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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 1-13452
PAXSON COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 59-3212788
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
601 CLEARWATER PARK ROAD, WEST PALM BEACH, FLORIDA 33401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 659-4122
Securities Registered Pursuant to Section 12(b) of the
Act:
NAME OF EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- -------------------------------------------------------- ----------------------------
Class A Common Stock, $0.001 par value American Stock Exchange
11 5/8% Senior Subordinated Notes American Stock Exchange
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates as of
March 9, 1998 is $233,013,000, computed by reference to the closing price for
such shares on the American Stock Exchange.
The number of shares outstanding of each of the registrant's classes of
common stock, as of March 9, 1998 was: 51,381,100 shares of Class A Common
Stock, $.001 par value, and 8,311,639 shares of Class B Common Stock, $.001 par
value.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the definitive Proxy Statement for the Registrant's Annual Meeting
of Stockholders to be held on April 17, 1998.
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TABLE OF CONTENTS
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PAGE
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Item 1. Business.................................................... 1
Item 2. Properties.................................................. 16
Item 3. Legal Proceedings........................................... 17
Item 4. Submission of Matters to Vote of Security Holders........... 18
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 18
Item 6. Selected Financial Data..................................... 20
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 21
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 27
Item 8. Financial Statements and Supplementary Financial Data....... 27
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................... 27
Item 10. Directors and Executive Officers of the Registrant.......... 27
Item 11. Executive Compensation...................................... 27
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 27
Item 13. Certain Relationships and Related Transactions.............. 27
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 27
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ITEM 1. BUSINESS
GENERAL
Paxson Communications Corporation (the "Company") is a broadcasting company
whose principal business is the ownership and operation of the largest broadcast
television station group in the United States. The Company commenced its
television operations in early 1994 in anticipation of deregulation of the
broadcast industry. In response to federal regulatory changes increasing limits
on broadcast television station ownership and mandating cable carriage of local
television stations, the Company has expanded rapidly, through acquisitions and
construction of television stations, to establish the largest owned and operated
broadcast television station group in the United States. The Company currently
owns or operates 58 stations and has 8 affiliates carrying the Company network
television programming. Upon completion of pending acquisitions, construction
projects, divestitures and other transactions, the Company will have 77 owned,
operated and affiliated television stations and it will be the only television
broadcaster that owns stations in all of the top 20 television markets in the
United States. The Company's broadcast television station group will then
include 71 full power television stations and the Company will have a
broadcasting presence in 75 markets, including 42 of the top 50 television
markets. Subject to the receipt of additional financing, regulatory approvals
and other conditions, the Company expects to complete substantially all of the
acquisitions within the next year.
In addition to expanding the distribution capacity of its broadcast
television group, the Company has traditionally pursued a strategy of operating
its television stations inexpensively relative to comparable television stations
in similar markets. Typically, the Company has been able to acquire non-network
affiliated stations with marginal operating results for relatively low cost.
Generally, the stations have begun to cover operating costs and contribute
positively to the Company's cash flows from operations shortly after being
incorporated into the Company's centralized television infrastructure.
The Company has sought to provide its stations with programming that
maximizes the value of its television properties. Consistent with its low cost
operating strategy, the Company's television group currently broadcasts long
form paid programming, consisting primarily of infomercials, under the Company's
proprietary television network programming service known as "inTV". The Company
launched inTV in January 1995 with four broadcast television stations in order
to participate in the rapidly growing infomercial industry. Infomercials and
long form paid programming have allowed the Company to operate its stations with
insignificant programming costs, furthering its low cost operating strategy.
As the Company's television distribution capacity has increased, the
Company has continued to evaluate the best use of such capacity. Seeking to
leverage the value of its extensive broadcast properties and to participate in
the larger advertising revenue pool of the traditional television "spot"
advertising market, the Company announced in November 1997 that it would launch
its PAX NET television network on August 31, 1998. PAX NET will serve as a brand
name for the programming that the Company expects to provide to its television
stations, other affiliated television stations, cable systems and satellite
television providers. PAX NET programming will generally consist of
family-oriented traditional entertainment television programming, including a
variety of off-network drama, situation comedy, talk and information programs
and movies. By utilizing a centralized programming acquisition strategy, the
Company expects to incur programming costs per station less than those of
comparable television stations in similar markets. After the launch of PAX NET,
the Company will continue to air long form and infomercial programming at such
times and in such amounts as the Company believes will maximize the value of its
broadcast properties.
The Company was founded in 1991 by Lowell W. "Bud" Paxson. 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.
In 1997, the Company discontinued two business segments, Paxson Radio and
Paxson Network-Affiliated Television. Paxson Radio's assets, which included the
Company's radio and billboard operations and an agreement to purchase three
additional radio stations, were sold for aggregate consideration of
approximately $629 million, consisting of approximately $602 million of cash and
the assumption of the purchase commitment. Paxson Network-Affiliated Television,
which consisted of two traditional network-affiliated
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television stations, was sold for aggregate consideration of approximately $119
million. The Company is reinvesting the net proceeds from such sales in
additional television stations. These business segments have been classified as
discontinued operations in the accompanying Consolidated Statements of
Operations for all periods presented. See Note 2 to the Consolidated Financial
Statements appearing elsewhere in this report for additional discussion of these
transactions.
PAXSON TELEVISION DISTRIBUTION STRATEGY
The Company has typically acquired non-network affiliated stations with
marginal operating results 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'
designated market areas ("DMA"). By virtue of the "must carry" rules of the
Federal Communications Commission ("FCC"), these stations are generally entitled
to carriage on cable systems throughout the DMA. Through the exercise of "must
carry" rights and the improvement of its stations' over-the-air signals, the
Company has increased its station reach within each of its markets. The
upholding of the "must carry" rules by the Supreme Court in March 1997
reinforced the Company's distribution strategy. The Company believes that its
stations reach a significant number of over-the-air television households that
do not receive cable television. The Company continues to seek to expand
television distribution through the purchase or operation of, or affiliation
with, independent television stations in major United States television markets.
As of February 28, 1998, the DMAs to be served by the Company's stations upon
completion of pending acquisitions, divestitures and other transactions,
contained approximately 72 million television households, of which approximately
48 million were served by cable television.
By purchasing independent television stations, entering into time brokerage
agreements, affiliating with stations, and extending its stations' reach on
cable via "must carry" requirements, the Company has created a valuable national
television broadcasting distribution infrastructure. The Company's television
stations included in its broadcast distribution network are either (i) owned, in
whole or in part, by the Company, (ii) operated by the Company pursuant to time
brokerage agreements entered into with FCC licensees, or (iii) owned by
independent television station operators that enter into affiliation agreements
with the Company. During January 1998, the Company adopted new call letters for
39 of its television stations in an effort to more closely align the station
call letters with PAX NET. These new call letters have been utilized throughout
this report.
The following table lists television stations that the Company owns,
operates or is affiliated with, and that the Company has agreements to acquire
or operate, as identified under "Pending Acquisitions or Affiliates" below.
(Television and cable households in thousands.)
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STATION CABLE CURRENT TOTAL
TV MARKET STATION CALL COMMENCEMENT CARRIAGE AT STATION CABLE MARKET CABLE
MARKET(1) RANK (FORMER CALL) CH OF OPERATIONS COMMENCEMENT(2) CARRIAGE(3) HOUSEHOLDS(3)
- --------- --------- ------------------ --- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Owned or Operated
New York, NY......... 1 WPXN 31 7/97 4,141 4,419 4,825
New York, NY......... 1 WIPX (whai)(17) 43 3/96 626 541 4,825
Los Angeles, CA...... 2 KPXN (kzki) 30 5/95 1,453 2,729 3,133
Philadelphia, PA..... 4 WPPX (wtgi) 61 2/95 1,225 1,663 2,033
San Francisco, CA.... 5 KKPX (klxv) 65 6/95 650 1,310 1,640
Boston, MA........... 6 WPXB (wgot) 60 5/95 604 1,056 1,694
Boston, MA*.......... 6 WBPX (whrc)(5) 46 4/97 0 460 1,694
Washington, D.C...... 7 WPXW (wvvi) 66 8/97 940 1,040 1,331
Dallas, TX........... 8 KPXD (kinz)(15) 68 12/96 0 687 989
Detroit, MI.......... 9 WPXD (wbsx) 31 1/98 624 712 1,191
Atlanta, GA.......... 10 WPXA (wtlk) 14 4/94 300 985 1,144
Atlanta, GA*......... 10 WNGM(10) 34 4/96 182 344 1,144
Houston, TX.......... 11 KPXB (ktfh) 49 3/95 647 889 918
Seattle, WA.......... 12 KWPX(kbge) 33 3/98 592 592 1,104
Cleveland, OH........ 13 WVPX (wakc) 23 3/96 560 981 1,026
Cleveland, OH*....... 13 WOAC(10) 67 10/95 332 470 1,026
Minneapolis, MN...... 14 KPXM (kxli) 41 10/96 605 637 746
Tampa, FL............ 15 WXPX (wfct) 66 8/94 0 1,045 1,043
Miami, FL............ 16 WPXM (wctd) 35 4/94 396 1,047 993
Phoenix, AZ.......... 17 KBPX (kwbf) 13 3/96 23 28 755
Phoenix, AZ*......... 17 KAJW(4)(8) 51 0 0 755
Denver, CO........... 18 KPXC (kubd) 59 8/95 430 474 741
Sacramento, CA*...... 20 KSPX (kcmy) 29 7/95 624 640 726
Orlando, FL.......... 22 WOPX (wirb) 56 12/94 468 781 796
Indianapolis, IN..... 25 W51BU(14) 51 3/98 0 0 618
Hartford, CT*........ 27 WHPX (wtws)(5) 26 3/95 661 832 792
Raleigh, NC.......... 29 WFPX (wfay) 62 1/98 111 132 512
Kansas City, MO...... 31 KPXE (kinb) 50 5/97 397 439 518
Milwaukee, WI........ 32 WPXE (whke)(6)(10) 55 7/96 257 401 477
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CURRENT TOTAL
STATION CABLE MARKET TV
MARKET(1) CARRIAGE%(3) HOUSEHOLDS(3)
- --------- --------------- -------------
<S> <C> <C>
Owned or Operated
New York, NY......... 91.6% 6,756
New York, NY......... 11.2% 6,756
Los Angeles, CA...... 87.1% 5,009
Philadelphia, PA..... 81.8% 2,659
San Francisco, CA.... 79.9% 2,298
Boston, MA........... 62.3% 2,174
Boston, MA*.......... 27.1% 2,174
Washington, D.C...... 78.1% 1,928
Dallas, TX........... 69.4% 1,899
Detroit, MI.......... 59.7% 1,782
Atlanta, GA.......... 86.1% 1,675
Atlanta, GA*......... 30.1% 1,675
Houston, TX.......... 96.8% 1,624
Seattle, WA.......... 53.6% 1,514
Cleveland, OH........ 95.6% 1,469
Cleveland, OH*....... 45.8% 1,469
Minneapolis, MN...... 85.4% 1,448
Tampa, FL............ 100.2% 1,436
Miami, FL............ 105.4% 1,386
Phoenix, AZ.......... 3.7% 1,289
Phoenix, AZ*......... 0.0% 1,289
Denver, CO........... 64.0% 1.199
Sacramento, CA*...... 88.0% 1,127
Orlando, FL.......... 98.1% 1,041
Indianapolis, IN..... 0.0% 957
Hartford, CT*........ 105.1% 916
Raleigh, NC.......... 25.7% 826
Kansas City, MO...... 84.7% 792
Milwaukee, WI........ 84.0% 791
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STATION CABLE CURRENT TOTAL
TV MARKET STATION CALL COMMENCEMENT CARRIAGE AT STATION CABLE MARKET CABLE
MARKET(1) RANK (FORMER CALL) CH OF OPERATIONS COMMENCEMENT(2) CARRIAGE(3) HOUSEHOLDS(3)
- --------- --------- ------------------ --- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Nashville, TN........ 33 WNPX (wkzx) 28 1/98 39 39 496
Columbus, OH......... 34 WLWG-LP(14) 62 3/98 0 0 473
Salt Lake City, UT... 36 KUPX (koog) 30 7/97 200 219 387
Norfolk, VA.......... 39 WPXV (wjcb) 49 8/95 343 408 474
New Orleans, LA*..... 41 WCCL 49 1/98 366 366 455
Memphis, TN*......... 42 WFBI 50 1/98 259 259 390
West Palm Beach, FL.. 43 WPXP(whbi)(12) 67 3/98 0 0 496
Oklahoma City, OK.... 44 KOPX (kmnz) 62 10/96 0 234 374
Greensboro, NC....... 46 WGPX (waap) 16 7/96 323 341 367
Wilkes Barre, PA*.... 47 WQPX (wswb)(4)(8) 64 0 0 452
Providence, RI....... 49 WPXQ (wost)(4)(7) 69 0 0 433
Birmingham, AL....... 51 WPXH (wnal) 44 10/96 31 109 363
Albany, NY........... 52 WYPX (wocd) 55 5/96 251 274 376
Dayton, OH........... 53 WDPX (wtjc) 26 10/95 298 310 351
Fresno, CA........... 55 KPXF (kkag) 61 6/97 195 193 263
Little Rock, AR*..... 56 KVUT(4)(8) 42 0 0 301
Charleston, WV*...... 57 WKRP(4)(8) 29 0 0 353
Tulsa, OK*........... 58 KTPX (kglb) 44 10/97 0 191 299
Las Vegas, NV........ 61 KVPX-LP(14) 59 2/98 0 0 302
Knoxville, TN*....... 64 WPXK(wpmc) 54 1/98 161 161 299
Roanoke, VA.......... 68 WPXR (wefc) 38 10/97 182 189 263
Green Bay, WI........ 70 WPXG (wsco)(4) 14 0 0 226
Syracuse, NY*........ 72 WAUP(4)(8) 56 0 0 379
Ft. Myers, FL........ 83 W57CJ(14) 57 8/96 0 0 253
Chattanooga, TN...... 86 W55CD(14) 55 4/94 0 0 217
Cedar Rapids, IA..... 87 KPXR (ktvc) 48 5/97 0 161 198
San Sebastian, PR.... NR WJWN 38 2/96
Ponce, PR............ NR WKPV 20 2/96
San Juan, PR......... NR WJPX (wsjn) 24 2/96 285 285 298
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Total Owned or Operated(9) 19,782 29,070 39,185
Affiliates
Philadelphia, PA..... 4 WTVE(11) 51 10/96 414 814 2,033
Washington, D.C...... 7 WWPX (wshe)(13) 60 10/96 0 122 1,331
St. Louis, MO........ 21 WPXS (wcee)(13) 13 1/96 23 65 585
Indianapolis, IN..... 25 WIIB(11) 63 1/96 401 424 618
Hartford, CT......... 27 WHCT(11) 18 7/97 0 183 792
Raleigh, NC.......... 29 WRPX (wrmy)(13) 47 6/96 0 377 512
Grand Rapids, MI..... 37 WZPX (wilv)(13) 43 9/96 0 415 412
Fresno, CA........... 55 KGMC(11) 43 1/96 179 164 263
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Total Affiliates 1,016 2,564 6,546
Total Owned, Operated and Affiliates(9) 20,798 31,634 40,182
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CURRENT TOTAL
STATION CABLE MARKET TV
MARKET(1) CARRIAGE%(3) HOUSEHOLDS(3)
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Nashville, TN........ 7.9% 789
Columbus, OH......... 0.0% 739
Salt Lake City, UT... 56.5% 690
Norfolk, VA.......... 86.1% 636
New Orleans, LA*..... 80.6% 623
Memphis, TN*......... 66.2% 614
West Palm Beach, FL.. 0.0% 593
Oklahoma City, OK.... 62.5% 593
Greensboro, NC....... 92.9% 577
Wilkes Barre, PA*.... 0.0% 566
Providence, RI....... 0.0% 559
Birmingham, AL....... 30.1% 547
Albany, NY........... 72.8% 509
Dayton, OH........... 88.3% 503
Fresno, CA........... 73.3% 496
Little Rock, AR*..... 0.0% 481
Charleston, WV*...... 0.0% 480
Tulsa, OK*........... 64.0% 468
Las Vegas, NV........ 0.0% 450
Knoxville, TN*....... 53.8% 441
Roanoke, VA.......... 71.8% 402
Green Bay, WI........ 0.0% 381
Syracuse, NY*........ 0.0% 378
Ft. Myers, FL........ 0.0% 320
Chattanooga, TN...... 0.0% 310
Cedar Rapids, IA..... 81.7% 308
San Sebastian, PR....
Ponce, PR............
San Juan, PR......... 95.6% 1,064
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Total Owned or Operated(9) 74.9% 58,512
Affiliates
Philadelphia, PA..... 40.0% 2,659
Washington, D.C...... 9.2% 1,928
St. Louis, MO........ 11.2% 1,109
Indianapolis, IN..... 68.6% 957
Hartford, CT......... 23.1% 916
Raleigh, NC.......... 73.6% 826
Grand Rapids, MI..... 100.9% 659
Fresno, CA........... 62.3% 496
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Total Affiliates 39.2% 9,550
Total Owned, Operated and Affiliates(9) 79.7% 60,280
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Pending Acquisitions or Affiliates
Chicago, IL.......... 3 WCFC 38 1,950
San Francisco, CA.... 5 KWOK(4)(10) 68 1,640
Pittsburgh, PA....... 19 Channel 40 40 899
Portland, OR......... 24 KBSP 22 611
Buffalo, NY.......... 40 WAQF(4) 51 475
Albuquerque, NM...... 48 Channel 14(4) 14 332
Jacksonville, FL..... 54 WDVL-LP(4)(14) 54 376
Mobile, AL........... 62 Channel 61(4) 61 324
Des Moines, IA....... 69 Channel 39(4) 39 233
Honolulu, HI*........ 71 KAPA(4) 66 333
Spokane, WA.......... 73 Channel 34(4) 34 233
Shreveport, LA....... 76 Channel 21(4) 21 217
Portland, ME......... 80 Channel 23(4) 23 266
Champaign, IL........ 81 WFHL 23 249
Davenport, IA........ 89 Channel 67(4) 67 202
Jackson, MS.......... 90 Channel 51(4) 51 177
Greenville, NC....... 106 Channel 38(4) 38 152
Odessa, TX........... 150 Channel 30(4) 30 98
Christiansted, VI.... NR Channel 15(4) 15 18
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Total Proposed TV Stations(9) 7,146
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Total Pending TV Acquisitions or Affiliates(9)(16) 47,327
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Pending Acquisitions
Chicago, IL.......... 3,140
San Francisco, CA.... 2,298
Pittsburgh, PA....... 1,140
Portland, OR......... 976
Buffalo, NY.......... 630
Albuquerque, NM...... 560
Jacksonville, FL..... 502
Mobile, AL........... 450
Des Moines, IA....... 383
Honolulu, HI*........ 380
Spokane, WA.......... 375
Shreveport, LA....... 366
Portland, ME......... 350
Champaign, IL........ 331
Davenport, IA........ 302
Jackson, MS.......... 297
Greenville, NC....... 234
Odessa, TX........... 134
Christiansted, VI.... 36
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Total Proposed TV Stations(9) 10,688
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Total Pending TV Acquisitions or Affiliates(9)(16) 70,868
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* Operated or to be operated pursuant to a time brokerage agreement; except as
noted, the Company has an agreement and/or an option to acquire a 100%
ownership interest.
NR Not ranked
(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 are those reached at 2/98, per station and local cable
system management and are to be billed in 3/98. Source for total market
cable and total market television households is A.C. Nielsen, published
9/97. Households for the three markets in Puerto Rico per Morgan Stanley,
Dean Witter and the Virgin Islands per BIA.
(4) Station is currently under construction or not operating commercially.
(5) The Company has no option to acquire this station.
(6) Pending affiliate.
(7) 50% ownership interest.
(8) 49% ownership interest with an option for the remaining 51%.
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(9) Figures represent total cable and television households in each market
monthly 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.
(10)The Company has contracted or entered into a letter of intent to sell its
interest in this station.
(11)Currently an inTV affiliate only.
(12)33% ownership interest with an option to acquire up to 90%.
(13)The Company has an option to acquire, or right of first refusal upon a
proposed sale, of station.
(14)A low power station. Other low power stations the Company owns or operates,
which simulcast programs aired on an owned or operated full power television
station in the same market, are not presented.
(15)The Company has an 80% ownership interest in this station.
(16)After accounting for all acquisitions, divestitures, and other transactions
including those stations which the Company does not anticipate becoming a
PAX NET affiliate (see footnote 11) as well as additional markets served by
the Company's station group including Rochester, NY (WAQF), Lansing, MI
(WZPX), Monterey/Salinas, CA (KKPX) and Bakersfield, CA (KPXF), the markets
served by the Company's television stations will contain 48.0 million cable
households and approximately 72 million television households.
(17)In conjunction with its acquisition of WPXN in New York the FCC has required
that the Company sell this station.
TELEVISION PROGRAMMING
As the Company has developed its television distribution capacity, it has
continued to evaluate the optimal use of its broadcasting assets. The Company's
broadcast television group currently broadcasts long form paid programming,
consisting primarily of infomercials on its inTV television network.
Infomercials and other long form paid programming have allowed the Company to
operate its stations with insignificant programming costs, furthering its low
cost operating strategy.
Seeking to leverage the value of its extensive broadcast properties and to
participate in the larger advertising revenue pool of the traditional television
"spot" advertising market, the Company announced in November 1997 that it would
launch PAX NET on August 31, 1998. PAX NET programming will consist primarily of
one-hour drama, situation comedy, talk and information programs and movies, most
of which have aired (and in certain cases continue to air) on other national
television networks. The Company's management has stated its intent to select
programs that are family-friendly and will appeal to a broad viewership. PAX
NET's prime time programming line-up will include the off-network CBS hit series
Touched By An Angel, Promised Land, Dr. Quinn, Medicine Woman, Diagnosis Murder,
Highway to Heaven, and Life Goes On. Additionally, the line-up includes I'll Fly
Away, Dave's World, Christy, The Father Dowling Mystery Series, Neon Rider, Love
Boat, The New Flipper, Barnaby Jones, and Seventh Heaven, as well as theatrical
and made-for-television movies.
Although the Company's programming costs under PAX NET will rise relative
to its inTV operations, the Company negotiated program license contracts which
in most cases entitle the Company to exclusive nationwide distribution rights to
deliver programming for a fixed cost independent of the number of households
which receive such programming. Accordingly, the Company's costs for a
particular program are expected to remain relatively fixed, even as the Company
expands its television distribution network and the viewers made available to
advertisers. The Company will continue to maintain lean staffing levels at each
television station relative to traditional television stations. The Company
expects that when its stations start broadcasting PAX NET programming, they will
be operated by an average of 18 people, compared to network and independent
stations which average over 100 and 60 people, respectively, in markets of
similar size to the Company's. The Company intends to continue seeking
efficiencies in centralization of many station functions, including promotion,
research, engineering, accounting, traffic and programming through PAX NET.
With most of the television industry's revenues derived from traditional
30-second spots rather than infomercials, the Company is seeking through PAX NET
to access this greater source of advertising revenue. The Company intends to
continue to carry a reduced but still significant amount of infomercial
programming. Management's goal is to create a mix of syndicated entertainment
programming and infomercials to maximize the Company's national distribution
system. While inTV has relied on the "must carry" rules to obtain distribution,
management believes that PAX NET's programming will be attractive enough to
certain cable operators and independent broadcasters to enable the Company's
programming to be carried voluntarily.
As the Company prepares to commence airing its PAX NET programming through
its television distribution system, it is seeking to broaden its network
television management, complete its family-oriented programming line-up, further
expand its television distribution capacity and finalize its advertising sales
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strategy. Because the Company owns or has an economic interest in a significant
portion of its broadcast television distribution network, the Company is seeking
to maximize PAX NET advertising revenues by optimizing the mix of advertising
time it plans to sell to local, national spot, and network advertisers, as well
as its current base of long form paid programmers. The Company currently intends
to sell a significant portion of advertising time to both local advertisers in
each market and to national advertisers seeking to reach specific markets within
the Company's television group. The Company believes that these advertisers, who
seek to target viewers in specific markets, will purchase advertising inventory
at rates per viewer that the Company believes will be higher than an advertiser
would typically pay for a single commercial aired across the Company's entire
television distribution system.
The Company sells its programming and advertising time on a local, national
and network basis. The Company currently makes available to long form
programmers and advertisers time on inTV at rates 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. Advertising time made
available to spot advertisers on PAX NET will primarily be based on audience
ratings generated by its programming in each of the markets served by the
Company's television distribution system. Local programming and advertising time
is sold by each station's local sales force and is offered to merchants and
businesses operating within a station's local market and local advertisers
seeking to target viewers in specific markets, including retailers, insurance
companies, automobile dealers, financial services providers and general
merchandisers. National and network programming and time is sold by national
advertising placement agencies and the Company's own in-house national and
network sales force. National and network long form paid programming and
advertising times appeal to advertisers who desire to reach viewers in,
respectively, targeted television markets and all television markets served by
the Company's television distribution system. The Company maintains national
sales offices in New York, Los Angeles, Chicago and at the Company's
headquarters in West Palm Beach.
In 1997, the Company and Discovery Communications, Inc. (operators of
Discovery Channel, The Learning Channel and Discovery Animal Planet) formed The
Travel Channel, L.L.C., of which the Company owns a 30% interest, to operate The
Travel Channel in an effort to expand the cable television network's
distribution and programming offerings (See Note 3 to the Consolidated Financial
Statements appearing elsewhere in this report).
COMPETITION
The Company's television stations compete with the other television
broadcasting stations in their respective market areas, as well as with other
advertising media, including newspapers, radio, magazines, outdoor advertising,
transit advertising, direct mail marketing and cable television networks.
Competition within the television broadcasting industry 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
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 in its market, authorized power, assigned frequency, audience
characteristics, local program acceptance and the programming characteristics of
other stations in the market area.
Although the television broadcasting industry is highly competitive, some
barriers to entry exist. The operation of a television broadcasting station
requires a license from the FCC, and the number of television stations that can
operate in a given market is limited by the availability of stations that the
FCC will license in that market. The television broadcasting industry
historically has grown in terms of total revenue, despite the introduction of
new technologies for the delivery of entertainment and information, such as
cable, and direct satellite. There is no assurance that market fragmentation
resulting from the application of new media technologies will not have an
adverse effect on the television broadcasting industry.
The Company's successful development of PAX NET is subject to obtaining
sufficient audience ratings for its programming and converting such ratings into
advertising revenue sufficiently greater than the related programming and other
operating costs. The family-friendly programming is subject to competition from
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several sources including certain programming of major broadcasting and cable
networks targeted to family viewers.
TIME BROKERAGE AGREEMENTS AND OTHER INTERESTS IN BROADCAST STATIONS
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 television station while not owning the FCC
license. The Company is currently operating, or will operate upon consummation
of pending acquisitions or construction, stations KAJW-TV, Phoenix, Arizona,
KSPX-TV, Sacramento, California, WCCL-TV, New Orleans, Louisiana, WFBI-TV,
Memphis, Tennessee, WQPX-TV, Wilkes Barre, Pennsylvania, KVUT-TV, Little Rock,
Arkansas, WKRP-TV, Charleston, West Virginia, KTPX-TV, Tulsa, Oklahoma, WPXK-TV,
Knoxville, Tennessee, KAPA-TV Honolulu, Hawaii and WAUP-TV, Syracuse, New York
pursuant to time brokerage agreements. 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 television stations that it might
not be able to own itself under current FCC multiple station ownership
restrictions.
The Company also operates or intends to operate pursuant to time brokerage
agreements certain stations that the Company is not in the process of acquiring.
The Company currently operates each of WOAC-TV, Cleveland, Ohio, WNGM-TV,
Atlanta, Georgia, WHPX-TV, Hartford, Connecticut, and WBPX-TV, Boston,
Massachusetts, under time brokerage agreements. Two of the stations (WOAC-TV and
WNGM-TV) are operated pursuant to time brokerage agreements with entities owned
or controlled by Eddie Whitehead (collectively, "Whitehead Media") and the
Company's interest in these stations is presently under contract to be sold. In
addition, one station (WHPX-TV) is operated pursuant to a time brokerage
agreement with an entity owned or controlled by Steven Roberts and Michael
Roberts jointly ("Roberts Broadcasting"), and one (WBPX-TV) is operated pursuant
to a time brokerage agreement with The Christian Network, Inc. ("CNI").
With limited exceptions, the time brokerage agreements that the Company
enters into, other than in anticipation of an acquisition, involve a basic
transaction structure. The Company (i) finances the acquisition by a third party
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 the third party
that allows the Company to operate the brokered station in accordance with FCC
guidelines. In the case of Whitehead Media, the Company initially financed the
acquisition by Whitehead Media of each of WNGM-TV and WOAC-TV. Whitehead Media
subsequently obtained third party financing, part of the proceeds of which was
used to repay the Company. In general, payments made to the FCC licensee under
the time brokerage agreement are established, and renegotiated from time to
time, based upon increases in expenses. According to FCC regulations, the FCC
licensee remains primarily liable for those expenses, which include the
indebtedness owed by such FCC licensee to the Company or, in the case of
Whitehead Media, 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 FCC licensee also grants to
the Company an option to purchase the station for an amount payable in cash
together with the forgiveness of all indebtedness. The Company has options to
purchase WNGM-TV and WOAC-TV. The Company has no ownership interest in the
parties with which it has entered into time brokerage agreements.
Affiliation Agreements and Other Investments in Television Properties. The
Company has several affiliation agreements with third parties, including DP
Media, Inc. (an entity owned and controlled by members of Mr. Paxson's family).
The affiliation agreements with DP Media, Inc. include the following television
stations: WWPX(TV) Martinsburg, West Virginia; WPXS(TV) Mt. Vernon, Illinois;
WRPX(TV) Rocky Mount, North Carolina; and WZPX(TV) Battle Creek, Michigan. The
Company has options to acquire WWPX(TV), and WRPX(TV) and a right of first
refusal upon any proposed sale of WPXS(TV) and WZPX(TV).
The Company has purchased the stock of Cocola Media of San Francisco, Inc.,
which was financing the construction of KWOK-TV, San Francisco, California, with
the proceeds of loans made to it by the Company,
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and held an option to acquire the station from the licensee. Upon completion of
the station's construction, the Company will exercise its option to acquire
KWOK-TV, and then include the station as partial consideration for the Company's
pending acquisition of WCFC-TV, Chicago, Illinois.
The Company had also extended financing to Cocola Media Corporation of
Florida ("Cocola"), which has in turn financed the construction of television
station WPXP-TV, West Palm Beach, Florida, that is licensed to Hispanic
Broadcasting, Inc. ("HBI"). Cocola owns thirty-three percent (33%) of HBI and is
the holder of an option to acquire up to ninety percent (90%) of HBI after the
station commences broadcast operations. During March 1998 the Company purchased
all of the stock of Cocola and began operating WPXP pursuant to a time brokerage
agreement with HBI.
FEDERAL REGULATION OF BROADCASTING
The FCC regulates television broadcast stations pursuant to the
Communications Act of 1934, as amended (the "Communications Act"). The
Communications Act permits the operation of television broadcast stations only
according to a license issued by the FCC upon a finding that the grant of the
license would serve the public interest, convenience and necessity and 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; 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. The Telecommunications Act of 1996 (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 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. The license term for both television and radio broadcast stations is
eight years. The Company's full power licenses, and the licenses of stations
with which the Company has time brokerage and affiliation agreements expire on
the following dates:
<TABLE>
<CAPTION>
OWNED TELEVISION STATIONS MARKET(1) LICENSE EXPIRATION
- ------------------------- --------- ------------------
<S> <C> <C>
WPXN.............................................. New York June 1, 1999
WIPX(whai)........................................ New York April 1, 1999
KPXN(kzki)........................................ Los Angeles December 1, 1998
WPPX(wtgi)........................................ Philadelphia August 1, 1999
KKPX(klxv)........................................ San Francisco December 1, 1998
WPXB(wgot)........................................ Boston April 1, 1999
WPXW(wvvi)........................................ Washington October 1, 2004
KPXD(kinz)(3)..................................... Dallas August 1, 1998
WPXD(wbsx)........................................ Detroit October 1, 2005
WPXA(wtlk)........................................ Atlanta April 1, 2005
KPXB(ktfh)........................................ Houston August 1, 1998
KWPX(kbge)........................................ Seattle February 1, 1999
WVPX(wakc)........................................ Cleveland October 1, 2005
KPXM(kxli)*....................................... Minneapolis April 1, 1998
WXPX(wfct)........................................ Tampa February 1, 2005
WPXM(wctd)........................................ Miami February 1, 2005
KAJW(4)........................................... Phoenix October 1, 1998
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
OWNED TELEVISION STATIONS MARKET(1) LICENSE EXPIRATION
- ------------------------- --------- ------------------
<S> <C> <C>
KBPX(kwbf)........................................ Phoenix October 1, 1998
KPXC(kubd)*....................................... Denver April 1, 1998
WOPX(wirb)........................................ Orlando February 1, 2005
WFPX(wfay)........................................ Raleigh December 1, 2004
KPXE(kinb)........................................ Kansas City December 1, 2006
WPXE(whke)........................................ Milwaukee December 1, 2005
WNPX(wkzx)........................................ Nashville August 1, 2005
KUPX(koog)........................................ Salt Lake City October 1, 1998
WPXV (wjcb)....................................... Norfolk October 1, 2004
WPXP(whbi)(6)..................................... West Palm Beach February 1, 2005
KOPX(kmnz)*....................................... Oklahoma City June 1, 1998
WGPX(waap)........................................ Greensboro December 1, 2004
WQPX(wswb)(4)..................................... Wilkes Barre August 1, 1999
WPXQ(wost)(5)..................................... Providence April 1, 1999
WPXH(wnal)........................................ Birmingham April 1, 2005
WYPX(wocd)........................................ Albany June 1, 1999
WDPX(wtjc)........................................ Dayton October 1, 2005
KPXF(kkag)........................................ Fresno December 1, 1998
KVUT(4)........................................... Little Rock June 1, 2005
WKRP(4)........................................... Charleston October 1, 2004
KTPX(kglb)*....................................... Tulsa June 1, 1998
WPXR(wefc)........................................ Roanoke October 1, 2004
WPXG(wsco)*....................................... Green Bay December 1, 1997
WAUP(4)........................................... Syracuse June 1, 1999
KPXR(ktvc)*....................................... Cedar Rapids February 1, 1998
WJPX(wsjn)........................................ San Juan, Puerto Rico February 1, 2005
WKPV.............................................. Ponce, Puerto Rico February 1, 2005
WJWN.............................................. San Sebastian, Puerto Rico February 1, 2005
</TABLE>
<TABLE>
<CAPTION>
TIME BROKERAGE AND AFFILIATED
TELEVISION STATIONS MARKET(1) LICENSE EXPIRATION
- ----------------------------- --------- ------------------
<S> <C> <C>
WTVE.............................................. Philadelphia August 1, 1999
WBPX(whrc)........................................ Boston April 1, 1999
WWPX(wshe)........................................ Washington October 1, 2004
WNGM.............................................. Atlanta April 1, 2005
WOAC.............................................. Cleveland October 1, 2005
KSPX (kcmy)....................................... Sacramento December 1, 1998
WPXS(wcee)........................................ St. Louis December 1, 2005
WIIB.............................................. Indianapolis August 1, 2005
WHPX(wtws)........................................ Hartford/New Haven April 1, 1999
WHCT.............................................. Hartford/New Haven April 1, 1999
WRPX(wrmy)........................................ Raleigh December 1, 2004
WZPX(wilv)........................................ Grand Rapids October 1, 2005
WCCL.............................................. New Orleans June 1, 2005
WFBI.............................................. Memphis August 1, 2005
KGMC.............................................. Fresno December 1, 1998
WPXK(wpmc)........................................ Knoxville August 1, 2005
</TABLE>
<TABLE>
<CAPTION>
RADIO STATIONS(2) MARKET(1) LICENSE EXPIRATION
- ----------------- --------- ------------------
<S> <C> <C>
WHNZ-AM........................................... Tampa/St. Petersburg February 1, 2004
WYCL-FM........................................... Pensacola February 1, 2004
</TABLE>
- ---------------
* License renewal pending.
(1) Each station is licensed by the FCC to serve a specific community which is
included in the listed market.
(2) The formal call sign assigned by the FCC does not include the "-AM" suffix
and does not necessarily include the "-FM" suffixes. These stations are
contracted for sale.
(3) 80% owned.
(4) 49% owned.
(5) 50% owned.
(6) 33% ownership interest with an option to acquire up to 90%.
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<PAGE> 11
Generally, the FCC renews licenses without a hearing. The Communications
Act authorizes the filing of petitions to deny 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 FCC will renew broadcast licenses if
the incumbent meets 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 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
renewal to the incumbent. Before denying renewal to an incumbent, the FCC must
first allow the licensee a hearing on the licensee's alleged failure to satisfy
the statutory standard.
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 broadcast license or a transfer of control of a
broadcast licensee, 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 positions 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
insurance companies, certain regulated investment companies and bank trust
departments, that hold stock for investment purposes only, such interests become
attributable with the ownership of ten percent or more of the stock of the
corporation holding broadcast licenses.
The Communications Act permits an entity to hold an attributable interest
in television stations reaching up to 35% of the United States television
households. The FCC utilizes a UHF discount in determining the reach of UHF
television stations by considering them to reach only fifty percent (50%) of the
households within their markets. The FCC also has rules that limit the number of
co-located television broadcast stations in which a single entity may own an
attributable interest. No single entity may hold an attributable interest in
television stations with overlapping Grade B service contours. The 1996 Act
directs the FCC to conduct a rule making proceeding to determine whether these
rules should be retained. 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, and in some circumstances involving failed
stations and in other situations where more stringent waiver standards can be
met. The 1996 Act extends this waiver policy to the top 50 markets.
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 FCC has initiated proceedings to inquire whether it
should change or eliminate its cross interest policy, covering joint ventures
and common key employees. The policy does not necessarily prohibit these
interests, but may require that the FCC consider whether they could have a
significant adverse affect on programming diversity and competition in the
market.
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 common stock of
a broadcasting corporation, a minority shareholder
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<PAGE> 12
of the corporation generally would not acquire an attributable interest in the
corporation. 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.
Under the Communications Act, no FCC broadcast license may be held by a
corporation of which any officer or director is an alien or of which more than
one-fifth of its capital stock is owned 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 controlled by any other corporation of
which more than 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
present programming that responds to community problems, needs and interests and
to maintain certain records demonstrating such responsiveness.
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 radio frequency
radiation. Pursuant to the Children's Television Act of 1990, the FCC has
adopted rules limiting advertising in children's television programming and has
required that television broadcast stations serve the educational and
informational needs of children.
Time Brokerage Agreements. Over the past several years a significant
number of broadcast licensees, including the Company, have entered into time
brokerage agreements. These arrangements are subject under FCC rules and
regulations to maintenance by the licensee of each station of 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.
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 has
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.
The FCC has no present rules on the attribution of television time
brokerage agreements as it does with radio time brokerage agreements. The 1996
Act grandfathered time brokerage agreements existing at the time of its passage
and included a provision that the broadcast ownership section of the Act is not
to be construed to prohibit the origination, continuation or renewal of any
television time brokerage agreement that complies with FCC regulations.
"Must Carry"/Retransmission Consent. The Communications Act contains
broadcast signal carriage requirements that allow local commercial television
broadcast stations to elect once every three years to require a cable system to
carry the station 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. Additionally, cable
systems are required to obtain retransmission consent for all distant commercial
television stations (except for
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<PAGE> 13
commercial satellite-delivered independent super stations such as WTBS),
commercial radio stations and certain low power television stations carried by
such systems after October 6, 1993.
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
the FCC will determine a broadcast station's market by using commercial
publications that delineate television markets based on viewing patterns. This
modification has resulted in the FCC ruling that for the election period
commencing January 1, 2000 a station's market will be defined by the DMA to
which it has been designated. 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 or within 120 days of enactment of the 1996 Act, whichever is
later.
Equal Employment Opportunity Requirements. The FCC's existing equal
employment opportunity ("EEO") regulations and reporting forms used by
television broadcast stations have been codified in the Communications Act. In
addition, 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
record keeping and filing requirements of certain categories of stations.
Syndicated Exclusivity/Territorial Exclusivity. The FCC has imposed on
cable operators syndicated exclusivity rules and 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.
Television 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, and federal, state and local
environmental and land use restrictions and general business regulation, and a
variety of local regulatory concerns.
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.
FCC Proceedings to Revise Broadcast Ownership Rules. The FCC has 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 and by permitting certain UHF/UHF or UHF/VHF overlaps; (iii) relaxing
the rules prohibiting cross-ownership of radio and television stations in the
same market; and (iv) treating television time brokerage agreements the same as
radio time brokerage agreements which would presently preclude certain
television time brokerage agreements 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 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). The FCC also issued a further notice of proposed rule
making that combined several long-pending proceedings to consider changes in its
ownership rules and policies.
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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.
Advanced High Definition Television System. The FCC has adopted rules for
implementing advanced (high definition) television ("ATV") 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 FCC has
adopted ATV technical standards and other rules necessary to protect the public
interest. The FCC has conditioned ATV licenses on recapture of either the new
ATV spectrum or television licensees' initial spectrum. Ten years after it first
issues ATV licenses, 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. The FCC has decided that it will
set aside specific new channel allotments for ATV service. Initial eligibility
for these channels will be limited to existing television licensees.
Beginning in May 2002 the Company will be required to air a certain number
of broadcast hours in the ATV format.
EMPLOYEES
As of December 31, 1997, the Company had approximately 447 full-time
employees and 130 part-time employees. The substantial majority of the Company's
employees are not represented by labor unions. The Company considers its
relations with its employees to be good.
SEASONALITY
Seasonal revenue fluctuations are common within the television broadcasting
industry and result primarily from fluctuations in advertising expenditures.
Because of the short operating history of inTV and the start up nature of PAX
NET, the Company's ability to assess the effects of seasonality on either inTV
or PAX NET is limited. It appears, however, that inTV experiences its highest
revenues during the first and fourth calendar quarters.
TRADEMARKS AND SERVICE MARKS
The Company has 13 federally registered trademarks and service marks with
another 21 applications pending. It does not own any patents or patent
applications.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED CONSIDERATIONS
This Report contains forward-looking statements that reflect the Company's
current views with respect to future events and financial performance. These
forward-looking statements are made pursuant to the "safe harbor" provisions of
the Securities Litigation Reform Act of 1995 and involve risks and
uncertainties, including those identified below, which could cause actual
results to differ materially from historical results or those anticipated. The
words "believe," "expect," "intend," "anticipate" and similar expressions
identify certain of such forward-looking statements, which speak only as of the
dates on which they were made. All statements herein, other than those
consisting solely of historical facts, that address activities, events or
developments that the Company expects or anticipates will or may occur in the
future, including such things as business strategy, measures to implement
strategy, competitive strengths, goals, projected revenues, costs and other
financial results, references to future success and other events may be
forward-looking statements. Statements herein are based on certain assumptions
and analysis made by the Company in light of its experience and its perception
of historical trends, current conditions and potential future developments, as
well as other factors it believes are appropriate in the circumstances. Whether
actual results, events and developments will conform with the Company's
expectations is subject to a number of risks and uncertainties and important
factors that could cause actual results, events and developments to differ
materially from those
12
<PAGE> 15
referenced in, contemplated by or underlying any forward-looking statements
herein, many of which are beyond the control of the Company. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events, or otherwise.
Readers are cautioned not to place undue reliance on these forward-looking
statements. Factors to consider in evaluating any forward-looking statements and
the other information contained herein and which could cause actual results to
differ from those anticipated in the forward-looking statements or otherwise
adversely affect the Company's business include those set forth below:
High Level of Indebtedness; Restrictions Imposed by Terms of Indebtedness and
Preferred Stock
The Company is highly leveraged. At December 31, 1997, the Company had
$350.8 million of total debt as well as $211.0 million of redeemable securities.
In addition, the Company may incur additional indebtedness and will likely issue
additional shares of preferred stock to finance acquisitions, capital
expenditures and for other corporate purposes. Its ability to do so is subject
to restrictions in the Company's Senior Secured Revolving Credit Facility (the
"Credit Facility"), the indenture (the "Indenture") governing the Company's
11 5/8% Senior Subordinated Notes (the "Notes"), the terms of the Company's
Junior Cumulative Compounding Redeemable Preferred Stock (the "Junior Redeemable
Preferred Stock") and the terms of the Company's redeemable 12 1/2% Cumulative
Exchangeable Preferred Stock (the "Exchangeable Preferred Stock," and with the
Junior Redeemable Preferred Stock, collectively, the "Preferred Stock").
The level of the Company's indebtedness could have important consequences
to the Company, including: (i) a significant amount 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; and (iv) 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. Many 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 Credit Facility, the Indenture and the Preferred Stock 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. Currently,
such covenants prevent the Company from incurring additional indebtedness,
although refinancing of existing debt is not prohibited. In addition, the Credit
Facility requires the Company to comply with certain financial ratios and tests,
under which the Company is required to achieve certain financial and operating
results. If the Company defaults under the Credit Facility, the lenders may
terminate their lending commitments and declare the indebtedness under the
Credit Facility immediately due and payable. If this were to happen there is no
assurance that the Company would have sufficient assets to pay indebtedness then
outstanding under the Credit Facility and the Notes. If the Company is unable to
service its indebtedness or satisfy its dividend or redemption obligations 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 is no assurance that any of these
strategies could be effected on satisfactory terms, if at all.
"Must Carry" Regulations
The Company believes that the growth and success of its television station
group depends materially upon access to households served by cable television
systems. Pursuant to 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 DMA, 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
13
<PAGE> 16
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,
1999. If the law were changed to eliminate or materially alter "must carry"
rights, the Company could suffer adverse effects.
Government Regulation
Each of the Company's television stations operates pursuant to one or more
licenses issued by the FCC that expire at different times, some of which are
currently up for renewal. The Company may apply to renew those licenses, and
third parties may challenge those applications. The license term for broadcast
television stations is eight years. 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 television broadcasting
industry is subject to extensive and changing regulation. See "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 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 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
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 interest 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 renewal of any television time brokerage agreement
that is in compliance with the regulations of the FCC. 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 "Federal Regulation of
Broadcasting."
New Industry
inTV operates in a relatively new industry with a limited operating
history. Difficulties and uncertainty 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 is no assurance that this new industry
will develop and continue as a viable industry. 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. Should
these circumstances not occur, the Company's business could be adversely
affected.
14
<PAGE> 17
Risk Associated with Starting PAX NET
PAX NET will be operated differently from traditional television and cable
networks and independent stations. The Company believes its revenues and
expenses will likewise be different. As a result, the Company's plans and
strategies with respect to PAX NET cannot be tested against traditional
television and cable networks and independent station data or experiences. The
success of the Company's PAX NET network will depend largely on the programming
PAX NET offers and the Company's cost of obtaining such programming. The Company
seeks to acquire programming for PAX NET which will generate sufficient ratings
to enable the Company to capture advertising revenues exceeding the Company's
programming costs and other expenses. The Company has made certain assumptions
in formulating its plans and strategies including, among others, the Company's
ability to achieve certain ratings, sell advertising at certain rates, sell a
significant amount of its time on a local basis at higher rates, sell out its
time at targeted rates, locate and hire the significant number of additional
employees which the Company expects will be necessary for the launch of PAX NET,
operate its stations at the anticipated staffing levels, achieve targeted cost
savings through the centralization of certain tasks for multiple stations, sell
time utilizing limited outside sales representatives, attract affiliates and
acquire additional stations, and continue to sell time for infomercials during
the day, on weekends, at anticipated rates. There can be no assurance that the
PAX NET programming obtained by the Company will generate sufficient audience
ratings for the profitable operation of PAX NET or that the Company's
programming costs will not prove excessive in relation to its advertising
revenues, nor can there be any assurance that any of the Company's assumptions
regarding the startup and operation of PAX NET will prove correct.
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 Preferred Stock. There is 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.
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 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 acquired operations or successfully manage the costs
often associated with rapid growth.
Competition
The Company's television stations are located in highly competitive
markets. Upon the launch of PAX NET, the financial success of each of the
Company's television stations will depend, to a significant degree, upon its
audience ratings, its share of the overall television sales 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 cash flow of the Company. The
Company's television stations will compete for audience share and advertising
revenue directly with other television stations and with other media within
their respective markets. In addition, to the extent that many 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 obtain or
maintain significant audience ratings and advertising revenue. See
"Competition."
15
<PAGE> 18
Industry and Economic Conditions
The profitability of the Company's television stations is subject to
various factors that influence the television broadcasting industries as a
whole, 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 television station
acquisitions and operations. 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 or regional economic downturns.
ITEM 2. PROPERTIES
The following table sets forth information with respect to the Company's
offices and its studios and broadcast tower locations. Management believes that
the Company's properties are in good condition and are suitable for its
operations.
<TABLE>
<CAPTION>
MARKET(A) PROPERTY OWNED/LEASED LEASE EXPIRATION
- --------- -------- ------------ ----------------
<S> <C> <C> <C>
New York, NY............................ Studio Leased March 2001
Offices Leased June 2000
Los Angeles, CA......................... Tower Leased March 2006
Studio/Offices Leased April 2008
Tower Leased June 2005
Chicago, IL............................. Offices Leased June 2000
Philadelphia, PA........................ Sales Office Leased July 1998
Studio Leased September 2000
San Francisco, CA....................... Tower Leased June 2020
Studio/Offices Leased June 2005
Boston, MA.............................. Studio/Offices Leased February 2006
Tower Leased February 2012
Washington, DC.......................... Tower Owned
Studio Owned
Dallas, TX.............................. Studio Leased October 2001
Tower Leased March 2016
Detroit, MI............................. Studio Leased August 1999
Tower Owned
Atlanta, GA............................. Tower Leased October 2015
Studio/Offices Leased June 2001
Houston, TX............................. Tower Owned
Studio Owned
Seattle, WA............................. Tower Leased August 2002
Studio Leased October 2000
Cleveland, OH........................... Tower Leased May 2006
Studio Leased October 1999
Minneapolis, MN......................... Studio Owned
Tower Owned
Tampa, FL............................... WHNZ-AM Tower Owned
WXPX(wfct) Tower Owned
WXPX(wfct) Studio Leased April 2001
Miami, FL............................... Tower Leased October 1999
Studio Leased July 2001
Phoenix, AZ............................. KBPX(kwbf) Studio Leased September 1999
KBPX(kwbf) Tower Leased October 2001
KAJW Tower Leased June 2012
Denver, CO.............................. Studio Leased August 2001
Tower Leased August 2003
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
MARKET(A) PROPERTY OWNED/LEASED LEASE EXPIRATION
- --------- -------- ------------ ----------------
<S> <C> <C> <C>
Orlando, FL............................. Tower Leased August 2015
Tower Owned
Studio/Offices Leased Month to Month
Raleigh/Fayetteville, NC................ Studio Leased January 2003
Tower Leased January 2003
Kansas City, MO......................... Studio Leased August 2004
Tower Leased August 2047
Milwaukee, WI........................... Studio Owned
Tower Leased June 2012
Nashville, TN........................... Studio Leased January 2003
Tower Leased January 2013
Salt Lake City, UT...................... Studio Leased July 2000
Tower Leased January 1999
Norfolk, VA............................. Studio Leased June 1998
Tower Leased May 1999
Oklahoma City, OK....................... Studio Leased October 2003
Tower Leased September 2003
Greensboro, NC.......................... Tower Leased October 2011
Studio Leased September 2002
West Palm Beach, FL..................... Headquarters Owned
Annex Leased February 2000
Undeveloped Land Owned
Providence, RI.......................... Tower Leased August 2006
Birmingham, AL.......................... Studio Leased November 1999
Tower Owned
Albany, NY.............................. Tower Owned
Studio Leased November 2003
Dayton, OH.............................. Tower Owned
Studio Owned
Fresno, CA.............................. Studio Leased Month to Month
Tower Leased June 2000
Little Rock, AR......................... Tower Leased January 2012
Tulsa, OK............................... Tower Leased December 2006
Studio Leased February 2004
Roanoke, VA............................. Studio Leased December 2003
Tower Owned
Green Bay, WI........................... Studio Leased December 2007
Tower Leased January 2012
Cedar Rapids, IA........................ Studio Leased December 1999
Tower Owned
Tower land Leased December 2015
Pensacola, FL........................... Studio Leased Month to Month
Tower Owned
Puerto Rico............................. Towers -- two Owned
Tower Leased Month to Month
Studio Leased November 2001
</TABLE>
- ---------------
(a) Market listed may differ from actual location.
ITEM 3. 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> 20
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of the period covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Class A Common Stock became publicly-held November 7, 1994
when it was listed on the NASDAQ Small-Cap Market. Since July 10, 1995, the
Class A Common Stock has been listed on the American Stock Exchange under the
symbol PXN. On November 24, 1997, the Company changed its listing symbol to PAX.
The following table sets forth, for the periods indicated, the high and low last
sales price per share for the Class A Common Stock.
<TABLE>
<CAPTION>
1997 1996
------------- -------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter.............................................. 10 1/4 7 15/16 21 1/4 13 7/8
Second Quarter............................................. 13 1/8 9 3/4 15 3/8 10 5/8
Third Quarter.............................................. 14 3/8 10 15/16 13 9 11/16
Fourth Quarter............................................. 12 1/16 7 3/16 11 1/8 6 5/8
</TABLE>
On March 9, 1998, the closing sale price of the Class A Common Stock on the
American Stock Exchange was $8.4375 per share. As of that date, there were
approximately 363 holders of record of the Class A Common Stock.
On January 27, 1998, in connection with the Company's acquisition of
KPXR-TV, the Company issued 600,000 shares of Class A Common Stock with an
approximate market value at the time of $5,250,000 to Fant Broadcasting of Iowa,
Inc. The shares issued were not registered under the Securities Act of 1933 and
were issued in reliance upon the exemption from registration provided in Section
4(2) of such Act for transactions not involving a public offering.
On July 30, 1997, in connection with the Company's acquisition of WPXW-TV,
the Company issued 1,197,892 shares of Class A Common Stock with an approximate
market value at the time of $10,000,000 to ValueVision International. The shares
issued to ValueVision International are entitled to piggyback registration
rights in the event of certain offerings of shares to the public. The shares
issued were not registered under the Securities Act of 1933 and were issued in
reliance upon the exemption from registration provided in Section 4(2) of such
Act for transactions not involving a public offering.
On July 11, 1997, in connection with the Company's acquisition of The
Travel Channel, the Company issued 4,773,097 shares of Class A Common Stock with
an approximate market value at the time of $55,000,000 to the shareholders of
Landmark Communications, Inc. ("Landmark") and the Company also issued 97,632
shares of Class A Common Stock valued at $1,125,000 to Communications Equity
Associates, Inc. ("CEA") in connection with their role as financial advisor in
the Travel Channel transaction. The shares issued to Landmark and CEA are
entitled to piggyback registration rights in the event of certain offerings of
shares to the public. The shares issued were not registered under the Securities
Act of 1933 and were issued in reliance upon the exemption from registration
provided in Section 4(2) of such Act for transactions not involving a public
offering.
On June 28, 1996, in connection with the Company's acquisition of Todd
Communications, Inc., the Company issued 139,555 shares of Class A Common Stock
with an approximate market value at the time of $1,535,000 to the shareholders
of Todd Communications in payment of a portion of the $5 million purchase price.
The shares issued were not registered under the Securities Act of 1933 and were
issued in reliance upon the exemption from registration provided in Section 4(2)
of such Act for transactions not involving a public offering.
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<PAGE> 21
The Company has not paid cash dividends and does not intend for the
foreseeable future to declare or pay any cash dividends on any of the Common
Stocks and intends to retain earnings, if any, for the future operation and
expansion of the Company's business. Any determination to declare or pay
dividends will be at the discretion of the Company's board of directors and will
depend upon the Company's future earnings, results of operations, financial
condition, capital requirements, contractual restrictions under the Company's
debt instruments, considerations imposed by applicable law and other factors
deemed relevant by the board of directors. In addition, the terms of the Credit
Facility, the Indenture and the Preferred Stock contain restrictions on the
declaration of dividends with respect to the Common Stock.
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<PAGE> 22
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data as of
and for each of the years in the five year period ended December 31, 1997. This
information is qualified in its entirety by, and should be read in conjunction
with, the consolidated financial statements and the notes thereto which are
included elsewhere in this report. The following data insofar as it relates to
each of the years presented has been derived from annual financial statements,
including the consolidated balance sheets at December 31, 1997 and 1996 and the
related consolidated statements of operations and of cash flows for the three
years ended December 31, 1997 and notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues........... $ 88,421,453 $ 62,332,618 $ 31,784,315 $ 4,226,641 $ 1,982,042
Operating loss........... (21,934,375) (3,895,436) (7,996,836) (4,646,812) (3,271,290)
Loss from continuing
operations before
extraordinary item..... (36,502,962) (30,435,471) (22,705,467) (8,740,661) (6,281,311)
Income (loss) from
discontinued
operations(a).......... 251,192,869 4,216,570 (142,096) 3,978,587 (4,670,542)
Extraordinary item....... -- -- 10,625,727 -- (457,157)
Net income (loss)........ 214,689,907 (26,218,901) (33,473,290) (4,762,074) (11,409,000)
Net income (loss)
attributable to common
stock(b)............... $ 188,412,901 $(48,127,485) $(46,770,496) $ (8,417,530) $(11,560,367)
PER SHARE DATA:(C)
Loss from continuing
operations before
extraordinary item..... (1.17) (1.20) (1.05) (0.36) (0.21)
Discontinued
operations............. 4.67 0.10 -- 0.12 (0.15)
Extraordinary item....... -- -- (0.31) -- (0.01)
Net income (loss)........ 3.50 (1.10) (1.36) (0.24) (0.37)
Cash dividends
declared............... -- -- -- -- --
Weighted average shares
outstanding -- basic
and fully diluted(d)... 53,808,472 43,836,526 34,429,517 33,430,116 31,581,948
BALANCE SHEET DATA:
Working capital.......... 86,943,106 76,200,837 74,388,086 26,392,082 12,894,569
Total assets............. 1,057,112,974 543,182,460 293,832,077 152,670,381 66,574,608
Current portion of
long-term debt......... 496,378 644,509 430,590 6,393,415 410,632
Long-term debt and
notes.................. 350,257,761 231,062,784 239,858,935 76,013,542 32,206,770
Total redeemable
securities............. 210,986,652 184,709,646 57,175,963 43,878,757 13,798,540
Total common
stockholders' equity... 367,743,559 106,775,237 (17,478,797) 17,019,390 16,119,257
</TABLE>
- ---------------
(a) Includes in 1997 a gain on disposal of discontinued operations of
$254,748,055, net of applicable income taxes. See Note 2 to the Consolidated
Financial Statements for additional discussion on the disposition of the
Network-Affiliated Television and Paxson Radio segments during 1997.
(b) Includes dividends and accretion on redeemable preferred stock and
redeemable common stock warrants, as applicable.
(c) The Company computes per share data in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share". Due to losses
from continuing operations, the effect of stock options and
20
<PAGE> 23
warrants is antidilutive. Accordingly, the Company's presentation of diluted
earnings per share is the same as that of basic earnings per share.
(d) Loss per share data and weighted average shares outstanding for the years
ended December 31, 1993 and 1994 give retroactive effect to (i) the
Company's recapitalization related to the merger with The American Network
Group, Inc. on November 7, 1994; and (ii) a stock dividend on common shares
outstanding on January 1, 1995.
ITEM 7. 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. Two of the Company's former business segments, Paxson Radio and
Paxson Network-Affiliated Television, have been classified as discontinued
operations in the consolidated financial statements for all periods presented as
a result of the Company's sale of these operations during 1997.
The Company currently operates a nationwide network of owned, operated or
affiliated television stations carrying its proprietary network, which
broadcasts long form paid programming consisting primarily of infomercials.
Certain of the Company's television stations were and continue to be operated
under time brokerage and affiliation agreements for various periods. Pursuant to
the time brokerage agreements, the stations' operating revenues and expenses are
controlled by the Company and are included in its consolidated statements of
operations. Pursuant to the affiliation agreements the Company includes
advertising revenue, related sales costs and affiliation fees in its
consolidated statements of operations. The Company announced in November 1997
its intention to launch PAX NET, a new broadcast television network of family
values oriented programming on August 31, 1998. The Company also owns a 30%
interest in The Travel Channel, L.L.C., a cable television network joint venture
with Discovery Communications, Inc. ("DCI"). The Company's interest in the
operating results of The Travel Channel, L.L.C. has been included in the
consolidated financial statements using the equity method of accounting.
The Company's operating data throughout the periods discussed have been
impacted significantly by the timing and mix of television acquisitions
throughout such periods. Operating revenues are derived from the sale of
advertising to local and national advertisers. The Company's primary operating
expenses include commissions on revenues, employee salaries and administrative
expenses. Upon launch of PAX NET the Company will also incur significant expense
for syndicated program rights fees, ratings services and promotion. Presently
the costs of operating the Company's television stations 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 television 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 above.
The Company's business is subject to various risks and uncertainties which
may significantly reduce revenues and increase operating expenses. For example,
a reduction in expenditures by television advertisers in the Company's markets
may result in lower revenues. The Company may be unable to reduce expenses,
including syndicated program rights fees and certain variable expenses, in an
amount sufficient in the short term to offset lost revenues caused by poor
market conditions. 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
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
21
<PAGE> 24
assets and liabilities at the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. The fair values of
the Company's investments in broadcast properties are estimated based on recent
market sale prices for comparable stations and markets and approximates their
carrying value as of December 31, 1997. The fair values of the Company's
long-term debt and the Notes were estimated based on market rates of instruments
with similar risks and maturities, and approximates the carrying value as of
December 31, 1997. 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 and have not been
comprehensively revalued for purposes of the Company's financial statements.
The Company believes that its network of television stations comprise a
valuable national television broadcasting distribution infrastructure, the value
of which could potentially be greater if employed to air programming other than,
or in addition to, the long form paid programming which is currently being
aired. Including all pending station acquisitions, construction projects,
divestitures and other transactions, the Company will broadcast via a total of
77 stations in markets reaching more than approximately 72 million U.S. TV
households, including stations in each of the nation's top 20 markets as well as
42 of the nation's top 50 markets. The Company announced in November 1997 its
intention to launch PAX NET, a new broadcast television network of family values
oriented programming, on August 31, 1998. This new network will allow the
Company to obtain programming and sell spot advertising during such programming
on its own. The Company believes that this strategy will provide an opportunity
to achieve greater long term shareholder value than that achievable through
alternative uses of its broadcasting distribution infrastructure. The Company
has entered into programming contracts to air syndicated television shows as
well as theatrical and made-for-television movies from 1998 to 2004. As of March
16, 1998, such programming contracts require collective payments by the Company
of approximately $325.6 million over such periods as follows:
<TABLE>
<S> <C>
1998........................................................ $ 46,114,015
1999........................................................ 75,202,626
2000........................................................ 71,015,115
2001........................................................ 62,155,787
2002........................................................ 31,723,792
Thereafter.................................................. 39,418,667
------------
$325,630,002
============
</TABLE>
The Company had $36.7 million of broadcast rights deposits recorded in
other assets as of December 31, 1997. The Company continues to evaluate
additional programming. The Company expects that under PAX NET, selling expenses
will remain proportionate to revenues and that revenues as well as promotional
and programming expenses will increase significantly.
See "Business -- Forward-Looking Statements and Associated Considerations"
for a discussion of certain factors which could influence the Company's future
performance and prospects.
DISCONTINUED OPERATIONS
During 1997, the Company sold two business segments, Paxson Radio and
Paxson Network-Affiliated Television. Losses from operations of these segments
in 1997, net of tax, were $3.6 million compared to income of $4.2 million in
1996. The losses in 1997 primarily reflect the sale of Paxson Network-Affiliated
Television on July 31, 1997 and Paxson Radio on October 1, 1997 compared to full
year results of operations for 1996. Paxson Network-Affiliated Television and
Paxson Radio generally experienced their lowest revenue in the first quarter of
the year, whereas the highest revenue for the year generally occurred in the
fourth quarter. Paxson Network-Affiliated Television net losses were $937,000 in
1997 compared to net income of $354,000 in 1996. Paxson Radio net losses were
$2.7 million in 1997 compared to net income of $3.9 million in 1996.
Income from operations of these segments in 1996, net of tax, was $4.2
million compared to a loss of $142,000 in 1995. The improved results in 1996
were primarily related to Paxson Radio, which had income of
22
<PAGE> 25
$3.9 million in 1996 compared to a loss of $1.4 million in 1995. The increase in
income in 1996 for Paxson Radio primarily reflects revenue increases from radio
stations and billboard faces due to acquisitions as well as revenue increases
from existing stations. In 1996, Paxson Network-Affiliated Television had income
of $354,000 compared to income of $1.3 million in 1995. The decline in income in
1996 for Paxson Network-Affiliated Television primarily reflects increased time
brokerage fees paid to operate WTVX-TV, which the Company began to operate
pursuant to a time brokerage agreement in August 1995.
In connection with the disposal of its Network Affiliated Television and
Paxson Radio segments in 1997, the Company recorded gains of $68.7 million and
$186.1 million, respectively, net of applicable income taxes. Net proceeds from
the sale of these segments were approximately $722.0 million.
RESULTS OF CONTINUING OPERATIONS
Years Ended December 31, 1997 and 1996
Consolidated revenues for 1997 increased 42% (or $26.1 million) to $88.4
million from $62.3 million for 1996. This increase was primarily due to
television station acquisitions and new time brokerage operations, with WPXN-TV
in New York which has been operated by the Company since June 30, 1997
accounting for $13.3 million of the increase.
Operating expenses for 1997 increased 67% (or $44.2 million) to $110.4
million from $66.2 million for 1996. The increase was due to higher direct
expenses such as commissions which rise in proportion to revenues ($4.0
million), compensation associated with Paxson Radio asset sales ($9.7 million),
other non-direct costs, which are primarily due to operating new television
stations ($11.3 million), higher depreciation and amortization primarily related
to assets acquired ($9.2 million), and increased time brokerage agreement fees,
primarily related to new time brokerage operations ($13.4 million), of which
increase, $10.3 million is attributable to WPXN-TV, all of which were partially
offset by lower option plan compensation costs ($3.6 million).
Operating cash flow for 1997 increased 55% (or $10.7 million) to $30.2
million, from $19.5 million for 1996. The increase in operating cash flow was
primarily a result of television station acquisitions and new time brokerage
operations, with WPXN-TV accounting for $10.5 million of the increase.
For purposes of this report, "operating cash flow" is defined as net income
excluding non-cash items, non-recurring items including 1997 compensation
associated with Paxson Radio asset sales, discontinued operations and relocation
costs, 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. Operating cash
flow is not, and should not be used as, an indicator of 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.
The Company has issued options to purchase shares of Class A Common Stock
to certain members of management and employees during 1997, 1996 and 1995 under
its stock compensation plans. There are currently 3,605,461 options outstanding
under these plans. Further, the Company recognized total option plan
compensation expense, including amounts recorded in income (loss) from
discontinued operations, of approximately $6.5 million, $7.9 million and $10.8
million in 1997, 1996 and 1995, respectively, and expects that approximately
$2.2 million of compensation expense will be recognized over the remaining
vesting period of the outstanding options.
Interest expense for 1997 increased to $37.7 million from $31.5 million for
1996, an increase of 20% primarily due to a greater level of senior debt
throughout the period. As a result of acquisitions, at December 31, 1997, total
long-term debt and senior subordinated notes were $350.8 million, compared with
the balance of $231.7 million outstanding a year prior.
Interest income for 1997 increased to $9.5 million from $6.7 million,
primarily due to greater levels of cash and cash equivalents and cash held by
qualified intermediary invested during the second half of the
23
<PAGE> 26
period primarily as a result of the receipt of the proceeds from the
Network-Affiliated Television and Radio segments sales during 1997.
At December 31, 1996 the Company had accumulated approximately $70 million
of net operating losses available to offset future taxable income, $7.9 million
of which were limited as to use. The gain realized upon the disposal of Paxson
Radio was substantially deferred for tax purposes. The remaining gain on the
disposal of the Paxson Radio and Network-Affiliated Television segments was
offset through the use of net operating losses available at December 31, 1996 as
well as tax losses generated from operations during 1997.
The deferral of approximately $119 million of taxes on the approximately
$305 million gain upon the sale of Paxson Radio could be contested by the
Internal Revenue Service ("IRS"). Based on the advice of counsel, management
believes that, in the event of a challenge by the IRS of these tax positions, it
is more likely than not that the Company would prevail. Should the IRS
successfully challenge the Company on these matters, the Company could be
subject to a material current tax liability.
Years Ended December 31, 1996 and 1995
Consolidated revenues for 1996 increased 96% (or $30.5 million) to $62.3
million from $31.8 million for 1995. This increase was primarily due to
television station acquisitions and new time brokerage operations.
Operating expenses for 1996 increased 66% (or $26.4 million) to $66.2
million from $39.8 million for 1995. The increase was primarily due to higher
direct expenses such as commissions which rise in proportion to revenues ($3.8
million), other non-direct costs, which are primarily due to operating new
television stations ($13.8 million), higher depreciation and amortization
primarily related to assets acquired ($8.2 million), and increased time
brokerage agreement fees, primarily related to new time brokerage operations
($2.7 million), all of which were partially offset by lower option plan
compensation costs ($2.1 million).
Operating cash flow for 1996 increased 174% (or $12.4 million) to $19.5
million, from $7.1 million for 1995. The increase in operating cash flow was
primarily a result of television station acquisitions and new time brokerage
operations.
Interest expense for 1996 increased to $31.5 million from $17.2 million for
1995, an increase of 83% primarily due to a greater level of debt throughout the
period and higher borrowing rates. At December 31, 1996, total long-term debt
and senior subordinated notes were $231.7 million, compared with the balance of
$240.3 million outstanding a year prior. The balance sheets reflect the private
sale of $230 million of Notes at a discount netting $227.3 million before
transaction costs on September 28, 1995.
Interest income for 1996 increased to $6.7 million from $1.7 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 April
1996 common stock sale and the October 1996 exchangeable preferred stock sale.
24
<PAGE> 27
The following table sets forth, for the periods indicated, selected
financial information as a percentage of revenues.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
---------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Total revenue............................................... 100.0% 100.0% 100.0%
----- ----- -----
Operating Expenses:
Direct...................................................... 16.6 17.0 21.3
Programming................................................. 5.7 4.2 4.3
Sales & promotion........................................... 6.6 5.8 7.6
Technical................................................... 10.2 8.0 7.1
General & administrative.................................... 26.6 33.4 38.6
Trade and barter............................................ 0.3 0.2 0.4
Time brokerage agreement fees............................... 19.2 5.7 2.8
Option plan compensation.................................... 3.8 11.2 28.5
Compensation associated with Paxson Radio asset sales....... 10.9 -- --
Depreciation and amortization............................... 24.9 20.7 14.6
----- ----- -----
Total operating expenses.................................... 124.8 106.2 125.2
----- ----- -----
Operating loss.............................................. (24.8) (6.2) (25.2)
Other Income (expense):
Interest expense............................................ (42.7) (50.6) (54.0)
Interest income............................................. 10.7 10.8 5.2
Equity in loss of unconsolidated investment................. (2.8) -- --
Other expense, net.......................................... (6.4) (2.8) (1.5)
----- ----- -----
Loss from continuing operations before income tax benefit... (66.0) (48.8) (75.5)
Income tax benefit.......................................... 24.7 -- 4.0
----- ----- -----
Loss from continuing operations............................. (41.3) (48.8) (71.5)
===== ===== =====
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
During 1997, the Company sold its network-affiliated television operations
for gross proceeds of approximately $119 million and its radio operations
(including billboards) for gross proceeds of approximately $602 million. The
Company anticipates that the proceeds from the above segment sales will be
utilized primarily to fund the pending television acquisitions, related capital
expenditures and programming payments discussed elsewhere herein and for general
corporate purposes. The completion of each of the acquisitions discussed
elsewhere herein is subject to a variety of factors and to the satisfaction of
various conditions, and there can be no assurance that any such acquisitions
will be completed.
The Company's working capital at December 31, 1997 and December 31, 1996
was $86.9 million and $76.2 million, respectively, and the ratio of current
assets to current liabilities was 5.29:1 and 4.88:1 on such dates, respectively.
Working capital increased primarily due to the funds received from the segment
sales discussed above.
Cash (used in) provided by operating activities was $(38.6), $(1.1) and
$11.0 million for 1997, 1996 and 1995, respectively. The increase in cash used
primarily reflects the decrease in accounts payable, the payment of compensation
associated with Paxson Radio asset sales and the increase in restricted cash
required pursuant to the amendments to the revolving Credit Facility. Cash used
for investing activities of $58.5, $258.5 and $105.6 million for 1997, 1996 and
1995, respectively, primarily reflects acquisitions of and investments in
broadcast properties and purchases of equipment for acquired and existing
properties net of the proceeds from the above segment sales and asset sales.
Cash provided by financing activities of $117.9, $253.3 and $141.1
25
<PAGE> 28
million in 1997, 1996 and 1995, respectively, primarily reflects the proceeds
from borrowings and \proceeds of equity offerings, net of repayments and loan
origination costs incurred. Non-cash activity relates to option plan
compensation, stock issued for the Travel Channel, WPXW-TV and WFSJ-FM
acquisitions, a note payable incurred with the WYPX-TV acquisition, reciprocal
trade and barter advertising revenue and expense and accretion of discount on
the Notes, as well as dividends on the Company's redeemable preferred stock and
common stock warrants.
The Company's primary capital requirements are for the acquisition of
broadcasting properties and related capital expenditures, syndicated programming
payments and interest payments on indebtedness. The Notes require semi-annual
interest payments at a fixed rate.
At December 31, 1997, the Company was not in compliance with certain of the
financial covenants under its revolving Credit Facility. In March 1998, the
Company obtained a waiver of such noncompliance from its lenders and executed an
amendment to the terms of the revolving Credit Facility. The amended terms
adjust the covenants of the Credit Facility for the sale of the Company's
Network-Affiliated Television and Paxson Radio segments in 1997 and address the
Company's business plan related to the PAX NET launch. In addition, certain
financial covenants were temporarily modified to allow for anticipated
compliance by the Company throughout the remainder of 1998. The waiver and
amendment agreement also requires the Company to use its best efforts to raise
an additional $150 million of equity by May 31, 1998 and apply the net proceeds
therefrom to repay the revolving Credit Facility and requires the Company to
fund $17 million of interest into a cash collateral account for the benefit of
the lenders.
On March 11, 1998, the Company obtained a fully underwritten commitment
(the "Commitment Letter") for a $122 million senior term credit facility
maturing June 2002 (the "Senior Credit Facility") to be used to refinance the
amounts outstanding under its revolving Credit Facility. Under the terms of the
Commitment Letter, the outstanding debt will be secured by substantially all of
the Company's assets and bear interest at a base rate plus 1.75% or LIBOR plus
2.75%, at the Company's option. The Senior Credit Facility will require the
Company to maintain compliance with certain financial ratios subsequent to March
2000 and will contain other restrictions. Management expects to execute a Senior
Credit Facility pursuant to the terms of the Commitment Letter before May 31,
1998.
The Company will require additional financing to enable it to complete
acquisitions which are currently pending, continue its acquisition strategy and
to fund capital expenditures on existing and acquired properties, syndicated
program rights fees and the Company's working capital requirements. The timing
and amount of the Company's additional financing needs will depend, among other
things, upon the timing of closings of pending acquisitions (which are dependent
upon the satisfaction of closing conditions, some of which are beyond the
control of the Company). The Company presently has no additional borrowing
capacity pursuant to the financial covenants of the revolving Credit Facility.
As the Company's cash available for acquisitions at December 31, 1997 will not
be adequate to pay the purchase price of all pending acquisitions, the Company
is considering additional sources of financing, including public and private
sales of equity and debt securities. The failure to 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, the Company could have
insufficient resources to repay indebtedness under the revolving Credit Facility
or the Notes when due or to make required payments on the Preferred Stock.
Year 2000 Considerations
In the next two years, many companies will face potentially serious issues
associated with the inability of existing data processing hardware and software
to appropriately recognize calendar dates beginning in the year 2000. Many
computer programs that can only distinguish the final two digits of the year
entered may read entries for the year 2000 as the year 1900 and compute payment,
interest or delinquency based on the wrong date, or are expected to be unable to
compute payment, interest or delinquency. The Company is in the process of
identifying the software applications and hardware devices expected to be
impacted by this issue. The Company is currently developing a new billing and
inventory system to be put in use by the end of 1998 to
26
<PAGE> 29
meet the needs of PAX NET. This new billing and inventory system will address
the year 2000 compliance issues. The Company's general ledger system is not year
2000 compliant. As a result, and in order to accommodate the Company's future
growth, the Company's management is in the process of evaluating third party
systems which are year 2000 compliant. While the Company expects that efforts on
the part of current employees of the Company will be required to continue to
monitor Year 2000 activities, the Company does not expect the cost of addressing
any Year 2000 issue will be a material event or uncertainty that would have a
material adverse effect on future operating results or financial condition.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA
The response to this item is submitted in a separate section of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None required to be reported.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item regarding directors and officers is
incorporated by reference from the definitive Proxy Statement being filed by the
Company for the Annual Meeting of Stockholders to be held April 17, 1998.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item regarding compensation of officers and
directors is incorporated by reference from the definitive Proxy Statement being
filed by the Company for the Annual Meeting of Stockholders to be held April 17,
1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is incorporated by reference from the
definitive Proxy Statement being filed by the Company for the Annual Meeting of
Stockholders to be held April 17, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is incorporated by reference from the
definitive Proxy Statement being filed by the Company for the Annual Meeting of
Stockholders to be held April 17, 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of the report:
1. The financial statements filed as part of this report are listed
separately in the Index to Consolidated Financial Statements and Financial
Statement Schedule on page F-1 of this report.
2. The Financial Statement Schedule filed as part of this report is
listed separately in the Index to Consolidated Financial Statements and
Financial Statement Schedule on page F-1 of this report.
3. For Exhibits see Item 14(c), below. Each management contract or
compensatory plan or arrangement required to be filed as an exhibit hereto
is listed in Exhibits Nos. 10.26, 10.27, 10.28 and 10.157 of Item 14(c)
below.
(b) Reports on Form 8-K.
The Company filed a Form 8-K, dated October 1, 1997, under Item 2.
Acquisition or Disposition of Assets in connection with the Company's sale of
its radio segment. The Form 8-K included pro forma financial information of the
Company and exhibits required under Item 7. Financial Statements and Exhibits.
27
<PAGE> 30
(c) List of Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <C> <S>
3.1.1 -- Certificate of Incorporation of the Company(2)
3.1.2 -- The Company's Certificate of Designations of the Company's
Junior Cumulative Compounding Redeemable Preferred stock(2)
3.2 -- Bylaws of the Company(8)
4.1 -- Indenture dated as of September 28, 1995 by and between the
Company, the guarantors named therein and The Bank of New
York, as Trustee, with respect to the Senior Subordinated
Notes(7)
4.2 -- Indenture dated as of October 4, 1996 by and between the
Company, the Guarantors named therein and the Bank of New
York, as Trustee, with respect to the Exchange
Debentures(11)
4.3 -- Credit Agreement, dated as of December 19, 1995, among PCC,
the Lenders named therein, and Union Bank, as Agent(7)
4.3.1 -- Amended and Restated Credit Agreement, dated November 19,
1996, among Paxson Communications Corporation, the Lenders
named therein and Union Bank of California, N.A., as the
Agent(14)
4.3.2 -- Second amendment, dated May 2, 1997, with respect to the
Amended and Restated Credit Agreement, dated as of November
19, 1996, among Paxson Communications Corporation, the
Lenders named therein and Union Bank of California, N.A., as
Agent(16)
4.3.3 -- Third amendment, dated May 30, 1997, with respect to the
Amended and Restated Credit Agreement, dated as of November
19, 1996, among Paxson Communications Corporation, the
Lenders named therein and Union Bank of California, N.A., as
Agent(17)
4.3.4 -- Fourth amendment, dated September 25, 1997, with respect to
the Amended and Restated Credit Agreement, dated as of
November 19, 1996, among Paxson Communications Corporation,
the Lenders named therein and Union Bank of California,
N.A., as Agent(18)
4.3.5 -- Credit agreement, dated July 11, 1997, among Travel Channel
Acquisition Corporation, the several Lenders from Time to
Time Parties Hereto and Union Bank of California, N.A., as
the Agent(18)
4.3.6 -- Fifth Amendment, dated as of October 31, 1997, to the
Amended and Restated Credit Agreement, dated as of November
19, 1996 among Paxson Communications Corporation, the
lenders from time to time party thereto and Union Bank of
California, N.A., as agent.
4.3.7 -- Sixth Amendment, dated March 11, 1998, with respect to the
Amended and Restated Credit Agreement, dated as of November
19, 1996, among Paxson Communications Corporation, the
Lenders from time to time party thereto and Union Bank of
California, N.A., as Agent.
9.1 -- Amended and Restated Stockholders Agreement, dated as of
December 22, 1994, by and among the Company and certain
stockholders thereof(2)
9.2 -- Agreement, dated March 26, 1996, amending the Amended and
Restated Stockholders Agreement, dated as of December 22,
1994, by and among the Company and certain stockholders
thereof and certain related agreements(8)
10.1 -- Securities Purchase Agreement, dated as of September 22,
1995, by and among the Company, the Guarantors named therein
and the Initial Purchasers named therein(7)
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <C> <S>
10.2 -- Stock Purchase Agreement, dated as of December 15, 1993, by
and among the Company and certain purchasers of the Company
securities(2)
10.3 -- Stock Purchase Agreement, dated as of December 22, 1994, by
and among the Company and certain purchasers of the Company
securities(2)
10.4 -- Amended and Restated Stockholders Agreement, dated as of
December 22, 1994, by and among the Company and certain
stockholders thereof (incorporated by reference to Exhibit
9.1)(2)
10.4.1 -- Agreement, dated March 26, 1996 amending the Amended and
Restated Stockholders Agreement, by and among the Company
and certain stockholders thereof and certain related
agreements (incorporated by reference to Exhibit 9.2)
10.5 -- Exchange and Consent Agreement, dated as of December 22,
1994 by and among the Company and certain stockholders
thereof(2)
10.20 -- Warrant Agreement, dated as of December 15, 1993, by and
among the Company and William Watson as Warrant Agent(1)
10.25 -- Warrant Agreement, dated as of December 22, 1994, by and
among the Company and William Watson as Warrant Agent(2)
10.26 -- Employment Agreement, dated as of June 30, 1994, by and
between the Company and Lowell W. Paxson(1)
10.27 -- Paxson Communications Corp. Profit Sharing Plan(1)
10.28 -- Paxson Communications Corp. Stock Incentive Plan(1)
10.29 -- Asset Purchase Agreement, dated as of March 31, 1995, by and
among The Christian Network, Inc. and LeSea Broadcasting
Corporation and the Company(3)
10.30 -- Stock Purchase Agreement, dated as of April 30, 1995, by and
among Channel 59 of Denver, Inc. and David M. Drucker and
Charles Ergen and the Company(3)
10.31 -- Asset Purchase Agreement, dated as of April 30, 1995, by and
among Channel 59 of Denver, Inc. and Echonet Corporation and
the Company(3)
10.32 -- First Letter Agreement, dated as of December 2, 1994, to
Asset Purchase Agreement by and between the Company and
Sandino Telecasters, Inc., dated as of December 5, 1994(4)
10.33 -- Second Letter Agreement, dated as of December 5, 1994, to
Asset Purchase Agreement by and between the Company and
Sandino Telecasters, Inc., dated as of December 5, 1994(4)
10.34 -- Third Amendment, dated as of May 17, 1995, to Asset Purchase
Agreement by and between the Company and Sandino
Telecasters, Inc., dated as of December 5, 1994(4)
10.35 -- Asset Purchase Agreement, dated January 31, 1995, between
Gary A. Rosen in his capacity as Bankruptcy Trustee for
Flying A Communications, Inc. and the Company(5)
10.36 -- Real Estate Sale and Purchase Agreement, dated as of May 18,
1995, by and between F&M Bank -- Martinsburg and Paxson
Communications of Washington-60, Inc.(5)
10.37 -- Asset Purchase Agreement, dated as of June 1, 1995, by and
between Channel 26 of Dayton, Inc. and Video Mall
Communications, Inc. for Television Station WTJC-TV,
Springfield, Ohio(5)
10.38 -- Asset Purchase Agreement, dated as of May 23, 1995, by and
among Whitehead Media, Inc., Morton J. Kent and Canton, Inc.
for Television Station WOAC(TV) Canton, Ohio(5)
</TABLE>
29
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <C> <S>
10.39 -- Option Agreement, dated December 29, 1995 by and among
Whitehead Media, Inc., Whitehead Media of Ohio, Inc. and
Paxson Communications of Cleveland-67, Inc. for WOAC (TV),
Channel 67, Canton, Ohio(7)
10.40 -- Time Brokerage Agreement, dated October 30, 1995, between
Whitehead Media, Inc. and Paxson Communications of
Cleveland-67, Inc. for WOAC (TV), Channel 67, Canton,
Ohio(7)
10.41 -- Amendment to Time Brokerage Agreement, dated December 29,
1995, between Whitehead Media, Inc. and Paxson
Communications of Cleveland-67, Inc. for WOAC (TV), Channel
67, Canton, Ohio(6)
10.42 -- Time Brokerage Agreement, dated September 22, 1994,
effective as of August 4, 1995, between Whitehead Media,
Inc. and the Company for Television Station WTVX-TV Fort
Pierce, Florida(6)
10.43 -- Amendment to Time Brokerage Agreement, dated as of April 19,
1995, between Whitehead Media, Inc. and the Company for
Television Station WTVX-TV Fort Pierce, Florida(6)
10.44 -- Amendment to Time Brokerage Agreement, dated December 29,
1995, by and between Whitehead Media, Inc. and Paxson
Communications of Ft. Pierce-34, Inc. for Television Station
WTVX-TV, Ft. Pierce, Florida(7)
10.45 -- Option Agreement, dated December 29, 1995, by and among
Whitehead Media, Inc., Whitehead Media of Florida, Inc., and
Paxson Communications of Ft. Pierce-34, Inc. for Television
Station WTVX-TV Ft. Pierce, Florida(8)
10.46 -- Non-compete Agreement, dated August 18, 1995, between the
Company and Lowell W. Paxson(7)
10.47 -- Asset Purchase Agreement, dated as of August 23, 1995, by
and among Valuevision International, Inc., VVI Bridgeport,
Inc., VVI Akron, Inc., and the Company(7)
10.48 -- Time Brokerage Agreement, dated August 31, 1995, by and
between Channel 56 of Orlando, Inc. and Paxson
Communications of Orlando-56 Inc. for Television Station
WIRB(TV), Melbourne, Florida(7)
10.49 -- Loan Agreement, dated August 31, 1995, among Paxson
Communications of Orlando-56, Inc. and Channel 56 of
Orlando, Inc.(7)
10.50 -- Time Brokerage Agreement, dated August 31, 1995, by and
between UHF Channel 59 Corp. and Paxson Communications of
Denver-59, Inc. for Television Station KUBD(TV), Denver,
Colorado(7)
10.51 -- Loan Agreement, dated August 31, 1995, by and between Paxson
Communications of Denver-59, Inc. and Channel 59 of Denver,
Inc.(7)
10.52 -- Option Agreement, dated August 31, 1995, by and among Paxson
Communications of Denver-59, Inc., Channel 59 of Denver,
Inc., and UHF Channel 59 Corp.(7)
10.53 -- Asset Purchase Agreement, dated August 31, 1995, by and
between Channel 13 of Flagstaff, Inc., Michael C. Gelfand,
and Del Ray Television Company, Inc.(7)
10.53.1 -- Option Agreement, dated January 24, 1996, by and between
Channel 13 of Flagstaff, Inc. and Paxson Communications of
Flagstaff-13, Inc. for television station KWBF-TV(8)
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <C> <S>
10.54 -- Indenture, dated as of September 28, 1995, among the
Company, the Guarantors named therein and The Bank of New
York, as Trustee with respect to the Senior Subordinated
Notes(7)
10.55 -- Original Note No. 1 for $115,000,000 CUSIP No. 704231-AA-7,
with Guarantee of Guarantors listed therein(7)
10.56 -- Original Note No. 2 for $115,000,000, CUSIP No. 704231-AA-7,
with Guarantee of Guarantors listed therein(7)
10.57 -- Form of New Note with Form of New Guarantee(7)
10.58 -- Registration Rights Agreement, dated as of September 28,
1995, by and among the Company, the Guarantors named therein
and each of the Purchasers referred to therein(7)
10.59 -- Asset Purchase Agreement, dated October 2, 1995 by and
between Whitehead Media, Inc. and NGM Television Partners,
Limited for Television Station WNGM-TV, Athens, Georgia(7)
10.60 -- Option Agreement dated December 29, 1995, by and between
Whitehead Media, Inc., Whitehead Media of Georgia, Inc. and
Paxson Communications of Atlanta-14, Inc. for WNGM (TV),
Channel 34, Athens, Georgia(7)
10.61 -- Time Brokerage Agreement, dated December 29, 1995, by and
between Whitehead Media of Georgia, Inc. and Paxson
Communications of Atlanta-14, Inc. for WNGM (TV), Athens,
Georgia(7)
10.62 -- Time Brokerage Agreement, dated October 16, 1995, by and
between Channel 26 of Dayton, Inc. and Paxson Communications
of Dayton-26, Inc. for Television Station WTJC(TV),
Springfield, Ohio(7)
10.63 -- Loan Agreement, dated October 6, 1995, by and among Paxson
Communications of Dayton-26, Inc. and Channel 26 of Dayton,
Inc.(7)
10.64 -- Option Agreement, dated October 6, 1995, by and between
Paxson Communications of Dayton-26, Inc. and Channel 26 of
Dayton, Inc.(7)
10.65 -- Asset Purchase Agreement, dated August 25, 1995, by and
between Channel 13 of St. Louis, Inc. and McEntee
Broadcasting, Inc., for Television Station WCEE-TV, Mt.
Vernon, Illinois(7)
10.65.1 -- Time Brokerage Agreement, dated January 26, 1996, between
Channel 13 of St. Louis, Inc. and Paxson Communications of
St. Louis-13, Inc. for television station WCEE-TV, Mt.
Vernon, Illinois(7)
10.65.2 -- Option Agreement, dated January 26, 1996, by and between
Channel 13 of St. Louis, Inc. and Paxson Communications of
St. Louis-13, Inc.(7)
10.65.3 -- Letter Exercising Option, dated February 21, 1996, by and
between Channel 13 of St. Louis, Inc. and Paxson
Communications of St. Louis-13, Inc. for television station
WCEE-TV(8)
10.67 -- Letter of Intent, dated February 24, 1996, among the
Company, New Age Broadcasting, Inc. and The Seventies
Broadcasting Corporation(8)
10.68 -- Time Brokerage Agreement, dated December 17, 1993, by and
between Bradenton Broadcast Television Co., Ltd., and The
Christian Network, Inc. regarding television station
WFCT-TV(8)
10.69 -- Loan and Option Agreement, dated December 17, 1993, between
Bradenton Broadcasting Television Company, Ltd. and The
Christian Network, Inc. for Channel 66(8)
</TABLE>
31
<PAGE> 34
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <C> <S>
10.69.1 -- Partial Assignment of Loan and Option Agreement, dated May
15, 1994, between Bradenton Broadcast Television Company,
Ltd., The Christian Network, Inc. and Paxson Communications
of Tampa-66, Inc. for Channel 66(8)
10.70 -- Partial Assignment of Time Brokerage Agreement, dated May
15, 1994, between Bradenton Broadcast Television Company,
Ltd., The Christian Network, Inc. and Paxson Communications
of Tampa-66, Inc.(8)
10.71 -- Letter Exercising Option, dated February 22, 1996, by Paxson
Broadcasting of Tampa-66, Inc. to exercise option on
WFCT-TV(8)
10.72 -- Time Brokerage Agreement, dated April 1, 1994, by and
between Channel 35 of Miami, Inc. and Paxson Communications
of Miami-35, Inc. regarding television station WCTD-TV(8)
10.73 -- Option Agreement, dated April 1, 1994, by and between
Channel 35 of Miami, Inc. and Paxson Communications of
Miami-35, Inc. regarding television station WCTD-TV(8)
10.74 -- Time Brokerage Agreement, dated January 31, 1996, by and
between S&E Network, Inc. and Paxson Communications of San
Juan, Inc. for television station WSJN-TV(8)
10.74.1 -- Stock Purchase Agreement, by and between S&E Network, Inc.
and Paxson Com Communications of San Juan, Inc. for
television station WSJN-TV(8)
10.75 -- Time Brokerage Agreement, dated October 31, 1995, by and
between Roberts Broadcasting Company of Raleigh-Durham, L.P.
and Paxson Communications of Raleigh Durham-47, Inc. for
television station WRMY-TV(8)
10.76 -- Option Agreement dated October 31, 1995, between Roberts
Broadcasting Company of Raleigh-Durham, L.P. and Paxson
Communications of Raleigh-Durham-47, Inc. for interest in
WRMY-TV(8)
10.77 -- Loan Agreement, dated October 31, 1995, between Roberts
Broadcasting Company of Raleigh-Durham, L.P. and the Company
for $4,000,000(8)
10.78 -- Letter of Intent, dated November 14, 1995, with Offshore
Broadcasting Company regarding television station WOST-TV(8)
10.79 -- Letter of Intent, dated February 22, 1996, with Roberts
Broadcasting Company of Salt Lake City LLC regarding
television station KZAR-TV(8)
10.80 -- Loan Agreement, dated March 23, 1995, with Cocola Media
Corporation of Florida for construction of facilities for
WHBI-TV(8)
10.81 -- Asset Purchase Agreement, dated January 31, 1996 between
TeleSouth Communications, Inc., Paxson Networks, Inc. and
Lowell W. Paxson in connection with the sale of South
Carolina Radio Network(8)
10.82 -- Asset Purchase Agreement, dated January 1, 1996, between the
Company and Lowell W. Paxson in connection with the sale of
World Travelers Network(8)
10.83 -- Lease Agreement, dated June 14, 1994, between Paxson
Communications of Tampa-66, Inc. and The Christian Network,
Inc. for lease of production and distribution facilities at
WFCT-TV(8)
10.84 -- Replacement Promissory Note, dated October 20, 1995, from
Channel 55 of Dallas, Inc., assigned to the Company for
$1,000,000 regarding KLDT-TV(8)
10.85 -- Letter of Intent, dated September 22, 1995, from The
Christian Network, Inc. to Western Michigan Family
Broadcasting, Inc. for television station WJUE-TV, Battle
Creek, Michigan(8)
10.86 -- Letter of Intent, dated October 4, 1995, from The Christian
Network, Inc. to Cornerstone Television, Inc. for television
station WOCD-TV, Amsterdam, New York(8)
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <C> <S>
10.87 -- First Amendment dated February 29, 1996 between Channel 55
of Albany, Inc. and Cornerstone Television, Inc.(9)
10.88 -- Asset Purchase Agreement dated as of March 29, 1996 by and
between Paxson Communications of Cookeville, Inc. and WHUB,
Inc.(10)
10.89 -- Amended and Restated Promissory Note dated August 5, 1996
between Roberts Broadcasting of Salt Lake City, L.L.C. and
Paxson Communications of Salt Lake City-16, Inc.(10)
10.90 -- First Amendment to Loan Agreement dated August 5, 1996
between Roberts Broadcasting of Salt Lake City, L.L.C. and
Paxson Communications of Salt Lake City-16, Inc.(10)
10.91 -- Asset Purchase Agreement, dated March 15, 1996, between
Ralph E. Kaschai, d/b/a Cashi Signs, Cashi Corp., Cashi
Outdoor Advertising, Inc., and Cashi Services, Inc., and
Paxson Outdoor, Inc.(10)
10.92 -- Asset Purchase Agreement, dated May 31, 1996 by and between
Paxson Broadcasting of Orlando, Limited Partnership and
Press Broadcasting Company for Radio Station WTKS(FM) Cocoa
Beach, Florida(10)
10.93 -- Time Brokerage Agreement, dated May 31, 1996, by and between
Press Broadcasting Company, Inc. and Paxson Broadcasting of
Orlando, Limited Partnership for Radio Station WTKS(FM)Cocoa
Beach, Florida(10)
10.94 -- Asset Purchase Agreement, dated December 11, 1995, by and
between Channel 55 of Albany, Inc. and Cornerstone
Television, Inc. for Television Station WOCD(TV) Amsterdam,
New York (10)
10.95 -- First Amendment to Asset Purchase Agreement, dated February
29, 1996, by and between Channel 55 of Albany, Inc. and
Cornerstone Television, Inc.(10)
10.96 -- Promissory Note, dated May 31, 1996, between Channel 55 of
Albany, Inc. and Cornerstone Television, Inc. principal sum
of $1,650,000(10)
10.97 -- Stock Purchase Agreement, dated May 23, 1996 by and among
Channel 44 of Tulsa, Inc., Paxson Communications of
Tulsa-44, Inc. and Broadcasting Systems Inc.(10)
10.98 -- Asset Purchase Agreement, dated April 18, 1996, by and
between Paxson Communications of Phoenix-13, Inc. and
Channel 13 of Flagstaff, Inc.(10)
10.99 -- Asset Purchase Agreement, dated April 18, 1996 by and among
Paxson Communications of Denver-59, Inc., UHF Channel 59
Corp. and Channel 59 of Denver, Inc.(10)
10.100 -- Asset Purchase Agreement, dated April 18, 1996, by and
between Paxson Communications of Dayton-26, Inc. and Channel
26 of Dayton, Inc.(10)
10.101 -- Asset Purchase Agreement, dated April 18, 1996 by and
between Paxson Communications of St. Louis-13, Inc. and
Channel 13 of St. Louis, Inc.(10)
10.102 -- Asset Purchase Agreement, dated April 12, 1996, by and
between Paxson Broadcasting of Miami, Limited Partnership
and TK Communications, L.C.(10)
10.103 -- Construction Agreement, dated April 16, 1996, by and among
Offshore Broadcasting Corporation, Ocean State Television,
L.L.C. and Paxson Communications of Providence-69, Inc.(10)
10.104 -- Loan Agreement, dated April 16, 1996, by and among Paxson
Communications of Providence-69, Inc., Offshore Broadcasting
Corporation and Ocean State Television, L.L.C.(10)
</TABLE>
33
<PAGE> 36
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <C> <S>
10.105 -- Asset Purchase Agreement, dated April 19, 1996 by and
between Paxson Communications of Greensboro-16, Inc. and
Television Communications, Inc. for Television Station
WAAP(TV), Burlington, North Carolina(10)
10.106 -- Asset Purchase Agreement, dated April 26, 1996, by and
between Paxson Broadcasting of Miami, Limited Partnership
and WIOD, Inc.(10)
10.107 -- Agreement and Plan of Merger, dated April 12, 1996 by and
among Devon W. Paxson, Todd L. Paxson, Pax Jax, Inc., the
Company and Todd Communications, Inc.(10)
10.107.1 -- First Amendment to Agreement and Plan of Merger, dated June
27, 1996 by and among Devon W. Paxson, Todd L. Paxson, Pax
Jax, Inc., the Company and Todd Communications, Inc.(10)
10.108 -- Asset Purchase Agreement, dated May 13, 1996, by and among
Paxson Communications of Tallahassee, Inc., B. Radio, Inc.,
and Boss Radio Group, Inc., for WGNE, WFSY, WEBZ(10)
10.109 -- Option Agreement by and between Paxson Communications of
Minneapolis 41, Inc. and KX Acquisition, L.P. for Television
Station KXLI(TV), St. Cloud Minnesota dated May 30,
1996.(10)
10.110 -- Subordinated Note between MacDonald Communications
Corporation and the Company for $3,000,000 dated June 7,
1996.(10)
10.111 -- Asset Purchase Agreement, dated April 29, 1996, by and among
Paxson Communications of Tallahassee, Inc., Southern
Broadcasting Companies,Inc., Great South Broadcasting, Inc.,
Charles E. Giddens, Inc., and Southern Broadcasting of
Pensacola, Inc.(10)
10.112 -- Asset Purchase Agreement, dated April 26, 1996, by and
between Paxson Broadcasting of Orlando, Limited Partnership
and Shamrock Communications, Inc.(10)
10.113 -- Time Brokerage Agreement, dated April 26, 1996, by and
between Shamrock Communications, Inc. and Paxson
Broadcasting of Orlando, Limited Partnership for Radio
Station WDIZ(FM) Orlando, Florida(10)
10.114 -- Purchase Agreement, dated July 17, 1996, by and between
Impact Communications of Central Florida, Inc. and Paxson
Outdoor, Inc.(10)
10.115 -- Asset Purchase Agreement, dated February 23, 1996, by and
among Paxson Communications LPTV, Inc., and Michael A.
Bogner d/b/a Amity Broadcasting Company(10)
10.116 -- Asset Purchase Agreement, dated July 1, 1996, by and among
Paxson Communications of New London-26, Inc., Paxson New
London License, Inc., and Roberts Broadcasting of Hartford,
L.L.C.(10)
10.117 -- Asset Purchase Agreement, dated March 5, 1996, by and
between Paxson Communications LPTV, Inc., and Craig L.
Fox(10)
10.118 -- Asset Purchase Agreement, dated June 18, 1996, by and
between Paxson Communications LPTV, Inc. and Communications
Corporation(10)
10.119 -- Time Brokerage Agreement, dated July 9, 1996, by and between
Channel 55 of Milwaukee, Inc. and Paxson Communications of
Milwaukee-55, Inc. for Television Station WHKE-TV Milwaukee,
Wisconsin(10)
10.120 -- Loan Agreement, dated July 9, 1996, by and between Paxson
Communications of Milwaukee-55 of Milwaukee, Inc. for
Television Station WHKE-TV Kenosha, Wisconsin(10)
10.121 -- Second Amendment to Asset Purchase Agreement, dated July 9,
1996, by and between LeSea Broadcasting Corporation and
Channel 55 of Milwaukee, Inc.(10)
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <C> <S>
10.122 -- Asset Purchase Agreement, dated July 1, 1996, by and between
Paxson Communications LPTV, Inc. and Electron Communications
Corporation(10)
10.123 -- Asset Exchange Agreement, dated August 7, 1996, by and
between Paxson Broadcasting of Birmingham-44, Inc. and
WNAL-TV Inc.(10)
10.124 -- Loan Agreement, dated August 7, 1996, by and between Paxson
Broadcasting of Birmingham-44 Inc. and WNAL-TV Inc.(10)
10.125 -- Time Brokerage Agreement, dated August 7, 1996, by and
between Paxson Broadcasting of Birmingham-44 Inc. and
WNAL-TV Inc.(10)
10.126 -- Option Agreement by and among Paxson Communications of Salt
Lake City-16, Inc. and Roberts Broadcasting of Salt Lake
City L.L.C., dated August 5, 1996(10)
10.127 -- Asset Purchase Agreement, dated July 31, 1996, by and
between Paxson Communications of Oklahoma City-62, Inc. and
Aracelis Ortiz for Television Station KMNZ-TV, Oklahoma
City, Oklahoma(12)
10.128 -- Purchase Agreement, dated July 31, 1996, by and among
America 51, L.P., Paxson Communications of Phoenix-51.,
Inc., and Hector Garcia Salvatierra for Television Station
Channel 51, Tolleson, Arizona(12)
10.129 -- Loan, Option and Related Transactions, dated August 19,
1996, between Paxson Communications of Seattle-24, Inc. and
World Television of Washington, L.L.C. for Television
Station KBCB(TV), Bellingham, Washington(12)
10.130 -- Stock Purchase and Related Transactions, dated August 21,
1996, between Paxson Communications of Little Rock-42, Inc.,
Leininger-Geddes Partnership and Channel 42 of Little Rock,
Inc. for Television Station KVUT(TV), Little Rock,
Arkansas(12)
10.131 -- Asset Purchase and Sale Agreement, dated August 27, 1996,
between Intermart Broadcasting First Coast, Inc., and Paxson
Broadcasting of Jacksonville, Limited Partnership for Radio
Station WPVJ-FM of Ponte Verda Beach, Florida(12)
10.132 -- Purchase Agreement, dated August 29, 1996, by and between
Boardworks Outdoor Advertising Company, Inc., and Paxson
Outdoor, Inc.(12)
10.133 -- Asset Purchase Agreement, dated August 30, 1996, by and
between Paxson Communications Television, Inc. and Alpha &
Omega Communications, L.L.C. for Television Station KOOG-TV,
Ogden, Utah(12)
10.134 -- Loan Agreement, dated September 6, 1996, by and between
Ponce-Nicasio Broadcasting, A Limited Partnership and Paxson
Communications of Sacramento-29, Inc. for Television Station
KCMY-TV, Sacramento, California(12)
10.135 -- Option Agreement, dated September 6, 1996, by and between
Ponce-Nicasio Broadcasting, A Limited Partnership and Paxson
Communications of Sacramento for Television Station KCMY-TV,
Sacramento, California(12)
10.136 -- Asset Purchase Agreement, dated September 12, 1996, by and
between The Moody Bible Institute of Chicago and Paxson
Broadcasting of Tampa, Limited Partnership for Radio Station
WKES-FM, St., Petersburg, Florida(12)
10.137 -- Asset Purchase Agreement, dated September 27, 1996, by and
between Channel 46 of Boston, Inc. and Massachusetts
Redevelopment Limited Liability Company for Television
Station WHRC(TV), Norwell, Massachusetts(12)
10.138 -- Easement Agreement, dated October 9, 1996, by and between
Kartworlds of Central Florida L.C. and Paxson Outdoor,
Inc.(12)
10.139 -- Contract for Sale and Purchase, dated October 22, 1996,
between Southern Land Investors, LTD., and Paxson Outdoor,
Inc.(12)
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <C> <S>
10.139.1 -- Promissory Note, dated October 22, 1996, between Southern
Land Investors, LTD. and Paxson Outdoor, Inc.(12)
10.139.2 -- Real Estate Mortgage, dated October 22, 1996, Southern Land
Investors, Ltd. and Paxson Outdoor, Inc.(12)
10.139.3 -- Assignment of Rights Under Pre-annexation Agreement, dated
October 22, 1996, by and between Michael J. Grinstaff and
Southern Land Investors, Ltd.(12)
10.140 -- Stock Purchase Agreement, dated November 12, 1996, by and
between Housing Development Associates S.E. and Paxson
Communications of San Juan, Inc.(14)
10.141 -- Asset Purchase Agreement, dated November 21, 1996, by and
among Value Vision International, Inc., VVI Manassas, Inc.,
WVVI(TV), Inc., Paxson Communications of Washington-66,
Inc., and the Company(14)
10.142 -- Asset Purchase Agreement, dated November 21, 1996, by and
between Paxson Communications of Milwaukee-55, Inc. and
Channel 55 of Milwaukee, Inc.(14)
10.143 -- Asset Purchase Agreement, dated December 13, 1996, by and
between Paxson Communications of the Keys, Inc., and Key
Chain, Inc. for Radio Stations WFKZ-FM, Plantation Key,
Florida, WAVK-FM, Marathon, Florida, and WKRY-FM, Key West,
Florida(14)
10.144 -- Asset Purchase Agreement, dated December 10, 1966, by and
between Paxson Communications of Kansas City-50, Inc. and
Kansas City Youth for Christ, Inc. for Television Station
KYFC-TV, Kansas City, Missouri(14)
10.145 -- Stock Purchase Agreement, dated December 11, 1996, by and
among Channel 64 of Scranton, Inc., Paxson Communication of
Scranton-64, Inc. and Ted Ehrhardt D/B/A Ehrhardt
Broadcasting(14)
10.146 -- Asset Purchase Agreement, dated February 19, 1997, by and
between Paxson Communications of Ft. Pierce-34, Inc., and
Paramount Stations Group, Inc. for Television Station
WTVX(TV), Ft. Pierce, Florida(14)
10.147 -- Promissory Note, dated February 12, 1997, by and between
Roberts Broadcasting of Hartford, L.L.C. and Paxson
Communications of New London-26, Inc. for Television Station
WTWS (TV), New London, Connecticut(14)
10.147.1 -- Time Brokerage Agreement, dated February 12, 1997, by and
between Roberts Broadcasting of Hartford, L. L. C. and
Paxson Communications of New London-26, Inc. for Television
Station WTWS(TV), New London, Connecticut(14)
10.147.2 -- Amendment to Asset Purchase Agreement, dated December 16,
1996, by and among Roberts Broadcasting of Hartford, L.L.P.,
Paxson Communications of New London-26, Inc., and Paxson New
London License, Inc.(14)
10.148 -- Amended and Restated Promissory Note, dated April 16, 1996,
by and between Ocean State Television, L. L. C. and Paxson
Communications of Providence-69, Inc.(14)
10.149 -- Second Amendment to Stock Purchase and Option Agreement,
dated September 27, 1996, by and among Paxson Communications
of Battle Creek-43, Inc., Western Michigan Christian
Broadcasting, Inc., Western Michigan Family Broadcasting,
Inc., Horizon Broadcasting Corporation, and William B.
Popjes.(14)
10.150 -- Partnership Interest Purchase Agreement, dated February 14,
1997, by and among DP Media, Inc., Roberts Broadcasting,
L.L.C., and Roberts Broadcasting company of Raleigh-Durham,
L.P.(14)
10.151 -- Option Purchase Agreement, dated February 14, 1997, by and
between Paxson Communications of Raleigh-Durham-47, Inc.,
and D P. Media, Inc.(14)
</TABLE>
36
<PAGE> 39
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <C> <S>
10.152 -- Amendment Agreement, dated February 13, 1996, by and among
Channel 43 of Battle Creek, Inc., Western Michigan Christian
Broadcasting, Inc., Western Michigan Family Broadcasting,
Inc., Horizon Broadcasting Corporation, William B. Popjes
and Paxson Communications of Battle Creek-43, Inc.(14)
10.153 -- Asset Purchase Agreement, dated March 13, 1997 by and among
Paxson Communications of Detroit-31, Inc. and Blackstar
Communications, Inc. for Television Stations WBSX(TV) and
W48AV(14)
10.154 -- Asset Purchase Agreement, dated March 25, 1997, by and
between Paxson Communications of West Palm Beach-25, Inc.
and The Hearst Corporation, for Television Station WPBF(TV),
West Palm Beach, Florida(14)
10.155 -- Purchase and Sale of Option, dated March 26, 1997, by and
between Paxson Communications of Cleveland -- 67, Inc., and
Global Broadcasting Systems, Inc. for Television Station
WOAC(TV), Cleveland, Ohio(14)
10.155.1 -- Purchase and Sale of Option, dated March 26, 1997, by and
between Paxson Communications of Atlanta -- 14, Inc., and
Global Broadcasting Systems, Inc. for Television Station
WNGM(TV), Atlanta, Georgia(14)
10.156 -- Asset purchase agreement, dated March 21, 1997, by and
between Whitehead Media of Florida, Inc., Whitehead
Broadcasting of Florida, Inc. and Paxson Communications of
Ft. Pierce-34, Inc. for Television Station WTVX(TV), Ft.
Pierce, Florida(14)
10.157 -- Paxson Communications Corporation 1996 Stock Incentive
Plan(13)
10.158 -- Loan agreement, dated March 26, 1996, by and between Paxson
Communications Corporation and Cocola Media Corporation of
San Francisco for television station KWOK-TV, Novato,
California(16)
10.159 -- Asset purchase agreement, dated April 1, 1997, by and
between Paxson Communications Corporation and The Kralowec
Children's Family Trust and KKAK-TV, Inc. for television
station KKAG(TV), Porterville, California(16)
10.160 -- Asset purchase agreement, dated May 5, 1997, by and among
Paxson Communications of Cedar Rapids-48, Inc., Fant
Broadcasting Company of Iowa, Inc. and Paxson Communications
Corporation for television station KTVC-TV, Cedar Rapids,
Iowa(16)
10.161 -- Asset purchase agreement, dated April 15, 1997, by and among
Paxson Communications of Buffalo-51, Inc., Fant Broadcasting
of New York, L.L.C., Anthony Fant and Paxson Communications
Corporation for television station WAQF-TV(16)
10.162 -- Assignment and acceptance agreement, dated April 18, 1997,
among WQED Pittsburgh and Paxson Communications of
Pittsburgh-40, Inc.(16)
10.163 -- Merger agreement, dated April 29, 1997, among WPBF Merger,
Inc. and WPBF License, Inc. and Paxson Communications of
West Palm Beach-25, Inc. and Paxson West Palm Beach License,
Inc.(15)
10.163.1 -- Paxson Communications of West Palm Beach -- 25, Inc. and
Paxson West Palm Beach License, Inc. Subordinated Promissory
Note, dated April 29, 1997(15)
10.163.2 -- Time brokerage agreement, dated April 29, 1997, by and
between Paxson Communications of West Palm Beach -- 25,
Inc., and Paxson West Palm Beach License, Inc., and Paxson
Communications of Florida, Inc.(15)
10.164 -- Asset purchase agreement, dated April 22, 1997, by and
between Paxson Communications of Miami-35, Inc. and Channel
35 of Miami, Inc.(16)
10.165 -- Asset purchase agreement, dated April 22, 1997, by and
between Paxson Communications of Tampa-66, Inc. and Channel
66 of Tampa, Inc.(16)
</TABLE>
37
<PAGE> 40
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <C> <S>
10.166 -- Asset purchase agreement, dated April 30, 1997, by and
between Paxson Communications of Green Bay-14, Inc and VCY
America, Inc. for television station WSCO(TV), Green Bay,
Wisconsin(16)
10.167 -- Asset purchase agreement, dated May 12, 1997, by and between
the Company, Paxson communications of New York City, ITT-Dow
Jones Television, ITT Corporation and Dow Jones & Company
for Television Station WBIS(TV), New York City, New York(16)
10.167.1 -- Time brokerage agreement, dated May 1997, by and between
ITT-Dow Jones Television and Paxson Communications of New
York-31, Inc. for Television Station WBIS(TV), New York
City, New York(16)
10.168 -- Construction Agreement, dated December 23, 1996, between
WHCT Broadcasting, Inc., and Paxson Communications of
Hartford-18, Inc. for WHCT(TV), Channel 18, Hartford,
Connecticut(17)
10.169 -- Asset Purchase Agreement, dated April 11, 1997, by and
between Roberts Broadcasting of Cookeville, L.L.C. and
Paxson Communications of Nashville-28, Inc. (17)
10.170 -- Amended and Restated Asset Purchase Agreement, dated April
15, 1997, by and among Paxson Communications of Buffalo-51,
Inc., Fant Broadcasting Company of New York, L.L.C., Anthony
Fant and Paxson Communications Corporation(17)
10.171 -- Asset Purchase Agreement, dated May 14, 1997, by and between
Paxson Communications of West Palm Beach, Inc. and American
Radio Systems Corporation(17)
10.172 -- Option Agreement, dated May 20, 1997, by and between Paxson
Communications of Honolulu-66, Inc. and Dove Broadcasting
Company of Hawaii, Inc. for television station KAPA(TV),
Kaneohe, Hawaii(17)
10.172.1 -- Loan Agreement, dated May 20, 1997, by and among Paxson
Communications of Honolulu-66, Inc., and Dove Broadcasting
Company of Hawaii(17)
10.173 -- Asset Purchase Agreement, dated May 28, 1997, by and among
Paxson Communications of Roanoke-38, Inc., Vine and Branch,
Inc. and Evangel Foursquare Church for television station
WEFC, Roanoke, Virginia(17)
10.174 -- Loan Agreement, dated June 10, 1997, by and between Paxson
Communications of Boston-46, Inc. and Channel 46 of Boston,
Inc. for television station WHRC(TV), Norwell,
Massachusetts(17)
10.175 -- Asset Acquisition Agreement, dated June 13, 1997, by and
among Landmark Communications, Inc., The Travel Channel,
Inc., and Paxson Communications(17)
10.176 -- Asset Purchase Agreement, dated June 23, 1997, by and
between Paxson Communications of Orlando-56, Inc. and
Channel 56 of Orlando, Inc.(17)
10.177 -- Loan Agreement, dated June 30, 1997, by and between Roberts
Broadcasting Company of Albuquerque and Paxson
Communications of Albuqurque-14, Inc. relating to television
station (Channel 14), Albuquerque, New Mexico(17)
10.178 -- Asset Purchase Agreement, dated June 25, 1997, by and
between John W. Hyde, as Chapter 11 Trustee of the Chapter
11 Debtor Estate of Riklis Broadcasting Corporation, AKA
KADY-TV, AKA Pacific Rim Video and Paxson Communications of
Los Angeles-63, Inc.(17)
10.179 -- Asset Purchase Agreement, dated August 25, 1997, by and
among Paxson Communications Corporation, Clear Channel
Metroplex, Inc., Clear Channel Metroplex Licenses, Inc. and
Clear Channel Communications, Inc. (filed as exhibit 2.1
with the Company's Form 8-K, dated October 1, 1997 and
incorporated herein by reference)
</TABLE>
38
<PAGE> 41
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <C> <S>
10.180 -- Asset Purchase Agreement, dated August 25, 1997, by and
among Paxson Communications Corporation, L. Paxson, Inc.,
Clear Channel Metroplex, Inc., Clear Channel Metroplex
Licenses, Inc. and Clear Channel Communications, Inc. (filed
as exhibit 2.2 with the Company's Form 8-K, dated October 1,
1997 and incorporated herein by reference)
10.181 -- Asset Purchase Agreement, dated August 29, 1997, by and
among Paxson Communications of Fayetteville-62, Inc.,
Fayetteville-Cumberland Telecasters, Inc., Fayetteville-
Cumberland Telecasters Inc., Debtor-in-Possession, and
Poplar Apartments Limited Partnership for Television station
WFAY, Fayetteville, North Carolina(18)
10.182 -- Stock Purchase Agreement, dated September 2, 1997, by and
among Channel 29 of Charleston, Inc., Paxson Communications
of Charleston-29, Inc. and Mountaineer Broadcasting
Corporation and William L. Kepper(18)
10.183 -- Stock Purchase Agreement, dated September 9, 1997, by and
among Channel 46 of Tucson, Inc., Paxson Communications of
Tucson-46, Inc. and Sungilt Corporation, Inc. (18)
10.184 -- Asset Purchase Agreement, dated October 16, 1997, by and
between Paxson Communications Corporation and Channel 49
Acquisition Corporation for television station WJCB-TV,
Norfolk, Virginia(18)
10.185 -- Asset Purchase Agreement, dated October 24, 1997, between
Universal Outdoor, Inc. and Paxson Communications
Corporation(18)
10.186 -- Option Agreement, dated November 14, 1997, by and between
Paxson Communications Corporation and Flinn Broadcasting
Corporation for Television station WCCL-TV, New Orleans,
Louisiana
10.187 -- Option Agreement, dated November 14, 1997, by and between
Paxson Communications Corporation and Flinn Broadcasting
Corporation for Television station WFBI-TV, Memphis,
Tennessee
10.188 -- Asset Purchase Agreement, dated January 26, 1998, by and
among DP Media of Milwaukee, Inc., Paxson Communications of
Milwaukee-55, Inc. and Paxson Milwaukee License, Inc. for
Television station WPXE(TV), Kenosha, Wisconsin
10.189 -- Asset and Stock Purchase and Option Grant Agreement, dated
as of November 14, 1997, by and among ValueVision
International, Inc., VVI Seattle, Inc., VVI LPTV, Inc., VVI
Spokane, Inc., VVI Tallahassee, Inc. and Paxson
Communications Corporation
10.190 -- Limited Liability Company Agreement of The Travel Channel,
L.L.C. dated as of November 24, 1997
10.191 -- Asset Purchase Agreement, dated as of November 24, 1997, by
and among Travel Channel Acquisition Corporation, Project
Discovery, Inc., Paxson Communications Corporation and
Discovery Communications, Inc.
10.192 -- Guaranty Agreement, dated as of November 24, 1997, made by
Discovery Communications, Inc., in favor of Travel Channel
Acquisition Corporation
10.193 -- Asset Exchange Agreement, dated January 26, 1998, by and
among Paxson Communications of Chicago-38, Inc., Christian
Communications of Chicagoland, Inc., and Paxson
Communications Corporation
10.193.1 -- Programming Agreement by and between Paxson Communications
of Chicago-38, Inc. and Christian Communications of
Chicagoland Inc.
</TABLE>
39
<PAGE> 42
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <C> <S>
21 -- Subsidiaries of the Company
23 -- Consent of Price Waterhouse LLP
27 -- Financial Data Schedule (for SEC use only)
99.1 -- Tax Exemption Savings Agreement between the Company and The
Christian Network, Inc., dated May 15, 1994(8)
</TABLE>
- ---------------
(1) Filed with the Company's Registration Statement on Form S-4, filed
September 26, 1994, Registration No. 33-84416 and incorporated herein by
reference.
(2) Filed with the Company's Annual Report on Form 10-K, dated March 31,
1995 and incorporated herein by reference.
(3) Filed with the Company's Quarterly Report on Form 10-Q, dated May 12,
1995 and incorporated herein by reference.
(4) Filed with the Company's Report on Form 8-K dated June 1, 1995 and
incorporated herein by reference.
(5) Filed with the Company's Quarterly Report on Form 10-Q, dated August 14,
1995 and incorporated herein by reference.
(6) Filed with the Company's Report on Form 8-K, dated August 21, 1995 and
incorporated herein by reference.
(7) Filed with the Company's Registration Statement on Form S-4, as amended,
filed January 23, 1996, Registration No. 33-63765 and incorporated herein by
reference.
(8) Filed with the Company's Registration Statement on Form S-1, as amended,
filed January 26, 1996, Registration No. 333-473 and incorporated herein by
reference.
(9) Filed with the Company's Quarterly Report on Form 10-Q, dated March 31,
1996 and incorporated herein by reference.
(10) Filed with the Company's Quarterly Report on Form 10-Q, dated June 30,
1996 and incorporated herein by reference.
(11) Filed with the Company's Registration Statement on Form S-3, as
amended, filed August 15, 1996, Registration No. 333-10267 and incorporated
herein by reference.
(12) Filed with the Company's Quarterly Report on Form 10-Q, dated September
30, 1996 and incorporated herein by reference.
(13) Filed with the Company's Registration Statement on Form S-8, filed
January 22, 1997, Registration No. 333-20163 and incorporated herein by
reference.
(14) Filed with the Company's Annual Report on Form 10-K, dated December 31,
1996 and incorporated herein by reference.
(15) Filed with the Company's Report on Form 8-K dated April 29, 1997, under
Item 7. Financial Statements and Exhibits and incorporated herein by reference.
(16) Filed with the Company's Quarterly Report on Form 10-Q, dated March 31,
1997 and incorporated herein by reference.
(17) Filed with the Company's Quarterly Report on Form 10-Q, dated June 30,
1997 and incorporated herein by reference.
(18) Filed with the Company's Quarterly Report on Form 10-Q, dated September
30, 1997 and incorporated herein by reference.
(d) The financial statement schedule filed as part of this report is listed
separately in the Index to Financial Statements beginning on page F-1 of this
report.
40
<PAGE> 43
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized, in the City of West Palm
Beach, State of Florida, on March 16, 1998.
PAXSON COMMUNICATIONS
CORPORATION
By: /s/ LOWELL W. PAXSON
------------------------------------
Lowell W. Paxson
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ LOWELL W. PAXSON Chairman of the Board, Chief March 16, 1998
- ----------------------------------------------------- Executive Officer, and
Lowell W. Paxson Director (Principal Executive
Officer)
/s/ ARTHUR D. TEK Vice President, Chief Financial March 16, 1998
- ----------------------------------------------------- Officer, and Director
Arthur D. Tek (Principal Financial Officer)
/s/ KENNETH M. GAMACHE Vice President and Controller March 16, 1998
- ----------------------------------------------------- (Principal Accounting
Kenneth M. Gamache Officer)
/s/ JAMES B. BOCOCK President and Chief Operating March 16, 1998
- ----------------------------------------------------- Officer, Director
James B. Bocock
/s/ BRUCE L. BURNHAM Director March 16, 1998
- -----------------------------------------------------
Bruce L. Burnham
/s/ JAMES L. GREENWALD Director March 16, 1998
- -----------------------------------------------------
James L. Greenwald
</TABLE>
41
<PAGE> 44
PAXSON COMMUNICATIONS CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Changes in Common Stockholders'
Equity.................................................... F-5
Consolidated Statements of Cash Flows....................... F-6-F-7
Notes to Consolidated Financial Statements.................. F-8-F-32
Financial Statement Schedule -- Schedule II-Valuation and
Qualifying Accounts....................................... F-33
</TABLE>
F-1
<PAGE> 45
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
of Paxson Communications Corporation
In our opinion, the consolidated financial statements referred to under
Items 14(a)(1) and (2) on page 27 and listed in the accompanying index on page
F-1 present fairly, in all material respects, the financial position of Paxson
Communications Corporation and its subsidiaries at December 31, 1997 and 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997, 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.
PRICE WATERHOUSE LLP
Fort Lauderdale, Florida
March 13, 1998
F-2
<PAGE> 46
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1996
-------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 82,641,444 $ 61,748,788
Restricted cash........................................... 17,000,000 --
Accounts receivable, less allowance for doubtful accounts
of $911,941 and $1,576,593, respectively................ 4,813,524 29,860,998
Prepaid expenses and other current assets................. 2,765,984 2,713,565
Current program rights.................................... -- 1,512,019
-------------- ------------
Total current assets............................... 107,220,952 95,835,370
Cash held by qualified intermediary......................... 418,949,550 --
Property and equipment, net................................. 105,896,873 144,415,412
Intangible assets, net...................................... 205,400,029 220,409,421
Investments in broadcast properties......................... 72,762,195 53,297,022
Investment in cable network................................. 58,974,491 --
Other assets, net........................................... 87,908,884 28,149,699
Program rights, net......................................... -- 1,075,536
-------------- ------------
Total assets....................................... $1,057,112,974 $543,182,460
============== ============
LIABILITIES, REDEEMABLE SECURITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 11,305,782 $ 10,676,692
Accrued interest.......................................... 8,475,686 6,684,373
Current portion of program rights payable................. -- 1,628,959
Current portion of long-term debt......................... 496,378 644,509
-------------- ------------
Total current liabilities.......................... 20,277,846 19,634,533
Program rights payable...................................... -- 1,000,260
Deferred gain............................................... 12,100,000 --
Deferred income taxes....................................... 95,747,156 --
Long-term debt.............................................. 122,299,025 3,407,688
Senior subordinated notes, net.............................. 227,958,736 227,655,096
Redeemable Cumulative Compounding Junior preferred stock,
$0.001 par value; 12% dividend rate per annum, 33,000
shares authorized, issued and outstanding................. 42,610,662 36,780,496
Redeemable Exchangeable preferred stock, $0.001 par value;
12.5% dividend rate per annum, 440,000 shares authorized,
170,782 and 150,000 shares issued and outstanding......... 168,375,990 147,929,150
Class A common stock, $0.001 par value; one vote per share;
150,000,000 shares authorized, 50,701,600 and 40,442,482
shares issued and outstanding............................. 50,702 40,442
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 A and B common stock warrants......................... 2,316,225 6,862,647
Class C common stock warrants............................... -- 2,335,528
Stock subscription notes receivable......................... (2,813,250) (1,873,139)
Additional paid-in capital.................................. 285,795,787 209,621,241
Deferred option plan compensation........................... (2,205,240) (6,397,916)
Retained earnings (accumulated deficit)..................... 84,591,023 (103,821,878)
Commitments and contingencies (Note 18)..................... -- --
-------------- ------------
Total liabilities, redeemable securities and common
stockholders' equity............................. $1,057,112,974 $543,182,460
============== ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of the consolidated financial statements.
F-3
<PAGE> 47
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Local and national advertising..................... $ 87,654,004 $ 60,772,499 $ 29,464,515
Other.............................................. 545,344 1,400,169 2,131,037
Trade and barter................................... 222,105 159,950 188,763
------------ ------------ ------------
Total revenues....................................... 88,421,453 62,332,618 31,784,315
------------ ------------ ------------
Operating expenses:
Direct............................................. 14,648,173 10,609,812 6,771,051
Programming........................................ 5,010,635 2,607,796 1,349,787
Sales and promotion................................ 5,809,864 3,642,038 2,424,629
Technical.......................................... 8,982,149 5,011,353 2,259,341
General and administrative......................... 23,562,985 20,814,808 12,259,416
Trade and barter................................... 266,674 110,449 118,339
Time brokerage and affiliation agreement fees ..... 16,961,427 3,568,192 898,643
Option plan compensation........................... 3,369,812 6,975,830 9,052,003
Compensation associated with Paxson Radio asset
sales........................................... 9,700,000 -- --
Depreciation and amortization...................... 22,044,109 12,887,776 4,647,942
------------ ------------ ------------
Total operating expenses............................. 110,355,828 66,228,054 39,781,151
------------ ------------ ------------
Operating loss....................................... (21,934,375) (3,895,436) (7,996,836)
Other income (expense):
Interest expense................................... (37,728,307) (31,525,927) (17,151,099)
Interest income.................................... 9,494,894 6,741,552 1,651,193
Other expenses, net................................ (5,721,743) (1,755,660) (488,725)
Equity in loss of unconsolidated investment........ (2,492,691) -- --
------------ ------------ ------------
Loss from continuing operations before income tax
benefit and extraordinary item..................... (58,382,222) (30,435,471) (23,985,467)
Income tax benefit................................... 21,879,260 -- 1,280,000
------------ ------------ ------------
Loss from continuing operations before extraordinary
item............................................... (36,502,962) (30,435,471) (22,705,467)
------------ ------------ ------------
Discontinued operations:
Income (loss) from discontinued operations, net of
applicable income taxes......................... (3,555,186) 4,216,570 (142,096)
Gain on disposal of discontinued operations, net of
applicable income taxes......................... 254,748,055 -- --
------------ ------------ ------------
251,192,869 4,216,570 (142,096)
------------ ------------ ------------
Income (loss) before extraordinary item.............. 214,689,907 (26,218,901) (22,847,563)
Extraordinary item................................... -- -- (10,625,727)
------------ ------------ ------------
Net income (loss).................................... 214,689,907 (26,218,901) (33,473,290)
Dividends and accretion on redeemable preferred stock
and redeemable common stock warrants............... (26,277,006) (21,908,584) (13,297,206)
------------ ------------ ------------
Net income (loss) attributable to common stock....... $188,412,901 $(48,127,485) $(46,770,496)
============ ============ ============
Basic and diluted (loss) earnings per share:
Loss from continuing operations before extraordinary
item............................................... $ (1.17) $ (1.20) $ (1.05)
Discontinued operations.............................. 4.67 0.10 --
Extraordinary item................................... -- -- (0.31)
------------ ------------ ------------
Net income (loss).................................... $ 3.50 $ (1.10) $ (1.36)
============ ============ ============
Weighted average shares outstanding.................. 53,808,472 43,836,526 34,429,517
============ ============ ============
</TABLE>
The accompanying Notes to Consolidated Financial statements are an integral part
of the consolidated financial statements.
F-4
<PAGE> 48
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS CLASS C STOCK DEFERRED
COMMON STOCK A AND B COMMON SUBSCRIPTION ADDITIONAL OPTION
----------------- STOCK STOCK NOTES PAID-IN PLAN
CLASS A CLASS B WARRANTS WARRANTS RECEIVABLE CAPITAL COMPENSATION
------- ------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994........... $26,042 $8,312 $ 5,338,952 $ (77,666) $ 20,647,647
Stock issued for Cookeville
acquisition.......................... 95 1,199,905
Deferred option plan compensation...... 90 12,187,508 $(12,187,508)
Option plan compensation............... 10,803,241
Stock options exercised................ 307,026
Increase in stock subscription
receivable........................... (48,029)
Repayments of stock subscription notes
receivable........................... 9,981
Dividends on redeemable preferred
stock................................
Accretion on Senior redeemable
preferred stock......................
Accretion on Series B preferred
stock................................
Accretion on Junior preferred stock....
Accretion on Class A and B common stock
warrants.............................
Net loss...............................
------- ------ ----------- ----------- ----------- ------------ ------------
Balance at December 31, 1995........... 26,227 8,312 5,338,952 (115,714) 34,342,086 (1,384,267)
Release of put option on Class A and B
common stock warrants................ $ 9,116,399
Issuance of common stock, net of
issuance costs of $10,000,000........ 10,300 154,789,700
Exercise of Class A, B and C common
stock warrants....................... 3,623 (2,253,752) (3,003,424) 5,253,548
Stock issued for Todd Communications
acquisition.......................... 139 1,534,967
Deferred option plan compensation...... 12,932,506 (12,932,506)
Option plan compensation............... 7,918,857
Stock options exercised................ 153 768,434
Increase in stock subscription
receivable........................... (1,873,139)
Repayment of stock subscription notes
receivable........................... 115,714
Dividends on redeemable preferred
stock................................
Accretion on Senior redeemable
preferred stock......................
Accretion on Series B preferred
stock................................
Accretion on Junior preferred stock....
Accretion on Redeemable Exchangeable
preferred stock......................
Accretion on Class A and B common stock
warrants.............................
Net loss...............................
------- ------ ----------- ----------- ----------- ------------ ------------
Balance at December 31, 1996........... 40,442 8,312 6,862,647 2,335,528 (1,873,139) 209,621,241 (6,397,916)
Stock issued for acquisitions.......... 6,069 66,118,931
Exercise of Class A, B and C common
stock warrants....................... 3,923 (4,546,422) (2,335,528) 6,878,028
Deferred option plan compensation...... 2,263,167 (2,263,167)
Option plan compensation............... 6,455,843
Stock options exercised................ 268 914,420
Increase in stock subscription notes
receivable........................... (940,111)
Dividends on redeemable preferred
stock................................
Accretion on Junior preferred stock....
Accretion on Redeemable Exchangeable
preferred stock......................
Net income.............................
------- ------ ----------- ----------- ----------- ------------ ------------
Balance at December 31, 1997........... $50,702 $8,312 $ 2,316,225 $ -- $(2,813,250) $285,795,787 $ (2,205,240)
======= ====== =========== =========== =========== ============ ============
<CAPTION>
RETAINED
EARNINGS
(ACCUMULATED
DEFICIT)
-------------
<S> <C>
Balance at December 31, 1994........... $ (8,923,897)
Stock issued for Cookeville
acquisition..........................
Deferred option plan compensation......
Option plan compensation...............
Stock options exercised................
Increase in stock subscription
receivable...........................
Repayments of stock subscription notes
receivable...........................
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 and B common stock
warrants............................. (4,729,338)
Net loss............................... (33,473,290)
-------------
Balance at December 31, 1995........... (55,694,393)
Release of put option on Class A and B
common stock warrants................
Issuance of common stock, net of
issuance costs of $10,000,000........
Exercise of Class A, B and C common
stock warrants.......................
Stock issued for Todd Communications
acquisition..........................
Deferred option plan compensation......
Option plan compensation...............
Stock options exercised................
Increase in stock subscription
receivable...........................
Repayment of stock subscription notes
receivable...........................
Dividends on redeemable preferred
stock................................ (13,223,227)
Accretion on Senior redeemable
preferred stock...................... (1,805,599)
Accretion on Series B preferred
stock................................ (3,418,615)
Accretion on Junior preferred stock.... (650,084)
Accretion on Redeemable Exchangeable
preferred stock...................... (159,977)
Accretion on Class A and B common stock
warrants............................. (2,651,082)
Net loss............................... (26,218,901)
-------------
Balance at December 31, 1996........... (103,821,878)
Stock issued for acquisitions..........
Exercise of Class A, B and C common
stock warrants.......................
Deferred option plan compensation......
Option plan compensation...............
Stock options exercised................
Increase in stock subscription notes
receivable...........................
Dividends on redeemable preferred
stock................................ (24,942,740)
Accretion on Junior preferred stock.... (665,540)
Accretion on Redeemable Exchangeable
preferred stock...................... (668,726)
Net income............................. 214,689,907
-------------
Balance at December 31, 1997........... $ 84,591,023
=============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of the consolidated financial statements.
F-5
<PAGE> 49
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 214,689,907 $ (26,218,901) $ (33,473,290)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization........................... 35,511,000 25,974,909 17,771,109
Option plan compensation................................ 6,455,843 7,918,857 10,803,241
Program rights amortization............................. 703,789 1,381,582 1,765,942
Provision for doubtful accounts......................... 2,011,337 1,287,819 1,098,181
Deferred income tax benefit............................. (21,879,260) -- (1,280,000)
Loss on sale or disposal of assets...................... 3,794,027 181,586 145,857
Loss on extinguishment of long-term debt................ -- -- 10,625,727
Equity in loss of unconsolidated investment............. 2,492,691 -- --
Gain on disposal of discontinued operations, net........ (254,748,055) -- --
Changes in assets and liabilities:
Increase in restricted cash........................... (17,000,000) -- --
Decrease (increase) in accounts receivable............ 5,172,545 (13,422,402) (5,255,398)
(Increase) decrease in prepaid expenses and other
current assets..................................... (1,631,864) (1,742,202) 608,591
Increase in intangible assets......................... -- -- (1,200,000)
(Increase) decrease in other assets................... (5,352,711) (1,886,853) 2,578,733
(Decrease) increase in accounts payable and accrued
liabilities........................................ (10,590,638) 5,646,000 131,529
Increase (decrease) in accrued interest............... 1,815,673 (247,969) 6,707,814
------------- ------------- -------------
Net cash (used in) provided by operating
activities....................................... (38,555,716) (1,127,574) 11,028,036
------------- ------------- -------------
Cash flows from investing activities:
Acquisitions of broadcasting and billboard properties..... (253,804,699) (186,662,299) (58,510,509)
Increase in investments in broadcast properties........... (8,026,173) (32,104,992) (19,442,030)
Deposits on broadcasting properties....................... (26,597,000) (3,837,000) (2,381,619)
Increase in programming deposits.......................... (36,682,500) -- --
Cash held by qualified intermediary....................... (418,949,550) -- --
Purchases of property and equipment....................... (44,473,918) (36,709,477) (25,016,816)
Investment in cable network............................... (5,342,182) -- --
Deposits (made) refunded on buildings and equipment....... (320,000) 555,341 (735,074)
Proceeds from sales of discontinued operations............ 721,978,459 -- --
Proceeds from sale of assets.............................. 13,764,020 228,279 466,820
------------- ------------- -------------
Net cash used in investing activities.............. (58,453,543) (258,530,148) (105,619,228)
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from issuance of common stock, net............... -- 154,800,000 --
Proceeds from issuance of long-term debt.................. 120,000,000 17,700,000 327,539,000
Repayments of long-term debt.............................. (1,269,978) (28,230,464) (169,722,340)
Payment of loan origination costs......................... -- (2,985,742) (15,896,473)
Payments for program rights............................... (802,684) (1,424,912) (1,098,731)
Proceeds from issuance of redeemable preferred stock,
net..................................................... -- 143,197,254 --
Redemption of Senior and Series B preferred stock......... -- (28,455,758) --
Proceeds from exercise of common stock options, net....... 914,688 492,567 307,116
Increase in stock subscription notes receivable........... (940,111) (1,873,139) (48,029)
Repayment of stock subscription notes receivable.......... -- 115,714 9,981
------------- ------------- -------------
Net cash provided by financing activities.......... 117,901,915 253,335,520 141,090,524
------------- ------------- -------------
Increase (decrease) in cash and cash equivalents............ 20,892,656 (6,322,202) 46,499,332
Cash and cash equivalents, beginning of year................ 61,748,788 68,070,990 21,571,658
------------- ------------- -------------
Cash and cash equivalents, end of year...................... $ 82,641,444 $ 61,748,788 $ 68,070,990
============= ============= =============
</TABLE>
F-6
<PAGE> 50
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid for interest.................................... $ 33,895,837 $ 28,342,148 $ 8,292,274
============= ============= =============
Cash paid for income taxes................................ $ 975,000 $ -- $ --
============= ============= =============
Non-cash operating, investing and financing activities:
Accretion of discount on Senior Subordinated Notes........ $ 303,640 $ 280,185 $ 65,911
============= ============= =============
Issuance of common stock in connection with
acquisitions............................................ $ 66,125,000 $ 1,535,106 $ 1,200,000
============= ============= =============
Note payable incurred for WYPX-TV acquisition............. $ -- $ 1,650,000 $ --
============= ============= =============
Dividends accreted on redeemable preferred stock.......... $ 24,942,740 $ 12,273,227 $ 7,275,516
============= ============= =============
Discount accretion on redeemable securities............... $ 1,334,266 $ 9,635,357 $ 6,021,690
============= ============= =============
Trade and barter revenue.................................. $ 3,656,597 $ 4,154,986 $ 3,068,354
============= ============= =============
Trade and barter expense.................................. $ 3,732,765 $ 4,166,918 $ 2,604,950
============= ============= =============
Sale of broadcast property for note receivable............ $ 15,000,000 $ -- $ --
============= ============= =============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of the consolidated financial statements.
F-7
<PAGE> 51
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
OPERATIONS
The Company currently operates a nationwide network of owned, operated or
affiliated television stations carrying programming from its proprietary
network, which presently broadcasts long form paid programming consisting
primarily of infomercials. At December 31, 1997, the Company operates 33 owned,
11 time brokered and 7 affiliated television stations. The Company announced in
November 1997 its intention to launch a new broadcast television network of
family values oriented programming ("PAX NET") effective August 31, 1998. The
Company also owns a 30% interest in The Travel Channel, L.L.C., a cable
television network joint venture with Discovery Communications, Inc. ("DCI").
(See Note 3.)
During January 1998, the Company adopted new call letters for 39 of its
television stations in an effort to more closely align the station call letters
with PAX NET. These new call letters have been utilized in the notes to the
financial statements.
Two other business segments, Paxson Radio and Paxson Network-Affiliated
Television, have been classified as discontinued operations in the accompanying
consolidated statements of operations for all periods presented as a result of
the Company's sale of these operations during 1997 (see Note 2).
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. The Company accounts for its investment in
The Travel Channel L.L.C. under the equity method of accounting. 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. At December 31, 1997 and 1996, approximately
$96 million and $45 million, respectively, of debt securities, all classified as
available for sale and consisting of money market accounts, commercial paper and
overnight repurchase agreements, were included in cash and cash equivalents.
RESTRICTED CASH
Restricted cash consists of cash held in an escrow account to be applied to
the payment of interest due pursuant to an amendment to the Company's revolving
credit facility executed in March 1998 (see Note 10).
CASH HELD BY QUALIFIED INTERMEDIARY
The Company placed a portion of the proceeds received from the Paxson Radio
segment sale with a qualified intermediary in order to reinvest such proceeds
and, to the extent reinvested, qualify for tax deferred exchange treatment in
connection with such sale. In order to qualify for deferral, these funds must be
used to fund broadcast properties acquisitions prior to March 27, 1998.
Accordingly, they have been classified as long term in the accompanying
Consolidated Balance Sheet at December 31, 1997.
F-8
<PAGE> 52
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 (see Note 6):
<TABLE>
<S> <C>
Broadcasting towers and equipment........................... 6-13 years
Office furniture and equipment.............................. 5-10 years
Buildings and building improvements......................... 15-40 years
Leasehold improvements...................................... Term of lease
Aircraft, 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
recorded as goodwill. Intangible assets are being amortized using the straight
line method over their estimated useful lives as follows (see Note 7):
<TABLE>
<S> <C>
FCC licenses................................................ 25 years
Goodwill.................................................... 25 years
Covenants not to compete.................................... Generally 3 years
Favorable lease and other contracts......................... Contract term
</TABLE>
INVESTMENTS IN BROADCAST PROPERTIES
Investments in broadcast properties primarily represent the Company's
financing of television and radio station acquisitions by third parties, and
purchase options or equity investments in entities owning broadcasting stations
or television construction permits. In connection with the financing of
acquisitions by third parties, the Company has entered into time brokerage
agreements ("TBAs") with such parties for the broadcast operations and has
written options to purchase certain of the related station assets and Federal
Communications Commission ("FCC") licenses at various amounts and terms (see
Notes 9 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 programming is available to air. Program rights are amortized
on a method that approximates the straight line method per the number of
available runs. 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 (see Note 18).
OTHER ASSETS
Other assets consist primarily of escrow funds, programming deposits and
loan origination costs. Escrow funds represent funds held in escrow on
acquisitions pending FCC approval. Programming deposits represent deposits for
broadcast rights contracts available for airing beginning in August 1998. 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. Other
assets are stated at cost (see Note 8).
F-9
<PAGE> 53
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
\LONG-LIVED ASSETS
The Company reviews long-lived assets, identifiable intangibles and
goodwill and reserves for impairment whenever events or changes in circumstances
indicate, based on estimated undiscounted future cash flows, the carrying amount
of the assets may not be fully recoverable.
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. 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 TBAs 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. The Company currently operates 11 stations under TBAs which expire
from May 1998 through October 2005. The financial results of TBA operated
stations have been included in the Company's statements of operations since the
respective date of commencement of the TBA.
STOCK-BASED COMPENSATION
The Company's employee stock option plans are accounted for using the
intrinsic value method. The Company also provides disclosure of certain pro
forma information as if the Company's employee stock option plans were accounted
for using the fair value method (see Note 13).
INCOME TAXES
The Company records deferred income taxes using the liability method. Under
the liability method, deferred tax assets and liabilities are recognized for the
expected future tax consequences of temporary differences between the financial
statement and income tax bases of the Company's assets and liabilities. An
allowance is recorded, based upon currently available information, when it is
more likely than not that any or all of a deferred tax asset will not be
realized. The provision for income taxes includes taxes currently payable, if
any, plus the net change during the year in deferred tax assets and liabilities
recorded by the Company.
PER SHARE DATA
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS 128"), which require the
retroactive restatement of previously reported earnings per share data. SFAS 128
requires the presentation of basic and diluted earnings per share. Because
F-10
<PAGE> 54
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of losses from continuing operations, the effect of stock options and warrants
is antidilutive. Accordingly, the Company's presentation of diluted earnings per
share is the same as that of basic earnings per share.
Basic and diluted loss per share from continuing operations was computed by
dividing the loss from continuing operations before extraordinary item less
dividends and accretion on redeemable preferred stock and redeemable common
stock warrants by the weighted average number of common shares outstanding
during the period.
Potentially dilutive common shares in the amount of 4,523,210, 8,433,108,
and 10,218,205 for the years ended December 31, 1997, 1996 and 1995,
respectively, have been excluded from the computation of diluted earnings per
share as the effect of their inclusion is antidilutive.
USE OF ESTIMATES
The preparation of financial statements 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.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' financial
statements to conform with the 1997 presentation.
2. DISCONTINUED OPERATIONS
During 1997, the Company sold its interests in WTVX-TV and WPBF-TV and thus
discontinued the operations of the Paxson Network-Affiliated Television segment.
The results of operations for the Paxson Network-Affiliated Television segment
through the date of disposition, net of applicable income taxes, have been
reclassified and presented as discontinued operations in the accompanying
Consolidated Statements of Operations for all periods presented. Aggregate
consideration of approximately $119 million was received in conjunction with the
disposition of these operations during the second and third quarters of 1997. Of
the consideration received, approximately $19 million was used to exercise the
Company's option to acquire WTVX-TV from Whitehead Media, Inc. The Company
realized a gain of approximately $69 million from these sales which is net of
brokerage fees and other estimated costs in connection with such sale.
The Paxson Network Affiliated Television operations generated revenues of
approximately $12,319,000, $20,517,000 and $16,537,000 for the years ended
December 31, 1997, 1996 and 1995, respectively.
During 1997, the Company also sold substantially all of its Paxson Radio
segment assets for approximately $602 million. The results of operations for
Paxson Radio, net of applicable income taxes, have been presented as
discontinued operations in the accompanying Consolidated Statements of
Operations for all periods presented. The Company realized a gain of
approximately $186 million from the sale of these assets which is net of
applicable income taxes, closing costs and other estimated costs attributable to
the segment disposal. The sale of certain assets was structured as a tax
deferred exchange, permitting the Company to defer a substantial portion of the
gain for tax purposes to the extent the sales proceeds are reinvested in like
kind broadcasting properties during the first quarter of 1998. It is anticipated
that the Company will not pay current taxes on the remaining non-deferred gain
as it has sufficient net operating losses to offset such gain.
Included in operating expenses are approximately $9.7 million of cash
bonuses paid to certain members of the Company's management in connection with
their efforts in assimilating, operating and arranging for the sale of the radio
stations and related properties. Although the payment of such bonuses was
contingent upon the successful disposition of the segment and directly
associated with such disposition, the Company has recorded these amounts as
operating expenses because the actual amount of such payments was discretionary
in nature.
F-11
<PAGE> 55
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In order to accelerate the payment of the proceeds from the sales of the
Network Affiliated Television segment and the Paxson Radio segment, the Company
entered into certain bridge agreements with its principal shareholder under
similar terms and conditions to those with the ultimate buyers. As of December
31, 1997, all Network Affiliated Television and Paxson Radio properties under
these bridge agreements had been sold to the ultimate third party. The principal
shareholder did not realize any direct financial benefit from the transactions
with the Company and, in accordance with the terms of the Company's senior
subordinated notes and preferred stock, the Company obtained a written opinion
as to the fairness of such transactions from an independent investment banking
firm.
The Paxson Radio operations generated revenues of approximately
$78,190,000, $82,165,000 and $54,752,000 for the years ended December 31, 1997,
1996 and 1995, respectively.
The net assets of discontinued operations at December 31, 1997 consist of
the assets of two remaining radio stations which are under contract to be sold
for $3,000,000. The components of net assets of discontinued operations included
in the consolidated balance sheets at December 31, 1997 and December 31, 1996,
are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ------------
<S> <C> <C>
Current assets.............................................. $ 23,017,001
Noncurrent assets........................................... $2,956,042 180,194,830
---------- ------------
Total assets...................................... 2,956,042 203,211,831
---------- ------------
Current liabilities......................................... -- 8,344,163
Noncurrent liabilities...................................... -- 1,576,467
---------- ------------
Total liabilities................................. -- 9,920,630
---------- ------------
Total net assets............................................ $2,956,042 $193,291,201
========== ============
</TABLE>
3. INVESTMENT IN CABLE NETWORK
On July 11, 1997, the Company, through a wholly-owned unconsolidated
subsidiary, acquired the assets of The Travel Channel ("Travel") from Landmark
Communications, Inc. for aggregate consideration of $75,000,000, including
$55,000,000 of the Company's Class A common stock (4,773,097 shares issued at
closing) and $20,000,000 in cash. The Company also issued 97,632 shares
($1,125,000) of its Class A common stock to Communications Equity Associates,
Inc. in connection with their role as financial advisor in the Travel Channel
transaction (see Note 5).
In November 1997, the Company completed transactions with Discovery
Communications, Inc. ("DCI") whereby the Company received a 30% ownership
interest in a newly formed entity, The Travel Channel, L.L.C. ("Travel L.L.C.")
in exchange for the assets of Travel. DCI effectively contributed $20,000,000
along with certain programming and intangible assets, including operating
services such as sales, affiliations, marketing, promotion and accounting, for a
70% ownership interest in Travel L.L.C. DCI will serve as the managing partner
of Travel L.L.C., overseeing all operations. The Company will receive an annual
consulting fee of $300,000.
The results of operations of Travel and Travel L.L.C. have been included in
the Company's December 31, 1997 consolidated statement of operations using the
equity method of accounting. The investment in cable network balance on the
Company's December 31, 1997 consolidated balance sheet reflects the Company's
issuance of common stock in connection with the Travel acquisition from Landmark
Communications, Inc. discussed above along with closing costs and advances to
Travel prior to the formation of Travel L.L.C. Goodwill of approximately $32.5
million included in the investment in cable network amount is being amortized
over 25 years. For the year ended December 31, 1997 approximately $130,000 was
amortized related to this goodwill.
F-12
<PAGE> 56
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. ACQUISITIONS
Acquisitions
During 1997, the Company acquired the assets of seventeen television
stations, for total consideration of approximately $120,290,000, one
network-affiliated television station for total consideration of approximately
$19,001,000 (see Note 2), seven radio stations for total consideration of
approximately $123,014,000 and easements for three billboard locations for total
consideration of approximately $1,500,000.
During 1996, the Company acquired the assets of ten television stations and
eighteen radio stations for total consideration of approximately $165,700,000
and three billboard companies for total consideration of approximately
$21,000,000.
All of the previously described acquisitions have been accounted for using
the purchase method of accounting. Goodwill recorded in connection with the
television acquisitions (approximately $11,388,000 and $2,567,000 in 1997 and
1996, respectively) will be amortized over a period of 25 years.
Pro Forma (unaudited)
The Company's results of operations for the years ended December 31, 1997
and 1996 include the results of operations for acquisitions and investments in
television stations from their respective dates of commencement. The following
unaudited pro forma statement of operations data gives effect to the 1997 and
1996 television acquisitions as if they had occurred on January 1, 1996.
Depreciation and amortization has been increased each period to reflect the
initial purchase price allocation on all acquisitions and investments (whether
businesses or assets), and interest expense on associated debt financing as if
such transactions and debt issuance had occurred on January 1, 1996. Pro forma
results of operations for the years ended December 31, 1997 and 1996 exclude the
results of operations of the Company's Network Affiliated Television and Paxson
Radio segment operations sold in 1997 (see Note 2).
<TABLE>
<CAPTION>
PRO FORMA
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1997 1996
---------- ----------
(IN THOUSANDS, EXCEPT
FOR SHARE AMOUNTS)
<S> <C> <C>
Revenues.................................................... $ 88,421 $ 63,738
---------- ----------
Operating loss.............................................. $ (26,602) $ (13,928)
---------- ----------
Loss from continuing operations............................. $ (43,339) $ (51,357)
---------- ----------
Basic and diluted loss per share from continuing operations,
before extraordinary item................................. $ (1.18) $ (1.36)
---------- ----------
Pro forma weighted average shares outstanding............... 58,850,806 58,710,426
---------- ----------
</TABLE>
5. CERTAIN TRANSACTIONS
The Company has entered into certain operating and financing transactions
with related parties as described below.
THE 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. Lowell W. Paxson, the majority
stockholder of
F-13
<PAGE> 57
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Company, has been a substantial contributor and of which he was a member of
the Board of Stewards through 1993.
Investment in Broadcast Properties. At December 31, 1997 and 1996 the
Company had approximately $15.4 million and $12.8 million of advances to CNI
relating to television stations recorded as investments in broadcast properties.
(See Note 9.)
During 1997 and 1996, the Company acquired television stations from CNI in
Miami, Orlando, Tampa, Denver, Milwaukee and Dayton, for total consideration of
approximately $14,000,000 and $17,200,000, respectively.
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 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 as favorable to CNI as it would obtain in
arm's length transactions. The Company intends any future agreements with CNI to
be 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.
Demand Note. On December 30, 1997, the Company's advances to CNI totaling
$5,485,000 under a demand note bearing interest at the prime rate were repaid
out of the proceeds of television stations sold by CNI to the Company. At
December 31, 1996, amounts outstanding under the demand note to CNI totaled
approximately $2,993,000 and were included in investment in broadcast
properties.
Worship Channel Studio. CNI and the Company have contracted for the
Company to lease CNI's television production and distribution facility for the
purpose of producing television programming for the Company's television
network. During the years ended December 31, 1997, 1996 and 1995, the Company
incurred rental charges in connection with this agreement of $231,000, $193,000
and $174,000, respectively.
AIRCRAFT LEASE
During 1997, the Company entered into a three year aircraft lease with a
company which is owned by Mr. Paxson. The lease is for a Boeing 727 aircraft and
calls for monthly payments of $63,600. In connection with such lease, the
Company incurred rental costs of approximately $382,000 during 1997.
Additionally, the Company has recorded at December 31, 1997 leasehold
improvements of approximately $107,000 in connection with the lease.
SPORTS VENTURES
During 1996, the Company invested in various ventures which would own and
operate interests in two Arena Football League teams located in West Palm Beach
and Miami, Florida, an inactive American Hockey League franchise for Palm Beach
County, Florida and a proposed sports arena in West Palm Beach, Florida. During
1996, the Company included in other expenses, net the write-off of approximately
$1,200,000 relating to its investments in the West Palm Beach Arena Football
League team and the proposed sports arena and in connection with its acquisition
of the Arena Football League team in Miami, Florida. During 1997, in conjunction
with the decision to dispose of the Paxson Radio segment, the Company wrote-off
its investments in the remaining sports ventures, resulting in a 1997 charge to
other expenses, net of approximately $2,900,000, which is net of anticipated
proceeds on the sale of the hockey franchise which the Company has contracted to
sell for $2,000,000.
F-14
<PAGE> 58
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
HOME SHOPPING NETWORK, INC.
On August 25, 1995, the Company and Mr. Paxson agreed with Home Shopping
Network, Inc. ("HSN") to, among other things, terminate HSN's rights under a
consulting agreement between Mr. Paxson and HSN in consideration of a payment to
HSN by the Company of $1,200,000. Mr. Paxson has agreed with the Company that 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. In
connection with its payment to HSN, the Company recorded an intangible asset of
$1,200,000 which is being amortized through December 1999.
TODD COMMUNICATIONS, INC.
During June 1996, the Company acquired Todd Communications, Inc. ("Todd
Communications"), a company which owned WFSJ-FM (St. Augustine, Florida) and was
beneficially owned by members of Mr. Paxson's family. The Company gave aggregate
consideration of $5,000,000, consisting of the cancellation of a note receivable
held by the Company from Todd Communications in the principal amount of
$1,822,000, the assumption and immediate repayment by the Company of a note
payable to Mr. Paxson by Todd Communications in the amount of $1,643,000 and the
issuance of shares of Class A Common Stock valued at approximately $1,535,000 to
the shareholders of Todd Communications. During 1996, the Company recognized
approximately $71,000 of interest income on its note receivable from Todd
Communications. The Todd Communications assets were sold as part of the disposal
of the Paxson Radio segment.
DP MEDIA, INC.
In connection with the acquisition by DP Media, Inc. (DP Media) of WEBZ-FM,
during September 1996, the Company agreed to loan up to $750,000 to DP Media, a
company beneficially owned by members of Mr. Paxson's family. The loan bore
interest at the rate of 10% and required monthly principal and interest
payments.
During May 1997, the Company sold WWPX-TV to DP Media in exchange for a
$2,470,000 promissory note. Upon its sale to DP Media the station became a
Company network affiliate.
During June 1997, the Company financed DP Media's purchase of WRPX-TV from
Roberts Broadcasting through a loan of approximately $10,000,000 (of which
approximately $7,500,000, which was assumed by DP Media, had been advanced to
Roberts Broadcasting through the date of closing). Upon its sale to DP Media the
station became a Company network affiliate.
During July 1997, the Company entered into contracts to sell its interest
in television stations WPXS-TV and WZPX-TV, serving the St. Louis, Missouri and
Grand Rapids, Michigan markets for $4,800,000 and $7,000,000, respectively, to
DP Media. The sale of WPXS-TV to DP Media was consummated in December 1997. The
sale of the tangible assets of WZPX-TV was transacted separately from the sale
of the FCC license. As of December 31, 1997, the Company had received
approximately $5,250,000 for the sale of the tangible assets, and received
$1,750,000 in January 1998 for the sale of the station license upon receipt of
regulatory approval to transfer the station license.
The DP Media loans for WEBZ-FM, WWPX-TV, and WRPX-TV were repaid to the
Company on July 30, 1997, using proceeds of third party financing obtained by DP
Media from Banque Paribas, an affiliate of a holder of the Company's Junior
preferred stock.
During February 1998, the Company contracted to sell WPXE-TV to DP Media
for $6,000,000. Upon its sale to DP Media the station will become a Company
network affiliate.
During 1997, the Company granted 33,000 fully vested non-qualified stock
options with a fair value of approximately $299,000 to the President and Vice
President of DP Media, members of Mr. Paxson's family, as consideration for past
services as former employees of the Company.
F-15
<PAGE> 59
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSULTING AGREEMENT
During 1996, the Company entered into a one year consulting arrangement
with the former Chairman of American Network Group to provide review,
implementation and development consulting services to the Company with respect
to its general and medical insurance programs and policies and executive
insurance, deferred compensation and benefit planning as well as general
financial consulting services. Consulting expense in 1997 and 1996 related to
this agreement totaled $600,000 for each year. This agreement expired in June
1997. The consultant was also granted 75,000 nonqualified stock options with a
fair value of $930,000 during February 1996.
BOARD OF DIRECTORS
The Company has entered into transactions with certain members of its Board
of Directors.
Communications Equity Associates, Inc. ("CEA"). The Chairman of the Board
and Chief Executive Officer of CEA had been a director of the Company since
February 1995, resigning in August 1997. The Company engaged CEA as a financial
advisor in connection with private debt and equity placements and various other
lending, acquisition and divestiture services. Fees paid to CEA for these
services totaled approximately $2,365,000, $250,000 and $1,300,000 for the years
ended December 31, 1997, 1996 and 1995, respectively, including $1,125,000 of
the Company's Class A common stock during 1997 in conjunction with The Travel
Channel acquisition.
Stockholders Agreement. Certain entities controlled by Mr. Paxson and
entities which are affiliates of a former director of the Company are parties to
a stockholders agreement whereby the parties to such agreement were granted
registration rights with respect to certain shares of common stock held by such
parties and the right of first refusal to acquire a pro rata share of any new
securities the Company may issue. Additionally, the stockholders agreement
grants certain cosale rights in the event that Mr. Paxson should sell more than
a predetermined percentage of his ownership interest in the Company.
S. William Scott. S. William Scott, a director of the Company since
February 1995, had 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 $10,000, $81,000 and $80,000 for such services
during the years ended December 31, 1997, 1996 and 1995, respectively.
Additionally, Mr. Scott received benefits under the Company's health and
benefits plan and was granted options to purchase 20,000 shares of stock under
the Company's stock incentive plan. During 1997 the Company hired Mr. Scott and
subsequently named him President of Network Programming, on January 1, 1998. Mr.
Scott resigned as a director of the Company on February 23, 1998.
6. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Broadcasting towers and equipment........................... $105,585,397 $122,771,345
Office furniture and equipment.............................. 6,619,896 12,833,246
Buildings, billboards and leasehold improvements............ 7,594,594 21,354,005
Land and land improvements.................................. 5,840,840 13,830,692
Aircraft, vehicles and other................................ 6,910,458 9,422,324
------------ ------------
132,551,185 180,211,612
Accumulated depreciation.................................... (26,654,312) (35,796,200)
------------ ------------
Property and equipment, net................................. $105,896,873 $144,415,412
============ ============
</TABLE>
Depreciation expense aggregated $19,148,793, $15,197,945 and $10,083,135
for the years ended December 31, 1997, 1996 and 1995, respectively.
F-16
<PAGE> 60
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
FCC licenses.............................................. $196,268,719 $191,624,748
Goodwill.................................................. 18,359,013 36,467,957
Covenants not to compete.................................. 3,777,770 17,425,145
Favorable lease and other contracts....................... 437,407 8,598,155
------------ ------------
218,842,909 254,116,005
Accumulated amortization.................................. (13,442,880) (33,706,584)
------------ ------------
Intangible assets, net.................................... $205,400,029 $220,409,421
============ ============
</TABLE>
Amortization expense related to intangible assets aggregated $15,208,244,
$10,669,065 and $7,621,848 for the years ended December 31, 1997, 1996 and 1995,
respectively.
8. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Escrow funds for station acquisitions..................... $ 37,107,000 $ 10,510,000
Programming deposits...................................... 36,682,500 --
Loan origination costs.................................... 12,333,649 11,958,684
Other..................................................... 5,303,271 7,630,717
------------ ------------
91,426,420 30,099,401
Accumulated amortization.................................. (3,517,536) (1,949,702)
------------ ------------
$ 87,908,884 $ 28,149,699
============ ============
</TABLE>
Amortization expense related to organization costs and other assets
aggregated $1,153,963, $107,899 and $66,126 for the years ended December 31,
1997, 1996 and 1995, respectively. Additionally, during the years ended December
31, 1997, 1996 and 1995, the Company recorded amortization of loan origination
costs of $1,782,000, $1,643,000 and $948,000, respectively, and classified such
amortization as interest expense.
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.
9. INVESTMENTS IN BROADCAST PROPERTIES
Investments in broadcast properties represent primarily the Company's
financing of broadcasting asset acquisitions by third party licensees, purchase
options and equity investments in entities owning broadcasting stations or
television construction permits. Interest rates on financing arrangements range
from 7% to 11.875% with loans maturing in five to seven years. In connection
with the financing of acquisitions by third parties, the Company has obtained
the right to provide programming for the related stations pursuant to TBAs and
has obtained options to purchase certain stations. Unpaid principal balances
will be applied toward the acquisition
F-17
<PAGE> 61
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
cost upon exercise of purchase options. The Company records interest on certain
investments as received. Investments in broadcast properties consist of:
<TABLE>
<CAPTION>
ENTITY 1997 1996
- ------ ----------- -----------
<S> <C> <C>
Roberts Broadcasting........................................ $17,260,394 $ 6,459,163
CNI......................................................... 15,483,364 12,810,087
Cocola Broadcasting......................................... 12,240,934 3,213,122
Ponce-Nicasio Broadcasting.................................. 8,630,655 8,549,583
America 51, L.P............................................. 5,480,713 --
Flinn Investments........................................... 4,025,000 --
Kaleidoscope Investments.................................... 3,081,000 --
United Broadcast Group...................................... -- 3,771,672
Southern Land Investors..................................... -- 4,460,000
Fant Broadcasting........................................... -- 8,068,500
Others...................................................... 6,560,135 5,964,895
----------- -----------
$72,762,195 $53,297,022
=========== ===========
</TABLE>
During February 1997, the Company sold WHPX-TV to Roberts Broadcasting in
exchange for a $15,000,000 note receivable and entered into a five year time
brokerage agreement to operate the station. The note bears interest at LIBOR
plus 3.5% and has been included by the Company in investments in broadcast
properties. Interest is payable monthly with principal payments commencing
February 1998 and payable monthly in 84 equal installments. The Company
recognized a deferred gain on the sale of approximately $12,100,000 which will
be accreted to income using the installment method.
10. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1997 1996
------------ ----------
<S> <C> <C>
Revolving credit facility, interest at LIBOR plus 3.00%
(8.75% to 8.91% at December 31, 1997), maturing June 30,
2002...................................................... $120,000,000
Mortgage note payable, interest at 10%, repaid in September
1997...................................................... -- $ 167,778
Mortgage note payable, interest at 8.83%, principal and
interest payment of $8,284 due monthly from June 1995 to
May 2010.................................................. 754,071 784,463
Notes payable, interest at 8.25% to 9.325%, aggregate
principal and interest payments of $53,129 due monthly,
maturing at varying dates through June 2003, secured by
purchased assets.......................................... 2,041,332 3,099,956
------------ ----------
122,795,403 4,052,197
Less current portion........................................ (496,378) (644,509)
------------ ----------
$122,299,025 $3,407,688
============ ==========
</TABLE>
Under the terms of its revolving credit facility (the "Credit Facility"),
the Company was required to obtain approval from the lenders under such facility
for the sale of the Paxson Radio segment. Approval of the sale was obtained
under an amendment to the revolving Credit Facility in September 1997. As a
result of the sale of the Paxson Radio assets and the related loss of cash flows
from such assets, borrowings under the revolving Credit Facility were
effectively frozen due to noncompliance with certain leverage ratio covenants.
Under the amended terms of the revolving Credit Facility, amounts
outstanding under the facility at December 31, 1997 bear interest at LIBOR or a
base rate (as defined) plus a margin of 3.5% and 2.25%, respectively. Until the
revised business plan required under the revolving Credit Facility is ratified
by the lenders, the interest rate margins will increase by .5% per quarter
through December 31, 1998. The Company is also required to pay quarterly a
commitment fee of .5% per year on the unborrowed commitment ($75,000,000 at
December 31, 1997). The revolving Credit Facility is secured by substantially
all of the Company's assets.
F-18
<PAGE> 62
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1997, the Company was not in compliance with certain of the
financial covenants under the amended terms of the revolving Credit Facility. In
March 1998, the Company obtained a waiver of such noncompliance from its lenders
and executed an amendment to the terms of the revolving Credit Facility. The
amended terms adjust the covenants of the revolving Credit Facility for the sale
of the Company's Network-Affiliated Television and Paxson Radio segments in 1997
and address the Company's business plan related to the PAX NET launch. In
addition, certain financial covenants were temporarily modified to allow for
anticipated compliance by the Company throughout the remainder of 1998. The
waiver and amendment agreement also requires the Company to use its best efforts
to raise an additional $150 million of equity prior to May 31, 1998 and apply
the net proceeds therefrom to repay the revolving credit facility and requires
the Company to fund $17 million of interest into a cash collateral account for
the benefit of the lenders.
On March 11, 1998, the Company obtained a fully underwritten commitment
(the "Commitment Letter") for a $122 million senior term credit facility
maturing June 2002 (the "Senior Credit Facility") to be used to refinance the
amounts outstanding under its revolving credit facility. Under the terms of the
Commitment Letter, the outstanding debt will be secured by substantially all of
the Company's assets and bear interest at a base rate plus 1.75% or LIBOR plus
2.75%, at the Company's option. The Senior Credit Facility will require the
Company to maintain compliance with certain financial ratios subsequent to March
2000 and will contain other restrictions. Management expects to execute a Senior
Credit Facility pursuant to the terms of the Commitment Letter before May 31,
1998.
The 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.
Aggregate maturities of long-term debt at December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998....................................................... $ 496,378
1999....................................................... 578,748
2000....................................................... 35,396,461
2001....................................................... 42,808,332
2002....................................................... 42,835,083
Thereafter................................................. 680,401
------------
$122,795,403
============
</TABLE>
11. 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, 1997, the
unamortized discount was $2,041,264 ($2,344,904 in 1996). Interest on the Notes
accrues at 11.625% to yield an effective rate per annum of 11.875%. Interest
payments are payable semiannually on each April 1 and October 1. The principal
balance is due at maturity on October 1, 2002.
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 are 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
F-19
<PAGE> 63
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
12. INCOME TAXES
As a result of tax losses incurred by the Company during previous years,
and net operating loss carryforwards available to offset taxable income in 1997,
no current tax provision has been recorded by the Company for the years 1995 to
1997. The deferred benefit (provision) for federal and state income taxes for
the three years ended December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------- ---------- ----------
<S> <C> <C> <C>
CONTINUING OPERATIONS
Federal................................... $ 19,576,180 $ -- $1,152,000
State..................................... 2,303,080 -- 128,000
------------- ---------- ----------
$ 21,879,260 $ -- $1,280,000
============= ========== ==========
DISCONTINUED OPERATIONS
Federal................................... $ 1,196,191 $ -- $ --
State..................................... 140,728 -- --
------------- ---------- ----------
$ 1,336,919 $ -- $ --
============= ========== ==========
FROM DISPOSAL OF DISCONTINUED OPERATIONS
Federal................................... $(106,440,879) $ -- $ --
State..................................... (12,522,456) -- --
------------- ---------- ----------
$(118,963,335) $ -- $ --
============= ========== ==========
</TABLE>
Deferred tax assets and deferred tax liabilities reflect the tax effect of
differences between financial statement carrying amounts and tax bases of assets
and liabilities as follows:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards...................... $ 17,505,309 $ 24,338,000
Deferred compensation................................. 7,231,812 6,359,000
Allowance for doubtful accounts....................... 346,538 599,000
Alternative minimum tax payments...................... 975,000 --
------------- -------------
26,058,659 31,296,000
Deferred tax asset valuation allowance................ (3,070,754) (23,615,000)
------------- -------------
22,987,905 7,681,000
Deferred tax liabilities:
Tax over book depreciation and amortization........... (13,904,824) (7,681,000)
Deferred gain on disposal of discontinued
operations......................................... (104,830,237) --
------------- -------------
Net deferred tax liabilities.................. $ (95,747,156) $ --
============= =============
</TABLE>
The Company and its subsidiaries have filed consolidated tax returns for
all periods subsequent to December 15, 1993.
F-20
<PAGE> 64
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The reconciliation of income tax benefit attributable to continuing
operations, computed at the U.S. federal statutory tax rate, to the provision
for income taxes is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ----------- ------------
<S> <C> <C> <C>
Tax benefit at U.S. federal statutory tax
rate........................................ $(19,849,954) $(8,914,000) $(11,417,000)
State income tax benefit, net of federal
tax......................................... (2,335,289) (1,038,000) (1,343,000)
Non deductible items.......................... 305,983 1,346,000 597,000
Valuation allowance........................... -- 8,606,000 10,883,000
------------ ----------- ------------
Benefit for income taxes...................... $(21,879,260) $ -- $ (1,280,000)
============ =========== ============
</TABLE>
During 1997, the Company reversed approximately $20,544,000 of its deferred
tax asset valuation allowance in connection with the disposition of discontinued
operations. Accordingly, the benefit of the reversal of this allowance has been
included within the gain on disposal of discontinued operations.
As a result of the deferred tax liability created by the tax deferred treatment
of the gain on the sale of the Paxson Radio assets during the fourth quarter of
1997, management believes it is more likely than not that the Company's deferred
tax assets created by such losses will be realized. Accordingly, the Company
recognized a deferred tax benefit from continuing operations in the amount of
approximately $21,879,260 during the fourth quarter of 1997.
The Company has net operating loss carryforwards for income tax purposes
subject to certain carryforward limitations of approximately $46,067,000 at
December 31, 1997 expiring through 2012. A portion of the net operating losses,
amounting to approximately $7,900,000, are limited to annual utilization as a
result of a change in ownership. Additionally, further limitations on the
utilization of the Company's net operating tax loss carryforwards could result
in the event of certain changes in the Company's ownership.
The tax deferral of the gain upon the sale of Paxson Radio, of
approximately $305 million before deferred taxes of approximately $119 million,
could be contested by the Internal Revenue Service ("IRS"). Based on the advise
of counsel, management believes that, in the event of a challenge by the IRS of
these tax positions, it is more likely than not that the Company would prevail.
Should the IRS successfully challenge the Company on these matters, the Company
could be subject to a material current tax liability.
13. 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. For the plan years ended December 31, 1997, 1996 and 1995, the
Company made retirement savings contributions of approximately $68,000, $175,000
and $0, respectively. Under the cafeteria plan, employees may elect to
participate in health, dental, life and disability insurance benefit plans
funded through employee payroll deductions.
DEFERRED COMPENSATION PLAN
During 1996, the Company established a supplemental deferred compensation
plan for certain key executives. Under this program, participants may defer
certain amounts of their base compensation and receive a corresponding match by
the Company. Participants vest 100% in the company match after five years of
service. Upon retirement, participants shall be eligible to receive from the
Company certain amounts based on the initial deferral and the Company match.
Certain amounts are also due if a participant terminates employment (other than
by his voluntary action or discharge for cause) before attaining retirement age.
The participants in this plan are general creditors of the Company with respect
to the benefits under the plan. The
F-21
<PAGE> 65
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expense associated with this program was approximately $131,200 and $66,000 for
1997 and 1996, respectively. The cash surrender value of the insurance policies
under this program at December 31, 1997 is approximately $366,000 and the total
liability under this program at December 31, 1997 is approximately $370,000.
LIFE INSURANCE
The Company maintains a life insurance agreement for the benefit of Mr.
Paxson and his spouse (the "Insureds") whereby the Company contributes to the
payment of premiums on the policy. Upon the death of the survivor of the
Insureds, the Company will be repaid its premium advance. The policy owner will
retain all remaining proceeds. Premiums paid with respect to this policy were
approximately $176,000 and $220,000 for 1997 and 1996, respectively.
STOCK INCENTIVE PLANS
In November 1994 and October 1996, the Company established the Stock
Incentive Plan (the "1994 Plan") and the 1996 Stock Incentive Plan (the "1996
Plan"), respectively, to provide incentives to officers, employees and others
who perform services for the Company through awards of options and shares of
restricted stock. Awards granted under each plan are at the discretion of the
Company's Compensation Committee and may be in the form of either incentive or
nonqualified stock options or awards of restricted stock. At December 31, 1997,
27,936 options for shares of Class A common stock were available for additional
awards under the plans.
When options are granted, a non-cash charge representing the difference
between the exercise price and the fair market value of the common stock
underlying the vested options on the date of grant is recorded as option plan
compensation expense with the balance deferred and amortized over the remaining
vesting period. For the years ended December 31, 1997, 1996 and 1995, the
Company recognized approximately $6,500,000, $7,900,000 and $10,800,000,
respectively, of option plan compensation expense and expects to recognize
additional expense of approximately $2,200,000 over the next five years as such
options vest. To date, no awards of shares of restricted stock have been made
under the plans.
Options granted under the 1994 Plan are pursuant to a five year vesting
cycle commencing retroactively to the participant's date of employment or are
exercisable in full at the date of grant. Options granted under the 1996 Plan
are pursuant to a five year vesting cycle commencing January 1, 1996, if the
participant was employed by the Company at January 1, 1996 and January 1, 1997,
if the participant commenced employment with the Company subsequent to January
1, 1996, or, in certain instances, are exercisable in full at the date of grant.
All options granted expire ten years after the date of grant.
A summary of the Company's 1994 and 1996 stock option plans as of December
31, 1997 and 1996 and changes during the years ending on those dates is
presented below:
F-22
<PAGE> 66
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year............. 3,590,693 $3.41 1,752,405 $3.42 -- $ --
Granted.................................... 348,018 2.07 2,030,216 3.38 1,847,005 3.42
Forfeited.................................. (65,800) 3.42 (39,000) 3.42 (4,800) 3.42
Exercised.................................. (267,450) 3.42 (152,928) 3.22 (89,800) 3.42
--------- ----- --------- ----- --------- -----
Outstanding, end of year................... 3,605,461 $3.28 3,590,693 $3.41 1,752,405 $3.42
========= ===== ========= ===== ========= =====
Weighted average fair value of options
granted during the year.................. $8.39 $8.23 $8.66
===== ===== =====
</TABLE>
The majority of the Company's option grants have been at exercise prices of
$3.42, a price which has historically been below the fair market value of the
underlying common stock at the date of grant.
FAIR VALUE DISCLOSURES
Had compensation expense for the Company's option plans been determined
using the fair value method the Company's net income (loss) and net income
(loss) per share would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss):
As reported............................ $188,412,901 $(48,127,485) $(46,770,496)
Pro forma.............................. 187,297,693 (50,444,441) (49,974,777)
Basic and diluted net income (loss) per
share:
As reported............................ $ 3.50 $ (1.10) $ (1.36)
Pro forma.............................. 3.48 (1.15) (1.45)
</TABLE>
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option pricing model assuming a dividend yield of 0.0%,
expected volatility range of 54% to 73%, and risk free interest rates of 6% to
6.9% and weighted average expected option terms of 7.5 years for both periods.
The following tables summarize information about employee and director
stock options at December 31, 1997:
OPTIONS OUTSTANDING AND EXERCISABLE
<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE NUMBER
OUTSTANDING AT REMAINING EXERCISABLE AT
DECEMBER 31, CONTRACTUAL DECEMBER 31,
EXERCISE PRICES 1997 LIFE 1997
- --------------- -------------- ----------- --------------
<S> <C> <C> <C>
$0.01...................................... 151,071 2 151,071
$3.42...................................... 3,454,390 6 2,591,390
</TABLE>
EMPLOYMENT AGREEMENTS
Mr. Paxson is employed under an employment agreement for a term expiring
December 31, 1999, unless sooner terminated. The agreement provides that Mr.
Paxson's base salary will be $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 of,
and in an amount set by, those members of the Compensation Committee who are not
employees of the Company.
F-23
<PAGE> 67
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTES RECEIVABLE FROM THE SALE OF STOCK
During December 1996, the Company approved a program under which it would
extend loans to certain members of management for the purchase, in the open
market, of Company common stock by those individuals. The notes are full
recourse promissory notes bearing interest at 5.75% per annum and are
collateralized by the stock purchased with the loan proceeds. Principal and
interest is payable at maturity, March 31, 1999. The outstanding balance on such
loans aggregated $2,813,250 and $1,873,139 at December 31, 1997 and 1996,
respectively, and is reflected as stock subscription notes receivable in the
accompanying balance sheet.
14. REDEEMABLE PREFERRED STOCK
The following represents a summary of the changes in the Company's
preferred stock during the three years ended December 31, 1997:
<TABLE>
<CAPTION>
REDEEMABLE REDEEMABLE REDEEMABLE REDEEMABLE
EXCHANGEABLE JUNIOR SENIOR SERIES B
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1994...... $ -- $26,808,053 $ 14,060,054 $ 1,274,671
Issuance of shares................ -- -- -- --
Accretion......................... -- 634,988 332,156 325,208
Accrual of cumulative dividends... -- 4,090,869 2,431,872 752,775
------------ ----------- ------------ -----------
Balance at December 31, 1995...... -- 31,533,910 16,824,082 2,352,654
Issuances......................... 143,197,254 -- -- --
Accretion......................... 159,977 650,084 1,805,599 3,418,615
Accrual of cumulative dividends... 4,571,919 4,596,502 2,374,740 730,066
Redemption premium................ -- -- 700,000 250,000
Redemptions....................... -- -- (21,704,421) (6,751,335)
------------ ----------- ------------ -----------
Balance at December 31, 1996...... 147,929,150 36,780,496 -- --
Accretion......................... 668,726 665,540 -- --
Accrual of cumulative dividends... 19,778,114 5,164,626 -- --
------------ ----------- ------------ -----------
Balance at December 31, 1997...... $168,375,990 $42,610,662 $ -- $ --
============ =========== ============ ===========
</TABLE>
REDEEMABLE EXCHANGEABLE PREFERRED STOCK
The Company issued the Redeemable Exchangeable preferred stock on October
4, 1996 for gross proceeds of $150,000,000. Holders of Redeemable Exchangeable
preferred stock are entitled to cumulative dividends at an annual rate of 12.5%
of the liquidation price, per annum, payable semi-annually beginning April 30,
1997. The Company, at its option, may pay dividends on or before October 31,
2002 either in cash or by the issuance of additional shares of Redeemable
Exchangeable preferred stock.
The Company is required, subject to certain conditions, to redeem all of
the Redeemable Exchangeable preferred stock outstanding on October 31, 2006 plus
accumulated and unpaid dividends to the date of redemption. Additionally, the
Redeemable Exchangeable preferred stock is redeemable, subject to certain
F-24
<PAGE> 68
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
restrictions, at the option of the Company on or after October 31, 2001 at the
redemption prices set forth below (expressed as a percentage of liquidation
price):
<TABLE>
<CAPTION>
TWELVE MONTH PERIOD
BEGINNING OCTOBER 31,
- ---------------------
<S> <C>
2001........................................................ 106.250%
2002........................................................ 104.167%
2003........................................................ 102.083%
2004 and thereafter......................................... 100.000%
</TABLE>
The Redeemable Exchangeable preferred stock also requires redemption
features in the event of certain changes in ownership control of the Company.
On or before October 31, 1999, subject to certain restrictions, the Company
may use the proceeds of a Public Equity Offering or a Major Asset Sale, as
defined, to redeem for cash up to an aggregate of 35% of the shares of
Redeemable Exchangeable preferred stock at a redemption price of 112.500% of the
liquidation price of such shares plus accumulated and unpaid dividends.
Subject to certain limitations, the Company may, at its option and provided
it is not contractually prohibited from doing so, exchange the outstanding
Redeemable Exchangeable preferred stock for Exchange Debentures as defined.
Additionally, the Company has agreed to exchange all outstanding Redeemable
Exchangeable preferred stock for Exchange Debentures within 60 days from the
date on which the Company is no longer contractually prohibited from effecting
such exchange.
The Exchange Debentures bear interest at 12.5% per annum and are due
October 31, 2006. The Exchange Debentures have redemption features similar to
those of the Redeemable Exchangeable preferred stock.
During 1997, the Company paid dividends of $20,782,320 by the issuance of
additional shares of Redeemable Exchangeable preferred stock. Cumulative
Redeemable Exchangeable preferred stock dividends in arrears aggregated
$3,567,713 and $4,571,919 at December 31, 1997 and 1996, respectively.
REDEEMABLE JUNIOR PREFERRED STOCK
The Company issued the Redeemable Junior preferred stock with 4,853,628
detachable Class C common stock warrants (after giving effect to the stock
dividend during January 1995) on December 22, 1994 for gross proceeds of
$33,000,000. Holders of Redeemable Junior preferred stock are entitled to
cumulative dividends at an annual rate of 12% 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
thereafter. Semi-annual dividend payments are required commencing December 31,
1999.
The Redeemable Junior preferred shares are redeemable, at the option of the
Company, at a 2% premium over the liquidation price thereof, plus unpaid,
deferred, and accrued dividends after the third and prior to the fourth
anniversary of the issue date (December 22, 1998), and at par plus unpaid,
deferred, and accrued dividends on or after the fourth anniversary of the issue
date. The shares are subject to mandatory redemption on the ninth anniversary of
the issue date (December 22, 2003).
Cumulative Redeemable Junior preferred stock dividends in arrears
aggregated $13,949,641 and $8,785,015 at December 31, 1997 and 1996,
respectively.
F-25
<PAGE> 69
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REDEEMABLE SENIOR PREFERRED STOCK
On October 4, 1996, the Company redeemed all of the outstanding shares of
Redeemable Senior preferred stock for an aggregate of $21,704,421. Of this
amount, $700,000 was considered a redemption premium over book value and
accounted for as a preferred stock dividend.
REDEEMABLE SERIES B PREFERRED STOCK
On October 4, 1996, the Company redeemed all of the outstanding shares of
Redeemable Series B preferred stock for an aggregate of $6,751,335. Of this
amount, $250,000 was considered a redemption premium over book value and
accounted for as a preferred stock dividend.
REDEMPTION FEATURES OF PREFERRED STOCK
The following table presents the redemption value of the two classes of
preferred stock outstanding at December 31, 1997 should each be redeemed in the
indicated year, assuming no dividends are paid prior to redemption, unless
required:
<TABLE>
<CAPTION>
JUNIOR EXCHANGEABLE
PREFERRED(1) PREFERRED(2)
------------ ------------
<S> <C> <C>
1998........................................................ $53,412,616 --
1999........................................................ 59,102,420 --
2000........................................................ 59,102,420 --
2001........................................................ 59,102,420 300,494,498
2002........................................................ 59,102,420 332,707,505
</TABLE>
- ---------------
(1) Mandatorily redeemable on December 22, 2003; redeemable by the Company prior
to that date.
(2) Redeemable at the option of the Company on or after October 31, 2001. See
previous discussion for earlier redemption features on up to 35% of the
shares.
15. COMMON STOCK WARRANTS
CLASS A AND B COMMON STOCK WARRANTS
In connection with the 1993 Redeemable Senior preferred stock issuance, the
Company issued 225 detachable redeemable common stock purchase warrants. During
April 1996, in connection with the Company's offering of 10.3 million previously
unissued shares of Class A common stock, the holders of the then outstanding
Class A and B warrants surrendered their put provision requiring the Company to
repurchase the warrants. The holders of the warrants are entitled to demand
registration rights and piggyback registration rights following certain
offerings of shares to the public. Additionally, the holders of the warrants
have rights to convert shares of Class B common stock acquired in connection
with the exercise of the warrants to shares of Class A common stock. On April 3,
1996, 32.2319 warrants were exercised for 893,000 shares of Class A common
stock. In July 1997, the holders of the Company's Class A and B common stock
warrants exercised 32.5083 warrants for 900,000 shares of Class A common stock
and in September 1997, exercised 32.5121 warrants for 900,000 shares of Class A
common stock. At December 31, 1997, the Company had 33.1252 Class A and B common
stock warrants still outstanding which entitle the holders to purchase 688,312
Class A common shares and 229,437 Class B common shares.
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, 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
F-26
<PAGE> 70
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. During 1996, the terms of
the Class C common stock purchase warrants were modified to allow the issuance
of Class A common stock upon exercise of the warrants. Subsequent to such
modification, 2,730,385 Class C common stock warrants were exercised for
2,730,173 shares of Class A common stock. During the quarter ended June 30,
1997, 2,123,243 Class C common stock warrants were exercised for approximately
2,123,047 shares of Class A common stock. At December 31, 1997, no class C
common stock warrants were outstanding.
16. COMMON STOCK
The Company has authorized 12,500,000 shares of Class C common stock with a
par value of $0.001 per share. No shares of the Company's Class C common stock
were issued or outstanding at December 31, 1997 or 1996.
On April 3, 1996, the Company sold 10,300,000 previously unissued shares of
its Class A common stock for net proceeds of approximately $154,800,000.
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 non-voting. 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. Under certain circumstances, Class C common
stock may be converted, at the option of the holder, into Class A common stock.
17. 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,
1997. 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 for which it is
practicable to estimate such value:
Cash and cash equivalents, accounts receivable, cash held by qualified
intermediary, 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 recent market sale prices for
comparable stations and/or markets. 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.
Mandatorily redeemable securities. Redeemable preferred stock (Junior and
Exchangeable) is being accreted to its respective redemption values.
F-27
<PAGE> 71
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. COMMITMENTS AND CONTINGENCIES
The Company incurred total operating expenses of approximately $4,689,000,
$2,876,000 and $1,531,000 for the years ended December 31, 1997, 1996 and 1995,
respectively, under operating leases for broadcasting facilities and equipment,
employment agreements and on-air talent agreements. Future minimum annual
payments under these non-cancelable operating leases and agreements, as of
December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 6,236,000
1999........................................................ 5,062,000
2000........................................................ 3,501,000
2001........................................................ 2,962,000
2002........................................................ 2,815,000
Thereafter.................................................. 10,585,000
-----------
$31,161,000
-----------
</TABLE>
As of December 31, 1997 the Company had entered into TBAs with 11 licensees
which require monthly TBA payments ranging from $2,500 to $1,250,000 and have
effective terms ranging from one to ten years. The Company expects to acquire
four of these TBA stations during the first quarter of 1998, including WPXN-TV
which currently requires a monthly payment of $1,250,000.
PROGRAMMING COMMITMENTS
In conjunction with its announced launch of a new broadcast television
network the Company has entered into commitments for broadcast rights related to
programs that are not currently available for broadcast and therefore not
included in the consolidated financial statements. Future minimum annual
payments (including deposits) under these agreements are as follows.
<TABLE>
<S> <C>
1998....................................................... $ 46,114,015
1999....................................................... 75,202,626
2000....................................................... 71,015,115
2001....................................................... 62,155,787
2002....................................................... 31,723,792
Thereafter................................................. 39,418,667
------------
$325,630,002
============
</TABLE>
As of December 31, 1997, the Company had $36,682,500 of broadcast rights
deposits recorded in Other Assets.
The Company has also committed to purchase at similar terms additional
future episodes of these programs should they be made available.
F-28
<PAGE> 72
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INVESTMENT COMMITMENTS
The completion of each of the investments discussed below is subject to a
variety of factors and to the satisfaction of various conditions, and there can
be no assurance that any such investments will be completed. The Company has
agreements to purchase significant assets of, or to enter into time brokerage
and financing arrangements with respect to, the following properties, which are
subject to various conditions, including the receipt of regulatory approvals:
<TABLE>
<CAPTION>
STATION MARKET SERVED(*) COMMITMENT AMOUNT
- ------- ---------------- -----------------
<S> <C> <C>
WPXN-TV............................ New York, NY(1) $257,500,000
WCFC-TV............................ Chicago, IL(2) 135,000,000
WFBI/WCCL.......................... Memphis, TN/New Orleans, LA 40,000,000
WPXD-TV............................ Detroit, MI(10) 35,000,000
Channel 40......................... Pittsburgh, PA 35,000,000
KWPX-TV............................ Seattle, WA(3)(11) 35,000,000
KBSP-TV............................ Portland, OR(13) 30,000,000
KSPX-TV............................ Sacramento, CA(4) 17,000,000
WPXP-TV............................ West Palm Beach, FL(6) 16,635,000
WPXV-TV............................ Norfolk, VA(11) 14,750,000
WFHL-TV............................ Champaign, IL 9,250,000
WKRP-TV............................ Charleston, WV(7) 8,070,000
KPXF-TV............................ Fresno, CA(5)(10) 7,960,000
WAUP-TV............................ Syracuse, NY(7) 6,750,000
KAJW-TV............................ Phoenix, AZ(7) 6,600,000
WQPX-TV............................ Wilkes-Barre, PA 6,160,000
Channel 34......................... Spokane, WA(12) 5,676,667
Channel 61......................... Mobile, AL(12) 5,150,000
KAPA-TV............................ Honolulu, HI 5,000,000
KPXR-TV............................ Cedar Rapids, IA(8)(10) 5,000,000
WPXK-TV............................ Knoxville, TN 5,000,000
Channel 14......................... Albuquerque, NM(12) 4,650,000
WFPX-TV............................ Raleigh, NC(10) 4,500,000
WNPX-TV............................ Nashville, TN(10) 4,200,000
Channel 21......................... Shreveport, LA(12) 3,939,000
Channel 67......................... Davenport, IA(12) 3,800,000
Channel 39......................... Des Moines, IA(12) 3,750,000
Channel 23......................... Portland, ME(12) 3,550,000
Channel 38......................... Greenville, NC 3,550,000
WAQF-TV............................ Buffalo, NY(9) 3,000,000
WLWG-LP............................ Columbus, OH 2,500,000
Channel 51......................... Jackson, MS(12) 2,250,000
KWOK-TV............................ San Francisco, CA(2)(6) 2,215,000
Channel 30......................... Odessa, TX(12) 1,306,000
KVUT-TV............................ Little Rock, AR(7) 1,250,000
WDVL-LP............................ Jacksonville, FL 600,000
K59ER-LP........................... Las Vegas, NV(11) 500,000
Channel 15......................... Christiansted, Virgin Islands(12) 200,000
</TABLE>
- ---------------
In connection with the above commitments, the Company has made deposits or
advances totaling approximately $74 million at December 31, 1997, recorded
as escrow deposits or investments in broadcast properties. The Company has
additional commitments of approximately $13.9 million in connection with a
pending television station acquisition. The commitment amounts do not
include capital expenditures required to upgrade or construct the above
properties.
* Each station is licensed by the FCC to serve a specific community, which is
included in the listed market.
(1) The Company began operating the station pursuant to a time brokerage
agreement on June 30, 1997. The Company completed the purchase of this
station in March 1998.
F-29
<PAGE> 73
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) The Company is acquiring the station for consideration of $120 million
cash, the Company's interests in KWOK-TV and up to $15 million of
contingent payments to be determined based upon the seller's ability to
deliver its programming to the Chicago market via cable carriage post
closing.
(3) The station purchase price of $35 million includes $10 million of
consideration which is contingent upon the subsequent improvement of the
station's broadcast signal, if feasible.
(4) The Company has loaned an aggregate of $8,500,000 to KCMY-TV and began
operating the station pursuant to a time brokerage agreement on October 1,
1996, pending completion of the acquisition of the station. The loan will
be applied to the purchase price at the date of closing.
(5) The Company began operating the station pursuant to a time brokerage
agreement on June 1, 1997 pending completion of the acquisition of the
station.
(6) The Company has entered into various agreements with Cocola Broadcasting,
its subsidiaries and other parties, whereby, the Company will acquire 100%
and 90% of the ownership of KWOK-TV and WHBI-TV, respectively.
(7) The Company has acquired a 49% interest in this property.
(8) On May 3, 1997, the Company began operating the station pursuant to a time
brokerage agreement. The purchase price reflects the cash portion only and
does not include additional consideration of 600,000 shares of Class A
common stock of the Company.
(9) Includes the purchase of two low power television stations, W69CS and
W63BM.
(10) The Company completed the purchase of this station in January 1998.
(11) The Company completed the purchase of this station in February 1998.
(12) The Company participated in FCC settlements and thereby acquired a
construction permit for this property.
(13) Presently under a letter of intent.
GUTHY-RENKER
During 1997, the Company entered into an agreement with Guthy-Renker
Corporation to create transactional, entertainment and direct response
programming. The Company has committed to provide the venture with funding of at
least $3,000,000, of which $600,000 had been advanced as of December 31, 1997.
The parties will share in the revenues generated by this programming.
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.
F-30
<PAGE> 74
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
19. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE 1997 QUARTERS ENDED
-----------------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Total revenue...................... $ 27,168,270 $ 23,778,844 $18,536,999 $ 18,937,340
Operating expenses, less
depreciation, amortization,
compensation associated with
Paxson Radio asset sales and
option plan compensation......... 26,113,720 20,365,043 14,169,937 14,593,207
Compensation associated with Paxson
Radio asset sales................ 9,700,000 -- -- --
Depreciation and amortization...... 7,256,111 5,854,249 4,854,019 4,079,730
Option plan compensation........... 1,215,809 722,166 717,832 714,005
------------ ------------ ----------- ------------
Operating loss..................... $(17,117,370) $ (3,162,614) $(1,204,789) $ (449,602)
============ ============ =========== ============
Loss from continuing operations.... $ (4,178,923) $(14,810,071) $(9,790,548) $ (7,723,420)
Discontinued operations............ 185,065,802 14,553,473 52,309,170 (735,576)
------------ ------------ ----------- ------------
Net income (loss).................. $180,886,879 $ (256,598) $42,518,622 $ (8,458,996)
============ ============ =========== ============
Net income (loss) attributable to
common stock..................... $174,033,528 $ (6,982,630) $36,092,638 (14,730,635)
============ ============ =========== ============
Basic and diluted earnings per
share:
Loss from continuing
operations.................... $ (0.19) $ (0.38) $ (0.33) $ (0.28)
Discontinued operations.......... $ 3.14 $ 0.26 $ 1.04 $ (0.02)
Net income (loss)................ $ 2.95 $ (0.12) $ 0.71 $ (0.30)
Weighted average common shares
outstanding...................... 58,980,015 56,835,119 50,495,490 48,777,893
============ ============ =========== ============
Stock price(1)
High.......................... $ 12 1/16 $ 14 3/8 $ 13 1/8 $ 10 1/4
Low........................... $ 7 3/16 $ 10 15/16 $ 9 3/4 $ 7 15/16
</TABLE>
- ---------------
(1) The Company's Class A common stock is listed on the American Stock Exchange
under the symbol PAX.
F-31
<PAGE> 75
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE 1996 QUARTERS ENDED
-----------------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Total revenue....................... $ 19,335,060 $14,950,507 $14,994,642 $ 13,052,409
Operating expenses, less
depreciation, amortization and
option plan compensation.......... 16,076,043 11,740,206 10,061,577 8,486,622
Depreciation and amortization....... 4,339,268 3,576,510 2,636,273 2,335,725
Option plan compensation............ 4,629,964 308,200 312,702 1,724,964
------------ ----------- ----------- ------------
Operating income (loss)............. $ (5,710,215) $ (674,409) $ 1,984,090 $ 505,098
============ =========== =========== ============
Loss from continuing operations..... $(14,597,739) $(6,698,736) $(2,769,195) $ (6,369,801)
Discontinued operations............. 2,087,784 995,119 1,382,526 (248,859)
------------ ----------- ----------- ------------
Net (loss).......................... $(12,509,955) $(5,703,617) $(1,386,669) $ (6,618,660)
============ =========== =========== ============
Net (loss) attributable to common
stock............................. $(24,541,413) $(8,166,709) $(3,852,754) $(11,566,609)
============ =========== =========== ============
Basic and diluted earnings per
share:
Loss from continuing operations... $ (0.56) $ (0.19) $ (0.11) $ (0.32)
Discontinued operations........... $ 0.04 $ 0.02 $ 0.03 $ (0.01)
Net loss.......................... $ (0.52) $ (0.17) $ (0.08) $ (0.33)
Weighted average common shares
outstanding....................... 47,158,019 46,983,274 46,570,794 34,556,861
============ =========== =========== ============
Stock price(1)
High........................... $ 11 1/8 $ 13 $ 15 3/8 $ 21 1/4
Low............................ $ 6 5/8 $ 9 11/16 $ 10 5/8 $ 13 7/8
</TABLE>
- ---------------
(1) The Company's Class A common stock is listed on the American Stock Exchange
under the symbol PAX.
F-32
<PAGE> 76
SCHEDULE II
PAXSON COMMUNICATIONS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
ADDITIONS
------------------------
BALANCES AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF YEAR EXPENSES OTHER DEDUCTIONS YEAR
----------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1997
Allowance for doubtful
accounts.............. $ 1,576,593 $2,011,337 $ -- $ (2,675,989)(1) $ 911,941
=========== ========== =========== ============ ===========
Deferred tax assets
valuation allowance... $23,615,000 $ -- $ -- $(20,544,246)(2) $ 3,070,754
=========== ========== =========== ============ ===========
For the year ended
December 31, 1996
Allowance for doubtful
accounts.............. $ 909,713 $1,287,819 $ -- $ (620,939)(3) $ 1,576,593
=========== ========== =========== ============ ===========
Deferred tax assets
valuation allowance... $15,009,000 $ -- $ 8,606,000(4) $ -- $23,615,000
=========== ========== =========== ============ ===========
For the year ended
December 31, 1995
Allowance for doubtful
accounts.............. $ 556,950 $1,098,181 $ -- $ (745,418)(3) $ 909,713
=========== ========== =========== ============ ===========
Deferred tax assets
valuation allowance... $ 4,126,507 $ -- $10,882,493(4) $ -- $15,009,000
=========== ========== =========== ============ ===========
</TABLE>
- ---------------
(1) Reflects the impact of the sale of Network-Affiliated Television and Paxson
Radio receivables in connection with the sales of these segments during 1997
of $1,495,695 as well as the write off of uncollectible receivables of
$1,180,294.
(2) Reflects utilization of deferred tax assets generated by net operating loss
carryforwards to offset non-tax deferred gains on the sale of
Network-Affiliated Television and Paxson Radio segments during 1997.
(3) Write off of uncollectible receivables.
(4) A valuation allowance related to deferred tax assets.
F-33
<PAGE> 1
Exhibit 4.3.6
FIFTH AMENDMENT, dated as of October 31, 1997 (this "FIFTH
AMENDMENT"), to the AMENDED AND RESTATED CREDIT AGREEMENT, dated as of
November 19, 1996 (as amended, supplemented or otherwise modified from time to
time, the "CREDIT AGREEMENT"), among PAXSON COMMUNICATIONS CORPORATION, a
Delaware corporation (the "BORROWER"), the lenders from time to time party
thereto (the "LENDERS") and UNION BANK OF CALIFORNIA, N.A., as Agent.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the parties hereto wish to amend certain provisions
of the Credit Agreement, but only on the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained, the parties hereto agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, terms defined
in the Credit Agreement shall be used as so defined.
2. AMENDMENT TO CREDIT AGREEMENT. Subsection 5.14 of the
Credit Agreement is hereby amended by deleting the date "November 1, 1997" where
it appears in such subsection and substituting in lieu thereof the date
"November 19, 1997".
3. EFFECTIVE DATE. This Fifth Amendment will become effective
as of the date (the "EFFECTIVE DATE") hereof upon its execution by the Borrower
and the Required Lenders in accordance with the terms of the Credit Agreement.
4. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to each Lender that (a) this Fifth Amendment constitutes the legal,
valid and binding obligation of the Borrower, enforceable against it in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, fraudulent conveyances, reorganization, moratorium or
similar laws affecting creditors' rights generally, by general equitable
principles (whether enforcement is sought by proceedings in equity or at law)
and by an implied covenant of good faith and fair dealing, (b) the
representations and warranties made by the Loan Parties in the Loan Documents
are true and correct in all material respects on and as of the date hereof
(except to the extent that such representations and warranties are expressly
stated to relate to an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects on and as
of such earlier date) and (c) no Default or Event of Default has occurred and is
continuing as of the date hereof.
5. CONTINUING EFFECT. Except as expressly waived or amended
hereby, the Credit Agreement shall continue to be and shall remain in full force
and effect in accordance with its terms.
<PAGE> 2
2
6. GOVERNING LAW. THIS FIFTH AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
7. COUNTERPARTS. This Fifth Amendment may be executed by the
parties hereto in any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
8. PAYMENT OF EXPENSES. The Borrower agrees to pay and
reimburse the Agent for all of its out-of-pocket costs and reasonable expenses
incurred in connection with this Fifth Amendment, including, without limitation,
the reasonable fees and disbursements of counsel to the Agent.
<PAGE> 3
3
IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Amendment to be duly executed and delivered by their properly and duly
authorized officers as of the day and year first above written.
PAXSON COMMUNICATIONS
CORPORATION
By: /s/ Arthur Tek
-------------------------------------
Title: TREASURER
UNION BANK OF CALIFORNIA, N.A., as
Agent
By: /s/ Christine P. Ball
-------------------------------------
Title: Vice President
THE BANK OF NEW YORK
By: /s/ CYNTHIA L. ROGERS
-------------------------------------
Title: CYNTHIA L. ROGERS
A.V.P.
CIBC, INC.
By: /s/ William Phoenix
-------------------------------------
Title: DIRECTOR WILLIAM PHOENIX
SECURITIES CORP., AS AGENT
BANKBOSTON, N.A.
By: /s/ MIKE MACKEAN
-------------------------------------
Title: DIRECTOR
<PAGE> 4
4
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: /s/ BRUCE W. LOFTIN
-------------------------------------
Title: BRUCE W. LOFTIN
SENIOR VICE PRESIDENT
ABN-AMRO BANK N.V.
ABN AMRO NORTH AMERICA, INC.
By: /s/ [ILLEGIBLE]
------------------------------------
Title: VP
BANK OF AMERICA NT&SA
By: /s/ CARL F. SALAS
------------------------------------
Title: VICE PRESIDENT
CARL F. SALAS
BANK OF MONTREAL
By: /s/ W.T. CALDER
-------------------------------------
Title: W.T. CALDER
DIRECTOR
BARNETT BANK, N.A.
By:
-------------------------------------
Title:
<PAGE> 5
5
FLEET NATIONAL BANK
By: /s/ EILEEN M. BURKE
-------------------------------------
Title: SVP
LTCB TRUST COMPANY
By: /s/ PHILIP FREEMAN
-------------------------------------
Title: SVP
THE SUMITOMO BANK, LIMITED
By: /s/ ALLEN HARWELL
-------------------------------------
Title:
By: /s/ M. PHILLIP FREEMAN
-------------------------------------
Title: M. PHILLIP FREEMAN
VICE PRESIDENT
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By: /s/ ALLEN HARWELL
-------------------------------------
Title: VICE PRESIDENT
<PAGE> 1
EXHIBIT 4.3.7
WAIVER AND SIXTH AMENDMENT, dated as of March 11, 1998 (this
"SIXTH AMENDMENT"), to the AMENDED AND RESTATED CREDIT AGREEMENT, dated as of
November 19, 1996 (as amended, supplemented or otherwise modified from time to
time, the "CREDIT AGREEMENT"), among PAXSON COMMUNICATIONS CORPORATION, a
Delaware corporation (the "BORROWER"), the lenders from time to time party
thereto (the "LENDERS") and UNION BANK OF CALIFORNIA, N.A., as Agent.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower has requested that the Lenders agree to
amend certain provisions of the Credit Agreement in connection with the
Borrower's sale of its radio and radio related businesses to Clear Channel
Communications, Inc. and its affiliates and the launch of its new network
PAXnet.
WHEREAS, the Lenders are willing to amend certain provisions
of the Credit Agreement but only on the terms and subject to the conditions
contained herein;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained, the parties hereto agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, terms defined
in the Credit Agreement shall be used as so defined.
2. WAIVERS. The Lenders hereby waive: (i) subsection 2.6(d) of
the Credit Agreement to the extent necessary such that Net Cash Proceeds from
the Radio Group Sale do not have to be applied to prepay the Loans or reduce the
Commitments, (ii) subsection 6.1(e) of the Credit Agreement in respect of the
fiscal year ended December 31, 1997, and (iii) subsections 2.6(d) and 6.7 of the
Credit Agreement in respect of the sale of WOAC (Cleveland) so long as the
purchase price therefor is at least $23,000,000.
3. AMENDMENTS TO CREDIT AGREEMENT. The provisions contained in
this Section 2 of this Sixth Amendment shall be effective until and including
December 31, 1998, at which time the amendments to the Credit Agreement
contained in this Section 2 of this Sixth Amendment shall cease to be in effect
and the provisions of the Credit Agreement amended by this Section 2 of this
Sixth Amendment shall be in effect as such provisions were in effect prior to
this Sixth Amendment, except as such provisions may be amended, modified or
supplemented subsequent to the date hereof in accordance with the Credit
Agreement.
A. Subsection 1.1 of the Credit Agreement is hereby amended
by substituting the following definitions in alphabetical order in lieu of the
current definitions of such terms:
"`ADJUSTED CONSOLIDATED OPERATING CASH FLOW': (a) at any
date on or prior to December 31, 1998, the sum of (i) the
Consolidated Operating Cash Flow of the Borrower and its
Subsidiaries for the twelve most recently ended calendar
months for
<PAGE> 2
2
which the Lenders shall have received financial statements
pursuant to subsection 5.1(b)(i), MINUS (ii) Consolidated
Operating Cash Flow of the INTV Properties for such
twelve-month period, PLUS (iii) the product of (x) four times
(y) the Consolidated Operating Cash Flow of the INTV
Properties for the three most recently ended calendar months
for which the Lenders shall have received financial statements
pursuant to subsection 5.1(b)(i), PLUS (iv) up to $6,400,000
in start up costs paid by the Borrower or its Subsidiaries
related to the marketing of the launch of the new television
network planned by the Borrower (expected to be named PAXnet);
PLUS (v) up to $9,700,000 in management bonuses paid in the
fourth quarter of the 1997 fiscal year of the Borrower in
connection with the Radio Group Sale and (b) at any date after
December 31, 1998, Consolidated Operating Cash Flow of the
Borrower and its Subsidiaries.
`CONSOLIDATED CASH INTEREST EXPENSE': for any period, the
sum of (a) Consolidated Interest Expense of the Borrower and
its Subsidiaries, but excluding, however, amortization of
discount, deferred financing costs and other items included in
interest expense not payable or not actually paid in cash
during such period (including, but not limited to, any
interest on the Exchange Debentures paid in kind) MINUS (b)
the total interest income received by the Borrower and its
Subsidiaries on a consolidated basis for such period.
`LEVERAGE RATIO': at any date of determination, the ratio
of (a) Consolidated Total Debt of the Borrower and its
Subsidiaries on such date MINUS the amount of unencumbered
(other than encumbrances granted pursuant to the Loan
Documents) cash and Cash Equivalents held by the Borrower and
its Subsidiaries (or, in respect of December 31, 1997, cash
and Cash Equivalents held by the qualified intermediary
previously identified for the Lenders) on such date of
determination in excess of $5,000,000 to (b) Adjusted
Consolidated Operating Cash Flow as of the last day of the
month for which the Borrower shall have then most recently
delivered financial statements pursuant to subsection
5.1(b)(i).
`CONSOLIDATED FIXED CHARGES': for any period, without
duplication, the sum of (i) Consolidated Debt Service, PLUS
(ii) Consolidated Capital Expenditures to the extent actually
made, PLUS (iii) to the extent actually paid in cash during
such period, income tax expense (other than, to the extent
otherwise included therein, current income tax expenses
attributable to gains on Asset Sales) PLUS (iv) the aggregate
amount paid in cash during such period in connection with any
(A) dividend or other distribution or (B) redemption,
retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, on account of any
preferred capital stock (including, but not limited to, in
respect of Cumulative Preferred Stock or Exchangeable
Preferred Stock) of the Borrower or its Subsidiaries now or
hereafter outstanding, PROVIDED that to the extent any
redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value is made on the
Cumulative Preferred Stock prior to December 31, 1997, or any
dividend is paid in connection therewith, the amount expended
in connection therewith shall be
<PAGE> 3
3
excluded from any calculations pursuant to this definition
MINUS (v) the total interest income received by the Borrower
and its Subsidiaries on a consolidated basis for such period."
B. Section 5 of the Credit Agreement is hereby amended by
inserting at the end of such Section the following subsection 5.15:
"5.15 ISSUANCE OF CAPITAL STOCK. Prior to May 31, 1998, the
Borrower shall use its best efforts to issue Capital Stock
(common or preferred) on terms and conditions satisfactory to
the Agent for aggregate proceeds of at least $150,000,000 and
immediately apply the Net Cash Proceeds thereof to prepay the
Loans."
C. Subsection 6.1(b) of the Credit Agreement is hereby
amended by deleting the table therein and substituting in lieu thereof the
following new table:
================================================================================
CASH INTEREST
PERIOD COVERAGE RATIO
================================================================================
- --------------------------------------------------------------------------------
October 1, 1997 - December 31, 1997 1.15:1.00
- --------------------------------------------------------------------------------
January 1, 1998 - June 30, 1998 1.25:1.00
- --------------------------------------------------------------------------------
July 1, 1998 - December 31, 1998 1.50:1.00
- --------------------------------------------------------------------------------
Thereafter 2.00:1.00
================================================================================
D. Subsection 6.1(d) of the Credit Agreement is hereby
amended by deleting such Subsection in its entirety and substituting in lien
thereof the following:
"FIXED CHARGE COVERAGE. Permit the ratio of (y) Adjusted
Consolidated Operating Cash Flow to (z) Consolidated Fixed
Charges of the Borrower and its Subsidiaries for the twelve
consecutive month period ending as of the last day of any
calendar quarter to be less than 1.00:1.00 with respect to any
calendar quarter ended on or prior to June 30, 1998 and
1.10:1.00 with respect to any calendar quarter ended
thereafter."
E. Subsection 6.2 of the Credit Agreement is hereby amended
by inserting immediately at the end of such subsection the following:
"PROVIDED, that after February 25, 1998 neither the
Borrower nor any of its Subsidiaries shall directly or
indirectly create, incur, assume, guaranty or otherwise become
directly or indirectly liable with respect to any Indebtedness
not outstanding on such date as Indebtedness of the Borrower
or any of its Subsidiaries, other than Capital Stock issued
pursuant to subsection 5.15 and Indebtedness incurred or
issued pursuant to subsection 6.2(j)."
<PAGE> 4
4
F. Schedule 1.1C of the Credit Agreement is hereby amended
by deleting such Schedule in its entirety and substituting in lieu thereof Annex
A hereto.
4. AMENDMENT FEE. The Borrower hereby agrees to pay a fee in
an amount equal to 0.25% of such Lender's Commitment to each Lender that
approves this Sixth Amendment by executing and delivering to the Administrative
Agent or its counsel said Amendment on or before March 11, 1998.
5. EFFECTIVE DATE. This Sixth Amendment will become effective
as of the date (the "EFFECTIVE DATE") hereof upon (i) its execution by the
Borrower and the Required Lenders in accordance with the terms of the Credit
Agreement and (ii) the execution and delivery by the Borrower to the
Administrative Agent for the benefit of the Lenders of a cash collateral
agreement in form and substance satisfactory to the Lenders and the deposit by
the Borrower in the cash collateral account provided for therein of $17,000,000
to be applied to the payment of interest due pursuant to the Credit Agreement
and as Collateral for the Obligations.
6. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to each Lender that (a) this Sixth Amendment constitutes the legal,
valid and binding obligation of the Borrower, enforceable against it in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, fraudulent conveyances, reorganization, moratorium or
similar laws affecting creditors' rights generally, by general equitable
principles (whether enforcement is sought by proceedings in equity or at law)
and by an implied covenant of good faith and fair dealing, (b) the
representations and warranties made by the Loan Parties in the Loan Documents
are true and correct in all material respects on and as of the date hereof
(except to the extent that such representations and warranties are expressly
stated to relate to an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects on and as
of such earlier date) and (c) no Default or Event of Default has occurred and is
continuing as of the date hereof.
7. CONTINUING EFFECT. Except as expressly waived or amended
hereby, the Credit Agreement shall continue to be and shall remain in full force
and effect in accordance with its terms. This Sixth Amendment (and all
amendments to and waivers in respect of the Credit Agreement and other Loan
Documents) shall be deemed to be a Loan Document.
8. GOVERNING LAW. THIS SIXTH AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
9. COUNTERPARTS. This Sixth Amendment may be executed by the
parties hereto in any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
<PAGE> 5
5
10. PAYMENT OF EXPENSES. The Borrower agrees to pay and
reimburse the Agent for all of its out-of-pocket costs and reasonable expenses
incurred in connection with this Sixth Amendment, including, without limitation,
the reasonable fees and disbursements of counsel to the Agent.
<PAGE> 6
6
IN WITNESS WHEREOF, the parties hereto have caused this Sixth
Amendment to be duly executed and delivered by their properly and duly
authorized officers as of the day and year first above written.
PAXSON COMMUNICATIONS
CORPORATION
By:
-------------------------------------
Title:
UNION BANK OF CALIFORNIA, N.A., as
Agent
By:
-------------------------------------
Title:
THE BANK OF NEW YORK
By:
-------------------------------------
Title:
CIBC, INC.
By:
-------------------------------------
Title:
BANKBOSTON, N.A.
By:
-------------------------------------
Title:
<PAGE> 7
7
ABN-AMRO BANK N.V.
ABN AMRO NORTH AMERICA, INC.
By:
-------------------------------------
Title:
BANK OF AMERICA NT&SA
By:
-------------------------------------
Title:
BANK OF MONTREAL
By:
-------------------------------------
Title:
BARNETT BANK, N.A.
By:
-------------------------------------
Title:
FLEET NATIONAL BANK
By:
-------------------------------------
Title:
<PAGE> 8
8
LTCB TRUST COMPANY
By:
-------------------------------------
Title:
THE SUMITOMO BANK, LIMITED
By:
-------------------------------------
Title:
By:
-------------------------------------
Title:
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By:
-------------------------------------
Title:
<PAGE> 1
EXHIBIT 10.186
OPTION AGREEMENT
THIS OPTION AGREEMENT (the "Option Agreement") is entered into as of
November 14, 1997, by and between PAXSON COMMUNICATIONS CORPORATION, a Delaware
corporation ("PCC"), and FLINN BROADCASTING CORPORATION, a Tennessee corporation
("FBC").
R E C I T A L S
A. FBC owns, licenses or leases all of the assets (the "Assets" as that
term is defined in the Asset Purchase Agreement attached hereto as Exhibit A),
which Assets are used or useful in the business and operations of Television
Station WFBI-TV, Channel 50, Memphis, Tennessee (the "Station"), including,
without limitation, the licenses and construction permits issued by the Federal
Communications Commission ("FCC") for the Station (the "FCC Licenses").
B. PCC and FBC have agreed to enter into a Time Brokerage Agreement (as
defined in Section 7 below), pursuant to which PCC shall provide programming for
broadcast on the Station.
C. FBC desires to grant to PCC an exclusive, irrevocable and assignable
option to purchase the Assets, including the FCC Licenses, and PCC desires to
grant to FBC an exclusive, irrevocable and assignable option to require PCC to
purchase the Assets, including the FCC Licenses, on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. Grant of Put Option.
(a) For and in consideration of FBC's execution of this Option
Agreement, the sufficiency of which is hereby acknowledged by PCC, PCC hereby
grants to FBC an exclusive and irrevocable option to require PCC to acquire the
Assets, including the FCC Licenses (the "Put Option"), for a purchase price of
Eighteen Million Dollars ($18,000,000), subject to adjustment as provided in,
and payable upon the closing of, the Asset Purchase Agreement (as defined in
Section 3 below). FBC may assign its rights and interests in the Put Option so
long as any such assignment complies with the requirements of Section 20 hereof.
<PAGE> 2
(b) FBC may deliver to PCC written notice of FBC's intention to
exercise the Put Option (the "Put Notice") at any time following a PCC default
of the Time Brokerage Agreement or at any time during the period commencing on
November 15, 1999 (the "Put Commencement Date") and ending on November 15, 2001
(the "Put Termination Date"). The Put Option shall have no force or effect, and
PCC shall have no obligation with respect thereto, prior to the Put Commencement
Date or after the Put Termination Date. Notwithstanding the requirement in the
preceding sentences, if FBC has not exercised the Put Option on or before the
Put Termination Date, and PCC has not exercised the Call Option on or before the
Call Termination Date (as those terms are defined below), FBC may deliver to PCC
a Put Notice at any time during the 90-day period following expiration of the
Call Option, if the reason for such expiration was a change in any federal law
or any rule, regulation or policy of the FCC or any other governmental agency
that renders, or could reasonably be expected to render, the Time Brokerage
Agreement invalid, illegal or unenforceable; provided, however, that FBC's
delivery of a Put Notice as contemplated by this sentence shall have no effect
if, prior to the end of such 90-day period, PCC has assigned the Time Brokerage
Agreement in accordance with the terms of Section 7.1(a) thereof and, as a
result of such assignment, the Time Brokerage Agreement is legal, valid and
enforceable.
2. Grant of Call Option.
(a) For and in consideration of the option consideration in the
amount of $2,000,000 paid by PCC to FBC (the "Option Payment"), the receipt and
sufficiency of which are hereby acknowledged by FBC, FBC hereby grants to PCC an
exclusive and irrevocable option to acquire the Assets, including the FCC
Licenses (the "Call Option"), for a purchase price of Eighteen Million Dollars
($18,000,000), subject to adjustment as provided in, and payable upon the
closing of, the Asset Purchase Agreement. PCC may assign its rights and
interests in the Call Option so long as any such assignment complies with the
requirements of Section 20 hereof.
(b) PCC may deliver to FBC written notice of PCC's intention to
exercise the Call Option (the "Call Notice") at any time during the period
commencing on November 16, 2001 (the "Call Commencement Date") and ending on
November 16, 2003 (the "Call Termination Date"). The Call Option shall have no
force or effect, and FBC shall have no obligation with respect thereto, prior to
the Call Commencement Date. Notwithstanding the requirement in the preceding
sentences, PCC may deliver to FBC a Call Notice at any time following (i) a
termination of the Time Brokerage Agreement in accordance with its terms for any
reason other than a material breach by PCC of its obligations thereunder or (ii)
a change in any federal law or any rule, regulation or policy of the FCC or any
other governmental agency that renders, or could reasonably be expected to
render, the Time
- 2 -
<PAGE> 3
Brokerage Agreement invalid, illegal or unenforceable. In the event that PCC
fails to give FBC the Call Notice on or prior to the later of (x) the Call
Termination Date or (y) the date that is ninety (90) days following the
effective date of the change in law, rule, regulation or policy described in
clause (ii) of the preceding sentence, the Call Option shall expire.
(c) Within five (5) business days following demand, FBC shall
immediately return to PCC the Option Payment following (i) a termination by PCC
of this Option Agreement in accordance with the terms of Section 13(b)(i) hereof
as a result of a breach by FBC of any material representation, warranty,
agreement or obligation of FBC contained herein, (ii) the delivery of a Put
Notice or a Call Notice, a termination by PCC of the Asset Purchase Agreement in
accordance with the terms of Section 9.2 thereof as a result of a breach by FBC
of any material representation, warranty, agreement or obligation of FBC
contained in the Asset Purchase Agreement, or (iii) a termination by FBC of this
Agreement pursuant to Section 13(a)(ii) hereof or a termination by PCC of this
Agreement pursuant to Section 13(b)(ii) hereof. Except as provided in this
Section 2(c), FBC shall not be obligated to return the Option Payment to PCC.
3. Asset Purchase Agreement.
(a) Within fifteen (15) business days following PCC's receipt of the
Put Notice or FBC's receipt of the Call Notice, as the case may be, FBC and PCC
shall enter into the Asset Purchase Agreement in the form of Exhibit A hereto
(the "Asset Purchase Agreement"), it being understood that the only change to
such form shall be changes, if any, in the information contained in the
Schedules thereto and the addition, if any, of Schedules thereto that are
reasonably required to reflect events occurring after the date hereof; provided,
however, that PCC shall not be required to accept any such change or addition
that could reasonably be expected to cause a material adverse change in, or have
a material adverse effect on, (i) the Assets to be conveyed to PCC pursuant to
the Asset Purchase Agreement, (ii) the conduct of the business or operations of
the Station or (iii) the ability of FBC to consummate the transactions
contemplated by the Asset Purchase Agreement in accordance with its terms;
provided further, however, that PCC shall be required to accept any change or
addition of the type described in the preceding proviso if such change or
addition results from any action taken (or, if required, not taken) by PCC under
the Time Brokerage Agreement. Upon the execution and delivery of the Asset
Purchase Agreement, FBC and PCC shall perform their respective obligations
thereunder, including, without limitation, filing and prosecuting an appropriate
application for FCC consent to the assignment of the FCC Licenses from FBC to
PCC (the "FCC Consent"). Except as expressly set forth in the Time Brokerage
Agreement or the Asset Purchase Agreement, PCC shall not assume any obligations
or liabilities of FBC under any contract, agreement, license, permit or other
instrument or arrangement.
- 3 -
<PAGE> 4
(b) Notwithstanding Section 3(a) of this Option Agreement, in the
event that, at the time of the exercise of the Put Option or the Call Option, as
the case may be, the only assets held by FBC are (i) the assets to be conveyed
to PCC pursuant to the Asset Purchase Agreement and (ii) the certain similar
assets to be sold to Buyer pursuant to a certain Option Agreement bearing even
date herewith with respect to Seller's New Orleans Station (as identified in
such Option Agreement, the "New Orleans Option"), FBC may, at its election,
notify PCC in writing that the transactions contemplated by the Asset Purchase
Agreement and the New Orleans Option shall each be reconstituted as a sale to
PCC of all of the capital stock of FBC (the "Stock Purchase Election");
provided, however, that FBC shall have no right to exercise the Stock Purchase
Election if (i) PCC is unable to treat such purchase of stock as a purchase of
assets pursuant to Internal Revenue Code ss. 338(h)(10), or its successor, as
the same may be amended from time to time, and (ii) PCC and FBC are unable to
agree upon the terms and conditions of, and execute and deliver, a Stock
Purchase Agreement within thirty (30) days following PCC's receipt from FBC of
written notice of its election to exercise the Stock Purchase Election. If FBC
exercises the Stock Purchase Election in accordance with the terms of this
Section 3(b), FBC and PCC shall negotiate in good faith the terms of the Stock
Purchase Agreement, it being understood that such Stock Purchase Agreement shall
be substantially equivalent to the Asset Purchase Agreement except for such
modifications and additions thereto that are required to conform the Asset
Purchase Agreement to the form of agreement customarily used in connection with
a sale of capital stock rather than assets, and it being further understood that
neither FBC nor PCC shall be required to accept any term or provision in the
Stock Purchase Agreement that would, or could reasonably be expected to, result
in any increase or decrease in the consideration payable by PCC under the Asset
Purchase Agreement or in the liabilities to be assumed by PCC under the Asset
Purchase Agreement.
4. Survival of Options.
(a) In the event that the exercise of the Put Option is not
consummated for any reason whatsoever, and in the further event that this Option
Agreement is not terminated by FBC or PCC pursuant to Section 13 hereof, the Put
Option shall nevertheless remain exercisable by FBC through the Put Termination
Date, and FBC may at any time, and from time to time, prior to such expiration
again exercise the Put Option as set forth in this Option Agreement and, upon
such exercise, PCC and FBC shall enter into an Asset Purchase Agreement that is
substantially identical to the Asset Purchase Agreement and thereafter
diligently proceed to perform their obligations thereunder.
(b) In the event that the exercise of the Call Option is not
consummated for any reason whatsoever, and in the further event that this Option
Agreement is not terminated by FBC or PCC pursuant to Section 13 hereof, the
Call Option shall nevertheless remain
- 4 -
<PAGE> 5
exercisable by PCC through the Call Termination Date, and PCC may at any time,
and from time to time, prior to such expiration again exercise the Call Option
as set forth in this Option Agreement and, upon such exercise, FBC and PCC shall
enter into an Asset Purchase Agreement that is substantially identical to the
Asset Purchase Agreement and thereafter diligently proceed to perform their
obligations thereunder.
5. Control of the Station. Prior to the closing of the transactions
contemplated by the Asset Purchase Agreement, PCC shall not, directly or
indirectly, control, supervise, direct, or attempt to control, supervise, or
direct, the operations of the Station; such operations, including complete
control and supervision of all of the Station programs, employees, and policies,
shall be the sole responsibility of FBC until the closing of the transactions
contemplated by the Asset Purchase Agreement.
6. HSR Act. As soon as practicable after the execution hereof but in no
event later than ten business days after the execution hereof, each of PCC and
FBC shall make such filings, if any, required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") as a result of the
transactions contemplated by this Option Agreement and the Time Brokerage
Agreement. PCC and FBC agree to (a) cooperate with each other in connection with
all such HSR Act filings, which cooperation shall include furnishing the other
with any information or documents that may be reasonably required in connection
with such filings; (b) promptly file, after any request by the Federal Trade
Commission ("FTC") or Department of Justice ("DOJ") and after appropriate
negotiation with the FTC or DOJ of the scope of such request, any information or
documents requested by the FTC or DOJ; and (c) furnish each other with any
correspondence from or to, and notify each other of any other communications
with, the FTC or DOJ that relates to the transactions contemplated hereunder and
under the Time Brokerage Agreement, and to the extent practicable, to permit
each other to participate in any conferences with the FTC or DOJ. The transfer
of the Assets pursuant to the Asset Purchase Agreement and the commencement of
the transaction contemplated by the Time Brokerage Agreement are expressly
conditioned upon the waiting period relating to any such filings the ("HSR
Waiting Period") having duly expired or been terminated by the appropriate
government agencies without the enforcement of any action by any such agencies
to restrain or postpone the transactions contemplated hereby. Any filing fees
required to be paid as a result of the HSR Act shall be paid one-half by PCC and
one-half by FBC.
7. Time Brokerage Agreement. Following the expiration or termination of
the HSR Waiting Period, PCC and FBC shall enter into a Time Brokerage Agreement
with respect to the Station in the form of the Time Brokerage Agreement attached
hereto as Exhibit B (the "Time Brokerage Agreement"). The effective date of the
Time Brokerage Agreement shall be a date mutually acceptable to PCC and FBC that
is no sooner than five
- 5 -
<PAGE> 6
(5) business days, and no later than ten (10) business days, following the date
of expiration or termination of the HSR Waiting Period. If PCC and FBC fail to
agree on such effective date, the Time Brokerage Agreement shall be duly
executed and delivered by PCC and FBC and shall be effective upon the date that
is ten (10) business days following the expiration or termination of the HSR
Waiting Period. No later than ten (10) business days following the date hereof,
FBC shall notify PCC in writing of the names of those employees of FBC that FBC
elects, in its sole discretion, to retain.
8. Representations and Warranties of FBC. FBC represents and
warrants to PCC as follows:
(a) FBC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Tennessee. FBC has full corporate
power and authority to execute and deliver this Option Agreement, the Asset
Purchase Agreement and the Time Brokerage Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Option Agreement and the Time Brokerage Agreement and the consummation of the
transactions contemplated hereby and thereby by FBC have been duly and validly
authorized by all necessary corporate action on the part of FBC. This Option
Agreement has been duly and validly executed and delivered by FBC and
constitutes a legal, valid and binding agreement of FBC enforceable against FBC
in accordance with its terms, except as such enforceability may be affected by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
by judicial discretion in the enforcement of equitable remedies. The Time
Brokerage Agreement, when executed and delivered by FBC, will be duly and
validly executed and delivered by FBC and will constitute a legal, valid and
binding agreement of FBC enforceable against FBC in accordance with its terms,
except as such enforceability may be affected by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and by judicial discretion in
the enforcement of equitable remedies.
(b) Except for the FCC Consent and the requirements under the HSR
Act, there is no requirement applicable to FBC to make any filing with, or to
obtain any permit, authorization, consent or approval of, any governmental or
regulatory authority as a condition to the execution and delivery by FBC of this
Option Agreement, the Asset Purchase Agreement or the Time Brokerage Agreement
or the performance by FBC of its obligations thereunder.
(c) Subject to obtaining the FCC Consent, satisfying the
requirements under the HSR Act and obtaining the consents of third parties
identified on Schedule 3.3 to the Asset Purchase Agreement, the execution,
delivery and performance of this Option Agreement, the Asset Purchase Agreement
and the Time Brokerage Agreement by FBC will
- 6 -
<PAGE> 7
not (i) conflict with FBC's organizational documents or agreements, (ii) result
in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, agreement, or lease to which FBC is a party or by which any of
the FCC Licenses or the other Assets are bound, or (iii) to FBC's knowledge,
violate any statute, law, rule, regulation, order, writ, injunction or decree
applicable to FBC, the FCC Licenses or the other Assets.
(d) Since January 1, 1997, FBC has conducted the business and
operations of the Station only in the ordinary course and has not:
(i) Suffered any material adverse change in the business,
assets, or properties of the Station;
(ii) except in the ordinary course of business consistent with
past practices, made any material increase in compensation payable or
to become payable to any of the employees of the Station, or made any
bonus payment to any employee of the Station, or made any material
change in personnel policies, employee benefits, or other compensation
arrangements affecting the employees of the Station;
(iii) made any sale, assignment, lease, or other transfer of any
of the Station's properties other than in the normal and usual course
of business with suitable replacements being obtained therefor;
(iv) canceled any claims held by FBC with respect to the
Station, except in the normal and usual course of business;
(v) suffered any material write-down of the value of any
Assets or any material write-off as uncollectible of any accounts
receivable of the Station; or
(vi) Transferred or granted any right under, or entered into
any settlement regarding the breach or infringement of, any material
license, patent, copyright, trademark, trade name, franchise, or
similar right, or modified any existing right specific, to the Station.
(e) The representations and warranties of FBC set forth in Sections
3.4 through and including 3.19 of the Asset Purchase Agreement are incorporated
herein by reference, and FBC hereby makes each such representation and warranty
to PCC as if each such representation and warranty were expressly set forth
herein.
- 7 -
<PAGE> 8
FBC acknowledges and agrees that FBC's representations and warranties
contained in this Section 8 are a material inducement to PCC's agreement to
enter into and perform this Option Agreement and make the Option Payment.
9. Representations and Warranties of PCC. PCC represents and
warrants to FBC as follows:
(a) PCC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. PCC has full corporate
power and authority to execute and deliver this Option Agreement, the Asset
Purchase Agreement and the Time Brokerage Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Option Agreement and the Time Brokerage Agreement and the consummation of the
transactions contemplated hereby and thereby by PCC have been duly and validly
authorized by all necessary corporate action on the part of PCC. This Option
Agreement has been duly and validly executed and delivered by PCC and
constitutes a legal, valid and binding agreement of PCC enforceable against PCC
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
by judicial discretion in the enforcement of equitable remedies. The Time
Brokerage Agreement, when executed and delivered by PCC, will be duly and
validly executed and delivered by PCC and will constitute a legal, valid and
binding agreement of PCC enforceable against PCC in accordance with its terms,
except as such enforceability may be affected by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and by judicial discretion in
the enforcement of equitable remedies.
(b) Except for the FCC Consent and the requirements under the HSR
Act, there is no requirement applicable to PCC to make any filing with, or to
obtain any permit, authorization, consent or approval of, any governmental or
regulatory authority as a condition to the execution and delivery by PCC of this
Option Agreement, the Asset Purchase Agreement or the Time Brokerage Agreement
or the performance by PCC of its obligations thereunder.
(c) Subject to obtaining the FCC Consent, satisfying the
requirements under the HSR Act and obtaining the consents of third parties
identified on Schedule 4.5 to the Asset Purchase Agreement, the execution,
delivery and performance of this Option Agreement, the Asset Purchase Agreement
and the Time Brokerage Agreement by PCC will not (i) conflict with PCC's
organizational documents, (ii) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, agreement, or lease to which PCC is a
party or by
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<PAGE> 9
which any of its assets are bound, or (iii) to PCC's knowledge, violate any
statute, law, rule, regulation, order, writ, injunction or decree applicable to
PCC.
(d) The representations and warranties of PCC set forth in Sections
4.4 through and including 4.7 of the Asset Purchase Agreement are incorporated
herein by reference, and PCC hereby makes each such representation and warranty
to FBC as if each such representation and warranty were expressly set forth
herein.
PCC acknowledges and agrees that PCC's representations and warranties
contained in this Section 9 are a material inducement to FBC's agreement to
enter into and perform this Option Agreement.
10. Covenants of FBC. From the date hereof until termination of this
Option Agreement, FBC will not (i) commit any act that is inconsistent with the
grant of the Call Option to PCC or the transactions contemplated by this Option
Agreement and the Asset Purchase Agreement or (ii) violate any of the covenants,
by any act or failure to act, set forth in Section 5 of the Asset Purchase
Agreement, each of which are incorporated herein by reference and shall be
binding on and enforceable against FBC in accordance with their terms as if each
such covenant were expressly set forth herein.
11. Cooperation. FBC and PCC shall cooperate fully with each other
and their respective counsel and accountants in connection with any steps
required to be taken as part of their respective obligations under this Option
Agreement and the Asset Purchase Agreement and will each use their respective
best efforts to perform or fulfill all conditions and obligations to be
performed or fulfilled by them under this Option Agreement and the Asset
Purchase Agreement so that the transactions contemplated hereby and thereby
shall be consummated.
12. Specific Performance.
(a) The parties recognize that if FBC breaches this Option
Agreement and refuses to perform under the provisions of this Option Agreement,
monetary damages alone would not be adequate to compensate PCC for its injury.
PCC shall therefore be entitled, in addition to any other remedies that may be
available, including money damages, to obtain specific performance of the terms
of this Option Agreement. If any action is brought by PCC to enforce this Option
Agreement, FBC shall waive the defense that there is an adequate remedy at law.
(b) The parties recognize that if PCC breaches this Option Agreement
and refuses to perform under the provisions of this Option Agreement, monetary
damages alone
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<PAGE> 10
would not be adequate to compensate FBC for its injury. FBC shall therefore be
entitled, in addition to any other remedies that may be available, including
money damages, to obtain specific performance of the terms of this Option
Agreement. If any action is brought by FBC to enforce this Option Agreement, PCC
shall waive the defense that there is an adequate remedy at law.
13. Termination.
(a) This Option Agreement may be terminated by FBC and the purchase
and sale of the Assets abandoned, so long as FBC is not in breach of any of its
material representations, warranties, agreements or obligations contained in
this Option Agreement, the Time Brokerage Agreement or the Asset Purchase
Agreement, upon written notice to PCC, (i) if PCC has failed to cure a breach of
any of its material representations, warranties, agreements or obligations
contained in this Option Agreement, the Time Brokerage Agreement (including a
failure to make any payment required under the terms of the Time Brokerage
Agreement), or the Asset Purchase Agreement within 30 days after PCC has
received written notice from FBC of such breach or (ii) if, on or before the
date that is 180 days following the date of this Agreement, the HSR Waiting
Period has not expired or been terminated by the appropriate government agencies
without the enforcement of any action by any such agencies to restrain or
postpone the transactions contemplated hereby.
(b) This Option Agreement may be terminated by PCC and the purchase
and sale of the Assets abandoned, so long as PCC is not in breach of any of its
material representations, warranties, agreements or obligations contained in
this Option Agreement, the Time Brokerage Agreement or the Asset Purchase
Agreement, upon written notice to FBC, (i) if FBC has failed to cure a breach of
any of its material representations, warranties, agreements or obligations
contained in this Option Agreement, the Time Brokerage Agreement or the Asset
Purchase Agreement within 30 days after FBC has received written notice from PCC
of such breach or (ii) if, on or before the date that is 180 days following the
date of this Agreement, the HSR Waiting Period has not expired or been
terminated by the appropriate government agencies without the enforcement of any
action by any such agencies to restrain or postpone the transactions
contemplated hereby.
(c) The notice and cure period set forth in this Section 13 shall be
the only notice and cure period required in connection with any termination of
this Option Agreement by FBC or PCC and shall not be in addition to any notice
and cure rights contained in any other agreement between PCC and FBC.
14. Notices. All notices, demands, and requests required or permitted
to be given under the provisions of this Option Agreement shall be (a) in
writing, (b) delivered by
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<PAGE> 11
personal delivery, or sent by commercial delivery service or registered or
certified mail, return receipt requested, (c) deemed to have been given on the
date of personal delivery or the date set forth in the records of the delivery
service or on the return receipt, and (d) addressed as follows:
If to FBC: George S. Flinn, Jr.
Flinn Broadcasting Corporation
188 South Bellevue, Suite 222
Memphis, TN 38104
With a copy (which shall not Stephen C. Simpson, Esq.
constitute notice) to: Law Offices of Stephen C. Simpson
1090 Vermont Avenue, N.W.
Suite 800
Washington, DC 20005
If to PCC: Lowell W. Paxson
Paxson Communications Corporation
601 Clearwater Park Road
West Palm Beach, FL 33401
With a copy (which shall not John R. Feore, Jr., Esq.
constitute notice) to: Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, DC 20036
or to any other or additional persons and addresses as the parties may from time
to time designate in a writing delivered in accordance with this Section 14.
15. Entire Agreement; Amendment. This Option Agreement supersedes all
prior agreements and understandings of the parties, oral and written, with
respect to its subject matter. This Option Agreement may be modified only by an
agreement in writing executed by all of the parties thereto. No waiver of
compliance with any provision of this Option Agreement will be effective unless
evidenced by an instrument evidenced in writing and signed by the parties
thereto.
16. Further Assurances. From time to time after the date of
execution hereof, the parties shall take such further action and execute such
further documents, assurances and
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<PAGE> 12
certificates as either party reasonably may request of the other to effectuate
the purposes of this Option Agreement.
17. Counterparts. This Option Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and shall become
effective when each of the parties hereto shall have delivered to it this Option
Agreement duly executed by the other parties hereto.
18. Headings. The headings in this Option Agreement are for the sole
purpose of convenience of reference and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Option
Agreement.
19. Governing Law; Disputes. This Option Agreement shall be construed
under and in accordance with the laws of the State of Florida, without giving
effect to the principles of conflicts of law. Except as otherwise provided to
the contrary below, any dispute arising out of or related to this Option
Agreement that FBC and PCC are unable to resolve by themselves shall be settled
by arbitration by a panel of three (3) neutral arbitrators who shall be selected
in accordance with the procedures set forth in the commercial arbitration rules
of the American Arbitration Association. The persons selected as arbitrators
shall have prior experience in the broadcasting industry but need not be
professional arbitrators, and persons such as lawyers, accountants, brokers and
bankers shall be acceptable. Before undertaking to resolve the dispute, each
arbitrator shall be duly sworn faithfully and fairly to hear and examine the
matters in controversy and to make a just award according to the best of his or
her understanding. The arbitration hearing shall be conducted in accordance with
the commercial arbitration rules of the American Arbitration Association in
Washington, D.C. The written decision of a majority of the arbitrators shall be
final and binding on FBC and PCC. The costs and expenses of the arbitration
proceeding shall be assessed between FBC and PCC in a manner to be decided by a
majority of the arbitrators, and the assessment shall be set forth in the
decision and award of the arbitrators. Judgment on the award, if it is not paid
within thirty days, may be entered in any court having jurisdiction over the
matter. No action at law or suit in equity based upon any claim arising out of
or related to this Option Agreement shall be instituted in any court by FBC or
PCC against the other except (i) an action to compel arbitration pursuant to
this Section, (ii) an action to enforce the award of the arbitration panel
rendered in accordance with this Section, or (iii) a suit for specific
performance pursuant to Section 12 of this Option Agreement.
20. Benefit and Binding Effect; Assignability. This Option Agreement
shall inure to the benefit of and be binding upon FBC, PCC and their respective
successors and permitted assigns. Neither PCC nor FBC may assign this Option
Agreement without the
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<PAGE> 13
prior written consent of the other, except that (a) PCC may assign its rights
and obligations under this Option Agreement without FBC's consent to (i) any
entity controlled by or under common control with PCC or (ii) any other entity
designated by PCC, so long as PCC determines, in the exercise of reasonable
business judgment, that such entity possesses the financial capacity, and the
requisite qualifications under the Communications Act of 1934, as amended, and
the rules and regulations promulgated thereunder, to consummate the transactions
contemplated by this Option Agreement and the Asset Purchase Agreement and (b)
FBC may assign its rights and obligations under this Option Agreement without
PCC's consent to any entity controlled by or under common control with FBC;
provided, however, in the case of any assignment permitted under clause (a) or
(b) above, as a condition precedent to the effectiveness of any such assignment,
PCC or FBC, as the case may be, shall, concurrent with such assignment, enter
into an agreement with the other pursuant to which PCC or FBC shall guarantee
the performance of all obligations assumed by such party's assignee. Upon any
permitted assignment by a party in accordance with this Section 20, all
references to "PCC" herein shall be deemed to be references to PCC's assignee
and all references to "FBC" herein shall be deemed to be references to FBC's
assignee, as the case may be. Notwithstanding the foregoing, either PCC or FBC
may assign its rights, benefits, duties or obligations hereunder to its lenders
as collateral security for its obligations to such lenders.
21. Confidentiality. Except as necessary for the consummation of the
transaction contemplated by this Option Agreement, and except as and to the
extent required by law, each party will keep confidential any information
obtained from the other party in connection with the transactions contemplated
by this Option Agreement. If this Option Agreement is terminated, each party
will return to the other party all information obtained by the such party from
the other party in connection with the transactions contemplated by this Option
Agreement.
22. Press Release. Neither party shall publish any press release, make
any other public announcement or otherwise communicate with any news media
concerning this Option Agreement or the transactions contemplated hereby without
the prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed; provided, however, that nothing contained
herein shall prevent either party from (a) making such public announcements as
may be required under federal or state securities laws or (b) promptly making
all filings with governmental authorities as may, in its judgement be required
or advisable in connection with the execution and delivery of this Option
Agreement or the consummation of the transactions contemplated hereby.
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<PAGE> 14
23. Attorneys' Fees. In the event of a default by either party which
results in a lawsuit or other proceeding for any remedy available under this
Option Agreement, the prevailing party shall be entitled to reimbursement from
the other party of its reasonable legal fees and expenses.
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<PAGE> 15
IN WITNESS WHEREOF the parties hereto have executed this Option
Agreement as of the date first above written.
PAXSON COMMUNICATIONS CORPORATION
By: /s/ James B. Bocock
--------------------------------
Name: James B. Bocock
Title: President
FLINN BROADCASTING CORPORATION
By: /s/ George S. Flinn, Jr.
--------------------------------
Name: George S. Flinn, Jr.
Title: President
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<PAGE> 1
Exhibit 10.187
OPTION AGREEMENT
THIS OPTION AGREEMENT (the "Option Agreement") is entered into as of
November 14, 1997, by and between PAXSON COMMUNICATIONS CORPORATION, a Delaware
corporation ("PCC"), and FLINN BROADCASTING CORPORATION, a Tennessee
corporation ("FBC").
R E C I T A L S
A. FBC owns, licenses or leases all of the assets (the "Assets" as
that term is defined in the Asset Purchase Agreement attached hereto as Exhibit
A), which Assets are used or useful in the business and operations of
Television Station WFBI-TV, Channel 50, Memphis, Tennessee (the "Station"),
including, without limitation, the licenses and construction permits issued by
the Federal Communications Commission ("FCC") for the Station (the "FCC
Licenses").
B. PCC and FBC have agreed to enter into a Time Brokerage Agreement
(as defined in Section 7 below), pursuant to which PCC shall provide
programming for broadcast on the Station.
C. FBC desires to grant to PCC an exclusive, irrevocable and
assignable option to purchase the Assets, including the FCC Licenses, and PCC
desires to grant to FBC an exclusive, irrevocable and assignable option to
require PCC to purchase the Assets, including the FCC Licenses, on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. Grant of Put Option.
(a) For and in consideration of FBC's execution of this Option
Agreement, the sufficiency of which is hereby acknowledged by PCC, PCC hereby
grants to FBC an exclusive and irrevocable option to require PCC to acquire the
Assets, including the FCC Licenses (the "Put Option"), for a purchase price of
Eighteen Million Dollars ($18,000,000), subject to adjustment as provided in,
and payable upon the closing of, the Asset Purchase Agreement (as defined in
Section 3 below). FBC may assign its rights and interests in the Put Option so
long as any such assignment complies with the requirements of Section 20
hereof.
<PAGE> 2
(b) FBC may deliver to PCC written notice of FBC's intention to
exercise the Put Option (the "Put Notice") at any time following a PCC default
of the Time Brokerage Agreement or at any time during the period commencing on
November 15, 1999 (the "Put Commencement Date") and ending on November 15, 2001
(the "Put Termination Date"). The Put Option shall have no force or effect, and
PCC shall have no obligation with respect thereto, prior to the Put
Commencement Date or after the Put Termination Date. Notwithstanding the
requirement in the preceding sentences, if FBC has not exercised the Put Option
on or before the Put Termination Date, and PCC has not exercised the Call
Option on or before the Call Termination Date (as those terms are defined
below), FBC may deliver to PCC a Put Notice at any time during the 90-day
period following expiration of the Call Option, if the reason for such
expiration was a change in any federal law or any rule, regulation or policy of
the FCC or any other governmental agency that renders, or could reasonably be
expected to render, the Time Brokerage Agreement invalid, illegal or
unenforceable; provided, however, that FBC's delivery of a Put Notice as
contemplated by this sentence shall have no effect if, prior to the end of such
90-day period, PCC has assigned the Time Brokerage Agreement in accordance with
the terms of Section 7.1(a) thereof and, as a result of such assignment, the
Time Brokerage Agreement is legal, valid and enforceable.
2. Grant of Call Option.
(a) For and in consideration of the option consideration in the
amount of $2,000,000 paid by PCC to FBC (the "Option Payment"), the receipt and
sufficiency of which are hereby acknowledged by FBC, FBC hereby grants to PCC
an exclusive and irrevocable option to acquire the Assets, including the FCC
Licenses (the "Call Option"), for a purchase price of Eighteen Million Dollars
($18,000,000), subject to adjustment as provided in, and payable upon the
closing of, the Asset Purchase Agreement. PCC may assign its rights and
interests in the Call Option so long as any such assignment complies with the
requirements of Section 20 hereof.
(b) PCC may deliver to FBC written notice of PCC's intention
to exercise the Call Option (the "Call Notice") at any time during the period
commencing on November 16, 2001 (the "Call Commencement Date") and ending on
November 16, 2003 (the "Call Termination Date"). The Call Option shall have no
force or effect, and FBC shall have no obligation with respect thereto, prior
to the Call Commencement Date. Notwithstanding the requirement in the preceding
sentences, PCC may deliver to FBC a Call Notice at any time following (i) a
termination of the Time Brokerage Agreement in accordance with its terms for
any reason other than a material breach by PCC of its obligations thereunder or
(ii) a change in any federal law or any rule, regulation or policy of the FCC
or any other governmental agency that renders, or could reasonably be expected
to render, the Time
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<PAGE> 3
Brokerage Agreement invalid, illegal or unenforceable. In the event that PCC
fails to give FBC the Call Notice on or prior to the later of (x) the Call
Termination Date or (y) the date that is ninety (90) days following the
effective date of the change in law, rule, regulation or policy described in
clause (ii) of the preceding sentence, the Call Option shall expire.
(c) Within five (5) business days following demand, FBC shall
immediately return to PCC the Option Payment following (i) a termination by PCC
of this Option Agreement in accordance with the terms of Section 13(b)(i)
hereof as a result of a breach by FBC of any material representation, warranty,
agreement or obligation of FBC contained herein, (ii) the delivery of a Put
Notice or a Call Notice, a termination by PCC of the Asset Purchase Agreement
in accordance with the terms of Section 9.2 thereof as a result of a breach by
FBC of any material representation, warranty, agreement or obligation of FBC
contained in the Asset Purchase Agreement, or (iii) a termination by FBC of
this Agreement pursuant to Section 13(a)(ii) hereof or a termination by PCC of
this Agreement pursuant to Section 13(b)(ii) hereof. Except as provided in this
Section 2(c), FBC shall not be obligated to return the Option Payment to PCC.
3. Asset Purchase Agreement.
(a) Within fifteen (15) business days following PCC's receipt
of the Put Notice or FBC's receipt of the Call Notice, as the case may be, FBC
and PCC shall enter into the Asset Purchase Agreement in the form of Exhibit A
hereto (the "Asset Purchase Agreement"), it being understood that the only
change to such form shall be changes, if any, in the information contained in
the Schedules thereto and the addition, if any, of Schedules thereto that are
reasonably required to reflect events occurring after the date hereof;
provided, however, that PCC shall not be required to accept any such change or
addition that could reasonably be expected to cause a material adverse change
in, or have a material adverse effect on, (i) the Assets to be conveyed to PCC
pursuant to the Asset Purchase Agreement, (ii) the conduct of the business or
operations of the Station or (iii) the ability of FBC to consummate the
transactions contemplated by the Asset Purchase Agreement in accordance with
its terms; provided further, however, that PCC shall be required to accept any
change or addition of the type described in the preceding proviso if such
change or addition results from any action taken (or, if required, not taken)
by PCC under the Time Brokerage Agreement. Upon the execution and delivery of
the Asset Purchase Agreement, FBC and PCC shall perform their respective
obligations thereunder, including, without limitation, filing and prosecuting
an appropriate application for FCC consent to the assignment of the FCC
Licenses from FBC to PCC (the "FCC Consent"). Except as expressly set forth in
the Time Brokerage Agreement or the Asset Purchase Agreement, PCC shall not
assume any obligations or liabilities of FBC under any contract, agreement,
license, permit or other instrument or arrangement.
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<PAGE> 4
(b) Notwithstanding Section 3(a) of this Option Agreement, in
the event that, at the time of the exercise of the Put Option or the Call
Option, as the case may be, the only assets held by FBC are (i) the assets to
be conveyed to PCC pursuant to the Asset Purchase Agreement and (ii) the
certain similar assets to be sold to Buyer pursuant to a certain Option
Agreement bearing even date herewith with respect to Seller's New Orleans
Station (as identified in such Option Agreement, the "New Orleans Option"), FBC
may, at its election, notify PCC in writing that the transactions contemplated
by the Asset Purchase Agreement and the New Orleans Option shall each be
reconstituted as a sale to PCC of all of the capital stock of FBC (the "Stock
Purchase Election"); provided, however, that FBC shall have no right to
exercise the Stock Purchase Election if (i) PCC is unable to treat such
purchase of stock as a purchase of assets pursuant to Internal Revenue Code ss.
338(h)(10), or its successor, as the same may be amended from time to time, and
(ii) PCC and FBC are unable to agree upon the terms and conditions of, and
execute and deliver, a Stock Purchase Agreement within thirty (30) days
following PCC's receipt from FBC of written notice of its election to exercise
the Stock Purchase Election. If FBC exercises the Stock Purchase Election in
accordance with the terms of this Section 3(b), FBC and PCC shall negotiate in
good faith the terms of the Stock Purchase Agreement, it being understood that
such Stock Purchase Agreement shall be substantially equivalent to the Asset
Purchase Agreement except for such modifications and additions thereto that are
required to conform the Asset Purchase Agreement to the form of agreement
customarily used in connection with a sale of capital stock rather than assets,
and it being further understood that neither FBC nor PCC shall be required to
accept any term or provision in the Stock Purchase Agreement that would, or
could reasonably be expected to, result in any increase or decrease in the
consideration payable by PCC under the Asset Purchase Agreement or in the
liabilities to be assumed by PCC under the Asset Purchase Agreement.
4. Survival of Options.
(a) In the event that the exercise of the Put Option is not
consummated for any reason whatsoever, and in the further event that this
Option Agreement is not terminated by FBC or PCC pursuant to Section 13 hereof,
the Put Option shall nevertheless remain exercisable by FBC through the Put
Termination Date, and FBC may at any time, and from time to time, prior to such
expiration again exercise the Put Option as set forth in this Option Agreement
and, upon such exercise, PCC and FBC shall enter into an Asset Purchase
Agreement that is substantially identical to the Asset Purchase Agreement and
thereafter diligently proceed to perform their obligations thereunder.
(b) In the event that the exercise of the Call Option is not
consummated for any reason whatsoever, and in the further event that this
Option Agreement is not terminated by FBC or PCC pursuant to Section 13 hereof,
the Call Option shall nevertheless remain
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<PAGE> 5
exercisable by PCC through the Call Termination Date, and PCC may at any time,
and from time to time, prior to such expiration again exercise the Call Option
as set forth in this Option Agreement and, upon such exercise, FBC and PCC
shall enter into an Asset Purchase Agreement that is substantially identical to
the Asset Purchase Agreement and thereafter diligently proceed to perform their
obligations thereunder.
5. Control of the Station. Prior to the closing of the transactions
contemplated by the Asset Purchase Agreement, PCC shall not, directly or
indirectly, control, supervise, direct, or attempt to control, supervise, or
direct, the operations of the Station; such operations, including complete
control and supervision of all of the Station programs, employees, and
policies, shall be the sole responsibility of FBC until the closing of the
transactions contemplated by the Asset Purchase Agreement.
6. HSR Act. As soon as practicable after the execution hereof but
in no event later than ten business days after the execution hereof, each of
PCC and FBC shall make such filings, if any, required by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") as a result of
the transactions contemplated by this Option Agreement and the Time Brokerage
Agreement. PCC and FBC agree to (a) cooperate with each other in connection
with all such HSR Act filings, which cooperation shall include furnishing the
other with any information or documents that may be reasonably required in
connection with such filings; (b) promptly file, after any request by the
Federal Trade Commission ("FTC") or Department of Justice ("DOJ") and after
appropriate negotiation with the FTC or DOJ of the scope of such request, any
information or documents requested by the FTC or DOJ; and (c) furnish each
other with any correspondence from or to, and notify each other of any other
communications with, the FTC or DOJ that relates to the transactions
contemplated hereunder and under the Time Brokerage Agreement, and to the
extent practicable, to permit each other to participate in any conferences with
the FTC or DOJ. The transfer of the Assets pursuant to the Asset Purchase
Agreement and the commencement of the transaction contemplated by the Time
Brokerage Agreement are expressly conditioned upon the waiting period relating
to any such filings the ("HSR Waiting Period") having duly expired or been
terminated by the appropriate government agencies without the enforcement of
any action by any such agencies to restrain or postpone the transactions
contemplated hereby. Any filing fees required to be paid as a result of the HSR
Act shall be paid one-half by PCC and one-half by FBC.
7. Time Brokerage Agreement. Following the expiration or
termination of the HSR Waiting Period, PCC and FBC shall enter into a Time
Brokerage Agreement with respect to the Station in the form of the Time
Brokerage Agreement attached hereto as Exhibit B (the "Time Brokerage
Agreement"). The effective date of the Time Brokerage Agreement shall be a date
mutually acceptable to PCC and FBC that is no sooner than five
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<PAGE> 6
(5) business days, and no later than ten (10) business days, following the date
of expiration or termination of the HSR Waiting Period. If PCC and FBC fail to
agree on such effective date, the Time Brokerage Agreement shall be duly
executed and delivered by PCC and FBC and shall be effective upon the date that
is ten (10) business days following the expiration or termination of the HSR
Waiting Period. No later than ten (10) business days following the date hereof,
FBC shall notify PCC in writing of the names of those employees of FBC that FBC
elects, in its sole discretion, to retain.
8. Representations and Warranties of FBC. FBC represents and
warrants to PCC as follows:
(a) FBC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Tennessee. FBC has full
corporate power and authority to execute and deliver this Option Agreement, the
Asset Purchase Agreement and the Time Brokerage Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Option Agreement and the Time Brokerage Agreement and the consummation of
the transactions contemplated hereby and thereby by FBC have been duly and
validly authorized by all necessary corporate action on the part of FBC. This
Option Agreement has been duly and validly executed and delivered by FBC and
constitutes a legal, valid and binding agreement of FBC enforceable against FBC
in accordance with its terms, except as such enforceability may be affected by
bankruptcy, insolvency or similar laws affecting creditors' rights generally
and by judicial discretion in the enforcement of equitable remedies. The Time
Brokerage Agreement, when executed and delivered by FBC, will be duly and
validly executed and delivered by FBC and will constitute a legal, valid and
binding agreement of FBC enforceable against FBC in accordance with its terms,
except as such enforceability may be affected by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and by judicial discretion
in the enforcement of equitable remedies.
(b) Except for the FCC Consent and the requirements under the
HSR Act, there is no requirement applicable to FBC to make any filing with, or
to obtain any permit, authorization, consent or approval of, any governmental
or regulatory authority as a condition to the execution and delivery by FBC of
this Option Agreement, the Asset Purchase Agreement or the Time Brokerage
Agreement or the performance by FBC of its obligations thereunder.
(c) Subject to obtaining the FCC Consent, satisfying the
requirements under the HSR Act and obtaining the consents of third parties
identified on Schedule 3.3 to the Asset Purchase Agreement, the execution,
delivery and performance of this Option Agreement, the Asset Purchase Agreement
and the Time Brokerage Agreement by FBC will
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<PAGE> 7
not (i) conflict with FBC's organizational documents or agreements, (ii) result
in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, agreement, or lease to which FBC is a party or by which any of
the FCC Licenses or the other Assets are bound, or (iii) to FBC's knowledge,
violate any statute, law, rule, regulation, order, writ, injunction or decree
applicable to FBC, the FCC Licenses or the other Assets.
(d) Since January 1, 1997, FBC has conducted the business and
operations of the Station only in the ordinary course and has not:
(i) Suffered any material adverse change in the business,
assets, or properties of the Station;
(ii) except in the ordinary course of business consistent
with past practices, made any material increase in compensation
payable or to become payable to any of the employees of the Station,
or made any bonus payment to any employee of the Station, or made any
material change in personnel policies, employee benefits, or other
compensation arrangements affecting the employees of the Station;
(iii) made any sale, assignment, lease, or other transfer
of any of the Station's properties other than in the normal and usual
course of business with suitable replacements being obtained therefor;
(iv) canceled any claims held by FBC with respect to the
Station, except in the normal and usual course of business;
(v) suffered any material write-down of the value of any
Assets or any material write-off as uncollectible of any accounts
receivable of the Station; or
(vi) Transferred or granted any right under, or entered
into any settlement regarding the breach or infringement of, any
material license, patent, copyright, trademark, trade name, franchise,
or similar right, or modified any existing right specific, to the
Station.
(e) The representations and warranties of FBC set forth in
Sections 3.4 through and including 3.19 of the Asset Purchase Agreement are
incorporated herein by reference, and FBC hereby makes each such representation
and warranty to PCC as if each such representation and warranty were expressly
set forth herein.
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<PAGE> 8
FBC acknowledges and agrees that FBC's representations and warranties
contained in this Section 8 are a material inducement to PCC's agreement to
enter into and perform this Option Agreement and make the Option Payment.
9. Representations and Warranties of PCC. PCC represents and
warrants to FBC as follows:
(a) PCC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. PCC has full
corporate power and authority to execute and deliver this Option Agreement, the
Asset Purchase Agreement and the Time Brokerage Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Option Agreement and the Time Brokerage Agreement and the consummation of
the transactions contemplated hereby and thereby by PCC have been duly and
validly authorized by all necessary corporate action on the part of PCC. This
Option Agreement has been duly and validly executed and delivered by PCC and
constitutes a legal, valid and binding agreement of PCC enforceable against PCC
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally
and by judicial discretion in the enforcement of equitable remedies. The Time
Brokerage Agreement, when executed and delivered by PCC, will be duly and
validly executed and delivered by PCC and will constitute a legal, valid and
binding agreement of PCC enforceable against PCC in accordance with its terms,
except as such enforceability may be affected by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and by judicial discretion
in the enforcement of equitable remedies.
(b) Except for the FCC Consent and the requirements under the
HSR Act, there is no requirement applicable to PCC to make any filing with, or
to obtain any permit, authorization, consent or approval of, any governmental
or regulatory authority as a condition to the execution and delivery by PCC of
this Option Agreement, the Asset Purchase Agreement or the Time Brokerage
Agreement or the performance by PCC of its obligations thereunder.
(c) Subject to obtaining the FCC Consent, satisfying the
requirements under the HSR Act and obtaining the consents of third parties
identified on Schedule 4.5 to the Asset Purchase Agreement, the execution,
delivery and performance of this Option Agreement, the Asset Purchase Agreement
and the Time Brokerage Agreement by PCC will not (i) conflict with PCC's
organizational documents, (ii) result in a default (or give rise to any right
of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, agreement, or lease to
which PCC is a party or by
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<PAGE> 9
which any of its assets are bound, or (iii) to PCC's knowledge, violate any
statute, law, rule, regulation, order, writ, injunction or decree applicable to
PCC.
(d) The representations and warranties of PCC set forth in
Sections 4.4 through and including 4.7 of the Asset Purchase Agreement are
incorporated herein by reference, and PCC hereby makes each such representation
and warranty to FBC as if each such representation and warranty were expressly
set forth herein.
PCC acknowledges and agrees that PCC's representations and warranties
contained in this Section 9 are a material inducement to FBC's agreement to
enter into and perform this Option Agreement.
10. Covenants of FBC. From the date hereof until termination of this
Option Agreement, FBC will not (i) commit any act that is inconsistent with the
grant of the Call Option to PCC or the transactions contemplated by this Option
Agreement and the Asset Purchase Agreement or (ii) violate any of the
covenants, by any act or failure to act, set forth in Section 5 of the Asset
Purchase Agreement, each of which are incorporated herein by reference and
shall be binding on and enforceable against FBC in accordance with their terms
as if each such covenant were expressly set forth herein.
11. Cooperation. FBC and PCC shall cooperate fully with each other
and their respective counsel and accountants in connection with any steps
required to be taken as part of their respective obligations under this Option
Agreement and the Asset Purchase Agreement and will each use their respective
best efforts to perform or fulfill all conditions and obligations to be
performed or fulfilled by them under this Option Agreement and the Asset
Purchase Agreement so that the transactions contemplated hereby and thereby
shall be consummated.
12. Specific Performance.
(a) The parties recognize that if FBC breaches this Option
Agreement and refuses to perform under the provisions of this Option Agreement,
monetary damages alone would not be adequate to compensate PCC for its injury.
PCC shall therefore be entitled, in addition to any other remedies that may be
available, including money damages, to obtain specific performance of the terms
of this Option Agreement. If any action is brought by PCC to enforce this
Option Agreement, FBC shall waive the defense that there is an adequate remedy
at law.
(b) The parties recognize that if PCC breaches this Option
Agreement and refuses to perform under the provisions of this Option Agreement,
monetary damages alone
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<PAGE> 10
would not be adequate to compensate FBC for its injury. FBC shall therefore be
entitled, in addition to any other remedies that may be available, including
money damages, to obtain specific performance of the terms of this Option
Agreement. If any action is brought by FBC to enforce this Option Agreement,
PCC shall waive the defense that there is an adequate remedy at law.
13. Termination.
(a) This Option Agreement may be terminated by FBC and the
purchase and sale of the Assets abandoned, so long as FBC is not in breach of
any of its material representations, warranties, agreements or obligations
contained in this Option Agreement, the Time Brokerage Agreement or the Asset
Purchase Agreement, upon written notice to PCC, (i) if PCC has failed to cure a
breach of any of its material representations, warranties, agreements or
obligations contained in this Option Agreement, the Time Brokerage Agreement
(including a failure to make any payment required under the terms of the Time
Brokerage Agreement), or the Asset Purchase Agreement within 30 days after PCC
has received written notice from FBC of such breach or (ii) if, on or before
the date that is 180 days following the date of this Agreement, the HSR Waiting
Period has not expired or been terminated by the appropriate government
agencies without the enforcement of any action by any such agencies to restrain
or postpone the transactions contemplated hereby.
(b) This Option Agreement may be terminated by PCC and the
purchase and sale of the Assets abandoned, so long as PCC is not in breach of
any of its material representations, warranties, agreements or obligations
contained in this Option Agreement, the Time Brokerage Agreement or the Asset
Purchase Agreement, upon written notice to FBC, (i) if FBC has failed to cure a
breach of any of its material representations, warranties, agreements or
obligations contained in this Option Agreement, the Time Brokerage Agreement or
the Asset Purchase Agreement within 30 days after FBC has received written
notice from PCC of such breach or (ii) if, on or before the date that is 180
days following the date of this Agreement, the HSR Waiting Period has not
expired or been terminated by the appropriate government agencies without the
enforcement of any action by any such agencies to restrain or postpone the
transactions contemplated hereby.
(c) The notice and cure period set forth in this Section 13
shall be the only notice and cure period required in connection with any
termination of this Option Agreement by FBC or PCC and shall not be in addition
to any notice and cure rights contained in any other agreement between PCC and
FBC.
14. Notices. All notices, demands, and requests required or
permitted to be given under the provisions of this Option Agreement shall be
(a) in writing, (b) delivered by
- 10 -
<PAGE> 11
personal delivery, or sent by commercial delivery service or registered or
certified mail, return receipt requested, (c) deemed to have been given on the
date of personal delivery or the date set forth in the records of the delivery
service or on the return receipt, and (d) addressed as follows:
If to FBC: George S. Flinn, Jr.
Flinn Broadcasting Corporation
188 South Bellevue, Suite 222
Memphis, TN 38104
With a copy (which shall not Stephen C. Simpson, Esq.
constitute notice) to: Law Offices of Stephen C. Simpson
1090 Vermont Avenue, N.W.
Suite 800
Washington, DC 20005
If to PCC: Lowell W. Paxson
Paxson Communications Corporation
601 Clearwater Park Road
West Palm Beach, FL 33401
With a copy (which shall not John R. Feore, Jr., Esq.
constitute notice) to: Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, DC 20036
or to any other or additional persons and addresses as the parties may from
time to time designate in a writing delivered in accordance with this Section
14.
15. Entire Agreement; Amendment. This Option Agreement supersedes
all prior agreements and understandings of the parties, oral and written, with
respect to its subject matter. This Option Agreement may be modified only by an
agreement in writing executed by all of the parties thereto. No waiver of
compliance with any provision of this Option Agreement will be effective unless
evidenced by an instrument evidenced in writing and signed by the parties
thereto.
16. Further Assurances. From time to time after the date of
execution hereof, the parties shall take such further action and execute such
further documents, assurances and
- 11 -
<PAGE> 12
certificates as either party reasonably may request of the other to effectuate
the purposes of this Option Agreement.
17. Counterparts. This Option Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and shall become
effective when each of the parties hereto shall have delivered to it this
Option Agreement duly executed by the other parties hereto.
18. Headings. The headings in this Option Agreement are for the sole
purpose of convenience of reference and shall not in any way limit or affect
the meaning or interpretation of any of the terms or provisions of this Option
Agreement.
19. Governing Law; Disputes. This Option Agreement shall be
construed under and in accordance with the laws of the State of Florida,
without giving effect to the principles of conflicts of law. Except as
otherwise provided to the contrary below, any dispute arising out of or related
to this Option Agreement that FBC and PCC are unable to resolve by themselves
shall be settled by arbitration by a panel of three (3) neutral arbitrators who
shall be selected in accordance with the procedures set forth in the commercial
arbitration rules of the American Arbitration Association. The persons selected
as arbitrators shall have prior experience in the broadcasting industry but
need not be professional arbitrators, and persons such as lawyers, accountants,
brokers and bankers shall be acceptable. Before undertaking to resolve the
dispute, each arbitrator shall be duly sworn faithfully and fairly to hear and
examine the matters in controversy and to make a just award according to the
best of his or her understanding. The arbitration hearing shall be conducted in
accordance with the commercial arbitration rules of the American Arbitration
Association in Washington, D.C. The written decision of a majority of the
arbitrators shall be final and binding on FBC and PCC. The costs and expenses
of the arbitration proceeding shall be assessed between FBC and PCC in a manner
to be decided by a majority of the arbitrators, and the assessment shall be set
forth in the decision and award of the arbitrators. Judgment on the award, if
it is not paid within thirty days, may be entered in any court having
jurisdiction over the matter. No action at law or suit in equity based upon any
claim arising out of or related to this Option Agreement shall be instituted in
any court by FBC or PCC against the other except (i) an action to compel
arbitration pursuant to this Section, (ii) an action to enforce the award of
the arbitration panel rendered in accordance with this Section, or (iii) a suit
for specific performance pursuant to Section 12 of this Option Agreement.
20. Benefit and Binding Effect; Assignability. This Option Agreement
shall inure to the benefit of and be binding upon FBC, PCC and their respective
successors and permitted assigns. Neither PCC nor FBC may assign this Option
Agreement without the
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<PAGE> 13
prior written consent of the other, except that (a) PCC may assign its rights
and obligations under this Option Agreement without FBC's consent to (i) any
entity controlled by or under common control with PCC or (ii) any other entity
designated by PCC, so long as PCC determines, in the exercise of reasonable
business judgment, that such entity possesses the financial capacity, and the
requisite qualifications under the Communications Act of 1934, as amended, and
the rules and regulations promulgated thereunder, to consummate the
transactions contemplated by this Option Agreement and the Asset Purchase
Agreement and (b) FBC may assign its rights and obligations under this Option
Agreement without PCC's consent to any entity controlled by or under common
control with FBC; provided, however, in the case of any assignment permitted
under clause (a) or (b) above, as a condition precedent to the effectiveness of
any such assignment, PCC or FBC, as the case may be, shall, concurrent with
such assignment, enter into an agreement with the other pursuant to which PCC
or FBC shall guarantee the performance of all obligations assumed by such
party's assignee. Upon any permitted assignment by a party in accordance with
this Section 20, all references to "PCC" herein shall be deemed to be
references to PCC's assignee and all references to "FBC" herein shall be deemed
to be references to FBC's assignee, as the case may be. Notwithstanding the
foregoing, either PCC or FBC may assign its rights, benefits, duties or
obligations hereunder to its lenders as collateral security for its obligations
to such lenders.
21. Confidentiality. Except as necessary for the consummation of the
transaction contemplated by this Option Agreement, and except as and to the
extent required by law, each party will keep confidential any information
obtained from the other party in connection with the transactions contemplated
by this Option Agreement. If this Option Agreement is terminated, each party
will return to the other party all information obtained by the such party from
the other party in connection with the transactions contemplated by this Option
Agreement.
22. Press Release. Neither party shall publish any press release,
make any other public announcement or otherwise communicate with any news media
concerning this Option Agreement or the transactions contemplated hereby
without the prior written consent of the other party, which consent shall not
be unreasonably withheld or delayed; provided, however, that nothing contained
herein shall prevent either party from (a) making such public announcements as
may be required under federal or state securities laws or (b) promptly making
all filings with governmental authorities as may, in its judgement be required
or advisable in connection with the execution and delivery of this Option
Agreement or the consummation of the transactions contemplated hereby.
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<PAGE> 14
23. Attorneys' Fees. In the event of a default by either party which
results in a lawsuit or other proceeding for any remedy available under this
Option Agreement, the prevailing party shall be entitled to reimbursement from
the other party of its reasonable legal fees and expenses.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 15
IN WITNESS WHEREOF the parties hereto have executed this Option
Agreement as of the date first above written.
PAXSON COMMUNICATIONS CORPORATION
By: /s/ James B. Bocock
---------------------------------
Name: James B. Bocock
Title: President
FLINN BROADCASTING CORPORATION
By: /s/ George S. Flinn, Jr.
---------------------------------
Name: George S. Flinn, Jr.
Title: President
- 15 -
<PAGE> 1
Exhibit 10.188
- ------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
BY AND AMONG
DP MEDIA OF MILWAUKEE, INC.
PAXSON COMMUNICATIONS OF MILWAUKEE-55, INC.
AND
PAXSON MILWAUKEE LICENSE, INC.
FOR
TELEVISION STATION WPXE(TV),
KENOSHA, WISCONSIN
* * *
JANUARY 26, 1998
- ------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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RECITALS..........................................................................................................1
AGREEMENTS........................................................................................................1
SECTION 1. DEFINITIONS...........................................................................................1
SECTION 2. PURCHASE AND SALE OF ASSETS...........................................................................3
2.1 Agreement to Sell and Buy.......................................................................3
2.2 Excluded Assets.................................................................................4
2.3 Purchase Price..................................................................................4
2.4 Payment of Purchase Price.......................................................................5
2.5 Assumption of Liabilities and Obligations.......................................................5
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER..............................................................5
3.1 Organization, Standing and Authority............................................................5
3.2 Authorization and Binding Obligation............................................................6
3.3 Absence of Conflicting Agreements...............................................................6
3.4 Governmental Licenses...........................................................................6
3.5 Title to and Condition of Real Property.........................................................7
3.6 Title to and Condition of Tangible Personal Property............................................8
3.7 Assumed Contracts...............................................................................8
3.8 Consents........................................................................................8
3.9 Intangibles.....................................................................................9
3.10 Insurance.......................................................................................9
3.11 Reports.........................................................................................9
3.12 Personnel.......................................................................................9
3.13 Taxes..........................................................................................10
3.14 Claims and Legal Actions.......................................................................10
3.15 Environmental Matters..........................................................................11
3.16 Compliance with Laws...........................................................................12
3.17 Conduct of Business in Ordinary Course.........................................................12
3.18 Full Disclosure................................................................................13
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................13
4.1 Organization, Standing and Authority...........................................................13
4.2 Authorization and Binding Obligation...........................................................13
4.3 Absence of Conflicting Agreements..............................................................13
4.4 Full Disclosure................................................................................14
</TABLE>
i
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<TABLE>
<CAPTION>
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<S> <C>
4.5 Buyer Qualifications...........................................................................14
SECTION 5. OPERATIONS OF THE STATION PRIOR TO CLOSING...........................................................14
5.1 Generally......................................................................................14
5.2 Contracts......................................................................................14
5.3 Disposition of Assets..........................................................................14
5.4 Encumbrances...................................................................................14
5.5 Licenses.......................................................................................15
5.6 Rights.........................................................................................15
5.7 Access to Information..........................................................................15
5.8 Insurance......................................................................................15
5.9 Consents.......................................................................................15
5.10 Books and Records..............................................................................15
5.11 Notification...................................................................................16
5.12 Compliance with Laws...........................................................................16
5.13 Compensation...................................................................................16
5.14 No Inconsistent Action.........................................................................16
5.15 Maintenance of Assets..........................................................................16
5.16 Financial Information..........................................................................16
5.17 Financing Leases...............................................................................16
5.18 Programming....................................................................................17
5.19 Preservation of Business.......................................................................17
SECTION 6. SPECIAL COVENANTS AND AGREEMENTS.....................................................................17
6.1 FCC Consent....................................................................................17
6.2 Control of the Station.........................................................................17
6.3 Risk of Loss...................................................................................18
6.4 Confidentiality................................................................................18
6.5 Cooperation....................................................................................18
6.6 Access to Books and Records....................................................................19
6.7 Broker.........................................................................................19
6.8 Environmental Audit............................................................................19
6.9 Engineering Study..............................................................................19
6.10 Sales Tax Filings..............................................................................19
6.11 Appraisal......................................................................................19
SECTION 7. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER
AT CLOSING....................................................................................19
7.1 Conditions to Obligations of Buyer.............................................................19
7.2 Conditions to Obligations of Seller............................................................20
</TABLE>
ii
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<TABLE>
<S> <C>
SECTION 8. CLOSING AND CLOSING DELIVERIES.......................................................................21
8.1 Closing........................................................................................21
8.2 Deliveries by Seller...........................................................................21
8.3 Deliveries by Buyer............................................................................22
SECTION 9. TERMINATION..........................................................................................23
9.1 Termination by Seller..........................................................................23
9.2 Termination by Buyer...........................................................................23
9.3 Rights on Termination..........................................................................23
9.4 Escrow Deposit.................................................................................24
SECTION 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; CERTAIN REMEDIES............................................................24
10.1 Representations and Warranties.................................................................24
10.2 Indemnification by Seller......................................................................25
10.3 Indemnification by Buyer.......................................................................25
10.4 Procedure for Indemnification..................................................................26
10.5 Specific Performance...........................................................................27
10.6 Attorneys' Fees................................................................................27
SECTION 11. MISCELLANEOUS.......................................................................................27
11.1 Fees and Expenses..............................................................................27
11.2 Arbitration....................................................................................28
11.3 Notices........................................................................................28
11.4 Benefit and Binding Effect.....................................................................29
11.5 Further Assurances.............................................................................29
11.6 GOVERNING LAW..................................................................................30
11.7 Headings.......................................................................................30
11.8 Gender and Number..............................................................................30
11.9 Entire Agreement...............................................................................30
11.10 Waiver of Compliance; Consents.................................................................30
11.11 Counterparts...................................................................................30
11.12 Press Releases.................................................................................30
</TABLE>
iii
<PAGE> 5
LIST OF SCHEDULES
Schedule 2.2 -- Excluded Property
Schedule 3.3 -- Consents
Schedule 3.4 -- Licenses
Schedule 3.5 -- Real Property
Schedule 3.6 -- Tangible Personal Property
Schedule 3.7 -- Assumed Contracts
Schedule 3.9 -- Intangibles
Schedule 3.10 -- Insurance Policies
Schedule 3.12 -- Employee Matters
Schedule 3.14 -- Legal Matters
Schedule 8.2(f) -- Form of Opinion of Seller's Counsel
Schedule 8.3(d) -- Form of Opinion of Buyer's Counsel
Schedule 9.4 -- Escrow Agreement
Exhibit A -- Right of First Refusal Agreement
Exhibit B -- Affiliation Agreement
iv
<PAGE> 6
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is dated as of January 26, 1998, by and
between DP Media of Milwaukee, Inc., a Florida corporation ("Buyer"), Paxson
Milwaukee License, Inc. ("Paxson License"), a Florida corporation and Paxson
Communications of Milwaukee-55, Inc., a Florida corporation ("Paxson
Communications" and "Paxson- Licensee" collectively the "Seller").
RECITALS
A. Paxson License is the licensee of Television Station WPXE(TV),
Kenosha, Wisconsin (the "Station"), pursuant to authorizations issued by the
Federal Communications Commission ("FCC"), and Paxson Communications owns the
equipment and property necessary for the operation of the Station.
B. Seller desires to sell, and Buyer wishes to buy, the business of the
Station and substantially all the assets that are owned by Seller or in which
Seller has a transferable interest and which are used or useful in the business
or operations of the Station, for the price and on the terms and conditions set
forth in this Agreement.
AGREEMENTS
In consideration of the above recitals and of the mutual agreements and
covenants contained in this Agreement, Buyer and Seller, intending to be bound
legally, agree as follows:
SECTION 1. DEFINITIONS
The following terms, as used in this Agreement, shall have the meanings
set forth in this Section:
"Assets" means the assets to be sold, transferred, assigned or
delivered to Buyer under this Agreement, as specified in Section 2.1, except
that "Assets" shall not include the Excluded Assets.
"Assumed Contracts" means (i) all Contracts listed in Schedule 3.7 that
are marked to indicate that they are to be assumed by Buyer upon its purchase of
the Station, (ii) all Contracts entered into by Seller in the ordinary course of
business which comply with the provisions of Section 5.2 hereof; and (iii) any
other Contracts entered into by Seller between the date of this Agreement and
the Closing Date that Buyer agrees in writing to assume.
"Closing" means the consummation of the purchase and sale of the Assets
pursuant to this Agreement in accordance with the provisions of Section 8.
<PAGE> 7
"Closing Date" means the date on which the Closing occurs, as
determined pursuant to Section 8.
"Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to transfer the Assets to Buyer or
otherwise to consummate the transactions contemplated by this Agreement.
"Contracts" means all contracts, leases, non-governmental licenses, and
other agreements (including, without limitation, leases for personal or real
property and employment agreements), written or oral (including any amendments
and other modifications thereto) to which Seller is a party or which are binding
upon Seller and which relate to or affect the Assets or the business or
operations of the Station, and (i) which are in effect on the date of this
Agreement or (ii) which are entered into by Seller between the date of this
Agreement and the Closing Date.
"Excluded Assets" means those assets specified in Section 2.2.
"FCC" means the Federal Communications Commission.
"FCC Consent" means action by the FCC granting its consent to the
assignment of the FCC Licenses to Buyer as contemplated by this Agreement.
"FCC Licenses" means all Licenses and/or Construction Permits issued by
the FCC to Seller in connection with the business or operations of the Station.
"Final Order" means an action by the FCC that has not been reversed,
stayed, enjoined, set aside, annulled, or suspended, and with respect to which
(i) no requests are pending for administrative or judicial review,
reconsideration, appeal, or stay, and (ii) the time for filing any such requests
and the time for the FCC to set aside the action on its own motion have expired.
"Intangibles" means all copyrights, trademarks, trade names, service
marks, service names, licenses, patents, permits, jingles, proprietary
information, technical information and data, machinery and equipment warranties,
and other similar intangible property rights and interests (and any goodwill
associated with any of the foregoing) applied for, issued to, or owned by Seller
or under which Seller is licensed or franchised and which are used or useful in
the business and operations of the Station, together with any additions thereto
between the date of this Agreement and the Closing Date.
"Licenses" means all licenses, permits, and other authorizations issued
by the FCC, the Federal Aviation Administration, or any other federal, state, or
local government authorities to Seller in connection with the conduct of the
business or operations of the
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<PAGE> 8
Station, together with any additions thereto between the date of this Agreement
and the Closing Date.
"Permitted Liens" means liens for taxes not yet due and payable.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, or any
governmental entity.
"Purchase Price" means the purchase price specified in Section 2.3.
"Real Property" means all real property, interests in real property,
leaseholds and subleaseholds, purchase options, easements, licenses, rights of
access, and rights of way, and all buildings and other improvements thereon,
which are used or useful in the business or operations of the Station, together
with any additions thereto between the date of this Agreement and the Closing
Date.
"Tangible Personal Property" means all machinery, equipment, tools,
motor vehicles, furniture, leasehold improvements, office equipment, plant,
inventory, spare parts, and other tangible personal property which is owned by
the Seller or in which Seller has an interest and which is used or useful in the
conduct of the business or operations of the Station, together with any
additions thereto between the date of this Agreement and the Closing Date, but
excluding any Tangible Personal Property consumed in the ordinary course of
business between the date hereof and the Closing Date.
SECTION 2. PURCHASE AND SALE OF ASSETS
2.1 Agreement to Sell and Buy. Subject to the terms and conditions set
forth in this Agreement, Seller hereby agrees to sell, transfer, assign and
deliver to Buyer on the Closing Date, and Buyer agrees to purchase and accept,
all of the Assets and property interests owned by Seller or in which Seller has
a property interest which are used or useful in the conduct of the business or
operations of the Station, together with any additions thereto between the date
of this Agreement and the Closing Date, but excluding the assets described in
Section 2.2, free and clear of any claims, liabilities, security interests,
mortgages, liens, pledges, conditions, charges, or encumbrances of any nature
whatsoever (except for Permitted Liens), including, without limitation, the
following:
(a) The Tangible Personal Property;
(b) The Real Property;
(c) The Licenses;
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<PAGE> 9
(d) The Assumed Contracts;
(e) The Intangibles, including the goodwill of the Station,
if any;
(f) All proprietary information, technical information and
data, machinery and equipment warranties, maps, computer discs and tapes, plans,
diagrams, blueprints, and schematics, including filings with the FCC relating to
the business and operation of the Station, which belong to Seller and are within
its possession and control;
(g) All choses in action of Seller relating to the Station
that are assignable to Buyer as provided herein;
(h) All records required by the FCC to be kept by the Station
and copies of all other books and records which belong to Seller and are within
its possession and control relating to the business or operations of the Station
(exclusive of corporate, financial and accounting records), including executed
copies of the Assumed Contracts; and
2.2 Excluded Assets. The Excluded Assets shall include the following:
(a) Seller's cash on hand as of the Closing and all other cash in
any of Seller's bank or savings accounts; any insurance policies, letters of
credit, or other similar items and cash surrender value in regard thereto; the
Station's accounts receivable; and any stocks, bonds, certificates of deposit
and similar securities or other investments;
(b) All corporate and accounting records of Seller and copies of
all other books and records relating to the business and operations of the
Station; and
(c) Any pension, profit-sharing or employee benefit plans, and any
collective bargaining agreements; and
(d) All property listed on Schedule 2.2 hereto.
2.3 Purchase Price. The Purchase Price for the Assets shall be Six
Million Dollars ($6,000,000), adjusted as provided below:
(a) Prorations. The Purchase Price shall be increased or decreased
as required to effectuate the proration of expenses as of 11:59 p.m. local time,
on the day prior to the Closing Date. All expenses arising from the operation of
the Station, including business and license fees, utility charges, real and
personal property taxes and assessments levied against the Assets, property and
equipment rentals, applicable copyright or other fees, sales and service
charges, taxes (except for taxes arising from the transfer of the Asset under
this Agreement which shall be governed by Section 11.1 hereof), prepaid time
sales
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agreements, FCC regulatory fees, and similar prepaid and deferred items, shall
be prorated between Buyer and Seller such that Seller shall be solely
responsible for all such expenses, costs, and liabilities allocable to the
period prior to the Closing Date, and Buyer shall be solely responsible for all
such expenses, costs, and liabilities allocable to the period on and after the
Closing Date. Notwithstanding the preceding sentence, there shall be no
adjustment for, and Seller shall remain solely liable with respect to, any
Contracts not included in the Assumed Contracts and any other obligation or
liability not being assumed by Buyer in accordance with Section 2.5.
(b) Manner of Determining Adjustments. Any adjustments will,
insofar as feasible, be determined and paid on the Closing Date, with final
settlement and payment by the appropriate party occurring no later than sixty
(60) days after the Closing Date or such other date as the parties shall
mutually agree upon in writing.
2.4 Payment of Purchase Price. The Purchase Price shall be paid by
Buyer to Seller by wire transfer of immediately available funds pursuant to wire
instructions provided by Seller to Buyer at least two (2) days prior to Closing.
2.5 Assumption of Liabilities and Obligations. As of the Closing Date,
Buyer shall assume and undertake to pay, discharge, and perform all obligations
and liabilities of the Seller under the Licenses and the Assumed Contracts
insofar as they relate to the time on and after the Closing Date, and arise out
of events related to Buyer's ownership of the Assets or its operation of the
Station on or after the Closing Date. Buyer shall not assume any other
obligations or liabilities of Seller, including (i) any obligations or
liabilities under any Contract not included in the Assumed Contracts, (ii) any
obligations or liabilities under the Assumed Contracts relating to the period
prior to the Closing Date, (iii) any claims or pending litigation or proceedings
relating to the operation of the Station prior to the Closing, (iv) any
obligations or liabilities arising under agreements entered into other than the
Assumed Contracts, (v) any obligation to any employee of the Station for
severance benefits, vacation time, or sick leave accrued prior to the Closing
Date, (vi) any obligations or liabilities caused by, arising out of, or
resulting from any action or omission of Seller prior to the Closing, and all
such obligations and liabilities shall remain and be the obligations and
liabilities solely of Seller, or (vii) any obligations or liabilities of Seller
under any employee pension, retirement, or other benefit plans or collective
bargaining agreements.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 Organization, Standing and Authority. Seller is a corporation
duly organized, validly existing, and in good standing under the laws of Florida
and duly qualified, in good standing and authorized to transact business in
Wisconsin. Seller has all requisite corporate
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power and authority (i) to own, lease, and use the Assets as now owned, leased,
and used, (ii) to conduct the business operations of the Station as now
conducted, and (iii) to execute and deliver this Agreement and the documents
contemplated hereby, and to perform and comply with all of the terms, covenants,
and conditions to be performed and complied with by Seller hereunder and
thereunder. Seller is not a participant of any joint venture or partnership with
any person or entity with respect to the operations of the Station or any of the
Assets.
3.2 Authorization and Binding Obligation. The execution, delivery, and
performance of this Agreement by Seller has been duly authorized by all
necessary corporate actions on the part of Seller. This Agreement has been duly
executed and delivered by Seller and, assuming the due execution and delivery
hereof by Buyer, constitutes the legal, valid, and binding obligation of Seller,
enforceable against Seller in accordance with its terms except as the
enforceability of this Agreement may be affected by bankruptcy, insolvency, or
similar laws affecting creditors' rights generally, and by judicial discretion
in the enforcement of equitable remedies.
3.3 Absence of Conflicting Agreements. Subject to obtaining the
Consents listed on Schedule 3.3, the execution, delivery and performance of this
Agreement and the documents contemplated hereby (with or without the giving of
notice, the lapse of time, or both): (i) do not require the consent of any third
party; (ii) will not conflict with, result in a breach of, or constitute a
default under, any law, judgment, order, ordinance, injunction, decree, rule,
regulation, or ruling of any court or governmental instrumentality in a
proceeding involving Seller; (iii) will not conflict with, constitute grounds
for termination of, result in a breach of, constitute a default under, or
accelerate or permit the acceleration of any performance required by the terms
of, any agreement, instrument, license, or permit to which Seller is a party or
by which Seller may be bound; (iv) will not create any claim, liability,
mortgage, lien, pledge, condition, charge, or encumbrance of any nature
whatsoever upon any of the Assets; and (v) will not conflict with any provision
of Seller's Articles of Incorporation or By-laws.
3.4 Governmental Licenses. Except as set forth on Schedule 3.4, (i)
Schedule 3.4 includes a true and complete list of the Licenses and lists pending
applications affecting the Licenses; (ii) Seller has delivered to Buyer true and
complete copies of the Licenses listed on such Schedule (including any amendment
and other modifications thereto), (iii) the Licenses have been validly issued,
and Seller is the authorized legal holder thereof, (iv) the Licenses listed on
Schedule 3.4 comprise all of the licenses, permits, and other authorizations
required from any governmental or regulatory authority for the lawful conduct of
the business and operations of the Station in the manner and to the full extent
they are now conducted, (v) none of the Licenses is subject to any restriction
or condition that would limit the full operation of the Station as now operated,
(vi) the Licenses are in full force and effect, in all material respects, and
the conduct of the business and operations of the Station is in material
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accordance therewith, and (vii) Seller has no reason to believe that any of the
Licenses would not be renewed by the FCC or other granting authority in the
ordinary course. The Station's city of license, as determined by the FCC, is
located within the Milwaukee, Wisconsin Area of Dominant Influence as defined by
the 1991-1992 Area of Dominant Influence Market Guide published by The Arbitron
Co. and the Milwaukee, Wisconsin Designated Market Area as defined by the 1995
United States Television Household Estimates published by Nielsen Media
Research. To the best of Seller's knowledge, on or before October 1, 1996, the
Station made a valid election of must carry with respect to each cable system
located within the Station's Area of Dominant Influence. Except as disclosed on
Schedule 3.4, no cable system on which the Station is entitled to must carry
status has advised the Station of any signal quality or copyright indemnity or
other prerequisite to cable carriage of the Station's signal, and no cable
system has declined or threatened to decline such carriage or failed to respond
to a request for carriage or sought any form of relief from carriage from the
FCC.
3.5 Title to and Condition of Real Property. Schedule 3.5 contains a
complete and accurate description of all the Real Property and Seller's
interests therein (including street address, legal description, owner, and use
and the location of all improvements thereon). The Real Property listed on
Schedule 3.5 comprises all real property interests necessary to conduct the
business and operations of the Station as now conducted. Seller has good and
marketable fee simple title, insurable at standard rates, to all fee estates
(including the improvements thereon) included in the Real Property, free and
clear of all liens, mortgages, pledges, covenants, easements, restrictions,
encroachments, leases, charges, and other claims and encumbrances of any nature
whatsoever, and without reservation or exclusion of any mineral, timber, or
other rights or interests, except for liens for real estate taxes not yet due
and payable and liens disclosed on Schedule 3.5. With respect to each leasehold
or subleasehold interest included in the Real Property being conveyed under this
Agreement, so long as Seller fulfills its obligations under the lease therefor,
Seller has enforceable rights to nondisturbance and quiet enjoyment, and no
third party holds any interest in the leased premises with the right to
foreclose upon Seller's leasehold or subleasehold interest. Seller has full
legal and practical access to the Real Property. All easements, rights-of-way,
and real property licenses relating to the Real Property have been properly
recorded in the appropriate public recording offices. Seller shall cooperate
with Buyer and provide such assistance as Buyer may reasonably request in
connection with Buyer's efforts to obtain on or before Closing, at Buyer's
election and expense, a current survey and, at Buyer's election and at Seller's
expense, a policy of title insurance with respect to the Real Property,
including, without limitation, using its best efforts to cause all lease
agreements relating to the Real Property to be recorded in the appropriate
public recording offices. All towers, guy anchors, and buildings and other
improvements included in the Assets are located entirely on the Real Property
listed in Schedule 3.5. Seller has delivered to Buyer true and complete copies
of all deeds pertaining to the Real Property. All Real Property (including the
improvements thereon) (i) is in good condition and repair consistent with its
present use,
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(ii) is available for immediate use in the conduct of the business and
operations of the Station, and (iii) complies in all material respects with all
applicable building or zoning codes and the regulations of any governmental
authority having jurisdiction. Seller has full legal and practical access to the
Real Property.
3.6 Title to and Condition of Tangible Personal Property. Schedule 3.6
lists all material items of Tangible Personal Property. The Tangible Personal
Property listed on Schedule 3.6 comprises all material items of tangible
personal property used to conduct the business and operations of the Station as
now conducted. Except as described in Schedule 3.6, Seller owns and has good
title to each item of Tangible Personal Property, and none of the Tangible
Personal Property owned by Seller is subject to any security interest, mortgage,
pledge, conditional sales agreement, or other lien or encumbrance, except
Permitted Liens. Each item of Tangible Personal Property is available for
immediate use in the business and operations of the Station. All items of
transmitting and studio equipment included in the Tangible Personal Property (i)
have been maintained in a manner consistent with generally accepted standards of
good engineering practice, and (ii) will permit the Station and any auxiliary
broadcast stations used in the operation of the Station to operate, in all
material respects, in accordance with the terms of the FCC Licenses and the
rules and regulations of the FCC, and with all other applicable federal, state,
and local statutes, ordinances, rules, and regulations.
3.7 Assumed Contracts. Schedule 3.7 is a true and complete list of all
Contracts. Seller has delivered to Buyer true and complete copies of all written
Contracts and true and complete memoranda of all oral Contracts (including any
amendments and other modifications to such Contracts). Other than the Contracts
listed on Schedule 3.7 or any other Schedule to this Agreement, Seller requires
no contract, lease, or other agreement to enable it to carry on its business as
now conducted. All of the Assumed Contracts are in full force and effect, and
are valid, binding, and enforceable in accordance with their terms. To Seller's
knowledge, there is not under any Assumed Contract any default by any party
thereto or any event that, after notice or lapse of time or both, could
constitute a default. Seller is not aware of any intention by any party to any
Assumed Contract (i) to terminate such contract or amend the terms thereof, (ii)
to refuse to renew the Assumed Contract upon expiration of its term, or (iii) to
renew the Assumed Contract upon expiration only on terms and conditions which
are more onerous than those now existing. Except for the need to obtain the
Consents listed in Schedule 3.3, Seller has full legal power and authority to
assign its rights under the Assumed Contracts to Buyer in accordance with this
Agreement, and such assignment will not affect the validity, enforceability, or
continuation of any of the Assumed Contracts.
3.8 Consents. Except for the FCC Consent provided in Section 6.1 and
the other Consents described in Schedule 3.3, no consent, approval, permit, or
authorization of, or declaration to or filing with any governmental or
regulatory authority, or any other third
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party is required (i) to consummate this Agreement and the transactions
contemplated hereby, (ii) to permit Seller to sell, transfer, assign or deliver
the Assets to Buyer, or (iii) to enable Buyer to conduct the business and
operations of the Station in essentially the same manner as such business and
operations are now conducted.
3.9 Intangibles. Schedule 3.9 is a true and complete list of all
material Intangibles (exclusive of those listed in Schedule 3.4), all of which
are valid and in good standing and uncontested. Seller has delivered to Buyer
copies of all documents establishing or evidencing all Intangibles. To the best
knowledge of Seller, Seller is not infringing upon or otherwise acting adversely
to any trademarks, trade names, service marks, service names, copyrights,
patents, patent applications, know-how, methods, or processes owned by any other
person or persons, and there is no claim or action pending, or to the knowledge
of Seller threatened, with respect thereto. The Intangibles listed on Schedule
3.9 comprise all intangible property interests necessary to conduct the business
and operations of the Station as now conducted.
3.10 Insurance. Schedule 3.10 is a true and complete list of all
insurance policies of Seller that insure any part of the Assets or the business
of the Station. All policies of insurance listed in Schedule 3.10 are in full
force and effect and are adequate in amount with respect to, and for the full
value (subject to customary deductibles) of, the Assets, and insure the Assets
against all customary and foreseeable risks.
3.11 Reports. Except as set forth in Schedule 3.4, all returns,
reports, and statements that the Station is currently required to file with the
FCC or place in its Public File or file with any other governmental agency have
been filed, and all reporting requirements of the FCC and other governmental
authorities having jurisdiction over Seller and the Station have been complied
with in all material respects and all of such returns, reports, and statements
are substantially complete and correct as filed. Seller has timely paid to the
FCC all annual regulatory fees required to be paid by Seller with respect to the
FCC Licenses.
3.12 Personnel.
(a) Employees and Compensation. Schedule 3.12 contains a true
and complete list of all employees of the Station, their job description, date
of hire, salary and amount and date of last salary increase. Schedule 3.12 also
contains a true and complete list as of the date of this Agreement of all
employee benefit plans or arrangements applicable to the employees of the
Station and all fixed or contingent liabilities or obligations of Seller with
respect to any person now or formerly employed by Seller at the Station,
including pension or thrift plans, individual or supplemental pension or accrued
compensation arrangements, contributions to hospitalization or other health or
life insurance programs, incentive plans, bonus arrangements, and vacation, sick
leave, disability and termination arrangements or policies, including workers'
compensation policies, and a description of all
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fixed or contingent liabilities or obligations of Seller with respect to any
person now or formerly employed at the Station or any person now or formerly
retained as an independent contractor at the Station.
(b) Labor Relations. Seller is not a party to or subject to any
collective bargaining agreements with respect to the Station. Seller has no
written or oral contracts of employment with any employee of the Station, other
than those listed in Schedule 3.7.
(c) Liabilities. Seller has no liability of any kind to or in
respect of any employee benefit plan, including withdrawal liability under
Section 4201 of ERISA. Seller has not incurred any accumulated funding
deficiency within the meaning of ERISA or Section 4971 of the Internal Revenue
Code. Seller has not failed to make any required contributions to any employee
benefit plan. The Pension Benefit Guaranty Corporation has not asserted that
Seller has incurred any liability in connection with any such plan. No lien has
been attached and no person has threatened to attach a lien on any property of
Seller as a result of a failure to comply with ERISA.
3.13 Taxes. Seller has filed or caused to be filed all federal income
tax returns and all other federal, state, county, local, or city tax returns
which are required to be filed, and it has paid or caused to be paid all taxes
shown on those returns or on any tax assessment received by it to the extent
that such taxes have become due. There are no governmental investigations or
other legal, administrative, or tax proceedings pursuant to which Seller is or
could be made liable for any taxes, penalties, interest, or other charges, the
liability for which could extend to Buyer as transferee of the business of the
Station, and no event has occurred that could impose on Buyer any transferee
liability for any taxes, penalties, or interest due or to become due from
Seller.
3.14 Claims and Legal Actions. Except for any FCC rulemaking
proceedings generally affecting the broadcasting industry, and except as set
forth on Schedule 3.14, there is no claim, legal action, counterclaim,
arbitration, governmental investigation or other legal, administrative or tax
proceeding, nor any order, decree or judgment, in progress or pending, or to the
knowledge of Seller threatened, against or relating to Seller with respect to
its ownership or operation of the Station or otherwise relating to the Assets or
the business or operations of the Station, nor does Seller know or have reason
to be aware of any basis for the same. In particular, but without limiting the
generality of the foregoing, and except as forth on Schedule 3.14, to the best
of Seller's knowledge, there are no applications, complaints or proceedings
pending or, to the best of its knowledge, threatened (i) before the FCC relating
to the business or operations of the Station other than rule making proceedings
which affect the television industry generally, (ii) before any federal or state
agency relating to the business or operations of the Station involving charges
of illegal discrimination under any federal or state employment laws or
regulations, or (iii) before any federal, state, or
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local agency relating to the business or operations of the Station involving
zoning issues under any federal, state, or local zoning law, rule, or
regulation.
3.15 Environmental Matters.
(a) Seller has complied and is in compliance in all material
respects with all laws, rules, and regulations of all federal, state, and local
governments (and all agencies thereof) concerning the environment, public health
and safety, and employee health and safety, and no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, demand, or notice has been
filed or commenced against Seller in connection with its ownership or operation
of the Station or the Assets alleging any failure to comply with any such law,
rule, or regulation.
(b) To the best of Seller's knowledge, Seller has no liability
relating to its ownership and operation of the Station or the Assets (and there
is no basis related to the past or present operations, properties, or facilities
of Seller for any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand against Seller giving rise to any such
liability) under any law, rule, or regulation of any federal, state, or local
government (or agency thereof) concerning release or threatened release of
hazardous substances, public health and safety, or pollution or protection of
the environment.
(c) To the best of Seller's knowledge, Seller has no liability
relating to its ownership and operation of the Station or the Assets (and Seller
has not handled or disposed of any substance, arranged for the disposal of any
substance, or owned or operated any property or facility in any manner that
could form the basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand (under the common law or
pursuant to any statute) against Seller giving rise to any such liability) for
damage to any site, location, or body of water (surface of subsurface) or for
illness or personal injury.
(d) To the best of Seller's knowledge, Seller has no liability
relating to its ownership and operation of the Station or the Assets (and there
is no basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against Seller giving rise
to any such liability) under any law, rule, or regulation of any federal, state,
or local government (or agency thereof) concerning employee health and safety.
(e) In connection with its ownership or operation of the Station
or the Assets, Seller has obtained and been in material compliance with all of
the terms and conditions of all permits, licenses, and other authorizations
which are required under, and has complied in all material respects with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are
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contained in, all federal, state, and local laws, rules, and regulations
(including all codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety,
worker health and safety, and pollution or protection of the environment,
including laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes.
(f) To the best of Seller's knowledge, all properties and
equipment used in the business of the Station and the Assets are and have been
free of asbestos and asbestos- related products, PCB's, dioxins, and Extremely
Hazardous Substances (as defined in Section 302 of the Emergency Planning and
Community Right-to-Know Act).
(g) No pollutant, contaminant, or chemical, industrial, hazardous,
or toxic material or waste has ever been manufactured, buried, stored, spilled,
leaked, discharged, emitted, or released by Seller in connection with its
ownership and operation of the Station or the Assets or, to the best of Seller's
knowledge, after due investigation, by any other party on any Real Property.
3.16 Compliance with Laws. To the best of Seller's knowledge and except
as set forth on Schedule 3.14, Seller is in compliance in all material respects
with the Licenses and all federal, state, and local laws, rules, regulations,
and ordinances applicable or relating to the ownership and operation of the
Station and the Assets. To the best of Seller's knowledge, neither the ownership
or use of the properties of the Station or the Assets nor the conduct of the
business or operations of the Station conflicts with the rights of any other
person or entity.
3.17 Conduct of Business in Ordinary Course. Since February 28, 1997,
Seller has conducted the business and operations of the Station only in the
ordinary course and has not:
(a) Suffered any material adverse change in the assets or
properties of the Station, including any damage, destruction, or loss affecting
any assets used or useful in the conduct of the business of the Station;
(b) Made any sale, assignment, lease, or other transfer of any of
the Station's properties other than in the normal and usual course of business
with suitable replacements being obtained therefor;
(c) Canceled any debts owed to or claims held by Seller with
respect to the Station, except in the normal and usual course of business;
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(d) Suffered any material write-down of the value of any Assets or
any material write-off as uncollectible of any accounts receivable of the
Station; or
(e) Transferred or granted any right under, or entered into any
settlement regarding the breach or infringement of, any license, patent,
copyright, trademark, trade name, franchise, or similar right, or modified any
existing right relating to the Station.
3.18 Full Disclosure. No representation or warranty made by Seller in
this Agreement or in any certificate, document, or other instrument furnished or
to be furnished by Seller pursuant hereto contains or will knowingly contain any
untrue statement of a material fact, or omits or will omit to state any material
fact required to make any statement made herein or therein not misleading.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 Organization, Standing and Authority. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Florida and at Closing will be duly qualified to conduct business as a foreign
corporation in the State of Wisconsin. Buyer has all requisite corporate power
and authority to execute and deliver this Agreement and the documents
contemplated hereby, and to perform and comply with all of the terms, covenants,
and conditions to be performed and complied with by Buyer hereunder and
thereunder.
4.2 Authorization and Binding Obligation. The execution, delivery, and
performance of this Agreement by Buyer have been duly authorized by all
necessary actions on the part of Buyer. This Agreement has been duly executed
and delivered by Buyer and constitutes the legal, valid, and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms except as the
enforceability of this Agreement may be affected by bankruptcy, insolvency, or
similar laws affecting creditors' rights generally and by judicial discretion in
the enforcement of equitable remedies.
4.3 Absence of Conflicting Agreements. Subject to obtaining the
Consents, the execution, delivery, and performance by Buyer of this Agreement
and the documents contemplated hereby (with or without the giving of notice, the
lapse of time, or both): (i) do not require the consent of any third party; (ii)
will not conflict with the Articles of Incorporation or Bylaws of Buyer; (iii)
will not conflict with, result in a breach of, or constitute a default under,
any law, judgment, order, injunction, decree, rule, regulation, or ruling of any
court or governmental instrumentality; (iv) will not conflict with, constitute
grounds for termination of, result in a breach of, constitute a default under,
or accelerate or
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permit the acceleration of any performance required by the terms of, any
agreement, instrument, license, or permit to which Buyer is a party or by which
Buyer may be bound, such that Buyer could not acquire the Assets or operate the
Station.
4.4 Full Disclosure. No representation or warranty made by Buyer in
this Agreement or in any certificate, document, or other instrument furnished or
to be furnished by Buyer pursuant hereto contains or will knowingly contain any
untrue statement of a material fact.
4.5 Buyer Qualifications. Buyer is legally, financially and otherwise
qualified to be the licensee of, acquire, own and operate the Station under the
Communications Act of 1934, as amended, and the rules, regulations and policies
of the FCC. Buyer knows of no fact that would, under existing law and the
existing rules, regulations, policies and procedures of the FCC disqualify Buyer
as assignee of the FCC Licenses or as the owner and operator of the Station.
SECTION 5. OPERATIONS OF THE STATION PRIOR TO CLOSING
5.1 Generally. Between the date of this Agreement and the Closing Date,
Seller shall operate the Station in the ordinary course of business in
accordance with its past practices (except where such conduct would conflict
with the following covenants or with Seller's other obligations under this
Agreement), and in accordance with the other covenants in this Section 5.
5.2 Contracts. Seller will not, without the prior written consent of
Buyer, enter into any contract or commitment relating to the Station or the
Assets, or amend or terminate any Assumed Contract (or waive any material right
thereunder), or incur any obligation (including obligations relating to the
borrowing of money or the guaranteeing of indebtedness) that will be binding on
Buyer after Closing. Prior to the Closing Date, Seller shall deliver to Buyer a
list of all Contracts entered into between the date of this Agreement and the
Closing Date, together with copies of such Contracts.
5.3 Disposition of Assets. Seller shall not sell, assign, lease, or
otherwise transfer or dispose of any of the Assets, except where no longer used
or useful in the business or operations of the Station or in connection with the
acquisition of replacement property of equivalent kind and value.
5.4 Encumbrances. Seller shall not create, assume or permit to exist
any claim, liability, mortgage, lien, pledge, condition, charge, or encumbrance
of any nature whatsoever upon the Assets, except for (i) liens which shall be
removed prior to the Closing Date, (ii) liens for current taxes not yet due and
payable, and (iii) mechanics' liens and other similar
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liens, which shall be removed prior to the Closing Date either by payment or
posting an appropriate indemnity bond.
5.5 Licenses. Seller shall not cause or permit, by any act or failure
to act, any of the Licenses issued by the FCC to expire or to be revoked,
suspended, or modified, or take any action that could cause the FCC or any other
governmental authority to institute proceedings for the suspension, revocation,
or adverse modification of any of the Licenses. Seller shall not fail to
prosecute with due diligence any applications to any governmental authority in
connection with the operation of the Station.
5.6 Rights. Seller shall not knowingly waive any material right
relating to the Station or any of the Assets. Seller shall not take any action
to intentionally cause any cable system located within the Station's Area of
Dominant Influence to refuse to carry the Station's signal.
5.7 Access to Information. Seller shall give Buyer and its counsel,
accountants, engineers, and other authorized representatives reasonable access
during normal business hours to the Assets and to all other properties,
equipment, books, records, Contracts, and documents relating to the Station for
the purpose of audit and inspection and will furnish or cause to be furnished to
Buyer or its authorized representatives all material information with respect to
the affairs and business of the Station that Buyer may reasonably request
(including any operations reports produced with respect to the affairs and
business of the Station).
5.8 Insurance. Seller shall maintain substantially the same insurance
coverage provided by insurance policies on the Station and the Assets effective
on the date of this Agreement..
5.9 Consents. Seller shall use its best efforts to obtain the Consents
and estoppel certificates described in Section 8.2(b)-(c), without any material
change in the terms or conditions of any Contract or License as in effect on the
date of this Agreement. Seller shall advise Buyer of any communications it
receives concerning the Consents and of any conditions proposed, considered, or
requested for any of the Consents. Upon Buyer's request, Seller shall cooperate
with Buyer and use its best efforts to obtain from the lessors under each Real
Property lease such estoppel certificates and consents to the collateral
assignment of the lessee's interest under each such lease as Buyer or Buyer's
lenders may request.
5.10 Books and Records. Seller shall maintain its books and records
relating to the Station and Assets in accordance with past practices.
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5.11 Notification. Seller shall promptly notify Buyer in writing of any
material change in any of the information contained in Seller's representations
and warranties contained in Section 3 of this Agreement.
5.12 Compliance with Laws. Seller shall comply in all material respects
with all laws, rules, and regulations applicable or relating to the ownership
and operation of the Station or the Assets.
5.13 Compensation. Seller shall not increase the compensation, bonuses,
or other benefits payable or to be payable to any person employed in connection
with the conduct of the business or operations of the Station, except in
accordance with past practices.
5.14 No Inconsistent Action. Seller shall not take any action that
is inconsistent with its obligations under this Agreement or that could hinder
or delay the consummation of the transactions contemplated by this Agreement.
5.15 Maintenance of Assets. Seller shall use its best efforts and take
all reasonable actions to maintain all of the Assets in good condition (ordinary
wear and tear excepted), and use, operate, and maintain all of the Assets in a
reasonable manner and in accordance with the terms of the FCC Licenses, all
rules and regulations of the FCC and generally accepted standards of good
engineering practice. Seller shall maintain inventories of spare parts and
expendable supplies at levels consistent with past practices. If any loss,
damage, impairment, confiscation, or condemnation of or to any of the Assets
occurs, Seller shall repair, replace, or restore the Assets to their prior
condition as represented in this Agreement as soon thereafter as possible, and
Seller shall use the proceeds of any claim under any insurance policy solely to
repair, replace, or restore any of the Assets that are lost, damaged, impaired,
or destroyed.
5.16 Financial Information. Seller shall furnish to Buyer such
financial information regarding the Assets and the business or operations of the
Station (including information on payables and receivables ) as Buyer may
reasonably request. All financial information delivered by Seller to Buyer
pursuant to this Section shall be prepared from the books and records of Seller
in accordance with generally accepted accounting principles consistently
applied, shall accurately reflect the books, records, and accounts of the
Station, shall be complete and correct in all material respects, and shall
present fairly the financial condition of the Station as at their respective
dates and results of operations for the periods then ended.
5.17 Financing Leases. Seller will satisfy at or prior to Closing all
outstanding obligations under capital and financing leases with respect to any
of the Assets and obtain good title to the Assets leased by Seller pursuant to
those leases so that those Assets shall be transferred to Buyer at Closing free
of any interest of the lessors.
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5.18 Programming. Seller shall not make any material changes in the
broadcast hours or in the percentages of types of programming broadcast by the
Station, or make any other material change in the Station's programming
policies.
5.19 Preservation of Business. Seller shall use its best efforts to
preserve the business and organization of the Station and use its best efforts
to keep available to the Station its present employees and the Station's present
relationships with suppliers and others having business relations with it, to
the end that the business and operations of the Station shall be unimpaired at
the Closing Date.
SECTION 6. SPECIAL COVENANTS AND AGREEMENTS
6.1 FCC Consent.
(a) The assignment of the FCC Licenses in connection with the
purchase and sale of the Station and the Assets pursuant to this Agreement shall
be subject to the prior consent and approval of the FCC.
(b) Seller and Buyer shall promptly prepare an appropriate
application for the FCC Consent and shall file the application with the FCC
within three (3) business days of the execution of this Agreement. The parties
shall prosecute the application with all reasonable diligence and otherwise use
their reasonable best efforts to obtain a grant of such application as
expeditiously as practicable. Each party agrees to comply with any condition
imposed on it by the FCC Consent, except that no party shall be required to
comply with a condition if (1) the condition was imposed on it as the result of
a circumstance the existence of which does not constitute a breach by the party
of any of its representations, warranties, or covenants under this Agreement,
and (2) compliance with the condition would have a material adverse effect upon
it. Buyer and Seller shall oppose any requests for reconsideration or judicial
review of the FCC Consent, provided, however, that the parties shall continue to
have all rights available to them pursuant to Section 9 hereof. If the Closing
shall not have occurred for any reason within the original effective period of
the FCC Consent, and neither party shall have terminated this Agreement under
Section 9, the parties shall jointly request an extension of the effective
period of the FCC Consent. No extension of the FCC Consent shall limit the
exercise by either party of its rights under Section 9.
6.2 Control of the Station. Prior to Closing, Buyer shall not, directly
or indirectly, control, supervise, direct, or attempt to control, supervise, or
direct, the operations of the Station; such operations, including complete
control and supervision of all of the Station programs, employees, and policies,
shall be the sole responsibility of the Seller until the Closing.
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6.3 Risk of Loss.
(a) The risk of any loss, damage, impairment, confiscation, or
condemnation of any of the Assets from any cause whatsoever shall be borne by
Seller at all times prior to the Closing.
(b) If any damage or destruction of the Assets or any other event
occurs which (i) causes the Station to cease broadcasting operations for a
period of seven or more days or (ii) prevents in any material respect signal
transmission by the Station in the normal and usual manner and Seller fails to
restore or replace the Assets so that normal and usual transmission is resumed
within 30 days of the damage, destruction or other event, Buyer, in its sole
discretion, may (x) terminate this Agreement forthwith without any further
obligations hereunder upon written notice to Seller or (y) proceed to consummate
the transaction contemplated by this Agreement and complete the restoration and
replacement of the Assets after the Closing Date, in which event Seller shall
deliver to Buyer all insurance proceeds received in connection with such damage,
destruction or other event.
6.4 Confidentiality. Except as necessary for the consummation of the
transaction contemplated by this Agreement, including Buyer's obtaining of
financing related hereto, and except as and to the extent required by law,
including, without limitation, disclosure requirements of federal or state
securities laws and rules and regulations of securities markets, each party will
keep confidential any information obtained from the other party in connection
with the transactions contemplated by this Agreement. Except as provided in this
Paragraph 6.4 each party will refrain from disclosing any such information to
any third party. If this Agreement is terminated, each party will return to the
other party all copies of all documents and all other information obtained by
such party from the other party in connection with the transactions contemplated
by this Agreement.
6.5 Cooperation. Buyer and Seller shall cooperate fully with each other
and their respective counsel and accountants in connection with any actions
required to be taken as part of their respective obligations under this
Agreement, and Buyer and Seller shall execute such other documents as may be
necessary and desirable to the implementation and consummation of this
Agreement, and otherwise use their reasonable best efforts to consummate the
transaction contemplated hereby and to fulfill their obligations under this
Agreement. Notwithstanding the foregoing, neither Buyer nor Seller shall have
any obligation (i) to expend funds to obtain any of the Consents or (ii) to
agree to any material adverse change in any License or Assumed Contract to
obtain a Consent required with respect thereto; provided, however, that Seller
shall be required to expend funds, if necessary, to cure any defaults in order
to obtain Consents and either party shall be required to expend funds in respect
of normal and usual filing fees and the fees of professional advisors.
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6.6 Access to Books and Records. Seller shall provide Buyer access and
the right to copy for a period of four (4) years from the Closing Date any books
and records relating to the Assets but not included in the Assets. Buyer shall
provide Seller access and the right to copy for a period of four (4) years from
the Closing Date any books and records relating to the Assets that are included
in the Assets.
6.7 Broker. Each of Buyer and Seller represents and warrants that
neither it nor any person or entity acting on its behalf has incurred any
liability for any finders' or brokers' fees or commissions in connection with
the transactions contemplated by this Agreement.
6.8 Environmental Audit. Buyer may, at its option and expense, retain
an environmental consultant to be selected by Buyer to perform a Phase I
environmental survey of the properties of the Station and such survey shall be
completed within 45 days from the date hereof. If the survey discloses any
material environmental hazard or material possibility of future liability for
environmental damages or clean-up costs, Buyer shall so notify Seller no later
than 50 days from the date hereof.
6.9 Engineering Study. Buyer may, at its option and expense, retain an
engineering firm to conduct a proof of performance study of the Station and to
prepare a report on the Station's compliance with customary engineering
practices and all applicable FCC rules, regulations, prescribed practices, and
technical standards and such study and report shall be completed within 30 days
from the date hereof. If the survey discloses any material deficiencies in the
operations or equipment of the Station, Buyer shall so notify Seller no later
than 40 days from the date hereof.
6.10 Sales Tax Filings. Through the Closing Date, Seller shall continue
to file Michigan sales tax returns with respect to the Station, if and to the
extent such returns are required to be filed by applicable law, and shall
concurrently deliver copies of all such returns to Buyer.
6.11 Appraisal. Buyer and Seller agree to allocate the Purchase Price
for tax and recording purposes in accordance with an appraisal conducted by an
appraisal firm with experience in the valuation and appraisal of television
station assets.
SECTION 7. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER
AT CLOSING
7.1 Conditions to Obligations of Buyer. All obligations of Buyer at
the Closing are subject at Buyer's option to the fulfillment or waiver (except
the requirement in 7.1(d) of the FCC Consent, which may not be waived) by Buyer
prior to or at the Closing Date of each of the following conditions:
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(a) Representations and Warranties. All representations and
warranties of Seller contained in this Agreement shall be true and complete in
all material respects at and as of the Closing Date as though made at and as of
the Closing Date.
(b) Covenants and Conditions. Seller shall have performed and
complied in all material respects with all covenants, agreements, and conditions
required by this Agreement to be performed or complied with by it prior to or on
the Closing Date.
(c) Consents. All Consents shall have been obtained and delivered
to Buyer without any material adverse change in the terms or conditions of any
agreement or any governmental license, permit, or other authorization.
(d) FCC Consent. The FCC Consent shall have been granted without
the imposition on Buyer of any material conditions that need not be complied
with by Buyer under Section 6.1 hereof, Seller shall have complied with or
accepted any material conditions imposed on it by the FCC Consent, and the FCC
Consent shall have become a Final Order.
(e) Governmental Authorizations. Seller shall be the holder of all
Licenses and there shall not have been any modification of any License that
could have a material adverse effect on the Station or the Assets or the conduct
of its business and operations. No proceeding shall be pending the effect of
which could be to revoke, cancel, fail to renew, suspend, or modify adversely
any material License.
(f) Deliveries. Seller shall have made or stand willing to make
all the deliveries to Buyer set forth in Section 8.2.
(g) Additional Agreements. Buyer and The Infomall TV Network, Inc.
shall have executed an Affiliation Agreement in the form attached hereto as
Exhibit B.
(h) Adverse Change. Subject to Section 6.3 hereof, between the
date of this Agreement and the Closing Date, there shall have been no material
adverse change in the assets, or properties of the Station, including any
damage, destruction, or loss affecting any assets used or useful in the conduct
of the business of the Station.
7.2 Conditions to Obligations of Seller. All obligations of Seller at
the Closing are subject at Seller's option to the fulfillment or waiver (except
the requirement in 7.2(d) of the FCC Consent, which may not be waived) by Seller
prior to or at the Closing Date of each of the following conditions:
(a) Representations and Warranties. All representations and
warranties of Buyer contained in this Agreement shall be true and complete in
all material respects at and as of the Closing Date as though made at and as of
the Closing Date.
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(b) Covenants and Conditions. Buyer shall have performed and
complied in all material respects with all covenants, agreements, and conditions
required by this Agreement to be performed or complied with by it prior to or on
the Closing Date.
(c) Deliveries. Buyer shall have made or stand willing to make all
the deliveries set forth in Section 8.3.
(d) FCC Consent. The FCC Consent shall have been granted without
the imposition on Seller of any material conditions that need not be complied
with by Seller under Section 6.1 hereof and Buyer shall have complied with any
conditions imposed on it by the FCC Consent.
(e) Additional Agreements. Buyer and Paxson Communications
Corporation shall have executed the Right of First Refusal Agreement and Buyer
and The Infomall TV Network, Inc. shall have executed an Affiliation Agreement,
each substantially in the form attached hereto as Exhibit A and B, respectively.
SECTION 8. CLOSING AND CLOSING DELIVERIES
8.1 Closing.
(a) Closing Date. The Closing shall take place at 10:00 a.m. on a
date to be set by Buyer on at least five days' prior written notice to Seller,
that is (i) not earlier than the first business day after the FCC Consent is
granted, and (ii) not later than ten business days following the date upon which
the FCC Consent has become a Final Order. If Buyer fails to specify the date for
Closing pursuant to the preceding sentence prior to the fifth business day after
the date upon which the FCC Consent becomes a Final Order, the Closing shall
take place on the tenth business day after the date upon which the FCC Consent
becomes a Final Order.
(b) Closing Place. The Closing shall be held at the offices of
Dow, Lohnes & Albertson, 1200 New Hampshire Avenue, N.W., Suite 800, Washington,
D.C. 20036, or such other place that is agreed upon in writing by Buyer and
Seller.
8.2 Deliveries by Seller. Prior to or on the Closing Date, Seller
shall deliver to Buyer the following, in form and substance reasonably
satisfactory to Buyer and its counsel:
(a) Transfer Documents. Subject to the provisions of this
Agreement, duly executed warranty bills of sale, deeds, motor vehicle titles,
assignments, and other transfer documents which shall be sufficient to vest good
and marketable title to the Assets in the name of Buyer, free and clear of all
mortgages, liens, restrictions, encumbrances, claims, and obligations, except
for Permitted Liens.
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(b) Estoppel Certificate. An Estoppel Certificate of the Lessor of
the leasehold interests listed in Schedule 3.5, in a form acceptable to Buyer
and Buyer's lenders.
(c) Consents. An executed copy of any instrument evidencing
receipt of any Consent;
(d) Certificates. Certificates, dated as of the Closing Date,
executed by Seller's President certifying (i) that the representations and
warranties of Seller contained in this Agreement are true and complete in all
material respects as of the Closing Date as though made on and as of that date,
(ii) that Seller has in all material respects performed and complied with all of
its obligations, covenants, and agreements set forth in this Agreement to be
performed and complied with on or prior to the Closing Date, and (iii) such
additional Certificates and confirmations to Buyer's lenders as Buyer may
reasonably request in connection with obtaining financing for the performance of
its payment obligations hereunder.
(e) Licenses, Contracts, Business Records, Etc. Copies of all
Licenses, Assumed Contracts, blueprints, schematics, working drawings, plans,
projections, engineering records, and all files and records used by Seller in
connection with its operations;
(f) Opinions of Counsel. Opinions of Seller's counsel dated as of
the Closing Date, substantially in the form of Schedule 8.2(f) hereto.
8.3 Deliveries by Buyer. Prior to or on the Closing Date, Buyer
shall deliver to Seller the following, in form and substance reasonably
satisfactory to Seller and its counsel;
(a) Purchase Price. The Purchase Price.
(b) Assumption Agreements. Appropriate assumption agreements
pursuant to which Buyer shall assume and undertake to perform Seller's
obligations under the Licenses and Assumed Contracts arising on or after the
Closing Date;
(c) Officer's Certificate. A certificate, dated as of the Closing
Date, executed on behalf of Buyer by its President, certifying (i) that the
representations and warranties of Buyer contained in this Agreement are true and
complete in all material respects as of the Closing Date as though made on and
as of that date, and (ii) that Buyer has in all material respects performed and
complied with all of its obligations, covenants, and agreements set forth in
this Agreement to be performed and complied with on or prior to the Closing
Date;
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(d) Opinion of Counsel. An opinion of Buyer's counsel dated as of
the Closing Date, substantially in the form of Schedule 8.3(d) hereto.
SECTION 9. TERMINATION
9.1 Termination by Seller. This Agreement may be terminated by Seller
and the purchase and sale of the Assets abandoned, if Seller is not then in
material default, upon written notice to Buyer, upon the occurrence of any of
the following:
(a) Conditions. If, on the date that would otherwise be the
Closing Date, any of the conditions precedent to the obligations of Seller set
forth in this Agreement have not been satisfied or waived in writing by Seller.
(b) Judgments. If there shall be in effect on the date that would
otherwise be the Closing Date any judgment, decree, or order, not caused by
Seller, that would prevent or make unlawful the Closing.
(c) Upset Date. If the Closing shall not have occurred by February
1, 1999.
9.2 Termination by Buyer. This Agreement may be terminated by Buyer
and the purchase and sale of the Station abandoned, if Buyer is not then in
material default, upon written notice to Seller, upon the occurrence of any of
the following:
(a) Conditions. If on the date that would otherwise be the Closing
Date any of the conditions precedent to the obligations of Buyer set forth in
this Agreement have not been satisfied or waived in writing by Buyer.
(b) Judgments. If there shall be in effect on the date that would
otherwise be the Closing Date any judgment, decree, or order, not caused by
Buyer, that would prevent or make unlawful the Closing.
(c) Upset Date. If the Closing shall not have occurred by February
1, 1999.
(d) Interruption of Service. If any event shall have occurred that
prevented signal transmission of the Station in the normal and usual manner for
a continuous period of seven days.
9.3 Rights on Termination. If this Agreement is terminated pursuant to
Section 9.1 or Section 9.2 and neither party is in material breach of this
Agreement, the parties hereto shall not have any further liability to each other
with respect to the purchase and sale of the
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Assets. If this Agreement is terminated by Seller due to Buyer's material breach
of this Agreement, then Seller shall be entitled to retain the One Hundred
Thousand Dollars ($100,000) held by the Escrow Agent, which shall be liquidated
damages and shall constitute full payment and the exclusive remedy for any
damages suffered by Seller by reason of Buyer's material breach of this
Agreement. Seller and Buyer agree in advance that actual damages would be
difficult to ascertain and that the amount of One Hundred Thousand Dollars
($100,000) is a fair and equitable amount to reimburse Seller for damages
sustained due to Buyer's material breach of any provision of this Agreement.
Buyer shall have all rights and remedies set forth under Section 10.5 hereof or
otherwise available at law or equity.
9.4 Escrow Deposit. Within ten (10) business days, Buyer will have
deposited with the Escrow Agent the sum of One Hundred Thousand Dollars
($100,000) in accordance with the Escrow Agreement in the form of Schedule 9.4
hereof. All such funds deposited with the Escrow Agent shall be held and
disbursed in accordance with the terms of the Escrow Agreement and the following
provisions:
(a) At the Closing, all amounts held by the Escrow Agent pursuant
to the Escrow Agreement, including any interest or other proceeds from the
investment of funds held by the Escrow Agent, shall be disbursed to or at the
direction of Buyer.
(b) If this Agreement is terminated pursuant to Section 9.1 or 9.2
and the Buyer is not in material breach of this Agreement, all amounts held by
the Escrow Agent pursuant to the Escrow Agreement, including any interest or
other proceeds from the investment of funds held by the Escrow Agent, shall be
disbursed to or at the direction of Buyer.
(c) If this Agreement is terminated by Seller due to Buyer's
material breach of this Agreement, then One Hundred Thousand Dollars ($100,000)
of the total amount held by the Escrow Agent pursuant to the Escrow Agreement
shall be disbursed by the Escrow Agent to or at the direction of Seller as
liquidated damages under Section 9.3 above and any interest or other proceeds
from the investment of funds held by the Escrow Agent after payment to Seller of
$100,000 shall be disbursed by the Escrow Agent to or at the direction of Buyer.
SECTION 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; CERTAIN REMEDIES
10.1 Representations and Warranties. All representations and warranties
contained in this Agreement shall be deemed continuing representations and
warranties and shall survive the closing for a period of twelve (12) months;
provided, however, that as to any representation or warranty made by either the
Buyer or Seller which the other party
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knowingly waives at the Closing, such representation or warranty shall not
survive the Closing. Until the Closing, Buyer and Seller will immediately advise
each other, in a detailed written notice, of any fact or occurrence or any
pending or threatened occurrence of which any of them obtains knowledge and
which (i) (if existing and known at the date of the execution of this Agreement)
would have been required to be set forth or disclosed in or pursuant to this
Agreement or a Schedule hereto, (ii) (if existing and known at any time prior to
or at the Closing) would make the performance by any party of a covenant
contained in this Agreement impossible or make that performance materially more
difficult than in the absence of that fact or occurrence, or (iii) (if existing
and known at the time of the Closing) would cause a condition to any party's
obligations under this Agreement not to be fully satisfied.
10.2 Indemnification by Seller. Seller hereby agrees to indemnify and
hold Buyer harmless against and with respect to, and shall reimburse Buyer for:
(a) Subject to the proviso contained in the first sentence of
Section 10.1, any and all losses, liabilities, or damages resulting from any
untrue representation, breach of warranty, or material omission or
nonfulfillment of any covenant by Seller contained in this Agreement or in any
certificate, schedule, document, or instrument delivered to Buyer under this
Agreement.
(b) Any and all obligations of Seller not assumed by Buyer
pursuant to this Agreement, including any liabilities arising at any time under
any Contract not included in the Assumed Contracts.
(c) Any and all losses, liabilities, or damages contingent or
otherwise resulting from the operation or ownership of the Station prior to the
Closing Date, including any liabilities arising under the Licenses or the
Assumed Contracts which relate to events occurring prior to the Closing Date.
(d) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs, and expenses, including reasonable legal fees and
expenses, incident to any of the foregoing or incurred in investigating or
attempting to avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
10.3 Indemnification by Buyer. Buyer hereby agrees to indemnify and
hold Seller harmless against and with respect to, and shall reimburse Seller
for:
(a) Subject to the proviso contained in the first sentence of
Section 10.1, any and all losses, liabilities, or damages resulting from any
untrue representation, breach of warranty, or material omission or
nonfulfillment of any covenant by Buyer contained in this
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Agreement or in any certificate, Schedule, document, or instrument delivered to
Seller under this Agreement.
(b) Any and all obligations of Seller assumed by Buyer pursuant to
this Agreement.
(c) Any and all losses, liabilities, or damages contingent or
otherwise, resulting from the operation or ownership of the Station on and after
the Closing.
(d) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including reasonable legal fees and
expenses, incident to any of the foregoing or incurred in investigating or
attempting to avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
10.4 Procedure for Indemnification. The procedure for indemnification
shall be as follows:
(a) The party claiming indemnification (the "Claimant") shall
promptly give notice to the party from which indemnification is claimed (the
"Indemnifying Party") of any claim, whether between the parties or brought by a
third party, specifying in reasonable detail the factual basis for the claim. If
the claim relates to an action, suit, or proceeding filed by a third party
against Claimant, such notice shall be given by Claimant as soon as practicable
after written notice of such action, suit, or proceeding was given to Claimant.
(b) With respect to claims solely between the parties, following
receipt of notice from the Claimant of a claim, the Indemnifying Party shall
have thirty days to make such investigation of the claim as the Indemnifying
Party deems necessary or desirable. For the purposes of such investigation, the
Claimant agrees to make available to the Indemnifying Party and/or its
authorized representatives the information relied upon by the Claimant to
substantiate the claim. If the Claimant and the Indemnifying Party agree at or
prior to the expiration of the thirty-day period (or any mutually agreed upon
extension thereof) to the validity and amount of such claim, the Indemnifying
Party shall immediately pay to the Claimant the full amount of the claim. If the
Claimant and the Indemnifying Party do not agree within the thirty-day period
(or any mutually agreed upon extension thereof), the Claimant may seek
appropriate remedy under the arbitration provisions of this Agreement, as
applicable.
(c) With respect to any claim by a third party as to which the
Claimant is entitled to indemnification under this Agreement, the Indemnifying
Party shall have the right at its own expense, to participate in or assume
control of the defense of such claim, and the Claimant shall cooperate fully
with the Indemnifying Party subject to reimbursement for reasonable actual
out-of-pocket expenses incurred by the Claimant as the result of a request by
the Indemnifying Party. If the Indemnifying Party elects to assume control of
the defense of any third-party claim, the Claimant shall have the right to
participate in the defense of such claim at its own expense. If the
Indemnifying Party does not elect to assume control or
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otherwise participate in the defense of any third party claim, it shall be
bound by the results obtained by the Claimant with respect to such claim.
(d) If a claim, whether between the parties or by a third party,
requires immediate action, the parties shall use their reasonable best efforts
to reach a decision with respect thereto as expeditiously as possible.
(e) The indemnification rights provided in Sections 10.2 and 10.3
shall extend to the shareholders, directors, officers, employees, and
representatives of any Claimant; provided, however, for the purpose of the
procedures set forth in this Section 10.4, any indemnification claims by such
parties shall be made by and through the Claimant.
(f) Notwithstanding anything in this Agreement to the contrary,
neither party shall indemnify or otherwise be liable to the other party for any
breach of a representation or warranty, or for breach of any covenant in this
Agreement except to the extent the losses, obligations, liabilities, costs and
expenses of such party arising therefrom exceed in the aggregate Five Thousand
Dollars ($5,000). The provisions of the foregoing sentence shall not apply to
liabilities assumed by either party pursuant to the adjustments and prorations.
10.5 Specific Performance. The parties recognize that if Seller
breaches this Agreement and refuses to perform under the provisions of this
Agreement, monetary damages alone would not be adequate to compensate Buyer for
its injury. Buyer shall therefore be entitled, in addition to any other remedies
that may be available, including money damages, to obtain specific performance
of the terms of this Agreement. If any action is brought by Buyer to enforce
this Agreement, Seller shall waive the defense that there is an adequate remedy
at law.
10.6 Attorneys' Fees. In the event of a default by either party which
results in a lawsuit or other proceeding for any remedy available under this
Agreement, the prevailing party shall be entitled to reimbursement from the
other party of its reasonable legal fees and expenses.
SECTION 11. MISCELLANEOUS
11.1 Fees and Expenses. Any federal, state, or local sales or transfer
tax arising in connection with the conveyance of the Assets or the Station by
Seller to Buyer pursuant to this Agreement shall be paid by Seller. Buyer and
Seller shall each pay one-half of the fee payable to the FCC in connection with
the filing of the application for FCC Consent. Except as otherwise provided in
this Agreement, each party shall pay its own expenses incurred in connection
with the authorization, preparation, execution, and performance of this
Agreement, including all fees and expenses of counsel, accountants, agents, and
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representatives, and each party shall be responsible for all fees or
commissions payable to any finder, broker, advisor, or similar person retained
by or on behalf of such party.
11.2 Arbitration. Except as otherwise provided to the contrary below,
any dispute arising out of or related to this Agreement that Seller and Buyer
are unable to resolve by themselves shall be settled by arbitration in the
District of Columbia by a panel of three arbitrators. Seller and Buyer shall
each designate one disinterested arbitrator, and the two arbitrators so
designated shall select the third arbitrator. In the event three arbitrators
have not been chosen pursuant to these rules within 30 days of the date notice
was first given requesting arbitration of a dispute under this provision, the
American Association of Arbitrators shall appoint three arbitrators. Before
undertaking to resolve the dispute, each arbitrator shall be duly sworn
faithfully and fairly to hear and examine the matters in controversy and to make
a just award according to the best of his or her understanding. The arbitration
hearing shall be conducted in accordance with the commercial arbitration rules
of the American Arbitration Association. The written decision of a majority of
the arbitrators shall be final and binding on Seller and Buyer. The costs and
expenses of the arbitration proceeding shall be assessed between Seller and
Buyer in a manner to be decided by a majority of the arbitrators, and the
assessment shall be set forth in the decision and award of the arbitrators.
Judgment on the award, if it is not paid within thirty days, may be entered in
any court having jurisdiction over the matter. No action at law or suit in
equity based upon any claim arising out of or related to this Agreement shall be
instituted in any court by Seller or Buyer against the other except (i) an
action to compel arbitration pursuant to this Section, (ii) an action to enforce
the award of the arbitration panel rendered in accordance with this Section, or
(iii) a suit for specific performance pursuant to Section 10.5.
11.3 Notices. All notices, demands, and requests required or permitted
to be given under the provisions of this Agreement shall be (i) in writing, (ii)
sent by telecopy (with receipt personally confirmed by telephone), delivered by
hand or by registered or certified mail, return receipt requested, (iii) deemed
to have been given on the date of personal delivery or the date set forth in the
records of the delivery service or on the return receipt, and (iv) addressed as
follows:
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<PAGE> 34
If to Seller: Mr. Lowell W. Paxson
Paxson Communications Corporation
601 Clearwater Park Road
West Palm Beach, FL 33401
Telecopy: (561) 655-9424
Telephone: (561) 659-4122
With a copy which John R. Feore, Jr., Esquire
shall not constitute Dow, Lohnes & Albertson, PLLC
notice to: 1200 New Hampshire Avenue, N.W., Suite 800
Washington, D.C. 20036
Telecopy: (202) 776-2222
Telephone: (202) 776-2786
If to Buyer: Mr. Devon Paxson
DP Media of Milwaukee, Inc.
231 Bradley Place
Suite 204
Palm Beach, FL 33480
Telecopy: (561) 655-3655
Telephone: (561) 655-9444
With a copy which Alan C. Campbell, Esq.
shall not constitute Irwin, Campbell & Tannenwald
notice to: 1730 Rhode Island Avenue, NW
Suite 200
Washington, D.C. 20036
Telecopy: (202) 728-0354
Telephone: (202) 728-0400
or to any other or additional persons and addresses as the parties may from time
to time designate in a writing delivered in accordance with this Section 11.3.
11.4 Benefit and Binding Effect. Neither party hereto may assign this
Agreement without the prior written consent of the other party hereto; provided,
however, that Buyer may assign its rights and obligations under this Agreement
to a wholly-owned subsidiary or commonly controlled affiliate without seeking or
obtaining Seller's prior approval, provided that such assignment does not
relieve Buyer of its responsibilities hereunder, and Buyer may collaterally
assign its rights and interests hereunder to its lenders without seeking or
obtaining Seller's prior approval. Upon any permitted assignment by Buyer or
Seller in accordance with this Section 11.4, all references to "Buyer" herein
shall be deemed to be references to Buyer's assignee and all references to
"Seller" herein shall be deemed to be references to Seller's assignee. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
11.5 Further Assurances. The parties shall take any actions and execute
any other documents that may be necessary or desirable to the implementation
and consummation of this Agreement, including, in the case of Seller, any
additional bills of sale, deeds, or other transfer documents that, in the
reasonable opinion of Buyer, may be necessary to ensure, complete, and evidence
the full and effective transfer of the Assets and the Station to Buyer pursuant
to this Agreement.
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<PAGE> 35
11.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED, AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA (WITHOUT REGARD TO
THE CHOICE OF LAW PROVISIONS THEREOF).
11.7 Headings. The headings in this Agreement are included for ease of
reference only and shall not control or affect the meaning or construction of
the provisions of this Agreement.
11.8 Gender and Number. Words used in this Agreement, regardless of
the gender and number specifically used, shall be deemed and construed to
include any other gender, masculine, feminine, or neuter, and any other number,
singular or plural, as the context requires.
11.9 Entire Agreement. This Agreement, the schedules, hereto, and all
documents, certificates, and other documents to be delivered by the parties
pursuant hereto, collectively represent the entire understanding and agreement
between Buyer and Seller with respect to the subject matter hereof. This
Agreement supersedes all prior negotiations between the parties and cannot be
amended, supplemented, or changed except by an agreement in writing that makes
specific reference to this Agreement and which is signed by the party against
which enforcement of any such amendment, supplement, or modification is sought.
11.10 Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, agreement, or condition herein may be waived
by the party entitled to the benefits thereof only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, representation, warranty, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be given
in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 11.10.
11.11 Counterparts. This Agreement may be signed in counterparts with
the same effect as if the signature on each counterpart were upon the same
instrument.
11.12 Press Releases. Prior to filing the application for FCC
Consent, neither party shall publish any press release, make any other public
announcement or otherwise communicate with any news media concerning this
Agreement or the transactions contemplated hereby without the prior written
consent of the other party; provided, however,
- 30 -
<PAGE> 36
that nothing contained herein shall prevent either party from promptly making
all filings with governmental authorities as may, in its judgment, be required
or advisable in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, in which case the
other party shall be first notified in writing.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
- 31 -
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the day and year first above written.
PAXSON COMMUNICATIONS OF
MILWAUKEE-55, INC.
By: /s/ William L. Watson
-----------------------------------------
Name: William L. Watson
Title: Secretary
PAXSON MILWAUKEE LICENSE, INC.
By: /s/ William L. Watson
------------------------------------------
Name: William L. Watson
Title: Secretary
DP MEDIA OF MILWAUKEE, INC.
By: /s/ Devon Paxson
-----------------------------------------
Name: Devon Paxson
Title: Vice President
<PAGE> 1
Exhibit 10.189
ASSET AND STOCK PURCHASE AND OPTION GRANT AGREEMENT
DATED AS OF NOVEMBER 14, 1997
BY AND AMONG
VALUEVISION INTERNATIONAL, INC.;
VVI SEATTLE, INC.;
VVILPTV, INC.;
VVI SPOKANE, INC.;
VVI TALLAHASSEE, INC.
AND
PAXSON COMMUNICATIONS CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1 CERTAIN DEFINITIONS....................................................................2
1.1 Terms Defined in this Section..........................................................2
1.2 Terms Defined Elsewhere in this Agreement..............................................5
SECTION 2 PURCHASE AND SALE OF ASSETS AND STOCK..................................................7
2.1 Agreement to Sell and Buy Assets.......................................................7
2.2 Agreement to Sell and Buy Shares.......................................................7
2.3 Excluded Assets........................................................................8
2.4 Purchase Price.........................................................................8
2.5 Working Capital Credits and Payment....................................................9
(a) Prorations....................................................................9
(b) Expenses and Revenues Not Prorated...........................................10
(c) Manner of Determining Prorations and Credits.................................10
(d) Payments at Closing With Respect to Working Capital Credits..................11
(e) Payments to Reflect Final Determination of Working Capital
Credits......................................................................11
2.6 Assumption of Liabilities and Obligations.............................................12
SECTION 3 OPTION................................................................................12
3.1 Grant.................................................................................12
3.2 Spokane Option Exercise...............................................................12
3.3 Tallahassee Option Exercise...........................................................13
3.4 Exercise Price........................................................................13
3.5 Determination of Fair Market Value....................................................13
SECTION 4 REPRESENTATIONS AND WARRANTIES OF SELLERS.............................................13
4.1 Organization, Standing, and Authority.................................................13
4.2 Authorization and Binding Obligation..................................................13
4.3 Absence of Conflicting Agreements.....................................................14
4.4 Governmental Licenses.................................................................14
4.5 Real Property.........................................................................15
4.6 Tangible Personal Property............................................................15
4.7 Assumed Contracts.....................................................................15
4.8 Consents..............................................................................15
4.9 Intangibles...........................................................................15
4.10 Financial Statements..................................................................15
4.11 Insurance.............................................................................16
4.12 Reports...............................................................................16
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C> <C>
4.13 Labor Relations.......................................................................16
4.14 Taxes.................................................................................16
4.15 Claims and Legal Actions..............................................................16
4.16 Compliance with Licenses..............................................................16
4.17 Conduct of Business in Ordinary Course................................................16
4.18 Transactions with Affiliates..........................................................17
4.19 No Broker.............................................................................17
4.20 Title to Shares.......................................................................17
4.21 Delivery of Channel 51 Agreement......................................................17
4.22 Disclaimer of Warranties..............................................................17
SECTION 5 REPRESENTATIONS AND WARRANTIES OF BUYER...............................................18
5.1 Organization, Standing, and Authority.................................................18
5.2 Authorization and Binding Obligation..................................................18
5.3 Absence of Conflicting Agreements.....................................................18
5.4 Licensee Qualifications...............................................................18
5.5 No Broker.............................................................................19
5.6 Investment Representation.............................................................19
5.7 Acknowledgment of "As-Is-Where-Is" Sale...............................................19
SECTION 6 OPERATIONS OF THE STATIONS PRIOR TO CLOSING...........................................19
6.1 Generally.............................................................................19
6.2 Contracts.............................................................................20
6.3 Disposition of Assets.................................................................20
6.4 Encumbrances..........................................................................20
6.5 Licenses..............................................................................20
6.6 Obligations...........................................................................20
6.7 Exclusivity...........................................................................20
6.8 Access to Information.................................................................21
6.9 Maintenance of Assets.................................................................21
6.10 Insurance.............................................................................22
6.11 Consents..............................................................................22
6.12 Books and Records.....................................................................22
6.13 Notification..........................................................................22
6.14 Financial Information.................................................................22
6.15 Compliance with Laws..................................................................22
SECTION 7 SPECIAL COVENANTS AND AGREEMENTS......................................................22
7.1 FCC Consents..........................................................................22
7.2 Control of the Stations...............................................................23
7.3 Risk of Loss..........................................................................24
7.4 Confidentiality.......................................................................24
7.5 Cooperation...........................................................................24
7.6 Access to Books and Records...........................................................25
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C> <C>
7.7 [Intentionally omitted]...............................................................25
7.8 HSR Act Filing........................................................................25
7.9 [Intentionally omitted]...............................................................25
7.10 [Intentionally omitted]...............................................................25
7.11 [Intentionally omitted]...............................................................25
7.12 Sales Tax Filings.....................................................................25
7.13 Accounts Receivable...................................................................25
(a) Collection...................................................................25
(b) Payments to ValueVision......................................................26
(c) Further Obligations..........................................................26
7.14 No Inconsistent Action................................................................26
7.15 VVI Spokane and VVI Tallahassee.......................................................26
7.16 Channel 51 Agreement..................................................................26
7.17 Control of Spokane Application and Tallahassee Application
Proceedings...........................................................................27
SECTION 8 CONDITIONS TO OBLIGATIONS OF BUYER AND SELLERS AT
CLOSING...............................................................................27
8.1 Conditions to Obligations of Buyer....................................................27
(a) FCC Consents.................................................................27
(b) Final Orders.................................................................27
(c) HSR Act......................................................................27
(d) Deliveries...................................................................28
(e) Judgments....................................................................28
8.2 Conditions to Obligations of Sellers..................................................28
(a) Representations and Warranties...............................................28
(b) Covenants and Conditions.....................................................28
(c) Deliveries...................................................................28
(d) FCC Consents.................................................................28
(e) HSR Act......................................................................28
(f) Judgments....................................................................28
SECTION 9 CLOSING AND CLOSING DELIVERIES........................................................28
9.1 Closing...............................................................................28
(a) Closing Date.................................................................28
(b) Closing Place................................................................29
9.2 Deliveries by Sellers.................................................................29
(a) [Intentionally omitted]......................................................29
(b) Conveyancing Documents.......................................................29
(c) Working Capital Payment......................................................29
(d) Estoppel Certificates and Lessor's Consents..................................29
(e) Consents.....................................................................29
(f) Certificate..................................................................29
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
(g) Licenses, Contracts, Business Records, Etc...................................30
9.3 Deliveries by Buyer...................................................................30
(a) Purchase Price...............................................................30
(b) Working Capital Payment......................................................30
(c) Assumption Agreements........................................................30
(d) Certificate..................................................................30
SECTION 10 TERMINATION...........................................................................30
10.1 Termination by Sellers................................................................30
(a) Conditions...................................................................30
(b) Judgments....................................................................30
(c) Upset Date...................................................................31
(d) Breach.......................................................................31
(e) Buyer's Wrongful Failure To Close............................................31
10.2 Termination by Buyer..................................................................31
(a) Conditions...................................................................31
(b) Judgments....................................................................31
(c) Intentionally omitted........................................................31
(d) Material Contracts...........................................................31
(e) Upset Date...................................................................31
10.3 Escrow Deposit; Rights on Termination.................................................31
10.4 Specific Performance..................................................................32
10.5 No Special Damages....................................................................32
SECTION 11 INDEMNIFICATION.......................................................................33
11.1 Indemnification by Sellers............................................................33
11.2 Indemnification by Buyer..............................................................33
11.3 Procedure for Indemnification........................................................33
SECTION 12 [Intentionally omitted]...............................................................34
SECTION 13 MISCELLANEOUS.........................................................................34
13.1 Fees and Expenses.....................................................................34
13.2 Notices...............................................................................35
13.3 Arbitration...........................................................................35
13.4 Benefit and Binding Effect............................................................36
13.5 Further Assurances....................................................................37
13.6 GOVERNING LAW.........................................................................37
13.7 Headings..............................................................................37
13.8 Gender and Number.....................................................................37
13.9 Entire Agreement......................................................................37
</TABLE>
- iv -
<PAGE> 6
<TABLE>
<S> <C> <C>
13.10 Waiver of Compliance: Consents........................................................37
13.11 Counterparts..........................................................................37
13.12 Survival of Representations and Warranties............................................38
</TABLE>
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<PAGE> 7
ASSET AND STOCK PURCHASE AND OPTION GRANT AGREEMENT
This ASSET AND STOCK PURCHASE AND OPTION GRANT AGREEMENT (the
"Agreement") is dated as of November 14, 1997, by and among VALUEVISION
INTERNATIONAL INC., a Minnesota corporation ("ValueVision"); VVI SEATTLE, INC.
("VVI Seattle"), a Minnesota corporation; VVILPTV, INC., a Minnesota corporation
("VVILP"); VVI SPOKANE, INC., a Minnesota corporation ("VVI Spokane"); VVI
TALLAHASSEE, INC., a Minnesota corporation ("VVI Tallahassee") and PAXSON
COMMUNICATIONS CORPORATION, a Delaware corporation ("Buyer").
PRELIMINARY STATEMENT
WHEREAS, VVI Seattle is the licensee of television station KBGE-TV,
Bellevue, Washington ("Station KBGE-TV") pursuant to licenses issued by the
Federal Communications Commission (the "FCC") and the owner of certain assets
used in the operation of Station KBGE-TV; and
WHEREAS, VVILP is the licensee of low power television station K43EK,
Portland, Oregon ("Channel 43") pursuant to licenses issued by the FCC and the
owner of certain assets used in the operation of Channel 43; and
WHEREAS, VVILP has entered into an asset purchase agreement dated
November 10, 1997 with Television Interests Company, Inc. (the "Channel 51
Agreement"), pursuant to which VVILP has agreed to purchase from Television
Interests Company, Inc. the license and the assets of low power television
station W51BU, in Indianapolis, Indiana ("Channel 51"); and
WHEREAS, VVI Spokane is an applicant for a television construction
permit to construct Channel 34 in Spokane, Washington, pursuant to FCC File
Number BPCT-961001XT (the "Spokane Application"); and
WHEREAS, VVI Tallahassee is an applicant for a television construction
permit to construct Channel 24 in Tallahassee, Florida, pursuant to FCC File
Number BPCT-960405LU (the "Tallahassee Application"); and
WHEREAS, VVI Seattle, VVILP, VVI Spokane and VVI Tallahassee are
wholly-owned subsidiaries of ValueVision; and
WHEREAS, VVI Seattle desires to sell the assets used or held for use in
the operation of Station KBGE-TV to Buyer, and Buyer desires to purchase such
assets, for the consideration and on the terms and conditions herein provided;
and
WHEREAS, VVILP desires to sell the assets used or held for use in the
operation of Channel 43 to Buyer, and Buyer desires to purchase such assets, for
the consideration and on the terms and conditions herein provided; and
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<PAGE> 8
WHEREAS, VVILP desires to sell the assets used or held for use in the
operation of Channel 51, which assets shall be acquired pursuant to the closing
of the Channel 51 Agreement (the "Channel 51 Closing"), to Buyer and Buyer
desires to purchase such assets, for the consideration and on the terms and
conditions herein provided; and
WHEREAS, ValueVision desires to sell 49% of the issued and outstanding
shares of the capital stock of VVI Spokane to Buyer (the "VVI Spokane Shares"),
and Buyer desires to purchase the VVI Spokane Shares for the consideration and
on the terms herein provided; and
WHEREAS, ValueVision desires to grant to Buyer an option (the "Spokane
Option") to purchase all, but not less than all, of the remaining 51% of the
issued and outstanding shares of VVI Spokane to Buyer (the "Spokane Option
Shares") and Buyer desires to acquire the Spokane Option, for the consideration
and on the terms herein provided; and
WHEREAS, ValueVision desires to sell 49% of the issued and outstanding
shares of the capital stock of VVI Tallahassee to Buyer (the "VVI Tallahassee
Shares"; together with the VVI Spokane Shares at times herein, the "Shares"),
and Buyer desires to purchase the VVI Tallahassee Shares for the consideration
and on the terms herein provided; and
WHEREAS, ValueVision desires to grant to Buyer an option (the
"Tallahassee Option"; together with the Spokane Option, the "Options") to
purchase all, but not less than all, of the remaining 51% of the issued and
outstanding shares of VVI Tallahassee to Buyer (the "Tallahassee Option Shares";
together with the Spokane Option Shares, the "Option Shares") and Buyer desires
to acquire the Tallahassee Option, for the consideration and on the terms herein
provided; and
WHEREAS, each of ValueVision, VVI Seattle, and VVILP is each sometimes
hereinafter referred to as a "Seller," and together they are hereinafter
sometimes referred to as "Sellers."
AGREEMENTS
In consideration of the above recitals and of the mutual agreements and
covenants contained in this Agreement, the parties hereto, intending to be bound
legally, agree as follows:
SECTION 1 CERTAIN DEFINITIONS.
1.1 Terms Defined in this Section. The following terms, as used in this
Agreement, shall have the meanings set forth in this Section:
"Affiliate" means "affiliate" as defined in Rule 12b-2 promulgated
under the Exchange Act.
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<PAGE> 9
"Assets" means the assets to be sold, transferred, or otherwise
conveyed to Buyer under this Agreement, as specified in Section 2.1.
"Assumed Contracts" means (a) all Material Contracts, (b) any other
Contract listed on Schedule 4.7 with respect to which Sellers are able to obtain
and deliver to Buyer at or prior to the Closing any Consent required for the
assignment of such Contract to Buyer, (c) contracts entered into prior to the
date of this Agreement with advertisers for the sale of advertising time or
production services for cash at rates consistent with past practices, (d) any
Contracts entered into by any Seller between the date of this Agreement and the
Closing Date that Buyer agrees in writing to assume, and (e) other contracts
entered into by any Seller between the date of this Agreement and the Closing
Date in compliance with Section 6.2.
"Closing" means the consummation of the transactions contemplated by
this Agreement in accordance with the provisions of Section 9.
"Closing Date" means the date on which the Closing occurs, as
determined pursuant to Section 9.
"Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to transfer the Assets, the
Shares, and the Options to Buyer or otherwise to consummate the transactions
contemplated by this Agreement, including consents to the assignment of the
Assumed Contracts.
"Contracts" means all contracts, leases, non-governmental licenses, and
other agreements (including leases for personal or real property and employment
agreements), written or oral (including any amendments and other modifications
thereto) to which any Seller is a party or that are binding upon any Seller and
that relate to or affect the Assets, the Shares, the Options or the conduct of
the business or operations of any of the Stations, and (a) that are in effect on
the date of this Agreement or (b) that are entered into by any Seller between
the date of this Agreement and the Closing Date; provided, however, that
"Contracts" shall not include any programming agreements.
"Effective Time" means 12:01 a.m., Eastern time, on the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means First Union National Bank.
"Escrow Agreement" means the Escrow Agreement to be entered into among
Buyer, ValueVision, and the Escrow Agent in accordance with Section 10.3.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
- 3 -
<PAGE> 10
"Excluded Assets" means the assets described in Section 2.2(a) through
(h) of this Agreement.
"Exercise Price" has the meaning set forth in Section 3.4.
"Fair Market Value" means, as of the date of determination, the cash
price at which a willing seller would sell, and a willing buyer would buy, each
being apprised of all relevant facts and neither acting under compulsion, in an
arm's length negotiated transaction with an unaffiliated third party without
time constraints.
"FCC Consent" means action or actions by the FCC granting its consent
to the assignment of all the FCC Licenses to Buyer, as contemplated by this
Agreement.
"FCC Licenses" means all Licenses issued by the FCC to Sellers in
connection with the existing or currently authorized business or operations of
the Stations.
"Final Order" means an action by the FCC that has not been reversed,
stayed, enjoined, set aside, annulled, or suspended, and with respect to which
no requests are pending for administrative or judicial review, reconsideration,
appeal, or stay, and the time for filing any such requests and the time for the
FCC to set aside the action on its own motion have expired.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Intangibles" means all copyrights, trademarks, trade names, service
marks, service names, licenses, patents, permits, jingles, proprietary
information, technical information and data, machinery and equipment warranties,
and other similar intangible property rights and interests (and any goodwill
associated with any of the foregoing) applied for, issued to, or owned by any
Seller or under which any Seller is licensed or franchised and that are used or
useful in connection with the conduct of the business or operations of the
Stations, together with any additions thereto between the date of this Agreement
and the Closing Date.
"Licenses" means all licenses, permits, construction permits, and other
authorizations issued by the FCC, the Federal Aviation Administration, or any
other federal, state, or local governmental authorities to any Seller, currently
in effect and used or useful in connection with the conduct of the business or
operations of the Stations, together with any additions thereto between the date
of this Agreement and the Closing Date.
"Material Contracts" means those Assumed Contracts that are designated
on Schedule 4.7 as "Material Contracts."
"Permitted Encumbrances" means (a) liens for current taxes not yet due
and payable, (b) easements, covenants, conditions, and restrictions that are
disclosed on Schedule 4.5, and (c) other easements, covenants, conditions, and
restrictions of record that affect any Real
- 4 -
<PAGE> 11
Property and do not have a material adverse effect on the use of such Real
Property in the conduct of the business or operations of the Stations or
materially detract from the value of such Real Property in the conduct of the
business or operations of the Stations.
"Person" means an individual, corporation, association, partnership,
joint venture, joint stock company, trust, estate, limited liability company,
limited liability partnership, governmental entity, or other entity or
organization.
"Purchase Price" means the purchase price specified in Section 2.3.
"Real Property" means all interests in real property, including fee
estates, leaseholds and subleaseholds, purchase options, easements, licenses,
rights to access, and rights of way, and all buildings and other improvements
thereon, owned or held by any Seller, that are used or useful in connection with
the conduct of the business or operations of the Stations.
"Securities Act" means the Securities Act of 1933, as amended.
"Stations" means Station KBGE-TV, Channel 43, and, at all times
subsequent to the Channel 51 Closing, Channel 51.
"Tangible Personal Property" means all machinery, equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant, inventory,
spare parts, and other tangible personal property owned or held by any Seller
that is used or useful in connection with the conduct of the business or
operations of the Stations, together with any additions thereto between the date
of this Agreement and the Closing Date.
"Transferee" means any Person to whom Buyer or its successors in
interest transfers all or any part of its ownership interest in or sells all or
substantially all of the assets of Station KBGE-TV, except in a transaction
authorized by Section 13.4(a)(ii) of this Agreement.
1.2 Terms Defined Elsewhere in this Agreement. For purposes of this
Agreement, the following terms have the meanings set forth in the Sections
indicated:
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Acceptable Power Level Section 7.1(f)
Agreement Preliminary Statement
Buyer Preliminary Statement
Buyer's Working Capital Credits Section 2.4(a)
Channel 51 Agreement Preliminary Closing
Channel 51 Closing Preliminary Statement
</TABLE>
- 5 -
<PAGE> 12
<TABLE>
<S> <C>
Claimant Section 11.3(a)
Collection Period Section 7.13(a)
DOJ Section 7.8
FCC Preliminary Statement
Financial Statements Section 4.10
FTC Section 7.8
In A Material Way Section 9.2(f)
Indemnifying Party Section 11.3
Options Preliminary Statement
Option Shares Preliminary Statement
Seller Preliminary Statement
Sellers' Working Capital Credits Section 2.4(a)
Shares Preliminary Statement
Spokane Application Preliminary Statement
Spokane Option Preliminary Statement
Spokane Option Exercise Date Section 3.2
Spokane Option Expiration Date Section 3.2
Spokane Option Shares Preliminary Statement
Station KBGE-TV Preliminary Statement
Stations' Receivables Section 7.13(a)
Tallahassee Application Preliminary Statement
Tallahassee Option Preliminary Statement
Tallahassee Option Exercise Date Section 3.3
Tallahassee Option Expiration Date Section 3.3
Tallahassee Option Shares Preliminary Statement
ValueVision Preliminary Statement
VVILP Preliminary Statement
VVI Seattle Preliminary Statement
VVI Spokane Preliminary Statement
VVI Spokane Shares Preliminary Statement
</TABLE>
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<TABLE>
<S> <C>
VVI Tallahassee Preliminary Statement
VVI Tallahassee Shares Preliminary Statement
Working Capital Credits Section 2.4(a)
301 Application Section 7.1(c)
302 Application Section 2.3(a)
</TABLE>
SECTION 2 PURCHASE AND SALE OF ASSETS AND STOCK.
2.1 Agreement to Sell and Buy Assets. Subject to the terms and
conditions set forth in this Agreement, Sellers hereby agree to sell, transfer,
convey, assign, and deliver to Buyer on the Closing Date (and ValueVision agrees
to cause each other Seller to sell, transfer, convey, assign, and deliver to
Buyer on the Closing Date), and Buyer agrees to purchase, all of each Seller's
right, title, and interest in the tangible and intangible assets used or useful
in connection with the conduct of the business or operations of the Stations,
together with any additions thereto between the date of this Agreement and the
Closing Date, but excluding the assets described in Section 2.3, free and clear
of any claims, liabilities, security interests, mortgages, liens, pledges,
conditions, charges, covenants, easements, restrictions, encroachments, leases,
or encumbrances of any nature (except for Permitted Encumbrances), including the
following:
(a) The Tangible Personal Property;
(b) The Real Property;
(c) The Licenses;
(d) The Assumed Contracts;
(e) The Intangibles and all intangible assets of any
Seller relating to the operation of the Stations that are not specifically
included within the Intangibles, including the goodwill of the Stations, if any;
(f) All of each Seller's proprietary information,
technical information and data, machinery and equipment warranties, maps,
computer discs and tapes, plans, diagrams, blueprints, and schematics, including
filings with the FCC relating to the business and operation of the Stations;
(g) All choses in action of any Seller relating to the
ownership or operations of the Stations to the extent they relate to the period
after the Effective Time; and
(h) Copies of all books and records relating to the
business or operations of the Stations, including executed copies of the Assumed
Contracts, and all records required by the FCC to be kept by the Stations.
2.2 Agreement to Sell and Buy Shares. Subject to the terms and
conditions set forth in this Agreement, ValueVision hereby agrees to sell,
transfer, convey, assign, and deliver to
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Buyer on the Closing Date, and Buyer agrees to purchase, all of ValueVision's
right, title, and interest in the Shares and all choses in action of ValueVision
relating to the ownership thereof to the extent they relate to the period after
the Effective Time.
2.3 Excluded Assets. The Assets shall exclude the following:
(a) [Intentionally omitted.]
(b) Any Seller's cash or cash equivalents on hand as of
the Closing and any Seller's interest in its bank accounts;
(c) Any insurance policies, promissory notes, amounts due
from employees, bonds, letters of credit, certificates of deposit, other similar
items, or deposits or prepaid items (except to the extent that Sellers receive a
Working Capital Credit for any such deposit or prepaid item pursuant to Section
2.5(a)), and any cash surrender value in regard thereto;
(d) Any pension, profit-sharing, or employee benefit
plans, including any Seller's interest in any welfare plan, pension plan, or
benefit arrangement;
(e) Any collective bargaining agreements;
(f) All tax returns and supporting materials, all
original financial statements and supporting materials, all books and records
that any Seller is required by law to retain, and all records of any Seller
relating to the sale of the Assets and the Shares;
(g) Any interest in and to any refunds of federal, state,
or local franchise, income, or other taxes for periods prior to the Closing
Date; and
(h) All accounts receivable, prepaids, and deposits of
Sellers as of the Closing Date and any intercompany accounts between the Sellers
or any Affiliates thereof.
2.4 Purchase Price.
(a) Subject to Sections 2.4(b)-(g) below, the aggregate
purchase price for the Assets, the Shares, and the Options (the "Purchase
Price") shall be Thirty-Five Million Dollars ($35,000,000), payable as follows:
(i) Twenty-Five Million Dollars ($25,000,000) in cash by wire transfer of
immediately available funds at Closing, plus (ii) Ten Million Dollars
($10,000,000) in cash by wire transfer of immediately available funds within
thirty (30) days of the earlier of (A) the date on which Buyer files or is
required to file FCC Form 302 (License Application) for Station KBGE-TV (the
"302 Application"), as provided in Section 7.1(f) below, or (B) the Improved
Coverage Date (as defined in Section 7.1(d)). The Purchase Price shall be
allocated among the Assets (allocable to each of the Stations), the respective
Shares, and each of the Options as set forth on Schedule 2.4 to this Agreement.
(b) In the event that Sellers are unable to obtain the
FCC Consents required to transfer to Buyer the FCC Licenses pertaining to
Channel 43, or the Consent identified as item 1 on Schedule 4.3 hereto, there
shall be a decrease in the Purchase Price equal to the allocated purchase price
for the portion of the Assets allocable to Channel 43 as set forth on Schedule
2.4.
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(c) In the event that Sellers are unable to obtain the
FCC Consents required to transfer to Buyer the FCC Licenses pertaining to
Channel 51, or the Consent identified as item 2 on Schedule 4.3 hereto, there
shall be a decrease in the Purchase Price equal to the allocated purchase price
for the portion of the Assets allocable to Channel 51 as set forth on Schedule
2.4.
(d) In the event that the FCC concludes or the parties
reasonably determine that transfer of the VVI Spokane Shares to Buyer at Closing
would jeopardize the Spokane Application, there shall be a decrease in the
Purchase Price equal to the allocated purchase price for the VVI Spokane Shares
as set forth on Schedule 2.4.
(e) In the event that the FCC concludes or the parties
reasonably determine that transfer of the VVI Tallahassee Shares to Buyer at
Closing would jeopardize the Tallahassee Application, there shall be a decrease
in the Purchase Price equal to the allocated purchase price for the VVI
Tallahassee Shares as set forth on Schedule 2.4.
(f) In the event that the FCC concludes or the parties
reasonably determine that ValueVision's grant of the Spokane Option to Buyer at
Closing would jeopardize the Spokane Application, there shall be a decrease in
the Purchase Price equal to the allocated purchase price for the Spokane Option
as set forth on Schedule 2.4.
(g) In the event that the FCC concludes or the parties
reasonably determine that ValueVision's grant of the Tallahassee Option to Buyer
at Closing would jeopardize the Tallahassee Application, there shall be a
decrease in the Purchase Price equal to the allocated purchase price for the
Tallahassee Option as set forth on Schedule 2.4.
(h) In the event of an adjustment to the Purchase Price
pursuant to Sections 2.4(b), (c), (d), (e), (f) or (g), the parties to this
Agreement shall be relieved of any obligation hereunder to transfer or acquire
only that portion or portions of the Assets, the Shares, or the Options, as the
case may be, to which such adjustment (or adjustments) relates.
2.5 Working Capital Credits and Payment.
(a) Prorations. All revenues and expenses arising from
the ownership of the Shares and the operation of the Stations, including tower
rental, business and license fees, utility charges, real and personal property
taxes and assessments levied against the Assets, property and equipment rentals,
applicable copyright or other fees, sales and service charges, taxes (except for
taxes arising from the transfer of the Assets and the Shares under this
Agreement), and similar prepaid and deferred items, shall be prorated between
Buyer and Sellers in accordance with the principle that Sellers shall receive
all revenues and shall be responsible for all expenses, costs, and liabilities
allocable to the ownership of the Shares and the operations of the Stations for
the period prior to the Effective Time, and Buyer shall receive all revenues and
shall be responsible for all expenses, costs, and obligations allocable to the
ownership of the Shares and the operations of the Stations for the period after
the Effective Time, subject to Section 2.5(b). To effectuate the proration of
expenses and revenues pursuant to this Section 2.5(a), but subject to Section
2.5(b), Sellers shall receive a credit equal to the amount of any expenses,
costs, or liabilities that are paid or incurred by Sellers and are allocable to
the ownership of the Shares and the operations of the Stations for the period
after the Effective Time plus the amount of any revenues that are received by
Buyer, and are allocable to the ownership of the Shares and the
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operations of the Stations for the period before the Effective Time, and Buyer
shall receive a credit equal to the amount of any expenses, costs, or
liabilities that are paid or incurred by Buyer and are allocable to the
ownership of the Shares and the operations of the Stations for the period before
the Effective Time plus the amount of any revenues that are received by Sellers
and are allocable to the ownership of the Shares and the operations of the
Stations for the period after the Effective Time. The credits to Sellers
pursuant to this Section 2.5(a) are referred to as "Sellers' Working Capital
Credits," the credits to Buyer pursuant to this Section 2.5(a) are referred to
as "Buyer's Working Capital Credits," and Sellers' Working Capital Credits and
Buyer's Working Capital Credits are referred to collectively as the "Working
Capital Credits."
(b) Expenses and Revenues Not Prorated.
(1) There shall be no proration of, and Sellers
shall remain solely liable with respect to, liabilities and obligations arising
under any Contracts not included in the Assumed Contracts and any other
obligation or liability not being assumed by Buyer in accordance with Section
2.6.
(2) Buyer shall receive a credit pursuant to
Section 2.5(a) to the extent that Buyer assumes any liability under any Assumed
Contract to refund (or to credit against payments otherwise due) any security
deposit or similar prepayment paid to any Seller by any lessee or other third
party.
(3) No proration shall be made in favor of
either Sellers or Buyer for any difference between the value of the goods or
services to be received by the Stations under their trade or barter agreements
as of the Effective Time and the value of any advertising time remaining to be
run by the Stations as of the Effective Time.
(4) There shall be no proration of earned
vacation time or other employee compensation. Sellers shall be solely
responsible for the payment of all compensation and commissions owed to the
Stations' employees up to the Effective Time. Buyer may, as of the Effective
Time, employ those employees of the Stations as Buyer may elect on terms and
conditions determined by Buyer.
(5) There shall be no proration of music license
fees (ASCAP, BMI, SESAC, etc.); Sellers shall be responsible for filing and
paying all music license fees due and payable as of the Effective Time, and
Buyer shall be responsible for filing and paying all such fees after the
Effective Time.
(c) Manner of Determining Prorations and Credits. The
prorations and Working Capital Credits required by Section 2.5(a) shall be
determined finally in accordance with the following procedures:
(1) ValueVision, on behalf of Sellers, shall
prepare and deliver to Buyer not later than five (5) days before the Closing
Date a preliminary settlement statement which shall set forth ValueVision's good
faith estimate of the Working Capital Credits, taking into account all
prorations under Section 2.5(a). The preliminary settlement statement (A) shall
contain all information reasonably necessary to determine the Working Capital
Credits, taking into account all prorations under Section 2.5(a), to the extent
such prorations can be determined
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or estimated as of the date of the preliminary settlement statement, and such
other information as may be reasonably requested by Buyer, and (B) shall be
certified by ValueVision to be true and complete to ValueVision's knowledge as
of the date thereof.
(2) Not later than sixty (60) days after the
Closing Date, Buyer shall deliver to ValueVision a statement setting forth
Buyer's determination of the Working Capital Credits pursuant to Section 2.5(a).
Buyer's statement (A) shall contain all information reasonably necessary to
determine the Working Capital Credits, taking into account all prorations under
Section 2.5(a), and such other information as may be reasonably requested by
ValueVision, and (B) shall be certified by Buyer to be true and complete to
Buyer's knowledge as of the date thereof. If ValueVision disputes the amount of
the Working Capital Credits determined by Buyer, it shall deliver to Buyer
within thirty (30) days after its receipt of Buyer's statement a statement
setting forth its determination of the amount of the Working Capital Credits. If
ValueVision notifies Buyer of its acceptance of Buyer's statement, or if
ValueVision fails to deliver its statement within the thirty-day period
specified in the preceding sentence, Buyer's determination of the Working
Capital Credits shall be conclusive and binding on Sellers as of the last day of
the thirty-day period.
(3) If ValueVision disputes the amount of the
Working Capital Credits determined by Buyer, Buyer and ValueVision shall use
good faith efforts to resolve any dispute involving the determination of the
Working Capital Credits as expeditiously as practicable.
(d) Payments at Closing With Respect to Working Capital
Credits. At Closing:
(1) Sellers shall pay or cause to be paid to or
for the account of Buyer, by wire transfer, the amount, if any, by which Buyer's
Working Capital Credits exceed Sellers' Working Capital Credits, each as
estimated in ValueVision's preliminary settlement statement pursuant to Section
2.5(c)(1).
(2) Buyer shall pay or cause to be paid to or
for the account of Sellers, by wire transfer, the amount, if any, by which
Sellers' Working Capital Credits exceed Buyer's Working Capital Credits, each as
estimated in ValueVision's preliminary settlement statement pursuant to Section
2.5(c)(1).
(e) Payments to Reflect Final Determination of Working
Capital Credits. Within five (5) business days after the date on which the
Working Capital Credits are finally determined pursuant to Section 2.5(c):
(1) Sellers shall pay or cause to be paid to or
for the account of Buyer, by wire transfer, the amount, if any, by which the sum
of the amount of Buyer's Working Capital Credits, as finally determined pursuant
to Section 2.5(c), plus the amount of any payment made by Buyer pursuant to
Section 2.5(d)(2) exceeds the sum of amount of Sellers' Working Capital Credits,
as finally determined pursuant to Section 2.5(c), plus the amount of any payment
made by Sellers pursuant to Section 2.5(d)(1).
(2) Buyer shall pay or cause to be paid to or
for the account of Sellers, by wire transfer, the amount, if any, by which the
sum of the amount of Sellers' Working Capital
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Credits, as finally determined pursuant to Section 2.5(c), plus the amount of
any payment made by Sellers pursuant to Section 2.5(d)(1) exceeds the sum of
amount of Buyer's Working Capital Credits, as finally determined pursuant to
Section 2.5(c), plus the amount of any payment made by Buyer pursuant to Section
2.5(d)(2).
2.6 Assumption of Liabilities and Obligations. As of the Closing
Date, Buyer shall assume and undertake to pay, discharge, and perform all
obligations and liabilities of Sellers under the Licenses and the Assumed
Contracts to the extent that either (a) the obligations and liabilities relate
to the time after the Effective Time or (b) Buyer received a Working Capital
Credit therefor under Section 2.5(a) as a result of the proration of such
obligations and liabilities. Buyer shall not assume any other obligations or
liabilities of any Seller, including (i) any obligations or liabilities under
any Contract (including any film or programming license agreement) not included
in the Assumed Contracts, (ii) any obligations or liabilities under the Assumed
Contracts relating to the period prior to the Effective Time except insofar as
Buyer receives a Working Capital Credit therefor under Section 2.5(a), (iii) any
claims, litigation, or proceedings relating to the operation of the Stations
prior to the Closing, whether asserted or filed before or after the Effective
Time, (iv) any obligations or liabilities of any Seller under any management
incentive, employee pension, retirement, or other benefit plans, (v) any
obligations or liabilities of any Seller under any collective bargaining
agreements, (vi) any obligation to any employee of the Stations for severance
benefits, vacation time, or sick leave accrued prior to the Closing Date, (vii)
any credit agreements, note purchase agreements, indentures, or other financing
arrangements, other than leases or agreements listed on Schedule 4.7 and
included in the Assumed Contracts, (viii) any agreements entered into other than
in the ordinary course of business of the Stations, or (ix) any obligations or
liabilities caused by, arising out of, or resulting from any action or omission
of any Seller prior to the Closing, and all such obligations and liabilities
shall remain and be the obligations and liabilities solely of Sellers.
SECTION 3 OPTION.
3.1 Grant. Subject to Sections 2.4(f) and (g), ValueVision shall
grant to Buyer at Closing (a) the Spokane Option to purchase the Spokane Option
Shares and (b) the Tallahassee Option to purchase the Tallahassee Option Shares.
3.2 Spokane Option Exercise. Buyer may exercise the Spokane Option
to purchase the Spokane Option Shares only by giving written notice to
ValueVision of its election to exercise said Spokane Option no earlier than (a)
thirty (30) days after the later to occur of (i) the Closing and (ii) the date
on which FCC action on the Spokane Application has become a Final Order (the
"Spokane Option Exercise Date"), and no later than (b) ninety (90) days after
the Spokane Option Exercise Date (the "Spokane Option Expiration Date"). If
Buyer shall not have timely exercised the Spokane Option on or before the
Spokane Option Expiration Date, the Spokane Option shall automatically be and
become null and void and of no further force or effect. Such notice shall
specify a date not more than thirty (30) days after any necessary FCC approval
shall have become a Final Order, on which the closing of the Spokane Option
shall occur and Buyer shall pay to ValueVision an amount of cash, by wire
transfer of immediately available funds, equal to the Exercise Price for the
Spokane Option.
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3.3 Tallahassee Option Exercise. Buyer may exercise the
Tallahassee Option to purchase the Tallahassee Option Shares only by giving
written notice to ValueVision of its election to exercise said Tallahassee
Option no earlier than (a) thirty (30) days after the later to occur of (i) the
Closing and (ii) the date on which FCC action on the Tallahassee Application has
become a Final Order (the "Tallahassee Option Exercise Date"), and no later than
(b) ninety (90) days after the Tallahassee Option Exercise Date (the
"Tallahassee Option Expiration Date"). If Buyer shall not have timely exercised
the Tallahassee Option on or before the Tallahassee Option Expiration Date, the
Tallahassee Option shall automatically be and become null and void and of no
further force or effect. Such notice shall specify a date not more than thirty
(30) days after any necessary FCC approval shall have become a Final Order, on
which the closing of the Tallahassee Option shall occur and Buyer shall pay to
ValueVision an amount of cash, by wire transfer of immediately available funds,
equal to the Exercise Price for the Tallahassee Option.
3.4 Exercise Price. The Exercise Price for the Spokane Option
shall be the Fair Market Value of the Spokane Option Shares on the date Buyer
gives ValueVision written notice of its election to exercise the Spokane Option.
The Exercise Price for the Tallahassee Option shall be the Fair Market Value of
the Tallahassee Option Shares on the date Buyer gives ValueVision written notice
of its election to exercise the Tallahassee Option.
3.5 Determination of Fair Market Value. The Fair Market Value of
the Option Shares shall be determined (a) by mutual agreement of ValueVision and
Buyer or (b) if no such agreement is reached, within ten (10) days of the
relevant date of determination, by arbitration pursuant to Section 13.3 of this
Agreement.
SECTION 4 REPRESENTATIONS AND WARRANTIES OF SELLERS.
Sellers, jointly and severally, represent and warrant to Buyer as
follows:
4.1 Organization, Standing, and Authority. Each of the Sellers,
VVI Spokane, and VVI Tallahassee is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Minnesota. Each
Seller is duly qualified to conduct business as a foreign corporation in each
state in which the nature of its business or the ownership of its assets
requires it to be so qualified. Schedule 4.1 sets forth the states in which the
Sellers are qualified to conduct business relevant to the ownership and
operation of the Assets and the Stations. Each Seller has all requisite
corporate power and authority (a) to own, lease, and use the Assets as now
owned, leased, and used by it, (b) to conduct the business and operations of the
Stations as now conducted, and (c) to execute and deliver this Agreement and the
documents contemplated hereby, and to perform and comply with all of the terms,
covenants, and conditions to be performed and complied with by such Seller
hereunder and thereunder. In addition, ValueVision has all requisite corporate
power and authority to transfer to Buyer the Shares and the Options. ValueVision
owns, directly or indirectly, all of the issued and outstanding shares of each
Seller (other than ValueVision), VVI Spokane and VVI Tallahassee.
4.2 Authorization and Binding Obligation. The execution,
delivery, and performance of this Agreement by each Seller have been duly
authorized by all necessary actions on the part of such Seller. This Agreement
has been duly executed and delivered by each Seller and
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constitutes the legal, valid, and binding obligation of each Seller, enforceable
against it in accordance with its terms except as the enforceability of this
Agreement may be affected by bankruptcy, insolvency, or similar laws affecting
creditors rights generally and by judicial discretion in the enforcement of
equitable remedies.
4.3 Absence of Conflicting Agreements. Subject to obtaining the
governmental Consents provided for in Section 7.1 and Section 7.8 and the other
Consents listed on Schedule 4.3, the execution, delivery, and performance of
this Agreement and the documents contemplated hereby (with or without the giving
of notice, the lapse of time, or both): (a) do not require the consent of any
third party; (b) will not conflict with any provision of the Articles of
Incorporation or By-Laws of any Seller, VVI Spokane or VVI Tallahassee; (c) will
not conflict with, result in a breach of, or constitute a default under, any
law, judgment, order, ordinance, injunction, decree, rule, regulation, or ruling
of any court or governmental instrumentality; (d) will not conflict with,
constitute grounds for termination of, result in a breach of, constitute a
default under, or accelerate or permit the acceleration of any performance
required by the terms of, any agreement (including the Channel 51 Agreement),
instrument, license, or permit to which any Seller, VVI Spokane or VVI
Tallahassee is a party or by which any Seller, VVI Spokane or VVI Tallahassee
may be bound legally; and (e) will not create any claim, liability, mortgage,
lien, pledge, condition, charge, or encumbrance of any nature upon any of the
Shares or the Assets.
4.4 Governmental Licenses.
(a) Schedule 4.4(a) includes a true and complete list of
the Licenses. Sellers have made available to Buyer true and complete copies of
the Licenses (including any amendments and other modifications thereto). The
Licenses have been validly issued, and the Seller designated as such on Schedule
4.4(a) is the authorized legal holder thereof. The Licenses listed on Schedule
4.4(a) comprise all licenses, permits, and other authorizations required from
the FCC and, to each Seller's knowledge, from any other governmental or
regulatory authority for the lawful conduct in all material respects of the
business and operations of the Stations in the manner and to the full extent
they are now conducted, and none of the Licenses is subject to any unusual or
special restriction or condition that could reasonably be expected to limit the
full operation of the Stations as now operated. Sellers have no reason to
believe that, under existing law, rules, regulations, policies, and procedures
of the FCC, any of the Licenses would not be renewed by the FCC or other
granting authority in the ordinary course. Except as set forth in Schedule
4.4(a), the Licenses are in full force and effect. Sellers have timely paid to
the FCC all annual regulatory fees payable with respect to the FCC Licenses.
(b) Schedule 4.4(b) includes a true and complete list,
to each Seller's knowledge, of (i) all cable television systems that carry the
signals of the Stations, (ii) all retransmission consent and other similar
agreements entered into by any Seller with respect to the Stations, and (iii)
all cable television systems to which either Seller has delivered a must carry
notice or retransmission consent notice in accordance with Section 4 of the
Cable Television Consumer Protection and Competition Act of 1992 and the rules
and regulations of the FCC promulgated thereunder.
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4.5 Real Property. Schedule 4.5 contains a complete and accurate
description of all Real Property (including street address, legal description
(where known), owner, and Sellers' use thereof), and all claims, liabilities,
security interests, mortgages, liens, pledges, conditions, charges, covenants,
easements, restrictions, encroachments, leases, or encumbrances known to any
Seller.
4.6 Tangible Personal Property. Schedule 4.6 lists all material
items of Tangible Personal Property, to the best of Sellers' knowledge without
inquiry. Except as described in Schedule 4.6, one of the Sellers, as designated
on Schedule 4.6, owns and has good title to each item of Tangible Personal
Property and none of the Tangible Personal Property owned by any Seller is
subject to any security interest, mortgage, pledge, conditional sales agreement,
or other lien or encumbrance, except for liens for current taxes not yet due and
payable.
4.7 Assumed Contracts. Schedule 4.7 is a true and complete list
of all Assumed Contracts except contracts with advertisers for production or the
sale of advertising time on the Stations for cash at rates consistent with past
practices and that may be canceled by Sellers without penalty on not more than
thirty (30) days' notice. Sellers have delivered to Buyer true and complete
copies of all written Assumed Contracts and true and complete written
descriptions of all oral Assumed Contracts (including any amendments and other
modifications to such Contracts). Schedule 4.7 also includes a schedule
summarizing as of the date of such schedule all contracts with advertisers for
production or the sale of advertising time on the Stations. Except for the need
to obtain the Consents listed on Schedule 4.3, the Seller that is a party to
each Assumed Contract has full legal power and authority to assign its rights
under such Assumed Contracts to Buyer in accordance with this Agreement, and
such assignment will not affect the validity, enforceability, or continuation of
such Assumed Contract.
4.8 Consents. Except for the governmental Consents provided for in
Section 7.1 and Section 7.8 and the other Consents described in Schedule 4.3, to
each Seller's knowledge, no consent, approval, permit, or authorization of, or
declaration to, or filing with any governmental or regulatory authority or any
other third party is required to consummate this Agreement and the transactions
contemplated hereby or to permit Sellers to assign or transfer the Assets, the
Shares, and the Options to Buyer.
4.9 Intangibles. Schedule 4.9 is a true and complete list of all
Intangibles (exclusive of Licenses listed in Schedule 4.4(a)) that are used in
the conduct of the business and operations of the Stations as now conducted.
Sellers have made available to Buyer copies of all documents establishing or
evidencing the Intangibles listed on Schedule 4.9. There is no claim or action
pending, or to the knowledge of any Seller threatened, relating to the Stations
with respect to any actual or alleged infringement by any Seller upon any
trademark, trade name, service mark, service name, copyright, patent, patent
application, know-how, method, or process owned by any other Person.
4.10 Financial Statements. Sellers have furnished Buyer with true
and complete copies of the unaudited financial statements of Station KBGE-TV
containing balance sheets as of January 31, 1997, and August 31, 1997, and a
statement of operations for the seven (7) months ended August 31, 1997
(collectively, the "Financial Statements").
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4.11 Insurance. Schedule 4.11 is a true and complete list of all
insurance policies of any Seller that insure any part of the Assets or the
business of the Stations. All policies of insurance listed in Schedule 4.11 are
in full force and effect.
4.12 Reports. All reporting requirements of the FCC and, to each
Seller's knowledge, any other governmental authority with respect to the
Stations have been complied with by Sellers in all material respects.
4.13 Labor Relations. No labor union or other collective bargaining
unit represents or claims to represent any of the employees of the Stations. To
each Seller's knowledge, there is no union campaign being conducted to solicit
cards from employees to authorize a union to request a National Labor Relations
Board certification election with respect to any employees at the Station.
4.14 Taxes. Each Seller has filed or caused to be filed all
federal, state, county, local, or city tax returns that are required to be filed
with respect to the ownership and operation of the Stations. ValueVision has
filed or caused to be filed all federal, state, county, local or city tax
returns that are required to be filed with respect to the ownership of the
shares of capital stock of VVI Spokane and VVI Tallahassee. Each Seller has paid
or caused to be paid all taxes shown on those returns or on any tax assessment
received by it to the extent that such taxes have become due. There are no
legal, administrative, or tax proceedings pursuant to which any Seller is or
could be made liable for any taxes, penalties, interest, or other charges, the
liability for which could extend to Buyer as transferee of the business of the
Stations or as transferee of the Shares, and no event has occurred that could
impose on Buyer any transferee liability for any taxes, penalties, or interest
due or to become due from any Seller.
4.15 Claims and Legal Actions. Except as disclosed on Schedule
4.15 and except for any FCC rulemaking proceedings generally affecting the
television broadcasting industry and not particular to any Seller, there is no
claim, legal action, counterclaim, suit, arbitration, or other legal,
administrative, or tax proceeding, nor any order, decree, or judgment, in
progress or pending, or to the knowledge of any Seller threatened, against or
relating to any Seller with respect to its ownership of the Shares or its
ownership or operation of any Station or otherwise relating to the Shares, the
Options, the Assets or the business or operations of the Stations, nor does any
Seller know of any basis for the same.
4.16 Compliance with Licenses. Each Seller has complied in all
material respects with the Licenses.
4.17 Conduct of Business in Ordinary Course. With respect to
Station KBGE-TV and Channel 43, since August 31, 1997, and with respect to
Channel 51, since the date of the Channel 51 Closing, the Sellers have or will
have conducted the business and operations of each Station only in the ordinary
course and, except as disclosed in Schedule 4.17:
(a) No Station has suffered any material damage,
destruction, or loss affecting any assets or transferred any material assets
used or useful in the conduct of the business of the Station;
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(b) No Station has suffered any material write-down of
the value of any Assets; and
(c) No Station has transferred or granted any right
under, or entered into any settlement regarding the breach or infringement of,
any license, patent, copyright, trademark, trade name, franchise, or similar
right, or modified any existing right relating to any Station.
4.18 Transactions with Affiliates. Except as set forth on Schedule
4.18, no Seller has been involved in any business arrangement or relationship
relating to any Station with any Affiliate of any Seller (other than another
Seller), and no Affiliate of any Seller (other than another Seller) owns any
property or right, tangible or intangible, that is used in the business of the
Stations.
4.19 No Broker. Except as set forth on Schedule 4.19, no Seller
has employed, nor obligated itself or Buyer to compensate, any finder, broker,
advisor or similar Person in connection with the transactions contemplated by
this Agreement.
4.20 Title to Shares. ValueVision is the holder of record and owns
beneficially that number of shares of the capital stock of each of VVI Spokane
and VVI Tallahassee set forth on Schedule 4.20, free and clear of all liens.
That number of shares of the capital stock of each of VVI Spokane and VVI
Tallahassee set forth on Schedule 4.20 represents all of the issued and
outstanding capital stock of each of VVI Spokane and VVI Tallahassee.
ValueVision has delivered to Buyer true and complete copies of the charter and
bylaws for each of VVI Spokane and VVI Tallahassee. The authorized capital
structure of VVI Spokane is as follows: 10,000 shares of capital stock, par
value $.01 per share, of which 1,000 shares are issued and outstanding. The
authorized capital structure of VVI Tallahassee is as follows: 10,000 shares of
capital stock, par value $.01 per share, of which 1,000 shares are issued and
outstanding. At the Closing, ValueVision will deliver to Buyer good and
marketable title to the Shares, free and clear of any lien, security interest,
mortgage, pledge, conditional sales agreement or other encumbrance. Other than
this Agreement, none of the Shares are subject to any voting trust agreement or
other contract, agreement, arrangement, commitment or understanding.
4.21 Delivery of Channel 51 Agreement. ValueVision has delivered to
Buyer a true and complete copy of the Channel 51 Agreement. To the best
knowledge of ValueVision, the representations and warranties of VVILP contained
in the Channel 51 Agreement are true and correct in all material respects as of
the date hereof.
4.22 Disclaimer of Warranties. Except for the foregoing
representations and warranties specifically set forth in Section 4.1 through
Section 4.21 of this Agreement and the representations and warranties in the
certificate delivered by Sellers pursuant to Section 9.2(f), the Assets, the
Shares, and the Options are being transferred by Sellers to Buyer on an
"as-is-where-is" basis without any representation or warranty, all other
representations and warranties of any kind, either express or implied, including
warranties of fitness, being hereby expressly disclaimed.
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SECTION 5 REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Sellers as follows:
5.1 Organization, Standing, and Authority. Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and, except as otherwise not required due to Sections
2.4(b)-(h), on the Closing Date, Buyer (or its wholly owned subsidiary or
subsidiaries, to be designated by Buyer prior to Closing) will be duly qualified
to conduct business in the States of Florida, Washington, Indiana, and Oregon.
Buyer has all requisite corporate power and authority to execute and deliver
this Agreement and the documents contemplated hereby, and to perform and comply
with all of the terms, covenants, and conditions to be performed and complied
with by it hereunder and thereunder.
5.2 Authorization and Binding Obligation. The execution, delivery,
and performance of this Agreement by Buyer has been duly authorized by all
necessary actions on the part of Buyer. This Agreement has been duly executed
and delivered by Buyer and constitutes the legal, valid, and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms except as the
enforceability of this Agreement may be affected by bankruptcy, insolvency, or
similar laws affecting creditors' rights generally and by judicial discretion in
the enforcement of equitable remedies.
5.3 Absence of Conflicting Agreements. Subject to obtaining the
governmental Consents provided for in Section 7.1 and Section 7.8 and the other
Consents listed on Schedule 5.3, the execution, delivery, and performance by
Buyer of this Agreement and the documents contemplated hereby (with or without
the giving of notice, the lapse of time, or both): (a) do not require the
consent of any third party; (b) will not conflict with the Certificate of
Incorporation or By-Laws of Buyer; (c) will not conflict with, result in a
breach of, or constitute a default under, any law, judgment, order, injunction,
decree, rule, regulation, or ruling of any court or governmental
instrumentality; or (d) will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, or accelerate
or permit the acceleration of any performance required by the terms of, any
agreement, instrument, license, or permit to which Buyer is a party or by which
Buyer may be bound legally, such that Buyer could not acquire the Assets, the
Shares, or the Options, operate the Assets, or could not perform its obligations
hereunder.
5.4 Licensee Qualifications. To Buyer's knowledge, there is no
fact that would, under the Communications Act of 1934, as amended, and the rules
and regulations of the FCC, each as in effect on the date of this Agreement,
disqualify Buyer from being the licensee of any Station. Buyer has sufficient
net liquid assets on hand or available from committed sources to consummate the
transactions contemplated by this Agreement and to operate the Stations for
three (3) months after Closing and is otherwise financially qualified under the
Communications Act of 1934, as amended, and the rules and regulations of the
FCC, each as in effect on the date of this Agreement, to be the licensee of the
Stations.
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<PAGE> 25
5.5 No Broker. Except as set forth in Schedule 5.5, Buyer has not
employed, nor obligated itself or any Seller to compensate, any finder, broker,
advisor or similar Person in connection with the transactions contemplated by
this Agreement.
5.6 Investment Representation. Buyer is acquiring the Shares and
the Options, and, if Buyer exercises the Options, Buyer will acquire the Option
Shares, for Buyer's own account for investment and not as a nominee or agent for
any other Person. Buyer does not intend to distribute or resell such securities
or any part thereof in any transactions that would be in violation of the
securities laws of the United States or any state thereof. Buyer is an
"accredited investor" within the meaning of Rule 501 under the Securities Act.
5.7 Acknowledgment of "As-Is-Where-Is" Sale. Buyer acknowledges
and agrees that it is purchasing and accepting the Assets, the Shares, and the
Options, and, if Buyer exercises the Options, will purchase and accept the
Option Shares, on an "as-is-where-is" basis, except for the representations and
warranties specifically set forth in Section 4.1 through Section 4.21 of this
Agreement and the representations and warranties in the certificate delivered by
Sellers pursuant to Section 9.2(f). To the fullest extent permitted by law,
Buyer hereby unconditionally and irrevocably waives and releases any and all
actual or potential claims that it might have against any Seller regarding any
form of warranty, express or implied, of any kind or type, including warranties
of fitness, relating to or in connection with the purchase of the Assets, the
Shares and the Options, other than the representations and warranties
specifically set forth in Section 4.1 through Section 4.21 of this Agreement and
the representations and warranties in the certificate delivered by Sellers
pursuant to Section 9.2(f). This waiver and release is, to the fullest extent
permitted by law, absolute, complete, total, and unlimited in every way and
includes, to the fullest extent permitted by law, a waiver and release of
express warranties (other than the representations and warranties specifically
set forth in Section 4.1 through Section 4.21 of this Agreement and the
representations and warranties in the certificate delivered by Sellers pursuant
to Section 9.2(f)), implied warranties, warranties of fitness for a particular
use, warranties of merchantability, warranties of habitability, claims based on
apparent or latent defects or deficiencies, whether now or hereafter existing,
and strict liability rights and claims of every kind and type (including claims
regarding defects that were not or are not discoverable and all other extant or
later created or conceived of strict liability or strict liability-type claims
and rights).
SECTION 6 OPERATIONS OF THE STATIONS PRIOR TO CLOSING.
Between the date of this Agreement and the Closing Date, Sellers shall
comply, and ValueVision shall cause each Seller to comply, with the covenants in
this Section 6 with respect to the Stations owned by Sellers:
6.1 Generally. Except as otherwise provided in this Agreement,
Sellers shall operate the Stations diligently in the ordinary course of business
in accordance with past practices (except where such conduct would conflict with
the following covenants or with Sellers' other obligations under this
Agreement).
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<PAGE> 26
6.2 Contracts. Sellers will not amend or terminate any Material
Contract (or waive any material right thereunder), or enter into any contract or
commitment relating to the Stations, the Assets, the Shares, or the Options or
incur any obligation (including obligations relating to the borrowing of money
or the guaranteeing of indebtedness and obligations arising from the amendment
of any existing Contract, regardless whether such Contract is a Material
Contract) that will be binding on Buyer after Closing, except for (a) cash time
sales agreements and production agreements made in the ordinary course of
business consistent with Sellers' past practices, and (b) other contracts
(excluding film or programming license agreements and trade or barter
agreements) entered into in the ordinary course of business consistent with
Sellers' past practices that do not involve consideration, in the aggregate, in
excess of $25,000 measured at Closing. Prior to the Closing Date, Sellers shall
deliver to Buyer a list of all Contracts entered into between the date of this
Agreement and the Closing Date and shall make available to Buyer copies of such
Contracts.
6.3 Disposition of Assets. No Seller shall sell, assign, lease, or
otherwise transfer or dispose of any assets that are used or useful in
connection with the conduct of the business or operations of the Stations,
except for (a) dispositions of assets in connection with the acquisition of
replacement property of equivalent kind and value and (b) the assignment and
transfer of assets and liabilities between Sellers.
6.4 Encumbrances. No Seller shall create, assume, or permit to
exist any claim, liability, security interest, mortgage, lien, pledge,
condition, charge, covenant, easement, restriction, encroachment, lease, or
encumbrance of any nature upon the Shares or the Assets, except for (a) liens
disclosed on Schedule 4.5, Schedule 4.6 or Schedule 4.20 that will be removed
prior to the Closing Date, and (b) Permitted Encumbrances.
6.5 Licenses. No Seller shall cause or permit, by any act or
failure to act, any of the Licenses required to be listed on Schedule 4.4 to
expire or to be revoked, suspended, or modified, or take any action that could
reasonably be expected to cause the FCC or any other governmental authority to
institute proceedings for the suspension, revocation, or material adverse
modification of any of the Licenses. Sellers shall use reasonable efforts to
prosecute (a) any applications to any governmental authority necessary for the
operation of the Stations and (b) any must-carry proceedings described on
Schedule 6.5.
6.6 Obligations. Sellers shall pay all obligations relating to the
Stations as they become due, consistent with past practices, so that all such
obligations shall be current as of the Closing Date.
6.7 Exclusivity.
(a) Neither any Seller nor any officer, director,
representative, or agent of any Seller shall, directly or indirectly, (i)
solicit, initiate, or encourage the submission of any proposal or offer relating
to (A) any liquidation, dissolution, or recapitalization of any Seller, (B) any
merger or consolidation of any Seller with any other Person, (C) any acquisition
or purchase of securities or assets by any Person from any Seller, or (D) any
similar transaction or business combination involving any Seller, or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner
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<PAGE> 27
any effort or attempt by any Person to do or seek any of the foregoing. Sellers
shall notify Buyer as soon as practicable if any Person makes any proposal with
respect to any of the foregoing.
(b) Section 6.7(a) shall not apply to any action by any
Seller or any officer, director, representative, or agent of any Seller with
respect to (i) the assignment and transfer by any Seller of all its assets and
liabilities to another Seller, or (ii) so long as ValueVision's ability to
perform its obligations under this Agreement is not adversely affected, any
recapitalization of ValueVision, any merger or consolidation of ValueVision with
any other Person, or any acquisition or purchase of securities or assets (other
than the Assets) by any Person from ValueVision.
6.8 Access to Information.
(a) Each Seller shall give Buyer and its counsel,
accountants, engineers, and other authorized representatives reasonable access
to the Assets and to all other books, records, and documents relating to the
Shares and the Stations for the purpose of audit and inspection, and will
furnish or cause to be furnished to Buyer or its authorized representatives all
information with respect to the affairs and business of the Stations that Buyer
may reasonably request (including any financial reports and operations reports
produced with respect to the affairs and business of VVI Spokane, VVI
Tallahassee and the Stations, a list of all employees of the Stations and a
description of their base compensation).
(b) Without limiting the generality of the foregoing, Sellers
shall give Buyer and its counsel, accountants, and other authorized
representatives reasonable access to Sellers' financial records relating to the
operations of the Stations and the Stations' employees, counsel, accountants,
and other representatives for the purpose of preparing and auditing such
financial statements as Buyer determines, in its reasonable judgment, are
required or advisable to comply with federal or state securities laws and the
rules and regulations of securities markets as a result of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby. Sellers agree to provide financial statements concerning the operations
of the Stations, reviewed by Sellers' accountants, containing reasonably
requested customary representations; provided, however, that the parties hereto
agree that Buyer shall have no right under any circumstance to delay the Closing
or terminate this Agreement on account of the information contained in any such
financial statement or the inability of Sellers or their accountants in good
faith to make any representation requested by Buyer. The preparation and
auditing of any financial statements pursuant to this Section 6.8(b) shall be at
Buyer's sole cost and expense.
6.9 Maintenance of Assets. Sellers shall maintain all of the
Assets in their condition on the date of this Agreement (ordinary wear and tear
excepted), and use, operate, and maintain all of the Assets in a reasonable
manner. Sellers shall maintain inventories of spare parts and expendable
supplies at levels consistent with past practices. If any insured or indemnified
loss, damage, impairment, confiscation, or condemnation of or to any of the
Assets occurs, Sellers shall repair, replace, or restore the Assets to their
prior condition as soon thereafter as possible, and Sellers shall use the
proceeds of any claim under any property damage insurance policy or other
recovery solely to repair, replace, or restore any of the Assets that are lost,
damaged, impaired, or destroyed.
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6.10 Insurance. Sellers shall maintain the existing insurance
policies on the Stations and the Assets.
6.11 Consents. Sellers shall use their respective reasonable
efforts to obtain all Consents, without any change in the terms or conditions of
any Assumed Contract or License that could reasonably be expected to be less
advantageous to Buyer than those pertaining under the Assumed Contract or
License as in effect on the date of this Agreement. Sellers shall request
estoppel certificates from the lessors of all leasehold and subleasehold
interests included in the Real Property, consents of such lessors to the
collateral assignment by Buyer to its lenders of such leasehold and subleasehold
interests, and estoppel certificates of contracting parties to all Material
Contracts. Sellers shall promptly advise Buyer of any difficulties experienced
in obtaining any of the Consents and of any conditions proposed, considered, or
requested for any of the Consents.
6.12 Books and Records. Each Seller shall maintain its books and
records relating to each Station, VVI Spokane and VVI Tallahassee in accordance
with past practices.
6.13 Notification. Sellers shall promptly notify Buyer in writing
of any material change in any of the information contained in Sellers'
representations and warranties contained in Section 4 of this Agreement.
6.14 Financial Information. Sellers shall furnish to Buyer within
forty-five (45) days after the end of each month ending between the date of this
Agreement and the Closing Date a statement of income and expense and a balance
sheet for and as of the end of such month for Station KBGE-TV. All financial
information delivered by Sellers to Buyer pursuant to this Section shall be
prepared from the books and records of Sellers in accordance with generally
accepted accounting principles consistently applied, shall accurately reflect
the books, records, and accounts of the Stations, shall be complete and correct
in all material respects, and shall present fairly the financial condition of
the Stations as at their respective dates and the results of operations for the
periods then ended.
6.15 Compliance with Laws. Each Seller shall comply in all material
respects with all laws, rules, and regulations applicable or relating to the
ownership of the Shares and the ownership and operation of the Stations.
SECTION 7 SPECIAL COVENANTS AND AGREEMENTS.
7.1 FCC Consents.
(a) The assignment of the FCC Licenses in connection with
the purchase and sale of the Assets pursuant to this Agreement shall be subject
to the prior consent and approval of the FCC.
(b) Within five (5) business days after the date of this
Agreement, Sellers and/or Buyer, as the case may be, shall (i) prepare and file
with the FCC appropriate applications for all FCC Consents that may be
necessary; (ii) to the extent necessary, use its best efforts to file all
applications for FCC Consent necessary to consummate the Channel 51 Closing; and
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(iii) unless such amendments have already been filed, file with the FCC
appropriate application amendments to designate VVI Spokane as the applicant
for the Spokane Application and VVI Tallahassee as the applicant for the
Tallahassee Application. The parties shall prosecute the foregoing applications
with all reasonable diligence and otherwise use their reasonable efforts to
obtain a grant of the applications, as expeditiously as practicable. Each party
agrees to comply with any condition imposed on it by the FCC Consent. Without
limitation of the foregoing, Buyer agrees to divest any interest and terminate
or modify any time brokerage or other agreement as may be required by FCC
rules, regulations, and policies (now or as they may hereafter be modified) to
permit Buyer to acquire the Stations.
(c) In accordance with Section 73.3517(a) of the FCC's
rules, Buyer, at its sole expense, shall prepare and, as soon as is reasonably
practicable after the date of this Agreement, shall file with the FCC a
contingent Form 301 construction permit application for Station KBGE-TV (the
"301 Application"). The 301 Application shall be prepared in accordance with FCC
rules, regulations, and policies and sound engineering practices, and Buyer
shall use its best efforts to obtain FCC approval thereof. Buyer shall also make
reasonable efforts to prepare and file promptly any amendments to such 301
Application as may be requested by the FCC or as may be necessary to secure FCC
approval for a site having an Acceptable Power Level.
(d) If Buyer's 301 Application is denied by the FCC,
Buyer shall be under no further obligation to seek the approval of the FCC for a
construction permit application for Station KBGE-TV; provided, however, that if
Buyer or any Transferee shall file any Form 301 application that would improve
the predicted coverage of Station KBGE-TV at an Acceptable Power Level within
twenty (20) years of the date of this Agreement, Buyer or such Transferee shall
pay to Sellers the portion of the Purchase Price payable to Sellers pursuant to
Section 2.4(a)(ii) of this Agreement within fifteen (15) business days of the
date such application is granted (the "Improved Coverage Date"); and provided
further that Buyer and its successors in interest hereby irrevocably and
unconditionally guarantee to Sellers the obligations of any Transferee pursuant
to this Section 7.1(d).
(e) For purposes of this Section 7.1, the requirement of
an Acceptable Power Level shall be deemed to be satisfied by any grant of
authority (i) of a site located within a radius of five (5) miles or less from
the building currently known as Columbia SeaFirst Center, situated at 701 Fifth
Avenue, Seattle, Washington (the "Seafirst Building") having an effective
radiated power level of not less than 500,000 watts or (ii) of a site located
more than five (5) miles from the Seafirst Building having an effective radiated
power level of not less than 1,500,000 watts.
(f) Buyer, at its sole expense, shall prepare and within
180 days after the Closing Date or the grant of the 301 Application, whichever
is later, file with the FCC the 302 Application for Station KBGE-TV.
(g) Time shall be deemed to be of the essence with
respect to each of Buyer's obligations sets forth in this Section 7.1.
7.2 Control of the Stations. Prior to Closing, Buyer shall not,
directly or indirectly, control, supervise, direct, or attempt to control,
supervise, or direct, the operations of any
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Station; such operations, including complete control and supervision of all of
the Stations' programs, employees, and policies, shall be the sole
responsibility of Sellers (or their current licensee, as the case may be) until
the Closing.
7.3 Risk of Loss.
(a) The risk of any loss, damage or impairment,
confiscation, or condemnation of any of the Assets from any cause shall be borne
by Sellers at all times prior to the completion of the Closing, except that
Buyer will be required to purchase the Assets notwithstanding any such loss,
damage or impairment, confiscation, or condemnation if the conditions contained
in Section 8.1 to the obligations of Buyer at the Closing are nonetheless
satisfied.
(b) In the event of any damage or destruction of the
Assets described above, if the damaged or destroyed Assets have not been
restored or replaced prior to the Closing Date, Sellers shall deliver to Buyer
all insurance proceeds received in connection with such damage or destruction of
the Assets to the extent of the costs and expenses arising in connection with
such restoration and replacement.
7.4 Confidentiality. (a) Except as necessary for the consummation
of the transactions contemplated by this Agreement, including Buyer's obtaining
of financing related hereto, and except as and to the extent required by law,
including disclosure requirements of federal or state securities laws and rules
and regulations of securities markets, each party will keep confidential any
information obtained from any other party in connection with the transactions
contemplated by this Agreement. If this Agreement is terminated, each party will
return to any other party that furnished it with information in connection with
the transactions contemplated by this Agreement all such information.
(b) No party shall publish any press release or make any
other public announcement concerning this Agreement or the transactions
contemplated hereby without the prior written consent of each other party, which
shall not be withheld unreasonably; provided, however, that nothing contained in
this Agreement shall prevent any party, after notification to each other party,
from making any filings with governmental authorities that, in its judgment, may
be required or advisable in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
7.5 Cooperation. Each party hereto shall cooperate fully with each
other party and their respective counsel and accountants in connection with any
actions required to be taken as part of their respective obligations under this
Agreement, and the parties hereto shall execute such other documents as may be
necessary and desirable to the implementation and consummation of this
Agreement, and otherwise use their reasonable efforts to consummate the
transactions contemplated hereby and to fulfill their obligations under this
Agreement. Notwithstanding the foregoing, and except as otherwise expressly
provided in this Agreement, (a) Buyer shall have no obligation to expend funds
to obtain any of the Consents (other than any fee payable to the FCC in
connection with the filing of the applications for FCC Consents, the 301
Application, and the 302 Application, and any fee imposed by the FTC in
connection with filings made pursuant to the HSR Act, in each case to the extent
provided in Section 13.1, and
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any expenses necessary to file and prosecute successfully the 301 Application
and the 302 Application), and (b) Sellers shall have no obligation to expend
funds to obtain any of the Consents (other than any fee payable to the FCC in
connection with the filing of the applications for FCC Consent or for the
amendments to the Spokane Application and the Tallahassee Application set forth
in Section 7.1(b)(iii), and any fee imposed by the FTC in connection with
filings made pursuant to the HSR Act, in each case to the extent provided in
Section 13.1).
7.6 Access to Books and Records. Each Seller shall provide Buyer
access and the right to copy for a period of two (2) years from the Closing Date
any books and records relating to the Shares and the Assets but not included in
the Assets. Buyer shall provide Sellers access and the right to copy for a
period of two (2) years after the Closing Date any books and records relating to
the Assets that are included in the Assets.
7.7 [Intentionally omitted].
7.8 HSR Act Filing. ValueVision and Buyer agree to (a) file, or
cause to be filed, with the U.S. Department of Justice ("DOJ") and Federal Trade
Commission ("FTC") all filings, if any, that are required in connection with the
transactions contemplated hereby under the HSR Act within forty-five (45) days
of the date of this Agreement; (b) submit to the other party, prior to filing,
their respective HSR Act filings to be made hereunder, and to discuss with the
other any comments the reviewing party may have; (c) cooperate with each other
in connection with such HSR Act filings, which cooperation shall include
furnishing the other with any information or documents that may be reasonably
required in connection with such filings; (d) promptly file, after any request
by the FTC or DOJ, any information or documents requested by the FTC or DOJ; and
(e) furnish each other with any correspondence from or to, and notify each other
of any other communications with, the FTC or DOJ that relates to the
transactions contemplated hereunder, and to the extent practicable, to permit
each other to participate in any conferences with the FTC or DOJ.
7.9 [Intentionally omitted].
7.10 [Intentionally omitted].
7.11 [Intentionally omitted].
7.12 Sales Tax Filings. Sellers shall continue to file state sales
tax returns with respect to the Stations and, to the extent necessary, the
Shares in accordance with all applicable legal requirements and shall
concurrently deliver copies of all such returns to Buyer.
7.13 Accounts Receivable.
(a) Collection. At the Closing, Sellers shall designate
Buyer as their agent to collect any accounts receivable of Sellers in existence
on the Closing Date and arising from the sale of advertising time by the
Stations prior to the Closing Date (the "Stations' Receivables"). Buyer shall
use reasonable efforts to collect the Stations' Receivables during the
"Collection Period," which shall be the period beginning on the Closing Date and
ending on the last day of the fourth calendar month beginning after the Closing
Date. Buyer shall not be obligated to use any extraordinary efforts to collect
any of the Stations' Receivables or to refer any of the Stations' Receivables to
a collection agency or attorney for collection, and Buyer shall not make
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any such referral or compromise, nor settle or adjust the amount of any of the
Stations' Receivables, except with the approval of ValueVision. Sellers and
their respective representatives and agents may undertake to collect any of the
Stations' Receivables during the Collection Period so long as Sellers first
notify and consult with Buyer concerning Sellers' proposed collection efforts.
(b) Payments to ValueVision. On or before the twentieth
day after the end of each full calendar month during the Collection Period,
Buyer shall furnish to ValueVision (i) a list of the amounts collected before
the end of such month with respect to the Stations' Receivables, and (ii) the
amount collected during such month with respect to the Stations' Receivables. On
or before the twentieth day after the end of the Collection Period, Buyer shall
furnish ValueVision with a list of all of the Stations' Receivables that remain
uncollected at the end of the Collection Period.
(c) Further Obligations. After the expiration of the
Collection Period, Buyer shall have no further obligation hereunder other than
to make the payment under Section 7.13(b) and to remit to ValueVision any
payments with respect to any of the Stations' Receivables that Buyer
subsequently receives, and any Seller itself may act to collect any of the
Stations' Receivables that remain uncollected without restriction.
7.14 No Inconsistent Action. Between the date of this Agreement
and the date on which Buyer has fulfilled all of its obligations under Sections
2.4 and 7.1 of this Agreement, no party shall take any action that is
inconsistent with its obligations under this Agreement in any material respect
or that could reasonably be expected to hinder or delay the consummation of any
of the transactions contemplated by this Agreement. Between the date of this
Agreement and the Closing Date, Buyer shall not take any action that would
disqualify Buyer from being the licensee of the Stations under the
Communications Act of 1934, as amended, and the rules and regulations of the
FCC, each as in effect on the date of this Agreement, and Buyer shall further
comply with its obligations set forth in Section 7.1(b) of this Agreement with
respect to any future modifications in FCC rules, regulations, and policies.
7.15 VVI Spokane and VVI Tallahassee. Between the date of this
Agreement and the completion of the Closing, ValueVision shall not (a) split,
combine, divide, distribute, or reclassify any shares of the capital stock of
VVI Spokane or VVI Tallahassee, declare, pay, or set aside for payment any
dividend or other distribution in respect of the capital stock of VVI Spokane or
VVI Tallahassee, or directly or indirectly, redeem, purchase, or otherwise
acquire any shares of the capital stock of VVI Spokane or VVI Tallahassee; (b)
issue, sell, pledge, dispose of, encumber, or deliver (whether through the
issuance or granting of any options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock of any class or any securities
convertible into or exercisable or exchangeable for shares of stock of any class
of VVI Spokane or VVI Tallahassee (other than the issuance of certificates in
replacement of lost certificates); or (c) change or amend the charter documents
or bylaws of VVI Spokane or VVI Tallahassee.
7.16 Channel 51 Agreement. ValueVision will not waive any material
right relating to the Assets related to Channel 51 or the Channel 51 Agreement
without the prior written consent of Buyer. ValueVision will not terminate the
Channel 51 Agreement. ValueVision will not
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amend or modify the Channel 51 Agreement in any material respect without the
prior written consent of Buyer. ValueVision shall comply with the terms of the
Channel 51 Agreement and shall use commercially reasonable efforts to enforce
its rights under the Channel 51 Agreement. ValueVision shall (a) as soon as
practicable after the time of receipt or delivery by ValueVision, deliver to
Buyer copies of all notices and other documents received or delivered by
ValueVision under the Channel 51 Agreement, (b) notify Buyer promptly upon
learning of any material breach or default under the Channel 51 Agreement, and
(c) notify Buyer promptly of any amendment or modification to the Channel 51
Agreement or any waiver by ValueVision of any of its rights or of any of the
obligations of Television Interests Company, Inc. under the Channel 51
Agreement.
7.17 Control of Spokane Application and Tallahassee Application
Proceedings. No Seller shall transfer any assets to VVI Spokane or VVI
Tallahassee, or cause VVI Spokane or VVI Tallahassee, or cause VVI Spokane or
VVI Tallahassee to assume any liabilities, after the date of this Agreement
unless such transfer or assumption is necessary or desirable in the reasonable
judgment of ValueVision in connection with the Spokane Application or the
Tallahassee Application. ValueVision shall not permit VVI Spokane or VVI
Tallahassee to dismiss either such application without the consent of Buyer,
which consent shall not be unreasonably withheld. Notwithstanding the foregoing,
the parties hereto agree that (a) if Buyer shall acquire the VVI Spokane Shares
or the Spokane Option at the Closing, Sellers shall not enter into any
settlement agreement with any competing applicants for the facilities requested
in the Spokane Application without the prior written consent of Buyer, which
shall not be unreasonably withheld, conditioned or delayed; and (b) if Buyer
shall acquire the VVI Tallahassee Shares or the Tallahassee Option at the
Closing, Sellers shall not enter into any settlement agreement with any
competing applicants for the facilities requested in the Tallahassee Application
without the prior written consent of Buyer, which shall not be unreasonably
withheld, conditioned or delayed.
SECTION 8 CONDITIONS TO OBLIGATIONS OF BUYER AND SELLERS AT
CLOSING.
8.1 Conditions to Obligations of Buyer. All obligations of Buyer
at the Closing are subject to the fulfillment prior to or at the Closing Date of
each of the following conditions, any of which (except for the grant of FCC
Consents and with respect to the HSR Act) may be waived by Buyer in writing:
(a) FCC Consents. Except as otherwise provided by
Section 2.4, all of the FCC Consents shall have been granted.
(b) Final Orders. The FCC Consents, to the extent such
are granted, shall have become Final Orders.
(c) HSR Act. The waiting period under the HSR Act shall
have expired or been terminated without action by the DOJ or the FTC to prevent
the Closing.
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(d) Deliveries. Sellers shall have made or stand willing
to make all the deliveries to Buyer set forth in Sections 9.2(b), (c), (e) and
(f).
(e) Judgments. There shall not be in effect any judgment,
decree, or order that will prevent or make unlawful the Closing.
8.2 Conditions to Obligations of Sellers. All obligations of
Sellers at the Closing are subject to the fulfillment prior to or at the Closing
Date of each of the following conditions, any of which (except for the
requirement of FCC Consents and with respect to the HSR Act) may be waived by
ValueVision in writing:
(a) Representations and Warranties. All representations
and warranties of Buyer contained in this Agreement shall be true and complete
in all material respects at and as of the Closing Date as though made at and as
of that time, and Sellers shall have received a certificate, executed on behalf
of Buyer by an authorized officer, to that effect.
(b) Covenants and Conditions. Buyer shall have performed
and complied in all material respects with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date, and Sellers shall have received a certificate,
executed on behalf of Buyer by an authorized officer, to that effect.
(c) Deliveries. Buyer shall have made or stand
willing to make all the deliveries set forth in Section 9.3.
(d) FCC Consents. Except as otherwise provided by Section
2.4, all of the FCC Consents shall have been granted.
(e) HSR Act. The waiting period under the HSR Act shall
have expired or been terminated without action by the DOJ or the FTC to prevent
the Closing.
(f) Judgments. There shall not be in effect any judgment,
decree, or order that would prevent or make unlawful the Closing.
SECTION 9 CLOSING AND CLOSING DELIVERIES.
9.1 Closing.
(a) Closing Date.
(1) Except as provided in the following sentence
or as otherwise agreed to by Buyer and ValueVision, but subject to Section
9.1(a)(2), the Closing shall take place at 10:00 a.m. on a date, to be set by
Buyer on at least five (5) days' written notice to ValueVision, which shall be
not later than ten (10) business days following the date upon which the last FCC
Consent has become a Final Order. Except as otherwise agreed to by Buyer and
ValueVision, but subject to Section 9.1(a)(2), if Buyer fails to specify the
date for Closing pursuant to the preceding sentence prior to the fifth business
day after the date upon which the last FCC Consent has become a Final Order, the
Closing shall take place on the tenth business day after the date upon which the
last FCC Consent has become a Final Order.
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(2) Notwithstanding Section 9.1(a)(1), if on the
date that, but for this Section 9.1(a)(2), would be the Closing Date pursuant to
Section 9.1(a)(1), the certificate provided to Buyer under Section 9.2(f)
discloses, or the Buyer has notified Sellers in writing that it has determined
that, any representation or warranty of Sellers contained in this Agreement is
not true and complete In A Material Way, or that Sellers have failed to comply
with their obligations and covenants to be performed under this Agreement In A
Material Way, then (A) Sellers shall take any actions necessary or appropriate
to make such representation or warranty true and complete or to comply with such
obligations and covenants, and (B) the Closing shall be postponed for such
period as is required to cure the conditions warranting such postponement.
(b) Closing Place. The Closing shall be held at the
offices of Dow, Lohnes & Albertson, PLLC in Washington, D.C., or any other place
that is agreed upon by Buyer and ValueVision.
9.2 Deliveries by Sellers. Prior to or on the Closing Date,
Sellers shall deliver to Buyer the following, in form and substance reasonably
satisfactory to Buyer and its counsel:
(a) [Intentionally omitted]
(b) Conveyancing Documents. Duly executed bills of sale,
motor vehicle titles, stock certificates, stock powers, assignments, and other
transfer documents that are sufficient to vest good title to all of the Assets,
the Shares, and the Options in the name of Buyer, free and clear of all claims,
liabilities, security interests, mortgages, liens, pledges, conditions, charges,
covenants, easements, restrictions, encroachments, leases, or encumbrances of
any nature.
(c) Working Capital Payment. Any payment required to be
made by Sellers pursuant to Section 2.5(d)(1).
(d) Estoppel Certificates and Lessor's Consents. Any
estoppel certificates and consents of lessors that Sellers shall have obtained
pursuant to Section 6.11.
(e) Consents. A manually executed copy of any instrument
evidencing receipt of any Consent.
(f) Certificate. A certificate, dated as of the Closing
Date, executed on behalf of each Seller by an authorized officer, certifying
that, except as specifically stated in such certificate, (1) the representations
and warranties of Sellers contained in this Agreement are true and complete in
all material respects as of the Closing Date as though made on and as of that
date, and (2) each Seller has in all material respects performed and complied
with all of its obligations, covenants, and agreements set forth in this
Agreement to be performed and complied with on or prior to the Closing Date;
provided, however, that if such certificate shall disclose, or Buyer shall
notify Sellers in writing prior to the Closing Date that Buyer has determined
that, any representation or warranty of Sellers contained in this Agreement is
not true and complete as of the Closing Date In A Material Way, or that Sellers
have failed to comply with their obligations and covenants to be performed under
this Agreement as of the Closing Date In A Material Way, Buyer may elect to
delay the Closing until such representation or warranty is made materially true
and complete or such obligation or covenant is complied with in all
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material respects, as the case may be, and Buyer's sole remedy hereunder shall
be the remedy of specific performance to compel Sellers to make such
representation or warranty materially true and complete or such obligation or
covenant to be complied with in all material respects. For purposes of this
Agreement, "In A Material Way" shall mean that an expenditure in excess of
$100,000.00 is reasonably estimated to be required to make such representation
or warranty materially true and complete or to materially comply with such
obligation or covenant.
(g) Licenses, Contracts, Business Records, Etc. Copies
of all Licenses, Assumed Contracts, blueprints, schematics, working drawings,
plans, projections, engineering records, and all files and records used by any
Seller in connection with its operation of the Stations and included in the
Assets.
9.3 Deliveries by Buyer. Prior to or on the Closing Date, Buyer
shall deliver to Sellers the following, in form and substance reasonably
satisfactory to Sellers and their counsel:
(a) Purchase Price. The Purchase Price as provided in
Section 2.4.
(b) Working Capital Payment. Any payment required to be
made by Buyer pursuant to Section 2.5(d)(2).
(c) Assumption Agreements. Appropriate assumption
agreements pursuant to which Buyer shall assume and undertake to perform each
Seller's obligations under the Licenses and Assumed Contracts to the extent
provided in Section 2.5.
(d) Certificate. A certificate, dated as of the Closing
Date, executed on behalf of Buyer by an authorized officer, certifying that,
except as specifically stated in such certificate, (1) the representations and
warranties of Buyer contained in this Agreement are true and complete in all
material respects as of the Closing Date as though made on and as of that date,
and (2) Buyer has in all material respects performed and complied with all of
its obligations, covenants, and agreements set forth in this Agreement to be
performed and complied with on or prior to the Closing Date.
SECTION 10 TERMINATION.
10.1 Termination by Sellers. This Agreement may be terminated by
Sellers and the purchase and sale of the Assets, the Shares, and the Options
abandoned, if Sellers are not then in material default under this Agreement,
upon written notice to Buyer, upon the occurrence of any of the following:
(a) Conditions. If on the date that would otherwise be
the Closing Date any of the conditions precedent to the obligations of Sellers
set forth in this Agreement have not been satisfied or waived in writing by
Sellers.
(b) Judgments. If there shall be in effect on the date
that would otherwise be the Closing Date any judgment, decree, or order that
would prevent or make unlawful the Closing.
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(c) Upset Date. If the Closing shall not have occurred on
or prior to November 14, 1998; provided, however, that Sellers shall not be
entitled to terminate this Agreement pursuant to this Section 10.1(c) if (a) the
Closing shall not have occurred on or prior to November 14, 1998, as a result of
the intentional breach of this Agreement by Sellers or (b) the Closing has been
postponed beyond November 14, 1998 pursuant to Section 9.1(a)(2), but only for
such period as is required to cure the condition warranting such postponement.
(d) Breach. If Buyer is in breach in any material respect
of any of its representations, warranties, or covenants under this Agreement.
(e) Buyer's Wrongful Failure To Close. If Buyer
wrongfully fails to close the purchase and sale of the Assets, the Shares, and
the Options on the Closing Date for any reason, including without limitation,
Buyer's failure to use good faith efforts to satisfy the conditions to Buyer's
obligations set forth in Section 8.1 or to make the deliveries required by
Section 9.3.
10.2 Termination by Buyer. This Agreement may be terminated by
Buyer and the purchase and sale of the Shares, the Options and the Assets
abandoned, if Buyer is not then in material default under this Agreement, upon
written notice to Sellers, upon the occurrence of any of the following:
(a) Conditions. If on the date that would otherwise be
the Closing Date, any of the conditions precedent to the obligations of Buyer
set forth in this Agreement have not been satisfied or waived in writing by
Buyer.
(b) Judgments. If there shall be in effect on the date
that would otherwise be the Closing Date, any judgment, decree, or order that
would prevent or make unlawful the Closing.
(c) Intentionally omitted.
(d) Material Contracts. If Sellers shall not have
obtained and delivered to Buyer, within ninety (90) days after the date of this
Agreement, with respect to the Material Contracts identified as items 3-7 on
Schedule 4.7 hereto, any Consent required for the assignment to Buyer of such
Material Contract, without any change in the terms or conditions of such
Material Contract that could reasonably be expected to be less advantageous to
Buyer than those pertaining under the Material Contract as in effect on the date
of this Agreement; provided, however, that Buyer may only terminate this
Agreement pursuant to this Section 10.2(d) by delivering written notice to
ValueVision within seven (7) days after the end of such ninety-day period if
such Consent has not been delivered to Buyer.
(e) Upset Date. If Closing shall not have occurred on or
prior to November 14, 1998; provided, however, that Buyer shall not be entitled
to terminate this Agreement pursuant to this Section 10.2(e) if (a) the Closing
shall not have occurred on or prior to November 14, 1998, as a result of the
intentional breach of this Agreement by Buyer or (b) the Closing has been
postponed beyond November 14, 1998 pursuant to Section 9.1(a)(2), but only for
such period as is required to cure the condition warranting such postponement.
10.3 Escrow Deposit; Rights on Termination. Simultaneously with the
execution and delivery of this Agreement, Buyer has deposited with the Escrow
Agent the amount of Three
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Million Dollars ($3,000,000.00) in accordance with the Escrow Agreement. All
funds and documents deposited with the Escrow Agent shall be held and disbursed
in accordance with the terms of the Escrow Agreement and the following
provisions:
(a) At the Closing, Buyer and ValueVision shall jointly
instruct the Escrow Agent to disburse all amounts held by the Escrow Agent
pursuant to the Escrow Agreement, including any interest or other proceeds from
the investment of funds held by the Escrow Agent, to or at the direction of
ValueVision.
(b) If this Agreement is terminated pursuant to Section
10.1(a), (b), (c) or (d) by Sellers or pursuant to Section 10.2 by Buyer, Buyer
and ValueVision shall jointly instruct the Escrow Agent to disburse all amounts
held by the Escrow Agent pursuant to the Escrow Agreement, including any
interest or other proceeds from the investment of funds held by the Escrow
Agent, to or at the direction of Buyer.
(c) If this Agreement is terminated by Sellers pursuant
to Section 10.1(e), Buyer and ValueVision shall jointly instruct the Escrow
Agent to promptly pay or cause to be paid to Sellers the sum of Three Million
Dollars ($3,000,000.00), which amount shall be liquidated damages and shall
constitute full payment and the exclusive remedy for any damages suffered by
Sellers by reason of such event. Any remaining amounts held by the Escrow Agent
pursuant to the Escrow Agreement, including any interest or other proceeds from
the investment or funds held by the Escrow Agent shall be disbursed to or at the
direction of Buyer. The parties hereto agree in advance that actual damages
would be difficult to ascertain and that the sum of Three Million Dollars
($3,000,000.00) is a fair and equitable amount to reimburse Sellers for damages
sustained due to such event. Nothing in this Section 10.3 shall operate to limit
Sellers' rights at law or in equity with respect to any breach of this Agreement
by Buyer other than Buyer's obligation to close on the Closing Date.
(d) Termination of this Agreement by Buyer pursuant to
Section 10.2 shall be without liability or obligation on the part of any Seller.
10.4 Specific Performance. The parties recognize that if any
Sellers breach this Agreement and refuse to perform under the provisions of this
Agreement, monetary damages alone would not be adequate to compensate Buyer for
its injury. Buyer shall therefore be entitled to obtain specific performance of
the terms of this Agreement, which shall be Buyer's exclusive remedy hereunder.
If any action is brought by Buyer to enforce this Agreement, each Seller shall
waive the defense that there is an adequate remedy at law.
10.5 No Special Damages. No party to this Agreement shall be
entitled to any special, incidental, or consequential damages as a result of the
breach of this Agreement by any other party to this Agreement.
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SECTION 11 INDEMNIFICATION.
11.1 Indemnification by Sellers. After the Closing, and regardless
of any investigation made at any time by or on behalf of Buyer or any
information Buyer may have, each Seller hereby agrees, jointly and severally, to
indemnify and hold Buyer and its officers, directors, employees, and
representatives harmless against and with respect to, and shall reimburse Buyer
and its officers, directors, employees, and representatives for:
(a) Any and all losses, liabilities, or damages resulting
from the operation or ownership of the Stations prior to the Closing, including
any liabilities arising under the Licenses or the Assumed Contracts that relate
to events occurring prior the Closing Date, or resulting from any other
obligations of any Seller that are not assumed by Buyer pursuant to this
Agreement, including any liabilities arising at any time under any Contract that
is not included in the Assumed Contracts;
(b) Any loss, liability, obligation, or cost resulting
from any agreement with any finder, broker, advisor, or similar Person retained
by or on behalf of any Seller relating to the transactions contemplated by this
Agreement;
(c) Any and all out-of-pocket costs and expenses,
including reasonable legal fees and expenses, incident to any action, suit,
proceeding, claim, demand, assessment, or judgment incident to the foregoing or
incurred in investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.
11.2 Indemnification by Buyer. After the Closing, and regardless of
any investigation made at any time by or on behalf of any Seller or any
information any Seller may have, Buyer hereby agrees, to indemnify and hold each
Seller and its officers, directors, employees, and representatives harmless
against and with respect to, and shall reimburse each Seller and its officers,
directors, employees, and representatives for:
(a) Any and all obligations of such Seller assumed by
Buyer pursuant to this Agreement;
(b) Any and all losses, liabilities, or damages resulting
from the operation or ownership of the Stations after the Closing;
(c) Any loss, liability, obligation, or cost resulting
from any agreement with any finder, broker, advisor, or similar Person retained
by or on behalf of Buyer relating to the transactions contemplated by this
Agreement; and
(d) Any and all out-of-pocket costs and expenses,
including reasonable legal fees and expenses, incident to any action, suit,
proceeding, claim, demand, assessment, or judgment incident to the foregoing or
incurred in investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.
11.3 Procedure for Indemnification. The procedure for
indemnification shall be as follows:
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(a) The party claiming indemnification (the "Claimant")
shall promptly give notice to the party from which indemnification is claimed
(the "Indemnifying Party") of any claim, whether between the parties or brought
by a third party, specifying in reasonable detail the factual basis for the
claim.
(b) With respect to claims solely between the parties,
following receipt of notice from the Claimant of a claim, the Indemnifying Party
shall have thirty (30) days to make such investigation of the claim as the
indemnifying Party deems necessary or desirable. For the purposes of such
investigation, the Claimant agrees to make available to the Indemnifying Party
and its authorized representatives the information relied upon by the Claimant
to substantiate the claim. If the Claimant and the Indemnifying Party agree at
or prior to the expiration of the thirty-day period (or any mutually agreed upon
extension thereof) to the validity and amount of such claim, the Indemnifying
Party shall immediately pay to the Claimant the full amount of the claim. If the
Claimant and the Indemnifying Party do not agree within the thirty-day period
(or any mutually agreed upon extension thereof), the Claimant may seek
appropriate remedy at law or equity or under the arbitration provisions of this
Agreement, as applicable.
(c) With respect to any claim by a third party as to
which the Claimant is entitled to indemnification under this Agreement, if the
Indemnifying Party notifies the Claimant in writing within ten (10) days of its
receipt of notice from the Claimant of the third-party claim that the
Indemnifying Party acknowledges its potential liability to the Claimant under
this Agreement, the Indemnifying Party shall have the right at its own expense,
to participate in or assume control of the defense of such claim, and the
Claimant shall cooperate fully with the Indemnifying Party, subject to
reimbursement for actual out-of-pocket expenses incurred by the Claimant as the
result of a request by the Indemnifying Party. If the Indemnifying Party elects
to assume control of the defense of any third-party claim, the Claimant shall
have the right to participate in the defense of such claim at its own expense.
If the Indemnifying Party fails timely to notify the Claimant in writing that
the Indemnifying Party acknowledges its potential liability to the Claimant
under this Agreement or if the Indemnifying Party does not elect to assume
control or otherwise participate in the defense of any third-party claim, the
Indemnifying Party shall be bound by the results obtained by the Claimant with
respect to such claim.
(d) If a claim, whether between the parties or by a third
party, requires immediate action, the parties will make every effort to reach a
decision with respect thereto as expeditiously as possible.
SECTION 12 [Intentionally omitted]
SECTION 13 MISCELLANEOUS.
13.1 Fees and Expenses. ValueVision and Buyer shall each pay
one-half of any filing fees, transfer taxes, recordation taxes, sales taxes,
document stamps, or other charges levied by any governmental entity in
connection with the transactions contemplated by this Agreement, including any
fees payable to the FCC in connection with the filing of the applications for
FCC
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Consents and the fee imposed by the FTC in connection with filings made pursuant
to the HSR Act. Except as otherwise provided in this Agreement, each party shall
pay its own expenses incurred in connection with the authorization, preparation,
execution, and performance of this Agreement, including all fees and expenses of
counsel, accountants, agents and representatives, and each party shall be
responsible for all fees or commissions payable to any finder, broker, advisor,
or similar Person retained by or on behalf of such party.
13.2 Notices. All notices, demands, and requests required or permitted
to be given under the provisions of this Agreement shall be (a) in writing, (b)
delivered by telecopier, by personal delivery, by commercial delivery service,
or by registered or certified mail, return receipt requested, (c) deemed to have
been given on the date on which the telecopy is confirmed, the date of personal
delivery, or the date set forth in the records of the delivery service or on the
return receipt, as applicable, and (d) addressed as follows:
If to any Seller: ValueVision International, Inc.
6740 Shady Oak Road
Eden Prairie, Minnesota 55344
Attention: Robert L. Johander
Telecopier: 1-612-947-0188
With copies to: Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037-1420
Attention: M. Carolyn Cox
Telecopier: 1-202-663-6363
If to Buyer: Paxson Communications Corporation
601 Clearwater Park Road
West Palm Beach, Florida 33401
Attention: Lowell W. Paxson, Chairman
Telecopier: 1-561-655-9424
With a copy to: Dow, Lohnes & Albertson
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, D.C. 20036-1802
Attention: John R. Feore, Jr.
Telecopier: 1-202-776-2222
or to any other or additional Persons and addresses as the parties may from time
to time designate in a writing delivered in accordance with this Section 13.2.
13.3 Arbitration. Except as otherwise provided to the contrary
below, any dispute arising out of or related to this Agreement that Sellers and
Buyer are unable to resolve by themselves shall be settled by arbitration in
Washington, D.C., by a panel of three arbitrators.
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Sellers and Buyer shall each designate one disinterested arbitrator, and the two
arbitrators so designated shall select the third arbitrator. The persons
selected as arbitrators need not be professional arbitrators, and persons such
as lawyers, accountants, brokers, and bankers shall be acceptable. Before
undertaking to resolve the dispute, each arbitrator shall be duly sworn
faithfully and fairly to hear and examine the matters in controversy and to make
a just award according to the best of his or her understanding. The arbitration
hearing shall be conducted in accordance with the commercial arbitration rules
for large cases of the American Arbitration Association. The written decision of
a majority of the arbitrators shall be final and binding on all Sellers and
Buyer. The costs and expenses of the arbitration proceeding shall be assessed
between Sellers and Buyer in a manner to be decided by a majority of the
arbitrators, and the assessment shall be set forth in the decision and award of
the arbitrators. Judgment on the award, if it is not paid within thirty (30)
days, may be entered in any court having jurisdiction over the matter. No action
at law or suit in equity based upon any claim arising out of or related to this
Agreement shall be instituted in any court by any Seller or Buyer against any
other party except (a) an action to compel arbitration pursuant to this Section
13.3, (b) an action to enforce the award of the arbitration panel rendered in
accordance with this Section, or (c) a suit for specific performance pursuant to
Section 10.5.
13.4 Benefit and Binding Effect. (a) No party may assign any of its
rights, interests or obligations under this Agreement without the prior written
consent of the other parties hereto, except that (i) without the consent of any
Seller, Buyer may collaterally assign its rights, interests and obligations
under this Agreement to its lenders, (ii) without the consent of any Seller,
Buyer may assign its rights, interests and obligations under this Agreement to a
wholly owned subsidiary or subsidiaries of Buyer, and (iii) without the consent
of Buyer, any Seller may assign its rights, interests and obligations under this
Agreement to ValueVision in connection with the assignment of all its assets and
liabilities to ValueVision. If any Seller assigns all its assets to the other or
to ValueVision as contemplated by the preceding sentence and, in connection
therewith, ValueVision assumes all obligations and liabilities of such Seller
under this Agreement, Buyer and Sellers agree to amend this Agreement so as to
eliminate such Seller as a party hereto and to reflect the assumption by
ValueVision of all obligations and liabilities of Seller under this Agreement.
This Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. If Buyer assigns its rights,
interests and obligations under this Agreement to a wholly owned subsidiary or
subsidiaries, Buyer shall contemporaneously execute in writing a guarantee of
such party's or parties' obligations hereunder.
(b) Upon notice by either Seller or Buyer that an
assignment permitted by Section 13.4(a) has occurred, the other party shall
enter into an Amended and Restated Asset and Stock Purchase and Option Grant
Agreement to reflect the new parties hereto as a result of such assignment;
provided that the other party shall not condition its execution of such Amended
and Restated Asset and Stock Purchase and Option Grant Agreement upon the
modification or inclusion of any provision therein. The other party shall
execute any such Amended and Restated Asset and Stock Purchase and Option Grant
Agreement within two (2) business days of
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presentation of same by Sellers or Buyer, as the case may be, and any failure or
refusal to do so shall be a material breach of this Agreement.
13.5 Further Assurances. The parties shall take any actions and
execute any other documents that may be necessary or desirable to the
implementation and consummation of this Agreement, including, in the case of
Sellers, any additional deeds, bills of sale, stock powers, or other transfer
documents that, in the reasonable opinion of Buyer, may be necessary to ensure,
complete, and evidence the full and effective transfer of the Assets, the
Shares, and the Options to Buyer pursuant to this Agreement.
13.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED,
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT
REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF).
13.7 Headings. The headings in this Agreement are included for
ease of reference only and shall not control or affect the meaning or
construction of the provisions of this Agreement.
13.8 Gender and Number. Words used in this Agreement, regardless of
the gender and number specifically used, shall be deemed and construed to
include any other gender, masculine, feminine, or neuter, and any other number,
singular or plural, as the context requires.
13.9 Entire Agreement. This Agreement, the Escrow Agreement, the
schedules, hereto, and all documents, certificates, and other documents to be
delivered by the parties pursuant hereto, collectively represent the entire
understanding and agreement between Buyer and Sellers with respect to the
subject matter of this Agreement. This Agreement supersedes all prior
negotiations among Buyer and Sellers and cannot be amended, supplemented, or
changed except by an agreement in writing that makes specific reference to this
Agreement and that is signed by the party against which enforcement of any such
amendment, supplement, or modification is sought.
13.10 Waiver of Compliance: Consents. Except as otherwise provided
in this Agreement, any failure of any of the parties to comply with any
obligation, representation, warranty, covenant, agreement, or condition in this
Agreement may be waived by the party entitled to the benefits thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, representation,
warranty, covenant, agreement, or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section 12.10.
13.11 Counterparts. This Agreement may be signed in counterparts
with the same effect as if the signature on each counterpart were upon the same
instrument.
- 37 -
<PAGE> 44
13.12 Survival of Representations and Warranties. The
representations and warranties of the parties hereto shall be deemed to be
continuing representations and warranties and shall survive the Closing and
shall expire on the first anniversary of the Closing Date.
- 38 -
<PAGE> 45
IN WITNESS WHEREOF, this Agreement has been executed by Sellers and
Buyer as of the date first written above.
VALUEVISION INTERNATIONAL, INC.
By: /s/ Robert L. Johander
-----------------------------------------
Name: Robert L. Johander
---------------------------------------
Title: Chief Executive Officer
--------------------------------------
VVI SEATTLE, INC.
By: /s/ Robert L. Johander
-----------------------------------------
Name: Robert L. Johander
---------------------------------------
Title: Chief Executive Officer
--------------------------------------
VVILPTV, INC.
By: /s/ Robert L. Johander
-----------------------------------------
Name: Robert L. Johander
---------------------------------------
Title: Chief Executive Officer
--------------------------------------
VVI SPOKANE, INC.
By: /s/ Robert L. Johander
-----------------------------------------
Name: Robert L. Johander
---------------------------------------
Title: Chief Executive Officer
--------------------------------------
- 38 -
<PAGE> 46
VVI TALLAHASSEE, INC.
By: /s/ Robert L. Johander
-----------------------------------------
Name: Robert L. Johander
---------------------------------------
Title: Chief Executive Officer
--------------------------------------
PAXSON COMMUNICATIONS
CORPORATION
By: /s/ Lowell W. Paxson
-----------------------------------------
Name: Lowell W. Paxson
---------------------------------------
Title: Chairman
--------------------------------------
- 39 -
<PAGE> 1
EXHIBIT 10.190
LIMITED LIABILITY COMPANY AGREEMENT
OF
THE TRAVEL CHANNEL, L.L.C.
Dated as of November 24, 1997
<PAGE> 2
<TABLE>
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TABLE OF CONTENTS
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SECTION 1 FORMATION OF THE LIMITED LIABILITY COMPANY........................ 1
1.1 Formation......................................................... 1
1.2 Place of Business................................................. 1
1.3 Registered Office and Registered Agent ........................... 1
1.4 Qualification in Other Jurisdictions.............................. 2
1.5 Term.............................................................. 2
1.6 Status of Company for Tax Purposes................................ 2
1.7 Authorized Person................................................. 2
1.8 Single Class of Membership........................................ 2
SECTION 2 PURPOSE; POWERS................................................... 2
2.1 Purpose of the Company; Description of the Network................ 2
2.2 Powers............................................................ 3
SECTION 3 CAPITAL CONTRIBUTIONS; LIMITED LIABILITY COMPANY
INTEREST; CAPITAL ACCOUNTS........................................ 3
3.1 Interests......................................................... 3
3.2 Capital Contributions............................................. 3
3.3 Capital Accounts.................................................. 4
3.4 Maintenance of Capital Accounts................................... 5
3.5 Withdrawal from Capital Accounts.................................. 5
3.6 Interest on Capital Accounts...................................... 5
3.7 Use of Capital Accounts........................................... 5
3.8 Assignment, Assumption and Prorations............................. 5
SECTION 4 INITIAL LOAN; ADDITIONAL CAPITAL; ADJUSTMENTS..................... 7
4.1 The PDI Loan...................................................... 7
4.2 Additional Capital Generally...................................... 7
4.3 Adjustments....................................................... 8
SECTION 5 DISTRIBUTIONS..................................................... 8
5.1 Distributions..................................................... 8
5.2 Limitation on Distributions....................................... 8
5.3 Distributions in Kind............................................. 8
SECTION 6 ALLOCATIONS OF PROFITS AND LOSSES................................. 8
6.1 Timing............................................................ 8
6.2 Allocation of Profits............................................. 9
6.3 Allocation of Losses.............................................. 9
6.4 Allocations under Section 704(c) of the Code...................... 9
6.5 Qualified Income Offset........................................... 10
</TABLE>
<PAGE> 3
<TABLE>
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<S> <C> <C>
SECTION 7 MEMBERS.......................................................... 10
7.1 Limited Liability................................................ 10
7.2 Limitation on Members............................................ 10
7.3 Indemnification.................................................. 10
SECTION 8 MANAGEMENT OF THE COMPANY........................................ 11
8.1 Management Committee............................................. 11
8.2 Managing Director................................................ 12
8.3 Books and Records................................................ 14
8.4 Accounting; Fiscal Year.......................................... 14
8.5 Tax Reporting.................................................... 14
8.6 Inspection....................................................... 15
8.7 Compensation..................................................... 15
8.8 Bank Accounts.................................................... 15
SECTION 9 TERMINATION...................................................... 15
9.1 Events Causing Termination....................................... 15
9.2 Winding Up....................................................... 16
SECTION 10 TRANSFER OF INTEREST............................................. 17
10.1 General.......................................................... 17
10.2 Violative Transfers.............................................. 18
10.3 Preemptive Right................................................. 18
10.4 TCAC's Tag-Along Right........................................... 19
10.5 TCAC Put Right................................................... 19
10.6 Termination of Rights............................................ 20
10.7 PDI's Call Right................................................. 20
10.8 PDI's Lobby Purchase Option...................................... 20
10.9 Appraised Fair Market Value...................................... 21
10.10 Covenant of DCI.................................................. 22
10.11 Covenant of PCC.................................................. 23
SECTION 11 ADMISSION OF MEMBERS; RESIGNATIONS............................... 23
11.1 Admission of Members............................................. 23
11.2 Conditions....................................................... 23
11.3 Resignations..................................................... 23
SECTION 12 EVENTS OF DEFAULT................................................ 23
12.1 Events of Default................................................ 23
12.2 Notice and Cure.................................................. 24
12.3 Remedies......................................................... 24
12.4 Purchase of Defaulting Members' Interest......................... 25
SECTION 13 NON-COMPETE...................................................... 25
</TABLE>
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<PAGE> 4
<TABLE>
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<S> <C> <C>
13.1 Non-Compete........................................................ 25
SECTION 14 EXCULPATION; INDEMNIFICATION; LIABILITY............................ 27
14.1 Exculpation........................................................ 27
14.2 Indemnification.................................................... 27
SECTION 15 ADDITIONAL COVENANTS AND AGREEMENTS................................ 29
15.1 Network Programming and Commercial Breaks.......................... 29
15.2 Sublicense Rights.................................................. 29
SECTION 16 PRECONDITIONS; EFFECTIVE DATE...................................... 31
SECTION 17 MISCELLANEOUS...................................................... 32
17.1 Entire Agreement................................................... 32
17.2 Amendments......................................................... 32
17.3 Confidentiality.................................................... 32
17.4 Representations and Warranties..................................... 32
17.5 Validity and Severability.......................................... 32
17.6 Fair Market Value.................................................. 33
17.7 Press Release...................................................... 33
17.8 Headings and Usage................................................. 33
17.9 Counterparts....................................................... 33
17.10 Successors and Assigns; Survival of Representations and Warranties. 33
17.11 Venue.............................................................. 33
17.12 Further Assurances................................................. 34
17.13 Notices............................................................ 34
17.14 Governing Law...................................................... 34
SCHEDULE
Schedule 3.2(a)
Exhibit A Software License Agreement
Exhibit B PDI License Agreement
Exhibit C Programming License Agreement
Exhibit D Note
Exhibit E Security Agreement
Exhibit F Management Agreement
Exhibit G Consulting Agreement
</TABLE>
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<PAGE> 5
LIMITED LIABILITY COMPANY AGREEMENT
OF
THE TRAVEL CHANNEL, L.L.C.
Limited Liability Company Agreement, dated as of November 24, 1997
(this "Agreement"), of THE TRAVEL CHANNEL, L.L.C., between Project Discovery,
Inc., a Delaware corporation ("PDI") and Travel Channel Acquisition Corporation,
a Delaware corporation ("TCAC"; and each of PDI and TCAC a "Member," and,
together with any other entity or individual who may, pursuant to this
Agreement, become a Member, collectively, the "Members").
RECITAL
TCAC and PDI desire to establish a Delaware limited liability company
pursuant to the Delaware Limited Liability Company Act, as amended from time to
time (6 Del. C., Section 18-101 et seq.; the "Act") and further desire, pursuant
to this Agreement, to set forth, among other things, the management structure of
such limited liability company.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, the parties hereto hereby agrees as
follows:
SECTION 1
FORMATION OF THE LIMITED LIABILITY COMPANY
1.1 Formation. By execution and delivery of this Agreement and
by filing a certificate of formation (the "Certificate") with the Office of the
Secretary of State of the State of Delaware, the Members hereby form a Delaware
limited liability company named "The Travel Channel, L.L.C." (the "Company"),
pursuant to the Act, for the purposes described in Section 2 below.
1.2 Place of Business. The location of the Company's principal
place of business shall be at 7700 Wisconsin Avenue, Bethesda, Maryland 20814,
or such other location as shall be selected from time to time by the Management
Committee.
1.3 Registered Office and Registered Agent. The name of the
registered agent of the Company in the State of Delaware shall be Corporation
Service Company, located at 1013 Centre Road, Wilmington, Delaware 19805. The
registered office of the Company in the State of Delaware shall be located at
1013 Centre Road, Wilmington, Delaware 19805. The Management Committee may at
any time appoint another registered agent and/or registered office.
1.4 Qualification in Other Jurisdictions. The Managing
Director (defined below) shall cause the Company to be qualified or registered
to do business under
<PAGE> 6
the laws of any jurisdiction in which such qualification or registration is
required or desirable. Any Authorized Person (defined below) may execute,
deliver and file any certificates (and any amendments and/or restatements
thereof) necessary for the Company to qualify to do business in a jurisdiction
in which the Company may wish to conduct business.
1.5 Term. The term of the Company shall commence on the date
the Certificate is filed in the Office of the Secretary of State of the State of
Delaware and shall continue in existence until the Company is dissolved and its
affairs wound up in accordance with the provisions of this Agreement.
1.6 Status of Company for Tax Purposes. For federal, state and
local tax purposes, the Members intend that the Company be treated as a
partnership. All provisions of the Certificate and this Agreement shall be
interpreted and construed so as to effectuate such treatment, and the Managing
Director shall take appropriate action to ensure such treatment. However, the
Members intend that the Company not be a partnership, limited partnership or
joint venture for any purpose other than federal, state and local income tax
purposes and intend that this Agreement shall not be construed to suggest
otherwise.
1.7 Authorized Person. For purposes of executing, delivering
and filing any certificates, documents and other instruments that the Management
Committee deems necessary or appropriate to form, qualify or continue the
existence or qualification of the Company in the State of Delaware and in all
other jurisdictions in which the Company may conduct business or own property,
an authorized person (as such term is used in the Act) shall be any officer or
manager of the Company and any other person specifically authorized by the
Management Committee ("Authorized Person").
1.8 Single Class of Membership. There shall be only one class
of Members.
SECTION 2
PURPOSE; POWERS
2.1 Purpose of the Company: Description of the Network. The
purpose of the Company is to own and operate a cable and satellite programming
network (the "Network") to be called "Travel Channel," "Discovery Travel
Network," or such other name as is agreed upon by the Members, and to operate
other directly related businesses that support or receive support from the
Network. It is the further intent of the Members that the Company may do all
things specified in the Act, and may have and exercise all powers conferred by
the laws of the State of Delaware, as the laws are now in effect or may at any
time hereafter be amended to the extent necessary or appropriate to fulfill its
purposes.
The Network shall be distributed domestically, i.e., within the United
States of America and the territories and possessions thereof (the "Territory").
The Network will consist of programming relating to travel.
-2-
<PAGE> 7
2.2 Powers. The Company shall have all powers and privileges
granted by the Act or by any other applicable law, together with any powers
incidental thereto, and is empowered to do any and all acts necessary,
appropriate, proper, advisable, incidental or convenient to or for the
furtherance of the purposes and business of the Company and for the protection
and benefit of the Company (except to the extent specifically limited by the
terms of this Agreement), including, without limitation, any and all of the
powers which may be exercised on behalf of the Company by the Managing Director
in accordance with Section 8 of this Agreement, and including, without
limitation, buying, selling and holding real and personal property and entering
into and executing agreements in its own name. All real and personal property
(including intangible property acquired by the Company after the date hereof) of
the Company shall be held in the Company's name, and not in the name of any of
the Members, and no Member shall have any individual ownership rights in such
property except for its rights as a Member.
SECTION 3
CAPITAL CONTRIBUTIONS; LIMITED LIABILITY COMPANY
INTEREST; CAPITAL ACCOUNTS
3.1 Interests. "Interest" shall mean a Member's ownership
interest in the Company, and the ratio, stated as a percentage, of a Member's
interest in the Profits (defined below) and Losses (as defined below) of the
Company and in the right to receive distributions of the Company's assets, as
determined pursuant to the provisions of this Agreement and all of such Member's
other rights under this Agreement and the Act. Subject to adjustment as provided
in Section 4.3, TCAC shall have a 30% Interest and PDI shall have a 70%
Interest.
3.2 Capital Contributions. Simultaneously with the execution
and delivery of this Agreement, the Members shall make capital contributions
("Initial Capital Contributions" and, together with all Additional Capital
Contributions (defined herein), "Contributions") to the capital of the Company
in accordance with the provisions set forth below:
(a) TCAC shall contribute the following: (i) its 75% undivided
interest in the assets which comprise, or are otherwise used in
connection with, the cable television network presently known as "The
Travel Channel" (the "Channel"), as such assets are more specifically
described in Schedule 3.2(a) hereto, and subject to any exclusions and
prorations set forth in Section 3.8 below ("Travel Channel Assets"),
(ii) a 100% interest in the "World Travelers Network," ("WTN"), as more
specifically described in Schedule 3.2(a); and (iii) pursuant to a
license agreement between the Company and TCAC substantially in the
form attached hereto as Exhibit A (the "Software License Agreement,"),
a ten year, royalty-free, nonexclusive license to use, within the
Territory, the proprietary software of PCC which interfaces with
"Oracle(TM)" software for shopping, mail order and travel transactions.
In addition, simultaneously herewith, TCAC shall cause to be assigned
to the Company, and the Company shall assume therefrom, subject to the
consent of Landmark Communications, Inc. ("LCI"), all of the right,
title and interest in, and all of the
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<PAGE> 8
obligations of, Paxson Communications Corporation ("PCC") (the parent
company of TCAC) under and pursuant to that certain Asset Acquisition
Agreement, dated as of June 13, 1997 (the "Landmark Agreement") by and
among LCI, The Travel Channel, Inc. and PCC, and the Services Agreement
dated as of June 13, 1997, among LCI, The Travel Channel, Inc., PCC and
the Weather Channel, Inc. The Members agree that the property
contributed to the Company by TCAC as TCAC's Initial Capital
Contribution shall have an aggregate book value of $55,000,000.
(b) PDI shall contribute the following: (x) its 25% undivided
interest in that portion of the Travel Channel Assets purchased thereby
from TCAC pursuant to the Asset Purchase Agreement, dated of even date
herewith, between PDI and TCAC (the "PDI Purchase Agreement"); (y)
pursuant to a sublicense agreement, substantially in the form attached
hereto as Exhibit B, between the Company and PDI (the "PDI License
Agreement,") a royalty-free, nonexclusive license to use, within the
Territory, the name "Discovery" in connection with the operation and
distribution by the Company of the Network and all related activities
thereof (e.g., website, magazine, other publications, affinity cards,
etc.); and pursuant to a sublicense agreement, substantially in the
form attached hereto as Exhibit C, between the Company and PDI (the
"Programming License Agreement,") a royalty-free, nonexclusive license,
to distribute, within the Territory, subject to the terms and
conditions set forth in such sublicense agreement, the travel-oriented
programming listed on Schedule A to such Programming License Agreement,
which was produced by PDI or sublicensed to PDI by, and was produced
and is owned by, Discovery Communications, Inc. ("DCI"), PDI's parent
company, or any subsidiary thereof, prior to the Effective Date
(defined below). The Members agree that the property contributed to the
Company by PDI as PDI's Initial Capital Contribution shall have an
aggregate book value of $128,333,333.
3.3 Capital Accounts. The Company shall establish and maintain
a separate Capital Account for each Member. Each Member's Capital Account will
be increased by (i) the amount of money contributed by such Member to the
Company; (ii) the fair market value of property contributed by such Member to
the Company (net of liabilities secured by such contributed property that the
Company is considered to assume or take subject to under Section 752 of the
Internal Revenue Code of 1986, as amended ("Code")); (iii) allocations of
Profits to such Member; and (iv) allocations to such Member of income described
in Section 705(a)(1)(B) of the Code. Each Member's Capital Account will be
decreased by (i) the amount of money distributed to such Member by the Company;
(ii) the fair market value of property distributed to such Member by the Company
(net of liabilities secured by such distributed property that such Member is
considered to assume or take subject to under Section 752 of the Code); (iii)
allocations of Losses to such Member; and (iv) allocations to such Member of
expenditures described in Section 705(a)(2)(B) of the Code. TCAC's Capital
Account shall initially be $55,000,000 and PDI's Capital Account shall initially
be $128,333,333.
3.4 Maintenance of Capital Accounts. The manner in which
Capital Accounts are to be maintained pursuant to this Section 4.4 is intended
to comply with the
-4-
<PAGE> 9
requirements of Section 704(b) of the Code and the Treasury Regulations
promulgated thereunder and is intended to properly reflect each Member's
"interest in the partnership" pursuant to such Treasury Regulations. If, in the
opinion of the Company's accountants, the manner in which Capital Accounts are
to be maintained pursuant to the provisions of this Section 4.4 should be
modified, in order to comply with section 704(b) of the Code and the Treasury
Regulations promulgated thereunder and in order to properly reflect each
Member's "interest in the partnership," then, notwithstanding anything to the
contrary contained in the preceding provisions of this Section 3.4 the method in
which Capital Accounts are maintained shall be so modified; provided, however,
that any change in the manner of maintaining Capital Accounts shall not
materially alter the economic agreement between or among the Members.
3.5 Withdrawal from Capital Accounts. Except as specifically
provided by law, no Member shall have the right to withdraw any part of its
Capital Account or to demand or receive the return of any of its Capital
Contributions from the Company.
3.6 Interest on Capital Accounts. No Member shall be entitled
to receive any interest in respect of either its Capital Contributions or its
Capital Account.
3.7 Use of Capital Accounts. The aggregate of all Capital
Contributions of the Members to the Company shall be available to the Company to
carry out the objects and purposes of the Company.
3.8 Assignment Assumption and Prorations.
(a) Unless otherwise defined in this Agreement, capitalized
terms used in this Section 3.8 shall have the meanings assigned thereto in the
PDI Purchase Agreement. Upon the contribution of the Travel Channel Assets to
the Company in accordance with Section 3.2, the Company assumes and undertakes
to pay, discharge, and perform (i) regardless of whether any Consent to the
assignment of any License or Assumed Contract to the Company has been obtained,
all obligations and liabilities of TCAC and PDI relating to the business and
operations of the Channel and the use and operation of the Travel Channel
Assets, including obligations and liabilities of TCAC and of PDI (if any) under
the Licenses and Assumed Contracts (as defined in the PDI Purchase Agreement),
to the extent that (1) such obligations and liabilities relate to the time after
the Effective Date, or (2) the Company received a credit under Section 3.8(c)
for deferred expenses, and (ii) all obligations and liabilities of TCAC and PDI
to pay severance or other similar benefits to any employees of "The Travel
Channel" who are terminated at or after the Effective Date provided that the
Company retains its right to exercise its rights under the Landmark Agreement
(defined herein) for such obligation, (iii) payments to any party to an
affiliate agreement (each, an "MSO"), which payments constitute indemnification
of damages suffered by such MSO and/or a repayment of affiliate fees paid by
such MSO prior to the Effective Date (whether as a result of such MSO enforcing
the "most favored nation" provision of the relevant affiliate agreement, or
otherwise), and (iv) free or reduced rate advertising time which the Company is
required to provide to advertisers on the Network (i.e. "make good" time), as a
result of the inability of TCAC to have provided to such advertiser the number
of
-5-
<PAGE> 10
subscribers for the advertising time purchased and used by such advertiser prior
to the Effective Date.
(b) Concurrently with the contribution of the Assets to the
Company in accordance with Section 3.2, TCAC will transfer, convey, assign, and
deliver to the Company (i) all security deposits under any Assumed Contract; and
(ii) all prepaid and deferred expenses of the Channel as of the Closing Date.
(c) All security deposits and prepaid and deferred expenses
arising from the operation of the Channel and assigned by TCAC pursuant to
Section 3.8(b) or assumed by the Company pursuant to Section 3.8(a), including
business and license fees, utility charges, real and personal property taxes and
assessments levied against the Assets, property and equipment rentals,
applicable copyright or other fees, sales and service charges, and similar
prepaid and deferred items, but excluding severance obligations and any
obligations set forth in Section 3.8(a)(iii) and (iv), shall be prorated between
TCAC and the Company in accordance with the principle that TCAC shall be
responsible for all expenses, costs, liabilities, and obligations allocable to
the operations of the Channel for the period prior to the Effective Date, and
the Company shall be responsible for all expenses, costs, liabilities, and
obligations allocable to the operations of the Channel for the period after the
Effective Date. To effectuate the proration of expenses pursuant to this Section
3.8(c), TCAC shall receive a credit equal to the amount of any security deposits
assigned to the Company and any expenses, costs, liabilities, or obligations
that are paid or incurred by TCAC and are allocable to the operations of the
Channel for the period after the Effective Date and the Company shall receive a
credit equal to the amount of any expenses, costs, liabilities, or obligations
that are paid or incurred by the Company and are allocable to the operations of
the Channel for the period before the Effective Date. TCAC and the Company will
use good faith efforts to agree on the prorations. Within fifteen Business Days
after the date on which the prorations are finally determined pursuant to this
Section 3.8(c). TCAC shall pay or cause to be paid to or for the account of the
Company, in immediately available funds, the amount, if any, by which the sum of
the credits to the Company pursuant to this Section 3.8(c) exceeds the sum of
the credits to TCAC pursuant to this Section 3.8(c), and the Company shall pay
or cause to be paid to or for the account of TCAC, in immediately available
funds, the amount, if any, by which the sum of the credits to TCAC pursuant to
this Section 3.8(c), exceeds the sum of the credits to the Company pursuant to
this Section 3.8(c).
-6-
<PAGE> 11
SECTION 4
INITIAL LOAN; ADDITIONAL CAPITAL; ADJUSTMENTS.
4.1 The PDI Loan. Simultaneously with the execution and
delivery of this Agreement, PDI is making available to the Company a secured
line of credit of a maximum amount of $20,000,000 (the "PDI Loan"), as evidenced
by a note, made by the Company in favor of PDI in the form of Exhibit D hereto
(the "Note") and a security agreement, made by the Company in favor of PDI in
the form of Exhibit E hereto (the "Security Agreement"). The proceeds of the PDI
Loan shall be used by the Company for the capital needs of the Company. The
obligation of the Company to repay the PDI Loan shall be senior in right to the
obligation of the Company to repay additional loans made by Members pursuant to
Section 4.2, below, or otherwise.
4.2 Additional Capital Generally. If any business plan or
budget approved by the Management Committee in accordance with the terms of this
Agreement requires additional capital to finance the Company beyond the Initial
Capital Contributions and the PDI Loan, the Management Committee may make a call
for additional Capital Contributions, of cash only ("Additional Capital
Contributions"). The Management Committee shall send a notice to the Members
identifying the amount and purpose of such Additional Capital Contributions and
specifying a date, not less than 30 days after the date of the notice (the
Notice Period), on which such Additional Capital Contributions shall be made.
Each of the Members shall have the option to contribute up to its pro rata share
of such Additional Capital Contributions, in accordance with the Percentage
Interests of the Members at the time such Additional Capital Contribution is
required. If a Member declines or fails to contribute its pro rata share of any
additional capital requirements by the expiration of such Notice Period, the
other Member shall have the right, but not the obligation, to make up the
shortfall of additional capital, either in the form of an Additional Capital
Contribution or a loan secured by the assets of the Company ("Additional Loan")
to the Company. Each such Additional Loan shall bear interest at a rate of 15%
per annum and shall be for a term of ten years, as reasonably determined by such
Member, mandatorily prepayable as set forth below and voluntarily prepayable
without premium or penalty thereon. In the event Additional Loans are made
pursuant to this Section 4.2, the repayment thereof, and the security granted
thereunder, shall be subordinate in right and time to the repayment of the PDI
Loan and of any previous Additional Loans ("Previous Loans") made pursuant to
this Section 4.2. (With respect to property of the Company in which a Member has
been granted a security interest as security for the PDI Loan or any Additional
Loan (hereinafter, "Collateral"), any and all decisions regarding such
Collateral, and the disposition thereof, shall be made at the reasonable
discretion of the holder of the most senior security interest in such
Collateral, as such intercreditor rights may be more specifically set forth in
an intercreditor agreement, upon the making of an Additional Loan by an entity
other than the entity which has made a Previous Loan, which is still
outstanding.) Subject to the foregoing subordination provision, each such
Additional Loan made pursuant to this Section 4.2, shall be mandatorily
prepayable, in successive annual installments, commencing on the last day of the
second year after which the PDI Loan and all Previous Loans shall have been
prepaid in full, and on each anniversary thereof. Each such prepayment shall be
in an amount equal to the "excess cash flow" of the Company for
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<PAGE> 12
the immediately preceding fiscal year of the Company. For purposes hereof,
"excess cash flow" shall mean, for any period, the gross operating revenues of
the Company for such period derived in the ordinary course of business, minus
all operating, programming, selling and general and administrative expenses,
debt service (exclusive of prepayments of principal made in respect of the PDI
Loan and the Previous Loans) and capital expenditures for such period, less
reserves for expenses or expenditures during subsequent periods as reasonably
determined by the Management Committee.
4.3 Adjustments. Immediately following any Additional Capital
Contributions which are not made pro rata, the Interests held by each Member
shall be redetermined by dividing (x) the aggregate Capital Contributions made
by such Member through the date of such calculation, by (y) the sum of all
Capital Contributions made by all Members through the date of such calculation.
For purposes of this Section 4.3, TCAC's initial 30 % Interest shall be based on
aggregate Initial Capital Contributions deemed to be $55,000,000 and PDI's
initial 70% Interest shall be based on aggregate Initial Capital Contributions
deemed to be $128,333,333. Additional Loans made by any Member pursuant to
Section 4.2, above shall not be considered Additional Capital Contributions and
shall not result in an adjustment of Interests.
SECTION 5
DISTRIBUTIONS
5.1 Distributions. Distributions shall be made to the Members
at the times and in the aggregate amounts determined by the Management
Committee. Such distributions shall be allocated to the Members in the same
proportion as their Interests at the time of distribution.
5.2 Limitation on Distributions. Notwithstanding the
foregoing, no distribution shall be declared and paid unless, after giving
effect thereto, the assets of the Company exceed the Company's liabilities each
as determined by the Management Committee.
5.3 Distributions in Kind. All distributions of property of
the Company in kind shall be valued at their fair market value as of the date of
the distribution, and the amount of any gain or loss that would be realized by
the Company if it were to sell such property at such fair market value shall be
allocated to the Members in accordance with Section 6 hereof. The Company shall
not distribute property in kind without the unanimous approval of the Members.
SECTION 6
ALLOCATIONS OF PROFITS AND LOSSES
6.1 Timing. Profits and Losses shall be determined annually,
promptly following the close of each fiscal year.
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6.2 Allocation of Profits. For each taxable year of the
Company, subject to the provisions of Sections 6.4 and 6.5, hereof, the taxable
income of the Company as determined for federal income tax purposes under
Section 703(a) of the Code, including items separately stated pursuant to
Section 703(a)(1) of the Code, ("Profits") shall be allocated as follows:
(a) First, pro rata among the Members in accordance with the
aggregate Losses previously allocated to them under Section 6.3(c) of
this Agreement, in an amount equal to the excess of such previously
allocated Losses over any Profits previously allocated under this
Section 6.2(a);
(b) Second, pro rata among the Members in accordance with the
aggregate Losses previously allocated to them under Section 6.3(b) of
this Agreement, in an amount equal to the excess of such previously
allocated Losses over any Profits previously allocated under this
Section 6.2(b); and
(c) Third, pro rata among the Members in proportion to each
Member's Interests.
6.3 Allocation of Losses. For each taxable year of the
Company, subject to the provisions of Sections 6.4 and 6.5 hereof, the taxable
loss of the Company as determined for federal income tax purposes under Section
703(a) of the Code, including items separately stated pursuant to Section
703(a)(1) of the Code, ("Losses") shall be allocated as follows:
(a) First, pro rata among the Members in proportion to each
Member's Interests until the Capital Account of any Member is zero;
(b) Second, pro rata among the Members having positive Capital
Accounts until the Capital Accounts of the remaining Members are zero;
and
(c) Third, pro rata among the Members in proportion to each
Member's Interests.
6.4 Allocations under Section 704(c) of the Code. Pursuant to
Section 704(c) of the Code and the Regulations thereunder, income, gain, loss,
and deduction with regard to any property contributed to the capital of the
Company shall, solely for tax purposes, be allocated between the Members so as
to take into account any variation between the adjusted basis of such property
to the Company for federal income tax purposes and its fair market value at the
time of contribution in accordance with Treas. Reg. Section 1.704-3(b). In the
event the book value of any property of the Company is adjusted pursuant to this
Agreement, subsequent allocations of income, gain, loss, and deduction shall
take into account any variation between the adjusted basis of the property and
its adjusted book value in the same manner as under Section 704(c) of the Code
and the Regulations thereunder.
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6.5 Qualified Income Offset. If a Member unexpectedly receives
any adjustments, allocations, or distributions described in Treasury Regulations
Section 1.704-l(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain
shall be specially allocated to such Member in an amount and manner sufficient
to eliminate the deficit balance in such Member's Capital Account created by
such adjustments, allocations or distributions as promptly as possible;
provided, however, that for this purpose, a Capital Account shall be increased
by the Member's share of Company Minimum Gain (as defined in the Code) as of the
end of the taxable year. It is the intention of the Members that this Section
6.5 be treated as a "qualified income offset" within the meaning of Treas. Reg.
Section 1.7041(b)(2)(ii)(d). In any such event, the Management Committee is
hereby authorized to make subsequent allocations of other items of income, gain,
loss and deduction among the Members so as, to the extent possible, to
counteract the effect of special allocations pursuant to the first sentence of
this Section 6.5.
SECTION 7
MEMBERS
7.1 Limited Liability. Except as otherwise provided by the Act
or expressly set forth in this Agreement, the debts, obligations and liabilities
of the Company, whether arising in contract, tort or otherwise, shall be solely
the debts, obligations and liabilities of the Company and no Member shall be
obligated personally for any such debt, obligation or liability of the Company
solely by reason of being a Member or acting as a Manager of the Company.
7.2 Limitation on Members. No Member, in its capacity as a
Member, may act for or on behalf of the Company, without the prior authorization
of the Management Committee, except to the extent such authorization is
specifically authorized in this Agreement or required by the Act. No Member
shall hold itself out as having any authority or agency to act on behalf of any
other Member in any capacity or in any other manner except as specifically
authorized in this Agreement or by the Management Committee, and no Member shall
become liable by reason of any representation, action or omission of any other
Member contrary to the provisions of this Agreement. In no event shall a Member
have any obligation or liability for any contractual obligation or liabilities
of the other Member, with respect to any matter outside the scope of this
Agreement.
7.3 Indemnification. Each Member shall indemnify, defend and
hold harmless the Company and/or each other Member, its directors, officers and
employees from and against any and all losses, claims, damages, liabilities and
expenses arising out of (i) any act or omission or any assumption of liability
by the indemnifying Member on behalf of the indemnified Member taken in
contravention of the terms of the Act and/or this Agreement; (ii) any other
breach of the Act and/or this Agreement by the indemnifying Member; or (iii) the
willful misfeasance or gross negligence of the indemnifying Member.
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SECTION 8
MANAGEMENT OF THE COMPANY
8.1 Management Committee.
(a) The business, property and affairs of the Company shall be
managed by and under the direction of a management committee (the
"Management Committee"). The Management Committee shall be made up of
four individuals (each, a "Manager"), who shall be deemed to be
"managers" within the meaning of the Act. Initially, three of the
Managers shall be appointed by PDI and one Manager shall be appointed
by TCAC. If at any time PDI shall hold 50% or less of the total
Interests; PDI shall be required to relinquish (and shall be deemed to
have done so) to TCAC its right to appoint one Manager. If at any time
TCAC shall hold less than 15% of the total Interests, TCAC shall be
required to relinquish (and shall be deemed to have done so) to PDI its
right to appoint one Manager. Initially, the individuals appointed by
PDI as Managers shall be John Hendricks, Judith McHale and Greg Durig,
and the individual appointed by TCAC as a Manager shall be Lowell
Paxson. If a Member shall, pursuant hereto, be deemed to have
relinquished the right to appoint a Manager, such Member shall request
that one of the Managers previously appointed thereby resign, and such
Manager shall be replaced with a Manager appointed by the other Member.
The appointment of each Manager shall be affirmed annually, provided
that each Manager shall serve until such Manager is removed by the
Member that appointed him, with or without cause, or until he or she
resigns. Any Manager may resign at any time by giving written notice of
his resignation to all the Members, or to the Member who appointed such
Manager. Such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not be
specified therein, immediately upon its receipt, and, unless otherwise
specified therein, the acceptance of a resignation shall not be
necessary to make it effective. Each Member may fill any vacancy
existing from time to time in their respective designees to the
Management Committee. No action may be taken by the Management
Committee at any meeting unless a quorum is present, and the
affirmative vote of a majority of such quorum of the Management
Committee shall be required for any act or decision thereof. A quorum
for any meeting of the Management Committee must include Managers
appointed by both Members, unless pursuant to this Section 8.1(a), (x)
a Member does not, at such time, have the right to appoint a Manager,
or (y) (i) the Manager(s) who failed to attend received at least five
(5) business days' prior written notice of the meeting, in which case
the Managers present at such meeting shall constitute a quorum for all
the purposes of that meeting. The aggregate vote cast by all Managers
appointed by a Member shall have a value equal to the Interests held by
such Member at the time the votes are cast: i.e., the "Total Management
Committee Votes" shall equal 100% and if, for example, the aggregate
votes of all Managers appointed by a Member owning 75% of the
Interests at the time of the vote shall count as 75% of Total
Management Committee Votes.
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(b) The Management Committee will hold regular meetings, at
least quarterly, at such place as the Management Committee may agree
upon. The Managing Director shall give at least ten (10) business days'
notice to all Managers of such regular meetings, which notice may be
waived by any and all Managers. Any Member or Manager may call a
special meeting of the Management Committee upon at least ten (10)
business days prior notice to all Managers. Any notice of a regular or
special meeting shall contain a description of the agenda for such
meeting. No business shall be conducted at a meeting which is not
referred to in the notice for such meeting except with the unanimous
consent of the Management Committee.
(c) Managers shall have the right to participate in any
meeting of the Management Committee by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear one another, and such
participation shall constitute presence in person at such meeting.
(d) Each Manager may vote in person or by proxy at any
meeting. A Manager may provide to the Management Committee, in writing,
the names of up to five individuals who may have such Manager's proxy.
The attendance of any meeting by any of such individuals, or the
execution of a consent by any such individual, shall be deemed for all
purposes to have been authorized for such purpose as a holder of the
proxy of the Manager who provided the name of such individual, unless
the Management Committee shall have received written notice, prior to
such meeting or consent execution, that such individual no longer holds
such Manager's proxy.
8.2 Managing Director.
(a) The Company shall be managed primarily by a managing
director, who shall also be known as the "President" of the Company
(the "Managing Director"). The Management Committee shall select the
Managing Director, who may be an employee of PDI or an Affiliate
thereof. The Managing Director shall initially be Judith McHale. The
Managing Director shall serve until removed by the Management
Committee, with or without cause, or until he or she resigns upon
notice to the Company. Such resignation shall be in writing and shall
take effect at the time specified therein, and if no time be specified,
at the time of its receipt by the Management Committee. The Managing
Director shall be responsible for the day-to-day operations of the
Company and will report to the Management Committee regarding the same.
The Managing Director shall be authorized to execute and deliver
contracts and agreements on behalf of the Company in the ordinary
course of its business, and all other contracts and agreements upon the
direction of the Management Committee, and the Managing Director may
delegate such powers to other officers, employees and representatives
of the Company.
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(b) The Managing Director shall have such powers and
responsibilities as may be designated by and shall be paid such salary
and entitled to such benefits as shall be determined by the Management
Committee.
(c) The Managing Director may not, without the prior approval
of a majority of the Management Committee:
(i) invest or borrow money on behalf of the Company in
excess of limits set forth by the Members;
(ii) expend or authorize any expenditure on behalf of the
Company in excess of amounts provided for in any business plan or
budget approved by the Management Committee; or
(iii) enter into contracts on behalf of the Company in the
ordinary course of business which exceed the financial limits set
forth by the Management Committee from time to time.
(d) In addition, the Managing Director shall not, without the
prior approval of all of the Managers, take, or permit the Company to
take, any of the following actions:
(i) Issuance or redemption of Interests, other than
pursuant to Section 11, or Paragraph 12.3 below;
(ii) Entering into material transactions with Affiliates
(defined below) of either Member outside of the ordinary course of
business (programming acquisitions and affiliate agreements are
deemed to be within the ordinary course of business, provided that
the Company shall enter into such agreements only on terms at
least as favorable to the Company as an unrelated willing third
party would agree to) (For purposes of this Agreement, Affiliate
shall mean, as to any entity or person, (a) any other entity or
person which directly or indirectly is in control of, is
controlled by, or is under common control with, such entity or
person, or (b) any person who is a director, officer or employee
(i) of such entity or person or (ii) of any other entity or person
described in the preceding clause (a). For purposes of this
definition and the definition of "Controlled Affiliated" set forth
below in Section 9.1, control of an entity or shall mean (a) the
power, directly or indirectly, to direct or cause the direction of
the management or policies of such entity (whether through the
ownership of securities or partnership or other ownership
interests of any other entity or person, by contract or
otherwise), or (b) the ownership, direct or indirect, of 10% or
more of the securities having voting power for the election of
directors or other governing body of a corporation or of the
partnership or other ownership interests of any other entity or
person other than as a limited partner of any such entity);
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(iii) Incurrence of indebtedness for borrowed money,
exclusive of the PDI Loan and Additional Loans, in excess of
$1,000,000;
(iv) Significant (in terms of dollars and effect on the
Company) acquisitions and dispositions, exclusive of acquisitions
(such as programming) in the ordinary course;
(v) Dissolution of the Company prior to the stated
termination date, other than pursuant to Paragraph 12.3 of this
Agreement;
(vi) Any material change in the operation of the
business of the Company and/or in the programming theme of the
Network;
(vii) Any merger or consolidation of the Company with or
into any other person or entity;
(viii) Any sale or other disposal of all or substantially
all of the assets of the Company; and
(ix) Any voluntary liquidation, dissolution, winding-up,
recapitalization or reorganization of the Company.
(e) In addition to the foregoing, the Management Committee may
elect to cause the Company to terminate the TCAC Consulting Agreement
(defined below) only at such time as TCAC shall no longer own at least
15% of the Interests.
8.3 Books and Records. At all times during the continuance of
the Company, the Company shall maintain, at the principal place of business of
the Company, or at such other place as the Members shall determine, books and
records which shall be adequate and appropriate for the business of the Company
and in which each transaction of the Company shall be entered fully and
accurately. The Company shall maintain such other books and records as may be
required by applicable law, at such places as may be specified by such law.
8.4 Accounting: Fiscal Year. The books and records, and the
financial statements and reports, of the Company, for Federal, state and local
tax purposes, and for purposes of reports to the Members, shall be kept on an
accrual basis unless the Management Committee determines otherwise. The fiscal
year of the Company shall be the calendar year unless the Management Committee
determines otherwise.
8.5 Tax Reporting.
(a) The Members hereby designate PDI as the "tax matters
partner" (as such term is defined in Section 6231(a)(7) of the Code) or
any successor Member selected by vote of the Members and agree that PDI
shall have all of the powers and obligations of a tax matters partner
pursuant to the Code.
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(b) The Managing Director shall cause the Company to file all
income tax returns required to be filed by the Company for each
calendar year or part thereof. On or prior to April 1 of each year, the
Managing Director shall cause each Member to be furnished with
information relating to the Company necessary for preparing such
Member's income tax returns. A copy of the Company's federal income tax
return and other tax returns will be made available for inspection and
copying by any Member at the office of the Company.
(c) No election at the Company level shall be made to be
excluded from the application of Subchapter K of the Code, or from any
similar provision of state law. The Managing Director is authorized to
cause the Company to make such other elections for federal income tax
purposes as the Company deems advisable, except that an election
pursuant to Code Section 754 shall be made by the Managing Director, on
behalf of the Company, at the request of any Member.
8.6 Inspection. Any Member, and any person which it may
designate, may examine the books, records, reports and other papers of the
Company, make copies and take extracts therefrom, and discuss the affairs,
finances and accounts of the Company with the Managing Director, or with the
Company's accountants, for any purpose reasonably related to such Member's
Interest, all at such reasonable times and as often as may be reasonably
requested.
8.7 Compensation. No Manager shall receive any compensation
for services rendered to the Company except as determined by the Members. The
Management Committee shall make all determinations with respect to compensation,
including salaries and bonuses, of all employees of the Company.
8.8 Bank Accounts. All funds of the Company shall be deposited
in one or more separate bank accounts in the name of the Company. The Management
Committee shall determine the institution or institutions at which the accounts
will be opened and maintained, the types of accounts, and the persons who will
have authority with respect to the accounts and the funds therein.
SECTION 9
TERMINATION
9.1 Events Causing Termination.
(a) Notwithstanding anything to the contrary contained herein,
the Company shall be dissolved and its affairs wound up upon the
occurrence of any of the following events:
(i) the election of all of the Members to dissolve the
Company;
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(ii) the occurrence of any event which shall make it
unlawful for a Member to be a Member or a party to this Agreement,
unless such Member shall elect to transfer its Interest to a
Controlled Affiliate (defined below) which may lawfully be a
Member;
(iii) an election by a Member pursuant to Section 12.3(a);
(iv) upon sale or liquidation of the Company upon
election of the Members in accordance with the terms of this
Agreement;
(v) any other event which causes dissolution under the
Act unless, pursuant to the Act, Members holding at least a
majority of the total Interests may elect to continue the Company
within 90 days of such event, and such election is made within
such 90 day period.
For purposes of this Agreement, a "Controlled Affiliate" of
any entity or person means any other entity or person that, through
ownership of voting equity securities, controls, is controlled by or is
under common control with, such entity or person.
(b) The dissolution of the Company shall be effective on the
day on which the event giving rise to the dissolution occurs, but the
Company shall not terminate until the business of the Company shall be
wound up and liquidated and the assets of the Company have been
distributed as provided in Section 9.2 and the Certificate shall have
been cancelled in the manner required by the Act. In the event of a
dissolution pursuant to Section 9.l(a)(ii) or 9.l(a)(vi), the remaining
Members may elect to continue the Company, alone or with new Members
admitted thereby, and/or such remaining and new Members may purchase
the Interests of any Member which is no longer continuing as a Member
in accordance with the terms of this Agreement. Notwithstanding the
dissolution of the Company, the business and affairs of the Company
shall continue to be governed by this Agreement.
9.2 Winding Up. If the Company is dissolved pursuant to the
preceding Section, the Company shall be wound up and liquidated in accordance
with the Act and the following provisions:
(a) A final audit shall be made by the independent certified
public accountants for the Company. The Management Committee shall
arrange for any non-cash assets of the Company to be sold by public or
private sale, at the discretion of and on terms set by the Management
Committee, at which any Member may bid for such assets.
(b) The assets of the Company shall be liquidated by the
Management Committee as promptly as possible, but in an orderly and
businesslike manner so as not to involve undue sacrifice.
Notwithstanding the foregoing, in the event the Management Committee
shall reasonably determine in good faith that an
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immediate sale of part or all of the Company's assets would cause undue
loss to the Members, or would cause undue loss to the Management
Committee, in order to avoid such loss or violation, the Management
Committee may, to the extent not then prohibited by the Act, either
defer liquidation of, and withhold from distribution, and continue to
use for a reasonable time any assets of the Company, or distribute the
assets to the Member in kind (subject to Section 5.3). If any assets of
the Company are to be distributed in kind, such assets shall be
distributed based on fair market value.
(c) The proceeds from any liquidation of the Company shall be
applied and distributed as follows:
(i) first, to the payment of debts and liabilities of the
Company and the expenses of liquidation, including without
limitation, the PDI Loan, any Additional Loans, and the setting up
of any reserves that are reasonably necessary for any contingent,
conditional, unmatured or unforeseen liabilities or obligations of
the Company or of the Members arising out of, or in connection
with, the Company; and
(ii) second to the Members in accordance with their
respective Capital Accounts.
SECTION 10
TRANSFER OF INTEREST
10.1 General. Except for a transfer to a Controlled Affiliate
and except for a Qualified Public Offering, as consented to by the Members
pursuant to the terms of this Agreement, during the five year period following
the Effective Date, a Member shall not transfer, grant, assign, encumber, pledge
or otherwise commit or dispose of ("Transfer") all or any part of its Interests.
After the end of such five year period, a Member may Transfer its Interests, or
a portion thereof, only upon the following terms and conditions:
(a) A Transfer may be made only upon compliance with Section
10.3 below;
(b) The Transfer will not require registration of Interests
under any federal or state securities laws;
(c) No transferee of all or part of the Interest of a Member
(the "Transferee") in the Company shall have the rights of a Member
unless and until the transferring Member (the "Transferor") has
provided to the other Member notice of the Transfer and the Transferee,
as of the effective date of the Transfer, has committed in writing to
be bound by this Agreement to the same extent and nature as the
Transferor;
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(d) No Member, without the consent of the other Member, shall
make a Transfer which shall cause the Company to be classified other
than as a partnership for U.S. Federal income tax purposes;
(e) No Transfer permitted by this Section 10 shall relieve
the Transferor of any liability, whether accruing before or after such
Transfer, which arises out of acts of the Transferor conducted prior to
such Transfer; and
(f) The Transferor and the Transferee shall bear all tax
consequences of the Transfer.
If, contrary hereto, a Transfer is made which causes the
Company to be classified other than as a partnership for U.S. Federal income tax
purposes, the Transferor shall indemnify, defend and hold harmless the other
Members from and against any and all tax, loss, cost, expense or damage in
connection therewith.
10.2 Violative Transfers. Any Transfer made in violation of
this Section 10 shall be deemed to be invalid, null and void, and shall be
without effect. The Managing Director may request officer certificates,
representations and warranties from the Transferee and Transferor and an opinion
of counsel as to the matters set forth in (b) and (d) above of Section 10.1 and
such other factual matters as the Managing Committee may reasonably request.
10.3 Preemptive Right. If a Member desires to Transfer all or
any part of its Interests in the Company (such Member, the "Transferor"), the
other Member (the "Purchasing Member") shall have a preemptive right to acquire
such Interests at the same price and on substantially the same terms and
conditions as agreed to by any proposed Transferee (the "Terms"), provided,
however, that with respect to those Terms which are not monetary (i.e. consist
of payment of cash) and which, by their nature, could not be performed by the
Purchasing Member, the Purchasing Member shall have the right to substitute cash
having the equivalent economic value of such Terms (and the Members shall
thereafter use their best efforts to come to an agreement regarding the
equivalent value of such non-economic Terms, and if they are not so able to, the
Members shall retain an independent outside financial advisor, acceptable to
both Members, to arbitrate the same). The Transferor shall give to the
Purchasing Member notice of the terms and conditions of the proposed Transfer,
including the Transferor's determination of the equivalent economic value of
such non-monetary Term and including the entity or individual to which such
Interests are intended to be transferred (the "Proposed Purchaser"). A Member
wishing to exercise its preemptive right may elect to do so by written notice to
the Transferor within thirty (30) days of such Member's receipt of the notice of
proposed Transfer (such notice which will contain such Member's determination of
the equivalent economic value of any such non-monetary Terms, if applicable.) If
at such time there are more than two Members, the Interests of the Transferor
may be allocated among the electing Member(s) in any manner to which they agree,
or absent an agreement shall be allocated in proportion to their respective
Interests immediately prior to the exercise of the preemptive right. No election
to exercise the preemptive right shall be effective unless the electing
Member(s) collectively
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elect to purchase all of the Interests of the Transferor being offered hereby.
Any purchase by the electing Member(s) shall occur on the terms set forth in the
Transferor's notice, except that the closing date may be postponed by thirty
(30) days at the request of any electing Member. If the Purchasing Member(s)
decline to acquire the portion of the Transferor's Interest that the Transferor
proposes to Transfer, the Transferor may Transfer such portion of its Interest
to the Proposed Purchaser on the terms set forth in the Transferor's notice. If
PDI is the Transferor, the terms on which TCAC may acquire PDI's Interest shall
include any continuation of rights under the PDI License Agreement or the
Programming Licensing Agreement that PDI or any of its Controlled Affiliates has
offered to the Proposed Purchaser.
10.4 TCAC's Tag-Along Right. In the event that PDI intends to
Transfer its Interests in the Company pursuant to this Section 10 (exclusive of
Transfers to Controlled Affiliates), and TCAC has declined to exercise its
preemptive right pursuant to Paragraph 10.3 above, TCAC shall have the right, in
its sole discretion, to also sell to the Proposed Purchaser, as a condition to
such sale by PDI, at the same price per Interests percentage, and on the same
terms and conditions as involved in such sale by PDI, the same percentage of its
Interests as equals the percentage of its Interests to be sold by PDI to the
Proposed Purchaser represent with respect to the Interests owned by PDI
immediately prior to the sale of any portion of its Interests to the Proposed
Purchaser (i.e., if PDI intends to sell 20% of its 70% Interests, TCAC may
require as a condition to such sale that the Proposed Purchaser purchase from
TCAC 20% of its 30% of Interests, i.e. 6% of the total Interests). The exercise
or non-exercise by TCAC of its rights pursuant to this Paragraph 10.4 shall be
without prejudice to its rights under this Paragraph 10.4 to any future
Transfers proposed to be made by PDI. If TCAC wishes to so participate in any
Transfer pursuant to this Paragraph 10.4 it shall notify PDI by written notice
within the thirty (30) days following TCAC's receipt of the notice of proposed
Transfer pursuant to Paragraph 10.3 above. In the event that the transaction
between PDI and such Proposed Purchaser contains terms which are non-monetary
and which cannot be similarly performed by or for the benefit of TCAC, as
applicable, TCAC, PDI and such proposed Purchaser shall arrive at the equivalent
economic value of such non-monetary terms, pursuant to the methods set forth
above in 10.3.
10.5 TCAC Put Right. On the fifth anniversary of the Effective
Date, and every two years thereafter (each, a "Put Date"), unless and until the
Company, or a successor thereto, shall have effected a Qualified Public Offering
(defined below), TCAC will have the right (the "Put Right") to require PDI to
purchase all, but not less than all, of TCAC's Interests, by delivery to PDI of
a written notice by TCAC of its election to so require PDI to purchase its
Interests, not later than 30 days prior to each Put Date. The purchase price for
TCAC's Interests shall be paid in cash upon consummation of such purchase and
the transfer to PDI of TCAC's Interests, and shall equal the Appraised Fair
Market Value (defined below) of TCAC's Interests as of the Put Date, provided
that the Appraised Fair Market Value of the Company shall be determined as if
the Company's license to use the "Discovery" name had an indefinite term. If the
Company, or a successor thereof, has effected a consummation of an underwritten
public offering of shares of the same class as those held by TCAC and
representing at least 20% of the total equity of the
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Company (or its successor) (a "Qualified Public Offering") pursuant to a
registration statement filed and declared effective under the Securities Act of
1933, as amended (the "Act") and applicable state securities laws, prior to
exercise by TCAC of its Put Right, in lieu of such Put Right, TCAC will have the
right to require PDI to agree to cause the Company, within a reasonable time
after such request is made, to register for sale pursuant to the Act and any
applicable state statutes, all or any part of the shares of stock then held by
TCAC in the Company (or its successor), provided that, if the underwriter for
such registration advises the Company that marketing considerations require a
limitation on the number of shares offered pursuant to any registration
statement, then the Company may so limit the number of shares held by TCAC to be
so registered so long as no securities other than shares held by TCAC are
included in such registration. TCAC acknowledges and agrees that the Company
shall select the underwriter for an offering made pursuant to a Qualified Public
Offering and any registration of TCAC's shares. The Company (or its successor)
will also register shares held by TCAC in connection with the initial public
offering or any subsequent public offering by the Company (or its successor) at
TCAC's request, subject to customary standstill provisions required by the
managing underwriter of any such offering.
10.6 Termination of Rights. The rights and obligations of TCAC
and PDI under Paragraph 10.3 and of TCAC under Paragraphs 10.4 of this Agreement
shall terminate on the date of the consummation of a Qualified Public Offering
by the Company or a successor thereto.
10.7 PDI's Call Right. On the seventh anniversary of the
Effective Date and on each subsequent two year anniversary thereafter, PDI shall
have the right (the "Call Right") to require TCAC to sell to PDI all, but not
less than all, of TCAC's Interests, at a price equal to 110% of the then
Appraised Fair Market Value of TCAC's Interests, provided that the Appraised
Fair Market Value of the Company shall be determined as if the Company's license
to use the "Discovery" name had an indefinite term. The purchase price shall be
payable in cash, upon consummation of such sale to PDI.
10.8 PDI's Lobby Purchase Option.
(a) The parties hereto agree that it would be counter to the
interests of the Company for any Member, or an Affiliate thereof, to lobby for
changes in the U.S. regulatory environment which would benefit broadcast
stations to the potential detriment to the carriage of the Network. For example,
it would be counter to the interests of the Company for any Member or an
Affiliate thereof to lobby for "must carry" status for digital broadcast
signals. Accordingly, in the event that TCAC or any of its Affiliates lobbies
for any such change in the U.S. regulatory environment which would benefit
broadcast stations to the potential detriment to the carriage of the Network,
PDI shall have the right to purchase (the "Lobby Purchase Option") TCAC's
Interests, at a price (the "Appraised Interest Price") based on the then
Appraised Fair Market Value of the Company, provided that the Appraised Fair
Market Value of the Company shall be determined as if the Company's license to
use the "Discovery" name had an indefinite term, provided, further, that if such
Lobby Purchase Option is exercised at any time prior to the two year anniversary
of the Effective Date (such
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two year period, the "Guaranty Period"), PDI shall pay to TCAC, in addition to
the Appraised Interest Price, that amount (the "Make Good Amount"), if any,
equal to the difference between (x) that amount which, in accordance with the
definition of Appraised Fair Market Value, would have been arrived at as the
amount which would have been received by TCAC upon a liquidation of the Company
had the initial Capital Account of TCAC been $55,000,000 and the initial Capital
Account of PDI been $20,000,000, and (y) the aggregate amount actually
determined as the price to be paid to TCAC, based on the Capital Accounts of the
Members as of the time of such determination; provided, however, that in no
event shall the aggregate amount of the Make Good Amount plus the Appraised
Interest Price payable by PDI hereunder be in excess of the amount which would
have been paid by PDI for such Interests upon exercise of the Lobby Purchase
Option, had PDI's initial Capital Account been $20,000,000 and TCAC's initial
Capital Account been $55,000,000. Notwithstanding the foregoing, the parties
agree that such lobbying shall not, however, constitute a violation of this
Agreement or otherwise subject TCAC or any of its Affiliates to any liability to
the Company, PDI or its Affiliates.
(b) In the event that TCAC's lobbying activities are in
response to changes sought by representatives of the cable industry in
the current regulatory environment as it relates to broadcasters (e.g.,
representatives of the cable industry for a Congressional repeal of
broadcasters' current "must carry" rights for analog signals) and TCAC
lobbies in response to this, if PDI shall exercise its Lobby Purchase
Option pursuant to Paragraph 10.8(a) above, and the purchase price for
TCAC's Interests is less than $55,000,000, in addition to the purchase
price payable to TCAC as provided in Paragraph 10.8 (a) above, TCAC
shall also be entitled to a "Contingent Payment" right with an initial
value of the difference between the purchase price determined under
Paragraph 10.8(a) above and $55,000,000 (the "Initial Value"). Such
right shall entitle TCAC to be paid, at the next opportunity PDI would
have to exercise its Call Right as provided in Paragraph 10.7 above, an
amount equal to (i) the Initial Value multiplied by (ii) 100% plus
(iii) the percentage increase in the Appraised Fair Market Value from
the time of PDI's exercise of the Lobby Purchase Option and
consummation of the purchase of TCAC's Interest pursuant thereto to the
time of the making of such "Contingent Payment", provided that in no
event shall TCAC be entitled to receive more than $55,000,000 as a
"Contingent Payment".
(c) For purposes of this Section 10.8, (i) TCAC, PCC, or an
Affiliate thereof shall not be considered to have engaged in lobbying
as a result of non-substantive conversations between representatives of
TCAC, PCC, or an Affiliate thereof and public officials, lobbying
activities conducted by any organization (such as the National
Association of Broadcasters), in which TCAC or any Affiliate of TCAC
may be a member or otherwise affiliated, or lobbying activities
conducted by individuals who may be attorneys or other representatives
or agents of TCAC, but who are in such instance not being paid by, nor
acting at the direction or on behalf of, TCAC or PCC or an Affiliate
thereof at the time of such lobbying activities, and (ii) PDI may not
elect the Lobby Purchase Option unless it can affirmatively demonstrate
by material evidence that TCAC, PCC, or an Affiliate thereof has
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engaged in lobbying as described in Section 10.8(a) and qualified by
this Section 10.8(c).
10.9 Appraised Fair Market Value. For purposes of any
provision of this Agreement that refers to the "Appraised Fair Market Value" of
a Member's Interest:
(a) PDI and TCAC shall each designate an independent
investment banker, and the two investment bankers so designated shall
designate a third independent investment banker, to determine
independently the fair market value of the Company's assets. In
determining the fair market value of the Company's assets, each
investment banker shall (i) assume the fair market value of any asset
is the price at which such asset (as a going concern, if applicable)
would change hands between a willing buyer and a willing seller,
neither being under any compulsion to buy or sell and each having
reasonable knowledge of all relevant facts; (ii) assume a sale of such
asset for cash; and (iii) use valuation techniques then prevailing in
the applicable industry, and (iv) in all instances where this Agreement
specifically states the same, Appraised Fair Market Value shall be
determined as if the Company's license to use the "Discovery" name has
an indefinite term.
(b) After each investment banker has determined the fair
market value of the Company's assets, each investment banker shall then
calculate the amount that would be distributed to each Member in
liquidation of the Company (the "Liquidation Amount"), if (i) the
assets of the Company were sold for such investment banker's
determination of their fair market value, without reduction for filing
fees, transfer taxes, sales taxes, and other transaction costs, (ii)
net profit and net loss, including any gain or loss resulting from the
liquidating sales described in clause (i), were allocated in accordance
with this Agreement, (iii) the Company paid its accrued, but unpaid,
liabilities (but not any prepayment premiums or penalties or other
similar costs attributable to the payment of any such liabilities), and
(iv) the Company distributed the remaining proceeds received by it
(without establishing reserves for contingent or unknown liabilities)
to the Members in liquidation.
(c) The "Appraised Fair Market Value" of a Member's Interest
shall be determined as follows:
(i) If the difference between the Liquidation Amount
determined by the investment banker designated by PDI and the
Liquidation Amount determined by the investment banker designated
by TCAC is less than or equal to five percent of the higher of
such Liquidation Amounts, the "Appraised Fair Market Value" of the
Member's Interest shall be the average of such Liquidation
Amounts.
(ii) In all other cases, the "Appraised Fair Market
Value" of the Member's Interest shall be the average of the two
closest of the Liquidation Amounts determined by the three
investment bankers.
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10.10 Covenant of DCI. DCI agrees that it will not cause or
permit to occur any transaction or series of transactions if, after giving
effect to such transaction or series of transactions, it would not own, directly
or indirectly, more than fifty percent of the outstanding equity interests in
PDI (or any Controlled Affiliate of PDI to which PDI has Transferred its
Interest) or would not directly or indirectly control PDI (or any Controlled
Affiliate of PDI to which PDI has Transferred its Interest).
10.11 Covenant of PCC. PCC agrees that it will not cause or
permit to occur any transaction or series of transactions if, after giving
effect to such transaction or series of transactions, it would not own, directly
or indirectly, more than fifty percent of the outstanding equity interests in
TCAC (or any Controlled Affiliate of TCAC to which TCAC has Transferred its
Interest) or would not directly or indirectly control TCAC (or any Controlled
Affiliate of PDI to which TCAC has Transferred its Interest).
SECTION 11
ADMISSION OF MEMBERS; RESIGNATIONS
11.1 Admission of Members. Additional or substitute Members
(other than Controlled Affiliates) may be admitted to the Company only as
expressly permitted by this Agreement.
11.2 Conditions. As a condition to the admission of any
person or entity as an additional or substituted Member, any person to be
admitted shall execute and acknowledge such instruments, in form and substance
satisfactory to the Management Committee, as the Management Committee may deem
necessary or advisable to effectuate such admission, and shall confirm that such
person or entity to be admitted as such Member has agreed to be bound by all of
the covenants, terms and conditions of this Agreement, as the same shall have
been amended from time to time.
11.3 Resignations. No Member may resign from the Company if
such resignation shall cause the Company to be classified other than as a
partnership for U.S. Federal income tax purposes, and except upon the Transfer
of its entire Interests to a person or entity admitted as a substitute Member or
to an existing Member.
SECTION 12
EVENTS OF DEFAULT
12.1 Events of Default. Upon the occurrence of any of the
following, there shall be deemed to have occurred an Event of Default, and the
Member in respect of which such event shall have occurred shall be deemed to be
in default hereunder and shall be referred to as the Defaulting Member, and the
other Member shall be referred to as the Non-Defaulting Member:
(a) A Member commences a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar
laws now or hereafter in effect or
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seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its
property, or consents to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or makes a general assignment for the
benefit of creditors, or fails generally to pay its debts as they
become due, or takes any action to authorize any of the foregoing;
(b) An involuntary case or other proceeding is commenced
against a Member seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official
of it or any substantial part of its property, and such involuntary
case or other proceeding remains undismissed and unstayed for a period
of ninety (90) days, or an order for relief is entered against a Member
under the federal bankruptcy laws, or similar applicable laws of
another country, as now or hereafter in effect;
(c) A substantial portion of the Interest of a Member is
seized by a creditor of such Member, and the same is not released from
seizure or bonded out within ninety (90) days from the date of notice
of seizure; or
(d) Subject to the notice and cure provision of Section 12.2
below, a Member commits a material breach of any of its obligations
under this Agreement.
12.2 Notice and Cure. Any Non-Defaulting Member shall have the
right to give the Defaulting Member a Notice of Default occurring under
Paragraph 12.1(d) (a "Notice") which shall be in writing, shall set forth the
nature of the default and, if applicable, the obligations that the Defaulting
Member has not performed or has breached. The date for cure shall be thirty (30)
days after receipt of the Notice. If, within the period specified in the Notice,
the Defaulting Member cures such Default, the Notice shall be inoperative and
the Defaulting Member shall lose no rights hereunder. If, within such specified
period, the Defaulting Member does not cure such default, any Non-Defaulting
Member, at the expiration of such period, shall have the rights hereinafter
specified.
12.3 Remedies. Upon the occurrence and expiration of any
applicable cure period with respect to an Event of Default, the Non-Defaulting
Member shall have the option, in its sole discretion, by decision of the
Non-defaulting Members holding at least a majority of the Interests, exclusive
of Interests held by the Defaulting Member, to:
(a) dissolve the Company (but the Company shall not so
dissolve, regardless of the Event of Default which has occurred unless
such Non-Defaulting Member shall elect to so dissolve);
(b) expel the Defaulting Member and purchase on a date
specified by such Non-Defaulting Member in a written notice, which date
shall be not more than sixty (60) days from the date of such notice,
all of the Defaulting Member's Interest in accordance with Paragraph
12.4;
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(c) cure the default, and the cost of such curing shall be
charged against the Defaulting Member's Capital Account and credited to
the Non-Defaulting Member's Capital Account, and the Interest of the
Non-Defaulting Member shall be increased in proportion to the foregoing
adjustments to the Capital Accounts; and
(d) enforce its rights by suit in equity, action at law
and/or other appropriate proceedings, whether for damages or the
specific performance of any covenant or agreement contained herein.
The remedies of the Members set forth herein are cumulative, and may be
exercised singly or concurrently.
12.4 Purchase of Defaulting Members' Interest. After expulsion
of a Defaulting Member pursuant to Paragraph 12.3(b), a Non-Defaulting Member
may purchase the Defaulting Member's Interests at a price which for such
purposes shall be equal in amount to the Appraised Fair Market Value of the
Defaulting Member's Interests, provided that such amount shall be determined by
an independent investment banker selected by the Non-Defaulting Member, taking
account of any distributions by the Company of cash or assets made since the end
of such month, and after deducting any amounts payable to the Company by the
Defaulting Member, any costs of remedying the default and any damages or costs
to the Company or Non-Defaulting Member resulting from the Default. Payment to
the Defaulting Member may take the form of a two (2) year note with interest at
8%. If the Company suffers any liability in respect of a period prior to the
expulsion of the Defaulting Member which liability had not been accrued on the
books of the Company on the date that the purchase price of the Defaulting
Member's Interests was determined, the payment provided for above shall be
reduced by an amount equal to the Defaulting Member's pro rata interest (based
on the Interests held thereby) in such liability.
SECTION 13
NON-COMPETE
13.1 Non-Compete.
(a) The parties hereby agree that the Network will be the
exclusive vehicle for themselves and their respective Controlled
Affiliates within the Territory, (exclusive of Puerto Rico, where it
shall be the non-exclusive vehicle) for providing programming (for
distribution by broadcast, cable, satellite or other means) that is
predominately travel-oriented and for seeking transactional revenue
*** Confidential Treatment Requested
from travel programming, provided that in no event shall such
exclusivity be deemed to prohibit airing of a limited amount of travel
programming on other networks or media owned in whole or in part by
PDI,TCAC, PCC, DCI or their Controlled Affiliates defined below), or
prohibit the airing of programming as described in Paragraph 15.2 of
this Agreement, or from seeking transactional revenue in connection
with the airing thereof, nor does it prevent either PCC, DCI or their
Affiliates from licensing to third parties travel oriented programs
owned thereby, nor does it apply to DCI's shareholders or their
Affiliates (exclusive of DCI and its subsidiaries, if applicable),
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to the extent the same might in any way be deemed to constitute a
Controlled Affiliate.
In addition, except for the license granted to PDI to permit a
sublicense thereby to the Company, DCI shall not grant a license for
the Territory (exclusive of Puerto Rico) to any third party to use the
"Discovery" name or logo in connection with a television programming
service the content of which is primarily travel related.
(b) At all times after the date hereof, no Member, Manager or
any Affiliate thereof shall disclose or use any Confidential
Information (as defined below), provided, however, that:
(i) a Member shall be permitted to disclose Confidential
Information to those of its agents, representatives, and employees
who need to be familiar with such information in connection with
such Member's investment in the Company, the performance of its
obligations under this Agreement, or the exercise of its rights
under this Agreement;
(ii) a Member shall be permitted to disclose Confidential
Information to its Affiliates;
(iii) a Member shall be permitted to disclose Confidential
Information to the extent required by law, including federal or
state securities laws or regulations, or by the rules and
regulations of any stock exchange or association on which
securities of such Member or any of its Affiliates are traded; and
(iv) a Member shall be permitted to disclose Confidential
Information to a potential purchaser of its Interest so long as
such potential purchaser agrees (in writing which provides the
Company with an independent right of enforcement) to be bound by
the provisions of this Section 13.1(b).
As used in this Agreement, the term "Confidential Information"
shall include, without limitation, trade secrets, confidential or
proprietary information, owned, developed or possessed by the Company,
a Manager, Member or an Affiliate thereof, whether in tangible or
intangible form, which pertains, in any manner, to subjects which
include, but which are not limited to, such entity's or individual's
research, operations, customers (including identities of customers and
prospective customers, identities of individual contacts at customers,
preferences, business or habits), business relationships, products
(including prices, costs, sales or content and including realized or
unrealized products), financial information, marketing or promotion
information, business methods, future business plans, databases,
computer programs, designs, models, operating procedures, knowledge of
the organization, and information received from others that such entity
or individual is obligated to treat as confidential.
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Notwithstanding the foregoing, Confidential Information shall
not include knowledge, information, documents or materials which any
such Member, Manager or Affiliate thereof can establish: (i) have
entered the public domain without such entity's or individual's breach
of any obligation owed to such entity or individual; (ii) have become
known to such entity or person prior to such entity's or individual's
disclosure of such information to such entity or person; (iii) are
permitted to be disclosed by the prior written consent of such entity
or individual; (iv) have become known to such person or entity from a
source other than such entity or individual other than by breach of an
obligation of confidentiality owed to the Company and known to such
Manager, Member or Affiliate; (v) are disclosed by such entity or
individual to a third party without restrictions on its disclosure; or
(vi) are independently developed by such person or entity without
breach of this Agreement.
(c) Because the Company and the Members do not have an
adequate remedy at law to protect the Company's business from any
breach of the obligations set forth in this Section 13, each of them
shall be entitled to injunctive relief, in addition to such other
remedies and relief that would, in such event, be available to it or
them.
SECTION 14
EXCULPATION; INDEMNIFICATION; LIABILITY
14.1 Exculpation. A Member or Manager exercising management
powers or responsibilities for or on behalf of the Company shall not have
personal liability to the Company or its Members for damages for any breach of
duty in such capacity; provided, however, that nothing in this Section shall
eliminate or limit the liability of any such Member or Manager if a judgment or
other final determination adverse to him or her establishes that his or her acts
or omissions were in bad faith or involved intentional misconduct or a knowing
violation of law or a breach of this Agreement. Except as otherwise provided by
the Act or expressly set forth in this Agreement, the debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liabilities of the Company and no
Managing Director, Member or Manager shall be obligated personally for any such
debt, obligation or liability of the Company solely by reason of being Manager,
Managing Director, or a Member of the Company.
14.2 Indemnification. (i) To the fullest extent permitted by
law, the Company shall indemnify any Person and/or entity (an "Indemnitee") who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding brought by or against the Company or
otherwise, whether civil, criminal, administrative or investigative, including,
without limitation, an action by or on behalf of the Company to procure a
judgment in its favor, by reason of the fact that such Indemnitee is or was a
Member, Manager or agent of a Member, or that such Indemnitee is or was serving
at the request of the Company as a partner, director, officer, trustee, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against all expenses, including attorneys' fees and disbursements,
judgments, fines and amounts paid in settlement
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actually and reasonably incurred by such Indemnitee in connection with such
action, suit or proceeding. Notwithstanding the foregoing, no indemnification
shall be provided to or on behalf of any Indemnitee if a judgment or other final
determination adverse to such Indemnitee establishes that his or her acts or
omissions were in bad faith or involved intentional misconduct, or a knowing
violation of the law or a breach of this Agreement.
(a) Any indemnification under the preceding subsection of this
Paragraph 14.2 (unless ordered by a court of competent jurisdiction)
shall be made by the Company only as authorized in the specific case
upon a determination that the indemnification of an Indemnitee is
proper under the circumstances because he or she has met the applicable
standard of conduct set forth in the preceding subsection of this
Paragraph 14.2. Such determination shall be made by the Members or, if
the Members so direct, by independent legal counsel in a written
opinion.
(b) The Company will, at the discretion of the Members, pay
expenses incurred in defending any action, suit or proceeding described
in the first subsection of this Paragraph 14.2 in advance of the final
determination of such action, suit or proceeding, provided that the
Indemnitee shall agree to reimburse the Company if after final
determination, the Indemnitee was not entitled to be indemnified as set
forth herein.
(c) The Company may, at the discretion of the Members,
purchase and maintain insurance on behalf of any Indemnitee against any
liability asserted against him or her, whether or not the Company would
have the power to indemnify him or her against such liability by law.
(d) The indemnification provided by this Section shall not be
deemed exclusive of any other rights to indemnification to which those
seeking indemnification may be entitled under any agreement,
determination of Members or otherwise. The rights to indemnification
and reimbursement or advancement of expenses provided by, or granted
pursuant to, this Section shall continue as to an Indemnitee who has
ceased to be a Member (or other Person indemnified hereunder) and shall
inure to the benefit of the executors, administrators, legatees and
distributees of such Person.
(e) The provisions of this Section shall be a contract between
the Company and each Indemnitee who served in such capacity at any time
while this Section is in effect pursuant to which the Company and each
such Indemnitee intend to be legally bound. No repeal or modification
of this Section shall affect any rights or obligations with respect to
any state of facts then or theretofore existing or thereafter arising
or any proceeding theretofore or thereafter brought or threatened based
in whole or in part upon such state of facts.
(f) To the extent that, at law or in equity, an Indemnitee has
duties (including fiduciary duties and liabilities relating thereto) to
the Company or to any Member, an Indemnitee acting under this Agreement
shall not be liable to the
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Company or any Member for its good faith reliance on the provisions of
this Agreement or on the interpretation thereof given to such
Indemnitee by its counsel. The provisions of this Agreement, to the
extent that they restrict the duties and liabilities of an Indemnitee
otherwise existing, at law or in equity, are agreed by the Members to
replace such other duties and liabilities of such Indemnitee.
SECTION 15
ADDITIONAL COVENANTS AND AGREEMENTS
15.1 Network Programming and Commercial Breaks. The Network
content will consist of programming relating to travel and, as may be determined
by the Management Committee, living. The programming will include a number of
commercial breaks consistent with the norms of other cable networks. Such
commercials will include spots designed to create transactional revenue from
travel agencies or others, to the extent such transactional revenue is expected
to exceed traditional advertising revenue that would otherwise be available. The
programming will also include, as appropriate, solicitations of viewers to
contact the Company or its agents (by telephone, web browser, or other means)
for information as a means of stimulating transactions that will create
transactional revenue for the Company.
15.2 Sublicense Rights. Upon issuance of FCC licenses to
permit broadcasters to distribute over the air additional digital signals, and
upon commencement of such digital distribution by PCC, TCAC or any Controlled
Affiliate thereof (each a "PCC Broadcaster"), such entity will be permitted to
sublicense certain programming from the Company, pursuant to a sublicense
agreement in form and substance satisfactory to PDI, as discussed in
subparagraph (a) below, for use thereby on the digital broadcast station or
stations thereof, subject to the following conditions:
(a) Subject to Subparagraphs (b) and (f) below, programming
which airs on the Network and which is in the travel genre ("Network
Travel Programming") and in which the broadcast rights for the
Territory are owned by DCI or a Controlled Affiliate thereof, will be
further sublicensed by the Company, without additional charge, to the
PCC Broadcasters. DCI will coordinate with PCC regarding the
acquisition by such PCC Broadcasters of broadcast rights for the
Territory in Network Travel Programming for which neither DCI nor a
Controlled Affiliate thereof has such broadcast rights for the
Territory, provided that PCC, on behalf of the PCC Broadcasters, shall
bear all costs for such broadcast rights, and shall seek reimbursement
therefor from the PCC Broadcasters, and further provided that DCI is
required only to coordinate the acquisition of such rights, and only
where commercially reasonable, and DCI is under no obligation to
acquire the same on behalf of the PCC Broadcasters. TCAC and PCC, by
execution of this Agreement, each acknowledge that such rights may not
be available for all Network Travel Programming.
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(b) Distribution of Network Travel Programming by any PCC
Broadcaster will not be permitted if cable operators are required by
law or regulation to carry any such additional digital signals.
(c) No PCC Broadcaster may use the "Discovery" brand or any
other trademark of DCI, PDI, or any other Affiliate of DCI, without the
prior approval of DCI.
(d) Other than Network Travel Programming for which the PCC
Broadcasters have had to purchase broadcast rights, one-half of the
commercial time in each hour of Network Travel Programming aired by a
PCC Broadcaster on a digital broadcast station pursuant to this
Paragraph 15.2, will be available for resale by such PCC Broadcasters,
with the remainder of such commercial time to be retained for resale by
the Company. With respect to Network Travel Programming aired by a PCC
Broadcaster, on a digital broadcast station pursuant to this Paragraph
15.2 for which the PCC Broadcasters have had to purchase broadcast
rights, the Company shall not retain any such commercial time.
(e) All transaction sales, whether as a result of
solicitations of viewers to contact the Company or its agents (by
telephone, web browser, or other means) or by other means, will be
arranged by the Company for both the cable feed and other means of
distribution of the Network and for any broadcast redistribution
thereof or of any Network Travel Programming; provided that, any
transaction revenue arising from broadcast distribution by a PCC
Broadcaster of Network Travel Programming in accordance with this
Paragraph 15.2, will be split equally between the Company and such PCC
Broadcasters. To the extent that the Company shall receive
transactional revenue which pursuant to this Section (e) are for the
account of a PCC Broadcaster, such amounts shall be paid to PCC for the
account of such PCC Broadcaster.
(f) To the extent the Network has cable distribution in a
market and such distribution is dropped in favor of distribution of the
digital signal (as evidenced by such drop occurring within the 12-month
period following the date such distribution of the digital signal has
commenced), all transactional and other advertising revenue relating to
Network Travel Programming aired on the broadcast signal will belong
to, and shall be arranged/sold by, the Company.
(g) The rights of the PCC Broadcaster's representative to
elect, on behalf of the PCC Broadcasters, to so license Network Travel
Programming (the "Programming Election") may be exercised thereby only
prior to the tenth anniversary of the Effective Date; provided that (i)
the right of such representative to exercise the Programming Election
shall immediately terminate if TCAC ceases to be a Member of the
Company as a result of the exercise by PDI of the Lobby Purchase
Option, and (ii) the right of such representative to exercise the
Programming Election shall terminate on the fifth anniversary of the
Effective Date if PDI gives notice to TCAC of its election to so
terminate the same prior to the fourth anniversary of the
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Effective Date. Except where the PCC Broadcasters' right to exercise
the Programming Election is terminated as a result of PDI's exercise of
the Lobby Purchase Option, any license arrangement relating to
broadcast distribution of Network Travel Programming shall have a
ten-year term and shall survive the termination of the Company. Where
such representative right to exercise the Programming Election on
behalf of the PCC Broadcasters is terminated as a result of PDI's
exercise of the Lobby Purchase Option, any license arrangement relating
to broadcast distribution of Network Travel Programming shall terminate
immediately.
SECTION 16
PRECONDITIONS; EFFECTIVE DATE
The provisions of this Agreement shall become effective on the
date (the "Effective Date") which shall be the date on which (i) counterparts of
this Agreement shall have been executed and delivered by the PDI and TCAC, and
by Discovery Communications, Inc. and Paxson Communications Corporation with
respect to certain specific obligations and rights thereof as set forth herein;
and (ii) the following conditions precedent shall have been, or shall
simultaneously with the execution and delivery of this Agreement be, fulfilled:
*** Confidential Treatment Requested
(a) The transactions contemplated by the PDI Purchase
Agreement, pursuant to which PDI shall have purchased a 25% undivided
interest in the Travel Channel Assets, shall have been consummated;
(b) The Software License Agreement shall have been executed
and delivered by TCAC and the Company;
(c) The PDI License Agreement shall have been executed and
delivered by PDI and the Company;
(d) The Programming License Agreement shall have been executed
and delivered by PDI and the Company;
(e) The Security Agreement and the Note shall have been
executed and delivered by the Company;
(f) The Company and PDI shall have executed and delivered a
management agreement substantially in the form of Exhibit F hereto,
pursuant to which, subject to the authority of the board of directors
of the Company, PDI will, in conjunction with the Manager, manage all
aspects of the business of the Company on a day to day basis.
(g) The Company and PCC shall have executed and delivered a
consulting agreement, substantially in the form of Exhibit G hereto
(the "Consulting Agreement"), pursuant to which PCC shall provide
consulting services to the
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<PAGE> 36
Company with respect to transactional aspects of travel, and shall
receive a consulting fee equal to $300,000 per year, plus pre-approved
expenses for such services.
SECTION 17
MISCELLANEOUS
17.1 Entire Agreement. This Agreement embodies the entire
understanding and agreement among the parties concerning the matters addressed
herein and supersedes all prior and contemporaneous negotiations, understandings
or agreements in regard thereto.
17.2 Amendments. This Agreement may not be modified or amended
except by an instrument in writing signed by all of the Members.
17.3 Confidentiality. Except as may be required in connection
with filings with governmental agencies or courts or except as may be required
under applicable law, each party shall keep strictly confidential and shall not
disclose to any other person or entity other than to its officers and employees
on a must-know basis, or to its respective lawyers or accountants, the material
terms and provisions of this Agreement To the extent that information with
respect to this Agreement is revealed pursuant to this Section, each party shall
use its best efforts to ensure that each person or entity receiving such
information shall maintain it in confidence.
17.4 Representations and Warranties. Each Member represents
and warrants to the other that: (i) it has all requisite power and authority to
enter into this Agreement and perform its obligations hereunder; (ii) the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
action on the part of such Member; the execution, delivery and performance of
this Agreement will not conflict with or result in a breach or violation of any
provision of corporate charter or the bylaws thereof, or of any order, writ,
injunction, judgment, decree, law, statute, rule or regulation of any
governmental authority applicable to such Member; and (iii) assuming due
authorization, execution and delivery by the other Member, this Agreement is a
legal, valid and binding obligation of such Member enforceable against such
Member in accordance with its terms.
17.5 Validity and Severability. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under pertinent
present or future laws effective during the term of this Agreement, such
provision shall be fully severable; this Agreement shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part of this Agreement and the remaining provisions of this
Agreement shall remain in full force and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance from this Agreement.
17.6 Fair Market Value. Except as otherwise set forth in this
Agreement or agreed to by the Members, fair market value of any asset
distributed by, or contributed to, the Company, shall be determined by the
Members, or in the event the
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<PAGE> 37
Members fail to agree, by an independent third party appraiser selected by
agreement of the Members. If the Members fail to agree on selection of an
independent third party appraiser, the Members shall each select one independent
outside appraiser, and those appraisers shall appoint another appraiser, who
shall make the determination of fair market value.
17.7 Press Release. All press releases and other public
statements regarding this agreement and any venture other than those issued in
the ordinary course of business shall be approved by each of the parties hereto.
17.8 Headings and Usage. Paragraph and subparagraph headings
have been inserted herein for convenience only and shall not be construed to be
a part hereof or thereof. Unless the context otherwise requires, words in the
singular include the plural, and words in the plural include the singular.
17.9 Counterparts. This Agreement may be executed in any one
or more counterparts, each of which shall be an original and all of which shall
constitute one and the same agreement.
17.10 Successors and Assigns: Survival of Representations and
Warranties. This Agreement shall be binding upon and inure to the benefit of the
Members and their respective successors and assigns; provided, however, that
except as specifically provided herein, no Member may assign or otherwise
dispose of any of its rights or obligations hereunder. All covenants,
agreements, warranties and representations made herein and in all certificates
or other documents delivered in connection with this Agreement shall survive the
execution and delivery hereof, and all such covenants, agreements,
representations and warranties shall inure to the respective successors and
assigns of the Members, whether or not so expressed.
17.11 Venue. Any judicial proceeding brought against either
Member with respect to this Agreement may be brought in any court of competent
jurisdiction located in the State of Maryland. By execution and delivery of this
Agreement, the Members accept, generally and unconditionally, the exclusive
jurisdiction of such courts and any related appellate court, and irrevocably
agrees to be bound by any judgment rendered thereby in connection therewith,
subject to any right of appeal thereof.
17.12 Further Assurances. Each of the Members hereby agrees to
do such other acts and things as the other Member may reasonably request in
order fully to effect the purposes of this Agreement.
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<PAGE> 38
17.13 Notices. All notices, requests, consents, demands and
other communications hereunder shall be in writing delivered by any of the
following: personal delivery; first class certified or registered mail; return
receipt requested; U.S. Express mail, or an express overnight service (such as
Federal Express), addressed to the respective parties to the Agreement at the
addresses set forth under the signature line of such party or to such other
person or address as a party hereto shall designate to the other party hereto
from time to time in writing forwarded in like manner. Any notice, request,
consent, demand or communication given in accordance with the provisions of this
paragraph shall be deemed to have been given and effective when actually
received.
17.14 Governing Law. The validity, interpretation and
enforcement of this Agreement shall be governed by the laws of the State of
Delaware without giving effect to the conflict of law principles thereof.
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<PAGE> 39
IN WITNESS WHEREOF, this Agreement has been executed by the
undersigned as of the date first written above.
TRAVEL CHANNEL ACQUISITION
CORPORATION
/s/ William L. Watson
---------------------------------------
By: WILLIAM L. WATSON
Its: SECRETARY
c/o Paxson Communications Corporation
601 Clearwater Park Road
West Palm Beach, Florida 33401
Attention: General Counsel
PROJECT DISCOVERY, INC.
/s/
---------------------------------------
By:
Its:
c/o Discovery Communications, Inc.
7700 Wisconsin Avenue
Bethesda, Maryland 20814
Attention: General Counsel
DISCOVERY COMMUNICATIONS, INC.,
solely with respect to the limited rights and
obligations thereof set forth herein.
/s/
---------------------------------------
By:
Its:
7700 Wisconsin Avenue
Bethesda, Maryland 20814
Attention: General Counsel
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<PAGE> 40
PAXSON COMMUNICATIONS CORPORATION,
solely with respect to the limited rights and
obligations thereof set forth herein.
/s/ William L. Watson
----------------------------------------
By: WILLIAM L. WATSON
Its: SECRETARY
601 Clearwater Park Road
West Palm Beach, Florida 33401
Attention: General Counsel
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<PAGE> 1
EXHIBIT 10.191
ASSET PURCHASE AGREEMENT
by and among
TRAVEL CHANNEL ACQUISITION CORPORATION,
PROJECT DISCOVERY, INC.,
PAXSON COMMUNICATIONS CORPORATION
and
DISCOVERY COMMUNICATIONS, INC.
Dated as of November 24, 1997
<PAGE> 2
ASSET PURCHASE AGREEMENT
Dated as of November 24, 1997
by and among
TRAVEL CHANNEL ACQUISITION CORPORATION,
PROJECT DISCOVERY, INC.,
PAXSON COMMUNICATIONS CORPORATION
and
DISCOVERY COMMUNICATIONS, INC.
================================================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. CERTAIN DEFINITIONS.................................................................1
1.1 Terms Defined in this Section..............................................................1
1.2 Terms Defined Elsewhere in this Agreement..................................................4
1.3 Terms Generally............................................................................5
SECTION 2. ACQUISITION OF ASSETS AND CONSIDERATION.............................................6
2.1 Acquisition of Assets......................................................................6
2.2 Consideration..............................................................................7
2.3 Allocation of Consideration................................................................7
2.4 Assumption of Liabilities and Obligations..................................................8
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PCC AND SELLER...................................8
3.1 Organization, Standing, and Authority......................................................8
3.2 Authorization and Binding Obligation.......................................................9
3.3 Absence of Conflicting Agreements; Consents................................................9
3.4 Licenses..................................................................................10
3.5 Real Property.............................................................................10
3.6 Tangible Personal Property................................................................10
3.7 Contracts.................................................................................11
3.8 Intangible Property.......................................................................11
3.9 Financial Statements......................................................................12
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.10 Personnel................................................................................12
3.11 Claims and Legal Actions.................................................................14
3.12 Compliance with Laws.....................................................................14
3.13 Environmental Matters....................................................................14
3.14 Transactions with Affiliates; Completeness of Assets.....................................15
3.15 Cable Subscribers........................................................................15
3.16 Conduct of Business......................................................................16
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER........................................17
4.1 Organization, Standing, and Authority.....................................................17
4.2 Authorization and Binding Obligation......................................................17
4.3 Absence of Conflicting Agreements.........................................................17
SECTION 5. SPECIAL COVENANTS AND AGREEMENTS...................................................18
5.1 Confidentiality...........................................................................18
5.2 Cooperation...............................................................................18
5.3 Access to Books and Records...............................................................19
5.4 Bulk Sales Law............................................................................19
5.5 No Inconsistent Action....................................................................19
SECTION 6. CONDITIONS TO OBLIGATIONS OF PARTIES AT CLOSING....................................19
6.1 Conditions to Obligations of Purchaser....................................................19
6.2 Conditions to Obligations of Seller.......................................................20
SECTION 7. CLOSING AND CLOSING DELIVERIES.....................................................20
7.1 Closing...................................................................................20
7.2 Deliveries by Seller......................................................................21
7.3 Deliveries by Purchaser...................................................................21
SECTION 8. TERMINATION........................................................................22
8.1 Termination by Seller.....................................................................22
8.2 Termination by Purchaser..................................................................22
8.3 Rights on Termination.....................................................................23
8.4 Specific Performance......................................................................23
8.5 Attorneys' Fees...........................................................................23
SECTION 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; CERTAIN REMEDIES......23
9.1 Representations and Warranties............................................................23
9.2 Indemnification by PCC....................................................................24
9.3 Indemnification by DCI....................................................................25
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
9.4 Procedure for Indemnification.............................................................25
9.5 Certain Limitations.......................................................................26
9.6 Remedies..................................................................................27
SECTION 10. MISCELLANEOUS.....................................................................27
10.1 Fees and Expenses........................................................................27
10.2 Notices..................................................................................28
10.3 Benefit and Binding Effect...............................................................29
10.4 Further Assurances.......................................................................29
10.5 GOVERNING LAW............................................................................29
10.6 Headings.................................................................................29
10.7 Entire Agreement.........................................................................29
10.8 Waiver of Compliance; Consents...........................................................30
10.9 Counterparts.............................................................................30
</TABLE>
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<PAGE> 5
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of November 24, 1997, by and among
TRAVEL CHANNEL ACQUISITION CORPORATION, a Delaware corporation ("Seller"),
PROJECT DISCOVERY, INC., a Delaware corporation ("Purchaser"), PAXSON
COMMUNICATIONS CORPORATION, a Delaware corporation and the parent company of
Seller, solely with respect to the specific obligations thereof set forth herein
("PCC"), and DISCOVERY COMMUNICATIONS, INC., a Delaware corporation and the
parent company of Purchaser, solely with respect to the specific obligations
thereof set forth herein ("DCI").
PRELIMINARY STATEMENT
Seller acquired substantially all of the assets owned and rights held
by The Travel Channel, Inc. ("Travel") for use in the business and operations of
the Channel (defined below) pursuant to that certain Asset Acquisition
Agreement, dated as of June 13, 1997 (the "Landmark Agreement"), by and among
PCC, Travel and Landmark Communications, Inc. ("Landmark"). Seller now desires
to convey to Purchaser, and Purchaser wishes to acquire therefrom, a twenty-five
percent (25%) undivided interest in such assets, for the consideration and on
the terms and conditions set forth in this Agreement.
AGREEMENTS
In consideration of the above recitals and of the mutual agreements and
covenants contained in this Agreement, the parties hereto, intending to be bound
legally, agree as follows:
SECTION 1. CERTAIN DEFINITIONS
1.1 Terms Defined in this Section
The following terms, as used in this Agreement, have the meanings set
forth in this Section:
"Affiliate," with respect to any Person, means any other Person
controlling, controlled by, or under common control with such Person. For
purposes of this definition, the term "control" means the possession, direct or
indirect, 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, and the terms "controlled by" and "under common control
with" have meanings corresponding to the meaning of "control."
"Agreement" means this Asset Purchase Agreement, as it may be amended
from time to time.
<PAGE> 6
"Assumed Contracts" means all Contracts listed on Schedule 3.7 and the
Contracts entered into by Seller in the ordinary course of business between July
11, 1997 and the Closing Date.
"Business Day" means any day (other than a day which is a Saturday or
Sunday) on which banks are permitted to be open for business in the City of New
York.
"Channel" means The Travel Channel, a cable television network
providing viewers in the United States and certain of its territories and
possessions with programming relating to leisure travel and related topics
through original, co-produced, and acquired non-fiction programming.
"Closing" means the consummation of the acquisition of the Assets
pursuant to this Agreement, in accordance with the provisions of Section 7.
"Closing Date" means the date on which the Closing occurs, as
determined pursuant to Section 7.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Consents" means the consents, permits, or approvals of governmental
authorities and other third parties that are necessary to transfer the Assets to
the Purchaser, if applicable, or otherwise to consummate the transactions
contemplated by this Agreement and the LLC Agreement in compliance with any
provision of law or the terms of any mortgage, indenture, lease, contract,
agreement, instrument, license, or permit to which any party to this Agreement
is a party or by which any party to this Agreement or its properties may be
bound legally, regardless whether the obtaining of such consent, permit, or
approval is a condition to the obligations of any party at the Closing under
this Agreement.
"Contracts" means all contracts, leases, non-governmental licenses, and
other agreements, commitments, or arrangements (including leases for personal or
real property and employment agreements), written or oral, to which Seller is a
party or which are binding upon Seller and that relate to or affect the Assets
or the business or operations of the Channel, and that are in effect on the date
of this Agreement.
"Effective Time" means 12:01 a.m., Eastern time, on the Closing Date.
"Environmental Laws" means all currently effective federal, state,
local, and foreign statutes, regulations, ordinances, and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations, and all common law concerning public health, and pollution or
protection of the environment, including all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal,
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<PAGE> 7
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances, or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Intangible Property" means any trademark, trade name, logo, service
mark, brand mark, brand name, computer program, database, industrial design,
copyright, invention, drawing, customer list, proprietary know-how, or
information owned by Seller, and Seller's rights to use any trademark, trade
name, logo, service mark, brand mark, brand name, computer program, database,
industrial design, copyright, invention, drawing, customer list, proprietary
know-how, or information that is not owned by Seller, for use in connection with
the conduct of the business or operations of the Channel (including the name
"The Travel Channel" and all rights relating to the use of such name and any
logos or characters developed by or on behalf of Travel and Seller for use in
connection with the Channel), and all registrations thereof and pending
applications therefor.
"LLC" means The Travel Channel, L.L.C., a Delaware limited liability
company.
"LLC Agreement" means the Limited Liability Company Agreement, dated as
of even date herewith between Purchaser and Seller, as members of the LLC.
"Licenses" means all licenses, permits, construction permits,
registrations, and other authorizations issued by any federal, state, or local
governmental authorities to Seller, used or held by Seller for use in connection
with the conduct of the business or operations of the Channel, and all
applications therefor.
"Material Adverse Effect" means a material adverse effect on the
business, results of operations, properties, operations, financial condition,
assets, or liabilities of the Channel, taken as a whole.
"Permitted Liens" means, with respect to any Asset, (a) liens for
current taxes not yet due and payable or taxes that in good faith are being
contested or litigated and are not material to the business or operations of the
Channel, (b) landlord's liens for property taxes not delinquent, (c) statutory
liens that were created in the ordinary course of business, and (d) easements
and restrictions that are disclosed on Schedule 3.5.
"Person" means an individual, corporation, association, partnership,
joint venture, trust, estate, limited liability company, limited liability
partnership, governmental entity, or other entity or organization.
"Real Property" means all real property, and all buildings, fixtures,
and other improvements thereon, whether or not owned or held by Seller, used in
the business or operations of the Channel.
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<PAGE> 8
"Real Property Interests" means all interests in real property,
including fee estates, leaseholds and subleaseholds, purchase options,
easements, licenses, rights to access, and rights of way, and all buildings, and
other improvements thereon, used or held by Seller for use in connection with
the conduct of the business or operations of the Channel.
"Tangible Personal Property" means all machinery, equipment, tools,
vehicles, furniture, fixtures, leasehold improvements, office equipment,
materials and supplies, plant, inventory, video libraries and archives, spare
parts, and other tangible personal property of every kind and description used
or held by Seller for use in connection with the conduct of the business or
operations of the Channel.
"Taxes" means all taxes, charges, fees, levies, or other assessments
imposed by any federal, state, local, or foreign taxing authority, whether
disputed or not, including income, capital, estimated, excise, property, sales,
transfer, withholding, employment, payroll, and franchise taxes and any
interest, penalties, or additions attributable to or imposed on or with respect
to such assessments.
"Transponder Agreement" means the C-4 Satellite Transponder Service
Agreement between GE American Communications, Inc. and Seller, as assignee,
dated as of November 9, 1990, as amended on April 7, 1997.
1.2 Terms Defined Elsewhere in this Agreement
For purposes of this Agreement, the following terms have the meanings
set forth in the sections indicated:
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<PAGE> 9
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Affiliation Agreements Section 3.7
Assets Section 2.1
Benefit Arrangements Section 3.10(a)(iii)
Claimant Section 9.4(a)
Consideration Section 2.2
DCI Introductory Paragraph
Employees Section 3.10(a)
ERISA Affiliate Section 3.10(c)
Indemnifying Party Section 9.4(a)
Landmark Preliminary Statement
Landmark Agreement Preliminary Statement
Landmark Financial Statements Section 3.9
Losses Section 9.2
PCC Introductory Paragraph
Pension Plan Section 3.10(b)
Programming Agreements Section 3.7
Purchaser Introductory Paragraph
Seller Introductory Paragraph
Travel Preliminary Statement
TCAC Financial Statements Section 3.9
Welfare Plan Section 3.10(a)(i)
</TABLE>
1.3 Terms Generally
The definitions in Section 1.1 and elsewhere in this Agreement shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context requires, any pronoun includes the corresponding masculine,
feminine, and neuter forms. The words "include," "includes," and "including" are
not limiting. Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "Business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or notice
is to be taken or
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<PAGE> 10
given on or by a particular calendar day, and such calendar day is not a
Business Day, then such action or notice shall be deferred until, or may be
taken or given on, the next Business Day. As used in this Agreement, "knowledge"
of Seller is limited to the actual knowledge of: Tom Lucas, Doug DePriest, Seth
Grossman, Sheila Grossman and Bill Scott, a board member of PCC.
SECTION 2. ACQUISITION OF ASSETS AND CONSIDERATION
2.1 Acquisition of Assets
(a) Subject to the terms and conditions set forth in this
Agreement (including the representations and warranties made and relied upon
hereunder), Seller hereby agrees to sell, assign, transfer, convey, and deliver
to Purchaser on the Closing Date, and Purchaser agrees to acquire, a twenty-five
percent (25%) undivided interest in and to all of the tangible and intangible
assets used or held by Seller, or any Affiliate thereof, for use in connection
with the conduct of the business or operations of the Channel (the "Assets"),
free and clear of any claims, liabilities, liens, security interests, mortgages,
pledges, encumbrances, or restrictions, except for Permitted Liens, including,
without limitation, the following:
(i) The Tangible Personal Property;
(ii) The Real Property Interests;
(iii) The Licenses;
(iv) The Assumed Contracts;
(v) The Intangible Property;
(vi) Proprietary information, technical
information and data, machinery and equipment warranties, maps, computer discs
and tapes, plans, diagrams, blueprints, and schematics relating to the business
or operations of the Channel;
(vii) All claims or causes of action of Seller to
the extent they relate to the Assets;
(viii) Copies of all books and records, including
files, books of account, computer programs, tapes, electronic data processing
software, customer lists, and other records
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<PAGE> 11
relating to the Assets or the business or operations of the Channel, including
executed copies of the Assumed Contracts and Seller's database of program
rights;
(ix) Insurance proceeds arising out of damage,
destruction, or loss of any Asset to the extent of any damage or destruction
that remains unrepaired, or to the extent any destroyed property or asset that
remains unreplaced, at the Closing Date;
(x) All programs, program rights, and
programming materials and elements of whatever form or nature owned or held by
Seller, whether recorded on film, tape, or any other medium or intended for live
performance, broadcast, or other manner of presentation and whether completed or
in production (such as outlines, scripts, or otherwise);
(xi) All rights under manufacturers' and
vendors' warranties relating to Assets; and
(xii) All goodwill in, and going concern value of,
the Channel.
(b) The following shall be excluded from the definition
of Assets:
(i) All receivables of Seller arising with
respect to an event occurring prior to the Effective Time;
(ii) All prepaid expenses paid in respect of the
period occurring after the Effective Time; and
(iii) All security deposits made by Seller.
(c) In the event that Seller is unable to transfer to
Purchaser a twenty-five percent (25%) undivided interest in any Asset pursuant
to this Section 2.1, then Seller shall transfer to Purchaser an additional
twenty-five percent (25%) undivided interest in another Asset or Assets as shall
be acceptable to Purchaser, so that on the Closing Date, Purchaser shall receive
from Seller in the aggregate a twenty-five percent (25%) undivided interest in
the Assets based on the fair market value of the Assets on the Closing Date.
2.2 Consideration
In consideration of the sale, transfer, conveyance, assignment, and
delivery to Purchaser of a twenty-five percent (25%) undivided interest in the
Assets pursuant to this Agreement, Purchaser shall pay to or for the account of
Seller, the sum of $20,000,000 (the "Consideration"), by wire transfer of
same-day funds in U.S. Dollars, pursuant to wire instructions which shall be
delivered by Seller to Purchaser at least two Business Days prior to the Closing
Date.
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<PAGE> 12
2.3 Allocation of Consideration
The parties agree that the Consideration payable by Purchaser to Seller
at the Closing pursuant to this Agreement shall be allocated among the Assets in
accordance with Section 1060 of the Code and Temporary Treasury Regulation
Section 1.1060-1T. The parties will cooperate with each other in arriving at
such allocations, and each party shall provide a copy of its allocation to the
other party, upon request thereof.
2.4 Assumption of Liabilities and Obligations
All obligations and liabilities under the Licenses and Assumed
Contracts, whether occurring prior to or after the Effective Time, shall remain
the obligations and liabilities of Seller and shall be assumed by the LLC in
accordance with the LLC Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PCC AND SELLER
PCC and Seller, jointly and severally, represent and warrant to
Purchaser as follows:
3.1 Organization, Standing, and Authority
Each of PCC and Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware. Seller
has all requisite corporate power and authority (a) to own, lease, and use the
Assets as now owned, leased, and used by it, (b) to conduct the business and
operations of the Channel as now conducted by it, and (c) to execute and deliver
this Agreement and the documents contemplated hereby, and to perform and comply
with all of the terms, covenants, and conditions to be performed and complied
with by Seller hereunder and thereunder. Seller is duly qualified to transact
business in each jurisdiction in which the nature of its business makes such
qualification necessary except where failure to so qualify would not have a
Material Adverse Effect or impair or hinder the ability of Seller to perform its
obligations under this Agreement. PCC has all requisite corporate power and
authority to execute and deliver this Agreement and the documents contemplated
hereby, and to perform and comply with all of the terms, covenants, and
conditions to be performed and complied with by PCC hereunder and thereunder.
PCC is duly qualified to transact business in each jurisdiction in which the
nature of its business makes such qualification necessary except where failure
to so qualify would not impair or hinder the ability of PCC to perform its
obligations under this Agreement.
3.2 Authorization and Binding Obligation
The execution, delivery, and performance of this Agreement by each of
PCC and Seller and the performance by PCC and Seller of their respective
obligations hereunder have been duly authorized by all necessary corporate
actions on the part of PCC and Seller. This Agreement
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<PAGE> 13
has been duly executed and delivered by each of PCC and Seller and constitutes
the legal, valid, and binding obligation of each of PCC and Seller, enforceable
against each of PCC and Seller in accordance with its terms except as the
enforceability of this Agreement may be affected by bankruptcy, insolvency, or
similar laws affecting creditors' rights generally, and by judicial discretion
in the enforcement of equitable remedies.
3.3 Absence of Conflicting Agreements; Consents
Subject to obtaining the Consents listed on Schedule 3.3, the
execution, delivery and performance of this Agreement and the documents
contemplated hereby by each of PCC and Seller (with or without the giving of
notice, the lapse of time, or both), assuming for the purposes of this Section
3.3 only that the interest in the Assets being transferred hereby is a 100%
undivided interest in the Assets, (a) do not require the consent of any third
party (including any governmental or regulatory authority); (b) will not
conflict with any provision of the Certificate of Incorporation or By-Laws of
either PCC or Seller; (c) will not violate or result in a breach of, or
contravene any law, judgment, order, ordinance, injunction, decree, rule,
regulation, or ruling of any court or governmental instrumentality applicable to
either PCC or Seller; (d) will not violate, conflict with, or result in a
material breach of any terms of, constitute grounds for termination of,
constitute a default under, or result in the acceleration of any performance
required by the terms of, any mortgage, indenture, lease, contract, agreement,
instrument, license, or permit to which either PCC or Seller is a party or by
which either PCC or Seller or their respective properties may be bound legally,
with such exceptions which, singly or in the aggregate, are not material and do
not result in a material adverse change in the financial condition, or in the
earnings, business affairs or business prospects of PCC or Seller, or cause the
unwinding of the transactions contemplated under this Agreement or the
contributions contemplated under the LLC Agreement; and (e) will not create any
claim, liability, mortgage, lien, pledge, condition, charge, encumbrance, or
other security interest upon any of the Assets.
3.4 Licenses
Schedule 3.4 is a true and complete list as of the date of this
Agreement of all Licenses. Each License has been validly issued, and Seller is
the authorized legal holder thereof. The Licenses are in full force and effect,
and the conduct of the business and operations of the Channel is in accordance
therewith in all material respects. As of the date of this Agreement, there is
no proceeding pending or, to Seller's knowledge, threatened, seeking the
revocation or limitation of any Licenses. Seller is the holder of all Licenses
necessary or appropriate to enable it to continue to conduct the business of the
Channel as now conducted.
3.5 Real Property
Schedule 3.5 contains a complete and accurate description of all the
Real Property and Seller's interests therein (including street address (where
known), legal description (where known), owner, and Seller's use thereof). No
fee estates are included in the Real Property
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Interests. Except as set forth on Schedule 3.5, Seller has good title to all
Real Property Interests, free and clear of all liens, security interests,
mortgages, pledges, encumbrances, or restrictions on the Real Property
Interests, except for Permitted Liens; provided, however, that neither PCC or
Seller makes any representation or warranty hereby regarding any liens, security
interests, mortgages, pledges, encumbrances, or restrictions on any fee estate
underlying any Real Property Interest. All Real Property (including the
improvements thereon) is in good condition and repair consistent with its
present use and is available for immediate use in the conduct of the business
and operations of the Channel. Except for that portion of the Real Property and
Real Property Interests subject to leases where Seller is lessor or sublessor
(as identified on Schedule 3.5), Seller is in possession of the Real Property.
As of the date of this Agreement there are no pending or, to the knowledge of
Seller, threatened condemnation or appropriation proceedings against any of the
Real Property, or against the Real Property Interests. Seller has full legal and
practical access to all Real Property. With respect to each leasehold or
subleasehold interest included in the Real Property Interests, Seller has
enforceable rights to nondisturbance and quiet enjoyment, and no third party
holds any interest in the leased premises with the right to foreclose upon
Seller's leasehold or subleasehold interest.
3.6 Tangible Personal Property
Schedule 3.6 lists all material items of Tangible Personal Property
used to conduct the business and operations of the Channel as now conducted.
Except as described in Schedule 3.6 and except for Tangible Personal Property
leased pursuant to any Assumed Contract, Seller owns and has good title to each
item of Tangible Personal Property, and none of the Tangible Personal Property
is subject to any liens, security interests, mortgages, pledges, encumbrances,
or restrictions, except for Permitted Liens. The items of Tangible Personal
Property listed on Schedule 3.6 are in good working condition (ordinary wear and
tear excepted) and are available for immediate use in the business and
operations of the Channel.
3.7 Contracts
Schedule 3.7 is a true and complete list as of the date of this
Agreement of all Contracts which, as of the date of this Agreement, were either
assigned to or assumed by Seller pursuant to the Landmark Agreement and are
still in existence as of the Closing Date, or were entered into by Seller after
the consummation of the transactions contemplated by the Landmark Agreement (the
"Landmark Purchase"), exclusive of Contracts entered into by Seller in the
ordinary course of business after the Landmark Purchase of which Seller does not
have actual knowledge ("Ordinary Course Contracts"). Schedule 3.7 includes all
(other than Ordinary Course Contracts) of Seller's (a) cable television system
affiliation agreements ("Affiliation Agreements"), and other agreements or
understandings with cable television system operators, (b) program license
agreements and other agreements with respect to the production, development,
broadcast, distribution, or other use of television programs, films, music, and
other audio, visual, and audio-visual works ("Programming Agreements"), (c)
leases and rental agreements, (d) agreements to buy or sell advertising or
engage in other promotional activities. Seller has delivered or made available
to Purchaser true and complete copies of all written
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Assumed Contracts and accurate descriptions of all oral Assumed Contracts listed
on Schedule 3.7, other than Ordinary Course Contracts. Except as disclosed on
Schedule 3.7, to the knowledge of Seller, all of the Assumed Contracts are in
full force and effect and are valid and binding agreements of the parties
thereto, enforceable in accordance with their terms. Except as disclosed on
Schedule 3.7, neither Seller nor, to the knowledge of Seller, any other party is
in default in any material respect under any of the Assumed Contracts, nor does
any condition exist that with the notice or lapse of time or both would
constitute such a default. Except for the need to obtain the Consents listed on
Schedule 3.3 (however, this representation and warranty does not create any
obligation on the part of Seller to obtain any such Consent or make the
obtaining of such Consent a condition to Closing with respect to any party
hereto except as expressly set forth elsewhere in this Agreement), Seller has
full legal power and authority to assign its rights under the Assumed Contracts
to Purchaser and to the LLC, in accordance with this Agreement and the
contribution contemplated under the LLC Agreement, and such assignments together
will not affect the validity, enforceability, or continuation of any of the
Assumed Contracts. Except as disclosed on Schedule 3.7, as of the date of this
Agreement, to the knowledge of Seller, no party to any Assumed Contract has
informed Seller of its intention (a) to terminate such Assumed Contract or amend
the terms thereof, (b) to refuse to renew the Assumed Contract upon expiration
of its term, or (c) to renew the Assumed Contract upon expiration only on terms
and conditions that are more onerous than those now existing.
3.8 Intangible Property
Schedule 3.8 is a list of all Intangible Property and indicates, with
respect to each item of Intangible Property, the owner thereof and, if
applicable, the name of the licensor and licensee thereof. Except as set forth
on Schedule 3.8, to Seller's knowledge, each item of Intangible Property is in
good standing and no other Person has any claim of ownership or right of use
with respect thereto. To Seller's knowledge, the use of the Intangible Property
by Seller does not, and the use thereof by the LLC immediately after the Closing
will not, conflict with, infringe upon, violate, or interfere with or constitute
an appropriation of any right, title, interest, or goodwill, including any
intellectual property right, trademark, trade name, service mark, brand mark,
brand name, computer program, database, industrial design, copyright, or any
pending application therefor of any other Person, and there have been no claims
made and Seller has not received any notice or otherwise acquired any knowledge
that any item of Intangible Property is invalid or conflicts with the asserted
rights of any Person or has not been used or enforced or has been failed to be
used or enforced in a manner that would result in the abandonment, cancellation,
or unenforceability of any of the Intangible Property. Except as set forth on
Schedule 3.8, Seller is not a party to or bound by any contract, license, or
other agreement relating to the Intangible Property.
3.9 Financial Statements
Seller has furnished Purchaser with true and complete copies of (i) an
unaudited balance sheet and income statement of Landmark or its subsidiary, with
respect to the Channel, as at and for the fiscal years ended December 31, 1996,
December 31, 1995, and December 31, 1994,
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and as at and for the five months ended May 31, 1997 (the "Landmark Financial
Statements") that were delivered to PCC pursuant to the Landmark Agreement, and
(ii) any unaudited balance sheet and income statement of Seller or PCC with
respect to the Channel (the "TCAC Financial Statements") for the period from the
date of the Landmark Agreement to the Closing Date. The Financial Statements, if
any, have been prepared from the books and records of Seller on a consistent
basis in accordance with the accounting principles applied by PCC in preparing
its consolidated financial statements which, on a consolidated basis, have been
prepared in accordance with generally accepted accounting principles and present
fairly, in all material respects, the consolidated financial condition of TCAC
as at their respective dates and the results of operations for the periods then
ended.
3.10 Personnel
(a) Employees and Compensation. Schedule 3.10 contains a true
and complete list as of the date of this Agreement of all employees of Seller
engaged in the business and operations of the Channel (collectively, the
"Employees") and a description of all compensation arrangements affecting them.
Schedule 3.10 also contains a true and complete list of all material employee
benefit plans or arrangements maintained or administered by Seller or to which
Seller contributes or is required to contribute and that cover any Employee,
including any:
(i) "Employee welfare benefit plan," as
defined in Section 3(1) of ERISA (a "Welfare Plan");
(ii) Employee plan that is maintained in
connection with any trust described in Section 501(c)(9) of the Code; and
(iii) Employment, severance, or other similar
contract, arrangement, or policy and each plan or arrangement (written or oral)
providing for insurance coverage (including any self-insured arrangements),
workers' compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, or retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation rights, stock
purchases, or other forms of incentive compensation or post-retirement
insurance, compensation, or benefits that is not a Welfare Plan (collectively,
"Benefit Arrangements").
(b) Pension Plans. Except as disclosed in Schedule 3.10, there
is no "employee pension benefit plan," as defined in Section 3(2) of ERISA (a
"Pension Plan"), that is subject to Title IV or ERISA or Section 412 of the
Code, that covers any Employee and to which Seller contributes or is required to
contribute.
(c) Multiemployer Plans. Neither Seller nor any entity
required to be combined with Seller under Section 414(b), Section 414(c),
Section 414(m), or Section 414(o) of the Code (an "ERISA Affiliate") has at any
time been a participant in any "multiemployer pension plan," as defined in
Section 3(37) of ERISA, that covers any Employee.
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(d) Plan Liabilities. Neither Seller nor any ERISA Affiliate
has incurred, or expects to incur as a result of the consummation of the
transactions contemplated under this Agreement, any cost, fee, expense,
liability, claim, suit, obligation, or other damage with respect to any Pension
Plan, any Welfare Plan, or any Benefit Arrangement that could give rise to the
imposition of any liability, cost, fee, expense, or obligation on Purchaser or
any of its Affiliates, and, to Seller's knowledge, no facts or circumstances
exist that could give rise to any such cost, fee, expense, liability, claim,
suit, obligation, or other damage.
(e) Delivery of Copies of Relevant Documents and Other
Information. Seller has delivered or made available to Purchaser true and
complete copies of each of the following documents:
(i) Each Welfare Plan (and, if applicable,
related trust agreements) and all amendments thereto, and each summary plan
description together with any summary of material modifications;
(ii) Each written Benefit Arrangement and
written descriptions thereof that have been distributed to Employees
(including descriptions of the number and level of employees covered thereby);
and
(iii) Each employee handbook or similar document
describing any Pension Plan, Welfare Plan, or Benefit Arrangement applicable to
Employees.
(f) Labor Relations. Except as set forth in Schedule 3.10,
Seller is not a party to or subject to any written or oral employment contract
with any Employee. Seller is not subject to any contract prohibiting the
termination of any Employee. Except as disclosed on Schedule 3.10, no
controversies, disputes, or proceedings are pending or, to Seller's knowledge,
threatened, between Seller and any Employee. No labor union or other collective
bargaining unit represents or, to Seller's knowledge, claims to represent any of
the employees of the Channel. To Seller's knowledge, there is no union campaign
being conducted to solicit cards from employees to authorize a union to request
a National Labor Relations Board Certification election with respect to any
employees at the Channel.
3.11 Claims and Legal Actions
Except as disclosed on Schedule 3.11, as of the date of this Agreement,
there is no claim, legal action, counterclaim, suit, arbitration, or other
legal, administrative, or tax proceeding, nor any order, decree, or judgment, in
progress or pending, or to Seller's knowledge threatened, against or relating to
Seller or any of its Affiliates with respect to the Assets or the business or
operations of the Channel, that could be expected to have a Material Adverse
Effect or impair or hinder the ability of PCC or Seller to perform their
obligations under this Agreement.
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3.12 Compliance with Laws
Seller has complied with the Licenses and all federal, state, and local
laws, rules, regulations, ordinances, judgments, orders, and decrees applicable
or relating to the business and operation of the Channel, except for any
noncompliance that would not have a Material Adverse Effect or impair or hinder
the ability of PCC or Seller to perform their obligations under this Agreement.
3.13 Environmental Matters
(a) Seller and its Affiliates, with respect to the Assets,
have complied and are in compliance with all Environmental Laws. Without
limiting the generality of the foregoing, each of Seller and its Affiliates have
obtained and complied with, or filed timely applications for, and are in
compliance with, all permits, licenses, and other authorizations that are
required pursuant to Environmental Laws for the occupation of the Assets and the
operation of the Channel. Schedule 3.13 is a list of all permits, licenses, and
other authorizations that are required pursuant to Environmental Laws for the
occupation of the Assets and the operation of the Channel.
(b) Neither Seller nor any of its Affiliates, with respect to
the Channel or the Assets, has received any written notice regarding any actual
or alleged violation of Environmental Laws, or any liabilities or potential
liabilities, including any investigatory, remedial, or corrective obligations,
relating to any of them or their facilities arising under Environmental Laws.
(c) To Seller's knowledge, none of the following exists at any
Real Property: (1) underground storage tanks, (2) asbestos-containing material
in any form or condition, (3) materials or equipment containing polychlorinated
biphenyls, or (4) landfills.
(d) Neither Seller nor any of its Affiliates, with respect to
the Channel or the Assets, has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or released any substance,
including any hazardous substance, or owned or operated any property or facility
in a manner that has given or would give rise to liabilities, including any
liability for response costs, corrective action costs, personal injury, property
damage, or natural resources damages, pursuant to any Environmental Laws.
(e) Neither this Agreement nor the assignment of the Assets
pursuant to the LLC Agreement will result in any obligations for site
investigation or cleanup, or notification to or consent of government agencies
or third parties, pursuant to any "transaction-triggered" or "responsible
property transfer" Environmental Laws.
(f) Neither Seller nor any of its Affiliates, with respect to
the Channel or the Assets, has, either expressly or by operation of law, assumed
or undertaken any liability,
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including any obligation for corrective or remedial action, of any other Person
relating to Environmental Laws.
3.14 Transactions with Affiliates; Completeness of Assets
Except as set forth on Schedule 3.14, there are no agreements relating
to the business or operations of the Channel between Seller and any of its
Affiliates, Seller has not been involved in any material business arrangement or
relationship relating to the Channel or the Assets with any of its Affiliates,
and no Affiliate of Seller owns any property or right, tangible or intangible,
that is used in the business or operations of the Channel. Except as set forth
on Schedule 3.14, the Assets, together with those assets and properties used in
the performance of services by The Weather Channel, Inc. pursuant to the
Services Agreement between Seller and The Weather Channel, Inc., constitute all
tangible and intangible assets and properties necessary for the conduct of the
business and operations of the Channel as now conducted.
3.15 Cable Subscribers
Schedule 3.15 sets forth, with respect to each cable television system
operator so listed, under the column "Network Subs," as of a recent date, the
number of cable system subscribers to which such cable television system
operator makes the Channel available, based upon the Affiliation Agreement with
such cable television system operator (if an Affiliation Agreement with such
cable television system operator exists) and such other information that Seller
reasonably and in good faith deems relevant to such determination. Schedule 3.15
also designates those cable television system operators that, to Seller's
knowledge, make the Channel available to subscribers without an Affiliation
Agreement.
3.16 Conduct of Business
Since July 11, 1997, Seller has not:
(a) Suffered any damage, destruction, or loss affecting any
assets used or useful in the conduct of the business of the Channel that has had
or would have a Material Adverse Effect;
(b) Except in this Agreement, made or agreed to make any sale,
assignment, lease, or other transfer or disposition of any of the Channel's
assets of the types described in Section 2.1(a) other than in the normal and
usual course of business with suitable replacements being obtained therefor;
(c) Canceled, amended, or modified, or agreed to cancel,
amend, or modify, any Affiliation Agreement or any Programming Agreement that
has had or would have a Material Adverse Effect; or
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(d) Entered into any settlement regarding the breach or
infringement of, any license, patent, copyright, trademark, trade name,
franchise, or similar right, or modified any existing right relating to the
Channel.
Neither PCC or Seller shall be deemed to have made to the Purchaser any
representation or warranty other than as expressly made by PCC or Seller in
Section 3 hereof. Without limiting the generality of the foregoing, and
notwithstanding any otherwise representations and warranties made by PCC or
Seller in Section 3 hereof, neither PCC nor Seller makes any representation or
warranty to Purchaser with respect to any projections, estimates or budgets
heretofore delivered to or made available to Purchaser of future revenues,
expenses or expenditures or future results of operations with respect to PCC,
Seller or the Assets. Except as expressly covered by a representation or
warranty contained in Section 3 hereof, neither PCC or Seller makes any
representation or warranty to Purchaser with respect to any other information or
documents (financial or otherwise) made available to Purchaser or its counsel,
accountants or advisors with respect to PCC, Seller or the Assets.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
4.1 Organization, Standing, and Authority
Purchaser is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware. Purchaser has all
requisite corporate power and authority to execute and deliver this Agreement
and the documents contemplated hereby, and to perform and comply with all of the
terms, covenants, and conditions to be performed and complied with by Purchaser
hereunder and thereunder.
4.2 Authorization and Binding Obligation
The execution, delivery, and performance of this Agreement by Purchaser
and the performance by Purchaser of its obligations hereunder have been duly
authorized by all necessary actions on the part of Purchaser. This Agreement has
been duly executed and delivered by Purchaser and constitutes the legal, valid,
and binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms except as the enforceability of this Agreement may be affected by
bankruptcy, insolvency, or similar laws affecting creditors' rights generally
and by judicial discretion in the enforcement of equitable remedies.
4.3 Absence of Conflicting Agreements
The execution, delivery, and performance by Purchaser of this Agreement
and the documents contemplated hereby (with or without the giving of notice, the
lapse of time, or both): (a) do not require the consent of any third party
(including any governmental or
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regulatory authority); (b) will not conflict with the Certificate of
Incorporation or By-Laws of Purchaser; (c) will not violate, conflict with, or
result in a breach of, or constitute a default under, any law, judgment, order,
injunction, decree, rule, regulation, or ruling of any court or governmental
instrumentality applicable to Purchaser; and (d) will not violate, conflict
with, constitute grounds for termination of, result in a breach of, constitute a
default under, or accelerate or permit the acceleration of any performance
required by the terms of, any mortgage, indenture, lease, contract, agreement,
instrument, license, or permit to which Purchaser is a party or by which
Purchaser may be bound legally with such exceptions which, singly or in the
aggregate, are not material and do not result in a material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of Purchaser, or cause the unwinding of the transactions
contemplated under this Agreement or the LLC Agreement.
SECTION 5. SPECIAL COVENANTS AND AGREEMENTS
5.1 Confidentiality
(a) Except as and to the extent required by law or as provided
in Section 5.1(c), each party will keep confidential any information obtained
from the other party in connection with the transactions contemplated by this
Agreement. If this Agreement is terminated, each party will return to the
disclosing party or destroy all information obtained by such party from any
other party in connection with the transactions contemplated by this Agreement.
(b) Except as provided in Section 5.1(c), no party shall
publish any press release or make any other public announcement concerning this
Agreement or the transactions contemplated hereby without the prior written
consent of each other party, which shall not be withheld unreasonably.
(c) Nothing contained in this Agreement shall prevent any
party, after notification to each other party, from making any filings with
governmental authorities, including in connection with any securities filings
with any governmental authorities or exchanges that, in its judgment, may be
required or advisable in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
5.2 Cooperation
Seller and Purchaser shall cooperate fully with each other and their
respective counsel and accountants in connection with any actions required to be
taken as part of their respective obligations under this Agreement, and Seller
and Purchaser shall use commercially reasonable efforts to take or cause to be
taken all actions necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including making such filings with governmental and regulatory
authorities,
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providing information, using commercially reasonable efforts to obtain all
necessary or appropriate waivers, consents, and approvals, and executing such
other documents as may be necessary and desirable to the implementation and
consummation of this Agreement, and otherwise use commercially reasonable
efforts to consummate the transaction contemplated hereby and to fulfill their
obligations under this Agreement. Notwithstanding the foregoing, and except as
otherwise expressly provided in this Agreement, Purchaser shall have no
obligation to expend funds to obtain any of the Consents or to agree to any
adverse change in any License or Assumed Contract in order to obtain a Consent
required with respect thereto, and Seller shall not have any obligation to
expend funds to obtain any of the Consents or any estoppel certificates.
5.3 Access to Books and Records
To the extent requested for any reasonable business purposes hereunder,
and subject to the following two sentences of this Section 5.3, (a) Seller shall
provide Purchaser access and the right to copy for a period of five years from
the Closing Date any books and records of Seller (or true and complete copies
thereof) relating to the Channel or the Assets but not included in the Assets,
and (b) Purchaser shall provide Seller the right to request true and complete
copies, for a period of five years after the Closing Date, of any books and
records relating to the Channel or the Assets with respect to periods prior to
the Closing that are included in the Assets. Any party that is required to grant
any other party access and the right to copy any books and records (or true and
complete copies thereof) pursuant to this Section 5.3 may, before doing so,
redact or remove therefrom any information contained therein that does not
relate to the Channel or the Assets. Except as and to the extent required by law
or as provided in Section 5.1(c), each party will keep confidential any
information to which it is given access pursuant to this Section 5.3.
5.4 Bulk Sales Law
Purchaser hereby waives compliance by Seller with the provisions of any
applicable bulk sales laws.
5.5 No Inconsistent Action
No party to this Agreement shall take any action that is inconsistent
with its obligations under this Agreement or that could reasonably be expected
to hinder or delay the consummation of the transactions contemplated by this
Agreement.
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SECTION 6. CONDITIONS TO OBLIGATIONS OF PARTIES AT CLOSING
6.1 Conditions to Obligations of Purchaser
All obligations of Purchaser at the Closing are subject at Purchaser's
option to the fulfillment prior to or at the Closing Date of each of the
following conditions:
(a) Injunction, etc. There shall be no effective injunction,
writ, or preliminary restraining order or any order of any nature issued by a
court or governmental agency of competent jurisdiction to the effect that
transactions contemplated by this Agreement may not be consummated as herein
provided, no proceeding or lawsuit shall have been commenced and be continuing
by any federal or state governmental or regulatory agency for the purpose of
obtaining any such injunction, writ, or preliminary restraining order, and no
written notice directed to either Seller or Purchaser shall have been received
from any such federal or state agency indicating an intent to restrain, prevent,
materially delay, or restructure the transactions contemplated by this
Agreement; provided, however, that Purchaser shall have used all commercially
reasonable efforts to prevent the entry of any such injunction or other order
that may be entered.
(b) Transponder Agreement. The Transponder Agreement shall be
in full force and effect and GE American Communications, Inc. shall have granted
its Consent to the assignment of the Transponder Agreement to the LLC and shall
have executed and delivered an estoppel certificate with respect to the
Transponder Agreement in form and substance reasonably satisfactory to
Purchaser.
(c) LLC Agreement. Seller shall have entered into the LLC
Agreement.
(d) Deliveries. Seller shall have made all the deliveries to
Purchaser set forth in Section 7.2.
6.2 Conditions to Obligations of Seller
All obligations of Seller at the Closing are subject at Seller's option
to the fulfillment prior to or at the Closing Date of each of the following
conditions:
(a) Injunction, etc. There shall be no effective injunction,
writ, or preliminary restraining order or any order of any nature issued by a
court or governmental agency of competent jurisdiction to the effect that
transactions contemplated by this Agreement may not be consummated as herein
provided, no proceeding or lawsuit shall have been commenced and be continuing
by any federal or state governmental or regulatory agency for the purpose of
obtaining any such injunction, writ, or preliminary restraining order, and no
written notice directed to either Seller or Purchaser shall have been received
from any such federal or state agency indicating an intent to restrain, prevent,
materially delay, or restructure the transactions
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contemplated by this Agreement; provided, however, that Seller shall have used
all commercially reasonable efforts to prevent the entry of any such injunction
or other order that may be entered.
(b) Deliveries. Purchaser shall have made all the deliveries
set forth in Section 7.3.
(c) LLC Agreement. Purchaser shall have entered into the LLC
Agreement.
SECTION 7. CLOSING AND CLOSING DELIVERIES
7.1 Closing
(a) Closing Date. Except as otherwise agreed to by Purchaser
and Seller, the Closing shall take place at 10:00 a.m. on November 25, 1997.
(b) Closing Place. The Closing shall be held at the offices of
LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125 West 55th Street, New York, New York
10019-5389, or any other place that is agreed upon by Purchaser and Seller.
7.2 Deliveries by Seller
Prior to or on the Closing Date, Seller shall deliver to Purchaser the
following, in form and substance reasonably satisfactory to Purchaser and its
counsel:
(a) Transfer Documents. Duly executed instruments of
conveyance and transfer, including bills of sale, motor vehicle titles,
assignments, and other transfer documents that are sufficient to vest good and
marketable title to a twenty-five percent (25%) undivided interest in the Assets
in the name of Purchaser, free and clear of all liens, security interests,
mortgages, pledges, encumbrances, or restrictions (other than any liens,
security interests, mortgages, pledges, encumbrances, or restrictions resulting
from the failure to obtain any Consent), except for liens for current taxes not
yet due and payable and landlord's liens for property taxes not delinquent.
(b) Consents. Copies of all instruments evidencing receipt of
any Consents and estoppel certificates that have been obtained prior to the
Closing (but this delivery requirement does not create any obligation on the
part of Seller to obtain any Consent or estoppel certificate or make the
obtaining of any Consent or estoppel certificate a condition to any party's
obligations at Closing, other than as expressly provided elsewhere in this
Agreement).
(c) Licenses, Contracts, Business Records, Etc. Copies of all
Licenses, Assumed Contracts, blueprints, schematics, working drawings, plans,
projections, engineering records, and all files and records included in the
Assets.
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(d) Opinion of Counsel. An opinion of counsel to Seller dated
as of the Closing Date, substantially in the form of Schedule 7.2(d) hereto.
(e) Other Documents. Such additional documents, information,
and materials as Purchaser shall reasonably request.
7.3 Deliveries by Purchaser
Prior to or on the Closing Date, Purchaser shall deliver to Seller the
following, in form and substance reasonably satisfactory to Seller and its
counsel:
(a) Cash Consideration. The Consideration provided in Section
2.2.
(b) Other Documents. Such additional documents, information,
and materials as Seller shall reasonably request.
SECTION 8. TERMINATION
8.1 Termination by Seller
This Agreement may be terminated by Seller prior to the Closing, and
the acquisition by Purchaser of a twenty-five percent (25%) undivided interest
in the Assets abandoned, if Seller is not then in material default, upon written
notice to Purchaser, upon the occurrence of any of the following:
(a) Conditions. If on the date on which the Closing is
required to take place pursuant to Section 7.1(a) any of the conditions
precedent to the obligations of Seller set forth in this Agreement has not been
satisfied or waived in writing by Seller.
(b) Judgments. If there shall be in effect on the date on
which the Closing is required to take place pursuant to Section 7.1(a) any
judgment, decree, or order that would prevent or make unlawful the Closing.
(c) Upset Date. If the Closing shall not have occurred on or
before December 1, 1997.
8.2 Termination by Purchaser
This Agreement may be terminated by Purchaser, and the acquisition by
Purchaser of a twenty-five percent (25%) undivided interest in the Assets
abandoned, if Purchaser is not then in material default, upon written notice to
Seller, upon the occurrence of any of the following:
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<PAGE> 26
(a) Conditions. If on the date on which the Closing is
required to take place pursuant to Section 7.1(a) any of the conditions
precedent to the obligations of Purchaser set forth in this Agreement has not
been satisfied or waived in writing by Purchaser.
(b) Judgments. If there shall be in effect on the date on
which the Closing is required to take place pursuant to Section 7.1(a) any
judgment, decree, or order that would prevent or make unlawful the Closing.
(c) Upset Date. If the Closing shall not have occurred on or
before December 1, 1997.
8.3 Rights on Termination
Upon the termination of this Agreement, each party shall have all
rights and remedies available to it at law or equity.
8.4 Specific Performance
The parties recognize that if any party breaches this Agreement and
refuses to perform under the provisions of this Agreement, monetary damages
alone would not be adequate to compensate the other parties for their injury.
Each party shall therefore be entitled, in addition to any other remedies that
may be available, including money damages, to obtain specific performance of the
terms of this Agreement. If any action is brought by any party to enforce this
Agreement, the other parties shall waive the defense that there is an adequate
remedy at law.
8.5 Attorneys' Fees
In the event of a default by any party that results in a lawsuit or
other proceeding for any remedy available under this Agreement, the prevailing
party shall be entitled to reimbursement from the other party of its reasonable
legal fees and expenses (whether incurred in arbitration, at trial, or on
appeal).
SECTION 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION;
CERTAIN REMEDIES
9.1 Representations and Warranties
Without prejudice to representations and warranties in other agreements
delivered hereunder, all representations and warranties contained in this
Agreement shall be deemed continuing representations and warranties and shall
survive the Closing Date for a period of twelve months. Any investigations by or
on behalf of any party hereto shall not constitute a waiver as to enforcement of
any representation, warranty, or covenant contained in this Agreement. No notice
or information delivered by any party shall affect any other party's right
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<PAGE> 27
to rely on any representation, warranty, or covenant made by such party or
relieve such party of any obligations under this Agreement as the result of a
breach of any of its representations and warranties.
9.2 Indemnification by PCC
After the Closing, and regardless of any investigation made at any time
by or on behalf of Purchaser or any information Purchaser may have, PCC hereby
agrees to indemnify and hold harmless Purchaser from and against, and to
reimburse Purchaser for, any and all losses, liabilities, and damages (including
punitive and exemplary damages and fines or penalties and any interest thereon),
costs and expenses (including reasonable fees and disbursements of counsel and
expenses of investigation and defense), claims, or other obligations of any
nature (collectively, "Losses") that result from:
(a) Any inaccuracy in or breach of any representation and
warranty, or any breach or nonfulfillment of any covenant or agreement of PCC or
Seller contained in this Agreement or in any certificate, document, or
instrument delivered to Purchaser under this Agreement;
(b) Any failure to comply with applicable bulk sales laws;
(c) The operation or ownership of the Channel and the Assets
prior to the "Closing" set forth in the Landmark Agreement, including any
liabilities arising under the Licenses or the Assumed Contracts that relate to
events occurring prior the "Closing Date" set forth in the Landmark Agreement;
and
(d) Any claim relating to or arising in connection with any
Pension Plan, Welfare Plan, or Benefit Arrangement established or maintained by
Landmark, Travel, Seller or any ERISA Affiliate of any thereof, including any
claim relating to any severance pay program or any obligation to provide
"continuation coverage" (within the meaning of Sections 601 through 609 of ERISA
or Section 4980B of the Code) to any Employee as the result of any act or
omission of Landmark, Travel, Seller or any ERISA Affiliate of any thereof, or
arising as the result of any determination that PCC, Seller or any Affiliate
thereof is a successor employer to such entity.
9.3 Indemnification by DCI
After the Closing, and regardless of any investigation made at any time
by or on behalf of Seller or any information that Seller may have, DCI hereby
agrees to indemnify and hold harmless Seller from and against, and to reimburse
Seller for, any and all Losses that result from any inaccuracy in or breach of
any representation and warranty, or any breach or nonfulfillment
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<PAGE> 28
of any covenant or agreement of Purchaser or DCI contained in this Agreement or
in any certificate, document, or instrument delivered to Seller under this
Agreement.
9.4 Procedure for Indemnification
The procedure for indemnification shall be as follows:
(a) The party claiming indemnification (the "Claimant") shall
promptly give notice to the party from which indemnification is claimed (the
"Indemnifying Party") of any claim, whether between the parties or brought by a
third party, specifying in reasonable detail the factual basis for the claim. If
the claim relates to an action, suit, or proceeding filed by a third party
against Claimant, such notice shall be given by Claimant within ten Business
Days after written notice of such action, suit, or proceeding was given to
Claimant. The Claimant's failure to give such notice timely shall not relieve
the Indemnifying Party from any liability that it otherwise may have to the
Claimant except to the extent the Indemnifying Party is actually prejudiced by
such failure.
(b) With respect to claims solely between the parties,
following receipt of notice from the Claimant of a claim, the Indemnifying Party
shall have thirty days to make such investigation of the claim as the
Indemnifying Party deems necessary or desirable. For the purposes of such
investigation, the Claimant agrees to make available to the Indemnifying Party
and its authorized representatives the information relied upon by the Claimant
to substantiate the claim. If the Claimant and the Indemnifying Party agree at
or prior to the expiration of the thirty-day period (or any mutually agreed upon
extension thereof) to the validity and amount of such claim, the Indemnifying
Party shall immediately pay to the Claimant the full amount of the claim. If the
Claimant and the Indemnifying Party do not agree within the thirty-day period
(or any mutually agreed upon extension thereof), the Claimant may seek
appropriate remedy at law or equity.
(c) With respect to any claim by a third party as to which the
Claimant is entitled to indemnification under this Agreement, if the
Indemnifying Party notifies the Claimant in writing within ten Business Days of
its receipt of notice from the Claimant of the third-party claim that the
Indemnifying Party acknowledges its potential liability to the Claimant under
this Agreement, the Indemnifying Party shall have the right at its own expense,
to participate in or assume control of the defense of such claim (subject to
Section 9.4(d)), and the Claimant shall cooperate fully with the Indemnifying
Party, subject to reimbursement for actual out-of-pocket expenses incurred by
the Claimant as the result of a request by the Indemnifying Party. If the
Indemnifying Party elects to assume control of the defense of any third-party
claim, the Claimant shall have the right to participate in the defense of such
claim at its own expense (except that the Claimant shall have the right to
participate in the defense of such claim at the Indemnifying Party's expense if
(i) the Claimant has been advised by its counsel that use of the same counsel to
represent both the Indemnifying Party and the Claimant would present a conflict
of interest, which shall be deemed to include any case where there may be a
legal defense or claim available to the Claimant that is different from or
additional to those available to the Indemnifying Party,
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<PAGE> 29
or (ii) the Indemnifying Party fails vigorously to defend or prosecute such
claim within a reasonable time). If the Indemnifying Party fails timely to
notify the Claimant in writing that the Indemnifying Party acknowledges its
potential liability to the Claimant under this Agreement or if the Indemnifying
Party does not elect to assume control or otherwise participate in the defense
of any third-party claim, the Indemnifying Party shall be bound by the results
obtained by the Claimant with respect to such claim.
(d) The Indemnifying Party may not control the defense of any
claim, without the written consent of the Claimant, if (i) the Claimant has been
advised by its counsel that use of the same counsel to represent both the
Indemnifying Party and the Claimant would present a conflict of interest, or
(ii) the claim involves any material risk of the sale, forfeiture, or loss of,
or the creation of any lien (other than a judgment lien) on, any material
property of the Claimant or could entail a risk of criminal liability to the
Claimant.
9.5 Certain Limitations
Notwithstanding anything in this Agreement to the contrary,
(a) no party shall indemnify or otherwise be liable to any
other party with respect to any claim for any breach of a representation or
warranty, unless notice of the claim is given within twelve months after the
Closing Date;
(b) PCC shall not be required to indemnify or otherwise be
liable to DCI or Purchaser for any breach of a representation or warranty,
unless the Losses of DCI or Purchaser from all such breaches exceed in the
aggregate Twenty-Five Thousand Dollars ($25,000), in which event PCC shall be
required to indemnify DCI and Purchaser for all such Losses (subject to the
other limitations in this Agreement);
(c) DCI shall not be required to indemnify or otherwise be
liable to PCC or Seller for any breach of a representation or warranty unless
the Losses of PCC and Seller from all such breaches exceed in the aggregate
Twenty-Five Thousand Dollars ($25,000), in which event DCI shall be required to
indemnify PCC and Seller for all such Losses (subject to the other limitations
in this Agreement);
(d) PCC shall not be required to indemnify or otherwise be
liable to DCI or Purchaser for any breach of a representation or warranty, to
the extent that the Losses of DCI and Purchaser from all such breaches exceed in
the aggregate Twenty Million Dollars ($20,000,000);
(e) DCI shall not be required to indemnify or otherwise be
liable to PCC or Seller for any breach of a representation or warranty to the
extent that the Losses of PCC and Seller from all such breaches exceed in the
aggregate Twenty Million Dollars ($20,000,000);
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<PAGE> 30
(f) PCC shall not be required to indemnify or otherwise be
liable to DCI or Purchaser for any breach of Section 3.9 unless PCC is able to
recover and does recover the amount of the Loss from such breach from Landmark
pursuant to the Landmark Agreement.
(g) the amount of Losses for which a Claimant may be entitled
to indemnification under this Agreement (but not the amount of Losses suffered
by a Claimant for purposes of the foregoing provisions of this Section 9.5)
shall be determined on an after-tax basis, after giving effect to any tax
benefit arising from the incurring of any Loss and any tax detriment arising
from the indemnification thereof;
(h) indemnification of Losses under this Agreement shall be
net of any insurance proceeds actually paid to the Claimant with respect to the
event giving rise to such Loss, but no Claimant shall have any obligation under
this Agreement to make any claim under any insurance policy that may be
applicable to such event.
9.6 Remedies
The remedy of indemnification under this Section 9 is in addition to
any action either party may have in equity, and all such remedies may be
exercised singly or concurrently. In the event that a party is unable to obtain
indemnification pursuant to this Section 9, such party shall have the right to
pursue any rights and remedies at law or in equity.
SECTION 10. MISCELLANEOUS
10.1 Fees and Expenses
Except as otherwise provided in this Agreement, each party shall pay
its own expenses incurred in connection with the authorization, preparation,
execution, and performance of this Agreement, including all fees and expenses of
counsel, accountants, agents, and representatives, and each party shall be
responsible for all fees or commissions payable to any finder, broker, advisor,
or similar Person retained by or on behalf of such party. Seller and Purchaser
shall each pay one-half of any filing fees, transfer taxes, recordation taxes,
sales taxes, document stamps, or other charges levied by any governmental entity
in connection with the transactions contemplated by this Agreement.
10.2 Notices
All notices, demands, and requests required or permitted to be given
under the provisions of this Agreement shall be (a) in writing, (b) delivered by
personal delivery, or sent by commercial delivery service or registered or
certified mail, return receipt requested, or sent by facsimile transmission, (c)
deemed to have been given on the date of personal delivery or the date set forth
in the records of the delivery service or on the return receipt or by facsimile
confirmation, and (d) addressed as follows:
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<PAGE> 31
If to Seller to: Travel Channel Acquisition Corporation
c/o Paxson Communications Corporation
601 Clearwater Park Road
West Palm Beach, Florida 33401
Attention: Lowell W. Paxson, President
Telecopier: 561-659-4252
With a copy to: Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, D.C. 20036-6802
Attention: Leonard J. Baxt, Esq.
Telecopier: 202-776-2222
If to Purchaser to: Project Discovery, Inc.
c/o Discovery Communications, Inc.
7700 Wisconsin Avenue
Bethesda, Maryland 20814
Attention: Mark Hollinger, Esq.
Telecopier: 301-986-4971
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
With a copy to: 125 West 55th Street
New York, New York 10019-5389
Attention: Alayne F. Serle, Esq.
Telecopier: 212-424-8500
or to any other or additional Persons and addresses as the parties may from time
to time designate in a writing delivered in accordance with this Section 10.2.
10.3 Benefit and Binding Effect
No party may assign this Agreement without the prior written consent of
each other party hereto, except that, any party may assign any or all of its
rights under this Agreement to any Affiliate (which assignment shall not relieve
the assigning party of any obligations or liabilities under this Agreement).
This Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns.
10.4 Further Assurances
The parties shall take any actions and execute any other documents that
may be necessary or desirable to the implementation and consummation of this
Agreement, including, in the case of Seller, any additional deeds, bills of
sale, or other transfer documents that, in the reasonable opinion of Purchaser,
may be necessary to ensure, complete, and evidence the full and effective
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<PAGE> 32
transfer of a twenty-five percent (25%) undivided interest in the Assets to
Purchaser pursuant to this Agreement.
10.5 GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED, AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CHOICE OF LAW
PROVISIONS THEREOF.
10.6 Headings
The headings in this Agreement are included for ease of reference only
and shall not control or affect the meaning or construction of the provisions of
this Agreement.
10.7 Entire Agreement
This Agreement, the schedules, hereto, and all documents, certificates,
and other documents to be delivered by the parties pursuant hereto, collectively
represent the entire understanding and agreement between Seller and Purchaser
with respect to the subject matter of this Agreement. This Agreement supersedes
all prior negotiations among the parties and cannot be amended, supplemented, or
changed except by an agreement in writing that makes specific reference to this
Agreement and that is signed by each party against which enforcement of any such
amendment, supplement, or modification is sought. This document shall not
constitute or otherwise evidence an agreement among the parties hereto relating
to the subject matter hereof unless and until it has been executed and delivered
by the parties hereto.
10.8 Waiver of Compliance; Consents
Except as otherwise provided in this Agreement, any failure of any of
the parties to comply with any obligation, representation, warranty, covenant,
agreement, or condition herein may be waived by the party entitled to the
benefits thereof only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with such
obligation, representation, warranty, covenant, agreement, or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
10.8.
10.9 Counterparts
This Agreement may be signed in counterparts with the same effect as if
the signature on each counterpart were upon the same instrument.
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<PAGE> 33
<PAGE> 34
IN WITNESS WHEREOF, this Agreement has been executed by the parties as
of the date first written above.
TRAVEL CHANNEL ACQUISITION CORPORATION
By: /s/ William L.Watson
-------------------------------------------
Name: WILLIAM L. WATSON
----------------------------------------
Title: SECRETARY
---------------------------------------
PROJECT DISCOVERY, INC.
By:
-------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
PAXSON COMMUNICATIONS CORPORATION
By: /s/ William L.Watson
-------------------------------------------
Name: WILLIAM L. WATSON
----------------------------------------
Title: SECRETARY
---------------------------------------
DISCOVERY COMMUNICATIONS, INC.
By:
-------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
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<PAGE> 1
Exhibit 10.192
GUARANTY AGREEMENT
-------------------
Guaranty Agreement, dated as of November 24, 1997 (this "Guaranty"),
made by Discovery Communications, Inc., a Delaware close corporation
("Guarantor"), in favor of Travel Channel Acquisition Corporation, a Delaware
corporation ("TCAC").
A. Reference is hereby made to that certain Limited Liability Company
Agreement, dated as of November 24, 1997 (the "LLC Agreement"), of THE TRAVEL
CHANNEL, L.L.C. (the "LLC"), between Project Discovery, Inc., a Delaware
corporation and a wholly owned subsidiary of Guarantor ("PDI") and TCAC.
B. Capitalized terms used herein which are defined in the LLC
Agreement shall have the same meanings when used herein as therein defined.
In order to induce TCAC to enter into the LLC Agreement, Guarantor
hereby agrees to and in favor of TCAC as follows:
1. GUARANTY. Guarantor hereby covenants and agrees that, if
there shall be filed in respect of the LLC a certificate of dissolution at any
time prior to the two year anniversary of the Effective Date (such two year
period, the "Guaranty Period"), Guarantor shall pay to TCAC, upon complete
liquidation of the LLC, the amount (the "Guarantied Amount"), if any, equal to
the difference between (x) that amount which TCAC would have received upon
liquidation had the initial Capital Account of TCAC been $55,000,000 and the
initial Capital Account of PDI been $20,000,000, and (y) the aggregate amount
actually received by TCAC in respect of the liquidation of the LLC; provided
however, that in no event shall Guarantor be obligated to pay to TCAC pursuant
to this Guaranty in excess of the aggregate amount actually received by PDI in
respect of such liquidation less the amount PDI would have so received had PDI's
initial Capital Account been $20,000,000.
2. TERMS OF PAYMENT. Any amounts that become due in accordance
with the terms of this Guaranty shall be promptly paid to TCAC not later than
10 business days after the complete liquidation of the LLC and final
determination, in accordance with paragraph 3 below, of the Guarantied Amount.
3. DETERMINATION OF GUARANTIED AMOUNT. Upon complete
liquidation of the LLC, the parties hereto shall calculate the Guarantied
Amount. In the event that the calculation of the parties as to such amount
are different, the parties shall attempt to recalculate and agree upon the
same.
<PAGE> 2
4. AMENDMENTS; WAIVERS. Neither this Guaranty nor any provision
hereof may be amended, modified, waived, discharged (except by payment of the
Guarantied Amount, if any) or terminated except by an instrument in writing
duly signed by or on behalf of TCAC and the Guarantor.
5. NOTICES. All notices, demands or other communications required
or desirable to be given pursuant to the provisions of this Guaranty shall be
in writing and shall be deemed to be properly served if delivered in accordance
with the terms of the LLC Agreement. For purposes of notices, demands or other
communications the address of the parties shall be as provided in the LLC
Agreement, at the address set forth herein below such entity's signature line,
provided that any party shall have the right to change its address for notice
hereunder to any other location within the continental United States by the
giving of fifteen (15) days notice to the other parties in the manner set
forth herein.
6. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO ITS PROVISIONS RELATING TO CONFLICTS OR CHOICE OF LAW.
7. JURISDICTION. The parties hereto agree that any legal action,
suit or proceeding against it with respect to its obligations and liabilities
under this Guaranty or any other matter under or arising out of or in connection
with this Guaranty, or for recognition or enforcement of any judgment rendered
in any such action, suit or proceeding may be brought in the State of Maryland.
8. HEADINGS. Section headings used herein are for convenience of
reference only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Guaranty.
<PAGE> 3
9. COMPLETE AGREEMENT. This Guaranty contains a complete statement
of all arrangements among the parties with respect to the subject matter hereof
and supersedes any previous agreements, written or oral, between them
concerning its subject matter, all of which are merged into this Guaranty.
10. COUNTERPARTS. The parties may sign this Guaranty in
counterparts, all of which shall be considered one and the same instrument.
<PAGE> 4
11. TERM OF GUARANTY. The guaranty of Guarantor hereunder shall
terminate on and as of the last day of the Guaranty Period unless, during the
Guaranty Period, there shall have been filed in respect of the LLC a certificate
of dissolution.
DISCOVERY COMMUNICATIONS, INC.
By:
----------------------
Name:
Title:
TRAVEL CHANNEL ACQUISITION CORPORATION
By: /s/ William L. Watson
-----------------------
Name: WILLIAM L. WATSON
Title: SECRETARY
<PAGE> 1
Exhibit 10.193
ASSET EXCHANGE AGREEMENT
THIS ASSET EXCHANGE AGREEMENT (this "Agreement") is entered into as of
this 26th day of January, 1998, by and among PAXSON COMMUNICATIONS OF
CHICAGO-38, INC., a Florida corporation ("Paxson-38"), CHRISTIAN COMMUNICATIONS
OF CHICAGOLAND, INC., an Illinois corporation ("Christian"), and PAXSON
COMMUNICATIONS CORPORATION, a Delaware corporation ("PCC").
RECITALS
A. Christian owns and operates and is the licensee of television
station WCFC-TV, Chicago, Illinois ("WCFC").
B. Cocola Media Corporation of San Francisco, a California
corporation ("Cocola Media"), and North Bay Television, Inc., a California
corporation ("North Bay"), are parties to:
(1) an Option Agreement dated as of April 30, 1996 (the "KWOK
Option Agreement"), pursuant to which North Bay has granted to Cocola
Media an exclusive and irrevocable option (the "KWOK Option") to
purchase substantially all of the assets of North Bay that are used or
useful in connection with the conduct of the business or operations of
new television station KWOK-TV to be constructed on Channel 68 in
Novato, California ("KWOK") on the terms and subject to the conditions
set forth in the KWOK Option Agreement and the form of Asset Purchase
Agreement attached thereto (the "North Bay Purchase Agreement");
(2) a Construction Agreement dated as of April 30, 1996,
pursuant to which North Bay has retained Cocola Media to construct KWOK
(the "Construction Agreement");
(3) a Time Brokerage Agreement dated as of April 30, 1996,
pursuant to which North Bay has retained Cocola Media to provide
programming for broadcast on KWOK (the "Cocola KWOK TBA"); and
(4) a Loan Agreement dated as of April 30, 1996, pursuant to
which Cocola Media has loaned to North Bay $500,000 for capital
advances to and other corporate purposes of North Bay.
C. Paxson-38 and Gary M. Cocola ("Cocola") have entered into a Stock
Purchase Agreement dated as of January 21, 1998 (the "Cocola Stock Purchase
Agreement"), pursuant to which Cocola has agreed to sell to Paxson-38, and
Paxson-38 has agreed to purchase from
<PAGE> 2
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Cocola, all of the issued and outstanding shares of capital stock of Cocola
Media (the "Cocola Stock").
D. On the terms, and subject to the conditions set forth herein,
Paxson-38 desires to (1) cause Cocola Media to transfer to Christian certain
assets of KWOK, immediately following and subject to the closing of the purchase
and sale transactions contemplated by the North Bay Purchase Agreement, and (2)
pay to Christian a total of One Hundred Twenty Million Dollars ($120,000,000) in
cash, in exchange for certain assets of WCFC, and Christian desires to transfer
to Paxson-38 certain assets of WCFC in exchange for certain assets of KWOK and a
total of One Hundred Twenty Million Dollars ($120,000,000) in cash.
E. Upon the consummation of the transactions contemplated by this
Agreement and in consideration therefor, Paxson-38 and Christian shall enter
into a Programming Agreement (the "Programming Agreement"), pursuant to which,
on the terms and subject to the conditions set forth therein, Paxson-38 shall
grant to Christian certain rights to provide programming for broadcast on WCFC
and PAX NET, PCC's national television network.
In consideration of the mutual covenants and agreements set forth
herein, and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions.
"Adjustment Time" means 12:01 a.m., local time, on the Closing Date.
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning 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 or voting interests,
by contract or otherwise.
"Agreement" has the meaning specified in the Preamble.
"Assets" means the WCFC Assets, in the case of Assets owned or held by
Christian, and the KWOK Assets, in the case of Assets owned or held by Cocola
Media or North Bay.
<PAGE> 3
- 3 -
"Assignment and Assumption of FCC Licenses" has the meaning specified
in Section 3.2(c).
"Assumed KWOK Liabilities" has the meaning specified in Section 2.2(b).
"Assumed WCFC Liabilities" has the meaning specified in Section 2.2(a).
"Assumption Agreement" has the meaning specified in Section 3.2(b).
"Cash Consideration" has the meaning specified in Section 2.1(b).
"Christian" has the meaning specified in the Preamble.
"Christian Ancillary Documents" means the documents, other than this
Agreement, to be executed and delivered by Christian in connection with the
transactions contemplated by this Agreement, including pursuant to Article 9 of
this Agreement.
"Christian Material Consents" means those consents referenced in
Schedule 4.3 that are designated with an asterisk.
"Christian Termination Notice" has the meaning specified in Section
11.14.
"Claims" means any and all debts, liabilities, obligations, losses,
damages, deficiencies, assessments and penalties, together with all Legal
Actions, pending or threatened, claims and judgments of whatever kind and nature
relating thereto, and all fees, costs, expenses and disbursements (including
without limitation reasonable attorneys' and other legal fees, costs and
expenses) relating to any of the foregoing.
"Closing" has the meaning specified in Section 3.1.
"Closing Date" has the meaning specified in Section 3.1.
"Cocola" has the meaning specified in the Recitals.
"Cocola KWOK TBA" has the meaning specified in the Recitals.
"Cocola Media" has the meaning specified in the Recitals.
"Cocola Stock" has the meaning specified in the Recitals.
"Cocola Stock Purchase Agreement" has the meaning specified in the
Recitals.
<PAGE> 4
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"Code" means the Internal Revenue Code of 1986, as amended.
"Construction Agreement" has the meaning specified in the Recitals.
"DOJ" means the Antitrust Division of the United States Department of
Justice.
"DP Media" has the meaning specified in Section 5.14.
"Encumbrance" means any claim, liability, security interest, mortgage,
lien, pledge, condition, charge or encumbrance of any nature whatsoever.
"ERISA" has the meaning specified in Section 4.11.
"Escrow Agent" means First Union National Bank.
"Escrow Agreement" means the Escrow Agreement dated as of the date
hereof among Paxson-38, Christian and the Escrow Agent.
"Escrow Deposit" means the sum of Ten Million Dollars ($10,000,000)
deposited on the date hereof by Paxson-38 with the Escrow Agent pursuant to the
terms of the Escrow Agreement.
"Excluded KWOK Assets" has the meaning specified in Section 2.1(d).
"Excluded WCFC Assets" has the meaning specified in Section 2.1(c).
"FCC" means the Federal Communications Commission.
"FCC Consent" means actions by the FCC granting both the WCFC FCC
Consent and the KWOK FCC Consent.
"Final Order" means an action or order by the FCC (a) that has not been
reversed, stayed, enjoined, set aside, annulled or suspended, and (b) with
respect to which (i) no requests have been filed for administrative or judicial
review, reconsideration, appeal or stay and the FCC has not initiated a review
of such action or order on its own motion and the periods provided by statute or
FCC regulations for filing any such requests and for the FCC to set aside the
action on its own motion have expired, or (ii) in the event of review,
reconsideration or appeal, the period provided by statute or FCC regulations for
further review, reconsideration or appeal has expired.
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"Final Report" has the meaning specified in Section 2.3(d).
"FTC" means the United States Federal Trade Commission.
"Governmental Authority" means (i) the United States of America, (ii)
any state or commonwealth of the United States of America and any political
subdivision thereof (including counties, municipalities and the like) or (iii)
any agency, authority or instrumentality of any of the foregoing, including any
court, tribunal, department, bureau, commission or board.
"Guaranteed Obligations" has the meaning specified in Section 12.1.
"Guaranty" has the meaning specified in Section 12.1.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnified Party" has the meaning specified in Section 10.2.
"Indemnifying Party" has the meaning specified in Section 10.2.
"Indemnity Period" has the meaning specified in Section 10.1.
"KWOK" has the meaning specified in the Recitals.
"KWOK Assets" has the meaning specified in Section 2.1(d).
"KWOK Contracts" means all of the contracts and agreements relating to
the business or operations of KWOK that are listed on Schedule 2.1(d)(iii).
"KWOK FCC Consent" means action by the FCC granting its consent to the
assignment of the KWOK FCC Licenses by North Bay to Cocola Media and,
immediately thereafter, by Cocola Media to Christian or, alternately, by North
Bay directly to Christian.
"KWOK FCC Licenses" means those licenses, permits and authorizations
issued by the FCC to North Bay for KWOK as set forth in Schedule 2.1(d)(ii).
"KWOK Intangibles" means (i) the call letters "KWOK", (ii) all
proprietary information, technical information and data, machinery and equipment
warranties relating to the KWOK Assets, (iii) all books and records in the
possession of Cocola Media or North
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Bay relating to the operations of KWOK or the KWOK Assets (other than corporate
and accounting records), (iv) all choses in action relating to the KWOK Assets,
(v) all records, logs and other information in the possession of Cocola Media or
North Bay that North Bay or Cocola Media is required to maintain under the rules
and policies of the FCC, and (vi) all filings by North Bay or Cocola Media with
the FCC with respect to KWOK, together with any additions thereto between the
date of this Agreement and the Closing Date.
"KWOK Licenses" means all licenses, permits and other authorizations
issued by any Governmental Authority to Cocola Media or North Bay in connection
with the conduct of the business or operations of KWOK, together with any
additions thereto between the date of this Agreement and the Closing Date.
"KWOK Material Adverse Effect" means any events or circumstances that
would result in loss, liability or damages in respect of the KWOK Assets in an
amount in the aggregate in excess of $250,000.
"KWOK Option" has the meaning specified in the Recitals.
"KWOK Option Agreement" has the meaning specified in the Recitals.
"KWOK Programming Agreement" means the KWOK Programming Agreement to be
entered into by Cocola Media and Christian pursuant to Section 6.16 hereof,
which KWOK Programming Agreement shall be substantially in the form of Exhibit H
hereto.
"KWOK Services Agreement" has the meaning specified in Section 6.17.
"KWOK Tangible Personal Property" means those items of equipment, spare
parts and other tangible personal property that are listed on Schedule 2.1(d)(i)
hereto, together with any additions thereto or replacements thereof between the
date of this Agreement and the Closing Date.
"Legal Action" means, with respect to any Person, any and all
litigation or legal or other actions, at law or in equity, arbitrations,
counterclaims, investigations, proceedings, or requests for material information
by or pursuant to the order of any Governmental Authority.
"Loss and Expense" has the meaning specified in Section 10.2.
"Marin TV" has the meaning specified in Section 5.12.
"MVP" means Media Venture Partners.
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"North Bay" has the meaning specified in the Recitals.
"North Bay Purchase Agreement" has the meaning specified in the
Recitals.
"Paxson-38" has the meaning specified in the Preamble.
"Paxson-38 Ancillary Documents" means the documents, other than this
Agreement, to be executed and delivered by Paxson-38 in connection with the
transactions contemplated by this Agreement, including pursuant to Article 8 of
this Agreement.
"Paxson-38 Material Consents" means those consents referenced in
Schedule 5.3 that are designated with an asterisk.
"Paxson-38 Termination Notice" has the meaning specified in Section
11.14.
"Paxson Milwaukee" has the meaning specified in Section 5.14.
"PCC" has the meaning specified in the Preamble.
"Permitted Encumbrances" means (a) liens for taxes not yet due and
payable; (b) landlord's liens; (c) statutory liens that were created in the
ordinary course of business that do not adversely affect the current use and
enjoyment of the WCFC Assets or the KWOK Assets, as the case may be; (d)
restrictions or rights required to be granted to Governmental Authorities or
otherwise imposed by Governmental Authorities under applicable law that do not
materially affect the current use and enjoyment of the WCFC Assets or the KWOK
Assets, as the case may be; (e) zoning, building, or similar restrictions
relating to or affecting property that do not adversely affect in any material
respect the current use and enjoyment of the WCFC Assets or the KWOK Assets, as
the case may be; and (f) the Assumed WCFC Liabilities and the Assumed KWOK
Liabilities, as the case may be. Notwithstanding the foregoing, "Permitted
Encumbrances" shall not include any mortgage, encumbrance to secure debt, deed
of trust, security agreement, judgment, lien or statutory claim of lien or any
other title exception or defect that is monetary in nature, except to the extent
otherwise specifically assumed under this Agreement.
"Person" means any natural person, corporation, partnership, trust,
unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
"Petition Deadline" has the meaning specified in Section 11.1.
"Preliminary Report" has the meaning specified in Section 2.3(c).
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"Programming Agreement" has the meaning specified in the Recitals.
"Records" has the meaning specified in Section 6.8.
"Signing Date" has the meaning specified in Section 11.14.
"Tax" means any federal, state, local or foreign income, gross
receipts, windfall profits, severance, property, production, sales, use,
license, excise, franchise, capital, transfer, employment, withholding or other
tax or governmental assessment, together with any interest, additions or
penalties with respect thereto and any interest in respect of such additions or
penalties.
"Tax Returns" means, with respect to Christian and Paxson-38, all
federal, state and local tax returns, reports, statements, declarations of
estimated tax and other similar filings required to be filed by Christian or
Paxson-38, as the case may be, with respect to the ownership and operation of
WCFC or KWOK, respectively.
"Termination Date" has the meaning specified in Section 11.2(a).
"Transfer" has the meaning specified in Section 6.1.
"Transferee" refers equally to Christian and Paxson-38 insofar as the
term refers to the party receiving assets from the other party.
"Transferor" refers equally to Christian and Paxson-38 insofar as the
term refers to the party transferring assets to the other party.
"WCFC" has the meaning specified in the Recitals.
"WCFC Assets" has the meaning specified in Section 2.1(c).
"WCFC Contracts" means all of the contracts and agreements relating to
the business or operations of WCFC that are listed on Schedule 2.1(c)(iii).
"WCFC FCC Consent" means action by the FCC granting its consent to the
assignment of the WCFC FCC Licenses by Christian to Paxson-38 in connection with
the transfer of the WCFC Assets to Paxson-38.
"WCFC FCC Licenses" means those licenses, permits and authorizations
issued by the FCC to Christian for WCFC as set forth in Schedule 2.1(c)(ii).
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"WCFC Intangibles" means (i) the call letters "WCFC", unless retained
by Christian pursuant to Section 6.14 hereof, (ii) all proprietary information,
technical information and data, machinery and equipment warranties relating to
the WCFC Assets, (iii) all books and records in the possession of Christian
relating to the operation of WCFC or the WCFC Assets (other than corporate and
accounting records), (iv) all choses in action relating to the WCFC Assets, (v)
all records, logs and other information in the possession of Christian that
Christian is required to maintain under the rules and policies of the FCC, and
(vi) all filings by Christian with the FCC, together with any additions thereto
between the date of this Agreement and the Closing Date.
"WCFC Licenses" means all licenses, permits and other authorizations
issued by any Governmental Authority to Christian in connection with the conduct
of the business or operations of WCFC, together with any additions thereto
between the date of this Agreement and the Closing Date.
"WCFC Material Adverse Effect" means any events or circumstances that
would result in loss, liability or damages in respect of the WCFC Assets in an
amount in the aggregate in excess of $250,000.
"WCFC Oppositions" has the meaning specified in Section 11.1.
"WCFC Tangible Personal Property" means those items of equipment, spare
parts and other tangible personal property that are listed on Schedule 2.1(c)(i)
hereto, together with any additions thereto or replacements thereof between the
date of this Agreement and the Closing Date.
"WPXE" has the meaning specified in Section 5.14.
"WPXE FCC Licenses" has the meaning specified in Section 6.3.
"WPXE Purchase Agreement" has the meaning specified in Section 5.14.
<PAGE> 10
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ARTICLE 2
EXCHANGE AND TRANSFER OF ASSETS
2.1 The Exchange; Additional Consideration.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, on the Closing Date, Christian agrees to transfer, assign,
convey and deliver to Paxson-38, and Paxson-38 agrees to accept and acquire from
Christian, free and clear of all Encumbrances, except for Permitted
Encumbrances, all of Christian's right, title and interest in and to the WCFC
Assets, and, subject to Section 6.19, Paxson-38 agrees to cause Cocola Media to
transfer, assign, convey and deliver to Christian, and Christian agrees to
accept and acquire from Cocola Media, free and clear of all Encumbrances, except
for Permitted Encumbrances, all of Cocola Media's right, title and interest in
and to the KWOK Assets.
(b) In addition to the consideration referenced in Section
2.1(a), Paxson-38 shall pay to Christian at Closing a total of One Hundred
Twenty Million Dollars ($120,000,000) (the "Cash Consideration"), less the
amount, if any, paid to Christian pursuant to Section 11.1(a) below, in cash by
federal wire transfer of immediately available funds in accordance with wire
transfer instructions provided by Christian to Paxson-38 in writing no later
than August 25, 1998.
(c) "WCFC Assets" means (i) the WCFC Tangible Personal
Property, (ii) the WCFC Licenses, including the WCFC FCC Licenses, (iii) the
WCFC Contracts, and (iv) the WCFC Intangibles. All other assets of Christian are
specifically excluded from the WCFC Assets (the "Excluded WCFC Assets").
(d) "KWOK Assets" means (i) the KWOK Tangible Personal
Property, (ii) the KWOK Licenses, including the KWOK FCC Licenses, (iii) the
KWOK Contracts, and (iv) the KWOK Intangibles. All other assets of Paxson-38,
Cocola Media and North Bay are specifically excluded from the KWOK Assets (the
"Excluded KWOK Assets").
2.2 Assumption of Obligations and Liabilities.
(a) As of, and from and after, the Closing Date, Paxson-38
shall assume, pay, discharge and perform the following (the "Assumed WCFC
Liabilities"):
(i) all obligations and liabilities of or under the
WCFC Contracts and WCFC Licenses arising on or after the Closing;
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(ii) all obligations and liabilities of Christian to the
extent that any adjustment is made or is to be made in connection therewith in
Paxson-38's favor pursuant to Section 2.3 hereof; and
(iii) except in respect of Excluded WCFC Assets, all other
obligations, liabilities, duties, claims, demands, actions, commitments, costs
or expenses, known or unknown, matured or contingent, arising out of, relating
to or attributable to the ownership or operation of the WCFC Assets arising on
or after the Closing.
Notwithstanding the foregoing, the Assumed WCFC Liabilities shall not include
the following, and Paxson-38 shall not assume any of the following:
(1) any liabilities or obligations for federal, state or local income or
franchise taxes of Christian, including, without limitation, deferred taxes or
those arising out of any of the transactions contemplated hereby;
(2) any liabilities or obligations for any brokerage or finder's fees or similar
compensation incurred by Christian or its Affiliates with respect to any of the
transactions contemplated by this Agreement or the Christian Ancillary
Documents;
(3) any liabilities or obligations for any indebtedness for borrowed money of
Christian under any loan agreement, credit agreement, indenture, evidence of
indebtedness or similar document or under any capital lease, financing agreement
or other agreement constituting deferred purchase price for any of the WCFC
Assets;
(4) any liabilities or obligations attributable to Excluded WCFC Assets and any
intercompany liabilities or payables of any nature whatsoever of Christian or
any of its Affiliates; and
(5) any obligation or liability of Christian under any employee pension,
retirement, health and welfare or other benefit plan or collective bargaining
agreement, or any obligation of Christian to any employee for severance
benefits, vacation time or sick leave accrued prior to the Closing Date.
(b) As of, and from and after, the Closing Date, subject to
Section 6.19, Christian shall assume, pay, discharge and perform the following
(the "Assumed KWOK Liabilities"):
(i) all obligations and liabilities of or under the KWOK
Contracts and KWOK Licenses arising on or after the Closing;
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(ii) all obligations and liabilities of Cocola Media to
the extent that any adjustment is made or is to be made in connection therewith
in Christian's favor pursuant to Section 2.3 hereof; and
(iii) except in respect of Excluded KWOK Assets, all other
obligations, liabilities, duties, claims, demands, actions, commitments, costs
or expenses, known or unknown, matured or contingent, arising out of, relating
to or attributable to the ownership or operation of the KWOK Assets arising on
or after the Closing.
Notwithstanding the foregoing, the Assumed KWOK Liabilities shall not include
the following, and Christian shall not assume any of the following:
(1) any liabilities or obligations for federal, state or local income or
franchise taxes of Paxson-38, Cocola Media or North Bay, including, without
limitation, deferred taxes or those arising out of any of the transactions
contemplated hereby;
(2) any liabilities or obligations for any brokerage or finder's fees or similar
compensation incurred by Paxson-38 or its Affiliates with respect to any of the
transactions contemplated by this Agreement or the Paxson-38 Ancillary
Documents;
(3) any liabilities or obligations for any indebtedness for borrowed money of
Paxson-38, Cocola Media or North Bay under any loan agreement, credit agreement,
indenture, evidence of indebtedness or similar document or under any capital
lease, financing agreement or other agreement constituting deferred purchase
price for any of the KWOK Assets;
(4) any liabilities or obligations attributable to Excluded KWOK Assets and any
intercompany liabilities or payables of any nature whatsoever of Paxson-38,
Cocola Media or North Bay or any of its Affiliates; and
(5) any obligation or liability of Paxson-38, Cocola Media or North Bay under
any employee pension, retirement, health and welfare or other benefit plan or
collective bargaining agreement, or any obligation of Paxson-38, Cocola Media or
North Bay to any employee for severance benefits, vacation time or sick leave
accrued prior to the Closing Date.
2.3 Prorations and Adjustments to Cash Consideration.
(a) All items of income and expense relating to the ownership
or operation of the WCFC Assets shall be prorated between Christian and
Paxson-38, in each case, as of
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the Adjustment Time, with Christian responsible for any such items prior to the
Closing Date and Paxson-38 responsible for any such items from and after the
Adjustment Time. Notwithstanding the preceding sentence, there shall be no
adjustment for, and Christian shall remain solely liable with respect to, any
obligation or liability not being assumed by Paxson- 38 pursuant to Section
2.2(a).
(b) All items of income and expense relating to the ownership
or operation of the KWOK Assets shall be prorated between Christian and Cocola
Media, in each case, as of the Adjustment Time, subject to Section 6.19, with
Cocola Media responsible for any such items prior to the Closing Date and
Christian responsible for any such items from and after the Adjustment Time.
Notwithstanding the preceding sentence, there shall be no adjustment for, and
Cocola Media shall remain solely liable with respect to, any obligation or
liability not being assumed by Christian pursuant to Section 2.2(b).
(c) At least five business days prior to the Closing,
Transferor will deliver to Transferee a preliminary settlement statement with
respect to the WCFC Assets or the KWOK Assets, as the case may be (the
"Preliminary Report"), certified as to completeness and accuracy by an officer
of Transferor (but without personal liability to such officer), showing in
detail the preliminary determination of the prorations referred to in Sections
2.3(a) and (b) that can be determined or estimated on the date of the
Preliminary Report, which are calculated in accordance with such Sections
together with any documents substantiating the determination of the adjustments
to the Cash Consideration proposed in the Preliminary Report. The net adjustment
shown in the Preliminary Reports will be reflected as an adjustment to the Cash
Consideration payable at the Closing.
(d) Within 60 days after the Closing, Transferor will deliver
to Transferee a statement with respect to the WCFC Assets or the KWOK Assets, as
the case may be (the "Final Report"), similarly certified by an officer of
Transferor (but without personal liability to such officer), showing in detail
the final determination of any prorations or adjustments which were not
calculated as of the Closing Date and containing any corrections to the
Preliminary Report, together with any documents substantiating the final
calculation of the prorations or adjustments proposed in the Final Report.
Transferee will provide Transferor with reasonable access to all records which
Transferee has in its possession and which are necessary for Transferor to
prepare the Final Report.
(e) Within 30 days after receipt of the Final Report, each
Transferee will give each Transferor written notice of such Transferee's
objections, if any, to the other's Final Report. If there are no objections to
the Final Reports, the net amount of any adjustments to the Cash Consideration
paid at Closing reflected in the Final Reports shall be promptly paid by the
appropriate party. If there are objections to either Final Report, the
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parties shall use good faith efforts to jointly resolve the objections within 30
days of Transferor's receipt of Transferee's written notice of objections, which
resolution, if achieved, shall be binding upon both parties to this Agreement
and not be subject to dispute or review. If the parties cannot resolve the
discrepancies to their mutual satisfaction within such 30-day period, the
parties shall, within the following 10 days, jointly designate a national
independent public accounting firm to be retained to review the Final Reports
together with the notice(s) of objections and any other relevant documents. The
parties agree that the foregoing independent public accounting firm shall not be
one that is regularly engaged by either party or its Affiliates. The cost of
retaining such independent public accounting firm shall be borne equally by the
parties. Such firm shall report its conclusions as to adjustments pursuant to
this Section 2.3(e) which shall be conclusive on all parties to this Agreement
and not be subject to dispute or review. If, after resolution of the Final
Reports, an additional adjustment to the Cash Consideration is appropriate with
respect to the amount of the adjustments paid or credited at the Closing, the
appropriate party shall promptly pay such amount.
(f) Nothing contained in this Section 2.3 is intended or shall be
deemed to amend or modify the indemnification provisions of Article 10 or to
reallocate responsibility for the matters set forth therein.
ARTICLE 3
THE CLOSING
3.1 Time and Place of Closing. Subject to (a) the requirements of
Section 6.19, (b) satisfaction or, to the extent permissible by law, waiver (by
the party for whose benefit the closing condition is imposed), on the Closing
Date of the closing conditions described in Articles 7, 8 and 9, and (c) the
provisions of Section 11.2 hereof, the closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Dow, Lohnes
& Albertson, PLLC, 1200 New Hampshire Avenue, N.W., Washington, D.C. or at such
other place as the parties shall mutually agree, at 10:00 a.m., local time, on
August 28, 1998 (the "Closing Date"). Notwithstanding the foregoing, but subject
to the provisions of Section 11.2, to the extent that on the date otherwise
scheduled for Closing hereunder, any of the conditions precedent set forth in
Sections 7.1, 7.2, 8.4, 8.10 (subject to Section 6.19), 9.4 and 9.10 are not
satisfied (other than as the result of a permanent, final, non-appealable
injunction prohibiting the consummation of this Agreement), the Closing Date
shall be postponed to a date reasonably agreed to by Christian and Paxson-38
that is not more than five (5) business days after the date on which the
circumstances preventing such conditions from being satisfied are no longer
applicable. In the event any material loss or damage of the Assets exists on the
Closing Date, then, notwithstanding any other provision
<PAGE> 15
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of this Agreement, the Transferee at its option may extend the Closing Date for
a period of up to sixty (60) days until such time as the Transferor shall have
repaired, replaced and restored any such damaged or lost Asset substantially to
its prior condition. Alternatively, at the request of the Transferee, the
Transferor shall assign to the Transferee the insurance proceeds and pay to the
Transferee the applicable deductible relating to the loss or damage and
consummate the transactions contemplated hereby on the Closing Date.
3.2 Deliveries by Christian. At the Closing, Christian shall deliver,
or cause to be delivered, to Paxson-38 the following:
(a) Bills of sale of personal property, assignments and other
instruments of transfer and conveyance duly executed by Christian, transferring
and assigning to Paxson-38 the WCFC Assets, free and clear of all Encumbrances,
other than Permitted Encumbrances;
(b) An Assignment and Assumption of Contracts substantially in the
form of Exhibit A-1 attached hereto (the "Assumption Agreement") duly executed
by Christian;
(c) An Assignment and Assumption of FCC Licenses substantially in
the form of Exhibit A-2 attached hereto (the "Assignment and Assumption of FCC
Licenses") duly executed by Christian;
(d) A Programming Agreement substantially in the form of Exhibit B
attached hereto (the "Programming Agreement") duly executed by Christian;
(e) The opinions, certificates, consents and other documents
contemplated by Article 9 hereof; and
(f) The Christian Material Consents and any other consents
received by Christian.
3.3 Deliveries by Paxson-38. At the Closing, subject to Section 6.19,
Paxson-38 shall deliver, or cause to be delivered, to Christian the following:
(a) Bills of sale of personal property, assignments and other
instruments of transfer and conveyance duly executed by Cocola Media,
transferring and assigning to Christian the KWOK Assets, free and clear of all
Encumbrances, other than Permitted Encumbrances;
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(b) The Assumption Agreement (with respect to the KWOK Contracts),
duly executed by Cocola Media, and the Assumption Agreement (with respect to the
WCFC Contracts), duly executed by Paxson-38;
(c) The Assignment and Assumption of FCC Licenses (with respect to
the KWOK FCC Licenses), duly executed by Cocola Media, and the Assignment and
Assumption of FCC Licenses (with respect to the WCFC FCC Licenses), duly
executed by Paxson-38;
(d) The Programming Agreement duly executed by PCC and Paxson-38;
(e) The opinions, certificates and other documents contemplated by
Article 8 hereof; and
(f) The Paxson-38 Material Consents and any other consents
received by Paxson-38 or Cocola Media.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF CHRISTIAN
Christian hereby represents and warrants to Paxson-38 as follows:
4.1 Organization. Christian is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Illinois. Christian
has the requisite corporate power and authority to carry on its business as it
is now being conducted.
4.2 Authority Relative to this Agreement. Christian has the necessary
corporate power and authority to execute and deliver this Agreement and the
Christian Ancillary Documents and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the
Christian Ancillary Documents, and the consummation of the transactions
contemplated hereby and thereby by Christian, have been duly and validly
authorized and approved by all necessary corporate action by Christian. This
Agreement and each of the Christian Ancillary Documents (when executed) have
been duly and validly executed and delivered by Christian and, assuming the due
authorization, execution and delivery by Paxson-38, constitute valid and binding
agreements, enforceable against Christian in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and to general principles of equity.
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4.3 Noncontravention; Consents and Approvals.
(a) Except as set forth in Schedule 4.3, assuming that all
filings, permits, authorizations, consents and approvals or waivers thereof have
been duly made or obtained pursuant to Section 4.3(b), the execution and
delivery of this Agreement and the Christian Ancillary Documents by Christian
and the consummation by Christian of the transactions contemplated hereby and
thereby will not (i) conflict with or violate any provisions of the articles of
incorporation or bylaws of Christian,(ii) violate any statute, ordinance, rule,
regulation, order, judgment or decree applicable to Christian or by which
Christian or any of the WCFC Assets may be bound or affected (assuming the
compliance therewith of Paxson- 38), or (iii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any Encumbrance on
any of the WCFC Assets pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Christian is a party or by which it or any of the WCFC
Assets are bound or affected, excluding from the foregoing clauses (ii) and
(iii) violations, breaches or defaults that would not, individually or in the
aggregate, have a WCFC Material Adverse Effect.
(b) No consent, waiver, license, approval, authorization,
order or permit or registration or filing with or notification to any
governmental entity or other third party is necessary for the execution and
delivery of this Agreement and the Christian Ancillary Documents by Christian or
the consummation by Christian of the transactions contemplated by this Agreement
and the Christian Ancillary Documents or the compliance by Christian with any
provision of this Agreement and the Christian Ancillary Documents, except (i)
the FCC Consent, (ii) filings with respect to sales and other transfer taxes,
(iii) such filings as may be required under the HSR Act, (iv) such filings,
registrations, notifications, permits, authorizations, consents or approvals
that result solely from specific legal or regulatory status of Paxson-38 or as a
result of any other facts that specifically relate to the business or activities
in which Paxson-38 is engaged, and (v) the consent of or notice to each party
identified on Schedule 4.3.
4.4 Litigation. Except as set forth in Schedule 4.4, there are no
legal, administrative, arbitration or other proceedings or governmental
investigations pending or, to the knowledge of Christian, threatened, against or
affecting the WCFC Assets.
4.5 Taxes. To the knowledge of Christian, Christian has duly filed
all Tax Returns, including extensions (including, but not limited to, those
filed on a consolidated, combined or unitary basis), required to have been filed
by it prior to the date hereof.
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Christian has paid or, prior to the Adjustment Time will pay, all Taxes shown on
such Tax Returns as being due or (except to the extent the same are contested in
good faith) claimed to be due any federal, state, local or other taxing
authority, and, except as set forth in Schedule 4.5, Christian has not received
any notice of the assessment or proposed assessment of any additional Taxes.
4.6 Tangible Personal Property. Christian has good title to the WCFC
Tangible Personal Property, and as of the Closing Date none of the WCFC Tangible
Personal Property will be subject to any Encumbrance, except for Permitted
Encumbrances. The WCFC Tangible Personal Property is in reasonable operating
condition and repair (subject to normal wear and tear), and is available for
immediate use in the conduct of the business or operations of WCFC, except for
that which is subject to routine maintenance or repair. All items of WCFC
Tangible Personal Property (i) have been maintained in a manner consistent in
all material respects with generally accepted standards of good engineering
practice and (ii) will permit Paxson-38 to operate WCFC in all material respects
in accordance with the terms of the WCFC FCC Licenses.
4.7 Compliance with Laws. The business and operations of Christian with
respect to WCFC are not being conducted in violation of any law, ordinance or
regulation of any Governmental Authority, except for possible violations which,
individually or in the aggregate, would not have a WCFC Material Adverse Effect.
4.8 FCC Licenses. Schedule 2.1(c)(ii) accurately and completely lists
all WCFC FCC Licenses and all material WCFC Licenses issued by Governmental
Authorities other than the FCC. Except as set forth on Schedule 2.1(c)(ii), all
of the WCFC FCC Licenses have been validly issued pursuant to Final Orders, are
in full force and effect and Christian has fulfilled and performed all of its
obligations with respect thereto in all material respects and has full power and
authority to operate thereunder. Christian holds all WCFC FCC licenses necessary
to enable Christian to conduct the business and operations of WCFC in all
material respects as currently conducted. Except as set forth in Schedule
2.1(c)(ii), (i) none of the WCFC FCC Licenses is subject to any restriction or
condition that would limit the full operation of WCFC as now conducted, and (ii)
Christian has no reason to believe that any of the WCFC FCC Licenses would not
be renewed by the FCC in the ordinary course. True and complete copies of the
WCFC FCC Licenses are attached to Schedule 2.1(c)(ii). Except as set forth on
Schedule 2.1(c)(ii), on or before October 1, 1996, Christian made a valid
election of must carry with respect to each cable system located within WCFC's
Area of Dominant Influence, no cable system has advised Christian of any signal
quality or copyright indemnity or other prerequisite to cable carriage of WCFC's
signal, and no cable system has declined or threatened to decline such carriage
or failed to respond to a request for carriage or sought any form of relief from
carriage from the FCC. All material returns, reports and
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statements that Christian is currently required to file with the FCC or with any
other Governmental Authority with respect to WCFC have been filed, and all
reporting requirements of the FCC and other Governmental Authorities with
respect to WCFC have been complied with in all material respects. All of such
returns, reports and statements are substantially complete and correct as filed.
Christian has timely paid to the FCC all annual regulatory fees payable by
Christian with respect to the WCFC FCC Licenses.
4.9 Brokers and Finders. Except as provided in Section 6.7 hereof,
neither Christian nor any of its officers, directors, partners or employees has
employed any broker or finder in connection with the transactions contemplated
by this Agreement or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated by this
Agreement.
4.10 Insurance. Schedule 4.10 is a true and complete list of all
insurance policies of Christian related to the WCFC Assets. All policies of
insurance listed in Schedule 4.10 are in full force and effect as of the date of
this Agreement.
4.11 Employee Benefit Liabilities. Neither Christian nor any entity
required to be combined with it (as determined under Internal Revenue Code
Sections 414(b), (c), (m), (n) or (o)) has incurred, or expects to incur as a
result of the consummation of the transactions contemplated under this
Agreement, any cost, fee, expense, liability, claim, suit, obligation, or other
damage with respect to any "employee benefit plan" (as defined in section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) or
any benefit arrangement not subject to ERISA that could give rise to the
imposition of any liability, cost, fee, expense, or obligation on Paxson-38 or
any of its Affiliates; and, to the knowledge of Christian, no facts or
circumstances exist that could give rise to any such cost, fee, expense,
liability, claim, suit, obligation, or other damage.
4.12 Contracts. All of the WCFC Contracts are valid and binding and, to
the knowledge of Christian, in full force and effect and legally enforceable in
accordance with their terms upon the other parties thereto. There is not under
any WCFC Contract any default by Christian or, to the knowledge of Christian,
any other party thereto or event which, after notice or lapse of time, or both,
would constitute a default, except for defaults which, individually or in the
aggregate, would not have a WCFC Material Adverse Effect.
4.13 Disclosure. To the knowledge of Christian, no statement of a
material fact by Christian contained in this Agreement, and all exhibits and
schedules related hereto, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein
or therein not misleading in light of the circumstances under which they were
made.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PAXSON-38
Paxson-38 hereby represents and warrants to Christian as follows:
5.1 Organization. Paxson-38 is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Florida.
Cocola Media is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of California. Paxson-38 and Cocola Media
each has the requisite corporate power and authority to carry on its respective
business as it is now being conducted.
5.2 Authority Relative to this Agreement. Paxson-38 has the
necessary corporate power and authority to execute and deliver this Agreement
and the Paxson-38 Ancillary Documents and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Paxson-38 Ancillary Documents, and the consummation of the transactions
contemplated hereby and thereby by Paxson-38, have been duly and validly
authorized and approved by all necessary corporate action by Paxson-38. This
Agreement and each of the Paxson-38 Ancillary Documents (when executed) have
been duly and validly executed and delivered by Paxson-38 and, assuming the due
authorization, execution and delivery by Christian, constitute its valid and
binding agreements, enforceable against Paxson-38 in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and to general principles of equity.
5.3 Noncontravention; Consents and Approvals.
(a) Except as set forth in Schedule 5.3, assuming that all
filings, permits, authorizations, consents and approvals or waivers thereof have
been duly made or obtained pursuant to Section 5.3(b), the execution and
delivery of this Agreement and the Paxson-38 Ancillary Documents by Paxson-38
and Cocola Media and the consummation by each of Paxson-38 and Cocola Media of
the transactions contemplated hereby and thereby will not (i) conflict with or
violate any provisions of its certificate of incorporation or bylaws, (ii)
violate any statute, ordinance, rule, regulation, order, judgment or decree
applicable to Paxson-38 or Cocola Media or by which Paxson-38 or Cocola Media or
any of the KWOK Assets may be bound or affected (assuming the compliance
therewith of Christian), or (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any Encumbrance on any of the KWOK
Assets
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pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Paxson-38
or Cocola Media is a party or by which it or any of the KWOK Assets are bound or
affected, excluding from the foregoing clauses (ii) and (iii) violations,
breaches or defaults that would not, individually or in the aggregate, have a
KWOK Material Adverse Effect.
(b) No consent, waiver, license, approval, authorization,
order or permit or registration or filing with or notification to any
governmental entity or other third party is necessary for the execution and
delivery of this Agreement and the Paxson-38 Ancillary Documents by Paxson-38 or
the consummation by Paxson-38 or Cocola Media of the transactions contemplated
by this Agreement and the Paxson-38 Ancillary Documents or the compliance by
Paxson-38 with any provision of this Agreement and the Paxson-38 Ancillary
Documents, except (i) the FCC Consent, (ii) filings with respect to sales and
other transfer taxes, (iii) such filings as may be required under the HSR Act,
(iv) such filings, registrations, notifications, permits, authorizations,
consents or approvals that result solely from the specific legal or regulatory
status of Christian or as a result of any other facts that specifically relate
to the business or activities in which Christian is engaged, and (v) the consent
of or notice to each party identified on Schedule 5.3.
5.4 Litigation. Except as set forth in Schedule 5.4, there are no
legal, administrative, arbitration or other proceedings or governmental
investigations pending or, to the knowledge of Paxson-38, threatened, against or
affecting the KWOK Assets.
5.5 Taxes. To the knowledge of Paxson-38, Paxson-38 has duly filed
all Tax Returns including extensions (including, but not limited to, those filed
on a consolidated, combined or unitary basis), required to have been filed by it
prior to the date hereof. Paxson-38 has paid or, prior to the Adjustment Time
will pay, all Taxes shown on such Tax Returns as being due or (except to the
extent the same are contested in good faith) claimed to be due any federal,
state, local or other taxing authority, and, except as set forth in Schedule
5.5, Paxson-38 has not received any notice of the assessment or proposed
assessment of any additional Taxes.
5.6 Tangible Personal Property. To the knowledge of Paxson-38,
Cocola Media has or at the Closing will have good title to the KWOK Tangible
Personal Property owned by Cocola Media, and as of the Closing Date none of the
KWOK Tangible Personal Property will be subject to any Encumbrance, except for
Permitted Encumbrances. The KWOK Tangible Personal Property is or at the Closing
will be in reasonable operating condition and repair (subject to normal wear and
tear), and is or at the Closing will be available for immediate use in the
conduct of the business or operations of KWOK, except for that which is subject
to routine maintenance or repair. All items of KWOK Tangible Personal Property
<PAGE> 22
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(i) have been or will be maintained in a manner consistent in all material
respects with generally accepted standards of good engineering practice and (ii)
will permit Christian to operate KWOK in all material respects in accordance
with the terms of the KWOK FCC Licenses.
5.7 Compliance with Laws. The business and operations of Paxson-38 and,
to the knowledge of Paxson-38, of Cocola Media and North Bay with respect to
KWOK are not being conducted in violation of any law, ordinance or regulation of
any Governmental Authority, except for possible violations which, individually
or in the aggregate, would not have a KWOK Material Adverse Effect.
5.8 FCC Licenses. Schedule 2.1(d)(ii) accurately and completely lists
all KWOK FCC Licenses and all KWOK Licenses issued by Governmental Authorities
other than the FCC. Except as set forth on Schedule 2.1(d)(ii), all of the KWOK
FCC Licenses have been validly issued to North Bay pursuant to Final Orders, are
in full force and effect, and, to the knowledge of Paxson-38, North Bay has
fulfilled and performed all of its obligations with respect thereto in all
material respects and has full power and authority to operate thereunder. North
Bay holds all KWOK FCC Licenses necessary to enable North Bay to conduct the
business and operations of KWOK in all material respects as currently conducted.
Except as set forth in Schedule 2.1(d)(ii), (i) none of the KWOK FCC Licenses is
subject to any restriction or condition that would limit the full operation of
KWOK as now conducted, and (ii) Paxson-38 has no reason to believe that any of
the KWOK FCC Licenses would not be renewed by the FCC in the ordinary course.
True and complete copies of the KWOK FCC Licenses are attached to Schedule
2.1(d)(ii). All material returns, reports and statements that North Bay is
currently required to file with the FCC or with any other Governmental Authority
with respect to KWOK have been filed, and all reporting requirements of the FCC
and other Governmental Authorities with respect to KWOK have been complied with
in all material respects. All of such returns, reports and statements are
substantially complete and correct as filed. North Bay has timely paid to the
FCC all annual regulatory fees payable by North Bay with respect to the KWOK FCC
Licenses. Schedule 2.1(d)(ii) sets forth each cable system located within KWOK's
Area of Dominant Influence for which North Bay is entitled to elect must-carry
in accordance with 47 C.F.R. 76.64(f)(4).
5.9 Brokers and Finders. Neither Paxson-38 nor any of its officers,
directors, partners or employees has employed any broker or finder in connection
with the transactions contemplated by this Agreement or incurred any liability
for any brokerage fees, commissions or finders' fees in connection with the
transactions contemplated by this Agreement.
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5.10 Insurance. Schedule 5.10 is a true and complete list of all
insurance policies obtained or to be obtained by Paxson-38 and Cocola Media
related to the KWOK Assets. All policies of insurance listed in Schedule 5.10
are as of the date of this Agreement in full force and effect or at Closing will
be in full force and effect.
5.11 Employee Benefit Liabilities. Neither Paxson-38 or any entity
required to be combined with Paxson-38 nor, to the knowledge of Paxson-38,
Cocola Media or any entity required to be combined with it (in each case as
determined under Internal Revenue Code Sections 414(b), (c), (m), (n) or (o))
has incurred, or expects to incur as a result of the consummation of the
transactions contemplated under this Agreement, any cost, fee, expense,
liability, claim, suit, obligation, or other damage with respect to any
"employee benefit plan" (as defined in section 3(3) of ERISA or any benefit
arrangement not subject to ERISA) that could give rise to the imposition of any
liability, cost, fee, expense, or obligation on Christian or any of its
Affiliates; and, to the knowledge of Paxson-38, no facts or circumstances exist
that could give rise to any such cost, fee, expense, liability, claim, suit,
obligation, or other damage.
5.12 Contracts. All of the KWOK Contracts are valid and binding and, to
the knowledge of Paxson-38, in full force and effect and legally enforceable in
accordance with their terms upon the other parties thereto. There is not under
any KWOK Contract any default by Paxson-38 or, to the knowledge of Paxson-38,
any other party thereto or event which, after notice or lapse of time or both,
would constitute a default, except for defaults which, individually or in the
aggregate, would not have a KWOK Material Adverse Effect. Cocola Media has
cancelled the option granted to Marin TV Service Partners, Ltd. ("Marin TV")
pursuant to the Stock Option Agreement dated October, 1996, between Cocola Media
and Marin TV.
5.13 Cocola Stock Purchase Agreement. Paxson-38 has entered into the
Cocola Stock Purchase Agreement, and the Cocola Stock Purchase Agreement is in
full force and effect. Paxson-38 shall (i) use commercially reasonable efforts
to maintain the Cocola Stock Purchase Agreement in full force and effect in
accordance with its terms, (ii) use commercially reasonable efforts to comply
with the terms of the Cocola Stock Purchase Agreement applicable to it, (iii)
not terminate, amend, modify or waive any of its rights or Gary Cocola's
obligations under the Cocola Stock Purchase Agreement without Christian's prior
written consent, which consent shall not be unreasonably withheld, (iv) use
commercially reasonable efforts to enforce its rights under the Cocola Stock
Purchase Agreement, and (v) use commercially reasonable efforts to consummate
the closing of the purchase and sale transactions contemplated by the Cocola
Stock Purchase Agreement on the earliest date permitted thereunder.
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5.14 WPXE Sale. Paxson Communications of Milwaukee-55, Inc. and Paxson
Milwaukee License, Inc. (collectively, "Paxson Milwaukee"), Affiliates of
Paxson-38, have entered into an Asset Purchase Agreement dated as of the date
hereof (the "WPXE Purchase Agreement") with DP Media of Milwaukee, Inc. ("DP
Media"), pursuant to which Paxson Milwaukee agrees to sell to DP Media
substantially all of the assets, including the licenses, permits and other
authorizations issued by the FCC to Paxson Milwaukee License, Inc., used or
useful in the business and operations of Television Station WPXE(TV) (formerly,
WHKE- TV), Kenosha, Wisconsin ("WPXE"). Paxson-38 shall cause Paxson Milwaukee
to (i) use commercially reasonable efforts to maintain the WPXE Purchase
Agreement in full force and effect in accordance with its terms, (ii) use
commercially reasonable efforts to comply with the terms of the WPXE Purchase
Agreement applicable to it, (iii) not terminate, amend, modify or waive any of
its rights or DP Media's obligations under the WPXE Purchase Agreement without
Christian's prior written consent, which consent shall not be unreasonably
withheld, (iv) use commercially reasonable efforts to enforce Paxson Milwaukee's
rights under the WPXE Purchase Agreement, and (v) use commercially reasonable
efforts to consummate the closing of the purchase and sale transactions
contemplated by the WPXE Purchase Agreement on the earliest date permitted
thereunder.
5.15 Disclosure. To the knowledge of Paxson-38, no statement of a
material fact by Paxson-38 contained in this Agreement, and all exhibits and
schedules related hereto, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein
or therein not misleading in light of the circumstances under which they were
made.
ARTICLE 6
COVENANTS OF THE PARTIES
6.1 Conduct of Business.
(a) Except as specifically provided in this Agreement, or set
forth in Schedule 6.1(a) with respect to Christian and Schedule 6.1(b) with
respect to Paxson-38, during the period from the date of this Agreement to the
Closing Date, Christian will conduct the business and operations of WCFC in the
ordinary course consistent with past practices, and Paxson-38 will cause Cocola
Media to construct KWOK in accordance with the Construction Agreement and
thereafter conduct the business and operations of KWOK in the ordinary course
and in accordance with the terms of the Cocola KWOK TBA. Without limiting the
generality of the foregoing, except as otherwise expressly provided in this
Agreement, prior to the Closing Date, (i) without the prior written consent of
Paxson-38, Christian, with respect to WCFC, and (ii) without the prior written
consent of Christian,
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Cocola Media, with respect to KWOK, will not (A) sell, transfer, lease, license,
pledge, encumber, mortgage, remove from the premises of WCFC or KWOK, as the
case may be, or otherwise dispose of, or agree to sell, transfer, lease,
license, pledge, encumber, mortgage, remove from the premises of WCFC or KWOK,
as the case may be, or otherwise dispose of (each of the actions described in
clause A above is a "Transfer"), any of the WCFC Assets or the KWOK Assets, as
the case may be, except (x) that a "Transfer" shall not include any lien
disclosed on Schedule 6.1(a) or 6.1(b), each of which shall be removed upon or
before the Closing and (y) for Permitted Encumbrances, (B) modify in any respect
the WCFC Contracts or the KWOK Contracts, as the case may be, (C) cause or
permit, by any act or failure to act, any of the WCFC Licenses or KWOK Licenses,
as the case may be, to expire or be revoked, suspended or adversely modified, or
any Governmental Authority to institute proceedings for the revocation,
suspension or adverse modification of the WCFC Licenses or KWOK Licenses, as the
case may be, or (D) cause, by any act or failure to act, any cable system
located within the Area of Dominant Influence or Designated Market Area of WCFC
or KWOK, as the case may be, to refuse to carry the signal of WCFC or KWOK,
respectively.
(b) Christian and Paxson-38 shall each use their commercially
reasonable efforts to maintain (or cause to be maintained) the WCFC Assets and
the KWOK Assets, respectively, in good condition (ordinary wear and tear
excepted), and use and operate (or cause to be used and operated) the WCFC
Assets and KWOK Assets, respectively, in a reasonable manner and in accordance
with the terms of the WCFC FCC Licenses and KWOK FCC Licenses, respectively, all
rules and regulations of the FCC and generally accepted standards of good
engineering practice. If any loss, damage, impairment, confiscation or
condemnation of or to any of the WCFC Assets or KWOK Assets occurs, Christian,
Paxson-38 or Cocola Media, as the case may be, shall repair, replace or restore
the WCFC Assets or KWOK Assets, respectively, to their prior condition as
represented in this Agreement as soon thereafter as possible, and Christian,
Paxson-38 or Cocola Media, as the case may be, shall use the proceeds of any
claim under any insurance policy solely to repair, replace or restore any of the
WCFC Assets or KWOK Assets, respectively, that are lost, damaged, impaired or
destroyed.
(c) Christian, Paxson-38 and Cocola Media each shall comply in
all material respects with the terms of the WCFC FCC Licenses and KWOK FCC
Licenses, respectively, and with all laws, rules and regulations applicable or
relating to the ownership and operation of WCFC and KWOK, respectively.
(d) Paxson-38 shall use commercially reasonable efforts to
complete construction of KWOK and file an appropriate application for covering
license no later than April 22, 1998, subject to delays caused by circumstances
or events not within the reasonable
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control of Paxson-38. No later than the first business day after KWOK commences
broadcast operations, Cocola Media shall, or shall cause North Bay to, send to
each cable system in KWOK's defined market a statement electing must-carry in
accordance with the requirements of 47 C.F.R. 76.64, and Cocola Media shall send
a copy of each such statement to Christian by overnight courier. Paxson-38 shall
promptly notify Christian if any cable system advises North Bay of any signal
quality or copyright indemnity or other prerequisite to cable carriage of KWOK's
signal, or if any cable system declines or threatens to decline such carriage or
fails to respond to a request for carriage or seeks any form of relief from
carriage from the FCC.
6.2 Access to Information. From the date of this Agreement to the
Closing Date, Christian, Paxson-38 or Cocola Media will each give the other
party and its authorized representatives reasonable access during normal
business hours (and at such other times as the parties may mutually agree) upon
reasonable prior notice and approval, which shall not be unreasonably withheld,
to its facilities, personnel and operations solely to the extent such
facilities, personnel and operations relate to the WCFC Assets or the KWOK
Assets, as the case may be, and to its books and records relating to the WCFC
Assets or the KWOK Assets; provided, that any inspection of the WCFC Assets or
the KWOK Assets, as the case may be, or discussion with personnel regarding the
WCFC Assets or the KWOK Assets, as the case may be, shall occur only if a
representative of the party granting such access is present. Each party to this
Agreement and its accountants, counsel and other representatives shall, in the
exercise of the rights described in this Section 6.2, not unduly interfere with
the operations or business of the other party hereto.
6.3 FCC Consent.
(a) The exchange of the WCFC Assets for the KWOK Assets as
contemplated by this Agreement is subject to obtaining the FCC Consent.
(b) Within five (5) business days of the execution of this
Agreement, Christian and Paxson-38 will prepare and file with the FCC an
appropriate application for the WCFC FCC Consent. The parties shall prosecute
such application with commercially reasonable diligence and otherwise use their
commercially reasonable efforts to obtain the grant of the application as
expeditiously as practicable. Each party will promptly provide to the other
party a copy of any pleading, order or other document served on it relating to
such application. Except as set forth in Schedule 6.1(b), Paxson-38 is and will
be legally, financially and otherwise qualified to be the licensee of, acquire,
own and operate the WCFC Assets under the Communications Act, and the rules,
regulations and policies of the FCC, and Paxson-38 shall take or cause to be
taken all actions necessary or appropriate to be taken
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by Paxson-38 (or its Affiliates) to permit the FCC to approve in a timely
fashion the assignment to Paxson-38 of the WCFC FCC Licenses.
(c) Within five (5) business days of the execution of this
Agreement, Paxson-38 will cause Paxson Milwaukee to prepare and file with the
FCC an appropriate application for FCC consent to the assignment to DP Media of
the licenses, permits and other authorizations issued by the FCC to Paxson
Milwaukee License, Inc. for WPXE (the "WPXE FCC Licenses"). Paxson-38 will cause
Paxson Milwaukee to prosecute such application with commercially reasonable
diligence and otherwise use its commercially reasonable efforts to obtain the
grant of the application as expeditiously as possible. Paxson- 38 will promptly
provide to Christian a copy of any pleading, order or other document served on
Paxson Milwaukee relating to such application. Paxson-38 will cause Paxson
Milwaukee to take or cause to be taken all actions necessary or appropriate to
be taken by Paxson Milwaukee (or its Affiliates) to permit the FCC to approve in
a timely fashion the assignment to DP Media of the WPXE FCC Licenses. To the
knowledge of Paxson-38, DP Media is legally, financially and otherwise qualified
to be the licensee of, acquire, own and operate WPXE under the Communications
Act and the rules, regulations and policies of the FCC.
(d) Within five (5) business days of the commencement by KWOK
of broadcast operations pursuant to program test authority, Christian and Cocola
Media will prepare and file with the FCC an appropriate application for the KWOK
FCC Consent. The parties shall prosecute such application with commercially
reasonable diligence and otherwise use their commercially reasonable efforts to
obtain the grant of the application as expeditiously as possible. Each party
will promptly provide to the other party a copy of any pleading, order or other
document served on it relating to such application. Except as set forth in
Schedule 6.1(a), Christian is and will be legally, financially and otherwise
qualified to be the licensee of, acquire, own and operate the KWOK Assets under
the Communications Act, and the rules, regulations and policies of the FCC, and
Christian shall take or cause to be taken all actions necessary or appropriate
to be taken by Christian (or its Affiliates) to permit the FCC to approve in a
timely fashion the assignment to Christian of the KWOK FCC Licences.
(e) Each party agrees to comply with any condition imposed on
it by any FCC Consent, except that no party shall be required to comply with a
condition if compliance with the condition would have a material adverse effect
upon it. For purposes hereof, a condition shall not be deemed to have a
"material adverse effect" upon a party solely because it requires such party to
file periodic reports. Christian, Paxson-38 and Cocola Media, as appropriate,
shall oppose any petitions to deny or other objections filed with respect to the
applications for any FCC Consent and any requests for reconsideration or
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review of any FCC Consent. Cocola Media and Paxson-38 shall use their
commercially reasonable efforts to have North Bay oppose any such petitions,
objections or requests.
(f) If the Closing shall not have occurred for any reason
within the original effective period of any FCC Consent, and neither party shall
have terminated this Agreement under Section 11.2, either Paxson-38, Cocola
Media or Christian shall request an extension of the effective period of such
FCC Consent. No extension of the effective period of any FCC Consent shall limit
the exercise by either party of its right to terminate the Agreement under
Section 11.2.
6.4 Control of the Stations. Prior to Closing, Paxson-38 shall
not, directly or indirectly, control, supervise or direct, or attempt to
control, supervise or direct, the operations of WCFC; those operations,
including complete control and supervision of all WCFC's programs, employees and
policies, shall be the sole responsibility of Christian. Prior to Closing,
Christian shall not, directly or indirectly, control, supervise or direct, or
attempt to control, supervise or direct, the operations of KWOK; those
operations, including complete control and supervision of all KWOK's programs,
employees and policies, shall be the sole responsibility of North Bay.
6.5 Consummation of Agreement. Each of Christian and Paxson-38
will use commercially reasonable efforts to perform or fulfill all conditions
and obligations to be performed or fulfilled by it under this Agreement so that
the transactions contemplated hereby shall be consummated as expeditiously as
possible, including, in the case of Paxson-38, acquiring the Cocola Stock. If
any event should occur, either within or outside the control of Christian or
Paxson-38, that would materially delay or prevent fulfillment of the conditions
to the obligations of any party hereto to consummate the transactions
contemplated by this Agreement, Christian and Paxson-38 will use their
respective commercially reasonable efforts to cure or minimize the same as
expeditiously as possible. Each party shall make all commercially reasonable
efforts to obtain (a) any consent necessary to the assignment of the WCFC
Assets, including the WCFC Contracts, and the KWOK Assets, including the KWOK
Contracts, without any materially adverse changes in the terms and conditions of
such contracts and (b) an Estoppel Certificate, substantially in the form of
Exhibit G hereto, from each landlord identified in Schedules 4.3 and 5.3.
6.6 Public Announcements. Except as may be required by law
(including, without limitation, federal securities laws) or court order,
Christian and Paxson-38 will consult with each other before issuing any press
release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement, and neither shall issue any such
press release or make any such public statement that is not approved by the
other parties hereto, which approval shall not be unreasonably withheld. Subject
to the requirements of
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the preceding sentence, Paxson-38 and Christian shall issue a press release with
respect to the transactions contemplated by this Agreement no later than January
27, 1998.
6.7 Broker. Christian and Paxson-38 acknowledge and agree that
Christian has retained the services of Media Venture Partners ("MVP") in
connection with the transactions contemplated by this Agreement. Christian
hereby agrees to pay all of the fees and expenses of MVP in connection
therewith.
6.8 Access to Books and Records. From and after the Closing, Christian
and Paxson-38 will allow each other full access to and right to copy documents
(including, but not limited to, records, files, financial information,
accounting records, and books of account, collectively, "Records") with respect
to the WCFC Assets or the KWOK Assets, as the case may be, in each case relating
to the period prior to the Closing. Neither Christian nor Paxson-38 will destroy
any Records for a period of three (3) years after the Closing Date without
having given thirty (30) days prior notice to Christian or Paxson-38, as the
case may be, and, in the event Christian or Paxson-38, as the case may be,
wishes to copy any such Records, the other party will cooperate in making such
records available for such copying, provided arrangements are made for
reimbursement of all expenses reasonably incurred by the party furnishing such
cooperation.
6.9 Cure. For all purposes under this Agreement, the existence or
occurrence of any events or circumstances that constitute or cause a breach of a
representation or warranty of either Christian or Paxson-38 (including, without
limitation, under the information disclosed in the Schedules hereto) on the date
such representation or warranty is made shall be deemed not to constitute a
breach of such representation or warranty if such event or circumstance is cured
in all material respects on or prior to the Closing Date.
6.10 Confidentiality. Each of Christian and Paxson-38 agrees that all
information provided to the other (including employees, attorneys, accountants
and advisors) by such party will be treated as confidential by such other party,
and will not be used for any purpose other than in connection with the
transactions contemplated by this Agreement and, further, that it will not be
disclosed to any third party who does not have a need to know for the purpose of
assisting the party receiving such confidential information in connection with
the transactions contemplated by this Agreement, except as may be required by
law (including federal securities laws) or by court order. Confidential
information shall not include information which is in the public domain, which
is generally known within the industry, or which can be obtained through lawful
methods not involving a breach of this or any similar obligation of
confidentiality. If this Agreement is terminated, each party shall return to the
other all confidential information in its possession; provided, however, that
any confidential information retained by the recipient thereof, inadvertently or
otherwise, shall continue to be
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subject to the provisions of this Section 6.10, notwithstanding the termination
of this Agreement.
6.11 Insurance. During the period from the date hereof until the
Closing Date, Christian shall maintain in effect all policies of insurance
currently in effect with respect to the WCFC Assets, and Paxson-38 or Cocola
Media shall maintain in effect all policies of insurance currently in effect
with respect to the KWOK Assets.
6.12 Risk of Loss.
(a) The risk of any loss, damage, impairment, confiscation, or
condemnation of any of the WCFC Assets from any cause whatsoever shall be borne
by Christian at all times prior to the Closing. If any damage or destruction of
the WCFC Assets or any other event occurs which (i) causes WCFC to cease
broadcasting operations for a period of five or more days or (ii) prevents in
any material respect signal transmission by WCFC in the normal and usual manner
and Christian fails to restore or replace the WCFC Assets so that normal and
usual transmission is resumed within fourteen days of the damage, destruction or
other event, Paxson-38, in its sole discretion, may (x) terminate this Agreement
forthwith without any further obligations hereunder upon written notice to
Christian, or (y) proceed to consummate the transaction contemplated by this
Agreement and complete the restoration and replacement of the WCFC Assets after
the Closing Date, in which event Christian shall deliver to Paxson-38 (or pay to
Paxson-38 an amount equal to) all insurance proceeds received by Christian in
connection with such damage, destruction or other event and pay to Paxson-38 the
deductible relating to the damage, destruction or other event.
(b) The risk of any loss, damage, impairment, confiscation, or
condemnation of any of the KWOK Assets from any cause whatsoever shall be borne
by Paxson-38 at all times prior to the Closing. If any damage or destruction of
the KWOK Assets or any other event occurs which, following the commencement by
KWOK of broadcast operations pursuant to program test authority, (i) causes KWOK
to cease broadcasting operations for a period of five or more days or (ii)
prevents in any material respect signal transmission by KWOK in the normal and
usual manner and Paxson-38 fails to restore or replace the KWOK Assets so that
normal and usual transmission is resumed within fourteen days of the damage,
destruction or other event, Christian, in its sole discretion, may (x) terminate
this Agreement forthwith without any further obligations hereunder upon written
notice to Paxson-38, or (y) proceed to consummate the transaction contemplated
by this Agreement and complete the restoration and replacement of the KWOK
Assets after the Closing Date, in which event Paxson-38 shall deliver to
Christian (or pay to Christian an amount equal to) all insurance proceeds
received by Paxson-38 or Cocola Media in
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connection with such damage, destruction or other event and pay to Christian the
deductible relating to the damage, destruction or other event.
6.13 HSR Act Filing. Christian and Paxson-38 agree to (a) file, or
cause to be filed, with the DOJ and FTC all filings, if any, which are required
in connection with the transactions contemplated hereby under the HSR Act within
ten (10) business days of the date of this Agreement; (b) cooperate with each
other in connection with such HSR Act filings, which cooperation shall include
furnishing the other with any information or documents in such party's
possession that may be reasonably required in connection with such filings; (c)
promptly file such other information or documents as may be requested by the FTC
or DOJ after appropriate negotiation with the DOJ or FTC of the scope of such
request; (d) furnish each other with any correspondence from or to, and notify
each other of any other communications with, the FTC or DOJ which relates to the
transactions contemplated hereunder; and (e) to the extent practicable, permit
each other to participate in any conferences with the FTC or DOJ.
6.14 Call Letters. Subject to the following sentence, Christian and
Paxson-38 shall file all requests with the FCC necessary to allow Christian to
adopt the "WCFC" call letters for Christian's low power television station, and
to allow Paxson-38 to adopt such call letters as Paxson-38 may designate on the
current WCFC channel (Channel 38), in each case effective as of the Closing
Date. Christian's right to adopt the "WCFC" call letters for Christian's low
power television station pursuant to this Section 6.14 is contingent upon the
prior or simultaneous adoption by Paxson-38 of the call letters designated by
Paxson-38 for Channel 38 in Chicago.
6.15 North Bay Purchase Agreement. Within five (5) days following the
commencement by KWOK of broadcast operations pursuant to program test authority,
Paxson-38 shall cause Cocola Media to provide written notice to North Bay of
Cocola Media's exercise of the KWOK Option in accordance with the terms of the
KWOK Option Agreement. Within five (5) days following the date Cocola Media
provides such written notice to North Bay, Paxson-38 shall cause Cocola Media to
execute and deliver to North Bay the North Bay Purchase Agreement in accordance
with the terms of the KWOK Option Agreement. Paxson-38 shall cause Cocola Media
to (i) use commercially reasonable efforts to maintain the North Bay Purchase
Agreement and Cocola KWOK TBA in full force and effect in accordance with their
respective terms, (ii) use commercially reasonable efforts to comply with the
terms of the North Bay Purchase Agreement and Cocola KWOK TBA applicable to it,
(iii) not terminate, amend, modify or waive any of its rights or North Bay's
obligations under the North Bay Purchase Agreement and Cocola KWOK TBA without
Christian's prior written consent, which consent shall not be unreasonably
withheld, (iv) use commercially reasonable efforts to enforce Cocola Media's
rights under the North Bay
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Purchase Agreement, including, without limitation, Cocola Media's rights with
respect to the filing and prosecution of its application for the KWOK FCC
Consent in accordance with the terms thereof, and the Cocola KWOK TBA, and (v)
use commercially reasonable efforts to consummate the closing of the purchase
and sale transactions contemplated by the North Bay Purchase Agreement on the
earliest date permitted thereunder. Notwithstanding anything to the contrary
contained herein, Paxson-38, in its sole discretion and without any obligation
or liability to Christian, may cause Cocola Media to terminate the North Bay
Purchase Agreement in accordance with its terms, except that Paxson-38 shall
immediately notify Christian of any such termination.
6.16 KWOK Programming Agreement. No later than five (5) business days
prior to the commencement of broadcast operations by KWOK pursuant to program
test authority, Paxson-38 shall cause Cocola Media to duly execute and deliver
to Christian, and Christian shall duly execute and deliver to Cocola Media, the
KWOK Programming Agreement.
6.17 KWOK Master Control Services. Upon written notice from Christian
to Paxson-38 no later than ten (10) business days prior to Closing, Christian
may, at its option, require Paxson-38 or an Affiliate of Paxson-38 designated by
Paxson-38 to enter into with Christian the KWOK Services Agreement substantially
in the form of Exhibit I hereto (the "KWOK Services Agreement"), pursuant to
which Christian shall retain Paxson-38 or such Affiliate to provide, effective
as of the Closing, master control and related technical support services with
respect to KWOK in exchange for a monthly payment by Christian to Paxson- 38 or
such Affiliate in the amount of $25,000.
6.18 WCFC Studio Facilities. Paxson-38 shall use commercially
reasonable efforts to obtain studio and office facilities for WCFC prior to the
Closing Date. In the event that such facilities are not available as of the
Closing Date, upon written notice from Paxson-38 to Christian no later than ten
(10) business days prior to Closing, Christian shall make available to
Paxson-38, effective as of Closing, the right to access and use the WCFC master
control facilities and such engineering space and offices as Paxson-38
reasonably requires for the operation of WCFC, rent-free, for a period not to
exceed 120 days following the Closing Date. Paxson-38 shall reimburse Christian
for such portion of the utilities charges incurred by Christian at the WCFC
studio that are allocable to Paxson-38's use of such master control facilities
and engineering space and offices.
6.19 KWOK Alternative Closing. Notwithstanding any provision in this
Agreement, the Paxson-38 Ancillary Documents or the Christian Ancillary
Documents to the contrary, the sale of the KWOK Assets by Cocola Media to
Christian shall not be a condition to the obligations of Christian at the
Closing if the FCC prohibits the assignment of the KWOK FCC Licenses by North
Bay until one year following the commencement by KWOK
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of broadcast operations and so long as on or prior to the Closing Date (a)
Christian shall have received the Cash Consideration, (b) KWOK shall have
commenced broadcast operations, (c) the Cocola KWOK TBA and KWOK Programming
Agreement shall be in full force and effect in accordance with their respective
terms, (d) Paxson-38 is not in material breach of its obligations hereunder, (e)
Paxson-38 owns all of the issued and outstanding capital stock of Cocola Media,
and (f) if the North Bay Purchase Agreement is in full force and effect, either
no material breach thereunder has occurred or, if a material breach thereunder
has occurred, such breach has been cured as of the Closing Date. If the
transactions contemplated by this Agreement are consummated, except that the
sale of the KWOK Assets to Christian has not occurred as contemplated by the
preceding sentence, all obligations of Paxson-38 contained in this Agreement or
any Paxson-38 Ancillary Document with respect to the sale of the KWOK Assets to
Christian, and all obligations of Christian contained in this Agreement or any
Christian Ancillary Document with respect to the purchase of the KWOK Assets
from Cocola Media, shall be postponed until a date acceptable to Paxson-38 and
Christian that is no later than ten (10) business days following the date Cocola
Media shall have acquired the KWOK FCC Licenses, whereupon Paxson-38 shall cause
Cocola Media to acquire the KWOK Assets owned by North Bay pursuant to the terms
of the North Bay Purchase Agreement, and Cocola Media shall sell, transfer,
convey and deliver to Christian, and Christian shall accept and acquire, the
KWOK Assets in accordance with the terms and conditions set forth herein and in
the Paxson-38 Ancillary Documents and the Christian Ancillary Documents.
Notwithstanding any provision herein to the contrary, if the sale of the KWOK
Assets to Christian occurs following the sale of the WCFC Assets to Paxson-38 in
accordance with the requirements of the first sentence of this Section 6.19, the
terms "Closing" and "Closing Date," as used in Section 6.12(b) hereof and in
each other provision in this Agreement concerning the computation of a period of
time that begins upon Closing or on the Closing Date (including, for example,
the computation of the survival period set forth in Section 10.1), shall mean
the consummation of the sale of the KWOK Assets to Paxson-38 and the date such
sale occurs, respectively.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY
The respective obligations of each party to effect the exchange of the
WCFC Assets and the KWOK Assets contemplated by this Agreement shall be subject
to the fulfillment at or prior to the Closing of the following conditions:
7.1 HSR Act. The waiting period under the HSR Act, if any, shall
have expired without unresolved action by the DOJ or FTC to prevent the Closing.
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7.2 North Bay Closing. Subject to Section 6.19, the consummation of
the purchase and sale transactions contemplated by the North Bay Purchase
Agreement shall have occurred.
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF CHRISTIAN
Subject to Section 6.19, the obligations of Christian to consummate the
exchange of the WCFC Assets and the KWOK Assets and to perform its other
obligations hereunder to be performed at or subsequent to the Closing shall be
subject to the fulfillment at or prior to the Closing of each of the following
additional conditions, any one or more of which may be waived by Christian:
8.1 Representations and Warranties. All representations and warranties
of Paxson-38 contained herein shall be true and correct on the Closing Date as
though such representations and warranties were made as of such date, except (1)
to the extent any such representation or warranty is expressly stated only as of
a specified earlier date or dates, in which case such representation or warranty
shall be true and accurate in all material respects as of such earlier specified
date or dates (but subject to clause (3) hereof), (2) for changes permitted or
contemplated pursuant to this Agreement, and (3) for inaccuracies that in the
aggregate do not constitute a KWOK Material Adverse Effect; provided, however,
that for purposes of this Section 8.1 only, in determining whether there has
been a KWOK Material Adverse Effect under Section 8.1(3), the representations
and warranties shall be read as if such provisions did not include any "KWOK
Material Adverse Effect" or other materiality qualifiers, whether individually
or in the aggregate for all such representations and warranties.
8.2 Covenants. Paxson-38 shall have performed and complied in all
material respects with all covenants and agreements contained in this Agreement
required to be performed or complied with by it on or prior to the Closing Date.
8.3 Certificates. Paxson-38 shall have furnished a certificate of an
authorized officer to evidence compliance with the conditions set forth in
Sections 8.1 and 8.2 substantially in the form of Exhibit C attached hereto.
8.4 Certain Proceedings. No writ, order, decree or injunction of a
court of competent jurisdiction or Governmental Authority shall have been
entered against Paxson-38, Cocola Media, North Bay or Christian that prohibits
or restricts the exchange of the WCFC Assets and the KWOK Assets contemplated
hereby.
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8.5 Opinion of Counsel. Christian shall have received the favorable
opinion of Dow, Lohnes & Albertson, PLLC, substantially in the form of Exhibit D
attached hereto.
8.6 Document Delivery. Paxson-38 shall have taken the following
actions and delivered the following documents, appropriately executed, to
Christian:
(a) Made payment of the Cash Consideration and any other amount
required to be made by Paxson-38 at Closing pursuant to Section 2.1;
(b) All documents required to be delivered to Christian pursuant
to Section 3.3;
(c) Certified copies of the resolutions of the Board of Directors
of PCC and Paxson-38 authorizing the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby;
(d) A certificate of good standing for Paxson-38 from the State of
Florida and a certificate of good standing for Paxson-38 as a foreign
corporation in the State of Illinois;
(e) The Programming Agreement; and
(f) The KWOK Services Agreement, if requested by Christian
pursuant to Section 6.17.
8.7 No Material Adverse Change. Since the date of this Agreement, there
shall not have occurred any material adverse change in the KWOK FCC Licenses,
other than changes resulting from matters affecting the television broadcasting
industry generally, or KWOK Tangible Personal Property.
8.8 Consents. All Paxson-38 Material Consents shall have been obtained
and delivered to Christian, without any materially adverse change in the terms
or conditions of the related license, agreement or other instrument or
obligation to which Cocola Media or North Bay is a party or by which either of
them or the KWOK Assets are bound.
8.9 Estoppel Certificate. Paxson-38 shall have obtained and delivered
to Christian the Estoppel Certificate required by Section 6.5.
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8.10 KWOK FCC Consent. The KWOK FCC Consent shall have been granted and
shall have become a Final Order.
8.11 WCFC FCC Consent. The WCFC FCC Consent shall have been granted.
ARTICLE 9
CONDITIONS TO THE OBLIGATIONS OF PAXSON-38
The obligations of Paxson-38 under this Agreement to consummate the
exchange of the WCFC Assets and the KWOK Assets and to perform its other
obligations hereunder to be performed at or subsequent to the Closing shall be
subject to the fulfillment at or prior to the Closing of each of the following
additional conditions, any one or more of which may be waived by Paxson-38:
9.1 Representations and Warranties. All representations and warranties
of Christian contained herein shall be true and correct on the Closing Date as
though such representations and warranties were made as of such date, except (1)
to the extent any such representation or warranty is expressly stated only as of
a specified earlier date or dates, in which cases such representation or
warranty shall be true and accurate in all material respects as of such earlier
specified date or dates (but subject to clause (3) hereof), (2) for changes
permitted or contemplated pursuant to this Agreement, and (3) for inaccuracies
that in the aggregate do not constitute a WCFC Material Adverse Effect;
provided, however, that for purposes of this Section 9.1 only, in determining
whether there has been a WCFC Material Adverse Effect under Section 9.1(3), the
representations and warranties shall be read as if such provisions did not
include any "WCFC Material Adverse Effect" or other materiality qualifiers,
whether individually or in the aggregate, for all such representations and
warranties.
9.2 Covenants. Christian shall have performed and complied in all
material respects with all covenants and agreements contained in this Agreement
required to be performed or complied with by it on or prior to the Closing Date.
9.3 Certificates. Christian shall have furnished a certificate of an
authorized officer to evidence compliance with the conditions set forth in
Sections 9.1 and 9.2 substantially in the form of Exhibit E attached hereto.
9.4 Certain Proceedings. No writ, order, decree or injunction of a
court of competent jurisdiction or Governmental Authority shall have been
entered against Paxson-38,
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Cocola Media, North Bay or Christian which prohibits or restricts the exchange
of the WCFC Assets and the KWOK Assets contemplated hereby.
9.5 Opinion of Counsel. Paxson-38 shall have received the favorable
opinion of Baker & Hostetler, substantially in the form of Exhibit F attached
hereto.
9.6 Document Delivery. Christian shall have taken the following
actions, and delivered the following to Paxson-38, and where documents are
involved, the documents shall be appropriately executed:
(a) All documents required to be delivered to Paxson-38 pursuant
to Section 3.2;
(b) Certified copies of the resolutions of the Board of Directors
of Christian authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby;
(c) A certificate of good standing for Christian from the State of
Illinois and a certificate of good standing for Christian as a foreign
corporation in the State of California;
(d) the Programming Agreement; and
(e) the KWOK Services Agreement, if requested by Christian
pursuant to Section 6.17.
9.7 No Material Adverse Change. Since the date of this Agreement,
there shall not have occurred any material adverse change in the WCFC FCC
Licenses, other than changes resulting from matters affecting the television
broadcasting industry generally, or WCFC Tangible Personal Property.
9.8 Consents. All Christian Material Consents shall have been obtained
and delivered to Paxson-38, without any materially adverse change in the terms
or conditions of the related license, agreement or other instrument or
obligation to which Christian is a party or by which it or the WCFC Assets are
bound.
9.9 Estoppel Certificate. Christian shall have obtained and delivered
to Paxson-38 the Estoppel Certificate required by Section 6.5.
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9.10 WCFC FCC Consent. The WCFC FCC Consent shall have been granted and
shall have become a Final Order.
9.11 KWOK FCC Consent. The KWOK FCC Consent shall have been granted.
9.12 WPXE Sale. Paxson Milwaukee License, Inc., an Affiliate of
Paxson-38, shall have consummated the disposition of the licenses, permits and
other authorizations issued by the FCC to Paxson Milwaukee License, Inc. for the
operation of WPXE-TV, Kenosha, Wisconsin.
ARTICLE 10
INDEMNIFICATION
10.1 Survival. The representations, warranties, covenants and
agreements of the parties contained in this Agreement shall survive the Closing
for a period of one (1) year after the Closing Date. Notwithstanding the
limitation set forth in the preceding sentence, the parties' obligations under
Sections 2.2, 2.3(d) and (e), 2.4, 6.8, 6.10, 10.1, 11.3 and 11.7, together with
Christian's obligation to pay, perform and discharge the Assumed KWOK
Liabilities, and Paxson-38's obligation to pay, perform and discharge the
Assumed WCFC Liabilities, shall survive until the obligations under such
Sections and such Assumed KWOK Liabilities or such Assumed WCFC Liabilities, as
the case may be, have been paid, performed or discharged in full. The foregoing
survival periods are collectively referred to herein as the "Indemnity Period."
No claim for indemnification, other than with respect to fraud, may be asserted
after the expiration of the Indemnity Period. Notwithstanding anything herein to
the contrary, any representation, warranty, covenant and agreement which is the
subject of a Claim which is asserted in writing prior to the expiration of the
Indemnity Period shall survive with respect to such Claim or any dispute with
respect thereto until the final resolution thereof.
10.2 Indemnification. Each of Christian and Paxson-38 (the
"Indemnifying Party") agrees that on and after the Closing it shall indemnify
and hold harmless the other party (which shall include its Affiliates, including
without limitation its officers, directors, employees, agents and other
representatives) (the "Indemnified Party") from and against any and all damages,
claims, losses, expenses, costs, obligations and liabilities, including without
limitation liabilities for all reasonable attorneys', accountants' and experts'
fees and expenses, including those incurred to enforce the terms of this
Agreement or any Christian Ancillary Document or Paxson-38 Ancillary Document
(collectively, "Loss and Expense"), suffered, directly or indirectly, by the
Indemnified Party by reason of, or arising out of:
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(a) any breach of a representation or warranty made by the
Indemnifying Party, as applicable, pursuant to this Agreement or any failure by
the Indemnifying Party, as applicable, to perform or fulfill any of its
respective covenants or agreements set forth in this Agreement or any Christian
Ancillary Document or Paxson-38 Ancillary Document, as applicable;
(b) any Legal Action or other Claim by any third party arising
from the business or the ownership or operations of any of the Assets by the
Indemnifying Party, as applicable, prior to the Closing Date, except to the
extent arising from obligations or liabilities that have been assumed by the
Indemnified Party pursuant to this Agreement;
(c) any failure by the Indemnifying Party, as applicable, to
pay, perform or discharge any and all liabilities of the Indemnifying Party, as
applicable, not assumed by the Indemnified Party pursuant to the terms hereof;
or
(d) any failure by the Indemnifying Party, as applicable, to
comply with the provisions of any bulk sales or similar law applicable to the
transfer of the Assets as contemplated by this Agreement.
10.3 Notice of Claims. If an Indemnified Party believes that it has
suffered or incurred any Loss and Expense, it shall notify the Indemnifying
Party promptly in writing, and in any event within the applicable time period
specified in Section 10.1, describing such Loss and Expense, all with reasonable
particularity and containing a reference to the provisions of this Agreement in
respect of which such Loss and Expense shall have occurred. If any Legal Action
is instituted by a third party with respect to which an Indemnified Party
intends to claim any liability or expense as Loss and Expense under this
Article, such Indemnified Party shall promptly notify the Indemnifying Party of
such Legal Action, but the failure to so notify the Indemnifying Party shall not
relieve such Indemnifying Party of its obligations under this Article, except to
the extent such failure to notify materially prejudices such Indemnifying
Party's ability to defend against such Claim.
10.4 Defense of Third Party Claims. The Indemnifying Party shall
have the right to conduct and control, through counsel of its own choosing,
reasonably acceptable to the Indemnified Party, any third party Legal Action or
other Claim, but the Indemnified Party may, at its election, participate in the
defense thereof at its sole cost and expense; provided, however, that if (a) the
Indemnifying Party shall fail to defend any such Legal Action or other Claim or
(b) the Indemnified Party shall have been advised by counsel that there may be
one or more legal defenses available to it which are different from or in
addition to those available to the Indemnifying Party, then the Indemnified
Party may defend, through counsel of its own choosing, reasonably satisfactory
to the Indemnifying Party, such Legal Action or
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other Claim, and (so long as it gives the Indemnifying Party at least fifteen
(15) days' notice of the terms of the proposed settlement thereof and permits
the Indemnifying Party to then undertake the defense thereof) settle such Legal
Action or other Claim and recover the amount of such settlement or of any
judgment and the reasonable costs and expenses of such defense. The Indemnifying
Party shall not compromise or settle any such Legal Action or other Claim
without the prior written consent of the Indemnified Party, which consent shall
not be unreasonably withheld, delayed or conditioned.
10.5 Exclusive Remedy. Except for fraud or as otherwise provided in
Section 11.2, the indemnification provided in this Article shall be the sole and
exclusive post-Closing remedy available to either party against the other party
for any Claim under this Agreement.
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 Escrow Deposit. Paxson-38 has deposited with the Escrow Agent on
the date hereof the Escrow Deposit. The Escrow Deposit and all interest earned
thereon shall be held and disbursed in accordance with the terms of the Escrow
Agreement and the following provisions:
(a) If (x) on or before the expiration of the 30-day period
specified in 47 C.F.R. 73.3584(a) (the "Petition Deadline"), either (i) no
petition to deny, informal objection or other opposition is filed against the
application for the WCFC FCC Consent (collectively, the "WCFC Oppositions") or
(ii) one or more WCFC Oppositions are filed, and none of such WCFC Oppositions
could reasonably be expected to result in a dismissal or denial of the
application for the WCFC FCC Consent, and (y) Christian is not in material
breach of its obligations hereunder, Paxson-38 and Christian shall, no later
than five (5) business days following the Petition Deadline, jointly instruct
the Escrow Agent to disburse to Christian the Escrow Deposit by federal wire
transfer of immediately available funds (in accordance with written wire
instructions provided by Christian to the Escrow Agent) and disburse to
Paxson-38 all interest earned thereon.
(b) If the requirements set forth in Section 11.1(a) above for
disbursement to Christian are not met, the Escrow Deposit and all interest
earned thereon shall be retained by the Escrow Agent and disbursed in accordance
with the terms of the Escrow Agreement and the following provisions:
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(i) At the Closing, all amounts held by the Escrow Agent
pursuant to the Escrow Agreement, including all interest earned on the Escrow
Deposit, shall be disbursed to or at the direction of Paxson-38;
(ii) If this Agreement is terminated pursuant to Section
11.2, the Escrow Deposit shall be disbursed to Christian unless (x) Christian
is in material breach of its obligations hereunder or (y) such termination
occurs pursuant to Section 11.2 as a result of the KWOK FCC Consent or WCFC FCC
Consent not having been obtained, or, having been obtained, not having become a
Final Order, due to the filing of a petition to deny, informal objection,
petition for reconsideration, application for review or other opposition that
challenges the qualification of Christian to assign the WCFC FCC Licenses or
acquire the KWOK FCC Licenses. If this Agreement is terminated pursuant to
Section 11.2 and either clause (x) or (y) of this Section 11.1(b)(ii) is
satisfied, all amounts held by the Escrow Agent pursuant to the Escrow
Agreement, including all interest earned on the Escrow Deposit, shall be
disbursed to or at the direction of Paxson-38.
11.2 Termination.
(a) Subject to Section 6.19, this Agreement may be terminated
prior to Closing:
(i) at any time by mutual written consent of Christian and
Paxson-38;
(ii) by either party, if the Closing hereunder has not taken
place on or before July 26, 1999 (the "Termination Date"), provided that the
party seeking such termination shall not then be in material breach of its
obligations under this Agreement;
(iii) by Christian if all conditions set forth in Articles 7
and 8 have not been satisfied or waived on or prior to the date scheduled for
Closing under Section 3.1, and Christian is not in material breach of its
obligations under this Agreement;
(iv) by Paxson-38 if all conditions set forth in Articles 7
and 9 have not been satisfied or waived on or prior to the date scheduled for
Closing under Section 3.1, and Paxson-38 is not in material breach of its
obligations under this Agreement;
(v) by Paxson-38 or Christian, as applicable, pursuant to
its right under Section 6.12(a) and (b), respectively, provided that the party
seeking such termination shall not then be in material breach of its obligations
under this Agreement;
<PAGE> 42
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(vi) by Paxson-38 or Christian, as applicable, pursuant to
its right under Section 11.14(a) and (b), respectively, provided that the party
seeking such termination shall not then be in material breach of its obligations
under this Agreement; and
(vii) by either party upon any termination of the North Bay
Purchase Agreement, provided that the party seeking such termination shall not
then be in material breach of its obligations under this Agreement.
(b) (i) In the event of termination of this Agreement and
abandonment of the transactions contemplated hereby by either party pursuant to
Section 11.2(a), prompt written notice thereof shall forthwith be given to the
other party and this Agreement shall terminate and the transactions contemplated
hereby shall be abandoned without further action by either party hereto. If this
Agreement is terminated as provided herein:
(A) Neither party hereto nor any of their directors,
officers, shareholders, employees, agents or affiliates shall have any liability
or further obligation to the other party or any of its directors, officers,
shareholders, employers, agents or affiliates pursuant to this Agreement with
respect to which termination has occurred, except as stated in Section
11.2(b)(ii) hereof;
(B) All filings, applications and other submissions
relating to the transactions contemplated hereby shall, to the extent
practicable, be withdrawn from the agency or other person to which made; and
(C) Christian shall return any information received by
Christian from Paxson-38 and will cause all confidential information obtained by
Christian from Paxson-38 concerning KWOK to be treated as such, and Paxson-38
shall return any information received by Paxson-38 from Christian and will cause
all confidential information obtained by Paxson-38 from Christian concerning
WCFC to be treated as such.
(ii) Notwithstanding anything to the contrary contained in
this Agreement, if Christian or Paxson-38 is in breach of its respective
obligations under this Agreement prior to the date of termination of this
Agreement, then and in that event, as appropriate, the following provisions
shall apply:
(A) In the event the parties hereto shall fail to
close this transaction due to Christian's breach of this Agreement, then
Christian shall immediately repay to Paxson-38 the entire amount of the Escrow
Deposit, if Christian shall have received the Escrow Deposit pursuant to
Section 11.1, and Paxson-38 shall have the right to seek all
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remedies available to it as provided hereunder or at law or equity and to
enforce its rights by an action for specific performance.
(B) In the event the parties hereto shall fail to
close this transaction due to Paxson-38's breach of this Agreement, then
Christian shall have the right to seek all remedies available to it as provided
hereunder or at law or equity and to enforce its rights by an action for
specific performance. If Christian receives the Escrow Deposit pursuant to
Section 11.1, the entire amount of the Escrow Deposit shall be credited against
any damage award that Christian may obtain against Paxson-38 or PCC as a result
of Paxson-38's breach of this Agreement.
(C) Each party hereby waives any requirement for
security or the posting of any bond or other surety in connection with any
temporary or permanent award of injunctive, mandatory or other equitable relief.
If any action is brought by any party to enforce this Agreement, the party whose
enforcement is sought shall waive the defense that there is an adequate remedy
at law. Nothing herein contained shall be construed as prohibiting either party
from pursuing any other remedies available to it pursuant to the provisions of,
and subject to the limitations contained in, this Agreement for such breach or
threatened breach.
11.3 Expenses. Whether or not the transactions contemplated hereby are
consummated, except as otherwise specifically provided herein, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby will be paid by the party incurring such costs and expenses;
provided that Christian and Paxson-38 shall each pay one-half of all filing fees
required in connection with the applications for the FCC Consent, any filings
required under the HSR Act, and the fees of the Escrow Agent pursuant to the
terms of the Escrow Agreement.
11.4 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement of Christian and Paxson-38.
11.5 Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, agreement or condition herein may be waived
by the party entitled to the benefits thereof only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, representation, warranty, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be given
in writing in a
<PAGE> 44
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manner consistent with the requirements for a waiver of compliance as set forth
in this Section 11.5.
11.6 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally or by facsimile
transmission, mailed by registered or certified mail (return receipt requested),
postage prepaid, or sent by nationally recognized courier service (receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice; provided that notices of a
change of address shall be effective only upon receipt thereof):
(a) If to Christian:
Christian Communications of Chicagoland, Inc.
38 S. Peoria Street
Chicago, IL 60607
Attention: Mr. Jerry Rose
Telecopy: (312) 433-3840
with copies (which shall not constitute notice)
to:
Baker & Hostetler
1050 Connecticut Avenue, N.W.
Suite 1100
Washington, DC 20036
Attention: Ann K. Ford, Esq.
Telecopy: (202) 861-1783
(b) If to Paxson-38 or PCC:
Paxson Communications Corporation
601 Clearwater Park Road
West Palm Beach, FL 33401
Attention: Mr. Lowell W. Paxson
Telecopy: (561) 655-9424
<PAGE> 45
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with copies (which shall not constitute notice) to:
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, DC 20036
Attention: John R. Feore, Jr., Esq.
Telecopy: (202) 776-2222
11.7 Assignment. Neither party may assign or transfer its rights,
interests or obligations under this Agreement without the prior written consent
of the other party, except either party may assign all or part of its rights,
interests and obligations under this Agreement to any Affiliate of such party;
provided, however, that (i) such assigning party shall remain liable to the
other party for the satisfactory performance of such assignee's obligations
under this Agreement and (ii) such assignment or delegation does not delay
receipt of the FCC Consent. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
11.8 Governing Law. This agreement shall be governed by the laws of
the State of Florida (but not the laws pertaining to choice of law) as to all
matters, including but not limited to matters of validity, construction, effect,
performance and remedies.
11.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.10 Interpretation. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
11.11 Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto and the documents delivered pursuant to this Agreement embody
the entire agreement and understanding of the parties hereto in respect of the
transactions contemplated by this Agreement. The Exhibits and Schedules hereto
are an integral part of this Agreement and are incorporated by reference herein.
There are no representations, warranties, covenants or agreements made with
respect to the WCFC Assets and the KWOK Assets, except as expressly set forth in
this Agreement and the Exhibits and Schedules hereto.
<PAGE> 46
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11.12 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to other Persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
11.13 Further Assurance. Subject to the terms and conditions of this
Agreement, each party to this Agreement will use commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the exchange of assets contemplated by this
Agreement. From time to time after the Closing Date, without further
consideration, Christian will, at its own expense, execute and deliver, or cause
to be executed and delivered, such documents to Paxson-38 as Paxson-38 may
reasonably request in order to more effectively vest in Paxson-38 good title to
the WCFC Assets and more effectively consummate the exchange of the WCFC Assets
and the assumption of liabilities and obligations by Christian pursuant to this
Agreement. From time to time after the Closing Date, without further
consideration, Paxson-38 will, at its own expense, execute and deliver, or cause
to be executed and delivered, such documents to Christian as Christian may
reasonably request in order to more effectively vest in Christian good title to
the KWOK Assets and more effectively consummate the exchange of the KWOK Assets
and the assumption of liabilities and obligations by Paxson-38 pursuant to this
Agreement.
11.14 Revised Schedules.
(a) Notwithstanding anything to the contrary contained herein,
if Christian has not, as of the date hereof (the "Signing Date"), completed
and/or delivered one or more of the Schedules referred to in this Agreement and
required to be delivered by it pursuant hereto or has not delivered one or more
of the documents required to be delivered by it pursuant hereto, then it shall
be permitted to complete and deliver such Schedules or documents to Paxson-38
after the Signing Date, but in no event later than January 30, 1998; provided,
however, that Christian shall not have the right to complete or otherwise modify
Schedule 2.1(c)(iii), which Schedule is correct and complete in the form
attached hereto. Paxson-38 shall be deemed to have accepted any such revised or
newly delivered Schedules and/or documents unless by no later than 5:00 p.m.,
Eastern Standard Time, on February 4, 1998, it shall have delivered to Christian
a notice terminating this Agreement (a "Paxson-38 Termination Notice"), together
with a certificate from an executive officer of Paxson-38 to the effect that
such revised or newly delivered Schedules and/or documents reflect matters that
could reasonably be expected to result in an increase in the obligations of
Paxson-38 hereunder or under the Paxson-38 Ancillary Documents or losses,
liabilities or damages to Paxson-38 in excess of, in the aggregate, $100,000. If
Paxson-38 delivers to Christian a Paxson-38 Termination Notice in accordance
with the preceding sentence, this Agreement
<PAGE> 47
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shall be terminated effective as of the date Christian receives the Paxson-38
Termination Notice unless Christian delivers to Paxson-38, no later than five
(5) business days following Christian's receipt of a Paxson-38 Termination
Notice, a written notice signed by an executive officer of Christian to the
effect that Christian agrees to a reduction in the Cash Consideration in an
amount equal to the increase in the obligations of Paxson-38 and the losses,
liabilities or damages to Paxson-38 resulting from the matters described by
Christian in the revised or newly delivered Schedules and/or documents,
whereupon the Paxson-38 Termination Notice shall have no force or effect and the
Cash Consideration shall be reduced by such amount. If approval of such revised
or newly delivered Schedules and/or documents is granted or is deemed granted,
any Schedules attached hereto as of the Signing Date and delivered by Christian
which have subsequently been revised shall be deemed to be amended in accordance
with such revised Schedules as of the Signing Date and such late-delivered
Schedules and/or documents shall be deemed delivered by Christian as of the
Signing Date. Christian shall not have the right to deliver any revised or new
Schedules or documents under this Section 11.14 after January 30, 1998.
(b) Notwithstanding anything to the contrary contained herein,
if Paxson-38 has not, as of the Signing Date, completed and/or delivered one or
more of the Schedules referred to in this Agreement and required to be delivered
by it pursuant hereto or has not delivered one or more of the documents required
to be delivered by it pursuant hereto, then it shall be permitted to complete
and deliver such Schedules or documents to Christian after the Signing Date, but
in no event later than January 30, 1998; provided, however, that Paxson-38 shall
not have the right to complete or otherwise modify Schedule 2.1(d)(iii), which
Schedule is correct and complete in the form attached hereto. Christian shall be
deemed to have accepted any such revised or newly delivered Schedules and/or
documents unless by no later than 5:00 p.m., Eastern Standard Time, on February
4, 1998, it shall have delivered to Paxson-38 a notice terminating this
Agreement (a "Christian Termination Notice"), together with a certificate from
an executive officer of Christian to the effect that such revised or newly
delivered Schedules and/or documents reflect matters that could reasonably be
expected to result in an increase in the obligations of Christian hereunder or
under the Christian Ancillary Documents or losses, liabilities or damages to
Christian in excess of, in the aggregate, $100,000. If Christian delivers to
Paxson-38 a Christian Termination Notice in accordance with the preceding
sentence, this Agreement shall be terminated effective as of the date Paxson-38
receives the Christian Termination Notice unless Paxson-38 delivers to
Christian, no later than five (5) business days following Paxson- 38's receipt
of a Christian Termination Notice, a written notice signed by an executive
officer of Paxson-38 to the effect that Paxson-38 agrees to an increase in the
Cash Consideration in an amount equal to the increase in the obligations of
Christian and the losses, liabilities or damages to Christian resulting from the
matters described by Paxson-38 in the revised or newly delivered Schedules
and/or documents, whereupon the Christian
<PAGE> 48
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Termination Notice shall have no force or effect and the Cash Consideration
shall be increased by such amount. If approval of such revised or newly
delivered Schedules and/or documents is granted or is deemed granted, any
Schedules attached hereto as of the Signing Date and delivered by Paxson-38
which have subsequently been revised shall be deemed to be amended in accordance
with such revised Schedules as of the Signing Date and such late- delivered
Schedules and/or documents shall be deemed delivered by Paxson-38 as of the
Signing Date. Paxson-38 shall not have the right to deliver any revised or new
Schedules or documents under this Section 11.14 after January 30, 1998.
ARTICLE 12
GUARANTY
12.1 Guaranty. PCC irrevocably guarantees (the "Guaranty"), as
principal and not as surety, to Christian, its successors and permitted assigns
full and prompt performance by Paxson-38 (which for all purposes hereof shall
include all Affiliates thereof and any assignee(s) of Paxson-38 permitted under
Section 11.7) of all of its obligations under or pursuant to this Agreement and
all Paxson-38 Ancillary Documents in accordance with the terms hereof and
thereof (the "Guaranteed Obligations"). The Guaranty shall apply and survive
until all obligations of Paxson-38 under this Agreement and all Paxson-38
Ancillary Documents are performed and satisfied in accordance with the terms
hereof and thereof. PCC hereby waives any provision of any statute or judicial
decision otherwise applicable hereto which restricts or in any way limits the
rights of any obligee against a guarantor or surety following a default or
failure of performance by an obligor with respect to whose obligations the
guarantee is provided. To the fullest extent permitted by applicable law, PCC
hereby waives diligence, presentment to, demand of payment from and protest of
any Guaranteed Obligation, and also waives notice of acceptance of its guarantee
and notice of protest for nonpayment. To the fullest extent permitted by
applicable law, the obligations of PCC hereunder shall not be affected by (a)
the failure of Christian to assert any claim or demand or to enforce any right
or remedy against Paxson-38 pursuant to the provisions of this Agreement or
otherwise and (b) any rescission, waiver, amendment or modification of, or any
release from any of the terms or provisions of this Agreement or the Paxson-38
Ancillary Documents, unless consented to in writing by Christian and Paxson-38.
12.2 Representations and Warranties of PCC. PCC hereby represents and
warrants to Christian as follows: (i) PCC is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to execute, deliver and
perform this Guaranty according to its terms; (ii) the execution, delivery and
performance of this Guaranty and the consummation of the transactions
contemplated hereby by PCC have been duly authorized by all necessary
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corporate action on the part of PCC; (iii) this Guaranty has been duly executed
and delivered by PCC and constitutes the legal, valid and binding obligation of
PCC enforceable against PCC in accordance with its terms, except as the
enforceability of this Guaranty may be affected by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and by judicial discretion in
the enforcement of equitable remedies; and (iv) the execution, delivery and
performance of this Guaranty: (1) do not require the consent of any third party,
(2) do not conflict with the Certificate of Incorporation or bylaws of PCC, and
(3) do not conflict in any material respect with, result in a material breach
of, or constitute a material default under any law, judgment, order, ordinance,
injunction, decree, rule, regulation or ruling of any court or governmental
authority applicable to PCC or any material contract or agreement to which PCC
is a party or by which PCC may be bound.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Christian, Paxson-38 and PCC have caused this Asset
Exchange Agreement to be signed by their respective duly authorized officers as
of the date first above written.
PAXSON COMMUNICATIONS OF
CHICAGO-38, INC.
By: /s/ Lowell W. Paxson
-----------------------------------------
Name: Lowell W. Paxson
Title: Chairman
CHRISTIAN COMMUNICATIONS OF
CHICAGOLAND, INC.
By: /s/ Jerry K. Rose
-----------------------------------------
Name: Jerry K. Rose
Title: President
PAXSON COMMUNICATIONS CORPORATION HEREBY
JOINS IN THE EXECUTION OF THE FOREGOING
AGREEMENT TO AGREE TO THE PROVISIONS OF
ARTICLE 12 ONLY, AS OF THE DATE FIRST ABOVE
WRITTEN.
PAXSON COMMUNICATIONS CORPORATION
By: /s/ Lowell W. Paxson
-----------------------------------------
Name: Lowell W. Paxson
Title: Chairman
<PAGE> 1
Exhibit 10.193.1
PROGRAMMING AGREEMENT
THIS PROGRAMMING AGREEMENT is made this 26th day of January, 1998, by
and between PAXSON COMMUNICATIONS OF CHICAGO-38, INC., a Florida corporation
("Paxson"), and CHRISTIAN COMMUNICATIONS OF CHICAGOLAND, INC., an Illinois
corporation (the "Programmer").
WHEREAS, Paxson owns and operates Television Station WCFC-TV, Chicago,
Illinois (the "Station"), pursuant to authorizations for the Station issued by
the Federal Communications Commission (the "FCC Licenses");
WHEREAS, affiliates of Paxson own and operate a television broadcast
network, PAX NET ("Network"), that provides programming to television stations
throughout the country;
WHEREAS, Programmer is the prior licensee and owner of the Station and
produces television programming;
WHEREAS, Paxson acquired the Station and the FCC Licenses from
Programmer pursuant to that certain Asset Exchange Agreement between Paxson and
Programmer dated January 26, 1998 (the "Exchange Agreement");
WHEREAS, Programmer is knowledgeable and experienced in the production
of programming for broadcast on the Station and the Network and is familiar with
the needs and interests of the community of license and other areas served by
the Station; and
WHEREAS, Paxson has agreed under the Exchange Agreement to provide
Programmer with broadcast time on the Station and the Network for the broadcast
of Christian programming that is in conformity with FCC policies and consistent
with the terms of this Programming Agreement.
In consideration of the mutual covenants and agreements set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Programmer's Representations and Warranties. Programmer has all
requisite power and authority to execute and deliver this Agreement and to
perform and comply with all of the terms, covenants, and conditions to be
performed and complied with by Programmer hereunder. The execution, delivery,
and performance of this Agreement by Programmer have been duly authorized by all
necessary actions on the part of Programmer. This Agreement has been duly
executed and delivered by Programmer and constitutes the
<PAGE> 2
legal, valid, and binding obligation of Programmer, enforceable against it in
accordance with its terms.
2. Paxson's Representation and Warranties. Paxson has all requisite
power and authority to execute and deliver this Agreement and to perform and
comply with all of the terms, covenants, and conditions to be performed and
complied with by Paxson hereunder. The execution, delivery, and performance of
this Agreement by Paxson has been duly authorized by all necessary actions on
the part of Paxson . This Agreement has been duly executed and delivered by
Paxson and constitutes the legal, valid, and binding obligation of Paxson,
enforceable against it in accordance with its terms.
3. Term. The effective date of this Agreement shall be [insert date of
Closing under Asset Exchange Agreement] and this Agreement shall continue in
force for a term of ten (10) years from that date (the "Term") unless otherwise
terminated as set forth below.
4. Control of Programming. Programmer acknowledges and agrees that
Paxson, as licensee of the Station and the other stations that comprise the
Network, is required by the FCC to control the operation of the Station and such
other Network stations, and that such control includes, but is not limited to,
the right to reject or refuse to broadcast all or such portions of the
Programmer's Christian programming which Paxson believes to be contrary to the
public interest. Programmer also acknowledges Paxson's obligations under the
Communications Act of 1934, as amended, and the rules, regulations and policies
of the FCC to broadcast from time to time programming of local or national
importance, and Programmer agrees that Paxson shall have the right to approve
the content of Programmer's Christian programming and any commercial matter and
to refuse to broadcast or preempt Programmer's Christian programming to
broadcast programming of greater local or national importance or to broadcast
such other programming required by the rules and regulations of the FCC.
5. Program Time. During the Term, Paxson shall make available to
Programmer broadcast time upon the Station or the Network, if applicable, as set
forth in Attachment I to this Agreement. Programmer shall deliver such
programming, at its expense, to the Station's or Network's transmission
facilities or other authorized remote control points as designated by Paxson.
The programming rights granted to Programmer hereunder shall be exclusive to
Programmer and Programmer's programming shall be limited to Christian programs
produced, co-produced or acquired by Programmer the content of which shall be
dedicated to communicating Judeo-Christian values. Without limiting the
generality of the foregoing, Programmer shall not resell such programming time
to any party nor permit such time to be used for "paid programming" without the
written consent of Paxson, and Paxson and Programmer agree that any disputes
between Paxson and Programmer regarding any proposed sale of such programming
time shall be decided by the Review Board pursuant to the procedures set forth
in Section 18 hereof.
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<PAGE> 3
6. Sales. Programmer's national and local advertising availabilities
broadcast on the Station will be those within the first 58 minutes of each hour
of Programmer's programming on the Station. Programmer's advertising
availabilities during Programmer's programming on the Network will be as
follows:
(i) For the hour of Programmer's programming on the Network
indicated in Section (a)(iii) of Attachment I (Sunday through Thursday, 12:00
midnight to 1:00 a.m.), half (i.e., seven minutes) of the availabilities within
the first 58 minutes of such hour within all of the United States covered by the
Network (except the Chicago DMA) and all of the availabilities within the first
58 minutes of such hour in the Chicago DMA; and
(ii) For the second hour of Programmer's programming on the Network
indicated in Section (a)(v) of Attachment I (Monday through Saturday from 6:00
a.m. to 7:00 a.m.), all of the availabilities within the first 58 minutes of
such hour.
Upon the execution of this Agreement, Programmer shall execute and deliver the
Representation Agreement in the form of Attachment II hereto, pursuant to which
Programmer agrees to utilize the PAX NET Sales Representative for all national
and network spot sales broadcast during Programmer's programming on the Station
or the Network and to pay PAX NET Sales Representative a 15% commission for all
such spot sales. Notwithstanding the foregoing, Programmer may provide to a
sponsor of Programmer's programming on the Station or on the Network, with the
written consent of Paxson, Programmer's national advertising availabilities
within the time that the programming sponsored by such sponsor will be broadcast
(the "Sponsored Programming") on the Station or the Network. Paxson and
Programmer agree that any disputes between them regarding any such Sponsored
Programming shall be decided by the Review Board pursuant to the procedures set
forth in Section 18 hereof. Programmer shall have the right to sell and retain
all revenue from all local advertising availabilities broadcast on the Station
during its programming.
7. Indemnification; Force Majeure.
(a) Programmer's Indemnification. Programmer shall indemnify and
hold harmless Paxson from and against (i) any and all claims, losses, costs,
liabilities, damages, forfeitures and expenses (including reasonable legal fees
and other expenses incidental thereto) of every kind, nature and description
(collectively, "Damages") resulting from Programmer's breach of any
representation, warranty, covenant or agreement contained in this Agreement or
(ii) any claim for slander, defamation or similar causes of action as a result
of the broadcast of the Programming on the Station or Network.
(b) Paxson's Indemnification. Paxson shall indemnify and hold
harmless Programmer from and against any and all Damages resulting from Paxson's
breach of any representation, warranty, covenant or agreement contained in this
Agreement.
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<PAGE> 4
(c) Limitation. Neither Paxson nor Programmer shall be entitled to
indemnification pursuant to this section unless such claim for indemnification
is asserted in writing delivered to the other party.
(d) Force Majeure. Any failure or impairment of the Station's or
Network's facilities or any delay or interruption in the broadcast of the
Programming, in whole or in part, due to Acts of God, strikes, lockouts,
material restrictions by any governmental authority, civil riot, floods,
earthquakes or other natural disasters and any other cause not reasonably within
the control of Paxson, or for power reductions necessitated for maintenance of
the Station or the other stations in the Network, or for maintenance of other
stations located on the tower from which the Station or the other stations in
the Network will be broadcasting, shall not constitute a breach of this
Agreement.
8. Termination. This Agreement may be terminated by either Paxson or
Programmer by written notice to the other upon the occurrence of any of the
following:
(a) the written consent of both parties;
(b) there has been a material change in FCC rules, policies or
precedent that would cause this Agreement to be in violation thereof and such
change, is in effect and not the subject of an appeal or further administrative
review and this Agreement cannot be reformed, in a manner reasonably acceptable
to Programmer or Paxson, to remove and/or eliminate the violation; or
(c) If Programmer ceases to be a not-for-profit Christian
organization.
9. Assignment.
(a) Neither this Agreement nor any of the rights, interests or
obligations of either party hereunder shall be assigned, encumbered,
hypothecated or otherwise transferred without the prior written consent of the
other party (it being understood that no such consent of Programmer is required
upon any sale of all or substantially all of the assets of the Station or a sale
of all of the issued and outstanding capital stock of Paxson or any sale of all
or substantially all of the Network stations); provided, however, that Paxson
shall be required to assign its rights and interests hereunder, with respect to
Programmer's programming to be broadcast on the Station, including programming
to be broadcast on a portion of the Station's DTV allocation as set forth in
Section II of Attachment I hereto, to any party that acquires the FCC license
for the Station and, with respect to Programmer's programming to be broadcast on
the Network, to any party that acquires the Network, and in each case such party
shall expressly agree to assume the obligations of Paxson hereunder.
(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted and required
assigns.
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<PAGE> 5
10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
11. Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties relating to the provision of programming for the
Station and the Network. No amendment, waiver of compliance with any provision
or condition hereof, or consent pursuant to this Agreement will be effective
unless evidenced by an instrument in writing signed by the parties.
12. Headings. The headings are for convenience only and will not
control or affect the meaning or construction of the provisions of this
Agreement.
13. Governing Law. The obligations of Paxson and Programmer are
subject to applicable federal, state and local law, rules and regulations,
including, but not limited to, the Communications Act of 1934, as amended, and
the Rules and Regulations of the FCC. The construction and performance of the
Agreement will be governed by the laws of the State of Florida.
14. Notices. All notices, demands and requests required or permitted to
be given under the provisions of this Agreement shall be (i) in writing, (ii)
sent by telecopy (with receipt personally confirmed by telephone), delivered by
personal delivery, or sent by commercial delivery service or certified mail,
return receipt requested, (iii) deemed to have been given on the date telecopied
with receipt confirmed, the date of personal delivery, or the date set forth in
the records of the delivery service or on the return receipt, and (iv) addressed
as follows:
To Programmer: Christian Communications of Chicagoland, Inc.
38 S. Peoria Street
Chicago, IL 60607
Facsimile: (312) 433-3840
Telephone: (312) 433-3830
To Paxson: Paxson Communications of Chicago-38, Inc.
601 Clearwater Park Road
West Palm Beach, Florida 33401
Facsimile: (561) 655-9424
Telephone: (561) 659-4122
or to any such other or additional persons and addresses as the parties may from
time to time designate in a writing delivered in accordance with this Section
14.
15. Severability. If any provision of this Agreement or the
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of
- 5 -
<PAGE> 6
this Agreement and the application of such provision to other persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law. In the event that the FCC alters or modifies
its rules or policies in a fashion which would raise substantial and material
question as to the validity of any provision of this Agreement, the parties
hereto shall negotiate in good faith to revise any such provision of this
Agreement with a view toward assuring compliance with all then existing FCC
rules and policies which may be applicable, while attempting to preserve, as
closely as possible, the intent of the parties as embodied in the provision of
this Agreement which is to be so modified.
16. No Joint Venture. Nothing in this Agreement shall be deemed to
create a joint venture between Paxson and the Programmer.
17. Guaranty.
(a) Guaranty. Paxson Communications Corporation ("PCC") irrevocably
guarantees (the "Guaranty"), as principal and not as surety, to Programmer, its
successors and permitted assigns full and prompt performance by Paxson (which
for all purposes hereof shall include all Affiliates thereof and any assignee(s)
of Paxson permitted under Section 9) of all of its obligations under or pursuant
to this Agreement in accordance with the terms hereof (the "Guaranteed
Obligations"). The Guaranty shall apply and survive until all obligations of
Paxson under this Agreement are performed and satisfied in accordance with the
terms hereof. PCC hereby waives any provision of any statute or judicial
decision otherwise applicable hereto which restricts or in any way limits the
rights of any obligee against a guarantor or surety following a default or
failure of performance by an obligor with respect to whose obligations the
guarantee is provided. To the fullest extent permitted by applicable law, PCC
hereby waives diligence, presentment to, demand of payment from and protest of
any Guaranteed Obligation, and also waives notice of acceptance of its guarantee
and notice of protest for nonpayment. To the fullest extent permitted by
applicable law, the obligations of PCC hereunder shall not be affected by (a)
the failure of Programmer to assert any claim or demand or to enforce any right
or remedy against Paxson pursuant to the provisions of this Agreement or
otherwise and (b) any rescission, waiver, amendment or modification of, or any
release from any of the terms or provisions of this Agreement, unless consented
to in writing by Programmer and Paxson.
(b) Representations and Warranties of PCC. PCC hereby represents
and warrants to Programmer as follows: (i) PCC is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to execute, deliver and
perform this Guaranty according to its terms; (ii) the execution, delivery and
performance of this Guaranty and the consummation of the transactions
contemplated hereby by PCC have been duly authorized by all necessary corporate
action on the part of PCC; (iii) this Guaranty has been duly executed and
delivered by PCC and constitutes the legal, valid and binding obligation of PCC
enforceable against PCC in accordance with its terms, except as the
enforceability of this Guaranty may be affected by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and
- 6 -
<PAGE> 7
by judicial discretion in the enforcement of equitable remedies; and (iv) the
execution, delivery and performance of this Guaranty: (1) do not require the
consent of any third party, (2) do not conflict with the Certificate of
Incorporation or bylaws of PCC, and (3) do not conflict in any material respect
with, result in a material breach of, or constitute a material default under any
law, judgment, order, ordinance, injunction, decree, rule, regulation or ruling
of any court or governmental authority applicable to PCC or any material
contract or agreement to which PCC is a party or by which PCC may be bound.
18. Review Board.
(a) Any dispute between Paxson and Programmer arising out of
or relating to (i) the content of Programmer's programming and of any
commercials or other announcements provided by Programmer for broadcast on the
Station, including, without limitation, Programmer's solicitation of donations,
contributions and other fund raising activities contained in Programmer's
programming, and (ii) any proposed sale by Programmer of programming time to any
other party, including, without limitation, the proposed sale of programming
time to be used for "paid programming," that cannot be resolved by Programmer
and Paxson, may be referred by Programmer or Paxson to the Review Board (as
defined below). The decision of the Review Board with respect to any matter that
is subject to review pursuant to the preceding sentence shall be final and
binding on Paxson and Programmer. Notwithstanding any provision in this
Agreement to the contrary, the Review Board shall not have jurisdiction over
Paxson's exercise of its authority pursuant to Section 4 hereof.
(b) The Review Board shall consist of five members appointed
in accordance with the procedures set forth in this paragraph. Paxson and
Programmer shall each designate two Review Board members, each of whom shall be
ordained ministers. The four Review Board members designated by Paxson and
Programmer shall then designate a fifth ordained minister who shall act as
Chairman of the Review Board. Paxson shall have the right, in its sole
discretion, to replace at any time either Review Board member designated by
Paxson upon written notice to Programmer. Programmer shall have the right, in
its sole discretion, to replace at any time either Review Board member
designated by Programmer upon written notice to Paxson. Unless replaced by
written agreement of Paxson and Programmer, the Chairman shall serve for a term
not to exceed one (1) year from his or her designation. The Review Board must
replace or re-elect the Chairman on each anniversary of his or her designation
in accordance with the procedures set forth in this Section.
(c) In the event of any dispute that is subject to review
under this Section 18, either Programmer or Paxson may commence review hereunder
by delivering notice to the other party and each member of the Review Board (a
"Review Notice"). The Review Board's consideration of any dispute under this
provision shall commence no later than fifteen (15) days after Paxson or
Programmer has provided a Review Notice to the other party and the Review Board
members. Any information provided by Paxson or Programmer
- 7 -
<PAGE> 8
to the Review Board shall be submitted in writing and a copy of which shall be
simultaneously provided to the other party. The Review Board decision shall be
issued as expeditiously as possible, but in no event later than thirty (30)
business days after delivery of the Review Notice. The Review Board shall base
its decision, which shall require the affirmative vote of no less than 3 Review
Board members, on the terms of this Agreement, shall render its decision in
writing, and shall deliver a copy of its decision to Programmer and Paxson.
Programmer and Paxson agree to cooperate fully with the Review Board to resolve
any dispute. Programmer and Paxson shall each pay one-half of all costs or
expenses incurred by the Review Board.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
- 8 -
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
PAXSON: PAXSON COMMUNICATIONS
OF CHICAGO-38, INC.
By: /s/ Lowell W. Paxson
-----------------------------------
Name: Lowell W. Paxson
Title: Chairman
PROGRAMMER: CHRISTIAN COMMUNICATIONS OF
CHICAGOLAND, INC.
By: /s/ Jerry K. Rose
-----------------------------------
Name: Jerry K. Rose
Title: President
PAXSON COMMUNICATIONS CORPORATION
HEREBY JOINS IN THE EXECUTION OF THE
FOREGOING AGREEMENT TO AGREE TO THE
PROVISIONS OF SECTION 17 ONLY, AS OF
THE DATE FIRST ABOVE WRITTEN.
GUARANTOR: PAXSON COMMUNICATIONS
CORPORATION
By: /s/ Lowell W. Paxson
-----------------------------------
Name: Lowell W. Paxson
Title: Chairman
<PAGE> 10
ATTACHMENT I
I. Program Time on the Station and PAX NET
(a) If, as of the date (the "Closing Date") Paxson acquires WCFC (the
"Station") from Programmer pursuant to the Asset Exchange Agreement dated
as of January 26, 1998, among Paxson, Programmer and Paxson Communications
Corporation ("PCC") and any time thereafter until the tenth anniversary of
the Closing Date, Programmer's programming is provided to less than 1.6
Million unduplicated cable (or other multichannel service provider)
households in the Chicago Designated Market Area ("Chicago Cable Homes"),
Programmer shall have the following programming rights (the "Programming
Rights") on the Station and PAX NET, as the case may be:
(i) If Programmer's programming is provided to 1.4 Million or more Chicago
Cable Homes but less than 1.6 Million Chicago Cable Homes, then Paxson
shall broadcast on the Station one hour of Programmer's programming
each day, Monday through Saturday, from 6:00 a.m. to 7:00 a.m. and
one hour of Programmer's programming on Sunday from 9:00 a.m. to
10:00 a.m.;
(ii) If Programmer's programming is provided to 1.2 Million or more
Chicago Cable Homes but less than 1.4 Million Chicago Cable
Homes, then Paxson shall broadcast on the Station the
Programmer's programming referred to in clause (a)(i) above
plus one additional hour of Programmer's programming per day,
seven days per week, from 10:00 a.m. to 11:00 a.m.;
(iii) If Programmer's programming is provided to 1 Million or more Chicago
Cable Homes but less than 1.2 Million Chicago Cable Homes, then Paxson
shall broadcast on the Station the Programmer's programming referred
to in clauses (a)(i) and (ii) above plus one hour of Programmer's
programming, Sunday through Thursday, from 12:00 midnight to 1:00 a.m.
and one hour of Programmer's programming on Friday and Saturday from
1:00 a.m. to 2:00 a.m., and Paxson shall broadcast on PAX NET one hour
of Programmer's programming per day, Sunday through Thursday, from
12:00 midnight to 1:00 a.m.;
(iv) If Programmer's programming is provided to more than one but
less than 1 Million Chicago Cable Homes, then Paxson shall
broadcast on the Station four hours of Programmer's
programming per day as follows:
(1) One hour of Programmer's programming, Monday through Saturday,
from 6:00 a.m. to 7:00 a.m. and one hour of Programmer's
programming on Sunday from 9:00 a.m. to 10:00 a.m.;
(2) Two hours of Programmer's programming, seven days per week, from
10:00 a.m. to noon; and
<PAGE> 11
(3) One hour of Programmer's programming, Sunday through Thursday,
from 12:00 midnight to 1:00 a.m. and one hour of Programmer's
programming, Friday and Saturday, from 1:00 a.m. to 2:00 a.m.;
(v) If Programmer's programming is provided to more than one but less
than 1 Million Chicago Cable Homes, Paxson shall broadcast on PAX
NET one hour of Programmer's programming, Monday through Saturday,
from 6:00 a.m. to 7:00 a.m. and one hour of Programmer's
programming, Sunday through Thursday, from 12:00 midnight to 1:00
a.m.;
(vi) If Programmer's programming is not provided to any Chicago Cable
Homes on August 28, 1998, then Paxson shall broadcast on the Station
and PAX NET Programmer's programming as provided in clause (a)(iv)
and (v) above;
(vii) The above times for the Station are Central and the above times for
PAX NET shall be consistent with the schedule utilized by the other
national television networks for their stations in the same or
similar markets as the PAX NET stations. PAX NET includes all
stations owned or time-brokered by PCC or its subsidiaries.
(b) On the Closing Date, Paxson shall deposit in escrow with First Union
National Bank (the "Escrow Agent"), pursuant to an Escrow Agreement in
form and substance acceptable to Paxson, Programmer and the Escrow Agent,
one of the following sums, less any reduction in either such sum pursuant
to paragraph (b)(i) below: $15,000,000, if, on the Closing Date,
Programmer's programming is not provided to any Chicago Cable Homes, or
$6,000,000, if, on the Closing Date, Programmer's programming is provided
to more than one but less than 1 Million Chicago Cable Homes. The amount,
if any, deposited by Paxson with the Escrow Agent on the Closing Date and
all interest earned thereon is referred to herein as the "Escrow Money."
(i) Any amounts paid by Paxson, in its sole discretion, prior to the
Closing Date to purchase cable carriage in the Chicago DMA for
Programmer's programming shall be credited against the amount
Paxson is required to deposit with the Escrow Agent pursuant to
paragraph (b) above. Between the Closing Date and September 30,
1999, Paxson, in its sole discretion, may withdraw and spend all or
part of the Escrow Money to purchase cable carriage in the Chicago
DMA for Programmer's programming, and Programmer shall join with
Paxson in providing such written instructions to the Escrow Agent
as may be required for such payments. The balance remaining in
the escrow as of September 30, 1999, if any, is the "Escrow
Balance";
(ii) If Programmer's programming is provided to more than one but less
than 1 Million Chicago Cable Homes on August 28, 1999, Paxson and
Programmer shall instruct the Escrow Agent to pay Programmer up to
$6,000,000 of the
- 2 -
<PAGE> 12
Escrow Balance, if any, on September 30, 1999, and to pay to
Paxson any amount remaining in escrow after such payment to
Programmer;
(iii) If Programmer's programming is not provided to any Chicago
Cable Homes on August 28, 1999, Paxson and Programmer shall
instruct the Escrow Agent to pay Programmer up to $15,000,000
of the Escrow Balance, if any, on September 30, 1999, and to
pay to Paxson any amount remaining in escrow after such
payment to Programmer; and
(iv) If Programmer's programming is provided to 1 Million or more
Chicago Cable Homes on August 28, 1999, Paxson and Programmer
shall instruct the Escrow Agent to disburse the Escrow Balance
to Paxson on September 30, 1999, and Paxson shall have no
further obligations under this paragraph (b).
(c) The parties agree that Paxson shall use the Carriage Agreement attached
hereto as Exhibit A (the "Carriage Agreement") to seek to obtain
carriage of Programmer's programming on the "first tier" of Chicago
cable or other multichannel provider systems (a "System Operator"). The
Carriage Agreement shall be negotiated and may be modified, by Paxson,
with the consent of Programmer, which consent shall not be unreasonably
withheld or delayed, in such manner as may be necessary to obtain such
carriage.
(d) Carriage of Programmer's programming on Chicago Cable Homes shall be
measured monthly (through Nielsen data, other recognized sources or
affidavits and audits supplied by the System Operator) during the
period ending on the tenth anniversary of the Closing Date. Upon the
request of Paxson, Programmer shall obtain such affidavits or seek such
audits from the System Operators in accordance with the terms of the
Carriage Agreement. Programming Rights shall fluctuate up or down in
accordance with the number of unduplicated Chicago Cable Homes as
outlined in (a) above and shall be commenced or terminated, as the case
may be, within thirty (30) days of the change in the number of Chicago
Cable Homes that results in such commencement or termination.
Programming Rights shall not commence and no adjustment upward in
Programming Rights will be made if a Carriage Agreement is terminated
as a result of a breach by Programmer or a System Operator prior to the
contract expiration date or earlier termination right of a System
Operator. If, as a result of a loss of Chicago Cable Homes, the
Programming Rights on PAX NET are added back at any time, Paxson at its
option may, in lieu of granting such Programming Rights on PAX NET,
purchase those rights for an amount equal to the product of (i) $10
(less $1.00 per year over the ten year period commencing on the Closing
Date) and (ii) the difference between 1.2 million and the number of
Chicago Cable Homes carrying Programmer's programming immediately after
the carriage loss.
(e) Programmer shall not be permitted to broadcast a program on the
Station at the same time such program is carried by a System Operator,
and Programmer shall take such actions, at Programmer's expense, that
are required to prevent such duplication of its programs.
- 3 -
<PAGE> 13
II. DTV Time On the Station
For a period of ten years commencing on the date the FCC permits the
Station to utilize its DTV allocation for simultaneous multichannel
broadcasting, if ever, Paxson shall provide Programmer with a digital channel
(the "Digital Channel") on the Station, subject to the following:
(i) The frequency of the Digital Channel shall be determined by
Paxson, but the bandwidth shall not be less than the Station's
primary digital channel;
(ii) The provision of the Digital Channel to Programmer shall be
subject to all then applicable restrictions and requirements of
the FCC;
(iii) Programmer shall reimburse Paxson for Programmer's Portion of the
demonstrated, direct out-of-pocket operating costs and expenses
incurred by Paxson that are attributable to the broadcast of the
Digital Channel (for the purpose of this provision, "Programmer's
Portion" shall mean the percentage determined by dividing the
bandwidth of the Station's entire DTV allocation into the
bandwidth of the Digital Channel); and
(iv) The programming restrictions contained in Sections 4 and 5 of
the preceding Programming Agreement shall apply to the
programming provided by Programmer for broadcast on the Digital
Channel.
- 4 -
<PAGE> 1
EXHIBIT 21
PAXSON COMMUNICATIONS CORPORATION
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF
INCORPORATION/
NAME ORGANIZATION
- ---- -----------------
FLORIDA
(EXCEPT AS NOTED)
<S> <C>
Excel Marketing, Inc.
Jetstar Development, Inc.
Pax Net, Inc................................................ Delaware
Paxson Communications Television, Inc.
Paxson Communications LPTV, Inc.
Paxson Communications Management Company, Inc.
Paxson Sports Ventures Company, Inc.
Paxson Television Productions, Inc. (formerly -- Paxson Live
Link Productions, Inc.)
PCC Direct (formerly -- Paxson Merchandising Ventures, Inc.)
The Infomall Cable Network, Inc............................. Delaware
The Infomall TV Network, Inc................................ Delaware
Infomall of Los Angeles, Inc.
Travel Channel Acquisition Corporation...................... Delaware
World Travelers Network -- Miami, Inc.
World Travelers Network, Inc.
Paxson Communications of Akron-23, Inc.
Paxson Akron License, Inc.
Paxson Communications of Albany-55, Inc.
Paxson Albany License, Inc.
Paxson Communications of Albuquerque-14, Inc.
Paxson Albuquerque License, Inc.
Paxson Communications of Atlanta-14, Inc.
Paxson Atlanta License, Inc.
Paxson Communications of Battle Creek-43, Inc.
Horizon Broadcasting Corporation............................ Delaware
Paxson Communications of Birmingham-44, Inc.
Paxson Birmingham License, Inc.
Paxson Communications of Boston-46, Inc.
Paxson Communications of Boston-60, Inc.
Paxson Boston License, Inc.
Paxson Communications of Buffalo-51, Inc.
Paxson Buffalo License, Inc.
Paxson Communications of Cedar Rapids-48, Inc.
Paxson Cedar Rapids License, Inc.
Paxson Communications of Charleston-29, Inc.
Paxson Charleston License, Inc.
Paxson Communications of Chicago-38, Inc.
Paxson Chicago License, Inc.
Paxson Communications of Cleveland-67, Inc.
Paxson Communications of Dallas-68, Inc.
Paxson Dallas License, Inc.
United Broadcast Group II, Inc.............................. Texas(1)
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF
INCORPORATION/
NAME ORGANIZATION
- ---- -----------------
FLORIDA
(EXCEPT AS NOTED)
<S> <C>
Paxson Communications of Davenport-67, Inc.
Paxson Davenport License, Inc.
Paxson Communications of Dayton-26, Inc.
Paxson Dayton License, Inc.
Paxson Communications of Decatur-23, Inc.
Paxson Decatur License, Inc.
Paxson Communications of Denver-59, Inc.
Paxson Denver License, Inc.
Paxson Communications of Des Moines-39, Inc.
Paxson Des Moines License, Inc.
Paxson Communications of Detroit-31, Inc.
Paxson Detroit License, Inc.
Paxson Communications of Fayetteville-62, Inc.
Paxson Fayetteville License, Inc.
Paxson Communications of Fresno-61, Inc.
Paxson Fresno License, Inc.
Paxson Communications of Green Bay-14, Inc.
Paxson Green Bay License, Inc.
Paxson Communications of Greensboro-16, Inc.
Paxson Greensboro License, Inc.
Paxson Communications of Greenville-38, Inc.
Paxson Greenville License, Inc.
Paxson Communications of Hartford-18, Inc.
Paxson Communications of Hawaii-66, Inc.
Paxson Hawaii License, Inc.
Paxson Communications of Houston-49, Inc.
Paxson Houston License, Inc.
Paxson Communications of Jackson-51, Inc.
Paxson Jackson License, Inc.
Paxson Communications of Kansas City-50, Inc.
Paxson Kansas City License, Inc.
Paxson Communications of Knoxville-54, Inc.
Paxson Communications of Little Rock-42, Inc.
Paxson Little Rock License, Inc.
Paxson Communications of Los Angeles-30, Inc.
Paxson Los Angeles License, Inc.
Paxson Communications of Los Angeles-63, Inc.
Paxson Communications of Memphis-50, Inc.
Paxson Communications of Miami-35, Inc.
Paxson Miami-35 License, Inc.
Paxson Communications of Milwaukee-55, Inc.
Paxson Milwaukee License, Inc.
Paxson Communications of Minneapolis-41, Inc.
Paxson Minneapolis License, Inc.
Paxson Communications of Mobile-61, Inc.
Paxson Mobile License, Inc.
Paxson Communications of Nashville-28, Inc.
(formerly -- Paxson Communications of Cookeville-28, Inc.)
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF
INCORPORATION/
NAME ORGANIZATION
- ---- -----------------
FLORIDA
(EXCEPT AS NOTED)
<S> <C>
Paxson Tennessee License, Inc.
Paxson Communications of New London-26, Inc.
Paxson Communications of New Orleans-49, Inc.
Paxson Communications of New York-31, Inc.
Paxson New York License, Inc.
Paxson Communications of New York-43, Inc.
Paxson Communications of Odessa-30, Inc.
Paxson Odessa License, Inc.
Paxson Communications of Oklahoma City-62, Inc.
Paxson Oklahoma City License, Inc.
Paxson Communications of Orlando-56, Inc.
Paxson Orlando License, Inc.
Paxson Communications of Philadelphia-61, Inc.
Paxson Philadelphia License, Inc.
Paxson Communications of Phoenix-13, Inc.
Paxson Phoenix License, Inc.
Paxson Communications of Phoenix-51, Inc.
Paxson Communications of Pittsburgh-40, Inc.
Paxson Pittsburgh License, Inc.
Paxson Communications of Portland-23, Inc.
Paxson Portland License, Inc.
Paxson Communications of Providence-69, Inc.
Ocean State Television, L.L.C............................... Delaware(2)
Paxson Communications of Raleigh-Durham-47, Inc.
Paxson Communications of Roanoke-38, Inc.
Paxson Roanoke License, Inc.
Paxson Communications of Sacramento-29, Inc.
Paxson Sacramento License, Inc.
Paxson Communications of Salt Lake City-30, Inc.
Paxson Salt Lake City License, Inc.
Paxson Communications of San Jose-65, Inc.
Paxson San Jose License, Inc.
Paxson Communications of San Juan, Inc.
S&E Networks, Inc........................................... Puerto Rico
Paxson Communications of Scranton-64, Inc.
Paxson Scranton License, Inc.
Paxson Communications of Seattle-24, Inc.
Paxson Seattle License, Inc.
Paxson Communications of Shreveport-21, Inc.
Paxson Shreveport License, Inc.
Paxson Communications of Springfield-34, Inc.
Paxson Springfield License, Inc.
Paxson Communications of St. Croix-15, Inc.
Paxson St. Croix License, Inc.
Paxson Communications of St. Louis-13, Inc.
(formerly -- Paxson Communications of Minneapolis-45,
Inc.)
Paxson Communications of Syracuse-56, Inc.
Paxson Syracuse License, Inc.
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF
INCORPORATION/
NAME ORGANIZATION
- ---- -----------------
FLORIDA
(EXCEPT AS NOTED)
<S> <C>
Paxson Communications of Tampa-66, Inc.
Paxson Tampa-66 License, Inc.
Paxson Communications of Tucson-46, Inc.
Paxson Tucson License, Inc.
Paxson Communications of Tulsa-44, Inc.
Paxson Communications of Washington-60, Inc.
Paxson Communications of Washington-66, Inc.
Paxson Washington License, Inc.
</TABLE>
- ---------------
(1) 80% ownership
(2) 50% ownership
4
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-60819) and the Registration Statement on Form S-8
(No. 333-20163) of Paxson Communications Corporation and its subsidiaries of our
report dated March 13, 1998, appearing in this Form 10-K.
PRICE WATERHOUSE LLP
Fort Lauderdale, Florida
March 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 82,641,444
<SECURITIES> 0
<RECEIVABLES> 5,725,465
<ALLOWANCES> 911,941
<INVENTORY> 0
<CURRENT-ASSETS> 107,220,952
<PP&E> 132,551,185
<DEPRECIATION> 26,654,312
<TOTAL-ASSETS> 1,057,112,974
<CURRENT-LIABILITIES> 20,277,846
<BONDS> 227,958,736
210,986,652
0
<COMMON> 59,014
<OTHER-SE> 367,684,545
<TOTAL-LIABILITY-AND-EQUITY> 1,057,112,974
<SALES> 88,421,453
<TOTAL-REVENUES> 88,421,453
<CGS> 0
<TOTAL-COSTS> 110,355,828
<OTHER-EXPENSES> 1,280,460
<LOSS-PROVISION> 2,011,337
<INTEREST-EXPENSE> 37,728,307
<INCOME-PRETAX> (58,382,222)
<INCOME-TAX> 21,879,260
<INCOME-CONTINUING> (36,502,962)
<DISCONTINUED> 251,192,869
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 188,412,901
<EPS-PRIMARY> 3.50
<EPS-DILUTED> 3.50
</TABLE>
