Paxson Miami License Limited Partnership*
3.18.1 -- Limited Partnership Agreement of Paxson Orlando License Limited Partnership*
3.18.2 -- Certificate of Limited Partnership of Paxson Orlando License Limited
Partnership*
3.19.1 -- Limited Partnership Agreement of Paxson Communications of Atlanta-14, Inc.*
3.19.2 -- Certificate of Limited Partnership of Paxson Communications of Atlanta-14, Inc.*
3.20.1 -- Articles of Incorporation of Paxson Atlanta License, Inc.*
3.20.2 -- Bylaws of Paxson Atlanta License, Inc.*
3.21.1 -- Articles of Incorporation of Paxson Communications of Boston-60, Inc.*
3.21.2 -- Bylaws of Paxson Communications of Boston-60, Inc.*
3.22.1 -- Articles of Incorporation of Paxson Boston License, Inc.*
3.22.2 -- Bylaws of Paxson Boston License, Inc.*
3.23.1 -- Articles of Incorporation of Paxson Communications of Dallas-68, Inc.*
3.23.2 -- Bylaws of Paxson Communications of Dallas-68, Inc.*
3.24.1 -- Articles of Incorporation of Paxson Dallas License, Inc.*
</TABLE>
<PAGE> 277
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -------------------------------------------------------------------------------------
<S> <C> <C>
3.24.2 -- Bylaws of Paxson Dallas License, Inc.*
3.25.1 -- Articles of Incorporation of Paxson Communications of New London-26, Inc.*
3.25.2 -- Bylaws of Paxson Communications of New London-26, Inc.*
3.26.1 -- Articles of Incorporation of Paxson New London License, Inc.*
3.26.2 -- Bylaws of Paxson New London License, Inc.*
3.27.1 -- Articles of Incorporation of Paxson Communications of Philadelphia-61, Inc.*
3.27.2 -- Bylaws of Paxson Communications of Philadelphia-61, Inc.*
3.28.1 -- Articles of Incorporation of Paxson Philadelphia License, Inc.*
3.28.2 -- Bylaws of Paxson Philadelphia License, Inc.*
3.29.1 -- Articles of Incorporation of Paxson Communications of Miami-35, Inc.*
3.29.2 -- Bylaws of Paxson Communications of Miami-35, Inc.*
3.30.1 -- Articles of Incorporation of Paxson Communications of San Jose-65, Inc.*
3.30.2 -- Bylaws of Paxson Communications of San Jose-65, Inc.*
3.31.1 -- Articles of Incorporation of Paxson San Jose License, Inc.*
3.31.2 -- Bylaws of Paxson San Jose License, Inc.*
3.32.1 -- Articles of Incorporation of Paxson Communications of Tampa-66, Inc.*
3.32.2 -- Bylaws of Paxson Communications of Tampa-66, Inc.*
3.33.1 -- Articles of Incorporation of Paxson Communications of West Palm Beach-25, Inc.*
3.33.2 -- Bylaws of Paxson Communications of West Palm Beach-25, Inc.*
3.34.1 -- Articles of Incorporation of Paxson West Palm Beach License, Inc.*
3.34.2 -- Bylaws of Paxson West Palm Beach License, Inc.*
3.35.1 -- Articles of Incorporation of Paxson Communications of Los Angeles-30, Inc.*
3.35.2 -- Bylaws of Paxson Communications of Los Angeles-30, Inc.*
3.36.1 -- Articles of Incorporation of Paxson Los Angeles License, Inc.*
3.36.2 -- Bylaws of Paxson Los Angeles License, Inc.*
3.37.1 -- Articles of Incorporation of Paxson Communications of Minneapolis-41, Inc.*
3.37.2 -- Bylaws of Paxson Communications of Minneapolis-41, Inc.*
3.38.1 -- Articles of Incorporation of Paxson Communications of St. Louis-13, Inc.*
3.38.2 -- Bylaws of Paxson Communications of St. Louis-13, Inc.*
3.39.1 -- Articles of Incorporation of Paxson Minneapolis License, Inc.*
3.39.2 -- Bylaws of Paxson Minneapolis License, Inc.*
3.40.1 -- Articles of Incorporation of Paxson Communications of Cookeville, Inc.*
3.40.2 -- Bylaws of Paxson Communications of Cookeville, Inc.*
3.41.1 -- Articles of Incorporation of Paxson Cookeville License, Inc.*
3.41.2 -- Bylaws of Paxson Cookeville License, Inc.*
3.42.1 -- Articles of Incorporation of Paxson Communications of Ft. Pierce-34, Inc.*
3.42.2 -- Bylaws of Paxson Communications of Ft. Pierce-34, Inc.*
3.43.1 -- Articles of Incorporation of Paxson Communications of Orlando-56, Inc.*
3.43.2 -- Bylaws of Paxson Communications of Orlando-56, Inc.*
3.44.1 -- Articles of Incorporation of Paxson Communications of Houston-49, Inc.*
3.44.2 -- Bylaws of Paxson Communications of Houston-49, Inc.*
3.45.1 -- Articles of Incorporation of Paxson Houston License, Inc.*
3.45.2 -- Bylaws of Paxson Houston License, Inc.*
3.46.1 -- Articles of Incorporation of Infomall TV Network, Inc.*
3.46.2 -- Bylaws of Infomall TV Network, Inc.*
3.47.1 -- Articles of Incorporation of Paxson St. Louis License, Inc.*
3.47.2 -- Bylaws of Paxson St. Louis License, Inc.*
3.48.1 -- Articles of Incorporation of Infomall Cable Network, Inc.*
3.48.2 -- Bylaws of Infomall Cable Network, Inc.*
3.49.1 -- Articles of Incorporation of Paxson Communications of Cleveland-67, Inc.*
3.49.2 -- Bylaws of Paxson Communications of Cleveland-67, Inc.*
</TABLE>
<PAGE> 278
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -------------------------------------------------------------------------------------
<S> <C> <C>
3.50.1 -- Articles of Incorporation of Paxson Communications of Washington-60, Inc.*
3.50.2 -- Bylaws of Paxson Communications of Washington-60, Inc.*
3.51.1 -- Articles of Incorporation of Paxson Washington License, Inc.*
3.51.2 -- Bylaws of Paxson Washington License, Inc.*
3.52.1 -- Articles of Incorporation of Paxson Communications of Phoenix-13, Inc.*
3.52.2 -- Bylaws of Paxson Communications of Phoenix-13, Inc.*
3.53.1 -- Articles of Incorporation of Paxson Phoenix License, Inc.*
3.53.2 -- Bylaws of Paxson Phoenix License, Inc.*
3.54.1 -- Articles of Incorporation of Infomall Los Angeles, Inc.*
3.54.2 -- Bylaws of Infomall Los Angeles, Inc.*
3.55.1 -- Articles of Incorporation of Paxson Communications of Milwaukee-55, Inc.*
3.55.2 -- Bylaws of Paxson Communications of Milwaukee-55, Inc.*
3.56.1 -- Articles of Incorporation of Paxson Communications of Denver-59, Inc.*
3.56.2 -- Bylaws of Paxson Communications of Denver-59, Inc.*
3.57.1 -- Articles of Incorporation of Paxson Communications of New York-43, Inc.*
3.57.2 -- Bylaws of Paxson Communications of New York-43, Inc.*
3.58.1 -- Articles of Incorporation of Paxson New York License, Inc.*
3.58.2 -- Bylaws of Paxson New York License, Inc.*
3.59.1 -- Articles of Incorporation of Paxson Communications of Akron-23, Inc.*
3.59.2 -- Bylaws of Paxson Communications of Akron-23, Inc.*
3.60.1 -- Articles of Incorporation of Paxson Akron License, Inc.*
3.60.2 -- Bylaws of Paxson Akron License, Inc.*
3.61.1 -- Articles of Incorporation of Paxson Communications of Dayton-26, Inc.*
3.61.2 -- Bylaws of Paxson Communications of Dayton-26, Inc.*
3.62.1 -- Articles of Incorporation of Paxson Sports of Miami, Inc.**
3.62.2 -- Bylaws of Paxson Sports of Miami, Inc.**
3.63.1 -- Articles of Incorporation of Paxson Communications of San Juan, Inc.**
3.63.2 -- Bylaws of Paxson Communications of San Juan, Inc.**
3.64.1 -- Articles of Incorporation of Paxson Communications of Battle Creek-43, Inc.**
3.64.2 -- Bylaws of Paxson Communications of Battle Creek-43, Inc.**
3.65.1 -- Articles of Incorporation of Paxson Communications of Albany-55, Inc.**
3.65.2 -- Bylaws of Paxson Communications of Albany-55, Inc.**
3.66.1 -- Articles of Incorporation of Paxson Albany License, Inc.**
3.66.2 -- Bylaws of Paxson Albany License, Inc.**
3.67.1 -- Articles of Incorporation of Paxson Communications of Raleigh Durham-47, Inc.**
3.67.2 -- Bylaws of Paxson Communications of Raleigh Durham-47, Inc.**
3.68.1 -- Articles of Incorporation of Paxson Communications L.P.T.V., Inc.**
3.68.2 -- Bylaws of Paxson Communications L.P.T.V., Inc.**
3.69.1 -- Articles of Incorporation of Paxson Dayton License, Inc.**
3.69.2 -- Bylaws of Paxson Dayton License, Inc.**
3.70.1 -- Articles of Incorporation of Paxson Denver License, Inc.**
3.70.2 -- Bylaws of Paxson Denver License, Inc.**
3.71.1 -- Articles of Incorporation of Paxson Communications of Providence-69, Inc.**
3.71.2 -- Bylaws of Paxson Communications of Providence-69, Inc.**
3.72.1 -- Articles of Incorporation of Paxson Communications of Salt Lake City-16, Inc.**
3.72.2 -- Bylaws of Paxson Communications of Salt Lake City-16, Inc.**
3.73.1 -- Articles of Incorporation of Paxson Communications of Greensboro-16, Inc.**
3.73.2 -- Bylaws of Paxson Communications of Greensboro-16, Inc.**
3.74.1 -- Articles of Incorporation of Paxson Greensboro License, Inc.**
3.74.2 -- Bylaws of Paxson Greensboro License, Inc.**
3.75.1 -- Articles of Incorporation of Paxson Communications of Tulsa-44, Inc.**
</TABLE>
<PAGE> 279
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -------------------------------------------------------------------------------------
<S> <C> <C>
3.75.2 -- Bylaws of Paxson Communications of Tulsa-44, Inc.**
3.76.1 -- Articles of Incorporation of Paxson Communications of Tallahassee, Inc.**
3.76.2 -- Bylaws of Paxson Communications of Tallahassee, Inc.**
3.77.1 -- Articles of Incorporation of Paxson Tallahassee License, Inc.**
3.77.2 -- Bylaws of Paxson Tallahassee License, Inc.**
3.78.1 -- Articles of Incorporation of Pax Jax, Inc.**
3.78.2 -- Bylaws of Pax Jax, Inc.**
3.79.1 -- Articles of Incorporation of Paxson Sports Ventures Company**
3.79.2 -- Bylaws of Paxson Sports Ventures Company**
3.80.1 -- Articles of Incorporation of PCC Direct, Inc.**
3.81.2 -- Bylaws of PCC Direct, Inc.**
3.83.1 -- Articles of Incorporation of Paxson Communications of Oklahoma City-62, Inc.**
3.83.2 -- Bylaws of Paxson Communications of Oklahoma City-62, Inc.**
3.84.1 -- Articles of Incorporation of Paxson/R&R Network, Inc.**
3.84.2 -- Bylaws of Paxson/R&R Network, Inc.**
3.85.1 -- Articles of Incorporation of Paxson Communications of Sacramento-29, Inc.**
3.85.2 -- Bylaws of Paxson Communications of Sacramento-29, Inc.**
3.86.1 -- Articles of Incorporation of Paxson Sacramento License, Inc.**
3.86.2 -- Bylaws of Paxson Sacramento License, Inc.**
3.87.1 -- Articles of Incorporation of Paxson Communications of Seattle-24, Inc.**
3.87.2 -- Bylaws of Paxson Communications of Seattle-24, Inc.**
3.88.1 -- Articles of Incorporation of Paxson Seattle License, Inc.**
3.88.2 -- Bylaws of Paxson Seattle License, Inc.**
3.89.1 -- Articles of Incorporation of Paxson Communications of Boston-46, Inc.**
3.89.2 -- Bylaws of Paxson Communications of Boston-46, Inc.**
3.90.1 -- Articles of Incorporation of Paxson Communications of Little Rock-42, Inc.**
3.90.2 -- Bylaws of Paxson Communications of Little Rock-42, Inc.**
3.91.1 -- Articles of Incorporation of Paxson Little Rock License, Inc.**
3.91.2 -- Bylaws of Paxson Little Rock License, Inc.**
3.92.1 -- Articles of Incorporation of Paxson Communications of Phoenix-51, Inc.**
3.92.2 -- Bylaws of Paxson Communications of Phoenix-51, Inc.**
3.93.1 -- Articles of Incorporation of Paxson Communications of Birmingham-44, Inc.**
3.93.2 -- Bylaws of Paxson Communications of Birmingham-44, Inc.**
3.94.1 -- Articles of Incorporation of Paxson Birmingham License, Inc.**
3.94.2 -- Bylaws of Paxson Birmingham License, Inc.**
4.1 -- Old Indenture*
4.2 -- Indenture dated as of , 1996 by and between Paxson Communications
Corporation, the guarantors named therein and Bank of New York, as Trustee, with
respect to the Exchange Debentures.
5.1 -- Opinion of Holland & Knight regarding the legality of the New Preferred Stock,
including consent.+
7.1 -- Opinion of Holland & Knight regarding liquidation preference matters, including
consent.+
12 -- Calculation of ratio of earnings to combined fixed charges and preferred stock
dividends.**
23.1 -- Consent of Price Waterhouse LLP.
23.2 -- Consent of Holland & Knight (exhibit 5.1).+
23.3 -- Consent of Holland & Knight (exhibit 7.1).+
23.4 -- Consent of Dow, Lohnes & Albertson+
23.5 -- Consent of Mathieson Aitken Jemison, LLP
23.6 -- Consent of Robert Rossi & Company
23.7 -- Consent of Schweitzer Rubin Karon & Premier
23.8 -- Consent of Deloitte & Touche LLP
</TABLE>
<PAGE> 280
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -------------------------------------------------------------------------------------
<S> <C> <C>
24.1 -- Powers of Attorney (included on signature pages to Registration Statement).**
25.1 -- Statement of Eligibility of Trustee on Form T-1 dated , 1996
relating to Exchange Debentures (No. 22- ).+
</TABLE>
- ---------------
+ To be filed by amendment.
* Filed with the Company's Registration Statement on Form S-4, as amended,
dated January 23, 1996 (Registration No. 33-63765, incorporated herein by
reference).
** Filed with the Company's Registration Statement on Form S-3, filed August 15,
1996.
<PAGE> 1
EXHIBIT 1
<PAGE> 2
EXHIBIT 1
150,000 SHARES
PAXSON COMMUNICATIONS CORPORATION
% CUMULATIVE EXCHANGEABLE PREFERRED STOCK
(PAR VALUE $.001 PER SHARE)
UNDERWRITING AGREEMENT
[ ], 1996
BT Securities Corporation
Goldman, Sachs & Co.
c/o BT Securities Corporation
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
Paxson Communications Corporation (the "Company"), a Delaware corporation,
and each of the Company's subsidiaries (collectively, the "Subsidiaries") listed
on Schedule I hereto (collectively, the "Guarantors") hereby confirm their
agreement with you, as set forth below.
1. The Securities. Subject to the terms and conditions herein contained,
the Company proposes to issue and sell to the underwriters named in Schedule II
hereto (the "Underwriters") for whom you are acting as representatives (the
"Representatives") an aggregate of 150,000 shares of % Cumulative
Exchangeable Preferred Stock, par value $.001 per share, of the Company (the
"Shares"). Subject to certain conditions, the Shares are to be exchangeable, in
whole or in part, at the option of the Company, on any dividend payment date for
the Company's [ ]% Exchange Debentures due 2006 (the "Exchange Debentures").
The Exchange Debentures will be guaranteed (the "Guarantees"), on a senior
subordinated basis, by each of the Guarantors. The Exchange Debentures and the
Guarantees are hereinafter referred to as the "Exchange Securities." The
Exchange Securities are to be issued under an indenture (the "Indenture") dated
as of [ ], 1996 by and among the Company, the Guarantors and
The Bank of New York, as trustee (the "Trustee"). The Shares and the
<PAGE> 3
-2-
Exchange Securities are hereinafter collectively referred to as the
"Securities."
The Company and the Guarantors have filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (SEC File
No. 333-10267) and a related preliminary prospectus for the registration of the
Securities under the Securities Act of 1933, as amended (together with the
rules and regulations of the Commission promulgated thereunder, the "Act"), and
have filed such amendments thereto, if any, as may have been required prior to
the date hereof.
As used in this Agreement, the term "Registration Statement" means such
registration statement, as amended at the time when it was or is declared
effective, including all financial statements and schedules and exhibits
thereto and including any information omitted therefrom pursuant to Rule 430A
under the Act ("Rule 430A"), if applicable, and included in the Prospectus (as
hereinafter defined); the term "Preliminary Prospectus" means each prospectus
relating to the Securities as filed with such registration statement or any
amendment thereto (including the prospectus, if any, included in such
registration statement or any amendment thereto at the time it was or is
declared effective if declared effective prior to the execution and delivery of
this Agreement); and the term "Prospectus" means the prospectus relating to the
Securities as first filed with respect to such registration statement with the
Commission pursuant to Rule 430A and Rule 424(b) under the Act ("Rule 424(b)"),
if required, or, if no prospectus is required to be filed pursuant to Rule 430A
or Rule 424(b), such term means the prospectus included in such registration
statement at the time it became or becomes effective; provided that if a
revised Prospectus shall be provided to the Underwriters by the Company for use
in connection with the offering and sale of the Shares that differs from the
prospectus on file with the Commission at the time such registration statement
becomes effective or as first filed under Rule 430A and Rule 424(b), the term
"Prospectus" shall refer to the revised prospectus from and after the time it
is first provided to the Underwriters for such use. If the Company has filed
an abbreviated registration statement to register additional securities
pursuant to Rule 462(b) under the Act (the "Rule 462 Registration Statement")
then any reference herein to "Registration Statement" shall be deemed to
include such Rule 462 Registration Statement. All references in this
Agreement to the Registration Statement, Preliminary Prospectus and Prospectus
and to financial statements and schedules and other information which is
"contained," "included" or "stated" therein (and all other references of like
import) shall be deemed to mean and include all such financial statements and
schedules and other information which
<PAGE> 4
-3-
is or is deemed to be incorporated by reference therein; and all references in
this Agreement to amendments or supplements to the Registration Statement, the
Preliminary Prospectus or the Prospectus shall be deemed to mean and include
the filing of any document under the Securities Exchange Act of 1934, as
amended (together with the rules and regulations of the Commission promulgated
thereunder, the "1934 Act"), which is or is deemed to be incorporated by
reference therein.
2. Representations and Warranties of the Company and the Guarantors. The
Company and the Guarantors, jointly and severally, represent and warrant to and
agree with the Underwriters that:
(a) The registration statement when originally filed with the
Commission with respect to the Securities, including the form of
prospectus, together with all amendments thereto, has been prepared by the
Company and the Guarantors in conformity with the requirements of the Act
and the Company and the Guarantors meet all the requirements for filing on
Form S-3; the Registration Statement at the time it was or will be
declared effective and at the Closing Date defined) complies and will
comply in all material respects with the requirements of the Act.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus nor instituted any proceeding for
such purpose. When the Registration Statement or any amendment thereto
was or is declared effective and on the Closing Date it did not or will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus, and any amendments or
supplements thereto on the date first filed with the Commission pursuant
to Rule 424(b) (or if not filed, on the date first provided to the
Underwriters in connection with the offering and sale of the Shares) and
on the Closing Date, (i) complied or will comply in all material respects
with the requirements of the Act, and (ii) did not or will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. The foregoing provisions of this paragraph (b) do not apply
to statements or omissions in the Registration Statement or any amendment
thereto or the Prospectus or any amendment or supplement thereto made in
reliance upon and in conformity with written information with
<PAGE> 5
-4-
respect to the Underwriters furnished to the Company by you specifically
for use therein, or to the Statement of Eligibility and Qualification
(Form T-1) under the Trust Indenture Act of 1939, as amended (the "TIA")
filed as an exhibit to the Registration Statement.
(c) The documents incorporated or deemed to be incorporated by
reference in the Prospectus, at the time they were or hereafter are filed
with the Commission, complied and will comply in all material respects
with the requirements of the 1934 Act and, when read together with the
other information in the Prospectus, at the time the Registration
Statement and any amendments thereto became or becomes effective and at
the Closing Date, did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) The Company is a corporation duly organized and validly existing
in good standing under the laws of the State of Delaware with full
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Registration Statement and the
Prospectus, and is duly registered and qualified to conduct its business
and is in good standing in each jurisdiction or place where the nature of
its properties or the conduct of its business requires such registration
or qualification, except where the failure so to register or qualify could
not have a material adverse effect on the condition (financial or other),
business, properties, net worth or results of operations of the Company
and its subsidiaries taken as a whole (a "Material Adverse Effect").
(e) All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable
and are free of any preemptive or similar rights; and the capital stock of
the Company conforms in all material respects to the descriptions thereof
in the Registration Statement and the Prospectus.
(f) The Company has no subsidiaries other than the Guarantors. Each
Guarantor is either (i) a corporation duly incorporated or organized,
validly existing and in good standing in the jurisdiction of its
incorporation or organization or (ii) a partnership duly organized and
validly existing under the applicable laws of the State of Florida and, in
each case, with full corporate or partnership power
<PAGE> 6
-5-
and authority, as the case may be, to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction or
place where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure so
to register or qualify does not have a Material Adverse Effect; all the
outstanding shares of capital stock of each Guarantor which is a
corporation have been duly authorized and validly issued and are fully
paid and nonassessable and were not issued in violation of any preemptive
or similar rights; all of the outstanding shares of capital stock or
outstanding partnership interests of the Guarantors are owned by the
Company directly, or indirectly through one of the other Guarantors, and,
other than as set forth in the Prospectus, are owned free and clear of
any lien, adverse claim, security interest, equity or other encumbrance.
Except as disclosed in the Prospectus, there are no outstanding
subscriptions, options, warrants, rights, convertible securities or other
binding agreements or commitments of any character obligating the Company
or any Guarantor to issue any securities; and there is no agreement,
understanding or arrangement among the Company or the Guarantors and
their respective stockholders or any other person relating to the
ownership or disposition of any capital stock in the Company or any
Guarantor, the election of directors of the Company or any of the
Guarantors or the governance of the Company's or any Guarantor's affairs.
(g) The Company and the Guarantors have all requisite corporate
power and authority to execute, deliver and perform their obligations
under this Agreement. The execution and delivery of, and the performance
by the Company and the Guarantors of their obligations under, this
Agreement have been duly and validly authorized by the Company and the
Guarantors, and this Agreement has been duly executed and delivered by the
Company and the Guarantors and constitutes the valid and legally binding
agreement of the Company and the Guarantors, enforceable against the
Company and the Guarantors in accordance with its terms except (i) that
the enforcement hereof may be subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally, and to
general principles of equity and the discretion of the court before which
any proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding in equity or at law) and (ii) as
any rights to indemnity or contribution hereunder may be
<PAGE> 7
-6-
limited by applicable securities laws and public policy considerations.
(h) The Certificate of Designation (the "Certificate of
Designation") relating to the Shares and any additional Shares issued as
dividends in accordance with the terms of the Certificate of Designation
(the "Dividend Shares") has been duly authorized by the Company. Prior
to the Closing Date, the Shares and the Dividend Shares shall have been
duly authorized for issuance pursuant to this Agreement in the case of
Shares and\or Dividend Shares in accordance with the terms of the
Certificate of Designation as the case may be, in the case of the
Dividend Shares, and, when issued and delivered by the Company in
accordance with the provisions of this Agreement against payment
therefor in the case of the Shares, and in accordance with the terms of
the Certificate of Designation, in the case of the Dividend Shares, will
be validly issued, fully paid and nonassessable; the Shares and the
Dividend Shares will conform in all material respects to all statements
relating thereto contained in the Prospectus; the issuance of the Shares
and the Dividend Shares by the Company is not subject to preemptive or
similar rights; the certificates for the Shares and the Dividend Shares
are in due and proper form; and the holders of such Shares and Dividend
Shares will not be subject to personal liability by reason of being such
holders. The Company has reserved for issuance, and duly authorized the
issuance of, the maximum number of Dividend Shares issuable as dividends
pursuant to the terms of the Certificate of Designation. The Certificate
of Incorporation of the Company, by virtue of the Certificate of
Designation, sets forth the rights, preferences and priorities of the
Shares and the Dividend Shares.
(i) The Company and the Guarantors have all requisite corporate
power and authority to execute, deliver and perform their obligations
under the Indenture and the Securities; the Indenture has been duly
authorized by the Company and the Guarantors and has been qualified under
the TIA, and, when executed and delivered by the Company and the
Guarantors (assuming the due authorization, execution and delivery by the
Trustee), will constitute a valid and legally binding agreement of the
Company and the Guarantors, enforceable against the Company and the
Guarantors in accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the
<PAGE> 8
-7-
court before which any proceeding therefor may be brought (regardless of
whether such enforcement is considered in a proceeding in equity or at
law).
(j) The Exchange Debentures and any additional Exchange Debentures
issued as interest in accordance with the provision of the Indenture on
outstanding Exchange Debentures (the "In-kind Exchange Debentures")
have been duly authorized by the Company for issuance and conform in all
material respects to the description thereof in the Prospectus. The
Exchange Debentures and the In-kind Exchange Debentures, when executed by
the Company and authenticated by the Trustee in accordance with the
provisions of the Indenture and delivered, upon the exchange of the
Shares and\or Dividend Shares, if any, in the case of the Exchange
Debentures, or as interest on outstanding Exchange Debentures, in the
case of the In-kind Exchange Debentures, will have been duly executed,
issued and delivered and will constitute valid and legally binding
obligations of the Company, entitled to the benefits of the Indenture and
enforceable against the Company in accordance with its terms, except that
the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights and remedies
generally and (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought (regardless of
whether such enforcement is considered in a proceeding in equity or at
law). The Company was authorized for issuance the maximum aggregate
principal amount of In-kind Exchange Debentures issuable as interest on
outstanding Exchange Debentures in accordance with the provisions of the
Indenture.
(k) The Guarantees endorsed on the Exchange Debentures and to be
endorsed on the In-kind Exchange Debentures, if any, have each been duly
authorized by each of the Guarantors and, when the Exchange Debentures
and the In-kind Exchange Debentures, if any, are executed by the Company
and authenticated by the Trustee in accordance with the provisions of the
Indenture and delivered upon the exchange of the Shares and\or Dividend
Shares, if any, in the case of the Exchange Debentures, or as interest on
outstanding Exchange Debentures, in the case of the In-kind Exchange
Debentures, the Guarantees will be entitled to the benefits of the
Indenture and will constitute valid and legally binding obligations of
the Guarantors enforceable in accordance with their terms, except that
the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
now or hereafter in effect relating to
<PAGE> 9
-8-
creditors' rights generally, and (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
(l) The execution and delivery of, and the performance by the
Company and the Guarantors (to the extent a party thereto) of each of its
obligations under, each agreement or instrument executed or delivered in
connection with the Proposed Acquisitions (as defined in the Prospectus)
(the "Transaction Documents"), other than this Agreement, have been duly
and validly authorized by the Company and the Guarantors (to the extent a
party thereto), and such Transaction Documents have been duly executed and
delivered by the Company and the Guarantors (to the extent a party
thereto) and constitute the valid and legally binding agreement of the
Company and the Guarantors (to the extent a party thereto), enforceable
against them in accordance with their terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights generally, and (ii) to general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought (regardless of whether such enforcement
is considered in a proceeding in equity or at law).
(m) There are no legal or governmental proceedings pending or, to
the knowledge of the Company, threatened, against the Company or any of
the Guarantors or any of their respective officers or directors, or to
which the Company or any of the Guarantors, or to which any of their
respective properties is subject, that are required to be described in the
Registration Statement or the Prospectuses but are not described as
required, and there are no agreements, contracts, indentures, leases or
other instruments that are required to be described in the Registration
Statement or the Prospectuses or to be filed as an exhibit to the
Registration Statement that are not described or filed as required by the
Act.
(n) Neither the Company nor any of the Guarantors is in violation of
its certificate or articles of incorporation or by-laws, or other
organizational documents, or of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Guarantors or of any decree of any court or governmental agency or body
having jurisdiction over the Company or any of the Guarantors, or in
<PAGE> 10
-9-
default in any material respect in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any
other evidence of indebtedness or in any material agreement, indenture,
lease or other instrument to which the Company or any of the Guarantors
is a party or by which any of them or any of their respective properties
may be bound, except as would not (individually or in the aggregate) have
a Material Adverse Effect.
(o) Except as disclosed in the Registration Statement and the
Prospectus, neither the issuance and sale of the Shares or the issuance of
the Dividend Shares, the Exchange Securities or the In-kind Exchange
Debentures (including the related Guarantees) upon the exchange of the
Shares or as interest on the Exchange Debentures as the case may be, the
execution, delivery or performance of this Agreement by the Company or
the Guarantors (to the extent a party thereto) nor the consummation by
the Company or the Guarantors (to the extent a party thereto) of the
Transactions (as defined in the Prospectus) or any of the other
transactions contemplated hereby or thereby (i) requires any consent,
approval, authorization or other order of or registration or filing with,
any court, regulatory body, administrative agency or other governmental
body, agency or official (except (A) such as may be required for the
registration of the Securities under the Act and compliance with the
securities or Blue Sky and other laws of various jurisdictions, all of
which have been or will be effected in accordance with this Agreement and
(B) as would not (individually or in the aggregate) have a Material
Adverse Effect) or conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the certificate or articles
of incorporation or by-laws, or other organizational documents, of the
Company or any of the Guarantors or (ii) conflicts or will conflict with
or constitutes or will constitute a breach of, or a default under, any
agreement, indenture, lease or other instrument to which the Company or
any of the Guarantors is a party or by which any of them or any of their
respective properties may be bound, or violates or will violate any
statute, law, regulation or filing or judgment, injunction, order or
decree applicable to the Company or any of the Guarantors or any of their
respective properties, or will result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the
Company or any of the Guarantors pursuant to the terms of any agreement
or instrument to which any of them is a party or by which any of them may
be bound or to which any of the property or assets of any of them is
<PAGE> 11
-10-
subject, except as would not (individually or in the aggregate) have a
Material Adverse Effect.
(p) Price Waterhouse LLP, Deloitte & Touche LLP, Matherson Aitken
Jemison, LLP, Robert Rossi & Company and Schwertzer Rubin Karon & Premier
who have certified or shall certify the financial statements included in
the Registration Statement and the Prospectus (or any amendment or
supplement thereto), are independent public accountants as required by
the Act.
(q) The financial statements of the Company and the Guarantors,
together with related schedules and notes, included in the Registration
Statement and the Prospectus (and any amendment or supplement thereto)
present fairly the consolidated financial position, results of operations
and changes in financial position of the Company and the Guarantors on the
basis stated in the Registration Statement and the Prospectus at the
respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved, except as disclosed therein; and
the other financial and statistical information and data included in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) are accurately presented and prepared on a basis consistent with
such financial statements and the books and records of the Company and the
Guarantors.
(r) The unaudited pro forma consolidated financial statements and
other pro forma financial information (including the notes thereto)
included in the Registration Statement and the Prospectus (A) present
fairly in all material respects the information shown therein; (B) have
been prepared in accordance with the applicable requirements of Regulation
S-X promulgated under the Act; (C) have been prepared in accordance with
the Commission's rules and guidelines with respect to pro forma financial
statements; and (D) have been properly computed on the bases described
therein. The assumptions used in the preparation of the pro forma
financial statements and other pro forma condensed consolidated financial
information included in the Registration Statement and the Prospectus are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions or circumstances referred to therein.
(s) Each of the Company and the Guarantors has good and marketable
title to all property (real and personal) described in the Prospectus as
being owned by it which is material to
<PAGE> 12
-11-
the business of the Company and the Guarantors, taken as a whole, free
and clear of all liens, claims, security interests or other encumbrances
except such as are described in the Registration Statement and the
Prospectuses or would not (individually or in the aggregate) have a
Material Adverse Effect and all property described in the Registration
Statement (including exhibits thereto) and the Prospectuses as being held
under lease by each of the Company and the Guarantors which is material
to the business of the Company and the Guarantors, taken as a whole, is
held by it under binding leases that are in force and effect.
(t) The Company and each of the Guarantors have such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities, including, without limitation, permits, licenses, franchises
and authorizations from the United States Federal Communications
Commission (the "FCC") ("Permits"), as are necessary to own their
respective properties and to conduct their business in the manner
described in the Prospectus, subject to such qualifications as may be set
forth in the Prospectus and, except as (individually or in the aggregate)
could not reasonably be expected to have a Material Adverse Effect; the
Company and each of the Guarantors have fulfilled and performed all of
their respective obligations with respect to such Permits and no event has
occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Permit, subject in each
case to such qualifications as may be set forth in the Prospectus and,
except as (individually or in the aggregate) could not reasonably be
expected to have a Material Adverse Effect; and, except as described in
the Prospectus, none of such Permits contains any restriction that is
materially burdensome to the Company or any of the Guarantors, taken as a
whole. Other than as disclosed in the Prospectus, there are no license
renewal or rate or tariff proceedings existing, pending or, to the best
knowledge of the Company, threatened that could reasonably be expected to
have a Material Adverse Effect.
(u) To the extent required by the 1934 Act, each of the Company and
the Guarantors maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability
<PAGE> 13
-12-
for assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(v) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectus (or any amendment or supplement thereto),
neither the Company nor any of the Guarantors has incurred any liability
or obligation, contingent or otherwise, or entered into any transaction,
not in the ordinary course of business, that is material to the Company
and the Guarantors taken as a whole, and there has not been any change in
the capital stock (other than as contemplated by this Agreement), or
material increase in the short-term debt or long-term debt, of the Company
or any of the Guarantors, or any material adverse change, or any
development involving or which may reasonably be expected to involve, a
prospective material adverse change, in the condition (financial or
other), business, properties, net worth or results of operations of the
Company and the Guarantors taken as a whole (any such change, a "Material
Adverse Change").
(w) The Company has not distributed and, prior to the later to occur
of (i) the Closing Date and (ii) completion of the distribution of the
Shares, will not distribute any offering material in connection with the
offering and sale of the Shares other than the Registration Statement, the
Preliminary Prospectus, the Prospectus or other materials, if any,
permitted by the Act.
(x) To the Company's knowledge, neither the Company nor any of the
Guarantors nor any officer, director, employee or agent of the Company or
any Guarantor has made any payment of funds of the Company or any
Guarantor or received or retained any funds in violation of any law, rule
or regulation, which payment, receipt or retention of funds is of a
character required to be disclosed in the Prospectus.
(y) The Company and each of the Guarantors have filed all tax
returns required to be filed, which returns are complete and correct, and
neither the Company nor any Guarantor is in default in the payment of any
taxes which were payable pursuant to said returns or any assessments with
respect thereto, other than those taxes or assessments being
<PAGE> 14
-13-
contested in good faith and those taxes or assessments for which adequate
reserves or accruals have been established in accordance with generally
accepted accounting principles, except where the failure to file such tax
returns or to pay such taxes or assessments is not reasonably likely to
have (individually or in the aggregate) a Material Adverse Effect. The
Company knows of no actual or proposed additional tax assessments for any
fiscal period against the Company or any of the Guarantors that would
(individually or in the aggregate) be reasonably likely to have a
Material Adverse Effect.
(z) Except as disclosed in the Registration Statement or the
Prospectus, no holder of any security of the Company or any Guarantor has
any right to require registration of any security of the Company or any
Guarantor because of the filing of the Registration Statement or
consummation of the transactions contemplated by this Agreement.
(aa) The Company and the Guarantors own or possess all patents,
trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade
secrets and rights described in the Prospectus as being owned by them or
any of them or necessary for the conduct of their respective businesses,
the absence of which would have or could reasonably be expected to have a
Material Adverse Effect, and the Company is not aware of any claim to the
contrary or any challenge by any other person to the rights of the
Company and the Guarantors with respect to the foregoing which claims or
challenges, if the subject of an unfavorable decision would, individually
or in the aggregate, have a Material Adverse Effect.
(ab) The Company and the Guarantors have complied with all provisions
of Florida Statutes, Section 517.075, relating to issuers doing business
with Cuba.
(ac) The Company and the Guarantors are not now, and after sale of
the Shares hereunder and application of the net proceeds from such sale as
described in the Prospectus under the caption "Use of Proceeds" will not
be, an "investment company" within the meaning of the Investment Company
Act of 1940, as amended.
(ad) There are no business relationships or related-party
transactions of the nature described in Item 404 of Regulation S-K
involving the Company or any of the Guarantors and any persons described
in such Item that are required to be
<PAGE> 15
-14-
disclosed in the Prospectus and which have not been so disclosed.
(ae) Except as stated in this Agreement and in the Preliminary
Prospectus and the Prospectus, neither the Company nor any of the
Guarantors, or any of such entities' directors, officers or controlling
persons, has taken, or will take, directly or indirectly, any action
designed to cause or result in stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the
Shares.
(af) None of the Company, the Guarantors or any agent thereof acting
on the behalf of the Company or any of the Guarantors respectively have
taken, and none of them will take, any action that might cause this
Agreement or the issuance or sale of the Securities to violate Regulation
G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220), Regulation U
(12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System.
3. Purchase, Sale and Delivery of the Shares; Appointment of Qualified
Independent Underwriter.
(a) On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price of $ per share, the number of Shares set forth opposite
their respective names on Schedule II hereto. The Representatives shall release
the Shares for public sale promptly after this Agreement becomes effective. The
Representatives may from time to time increase or decrease the public offering
price after the initial offering to such extent as they may determine.
(b) Certificates in definitive form for the Shares that each Underwriter
has agreed to purchase hereunder, and in such denomination or denominations and
registered in such name or names as such Underwriter requests upon notice to the
Company at least 48 hours prior to the Closing Date, shall be delivered by or on
behalf of the Company to such Underwriter, against payment by or on behalf of
such Underwriter of the purchase price therefor by check in New York Clearing
House funds payable to the order of the Company. Such delivery of and payment
for the Shares shall be made at the offices of Cahill Gordon & Reindel, 80 Pine
Street, New York, New York 10005, at 10:00 A.M., New York time, on [ ], 1996, or
at such other place, time or date as you and the Company may
<PAGE> 16
-15-
agree upon or as you may determine pursuant to Section 7(a) hereof, such time
and date of delivery against payment being herein referred to as the "Closing
Date." The Company will make such certificates for the Shares available for
checking and packaging by the Underwriters at the offices of BT Securities
Corporation in New York, New York at least 24 hours prior to the Closing Date.
The Company and the Guarantors hereby confirm their engagement of Goldman,
Sachs & Co. as, and Goldman, Sachs & Co. hereby confirms its agreement with the
Company and the Guarantors to render services as, a "qualified independent
underwriter" within the meaning of Rule 2720(b)(15) of the Conduct Rules of the
National Association of Securities Dealers, Inc. (the "NASD") with respect to
the offering and sale of the Shares. Goldman, Sachs & Co. is referred to
herein as the "QIU." As compensation for the services of the QIU hereunder,
the Company and the Guarantors hereby agree to pay the QIU $10,000 on the
Closing Date (which amount shall be deducted from the underwriting discounts
and commissions payable to Goldman, Sachs & Co. as an Underwriter).
4. Offering by the Underwriters. After the Registration Statement becomes
effective, the Underwriters propose to offer for sale to the public the Shares
at the price and upon the terms set forth in the Prospectus relating to the
Securities.
5. Covenants of the Company. The Company and the Guarantors covenant and
agree with the Underwriters that:
(a) The Company and the Guarantors will, if the registration
statement is not effective at the time of the execution and delivery of
this Agreement, prepare and timely file with the Commission an amendment
to the registration statement that includes the form of final prospectus,
which amendment and form of final prospectus shall contain all required
information with respect to the Securities and the offering thereof, and,
if required by Rule 424(b), a prospectus under Rule 424(b) or, if filed,
will file a post-effective amendment thereto or a new registration
statement with the Commission pursuant to and in accordance with Rule
462(b) (in each case only if the Representatives or their counsel have not
reasonably objected thereto after having been furnished a copy thereof
prior to the proposed filing thereof), and in each case will notify the
Underwriters promptly of such filing and will use its best efforts to
cause the registration statement, if not effective at the time of
execution of this Agreement (and any amendments thereto) to become
effective promptly. If required, the Company and the Guarantors will file
the Prospectus and any amendments or
<PAGE> 17
-16-
supplements thereto with the Commission in the manner and within the time
period required by Rule 424(b) (but only if the Representatives or their
counsel have not reasonably objected thereto after having been furnished
a copy thereof a reasonable time prior to the proposed filing thereof).
During any time when a prospectus relating to the Securities is required
to be delivered under the Act, (i) the Company and the Guarantors will
comply with all requirements imposed upon any of them by the Act to the
extent necessary to permit the continuance of sales of or dealings in the
Securities in accordance with the provisions hereof and of the
Prospectus, as then amended or supplemented, (ii) the Company and the
Guarantors will not file with the Commission the Prospectus or any
amendment or supplement to such Prospectus or any amendment to the
Registration Statement of which the Representatives and their counsel
shall not previously have been advised and furnished a copy for a
reasonable period of time prior to the proposed filing and as to which
filing the Representatives and their counsel shall not have given their
respective consent, which consent shall not be unreasonably withheld and
(iii) the Company and the Guarantors will file all documents required to
be filed with the Commission pursuant to Section 13, 14 or 15 of the 1934
Act within the time periods required by the 1934 Act. The Company and
the Guarantors will prepare and will file with the Commission, in
accordance with the Act, promptly upon request by the Representatives or
counsel for the Underwriters, any amendments to the Registration
Statement or amendments or supplements to the Prospectus that may be
necessary or reasonably advisable in connection with the distribution of
the Shares by the Underwriters, and will use its best efforts to cause
any such amendment to the Registration Statement to be declared effective
by the Commission promptly. The Company will advise the Representatives,
promptly after it receives notice thereof, of the time when the
Registration Statement or any amendment thereto has been filed or
declared effective or the Prospectus or any amendments or supplements
thereto have been filed.
(b) The Company and the Guarantors will advise the Representatives,
promptly after receiving notice or obtaining knowledge thereof, of (i) the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or any amendment thereto or any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, or any amendments or supplements thereto, (ii) the suspension
of the qualification of the Securities for offering or sale in any
jurisdiction, (iii) the institution,
<PAGE> 18
-17-
threatening or contemplation of any proceeding for any such purpose or
(iv) any request made by the Commission for amending the Registration
Statement, for amending or supplementing the Prospectus or for additional
information. The Company and the Guarantors will use their best efforts
to prevent the issuance of any such stop order and, if any such stop
order is issued, to obtain the withdrawal thereof as promptly as
possible.
(c) The Company and the Guarantors will cooperate with the
Representatives in arranging for the qualification of the Securities for
offering and sale under the securities or "Blue Sky" laws of such
jurisdictions as the Representatives may designate and will continue such
qualifications in effect for as long as may be necessary to complete the
distribution of the Securities; provided that in connection therewith the
Company and the Guarantors shall not be required to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction or to subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction in which it is not then so subject.
(d) During such time as a prospectus relating to the Securities is
required to be delivered under the Act, if after due inquiry, any event
occurs or information becomes known, as a result of which the Prospectus
as then amended or supplemented would include any untrue statement of a
material fact, or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if for any
other reason it is necessary at any time to amend or supplement the
Prospectus to comply with the Act, the Company and the Guarantors will
promptly notify the Representatives and their counsel thereof and the
Company and the Guarantors will prepare and, subject to Section 5(a)
hereof, will file with the Commission, at its sole expense, an amendment
to the Registration Statement or an amendment or supplement to the
Prospectus (in form and substance reasonably satisfactory to the
Representatives and their counsel and in compliance with the Act) so that
the Prospectus as so supplemented or amended will not contain an untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or so
that the Prospectus will comply with law, and will deliver to the
Underwriters, without charge, such number of copies thereof as they may
reasonably request.
<PAGE> 19
-18-
(e) The Company and the Guarantors will, without charge, provide (i)
to the Representatives and to their counsel a signed copy of the
registration statement originally filed and each amendment thereto (in
each case including exhibits thereto) and (ii) so long as a prospectus
relating to the Securities is required to be delivered under the Act, as
many copies of each Preliminary Prospectus and the Prospectus relating to
the Securities and any amendment or supplement thereto as each Underwriter
may reasonably request.
(f) The Company and the Guarantors, as soon as reasonably
practicable, will make generally available to holders of the Securities
and to the Underwriters consolidated earnings statements of the Company
(which need not be certified by an independent public accountant) that
satisfy the provisions of Section 11(a) of the Act and Rule 158
thereunder.
(g) The Company will apply the net proceeds from the sale of the
Shares being sold by it substantially as set forth under "Use of Proceeds"
in the Prospectus.
(h) For and during the period ending five years after the effective
date of the Registration Statement, the Company will use its best efforts
to furnish to the Representatives copies of all reports and other
communications (financial or otherwise) furnished by the Company to
holders of Exchangeable Preferred Stock and to its common securityholders
generally and, as soon as available, copies of any reports or financial
statements furnished to or filed by the Company with the Commission or
any national securities exchange on which any class of securities of the
Company may be listed.
(i) Prior to the Closing Date, the Company will furnish to the
Underwriters, as soon as they have been prepared, a copy of any unaudited
interim consolidated financial statements of the Company for any period
subsequent to the period covered by its most recent financial statements
appearing in the Registration Statement and the Prospectus.
(j) The Company, the Guarantors, its directors and officers, will
not at any time, directly or indirectly, take any action designed to cause
or result in stabilization or manipulation of the price of the shares of
Securities to facilitate the sale or resale of any of the Securities in
violation of the 1934 Act.
6. Expenses. The Company and the Guarantors agree to pay all costs and
expenses incident to the performance of its
<PAGE> 20
-19-
obligations under this Agreement, whether or not the transactions contemplated
herein are consummated or this Agreement is terminated, including all costs and
expenses incident to (i) any costs of printing the registration statement
originally filed with respect to the Securities and any amendment thereto and
the Registration Statement, any Preliminary Prospectus and the Prospectus and
any amendment or supplement thereto, (ii) the reproduction and delivery of this
Agreement, any Blue Sky Memoranda, any agreements and documents reproduced and
delivered to prospective underwriters, dealers and investors in connection with
the offering of the Securities, (iii) all arrangements relating to the delivery
to the Underwriters of copies of the foregoing documents, (iv) the fees and
disbursements of the counsel, the accountants and any other experts or advisors
retained by the Company or any of the Guarantors, (v) preparation (including
printing), issuance and delivery to the Underwriters of certificates evidencing
the Securities, (vi) the qualification of the Securities in the United States
under state securities and "Blue Sky" laws, including filing fees and
reasonable fees and disbursements of Cahill Gordon & Reindel, counsel for the
Underwriters, relating thereto, (vii) the filing fees of the Commission and the
NASD relating to the Securities, (viii) expenses of the Company and the
Guarantors in connection with any meetings with prospective investors in the
Securities and (ix) advertising relating to the offering of the Securities
approved in writing by the Company.
If the sale of the Shares provided for herein is not consummated because
any condition to the obligations of the Underwriters set forth in Section 7
hereof is not satisfied, because this Agreement is terminated pursuant to
Section 10(i) or (v) hereof or because of any failure, refusal or inability on
the part of the Company or any of the Guarantors to perform all obligations and
satisfy all conditions on their respective parts to be performed or satisfied
hereunder (other than solely by reason of a default by the Underwriters of
their obligations hereunder after all conditions hereunder have been satisfied
in accordance herewith), the Company will promptly reimburse the Underwriters
upon demand for all reasonable out-of-pocket expenses (including reasonable
fees and disbursements of Cahill Gordon & Reindel, counsel for the
Underwriters) that shall have been incurred by the Underwriters in connection
with the proposed purchase and sale of the Shares not so delivered.
7. Conditions of the Underwriter's Obligations. The obligation of the
Underwriters to purchase and pay for the Shares on the Closing Date shall, in
the sole discretion of the Underwriters, be subject to the accuracy of the
representations and
<PAGE> 21
-20-
warranties of the Company and the Guarantors contained herein as of the date
hereof and as of the Closing Date as if made on and as of the Closing Date, to
the accuracy of the statements of the Company's officers made pursuant to any
certificate delivered in accordance with the provisions hereof, to the
performance by each of the Company and the Guarantors of its covenants and
agreements hereunder to be performed prior to the Closing Date, and to the
following additional conditions:
(a) If the registration statement, as amended, with respect to the
Securities has not been declared effective as of the time of execution and
delivery hereof, the registration statement shall have been declared
effective not later than 11:00 A.M., New York City time, on the date of
this Agreement, or if any post-effective amendment to the Registration
Statement has been filed, 11:00 A.M., New York City time, on the date on
which such post-effective amendment to the Registration Statement has been
filed with the Commission, or such later time and date as shall have been
expressly consented to by the Underwriters in writing; if required, the
Prospectus and any amendments or supplements thereto shall have been
timely filed in accordance with Rule 430A and Rule 424(b); no stop order
suspending the effectiveness of the Registration Statement or any
amendment thereto shall have been issued and no proceedings for that
purpose shall have been instituted or, to the knowledge of the Company,
the Guarantors or the Underwriters, shall be contemplated or threatened by
the Commission.
(b) You shall have received on the Closing Date, an opinion, to be
limited to the laws of the State of Florida, the general corporation laws
of the State of Delaware and the federal laws of the United States of
America, of Holland & Knight, counsel for the Company and the Guarantors,
dated the Closing Date and addressed to you, as Representatives of the
several Underwriters, to the effect that:
(i) The Company is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Delaware.
To the knowledge of counsel, the Company has the requisite corporate
power to own and operate its properties and to transact its business
as described in the Registration Statement and the Prospectus (and
any amendment or supplement thereto), and is duly qualified to
transact its business and is in good standing as a foreign entity in
each jurisdiction in which the character of its business requires
such
<PAGE> 22
-21-
qualification, except where the failure so to qualify does not have
a Material Adverse Effect;
(ii) Each Guarantor which is a Florida corporation or
partnership is either (i) a corporation duly incorporated or
organized and currently existing under the laws of the State of
Florida and the status of each thereunder is active or (ii) a
partnership duly organized and currently existing under the
applicable laws of the State of Florida and the status of each such
Guarantor is active; to the knowledge of counsel, each Guarantor has
the requisite corporate or partnership power to own and operate its
properties and to transact the business in which it is engaged
except where the failure to own or operate such properties or
transact such business would not have a Material Adverse Effect;
each Guarantor that is a Delaware corporation is duly incorporated
and validly existing in good standing under the laws of the State of
Delaware; and each Guarantor is duly qualified to transact its
business and is in good standing as a foreign entity in each
jurisdiction in which the character of its business requires such
qualification, except where the failure so to qualify does not have
a Material Adverse Effect;
(iii) To the knowledge of counsel after reasonable inquiry,
the actual authorized and outstanding capital stock of the Company
as of June 30, 1996 is as set forth under the caption
"Capitalization" in the Prospectus; and the authorized capital stock
of the Company conforms in all material respects as to legal matters
to the descriptions thereof contained in the Prospectus under the
caption "Description of Capital Stock"; to the knowledge of counsel
after reasonable inquiry, all of the outstanding shares of capital
stock of or ownership interests in each of the Guarantors have been
duly authorized and validly issued, are fully paid and nonassessable
and were not issued in violation of any preemptive or similar
rights;
(iv) All the shares of capital stock of the Company
outstanding prior to the issuance of the Shares have been duly
authorized and validly issued and are fully paid and nonassessable
and, to the knowledge of counsel, were not issued in violation of
any preemptive or similar rights;
(v) The Shares and the Dividend Shares have been duly
authorized for issuance pursuant to this Agreement, in the case of
the Shares, and for issuance as dividends
<PAGE> 23
-22-
on outstanding Shares and, in accordance with the terms of the
Certificate of Designation in the case of the Dividend Shares
and, when issued and delivered to the Underwriters against payment
therefor in accordance with the terms hereof in the case of the
Shares, and in accordance with the terms of the Certificate of
Designation, in the case of the Dividend Shares, will be validly
issued, fully paid and nonassessable and, to the knowledge of
counsel, free of any preemptive or similar rights that entitle or
will entitle any person to acquire any securities of the Company
upon the issuance thereof by the Company. The Company has reserved
for issuance, and duly authorized the issuance of, the maximum
number of Dividend Shares issuable as dividends pursuant to the
terms of the Certificate of Designation.
(vi) The Certificate of Incorporation of the Company, by
virtue of the Certificate of Designation, sets forth the rights,
preferences and provisions of the Shares and the Dividend Shares.
The Certificate of Designation has been duly filed with the
Secretary of State of the State of Delaware and is effective. The
holders of the Shares are, and the holders of Dividend Shares, if
any, will be, entitled to the benefits of the provisions set forth
in the Certificate of Designation as provided therein.
(vii) If issued by the Company, the Exchange Debentures and
the In-kind Exchange Debentures will have been duly authorized and,
when executed by the Company and authenticated by the Trustee in
accordance with the provisions of the Indenture and delivered, upon
any exchange of the Shares and\or Dividend Shares, if any, in the
case of the Exchange Debentures, or as interest on outstanding
Exchange Debentures, in the case of the In-kind Exchange Debentures,
will be validly issued. The Company has authorized for issuance the
maximum aggregate principal amount of In-kind Exchange
Debentures issuable as interest on outstanding Exchange Debentures
in accordance with the provisions of to the Indenture;
(viii) If issued by the Guarantors, the Guarantees, when
endorsed on the Exchange Debentures and the In-kind Exchange
Debentures, if any, will have each been duly authorized by each of
the Guarantors and, when the Exchange Debentures and the In-kind
Exchange Debentures, if any, are executed by the Company and
authenticated by
<PAGE> 24
-23-
the Trustee in accordance with the provisions of the Indenture and
delivered upon exchange of the Shares and\or Dividend Shares, if
any, in the case of the Exchange Debentures or as interest on
outstanding Exchange Debentures in the case of the In-kind Exchange
Debentures the Guarantees will be validly issued;
(ix) The form of certificate for the Shares and the Dividend
Shares conforms to the requirements of the Delaware General
Corporation Law;
(x) The Registration Statement and all post- effective
amendments, if any, have become effective under the Act and, to the
knowledge of such counsel after reasonable inquiry, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose are pending before the
Commission; and any required filing of the Prospectus pursuant to
Rule 424(b) has been made in accordance with Rule 424(b);
(xi) The Company and the Guarantors have the requisite
corporate or partnership power and authority, as the case may be, to
enter into the Underwriting Agreement and the Underwriting Agreement
has been duly authorized, executed and delivered by the Company and
the Guarantors;
(xii) The Company and the Guarantors have the requisite
corporate or partnership power and authority, as the case may be, to
enter into the Indenture, to issue, sell and deliver the Shares and
the Dividend Shares, and to issue, execute and deliver the Exchange
Debentures and the In-kind Exchange Debentures, if any,
authenticated by the Trustee in accordance with the provisions of
the Indenture, upon the exchange of the Shares and the related
Guarantees, and the Indenture has been duly authorized, executed and
delivered by the Company and the Guarantors and qualified under the
Trust Indenture Act;
(xiii) Neither the offer, sale or delivery of the Shares or
the Dividend Shares, the execution by the Company and the Guarantors
and authentication by the Trustee in accordance with the provisions
of the Indenture and delivery of the Exchange Debentures and the
<PAGE> 25
-24-
In-kind Exchange Debentures, if any, and the related Guarantees upon
the exchange of the Shares and\or Dividend Shares as provided for
in the Certificate of Designation or as interest on the Exchange
Debentures and In-kind Exchange Debentures, if any, in the case of
the In-kind Exchange Debentures, the execution, delivery or
performance of the Underwriting Agreement, compliance by the
Company with the provisions thereof nor consummation by the Company
of the Transactions or any of the other transactions contemplated
thereby conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the certificate or
articles of incorporation or by-laws, or other organizational
documents, of the Company or any of the Guarantors or to the
knowledge of such counsel after reasonable inquiry any agreement
or document relating to the capital stock of the Company, nor will
any such action result in any violation of any law, regulation,
rule (assuming compliance with all applicable state securities and
Blue Sky laws) or to our knowledge after reasonable inquiry, any
judgment, ruling or court decree applicable to the Company, the
Guarantors or any of their respective properties;
(xiv) No consent, approval, authorization or other order of,
or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency, or
official is required on the part of the Company or the Guarantors
(except as have been obtained under the Act or such as may be
required under state securities or Blue Sky laws governing the
purchase and distribution of the Shares) for the valid issuance and
sale of the Shares to the Underwriters as contemplated by the
Underwriting Agreement and the issuance of the Dividend Shares and
the valid issuance, execution and delivery of the Exchange
Debentures and the In-kind Exchange Debentures and in each case, the
related Guarantors, upon the exchange of the Shares;
(xv) The Registration Statement and the Prospectus and any
supplements or amendments thereto (except for the financial
statements and the notes thereto and the schedules and other
financial and statistical data included therein, and the Statement
of Eligibility and Qualification (Form T-1) of the Trustee as to
which such counsel need not express any opinion) comply as to form
<PAGE> 26
-25-
in all material respects with the requirements of the Act;
(xvi) To the knowledge of such counsel after reasonable
inquiry, (A) other than as described or contemplated in the
Prospectus (or any supplement thereto), there are no legal or
governmental proceedings pending or threatened against the Company
or any of the Guarantors, or to which the Company or any of the
Guarantors, or any of their property, is subject, which are required
to be described in the Registration Statement or Prospectus (or any
amendment or supplement thereto) and (B) there are no agreements,
contracts, indentures, leases or other instruments that are required
to be described in the Registration Statement or the Prospectus (or
any amendment or supplement thereto) or to be filed as an exhibit to
the Registration Statement that are not described or filed as
required, as the case may be;
(xvii) Other than with respect to federal, state or local
broadcasting, licensing or communications law or regulatory matters,
the statements in the Registration Statement and Prospectus, insofar
as they are descriptions of contracts, agreements or other legal
documents, or refer to statements of law or legal conclusions, are
accurate and present fairly the information required to be shown;
and
(xviii) The Company is not an "investment company" or a
company "controlled by an investment company" within the meaning of
the Investment Company Act of 1940, as amended.
We have participated in the preparation of the Registration
Statement and the Prospectus. Although we have not independently
verified the accuracy or completeness of the information in the
Registration Statement and the Prospectus (other than in clause
(xvi) above), we have participated in conferences with
representatives of the Company and its general counsel and
independent accountants, at which the contents of the Registration
Statement and the Prospectus were discussed at length. Information
provided to us by such parties was not independently verified with
third parties or otherwise. Although there is no assurance that
all possible material information concerning the Company was
disclosed at such conferences, or that our familiarity with the
Company and its industry is such that we have
<PAGE> 27
-26-
necessarily recognized the materiality of the information that was
disclosed, or that we would not have discovered different or
additional information if we had conducted third-party inquiries,
no facts have come to our attention that give us reason to believe
that the Registration Statement or any post-effective amendment
thereto and the Prospectus as of their dates and as of the date
hereof contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(c) You shall have received on the Closing Date an opinion of
Anthony L. Morrison, Esq., General Counsel to the Company and the
Guarantors, dated the Closing Date and addressed to you, as
Representatives of the several Underwriters, to the effect that under the
laws of the State of New York and the federal laws of the United States of
America, as applicable:
(i) The Company and each of the Guarantors has full corporate
or partnership power and authority, and all necessary governmental
authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental regulatory
officials and bodies (except where the failure so to have full
corporate or partnership power or any such authorizations,
approvals, orders, licenses, certificates, franchises or permits,
individually or in the aggregate, would not have a Material Adverse
Effect), to own their respective properties and to conduct their
respective businesses as now being conducted, as described in the
Prospectus;
(ii) Except as disclosed in the Prospectus, all the
outstanding shares of capital stock of each of the Guarantors are
owned by the Company directly, or indirectly through one of the
other Guarantors, free and clear of any lien, adverse claim,
security interest, equity, or other encumbrance;
(iii) The Underwriting Agreement is a valid, legal and binding
agreement of the Company and the Guarantors, enforceable against the
Company and the Guarantors in accordance with its terms (it being
noted, without expressing any opinion with regard to the federal
securities laws and regulations, that the Commission has expressed
the view that indemnification against
<PAGE> 28
-27-
securities law liabilities is against public policy) and subject to
the qualification that the enforceability of the Company's and the
Guarantors' obligations hereunder may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally
and by general equitable principles;
(iv) Each document filed pursuant to the 1934 Act (other than
the financial statements and supporting schedules included therein,
as to which no opinion need be rendered) and incorporated or deemed
to be incorporated by reference in the Prospectus complied when so
filed as to form in all material respects with the 1934 Act;
(v) The Indenture is a valid and legally binding agreement of
the Company and the Guarantors, enforceable against the Company and
the Guarantors in accordance with its terms, subject to the
qualification that the enforceability of the Company's and the
Guarantor's obligations thereunder may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights
generally and by general equitable principles;
(vi) The Exchange Debentures and the In-kind Exchange
Debentures, if any, when executed by the Company and authenticated
by the Trustee in accordance with the provisions of the Indenture
and delivered, upon the exchange of the Shares and\or the Dividend
Shares, in the case of the Exchange Debentures, or as interest on
outstanding Exchange Debentures, in the case of the In-kind Exchange
Debentures, will be valid and legally binding obligations of the
Company entitled to the benefits of the Indenture and enforceable
against the Company in accordance with their terms;
(vii) If issued by the Guarantors, the Guarantees, when
endorsed on the Exchange Debentures and the In-kind Exchange
Debentures, if any, when the Exchange Debentures and the In-kind
Exchange Debentures, if any, are executed by the Company and
authenticated by the Trustee in accordance with the provisions of
the Indenture and delivered upon exchange of the Shares and\or
Dividend Shares, if any, in the case of the Exchange Debentures, or
as interest on outstanding Exchange Debentures and Exchange
Debentures, if any, in the case of the In-
<PAGE> 29
-28-
kind Exchange Debentures, in accordance with the terms of the
Indenture, will constitute valid and legally binding obligations of
the Guarantors entitled to the benefits of the Indenture and
enforceable against each Guarantor in accordance with their terms;
(viii) Each of the Company and the Subsidiaries has all
corporate or partnership power and authority, as the case may be, to
execute, deliver and perform each of the Transaction Documents to
which it is a party, to perform all of its obligations thereunder
and to consummate the transactions contemplated thereby, except
where the failure to have any such corporate or partnership power
and authority would not have a Material Adverse Effect;
(ix) Neither the Company nor any of the Guarantors is in
violation of its certificate or articles of incorporation or
by-laws, or other organizational documents, or to the knowledge of
such counsel after reasonable inquiry, is in default (and no event
has occurred which with notice or lapse of time, or both, would
constitute a default) in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or
other evidence of indebtedness, except in the case of any violation
or default which would not reasonably be expected to result in a
Material Adverse Effect;
(x) Except as disclosed in the Registration Statement and the
Prospectus, to my knowledge after reasonable inquiry, neither the
offer, sale or delivery of the Shares or the Dividend Shares, the
execution by the Company and the Guarantors and authentication by
the Trustee in accordance with the provisions of the Indenture and
delivery of the Exchange Debentures and the In-kind Exchange
Debentures, if any, and the related Guarantees upon the exchange of
the Shares and\or Dividend Shares as provided for in the Certificate
of Designation, or as interest on the Exchange Debentures and
In-kind Exchange Debentures, if any, in the case of the In-kind
Exchange Debentures, the execution, delivery or performance of the
Underwriting Agreement and the Transaction Documents, compliance by
the Company and the Guarantors (to the extent a party thereto) with
the provisions thereof nor consummation by the Company and the
Guarantors (to the extent a party thereto) of the
<PAGE> 30
-29-
transactions contemplated thereby, conflict or will conflict with
or constitute or will constitute a breach of, or a default under
the certificate or articles of incorporation or by-laws, or other
organizational documents, of the Company or any of the Guarantors
or any agreement, indenture, lease or other instrument to which the
Company or any of the Guarantors is a party or by which any of them
or any of their respective properties is bound or will result in
the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any of the Guarantors
which conflict, breach, default or lien could reasonably be
expected to have a Material Adverse Effect;
(xi) To my knowledge after reasonable inquiry, other than as
described in the Prospectus (or any supplement thereto), there are
no legal or governmental proceedings pending or threatened against
the Company or any of the Guarantors, or to which the Company or any
of the Guarantors, or any of their property, is subject, which are
required to be described in the Registration Statement or Prospectus
(or any amendment or supplement thereto) that are not so described;
(xii) There are no agreements, contracts, indentures, leases
or other instruments that are required to be described in the
Registration Statement or the Prospectus (or any amendment or
supplement thereto) that are not described or filed as required, as
the case may be;
(xiii) To my knowledge after reasonable inquiry, neither the
Company nor any of the Guarantors is in violation of any law,
ordinance, administrative or governmental rule or regulation
applicable to the Company or any of the Guarantors or of any decree
of any court or governmental agency or body having jurisdiction over
the Company or any of the Guarantors where such violation could
reasonably be expected to have a Material Adverse Effect;
(xiv) Except as described in the Prospectus, there is no
holder of any security of the Company or any other person who has
the right, contractual or otherwise, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale
of, the Shares or the right to have any capital stock or other
securities of the Company included in the Registration Statement or
the right, as a result of the filing of the Registration
<PAGE> 31
-30-
Statement, to require registration under the Act of any shares of
capital stock or other securities of the Company.
(d) You shall have received on the Closing Date an opinion of Dow,
Lohnes & Albertson, special communications counsel for the Company and the
Guarantors, dated the Closing Date and addressed to you, as
Representatives of the several Underwriters, to the effect that:
(i) Based upon a review of the FCC files, (a) Whitehead Media
of Florida, Inc., Whitehead Media of Georgia, Inc., Whitehead Media
of Ohio, Inc., S&E Networks Inc., Bradenton Broadcast Television
Company, Ltd., Roberts Broadcasting Company of Raleigh Durham, L.P.
and each subsidiary of the Company and each subsidiary of The
Christian Network, Inc. holds those broadcast licenses issued by the
FCC ("FCC Licenses") identified in such opinion as held by such
entity and (b) each of the FCC Licenses authorizes radio or
television broadcast operations by the holder thereof using the
channel or frequency assignment and serving the community of license
that is identified in such opinion for each of the FCC Licenses;
(ii) To our knowledge, based upon the review of the publicly
available records of the FCC and inquiry to officers of the Company,
except as may be disclosed in the Prospectus, there is no order,
judgment, decree, notice of apparent liability, or order of
forfeiture outstanding, and no petition, objection, notice of
apparent liability, order of forfeiture, investigation, complaint,
or other proceeding pending before the FCC against the stations
authorized by the FCC Licenses listed in such opinion (the
"Stations") or the FCC Licenses that reasonably could be expected to
result in the termination, revocation, suspension, or denial of
renewal of any of the FCC Licenses, except for rule making and other
similar proceedings generally applicable to the radio or television
broadcasting industry or substantial segments thereof;
(iii) To our knowledge based upon the review of the publicly
available files of the FCC and inquiry to officers of the Company,
other than as disclosed in the Prospectus, (a) there are no license
renewal proceedings pending for any of the FCC Licenses; and (b)
except as set forth on the FCC authorization certificates for the
<PAGE> 32
-31-
FCC Licenses or imposed by the generally applicable rules of the
FCC, none of the FCC Licenses is subject to any condition imposed
by the FCC that reasonably could be expected to have a material
adverse effect on the Company's ability to conduct its broadcast
operations as described in the Prospectus, taken as a whole;
(iv) The issuance, sale and delivery of the Shares pursuant to
the Underwriting Agreement and the execution and delivery of the
Exchange Debentures and the related Guarantees upon the exchange of
the Shares (A) do not require any consent or authorization from
the FCC, and (B) do not constitute a violation of the Communications
Act or the published rules and regulations of the FCC promulgated
thereunder;
(v) The statements in the Prospectus under the captions "Risk
Factors -- Must Carry Regulations," "-- Government Regulation," "--
Multiple Ownership Rules; Time Brokerage Agreements" and "Business
-- Federal Regulation of Broadcasting," insofar as they constitute
summaries of the Communications Act and the published rules and
regulations of the FCC promulgated thereunder, have been reviewed by
such counsel and are accurate in all material respects;
(vi) The execution, delivery and performance of the
Underwriting Agreement by the Company and the Guarantors (A) do not
require any consent or authorization from the FCC, and (B) do not
and will not violate the Communications Act and the rules and
regulations promulgated thereunder; and
(vii) There are no restrictions or limitations imposed by the
FCC on the ability of the Company to [make distributions in cash on
its shares of capital stock].
(e) The Underwriters shall have received an opinion, in form and
substance reasonably satisfactory to the Underwriters, dated the Closing
Date and addressed to the Underwriters, of Cahill Gordon & Reindel,
counsel for the Underwriters, with respect to the sufficiency of certain
corporate proceedings and other legal matters relating to this Agreement
and the Securities and such other related matters as the Representatives
may reasonably require. In rendering such opinion, Cahill Gordon &
Reindel shall have received, in form and substance satisfactory to such
counsel, and may rely upon,
<PAGE> 33
-32-
such certificates and other documents and information as they may
reasonably request to pass upon such matters.
(f) The Underwriters shall have received from Price Waterhouse LLP a
letter dated the date hereof and the Closing Date and addressed to the
Underwriters, in the form previously approved by the Representatives and
in form and substance reasonably satisfactory to the Representatives and
Cahill Gordon & Reindel, counsel for the Underwriters.
(g) The representations and warranties of the Company and the
Guarantors contained in this Agreement shall be true and correct in all
material respects on and as of the date hereof and on and as of the
Closing Date as if made on and as of such date; the statements of the
Company's officers made pursuant to any certificate delivered in
accordance with the provisions hereof shall be true and correct in all
material respects on and as of the date made and on and as of the Closing
Date; the Company and the Guarantors shall have complied in all material
respects with all agreements and satisfied all conditions on its part to
be performed or satisfied hereunder at or prior to the Closing Date; and
subsequent to the date of the most recent financial statements in the
Prospectus, there shall have been no Material Adverse Change or any
development involving a prospective Material Adverse Change.
(h) The sale of the Shares by the Company hereunder shall not be
enjoined (temporarily or permanently) on the Closing Date.
(i) Subsequent to the respective dates as of which information is
given in the Prospectus, except in each case as described in the
Prospectus, none of the Company and its Subsidiaries shall have incurred
any liabilities or obligations, direct or contingent (other than in the
ordinary course of business), that are material to the Company and its
Subsidiaries, taken as a whole, or entered into any transactions not in
the ordinary course of business that are material to the Company and its
Subsidiaries, taken as a whole, and there shall not have been any adverse
change in the capital stock or long-term indebtedness of the Company and
its Subsidiaries that is material to the Company and its Subsidiaries,
taken as a whole.
(j) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the conduct of the
business and operations of each
<PAGE> 34
-33-
of the Company and its Subsidiaries shall not have been interfered with
by strike, fire, flood, hurricane, accident or other calamity (whether or
not insured) or by any court or governmental action, order or decree,
and, except as otherwise stated therein, the properties of each of the
Company and its Subsidiaries shall not have sustained any loss or damage
(whether or not insured) as a result of any such occurrence, except any
such interference, loss or damage that would not have a Material Adverse
Effect.
(k) The Underwriters shall have received a certificate, in form and
substance reasonably satisfactory to the Underwriters and Cahill Gordon &
Reindel, counsel for the Underwriters, dated the Closing Date and
addressed to the Underwriters, of the Company, executed by its president
and its chief financial officer, to the effect that:
(i) The representations and warranties of the Company and the
Guarantors in this Agreement are true and correct in all material
respects as if made on and as of the Closing Date and the Company
has performed in all material respects all covenants and agreements
and satisfied all conditions to be performed or satisfied at or
prior to the Closing Date;
(ii) No stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued,
and, to the best of such officers' knowledge, no proceedings for
those purposes have been instituted or threatened or are
contemplated by the Commission;
(iii) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, the Company and its Subsidiaries have not sustained any
material loss or interference with their respective businesses or
properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any labor dispute or
any legal or governmental proceeding and there has not been any
material change in the capital stock, long-term debt, obligations
under capital leases or short-term borrowings or other agreements or
instruments relating to the ownership of the property of the Company
and its Subsidiaries or any Material Adverse Change, or any
development involving a prospective Material Adverse Change, except
in each case as described in or contemplated by the Prospectus; and
<PAGE> 35
-34-
(iv) To the best of such officers' knowledge and belief, the
sale of the Shares by the Company has not been enjoined (temporarily
or permanently).
On or before the Closing Date, the Underwriters and Cahill Gordon &
Reindel, counsel for the Underwriters, shall have received such further
documents, opinions, certificates and schedules or instruments relating to the
business, corporate, legal and financial affairs of the Company and each of its
Subsidiaries as they shall have heretofore reasonably requested.
All such opinions, certificates, letters, schedules, documents or
instruments delivered pursuant to this Agreement will comply with the
provisions hereof only if they are reasonably satisfactory in all respects to
the Underwriters and Cahill Gordon & Reindel, counsel for the Underwriters.
The Company and each of its Subsidiaries shall furnish to the Underwriters such
conformed copies of such opinions, certificates, letters, schedules, documents
and instruments in such quantities as the Underwriters shall reasonably
request.
8. Indemnification and Contribution.
(a) The Company and the Guarantors, jointly and severally, agree to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or Section
20 of the 1934 Act, against any losses, claims, damages or liabilities to which
any Underwriter or such controlling person may become subject under the Act, the
1934 Act or otherwise, insofar as any such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any material
fact contained in (A) the Registration Statement or any amendment thereto
or any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto or (B) any application or other document, or any
amendment or supplement thereto, executed by the Company or the Guarantors
or based upon written information furnished by or on behalf of the Company
or the Guarantors filed in any jurisdiction to qualify the Securities
under the securities or "Blue Sky" laws thereof or filed with the
Commission or any securities association or securities exchange (each an
"Application"); or
(ii) the omission or alleged omission to state in such Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or
<PAGE> 36
-35-
supplement thereto, or any Application, a material fact required to be
stated therein or necessary to make the statements therein not
misleading,
and will reimburse, as incurred, each Underwriter and each such controlling
person for any reasonable legal or other expenses incurred by any such
Underwriter or any such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action; provided that the Company and
the Guarantors will not be liable in any such case to the extent, but only to
the extent, that any such loss, claim, damage, or liability arises out of or is
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement or any amendment thereto,
any Preliminary Prospectus or the Prospectus or any amendments or supplements
thereto, or any Application in reliance upon and in conformity with written
information concerning the Underwriters furnished to the Company and the
Guarantors by the Underwriters specifically for use therein; provided, further,
that the Company and the Guarantors will not be liable to any Underwriter if
such untrue statement or omission or alleged untrue statement or omission was
contained or made in any Preliminary Prospectus and completely corrected in the
Prospectus and any such loss, liability, claim, damage or expense suffered or
incurred by any Underwriter resulted from any action, claim or suit by any
person who purchased Shares that are the subject thereof from any Underwriter
and such Underwriter failed to deliver or provide a copy of the Prospectus
relating to the Securities to such person with or prior to the confirmation of
the sale of such Shares sold to such person in any case where delivery is
required by the Act, unless such failure to deliver or provide a copy of the
Prospectus relating to the Securities was a result of noncompliance by the
Company or the Guarantors with Section 5(e)(ii) of this Agreement. This
indemnity agreement will be in addition to any liability that the Company or
the Guarantors may otherwise have to the indemnified parties. The Company and
the Guarantors shall not be liable under this Section 8 for any settlement of
any claim or action effected without their prior written consent, which shall
not be unreasonably withheld.
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company and the Guarantors, their respective directors and officers who signed
the Registration Statement and each person, if any, who controls the Company and
the Guarantors within the meaning of Section 15 of the Act or Section 20 of the
1934 Act against any losses, claims, damages or liabilities to which the Company
or any Guarantor, or any such director, officer or controlling person may become
subject under the Act, the 1934
<PAGE> 37
-36-
Act, or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement or any amendment thereto, any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or any Application or
(ii) the omission or the alleged omission to state therein a material fact
required to be stated in the Registration Statement or any amendment thereto,
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto or any Application, or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information concerning
the Underwriters furnished to the Company by any Underwriter specifically for
use therein; and, subject to the limitation set forth immediately preceding
this clause, will reimburse, as incurred, any reasonable legal or other
expenses incurred by the Company or any Guarantor or any such director, officer
or controlling person in connection with investigating or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action in respect thereof. This indemnity agreement will
be in addition to any liability that the Underwriters may otherwise have to the
indemnified parties. No Underwriter shall be liable under this Section 8 for
any settlement of any claim or action effected without its consent, which shall
not be unreasonably withheld. The Company and the Guarantors shall not,
without the prior written consent of the Underwriters, effect any settlement or
compromise of any pending or threatened proceeding in respect of which any
Underwriter or any controlling person is or could have been a party, or
indemnity could have been sought hereunder by any Underwriter or such
controlling person, unless such settlement (A) includes an unconditional
written release of the Underwriters and any such controlling person, in form
and substance reasonably satisfactory to the Underwriters and such controlling
person, from all liability on claims that are the subject matter of such
proceeding and (B) does not include any statement as to an admission of fault,
culpability or failure to act by or on behalf of any Underwriter or any
controlling person.
<PAGE> 38
-37-
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action for which such indemnified party is
entitled to indemnification under this Section 8, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party under
this Section 8, notify the indemnifying party of the commencement thereof in
writing, but the omission so to notify the indemnifying party will not relieve
it from any liability that it may have to any indemnified party otherwise than
under this Section 8. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party; provided that if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party or (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after receipt by the indemnifying party of notice of the institution of
such action, then, in each such case, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
or parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and approval by such indemnified
party of counsel appointed to defend such action, the indemnifying party will
not be liable to such indemnified party under this Section 8 for any legal or
other expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense thereof,
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the immediately preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be
<PAGE> 39
-38-
liable for the expenses of more than one separate counsel (in addition to local
counsel) in any one action or separate but substantially similar actions in the
same jurisdiction arising out of the same general allegations or circumstances,
designated by BT Securities Corporation in the case of paragraph (a) of this
Section 8 or the Company, in the case of paragraph (b) of this Section 8,
representing the indemnified parties under such paragraph (a) or paragraph (b),
as the case may be, who are parties to such action or actions) or (ii) the
indemnifying party has authorized in writing the employment of counsel for the
indemnified party at the expense of the indemnifying party. After such notice
from the indemnifying party to such indemnified party, the indemnifying party
will not be liable for the costs and expenses of any settlement of such action
effected by such indemnified party without the consent of the indemnifying
party, which consent shall not be unreasonably withheld.
(d) In circumstances in which the indemnity agreement provided for in the
preceding paragraphs of this Section 8 is for any reason unavailable (including,
but not limited to the failure to give any notice required by paragraph (c) of
Section 8) to, or insufficient to hold harmless, an indemnified party in respect
of any losses, claims, damages or liabilities (or actions in respect thereof),
each indemnifying party, in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect (i) the
relative benefits received by the indemnifying party or parties on the one hand
and the indemnified party on the other from the offering of the Securities or
(ii) if the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by the Company and
the Guarantors on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total proceeds from the offering (net of
underwriter's discounts and commissions but before deducting expenses) received
by the Company bear to the total underwriting discounts and commissions received
by the Underwriters, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the
<PAGE> 40
-39-
Company or the Guarantors on the one hand, or such Underwriter on the other,
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission or alleged statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Company, the Guarantors and the Underwriters agree that it
would not be equitable if the amount of such contribution were determined by
pro rata or per capita allocation (even if the Company and the Guarantors on
the one hand and the Underwriters on the other hand were treated as one entity
for such purpose) or by any other method of allocation that does not take into
account the equitable considerations referred to in the first sentence of this
paragraph (d). Notwithstanding any other provision of this paragraph (d), no
Underwriter shall be obligated to make contributions hereunder that in the
aggregate exceed the total underwriting discounts and commissions received by
the Underwriters under this Agreement, less the aggregate amount of any damages
that such Underwriter has otherwise paid or been required to pay by reason of
the untrue or alleged untrue statements or the omissions or alleged omissions
to state a material fact, and no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any,
who controls an Underwriter within the meaning of Section 15 of the Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
Underwriter, and each director and officer of the Company and any Guarantor who
signed the Registration Statement and each person, if any, who controls the
Company or any Guarantor within the meaning of Section 15 of the Act or Section
20 of the 1934 Act, shall have the same rights to contribution as the Company
and the Guarantors.
(e) (i) The Company and the Guarantors, jointly and severally, will
indemnify and hold harmless Goldman, Sachs & Co., in its capacity as QIU,
against any losses, claims, damages or liabilities, joint or several, to which
the QIU may become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the QIU for any legal or other expenses reasonably incurred
by the QIU in connection with investigating or defending any such action or
claim as such expenses are incurred.
<PAGE> 41
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(ii) Promptly after receipt by the QIU under subsection (i) above of
notice of the commencement of any action, the QIU shall, if a claim in respect
thereof is to be made against the Company or any Guarantor under such
subsection, notify the Company in writing of the commencement thereof; but the
omission so to notify the Company shall not relieve it from any liability which
it may have to the QIU otherwise than under such subsection. In case any such
action shall be brought against the QIU and it shall notify the Company of the
commencement thereof, the Company shall be entitled to participate therein and,
to the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
the QIU (who shall not, except with the consent of the QIU, be counsel to the
Company), and, after notice from the indemnifying party to the QIU of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to the QIU under such subsection for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by the QIU, in
connection with the defense thereof other than reasonable costs of
investigation. The Company shall not, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the QIU is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (1) includes an unconditional
release of the QIU from all liability arising out of such action or claim and
(2) does not include a statement as to or an admission of fault, culpability or
a failure to act, by or on behalf of QIU.
(iii) If the indemnification provided for in this Section 8(e) is
unavailable to or insufficient to hold harmless Goldman, Sachs & Co., in its
capacity as QIU, under subsection (i) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein, then
the Company and each Guarantor shall contribute to the amount paid or payable by
the QIU as a result of such losses, claims, damages or liabilities (or actions
in respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Guarantors on the one hand and the QIU
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the QIU failed to give the notice required under subsection (ii)
above, then the Company and each Guarantor shall contribute to such amount paid
or payable by the QIU in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and the
<PAGE> 42
-41-
Guarantors on the one hand and the QIU on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company and
the Guarantors on the one hand and the QIU on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company, as set forth in the table on the
cover page of the Prospectus, bear to the fee payable to the QIU pursuant to
Section 3 hereof. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and the Guarantors on the one
hand or the QIU on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Guarantors and the QIU agree that it would not be
just and equitable if contributions pursuant to this subsection (iii) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
subsection (iii). The amount paid or payable by the QIU as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this subsection (iii) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(iv) The obligations of the Company and the Guarantors under this Section
8(e) shall be in addition to any liability which the Company and the Guarantors
may otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls the QIU within the meaning of the Act.
9. Survival Clause. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, the
Guarantors, their officers and the Underwriters set forth in this Agreement or
made by or on behalf of them, respectively, pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any investigation made by or
on behalf of the Company, the Guarantors or any of their officers or directors,
the Underwriters or any controlling person referred to in Section 8 hereof and
(ii) delivery of and payment for the Shares. The respective agreements,
covenants, indemnities and other statements set forth in Sections 6, 8 and 14
hereof shall
<PAGE> 43
-42-
remain in full force and effect, regardless of any termination or cancellation
of this Agreement.
10. Termination.
(a) This Agreement may be terminated in the sole discretion of the
Underwriters by notice to the Company, given prior to the Closing Date, in the
event that the Company or the Guarantors shall have failed, refused or been
unable to perform all of their respective obligations and satisfy all of the
conditions on their part to be performed or satisfied hereunder at or prior
thereto or, if at or prior to the Closing Date:
(i) the Company or any Guarantor shall have sustained any loss or
interference with respect to its businesses or properties from fire,
flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any strike, labor dispute, slow down or work stoppage
or any legal or governmental proceeding, which loss or interference, in
the sole judgment of the Underwriters, has had or has a Material Adverse
Effect, or there shall have been, in the sole judgment of the
Underwriters, any event or development that, individually or in the
aggregate, has or could be reasonably likely to have a Material Adverse
Effect (including without limitation a change in control of the Company),
except in each case as described in the Prospectus (exclusive of any
amendment or supplement thereto);
(ii) trading in securities of the Company or in securities generally
on the New York Stock Exchange, American Stock Exchange or the Nasdaq
National Market shall have been suspended or minimum or maximum prices
shall have been established on such exchange or market;
(iii) a banking moratorium shall have been declared by New York or
United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international
calamity or emergency or (C) any material change in the financial markets
of the United States which, in the case of (A), (B) or (C) above, in the
judgment of the Underwriters, makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Securities as
contemplated by the Registration Statement, as amended as of the date
hereof; or
<PAGE> 44
-43-
(v) any securities of the Company shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 10 shall be
without liability of any party to any other party except as provided in Section
9 hereof.
11. Information Supplied by the Underwriters. The statements set forth in
the last paragraph on the front cover page of the Prospectus relating to the
Securities and the first and the third paragraphs under the heading
"Underwriting" in the Prospectus relating to the Securities (to the extent such
statements relate to the Underwriters) constitute the only information furnished
by the Underwriters to the Company for the purposes of Sections 2(b), 8(a) and
8(b) hereof. Each Underwriter confirms that such statements, to the extent such
statements relate to each such Underwriter, are correct in all material
respects.
12. Notices. All communications hereunder shall be in writing and, if
sent to the Underwriters, shall be mailed or delivered or telecopied and
confirmed in writing to the Underwriters in care of BT Securities Corporation,
One Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006,
Attention: Corporate Finance Department, and if sent to the Company, shall be
mailed, delivered or telegraphed and confirmed in writing to Paxson
Communications Corporation at 601 Clearwater Park Road, West Palm Beach, Florida
33401, Attention: Anthony L. Morrison, Esq.
13. Successors. This Agreement shall inure to the benefit of and be
binding upon the Underwriters, the Company, and the Guarantors and their
respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained. This Agreement and all
conditions and provisions hereof are intended to be and are for the sole and
exclusive benefit of such persons and for the benefit of no other person except
that (i) the indemnities of the Company and the Guarantors contained in Section
8 of this Agreement shall also be for the benefit of any person or persons who
control the Underwriters or the QIU within the meaning of Section 15 of the Act
or Section 20 of the 1934 Act and (ii) the indemnities of the Underwriters
contained in Section 8 of this Agreement shall also be for the benefit of the
directors of the Company and the Guarantors and their respective officers who
have signed the Registration Statement, and any person or persons
<PAGE> 45
-44-
who control the Company or any Guarantor within the meaning of Section 15 of
the Act or Section 20 of the 1934 Act. No purchaser of Shares from the
Underwriters will be deemed a successor because of such purchase.
14. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT,
AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
ANY PROVISIONS RELATING TO CONFLICTS OF LAW.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16. Joint and Several Obligations. All of the Obligations of the Company
and the Guarantors hereunder shall be joint and several obligations of each of
them.
<PAGE> 46
-45-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
PAXSON COMMUNICATIONS CORPORATION
(a Delaware corporation)
By:
------------------------------------
Name:
Title:
PAXSON COMMUNICATIONS TELEVISION, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF FLORIDA,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS LP, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS MANAGEMENT
COMPANY
(a Florida corporation)
PAXSON COMMUNICATIONS MARKETING, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS NETWORKS, INC.
(a Florida corporation)
PAXSON OUTDOOR, INC.
(a Florida corporation)
PAXSON NETWORKS, INC.
(a Florida corporation)
EXCEL MARKETING ENTERPRISES, INC.
(a Florida corporation)
INFOMALL CABLE NETWORK, INC.
(a Delaware corporation)
<PAGE> 47
-46-
INFOMALL TV NETWORK, INC.
(a Delaware corporation)
INFOMALL LOS ANGELES, INC.
(a Florida corporation)
PAX JAX INC.
(a Florida corporation)
PAXSON SPORTS VENTURES COMPANY
(a Florida corporation)
PCC DIRECT, INC.
(a Florida corporation)
PAXSON/R&R NETWORK, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF AKRON-23,
INC.
(a Florida corporation)
PAXSON AKRON LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF ALBANY-55
INC.
(a Florida corporation)
PAXSON ALBANY LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF ATLANTA-14,
INC.
(a Florida corporation)
PAXSON ATLANTA LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF BATTLE CREEK-43,
INC.
(a Florida corporation)
PAXSON COMMUNICATION OF
BIRMINGHAM-44, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF BOSTON-46,
<PAGE> 48
-47-
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF BOSTON-60,
INC.
(a Florida corporation)
PAXSON BOSTON LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF CLEVELAND-67,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF COOKEVILLE,
INC.
(a Florida corporation)
PAXSON COOKEVILLE LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF DALLAS-68,
INC.
(a Florida corporation)
PAXSON DALLAS LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF DAYTON-26,
INC.
(a Florida corporation)
PAXSON DAYTON LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF DENVER-59,
INC.
(a Florida corporation)
PAXSON DENVER LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF FT.
PIERCE-34, INC.
(a Florida corporation)
<PAGE> 49
-48-
PAXSON COMMUNICATIONS OF
GREENSBORO-16, INC.
(a Florida corporation)
PAXSON GREENSBORO LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF HOUSTON-49,
INC.
(a Florida corporation)
PAXSON HOUSTON LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF LITTLE
ROCK-42, INC.
(a Florida corporation)
PAXSON LITTLE ROCK LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
LOS ANGELES-30, INC.
(a Florida corporation)
PAXSON LOS ANGELES LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS L.P.T.V., INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF MIAMI-35,
INC.
(a Florida corporation)
PAXSON SPORTS OF MIAMI, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF MILWAUKEE-55,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
MINNEAPOLIS-41, INC.
(a Florida corporation)
PAXSON MINNEAPOLIS LICENSE, INC.
(a Florida corporation)
<PAGE> 50
-49-
PAXSON COMMUNICATIONS OF NEW
LONDON-26, INC.
(a Florida corporation)
PAXSON NEW LONDON LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF NEW YORK-43,
INC.
(a Florida corporation)
PAXSON NEW YORK LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF OKLAHOMA
CITY-62, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF ORLANDO-56,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF PHOENIX-51
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
PHILADELPHIA-61, INC.
(a Florida corporation)
PAXSON PHILADELPHIA LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF PHOENIX-13,
INC.
(a Florida corporation)
PAXSON PHOENIX LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
PROVIDENCE-69, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF RALEIGH
DURHAM-47, INC.
(a Florida corporation)
<PAGE> 51
-50-
PAXSON COMMUNICATIONS OF ST. LOUIS,
INC.
(a Florida corporation)
PAXSON ST. LOUIS LICENSE-13, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
SACRAMENTO-29, INC.
(a Florida corporation)
PAXSON SACRAMENTO LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF SALT LAKE
CITY-16, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF SAN JOSE-65,
INC.
(a Florida corporation)
PAXSON SAN JOSE LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF SAN JUAN,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF SEATTLE-24,
INC.
(a Florida corporation)
PAXSON SEATTLE LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
TALLAHASSEE, INC.
(a Florida corporation)
PAXSON TALLAHASSEE LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF TAMPA-66,
INC.
(a Florida corporation)
<PAGE> 52
-51-
PAXSON COMMUNICATIONS OF
TULSA-44, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
WASHINGTON-60, INC.
(a Florida corporation)
PAXSON WASHINGTON LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF WEST PALM
BEACH-25, INC.
(a Florida corporation)
PAXSON WEST PALM BEACH LICENSE, INC.
(a Florida corporation)
By:
------------------------------------
Name:
Title:
PAXSON BROADCASTING OF JACKSONVILLE,
LIMITED PARTNERSHIP
(a Florida partnership)
PAXSON JACKSONVILLE LICENSE
LIMITED PARTNERSHIP
(a Florida partnership)
PAXSON BROADCASTING OF MIAMI,
LIMITED PARTNERSHIP
(a Florida partnership)
PAXSON MIAMI LICENSE LIMITED
PARTNERSHIP
(a Florida partnership)
PAXSON BROADCASTING OF ORLANDO,
LIMITED PARTNERSHIP
(a Florida partnership)
PAXSON ORLANDO LICENSE LIMITED
PARTNERSHIP
<PAGE> 53
-52-
(a Florida partnership)
PAXSON BROADCASTING OF TAMPA,
LIMITED PARTNERSHIP
(a Florida partnership)
<PAGE> 54
-53-
PAXSON TAMPA LICENSE LIMITED
PARTNERSHIP
(a Florida partnership)
By: Paxson Communications of Florida,
Inc., their general partner
By: ___________________________________
Name:
Title:
BT SECURITIES CORPORATION
By: ___________________________________
Name:
Title:
GOLDMAN, SACHS & CO.
By: ___________________________________
Name:
Title:
<PAGE> 55
-54-
Schedule I
<TABLE>
<CAPTION>
State or Other
Jurisdiction of
Incorporation/
Name Formation
- ---- ---------------
<S> <C>
PAXSON COMMUNICATIONS OF FLORIDA, INC. ..................... Florida
PAXSON COMMUNICATIONS LP, INC. ............................ Florida
PAXSON COMMUNICATIONS MANAGEMENT COMPANY ................... Florida
PAXSON COMMUNICATIONS MARKETING, INC. ...................... Florida
PAXSON COMMUNICATIONS NETWORKS, INC. ....................... Florida
EXCEL MARKETING ENTERPRISES, INC. .......................... Florida
PAXSON OUTDOOR, INC. ....................................... Florida
PAXSON NETWORKS, INC. ...................................... Florida
PAXSON COMMUNICATIONS TELEVISION, INC. ..................... Florida
PAXSON BROADCASTING OF JACKSONVILLE, LIMITED PARTNERSHIP ... Florida
PAXSON BROADCASTING OF MIAMI, LIMITED PARTNERSHIP .......... Florida
PAXSON BROADCASTING OF ORLANDO, LIMITED PARTNERSHIP ........ Florida
PAXSON BROADCASTING OF TAMPA, LIMITED PARTNERSHIP .......... Florida
PAXSON TAMPA LICENSE LIMITED PARTNERSHIP ................... Florida
PAXSON JACKSONVILLE LICENSE LIMITED PARTNERSHIP ............ Florida
PAXSON MIAMI LICENSE LIMITED PARTNERSHIP ................... Florida
PAXSON ORLANDO LICENSE LIMITED PARTNERSHIP ................. Florida
PAXSON COMMUNICATIONS OF ATLANTA-14, INC. .................. Florida
PAXSON ATLANTA LICENSE, INC. ............................... Florida
PAXSON COMMUNICATIONS OF BOSTON-60, INC. ................... Florida
PAXSON BOSTON LICENSE, INC. ................................ Florida
PAXSON COMMUNICATIONS OF DALLAS-68, INC. ................... Florida
PAXSON DALLAS LICENSE, INC. ................................ Florida
PAXSON COMMUNICATIONS OF NEW LONDON-26, INC. ............... Florida
PAXSON NEW LONDON LICENSE, INC. ............................ Florida
PAXSON COMMUNICATIONS OF PHILADELPHIA-61, INC. ............. Florida
PAXSON PHILADELPHIA LICENSE, INC. .......................... Florida
PAXSON COMMUNICATIONS OF MIAMI-35, INC. .................... Florida
PAXSON COMMUNICATIONS OF SAN JOSE-65, INC. ................. Florida
PAXSON SAN JOSE LICENSE, INC. .............................. Florida
PAXSON COMMUNICATIONS OF TAMPA-66, INC. .................... Florida
PAXSON COMMUNICATIONS OF WEST PALM BEACH-25, INC. .......... Florida
PAXSON WEST PALM BEACH LICENSE, INC. ....................... Florida
PAXSON COMMUNICATIONS OF LOS ANGELES-30, INC. .............. Florida
PAXSON LOS ANGELES LICENSE, INC. ........................... Florida
PAXSON COMMUNICATIONS OF MINNEAPOLIS-41, INC. .............. Florida
PAXSON COMMUNICATIONS OF ST. LOUIS-13, INC. ................ Florida
PAXSON MINNEAPOLIS LICENSE, INC. ........................... Florida
PAXSON COMMUNICATIONS OF COOKEVILLE, INC. .................. Florida
PAXSON COOKEVILLE LICENSE, INC. ............................ Florida
PAXSON COMMUNICATIONS OF FT. PIERCE-34, INC. ............... Florida
PAXSON COMMUNICATIONS OF ORLANDO-56, INC. .................. Florida
PAXSON COMMUNICATIONS OF HOUSTON-49, INC. .................. Florida
PAXSON HOUSTON LICENSE, INC. ............................... Florida
THE INFOMALL TV NETWORK, INC. .............................. Delaware
PAXSON ST. LOUIS LICENSE, INC. ............................. Florida
</TABLE>
<PAGE> 56
-55-
<TABLE>
<S> <C>
THE INFOMALL CABLE NETWORK, INC. .............................. Delaware
PAXSON COMMUNICATIONS OF CLEVELAND-67, INC. ................... Florida
PAXSON COMMUNICATIONS OF WASHINGTON-60, INC. .................. Florida
PAXSON WASHINGTON LICENSE, INC. ............................... Florida
PAXSON COMMUNICATIONS OF PHOENIX-13, INC. ..................... Florida
PAXSON PHOENIX LICENSE, INC. .................................. Florida
INFOMALL LOS ANGELES, INC. .................................... Florida
PAXSON COMMUNICATIONS OF MILWAUKEE-55, INC. ................... Florida
PAXSON COMMUNICATIONS OF DENVER-59, INC. ...................... Florida
PAXSON COMMUNICATIONS OF NEW YORK-43, INC. .................... Florida
PAXSON NEW YORK LICENSE, INC. ................................. Florida
PAXSON COMMUNICATIONS OF AKRON-23, INC. ....................... Florida
PAXSON AKRON LICENSE, INC. .................................... Florida
PAXSON COMMUNICATIONS OF DAYTON-26, INC. ...................... Florida
PAXSON COMMUNICATIONS OF BATTLE CREEK-43, INC. ................ Florida
PAXSON COMMUNICATIONS OF ALBANY-55, INC. ...................... Florida
</TABLE>
<PAGE> 57
-56-
Schedule II
<TABLE>
<CAPTION>
Underwriter Number of Shares
- ----------- ----------------
<S> <C>
BT Securities Corporation
Goldman, Sachs & Co.
=======
Total 150,000
</TABLE>
<PAGE> 1
EXHIBIT 3.1
<PAGE> 2
EXHIBIT 3.1
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF %
CUMULATIVE EXCHANGEABLE PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
- -------------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
- -------------------------------------------------------------------------------
Paxson Communications Corporation (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
board of directors of the Corporation (the "Board of Directors") by its
Certificate of Incorporation, as amended (hereinafter referred to as the
"Certificate of Incorporation"), and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said Board of
Directors, by unanimous written consent dated , 1996 duly approved
and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, the Board of Directors does
hereby create, authorize and provide for the issuance of % Cumulative
Exchangeable Preferred Stock, par value $.001 per share, with a stated
value of $1,000.00 per share, consisting of [ ] shares, having the
designations, preferences, relative, participating, optional and other
special rights and the qualifications, limitations and restrictions thereof
that are set forth in the Certificate of Incorporation and in this
Resolution as follows:
(a) Designation. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Corporation a class of Preferred Stock
designated as the " % Cumulative Exchangeable Preferred Stock". The number
of shares constituting such class shall be [ ] and are referred to as the
"Exchangeable Preferred Stock." 150,000 shares of Exchangeable Preferred Stock
shall be initially issued with the remaining [ ] shares reserved for
issuance in accordance with paragraph (c)(i) hereof. The liquidation preference
of the Exchangeable Preferred Stock shall be $1,000.00 per share.
<PAGE> 3
(b) Rank. The Exchangeable Preferred Stock shall, with respect to
dividends and distributions upon liquidation, winding-up and dissolution of the
Corporation, rank (i) senior to all classes of Common Stock of the Corporation
and to each other class of Capital Stock of the Corporation or series of
Preferred Stock of the Corporation hereafter created the terms of which do not
expressly provide that it ranks senior to, or on a parity with, the Exchangeable
Preferred Stock as to dividends and distributions upon liquidation, winding-up
and dissolution of the Corporation (collectively referred to, together with all
classes of Common Stock of the Corporation, as "Junior Securities"); (ii) on a
parity with any class of Capital Stock of the Corporation or series of Preferred
Stock of the Corporation hereafter created the terms of which expressly provide
that such class or series will rank on a parity with the Exchangeable Preferred
Stock as to dividends and distributions upon liquidation, winding-up and
dissolution (collectively referred to as "Parity Securities"); provided that any
such Parity Securities not issued in accordance with the requirements of
paragraph (f)(ii)(A) hereof shall be deemed to be Junior Securities and not
Parity Securities; and (iii) junior to the Existing Preferred Stock and to each
other class of Capital Stock of the Corporation or series of Preferred Stock of
the Corporation hereafter created the terms of which expressly provide that such
class or series will rank senior to the Exchangeable Preferred Stock as to
dividends and distributions upon liquidation, winding-up and dissolution of the
Company (collectively referred to as "Senior Securities"); provided that any
such Senior Securities that were not approved by the Holders in accordance with
paragraph (f)(ii)(B) hereof shall be deemed to be Junior Securities and not
Senior Securities.
(c) Dividends.
(i) Beginning on the Issue Date, the Holders of the outstanding
shares of Exchangeable Preferred Stock shall be entitled to receive, when,
as and if declared by the Board of Directors, out of funds legally
available therefor, distributions in the form of cash dividends on each
share of Exchangeable Preferred Stock, at a rate per annum equal to [ ]%
of the liquidation preference per share of the Exchangeable Preferred
Stock, payable semi-annually. All dividends shall be cumulative, whether
or not earned or declared, on a daily basis from the date of issuance of
the Exchangeable Preferred Stock and shall be payable semi-annually in
arrears on each Dividend Payment Date, commencing April 30, 1997. Dividends
may be paid, at the Corporation's option, on any Dividend Payment Date
occurring on or prior to October 31, 2002 either in cash or by the
2
<PAGE> 4
issuance of additional shares of Exchangeable Preferred Stock (including
fractional shares) having an aggregate liquidation preference equal to the
amount of such dividends. In the event that on or prior to October 31,
2002 dividends are declared and paid through the issuance of additional
shares of Exchangeable Preferred Stock, as provided in the previous
sentence, such dividends shall be deemed paid in full and shall not
accumulate. Each dividend shall be payable to the Holders of record as
they appear on the stock books of the Corporation on the Dividend Record
Date immediately preceding the related Dividend Payment Date. Dividends
shall cease to accumulate in respect of the Exchangeable Preferred Stock on
the Exchange Date or on the date of their earlier redemption unless the
Corporation shall have failed to issue the appropriate aggregate principal
amount of Exchange Debentures in respect of the Exchangeable Preferred
Stock on such Exchange Date or shall have failed to pay the relevant
redemption price on the date fixed for redemption.
(ii) All dividends paid with respect to shares of the Exchangeable
Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to the
Holders entitled thereto.
(iii) For dividends payable after October 31, 2002, nothing herein
contained shall in any way or under any circumstances be construed or
deemed to require the Board of Directors to declare, or the Corporation to
pay or set apart for payment, any dividends on shares of the Exchangeable
Preferred Stock at any time.
(iv) Dividends accruing after October 31, 2002 on the Exchangeable
Preferred Stock for any past Dividend Period and dividends in connection
with any optional redemption pursuant to paragraph (e)(i) may be declared
and paid at any time, without reference to any regular Dividend Payment
Date, to Holders of record on such date, not more than forty-five (45) days
prior to the payment thereof, as may be fixed by the Board of Directors of
the Corporation.
(v) Dividends payable on the Exchangeable Preferred Stock for any
period less than a year shall be computed on the basis of a 360-day year of
twelve 30-day months and the actual number of days elapsed in the period
for which payable.
3
<PAGE> 5
(d) Liquidation Preference.
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the Holders of
shares of Exchangeable Preferred Stock then outstanding shall be entitled
to be paid out of the assets of the Corporation available for distribution
to its stockholders an amount in cash equal to the liquidation preference
for each share outstanding, plus, without duplication, an amount in cash
equal to accumulated and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding up (including an amount equal to a
prorated dividend for the period from the last Dividend Payment Date to the
date fixed for liquidation, dissolution or winding up) before any
distribution shall be made or any assets distributed to the holders of any
of the Junior Securities including, without limitation, Common Stock of the
Corporation. Except as provided in the preceding sentence, Holders of
Exchangeable Preferred Stock shall not be entitled to any distribution in
the event of any liquidation, dissolution or winding up of the affairs of
the Corporation. If the assets of the Corporation are not sufficient to
pay in full the liquidation payments payable to the Holders of outstanding
shares of the Exchangeable Preferred Stock and all Parity Securities, then
the holders of all such shares shall share equally and ratably in such
distribution of assets first in proportion to the full liquidation
preference to which each is entitled until such preferences are paid in
full, and then in proportion to their respective amounts of accumulated but
unpaid dividends.
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets
of the Corporation nor the consolidation or merger of the Corporation with
or into one or more entities shall be deemed to be a liquidation,
dissolution or winding up of the affairs of the Corporation.
(e) Redemption.
(i) Optional Redemption. (A) The Corporation may, at the option of
the Board of Directors, redeem at any time on or after October 31, 2001, in
whole or in part, in the manner provided for in paragraph (e)(iii) hereof,
any or all of the shares of the Exchangeable Preferred Stock, at the
redemption prices (expressed as a percentage of the
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<PAGE> 6
liquidation preference) set forth below plus, without duplication, an
amount in cash equal to all accumulated and unpaid dividends per share
(including an amount in cash equal to a prorated dividend for the period
from the Dividend Payment Date immediately prior to the Redemption Date to
the Redemption Date) (the "Optional Redemption Price") if redeemed during
the 12-month period beginning October 31 of each of the years set forth
below:
2001 ............................................ %
2002 ............................................ %
2003 ............................................ %
2004 and thereafter.............................. 100.00%
; provided that no redemption pursuant to this paragraph (e)(i)(A) shall
be authorized or made unless prior thereto full accumulated and unpaid
dividends are declared and paid in full, or declared and a sum in cash set
apart sufficient for such payment, on the Exchangeable Preferred Stock for
all Dividend Periods terminating on or prior to the Redemption Date.
(B) In addition to the foregoing paragraph (e)(i)(A), on or prior to
October 31, 1999, the Corporation may, at its option, use the Net Proceeds
of one or more Public Equity Offerings or Major Asset Sales to redeem for
cash, in the manner provided for in paragraph (e)(iii) hereof, the
Exchangeable Preferred Stock, in part, at a redemption price of % of
the liquidation preference thereof if redeemed during the 12-month period
commencing on October 31, 1996, % of the liquidation preference thereof
if redeemed during the 12-month period commencing on October 31, 1997 and
% of the liquidation preference thereof if redeemed during the 12-month
period commencing on October 31, 1998, plus, in each case, without
duplication, an amount in cash equal to all accumulated and unpaid
dividends to the Redemption Date (including an amount in cash equal to a
prorated dividend for the period from the Dividend Payment Date immediately
prior to the Redemption Date to the Redemption Date) (the "Net Proceeds
Redemption Price"); provided, however, that after any such redemption,
there is at least $75,000,000 million in aggregate liquidation preference
of Exchangeable Preferred Stock outstanding. Any such redemption pursuant
to this paragraph (e)(i)(B) must occur on or prior to 90 days after the
receipt by the Corporation of the proceeds of each Public Equity Offering
or Major Asset Sale.
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<PAGE> 7
(C) In the event of a redemption pursuant to paragraph (e)(i)(A) or
(e)(i)(B) hereof of only a portion of the then outstanding shares of the
Exchangeable Preferred Stock, the Corporation shall effect such redemption
on a pro rata basis according to the number of shares held by each Holder
of the Exchangeable Preferred Stock, except that the Corporation may redeem
such shares held by Holders of fewer than 10 shares (or shares held by
Holders who would hold less than 10 shares as a result of such redemption),
as may be determined by the Corporation.
(ii) Mandatory Redemption. On October 31, 2006, the Corporation
shall redeem, to the extent of funds legally available therefor, in the
manner provided for in paragraph (e)(iii) hereof, all of the shares of the
Exchangeable Preferred Stock then outstanding at a redemption price equal
to 100% of the liquidation preference per share, plus, without duplication,
an amount in cash equal to all accumulated and unpaid dividends per share
(including an amount equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Redemption Date to the
Redemption Date) (the "Mandatory Redemption Price").
(iii) Procedures for Redemption. At least thirty (30) days and not
more than sixty (60) days prior to the date fixed for any redemption of the
Exchangeable Preferred Stock, written notice (the "Redemption Notice")
shall be given by first class mail, postage prepaid, to each Holder of
record on the record date fixed for such redemption of the Exchangeable
Preferred Stock at such Holder's address as it appears on the stock books
of the Corporation, provided that no failure to give such notice nor any
deficiency therein shall affect the validity of the procedure for the
redemption of any shares of Exchangeable Preferred Stock to be redeemed
except as to the Holder or Holders to whom the Corporation has failed to
give said notice or to whom such notice was defective. The Redemption
Notice shall state:
(1) whether the redemption is pursuant to paragraph
(e)(i)(A), (e)(i)(B) or (e)(ii) hereof;
(2) the Optional Redemption Price, the Mandatory Redemption
Price or the Net Proceeds Redemption Price, as the case may be;
(3) whether all or less than all the outstanding shares of
the Exchangeable Preferred Stock are to be
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<PAGE> 8
redeemed and the total number of shares of the Exchangeable
Preferred Stock being redeemed;
(4) the date fixed for redemption;
(5) that the Holder is to surrender to the Corporation, in
the manner, at the place or places and at the price designated,
his certificate or certificates representing the shares of
Exchangeable Preferred Stock to be redeemed; and
(6) that dividends on the shares of the Exchangeable
Preferred Stock to be redeemed shall cease to accumulate on such
Redemption Date unless the Corporation defaults in the payment of
the Optional Redemption Price, the Mandatory Redemption Price or
the Net Proceeds Redemption Price, as the case may be.
(B) Each Holder of Exchangeable Preferred Stock shall surrender the
certificate or certificates representing such shares of Exchangeable
Preferred Stock to the Corporation, duly endorsed (or otherwise in proper
form for transfer, as determined by the Corporation), in the manner and at
the place designated in the Redemption Notice, and on the Redemption Date
the full Optional Redemption Price, Mandatory Redemption Price or Net
Proceeds Redemption Price, as the case may be, for such shares shall be
payable in cash to the Person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall
be canceled and retired. In the event that less than all of the shares
represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares.
(C) On and after the Redemption Date, unless the Corporation defaults
in the payment in full of the applicable redemption price, dividends on the
Exchangeable Preferred Stock called for redemption shall cease to
accumulate on the Redemption Date, and all rights of the Holders of
redeemed shares shall terminate with respect thereto on the Redemption
Date, other than the right to receive the Optional Redemption Price, the
Mandatory Redemption Price or the Net Proceeds Redemption Price, as the
case may be, without interest; provided, however, that if a notice of
redemption shall have been given as provided in paragraph (iii)(A) above
and the funds necessary for redemption (including an amount in respect of
all dividends that will accrue to the Redemption Date) shall have been
irrevocably deposited in trust for the equal and ratable
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<PAGE> 9
benefit for the Holders of the shares to be redeemed, then, at the close of
business on the day on which such funds are segregated and set aside, the
Holders of the shares to be redeemed shall cease to be stockholders of the
Corporation and shall be entitled only to receive the Optional Redemption
Price, the Mandatory Redemption Price or the Net Proceeds Redemption Price,
as the case may be, without interest.
(f) Voting Rights.
(i) The Holders of Exchangeable Preferred Stock, except as otherwise
required under Delaware law or as set forth in paragraphs (ii), (iii) and
(iv) below, shall not be entitled or permitted to vote on any matter
required or permitted to be voted upon by the stockholders of the
Corporation.
(ii) So long as any shares of the Exchangeable Preferred Stock are
outstanding, the Corporation shall not authorize any additional shares of
Exchangeable Preferred Stock or any class of Parity Securities without the
affirmative vote or consent of Holders of at least a majority of the then
outstanding shares of Exchangeable Preferred Stock, voting or consenting,
as the case may be, as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting; provided,
however, that no such vote or consent shall be necessary in connection with
(i) issuance of additional shares of Exchangeable Preferred Stock pursuant
to the provisions of paragraph (c) of this Resolution, or (ii) the
authorization and issuance of shares of additional shares of Exchangeable
Preferred Stock or of Parity Securities, which Parity Securities require
cash dividends at a time and in an amount not in excess of one percentage
point greater than the dividend rate borne by the Exchangeable Preferred
Stock (as existing on the Issue Date) and which does not prevent either the
payment of cash dividends on the Exchangeable Preferred Stock or the
exchange of the Exchangeable Preferred Stock for the Exchange Debentures,
and in the case of this clause (ii), in an amount sufficient to acquire the
Existing Preferred Stock in accordance with its terms on the Issue Date
(including any premium required to be paid), plus, the amount of reasonable
expenses incurred by the Corporation in acquiring such Existing Preferred
Stock and issuing such additional Exchangeable Preferred Stock or Parity
Securities (as the case may be); with such shares of additional
Exchangeable Preferred Stock or Parity Securities being issued no sooner
than the date the Corporation
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<PAGE> 10
repurchases, redeems or otherwise retires the Existing Preferred Stock.
(B) So long as any shares of the Exchangeable Preferred Stock are
outstanding, the Corporation shall not authorize any class of Senior
Securities without the affirmative vote or consent of Holders of at least a
majority of the outstanding shares of Exchangeable Preferred Stock, voting
or consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or special
meeting.
(C) So long as any shares of the Exchangeable Preferred Stock are
outstanding, the Corporation shall not amend this Resolution so as to
affect materially and adversely the specified rights, preferences,
privileges or voting rights of holders of shares of Exchangeable Preferred
Stock without the affirmative vote or consent of Holders of at least a
majority of the issued and outstanding shares of Exchangeable Preferred
Stock, voting or consenting, as the case may be, as one class, given in
person or by proxy, either in writing or by resolution adopted at an annual
or special meeting.
(D) While any of the Exchangeable Preferred Stock is outstanding, the
Corporation shall not amend or modify the Indenture for the Exchange
Debentures in the form as executed on the Issue Date (the "Indenture")
(except as expressly provided therein in respect of amendments without the
consent of Holders of Exchange Debentures) as permitted by Section 8.02 of
the Indenture to be amended or modified by a majority vote (i) without the
affirmative vote or consent of Holders of at least a majority of the
shares of Exchangeable Preferred Stock then outstanding or, (ii) if any
Exchange Debentures are then outstanding, without the affirmative vote or
consent of, in the aggregate, Holders of at least a majority in
liquidation preference of the Exchangeable Preferred Stock and holders of
at least a majority in principal amount of the Exchange Debentures in the
case of each of clauses (i) and (ii), voting or consenting, as the case
may be, as one class, and given in person or by proxy, either in writing
or by resolution adopted at an annual or special meeting (in the case of
Holders of Exchangeable Preferred Stock and, in accordance with the terms
of the Indenture, in the case of holders of Exchange Debentures).
(E) Except as set forth in paragraphs (f)(ii)(A), (f)(ii)(B) and
(f)(ii)(C) above, (x) the creation, authorization or issuance of any shares
of any Junior Securities, Parity Securities or Senior Securities or (y) the
increase or decrease in the amount of authorized Capital
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<PAGE> 11
Stock of any class, including Preferred Stock, shall not require the
consent of Holders of Exchangeable Preferred Stock and shall not be deemed
to affect adversely the rights, preferences, privileges or voting rights of
Holders of Exchangeable Preferred Stock.
(iii) Without the affirmative vote or consent of Holders of a
majority of the issued and outstanding shares of Exchangeable Preferred
Stock, voting or consenting, as the case may be, as one class, given in
person or by proxy, either in writing or by resolution adopted at an annual
or special meeting, the Corporation shall not, in a single transaction or
series of related transactions, consolidate or merge with or into, or sell,
assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets to, another Person or adopt a plan of
liquidation unless: (A) either (1) the Corporation is the surviving or
continuing Person or (2) the Person (if other than the Corporation) formed
by such consolidation or into which the Corporation is merged or the Person
that acquires by conveyance, transfer or lease the properties and assets of
the Corporation substantially as an entirety or in the case of a plan of
liquidation, the Person to which assets of the Corporation have been
transferred, shall be a corporation, partnership or trust organized and
existing under the laws of the United States or any State thereof or the
District of Columbia; (B) the Exchangeable Preferred Stock shall be
converted into or exchanged for and shall become shares of such successor,
transferee or resulting Person, having in respect of such successor,
transferee or resulting Person the same powers, preferences and relative,
participating, optional or other special rights and the qualifications,
limitations or restrictions thereon, that the Exchangeable Preferred Stock
had immediately prior to such transaction; (C) immediately after giving
effect to such transaction and the use of the proceeds therefrom (on a pro
forma basis, including giving effect to any Indebtedness incurred or
anticipated to be incurred in connection with such transaction), the
Corporation (in the case of clause (1) of the foregoing clause (A)) or such
Person (in the case of clause (2) of the foregoing clause (A)) shall be
able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under paragraph (l)(i) hereof; (D) immediately
after giving effect to such transactions, no Voting Rights Triggering Event
shall have occurred or be continuing; and (E) the Corporation has delivered
to the transfer agent for the Exchangeable Preferred Stock prior to the
consummation of the proposed transaction an Officers' Certificate and an
Opinion of Counsel, each stating that
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<PAGE> 12
such consolidation, merger or transfer complies with the terms hereof and
that all conditions precedent herein relating to such transaction have been
satisfied.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of related
transactions) of all or substantially all of the properties or assets of
one or more Subsidiaries of the Corporation, the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Corporation shall be deemed to be the transfer of all or substantially all
of the properties and assets of the Corporation.
(iv) (A) If (1) after October 31, 2002 dividends on the Exchangeable
Preferred Stock required to be paid in cash are in arrears and unpaid for
three or more semi-annual Dividend Periods (whether or not consecutive) (a
"Dividend Default"); (2) the Corporation fails to redeem all of the then
outstanding shares of Exchangeable Preferred Stock on October 31, 2006 or
otherwise fails to discharge any redemption obligation with respect to the
Exchangeable Preferred Stock; (3) the Corporation fails to make a Change of
Control Offer (whether pursuant to the terms of paragraph (h)(v) or
otherwise) following a Change of Control if such Change of Control Offer is
required by paragraph (h) hereof or fails to purchase shares of
Exchangeable Preferred Stock from Holders who elect to have such shares
purchased pursuant to the Change of Control Offer; (4) the Corporation
breaches or violates one of the provisions set forth in any of paragraphs
(l)(i), (l)(ii), (l)(iii) or (l)(iv) hereof and the breach or violation
continues for a period of 60 days or more after the Corporation receives
notice thereof specifying the default from the holders of at least 25% of
the shares of Exchangeable Preferred Stock then outstanding, (5) the
Corporation fails to pay at the final stated maturity (giving effect to any
extensions thereof) the principal amount of any Indebtedness of the
Corporation or any Restricted Subsidiary of the Corporation, or the final
stated maturity of any such Indebtedness is accelerated, if the aggregate
principal amount of such Indebtedness, together with the aggregate
principal amount of any other such Indebtedness in default for failure to
pay principal at the final stated maturity (giving effect to any extensions
thereof) or which has been accelerated, aggregates $10,000,000 or more at
any time, in each case, after a 20-day period during which such default
shall not have been cured or such acceleration rescinded or (6) any event
occurs or condition exists which results in an increase in the dividend
rate borne by the Existing Preferred Stock in accordance with the terms
thereof.
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then in the case of any of clauses (1)-(6) the number of directors
constituting the Board of Directors shall be adjusted by the number, if
any, necessary to permit the Holders of Exchangeable Preferred Stock,
voting separately and as one class, to elect the lesser of two directors
or that number of directors constituting 25% of the members of the Board
of Directors. Each such event described in clauses (1), (2), (3), (4),
(5) and (6) is a "Voting Rights Triggering Event." Holders of a majority
of the issued and outstanding shares of Exchangeable Preferred Stock,
voting separately and as one class, shall have the exclusive right to
elect the lesser of two directors or that number of directors constituting
25% of the members of the Board of Directors at a meeting therefor called
upon occurrence of such Voting Rights Triggering Event, and at every
subsequent meeting at which the terms of office of the directors so
elected by the Holders of the Exchangeable Preferred Stock expire (other
than as described in (f)(iv)(B) below). The voting rights provided herein
shall be the exclusive remedy at law or in equity of the holders of the
Exchangeable Preferred Stock for any Voting Rights Triggering Event.
(B) The right of the Holders of Exchangeable Preferred Stock voting
together as a separate class to elect members of the Board of Directors as
set forth in subparagraph (f)(iv)(A) above shall continue until such time
as (x) in the event such right arises due to a Dividend Default, all
accumulated dividends that are in arrears on the Exchangeable Preferred
Stock are paid in full in cash; and (y) in all other cases, the failure,
breach or default giving rise to such Voting Rights Triggering Event is
remedied, cured (including, but not limited to, in the case of clause (5)
of subparagraph (f)(iv)(A) above through the issuance of Refinancing
Indebtedness or the waiver of any breach or default by the holder of such
Indebtedness) or waived by the holders of at least a majority of the shares
of Exchangeable Preferred Stock then outstanding and entitled to vote
thereon, at which time (1) the special right of the Holders of Exchangeable
Preferred Stock so to vote as a class for the election of directors and (2)
the term of office of the directors elected by the Holders of the
Exchangeable Preferred Stock shall each terminate and the directors elected
by the holders of Common Stock or Capital Stock (other than the
Exchangeable Preferred Stock), if applicable, shall constitute the entire
Board of Directors. At any time after voting power to elect directors
shall have become vested and be continuing in the
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Holders of Exchangeable Preferred Stock pursuant to paragraph (f)(iv)
hereof, or if vacancies shall exist in the offices of directors elected by
the Holders of Exchangeable Preferred Stock, a proper officer of the
Corporation may, and upon the written request of the Holders of record of
at least twenty-five percent (25%) of the shares of Exchangeable Preferred
Stock then outstanding addressed to the secretary of the Corporation shall,
call a special meeting of the Holders of Exchangeable Preferred Stock, for
the purpose of electing the directors which such Holders are entitled to
elect. If such meeting shall not be called by a proper officer of the
Corporation within twenty (20) days after personal service of said written
request upon the secretary of the Corporation, or within twenty (20) days
after mailing the same within the United States by certified mail,
addressed to the secretary of the Corporation at its principal executive
offices, then the Holders of record of at least twenty-five percent (25%)
of the outstanding shares of Exchangeable Preferred Stock may designate in
writing one of their number to call such meeting at the reasonable expense
of the Corporation, and such meeting may be called by the Person so
designated upon the notice required for the annual meetings of stockholders
of the Corporation and shall be held at the place for holding the annual
meetings of stockholders. Any Holder of Exchangeable Preferred Stock so
designated shall have, and the Corporation shall provide, access to the
lists of stockholders to be called pursuant to the provisions hereof.
(C) At any meeting held for the purpose of electing directors at
which the Holders of Exchangeable Preferred Stock shall have the right,
voting together as a separate class, to elect directors as aforesaid, the
presence in person or by proxy of the Holders of at least a majority of the
outstanding shares of Exchangeable Preferred Stock shall be required to
constitute a quorum of such Exchangeable Preferred Stock.
(D) Any vacancy occurring in the office of a director elected by the
Holders of Exchangeable Preferred Stock may be filled by the remaining
directors elected by the Holders of Exchangeable Preferred Stock unless and
until such vacancy shall be filled by the Holders of Exchangeable Preferred
Stock.
(v) In any case in which the Holders of Exchangeable Preferred Stock
shall be entitled to vote pursuant to this paragraph (f) or pursuant to
Delaware law, each Holder of Exchangeable Preferred Stock entitled to vote
with respect
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to such matter shall be entitled to one vote for each share of Exchangeable
Preferred Stock held.
(g) Exchange.
(i) Requirements. The outstanding shares of Exchangeable Preferred
Stock are exchangeable, in whole or in part, on a pro rata basis, at the
option of the Corporation, at any time on any Dividend Payment Date for the
Corporation's % Exchange Debentures due 2006 (the "Exchange
Debentures") to be substantially in the form of Exhibit A to the form of
Indenture, a copy of which is on file with the secretary of the
Corporation; provided, however, that immediately after giving effect to any
partial exchange, there shall be shares of Exchangeable Preferred Stock
outstanding with an aggregate liquidation preference of not less than
$75,000,000 and not less than $75,000,000 aggregate principal amount of
Exchange Debentures are then outstanding; and provided, further, that any
such exchange may only be made if on or prior to the date of such exchange
(i) the Corporation has paid (or is deemed to have paid) all accumulated
dividends on the Exchangeable Preferred Stock (including the dividends
payable on the date of exchange) and there shall be no contractual
impediment to such exchange; (ii) there shall be funds legally available
sufficient therefor; (iii) such exchange would be permitted under the terms
of the Existing Preferred Stock, to the extent then outstanding, and
immediately after giving effect to such exchange, no Default or Event of
Default (as defined in the Indenture) would exist under the Indenture and
no default or event of default would exist under the Credit Agreement or
the Existing Note Indenture and no default or event of default under any
other material instrument governing Indebtedness outstanding at the time
would be caused thereby; (iv) that the Indenture has been qualified under
the Trust Indenture Act of 1939, as amended, if required at the time of
such exchange for public indentures; and (v) the Corporation shall have
delivered a written opinion to the effect that all conditions to be
satisfied prior to such exchange have been satisfied. The exchange rate
shall be $1.00 principal amount of Exchange Debentures for each $1.00 of
liquidation preference of Exchangeable Preferred Stock, including, to the
extent necessary, Exchange Debentures in principal amounts less than
$1,000, provided that the Corporation shall have the right, at its option,
to pay cash in an amount equal to the principal amount of that portion of
any Exchange Debenture that is not an integral multiple of $1,000 instead
of delivering an Exchange Debenture in a denomination of less than $1,000.
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(ii) Procedure for Exchange. (A) At least thirty (30) days and not
more than sixty (60) days prior to the date fixed for exchange, written
notice (the "Exchange Notice") shall be given by first-class mail, postage
prepaid, to each Holder of record on the record date fixed for such
exchange of the Exchangeable Preferred Stock at such Holder's address as
the same appears on the stock books of the Corporation; provided that no
failure to give such notice nor any deficiency therein shall affect the
validity of the procedure for the exchange of any shares of Exchangeable
Preferred Stock to be exchanged except as to the Holder or Holders to whom
the Corporation has failed to give said notice or to whom such notice was
defective. The Exchange Notice shall state:
(1) the date fixed for exchange;
(2) that the Holder is to surrender to the Corporation, in the
manner and at the place or places designated, his certificate or
certificates representing the shares of Exchangeable Preferred Stock
to be exchanged;
(3) that dividends on the shares of Exchangeable Preferred Stock
to be exchanged shall cease to accrue on such Exchange Date whether or
not certificates for shares of Exchangeable Preferred Stock are
surrendered for exchange on such Exchange Date unless the Corporation
shall default in the delivery of Exchange Debentures; and
(4) that interest on the Exchange Debentures shall accrue from
the Exchange Date whether or not certificates for shares of
Exchangeable Preferred Stock are surrendered for exchange on such
Exchange Date.
(B) On or before the Exchange Date, each Holder of Exchangeable
Preferred Stock shall surrender the certificate or certificates
representing such shares of Exchangeable Preferred Stock, in the manner and
at the place designated in the Exchange Notice. The Corporation shall
cause the Exchange Debentures to be executed on the Exchange Date and, upon
surrender in accordance with the Exchange Notice of the certificates for
any shares of Exchangeable Preferred Stock so exchanged, duly endorsed (or
otherwise in proper form for transfer, as determined by the Corporation),
such shares shall be exchanged by the Corporation into Exchange Debentures.
In the event that any certificate surrendered pursuant to this paragraph
(g) represents shares in excess
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of those being surrendered pursuant to the Exchange Notice, the Corporation
shall issue a new certificate representing the unexchanged portion of
shares of Exchangeable Preferred Stock. The Corporation shall pay interest
on the Exchange Debentures at the rate and on the dates specified therein
from the Exchange Date.
(C) If notice has been mailed as aforesaid, and if before the
Exchange Date specified in such notice (1) the Indenture shall have been
duly executed and delivered by the Corporation and the trustee thereunder
and (2) all Exchange Debentures necessary for such exchange shall have been
duly executed by the Corporation and delivered to the trustee under the
Indenture with irrevocable instructions to authenticate the Exchange
Debentures necessary for such exchange, then the rights of the Holders of
Exchangeable Preferred Stock so exchanged as stockholders of the
Corporation shall cease (except the right to receive Exchange Debentures,
an amount in cash equal to the amount of accrued and unpaid dividends to
the Exchange Date and, if the Corporation so elects, cash in lieu of any
Exchange Debenture not an integral multiple of $1,000), and the Person or
Persons entitled to receive the Exchange Debentures issuable upon exchange
shall be treated for all purposes as the registered Holder or Holders of
such Exchange Debentures as of the Exchange Date.
(iii) No Exchange in Certain Cases. Notwithstanding the foregoing
provisions of this paragraph (g), the Corporation shall not be entitled to
exchange the Exchangeable Preferred Stock for Exchange Debentures if such
exchange, or any term or provision of the Indenture or the Exchange
Debentures, or the performance of the Corporation's obligations under the
Indenture or the Exchange Debentures, shall materially violate any
applicable law or if, at the time of such exchange, the Corporation is
insolvent or if it would be rendered insolvent by such exchange.
(h) Change of Control.
(i) In the event of a Change of Control (the date of such occurrence
being the "Change of Control Date"), the Corporation shall notify the
Holders of the Exchangeable Preferred Stock in writing of such occurrence
and shall make an offer to purchase (the "Change of Control Offer") all
then outstanding shares of Exchangeable Preferred Stock at a purchase price
of 101% of the liquidation preference thereof plus, without duplication, an
amount in cash equal to all accumulated and unpaid dividends per share
(including an
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amount in cash equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Change of Control Payment
Date to the Change of Control Payment Date).
(ii) Within 30 days following the Change of Control Date, the
Corporation shall send, by first class mail, postage prepaid, a notice to
each Holder of Exchangeable Preferred Stock at such Holder's address as it
appears on the stock books of the Corporation, which notice shall govern
the terms of the Change of Control Offer. The notice to the Holders shall
contain all instructions and materials necessary to enable such Holders to
tender Exchangeable Preferred Stock pursuant to the Change of Control
Offer. Such notice shall state:
(A) that a Change of Control has occurred, that the Change of
Control Offer is being made pursuant to this paragraph (h) and that
all Exchangeable Preferred Stock validly tendered and not withdrawn
will be accepted for payment;
(B) the purchase price (including the amount of accumulated and
unpaid dividends, if any) and the purchase date (which shall be no
earlier than 30 days nor later than 45 days from the date such notice
is mailed, other than as may be required by law) (the "Change of
Control Payment Date");
(C) that any shares of Exchangeable Preferred Stock not tendered
will continue to accrue dividends;
(D) that, unless the Corporation defaults in making payment
therefor, any share of Exchangeable Preferred Stock accepted for
payment pursuant to the Change of Control Offer shall cease to accrue
dividends after the Change of Control Payment Date;
(E) that Holders electing to have any shares of Exchangeable
Preferred Stock purchased pursuant to a Change of Control Offer will
be required to surrender the certificate or certificates representing
such shares, properly endorsed for transfer together with such
customary documents as the Corporation and the transfer agent may
reasonably require, in the manner and at the place specified in the
notice prior to the close of business on the Business Day prior to the
Change of Control Payment Date;
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(F) that Holders will be entitled to withdraw their election if
the Corporation receives, not later than five Business Days prior to
the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
number of shares of Exchangeable Preferred Stock the Holder delivered
for purchase and a statement that such Holder is withdrawing his
election to have such shares of Exchangeable Preferred Stock
purchased;
(G) that Holders whose shares of Exchangeable Preferred Stock
are purchased only in part will be issued a new certificate
representing the unpurchased shares of Exchangeable Preferred Stock;
and
(H) the circumstances and relevant facts regarding such Change
of Control.
(iii) The Corporation will comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
repurchase of the Exchangeable Preferred Stock in connection with a Change
of Control Offer.
(iv) On the Change of Control Payment Date the Corporation shall (A)
accept for payment the shares of Exchangeable Preferred Stock validly
tendered pursuant to the Change of Control Offer, (B) pay to the Holders of
shares so accepted the purchase price therefor in cash and (C) cancel and
retire each surrendered certificate. Unless the Corporation defaults in
the payment for the shares of Exchangeable Preferred Stock tendered
pursuant to the Change of Control Offer, dividends will cease to accumulate
with respect to the shares of Exchangeable Preferred Stock tendered and all
rights of Holders of such tendered shares will terminate, except for the
right to receive payment therefor, on the Change of Control Payment Date.
(v) If the purchase of the Exchangeable Preferred Stock would violate
or constitute a default under the Credit Agreement, any other Senior Debt,
the Existing Note Indenture or the Existing Preferred Stock, then,
notwithstanding anything to the contrary contained above, prior to
complying with the foregoing provisions, but in any event within 30 days
following the Change of Control Date, the Corporation shall, to the extent
needed to permit such purchase of the Exchangeable Preferred Stock, either
(A) repay in full all such Indebtedness under the Credit Agreement, such
Senior Debt and the Existing Notes and, in
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the case of the Credit Agreement or other Senior Debt, terminate all
commitments outstanding thereunder and effect the termination of any such
prohibition under the Existing Preferred Stock or (B) obtain the requisite
consents, if any, under the Credit Agreement, the instruments governing
such Senior Debt, the Existing Note Indenture and the certificate of
designation governing the Existing Preferred Stock required to permit the
repurchase of Exchangeable Preferred Stock required by this paragraph (h).
Until the requirements of the immediately preceding sentence are satisfied,
the Corporation shall not make, and shall not be obligated to make, any
Change of Control Offer; provided that the Corporation's failure to comply
with the provisions of this paragraph (h)(v) shall constitute a Voting
Rights Triggering Event.
(i) Conversion or Exchange. The Holders of shares of Exchangeable
Preferred Stock shall not have any rights hereunder to convert such shares into
or exchange such shares for shares of any other class or classes or of any other
series of any class or classes of Capital Stock of the Corporation.
(j) Reissuance of Exchangeable Preferred Stock. Shares of Exchangeable
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged, shall (upon compliance with any
applicable provisions of the laws of Delaware) have the status of authorized and
unissued shares of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock, provided
that any issuance of such shares as Exchangeable Preferred Stock must be in
compliance with the terms hereof.
(k) Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(l) Certain Additional Provisions.
(i) Limitation on Incurrence of Additional Indebtedness. The
Corporation shall not, and shall not permit any Restricted Subsidiary of
the Corporation to, directly or indirectly, incur any Indebtedness
(including Acquired Indebtedness) other than Permitted Indebtedness.
Notwithstanding the foregoing limitation, the Corporation and its
Restricted Subsidiaries may incur Indebtedness if on the date of the
incurrence of such Indebtedness (i) no
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Voting Rights Triggering Event shall have occurred and be continuing or
shall occur as a consequence thereof and (ii) after giving effect to the
incurrence of such Indebtedness and the receipt and application of the
proceeds thereof, the ratio of the Corporation's total Indebtedness to the
Corporation's Adjusted EBITDA (determined on a pro forma basis for the last
four full fiscal quarters of the Corporation for which financial statements
are available at the date of determination) is less than 7.0 to 1;
provided, however, that if the Indebtedness which is the subject of a
determination under this provision is Acquired Indebtedness, or
Indebtedness incurred in connection with the simultaneous acquisition of
any Person, business, property or assets, then such ratio shall be
determined by giving effect (on a pro forma basis, as if the transaction
had occurred at the beginning of the four quarter period) to both the
incurrence or assumption of such Acquired Indebtedness or such other
Indebtedness by the Corporation and the inclusion in the Corporation's
Adjusted EBITDA of the Consolidated EBITDA of the acquired Person,
business, property or assets; and provided, further, that in the event that
the Consolidated EBITDA of the acquired Person, business, property or
assets reflects an operating loss, no amounts shall be deducted from the
Corporation's Adjusted EBITDA in making the determinations described above.
(ii) Limitation on Restricted Payments. (A) The Corporation shall
not, and shall not permit any of its Restricted Subsidiaries to, directly
or indirectly, make any Restricted Payment if at the time of such
Restricted Payment and immediately after giving effect thereto:
(1) any Voting Rights Triggering Event shall have occurred
and be continuing; or
(2) the Corporation could not incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance
with paragraph (l)(i) above; or
(3) the aggregate amount of Restricted Payments declared or
made after the Issue Date (the amount expended for such purposes,
if other than in cash, being the fair market value of such
property as determined by the Board of Directors of the
Corporation in good faith) exceeds the sum of (a) 100% of the
Corporation's Cumulative EBITDA minus 1.4 times the Corporation's
Cumulative Consolidated Interest Expense, plus (b) 100% of the
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aggregate Net Proceeds and the fair market value of securities or
other property received by the Corporation from the issue or
sale, after the Issue Date, of Capital Stock (other than
Disqualified Capital Stock of the Corporation or Capital Stock of
the Corporation issued to any Restricted Subsidiary of the
Corporation) of the Corporation or any Indebtedness or other
securities of the Corporation convertible into or exercisable or
exchangeable for Capital Stock (other than Disqualified Stock) of
the Corporation which have been so converted or exercised or
exchanged, as the case may be, plus (c) $10,000,000.
(B) Notwithstanding the foregoing, these provisions will not
prohibit: (1) the payment of any dividend or the making of any distribution
within 60 days after the date of its declaration if such dividend or
distribution would have been permitted on the date of declaration; (2) the
purchase, redemption or other acquisition or retirement of any Capital
Stock of the Corporation or any warrants, options or other rights to
acquire shares of any class of such Capital Stock (x) solely in exchange
for shares of Qualified Capital Stock or other rights to acquire Qualified
Capital Stock, (y) through the application of the Net Proceeds of a
substantially concurrent sale for cash (other than to a Restricted
Subsidiary of the Corporation) of shares of Qualified Capital Stock or
warrants, options or other rights to acquire Qualified Capital Stock or (z)
in the case of Disqualified Capital Stock, solely in exchange for, or
through the application of the Net Proceeds of a substantially concurrent
sale for cash (other than to a Restricted Subsidiary of the Corporation)
of, Disqualified Capital Stock that has a redemption date no earlier than,
is issued by the Corporation or the same Person as and requires the payment
of current dividends or distributions in cash no earlier than, in each
case, the Disqualified Capital Stock being purchased, redeemed or otherwise
acquired or retired and which Disqualified Capital Stock does not prohibit
cash dividends on the Exchangeable Preferred Stock or the exchange thereof
for Exchange Debentures.
(iii) Limitations on Transactions with Affiliates. (A) The
Corporation shall not, and shall not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate (including entities in which
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the Corporation or any of its Restricted Subsidiaries owns a minority
interest) or holder of 10% or more of the Corporation's Common Stock (an
"Affiliate Transaction") or extend, renew, waive or otherwise modify the
terms of any Affiliate Transaction entered into prior to the Issue Date
unless (1) such Affiliate Transaction is between or among the Corporation
and its Wholly-Owned Subsidiaries; or (2) the terms of such Affiliate
Transaction are fair and reasonable to the Corporation or such Restricted
Subsidiary, as the case may be, and the terms of such Affiliate Transaction
are at least as favorable as the terms which could be obtained by the
Corporation or such Restricted Subsidiary, as the case may be, in a
comparable transaction made on an arm's-length basis between unaffiliated
parties. In any Affiliate Transaction involving an amount or having a
value in excess of $1,000,000 which is not permitted under clause (1)
above, the Corporation must obtain a Board Resolution certifying that such
Affiliate Transaction complies with clause (2) above. In transactions with
a value in excess of $5,000,000 which are not permitted under clause (1)
above, the Corporation must obtain a written opinion as to the fairness of
such a transaction from an independent investment banking firm.
(B) The foregoing provisions shall not apply to (1) any Restricted
Payment that is not prohibited by the provisions described in paragraph
(l)(ii) above, (2) any transaction approved by the Board of Directors of
the Corporation with an officer or director of the Corporation or of any
Subsidiary in his or her capacity as officer or director entered into in
the ordinary course of business, including compensation and employee
benefit arrangements with any officer or director of the Corporation or of
any Subsidiary that are customary for public companies in the broadcasting
industry, or (3) modifications of the Existing Preferred Stock.
(iv) Limitation on Preferred Stock of Subsidiaries. The Corporation
shall not permit any Restricted Subsidiary to issue any Preferred Stock
(except to the Corporation or to a Restricted Subsidiary) or permit any
Person (other than the Corporation or a Restricted Subsidiary) to hold any
such Preferred Stock unless the Corporation or such Restricted Subsidiary
would be entitled to incur or assume Indebtedness in compliance with
paragraph (l)(i) above in an aggregate principal amount equal to the
aggregate liquidation value of the Preferred Stock to be issued.
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(v) Reports. The Corporation shall provide to the holders of
Exchangeable Preferred Stock, within 15 days after it files them with the
Commission, copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the foregoing as
the Commission may by rules and regulations prescribe) which the
Corporation files with the Commission pursuant to Section 13 or 15(d) of
the Exchange Act. In the event that the Corporation is no longer required
to furnish such reports to its securityholders pursuant to the Exchange
Act, the Corporation will cause its consolidated financial statements,
comparable to those that would have been required to appear in annual or
quarterly reports, to be delivered to the holders of Exchangeable Preferred
Stock.
(m) Definitions. As used in this Certificate of Designation, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Acquired Indebtedness" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a
Restricted Subsidiary or assumed in connection with the acquisition of
assets from such Person.
"Adjusted EBITDA" means, for any Person, prior to the date specified
by the Corporation, in a written notice delivered to the Holders of the
Corporation's election of its one time right to change the calculation of
Adjusted EBITDA (the "Calculation Change Notice"), the sum of (a)
Consolidated EBITDA of such Person and its Restricted Subsidiaries for the
four most recent fiscal quarters for which internal financial statements
are available, minus inTV EBITDA for the most recent four fiscal quarter
period and (b) inTV EBITDA for the most recent quarterly period, multiplied
by four and, subsequent to the effective date specified by the Corporation
in its Calculation Change Notice, the Consolidated EBITDA of such Person
and its Restricted Subsidiaries for the four most recent fiscal quarters
for which internal financial statements are available.
"Affiliate" means, for any Person, a Person who, directly or
indirectly, through one or more intermediaries controls, or is controlled
by, or is under common control with, such other Person. The term "control"
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a
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Person, whether through the ownership of voting securities, by contract or
otherwise. With respect to the Corporation, Affiliate will also include
any Permitted Holders or Persons controlled by the Permitted Holders.
"Affiliate Transaction" shall have the meaning ascribed to it in
paragraph (l)(iii) hereof.
"Asset Sale" means the sale, transfer or other disposition (other than
to the Corporation or any of its Restricted Subsidiaries) in any single
transaction or series of related transactions involving assets with a fair
market value in excess of $2,000,000 of (a) any Capital Stock of or other
equity interest in any Restricted Subsidiary of the Corporation other than
in a transaction where the Corporation or a Restricted Subsidiary receives
therefor one or more media properties with a fair market value equal to the
fair market value of the Capital Stock issued, transferred or disposed of
by the Corporation or the Restricted Subsidiary (with such fair market
values being determined by the Board of Directors of the Corporation), (b)
all or substantially all of the assets of the Corporation or of any
Restricted Subsidiary thereof, (c) real property or (d) all or
substantially all of the assets of any media property, or part thereof,
owned by the Corporation or any Restricted Subsidiary thereof, or a
division, line of business or comparable business segment of the
Corporation or any Restricted Subsidiary thereof; provided, however, that
Asset Sales shall not include sales, leases, conveyances, transfers or
other dispositions to the Corporation or to a Restricted Subsidiary or to
any other Person if after giving effect to such sale, lease, conveyance,
transfer or other disposition such other Person becomes a Restricted
Subsidiary, or the sale of all or substantially all of the assets of the
Corporation or a Restricted Subsidiary in a transaction complying with
paragraph (f)(iii) above, in which case only the assets not so sold shall
be deemed an Asset Sale.
"Board of Directors" shall have the meaning ascribed to it in the
first paragraph of this Resolution.
"Board Resolution" means a copy of a resolution certified pursuant to
an Officers' Certificate to have been duly adopted by the Board of
Directors of the Corporation and to be in full force and effect, and
delivered to the Holders.
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"Business Day" means any day except a Saturday, a Sunday, or any day
on which banking institutions in New York, New York are required or
authorized by law or other governmental action to be closed.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other
equivalents (however designated) of capital stock of such Person and (ii)
with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligation
of such Person to pay rent or other amounts under a lease to which such
Person is a party that is required to be classified and accounted for as a
capital lease obligation under GAAP, and for purposes of this definition,
the amount of such obligation at any date shall be the capitalized amount
of such obligation at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date
of acquisition thereof and, at the time of acquisition, having one of the
two highest ratings obtainable from either Standard & Poor's Corporation
("S&P") or Moody's Investors Service, Inc. ("Moody's"); (iii) commercial
paper maturing no more than one year from the date of creation thereof and,
at the time of acquisition, having a rating of at least A-1 from S&P or at
least P-1 from Moody's; (iv) certificates of deposit or bankers'
acceptances maturing within one year from the date of acquisition thereof
issued by any commercial bank organized under the laws of the United States
of America or any state thereof or the District of Columbia or any U.S.
branch of a foreign bank having at the date of acquisition thereof combined
capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any
bank meeting the qualifications specified in clause (iv) above; and (vi)
investments in money market funds which
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invest substantially all their assets in securities of the types described
in clauses (i) through (v) above.
"Certificate of Incorporation" shall have the meaning ascribed to it
in the first paragraph of this Resolution.
A "Change of Control" of the Corporation will be deemed to have
occurred at such time as (i) any Person (including a Person's Affiliates),
other than a Permitted Holder, becomes the beneficial owner (as defined
under Rule 13d-3 or any successor rule or regulation promulgated under the
Exchange Act) of 50% or more of the total voting power of the Corporation's
Common Stock, (ii) any Person (including a Person's Affiliates), other than
a Permitted Holder, becomes the beneficial owner of more than 33 1/3% of
the total voting power of the Corporation's Common Stock, and the Permitted
Holders beneficially own, in the aggregate, a lesser percentage of the
total voting power of the Common Stock of the Corporation than such other
Person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors of the Corporation, (iii) there shall be consummated any
consolidation or merger of the Corporation in which the Corporation is not
the continuing or surviving corporation or pursuant to which the Common
Stock of the Corporation would be converted into cash, securities or other
property, other than a merger or consolidation of the Corporation in which
the holders of the Common Stock of the Corporation outstanding immediately
prior to the consolidation or merger hold, directly or indirectly, at least
a majority of the voting power of the Common Stock of the surviving
corporation immediately after such consolidation or merger, (iv) during any
period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of the Corporation (together with
any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Corporation has been
approved by a majority of the directors then still in office who either
were directors at the beginning of such period or whose election or
recommendation for election was previously so approved) cease to constitute
a majority of the Board of Directors of the Corporation or (v) any "change
in control" occurs (as defined at such time) with respect to the Existing
Preferred Stock or any issue of Disqualified Capital Stock.
"Change of Control Date" shall have the meaning ascribed to it in
paragraph (h)(i) hereof.
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"Change of Control Offer" shall have the meaning ascribed to it in
paragraph (h)(i) hereof.
"Change of Control Payment Date" shall have the meaning ascribed to it
in paragraph (h)(ii) hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and
whether voting or non-voting) of, such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Consolidated EBITDA" means, for any Person, for any period, an amount
equal to (a) the sum of Consolidated Net Income for such period, plus, to
the extent deducted from the revenues of such Person in determining
Consolidated Net Income, (i) the provision for taxes for such period based
on income or profits and any provision for taxes utilized in computing a
loss in Consolidated Net Income above, plus (ii) Consolidated Interest
Expense, net of interest income earned on cash or Cash Equivalents for such
period (including, for this purpose, dividends on the Existing Preferred
Stock outstanding on the Issue Date and the Exchangeable Preferred Stock
and any Redeemable Dividends in each case only to the extent that such
dividends were deducted in determining Consolidated Net Income), plus (iii)
depreciation for such period on a consolidated basis, plus (iv)
amortization of intangibles and broadcast program licenses for such period
on a consolidated basis, minus (b) scheduled payments relating to broadcast
program license liabilities, except that with respect to the Corporation
each of the foregoing items shall be determined on a consolidated basis
with respect to the Corporation and its Restricted Subsidiaries only;
provided, however, that, for purposes of calculating Consolidated EBITDA
during any fiscal quarter, cash income from a particular Investment of such
Person shall be included only if cash income has been received by such
Person as a result of the operation of the business in which such
Investment has been made in the ordinary course without giving effect to
any extraordinary unusual and non-recurring gains.
"Consolidated Interest Expense" means, with respect to any Person, for
any period, the aggregate amount of interest which, in conformity with
GAAP, would be set forth opposite
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the caption "interest expense" or any like caption on an income statement
for such Person and its Subsidiaries on a consolidated basis, including,
but not limited to, Redeemable Dividends, whether paid or accrued, on
Subsidiary Preferred Stock, imputed interest included in Capitalized Lease
Obligations, all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing, the
net costs associated with hedging obligations, amortization of other
financing fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount or premium, if any, and all other
non-cash interest expense (other than interest amortized to cost of sales)
plus, without duplication, all net capitalized interest for such period and
all interest incurred or paid under any guarantee of Indebtedness
(including a guarantee of principal, interest or any combination thereof)
of any Person, all time brokerage fees relating to financing of radio or
television stations which the Corporation has an agreement or option to
acquire, plus the amount of all dividends or distributions paid on
Disqualified Capital Stock (other than dividends paid or payable in shares
of Capital Stock of the Corporation).
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the net income (or loss) of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided, however, that (a) the net income of any
Person (the "other Person") in which the Person in question or any of its
Subsidiaries has less than a 100% interest (which interest does not cause
the net income of such other Person to be consolidated into the net income
of the Person in question in accordance with GAAP) shall be included only
to the extent of the amount of dividends or distributions paid to the
Person in question or to the Subsidiary, (b) the net income of any
Subsidiary of the Person in question that is subject to any restriction or
limitation on the payment of dividends or the making of other distributions
(other than pursuant to the Exchange Debentures or the Existing Notes)
shall be excluded to the extent of such restriction or limitation, (c) (i)
the net income of any Person acquired in a pooling of interests transaction
for any period prior to the date of such acquisition and (ii) any net gain
(but not loss) resulting from an Asset Sale by the Person in question or
any of its Subsidiaries other than in the ordinary course of business shall
be excluded, (d) extraordinary, unusual and non-recurring gains and losses
shall be excluded, (e) expenses incurred in 1995 relating to the relocation
of the Corporation's headquarters shall be excluded, (f) losses
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associated with discontinued and terminated operations in an amount not to
exceed $1,000,000 per annum shall be excluded and (g) all non-cash items
(including, without limitation, cumulative effects of changes in GAAP and
equity entitlements granted to employees of the Corporation and its
Restricted Subsidiaries) increasing and decreasing Consolidated Net Income
and not otherwise included in the definition of Consolidated EBITDA shall
be excluded.
"Corporation" shall have the meaning ascribed to it in the first
paragraph of this Resolution.
"Credit Agreement" means the Credit Agreement dated as of December 19,
1995, among the Corporation, the financial institutions party thereto in
their capacities as lenders thereunder and Union Bank, as agent, as the
same may be amended from time to time, and any one or more agreements
evidencing the refinancing, modification, replacement, renewal,
restatement, refunding, deferral, extension, substitution, supplement,
reissuance or resale thereof.
"Cumulative Consolidated EBITDA" means, with respect to any Person, as
of any date of determination, Consolidated EBITDA from [ ], 1996 to
the end of the Corporation's most recently ended full fiscal quarter prior
to such date, taken as a single accounting period.
"Cumulative Consolidated Interest Expense" means, with respect to any
Person, as of any date of determination, Consolidated Interest Expense plus
any cash dividends paid on Senior Securities or Parity Securities not
already reflected in Consolidated Interest Expense that do not require the
approval of the holders of a majority of the shares of Exchangeable
Preferred Stock outstanding to be issued from [ ], 1996 to the end of
the Corporation's most recently ended full fiscal quarter prior to such
date, taken as a single accounting period.
"Disqualified Capital Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures
(excluding any maturity as the result of an optional redemption by the
issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof, in whole or in part, on or prior to the mandatory redemption date
of the Exchangeable Preferred Stock. Without limitation of the foregoing,
Disqualified Capital Stock shall be deemed to
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include (i) any Preferred Stock of a Restricted Subsidiary of the
Corporation, (ii) any Preferred Stock of the Corporation, with respect to
either of which, under the terms of such Preferred Stock, by agreement or
otherwise, such Restricted Subsidiary or the Corporation is obligated to
pay current dividends or distributions in cash during the period prior to
the redemption date of the Exchangeable Preferred Stock; and (iii) as long
as the Exchangeable Preferred Stock remains outstanding, Senior Securities
and Parity Securities; provided, however, that Preferred Stock of the
Corporation or any Restricted Subsidiary thereof that is issued with the
benefit of provision requiring a change of control offer to be made for
such Preferred Stock in the event of a change of control of the Corporation
or Restricted Subsidiary, which provisions have substantially the same
effect as paragraph (h) above, shall not be deemed to be Disqualified
Capital Stock solely by virtue of such provisions; and provided, further,
that the Exchangeable Preferred Stock and the Existing Preferred Stock in
effect on the Issue Date shall not be considered Disqualified Capital
Stock.
"Dividend Default" shall have the meaning ascribed to it in paragraph
(f)(iv) hereof.
"Dividend Payment Date" means April 30 and October 31 of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each Semi-annual Dividend Period.
"Dividend Record Date" means April 15 and October 15 of each year.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Exchange Date" means the date of issuance of any Exchange Debentures
in accordance with paragraph (g) hereof.
"Exchange Debentures" shall have the meaning ascribed to it in
paragraph (g)(i) hereof.
"Exchangeable Preferred Stock" shall have the meaning ascribed to it
in paragraph (a) hereof.
"Exchange Notice" shall have the meaning ascribed to it in paragraph
(g)(ii) hereof.
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"Existing Note Indenture" means the Indenture governing the Existing
Notes as such Indenture may be amended or supplemented from time to time in
accordance with the terms thereof.
"Existing Notes" means the Corporation's 11 5/8% Senior Subordinated
Notes due 2002 as the same may be modified or amended from time to time and
future refinancings thereof.
"Existing Preferred Stock" means the "Junior Cumulative Compounding
Redeemable Preferred Stock" of the Corporation outstanding on the Issue
Date.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time.
"Holder" means a holder of shares of Exchangeable Preferred Stock as
reflected in the stock books of the Corporation.
"incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to
GAAP or otherwise, of any such Indebtedness or other obligation on the
balance sheet of such Person (and "incurrence," "incurred," "incurrable"
and "incurring" shall have meanings correlative to the foregoing); provided
that a change in GAAP that results in an obligation of such Person that
exists at such time becoming Indebtedness shall not be deemed an incurrence
of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any
Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only
to a portion thereof) or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property (excluding, without limitation, any balances that
constitute accounts payable or trade payables and other accrued liabilities
arising in the ordinary course of business, including, without limitation,
any and all programming broadcast obligations) if and to the extent any of
the foregoing indebtedness would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, and shall also include, to
the extent not
31
<PAGE> 33
otherwise included, (i) any Capitalized Lease Obligations, (ii) obligations
secured by a Lien to which the property or assets owned or held by such
Person are subject, whether or not the obligation or obligations secured
thereby shall have been assumed (provided, however, that if such obligation
or obligations shall not have been assumed, the amount of such Indebtedness
shall be deemed to be the lesser of the principal amount of the obligation
or the fair market value of the pledged property or assets), (iii)
guarantees of items of other Persons which would be included within this
definition for such other Persons (whether or not such items would appear
upon the balance sheet of the guarantor), (iv) all obligations for the
reimbursement of any obligor on any letter of credit, banker's acceptance
or similar credit transaction, (v) in the case of the Corporation,
Disqualified Capital Stock of the Corporation or any Restricted Subsidiary
thereof and (vi) obligations of any such Person under any Interest Rate
Agreement applicable to any of the foregoing (if and to the extent such
Interest Rate Agreement obligations would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP). The amount
of Indebtedness of any Person at any date shall be the outstanding balance
at such date of all unconditional obligations as described above and, with
respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, provided that
(i) the amount outstanding at any time of any Indebtedness issued with
original issue discount is the principal amount of such Indebtedness less
the remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP and (ii)
Indebtedness shall not include any liability for federal, state, local or
other taxes. Notwithstanding any other provision of the foregoing
definition, any trade payable arising from the purchase of goods or
materials or for services obtained in the ordinary course of business or
contingent obligations arising out of customary indemnification agreements
with respect to the sale of assets or securities shall not be deemed to be
"Indebtedness" of the Corporation or any Restricted Subsidiaries for
purposes of this definition. Furthermore, guarantees of (or obligations
with respect to letters of credit supporting) Indebtedness otherwise
included in the determination of such amount shall not also be included.
"Indenture" shall have the meaning ascribed to it in paragraph (f)
hereof.
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<PAGE> 34
"Initial Dividend Period" means the dividend period commencing on the
Issue Date and ending on April 30, 1997.
"Interest Rate Agreement" means, for any Person, any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect the party indicated therein
against fluctuations in interest rates.
"inTV" means the Corporation's network of owned, operated or
affiliated television stations dedicated to infomercial programming.
"inTV EBITDA" means Consolidated EBITDA for the Infomall TV Network
determined on a basis consistent with the Corporation's internal financial
statements, generated by stations declared by the Board of Directors as
inTV properties.
"Investment" means, directly or indirectly, any advance, account
receivable (other than an account receivable arising in the ordinary course
of business), loan or capital contribution to (by means of transfers of
property to others, payments for property or services for the account or
use of others or otherwise), the purchase of any stock, bonds, notes,
debentures, partnership or joint venture interests or other securities of,
the acquisition, by purchase or otherwise, of all or substantially all of
the business or assets or stock or other evidence of beneficial ownership
of, any Person or the making of any investment in any Person. Investments
shall exclude extensions of trade credit on commercially reasonable terms
in accordance with normal trade practices and repurchases or redemptions of
the Existing Notes, the Exchange Debentures, the Existing Preferred Stock
or the Exchangeable Preferred Stock by the Corporation.
"Issue Date" means the date of original issuance of the Exchangeable
Preferred Stock.
"Junior Securities" shall have the meaning ascribed to it in paragraph
(b) hereof.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale
or other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
33
<PAGE> 35
"Major Asset Sale" means an Asset Sale or series of related Asset
Sales involving assets with a fair market value in excess of $25,000,000.
"Mandatory Redemption Price" shall have the meaning ascribed to it in
paragraph (e)(ii) hereof.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by
the Corporation, an Asset Sale or a Major Asset Sale, the aggregate net
proceeds received by the Corporation, after payment of expenses,
commissions and the like incurred in connection therewith, whether such
proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the Board of Directors, at the time
of receipt) and (b) in the case of any exchange, exercise, conversion or
surrender of outstanding securities of any kind for or into shares of
Capital Stock of the Corporation which is not Disqualified Capital Stock,
the net book value of such outstanding securities on the date of such
exchange, exercise, conversion or surrender (plus any additional amount
required to be paid by the holder to the Corporation upon such exchange,
exercise, conversion or surrender, less any and all payments made to the
holders, e.g., on account of fractional shares and less all expenses
incurred by the Corporation in connection therewith).
"Net Proceeds Redemption Price" shall have the meaning ascribed to it
in paragraph (e)(i) hereof.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing, or otherwise
relating to, any Indebtedness.
"Officers' Certificate" means a certificate signed by two officers or
by an officer and either an Assistant Treasurer or an Assistant Secretary
of the Corporation which certificate shall include a statement that, in the
opinion of such signers all conditions precedent to be performed by the
Corporation prior to the taking of any proposed action have been taken. In
addition, such certificate shall include (i) a statement that the
signatories have read the relevant covenant or condition, (ii) a brief
statement of the nature and scope of such examination or investigation upon
which the statements are based, (iii) a statement that, in the opinion of
such signatories, they have made such examination or investigation as is
reasonably necessary to
34
<PAGE> 36
express an informed opinion and (iv) a statement as to whether or not, in
the opinion of the signatories, such relevant conditions or covenants have
been complied with.
"Opinion of Counsel" means an opinion of counsel that, in such
counsel's opinion, all conditions precedent to be performed by the
Corporation prior to the taking of any proposed action have been taken.
Such opinion shall also include the statements called for in the second
sentence under "Officers' Certificate".
"Optional Redemption Price" shall have the meaning ascribed to it in
paragraph (e)(i) hereof.
"Parity Securities" shall have the meaning ascribed to it in paragraph
(b) hereof.
"Permitted Holders" means collectively Lowell W. Paxson, his spouse,
children or other lineal descendants (whether adoptive or biological) and
any revocable or irrevocable inter vivos or testamentary trust or the
probate estate of any such individual, so long as one or more of the
foregoing individuals is the principal beneficiary of such trust or probate
estate.
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness under the Exchange Debentures and the related
guarantees, including any Exchange Debentures issued in accordance
with the Exchange Indenture as payment of interest on the Exchange
Debentures;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed
$25,000,000;
(iii) all other Indebtedness of the Corporation and its Restricted
Subsidiaries outstanding on the Issue Date, including, without
limitation, the Existing Notes, reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(iv) Obligations under Interest Rate Agreements of the Corporation
covering Indebtedness of the Corporation or any of its Restricted
Subsidiaries;
35
<PAGE> 37
provided, however, that such Interest Rate Agreements are entered into
to protect the Corporation and its Restricted Subsidiaries from
fluctuations in interest rates on Indebtedness incurred in accordance
with this Resolution or the Exchange Indenture to the extent the
notional principal amount of such Interest Rate Agreement does not
exceed the principal amount of the Indebtedness to which such Interest
Rate Agreement relates;
(v) Indebtedness of a Restricted Subsidiary of the Corporation to the
Corporation or to a Restricted Subsidiary of the Corporation for so
long as such Indebtedness is held by the Corporation or a Restricted
Subsidiary of the Corporation, in each case subject to no Lien held by
a Person other than the Corporation or a Restricted Subsidiary of the
Corporation; provided that if as of any date any Person other than the
Corporation or a Restricted Subsidiary of the Corporation owns or
holds any such Indebtedness or holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness
not constituting Permitted Indebtedness by the issuer of such
Indebtedness;
(vi) Indebtedness of the Corporation to a Restricted Subsidiary of
the Corporation for so long as such Indebtedness is held by a
Restricted Subsidiary of the Corporation, in each case subject to no
Lien; provided that (a) any Indebtedness of the Corporation to any
Restricted Subsidiary of the Corporation is unsecured and
subordinated, pursuant to a written agreement, to the Corporation's
Obligations under the Indenture and the Exchange Debentures and (b) if
as of any date any Person other than a Restricted Subsidiary of the
Corporation owns or holds any such Indebtedness or any Person holds a
Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by
the Corporation;
(vii) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which
Indebtedness and Capitalized Lease Obligations do not in the
36
<PAGE> 38
aggregate exceed 5% of the Corporation's consolidated total assets at
any one time;
(viii) Refinancing Indebtedness; and
(ix) additional Indebtedness of the Corporation in an aggregate
principal amount not to exceed $10,000,000 at any one time
outstanding.
"Permitted Investments" means, for any Person, Investments made on or
after the Issue Date consisting of:
(i) Investments by the Corporation, or by a Restricted Subsidiary
thereof, in the Corporation or a Restricted Subsidiary;
(ii) Cash Equivalents;
(iii) Investments by the Corporation, or by a Restricted Subsidiary
thereof, in a Person (or in all or substantially all of the business
or assets of a Person) if as a result of such Investment (a) such
Person becomes a Restricted Subsidiary of the Corporation, (b) such
Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, the Corporation or a Restricted Subsidiary thereof or
(c) such business or assets are owned by the Corporation or a
Restricted Subsidiary;
(iv) reasonable and customary loans made to employees not to exceed
$500,000 to any employee, and not to exceed $5,000,000 in the
aggregate at any one time outstanding;
(v) an Investment that is made by the Corporation or a Restricted
Subsidiary thereof in the form of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities that are
issued by a third party to the Corporation or a Restricted Subsidiary
solely as partial consideration for the consummation of an Asset Sale;
(vi) time brokerage and other similar agreements under which
separately owned and licensed broadcast properties enter into
cooperative
37
<PAGE> 39
arrangements and which may include an option to acquire the broadcast
property at a future date;
(vii) accounts receivable of the Corporation and its Restricted
Subsidiaries generated in the ordinary course of business;
(viii) loans and guarantees of loans by third-party lenders to third
parties in connection with the acquisition of media properties,
secured by substantially all of such Person's assets (to the extent
permitted by Federal Communications Commission rules), which are made
in conjunction with the execution of a time brokerage agreement;
(ix) options on media properties having an exercise price of an
amount not in excess of $100,000 plus the forgiveness of any loan
referred to in clause (viii) above entered into in connection with the
execution of time brokerage agreements; and
(x) additional Investments of the Corporation and its Restricted
Subsidiaries from time to time of an amount not to exceed $75,000,000.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"Public Equity Offering" means a public offering by the Corporation of
shares of its Common Stock (however designated and whether voting or
non-voting) and any and all rights, warrants or options to acquire such
Common Stock.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the
cost of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection
therewith.
38
<PAGE> 40
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Redeemable Dividend" means, for any dividend or distribution with
regard to Disqualified Capital Stock, the quotient of the dividend or
distribution divided by the difference between one and the maximum
statutory federal income tax rate (expressed as a decimal number between 1
and 0) then applicable to the issuer of such Disqualified Capital Stock.
"Redemption Date", with respect to any shares of Exchangeable
Preferred Stock, means the date on which such shares of Exchangeable
Preferred Stock are redeemed by the Corporation.
"Redemption Notice" shall have the meaning ascribed to it in paragraph
(e)(iii) hereof.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire,
or to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Corporation or
any Restricted Subsidiary of the Corporation of Indebtedness incurred in
accordance with paragraph (l)(i) above, in each case that does not (1)
result in an increase in the aggregate principal amount of Indebtedness of
such Person as of the date of such proposed Refinancing (plus the amount of
any premium required to be paid under the terms of the instrument governing
such Indebtedness and plus the amount of reasonable expenses incurred by
the Corporation in connection with such Refinancing) or (2) create
Indebtedness with (A) a Weighted Average Life to Maturity that is less than
the Weighted Average Life to Maturity of the Indebtedness being Refinanced
or (B) a final maturity earlier than the final maturity of the Indebtedness
being Refinanced; provided that (x) if such Indebtedness being Refinanced
is Indebtedness of the Corporation, then such Refinancing Indebtedness
shall be Indebtedness solely of the Corporation and (y) if such
Indebtedness being Refinanced is subordinate or junior to the Exchange
Debentures, then such Refinancing Indebtedness shall be subordinate to the
Exchange Debentures at least to the same extent and in the same manner as
the Indebtedness being Refinanced.
39
<PAGE> 41
"Restricted Payment" means (i) the declaration or payment of any
dividend or the making of any other distribution (other than dividends or
distributions payable in Qualified Capital Stock) on shares of the
Corporation's Parity Securities or Junior Securities, (ii) any purchase,
redemption, retirement or other acquisition for value of any Parity
Securities or Junior Securities of the Corporation, or any warrants, rights
or options to acquire shares of Parity Securities or Junior Securities of
the Corporation, other than through the exchange of such Parity Securities
or Junior Securities or any warrants, rights or options to acquire shares
of any class of such Parity Securities or Junior Securities for Qualified
Capital Stock or warrants, rights or options to acquire Qualified Capital
Stock, (iii) the making of any Investment (other than a Permitted
Investment), (iv) any designation of a Restricted Subsidiary as an
Unrestricted Subsidiary on the basis of the fair market value of such
Subsidiary utilizing standard valuation methodologies and approved by the
Board of Directors and (v) forgiveness of any Indebtedness of an Affiliate
of the Corporation to the Corporation or a Restricted Subsidiary.
"Restricted Subsidiary" means a Subsidiary of the Corporation other
than an Unrestricted Subsidiary and includes all of the Subsidiaries of the
Corporation existing as of the Issue Date. The Board of Directors of the
Corporation may designate any Unrestricted Subsidiary or any Person that is
to become a Subsidiary as a Restricted Subsidiary if immediately after
giving effect to such action (and treating any Acquired Indebtedness as
having been incurred at the time of such action), the Corporation could
have incurred at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to paragraph (l)(i) above.
"Semi-Annual Dividend Period" shall mean the semi-annual period
commencing on each May 1 and November 1 and ending on the next succeeding
Dividend Payment Date, respectively.
"Senior Debt" means, the principal of and premium, if any, and
interest (including, without limitation, interest accruing or that would
have accrued but for the filing of a bankruptcy, reorganization or other
insolvency proceeding whether or not such interest constitutes an allowed
claim in such proceeding) on, and any and all other fees, expense
reimbursement obligations, indemnities and other amounts due pursuant to
their terms of all agreements, documents and instruments providing for,
creating, securing or evidencing
40
<PAGE> 42
or otherwise entered into in connection with (a) all Indebtedness of the
Corporation owed to lenders under the Credit Agreement, (b) all obligations
of the Corporation with respect to any Interest Rate Agreement, (c) all
obligations of the Corporation to reimburse any bank or other person in
respect of amounts paid under letters of credit, acceptances or other
similar instruments, (d) all other Indebtedness of the Corporation which
does not provide that it is to rank pari passu with or subordinate to the
Exchange Debentures and (e) all deferrals, renewals, extensions and
refundings of, and amendments, modifications and supplements to, any of the
Senior Debt described above. Notwithstanding anything to the contrary in
the foregoing, Senior Debt will not include (i) Indebtedness of the
Corporation to any of its Subsidiaries, (ii) Indebtedness represented by
the Exchange Debentures, (iii) any Indebtedness which by the express terms
of the agreement or instrument creating, evidencing or governing the same
is junior or subordinate in right of payment to any item of Senior Debt,
(iv) any trade payable arising from the purchase of goods or materials or
for services obtained in the ordinary course of business or (v)
Indebtedness incurred in violation of the Exchange Indenture except if such
Indebtedness was incurred under the Credit Agreement based on financial
information and certificates provided by responsible officers of the
Corporation and relied on in good faith by the lenders thereunder in which
event such Indebtedness shall be deemed to have been incurred in compliance
with the Indenture and constitute Senior Debt.
"Senior Securities" shall have the meaning ascribed to it in paragraph
(b) hereof.
"Subsidiary", with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such
Person or (ii) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person.
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Corporation which is classified
after the Issue Date as an Unrestricted Subsidiary by a resolution adopted
by the Board of Directors of the Corporation; provided that a Subsidiary
organized or acquired after the Issue Date may be so classified as an
Unrestricted Subsidiary only if such
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<PAGE> 43
classification is in compliance with paragraph (l)(ii) above. The Holders
shall be given prompt notice by the Corporation of each resolution adopted
by the Board of Directors of the Corporation under this provision, together
with a copy of each such resolution adopted.
"Voting Rights Triggering Event" shall have the meaning ascribed to it
in paragraph (f)(iv) hereof.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount of such Indebtedness into (b)
the total of the product obtained by multiplying (i) the amount of each
then remaining installment, sinking fund, serial maturity or other required
payment of principal, including payment at final maturity, in respect
thereof, by (ii) the number of years (calculated to the nearest
one-twelfth) which will elapse between such date and the making of such
payment.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary all of the
outstanding voting securities (other than directors' qualifying shares) of
which are owned, directly or indirectly, by the Corporation.
IN WITNESS WHEREOF, said Paxson Communications Corporation has caused this
Certificate to be signed by [ ], its [ ], this [ ] day of
September, 1996.
PAXSON COMMUNICATIONS CORPORATION
By:
-----------------------------
Name:
Title:
42
<PAGE> 1
EXHIBIT 4.2
<PAGE> 2
EXHIBIT 4.2
------------------------------------------------------------------------------
------------------------------------------------------------------------------
PAXSON COMMUNICATIONS CORPORATION, as Issuer,
ITS DIRECT AND INDIRECT SUBSIDIARIES, as Guarantors,
and
THE BANK OF NEW YORK, as Trustee
------------------------
INDENTURE
Dated as of , 1996
------------------------
$[ ]
% Exchange Debentures due 2006
------------------------------------------------------------------------------
------------------------------------------------------------------------------
<PAGE> 3
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
------- ---------
<S> <C>
310 (a)(1) ..................................................... 7.10
(a)(2) ..................................................... 7.10
(a)(3) ..................................................... N.A.
(a)(4) ..................................................... N.A.
(b) ..................................................... 7.08; 7.10;
12.02
(b)(1) ..................................................... 7.10
(b)(9) ..................................................... 7.10
(c) ..................................................... N.A.
311 (a) ..................................................... 7.11
(b) ..................................................... 7.11
(c) ..................................................... N.A.
312 (a) ..................................................... 2.05
(b) ..................................................... 12.03
(c) ..................................................... 12.03
313 (a) ..................................................... 7.06
(b)(1) ..................................................... 7.06
(b)(2) ..................................................... 7.06
(c) ..................................................... 12.02
(d) ..................................................... 7.06
314 (a) ..................................................... 4.02; 4.04
12.02
(b) ..................................................... N.A.
(c)(1) ..................................................... 12.04; 12.05
(c)(2) ..................................................... 12.04; 12.05
(c)(3) ..................................................... N.A.
(d) ..................................................... N.A.
(e) ..................................................... 12.05
(f) ..................................................... N.A.
315 (a) ..................................................... 7.01; 7.02
(b) ..................................................... 7.05; 12.02
(c) ..................................................... 7.01
(d) ..................................................... 6.05; 7.01;
7.02
(e) ..................................................... 6.11
316 (a) (last sentence) ........................................ 12.06
(a)(1)(A) .................................................. 6.05
(a)(1)(B) .................................................. 6.04
(a)(2) ..................................................... 8.02
(b) ..................................................... 6.07
(c) ..................................................... 8.04
317 (a)(1) ..................................................... 6.08
(a)(2) ..................................................... 6.09
(b) ..................................................... 7.12
318 (a) ..................................................... 12.01
</TABLE>
N.A. means Not Applicable
____________________
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to
be a part of the Indenture.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C>
Section 1.01. Definitions ...........................................
Section 1.02. Other Definitions .....................................
Section 1.03. Incorporation by Reference of Trust
Indenture Act .......................................
Section 1.04. Rules of Construction .................................
ARTICLE 2
THE SECURITIES
Section 2.01. Dating; Incorporation of Form in
Indenture ...........................................
Section 2.02. Execution and Authentication ..........................
Section 2.03. Registrar and Paying Agent ............................
Section 2.04. Paying Agent to Hold Money in Trust ...................
Section 2.05. Securityholder Lists ..................................
Section 2.06. Transfer and Exchange .................................
Section 2.07. Replacement Securities ................................
Section 2.08. Outstanding Securities ................................
Section 2.09. Temporary Securities ..................................
Section 2.10. Cancellation ..........................................
Section 2.11. Defaulted Interest ....................................
Section 2.12. Deposit of Moneys .....................................
Section 2.13. CUSIP Number ..........................................
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee ....................................
Section 3.02. Selection by Trustee of Securities to
Be Redeemed .........................................
Section 3.03. Notice of Redemption ..................................
Section 3.04. Effect of Notice of Redemption ........................
Section 3.05. Deposit of Redemption Price ...........................
Section 3.06. Securities Redeemed in Part ...........................
ARTICLE 4
COVENANTS
Section 4.01. Payment of Securities .................................
Section 4.02. SEC Reports ...........................................
Section 4.03. Waiver of Stay, Extension or Usury Laws ...............
Section 4.04. Compliance Certificate ................................
Section 4.05. Taxes .................................................
</TABLE>
-i-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4.06. Limitation on Incurrence of Additional
Indebtedness ........................................
Section 4.07. Limitation on Preferred Stock of
Restricted Subsidiaries .............................
Section 4.08. Limitation on Restricted Payments .....................
Section 4.09. Limitation on Certain Asset Sales .....................
Section 4.10. Limitation on Transactions with
Affiliates ..........................................
Section 4.11. Limitation on Creation of Subsidiaries ................
Section 4.12. Limitation on Other Senior Subordinated
Debt ................................................
Section 4.13. Payments for Consent ..................................
Section 4.14. Corporate Existence ...................................
Section 4.15. Change of Control .....................................
Section 4.16. Maintenance of Office or Agency .......................
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger and
Sale of Assets ......................................
Section 5.02. Successor Person Substituted ..........................
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default .....................................
Section 6.02. Acceleration ..........................................
Section 6.03. Other Remedies ........................................
Section 6.04. Waiver of Past Defaults and Events of
Default .............................................
Section 6.05. Control by Majority ...................................
Section 6.06. Limitation on Suits ...................................
Section 6.07. Rights of Holders to Receive Payment ..................
Section 6.08. Collection Suit by Trustee ............................
Section 6.09. Trustee May File Proofs of Claim ......................
Section 6.10. Priorities ............................................
Section 6.11. Undertaking for Costs .................................
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee .....................................
Section 7.02. Rights of Trustee .....................................
Section 7.03. Individual Rights of Trustee ..........................
Section 7.04. Trustee's Disclaimer ..................................
Section 7.05. Notice of Defaults ....................................
Section 7.06. Reports by Trustee to Holders .........................
Section 7.07. Compensation and Indemnity ............................
</TABLE>
-ii-
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 7.08. Replacement of Trustee ................................
Section 7.09. Successor Trustee by Consolidation,
Merger or Conversion ................................
Section 7.10. Eligibility; Disqualification .........................
Section 7.11. Preferential Collection of Claims
Against Company .....................................
Section 7.12. Paying Agents .........................................
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders ............................
Section 8.02. With Consent of Holders ...............................
Section 8.03. Compliance with Trust Indenture Act ...................
Section 8.04. Revocation and Effect of Consents .....................
Section 8.05. Notation on or Exchange of Securities .................
Section 8.06. Trustee to Sign Amendments, etc. ......................
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture ................................
Section 9.02. Legal Defeasance ......................................
Section 9.03. Covenant Defeasance ...................................
Section 9.04. Conditions to Defeasance or Covenant
Defeasance ..........................................
Section 9.05. Deposited Money and U.S. Government
Obligations to Be Held in Trust; Other
Miscellaneous Provisions ............................
Section 9.06. Reinstatement .........................................
Section 9.07. Moneys Held by Paying Agent ...........................
Section 9.08. Moneys Held by Trustee ................................
ARTICLE 10
GUARANTEE OF SECURITIES
Section 10.01. Guarantee .............................................
Section 10.02. Execution and Delivery of Guarantees ..................
Section 10.03. Limitation of Guarantee ...............................
Section 10.04. Additional Guarantors .................................
Section 10.05. Release of Guarantor ..................................
Section 10.06. Guarantee Obligations Subordinated to
Guarantor Senior Debt ...............................
Section 10.07. Payment Over of Proceeds upon
Dissolution, etc., of a Guarantor ...................
Section 10.08. Suspension of Guarantee Obligations When
Guarantor Senior Debt in Default ....................
Section 10.09. Subrogation to Rights of Holders of
Guarantor Senior Debt ...............................
</TABLE>
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Section 10.10. Guarantee Subordination Provisions
Solely to Define Relative Rights ....................
Section 10.11. Application of Certain Article 11
Provisions ..........................................
ARTICLE 11
SUBORDINATION OF SECURITIES
Section 11.01. Securities Subordinate to Senior Debt .................
Section 11.02. Payment Over of Proceeds upon
Dissolution, etc. ...................................
Section 11.03. Suspension of Payment When Senior Debt
in Default ..........................................
Section 11.04. Trustee's Relation to Senior Debt .....................
Section 11.05. Subrogation to Rights of Holders of
Senior Debt .........................................
Section 11.06. Provisions Solely to Define Relative
Rights ..............................................
Section 11.07. Trustee to Effectuate Subordination ...................
Section 11.08. No Waiver of Subordination Provisions .................
Section 11.09. Notice to Trustee .....................................
Section 11.10. Reliance on Judicial Order or
Certificate of Liquidating Agent ....................
Section 11.11. Rights of Trustee as a Holder of Senior
Debt; Preservation of Trustee's Rights ..............
Section 11.12. Article Applicable to Paying Agents ...................
Section 11.13. No Suspension of Remedies .............................
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls ..........................
Section 12.02. Notices ...............................................
Section 12.03. Communications by Holders with Other
Holders .............................................
Section 12.04. Certificate and Opinion as to
Conditions Precedent ................................
Section 12.05. Statements Required in Certificate and
Opinion .............................................
Section 12.06. When Treasury Securities Disregarded ..................
Section 12.07. Rules by Trustee and Agents ...........................
Section 12.08. Business Days; Legal Holidays .........................
Section 12.09. Governing Law .........................................
Section 12.10. No Adverse Interpretation of Other
Agreements ..........................................
Section 12.11. No Recourse Against Others ............................
Section 12.12. Successors ............................................
Section 12.13. Multiple Counterparts .................................
Section 12.14. Table of Contents, Headings, etc. .....................
</TABLE>
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Section 12.15. Separability ..........................................
EXHIBITS
Exhibit A. Form of Security ...................................... A-1
</TABLE>
-v-
<PAGE> 9
INDENTURE, dated as of , 1996, among PAXSON COMMUNICATIONS
CORPORATION, a Delaware corporation, as Issuer (the "Company"), its direct and
indirect subsidiaries (each individually, a "Guarantor" and, collectively, the
"Guarantors") and THE BANK OF NEW YORK, a New York banking corporation, as
Trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Company's % Exchange
Debentures due 2006 (the "Securities").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions.
"Acquired Indebtedness" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person.
"Adjusted EBITDA" means, for any Person, prior to the date specified by the
Company in a written notice delivered to the Trustee of the Company's election
of its one-time right to change the calculation of Adjusted EBITDA (the
"Calculation Change Notice"), the sum of (a) Consolidated EBITDA of such Person
and its Restricted Subsidiaries for the four most recent fiscal quarters for
which internal financial statements are available, minus inTV EBITDA for the
most recent four fiscal quarter period, and (b) inTV EBITDA for the most recent
quarterly period, multiplied by four, and, subsequent to the effective date
specified by the Company in its Calculation Change Notice, the Consolidated
EBITDA of such Person and its Restricted Subsidiaries for the four most recent
fiscal quarters for which internal financial statements are available.
"Adjusted Net Asset" of a Guarantor at any date shall mean the lesser of
the amount by which (x) the fair value of the property of such Guarantor exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities),
but excluding liabilities under the Guarantee, of such Guarantor at such date
and (y) the present fair ratable value of
<PAGE> 10
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the assets of such Guarantor at such date exceeds the amount that will be
required to pay the probable liability of such Guarantor on its debts (after
giving effect to all other fixed and contingent liabilities and after giving
effect to any collection from any Subsidiary of such Guarantor in respect of the
obligations of such Subsidiary under the Guarantee), excluding Indebtedness in
respect of the Guarantee, as they become absolute and matured.
"Affiliate" means, for any Person, a Person who, directly or indirectly,
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such other Person. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. With respect to the
Company, Affiliate will also include any Permitted Holders or Persons controlled
by the Permitted Holders.
"Agent" means any Registrar, Paying Agent, co-registrar or agent for
service of notices and demands.
"Asset Sale" means the sale, transfer or other disposition (other than to
the Company or any of its Restricted Subsidiaries) in any single transaction or
series of related transactions involving assets with a fair market value in
excess of $2,000,000 of (a) any Capital Stock of or other equity interest in any
Restricted Subsidiary of the Company other than in a transaction where the
Company or a Restricted Subsidiary receives therefor one or more media
properties with a fair market value equal to the fair market value of the
Capital Stock issued, transferred or disposed of by the Company or the
Restricted Subsidiary (with such fair market values being determined by the
Board of Directors of the Company), (b) all or substantially all of the assets
of the Company or of any Restricted Subsidiary thereof, (c) real property or (d)
all or substantially all of the assets of any media property, or part thereof,
owned by the Company or any Restricted Subsidiary thereof, or a division, line
of business or comparable business segment of the Company or any Restricted
Subsidiary thereof; provided that Asset Sales shall not include sales, leases,
conveyances, transfers or other dispositions to the Company or to a Restricted
Subsidiary or to any other Person if after giving effect to such sale, lease,
conveyance, transfer or other disposition such other Person becomes a Restricted
Subsidiary, or the sale of all or substantially all of the assets of the Company
or a Restricted
<PAGE> 11
-3-
Subsidiary in a transaction complying with Section 5.01, in which case only the
assets not so sold shall be deemed an Asset Sale.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Company or any Restricted Subsidiary from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such
Asset Sale, (b) payment of all brokerage commissions, underwriting, accounting,
legal and other fees and expenses related to such Asset Sale, (c) provision for
minority interest holders in any Restricted Subsidiary as a result of such
Asset Sale and (d) deduction of appropriate amounts to be provided by the
Company or a Restricted Subsidiary as a reserve, in accordance with GAAP,
against any liabilities associated with the assets sold or disposed of in such
Asset Sale and retained by the Company or a Restricted Subsidiary after such
Asset Sale, including, without limitation, pension and other post-employment
benefit liabilities and liabilities related to environmental matters or against
any indemnification obligations associated with the assets sold or disposed of
in such Asset Sale, and (ii) promissory notes and other non-cash consideration
received by the Company or any Restricted Subsidiary from such Asset Sale or
other disposition upon the liquidation or conversion of such notes or non-cash
consideration into cash.
"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sales that have not been applied
in accordance with clause (iii)(a), (b) or (c) and which have not yet been the
subject of an Excess Proceeds Offer in accordance with clause (iii)(d) of
Section 4.09(a).
"Board of Directors" means the board of directors of the Company or a
Guarantor, as appropriate, or any committee authorized to act therefor.
"Board Resolution" means a copy of a resolution certified pursuant to an
Officers' Certificate to have been duly adopted by the Board of Directors of
the Company or a Guarantor, as appropriate, and to be in full force and effect,
and delivered to the Trustee.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated) of capital stock, including each class of common stock and
preferred stock of such
<PAGE> 12
-4-
Person, and (ii) with respect to any Person that is not a corporation, any and
all partnership or other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligation of
such Person to pay rent or other amounts under a lease to which such Person is
a party that is required to be classified and accounted for as capital lease
obligations under GAAP and, for purposes of this definition, the amount of such
obligations at any date shall be the capitalized amount of such obligations at
such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250,000,000; (v) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (iv)
above; and (vi) investments in money market funds which invest substantially
all their assets in securities of the types described in clauses (i) through
(v) above.
"Change of Control" of the Company will be deemed to have occurred at such
time as (i) any Person (including a Person's Affiliates), other than a
Permitted Holder, becomes the beneficial owner (as defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of 50% or
more of the total voting power of the Company's Common Stock, (ii) any Person
(including a Person's Affiliates), other than a Permitted Holder, becomes the
beneficial owner of more than 33 1/3% of the total voting power of the
Company's Common Stock,
<PAGE> 13
-5-
and the Permitted Holders beneficially own, in the aggregate, a lesser
percentage of the total voting power of the Common Stock of the Company than
such other Person and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the
Board of Directors of the Company, (iii) there shall be consummated any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which the Common Stock of
the Company would be converted into cash, securities or other property, other
than a merger or consolidation of the Company in which the holders of the
Common Stock of the Company outstanding immediately prior to the consolidation
or merger hold, directly or indirectly, at least a majority of the voting power
of the Common Stock of the surviving corporation immediately after such
consolidation or merger, (iv) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by
such Board of Directors or whose nomination for election by the shareholders of
the Company has been approved by a majority of the directors then still in
office who either were directors at the beginning of such period or whose
election or recommendation for election was previously so approved) cease to
constitute a majority of the Board of Directors of the Company or (v) any
"change in control" occurs (as defined at such time) with respect to the
Existing Preferred Stock or any issue of Disqualified Capital Stock.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of, such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Company" means the party named as such in the first paragraph of this
Indenture until a successor replaces such party pursuant to Article 5 of this
Indenture and thereafter means the successor and any other obligor on the
Securities.
"Company Request" means any written request signed in the name of the
Company by the Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer or the Treasurer and attested to by the Secretary or
any Assistant Secretary of the Company.
"Consolidated EBITDA" means, for any Person, for any period, an amount
equal to (a) the sum of Consolidated Net Income for such period, plus, to the
extent deducted from the revenues
<PAGE> 14
-6-
of such Person in determining Consolidated Net Income, (i) the provision for
taxes for such period based on income or profits and any provision for taxes
utilized in computing a loss in Consolidated Net Income above, plus (ii)
Consolidated Interest Expense, net of interest income earned on cash or Cash
Equivalents for such period, (including, for this purpose, dividends on the
Existing Preferred Stock and the New Preferred Stock outstanding on the Issue
Date and any Redeemable Dividends in each case only to the extent that such
dividends were deducted in determining Consolidated Net Income), plus (iii)
depreciation for such period on a consolidated basis, plus (iv) amortization of
intangibles and broadcast program licenses for such period on a consolidated
basis, minus (b) scheduled payments relating to broadcast program license
liabilities, except that with respect to the Company each of the foregoing
items shall be determined on a consolidated basis with respect to the Company
and its Restricted Subsidiaries only; provided, however, that, for purposes of
calculating Consolidated EBITDA during any fiscal quarter, cash income from a
particular Investment of such Person shall be included only if cash income has
been received by such Person as a result of the operation of the business in
which such Investment has been made in the ordinary course without giving
effect to any extraordinary, unusual and non-recurring gains.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like caption on an
income statement for such Person and its Subsidiaries on a consolidated basis,
including, but not limited to, Redeemable Dividends, whether paid or accrued,
on Subsidiary Preferred Stock, imputed interest included in Capitalized Lease
Obligations, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, the net costs
associated with hedging obligations, amortization of other financing fees and
expenses, the interest portion of any deferred payment obligation, amortization
of discount or premium, if any, and all other non-cash interest expense (other
than interest amortized to cost of sales) plus, without duplication, all net
capitalized interest for such period and all interest incurred or paid under
any guarantee of Indebtedness (including a guarantee of principal, interest or
any combination thereof) of any Person, all time brokerage fees relating to
financing of radio or television stations which the Company has an agreement or
option to acquire, plus the amount of all dividends or distributions paid on
Disqualified Capital Stock (other than dividends paid or payable in shares of
Capital Stock of the Company).
<PAGE> 15
-7-
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the net income (or loss) of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that (a) the net income of any Person (the "other
Person") in which the Person in question or any of its Subsidiaries has less
than a 100% interest (which interest does not cause the net income of such
other Person to be consolidated into the net income of the Person in question
in accordance with GAAP) shall be included only to the extent of the amount of
dividends or distributions paid to the Person in question or to the Subsidiary,
(b) the net income of any Subsidiary of the Person in question that is subject
to any restriction or limitation on the payment of dividends or the making of
other distributions (other than pursuant to the Securities or the 11 5/8%
Notes) shall be excluded to the extent of such restriction or limitation,
(c)(i) the net income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition and (ii) any
net gain (but not loss) resulting from an Asset Sale by the Person in question
or any of its Subsidiaries other than in the ordinary course of business shall
be excluded, (d) extraordinary, unusual and non-recurring gains and losses
shall be excluded, (e) expenses incurred in 1995 relating to the relocation of
the Company's headquarters shall be excluded, (f) losses associated with
discontinued and terminated operations in an amount not to exceed $1,000,000
per annum shall be excluded and (g) all non-cash items (including, without
limitation, cumulative effects of changes in GAAP and equity entitlements
granted to employees of the Company and its Restricted Subsidiaries) increasing
and decreasing Consolidated Net Income and not otherwise included in the
definition of Consolidated EBITDA shall be excluded.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of execution of this Indenture is located at 101
Barclay Street, Floor 21 West, New York, New York 10286.
"Credit Agreement" means the Credit Agreement dated as of December 19,
1995, among the Company, the financial institutions party thereto in their
capacities as lenders thereunder and Union Bank, as agent, as the same may be
amended from time to time, and any one or more agreements evidencing the
refinancing, modification, replacement, renewal, restatement, refunding,
deferral, extension, substitution, supplement, reissuance or resale thereof.
<PAGE> 16
-8-
"Cumulative Consolidated EBITDA" means, with respect to any Person, as of
any date of determination, Consolidated EBITDA from [ ], 1996 to the
end of the Company's most recently ended full fiscal quarter prior to such
date, taken as a single accounting period.
"Cumulative Consolidated Interest Expense" means, with respect to any
Person, as of any date of determination, Consolidated Interest Expense from [
], 1996 to the end of the Company's most recently ended full fiscal quarter
prior to such date, taken as a single accounting period.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Depository" means, with respect to the Securities issued in the form of
one or more Global Securities, The Depository Trust Company or another Person
designated as Depository by the Company, which Person must be a clearing agency
registered under the Exchange Act.
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Credit Agreement and (ii) any other Indebtedness constituting Senior Debt
which, at the time of determination, has an aggregate principal amount of at
least $25,000,000 (or accreted value in the case of Indebtedness issued at a
discount) and is specifically designated in the instrument evidencing such
Senior Debt as "Designated Senior Debt" by the Company.
"Disqualified Capital Stock" means any Capital Stock which, by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable), or upon the happening of any event, matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof (except in each case,
upon the occurrence of a Change of Control), in whole or in part, on or prior
to the final maturity date of the Securities. Without limitation of the
foregoing, Disqualified Capital Stock shall be deemed to include (i) any
Preferred Stock of a Restricted Subsidiary of the Company and (ii) any
Preferred Stock of the Company, with respect to either of which, under the
terms of such Preferred Stock, by agreement or otherwise, such Restricted
Subsidiary or the Company is obligated to pay current dividends or
distributions in cash during the period prior to the redemption date of the New
<PAGE> 17
-9-
Preferred Stock or the maturity date of the Securities; provided, however, that
Preferred Stock of the Company or any Restricted Subsidiary thereof that is
issued with the benefit of provisions requiring a change of control offer to be
made for such Preferred Stock in the event of a change of control of the Company
or Restricted Subsidiary, which provisions have substantially the same effect as
the provisions of Section 4.15, shall not be deemed to be Disqualified Capital
Stock solely by virtue of such provisions; and provided, further, that the New
Preferred Stock and the Existing Preferred Stock in effect on the Issue Date
shall not be considered Disqualified Capital Stock.
"11 5/8% Notes" means the Company's 11 5/8% Senior Subordinated Securities
due 2002.
"11 5/8% Notes Indenture" means the indenture governing the 11 5/8% Notes,
dated as of September 28, 1995 among the Company, the guarantors named therein
and The Bank of New York, as trustee.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Date" means the date of original issuance of the Securities.
"Existing Preferred Stock" means the Company's Junior Cumulative
Compounding Redeemable Preferred Stock outstanding on the date of this
Indenture.
"FCC" means the United States Federal Communications Commission as
constituted from time to time or any successor performing substantially the
same functions.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
"Guarantee" means the guarantee of the Obligations of the Company with
respect to the Securities by each Guarantor pursuant to the terms of Article 10
hereof.
"Guarantor" means (i) each of the Company's Subsidiaries in existence on
the Issue Date and (ii) each of the Company's Restricted Subsidiaries that in
the future executes a supplemental indenture in which such Restricted
Subsidiary agrees to be bound by the terms of this Indenture as a Guarantor;
provided that any Person constituting a Guarantor as described
<PAGE> 18
-10-
above shall cease to constitute a Guarantor when its respective Guarantee is
released in accordance with the terms of this Indenture.
"Guarantor Senior Debt" means the principal of and premium, if any, and
interest (including, without limitation, interest accruing or that would have
accrued but for the filing of a bankruptcy, reorganization or other insolvency
proceeding whether or not such interest constitutes an allowed claim in such
proceeding) on, and any and all other fees, expense reimbursement obligations,
indemnities and other amounts due pursuant to the terms of all agreements,
documents and instruments providing for, creating, securing or evidencing or
otherwise entered into in connection with, (a) Guarantor's direct incurrence of
any Indebtedness or its guarantee of all Indebtedness of the Company or any
Restricted Subsidiaries, in each case, owed to lenders under the Credit
Agreement, (b) all obligations of such Guarantor with respect to any Interest
Rate Agreement, (c) all obligations of such Guarantor to reimburse any bank or
other person in respect of amounts paid under letters of credit, acceptances or
other similar instruments, (d) all other Indebtedness of such Guarantor which
does not provide that it is to rank pari passu with or subordinate to the
Guarantees and (e) all deferrals, renewals, extensions and refundings of, and
amendments, modifications and supplements to, any of the Guarantor Senior Debt
described above. Notwithstanding anything to the contrary in the foregoing,
Guarantor Senior Debt will not include (i) Indebtedness of such Guarantor to
any of its Subsidiaries, (ii) Indebtedness represented by the Guarantees, (iii)
any Indebtedness which by the express terms of the agreement or instrument
creating, evidencing or governing the same is junior or subordinate in right of
payment to any item of Guarantor Senior Debt, (iv) any trade payable arising
from the purchase of goods or materials or for services obtained in the
ordinary course of business or (v) Indebtedness incurred in violation of this
Indenture, except if such Indebtedness was incurred under the Credit Agreement
based on financial information and certificates provided by responsible
officers of the Company and relied on in good faith by the lenders thereunder
in which event such Indebtedness shall be deemed to have been incurred in
compliance with this Indenture and constitute Guarantor Senior Debt.
"Holder" or "Securityholder" means the Person in whose name a Security is
registered on the Registrar's books.
"inTV" means the Company's network of owned, operated or affiliated
television stations dedicated to infomercial programming.
<PAGE> 19
-11-
"inTV EBITDA" means Consolidated EBITDA for the Infomall TV Network
determined on a basis consistent with the Company's internal financial
statements, generated by stations declared by the Board of Directors as inTV
properties.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such Person (and
"incurrence," "incurred," "incurrable" and "incurring" shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in
an obligation of such Person that exists at such time becoming Indebtedness
shall not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person,
any indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof) or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
Property (excluding, without limitation, any balances that constitute accounts
payable or trade payables and other accrued liabilities arising in the ordinary
course of business, including, without limitation, any and all programming
broadcast obligations) if and to the extent any of the foregoing indebtedness
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, and shall also include, to the extent not otherwise
included, (i) any Capitalized Lease Obligations, (ii) obligations secured by a
Lien to which the Property or assets owned or held by such Person are subject,
whether or not the obligation or obligations secured thereby shall have been
assumed (provided, however, that if such obligation or obligations shall not
have been assumed, the amount of such Indebtedness shall be deemed to be the
lesser of the principal amount of the obligation or the fair market value of
the pledged Property or assets), (iii) guarantees of items of other Persons
which would be included within this definition for such other Persons (whether
or not such items would appear upon the balance sheet of the guarantor), (iv)
all obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (v) in the case of the
Company, Disqualified Capital Stock of the Company or any Restricted Subsidiary
thereof, and (vi) obliga-
<PAGE> 20
-12-
tions of any such Person under any Interest Rate Agreement applicable to any of
the foregoing (if and to the extent such Interest Rate Agreement obligations
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP). The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the obligation,
provided that (i) the amount outstanding at any time of any Indebtedness issued
with original issue discount is the principal amount of such Indebtedness less
the remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP and (ii)
Indebtedness shall not include any liability for federal, state, local or other
taxes. Notwithstanding any other provision of the foregoing definition, any
trade payable arising from the purchase of goods or materials or for services
obtained in the ordinary course of business or contingent obligations arising
out of customary indemnification agreements with respect to the sale of assets
or securities shall not be deemed to be "Indebtedness" of the Company or any
Restricted Subsidiaries for purposes of this definition. Furthermore,
guarantees of (or obligations with respect to letters of credit supporting)
Indebtedness otherwise included in the determination of such amount shall not
also be included.
"Indenture" means this Indenture as amended, restated or supplemented from
time to time.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Securities.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Investment" means, directly or indirectly, any advance, account
receivable (other than an account receivable arising in the ordinary course of
business), loan or capital contribution to (by means of transfers of property
to others, payments for Property or services for the account or use of others
or otherwise), the purchase of any stock, bonds, notes, debentures, partnership
or joint venture interests or other securities of, or the acquisition, by
purchase or otherwise, of all or substantially all of the business or assets or
stock or other evidence of beneficial ownership of, any Person or the
<PAGE> 21
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making of any investment in any Person. Investments shall exclude extensions
of trade credit on commercially reasonable terms in accordance with normal
trade practices and repurchases or redemptions of the 11 5/8% Notes, the
Securities, the Existing Preferred Stock or the New Preferred Stock by the
Company.
"Issue Date" means the date of original issuance of the Securities.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement to
give any security interest).
"Major Asset Sale" means an Asset Sale or series of related Asset Sales
involving assets with a fair market value in excess of $25,000,000.
"Maturity Date" means October 31, 2006.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by the
Company, an Asset Sale or a Major Asset Sale, the aggregate net proceeds
received by the Company, after payment of expenses, commissions and the like
incurred in connection therewith, whether such proceeds are in cash or in
property (valued at the fair market value thereof, as determined in good faith
by the Board of Directors, at the time of receipt) and (b) in the case of any
exchange, exercise, conversion or surrender of outstanding securities of any
kind for or into shares of Capital Stock of the Company which is not
Disqualified Capital Stock, the net book value of such outstanding securities
on the date of such exchange, exercise, conversion or surrender (plus any
additional amount required to be paid by the holder to the Company upon such
exchange, exercise, conversion or surrender, less any and all payments made to
the holder, e.g., on account of fractional shares, and less all expenses
incurred by the Company in connection therewith).
"New Preferred Stock" means the 150,000 shares of [ ]% Cumulative
Exchangeable Preferred Stock, par value $.001 per share, exchangeable, subject
to certain conditions, at the option of the Company, in whole or in part, on
any dividend payment date, for the Securities.
<PAGE> 22
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"Non-Payment Event of Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate the
maturity of any Designated Senior Debt.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing, or otherwise relating
to, any Indebtedness.
"Offer Period" shall have the meaning specified in Section 4.09(b).
"Officer" means the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer, the Treasurer, the Controller or the
Secretary of the Company or a Guarantor, or any other officer designated by the
Board of Directors, as the case may be.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer, the President or any Vice President, the
Chief Financial Officer, the Controller or any Treasurer of such Person that
shall comply with applicable provisions of this Indenture.
"Opinion of Counsel" means a written opinion from legal counsel which
counsel is reasonably acceptable to the Trustee.
"Payment Default" means any default, whether or not any requirement for
the giving of notice, the lapse of time or both, or any other condition to such
default becoming an event of default has occurred, in the payment of principal
of (or premium, if any) or interest on or any other amount payable in
connection with Designated Senior Debt.
"Permitted Holders" means, collectively, Lowell W. Paxson, his spouse,
children or other lineal descendants (whether adoptive or biological) and any
revocable or irrevocable inter vivos or testamentary trust or the probate
estate of any such individual, so long as one or more of the foregoing
individuals is the principal beneficiary of such trust or probate estate.
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness under the Securities and the Guarantees, including
any Securities issued in accordance with this Indenture as payment of
interest on the Securities;
<PAGE> 23
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(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed
$25,000,000;
(iii) all other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date, including, without limitation,
the 11 5/8% Notes, reduced by the amount of any scheduled amortization
payments or mandatory prepayments when actually paid or permanent
reductions thereon;
(iv) Obligations under Interest Rate Agreements of the Company
covering Indebtedness of the Company or any of its Restricted
Subsidiaries; provided, however, that such Interest Rate Agreements are
entered into to protect the Company and its Restricted Subsidiaries from
fluctuations in interest rates on Indebtedness incurred in accordance with
the certificate of designation governing the New Preferred Stock or this
Indenture to the extent the notional principal amount of such Interest
Rate Agreement does not exceed the principal amount of the Indebtedness to
which such Interest Rate Agreement relates;
(v) Indebtedness of a Restricted Subsidiary of the Company to the
Company or to a Restricted Subsidiary of the Company for so long as such
Indebtedness is held by the Company or a Restricted Subsidiary of the
Company, in each case subject to no Lien held by a Person other than the
Company or a Restricted Subsidiary of the Company; provided that if as of
any date any Person other than the Company or a Restricted Subsidiary of
the Company owns or holds any such Indebtedness or holds a Lien in respect
of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the issuer of such
Indebtedness;
(vi) Indebtedness of the Company to a Restricted Subsidiary of the
Company for so long as such Indebtedness is held by a Restricted
Subsidiary of the Company, in each case subject to no Lien; provided that
(a) any Indebtedness of the Company to any Restricted Subsidiary of the
Company is unsecured and subordinated, pursuant to a written agreement, to
the Company's Obligations under this Indenture and the Securities and (b)
if as of any date any Person other than a Restricted Subsidiary of the
Company owns or holds any such Indebtedness or any Person holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence of
<PAGE> 24
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Indebtedness not constituting Permitted Indebtedness by the Company;
(vii) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire Property in the ordinary course of business which
Indebtedness and Capitalized Lease Obligations do not in the aggregate
exceed 5% of the Company's consolidated total assets at any one time;
(viii) Refinancing Indebtedness; and
(ix) additional Indebtedness of the Company in an aggregate
principal amount not to exceed $10,000,000 at any one time outstanding.
"Permitted Investments" means, for any Person, Investments made on or
after the Issue Date consisting of:
(i) Investments by the Company, or by a Restricted Subsidiary
thereof, in the Company or a Restricted Subsidiary;
(ii) Cash Equivalents;
(iii) Investments by the Company, or by a Restricted Subsidiary
thereof, in a Person (or in all or substantially all of the business or
assets of a Person) if as a result of such Investment (a) such Person
becomes a Restricted Subsidiary of the Company, (b) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or
a Restricted Subsidiary thereof or (c) such business or assets are owned
by the Company or a Restricted Subsidiary;
(iv) reasonable and customary loans made to employees not to exceed
$500,000 to any employee, and not to exceed $5,000,000 in the aggregate
at any one time outstanding;
(v) an Investment that is made by the Company or a Restricted
Subsidiary thereof in the form of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities that are
issued by a third party to the Company or a Restricted Subsidiary solely
as partial consideration for the consummation of an Asset Sale that is
otherwise permitted under Section 4.09;
<PAGE> 25
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(vi) time brokerage and other similar agreements under which
separately owned and licensed broadcast properties enter into cooperative
arrangements and which may include an option to acquire the broadcast
property at a future date;
(vii) accounts receivable of the Company and its Restricted
Subsidiaries generated in the ordinary course of business;
(viii) loans and guarantees of loans by third-party lenders to third
parties in connection with the acquisition of media properties, secured
by substantially all of such Person's assets (to the extent permitted by
FCC rules), which are made in conjunction with the execution of a time
brokerage agreement;
(ix) options on media properties having an exercise price of an
amount not in excess of $100,000 plus the forgiveness of any loan
referred to in clause (viii) above entered into in connection with the
execution of time brokerage agreements; and
(x) additional Investments of the Company and its Restricted
Subsidiaries from time to time of an amount not to exceed $75,000,000.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemption or upon liquidation.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in
the most recent consolidated balance sheet of such Person and its Subsidiaries
under GAAP.
"Public Equity Offering" means a public offering by the Company of shares
of its Common Stock (however designated and whether voting or non-voting) and
any and all rights, warrants or options to acquire such Common Stock.
"Purchase Date" shall have the meaning specified in Section 4.09(b).
<PAGE> 26
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"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of Property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Redeemable Dividend" means, for any dividend or distribution with regard
to Disqualified Capital Stock, the quotient of the dividend or distribution
divided by the difference between one and the maximum statutory federal income
tax rate (expressed as a decimal number between 1 and 0) then applicable to the
issuer of such Disqualified Capital Stock.
"Redemption Date" when used with respect to any Security to be redeemed
means the date fixed for such redemption pursuant to this Indenture.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance
with Section 4.06, in each case that does not (1) result in an increase in the
aggregate principal amount of Indebtedness of such Person as of the date of
such proposed Refinancing (plus the amount of any premium required to be paid
under the terms of the instrument governing such Indebtedness and plus the
amount of reasonable expenses incurred by the Company in connection with such
Refinancing) or (2) create Indebtedness with (A) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (B) a final maturity earlier than the final
maturity of the Indebtedness being Refinanced; provided that (x) if such
Indebtedness being Refinanced is Indebtedness of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if
such Indebtedness being Refinanced is subordinate or junior to the Securities,
then such Refinancing Indebtedness shall be subordinate to the Securities at
least to the same extent and in the same manner as the Indebtedness being
Refinanced.
<PAGE> 27
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"Responsible Officer" when used with respect to the Trustee, means any
officer within the corporate trust department of the Trustee (or any successor
group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Payment" means (i) the declaration or payment of any dividend
or the making of any other distribution (other than dividends or distributions
payable in Qualified Capital Stock) on shares of the Company's Capital Stock
other than the New Preferred Stock, (ii) the purchase, redemption, retirement
or other acquisition for value of any Capital Stock of the Company, or any
warrants, rights or options to acquire shares of Capital Stock of the Company,
other than the exchange of shares of New Preferred Stock for the Securities or
through the exchange of such Capital Stock or any warrants, rights or options
to acquire shares of any class of such Capital Stock for Qualified Capital
Stock or warrants, rights or options to acquire Qualified Capital Stock, (iii)
the making of any principal payment on, or the purchase, defeasance,
redemption, prepayment, decrease or other acquisition or retirement for value,
prior to any scheduled final maturity, scheduled repayment or scheduled sinking
fund payment, of, any Indebtedness of the Company or its Subsidiaries that is
subordinated or junior in right of payment to the Securities, (iv) the making
of any Investment (other than a Permitted Investment), (v) any designation of a
Restricted Subsidiary as an Unrestricted Subsidiary on the basis of the fair
market value of such Subsidiary utilizing standard valuation methodologies and
approved by the Board of Directors or (vi) forgiveness of any Indebtedness of
an Affiliate of the Company to the Company or a Restricted Subsidiary.
"Restricted Subsidiary" means a Subsidiary of the Company other than an
Unrestricted Subsidiary and includes all of the Subsidiaries of the Company
existing as of the Issue Date. The Board of Directors of the Company may
designate any Unrestricted Subsidiary or any Person that is to become a
Subsidiary as a Restricted Subsidiary if immediately after giving effect to
such action (and treating any Acquired Indebtedness as having been incurred at
the time of such action), the Company could have incurred at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to Section
4.06.
"S&P" means Standard & Poor's Corporation and its successors.
<PAGE> 28
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"SEC" means the United States Securities and Exchange Commission as
constituted from time to time or any successor performing substantially the
same functions.
"Secondary Securities" shall have the meaning specified in the Security.
"Securities" means the Company's % Exchange Debentures due 2006, as
amended or supplemented from time to time in accordance with the terms hereof,
that are issued pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means the principal of and premium, if any, and interest
(including, without limitation, interest accruing or that would have accrued
but for the filing of a bankruptcy, reorganization or other insolvency
proceeding whether or not such interest constitutes an allowed claim in such
proceeding) on, and any and all other fees, expense reimbursement obligations,
indemnities and other amounts due pursuant to their terms of all agreements,
documents and instruments providing for, creating, securing or evidencing or
otherwise entered into in connection with (a) all Indebtedness of the Company
owed to lenders under the Credit Agreement, (b) all obligations of the Company
with respect to any Interest Rate Agreement, (c) all obligations of the Company
to reimburse any bank or other person in respect of amounts paid under letters
of credit, acceptances or other similar instruments, (d) all other Indebtedness
of the Company which does not provide that it is to rank pari passu with or
subordinate to the Securities and (e) all deferrals, renewals, extensions and
refundings of, and amendments, modifications and supplements to, any of the
Senior Debt described above. Notwithstanding anything to the contrary in the
foregoing, Senior Debt will not include (i) Indebtedness of the Company to any
of its Subsidiaries, (ii) Indebtedness represented by the Securities, (iii) any
Indebtedness which by the express terms of the agreement or instrument
creating, evidencing or governing the same is junior or subordinate in right of
payment to any item of Senior Debt, (iv) any trade payable arising from the
purchase of goods or materials or for services obtained in the ordinary course
of business or (v) Indebtedness incurred in violation of this Indenture except
if such Indebtedness was incurred under the Credit Agreement based on financial
information and certificates provided by responsible officers of the Company
and relied on in good faith by the lenders thereunder, in which event such
<PAGE> 29
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Indebtedness shall be deemed to have been incurred in compliance with this
Indenture and constitute Senior Debt.
"Subsidiary", with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Section Section
77aaa-77bbbb) as in effect on the date of this Indenture (except as provided in
Section 8.03 hereof).
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer trust accounts.
"Trustee" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Company which is classified after the
Issue Date as an Unrestricted Subsidiary by a resolution adopted by the Board
of Directors of the Company; provided that a Subsidiary organized or acquired
after the Issue Date may be so classified as an Unrestricted Subsidiary only if
such classification is in compliance with Section 4.08. The Trustee shall be
given prompt notice by the Company of each resolution adopted by the Board of
Directors of the Company under this provision, together with a copy of each
such resolution adopted.
"U.S. Government Obligations" means (a) securities that are direct
obligations of the United States of America for the payment of which its full
faith and credit are pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case,
are not callable or redeemable at the option of the issuer thereof, and shall
also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on
<PAGE> 30
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any such U.S. Government Obligation held by such custodian for the account of
the holder of such depository receipt; provided that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by
the custodian in respect of the U.S. Government Obligation or a specific
payment of principal or interest on any such U.S. Government Obligation held by
such custodian for the account of the holder of such depository receipt.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the total
of the product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary all of the
outstanding voting securities (other than directors' qualifying shares) of
which are owned, directly or indirectly, by the Company.
Section 1.02. Other Definitions.
The definitions of the following terms may be found in the sections
indicated as follows:
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Affiliate Transaction" .................... 4.10
"Agent Members" ............................ 2.14
"Bankruptcy Law" ........................... 6.01
"Business Day" ............................. 12.08
"Change of Control Offer" .................. 4.15
"Change of Control Payment Date" ........... 4.15
"Covenant Defeasance" ...................... 9.03
"Custodian" ................................ 6.01
"Event of Default" ......................... 6.01
"Excess Proceeds Offer" .................... 4.09
"Guarantee Payment Blockage Period" ........ 10.08
"Guarantor Representative .................. 10.08
"Initial Blockage Period" .................. 11.03
"Initial Guarantee Blockage Period" ........ 10.08
"Legal Defeasance" ......................... 9.02
</TABLE>
<PAGE> 31
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<TABLE>
<S> <C>
"Legal Holiday" ............................ 12.08
"Offer Period" ............................. 4.09
"Paying Agent" ............................. 2.03
"Payment Blockage Period" .................. 11.03
"Purchase Date" ............................ 4.09
"Registrar" ................................ 2.03
"Reinvestment Date" ........................ 4.09
"Representative" ........................... 11.03
"Required Filing Dates" .................... 4.02
</TABLE>
Section 1.03. Incorporation by Reference of Trust
Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the portion of
such provision required to be incorporated herein in order for this Indenture
to be qualified under the TIA is incorporated by reference in and made a part
of this Indenture. The following TIA terms used in this Indenture have the
following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture securityholder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor on the indenture securities" means the Company, the Guarantors or
any other obligor on the Securities.
All other terms used in this Indenture that are defined by the TIA,
defined in the TIA by reference to another statute or defined by SEC rule have
the meanings therein assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein, whether defined
expressly or by reference;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
<PAGE> 32
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(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) words used herein implying any gender shall apply to every
gender.
ARTICLE 2
THE SECURITIES
Section 2.01. Dating; Incorporation of Form in Indenture.
The Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A which is incorporated in and made part
of this Indenture. The Securities may have notations, legends or endorsements
required by law, stock exchange rule or usage. The Company may use "CUSIP"
numbers in issuing the Securities. The Company shall approve the form of the
Securities. Each Security shall be dated the date of its authentication.
The terms and provisions contained in the Securities shall constitute, and
are hereby expressly made, a part of this Indenture and, to the extent
applicable, the Company and the Trustee, by their execution and delivery of
this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
Section 2.02. Execution and Authentication.
The Securities shall be executed on behalf of the Company by two Officers
of the Company or an Officer and an Assistant Secretary of the Company. Such
signature may be either manual or facsimile. The Company's seal shall be
impressed, affixed, imprinted or reproduced on the Securities and may be in
facsimile form.
If an Officer whose signature is on a Security no longer holds that office
at the time the Trustee authenticates the Security, the Security shall be valid
nevertheless.
A Security shall not be valid until the Trustee manually signs the
certificate of authentication on the Security.
<PAGE> 33
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Such signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee or an authenticating agent shall authenticate Securities for
original issue in the aggregate principal amount of up to $[ ] upon a
Company Request. The aggregate principal amount of Securities outstanding at
any time may not exceed such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent to authenticate
Securities. An authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same right as an Agent to deal with the Company or an Affiliate.
The Securities shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof;
provided, however, that Securities may be issued in denominations of less than
$1,000 (but not less than $1.00) upon the initial exchange of the New Preferred
Stock for the Securities such that each holder of New Preferred Stock shall
receive Securities in a principal amount equal to the full liquidation
preference of the New Preferred Stock on the Issue Date; provided, further,
however, that Secondary Securities may be issued in denominations of less than
$1,000 (but not less than $1.00).
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar"), an office
or agency located in the Borough of Manhattan, City of New York, State of New
York where Securities may be presented for payment ("Paying Agent") and an
office or agency where notices and demands to or upon the Company in respect of
the Securities and this Indenture may be served. The Registrar shall keep a
register of the Securities and of their transfer and exchange. The Company may
have one or more co-registrars and one or more additional paying agents.
Neither the Company nor any Affiliate may act as Paying Agent. The Company may
change any Paying Agent, Registrar or co-registrar without notice to any
Securityholder.
The Company shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture. The agreement shall
implement the provisions of this
<PAGE> 34
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Indenture that relate to such Agent. The Company shall notify the Trustee of
the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or agent for service of notices and demands, or
fails to give the foregoing notice, the Trustee shall act as such. The Company
initially appoints the Trustee as Registrar, Paying Agent and agent for service
of notices and demands in connection with the Securities.
Section 2.04. Paying Agent to Hold Assets in Trust.
On or before each due date of the principal of and interest on any
Securities, the Company shall deposit with the Paying Agent a sum sufficient to
pay such principal and interest so becoming due. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee and the
Trustee, may at any time during the continuance of any Payment Default, upon
written request to a Paying Agent, require such Paying Agent to forthwith pay
to the Trustee all sums so held in trust by such Paying Agent together with a
complete accounting of such sums. Upon doing so, the Paying Agent shall have
no further liability for the money.
Section 2.05. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee on or before each April 30 and October 31 in each year,
and at such other times as the Trustee may request in writing, a list as of the
applicable Record Date and in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Securityholders.
Section 2.06. Transfer and Exchange.
When a Security is presented to the Registrar with a request to register
the transfer thereof, the Registrar shall register the transfer as requested if
the requirements of applicable law are met and, when Securities are presented
to the Registrar with a request to exchange them for an equal principal amount
of Securities of other authorized denominations, the Registrar shall make the
exchange as requested provided that every Security presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the Company and the
Registrar duly executed by the Holder thereof or his attorney duly authorized
in writing. To permit transfers and
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exchanges, upon surrender of any Security for registration of transfer at the
office or agency maintained pursuant to Section 2.03 hereof, the Company shall
execute and the Trustee shall authenticate Securities at the Registrar's
request. Any exchange or transfer shall be without charge, except that the
Company may require payment by the Holder of a sum sufficient to cover any tax
or other governmental charge that may be imposed in relation to a transfer or
exchange, but this provision shall not apply to any exchange pursuant to
Sections 2.09, 3.06 or 8.05 hereof. The Trustee shall not be required to
register transfers of Securities or to exchange Securities for a period of 15
days before selection of any Securities to be redeemed. The Trustee shall not
be required to exchange or register transfers of any Securities called or being
called for redemption in whole or in part, except the unredeemed portion of any
Security being redeemed in part.
Section 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder of
a Security presents evidence to the satisfaction of the Company and the Trustee
that the Security has been lost, destroyed or wrongfully taken, the Company
shall issue and the Trustee shall authenticate a replacement Security if the
requirements of Section 8-405 of the New York Uniform Commercial Code as in
effect on the date of this Indenture are met. An indemnity bond shall be
required that is sufficient in the judgment of the Company and the Trustee to
protect the Company, the Trustee or any Agent from any loss which any of them
may suffer if a Security is replaced. In every case of destruction, loss or
theft, the applicant shall also furnish to the Company and to the Trustee
evidence to their satisfaction of the destruction, loss or the theft of such
Security and the ownership thereof. The Company and the Trustee may charge for
its expenses in replacing a Security. Every replacement Security is an
additional obligation of the Company.
Section 2.08. Outstanding Securities.
Securities outstanding at any time are all Securities authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, and those described in this Section 2.08 as not outstanding.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding until the Company and the Trustee receive proof satisfactory to
each of them that the replaced Security is held by a bona fide purchaser.
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If a Paying Agent holds on a Redemption Date or Maturity Date money
sufficient to pay the principal of, premium, if any, and accrued interest on
Securities payable on that date, then on and after that date such Securities
cease to be outstanding and interest on them ceases to accrue.
Subject to Section 12.06, a Security does not cease to be outstanding
solely because the Company or an Affiliate holds the Security.
Section 2.09. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form, and shall carry all rights, of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities in
exchange for temporary Securities presented to it.
Section 2.10. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee shall cancel and retain or, upon written request of the Company, may
destroy or return to the Company in accordance with its normal practice, all
Securities surrendered for transfer, exchange, payment or cancellation and if
such Securities are destroyed, deliver a certificate of destruction to the
Company unless the Company instructs the Trustee in writing to deliver the
Securities to the Company. Subject to Section 2.07 hereof, the Company may not
issue new Securities to replace Securities in respect of which it has
previously paid all principal, premium and interest accrued thereon, or
delivered to the Trustee for cancellation.
Section 2.11. Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted amounts, plus any interest payable on defaulted amounts
pursuant to Section 4.01 hereof, to the persons who are Securityholders on a
subsequent special record date. The Company shall fix the special record date
and payment date in a manner satisfactory to the Trustee and provide the
Trustee at least 20 days notice of the proposed amount of default interest to
be paid and the special payment date. At
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least 15 days before the special record date, the Company shall mail or cause
to be mailed to each Securityholder at his address as it appears on the
Securities register maintained by the Registrar a notice that states the
special record date, the payment date (which shall be not less than five nor
more than ten days after the special record date), and the amount to be paid.
In lieu of the foregoing procedures, the Company may pay defaulted interest in
any other lawful manner satisfactory to the Trustee.
Section 2.12. Deposit of Moneys.
Prior to 10:00 a.m., New York City time, on each Interest Payment Date and
Maturity Date, the Company shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date or Maturity Date, as the case may be, in a timely
manner which permits the Trustee to remit payment to the Holders on such
Interest Payment Date or Maturity Date, as the case may be.
Section 2.13. CUSIP Number.
The Company in issuing the Securities may use a "CUSIP" number(s), and if
so, the Trustee shall use the CUSIP number(s) in notices of redemption or
exchange as a convenience to Holders, provided that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number(s) printed in the notice or on the Securities, and that reliance may be
placed only on the other identification numbers printed on the Securities. The
Company shall promptly inform the Trustee of any change in the CUSIP number(s).
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
If the Company elects to redeem Securities pursuant to paragraph 6 of the
Securities, (i) at least 60 days prior to the Redemption Date in the case of a
partial redemption, (ii) at least 45 days prior to the Redemption Date in the
case of a total redemption or (iii) during such other period as the Trustee may
agree to, the Company shall notify the Trustee in writing of the Redemption
Date, the principal amount of Securities to be re-
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deemed and the redemption price, and deliver to the Trustee an Officers'
Certificate stating that such redemption will comply with the conditions
contained in paragraph 6 of the Securities, as appropriate.
Section 3.02. Selection by Trustee of Securities to Be
Redeemed.
In the event that fewer than all of the Securities are to be redeemed, the
Trustee shall select the Securities to be redeemed, if the Securities are
listed on a national securities exchange, in accordance with the rules of such
exchange or, if the Securities are not so listed, on either a pro rata basis or
by lot, or such other method as it shall deem fair and equitable; provided,
however, that a redemption pursuant to the provisions of paragraph 6(b) of the
Securities shall be made by the Trustee on a pro rata basis, unless such method
is prohibited. The Trustee shall promptly notify the Company of the Securities
selected for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed. The Trustee may
select for redemption portions of the principal of Securities that have
denominations larger than $1,000. Securities and portions thereof the Trustee
selects shall be redeemed in amounts of $1,000 or whole multiples of $1,000.
For all purposes of this Indenture unless the context otherwise requires,
provisions of this Indenture that apply to Securities called for redemption
also apply to portions of Securities called for redemption.
Section 3.03. Notice of Redemption.
At least 30 days, and no more than 60 days, before a Redemption Date, the
Company shall mail, or cause to be mailed, a notice of redemption by
first-class mail to each Holder of Securities to be redeemed at his or her last
address as the same appears on the registry books maintained by the Registrar
pursuant to Section 2.03 hereof.
The notice shall identify the Securities to be redeemed (including the
CUSIP number(s) thereof) and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date and upon
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surrender of such Security, a new Security or Securities in principal
amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date;
(7) the paragraph of the Securities pursuant to which the Securities
are being redeemed; and
(8) the aggregate principal amount of Securities that are being
redeemed.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at the Company's sole expense.
Section 3.04. Effect of Notice of Redemption.
Once the notice of redemption described in Section 3.03 is mailed,
Securities called for redemption become due and payable on the Redemption Date
and at the redemption price, including any premium, plus interest accrued to
the Redemption Date. Upon surrender to the Paying Agent, such Securities shall
be paid at the redemption price, including any premium, plus interest accrued
to the Redemption Date, provided that if the Redemption Date is after a regular
interest payment record date and on or prior to the Interest Payment Date, the
accrued interest shall be payable to the Holder of the redeemed Securities
registered on the relevant record date, and provided, further, that if a
Redemption Date is a Legal Holiday, payment shall be made on the next
succeeding Business Day and no interest shall accrue for the period from such
Redemption Date to such succeeding Business Day.
Section 3.05. Deposit of Redemption Price.
On or prior to 10:00 A.M., New York City time, on each Redemption Date,
the Company shall deposit with the Paying Agent in immediately available funds
money sufficient to pay the redemption price of and accrued interest on all
Securities to be
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redeemed on that date other than Securities or portions thereof called for
redemption on that date which have been delivered by the Company to the Trustee
for cancellation.
On and after any Redemption Date, if money sufficient to pay the
redemption price of and accrued interest on Securities called for redemption
shall have been made available in accordance with the preceding paragraph, the
Securities called for redemption will cease to accrue interest and the only
right of the Holders of such Securities will be to receive payment of the
redemption price of and, subject to the first proviso in Section 3.04, accrued
and unpaid interest on such Securities to the Redemption Date. If any Security
called for redemption shall not be so paid, interest will be paid, from the
Redemption Date until such redemption payment is made, on the unpaid principal
of the Security and any interest not paid on such unpaid principal, in each
case, at the rate and in the manner provided in the Securities.
Section 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Trustee shall
authenticate for a Holder a new Security equal in principal amount to the
unredeemed portion of the Security surrendered.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the Securities on
the dates and in the manner provided in the Securities and this Indenture. An
installment of principal of or interest on the Securities shall be considered
paid on the date it is due if the Trustee or Paying Agent holds on that date
money designated for and sufficient to pay the installment or, if the interest
is to be paid in Secondary Securities, if the Trustee or the Paying Agent holds
on that date duly authenticated Secondary Securities in an aggregate principal
amount equal to such installment. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months and the actual number of days
elapsed.
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The Company shall pay interest on overdue principal (including
post-petition interest in a proceeding under any Bankruptcy Law), and overdue
interest, to the extent lawful, at the rate specified in the Securities.
Section 4.02. SEC Reports.
(a) The Company will file with the SEC all information, documents and
reports to be filed with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act, whether or not the Company is subject to such filing requirements so long
as the SEC will accept such filings. The Company (at its own expense) will file
with the Trustee within 15 days after it files them with the SEC, copies of the
annual reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company files with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act. The Company shall also comply with the provisions of TIA
Section 314(a). Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
(b) At the Company's expense, regardless of whether the Company is
required to furnish such reports and other information referred to in paragraph
(a) above to its stockholders pursuant to the Exchange Act, the Company shall
cause such reports and other information to be mailed to the Holders at their
addresses appearing in the register of Securities maintained by the Registrar
within 15 days after it files them with the SEC. In the event that the Company
is no longer required to furnish such reports to its stockholders pursuant to
the Exchange Act, the Company will cause its consolidated financial statements,
comparable to those which would have been required to appear in annual or
quarterly reports, to be delivered to the holders of the Securities.
Section 4.03. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead (as a defense or otherwise) or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law which would prohibit or forgive the
<PAGE> 42
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Company from paying all or any portion of the principal of, premium, if any,
and/or interest on the Securities as contemplated herein, wherever enacted, now
or at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
the Company hereby expressly waives all benefit or advantage of any such law,
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution
of every such power as though no such law had been enacted.
Section 4.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 100 days after the
end of each fiscal year and on or before 50 days after the end of the first,
second and third quarters of each fiscal year, an Officers' Certificate (one of
the signers of which shall be the principal executive officer, principal
financial officer or principal accounting officer of the Company) stating that a
review of the activities of the Company and its Subsidiaries during such fiscal
year or fiscal quarter, as the case may be, has been made under the supervision
of the signing Officers with a view to determining whether each has kept,
observed, performed and fulfilled its obligations under this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge each has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all or
such Defaults or Events of Default of which he or she may have knowledge and
what action each is taking or proposes to take with respect thereto) and that to
the best of his or her knowledge no event has occurred and remains in existence
by reason of which payments on account of the principal of or interest, if any,
on the Securities is prohibited or if such event has occurred, a description of
the event and what action each is taking or proposes to take with respect
thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.02 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements nothing has come to
their attention which would lead them
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to believe that the Company has violated any provisions of this Article 4 or
Article 5 hereof of this Indenture or, if any such violation has occurred,
specifying the nature and period of existence thereof, it being understood that
such accountants shall not be liable directly or indirectly for any failure to
obtain knowledge of any such violation.
(c) The Company will, so long as any of the Securities are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
Section 4.05. Taxes.
The Company shall, and shall cause each of its Subsidiaries to, pay prior
to delinquency all material taxes, assessments, and governmental levies except
as contested in good faith and by appropriate proceedings.
Section 4.06. Limitation on Incurrence
of Additional Indebtedness.
The Company shall not, and shall not permit any Restricted Subsidiary of
the Company to, directly or indirectly incur any Indebtedness (including
Acquired Indebtedness) other than Permitted Indebtedness. Notwithstanding the
foregoing limitation, the Company and its Restricted Subsidiaries may incur
Indebtedness if (a) after giving effect to the incurrence of such Indebtedness
and the receipt and application of the proceeds thereof, the ratio of the
Company's total Indebtedness to the Company's Adjusted EBITDA (determined on a
pro forma basis for the last four full fiscal quarters of the Company for which
financial statements are available at the date of determination) is less than
7.0 to 1; provided, however, that if the Indebtedness which is the subject of a
determination under this provision is Acquired Indebtedness, or Indebtedness
incurred in connection with the simultaneous acquisition of any Person,
business, Property or assets, then such ratio shall be determined by giving
effect (on a pro forma basis, as if the transaction had occurred at the
beginning of the four quarter period) to both the incurrence or assumption of
such Acquired Indebtedness or such other Indebtedness by the Company and the
inclusion in the Company's Adjusted EBITDA of the Consolidated EBITDA of the
acquired Person, business, Property or assets; and, provided, further, that in
the event that the Consolidated EBITDA of the acquired Person, business,
Property or assets reflects an operating loss,
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no amounts shall be deducted from the Company's Adjusted EBITDA in making the
determinations described above and (b) no Default or Event of Default shall
have occurred and be continuing at the time or as a consequence of the
incurrence of such Indebtedness.
Section 4.07. Limitation on Preferred Stock of
Restricted Subsidiaries.
The Company shall not permit any Restricted Subsidiary to issue any
Preferred Stock (except to the Company or to a Restricted Subsidiary) or permit
any Person (other than the Company or a Restricted Subsidiary) to hold any such
Preferred Stock unless the Company or such Restricted Subsidiary would be
entitled to incur or assume Indebtedness in compliance with Section 4.06 in an
aggregate principal amount equal to the aggregate liquidation value of the
Preferred Stock to be issued.
Section 4.08. Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment if at the
time of such Restricted Payment and immediately after giving effect thereto:
(i) any Default or Event of Default shall have occurred and be
continuing; or
(ii) the Company could not incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with Section 4.06; or
(iii) the aggregate amount of Restricted Payments declared or made
after the Issue Date (the amount expended for such purposes, if other than
in cash, being the fair market value of such Property as determined by the
Board of Directors of the Company in good faith) exceeds the sum of (a)
100% of the Company's Cumulative Consolidated EBITDA minus 1.4 times the
Company's Cumulative Consolidated Interest Expense, plus (b) 100% of the
aggregate Net Proceeds and the fair market value of securities or other
Property received by the Company from the issue or sale, after the Issue
Date, of Capital Stock (other than Disqualified Capital Stock of the
Company or Capital Stock of the Company issued to any Restricted
Subsidiary of the Company) of the Company or any Indebtedness or other
securities of the Company convertible into or exercisable or exchangeable
for Capital Stock (other than Disqualified Stock) of the Company which
have been so
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converted or exercised or exchanged, as the case may be, plus (c)
$10,000,000.
(b) Notwithstanding the foregoing, these provisions will not prohibit:
(1) the payment of any dividend or the making of any distribution within 60 days
after the date of its declaration if such dividend or distribution would have
been permitted on the date of declaration; (2) the purchase, redemption or other
acquisition or retirement of any Capital Stock of the Company or any warrants,
options or other rights to acquire shares of any class of such Capital Stock
either (x) solely in exchange for shares of Qualified Capital Stock or other
rights to acquire Qualified Capital Stock or (y) through the application of the
Net Proceeds of a substantially concurrent sale for cash (other than to a
Restricted Subsidiary of the Company) of shares of Qualified Capital Stock or
warrants, options or other rights to acquire Qualified Capital Stock; (3) the
acquisition of Indebtedness of the Company that is subordinate or junior in
right of payment to the Securities either (x) solely in exchange for shares of
Qualified Capital Stock (or warrants, options or other rights to acquire
Qualified Capital Stock) or for Indebtedness of the Company that is subordinate
or junior in right of payment to the Securities, at least to the extent that the
Indebtedness being acquired is subordinated to the Securities and has a Weighted
Average Life to Maturity no less than that of the Indebtedness being acquired or
(y) through the application of the Net Proceeds of a substantially concurrent
sale for cash (other than to a Restricted Subsidiaries of the Company) of shares
of Qualified Capital Stock (or warrants, options or other rights to acquire
Qualified Capital Stock) or Indebtedness of the Company which is subordinate or
junior in right of payment to the Securities, at least to the extent that the
Indebtedness being acquired is subordinated to the Securities and has a Weighted
Average Life to Maturity no less than that of the Indebtedness being refinanced;
(4) the retirement of the New Preferred Stock in accordance with the optional
and mandatory redemption and put provisions as in effect on the Issue Date and
the payment of cash dividends on the New Preferred Stock; or (5) as long as no
Default or Event of Default shall have occurred and be continuing, the payment
of cash dividends on the Existing Preferred Stock or the redemption thereof at
times and in amounts no less favorable to holders of the Securities than such
provisions as are in effect in the related certificate of designations on the
Issue Date; provided, however, that any cash dividends or cash redemptions or
premiums in respect thereof paid with respect to the Existing Preferred Stock
shall reduce amounts otherwise available for Restricted Payments.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers'
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Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.08 were
computed, which calculations may be based upon the Company's latest available
financial statements, and that no Default or Event of Default exists and is
continuing and no Default or Event of Default will occur immediately after
giving effect to any Restricted Payments.
Section 4.09. Limitation on Certain Asset Sales.
(a) The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or
such Restricted Subsidiary, as the case may be, receives consideration at least
equal to the fair market value thereof on the date the Company or Restricted
Subsidiary (as applicable) entered into the agreement to consummate such Asset
Sale (as determined in good faith by the Company's Board of Directors, and
evidenced by a Board Resolution); (ii) not less than 75% of the consideration
received by the Company or its Subsidiaries, as the case may be, is in the form
of cash or Cash Equivalents, other than in the case where the Company is
exchanging all or substantially all of the assets of one or more media
properties operated by the Company (including by way of the transfer of capital
stock) for all or substantially all of the assets (including by way of the
transfer of capital stock) constituting one or more media properties operated by
another Person, provided that at least 75% of the consideration received by the
Company in such exchange, other than the media properties, is in the form of
cash or Cash Equivalents; and (iii) the Asset Sale Proceeds received by the
Company or such Restricted Subsidiary are applied (a) first, to the extent the
Company elects, or is required, to prepay, repay or purchase Indebtedness under
any then existing Senior Debt of the Company or any Restricted Subsidiary
within 180 days following the receipt of the Asset Sale Proceeds from any Asset
Sale; (b) second, to the extent of the balance of Asset Sale Proceeds after
application as described above, to the extent the Company elects, to make an
Investment in assets (including Capital Stock or other securities purchased in
connection with the acquisition of Capital Stock or Property of another Person)
used or useful in businesses similar or ancillary to the business of the
Company or Restricted Subsidiary as conducted at the time of such Asset Sale,
provided that such Investment occurs or the company or a Restricted Subsidiary
enters into contractual commitments to make such investment, subject only to
customary conditions (other than the obtaining of financing), on or prior to
the 181st day following receipt of such Asset Sale Proceeds (the "Reinvestment
Date") and Asset Sale Proceeds contractually committed are so applied within
360 days
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following the receipt of such Asset Sale Proceeds; (c) third, to make any
required Excess Proceeds Offer (as defined in the 11 5/8% Notes Indenture) to
holders of the 11 5/8% Notes in accordance with the terms of the 11 5/8% Notes
Indenture; and (d) fourth, to make an offer for the Securities as described
under paragraph 6 of the Securities above following a Major Asset Sale or, if
on the Reinvestment Date with respect to any Asset Sale, the Available Asset
Sale Proceeds exceed $10,000,000, the Company shall apply an amount equal to
such Available Asset Sale Proceeds to an offer to repurchase the Securities, at
a purchase price in cash equal to 100% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of repurchase (an "Excess
Proceeds Offer"). If an Excess Proceeds Offer is not fully subscribed, the
Company may retain the portion of the Available Asset Sale Proceeds not
required to repurchase Securities.
(b) If the Company is required to make an Excess Proceeds Offer, the
Company shall mail, within 30 days following the Reinvestment Date, a notice to
the Holders stating, among other things: (1) that such Holders have the right
to require the Company to apply the Available Asset Sale Proceeds to repurchase
such Securities at a purchase price in cash equal to 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase; (2) the purchase date (the "Purchase Date"), which shall be no earlier
than 30 days and not later than 60 days from the date such notice is mailed; (3)
the instructions, determined by the Company, that each Holder must follow in
order to have such Securities repurchased; and (4) the calculations used in
determining the amount of Available Asset Sale Proceeds to be applied to the
repurchase of such Securities. The Excess Proceeds Offer shall remain open for
a period of 20 Business Days following its commencement (the "Offer Period").
The notice, which shall govern the terms of the Excess Proceeds Offer, shall
also state:
(1) that the Excess Proceeds Offer is being made pursuant to this
Section 4.09 and the length of time the Excess Proceeds Offer will remain
open;
(2) the purchase price and the Purchase Date;
(3) that any Security not tendered or accepted for payment will
continue to accrue interest;
(4) that any Security accepted for payment pursuant to the Excess
Proceeds Offer shall cease to accrue interest on and after the Purchase
Date;
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(5) that Holders electing to have a Security purchased pursuant to
any Excess Proceeds Offer will be required to surrender the Security,
with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Security completed, to the Company, a depositary, if
appointed by the Company, or a Paying Agent at the address specified in
the notice at least three Business Days before the Purchase Date;
(6) that Holders will be entitled to withdraw their election if the
Company, depositary or Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
the Security the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have the Security purchased;
(7) that, if the aggregate principal amount of Securities
surrendered by Holders exceeds the Available Asset Sale Proceeds, the
Company shall select the Securities to be purchased on a pro rata basis
(with such adjustments as may be deemed appropriate by the Company so
that only Securities in denominations of $1,000, or integral multiples
thereof, shall be purchased); and
(8) that Holders whose Securities were purchased only in part will
be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered.
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, Securities or
portions thereof tendered pursuant to the Excess Proceeds Offer, deposit with
the Paying Agent U.S. legal tender sufficient to pay the purchase price plus
accrued interest, if any, on the Securities to be purchased and deliver to the
Trustee an Officers' Certificate stating that such Securities or portions
thereof were accepted for payment by the Company in accordance with the terms
of this Section 4.09. The Paying Agent shall promptly (but in any case not
later than 5 days after the Purchase Date) mail or deliver to each tendering
Holder an amount equal to the purchase price of the Security tendered by such
Holder and accepted by the Company for purchase, and the Company shall promptly
issue a new Security, and the Trustee shall authenticate and mail or make
available for delivery such new Security to such Holder equal in principal
amount to any unpurchased portion of the Security surrendered. Any Securi-
<PAGE> 49
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ty not so accepted shall be promptly mailed or delivered by the Company to
the Holder thereof. The Company will publicly announce the results of the
Excess Proceeds Offer on the Purchase Date. If an Excess Proceeds Offer is not
fully subscribed, the Company may retain that portion of the Available Asset
Sale Proceeds not required to repurchase Securities.
Section 4.10. Limitation on Transactions with Affiliates.
(a) The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or suffer to
exist any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate (including entities in which the Company or any of
its Restricted Subsidiaries own a minority interest) or holder of 10% or more of
the Company's Common Stock (an "Affiliate Transaction") or extend, renew, waive
or otherwise modify the terms of any Affiliate Transaction entered into prior to
the Issue Date unless (i) such Affiliate Transaction is between or among the
Company and its Wholly-Owned Subsidiaries; or (ii) the terms of such Affiliate
Transaction is fair and reasonable to the Company or such Restricted
Subsidiaries, as the case may be, and the terms of such Affiliate Transaction
are at least as favorable as the terms which could be obtained by the Company or
such Restricted Subsidiary, as the case may be, in a comparable transaction made
on an arm's-length basis between unaffiliated parties. In any Affiliate
Transaction involving an amount or having a value in excess of $1,000,000 which
is not permitted under clause (i) above, the Company must obtain a resolution of
the Board of Directors certifying that such Affiliate Transaction complies with
clause (ii) above. In transactions with a value in excess of $5,000,000 which
are not permitted under clause (i) above, the Company must obtain a written
opinion as to the fairness of such a transaction from an independent investment
banking firm.
(b) The limitations set forth in Section 4.10(a) shall not apply to (i)
any Restricted Payment that is not prohibited by Section 4.08, (ii) any
transaction, approved by the Board of Directors of the Company, with an officer
or director of the Company or of any Subsidiary in his or her capacity as
officer or director entered into in the ordinary course of business, including
compensation and employee benefit arrangements with any officer or director of
the Company or of any Subsidiary that are customary for public companies in the
broadcasting industry or (iii) modifications of the Existing Preferred Stock.
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Section 4.11. Limitation on Creation of Subsidiaries.
The Company shall not create or acquire, nor permit any of its Restricted
Subsidiaries to create or acquire, any Subsidiary other than (i) a Restricted
Subsidiary existing as of the date of this Indenture, (ii) a Restricted
Subsidiary that is acquired or created after the date hereof, or (iii) an
Unrestricted Subsidiary; provided, however, that each Restricted Subsidiary
acquired or created pursuant to clause (ii) shall at the time it has either
assets or stockholder's equity in excess of $5,000 execute a guarantee,
satisfactory in form and substance to the Trustee (and with such documentation
relating thereto as the Trustee shall require, including, without limitation a
supplement or amendment to this Indenture and Opinions of Counsel as to the
enforceability of such guarantee), pursuant to which such Restricted Subsidiary
shall become a Guarantor.
Section 4.12. Limitation on Other Senior Subordinated Debt.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, incur, contingently or otherwise, any
Indebtedness (other than the Securities and the Guarantees, as the case may be)
that is both (i) subordinate in right of payment to any Senior Debt of the
Company or its Restricted Subsidiaries, as the case may be, and (ii) senior in
right of payment to the Securities and the Guarantees, as the case may be. For
purposes of this Section 4.12, Indebtedness is deemed to be senior in right of
payment to the Securities and the Guarantees, as the case may be, if it is not
explicitly subordinate in right of payment to Senior Debt at least to the same
extent as the Securities and the Guarantees, as the case may be, are
subordinate to Senior Debt.
Section 4.13. Payments for Consent.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Securities for or as an
inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Securities unless such consideration is
offered to be paid or agreed to be paid to all Holders of the Securities which
so consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or agreement.
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Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
Restricted Subsidiary, in accordance with the respective organizational
documents (as the same may be amended from time to time) of each Restricted
Subsidiary and the rights (charter and statutory), licenses and franchises of
the Company and its Restricted Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any of its Restricted
Subsidiaries, if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company
and its Restricted Subsidiaries, taken as a whole, and that the loss thereof is
not adverse in any material respect to the Holders.
Section 4.15. Change of Control.
(a) Within 30 days of the occurrence of a Change of Control, the Company
shall notify the Trustee in writing of such occurrence and shall make an offer
to purchase (the "Change of Control Offer") the outstanding Securities at a
purchase price equal to 101% of the principal amount thereof plus any accrued
and unpaid interest thereon to the Change of Control Payment Date (such purchase
price being hereinafter referred to as the "Change of Control Purchase Price")
in accordance with the procedures set forth in this Section 4.15.
At the time of the occurrence of a Change of Control, prior to the mailing
of the notice to Holders described in paragraph (b) below, but in any event
within 30 days following any Change of Control, the Company covenants that if
the purchase of the Securities would violate or constitute a default under the
Credit Agreement or any other then outstanding Senior Debt, then the Company
will, to the extent needed to permit such purchase of Securities, either (i)
repay in full all Indebtedness under the Credit Agreement and such Senior Debt
(and terminate all commitments thereunder) or (ii) obtain the requisite
consents under the Credit Agreement and the instrument governing such Senior
Debt to permit the repurchase of the Securities as provided in paragraph (b)
below. The Company must first comply with the covenant described in the
preceding sentence before it shall be required to purchase Securities in the
event of a Change of Control; provided that the Company's failure to comply
with the covenant described in the preceding sentence constitutes an Event of
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Default described in clause (3) under Section 6.01 hereof if not cured within
60 days after the notice required by such clause.
(b) Within 30 days of the occurrence of a Change of Control, the Company
also shall (i) cause a notice of the Change of Control Offer to be sent at least
once to the Dow Jones News Service or similar business news service in the
United States and (ii) send by first-class mail, postage prepaid, to the Trustee
and to each Holder of the Securities, at the address appearing in the register
maintained by the Registrar of the Securities, a notice stating:
(i) that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Securities validly tendered and not withdrawn
will be accepted for payment;
(ii) the Change of Control Purchase Price (including the amount of
accrued interest, if any) and the purchase date (which shall be no earlier
than 30 days nor later than 45 days from the date such notice is mailed,
other than as may be required by law) (the "Change of Control Payment
Date");
(iii) that any Security not tendered will continue to accrue
interest;
(iv) that, unless the Company defaults in the payment of the Change
of Control Purchase Price, any Securities accepted for payment pursuant to
the Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date;
(v) that Holders accepting the offer to have their Securities
purchased pursuant to a Change of Control Offer will be required to
surrender the Securities, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Security completed, to the Paying
Agent at the address specified in the notice prior to the close of
business on the Business Day preceding the Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their acceptance if
the Paying Agent receives, not later than the close of business on the
third Business Day preceding the Change of Control Payment Date, a
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Securities delivered for purchase, and a
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statement that such Holder is withdrawing his election to have such
Securities purchased;
(vii) that Holders whose Securities are being purchased only in part
will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered;
(viii) any other procedures that a Holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance; and
(ix) the name and address of the Paying Agent.
(c) On the Change of Control Payment Date, the Company shall (i) accept
for payment Securities or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Securities or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee Securities so accepted together
with an Officers' Certificate stating the Securities or portions thereof
tendered to the Company. The Paying Agent shall promptly mail to the Holders of
Securities so accepted payment in an amount equal to the purchase price for such
Securities, and the Company shall execute and issue, and the Trustee shall
promptly authenticate and make available for delivery to such Holder, a new
Security equal in principal amount to any unpurchased portion of the Securities
surrendered.
(d) The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of the Securities pursuant to a Change of Control Offer. To the extent the
provisions of any such rule conflict with the provisions of this Indenture
relating to a Change of Control Offer, the Company shall comply with the
provisions of such rule and be deemed not to have breached its obligations
relating to such Change of Control Offer by virtue thereof.
Section 4.16. Maintenance of Office or Agency.
The Company shall maintain an office or agency where Securities may be
surrendered for registration of transfer or exchange or for presentation for
payment and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in
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the location, of such office or agency. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the address of the Trustee as set forth in
Section 12.02.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations. The Company
shall give prompt written notice to the Trustee of such designation or
rescission and of any change in the location of any such other office or
agency.
The Company hereby initially designates the Corporate Trust Office of the
Trustee set forth in Section 12.02 as such office of the Company.
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation,
Merger and Sale of Assets.
The Company shall not and shall not cause or permit any Guarantor to, in a
single transaction or series of related transactions, consolidate with or merge
with or into, or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its assets to, another Person or adopt a plan of
liquidation unless (i) either (1) the Company or the Guarantor, as the case may
be, is the survivor of such merger or consolidation or (2) the surviving or
transferee Person is a corporation, partnership or trust organized and existing
under the laws of the United States, any state thereof or the District of
Columbia and such surviving or transferee Person expressly assumes by
supplemental indenture all the obligations of the Company or the Guarantor, as
the case may be, under the Securities and this Indenture; (ii) immediately
after giving effect to such transaction and the use of proceeds therefrom (on a
pro forma basis, including any Indebtedness incurred or anticipated to be
incurred in connection with such transaction), the Company or the surviving or
transferee Person is able to incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with Section 4.06; (iii) immediately
after giving effect to such transaction (including any Indebtedness incurred
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or anticipated to be incurred in connection with the transaction) no Default or
Event of Default has occurred and is continuing; and (iv) the Company has
delivered to the Trustee an Officers' Certificate and Opinion of Counsel, each
stating that such consolidation, merger or transfer complies with this
Indenture, that the surviving Person agrees by supplemental Indenture to be
bound thereby, and that all conditions precedent in this Indenture relating to
such transaction have been satisfied. For purposes of the foregoing, the
transfer (by lease, assignment, sale or otherwise, in a single transaction or
series of related transactions) of all or substantially all of the properties
and assets of one or more Subsidiaries the Capital Stock of which constitutes
all or substantially all of the properties and assets of the Company will be
deemed to be the transfer of all or substantially all of the properties and
assets of the Company.
Section 5.02. Successor Person Substituted.
Upon any consolidation or merger, or any transfer of all or substantially
all of the assets of the Company or any Guarantor in accordance with Section
5.01 above, the successor corporation formed by such consolidation or into
which the Company is merged or to which such transfer is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
or such Guarantor under this Indenture with the same effect as if such
successor corporation had been named as the Company or such Guarantor herein,
and thereafter the predecessor corporation shall be relieved of all obligations
and covenants under this Indenture and the Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if
(1) there is a default in the payment of any principal of, or
premium, if any, on the Securities when the same becomes due and payable
at maturity, upon acceleration, redemption or otherwise, whether or not
such payment is prohibited by the provisions of Article 11 hereof;
(2) there is a default in the payment of any interest on any Security
when the same becomes due and payable and
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the Default continues for a period of 30 days, whether or not such
payment is prohibited by the provisions of Article 11 hereof;
(3) the Company or any Guarantor defaults in the observance or
performance of any other covenant in the Securities or this Indenture for
60 days after written notice from the Trustee or the Holders of not less
than 25% in the aggregate principal amount of the Securities then
outstanding;
(4) there is a default in the payment at final maturity of principal
in an aggregate amount of $10,000,000 or more with respect to any
Indebtedness of the Company or any Restricted Subsidiary thereof which
default shall not be cured, waived or postponed pursuant to an agreement
with the holders of such Indebtedness within 60 days after written
notice, or the acceleration of any such Indebtedness aggregating
$10,000,000 or more which acceleration shall not be rescinded or annulled
within 20 days after written notice to the Company of such Default by the
Trustee or any Holder;
(5) a court of competent jurisdiction enters a final judgment or
judgments which can no longer be appealed for the payment of money in
excess of $10,000,000 against the Company or any Restricted Subsidiary
thereof and such judgment remains undischarged, for a period of 60
consecutive days during which a stay of enforcement of such judgment
shall not be in effect;
(6) the Company or any Restricted Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in
an involuntary case,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
(E) generally is not paying its debts as they become due; or
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(7) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted
Subsidiary in an involuntary case,
(B) appoints a Custodian of the Company or any Restricted
Subsidiary or for all or substantially all of the property of the
Company or any Restricted Subsidiary, or
(C) orders the liquidation of the Company or any Restricted
Subsidiary,
and the order or decree remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal
or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
The Trustee may withhold notice to the Holders of the Securities of any
Default (except in payment of principal or premium, if any, or interest on the
Securities) if the Trustee considers it to be in the best interest of the
Holders of the Securities to do so.
Section 6.02. Acceleration.
If an Event of Default (other than an Event of Default arising under
Section 6.01(6) or (7) with respect to the Company) occurs and is continuing,
the Trustee by notice to the Company, or the Holders of not less than 25% in
aggregate principal amount of the Securities then outstanding may by written
notice to the Company and the Trustee declare to be immediately due and payable
the entire principal amount of all the Securities then outstanding plus accrued
but unpaid interest to the date of acceleration and (i) such amounts shall
become immediately due and payable or (ii) if there are any amounts outstanding
under the Credit Agreement, such amounts shall become due and payable upon the
first to occur of an acceleration under the Credit Agreement or five Business
Days after receipt by the Company and the Representative of notice of the
acceleration of the Securities; provided, however, that after such acceleration
but before a judgement or decree based on such acceleration is obtained by the
Trustee, the Holders of a majority in aggregate principal amount of the
outstanding Securities may rescind and annul such acceleration
<PAGE> 58
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and its consequences if (i) all existing Events of Default, other than the
nonpayment of accelerated principal, premium, if any, or interest that has
become due solely because of the acceleration, have been cured or waived, (ii)
to the extent the payment of such interest is lawful, interest on overdue
installments of interest and overdue principal, which has become due otherwise
than by such declaration of acceleration, has been paid, (iii) the Company has
paid the Trustee its reasonable compensation and reimbursed the Trustee for its
expenses, disbursements and advances, (iv) the rescission would not conflict
with any judgment or decree and (v) in the event of the cure or waiver of a
Default or Event of Default described in Section 6.01(6) or (7), the Trustee
has received an Officers' Certificate and an Opinion of Counsel that such
Default or Event of Default has been cured or waived. No such rescission shall
affect any subsequent Default or impair any right consequent thereto. In case
an Event of Default specified in Section 6.01(6) or (7) with respect to the
Company occurs, such principal, premium, if any, and interest amount with
respect to all of the Securities shall be due and payable immediately without
any declaration or other act on the part of the Trustee or the Holders of the
Securities.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy by proceeding at law or in equity to collect the payment
of principal of, or premium, if any, and interest on the Securities or to
enforce the performance of any provision of the Securities or this Indenture
and may take any necessary action requested of it as Trustee to settle,
compromise, adjust or otherwise conclude any proceedings to which it is a
party.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
Section 6.04. Waiver of Past Defaults and Events of Default.
Subject to Sections 6.02, 6.07 and 8.02 hereof, the Holders of a majority
in principal amount of the Securities then outstanding have the right to waive
any existing Default or Event of Default or compliance with any provision of
this Indenture or
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the Securities. Upon any such waiver, such Default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.
Section 6.05. Control by Majority.
The Holders of a majority in principal amount of the Securities then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee by this Indenture. The Trustee, however, may refuse
to follow any direction that conflicts with law or this Indenture or that the
Trustee determines may be unduly prejudicial to the rights of another
Securityholder not taking part in such direction, and the Trustee shall have
the right to decline to follow any such direction if the Trustee, being advised
by counsel, determines that the action so directed may not lawfully be taken or
if the Trustee in good faith shall, by a Trust Officer, determine that the
proceedings so directed may involve it in personal liability; provided that the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
Section 6.06. Limitation on Suits.
Subject to Section 6.07 below, a Securityholder may not institute any
proceeding or pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of the
Securities then outstanding make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer to the Trustee indemnity reasonably
satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and
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(5) no direction inconsistent with such written request has been
given to the Trustee during such 60 day period by the Holders of a
majority in aggregate principal amount of the Securities then outstanding.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
Section 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal of, or premium, if any,
and interest of the Security on or after the respective due dates expressed in
the Security, or to bring suit for the enforcement of any such payment on or
after such respective dates, is absolute and unconditional and shall not be
impaired or affected without the consent of the Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal, premium or interest
specified in Section 6.01(1) or (2) hereof occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or the Guarantors (or any other obligor on the Securities)
for the whole amount of unpaid principal and accrued interest remaining unpaid,
together with interest on overdue principal and, to the extent that payment of
such interest is lawful, interest on overdue installments of interest, in each
case at the rate then borne by the Securities, and such further amounts as
shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and the Securityholders
allowed in any judicial proceedings relative to the Company or the Guarantors
(or any other obligor upon the Securities), its creditors or its property and
shall be entitled and empowered to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same
after deduction of its charges and expenses to the extent that any such
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charges and expenses are not paid out of the estate in any such proceedings and
any custodian in any such judicial proceeding is hereby authorized by each
Securityholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6, it shall pay
out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07 hereof;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal, premium, if any, and interest as to each,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Securities; and
THIRD: to the Company or, to the extent the Trustee collects any
amount from any Guarantor, to such Guarantor.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in the suit, having
due regard to the merits and good faith of the
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claims or defenses made by the party litigant. This Section 6.11 does not
apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07
hereof or a suit by Holders of more than 10% in principal amount of the
Securities then outstanding.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent man would
exercise or use under the same circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are specifically
set forth in this Indenture and no others.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture but, in the case of any such certificates or opinions which by
any provision hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Indenture (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is
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proved that the Trustee was negligent in ascertaining the pertinent
facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.02 and 6.05 hereof.
(4) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its rights or powers if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
satisfactory to it against such risk or liability is not reasonably
assured to it.
(d) Whether or not therein expressly so provided, paragraphs (a), (b) and
(c) of this Section 7.01 shall govern every provision of this Indenture that in
any way relates to the Trustee.
(e) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity reasonably satisfactory to it against any
loss, liability, expense or fee.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company or any Guarantor.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by the law.
Section 7.02. Rights of Trustee.
Subject to Section 7.01 hereof:
(1) The Trustee may rely on any document reasonably believed by it
to be genuine and to have been signed or presented by the proper person.
The Trustee need not investigate any fact or matter stated in the
document.
(2) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, or both, which shall
conform to the provisions of Section 12.05 hereof. The Trustee shall be
protected and shall not be liable for any action it takes or omits to
take in good faith in reliance on such certificate or opinion.
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(3) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed by it with due
care.
(4) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(5) The Trustee may consult with counsel of its selection, and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any
action taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may make loans to, accept deposits from, perform
services for or otherwise deal with the Company or any Guarantor, or any
Affiliates thereof, with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights. The Trustee, however, shall be
subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Securities, it shall not be accountable for the Company's use
of the proceeds from the sale of Securities or any money paid to the Company
pursuant to the terms of this Indenture and it shall not be responsible for any
statement in the Securities other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default occurs and is continuing and if it is known to the Trustee,
the Trustee shall mail to each Securityholder notice of the Default within 90
days after it occurs. Except in the case of a Default in payment of the
principal of, or premium, if any, or interest on any Security the Trustee may
withhold the notice if and so long as the board of directors of the Trustee,
the executive committee or any trust committee of such board and/or its Trust
Officers in good faith determine(s) that withholding the notice is in the
interests of the Securityholders.
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Section 7.06 Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after May 15 of any
year, commencing the May 15 following the date of this Indenture, the Trustee
shall mail to each Securityholder a brief report dated as of such May 15 that
complies with TIA Section 313(a). The Trustee also shall comply with TIA
Section 313(b)(2). The Trustee shall also transmit by mail all reports as
required by TIA Section 313(c) and TIA Section 313(d).
Reports pursuant to this Section 7.06 shall be transmitted by mail:
(1) to all registered Holders of Securities, as the names and
addresses of such Holders appear on the Registrar's books; and
(2) to such Holder of Securities as have, within the two years
preceding such transmission, filed their names and addresses with the
Trustee for that purpose.
A copy of each report at the time of its mailing to Securityholders shall
be filed with the SEC and each stock exchange on which the Securities are
listed. The Company shall promptly notify the Trustee when the Securities are
listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Company and the Guarantors shall pay to the Trustee from time to time
such compensation as shall be agreed in writing between the Company and the
Trustee for its services hereunder (which compensation shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust). The Company and the Guarantors shall reimburse the Trustee upon
request for all reasonable disbursements, expenses and advances incurred or
made by it in connection with its duties under this Indenture, including the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Company and the Guarantors shall indemnify each of the Trustee and any
predecessor Trustee for, and hold it harmless against, any and all loss,
damage, claim, liability or reasonable expense, including taxes (other than
taxes based on the income of the Trustee) incurred by it in connection with the
acceptance or performance of its duties under this Indenture including the
reasonable costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance
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of any of its powers or duties hereunder (including, without limitation,
settlement costs). The Trustee shall notify the Company and the Guarantors in
writing promptly of any claim asserted against the Trustee for which it may
seek indemnity. However, the failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder except to the extent
the Company is prejudiced thereby.
Notwithstanding the foregoing, the Company and the Guarantors need not
reimburse the Trustee for any expense or indemnify it against any loss or
liability incurred by the Trustee through its negligence or bad faith. To
secure the payment obligations of the Company and the Guarantors in this
Section 7.07, the Trustee shall have a lien prior to the Securities on all
money or property held or collected by the Trustee except such money or
property held in trust to pay principal of and interest on particular
Securities. The obligations of the Company and the Guarantors under this
Section 7.07 to compensate and indemnify the Trustee and each predecessor
Trustee and to pay or reimburse the Trustee and each predecessor Trustee for
expenses, disbursements and advances shall be joint and several liabilities of
the Company and each of the Guarantors and shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or (7) hereof occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
For purposes of this Section 7.07, the term "Trustee" shall include any
trustee appointed pursuant to Article 9.
Section 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company and the Guarantors in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by notifying the removed Trustee in writing
and may appoint a successor Trustee with the Company's written consent which
consent shall not be unreasonably withheld. The Company may remove the Trustee
at its election if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent;
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(3) a receiver or other public officer takes charge of the Trustee
or its property;
(4) the Trustee otherwise becomes incapable of acting; or
(5) a successor corporation becomes successor Trustee pursuant to
Section 7.09 below.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of a majority in principal amount of the outstanding Securities may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately following such
delivery, the retiring Trustee shall, subject to its rights under Section 7.07
hereof, transfer all property held by it as Trustee to the successor Trustee,
the resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Securityholder. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Consolidation, Merger
or Conversion.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust assets to, another corporation,
subject to Section 7.10 hereof, the successor corporation without any further
act shall be the successor Trustee.
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Section 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1) and (2) in every respect. The Trustee shall have a
combined capital and surplus of at least $100,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
Section 310(b), including the provision in Section 310(b)(1).
Section 7.11. Preferential Collection of Claims Against
Company.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311 (b). A Trustee who has resigned or
been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
Section 7.12. Paying Agents.
The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to it and the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the provisions of this Section 7.12:
(A) that it will hold all sums held by it as agent for the payment
of principal of, or premium, if any, or interest on, the Securities
(whether such sums have been paid to it by the Company or by any obligor
on the Securities) in trust for the benefit of Holders of the Securities
or the Trustee;
(B) that it will at any time during the continuance of any Event of
Default, upon written request from the Trustee, deliver to the Trustee all
sums so held in trust by it together with a full accounting thereof; and
(C) that it will give the Trustee written notice within three (3)
Business Days of any failure of the Company (or by any obligor on the
Securities) in the payment of any installment of the principal of,
premium, if any, or interest on, the Securities when the same shall be due
and payable.
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ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.
The Company and the Guarantors, when authorized by a Board Resolution of
each of them, and the Trustee may amend or supplement this Indenture or the
Securities without notice to or consent of any Securityholder:
(1) to comply with Section 5.01 hereof;
(2) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(3) to comply with any requirements of the SEC under the TIA;
(4) to cure any ambiguity, defect or inconsistency, or to make any
other change that does not materially and adversely affect the rights of
any Securityholder; or
(5) to make any other change that does not, in the opinion of the
Trustee, adversely affect in any material respect the rights of any
Securityholders hereunder.
The Trustee is hereby authorized to join with the Company and the
Guarantors in the execution of any supplemental indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations which may be therein contained, but the Trustee
shall not be obligated to enter into any such supplemental indenture which
adversely affects its own rights, duties or immunities under this Indenture.
Section 8.02. With Consent of Holders.
The Company, the Guarantors and the Trustee may modify or supplement this
Indenture or the Securities with the written consent of the Holders of not less
than a majority in aggregate principal amount of the outstanding Securities
without notice to any Securityholder. The Holders of not less than a majority
in aggregate principal amount of the outstanding Securities may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Securities without notice to any Securityholder. Subject to
Section 8.04, without the consent
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of each Securityholder affected, however, an amendment, supplement or waiver,
including a waiver pursuant to Section 6.04, may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver to this Indenture or the Securities;
(2) reduce the rate of or change the time for payment of interest on
any Security;
(3) reduce the principal of or premium on or change the stated
maturity of any Security;
(4) make any Security payable in money other than that stated in the
Security or change the place of payment from New York, New York;
(5) change the amount or time of any payment required by the
Securities or reduce the premium payable upon any redemption of the
Securities in accordance with Section 3.07 hereof, or change the time
before which no such redemption may be made;
(6) waive a default in the payment of the principal of, or interest
on, or redemption payment with respect to, any Security (including any
obligation to make a Change of Control Offer or, after the Company's
obligation to purchase Securities arises thereunder, an Excess Proceeds
Offer or modify any of the provisions or definitions with respect to such
offers);
(7) make any changes in Sections 6.04 or 6.07 hereof or this sentence
of Section 8.02; or
(8) affect the ranking of the Securities in a manner adverse to the
Holders.
After an amendment, supplement or waiver under this Section 8.02 becomes
effective, the Company shall mail to the Holders a notice briefly describing
the amendment, supplement or waiver.
Upon the request of the Company, accompanied by a Board Resolution
authorizing the execution of any such supplemental indenture, and upon the
receipt by the Trustee of evidence reasonably satisfactory to the Trustee of
the consent of the Securityholders as aforesaid and upon receipt by the Trustee
of
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the documents described in Section 8.06 hereof, the Trustee shall join with the
Company and the Guarantors in the execution of such supplemental indenture
unless such supplemental indenture affects the Trustee's own rights, duties or
immunities under this Indenture, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such supplemental
indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
Section 8.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities shall
comply with the TIA as then in effect.
Section 8.04. Revocation and Effect of Consents.
Until an amendment, supplement, waiver or other action becomes effective,
a consent to it by a Holder of a Security is a continuing consent conclusive
and binding upon such Holder and every subsequent Holder of the same Security
or portion thereof, and of any Security issued upon the transfer thereof or in
exchange therefor or in place thereof, even if notation of the consent is not
made on any such Security. Any such Holder or subsequent Holder, however, may
revoke the consent as to his Security or portion of a Security, if the Trustee
receives the notice of revocation before the date the amendment, supplement,
waiver or other action becomes effective.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement, or waiver. If a record date is fixed, then, notwithstanding the
preceding paragraph, those Persons who were Holders at such record date (or
their duly designated proxies), and only such Persons, shall be entitled to
consent to such amendment, supplement, or waiver or to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date unless the consent of the requisite number of Holders
has been obtained.
After an amendment, supplement, waiver or other action becomes effective,
it shall bind every Securityholder, unless it makes a change described in any
of clauses (1) through (8) of Section 8.02 hereof. In that case the amendment,
supplement,
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waiver or other action shall bind each Holder of a Security who has consented
to it and every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security.
Section 8.05. Notation on or Exchange of Securities.
If an amendment, supplement, or waiver changes the terms of a Security,
the Trustee may request the Holder of the Security to deliver it to the
Trustee. In such case, the Trustee shall place an appropriate notation on the
Security about the changed terms and return it to the Holder. Alternatively,
if the Company or the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new security that
reflects the changed terms. Failure to make the appropriate notation or issue
a new Security shall not affect the validity and effect of such amendment
supplement or waiver.
Section 8.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article 8 if the amendment, supplement or waiver does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may, but need not, sign it. In signing or refusing to
sign such amendment, supplement or waiver the Trustee shall be entitled to
receive and, subject to Section 7.01 hereof, shall be fully protected in
relying upon an Officers' Certificate and an Opinion of Counsel stating that
such amendment, supplement or waiver is authorized or permitted by this
Indenture. The Company or any Guarantor may not sign an amendment or
supplement until the Board of Directors of the Company or such Guarantor, as
appropriate, approves it.
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.
The Company and the Guarantors may terminate their obligations under the
Securities, the Guarantees and this Indenture, except the obligations referred
to in the last paragraph of this Section 9.01, if there shall have been
cancelled by the Trustee or delivered to the Trustee for cancellation all
Securities theretofore authenticated and delivered (other than any
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Securities that are asserted to have been destroyed, lost or stolen and that
shall have been replaced as provided in Section 2.07 hereof) and the Company
has paid all sums payable by it hereunder or deposited all required sums with
the Trustee.
After such delivery the Trustee upon request shall acknowledge in writing
the discharge of the Company's and the Guarantors' obligations under the
Securities, the Guarantees and this Indenture except for those surviving
obligations specified below.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company in Sections 7.07, 9.05 and 9.06 hereof shall
survive.
Section 9.02. Legal Defeasance.
The Company may at its option, by Board Resolution, be discharged from its
obligations with respect to the Securities and the Guarantors discharged from
their obligations under the Guarantees on the date the conditions set forth in
Section 9.04 below are satisfied (hereinafter, "Legal Defeasance"). For this
purpose, such Legal Defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by the Securities and
to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, shall, subject to Section 9.06 hereof, execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of outstanding Securities to receive solely from the trust funds
described in Section 9.04 hereof and as more fully set forth in such Section,
payments in respect of the principal of, premium, if any, and interest on such
Securities when such payments are due, (B) the Company's obligations with
respect to such Securities under Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08
and 4.16 hereof, (C) the rights, powers, trusts, duties, and immunities of the
Trustee hereunder (including claims of, or payments to, the Trustee under or
pursuant to Section 7.07 hereof) and (D) this Article 9. Subject to compliance
with this Article 9, the Company may exercise its option under this Section
9.02 with respect to the Securities notwithstanding the prior exercise of its
option under Section 9.03 below with respect to the Securities.
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Section 9.03. Covenant Defeasance.
At the option of the Company, pursuant to a Board Resolution, the Company
and the Guarantors shall be released from their respective obligations under
Sections 4.02 through 4.15 hereof, inclusive, and clause (ii) of Section 5.01
hereof with respect to the outstanding Securities on and after the date the
conditions set forth in Section 9.04 hereof are satisfied (hereinafter,
"Covenant Defeasance"). For this purpose, such Covenant Defeasance means that
the Company and the Guarantors may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
specified Section or portion thereof, whether directly or indirectly by reason
of any reference elsewhere herein to any such specified Section or portion
thereof or by reason of any reference in any such specified Section or portion
thereof to any other provision herein or in any other document, but the
remainder of this Indenture and the Securities shall be unaffected thereby.
Section 9.04. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of Section 9.02 or
Section 9.03 hereof to the outstanding Securities:
(1) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 7.10 hereof who shall agree to comply with the provisions of
this Article 9 applicable to it) as funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of the Securities, (A)
money in an amount, or (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than the due date of
any payment, money in an amount, or (C) a combination thereof, sufficient,
in the opinion of a nationally-recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay and discharge, and which shall be applied by the Trustee
(or other qualifying trustee) to pay and discharge, the principal of,
premium, if any, and accrued interest on the outstanding Securities at the
maturity date of such principal, premium, if any, or interest, or on dates
for payment and redemption of such principal, premium, if any, and
interest
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selected in accordance with the terms of this Indenture and of the
Securities;
(2) no Event of Default or Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit, or
shall have occurred and be continuing at any time during the period ending
on the 91st day after the date of such deposit or, if longer, ending on
the day following the expiration of the longest preference period under
any Bankruptcy Law applicable to the Company in respect of such deposit
(it being understood that this condition shall not be deemed satisfied
until the expiration of such period);
(3) such Legal Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest for purposes of the TIA with
respect to any securities of the Company;
(4) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute default under any other agreement
or instrument to which the Company is a party or by which it is bound;
(5) the Company shall have delivered to the Trustee an Opinion of
Counsel stating that, as a result of such Legal Defeasance or Covenant
Defeasance, neither the trust nor the Trustee will be required to register
as an investment company under the Investment Company Act of 1940, as
amended;
(6) in the case of an election under Section 9.02 above, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that (i)
the Company has received from, or there has been published by, the
Internal Revenue Service a ruling to the effect that or (ii) there has
been a change in any applicable Federal income tax law with the effect
that, and such opinion shall confirm that, the Holders of the outstanding
Securities or persons in their positions will not recognize income, gain
or loss for Federal income tax purposes solely as a result of such Legal
Defeasance and will be subject to Federal income tax on the same amounts,
in the same manner, including as a result of prepayment, and at the same
times as would have been the case if such Legal Defeasance had not
occurred;
(7) in the case of an election under Section 9.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Holders of the
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outstanding Securities will not recognize income, gain or loss for
Federal income tax purposes as a result of such Covenant Defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(8) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the Legal Defeasance under
Section 9.02 above or the Covenant Defeasance under Section 9.03 hereof
(as the case may be) have been complied with;
(9) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit under clause (1) was not made by the
Company with the intent of defeating, hindering, delaying or defrauding
any creditors of the Company or others; and
(10) the Company shall have paid or duly provided for payment under
terms mutually satisfactory to the Company and the Trustee all amounts
then due to the Trustee pursuant to Section 7.07 hereof.
Section 9.05. Deposited Money and U.S. Government
Obligations to Be Held in Trust; Other
Miscellaneous Provisions.
All money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee pursuant to Section 9.04 hereof in respect of the
outstanding Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon in respect of principal, premium, if any, and accrued interest, but
such money need not be segregated from other funds except to the extent
required by law.
The Company and the Guarantors shall pay and indemnify the Trustee against
any tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 9.04 hereof or the principal,
premium, if any, and interest received in respect thereof other than any such
tax, fee or other charge which by law is for the account of the Holders of the
outstanding Securities.
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Anything in this Article 9 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 9.04
hereof which, in the opinion of a nationally-recognized firm of independent
public accountants expressed in a written certification thereof delivered to
the Trustee, are in excess of the amount thereof which would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 9.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 9.01, 9.02 or 9.03 hereof by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's and each Guarantor's obligations under this
Indenture, the Securities and the Guarantees shall be revived and reinstated as
though no deposit had occurred pursuant to this Article 9 until such time as
the Trustee or Paying Agent is permitted to apply all such money or U.S.
Government Obligations in accordance with Section 9.01 hereof; provided,
however, that if the Company or the Guarantors have made any payment of
principal of, premium, if any, or accrued interest on any Securities because of
the reinstatement of their obligations, the Company or the Guarantors, as the
case may be, shall be subrogated to the rights of the Holders of such
Securities to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent.
Section 9.07. Moneys Held by Paying Agent.
In connection with the satisfaction and discharge of this Indenture, all
moneys then held by any Paying Agent under the provisions of this Indenture
shall, upon demand of the Company, be paid to the Trustee, or if sufficient
moneys have been deposited pursuant to Section 9.01 hereof, to the Company (or,
if such moneys had been deposited by the Guarantors, to such Guarantors), and
thereupon such Paying Agent shall be released from all further liability with
respect to such moneys.
Section 9.08. Moneys Held by Trustee.
Any moneys deposited with the Trustee or any Paying Agent or then held by
the Company or the Guarantors in trust for the payment of the principal of, or
premium, if any, or interest on any Security that are not applied but remain
unclaimed by the
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Holder of such Security for two years after the date upon which the principal
of, or premium, if any, or interest on such Security shall have respectively
become due and payable shall be repaid to the Company (or, if appropriate, the
Guarantors) upon Company Request, or if such moneys are then held by the
Company or the Guarantors in trust, such moneys shall be released from such
trust; and the Holder of such Security entitled to receive such payment shall
thereafter, as an unsecured general creditor, look only to the Company and the
Guarantors for the payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money shall thereupon cease; provided,
however, that the Trustee or any such Paying Agent, before being required to
make any such repayment, may, at the expense of the Company and the Guarantors,
either mail to each Securityholder affected, at the address shown in the
register of the Securities maintained by the Registrar pursuant to Section 2.03
hereof, or cause to be published once a week for two successive weeks, in a
newspaper published in the English language, customarily published each
Business Day and of general circulation in the City of New York, New York, a
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such mailing or
publication, any unclaimed balance of such moneys then remaining will be repaid
to the Company. After payment to the Company or the Guarantors or the release
of any money held in trust by the Company or any Guarantors, as the case may
be, Securityholders entitled to the money must look only to the Company and the
Guarantors for payment as general creditors unless applicable abandoned
property law designates another person.
ARTICLE 10
GUARANTEE OF SECURITIES
Section 10.01. Guarantee.
Subject to the provisions of this Article 10, each Guarantor hereby
jointly and severally unconditionally guarantees to each Holder and to the
Trustee, on behalf of the Holders, (i) the due and punctual payment of the
principal of, and premium, if any, and interest on each Security, when and as
the same shall become due and payable, whether at maturity, by acceleration or
otherwise, the due and punctual payment of interest on the overdue principal
of, and premium, if any, and interest on the Securities, to the extent lawful,
and the due and punctual performance of all other Obligations of the Company to
the
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Holders or the Trustee all in accordance with the terms of such Security and
this Indenture, and (ii) in the case of any extension of time of payment or
renewal of any Securities or any of such other Obligations, that the same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, at stated maturity, by acceleration or otherwise.
Each Guarantor hereby agrees that its obligations hereunder shall be absolute
and unconditional, irrespective of, and shall be unaffected by, any invalidity,
irregularity or unenforceability of any such Security or this Indenture, any
failure to enforce the provisions of any such Security or this Indenture, any
waiver, modification or indulgence granted to the Company with respect thereto
by the Holder of such Security or the Trustee, or any other circumstances which
may otherwise constitute a legal or equitable discharge of a surety or such
Guarantor.
Each Guarantor hereby waives diligence, presentment, filing of claims with
a court in the event of merger or bankruptcy of the Company, any right to
require a proceeding first against the Company, protest or notice with respect
to any such Security or the Indebtedness evidenced thereby and all demands
whatsoever, and covenants that this Guarantee will not be discharged as to any
such Security except by payment in full of the principal thereof, premium if
any, and interest thereon and as provided in Section 9.01 hereof. Each
Guarantor further agrees that, as between such Guarantor, on the one hand, and
the Holders and the Trustee, on the other hand, (i) the maturity of the
Obligations guaranteed hereby may be accelerated as provided in Article 6
hereof for the purposes of this Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (ii) in the event of any declaration of acceleration of
such Obligations as provided in Article 6 hereof, such Obligations (whether or
not due and payable) shall forthwith become due and payable by each Guarantor
for the purpose of this Guarantee. In addition, without limiting the foregoing
provisions, upon the effectiveness of an acceleration under Article 6 hereof,
the Trustee shall promptly make a demand for payment on the Securities under
the Guarantee provided for in this Article 10 and not discharged.
The Guarantee set forth in this Section 10.01 shall not be valid or become
obligatory for any purpose with respect to a Security until the certificate of
authentication on such Security shall have been signed by or on behalf of the
Trustee.
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Section 10.02. Execution and Delivery of Guarantees.
To evidence the Guarantee set forth in this Article 10, each Guarantor
hereby agrees that a notation of such Guarantee shall be placed on each
Security authenticated and made available for delivery by the Trustee and that
this Guarantee shall be executed on behalf of each Guarantor by the manual or
facsimile signature of an Officer of each Guarantor.
Each Guarantor hereby agrees that the Guarantee set forth in Section 10.01
shall remain in full force and effect notwithstanding any failure to endorse on
each Security a notation of such Guarantee.
If an Officer of a Guarantor whose signature is on the Guarantee no longer
holds that office at the time the Trustee authenticates the Security on which
the Guarantee is endorsed, the Guarantee shall be valid nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee set forth in
this Indenture on behalf of each Guarantor.
Section 10.03. Limitation of Guarantee.
The obligations of each Guarantor are limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor (including, without limitation, any guarantees of Senior Debt) and
after giving effect to any collections from or payments made by or on behalf of
any other Guarantor in respect of the obligations of such other Guarantor under
its Guarantee or pursuant to its contribution obligations under this Indenture,
result in the obligations of such Guarantor under the Guarantee not constituting
a fraudulent conveyance or fraudulent transfer under federal or state law. Each
Guarantor that makes a payment or distribution under a Guarantee shall be
entitled to a contribution from each other Guarantor in a pro rata amount based
on the Adjusted Net Assets of each Subsidiary Guarantor.
Section 10.04. Additional Guarantors.
The Company covenants and agrees that it will cause any Person which
becomes obligated to guarantee the Securities, pursuant to the terms of Section
4.11 hereof, to execute a guarantee satisfactory in form and substance to the
Trustee pursuant to which such Restricted Subsidiary shall guarantee the
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obligations of the Company under the Securities and this Indenture in
accordance with this Article 10 with the same effect and to the same extent as
if such Person had been named herein as a Guarantor.
Section 10.05. Release of Guarantor.
A Guarantor shall be released from all of its obligations under its
Guarantee if:
(i) the Guarantor has sold all or substantially all of its assets or
the Company and its Restricted Subsidiaries have sold all of the Capital
Stock of the Guarantor owned by them, in each case in a transaction in
compliance with Sections 4.09 and 5.01 hereof; or
(ii) the Guarantor merges with or into or consolidates with, or
transfers all or substantially all of its assets to, the Company or
another Guarantor in a transaction in compliance with Section 5.01 hereof;
and in each such case, the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such transactions have been complied
with.
Section 10.06. Guarantee Obligations Subordinated
to Guarantor Senior Debt.
Each Guarantor covenants and agrees, and each Holder of Securities, by its
acceptance thereof, likewise covenants and agrees, that to the extent and in the
manner hereinafter set forth in this Article 10, the Indebtedness represented by
the Guarantee and the payment of the principal of, premium, if any, and interest
on the Securities pursuant to the Guarantee by such Guarantor are hereby
expressly made subordinate and subject in right of payment as provided in this
Article 10 to the prior payment in full in cash or Cash Equivalents or, as
acceptable to the holders of Guarantor Senior Debt of such Guarantor, in any
other manner, of all Guarantor Senior Debt of such Guarantor.
This Section 10.06 and the following Sections 10.07 through 10.11 shall
constitute a continuing offer to all Persons who, in reliance upon such
provisions, become holders of or continue to hold Guarantor Senior Debt of any
Guarantor; and such provisions are made for the benefit of the holders of
Guarantor Senior Debt of each Guarantor; and such holders are made obligees
hereunder and they or each of them may enforce such provisions.
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Section 10.07. Payment Over of Proceeds upon
Dissolution, etc., of a Guarantor.
In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to any Guarantor or to its
creditors, as such, or to its assets, whether voluntary or involuntary, or (b)
any liquidation, dissolution or other winding-up of any Guarantor, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy
or (c) any general assignment for the benefit of creditors or any other
marshaling of assets or liabilities of any Guarantor, then and in any such
event:
(1) the holders of all Guarantor Senior Debt of such Guarantor shall
be entitled to receive payment in full in cash or Cash Equivalents or, as
acceptable to the holders of such Guarantor Senior Debt, in any other
manner, of all amounts due on or in respect of all such Guarantor Senior
Debt, or provision shall be made for such payment, before the Holders of
the Securities are entitled to receive, pursuant to the Guarantee of such
Guarantor, any payment or distribution of any kind or character by such
Guarantor on account of any of its Obligations on its Guarantee; and
(2) any payment or distribution of assets of such Guarantor of any
kind or character, whether in cash, property or securities, by set-off or
otherwise, to which the Holders or the Trustee would be entitled but for
the subordination provisions of this Article 10 shall be paid by the
liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the holders of Guarantor Senior Debt of
such Guarantor or their representative or representatives or to the
trustee or trustees under any indenture under which any instruments
evidencing any of such Guarantor Senior Debt may have been issued, ratably
according to the aggregate amounts remaining unpaid on account of such
Guarantor Senior Debt held or represented by each, to the extent necessary
to make payment in full in cash, Cash Equivalents or, as acceptable to the
Holders of such Guarantor Senior Debt of such Guarantor, in any other
manner, of all such Guarantor Senior Debt remaining unpaid, after giving
effect to any concurrent payment or distribution to the holders of such
Guarantor Senior Debt; and
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(3) in the event that, notwithstanding the foregoing provisions of
this Section 10.07, the Trustee or the Holder of any Security shall have
received any payment or distribution of assets of such Guarantor of any
kind or character, whether in cash, property or securities, including,
without limitation, by way of set-off or otherwise, in respect of any of
its Obligations on its Guarantee before all Guarantor Senior Debt of such
Guarantor is paid in full or payment thereof provided for, then and in
such event such payment or distribution shall be paid over or delivered
forthwith to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other Person making payment or distribution
of assets of such Guarantor for application to the payment of all such
Guarantor Senior Debt remaining unpaid, to the extent necessary to pay all
of such Guarantor Senior Debt in full in cash, Cash Equivalents or, as
acceptable to the holders of such Guarantor Senior Debt, any other manner,
after giving effect to any concurrent payment or distribution to or for
the holders of such Guarantor Senior Debt.
The consolidation of a Guarantor with, or the merger of a Guarantor with
or into, another Person or the liquidation or dissolution of a Guarantor
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another Person upon the terms and conditions
set forth in Article 5 hereof shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of such Guarantor for the purposes of this
Article 10 if the Person formed by such consolidation or the surviving entity
of such merger or the Person which acquires by conveyance, transfer or lease
such properties and assets substantially as an entirety, as the case may be,
shall, as a part of such consolidation, merger, conveyance, transfer or lease,
comply with the conditions set forth in such Article 5 hereof.
Section 10.08. Suspension of Guarantee Obligations
When Guarantor Senior Debt in Default.
(a) Unless Section 10.07 hereof shall be applicable, after the occurrence
of a Payment Default no payment or distribution of any assets or securities of a
Guarantor (or any Restricted Subsidiary or Subsidiary of such Guarantor) of any
kind or character (including, without limitation, cash, Property and any payment
or distribution which may be payable or deliverable by reason of the payment of
any other Indebtedness of such Guarantor being subordinated to its Obligations
on its Guarantee)
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may be made by or on behalf of such Guarantor (or any Restricted Subsidiary or
Subsidiary of such Guarantor), including, without limitation, by way of set-off
or otherwise, for or on account of its Obligations on its Guarantee, and
neither the Trustee nor any holder or owner of any Securities shall take or
receive from any Guarantor (or any Restricted Subsidiary or Subsidiary of such
Guarantor), directly or indirectly in any manner, payment in respect of all or
any portion of its Obligations on its Guarantee following the delivery by the
representative of the holders of Guarantor Senior Debt (the "Guarantor
Representative") to the Trustee of written notice of the occurrence of a
Payment Default, and in any such event, such prohibition shall continue until
such Payment Default is cured, waived in writing or ceases to exist. At such
time as the prohibition set forth in the preceding sentence shall no longer be
in effect, subject to the provisions of the following paragraph (b), such
Guarantor shall resume making any and all required payments in respect of its
Obligations under its Guarantee.
(b) Unless Section 10.07 hereof shall be applicable, upon the occurrence
of a Non-Payment Event of Default on Designated Senior Debt, no payment or
distribution of any assets of such Guarantor of any kind or character shall be
made by such Guarantor, including, without limitation, by way of set-off or
otherwise, on account of any of its Obligations on its Guarantee for a period
(the "Guarantee Payment Blockage Period") commencing on the date of receipt by
the Trustee of written notice from the Guarantor Representative of such
Non-Payment Event of Default, unless and until (subject to any blockage of
payments that may then be in effect under the preceding paragraph (a)) the
earliest to occur of the following events: (w) more than 179 days shall have
elapsed since the date of receipt of such written notice by the Trustee, (x)
such Non-Payment Event of Default shall have been cured or waived in writing or
shall have ceased to exist, (y) such Designated Senior Debt shall have been
discharged or paid in full in cash or Cash Equivalents or (z) such Guarantee
Payment Blockage Period shall have been terminated by written notice to such
Guarantor or the Trustee from the Guarantor Representative initiating such
Guarantee Payment Blockage Period, or the holders of at least a majority in
principal amount of such issue of Designated Senior Debt, after which, in the
case of clause (w), (x), (y) or (z), such Guarantor shall resume making any and
all required payments in respect of its Obligations on its Guarantee.
Notwithstanding any other provisions of this Indenture, no Non-Payment Event of
Default with respect to Designated Senior Debt which existed or was continuing
on the date of the commencement of any Guarantee Payment Blockage Period
initiated by the Guarantor Representative shall be, or be made,
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the basis for the commencement of a second Guarantee Payment Blockage Period
initiated by the Guarantor Representative unless such event of default shall
have been cured or waived for a period of not less than 90 consecutive days.
In no event shall a Guarantee Payment Blockage Period extend beyond 179 days
from the date of the receipt by the Trustee of the notice referred to in this
Section 10.08(b) or, in the event of a Non-Payment Event of Default which
formed the basis for a Payment Blockage Period under Section 11.03(b) hereof,
179 days from the date of the receipt by the Trustee of the notice referred to
in Section 11.03(b) (the "Initial Guarantee Blockage Period"). Any number of
additional Guarantee Payment Blockage Periods may be commenced during the
Initial Guarantee Blockage Period; provided, however, that no such additional
Guarantee Payment Blockage Period shall extend beyond the Initial Guarantee
Blockage Period. After the expiration of the Initial Guarantee Blockage
Period, no Guarantee Payment Blockage Period may be commenced under this
Section 10.08(b) and no Payment Blockage Period may be commenced under Section
11.03(b) hereof until at least 180 consecutive days have elapsed from the last
day of the Initial Guarantee Blockage Period.
(c) In the event that, notwithstanding the foregoing, the Trustee or the
Holder of any Security shall have received any payment from a Guarantor
prohibited by the foregoing provisions of this Section 10.08, then and in such
event such payment shall be paid over and delivered forthwith to the Guarantor
Representative initiating the Guarantee Payment Blockage Period, in trust for
distribution to the holders of Guarantor Senior Debt or, if no amounts are then
due in respect of Guarantor Senior Debt, promptly returned to the Guarantor, or
as a court of competent jurisdiction shall direct.
Section 10.09. Subrogation to Rights of Holders
of Guarantor Senior Debt.
Upon the payment in full of all amounts payable under or in respect of all
Guarantor Senior Debt of a Guarantor, the Holders shall be subrogated to the
rights of the holders of such Guarantor Senior Debt to receive payments and
distributions of cash, Property and securities of such Guarantor made on such
Guarantor Senior Debt until all amounts due to be paid under the Guarantee
shall be paid in full. For the purposes of such subrogation, no payments or
distributions to holders of Guarantor Senior Debt of any cash, Property or
securities to which Holders of the Securities or the Trustee would be entitled
except for the provisions of this Article 10, and no payments over pursuant to
the provisions of this Article 10 to holders of Guarantor Senior
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Debt by Holders of the Securities or the Trustee, shall, as among each
Guarantor, its creditors other than holders of Guarantor Senior Debt and the
Holders of the Securities, be deemed to be a payment or distribution by such
Guarantor to or on account of such Guarantor Senior Debt.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article 10 shall have been
applied, pursuant to the provisions of this Article 10, to the payment of all
amounts payable under Guarantor Senior Debt, then and in such case, the Holders
shall be entitled to receive from the holders of such Guarantor Senior Debt at
the time outstanding any payments or distributions received by such holders of
Guarantor Senior Debt in excess of the amount sufficient to pay all amounts
payable under or in respect of such Guarantor Senior Debt in full in cash or
Cash Equivalents.
Section 10.10. Guarantee Subordination Provisions
Solely to Define Relative Rights.
The subordination provisions of this Article 10 are and are intended
solely for the purpose of defining the relative rights of the Holders of the
Securities on the one hand and the holders of Guarantor Senior Debt on the
other hand. Nothing contained in this Article 10 or elsewhere in this
Indenture or in the Securities is intended to or shall (a) impair, as among
each Guarantor, its creditors other than holders of its Guarantor Senior Debt
and the Holders of the Securities, the obligation of such Guarantor, which is
absolute and unconditional, to make payments to the Holders in respect of its
Obligations on its Guarantee in accordance with its terms; or (b) affect the
relative rights against such Guarantor of the Holders of the Securities and
creditors of such Guarantor other than the holders of the Guarantor Senior
Debt; or (c) prevent the Trustee or the Holder of any Security from exercising
all remedies otherwise permitted by applicable law upon a Default or an Event
of Default under this Indenture, subject to the rights, if any, under this
Article 10 of the holders of Guarantor Senior Debt (1) in any case, proceeding,
dissolution, liquidation or other winding-up, assignment for the benefit of
creditors or other marshaling of assets and liabilities of the Company referred
to in Section 10.07 hereof, to receive, pursuant to and in accordance with such
Section, cash, Property and securities otherwise payable or deliverable to the
Trustee or such Holder, or (2) under the conditions specified in Section 10.08
hereof, to prevent any payment prohibited by such Section or enforce their
rights pursuant to Section 10.08(c) hereof.
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The failure by any Guarantor to make a payment in respect of its
obligations on its Guarantee by reason of any provision of this Article 10
shall not be construed as preventing the occurrence of a Default or an Event of
Default hereunder.
Section 10.11. Application of Certain Article 11
Provisions.
The provisions of Sections 11.04, 11.07, 11.08, 11.09, 11.10, 11.12 and
11.13 hereof shall apply, mutatis mutandis, to each Guarantor and their
respective holders of Guarantor Senior Debt and the rights, duties and
obligations set forth therein shall govern the rights, duties and obligations
of each Guarantor, the holders of Guarantor Senior Debt, the Holders and the
Trustee with respect to the Guarantee and all references therein to Article 11
hereof shall mean this Article 10.
ARTICLE 11
SUBORDINATION OF SECURITIES
Section 11.01. Securities Subordinate to Senior Debt.
The Company covenants and agrees, and each Holder of Securities, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article 11, the Indebtedness
represented by the Securities and the payment of the principal of, premium, if
any, and interest on the Securities are hereby expressly made subordinate and
subject in right of payment as provided in this Article 11 to the prior payment
in full in cash or Cash Equivalents or, as acceptable to the holders of Senior
Debt, in any other manner, of all Senior Debt.
This Article 11 shall constitute a continuing offer to all Persons who, in
reliance upon such provisions, become holders of or continue to hold Senior
Debt; and such provisions are made for the benefit of the holders of Senior
Debt; and such holders are made obligees hereunder and they or each of them may
enforce such provisions.
Section 11.02. Payment Over of Proceeds upon
Dissolution, etc.
In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization
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or other similar case or proceeding in connection therewith, relative to the
Company or to its creditors, as such, or to its assets, whether voluntary or
involuntary or (b) any liquidation, dissolution or other winding-up of the
Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any general assignment for the benefit of
creditors or any other marshalling of assets or liabilities of the Company,
then and in any such event:
(1) the holders of Senior Debt shall be entitled to receive payment
in full in cash or Cash Equivalents or, as acceptable to the holders of
Senior Debt, in any other manner, of all amounts due on or in respect of
all Senior Debt, or provision shall be made for such payment, before the
Holders of the Securities are entitled to receive any payment or
distribution of any kind or character on account of principal of, premium,
if any, or interest on the Securities; and
(2) any payment or distribution of assets of the Company of any kind
or character, whether in cash, Property or securities, by set-off or
otherwise, to which the Holders or the Trustee would be entitled but for
the provisions of this Article 11 shall be paid by the liquidating trustee
or agent or other Person making such payment or distribution, whether a
trustee in bankruptcy, a receiver or liquidating trustee or otherwise,
directly to the holders of Senior Debt or their representative or
representatives or to the trustee or trustees under any indenture under
which any instruments evidencing any of such Senior Debt may have been
issued, ratably according to the aggregate amounts remaining unpaid on
account of the Senior Debt held or represented by each, to the extent
necessary to make payment in full in cash, Cash Equivalents or, as
acceptable to the holders of Senior Debt, in any other manner, of all
Senior Debt remaining unpaid, after giving effect to any concurrent
payment or distribution, or provision therefor, to the holders of such
Senior Debt; and
(3) in the event that, notwithstanding the foregoing provisions of
this Section 11.02, the Trustee or the Holder of any Security shall have
received any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, including, without
limitation, by way of set-off or otherwise, in respect of principal of,
premium, if any, and interest on the Securities before all Senior Debt is
paid in full or payment thereof provided for, then and in such event such
payment or
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distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or
other Person making payment or distribution of assets of the Company for
application to the payment of all Senior Debt remaining unpaid, to the
extent necessary to pay all Senior Debt in full in cash, Cash Equivalents
or, as acceptable to the holders of Senior Debt, any other manner, after
giving effect to any concurrent payment or distribution, or provision
therefor, to or for the holders of Senior Debt.
The consolidation of the Company with, or the merger of the Company with
or into, another Person or the liquidation or dissolution of the Company
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another Person upon the terms and conditions
set forth in Article 5 hereof shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of the Company for the purposes of this
Article 11 if the Person formed by such consolidation or the surviving entity
of such merger or the Person which acquires by conveyance, transfer or lease
such properties and assets substantially as an entirety, as the case may be,
shall, as a part of such consolidation, merger, conveyance, transfer or lease,
comply with the conditions set forth in such Article 5 hereof.
Section 11.03. Suspension of Payment When Senior
Debt in Default.
(a) Unless Section 11.02 hereof shall be applicable, after the occurrence
of a Payment Default no payment or distribution of any assets or securities of
the Company or any Restricted Subsidiary of any kind or character (including,
without limitation, cash, property and any payment or distribution which may be
payable or deliverable by reason of the payment of any other Indebtedness of the
Company being subordinated to the payment of the Securities by the Company) may
be made by or on behalf of the Company or any Restricted Subsidiary, including,
without limitation, by way of set-off or otherwise, for or on account of
principal of, premium, if any, or interest on the Securities, or for or on
account of the purchase, redemption or other acquisition of the Securities, and
neither the Trustee nor any holder or owner of any Securities shall take or
receive from the Company or any Restricted Subsidiary, directly or indirectly in
any manner, payment in respect of all or any portion of Securities following the
delivery by the representative of the holders of Designated Senior Debt (the
"Representative") to the
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Trustee of written notice of the occurrence of a Payment Default, and in any
such event, such prohibition shall continue until such Payment Default is
cured, waived in writing or ceases to exist. At such time as the prohibition
set forth in the preceding sentence shall no longer be in effect, subject to
the provisions of the following paragraph (b), the Company shall resume making
any and all required payments in respect of the Securities, including any
missed payments.
(b) Unless Section 11.02 hereof shall be applicable, upon the occurrence
of a Non-Payment Event of Default on Designated Senior Debt, no payment or
distribution of any assets of the Company of any kind or character shall be made
by the Company, including, without limitation, by way of set-off or otherwise,
on account of any principal of, premium, if any, or interest on the Securities
or on account of the purchase, redemption, defeasance or other acquisition of
Securities for a period ("Payment Blockage Period") commencing on the date of
receipt by the Trustee of written notice from the Representative of such
Non-Payment Event of Default unless and until (subject to any blockage of
payments that may then be in effect under the preceding paragraph (a)) the
earliest to occur of the following events: (w) more than 179 days shall have
elapsed since the date of receipt of such written notice by the Trustee, (x)
such Non-Payment Event of Default shall have been cured or waived in writing or
shall have ceased to exist, (y) such Designated Senior Debt shall have been
discharged or paid in full in cash or Cash Equivalents or (z) such Payment
Blockage Period shall have been terminated by written notice to the Company or
the Trustee from the Representative initiating such Payment Blockage Period, or
the holders of at least a majority in principal amount of such issue of
Designated Senior Debt, after which, in the case of clause (w), (x), (y) or (z),
the Company shall resume making any and all required payments in respect of the
Securities, including any missed payments. Notwithstanding any other provisions
of this Indenture, no Non-Payment Event of Default with respect to Designated
Senior Debt which existed or was continuing on the date of the commencement of
any Payment Blockage Period initiated by the Representative shall be, or be
made, the basis for the commencement of a second Payment Blockage Period
initiated by the Representative unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days. In no event
shall a Payment Blockage Period extend beyond 179 days from the date of the
receipt by the Trustee of the notice referred to in this Section 11.03(b) (the
"Initial Blockage Period"). Any number of additional Payment Blockage Periods
may be commenced during the Initial Blockage Period; provided, however, that no
such additional Payment Blockage Period shall extend
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beyond the Initial Blockage Period. After the expiration of the Initial
Blockage Period, no Payment Blockage Period may be commenced under this Section
11.03(b) and no Guarantee Payment Blockage Period may be commenced under
Section 10.08(b) hereof until at least 180 consecutive days have elapsed from
the last day of the Initial Blockage Period.
(c) In the event that, notwithstanding the foregoing, the Trustee or the
Holder of any Security shall have received any payment prohibited by the
foregoing provisions of this Section 11.03, then and in such event such payment
shall be paid over and delivered forthwith to the Representative initiating the
Payment Blockage Period, in trust for distribution to the holders of Senior Debt
or, if no amounts are then due in respect of Senior Debt, promptly returned to
the Company, or otherwise as a court of competent jurisdiction shall direct.
Section 11.04. Trustee's Relation to Senior
Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article 11, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt and the Trustee shall not be
liable to any holder of Senior Debt if it shall mistakenly pay over or deliver
to Holders, the Company or any other Person moneys or assets to which any
holder of Senior Debt shall be entitled by virtue of this Article 11 or
otherwise.
Section 11.05. Subrogation to Rights of Holders
of Senior Debt.
Upon the payment in full of all Senior Debt, the Holders of the Securities
shall be subrogated to the rights of the holders of such Senior Debt to receive
payments and distributions of cash, Property and securities applicable to the
Senior Debt until the principal of, premium, if any and interest on the
Securities shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of Senior Debt of any cash, Property
or securities to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article 11, and no payments over
pursuant to the provisions of this Article 11 to the holders of Senior Debt by
Holders of the Securities or the Trustee, shall, as among the Company, its
creditors other than holders of Senior Debt and the
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Holders of the Securities, be deemed to be a payment or distribution by the
Company to or on account of the Senior Debt.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article 11 shall have been
applied, pursuant to the provisions of this Article 11, to the payment of all
amounts payable under the Senior Debt of the Company, then and in such case the
Holders shall be entitled to receive from the holders of such Senior Debt at
the time outstanding any payments or distributions received by such holders of
such Senior Debt in excess of the amount sufficient to pay all amounts payable
under or in respect of such Senior Debt in full in cash or Cash Equivalents.
Section 11.06. Provisions Solely to Define Relative
Rights.
The provisions of this Article 11 are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Debt on the other hand. Nothing contained
in this Article 11 or elsewhere in this Indenture or in the Securities is
intended to or shall (a) impair, as among the Company, its creditors other than
holders of Senior Debt and the Holders of the Securities, the obligation of the
Company, which is absolute and unconditional, to pay to the Holders of the
Securities the principal of, premium, if any, and interest on the Securities as
and when the same shall become due and payable in accordance with their terms;
or (b) affect the relative rights against the Company of the Holders of the
Securities and creditors of the Company other than the holders of Senior Debt;
or (c) prevent the Trustee or the Holder of any Security from exercising all
remedies otherwise permitted by applicable law upon a Default or an Event of
Default under this Indenture, subject to the rights, if any, under this Article
11 of the holders of Senior Debt (1) in any case, proceeding, dissolution,
liquidation or other winding-up, assignment for the benefit of creditors or
other marshaling of assets and liabilities of the Company referred to in
Section 11.02 hereof, to receive, pursuant to and in accordance with such
Section, cash, Property and securities otherwise payable or deliverable to the
Trustee or such Holder, or (2) under the conditions specified in Section 11.03,
to prevent any payment prohibited by such Section or enforce their rights
pursuant to Section 11.03(c) hereof.
The failure to make a payment on account of principal of, premium, if any,
or interest on the Securities by reason of any provision of this Article 11
shall not be construed as
<PAGE> 93
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preventing the occurrence of a Default or an Event of Default hereunder.
Section 11.07. Trustee to Effectuate Subordination.
Each Holder of a Security by his acceptance thereof authorizes and directs
the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Company whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid balance
of the indebtedness of the Company owing to such Holder in the form required in
such proceedings and the causing of such claim to be approved. If the Trustee
does not file such a claim prior to 30 days before the expiration of the time
to file such a claim, the holders of Senior Debt, or any Representative, may
file such a claim on behalf of Holders of the Securities.
Section 11.08. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any non-compliance
by the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
(b) Without limiting the generality of subsection (a) of this Section
11.08, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article 11
or the obligations hereunder of the Holders of the Securities to the holders of
Senior Debt, do any one or more of the following: (1) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Debt or any instrument evidencing the same or any agreement under which Senior
Debt is outstanding; (2) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Debt; (3) release any
Person liable in any manner for the collection or payment of Senior Debt; and
(4) exercise or refrain from exercising any rights against the Company and any
<PAGE> 94
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other Person; provided, however, that in no event shall any such actions limit
the right of the Holders of the Securities to take any action to accelerate the
maturity of the Securities pursuant to Article 6 hereof or to pursue any rights
or remedies hereunder or under applicable laws if the taking of such action
does not otherwise violate the terms of this Indenture.
Section 11.09. Notice to Trustee.
(a) The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee at its Corporate Trust Office in respect of the Securities.
Notwithstanding the provisions of this Article 11 or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to or by the Trustee in
respect of the Securities, unless and until the Trustee shall have received
written notice thereof from the Company or a holder of Senior Debt or from any
trustee, fiduciary or agent therefor; and, prior to the receipt of any such
written notice, the Trustee, subject to the provisions of this Section 11.09,
shall be entitled in all respects to assume that no such facts exist; provided,
however, that if the Trustee shall not have received the notice provided for in
this Section 11.09 at least five Business Days prior to the date upon which by
the terms hereof any money may become payable for any purpose under this
Indenture (including, without limitation, the payment of the principal of,
premium, if any, or interest on any Security), then, anything herein contained
to the contrary notwithstanding but without limiting the rights and remedies of
the holders of Senior Debt or any trustee, fiduciary or agent therefor, the
Trustee shall have full power and authority to receive such money and to apply
the same to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by it within five
Business Days prior to such date; nor shall the Trustee be charged with
knowledge of the curing of any such default or the elimination of the act or
condition preventing any such payment unless and until the Trustee shall have
received an Officers' Certificate to such effect.
(b) Subject to the provisions of Section 7.01 hereof, the Trustee shall be
entitled to rely on the delivery to it of a written notice to the Trustee and
the Company by a Person representing itself to be a holder of Senior Debt (or a
trustee, fiduciary or agent therefor) to establish that such notice has been
given by a holder of Senior Debt (or a trustee, fiduciary or agent therefor);
provided, however, that failure to give such
<PAGE> 95
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notice to the Company shall not affect in any way the ability of the Trustee to
rely on such notice. In the event that the Trustee determines in good faith
that further evidence is required with respect to the right of any Person as a
holder of Senior Debt to participate in any payment or distribution pursuant to
this Article 11, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article 11, and if such evidence is not furnished, the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
Section 11.10. Reliance on Judicial Order or
Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to in
this Article 11, the Trustee, subject to the provisions of Section 7.01 hereof,
and the Holders shall be entitled to rely upon any order or decree entered by
any court of competent jurisdiction in which such insolvency, bankruptcy,
receivership, liquidation, reorganization, dissolution, winding-up or similar
case or proceeding is pending, or a certificate of the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee for the benefit of
creditors, agent or other Person making such payment or distribution, delivered
to the Trustee or to the Holders, for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of Senior
Debt and other Indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article 11; provided that the foregoing shall
apply only if such court has been fully apprised of the provisions of this
Article 11.
Section 11.11. Rights of Trustee as a Holder of
Senior Debt; Preservation
of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article 11 with respect to any Senior Debt which may at any
time be held by it, to the same extent as any other holder of Senior Debt, and
nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder. Nothing in this Article 11 shall apply to claims
<PAGE> 96
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of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
Section 11.12. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article 11 shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article 11 in addition to or in place of the Trustee.
Section 11.13. No Suspension of Remedies.
Nothing contained in this Article 11 shall limit the right of the Trustee
or the Holders of Securities to take any action to accelerate the maturity of
the Securities pursuant to Article 6 or to pursue any rights or remedies
hereunder or under applicable law, subject to the rights, if any, under this
Article 11 of the holders, from time to time, of Senior Debt.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
Section 12.02. Notices.
Any notice or communication shall be given in writing and delivered in
person, sent by facsimile, delivered by commercial courier service or mailed by
first-class mail, postage prepaid, addressed as follows:
<PAGE> 97
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If to the Company or any Guarantor:
Paxson Communications Corporation
601 Clearwater Park Road
West Palm Beach, Florida 33401
Attention: Chief Financial Officer
General Counsel
Copy to:
Holland & Knight
400 North Ashley
Suite 2300
Tampa, Florida 33602
Attention: Michael L. Jamieson, Esq.
If to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust
Trustee Administration
Fax Number: (212) 815-5915
Such notices or communications shall be effective when received and shall
be sufficiently given if so given within the time prescribed in this Indenture.
The Company, the Guarantors or the Trustee by written notice to the others
may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall be mailed to
him by first-class mail, postage prepaid, at his address shown on the register
kept by the Registrar.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication to a Securityholder is mailed in
the manner provided above, it shall be deemed duly given, whether or not the
addressee receives it.
In case by reason of the suspension of regular mail service, or by reason
of any other cause, it shall be impossible to mail any notice as required by
this Indenture, then such
<PAGE> 98
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method of notification as shall be made with the approval of the Trustee shall
constitute a sufficient mailing of such notice.
Section 12.04. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Guarantors, the Trustee, the Registrar and anyone
else shall have the protection of TIA Section 312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company or any Guarantor to the
Trustee to take any action under this Indenture, the Company shall furnish to
the Trustee:
(1) an Officers' Certificate (which shall include the statements set
forth in Section 12.05 below) stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel (which shall include the statements set
forth in Section 12.05 below) stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section 12.05. Statements Required in Certificate and Opinion.
Each certificate and opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, it or he has
made such examination or investigation as is necessary to enable it or him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
<PAGE> 99
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(4) a statement as to whether or not, in the opinion of such Person,
such covenant or condition has been complied with.
Section 12.06. When Treasury Securities Disregarded.
In determining whether the Holders of the required aggregate principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by the Company, any Guarantor or any other obligor on the
Securities or by any Affiliate of any of them shall be disregarded, except that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Securities which the
Trustee actually knows are so owned shall be so disregarded. Securities so
owned which have been pledged in good faith shall not be disregarded if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right so
to act with respect to the Securities and that the pledgee is not the Company,
a Guarantor or any other obligor upon the Securities or any Affiliate of any of
them.
Section 12.07. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or meetings of
Securityholders. The Registrar and Paying Agent may make reasonable rules for
their functions.
Section 12.08. Business Days; Legal Holidays.
A "Business Day" is a day that is not a Legal Holiday. A "Legal Holiday"
is a Saturday, a Sunday, a federally-recognized holiday or a day on which
banking institutions are not required to be open in the State of New York. If
a payment date is a Legal Holiday at a place of payment, payment may be made at
that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
Section 12.09. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE SECURITIES.
<PAGE> 100
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Section 12.10. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan,
security or debt agreement of the Company or any Subsidiary thereof. No such
indenture, loan, security or debt agreement may be used to interpret this
Indenture.
Section 12.11. No Recourse Against Others.
No recourse for the payment of the principal of or premium, if any, or
interest on any of the Securities, or for any claim based thereon or otherwise
in respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company or any Guarantor in this Indenture or in any
supplemental indenture, or in any of the Securities, or because of the creation
of any Indebtedness represented thereby, shall be had against any stockholder,
officer, director or employee, as such, past, present or future, of the Company
or of any successor corporation or against the Property or assets of any such
stockholder, officer, employee or director, either directly or through the
Company or any Guarantor, or any successor corporation thereof, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise; it being expressly understood that this
Indenture and the Securities are solely obligations of the Company and the
Guarantors, and that no such personal liability whatever shall attach to, or is
or shall be incurred by, any stockholder, officer, employee or director of the
Company or any Guarantor, or any successor corporation thereof, because of the
creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or the
Securities or implied therefrom, and that any and all such personal liability
of, and any and all claims against every stockholder, officer, employee and
director, are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issuance of the
Securities. It is understood that this limitation on recourse is made
expressly for the benefit of any such shareholder, employee, officer or
director and may be enforced by any of them.
Section 12.12. Successors.
All agreements of the Company and the Guarantors in this Indenture and the
Securities shall bind their respective successors. All agreements of the
Trustee, any additional trustee and any Paying Agents in this Indenture shall
bind its successor.
<PAGE> 101
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Section 12.13. Multiple Counterparts.
The parties may sign multiple counterparts of this Indenture. Each signed
counterpart shall be deemed an original, but all of them together represent one
and the same agreement.
Section 12.14. Table of Contents, Headings, etc.
The table of contents, cross-reference sheet and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
Section 12.15. Separability.
Each provision of this Indenture shall be considered separable and if for
any reason any provision which is not essential to the effectuation of the
basic purpose of this Indenture or the Securities shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
<PAGE> 102
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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed, and the Company's corporate seal to be hereunto affixed and attested,
all as of the date and year first written above.
PAXSON COMMUNICATIONS CORPORATION
By:
------------------------------
Name:
Title:
ATTEST:
- ------------------------------
Name:
Title:
Guarantors:
PAXSON COMMUNICATIONS TELEVISION, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF FLORIDA, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS LP, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS MANAGEMENT COMPANY
(a Florida corporation)
PAXSON COMMUNICATIONS MARKETING, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS NETWORKS, INC.
(a Florida corporation)
PAXSON OUTDOOR, INC.
(a Florida corporation)
PAXSON NETWORKS, INC.
(a Florida corporation)
EXCEL MARKETING ENTERPRISES, INC.
(a Florida corporation)
<PAGE> 103
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INFOMALL CABLE NETWORK, INC.
(a Delaware corporation)
INFOMALL TV NETWORK, INC.
(a Delaware corporation)
INFOMALL LOS ANGELES, INC.
(a Florida corporation)
PAX JAX INC.
(a Florida corporation)
PAXSON SPORTS VENTURES COMPANY
(a Florida corporation)
PCC DIRECT, INC.
(a Florida corporation)
PAXSON/R&R NETWORK, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF AKRON-23, INC.
(a Florida corporation)
PAXSON AKRON LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF ALBANY-55, INC.
(a Florida corporation)
PAXSON ALBANY LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF ATLANTA-14, INC.
(a Florida corporation)
PAXSON ATLANTA LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF BATTLE
CREEK-43, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
BIRMINGHAM-44, INC.
(a Florida corporation)
<PAGE> 104
-96-
PAXSON COMMUNICATIONS OF BOSTON-46,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF BOSTON-60,
INC.
(a Florida corporation)
PAXSON BOSTON LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF CLEVELAND-67,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF COOKEVILLE,
INC.
(a Florida corporation)
PAXSON COOKEVILLE LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF DALLAS-68,
INC.
(a Florida corporation)
PAXSON DALLAS LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF DAYTON-26,
INC.
(a Florida corporation)
PAXSON DAYTON LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF DENVER-59,
INC.
(a Florida corporation)
PAXSON DENVER LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF FT.
PIERCE-34, INC.
(a Florida corporation)
<PAGE> 105
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PAXSON COMMUNICATIONS OF
GREENSBORO-16, INC.
(a Florida corporation)
PAXSON GREENSBORO LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF HOUSTON-49,
INC.
(a Florida corporation)
PAXSON HOUSTON LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF LITTLE
ROCK-42, INC.
(a Florida corporation)
PAXSON LITTLE ROCK LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF LOS
ANGELES-30, INC.
(a Florida corporation)
PAXSON LOS ANGELES LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS L.P.T.V., INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF MIAMI-35,
INC.
(a Florida corporation)
PAXSON SPORTS OF MIAMI, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF MILWAUKEE-55,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
MINNEAPOLIS-41, INC.
(a Florida corporation)
PAXSON MINNEAPOLIS LICENSE, INC.
(a Florida corporation)
<PAGE> 106
-98-
PAXSON COMMUNICATIONS OF NEW
LONDON-26, INC.
(a Florida corporation)
PAXSON NEW LONDON LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF NEW YORK-43,
INC.
(a Florida corporation)
PAXSON NEW YORK LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF OKLAHOMA
CITY-62, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF ORLANDO-56,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF PHOENIX-51,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
PHILADELPHIA-61, INC.
(a Florida corporation)
PAXSON PHILADELPHIA LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF PHOENIX-13,
INC.
(a Florida corporation)
PAXSON PHOENIX LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
PROVIDENCE-69, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF RALEIGH
DURHAM-47, INC.
(a Florida corporation)
<PAGE> 107
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PAXSON COMMUNICATIONS OF ST. LOUIS,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
SACRAMENTO-29, INC.
(a Florida corporation)
PAXSON SACRAMENTO LICENSE, INC.
(a Florida corporation)
PAXSON ST. LOUIS LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF SALT LAKE
CITY-16, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF SAN JOSE-65,
INC.
(a Florida corporation)
PAXSON SAN JOSE LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF SAN JUAN,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF SEATTLE-24,
INC.
(a Florida corporation)
PAXSON SEATTLE LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
TALLAHASSEE, INC.
(a Florida corporation)
PAXSON TALLAHASSEE LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF TAMPA-66,
INC.
(a Florida corporation)
<PAGE> 108
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PAXSON COMMUNICATIONS OF
TULSA-44, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
WASHINGTON-60, INC.
(a Florida corporation)
PAXSON WASHINGTON LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF WEST PALM
BEACH-25, INC.
(a Florida corporation)
PAXSON WEST PALM BEACH LICENSE, INC.
(a Florida corporation)
By:
------------------------------
Name:
Title:
ATTEST:
- ------------------------------
Name:
Title:
PAXSON BROADCASTING OF JACKSONVILLE,
LIMITED PARTNERSHIP
(a Florida partnership)
PAXSON JACKSONVILLE LICENSE
LIMITED PARTNERSHIP
(a Florida partnership)
PAXSON BROADCASTING OF MIAMI,
LIMITED PARTNERSHIP
(a Florida partnership)
PAXSON MIAMI LICENSE LIMITED
PARTNERSHIP
(a Florida partnership)
<PAGE> 109
-101-
PAXSON BROADCASTING OF ORLANDO,
LIMITED PARTNERSHIP
(a Florida partnership)
PAXSON ORLANDO LICENSE LIMITED
PARTNERSHIP
(a Florida partnership)
PAXSON BROADCASTING OF TAMPA,
LIMITED PARTNERSHIP
(a Florida partnership)
PAXSON TAMPA LICENSE LIMITED
PARTNERSHIP
(a Florida partnership)
By: Paxson Communications of Florida,
Inc., Their general partner
By:
------------------------------
Name:
Title:
ATTEST:
- ------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By:
------------------------------
Name:
Title:
ATTEST:
- ------------------------------
Name:
Title:
<PAGE> 110
EXHIBIT A
CUSIP NO.
PAXSON COMMUNICATIONS CORPORATION
% Exchangeable Debentures due 2006
No. $
PAXSON COMMUNICATIONS CORPORATION, a Delaware corporation (the "Company"),
for value received, promises to pay to or registered assigns
the principal sum of Dollars, on October 31, 2006.
Interest Payment Dates: April 30 and October 31
Record Dates: April 15 and October 15
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
PAXSON COMMUNICATIONS CORPORATION
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
A-1
<PAGE> 111
Trustee's Certificate of Authentication
This is one of the % Exchange Debentures due 2006 referred to in the
within-mentioned Indenture.
Dated:
THE BANK OF NEW YORK,
as Trustee
By:
------------------------------
Authorized Signatory
A-2
<PAGE> 112
(REVERSE OF SECURITY)
% Exchange Debentures due 2006
1. Interest. PAXSON COMMUNICATIONS CORPORATION, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
Security at the rate per annum shown above. Interest on the Securities will
accrue from the most recent date on which interest has been paid or, if no
interest has been paid, from ______________.1 The Company will pay interest
semi-annually in arrears on each Interest Payment Date, commencing .2
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
Notwithstanding anything herein to the contrary, on each Interest Payment
Date through and including October 31, 2002, the entire amount of the interest
payment on the Securities may be paid, at the option of the Company, in
additional Securities ("Secondary Securities") (valued at 100% of the principal
amount thereof). The Company may, at its option, pay cash in lieu of issuing
any Secondary Security to the extent the principal amount such Secondary
Security is not an integral multiple of $1,000. The Company shall notify the
Trustee of the Company's election to pay interest in Secondary Securities not
less than 10 days prior to the Record Date for an Interest Payment Date. On
each such Interest Payment Date, the Trustee shall authenticate Secondary
Securities for original issuance to each holder of Securities on the preceding
Record Date, as shown on the Security Register, in the amount required to pay
such interest. For purposes of determining the principal amount of Secondary
Securities to be issued in payment of interest, the Company shall be entitled to
aggregate as to each holder the principal amount of all Securities and Secondary
Securities held of record by such holder.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Securities to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Securities
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Securities are cancelled on registration of transfer or
registra-
- -----------------
1 Insert Issue Date.
2 Insert first Interest Payment Date following the Issue Date.
A-3
<PAGE> 113
tion of exchange after such Record Date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company shall pay principal and
interest (to the extent not paid in Secondary Securities) in money of the United
States that at the time of payment is legal tender for payment of public and
private debts ("U.S. Legal Tender"). However, the Company may pay principal and
interest by its check payable in such U.S. Legal Tender. The Company may
deliver any such interest payment (including any interest payment made in
Secondary Securities) to the Paying Agent or to a Holder at the Holder's
registered address.
3. Paying Agent and Registrar. Initially, THE BANK OF NEW YORK, a New
York banking corporation (the "Trustee"), will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to the Holders of the Notes. Neither the Company nor any of its Subsidiaries or
Affiliates may act as Paying Agent but may act as registrar or co-registrar.
4. Indenture and Guarantees; Restrictive Covenants. The Company issued
this Security under an Indenture dated as of [ ], 1996 (the
"Indenture"), among the Company, the Guarantors and the Trustee. The terms of
this Security include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Section
Section 77aaa-77bbbb) as in effect on the date of the Indenture. This Security
is subject to all such terms, and the Holder of this Security is referred to the
Indenture and said Trust Indenture Act for a statement of them. All capitalized
terms in this Security, unless otherwise defined, have the meanings assigned to
them by the Indenture.
The Securities are general unsecured obligations of the Company limited to
$[ ] aggregate principal amount. The Indenture imposes certain
restrictions on, among other things, the incurrence of indebtedness, the
issuance of preferred stock by the Company and its subsidiaries, mergers and
sale of assets, the payments of dividends on, or the repurchase of, capital
stock of the Company and its subsidiaries, certain other restricted payments by
the Company and its subsidiaries, certain transactions with, and investments in,
its affiliates, and a provision regarding change-of-control transactions.
5. Subordination. The Indebtedness evidenced by the Securities is, to the
extent and in the manner provided in the Indenture, subordinated and subject in
right of payment to the prior payment in full of all Senior Debt as defined in
the Indenture and this Security is issued subject to such provisions. Each
Holder of this Security, by accepting the same, (a) agrees to and shall be bound
by such provisions, (b) authorizes and
A-4
<PAGE> 114
directs the Trustee, on behalf of such Holder, to take such action as may be
necessary or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such
purpose; provided, however, that the Indebtedness evidenced by this Security
shall cease to be so subordinate and subject in right of payment upon any
defeasance of this Security referred to in Paragraph 17 below.
6. Optional Redemption. (a) The Securities will be redeemable, at the
Company's option, in whole at any time or in part from time to time, on and
after October 31, 2001, at the following redemption prices (expressed as
percentages of the principal amount) if redeemed during the twelve-month period
commencing on October 31 of the year set forth below, plus, in each case,
accrued interest thereon to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001 ......................... %
2002 ......................... %
2003 ......................... %
2004 and thereafter .......... 100.00 %
</TABLE>
(b) In addition, on or prior to October 31, 1999, the Company may, at its
option, use the Net Proceeds of one or more Public Equity Offerings or Major
Asset Sales to redeem for cash up to an aggregate of 35% of the aggregate
principal amount of the Securities then outstanding, at a redemption price of %
of the principal amount thereof if redeemed during the twelve-month period
commencing on October 31, 1996, % of the principal amount thereof if
redeemed during the twelve-month period commencing on October 31, 1997 and % of
the principal amount thereof if redeemed during the twelve-month period
commencing on October 31, 1998, plus, in each case, accrued interest thereon to
the date of redemption; provided, however, that after any such redemption the
aggregate principal amount of the Securities outstanding must equal at least
$75,000,000. Any such redemption will be required to occur on or prior to 90
days after the receipt by the Company of the proceeds of each Public Equity
Offering or Major Asset Sale.
7. Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at such Holder's registered address. In order to
effect a redemption with the proceeds of a Public Equity Offering or a Major
Asset Sale, the Company shall send the redemption notice not later than 60 days
after the consummation of such Public Equity Offering or Major Asset Sale.
Securities in denominations larger than $1,000 may be redeemed in part.
A-5
<PAGE> 115
8. Offers to Purchase. The Indenture requires that certain proceeds from
Asset Sales be used, subject to further limitations contained therein, to make
an offer to purchase certain amounts of Securities in accordance with the
procedures set forth in the Indenture. The Company is also required to make an
offer to purchase Securities upon occurrence of a Change of Control in
accordance with procedures set forth in the Indenture.
9. Denominations; Transfer; Exchange. The Securities are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000; provided, however, that Secondary Securities and Securities issued in
exchange for the New Preferred Stock may be issued in denominations of less than
$1,000 (but not less than $1.00). A Holder shall register the transfer of or
exchange Securities in accordance with the Indenture. The Registrar may require
a Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay certain transfer taxes or similar governmental charges
payable in connection therewith as permitted by the Indenture. The Registrar
need not register the transfer of or exchange any Securities during a period
beginning 15 days before the mailing of a redemption notice for any Securities
or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of this Security shall
be treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal, premium or
interest on any Security remains unclaimed for two years, the Trustee and the
Paying Agent will pay the money back to the Company at its request. After that,
Holders entitled to money must look to the Company for payment as general
creditors unless an "abandoned property" law designates another Person.
12. Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture or the Securities may be modified, amended or supplemented by the
Company, the Guarantors and the Trustee with the consent of the Holders of at
least a majority in principal amount of the Securities then outstanding and any
existing default or compliance with any provision may be waived in a particular
instance with the consent of the Holders of a majority in principal amount of
the Securities then outstanding. Without the consent of Holders, the Company,
the Guarantors and the Trustee may amend the Indenture or the Securities or
supplement the Indenture for certain specified purposes including providing for
uncertificated Securities in addition to certificated Securities, and curing any
ambiguity, defect or inconsistency, or making any other change that does not
materially and adversely affect the rights of any Holder.
A-6
<PAGE> 116
13. Successor Entity. When a successor corporation assumes all the
obligations of its predecessor under the Securities and the Indenture and
immediately before and thereafter no Default exists and certain other conditions
are satisfied, the predecessor corporation will be released from those
obligations.
14. Defaults and Remedies. Events of Default are set forth in the
Indenture. If an Event of Default (other than an Event of Default pursuant to
Section 6.01(6) or (7) of the Indenture with respect to the Company) occurs and
is continuing, the Trustee by notice to the Company, or the Holders of not less
than 25% in aggregate principal amount of the Securities then outstanding, may
declare to be immediately due and payable the entire principal amount of all the
Securities then outstanding plus accrued but unpaid interest to the date of
acceleration; provided, however, that after such acceleration but before
judgment or decree based on such acceleration is obtained by the Trustee, the
Holders of a majority in aggregate principal amount of the outstanding
Securities may, under certain circumstances, rescind and annul such acceleration
and its consequences if, among other things, all existing Events of Default,
other than the nonpayment of principal, premium or interest that has become due
solely because of the acceleration, have been cured or waived and if the
rescission would not conflict with any judgment or decree. No such rescission
shall affect any subsequent Default or impair any right consequent thereto. In
case an Event of Default specified in Section 6.01(6) or (7) of the Indenture
with respect to the Company occurs, such principal amount, together with
premium, if any, and interest with respect to all of the Securities, shall be
due and payable immediately without any declaration or other act on the part of
the Trustee or the Holders of the Securities.
15. Trustee Dealings With the Company. The Trustee under the Indenture,
in its individual or any other capacity, may make loans to, accept deposits
from, and perform services for the Company, any Guarantor or their Affiliates,
and may otherwise deal with the Company, any Guarantor or their Affiliates as if
it were not Trustee.
16. No Recourse Against Others. As more fully described in the Indenture,
a director, officer, employee or stockholder, as such, of the Company or any
Guarantor shall not have any liability for any obligations of the Company or any
Guarantor under the Securities or the Indenture or for any claim based on, in
respect or by reason of, such obligations or their creation. The Holder of this
Security by accepting this Security waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of this
Security.
A-7
<PAGE> 117
17. Defeasance and Covenant Defeasance. The Indenture contains provisions
for defeasance of the entire indebtedness on this Security and for defeasance of
certain covenants in the Indenture upon compliance by the Company with certain
conditions set forth in the Indenture.
18. Abbreviations. Customary abbreviations may be used in the name of a
Holder of a Security or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(Uniform Gifts to Minors Act).
19. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Note Identification Procedures, the Company has caused
CUSIP Numbers to be printed on the Securities and has directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to Holders of the
Securities. No representation is made as to the accuracy of such numbers either
as printed on the Securities or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.
20. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE SECURITIES.
THE COMPANY WILL FURNISH TO ANY HOLDER OF A SECURITY UPON WRITTEN REQUEST
AND WITHOUT CHARGE A COPY OF THE INDENTURE, REQUESTS MAY BE MADE TO: PAXSON
COMMUNICATIONS CORPORATION, 601 Clearwater Park Road, West Palm Beach, Florida
33401, Attention: General Counsel.
A-8
<PAGE> 118
ASSIGNMENT
I or we assign to
PLEASE INSERT SOCIAL SECURITY OR
TAX I.D. NUMBER
- ------------------------------------
- --------------------------------------------------------------------------------
(please print or type name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
- --------------------------------------------------------------------------------
attorney to transfer the Security on the books of the Company with full power of
substitution in the premises.
Dated:______________________ ___________________________________________
NOTICE: The signature on this assignment
must correspond with the name as it appears
upon the face of the within Security in
every particular without alteration or
enlargement or any change whatsoever and be
guaranteed by the endorser's bank or
broker.
Signature Guarantee: _________________________________
A-9
<PAGE> 119
FORM OF NOTATION ON SECURITY
RELATING TO GUARANTEE
Each Guarantor (the "Guarantor", which term includes any successor Person
under the Indenture) has unconditionally guaranteed, on a senior subordinated
basis, jointly and severally, to the extent set forth in the Indenture and
subject to the provisions of the Indenture, (a) the due and punctual payment of
the principal of and interest on the Securities, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on overdue
principal, and, to the extent permitted by law, interest, and the due and
punctual performance of all other Obligations of the Company to the
Securityholders or the Trustee all in accordance with the terms set forth in
Article 10 of the Indenture, and (b) in case of any extension of time of payment
or renewal of any Securities or any of such other Obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
The obligations of each Guarantor to the Securityholders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
10 of the Indenture and reference is hereby made to the Indenture for the
precise terms of this Guarantee.
This Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Security upon which this Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized signatories.
Guarantors:
PAXSON COMMUNICATIONS TELEVISION, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF FLORIDA,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS LP, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS MANAGEMENT
COMPANY
(a Florida corporation)
A-10
<PAGE> 120
PAXSON COMMUNICATIONS MARKETING, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS NETWORKS, INC.
(a Florida corporation)
PAXSON OUTDOOR, INC.
(a Florida corporation)
PAXSON NETWORKS, INC.
(a Florida corporation)
EXCEL MARKETING ENTERPRISES, INC.
(a Florida corporation)
INFOMALL CABLE NETWORK, INC.
(a Delaware corporation)
INFOMALL TV NETWORK, INC.
(a Delaware corporation)
INFOMALL LOS ANGELES, INC.
(a Florida corporation)
PAX JAX INC.
(a Florida corporation)
PAXSON SPORTS VENTURES COMPANY
(a Florida corporation)
PCC DIRECT, INC.
(a Florida corporation)
PAXSON/R&R NETWORK, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF AKRON-23,
INC.
(a Florida corporation)
PAXSON AKRON LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF ALBANY-55,
INC.
(a Florida corporation)
PAXSON ALBANY LICENSE, INC.
(a Florida corporation)
A-11
<PAGE> 121
PAXSON COMMUNICATIONS OF ATLANTA-14,
INC.
(a Florida corporation)
PAXSON ATLANTA LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF BATTLE
CREEK-43, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
BIRMINGHAM-44, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF BOSTON-46,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF BOSTON-60,
INC.
(a Florida corporation)
PAXSON BOSTON LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF CLEVELAND-67,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF COOKEVILLE,
INC.
(a Florida corporation)
PAXSON COOKEVILLE LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF DALLAS-68,
INC.
(a Florida corporation)
PAXSON DALLAS LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF DAYTON-26,
INC.
(a Florida corporation)
PAXSON DAYTON LICENSE, INC.
(a Florida corporation)
A-12
<PAGE> 122
PAXSON COMMUNICATIONS OF DENVER-59,
INC.
(a Florida corporation)
PAXSON DENVER LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF FT.
PIERCE-34, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
GREENSBORO-16, INC.
(a Florida corporation)
PAXSON GREENSBORO LICENSE,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF HOUSTON-49,
INC.
(a Florida corporation)
PAXSON HOUSTON LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF LITTLE
ROCK-42, INC.
(a Florida corporation)
PAXSON LITTLE ROCK LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF LOS
ANGELES-30, INC.
(a Florida corporation)
PAXSON LOS ANGELES LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS L.P.T.V., INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF MIAMI-35,
INC.
(a Florida corporation)
PAXSON SPORTS OF MIAMI, INC.
(a Florida corporation)
A-13
<PAGE> 123
PAXSON COMMUNICATIONS OF MILWAUKEE-55,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
MINNEAPOLIS-41, INC.
(a Florida corporation)
PAXSON MINNEAPOLIS LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF NEW
LONDON-26, INC.
(a Florida corporation)
PAXSON NEW LONDON LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF NEW YORK-43,
INC.
(a Florida corporation)
PAXSON NEW YORK LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF OKLAHOMA
CITY-62, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF ORLANDO-56,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF PHOENIX-51,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
PHILADELPHIA-61, INC.
(a Florida corporation)
PAXSON PHILADELPHIA LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF PHOENIX-13,
INC.
(a Florida corporation)
PAXSON PHOENIX LICENSE, INC.
(a Florida corporation)
A-14
<PAGE> 124
PAXSON COMMUNICATIONS OF
PROVIDENCE-69, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF RALEIGH
DURHAM-47, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF ST. LOUIS,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
SACRAMENTO-29, INC.
(a Florida corporation)
PAXSON SACRAMENTO LICENSE, INC.
(a Florida corporation)
PAXSON ST. LOUIS LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF SALT LAKE
CITY-16, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF SAN JOSE-65,
INC.
(a Florida corporation)
PAXSON SAN JOSE LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF SAN JUAN,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF SEATTLE-24,
INC.
(a Florida corporation)
PAXSON SEATTLE LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
TALLAHASSEE, INC.
(a Florida corporation)
PAXSON TALLAHASSEE LICENSE, INC.
(a Florida corporation)
A-15
<PAGE> 125
PAXSON COMMUNICATIONS OF TAMPA-66,
INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
TULSA-44, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF
WASHINGTON-60, INC.
(a Florida corporation)
PAXSON WASHINGTON LICENSE, INC.
(a Florida corporation)
PAXSON COMMUNICATIONS OF WEST PALM
BEACH-25, INC.
(a Florida corporation)
PAXSON WEST PALM BEACH LICENSE, INC.
(a Florida corporation)
By:
------------------------------
Name:
Title:
ATTEST:
- ------------------------------
Name:
Title:
PAXSON BROADCASTING OF JACKSONVILLE,
LIMITED PARTNERSHIP
(a Florida partnership)
PAXSON JACKSONVILLE LICENSE
LIMITED PARTNERSHIP
(a Florida partnership)
PAXSON BROADCASTING OF MIAMI,
LIMITED PARTNERSHIP
(a Florida partnership)
PAXSON MIAMI LICENSE LIMITED
PARTNERSHIP
(a Florida partnership)
A-16
<PAGE> 126
PAXSON BROADCASTING OF ORLANDO,
LIMITED PARTNERSHIP
(a Florida partnership)
PAXSON ORLANDO LICENSE LIMITED
PARTNERSHIP
(a Florida partnership)
PAXSON BROADCASTING OF TAMPA,
LIMITED PARTNERSHIP
(a Florida partnership)
PAXSON TAMPA LICENSE LIMITED
PARTNERSHIP
(a Florida partnership)
By: Paxson Communications of Florida,
Inc., their general partner
By:
------------------------------
Name:
Title:
A-17
<PAGE> 127
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security purchased by
the Company pursuant to Section 4.09 or Section 4.15 of the Indenture, check the
appropriate box:
/ / Section 4.09 / / Section 4.15
If you want to have only part of the Security purchased by the Company
pursuant to Section 4.09 or Section 4.15 of the Indenture, state the amount you
elect to have purchased:
$
--------------------
Date:
----------------
Your Signature:
----------------------------------------------------
(Sign exactly as your name appears on the face of
this Security)
- --------------------
Signature Guaranteed
A-18
<PAGE> 1
EXHIBIT 23.1
<PAGE> 2
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference and use in the Prospectus
constituting part of Amendment No. 1 to the Registration Statement on Form S-3
of our report dated February 28, 1996 appearing on page F-2 of Paxson
Communications Corporation's Annual Report on Form 10-K for the year ended
December 31, 1995. We also consent to the use in the Prospectus constituting
part of Amendment No. 1 to the Registration Statement on Form S-3 of our report
dated July 22, 1996 relating to the financial statements of WHUB, Inc. as of
and for the year ended December 31, 1995. We also consent to the use in the
Prospectus constituting part of Amendment No. 1 to the Registration
Statement on Form S-3 of our reports dated July 26, 1996 relating to the
financial statements of WTKS-FM (a division of Press Broadcasting Company) and
Todd Communications, Inc. each as of and for the year ended December 31, 1995.
We also consent to the use in the Prospectus constituting part of Amendment
No. 1 to the Registration Statement on Form S-3 of our report dated August 2,
1996 relating to the financial statements of Southern Broadcasting Companies,
Inc. as of and for the year ended December 31, 1995. We also consent to the
use in the Prospectus constituting part of Amendment No. 1 to the Registration
Statement on Form S-3 of our report dated September 12, 1996 relating to the
financial statements of Ponce Nicasio Broadcasting Ltd. as of and for the year
ended April 30, 1996. We also consent to the references to us under the heading
"Experts" in such Prospectus.
Price Waterhouse LLP
Fort Lauderdale, Florida
September 16, 1996
<PAGE> 1
EXHIBIT 23.5
<PAGE> 2
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-3 of Paxson Communications Corporation of our
report dated February 9, 1996, except for notes 2 and 7 as to which the date is
July 22, 1996, relating to the financial statements of the Fort Lauderdale Radio
Stations (a division of T. K. Communications, L. C.) as of and for the year
ended December 31, 1995. We also consent to the references to us under the
headings "Experts" in such Prospectus.
MATHIESON AIKEN JEMISON, LLP
Certified Public Accountants
Blue Bell, Pennsylvania
September 16, 1996
<PAGE> 1
EXHIBIT 23.6
<PAGE> 2
EXHIBIT 23.6
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-3 of Paxson Communications Corporation of our
report dated July 24, 1996 relating to the financial statements of Radio
Station WDIZ-FM (a division of Shamrock Communications, Inc.) as of and for the
year ended December 31, 1995. We also consent to the references to us under
the headings "Experts" in such Prospectus.
Robert Rossi & Co.
Certified Public Accountants
299 Main Street - Sturges
Olyphant, Pennsylvania 18447
September 16, 1996
<PAGE> 1
EXHIBIT 23.7
<PAGE> 2
EXHIBIT 23.7
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-3 of Paxson Communications Corporation of our
report dated March 25, 1996 except for Notes 7 and 12, as to which the date is
May 17, 1996, relating to the financial statements of KXLI (a division of KX
Acquisition Limited Parnership) as of and for the year ended December 31, 1995.
We also consent to the references to us under the heading "Experts" in the
Prospectus.
SCHWEITZER RUBIN KARON & BREMER
Certified Public Accountants
Minneapolis, Minnesota
September 13, 1996
<PAGE> 1
EXHIBIT 23.8
<PAGE> 2
EXHIBIT 23.8
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-10267 on Form S-3 of Paxson Communications Corporation of our report dated
August 8, 1996 relating to the special-purpose financial statements of WIOD-AM
appearing in the Prospectus, which is a part of such Registration Statement,
and to the reference to us under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Miami, Florida
September 13, 1996
