<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ___________
Commission File Number 1-13452
PAXSON COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 59-3212788
(State or other jurisdiction of (IRS 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
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 Act of 1934
during the proceeding 12 months (or for 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of July 31, 1999:
CLASS OF STOCK NUMBER OF SHARES
- -------------- ----------------
COMMON STOCK-CLASS A, $0.001 PAR VALUE PER SHARE 53,477,372
COMMON STOCK-CLASS B, $0.001 PAR VALUE PER SHARE 8,311,639
<PAGE> 2
PAXSON COMMUNICATIONS CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1999 (unaudited) and December 31, 1998 3
Consolidated Statements of Operations (unaudited)
Three Months Ended June 30, 1999 and 1998 4
Consolidated Statements of Operations (unaudited)
Six Months Ended June 30, 1999 and 1998 5
Consolidated Statement of Changes in
Common Stockholders' Equity
Year Ended December 31, 1998 and Six Months
Ended June 30, 1999 (unaudited) 6
Consolidated Statements of Cash Flows (unaudited)
Six Months Ended June 30, 1999 and 1998 7
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
</TABLE>
2
<PAGE> 3
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................ $ 29,438 $ 49,440
Restricted cash and short-term investments............................... 13,650 18,096
Accounts receivable, less allowance for doubtful accounts
of $4,088 and $3,953, respectively.................................... 34,097 21,391
Program rights........................................................... 69,976 81,867
Prepaid expenses and other current assets................................ 3,674 2,947
----------- ------------
Total current assets............................................... 150,835 173,741
Property and equipment, net................................................ 172,470 178,975
Intangible assets, net..................................................... 854,692 827,973
Investments in broadcast properties........................................ 60,745 74,683
Program rights, net........................................................ 121,180 214,331
Investment in cable network................................................ -- 42,531
Other assets, net.......................................................... 30,438 30,552
----------- ------------
Total assets........................................................ $ 1,390,360 $ 1,542,786
=========== ============
LIABILITIES, REDEEMABLE SECURITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities................................. $ 21,457 $ 25,738
Accrued interest......................................................... 8,437 8,391
Obligations for cable distribution rights ............................... 30,322 50,914
Obligation for satellite distribution ................................... 2,250 --
Obligations for program rights .......................................... 79,359 84,820
Income taxes payable..................................................... 2,022 1,542
Current portion of long-term debt........................................ 471 529
----------- ------------
Total current liabilities........................................... 144,318 171,934
Deferred income taxes...................................................... 16,056 58,109
Obligations for cable distribution rights, net of current portion ......... 16,230 15,400
Obligation for satellite distribution, net of current portion ............. 12,750 --
Obligations for program rights, net of current portion .................... 114,928 154,800
Long-term debt ............................................................ 153,459 145,164
Senior subordinated notes, net............................................. 228,495 228,305
Mandatorily redeemable preferred stock .................................... 556,524 521,401
Class A common stock, $0.001 par value; one vote per share; 150,000,000
shares authorized, 53,366,147 and 52,608,765 shares issued and
outstanding............................................................. 53 53
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 8
Class A common stock warrants.............................................. 1,582 1,582
Stock subscription notes receivable........................................ (1,973) (2,813)
Additional paid-in capital................................................. 323,060 318,935
Deferred option plan compensation.......................................... (13,904) (16,728)
Accumulated deficit........................................................ (161,226) (53,364)
Commitments and contingencies.............................................. -- --
----------- ------------
Total liabilities, mandatorily redeemable preferred stock
and common stockholders' equity.................................. $ 1,390,360 $ 1,542,786
=========== ============
</TABLE>
The accompanying Notes are an integral part of the
consolidated financial statements.
3
<PAGE> 4
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
-----------------------------------
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
Advertising revenues ............................................... $ 57,855 $ 30,376
----------- -----------
Expenses:
Operating ........................................................ 27,950 5,732
Selling, general and administrative .............................. 44,945 25,089
Time brokerage and affiliation fees .............................. 5,074 3,068
Stock-based compensation ......................................... 2,147 4,780
Adjustment of programming to net realizable value................. 70,499 --
Depreciation and amortization .................................... 18,730 10,408
----------- -----------
169,345 49,077
----------- -----------
Operating loss ..................................................... (111,490) (18,701)
Other income (expense):
Interest expense ................................................. (10,699) (10,380)
Interest income .................................................. 1,794 2,459
Other expenses, net .............................................. (670) (253)
Gain on sale of television stations .............................. 18,661 37,273
Equity in loss of unconsolidated investment ...................... -- (1,906)
----------- -----------
(Loss) income before income taxes................................... (102,404) 8,492
Income tax benefit (provision)...................................... 37,499 (3,267)
----------- -----------
Net (loss) income .................................................. (64,905) 5,225
Dividends and accretion on redeemable preferred stock............... (17,827) (9,346)
----------- -----------
Net loss attributable to common stock .............................. $ (82,732) $ (4,121)
=========== ===========
Basic and diluted loss per share:
Loss from operations ............................................... $ (1.35) $ (0.07)
----------- -----------
Net loss ........................................................... $ (1.35) $ (0.07)
=========== ===========
Weighted average shares outstanding ................................ 61,420,661 59,521,236
=========== ===========
</TABLE>
The accompanying Notes are an integral part of the
consolidated financial statements.
4
<PAGE> 5
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
-----------------------------------
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
Advertising revenues ............................................... $ 109,634 $ 62,041
----------- -----------
Expenses:
Operating ........................................................ 58,415 10,248
Selling, general and administrative .............................. 81,814 41,662
Time brokerage and affiliation fees .............................. 8,631 9,656
Stock-based compensation ......................................... 4,294 5,087
Adjustment of programming to net realizable value................. 70,499 --
Depreciation and amortization .................................... 37,356 18,358
----------- -----------
261,009 85,011
----------- -----------
Operating loss ..................................................... (151,375) (22,970)
Other income (expense):
Interest expense ................................................. (21,717) (20,886)
Interest income .................................................. 2,928 8,640
Other expenses, net .............................................. (1,009) (500)
Gain on sale of Travel Channel and television stations ........... 59,453 51,603
Equity in loss of unconsolidated investment ...................... (2,260) (3,196)
----------- -----------
(Loss) income before income taxes................................... (113,980) 12,691
Income tax benefit (provision)...................................... 41,242 (4,823)
----------- -----------
Net (loss) income .................................................. (72,738) 7,868
Dividends and accretion on redeemable preferred stock............... (35,124) (16,429)
----------- -----------
Net loss attributable to common stock .............................. $ (107,862) $ (8,561)
=========== ===========
Basic and diluted loss per share:
Loss from operations ............................................... $ (1.76) $ (0.14)
----------- -----------
Net loss ........................................................... $ (1.76) $ (0.14)
=========== ===========
Weighted average shares outstanding ................................ 61,188,760 60,250,050
=========== ===========
</TABLE>
The accompanying Notes are an integral part of the
consolidated financial statements.
5
<PAGE> 6
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Stock Retained
Common Stock Class A & B Subscription Additional Deferred Option Earnings
---------------- Common Stock Notes Paid-in Plan (Accumulated
Class A Class B Warrants Receivable Capital Compensation Deficit)
------- ------- ------------ ----------- ---------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 .......... $ 51 $ 8 $ 2,316 $(2,813) $285,796 $ (2,205) $ 84,591
Stock issued for acquisitions ......... 1 5,249
Issuance of common stock warrants ..... 1,582
Exercise of Class A and B common
stock warrants ...................... 1 (2,316) 2,315
Deferred option plan compensation ..... 24,314 (24,314)
Stock-based compensation .............. 9,791
Stock options exercised ............... 1,261
Dividends on redeemable and
convertible preferred stock ......... (47,399)
Accretion on redeemable
preferred stock ..................... (2,268)
Net loss .............................. (88,288)
--- --- ------- ------- -------- -------- ---------
Balance at December 31, 1998 .......... 53 8 1,582 (2,813) 318,935 (16,728) (53,364)
Deferred option plan compensation ..... 1,470 (1,470)
Stock-based compensation .............. 4,294
Stock options exercised ............... 2,655
Repayment of stock subscription
receivable...........................
840
Dividends on redeemable and
convertible preferred stock ......... (33,614)
Accretion on redeemable
preferred stock ...................... (1,510)
Net loss .............................. (72,738)
--- --- ------- ------- -------- -------- ---------
Balance at June 30, 1999
(unaudited) ........ $53 $ 8 $ 1,582 $(1,973) $323,060 $(13,904) $(161,226)
=== === ======= ======= ======== ======== =========
</TABLE>
The accompanying Notes are an integral part of the
consolidated financial statements.
6
<PAGE> 7
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
---------------------------
1999 1998
--------- ---------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income.......................................................... $ (72,738) $ 7,868
Adjustments to reconcile net (loss) income to net cash used in Operating
activities:
Depreciation and amortization............................................ 37,356 18,358
Stock-based compensation................................................. 4,294 5,087
Program rights amortization.............................................. 42,593 --
Payments for cable distribution rights................................... (20,592) --
Program rights payments and deposits..................................... (57,487) (23,065)
Provision for doubtful accounts.......................................... 4,554 1,354
Adjustment of programming to net realizable value........................ 70,499 --
Deferred income tax (benefit) provision.................................. (43,028) 4,823
Loss on sale or disposal of assets....................................... 194 232
Equity in loss of unconsolidated investment.............................. 2,260 3,196
Gain on sale of Travel Channel and television stations................... (59,453) (51,603)
Changes in assets and liabilities:
Decrease (increase) in restricted cash................................. 4,446 (5,400)
Increase in accounts receivable........................................ (12,428) (3,289)
Increase in prepaid expenses and other current assets.................. (739) (1,420)
Decrease in other assets............................................... 2,438 3,568
(Decrease) increase in accounts payable and accrued liabilities........ (5,302) 6,980
Increase (decrease) in accrued interest................................ 47 (246)
Decrease in current income taxes payable............................... 480 --
--------- ---------
Net cash used in operating activities................................ (102,606) (33,557)
--------- ---------
Cash flows from investing activities:
Acquisitions of broadcasting properties.................................. (38,756) (408,612)
Decrease (increase) in investments in broadcast properties............... 8,724 (66,962)
Decrease in deposits on broadcast properties............................. 3,681 32,171
Decrease in cash held by qualified intermediary.......................... -- 418,950
Purchases of property and equipment...................................... (16,178) (41,361)
Distribution received from unconsolidated investment..................... -- 2,947
Proceeds from sales of Travel Channel and television stations............ 113,401 65,618
--------- ---------
Net cash provided by investing activities............................ 70,872 2,751
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of exchangeable and convertible
preferred stock, net.................................................... -- 261,500
Proceeds from issuance of long-term debt.................................. 9,729 2,000
Repayments of long-term debt.............................................. (1,492) (231)
Proceeds from exercise of common stock options, net....................... 2,655 644
Repayments of stock subscription notes receivable......................... 840 --
--------- ---------
Net cash provided by financing activities............................ 11,732 263,913
--------- ---------
(Decrease) increase in cash and cash equivalents............................. (20,002) 233,107
Cash and cash equivalents at beginning of period............................. 49,440 82,641
Cash and cash equivalents at end of period................................... $ 29,438 $ 315,748
========= =========
</TABLE>
The accompanying Notes are an integral part of the
consolidated financial statements.
7
<PAGE> 8
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
---------------------------
1999 1998
--------- ---------
(Unaudited)
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid for interest............................................ $ 19,200 $ 19,917
========= =========
Cash paid for income taxes........................................ $ 1,306 $ 230
========= =========
Non-cash operating and financing activities:
Accretion of discount on senior subordinated notes.............. $ 190 $ 167
========= =========
Issuance of common stock for acquisition.......................... $ -- $ 5,250
========= =========
Dividends accrued on redeemable preferred stock................... $ 33,614 $ 15,657
========= =========
Discount accretion on redeemable securities....................... $ 1,510 $ 772
========= =========
Satellite distribution............................................ $ 15,000 $ --
========= =========
Sale of KWOK in exchange for WCPX................................. $ 30,000 $ --
========= =========
</TABLE>
The accompanying Notes are an integral part of the
consolidated financial statements.
8
<PAGE> 9
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Paxson Communications Corporation's (the "Company") financial information
contained in the financial statements and notes thereto as of June 30, 1999 and
for the six and three month periods ended June 30, 1999 and 1998, is unaudited.
In the opinion of management, all adjustments necessary for the fair
presentation of such financial information have been included. These
adjustments are of a normal recurring nature. There have been no changes in
accounting policies since the period ended December 31, 1998. The composition
of accounts has changed since December 31, 1998 to reflect the Company's sale
of its Investment in cable network and incurrence of its obligation for
satellite distribution.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. Certain reclassifications have been made to the
prior year's financial statements to conform with the 1999 presentation. These
financial statements, footnotes and discussions should be read in conjunction
with the financial statements and related footnotes and discussions contained
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1998, the definitive proxy statement for the annual meeting of stockholders
held April 30, 1999, and the Form 10-Q for the quarter ended March 31, 1999,
all of which were filed with the United States Securities and Exchange
Commission.
2. Gain on Sale of Travel Channel and Television Stations
In February 1999, the Company sold its 30% interest in The Travel Channel,
L.L.C., a joint venture with Discovery Communications, Inc., for aggregate
consideration of approximately $55 million and realized a pre-tax gain of
approximately $17 million. Of the consideration received, approximately $20.1
million was utilized to pay current obligations for cable distribution rights.
The results of operations of The Travel Channel, L.L.C. have been included in
the Company's June 30, 1998 and 1999 consolidated statement of operations using
the equity method of accounting through the date of sale.
In February 1999, the Company completed its acquisition of WCPX in Chicago by
transferring its interest in KWOK in San Francisco as partial consideration for
WCPX. In connection with the transfer of ownership of KWOK, the Company
recognized a pre-tax gain of approximately $23.8 million.
In May and June 1999, the Company completed its sale of four television
stations serving the Dayton, Ohio, Green Bay, Wisconsin, Champaign/Decatur,
Illinois, and New York City, New York markets for total consideration of
approximately $61 million. The Company recognized pre-tax gains of
approximately $18.7 million in connection with these sales.
3. Satellite Distribution Rights
During January 1999, the Company entered into an agreement with a satellite
television provider for carriage on its system in exchange for advertising
credits on PAX TV equaling $15 million. The advertising credit is on an
available time basis at the then prevailing rates not to exceed $7.5 million
per year. Satellite distribution rights are amortized over seven years using
the straight line method. An estimate of the advertising credit which will be
utilized within the next year is included in current liabilities.
4. Redeemable Preferred Stock
In each of March and June 1999, the Company paid dividends of approximately
$1.9 million by the issuance of additional shares of Series A Convertible
Preferred Stock. At June 30, 1999, there were no accrued and unpaid dividends
on the Series A Convertible Preferred Stock. At June 30, 1999, there were 8,304
shares of Series A Convertible Preferred Stock issued and outstanding.
9
<PAGE> 10
During the six months ended June 30, 1999, the Company accrued dividends of
approximately $3.2 million, $12.3 million and $14.2 million on, respectively,
the Junior Preferred Stock 12%, Exchangeable Preferred Stock 12 1/2% and Junior
Exchangeable Preferred Stock 13 1/4%. During the six months ended June 30,
1999, the Company paid dividends of approximately $12 million by the issuance
of 12,050 additional shares of Exchangeable Preferred Stock 12 1/2% and
dividends of approximately $14 million by the issuance of 1,401 additional
shares of Junior Exchangeable Preferred Stock 13 1/4%. Accrued and unpaid
dividends since the last dividend payment date aggregated approximately $23
million, $4 million and $3.3 million on, respectively, the Junior Preferred
Stock 12%, Exchangeable Preferred Stock 12 1/2% and Junior Exchangeable
Preferred Stock 13 1/4% at June 30, 1999. At June 30, 1999, the Company had
204,847 shares of Exchangeable Preferred Stock 12 1/2% and 22,571 shares of
Exchangeable Preferred Stock 13 1/4% issued and outstanding. There were no
changes to the shares authorized, issued and outstanding on the Junior
Preferred Stock 12% during the six months ended June 30, 1999.
5. Notes Receivable from the Sale of Stock
During December 1996, the Company approved a program under which it extended
loans to certain members of management for the purchase of Company common stock
in the open market by those individuals. The loans are full recourse promissory
notes bearing interest at 5.75% per annum and are collateralized by the shares
of stock purchased with the loan proceeds. All of these loans matured in March
1999. The Company is extending all outstanding loans under this program until
March 31, 2001. During the six months ended June 30, 1999, approximately
$951,000 of principal and interest was repaid to the Company under this
program. The outstanding principal balance on such loans was approximately $2
million at June 30, 1999 and is reflected as stock subscription notes
receivable in the accompanying balance sheet.
6. Per Share Data
Basic and diluted loss per share from continuing operations was computed by
dividing the loss from continuing operations less dividends and accretion on
redeemable preferred stock by the weighted average number of common shares
outstanding during the period. Because of per share losses from continuing
operations, the Company's presentation of diluted earnings per share is the
same as that of basic earnings per share. At June 30,1999 and 1998,
respectively, there were outstanding 9,559,780 and 9,786,027 stock options,
395,500 and 457,238 Class A and B common stock warrants, and at June 30, 1999,
5,189,375 shares of Class A common stock reserved for possible future issuance
in connection with the Series A Convertible Preferred Stock. These securities
that could potentially dilute earnings per share in the future were not
included in the computation of diluted earnings per share because to do so
would have been antidilutive for the periods presented.
7. Adjustment of Programming to Net Realizable Value
During the second quarter of 1999, the Company wrote down certain of its
program rights by a total of approximately $70.5 million to its expected net
realizable value. The write down was a result of the Company's ongoing
evaluation of its anticipated future usage of its programming, and the
anticipated future ratings and related advertising revenues to be generated in
connection with the Company's programming, all relative to the carrying value
of the related program rights.
As part of its continuing process of obtaining information and revising its
estimates as to the recoverability of programming rights, the Company has
modified its program rights amortization policy for purchased syndicated
programming to the greater of straight line per run or straight line over the
life of the contract. The effect of this change in accounting estimate will be
accounted for prospectively.
8. Subsequent Event
In August 1999, CAP Communications, Inc., a company beneficially owned by
family members of the Company's principal shareholder, Mr. Lowell W. Paxson,
repaid the notes receivable of $15.5 million and $15 million for WBPX and WHPX,
respectively. These amounts were recorded as investments in broadcast
properties in the accompanying consolidated balance sheets.
10
<PAGE> 11
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's principal business is the ownership and operation of the largest
broadcast television station group in the United States. On August 31, 1998,
the Company launched PAX TV, the programming that the Company provides to its
owned, operated and affiliated television stations and to certain cable system
affiliates and satellite providers. PAX TV programming consists of
family-friendly traditional entertainment television programs that have had or
are having successful first runs on television, as well as original programs.
Prior to launching PAX TV, the Company aired long form paid programming
consisting primarily of infomercials on its television distribution system. The
Company continues to carry infomercials at significantly reduced inventory
levels. Certain of the Company's stations broadcasting PAX TV were and continue
to be operated pursuant to time brokerage or affiliation agreements. The
Company's consolidated operating revenues and expenses include the operating
results of time brokered stations. In February 1999, the Company sold its 30%
interest in the Travel Channel, L.L.C., a cable television joint venture with
Discovery Communications, Inc. The Company's interest in the operating results
of the Travel Channel has been included in the consolidated financial
statements using the equity method of accounting through the date of sale.
The Company's operating data throughout the periods discussed have been
affected significantly by the costs incurred to launch and support PAX TV. The
Company's costs have decreased from 1998 post-launch levels but will remain
significantly higher than prior to the launch of PAX TV. The Company's primary
operating costs include commissions on revenues, employee salaries,
administrative expenses and payments with respect to syndicated program rights,
cable distribution, ratings services and promotional advertising.
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.
The Company believes that its group of television stations comprises a valuable
national broadcasting distribution infrastructure. PAX TV reaches US television
households through a distribution system comprised of broadcast television
stations, cable television systems in markets not served by a PAX TV station
and nationwide through satellite television providers. According to Nielsen
Television Index ("NTI"), as of June 1999, the PAX TV network reached 76% of US
television households through broadcast, cable and satellite distribution. Upon
completion of pending transactions, stations broadcasting PAX TV will include
123 broadcast television stations consisting of 72 stations which are owned and
operated by the Company or in which the Company has an economic interest and 51
non-owned or operated PAX TV affiliates. These stations reach all of the top 20
markets and 43 of the top 50 markets. Additionally, the Company has entered
into agreements with multiple cable system operators whereby the Company
receives carriage of its PAX TV programming in markets not currently served by
the Company's broadcast television station group and has entered into
nationwide distribution agreements with two satellite television providers who
carry PAX TV to their subscribers.
This report contains forward-looking statements which are made pursuant to the
safe harbor provisions of the Securities Litigation Reform Act of 1995.
Statements as to what the Company "believes", "intends", "expects",
"anticipates" and other similarly anticipatory expressions are forward-looking
and are made only as of the date of this Report. Readers of this Report are
cautioned not to place undue reliance on such forward-looking statements as
they are subject to risks and uncertainties which could cause actual results to
differ materially from those discussed in the forward-looking statements and
from historical results of operations. Among the risks and uncertainties which
could cause such a difference are those relating to the Company's high level of
indebtedness and the restrictions placed on the Company's business and
operations by the terms of its indebtedness and its outstanding preferred
stock, the risks relating to the comprehensive governmental regulation of the
Company's businesses including the restrictions on multiple broadcast property
ownership, the broadcast licensing renewal requirements, the risks of industry
and economic conditions which could adversely affect the Company's business
11
<PAGE> 12
operations and the other factors described in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998. The Company's launch of PAX TV
entails certain additional risks and uncertainties including those risks
associated with the launch of a new programming service, the ability to obtain
desirable programming at a financially feasible cost and the ability to
profitably sell advertising spots during such programming.
Preparation of financial statements requires management to make estimates and
assumptions that affect the reported amount (contingent or otherwise) of assets
and liabilities at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected financial
information as a percentage of revenues.
Statements of Operations
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1999 1998 1999 1998
----- ----- ------ -----
<S> <C> <C> <C> <C>
Advertising revenues.................................. 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
Operating............................................. 48.3 18.9 53.3 16.5
Selling, general and administrative................... 77.7 82.6 74.6 67.1
Time brokerage and affiliation fees .................. 8.8 10.1 7.9 15.6
Stock-based compensation.............................. 3.7 15.7 3.9 8.2
Adjustment of programming to net realizable value..... 121.9 -- 64.3 --
Depreciation and amortization ........................ 32.3 34.3 34.1 29.6
------ ------ ------ ------
Total operating expenses.............................. 292.7 161.6 238.1 137.0
------ ------ ------ ------
Operating loss ....................................... (192.7) (61.6) (138.1) (37.0)
Other income (expense):
Interest expense ..................................... (18.5) (34.2) (19.8) (33.7)
Interest income ...................................... 3.1 8.1 2.7 13.9
Other expenses, net .................................. (1.2) (0.8) (0.9) (0.8)
Gain on sale of Travel Channel and television
stations ............................................ 32.3 122.7 54.2 83.2
Equity in loss of unconsolidated investment .......... 0.0 (6.3) (2.1) (5.1)
------ ------ ------ ------
(Loss) income before income taxes..................... (177.0) 27.9 (104.0) 20.5
Income tax benefit (provision)........................ 64.8 (10.7) 37.6 (7.8)
------ ------ ------ ------
Net (loss) income..................................... (112.2) 17.2 (66.4) 12.7
====== ====== ====== ======
</TABLE>
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
Consolidated revenues for the three months ended June 30, 1999, increased 90%
(or $27.5 million) to $57.9 million over the same period in 1998. This increase
was primarily due to the launch of PAX TV and increased distribution via
television, cable systems and satellite.
Expenses from operations for the three months ended June 30, 1999, increased
245% (or $120.3 million) to $169.3 million over the same period in 1998. The
largest increase in expense relates to the programming rights adjustment to net
realizable value of $70.5 million, reflecting a decrease in programming value
due to lower anticipated future usage, ratings and related revenues for these
programs. The majority of the remaining expense increases were incurred as a
12
<PAGE> 13
result of the launch of PAX TV and costs associated with operating new
television stations. These increases primarily included program rights
amortization of $19.5 million, increased selling, general and administrative
costs, such as commissions and bad debt provisions of $7.8 million, promotion
costs of $3.2 million, and other selling, general and administrative costs of
$8.8 million, which were higher primarily due to additional employees hired and
regional sales offices added, and higher depreciation and amortization of $8.3
million, primarily related to assets acquired. These increases were partially
offset by lower stock based compensation of $2.6 million.
Interest expense for the three months ended June 30, 1999, increased to $10.7
million or 3% over the same period in 1998 primarily due to a greater level of
senior debt throughout the period. At June 30, 1999, total long-term debt and
senior subordinated notes were $382 million compared with the balance of $353
million in the prior year.
Interest income for the three months ended June 30, 1999, decreased from $2.5
million to $1.8 million or 27% over the same period in 1998 primarily due to
the reinvestment of cash held by qualified intermediary into television station
assets.
Gain on sale of television stations reflects the Company's sale of its interest
in four television stations during the second quarter.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Consolidated revenues for the six months ended June 30, 1999, increased 77% (or
$47.6 million) to $109.6 million over the same period in 1998. This increase
was primarily due to the launch of PAX TV and increased distribution via
television, cable systems and satellite.
Expenses from operations for the six months ended June 30, 1999, increased 207%
(or $176 million) to $261 million over the same period in 1998. The largest
increase in expense relates to the programming rights adjustment to net
realizable value of $70.5 million, reflecting a decrease in programming value
due to lower anticipated future usage, ratings and related revenues for these
programs. The majority of the remaining expense increases were incurred as a
result of the launch of PAX TV and costs associated with operating new
television stations. These increases primarily included program rights
amortization of $42.6 million, increased selling, general and administrative
costs, such as commissions and bad debt provisions of $10.5 million, promotion
costs of $6.8 million, and other selling, general and administrative costs of
$22.7 million, which were higher primarily due to additional employees hired
and regional sales offices added, increased technical costs of $1.3 million and
higher depreciation and amortization of $19.0 million, primarily related to
assets acquired. These increases were partially offset by lower stock based
compensation of $0.8 million.
Interest expense for the six months ended June 30, 1999, increased to $21.7
million or 4% over the same period in 1998 primarily due to a greater level of
senior debt throughout the period.
Interest income for the six months ended June 30, 1999, decreased from $8.6
million to $2.9 million or 66% over the same period in 1998 primarily due to
the reinvestment of cash held by qualified intermediary into television station
assets.
Gain on sale of Travel Channel and television stations reflects the Company's
sale of its interest in the Travel Channel, the transfer of the Company's
interest in KWOK and the sale of four television stations during the second
quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at June 30, 1999 and December 31, 1998 was $6.5
million and $1.8 million, respectively, and the ratio of current assets to
current liabilities was 1.05:1 and 1.01:1 on such dates, respectively. Working
capital increased primarily due to the proceeds from the Travel Channel and
television station sales during the six month period.
Cash used in operations of approximately $102.6 million and $33.6 million for
the six months ended June 30, 1999 and 1998, respectively, primarily reflects
the increase in operating costs incurred in connection with the operation of
PAX TV and the increase in related cable distribution rights and programming
rights payments. Cash provided by investing activities primarily reflects the
proceeds from the sale of the Travel Channel and television stations, use of
the cash held by qualified intermediary in the prior year, the acquisitions of
13
<PAGE> 14
and investments in broadcast properties and purchases of equipment for acquired
and existing properties. Cash provided by financing activities primarily
reflects the proceeds from long term debt net of repayments, the exercise of
common stock options and repayments of stock subscription notes receivable.
In connection with the amendment and restatement of the Company's $122 million
senior Credit Facility, in April 1998 the Company placed approximately $22.4
million in an interest bearing escrow in order to pre-fund interest payments
under this facility. The Company had approximately $13.6 million remaining in
an interest bearing escrow as of June 30, 1999.
In August 1998, the Company entered into a $50 million Equipment Facility which
matures the first business day of October 2003. The draw-down period of the
Equipment Facility expires in August 1999. All borrowings under this facility
are secured by the equipment purchased with the proceeds drawn. At June 30,
1999, the Company had borrowings of approximately $29.9 million outstanding
under the Equipment Facility. Subsequent to June 30, 1999, the Company has
borrowed an additional $1 million. The Company intends to use the Equipment
Facility to fund the majority of its capital expenditure needs through August
1999. The Company is in discussions with the lender to extend the draw-down
period under this Facility.
The Company has generated operating losses since the launch of PAX TV on August
31, 1998. While the Company expected to incur operating losses during the
startup phase of PAX TV, it has revised its expectations as to the length of
time such operating losses will continue in order to better reflect the period
of time required for a new network such as PAX TV to build an effective sales
and marketing operation and gain acceptance among advertisers. While ratings
for PAX TV and network and long form advertising revenues have generally met
the Company's expectations, the Company is adjusting its sales and marketing
strategies to focus on agency rather than direct sales of advertising airtime
in order to increase non-network advertising revenue. The Company believes that
as more historical ratings data for PAX TV become available, and as the Company
continues to refine its sales and marketing efforts, advertisers will become
more familiar with PAX TV and are likely to increase PAX TV's participation in
quarterly and annual advertising expenditure cycles. The Company also intends
to enter into joint services agreements for stations in markets outside the top
40 in order to increase revenue and reduce expenses.
The Company's primary capital requirements are for the funds required to
complete announced acquisitions of broadcasting properties, capital
expenditures on existing and acquired properties, syndicated programming rights
payments, cable carriage and promotion payments, debt service payments and the
Company's working capital requirements.
As of June 30, 1999, the Company's programming contracts require collective
payments by the Company of approximately $318.3 million as follows (in
thousands):
Obligations Program
for Program Rights
Rights Commitments Total
----------- ----------- --------
1999 (July - December)............. $ 41,042 $ 35,529 $ 76,571
2000 .............................. 67,618 20,450 88,068
2001 .............................. 52,153 13,110 65,263
2002 .............................. 31,127 15,255 46,382
2003 .............................. 2,347 17,509 19,856
Thereafter through 2005 ........... -- 22,147 22,147
-------- -------- --------
$194,287 $124,000 $318,287
======== ======== ========
The Company has also committed to purchase at similar terms additional future
series episodes of its licensed programs should they be made available.
14
<PAGE> 15
As of June 30, 1999, obligations for cable distribution rights require
collective payments by the Company of approximately $50.7 million over such
periods as follows (in thousands):
1999 (July - December) ................................. $ 30,322
2000 .................................................... 11,785
2001 .................................................... 6,169
2002 .................................................... 1,886
2003 .................................................... 180
Thereafter .............................................. 358
--------
50,700
Less: Amount representing interest ...................... (4,148)
--------
Present value of cable rights payable ................... $ 46,552
========
The Company has taken steps to defer obligations on cable distribution rights
by offering cable system operators the option of taking their payments in
common stock of the Company or cash in the future when the obligations become
due. If the cable system operators elect to take their payments in Company
stock this year, the Company's cash payment obligations will be reduced by
approximately $16 million.
As of June 30, 1999, the Company had agreements to purchase significant assets
of, or to enter into time brokerage and financing arrangements with respect to,
broadcast properties:
Anticipated to close in 1999 (July - December)............ $ 54,785
Anticipated to close in 2000 and thereafter .............. 63,011
--------
$117,796
========
The completion of such acquisitions or investments in broadcast properties is
subject to a variety of factors and the satisfaction of various conditions
including the receipt of regulatory approvals. There can be no assurance that
any of such investments will be completed.
The Company's liquidity is significantly affected by its operating performance
and capital commitments for programming, cable distribution and acquisitions as
described above, and by its current debt service and working capital
requirements and its ability to obtain debt financing, liquidate certain
investments in broadcast properties and dispose of non-core assets. The Company
is also subject to certain minimum liquidity requirements under the terms of
the Equipment Facility. As the Company's currently available sources of
liquidity will be insufficient to meet the Company's cash needs by year end,
the Company is pursuing alternatives for raising additional capital and is in
active negotiations with various financial and strategic investors which, if
successfully concluded, would likely involve the Company raising funds through
the issuance of additional shares of preferred or common stock or related
securities. The Company is also pursuing other measures to address its short
term liquidity position, such as the sale of non-essential broadcasting
stations, deferring or abandoning non-essential capital expenditures on
existing properties and additional operating expense reductions. The Company
cannot be sure that it will be able to raise the additional capital it needs in
the short term on terms which will be acceptable to it, nor can the Company be
sure that it will be able to implement other measures which will be sufficient
to address its short term liquidity needs. Should the Company be unable to
raise sufficient additional capital in the short term, its business could be
materially adversely affected.
The Company will also require additional financing to pursue its business
strategy and fund its capital requirements in the year 2000 and thereafter. The
amount of additional financing needed could be increased to the extent that the
Company pursues additional acquisitions, incurs additional programming rights
obligations, enters into additional cable carriage agreements or requires
additional working capital as a result of operating deficits. The Company
cannot be sure that it will be able to obtain the necessary additional
financing on terms acceptable to it. Should the Company be unable to raise the
necessary additional capital, its ability to pursue its business strategy in
the year 2000 and thereafter would be adversely affected.
YEAR 2000 CONSIDERATIONS
The "Year 2000 issue" is the result of computer programs that were written
using two digits rather than four to define the applicable year. If the
Company's computer programs with date-sensitive functions are not Year 2000
compliant, they may recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in a system failure or miscalculations causing
disruptions to operations.
15
<PAGE> 16
State of Readiness
The Company has identified four major categories of Year 2000 risk:
(1) Software systems -- these include the Company's revenue system ("Traffic
System"), financial system (e.g. general ledger, accounts payable, fixed
assets, etc.), and digital cable transmission and automation systems (for video
servers);
(2) Equipment with embedded chip technology -- these include "on-air" equipment
(e.g., video servers, compression gear, transmitters, etc.), computer hardware
and generators;
(3) External vendors and suppliers -- these include satellite transmission
operators, cable television operators, and other third parties whose systems
failures potentially could have a significant adverse impact on the Company's
operations; and
(4) Facilities -- these include fire alarm systems, phone systems and access
control systems.
The Company has completed its inventory of software systems and equipment and
has identified external vendors and suppliers whose systems failures could have
a significant impact on the Company's operations. The Company has completed its
assessment and is in the process of completing the remediation of all
mission-critical systems and equipment.
In 1998, the Company replaced its Traffic System with a system that is Year
2000 compliant. The Company replaced the general ledger and accounts payable
sections of its financial system with a Year 2000 compliant system during the
second quarter of 1999. The Company is currently replacing the fixed assets
section of its financial system with a Year 2000 compliant system which is
expected to be operational by September 30, 1999. The implementation of these
new systems minimizes the possibility of Year 2000 issues significantly
interrupting normal operations.
The Company has completed its assessment, remediation, testing and
certification of third party software for all mission-critical systems and
components. Over the next few months as the Company receives more information
on the extent of Year 2000 compliance by external vendors and third party
suppliers, the nature of any contingency plans that may be needed will evolve.
The Company is currently preparing contingency plans to identify and handle its
worst case scenarios. It expects to complete these plans by September 30, 1999.
Risks and costs
Based on its current efforts, the Company does not believe that Year 2000
issues will have a material adverse effect on the results of its operations,
liquidity or financial condition. However, this assessment is dependent on the
ability of third-party suppliers and others whose systems failures potentially
could have an impact on the Company's operations to be Year 2000 compliant.
Although the Company cannot control the conduct of external vendors and
suppliers, the Company expects to reduce the Company's level of uncertainty and
the adverse effect that any such failures may have.
16
<PAGE> 17
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's Annual Meeting of Stockholders was held on April 30, 1999. At the
meeting, all six of the Company's existing directors were re-elected for one
year terms and the adoption of the Company's 1998 Stock Incentive Plan was
ratified. The appointment of PricewaterhouseCoopers LLP as the Company's
independent certified public accountants for 1999 was also ratified.
The number of votes cast for, cast against and withheld, as applicable, with
respect to each of the matters submitted for a vote at the meeting, are set
forth below:
<TABLE>
<CAPTION>
<S> <C> <C>
Election of Directors For Withheld
- --------------------- --- --------
Lowell W. Paxson 124,258,027 1,645,481
William E. Simon, Jr. 124,331,690 1,571,818
Jeffrey Sagansky 124,333,096 1,570,412
James B. Bocock 124,340,233 1,563,275
Bruce L. Burnham 124,342,623 1,560,885
James L. Greenwald 124,344,411 1.559,097
For Against Withheld
--- ------- --------
Ratification of 1998 Stock Incentive Plan 111,980,714 4,474,264 69,073
For Against Withheld
--- ------- --------
Appointment of Accountants 125,862,070 32,724 8,714
</TABLE>
There were no broker non-votes with respect to any of the matters submitted for
a vote at the meeting.
Item 5. Other Information.
On August 5, 1999, the Federal Communications Commission ("FCC") adopted
changes to its Television Ownership Rules and its attribution rules and
policies "to reflect changes in the media marketplace." These new regulations
will become effective sixty days following their publication in the Federal
Register.
Television Duopoly
The FCC's current duopoly regulations prevent one entity from owning television
stations with certain contour overlap. The FCC's new rules will allow common
ownership of two television stations regardless of contour overlap if the
stations are in separate Nielsen Designated Market Areas (DMAs). Additionally,
a single broadcaster can now own two television stations in the same DMA so
long as one of the stations is not among the top four ranked stations in the
market based upon audience share and at least eight separately owned,
full-power (commercial and non-commercial) television stations are licensed to
communities within the DMA after this consolidation. In addition, under the new
revised rules, the FCC will waive its duopoly restrictions to otherwise permit
common ownership of two television stations in the same DMA where a
same-market-licensee is the only reasonably available buyer and the station
purchased is a "failed" station or a "failing" station. A "failed" station is
one that either has been off the air for at least four months prior to the
waiver request or is involved in a bankruptcy or insolvency proceeding. A
"failing" station is one that is experiencing low audience share and has been
financially struggling during the previous several years. Finally, for purposes
of determining compliance with the national audience cap of 35%, the FCC
announced that it will count market coverage only once even though a
broadcaster may own two stations in a single DMA.
17
<PAGE> 18
Radio/Television Cross-Ownership
Currently, FCC regulations prevent a broadcaster from owning a radio station
and a television station in the same market pursuant to the so-called
"One-to-a-Market" rule. Under the FCC's recently announced revisions, a party
will now be permitted to own two television stations, assuming compliance with
the modified television duopoly rules, and any of the following radio station
combinations in the same DMA:
- - Up to six radio stations (any combination of AM or FM stations) in any
market where at least twenty independent voices would remain after the
combination;
- - Up to four radio stations (again, in any combination of AM or FM) in
any market where at least ten independent voices would remain
post-merger; and
- - One radio station (AM or FM) notwithstanding the number of independent
voices in the market.
Additionally, in those markets where the revised rule would allow parties to
own eight outlets in the form of two television stations and six radio
stations, a party may instead own one television station and seven radio
stations.
For purposes of these new radio/television cross-ownership rules, "independent
voices" will include:
All independently owned, full-power, operational commercial and
non-commercial television stations licensed to a community within the
DMA in which the television station in question is located;
All independently owned, operational commercial and non-commercial
radio stations licensed to or with a reportable share in the
radio-metro market where the television station involved is located;
Daily newspapers that are published within the DMA with a circulation
exceeding 5% of the DMA; and
Wired cable service (counted as a single voice) provided cable service
is generally available within the DMA.
Finally, those broadcasters who hold or applied by July 29, 1999 for a
one-to-a-market waiver, permitting combinations in excess of the new limits
need not divest any properties as the FCC will grandfather those arrangements
until 2004.
Local Marketing Agreements ("LMAs")
The FCC will now apply to television LMAs the same attribution rules currently
in force for radio LMAs. Accordingly, ownership will be attributed to a
television station which brokers more than 15% of the weekly broadcast hours of
another television station in the same DMA. However, given the new television
duopoly rules and related waiver policies, the majority of currently existing
same-market television LMAs will continue to be permissible. The FCC announced
that those LMAs not falling under the new duopoly rule or waiver policies but
which were entered into before November 5, 1996, could continue in full force
and effect and will be grandfathered for an initial term of five years.
Post-November 5, 1996 LMAs will have two years from the date of adoption of
these rules within which to terminate their LMA agreement or otherwise come
into compliance with the new local broadcast ownership rules.
Attributable Investments
The FCC also revised its broadcast and cable/MDS ownership attribution rules.
Under the FCC's new rule, a holder of a financial interest, whether equity or
debt or both, in excess of 33% of a licensee's total assets will have an
attributable interest in that licensee if it is either a major program supplier
to that licensee (supplying more than 15% of the station's total weekly
broadcast programming hours) or if it is a same-market media entity
(broadcaster, cable operator or newspaper). All stock, both common and
preferred, both voting and non-voting will be counted towards the 33%
threshold. However, the new rules continue to retain the active investor
benchmark at 5% of voting stock, but raise the passive investment benchmark,
namely investment companies, mutual funds, insurance companies and bank trust
departments, to 20% from 10%.
Finally, the FCC eliminated the "cross-interest" policy which had placed limits
on non-voting stock interests, intra market joint ventures and the role of
certain key employees of media companies.
18
<PAGE> 19
Item 6. Exhibits and Reports on Form 8-K.
(a) List of Exhibits:
Exhibit No. Description
3.1.1 Certificate of Incorporation of the Company (1)
3.1.2 Bylaws of the Company (2)
3.1.3 Certificate of Designation of the Company's Junior Cumulative
Compounding Redeemable Preferred Stock (1)
3.1.4 Certificate of Designations of the Company's 12 1/2% Cumulative
Exchangeable Preferred Stock (3)
3.1.5 Certificate of Designations of the Company's 9 3/4% Series A
Convertible Preferred Stock (4)
3.1.6 Certificate of Designations of the Company's 13 1/4% Cumulative
Junior Exchangeable Preferred Stock (4)
10.205 Employment Agreement, dated April 14, 1999, between the Company and
John F. DeLorenzo
10.206 Asset Purchase Agreement, dated April 23, 1999, by and among Paxson
Communications Corporation, Paxson Communications License Company,
LLC, Paxson Communications of Green Bay-14, Inc., Paxson
Communications of Dayton-26, Inc., Paxson Dayton License, Inc.,
Paxson Communications of Decatur-23, Inc., and Paxson Decatur
License, Inc., and ACME Television of Ohio, LLC, ACME Television
Licenses of Ohio, LLC, ACME Television of Wisconsin, LLC, ACME
Television Licenses of Wisconsin, LLC, ACME Television of Illinois,
LLC, and ACME Television Licenses of Illinois, LLC for WDPX(TV),
Springfield, OF, WPXG(TV), Suring, WI and WPXU(TV), Decatur, IL
27 Financial Data Schedule (for SEC use only)
(1) Filed with the Company's Annual Report on Form 10-K, for the year
ended December 31, 1994 and incorporated herein by reference.
(2) 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.
(3) 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.
(4) Filed with the Company's Registration Statement on Form S-4, as
amended, filed July 23, 1998, Registration No. 333-59641 and
incorporated herein by reference.
(b) Reports on Form 8-K.
None.
19
<PAGE> 20
PAXSON COMMUNICATIONS CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAXSON COMMUNICATIONS CORPORATION
Date: August 16, 1999 By: /s/ Jeffrey Sagansky
----------------------------------
Jeffrey Sagansky
Chief Executive Officer,
President and Director
(Principal Executive Officer)
Date: August 16, 1999 By: /s/ John F. DeLorenzo
----------------------------------
John F. DeLorenzo
Executive Vice President, Chief
Financial Officer and Director
(Principal Financial Officer)
20
<PAGE> 1
Exhibit 10.205
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT made as of this 14th day of April, 1999, (this
"Agreement") by and between Paxson Communications Corporation, a Delaware
corporation with its principal place of business at 601 Clearwater Park Road,
West Palm Beach, Florida 33401-6233 ("Company") and John F. DeLorenzo, an
individual, currently residing at the address set forth under such individual's
signature below (the "Executive") (collectively, the "Parties").
WHEREAS, Company desires to employ Executive as Executive Vice President,
Treasurer and Chief Financial Officer, and the Parties desire to enter into
this agreement to secure Executive's employment as Executive Vice President,
Treasurer and Chief Financial Officer during the term hereof, all on the terms
and conditions set forth herein.
NOW, THEREFORE, the Parties agree as follows:
1. The Company agrees to employ the Executive and the Executive agrees to
serve the Company as Executive Vice President, Treasurer and Chief
Financial Officer based primarily at the Company's West Palm Beach,
Florida offices, on the terms and conditions hereinafter set forth.
Unless otherwise agreed, Executive shall not be required to relocate
to any other office of the Company outside of the South Florida
region.
2. Employment of the Executive by the Company pursuant to this Agreement
will be for a two year (2) year period commencing effective April 14,
1999 (the "Commencement Date"), unless sooner terminated, pursuant to
Paragraph 7 hereof (the "Term of Employment").
3. Subject to the direction and control of the Chief Executive Officer,
the Executive shall have all of the power and authority inherent in
the position of Executive Vice President, Treasurer and Chief
Financial Officer and shall supervise and be responsible for the
operations and management of the Company and its subsidiaries. The
Executive shall also have such other executive powers and duties,
consistent with his responsibilities as Executive Vice President,
Treasurer and Chief Financial Officer, as may, from time to time, be
prescribed by the Chief Executive Officer. The Company agrees to use
<PAGE> 2
its reasonable efforts to nominate Executive to the Board of Directors
and ensure that the Executive is elected to the Board of Directors of
the Company throughout the Term of Employment. The Executive agrees to
render his services under this Agreement loyally and faithfully, to
the best of his abilities and in substantial conformance with all
laws, rules and Company policies, and in connection therewith, will
not improperly or without good cause, in the best interest of the
Company, disclose any trade secrets or other confidential information
of the Company. Without limiting the foregoing, except as expressly
modified herein, Executive shall be subject to all of the Company's
policies including payola, plugola and conflicts of interests, as well
as the following:
(1) Executive will comply with all the Company and professional
standards governing Executive's objectivity in the
performance of Executive's duties, including restrictions on
outside activities, investments, business interests, or other
involvements which could compromise Executive's objectivity
or create an impression of conflict of interest. Executive
will not, without the prior approval of the Chairman of the
Board or the Chief Executive Officer , accept any gift,
compensation, or gratuity (which excludes business meals and
entertainment received by Executive in the ordinary course of
business) from any person or entity with which the the
Company or any of its broadcast properties is or may be in
competition or in any instance where there is a stated or
implied expectation of favorable treatment of that person or
entity. Executive will not, without the prior written
approval of the Chairman of the Board or the Chief Executive
Officer, take advantage of any business opportunity or
situation or engage in any enterprise or venture of which the
the Company may have an interest on his or her own behalf, if
said business opportunity or situation, enterprise or venture
is related in any way to or is similar to the business of the
the Company. Nothing herein shall prohibit Executive from
investing in any broadcast company where such investment does
not cause Executive to be an "affiliate" of such entity under
the terms of the Securities Act of 1993.
(2) In performing Executive's duties under this Agreement,
Executive shall conduct himself with due regard to social
conventions, public morals and standards of decency, and will
2
<PAGE> 3
not cause or permit any situation or occurrence which would
tend to degrade, scandalize, bring into public disrepute, or
otherwise lower the community standing of Executive or the
Company's public image. (1)
4. Compensation.
(1) Base Salary. Company will pay the Executive a base salary
(the "Base Salary"), to be paid on the same payroll cycle as
other salaried employees of the Company, at an annual rate
during the first year of the term hereof of $250,000, which
Base Salary shall be increased, effective on each anniversary
of Commencement Date, by an amount equal to not less than 10%
of the Base Salary in effect for the most recently ended
calendar year.
(2) Annual Bonus. In addition to the Base Salary, Executive
agrees to participate in and the Company shall make bonus
awards under, the Company's Executive Bonus Plan and receive
bonus awards from time thereunder, subject to the
satisfaction of the terms and conditions set forth therein
and as described in this paragraph 4(b). The Executive shall
be eligible to earn a bonus for each of the whole or partial
calendar years during the Term of Employment under the terms
of the Company's Executive Bonus Plan, which plan provides
for a bonus award, calculated as a percent of Executive's
Base Salary, subject to (i) the satisfaction of certain
annual performance benchmarks established by the Compensation
Committee of the Board of Directors, and (ii) the Executive's
employment is not terminated under subclause (c) of Paragraph
7. The bonus will be payable within the first six months of
the calendar year (the "Payment Year") following the year to
which the bonus applies (the "Bonus Year"), provided that the
bonus earned, if any, for calendar year 2001 will be paid
after the completion of such Bonus Year or as otherwise paid
to other senior management. The bonus shall be equal to 15%,
30% or 60% of the Base Salary paid to Executive in the Bonus
Year, with the applicable percentage dependent upon the
attainment of certain benchmarks established by the
Compensation Committee for members of the Executive Bonus
Plan. Without limiting the foregoing, nothing shall preclude
the Executive from receiving an additional cash bonus,
determined from time in the sole discretion of the
Compensation Committee of the Board of Directors.
3
<PAGE> 4
(3) Options. The Company shall grant the Executive non-qualified
stock options for 180,000 shares of Class A common stock of
the Company, at an exercise price of $7.25 per share. The
options shall be granted subject to an annual cumulative
"cliff" vesting schedule of 10%, 25%, 45%, 70%, and 100% over
five years commencing on the Commencement Date (i.e., first
10% vests April 14, 2000). The options shall be granted, at
the Company's option, under the terms of the 1998 Stock
Option Plan in the form of Exhibit 1 annexed hereto (the
"Plan") or under an individual stock option grant agreement,
which agreement shall contain substantially similar terms,
conditions and limitations of the Plan and the form of stock
option agreement pursuant to which other awards under the
Plan are made from time to time. Notwithstanding the
foregoing, the options of the Executive shall vest fully upon
the occurrence of a change of control as defined in Paragraph
7(f)(i) hereof.
Without limiting the foregoing, nothing shall preclude Executive from
receiving special cash bonus awards not included within the Executive
Bonus Plan, as determined from time to time in the sole discretion of
the Company. In addition to Executive's Base Salary and participation
in the Executive Bonus Plan, Executive may, as determined from time to
time, in the sole discretion of the Company, be eligible to receive or
participate in various other non-cash compensation programs,
including, without limitation, annual and special non-cash bonus
awards, grants of stock options, restricted stock, "phantom-equity"
and stock appreciation rights (collectively, "Non-Cash Bonus Awards")
as awarded or made available to other comparable senior management
(e.g., the Chairman and the Chief Executive Officer), including,
inclusion within the Executive Supplemental Retirement Plan (e.g., the
deferred compensation plan) made available to certain members of
senior management. Employee's rights in respect of any Non-Cash
Compensation shall be governed under the terms of a separate document
or documents, if any Non-Cash Compensation is to be awarded to
Employee.
The Company will have the right to withhold from payments otherwise
due and owing to Executive or to require the Executive to remit to the
Company in cash upon demand an amount sufficient to satisfy any
federal (including FICA and FUTA amounts), state, and/or local
4
<PAGE> 5
withholding tax requirements at the time the Executive recognizes
income for federal, state, and/or local tax purposes with respect to
any payments to Executive under the terms hereof or under any other
compensation arrangements, including, Non-Cash Compensation. If any
excise tax withholding by the Company is required pursuant to Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code") on
an "excess parachute payment," as this term is defined in Section 4999
of the Code, in connection with any payments made under the terms
hereof, or under any other compensation arrangements, including, the
Executive Bonus Plan and any Non-Cash Compensation, the Company will
be required to pay compensation to the Executive ("Gross-Up Payment")
in an amount equal to the excise tax withholding required to be
withheld by the Company on such amounts paid to Executive and the
Gross-Up Payment itself. The Company then will withhold the Gross-Up
Payment to satisfy this withholding obligation. Except as otherwise
provided by this Paragraph 4, the Company will not be liable to
Executive for any tax consequences incurred by Executive with respect
to payments to Executive under the terms hereof or under any other
compensation arrangements, including, Non-Cash Compensation.
5. During the Term of Employment, the Executive shall be eligible to
participate in all employee benefit plans and arrangements now in
effect or which may hereafter be established, which are generally
available to other senior executives of the Company, including,
without limitation, all life, group insurance and medical plans and
all disability, retirement and other employee benefit plans of the
Company, as long as any such plan or arrangement remains generally
applicable to other senior executives of the Company.
6. The Executive shall be reimbursed for all reasonable expenses incurred
by him in the discharge of his duties, including, but not limited to,
expenses for entertainment and travel. Executive shall be entitled to
travel in business class (and if unavailable, first class) on any
flight with an air duration of three (3) hours or more. In addition to
the foregoing, Executive shall be reimbursed for reasonable relocation
expenses incurred in connection with relocating (e.g., packing and
moving household and personal items, transporting automobiles and
temporary housing) from the Southern California area to West Palm
Beach, Florida, in accordance with the applicable policies of Paxson
and as separately pre-approved by the Company. To the extent any such
5
<PAGE> 6
relocation reimbursement payments are deemed to be taxable income to
the Executive under IRS guidelines, the Executive will be entitled to
a further payment (the "Relocation Gross-up Payment"), equal to the
income tax payable on such income and the Relocation Gross-up Payment
itself. In addition, the Executive shall be entitled to be reimbursed
for up to $5,000 of out of pocket home purchase closing costs incurred
in connection with the Executive's purchasing a home in Palm Beach
County, Florida. The Executive shall account to the Company for all
such expenses.
7. Notwithstanding the provisions of Paragraph 2 of this Agreement, the
Executive's Term of Employment pursuant to this Agreement shall
terminate on the earliest of the following dates:
(1) The date of the Executive's death. In such event, the Company
shall pay to the Executive's legal representatives or named
beneficiaries (as the Executive may designate from time to
time in a writing delivered to the Company) accrued and
unpaid Base Salary plus the Executive's Base Salary for a one
(1) year period following the date of the Executive's death;
(2) If the Board of Directors chooses to give the Executive
notice of termination of his employment due to his
disability, as defined in the Company's Long Term Disability
Plan, a date specified in the notice which shall be not less
than thirty (30) days after the date on which the notice is
received by the Executive. In the event that the Executive's
employment is terminated due to his disability under this
subparagraph (b), the Executive or the Executive's legal
representative shall continue to be paid the Executive's Base
Salary then in effect for the lesser of (i) two years and
(ii) the remaining Term of Employment. If, prior to the
specified termination date in such notice by the Company, the
Executive's illness or disability has terminated and the
Executive has resumed his duties under this Agreement, the
Executive shall be entitled to resume employment under this
Agreement as though such notice had not been given. The
opinion of the Executive's physician as to disability shall
be deemed presumptively valid;
6
<PAGE> 7
(3) If the Board of Directors chooses to give the Executive
notice of termination of his employment for "good cause", a
date specified in the notice, consistent with the provisions
of subparagraph (c). The term "good cause" as used in this
Agreement shall mean the occurrence of any of the following
events:
(1) Executive's arrest for the commission of (A) a felony,
(B) any criminal act with respect to Executive's
employment (including any criminal act involving a
violation of the Communications Act of 1934, as
amended, or regulations promulgated by the Federal
Communications Commission), or (C) any act that
materially threatens to result in suspension,
revocation, or adverse modification of any FCC license
of any broadcast station owned by any affiliate of the
Company or would subject any such broadcast station to
fine or forfeiture;
(2) Executive's willful taking of any action or inaction
the intended or reasonably foreseeable result of which
would cause the Company to be in default under any
material contract, lease or other agreement;
(3) Executive's dependence on alcohol or illegal drugs;
(4) Failure or refusal to perform according to or follow
the lawful policies and directives of the Chairman of
the Board or the Chief Executive Officer;
(5) Executive's misappropriation, conversion or
embezzlement of the assets of the Company or any
affiliate of the Company;
(6) A material breach of this Agreement by Executive; or
(7) Any representation of Executive in Paragraph 9 of this
Agreement being false when made; or
(8) The Executive voluntarily, including retirement, ceases
his employ with the Company at a time when the
Company is not in material breach of this Agreement.
In the event of a termination under this subparagraph (c),
other than pursuant to clause (c)(viii), the Company shall
notify the Executive of its intentions to terminate his
employment and the specific reason(s) therefore, and the
Executive, on at least ten (10) business days notice, shall
have had an opportunity to respond thereto; and, provided
further, if the basis for such termination is susceptible of
being cured by the Executive, the Company shall afford the
Executive a reasonable period, not to exceed 60 days, to
effect such cure, and the Executive's employment may not be
terminated during said period.
7
<PAGE> 8
In the event of termination for good cause, the Company will
be released from all further obligation to the Executive
under this Agreement, except for such salary as may have been
earned or bonus award made but not paid prior to the
termination;
(4) The date on which the Board of Directors chooses to notify
the Executive that the Board of Directors, in its sole
discretion, has determined that it is in the best interest of
the Company to terminate the Executive's employment. In the
event of such termination, the Executive will continue to be
paid the Executive's Base Salary then in effect for the
lesser of (i) one year and (ii) the remaining Term of
Employment. In addition, Executive shall be entitled to
receive any earned and unpaid cash bonus and Executive shall
automatically vest in stock options under Section 4(c) hereof
in an amount which, together with the number of stock options
in which Executive is vested in prior to such termination
date, equals 90,000 vested shares in the aggregate;
(5) On the date that the Executive terminates his employment for
Good Reason. For purposes of this subparagraph (e), "Good
Reason" shall mean that the Company has breached any of the
material terms, conditions and provisions of this Agreement
(including, a material diminution of Executive's
responsibilities). In such case, the Executive shall notify
the Company of his intentions to terminate his employment and
the specific reason(s) therefor, and the Company, on at least
ten (10) business days notice, shall have an opportunity to
respond thereto; and, provided further, if the basis for such
termination is susceptible of being cured by the Company, the
Executive shall afford the Company a reasonable period, not
to exceed 60 days, to effect such cure, and the Executive may
not terminate his employment during said 60 day period. In
the event of such termination, the Executive will continue to
be paid Executive's Base Salary then in effect for the lesser
of (i) one year and (ii) the remaining Term of Employment;
8
<PAGE> 9
(6) If, within one year after a Change of Control (as defined
below), the Company terminates Executive's employment with
the Company without Cause, the Executive will continue to be
paid Executive's Base Salary then in effect for the lesser of
(i) one year and (ii) the remaining Term of Employment. For
purposes of this Agreement:
(1) A "Change of Control" will occur if (a) none of Lowell
W. Paxson, his estate, his wife, his lineal
descendants, or any trust created for the sole benefit
of any one or more of them during their lifetimes, or
any combination of any of the foregoing, shall (i) own,
directly or indirectly, at least 35 percent of the
issued and outstanding capital stock of the Company or
(ii) have voting control, directly or indirectly, equal
to at least 51 percent of the issued and outstanding
capital stock of the Company entitled to vote in the
election of Board of Directors of the Company; (b) the
approval by the shareholders of the Company of a
reorganization, merger, or consolidation, in each case,
with respect to which persons who were shareholders of
the Company immediately prior to this reorganization,
merger or consolidation do not, immediately thereafter,
own more than 50 percent of the combined voting power
entitled to vote generally in the election of directors
of the reorganized, merged or consolidated company's
(or any successor entity's) then outstanding
securities; or (c) a liquidation or dissolution of the
Company or of the sale of all or at least 80 percent of
the Company's assets.
(7) The expiration of the Term of Employment as described in
Paragraph 2 of this Agreement. In the event of the
termination of the Executive's employment upon the expiration
of the Term of Employment, the Company will be released from
all further obligation to the Executive, except for such
compensation as may have been earned but not paid prior to
termination.
Following the termination of the Executive's employment under this
Agreement, the Company will have no further liability to the Executive
hereunder and no further payments will be made to him, except as
provided in subparagraphs (a) through (f) above or any bonus awards
not paid as of such termination, and except to the extent that the
Executive qualifies for benefits under any employee benefit plan
available to the Executive as provided in Paragraph 5.
9
<PAGE> 10
8. Renegotiation and Exclusive Services.
(1) Executive and the Company agree to renegotiate this agreement
during the first three (3) months after the first anniversary
of the Commencement Date, to provide for an extension of the
term hereunder provided, nothing shall require any such
extension to be agreed upon by the Company or the Executive.
(2) The Executive shall during the Term of Employment, except
during vacation periods, periods of illness and the like,
devote his full and undivided business time and attention to
his duties and responsibilities for the Company. During the
Executive's employment with the Company, the Executive shall
not: (i) engage in any other business activity that would
interfere with his responsibilities or the performance of his
duties under this Agreement; (ii) have any interest or
involvement, directly or indirectly, in any capacity
(including as employee, director, consultant, owner, lessor,
manager, or lender), in any business enterprise that competes
with the Paxson Group or that otherwise has interests in
conflict with the Paxson Group, including without limitation,
any television broadcast, cable television network, or
television programming service, provided however, that (x)
the Executive may own up to one percent (1%) of the issued
and outstanding common stock of any entity whose common stock
is traded on a nationally recognized stock exchange, and (y)
the Executive may sit on the boards of directors of other
entities, with the prior written approval of the Chairman,
which approval shall not be unreasonably withheld. The
Executive will not, prior to the conclusion of the
renegotiation period contemplated under 8(a) hereof, the Term
of Employment solicit offers for the Executive's services,
negotiate with potential employers, enter into any oral or
written agreement for the Executive's services, give or
accept any option for the Executive's services, enter into
the employment of, perform services for, or grant or receive
future rights of any kind relating to the Executive's
services to or from any person or entity whatsoever other
than the Company.
10
<PAGE> 11
9. To induce the Company to enter into this Agreement and to employ
Executive, Executive represents and warrants to the Company as of the
date hereof and as of each date of payment of any compensation under
the terms hereof as follows:
(1) The execution, delivery and performance of this Agreement by
Executive does not conflict with result in a breach of, or
constitute a default under any covenant not to compete or any
other agreement, instrument, or license, to which Executive
is a party or by which Executive is bound.
(2) Executive has not:
(1) Been convicted of any felony;
(2) Committed any criminal act with respect to Executive's
current or any prior employment (including any criminal
act involving a violation of the Communication Act of
1934, as amended, or regulations promulgated by the
FCC), or
(3) Committed any act that materially threatened to result
in suspension, revocation, or adverse modification of
any FCC license of any broadcast station or which
subjected any broadcast station to fine or forfeiture.
(3) Executive is not dependent on alcohol or illegal drugs.
Executive recognizes that the Company shall have the right to
conduct random drug testing of its employees and that
Executive may be called upon in such a manner.
10. Any dispute regarding this Agreement shall be decided by arbitration
by a single arbitrator in West Palm Beach, Florida, in accordance with
the Expedited Arbitration Rules of the American Arbitration
Association then obtaining unless the Parties mutually agree
otherwise; and, provided further, that both Parties will be entitled
to all rights of discovery in connection with such arbitration,
including, without limitation, all discovery rights described in the
Florida Rules of Civil Procedure. This undertaking to arbitrate shall
be specifically enforceable. The decision rendered by the arbitrator
will be final and judgment may be entered upon it in accordance with
appropriate laws in any court having jurisdiction thereof. During any
arbitration proceeding initiated by the Executive, the Company agrees,
to the extent that it may legally do so, to continue the Executive in
the Company's long-term disability, life and medical insurance plans.
11
<PAGE> 12
11. Both during and after the Term of Employment, neither Party will
disclose the financial terms of this Agreement to persons not involved
in the operations of the business of the Company, except as required
by applicable law, regulation, the rules or regulations of a stock
exchange or association on which securities of the Company or any
parent company thereof are listed or legal process (including, without
limitation, oral questions, interrogatories, requests for information
or documents, subpoenas, civil investigative demands, orders,
judgments or decrees). As to persons involved in the operations of the
business of the Company, disclosure of such terms may be made only on
a need-to-know basis. This restriction shall not apply to members of
the Executive's immediate family nor to the Executive's professional
advisers, lenders and investors, provided such persons agree to keep
the financial terms confidential and not disclose them to third
parties.
12. Any waiver by either Party of a breach of any provision of this
Agreement shall not operate as to be construed to be a waiver of any
other breach of such provision of this Agreement. The failure of a
Party to insist upon strict adherence to any term of this Agreement on
one or more occasions shall not be considered a waiver or deprive that
Party of the right thereafter to insist upon strict adherence to that
term or any other term of this Agreement. Neither this Agreement nor
any part of it may be waived, changed or terminated orally, and any
amendment or modification must be in writing and signed by each of the
Parties. Any waiver of any right of the Company hereunder or any
amendment hereof shall require the approval of the members of the
Compensation Committee of the Board of Directors who are not employees
of the Company or, if the Company does not have a Compensation
Committee or the Compensation Committee does not have any members who
are not employees of the Company, by the members of the Board of
Directors who are not employees of the Company. Until such approval or
waiver has been obtained, no such waiver or amendment shall be
effective.
13. The obligations and rights of the Executive under this Agreement shall
inure to the benefit of and shall be binding upon the heirs and legal
representatives of the Executive. Neither Party may assign this
Agreement without the prior written consent of the other.
12
<PAGE> 13
14. This Agreement may be executed in any number of counterparts, each of
which shall, when executed, be deemed to be an original and all of
which shall be deemed to be one and the same instrument.
15. No action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or
agreements contained herein or made pursuant hereto.
16. This Agreement will be governed and construed and enforced in
accordance with the laws of the State of Florida.
17. This Agreement contains the entire understanding of the Parties
relating to the subject matter of this Agreement and supersedes all
other prior written or oral agreements. The Executive acknowledges
that, in entering into this Agreement, he does not rely on any
statements or representations not contained in this Agreement.
18. Any term or provision of this Agreement which is determined to be
invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement or affecting the
validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction.
13
<PAGE> 14
19. Except as otherwise specifically provided in this Agreement, all
notices and other communications required or permitted to be given
under this Agreement shall be in writing and delivery thereof shall be
deemed to have been made when such notice shall have been either (i)
deposited in first class mail, postage prepaid, return receipt
requested, or any comparable or superior postal or air courier service
then in effect, or (ii) transmitted by hand delivery, telegram, telex,
telecopier or facsimile transmission, to the party entitled to receive
the same at the address indicated below or at such other address as
such party shall have specified by written notice to the other party
hereto given in accordance herewith:
if to the Company: Lowell W. Paxson
Chairman
Paxson Communications Corporation
601 Clearwater Park Road
West Palm Beach, Florida 33401-6233
if to the Executive: address below Executive's signature below
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties as of the first date written above.
Name: John F. DeLorenzo
Address: c/o TrenWest Development, LLC
10750 Wilshire Boulevard, #103
Los Angeles, California 90024
PAXSON COMMUNICATIONS CORPORATION
By:
Name:
Title:
14
<PAGE> 1
Exhibit 10.206
===============================================================================
ASSET PURCHASE AGREEMENT
BY AND AMONG
PAXSON COMMUNICATIONS CORPORATION,
PAXSON COMMUNICATIONS LICENSE COMPANY, LLC,
PAXSON COMMUNICATIONS OF GREEN BAY-14, INC.,
PAXSON COMMUNICATIONS OF DAYTON-26, INC.,
PAXSON DAYTON LICENSE, INC.,
PAXSON COMMUNICATIONS OF DECATUR-23, INC.,
AND PAXSON DECATUR LICENSE, INC.,
AND
ACME TELEVISION OF OHIO, LLC,
ACME TELEVISION LICENSES OF OHIO, LLC,
ACME TELEVISION OF WISCONSIN, LLC,
ACME TELEVISION LICENSES OF WISCONSIN, LLC,
ACME TELEVISION OF ILLINOIS, LLC,
AND ACME TELEVISION LICENSES OF ILLINOIS, LLC
FOR
WDPX(TV), SPRINGFIELD, OH,
WPXG(TV), SURING, WI
AND WPXU(TV), DECATUR, IL
* * *
APRIL 23, 1999
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Section 1. Definitions....................................................................................2
Section 2. Purchase And Sale Of Assets....................................................................6
2.1 Agreement to Sell and Buy......................................................................6
2.2 Excluded Assets................................................................................6
2.3 Conveyance of the Assets.......................................................................7
2.4 Purchase Price; Adjustments....................................................................8
2.5 Payment of Purchase Price; Allocations........................................................10
2.6 Assumption of Liabilities and Obligations.....................................................11
Section 3. Representations And Warranties Of Sellers.....................................................12
3.1 Organization, Standing, and Authority.........................................................12
3.2 Authorization and Binding Obligation..........................................................12
3.3 Absence of Conflicting Agreements.............................................................12
3.4 Governmental Licenses.........................................................................13
3.5 Title to and Condition of Real Property.......................................................13
3.6 Title to and Condition of Tangible Personal Property..........................................14
3.7 Assumed Contracts.............................................................................15
3.8 Broker........................................................................................15
3.9 Intangibles...................................................................................15
3.10 Insurance.....................................................................................15
3.11 Reports.......................................................................................15
3.12 Personnel.....................................................................................15
3.13 Taxes.........................................................................................16
3.14 Claims and Legal Actions......................................................................16
3.15 Environmental Matters.........................................................................16
3.16 Compliance with Laws..........................................................................17
3.17 Conduct of Business in Ordinary Course........................................................18
3.18 Insolvency....................................................................................18
3.19 Cable Carriage................................................................................18
3.20 No Material Omission..........................................................................18
3.21 Disclaimer....................................................................................18
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Section 4. Representations And Warranties Of Buyers......................................................19
4.1 Organization, Standing, and Authority.........................................................19
4.2 Authorization and Binding Obligation..........................................................19
4.3 Absence of Conflicting Agreements.............................................................19
4.4 Broker........................................................................................19
4.5 Buyer Qualifications..........................................................................20
4.6 Financing.....................................................................................20
4.7 Insolvency....................................................................................20
4.8 Material Omission.............................................................................20
Section 5. Operation of the Stations Prior to the Closings...............................................20
5.1 Generally.....................................................................................20
5.2 Compensation..................................................................................20
5.3 Contracts.....................................................................................20
5.4 Disposition of Assets.........................................................................21
5.5 Encumbrances..................................................................................21
5.6 FCC Licenses..................................................................................21
5.7 Access to Information.........................................................................21
5.8 Maintenance of Assets.........................................................................21
5.9 Insurance.....................................................................................21
5.10 Consents......................................................................................21
5.11 Cable Carriage................................................................................22
5.12 Organization, Good Will, Promotion............................................................22
5.13 Representations and Warranties................................................................22
5.14 Notice of Proceedings.........................................................................22
5.15 Performance Under Assumed Contracts...........................................................22
5.16 Books and Records.............................................................................23
5.17 Compliance with Laws..........................................................................23
5.18 Cure..........................................................................................23
Section 6. Special Covenants And Agreements..............................................................23
6.1 FCC Consent...................................................................................23
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6.2 HSR Act.......................................................................................24
6.3 Control of the Stations.......................................................................24
6.4 Risk of Loss..................................................................................24
6.5 Confidentiality...............................................................................24
6.6 Cooperation...................................................................................25
6.7 Access to Books and Records...................................................................25
6.8 Buyer Conduct.................................................................................25
6.9 Employment Matters............................................................................25
6.10 Noncompetition Agreement......................................................................26
6.11 Time Brokerage Agreements.....................................................................27
Section 7. Conditions to Obligations of Buyers and Sellers at the Closings...............................27
7.1 Conditions to Obligations of Buyers at the First Closing......................................27
7.2 Conditions to Obligations of Sellers at the First Closing.....................................28
7.3 Conditions to Obligations of Buyers at the Second Closing.....................................28
7.4 Conditions to Obligations of Sellers at the Second Closing....................................29
7.5 Separate Closings.............................................................................29
Section 8. Closings And Closing Deliveries...............................................................30
8.1 Closings......................................................................................30
8.2 Deliveries by Sellers at the First Closing....................................................30
8.3 Deliveries by Buyers at the First Closing.....................................................31
8.4 Deliveries by Sellers at the Second Closing...................................................31
8.5 Deliveries by Buyers at the Second Closing....................................................32
Section 9. Termination...................................................................................32
9.1 Termination by Sellers........................................................................32
9.2 Termination by Buyers.........................................................................33
9.3 Rights on Termination.........................................................................33
Section 10. Survival of Representations and Warranties; Indemnification; Certain Remedies.................33
10.1 Representations, Warranties and Covenants.....................................................33
10.2 Indemnification by Sellers....................................................................34
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10.3 Indemnification by Buyers.....................................................................34
10.4 Limitations...................................................................................35
10.5 Procedure for Indemnification.................................................................35
10.6 Specific Performance..........................................................................36
10.7 Closing Delay.................................................................................36
10.8 Attorneys' Fees...............................................................................37
Section 11. Miscellaneous.................................................................................37
11.1 Fees and Expenses.............................................................................37
11.2 Notices.......................................................................................37
11.3 Benefit and Binding Effect....................................................................38
11.4 Further Assurances............................................................................38
11.5 Governing Law.................................................................................39
11.6 Headings......................................................................................39
11.7 Gender and Number.............................................................................39
11.8 Entire Agreement..............................................................................39
11.9 Waiver of Compliance; Consents................................................................39
11.10 Press Release.................................................................................39
11.11 Like-Kind Exchange............................................................................39
11.12 Guaranty of PCC...............................................................................40
11.13 Guaranty of ACME Television Holdings, LLC.....................................................40
11.14 Consent to Jurisdiction.......................................................................41
11.15 Bulk Transfer Laws............................................................................41
11.16 Counterparts..................................................................................42
</TABLE>
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LIST OF SCHEDULES
Schedule 2.2 -- Excluded Assets
Schedule 3.3 -- Consents
Schedule 3.4 -- Licenses
Schedule 3.5 -- Real Property
Schedule 3.6 -- Tangible Personal Property
Schedule 3.7 -- Contracts
Schedule 3.9 -- Intangibles
Schedule 3.10 -- Insurance
Schedule 3.12 -- Employee Matters
Schedule 3.14 -- Litigation
Schedule 3.19 -- Cable Carriage
Schedule 4.3 -- Buyer Consents
LIST OF EXHIBITS
Exhibit A-1 -- Form of Noncompetition Agreement for WDPX
Exhibit A-2 -- Form of Noncompetition Agreement for WPXG
Exhibit A-3 -- Form of Noncompetition Agreement for WPXU
Exhibit B -- Form of Sellers' Opinion of Counsel
Exhibit C -- Form of Conditional Assignment
Exhibit D -- Form of Buyers' Opinion of Counsel
Exhibit E-1 -- Form of Secondary Affiliation Agreement for WDPX
Exhibit E-2 -- Form of Secondary Affiliation Agreement for WPXG
Exhibit E-3 -- Form of Secondary Affiliation Agreement for WPXU
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is dated as of the 23rd day of April,
1999, by and among Paxson Communications Corporation, a Delaware corporation
("PCC"); Paxson Communications License Company, LLC, a Delaware limited
liability company ("Paxson License"); Paxson Communications of Green Bay-14,
Inc., a Florida corporation ("Paxson Green Bay"); Paxson Communications of
Dayton-26, Inc., a Florida corporation ("Paxson Dayton"); Paxson Dayton
License, Inc., a Florida corporation ("Paxson Dayton License"); Paxson
Communications of Decatur-23, Inc., a Florida corporation ("Paxson Decatur");
and Paxson Decatur License, Inc., a Florida corporation ("Paxson Decatur
License") (PCC, Paxson License, Paxson Green Bay, Paxson Dayton, Paxson Dayton
License, Paxson Decatur and Paxson Decatur License are referred to herein
individually as a "Seller" and collectively as the "Sellers"); and ACME
Television of Ohio, LLC, a Delaware limited liability company ("ACME Ohio");
ACME Television Licenses of Ohio, LLC, a Delaware limited liability company
("ACME Ohio Licenses"); ACME Television of Wisconsin, LLC, a Delaware limited
liability company ("ACME Wisconsin"); ACME Television Licenses of Wisconsin,
LLC, a Delaware limited liability company ("ACME Wisconsin Licenses"); ACME
Television of Illinois, LLC, a Delaware limited liability company ("ACME
Illinois"); and ACME Television Licenses of Illinois, LLC, a Delaware limited
liability company ("ACME Illinois Licenses") (ACME Ohio, ACME Ohio Licenses,
ACME Wisconsin, ACME Wisconsin Licenses, ACME Illinois and ACME Illinois
Licenses are referred to herein individually as a "Buyer" and collectively as
the "Buyers").
R E C I T A L S
A. PCC, Paxson License and Paxson Green Bay own and operate Television
Station WPXG(TV), Suring, Wisconsin ("WPXG"), pursuant to authorizations issued
by the FCC to Paxson License.
B. Paxson Decatur and Paxson Decatur License own and operate
Television Station WPXU(TV), Decatur, Illinois ("WPXU"), pursuant to
authorizations issued by the FCC to Paxson Decatur License.
C. Paxson Dayton and Paxson Dayton License own and operate Television
Station WDPX(TV), Springfield, Ohio ("WDPX"), pursuant to authorizations issued
by the FCC to Paxson Dayton License. (WPXG, WPXU and WDPX are referred to
herein individually as a "Station" and collectively as the "Stations".)
D. Sellers desire to sell, and Buyers desires to buy, substantially
all of the assets that are used or useful in the business or operations of the
Stations for the price and on the terms and conditions set forth in this
Agreement.
<PAGE> 8
A G R E E M E N T S
In consideration of the above recitals and of the mutual agreements
and covenants contained in this Agreement, Buyers and Sellers, 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:
"Accounts Receivable" means the rights of Sellers to payment for
production services provided by Sellers or the sale of advertising or
programming time on the Stations by Sellers, it being understood that "Accounts
Receivable" shall not include any amounts payable to Buyers for the sale of
advertising or programming time on the Stations by Buyers pursuant to the Time
Brokerage Agreements.
"ACME Guaranty" has the meaning set forth in Section 11.13.
"ACME Holdings" has the meaning set forth in Section 6.1.
"Act" means the Communications Act of 1934, as amended.
"Application" or "Applications" has the meaning set forth in Section
6.1.
"Assets" means the assets to be sold, transferred, or otherwise
conveyed to Buyers under this Agreement, as specified in Section 2.1.
"Assumed Contracts" means (i) all Contracts listed in Schedule 3.7 and
(ii) all Contracts entered into by any Seller between the date of this
Agreement and the Second Closing Date that Buyers agree in writing to assume.
"Buyers' 401(k) Plan" has the meaning set forth in Section 6.9(b).
"Champaign TBA" means the Time Brokerage Agreement entered into on the
date hereof by Paxson Decatur, Paxson Decatur License and ACME Illinois,
pursuant to which, among other things, ACME Illinois shall provide programming
for broadcast on WPXU.
"Claimant" has the meaning set forth in Section 10.5(a).
"Closing Dates" means collectively, the First Closing Date and the
Second Closing Date.
"Closings" means collectively, the First Closing and the Second
Closing.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to transfer the Assets to Buyers
or otherwise to consummate the transactions contemplated by this Agreement.
"Contracts" means all agreements (including any amendments and other
modifications thereto) to which any Seller is a party and which relate to or
affect the business or operations of any Station, and (i) which are in effect
on the date of this Agreement or (ii) which are entered into by any Seller
between the date of this Agreement and the First Closing Date, but excluding
any of the foregoing that are included in the Excluded Assets.
"Dayton TBA" means the Time Brokerage Agreement entered into on the
date hereof by Paxson Dayton, Paxson Dayton License and ACME Ohio, pursuant to
which, among other things, ACME Ohio shall provide programming for broadcast on
WDPX.
"DOJ" has the meaning set forth in Section 6.2.
"Excluded Assets" has the meaning set forth in Section 2.2.
"FCC" means the Federal Communications Commission.
"FCC Consents" means one or more actions of the FCC granting its
consents to the assignments of the FCC Licenses to ACME Ohio Licenses, ACME
Wisconsin Licenses or ACME Illinois Licenses, as the case may be, as
contemplated by this Agreement.
"FCC Licenses" means all Licenses issued by the FCC to, or filed with
the FCC by, Paxson License, Paxson Dayton License or Paxson Decatur License, as
the case may be, in connection with the 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.
"First Closing" means the consummation of the purchase and sale of the
Assets to be conveyed at the First Closing pursuant to this Agreement in
accordance with the provisions of Section 2.3(a).
"First Closing Adjusted Purchase Price" has the meaning set forth in
Section 2.4(b).
"First Closing Date" means the date on which the First Closing occurs,
as determined pursuant to Section 8.1(a).
"First Closing Hired Employee" has the meaning set forth in Section
6.9(b).
"First Closing Purchase Price" has the meaning set forth in Section
2.4(a).
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<PAGE> 10
"FTC" has the meaning set forth in Section 6.2.
"GAAP" means generally accepted accounting principles, as in effect
from time to time, applied on a consistent basis.
"Green Bay TBA" means the Time Brokerage Agreement entered into on the
date hereof by PCC, Paxson License, Paxson Green Bay and ACME Wisconsin,
pursuant to which, among other things, ACME Wisconsin shall provide programming
for broadcast on WPXG.
"Hired Employees" has the meaning set forth in Section 6.9(b).
"HSR Act" has the meaning set forth in Section 6.2.
"HSR Notice" has the meaning set forth in Section 6.2.
"Indemnifying Party" has the meaning set forth in Section 10.5(a).
"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 which are
used or useful in the business and operations of any Station, together with any
additions thereto between the date of this Agreement and the First Closing
Date, but excluding any of the foregoing that are included in the Excluded
Assets.
"Intermediary" means an escrow agent or other person or entity serving
as a "qualified intermediary" under United States Treasury Regulations
promulgated pursuant to Section 1031 of the Code.
"IRS" has the meaning set forth in Section 2.5(b)(ii).
"Licenses" means all licenses, permits, and other authorizations
issued to any Seller by the FCC, the Federal Aviation Administration (the
"FAA"), if any, or any other federal, state, or local governmental authorities
in connection with the conduct of the business or operations of any Station,
together with (i) any additions thereto between the date of this Agreement and
the First Closing Date and (ii) any and all applications for modification or
renewal thereof.
"Material Adverse Effect" means a material adverse effect on either
(x) the Assets of all Stations taken as a whole or the business of all Stations
taken as a whole or (y) the Assets or business of an individual Station taken
as a whole, as the specific context may require, in each case as currently
conducted; provided that the foregoing shall not include any material adverse
effect arising out of (i) factors affecting the television broadcasting
industry generally, (ii) general national, regional or local economic
conditions, (iii) governmental or legislative laws, rules or regulations, or
(iv) actions or omissions of any Buyer or its agents.
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"Material Consents" has the meaning set forth in Section 7.1(c).
"PCC Guaranty" has the meaning set forth in Section 11.12.
"Permitted Liens" means liens for taxes and assessments not yet due
and payable, mechanics' and other statutory liens created in the ordinary
course of business that secure obligations not delinquent, restrictions or
rights retained by governmental authorities under applicable law and liens,
restrictions, easements and other encumbrances otherwise expressly permitted by
this Agreement.
"Petition" has the meaning set forth in Section 8.1(b).
"Purchase Price" means the purchase price specified in Section 2.4.
"Real Property" means Sellers' interests in real property that are set
forth on Schedule 3.5 hereto.
"Retained Liabilities" has the meaning set forth in Section 2.6.
"Second Closing" means the consummation of the purchase and sale of
the FCC Licenses pursuant to this Agreement in accordance with the provisions
of Section 2.3(b).
"Second Closing Adjusted Purchase Price" has the meaning set forth in
Section 2.4(c).
"Second Closing Date" means the date on which the Second Closing
occurs, as determined pursuant to Section 8.1(b).
"Second Closing Hired Employee" has the meaning set forth in Section
6.9(b).
"Second Closing Purchase Price" has the meaning set forth in Section
2.4(a).
"Sellers' 401(k) Plan" has the meaning set forth in Section 6.9(b).
"Station" or "Stations" has the meaning set forth in the Recitals
hereto.
"Tangible Personal Property" means the equipment, tools, vehicles,
leasehold improvements, office equipment, inventory, spare parts, and other
tangible personal property set forth on Schedule 3.6 hereto, less any
retirements or depositions thereof made in the ordinary course of business or
in connection with the acquisition of equivalent replacement property.
"Time Brokerage Agreements" means collectively, the Dayton TBA, Green
Bay TBA and Champaign TBA.
"WDPX" has the meaning set forth in the Recitals hereto.
"WPXG" has the meaning set forth in the Recitals hereto.
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"WPXU" has the meaning set forth in the Recitals hereto.
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, Sellers hereby agree to sell, assign, convey,
transfer, and deliver to Buyers, and Buyers agree to purchase and assume, all
of Sellers' rights, title and interest in and to the following tangible and
intangible Assets used or useful in connection with the conduct of the business
or operations of the Stations (the "Assets"), 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 the following:
(a) The Tangible Personal Property;
(b) The Real Property;
(c) The Licenses;
(d) The Assumed Contracts;
(e) The Intangibles and the goodwill of the Stations, if any;
(f) All of Sellers' proprietary information, technical
information and data, machinery and equipment warranties, maps, computer discs
and tapes, plans, diagrams, blueprints, and schematics, relating to the
business and operation of the Stations; and
(g) All of Sellers' books and records relating to the
business or operations of the Stations, other than those described in Section
2.2(b), including all records required by the FCC to be kept by the Stations.
2.2 EXCLUDED ASSETS. The Assets shall exclude the following assets
(the "Excluded Assets"):
(a) Sellers' cash on hand as of the Closings and all other
cash in any of Sellers' bank or savings accounts; any insurance policies,
letters of credit, or other similar items and cash surrender value in regard
thereto; and any stocks, bonds, certificates of deposit and similar
investments;
(b) All books and records that each Seller is required by law
to retain, that pertain to each Seller's organization or other internal matters
and all tax records;
(c) Any pension, profit-sharing, or employee benefit plans,
and any collective bargaining agreements;
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(d) The Accounts Receivable;
(e) Claims of any Seller, other than those involving the FCC
Licenses, with respect to matters occurring prior to the First Closing Date;
(f) Claims of any Seller involving the FCC Licenses with
respect to matters occurring prior to the Second Closing;
(g) All rights to the name "Paxson," "PAX" or any logo,
variation or derivation thereof, and the call signs "WDPX," "WPXG" and "WPXU";
(h) Prepaid expenses for which Sellers do not receive a
credit under Sections 2.4(b) or (c) hereof and deposits to the extent not
reflected in the adjustments made pursuant to Section 2.4(b) hereof;
(i) All assets or property of each Seller not related to the
Stations;
(j) All contracts, leases and other agreements not included
in the Assumed Contracts; and
(k) All other property listed on Schedule 2.2 hereto.
2.3 CONVEYANCE OF THE ASSETS.
(a) First Closing. Notwithstanding any provision of this
Agreement to the contrary, (i) all of the Assets, other than the FCC Licenses,
used or useful in connection with the business and operations of WDPX shall be
conveyed at the First Closing by Paxson Dayton to ACME Ohio in accordance with
Section 2.1, (ii) all of the Assets, other than the FCC Licenses, used or
useful in connection with the business or operations of WPXG shall be conveyed
at the First Closing by PCC and Paxson Green Bay to ACME Wisconsin in
accordance with Section 2.1, and (iii) all of the Assets, other than the FCC
Licenses, used or useful in connection with the business or operations of WPXU
shall be conveyed at the First Closing by Paxson Decatur to ACME Illinois in
accordance with Section 2.1.
(b) Second Closing. Notwithstanding any provision of this
Agreement to the contrary, (i) all of the FCC Licenses for WDPX shall be
conveyed at the Second Closing by Paxson Dayton License to ACME Ohio Licenses
in accordance with Section 2.1, (ii) all of the FCC Licenses for WPXG shall be
conveyed at the Second Closing by Paxson License to ACME Wisconsin Licenses in
accordance with Section 2.1, and (iii) all of the FCC Licenses for WPXU shall
be conveyed at the Second Closing by Paxson Decatur License to ACME Illinois
Licenses in accordance with Section 2.1.
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2.4 PURCHASE PRICE; ADJUSTMENTS.
(a) Purchase Price. The Purchase Price for the Assets shall
be Forty Million Dollars ($40,000,000). The portion of the Purchase Price
payable by Buyers to Sellers at the First Closing shall equal Thirty-Two
Million Dollars ($32,000,000) (the "First Closing Purchase Price"), subject to
adjustment as provided in Sections 2.4(b) and (d) below. Subject to the partial
closing provisions of Section 7.5 below, the portion of the Purchase Price
payable by Buyers to Sellers at the Second Closing shall equal Eight Million
Dollars ($8,000,000) (the "Second Closing Purchase Price"), subject to
adjustment as provided in Sections 2.4(c) and (d) below.
(b) First Closing Prorations. The First Closing Purchase
Price shall be increased or decreased as required to effectuate the proration
of the revenues and expenses of the Stations in accordance with this Section
2.4(b). All revenues and all expenses arising from the operation of the
Stations, 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 Assets under
this Agreement), employee compensation, including wages, for all employees of
Sellers who become employees of Buyers as of the First Closing, and similar
prepaid and deferred items, shall be prorated between Buyers and Sellers in
accordance with GAAP and the principle that Sellers shall be entitled to all
revenues and shall be responsible for all expenses, costs, and liabilities
allocable to the period prior to the First Closing Date and Buyers shall be
entitled to all revenues (except as otherwise provided in the Time Brokerage
Agreements) and shall be responsible for all expenses, costs, and obligations
(except as otherwise provided in the Time Brokerage Agreements) allocable to
the period on and after the First Closing Date. Notwithstanding the preceding
sentence, there shall be no adjustment for, and Sellers 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 Buyers in accordance
with Section 2.6. The First Closing Purchase Price adjusted in accordance with
this Section 2.4(b) is the "First Closing Adjusted Purchase Price."
(c) Second Closing Prorations. The Second Closing Purchase
Price shall be increased or decreased in accordance with GAAP and the principle
described in Section 2.4(b) as required to effectuate the proration of annual
regulatory fees that have been paid or are to be paid to the FCC with respect
to the FCC Licenses. The Second Closing Purchase Price adjusted in accordance
with this Section 2.4(c) is the "Second Closing Adjusted Purchase Price."
(d) Manner of Determining Adjustments.
(i) Any adjustments with respect to the First Closing
Date shall be determined as provided in this paragraph (i), with final
settlement and payment by the appropriate party to be completed in
accordance with paragraphs (iii) and (iv) of this subsection. Sellers
shall prepare and deliver to Buyers no later than thirty (30) days
following the First Closing Date a preliminary settlement statement
which shall set forth Sellers' good faith estimate of the prorations
required under Section 2.4(b). Such preliminary settlement statement
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shall contain all information reasonably necessary to determine the
prorations under Section 2.4(b), including appropriate supporting
documentation and such other information as may be reasonably
requested by Buyers, and shall be certified by an officer (but without
personal liability of such officer) on behalf of Sellers to be true
and complete to Sellers' knowledge.
(ii) Any adjustments with respect to the Second Closing
will, insofar as feasible, be determined and paid on the Second
Closing Date, with final settlement and payment by the appropriate
party to be completed in accordance with paragraphs (iii) and (iv) of
this subsection. Sellers shall prepare and deliver to Buyers not later
than five (5) business days before the Second Closing Date a
preliminary settlement statement which shall set forth Sellers' good
faith estimate of the prorations under Section 2.4(c). Such
preliminary settlement statement shall contain all information
reasonably necessary to determine the prorations under Section 2.4(c),
including appropriate supporting documentation and such other
information as may be reasonably requested by Buyers, to the extent
such prorations can be determined or estimated as of the date of the
preliminary settlement statement and shall be certified by an officer
(but without personal liability of such officer) on behalf of Sellers
to be true and complete to Sellers' knowledge.
(iii) Not later than thirty (30) days after Buyers
shall have received Sellers' preliminary settlement statement for the
First Closing and not later than thirty (30) days after the Second
Closing Date, Buyers shall deliver to Sellers a statement setting
forth Buyers' determination of any changes to the prorations made at
the First Closing and Second Closing, respectively. Buyers' statements
(A) shall contain all information reasonably necessary to determine
the prorations to the First Closing Purchase Price and Second Closing
Purchase Price under Sections 2.4(b) and (c), respectively, including
appropriate supporting documentation, and such other information as
may be reasonably requested by Sellers, and (B) shall be certified by
an officer (but without personal liability to such officer) on behalf
of Buyers to be true and complete to Buyers' knowledge. Following the
Second Closing, Sellers (and their authorized representatives) shall
have the right to visit the Stations during normal business hours to
verify and review such documentation upon providing reasonable notice
to Buyers (such access not to unreasonably interfere with the business
or operations of the Stations). If Sellers dispute the prorations
determined by Buyers, they shall deliver to Buyers within fifteen days
after their receipt of Buyers' statements a statement setting forth
their determination of such prorations. If Sellers notify Buyers of
their acceptance of Buyers' statements, or if Sellers fail to deliver
their statement within the fifteen-day period specified in the
preceding sentence, Buyers' determination of such adjustments and
prorations shall be conclusive and binding on the parties as of the
last day of such fifteen-day period.
(iv) Buyers and Sellers shall use good faith efforts to
resolve any dispute involving the determination of the prorations in
connection with the Closings. If the parties are unable to resolve any
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dispute within fifteen days following the delivery to Buyers of the
statements described in the penultimate sentence of Section
2.4(d)(iii), Buyers and Sellers shall jointly designate an independent
certified public accountant ) (a "CPA"), who shall be knowledgeable
and experienced in the operation of television broadcasting stations,
to resolve such dispute. If the parties are unable to agree on the
designation of a CPA, the selection of the CPA to resolve the dispute
shall be submitted to arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association. The CPA's
resolution of the dispute shall be final and binding on the parties,
and a judgment may be entered thereon in any court of competent
jurisdiction. Any fees of the CPA, and, if necessary, for arbitration
to select such CPA, shall be split equally between the parties.
Notwithstanding anything to the contrary in this Agreement, none of
the adjustments made pursuant to this Section shall be subject to the
limitations of Section 10.4 of this Agreement.
2.5 PAYMENT OF PURCHASE PRICE; ALLOCATIONS.
(a) Payments. The Purchase Price, as adjusted under Sections
2.4(b) and (c), shall be paid by Buyers to Sellers at the Closings as follows:
(i) On the First Closing Date, Buyers shall pay Sellers
the First Closing Adjusted Purchase Price by federal wire transfer of
same-day funds pursuant to wire instructions delivered by Sellers to
Buyers at least two (2) business days prior to the First Closing Date.
(ii) On the Second Closing Date, Buyers shall pay
Sellers the Second Closing Adjusted Purchase Price by federal wire
transfer of same-day funds pursuant to wire instructions delivered by
Sellers to Buyers at least two (2) business days prior to the Second
Closing Date.
(b) Allocations.
(i) The Purchase Price, subject to the adjustments
required by Sections 2.4(b) and (c), shall be allocated among the
Assets as follows:
(A) WDPX Assets. The portion of the Purchase
Price allocable to the Assets, including the FCC Licenses, used or useful in
the business or operations of WDPX shall be Sixteen Million Dollars
($16,000,000).
(B) WPXG Assets. The portion of the Purchase
Price allocable to the Assets, including the FCC Licenses, used or useful in
the business or operations of WPXG shall be Ten Million Dollars ($10,000,000).
(C) WPXU Assets. The portion of the Purchase
Price allocable to the Assets, including the FCC Licenses, used or useful in
the business or operations of WPXU shall be Fourteen Million Dollars
($14,000,000).
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(ii) The Purchase Price for the Assets allocated to
each of the Stations set forth in paragraph (i) of this subsection
shall be further allocated in accordance with an allocation schedule
to be agreed to by the parties on or prior to the later of the Second
Closing or December 31, 1999 (the "Allocation Deadline"). Buyers shall
prepare the allocation schedule for the Stations and submit such
schedule to Sellers for their approval no later than the earlier of
ten (10) business days prior to the Second Closing Date or December
20, 1999, which approval shall not be unreasonably withheld. If the
parties cannot agree on the allocation schedule for the Stations by
the Allocation Deadline, the parties will select a CPA within five (5)
business days thereafter who is experienced in such matters and whose
decision will be final and binding upon the parties. The CPA's fees
and expenses shall be divided equally between Sellers, on the one
hand, and Buyers, on the other hand. The allocation for each Station's
Purchase Price shall be included in an Internal Revenue Service
("IRS") Form 8594 and shall, as the case may be, be utilized by each
Seller and Buyer in filing any return or other document with the IRS
or any other taxing authority. No party shall take any position in any
document or communication with any governmental authority inconsistent
with the allocations set forth in the schedule developed pursuant to
this paragraph.
2.6 ASSUMPTION OF LIABILITIES AND OBLIGATIONS. As of the First Closing
Date, Buyers shall assume and undertake to pay, discharge, and perform all
obligations and liabilities (a) under the Licenses (other than the FCC
Licenses) and the Assumed Contracts insofar as they relate to the period on and
after the First Closing Date, (b) with respect to which an adjustment to the
First Closing Purchase Price is made in favor of Buyers pursuant to Section
2.4(b), (c) to any former employee of Sellers who is hired by Buyers as of the
First Closing Date insofar as such obligations and liabilities relate to the
period on and after the First Closing Date, and (d) arising out of the business
or operations of the Stations on and after the First Closing Date (except to
the extent such obligations and liabilities relate to the FCC Licenses or other
Assets not conveyed to Buyers). As of the Second Closing Date, Buyers shall
assume and undertake to pay, discharge and perform all obligations and
liabilities (x) under the FCC Licenses insofar as they relate to the period on
and after the Second Closing Date, (y) with respect to which an adjustment to
the Second Closing Purchase Price is made in favor of Buyers pursuant to
Section 2.4(c), and (z) to any former employee of Sellers who is hired by
Buyers as of the Second Closing Date insofar as such obligations and
liabilities relate to the period on and after the Second Closing Date. Buyers
shall not assume any other obligations or liabilities of Sellers, including (i)
any obligations or liabilities under any Contract not included in the Assumed
Contracts, (ii) any obligations or liabilities under the Licenses or Assumed
Contracts relating to the period prior to the First Closing Date, (iii) any
claims, litigation or proceedings relating to the operation of the Stations
prior to the First Closing, regardless of whether such claims, litigation or
proceedings are asserted or instituted before, on, or after the First Closing
Date, (iv) any claims, litigation or proceedings relating to the FCC Licenses
prior to the Second Closing, regardless of whether such claims, litigation or
proceedings are asserted or instituted before, on or after the Second Closing
(it being understood, however, that this clause (iv) shall not limit or
otherwise affect any obligation of Buyers under Section 10.3 hereof), (v) any
obligations for employees of any one of the Sellers who are not hired by a
Buyer, including, but not limited to, COBRA coverage, (vi) any obligations or
liabilities arising under capitalized leases or other financing agreements not
assumed by Buyers, and (vii) any obligations or liabilities of Sellers under
any employee pension or retirement plan or any collective bargaining agreement
(all of the foregoing are referred to hereinafter collectively as the "Retained
Liabilities"). All Retained Liabilities shall remain and be the obligations and
liabilities solely of Sellers.
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SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to Buyers as set forth below:
3.1 ORGANIZATION, STANDING, AND AUTHORITY. Each Seller, other than PCC
and Paxson License, is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Florida. PCC and Paxson License
are, respectively, a corporation and limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Each Seller is duly qualified as a foreign corporation and is in good standing
in each jurisdiction where the conduct of its business or operations as
currently conducted requires such Seller to be so qualified. Each Seller has
all requisite corporate or limited liability company power and authority, as
the case may be, (a) to own, lease, and use those Assets that are owned, leased
and used by it, as now owned, leased, and used, (b) to conduct the business and
operations of the Station conducted by it, 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.
3.2 AUTHORIZATION AND BINDING OBLIGATION. The execution, delivery, and
performance by Sellers of this Agreement and the documents contemplated hereby
have been duly authorized by all necessary corporate or limited liability
company actions, as the case may be, on the part of Sellers. This Agreement has
been duly executed and delivered by Sellers and constitutes the legal, valid,
and binding obligation of Sellers, enforceable against them 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 FCC
Consents, the Consents listed on Schedule 3.3 and applicable requirements under
the HSR Act (as defined below), the execution, delivery, and performance by
Sellers 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, except for such consents the failure of which
to obtain could not reasonably be expected to have a Material Adverse Effect on
the Assets or business of a Station taken as a whole; (b) will not conflict
with any provision of the organizational documents of Sellers; (c) will not
conflict with, result in a breach of, or constitute a default under, any law,
judgment, order, ordinance, injunction, decree, rule, regulation, policy or
ruling of any court or governmental instrumentality; and (d) will not conflict
with, constitute grounds for termination of, result in a breach of, or
constitute a default under, any material agreement, instrument, license, or
permit to which any Seller is a party or by which any Seller may be bound.
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3.4 GOVERNMENTAL LICENSES. Schedule 3.4 includes true and complete
copies of all FCC Licenses and those issued by the FAA, if any, as well as any
and all other licenses and authorizations issued by any other governmental
authority that are material to the operation of the Stations. All FCC Licenses
have been validly issued, and the Seller designated in Schedule 3.4 as the
licensee of each respective Station is the authorized legal holder thereof. The
FCC Licenses listed in Schedule 3.4 for each Station comprise all of the
material licenses, permits, and other authorizations required from any
governmental or regulatory authority for the lawful conduct of the business and
operations of such Station in the manner and to the extent they are now
conducted. Each FCC License is in full force and effect, and the conduct of the
business and operations of the Station to which each FCC License relates is in
compliance therewith except for such noncompliance that could not reasonably be
expected to have a Material Adverse Effect on the Assets or business of a
Station taken as a whole. Notwithstanding any provision in this Agreement to
the contrary, Sellers make no representation or warranty regarding the fitness
or suitability of any Station's existing facilities, including its existing
transmitter site, for such Station's DTV operations.
3.5 TITLE TO AND CONDITION OF REAL PROPERTY.
(a) Schedule 3.5 contains an accurate description of the Real
Property. The Real Property listed on Schedule 3.5 comprises all of the real
property interests owned or held by Sellers and used or useful in the conduct
of the business and operations of the Stations as currently conducted.
(b) Subject to the Permitted Liens, Sellers have good,
marketable and insurable fee simple title in and to each owned parcel of Real
Property described in Schedule 3.5.
(c) There is no pending condemnation or similar proceeding
affecting the owned Real Property or any portion thereof, and, to Sellers'
knowledge, no such action is contemplated or threatened.
(d) Sellers have not received any notice from any insurance
company of any defects or inadequacies in any title to the owned Real Property
or any part thereof, other than liens or encumbrances that would not adversely
affect the insurability of the owned Real Property or the premiums for the
insurance thereof.
(e) Sellers have not received any notice from any insurance
company which has issued any Seller a policy of title insurance with respect to
any portion of the owned Real Property or by any underwriters (or other body
exercising similar functions) requesting the performance of any repairs,
alterations or other work with which compliance has not been made.
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(f) Other than Sellers and any other party identified as a
tenant of any Seller in Schedule 3.7, there are no parties in possession of any
portion of the owned Real Property, whether as lessees, tenants at will,
trespassers or otherwise.
(g) There is no law, ordinance, order or regulation,
including, without limitation, the Americans with Disabilities Act of 1990, as
amended, under which Sellers have received a written notice of violation, which
requires any material expenditure to remediate, remedy, remove, modify or
improve any of the owned Real Property in order to bring it into compliance
therewith.
(h) Sellers have not received any written notice of any
governmental proceeding that would materially impair or curtail access to and
from the owned Real Property.
(i) As of the date hereof, there are no structural,
electrical, mechanical, plumbing, air conditioning, heating or other defects in
the building or structures used by any Seller and located on the owned Real
Property that adversely affect in any material respect the applicable Sellers'
use of such buildings or structures as currently used, and the roofs of each
such building or structure are free from leaks and in good condition,
reasonable wear and tear excepted.
(j) Other than the Permitted Liens, no claim, demand, suit,
proceeding or litigation of any kind is pending or, to the knowledge of
Sellers, threatened which would affect or limit Buyers' use of the owned Real
Property in the manner now used by Sellers.
(k) Sellers are in material compliance with their obligations
under all of the Leases included in Schedule 3.5 (the "Real Property Leases").
All Real Property Leases are valid, binding and enforceable in accordance with
their respective terms, except as enforceability may be limited by laws
affecting the enforcement of creditor rights or equitable principles generally.
To Sellers' knowledge, no other party to any of the Real Property Leases is in
material default thereunder.
3.6 TITLE TO AND CONDITION OF TANGIBLE PERSONAL PROPERTY. Except as
described in Schedule 3.6, each Seller owns and has good title to each item of
Tangible Personal Property owned by it, and none of the Tangible Personal
Property owned by Sellers is subject to any security interest, mortgage,
pledge, conditional sales agreement, or other lien or encumbrance, except for
Permitted Liens and liens set forth on Schedule 3.6 hereto. Each item of
Tangible Personal Property is available for immediate use in the business and
operations of the Station to which such Tangible Personal Property relates as
currently conducted. All items of transmitting equipment included in the
Tangible Personal Property (a) have been maintained in all material respects in
a manner consistent with generally accepted standards of good engineering
practice, and (b) will permit each Station to operate in material compliance
with the terms of the FCC Licenses for such Station and the Act, as well as the
rules, regulations and published policies of the FCC, and with all other
applicable federal, state, and local statutes, ordinances, rules, and
regulations.
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3.7 ASSUMED CONTRACTS. Sellers have delivered to Buyers true and
complete copies of all Assumed Contracts listed on Schedule 3.7. All of the
Assumed Contracts are in full force and effect. Each Seller that is a party to
an Assumed Contract is in material compliance with the terms thereof, and, to
Sellers' knowledge, there is not under any Assumed Contract any material
default by any other party thereto or any event that, after notice or lapse of
time or both, could constitute a material default. Assumed Contracts that
require the consent of a third party for their assignment to Buyers are also
listed on Schedule 3.3. Except for the need to obtain the Consents listed in
Schedule 3.3, each Seller that is a party to an Assumed Contract has full legal
power and authority to assign its rights under the Assumed Contract to the
applicable Buyer in accordance with this Agreement.
3.8 BROKER. Neither Sellers nor any person acting on Sellers' behalf
has incurred any liability for any finders' or brokers' fees or commissions in
connection with the transactions contemplated by this Agreement, except for a
transaction advisory fee payable to Paxson Communications Management Company,
Inc. in the amount of Four Million Dollars ($4,000,000), which fee shall be the
sole responsibility of Sellers, and a brokers' fee payable to Communications
Equity Associates, which fee shall be paid one-half by Sellers, on the one
hand, and one-half by Buyers, on the other hand.
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. Sellers have delivered to
Buyers copies of all documents establishing or evidencing all material
Intangibles (other than those included in the Excluded Assets). To Sellers'
knowledge, no Seller is 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.
3.10 INSURANCE. Schedule 3.10 sets forth all policies of insurance
covering the Assets and such policies are in full force and effect.
3.11 REPORTS. All material returns, reports, and statements required
to be filed by Sellers with respect to the Stations with the FCC or with any
other governmental agency have been filed, and all reporting requirements of
the FCC and other governmental authorities having jurisdiction over Sellers and
the Stations have been complied with by Sellers in all material respects. All
of such returns, reports, and statements are complete and correct as filed in
all material respects. Sellers have paid to the FCC all annual regulatory fees
required to be paid by Sellers with respect to the FCC Licenses. Sellers'
Children's Television Programming reports reflect the Stations' compliance in
all materials respects with applicable requirements of the FCC and will not
subject the Stations to any fines or other sanctions.
3.12 PERSONNEL.
(a) Employees and Compensation. Schedule 3.12 contains a true
and complete list in all material respects of all employees of Sellers who are
employed at the Stations, their job titles, date of hire and current salary.
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Schedule 3.12 also contains a description as of the date of this Agreement of
all employee benefit plans or arrangements applicable to Sellers' employees at
the Stations. All employee benefits and welfare plans or arrangements listed in
Schedule 3.12 were established and have been executed, managed and administered
in all material respects in accordance with the Code, and the Employee
Retirement Income Security Act of 1974, as amended. Sellers are not aware of
the existence of any governmental audit or examination of any of such plans or
arrangements.
(b) Labor Relations. No Seller is a party to or subject to
any collective bargaining agreements with respect to any Station. Except as set
forth in Schedule 3.7, no Seller has any written contract of employment with
any employee of the Stations. Sellers have complied in all material respects
with all laws, rules, and regulations relating to the employment of labor,
including those related to wages, hours, collective bargaining, occupational
safety, discrimination, and the payment of social security and other payroll
related taxes. No labor union or other collective bargaining unit represents or
to Sellers' knowledge, claims to represent any of Sellers' employees at the
Stations. To Sellers' 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 Sellers' employees at
the Stations.
3.13 TAXES. Sellers have filed or caused to be filed all federal,
state and local income tax returns required to be filed by Sellers and have
paid or accrued all taxes shown on those returns to the extent such taxes have
become due, except where the failure to file such returns or pay or accrue such
taxes does not result in a lien on the Assets or in the imposition of
transferee liability or other liability on any Buyer for the payment of such
taxes. There are no proceedings pending pursuant to which Sellers are or could
be made liable for any taxes, penalties, interest, or other charges, the
liability for which could extend to any Buyer as transferee of the Assets or as
operator of the Stations following the Closings, and, to Sellers' knowledge, no
event has occurred and no condition exists that could impose on any Buyer
(either as a transferee or the owner of the Assets) any transferee liability
for any taxes, penalties, or interest due or to become due from Sellers.
3.14 CLAIMS AND LEGAL ACTIONS. Except for any FCC rulemaking
proceedings generally affecting the broadcasting industry, including, without
limitation, the FCC rulemaking identified as In the Matter of Advanced
Television Systems, MM Docket No. 87-268 and any related or subsequent FCC or
court proceeding, or as listed on Schedule 3.14 attached hereto, there is no
material claim, legal action, counterclaim, suit, arbitration, governmental
investigation or other legal, administrative, or tax proceeding, nor any
material order, decree or judgment pending or, to Sellers' knowledge,
threatened, against Sellers with respect to their ownership or operation of the
Stations or otherwise relating to the Assets.
3.15 ENVIRONMENTAL MATTERS.
(a) With respect to their operation of the Stations and their
installation and use of the Assets, Sellers are in compliance in all material
respects with all laws, rules, published policies and regulations of all
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federal, state, and local governments (and all agencies thereof) concerning the
environment, and Sellers have received no written notice of a charge,
complaint, action, suit, proceeding, hearing, investigation, claim, demand, or
notice having been filed or commenced against Sellers in connection with their
operation of the Stations alleging any failure to comply with any such law,
rule, or regulation.
(b) To Sellers' knowledge following reasonable inquiry,
Sellers have no material liability relating to their operation of the Stations
under any law, rule, published policy or regulation of any federal, state, or
local government (or agency thereof) concerning the release or threatened
release of hazardous substances, pollution or protection of the environment.
(c) To Sellers' knowledge following reasonable inquiry, in
connection with Sellers' operation of the Stations, Sellers hold and are in
compliance in all material respects with all of the terms and conditions of all
permits, licenses, and other authorizations which are required under, and are
in compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which are
contained in, all federal, state, and local laws, rules, published policies and
regulations relating to 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.
(d) The Phase I Environmental Site Assessment prepared by
Dames and Moore for the WDPX transmitter site (the "WDPX Phase I") reports the
existence of spray-on soundproofing material and ceiling panels, floor tile and
pipe insulation that contain asbestos. Notwithstanding any other provision in
this Agreement to the contrary, Sellers shall have no obligation or liability
to Buyers for breach of any representation, warranty or covenant hereunder or
otherwise as a result of the existence of asbestos in such materials.
(e) As used in this Section 3.15, "to Sellers' knowledge
following reasonable inquiry" means to Sellers' actual knowledge following
inspection of the Assets and the operation of the Stations by Sellers'
employees but without any other investigation, including, without limitation,
the conduct of any environmental assessment or survey, other than the WDPX
Phase I, a copy of which has been provided to Buyers.
3.16 COMPLIANCE WITH LAWS. Each Seller is in material compliance with
the Licenses held by it and all federal, state, and local laws, rules,
regulations, and ordinances applicable or relating to the ownership or
operation of the Assets owned and operated by such Seller. Neither the
ownership nor operation of the Assets by Sellers conflicts in any material
respect with the rights of any other person or entity.
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3.17 CONDUCT OF BUSINESS IN ORDINARY COURSE. Since July 1, 1998, each
Seller has conducted the business and operations of its respective Station in
the ordinary course of business consistent with past practices in all material
respects and has not:
(a) Made any sale, assignment, lease, or other transfer of
such Station's properties other than obsolete assets no longer used in the
operation of the Station or other assets sold or disposed of in the normal and
usual course of business with suitable replacements being obtained therefor;
(b) Canceled any debts owed to or claims held by such Seller
with respect to its Station, except in the normal and usual course of business;
or
(c) Suffered any material write-down of the value of any
Assets or any material write-off as uncollectible of any accounts receivable of
such Station, except in the normal and usual course of business.
3.18 INSOLVENCY. No insolvency proceedings of any character,
including, without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting
any Seller or any of the Assets is pending or, to Sellers' knowledge,
threatened, and no Seller has made any assignment for the benefit of creditors,
nor taken any actions with a view to, or which would constitute the basis for,
the institution of any such insolvency proceedings.
3.19 CABLE CARRIAGE. Schedule 3.19 annexed hereto sets forth, to
Sellers' knowledge, a correct and complete list in all material respects of (a)
all cable television systems that carry the Stations' signals on the date
hereof under the FCC's "must carry" rules or under agreements implementing such
rules; and (b) all cable television systems that carry the Stations' signals
pursuant to retransmission consent agreements (with copies of all such
agreements included in the schedule).
3.20 NO MATERIAL OMISSION. Sellers have not failed to disclose any
material fact known to Sellers that would make any warranty or representation
in this Agreement inaccurate or misleading in any material respect.
3.21 DISCLAIMER. Except for the foregoing representations and
warranties specifically set forth in Sections 3.1 through 3.20, and the
representations and warranties in the Certificate to be delivered by Sellers
pursuant to Sections 8.2(c) and 8.4(b), the Assets are being transferred by
Sellers to Buyers 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. Without
limiting the generality of the foregoing, Buyers acknowledge that neither
Sellers nor any director, officer, employee or agent of Sellers has made any
warranty or representation, express or implied, as to the revenue or income to
be derived from the Stations or the expenses to be incurred with respect
thereto.
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYERS
Buyers represent and warrant to Sellers as follows:
4.1 ORGANIZATION, STANDING, AND AUTHORITY. Each Buyer is a limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware. Each Buyer is duly qualified as a foreign
limited liability company and in good standing in each jurisdiction where the
conduct of its business or operations as currently conducted or proposed to be
conducted upon consummation of the First Closing requires such Buyer to be so
qualified. Each Buyer has all requisite limited liability company 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 such Buyer hereunder.
4.2 AUTHORIZATION AND BINDING OBLIGATION. The execution, delivery, and
performance by Buyers of this Agreement and the documents contemplated hereby
have been duly authorized by all necessary limited liability company actions on
the part of Buyers. This Agreement has been duly executed and delivered by
Buyers and constitutes the legal, valid, and binding obligation of Buyers,
enforceable against Buyers 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 FCC
Consents, the Consents listed on Schedule 4.3 and applicable requirements under
the HSR Act, the execution, delivery, and performance by Buyers 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 except for such consents the failure of which to obtain could not
reasonably be expected to have a material adverse effect on the performance by
Buyers of their obligations hereunder; (b) will not conflict with the
organizational documents of Buyers; (c) will not conflict with, result in a
breach of, or constitute a default under, any law, judgment, order, injunction,
decree, rule, regulation, policy or ruling of any court or governmental
instrumentality; or (d) will not conflict with, constitute grounds for
termination of, result in a breach of, or constitute a default under, any
material agreement, instrument, license, or permit to which any Buyer is a
party or by which any Buyer may be bound, such that such Buyer could not
acquire or operate the Assets.
4.4 BROKER. Neither Buyers nor any person acting on Buyers' behalf has
incurred any liability for any finders' or brokers' fees or commissions in
connection with the transactions contemplated by this Agreement, except for a
brokers' fee payable to Communications Equity Associates, which fee shall be
paid one-half by Sellers, on the one hand, and one-half by Buyers, on the other
hand.
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4.5 BUYER QUALIFICATIONS. Each Buyer is, and as of the Closing will
be, legally, financially and otherwise qualified to perform its obligations
hereunder and to be the licensee of and to acquire, own and operate the Station
proposed to be acquired, owned and operated by such Buyer under the Act and the
rules, regulations and policies of the FCC. To Buyers' knowledge, no waiver of
any FCC rule or policy is required for the grant of the FCC Consents.
4.6 FINANCING. Buyers will have on the Closing Dates sufficient funds
to enable them to consummate the transactions contemplated hereby to occur on
such Closing Dates. Buyers acknowledge that the availability of financing shall
not be a condition to their obligation to consummate the transactions
contemplated hereby at the Closings, or to any of their other obligations
hereunder.
4.7 INSOLVENCY. No insolvency proceedings of any character, including,
without limitation, bankruptcy, receivership, reorganization, composition or
arrangement with creditors, voluntary or involuntary, affecting any Buyer is
pending or, to Buyers' knowledge, threatened, and no Buyer has made any
assignment for the benefit of creditors, nor taken any actions with a view to,
or which would constitute the basis for, the institution of any such insolvency
proceedings.
4.8 MATERIAL OMISSION. Buyers have not failed to disclose any material
fact known to Buyers that would make any warranty or representation in this
Agreement inaccurate or misleading in any material respect.
SECTION 5. OPERATION OF THE STATIONS PRIOR TO THE CLOSINGS
5.1 GENERALLY. Subject to the provisions of the Time Brokerage
Agreements, between the date of this Agreement and the Second Closing Date,
Sellers shall operate the Stations in all material respects in the ordinary
course of business in accordance with their past practices (except where such
conduct would conflict with the following covenants or with Sellers' other
obligations under this Agreement or the Time Brokerage Agreements), and in
accordance with the other covenants in this Section 5. Except as otherwise
expressly provided in this Section 5, all of the covenants of Sellers regarding
the operation of the Stations set forth in this Section 5 shall apply to the
period commencing on the date of this Agreement and ending on the Second
Closing Date.
5.2 COMPENSATION. Sellers shall not increase in any material respect
the compensation, bonuses, or other benefits payable or to be payable to any
person employed by Sellers in connection with the conduct of the business or
operations of the Stations, except in accordance with past practices.
5.3 CONTRACTS. Sellers will not, without the prior written consent of
Buyers, which consent shall not be unreasonably withheld, amend any Assumed
Contract or enter into any contract or commitment relating to the Stations that
will be binding on Buyers or impair in any material respect Buyers' rights
under this Agreement or the Time Brokerage Agreements.
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5.4 DISPOSITION OF ASSETS. Sellers 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 Stations or in connection with
the acquisition of replacement property of equivalent kind and value.
Notwithstanding the foregoing, the expiration by their terms of Contracts prior
to the First Closing shall not be deemed a violation of this Agreement.
5.5 ENCUMBRANCES. Sellers shall not create, acquiesce to, or assume
any claim, liability, mortgage, lien, pledge, condition, charge, or encumbrance
of any nature whatsoever upon the Assets, except for (a) liens disclosed on
Schedule 3.5 or Schedule 3.6, which liens shall be removed on or prior to the
First Closing Date, and (b) Permitted Liens.
5.6 FCC LICENSES. Sellers shall not cause or permit, by any act or
failure to act, any material FCC License to expire or to be revoked, suspended,
or modified in any materially adverse respect, 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 materially adverse
modification of any material FCC License.
5.7 ACCESS TO INFORMATION. From the date of this Agreement until the
Second Closing, Sellers shall give Buyers and their authorized representatives
access, during normal business hours and with reasonable prior notice, to the
Assets within Sellers' control and to all other books, records, Contracts, and
documents relating to the Stations and in Sellers' possession or control for
the purpose of audit and inspection, so long as such audit and inspection do
not unreasonably interfere with the business and operations of the Stations.
5.8 MAINTENANCE OF ASSETS. From the date of this Agreement until the
First Closing, Sellers shall use commercially reasonable efforts to maintain
the Assets in good condition (ordinary wear and tear excepted). From the date
of this Agreement until the First Closing, Sellers 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 prior to the First Closing, Sellers shall repair,
replace, or restore the Assets to their prior condition as represented in this
Agreement as soon thereafter as possible, and Sellers 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 prior to the First
Closing. Except as provided in this Section, Sellers shall not make any
material change in the Real Property or in any building, structure, fixture or
improvement on the Real Property.
5.9 INSURANCE. Sellers shall maintain the existing insurance policies
on the Stations and the Assets through the First Closing Date.
5.10 CONSENTS. Sellers shall use commercially reasonable efforts to
obtain the Consents without any change in the terms or conditions of any
Assumed Contract or License that could be materially less advantageous to the
Stations than those pertaining under the Assumed Contract or License as in
effect on the date of this Agreement; provided, however, that Sellers' failure
to obtain any Consent shall not constitute a breach of this Agreement so long
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as Sellers shall have used commercially reasonable efforts to obtain such
Consent. Sellers shall promptly advise Buyers of any difficulties experienced
in obtaining any of the Consents and of any conditions proposed, considered, or
requested for any of the Consents. Buyers shall use commercially reasonable
efforts to assist Sellers in obtaining the Consents, including, without
limitation, executing such assumption instruments and other documents as may be
reasonably required in connection with obtaining the Consents.
5.11 CABLE CARRIAGE. Sellers shall take any and all commercially
reasonable actions, and not fail to take any commercially reasonable actions,
necessary or appropriate to preserve the Stations' carriage on the cable
television systems identified in Schedule 3.19, except that Sellers shall not
be responsible for any action or omission of any Buyer following the First
Closing which causes a cable system to delete any Station's signal from
carriage on such system.
5.12 ORGANIZATION, GOOD WILL, PROMOTION. From the date of this
Agreement until the First Closing, Sellers shall use commercially reasonable
efforts to preserve the business organization of the Stations and shall
cooperate with Buyers to preserve the goodwill of the Stations' suppliers,
customers, and others having business relations with the Stations.
5.13 REPRESENTATIONS AND WARRANTIES. From the date of this Agreement
until the First Closing, Sellers shall give notice to Buyers promptly upon the
occurrence of any event known to Sellers that would cause or constitute a
material breach of any of Sellers' representations or warranties in Section 3
hereof. From the First Closing until the Second Closing, Sellers shall give
notice to Buyers promptly upon the occurrence of any event known to Sellers
that would cause or constitute a material breach of Sellers' representations or
warranties in Sections 3.1, 3.2, 3.3, 3.4, 3.8, 3.11, 3.12, 3.13, 3.14, 3.16,
3.18, 3.19 and 3.20 (as such Section 3.20 applies only to the subsections of
Section 3 listed in this sentence) hereof. From the date of this Agreement
until the Second Closing, Buyers shall give notice to Sellers promptly upon the
occurrence of any event known to Buyers that would cause or constitute a
material breach of any of Buyers' representations or warranties in Section 4 of
this Agreement.
5.14 NOTICE OF PROCEEDINGS. Sellers shall promptly notify Buyers (and
in any event within five (5) business days) upon receipt of notice of any
actual or threatened material claim, dispute, arbitration, litigation,
complaint, judgment, order, decree, investigation, action or proceeding
relating to Sellers, the Stations, the Assets, or the consummation of this
Agreement, other than FCC rulemaking proceedings generally affecting the
broadcasting industry. Buyers shall promptly notify Sellers (and in any event
within five (5) business days) upon receipt of notice of any actual or
threatened material claim, dispute, arbitration, litigation, complaint,
judgment, order, decree, investigation, action or proceeding relating to Buyers
or the consummation of this Agreement, other than FCC rulemaking proceedings
generally affecting the broadcasting industry.
5.15 PERFORMANCE UNDER ASSUMED CONTRACTS. From the date of this
Agreement until the First Closing, Sellers will perform in all material
respects their obligations under, and keep in effect, the Assumed Contracts.
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5.16 BOOKS AND RECORDS. Sellers shall maintain their books and records
relating to the Stations in all material respects in accordance with past
practices.
5.17 COMPLIANCE WITH LAWS. Sellers shall comply in all material
respects with all laws, published policies, rules, and regulations applicable
or relating to the ownership or operation by Sellers of the Stations.
5.18 CURE. For all purposes under this Agreement, except in connection
with a failure by Buyers to pay the entire First Closing Adjusted Purchase
Price on the First Closing Date or the Second Closing Adjusted Purchase Price
on the Second Closing Date, the existence or occurrence of any events or
circumstances that constitute or cause a breach of a representation or warranty
of Sellers or Buyers under this Agreement (including, without limitation, in
the case of Sellers, 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 before 10 days after the
receipt by such party of written notice thereof from the other party.
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 Assets pursuant to this Agreement shall be subject to
the prior consent and approval of the FCC.
(b) Paxson License, Paxson Dayton License and Paxson Decatur
License, on the one hand, and ACME Television Holdings, LLC ("ACME Holdings"),
on the other hand, have filed, respectively, Form 314 applications
(individually, an "Application" and collectively, the "Applications") to obtain
the FCC Consents for WPXG, WDPX and WPXU. The respective parties to each
Application shall prosecute such Application with all reasonable diligence and
otherwise use their commercially reasonable efforts to obtain a grant of the
Application as expeditiously as practicable. Without limiting the generality of
the foregoing, ACME Holdings shall amend each Application as soon as possible
following the date hereof but in no event later than the First Closing Date for
the purpose of substituting (i) ACME Ohio Licenses for ACME Holdings as the
proposed Assignee in the Application for WDPX, (ii) ACME Wisconsin Licenses for
ACME Holdings as the proposed Assignee in the Application for WPXG, and (iii)
ACME Illinois Licenses for ACME Holdings as the proposed Assignee in the
Application for WPXU. Each party shall promptly provide the other party with
copies of any pleadings or other documents received by such party (that are not
also separately provided to or served upon such other party) with respect to
the Applications. Each party agrees to comply with any condition imposed on it
by the FCC Consents, 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
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it. Buyers and Sellers shall cooperate with each other and otherwise employ
commercially reasonable efforts to oppose any requests for reconsideration or
judicial review of the FCC Consents. If the Second Closing shall not have
occurred for any reason within the original effective period of the FCC
Consents, and neither party shall have terminated this Agreement in accordance
with the terms hereof, the parties shall jointly request an extension of the
effective period of the FCC Consents. No extension of the FCC Consents shall
limit the exercise by any party of its rights under 8.5(e) hereof.
6.2 HSR ACT. The respective ultimate parent entities of Sellers and
Buyers have each filed with the Federal Trade Commission ("FTC") and Department
of Justice ("DOJ") Notification and Report Forms with respect to the
transactions contemplated by this Agreement (the "HSR Notices") pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). By letter dated April 12, 1999, the FTC granted the parties' request for
early termination of the waiting period under the HSR Act. Buyers and Sellers
agree to (a) cooperate with each other in connection with any subsequent 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 FTC or 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 to the extent practicable, to permit each other to
participate in any conferences with the FTC or DOJ.
6.3 CONTROL OF THE STATIONS. Prior to the Second Closing, Buyers shall
not, directly or indirectly, control, supervise, direct, or attempt to control,
supervise, or direct, the operations of the Stations; such operations,
including complete control and supervision of all of the programs, employees,
and policies of the Stations, shall be the sole responsibility of Sellers until
the Second Closing.
6.4 RISK OF LOSS. The risk of any loss, damage, impairment,
confiscation or condemnation of any of the Assets, other than the FCC Licenses,
from any cause, other than as a result of any action or omission of Buyers or
any of their agents, shall be borne by Sellers at all times prior to the First
Closing. The risk of any loss, damage, impairment or confiscation of any of the
FCC Licenses from any cause, other than as a result of any action or omission
of Buyers or any of their agents, shall be borne by Sellers at all times prior
to the Second Closing.
6.5 CONFIDENTIALITY. Except as necessary for the consummation of the
transactions contemplated by this Agreement, and except as and to the extent
required by law or any securities exchange, 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 other party all information obtained by such
party from the other party in connection with the transactions contemplated by
this Agreement, and neither Sellers nor Buyers shall disclose to third parties
(except to their respective agents and representatives, who will be bound by
this section) any information designated as confidential and received from the
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other or its agents in the course of investigating, negotiating, and
consummating the transactions contemplated by this Agreement; provided, that no
information shall be deemed to be confidential that (a) becomes publicly known
or available other than through disclosure by the disclosing party; (b) is
rightfully received by the disclosing party from a third party; or (c) is
independently developed by the disclosing party. All originals of all material
designated as confidential provided by either party or its agents shall be
returned and all copies thereof shall be destroyed.
6.6 COOPERATION. Buyers and Sellers 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 Buyers and Sellers shall execute such other documents as may be
necessary and desirable to the implementation and consummation of this
Agreement, and otherwise use their commercially reasonable efforts to
consummate the transaction contemplated hereby and to fulfill their obligations
under this Agreement. Notwithstanding the foregoing, Buyers shall have no
obligation to agree to any material adverse change in any License or Assumed
Contract to obtain a Consent required with respect thereto.
6.7 ACCESS TO BOOKS AND RECORDS. Sellers shall provide Buyers
reasonable access and the right to copy for a period of three years from the
First Closing Date any books and records relating to the assets that are not
included in the Assets. Buyers shall provide Sellers reasonable access and the
right to copy for a period of three years from the First Closing Date any books
and records relating to the Assets.
6.8 BUYER CONDUCT. Buyers shall not take any action or fail to take
any action that would (a) disqualify Buyers from being the licensee of and
owning and operating the Stations under the Act and the rules, regulations and
published policies of the FCC as in effect on the date hereof or (b) prevent
Buyers from otherwise fulfilling their obligations hereunder, including their
obligations to pay the entire First Closing Adjusted Purchase Price on the
First Closing Date and the Second Closing Adjusted Purchase Price on the Second
Closing Date.
6.9 EMPLOYMENT MATTERS.
(a) Buyers shall not be obligated to employ any of Sellers'
employees and any such employment by Buyers shall be at their sole discretion
and, subject to the terms of this Section 6.9, shall be on terms, conditions
and policies of employment established by Buyers; provided, however, that
Buyers shall not have the right to employ any person designated on Schedule
3.12 as an employee to be retained by Sellers.
(b) Subject to applicable law, within a reasonable period of
time after the First Closing Date, Sellers shall transfer from the Paxson
Communications Corporation 401(k) Retirement Plan (the "Sellers' 401(k) Plan")
to any 401(k) plan established by Buyers (the "Buyers' 401(k) Plan") an amount,
in cash, equal to the aggregate account balances held in the Sellers' 401(k)
Plan as of the date of transfer with respect to all employees of Sellers hired
by Buyers as of the Effective Date of the Time Brokerage Agreements (each a
"First Closing Hired Employee"). Prior to the date of any such transfer, and as
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preconditions thereto: (i) Buyers shall use commercially reasonable efforts to
deliver to Sellers a copy of the most recently issued IRS determination letter
(or other proof satisfactory to counsel for Sellers) that Buyers' 401(k) Plan
is qualified under the Code, and (ii) Sellers shall use commercially reasonable
efforts to deliver to Buyers a copy of the most recently issued IRS
determination letter (or other proof satisfactory to counsel for Buyers) that
Sellers' 401(k) Plan is qualified under the Code. Subject to applicable law,
within a reasonable period of time after the Second Closing Date, Sellers shall
transfer from Sellers' 401(k) Plan to Buyers' 401(k) Plan an amount, in cash,
equal to the aggregate account balances held in Sellers' 401(k) Plan as of the
date of transfer with respect to all employees of Sellers hired by Buyers as of
the Second Closing Date (each a "Second Closing Hired Employee" and,
collectively with the First Closing Hired Employees, the "Hired Employees").
Subsequent to any transfer of assets to Buyers' 401(k) Plan, neither Sellers
nor Sellers' 401(k) Plan shall retain any liability with respect to any Hired
Employee to provide him or her with benefits in accordance with the terms of
Sellers' 401(k) Plan. Sellers and Buyers agree to cooperate with respect to any
government filing, including, but not limited to, the filing of IRS Forms
5310-A, if necessary, to effect the transfer of assets contemplated by this
Section 6.9(b).
(c) For each Hired Employee, Buyers shall offer health and
other welfare plan coverage to all Hired Employees and their dependents under
the terms and conditions generally applicable to Buyers' employees as of the
dates of hire for First Closing Hired Employees and Second Closing Hired
Employees. For purposes of providing such coverage, if and to the extent
permitted by Buyer's group health plan or other welfare plan, Buyers shall
waive all pre-existing condition limitations for all Hired Employees and their
dependents covered by Sellers' group health plan or other welfare plan, without
the application of any eligibility period for coverage. If and to the extent
permitted by Buyer's healthcare plans, for each Hired Employee, Buyers shall
credit all employee payments toward deductible and co-payment obligations under
Sellers' healthcare plans for the plan year which includes the First Closing
Date for all First Closing Hired Employees and the Second Closing Date for all
Second Closing Hired Employees as if such payments had been made for similar
purposes under Buyers' healthcare plans during the plan year which includes
such Closing Dates.
(d) Sellers shall be responsible for any amount payable to
each First Closing Hired Employee and each Second Closing Hired Employee for
vacation, sick leave and personal days accrued but unused by such employees, in
each case as of the First Closing Date or Second Closing Date, as applicable.
(e) This Section 6.9 shall operate exclusively for the
benefit of the parties to this Agreement and is not intended for the benefit of
any other person, including, without limitation, any current or former employee
of any party hereto.
6.10 NONCOMPETITION AGREEMENT. At the Second Closing, each respective
Buyer and Seller identified in the Noncompetition Agreements set forth in
Exhibits A-1, A-2 and A-3 hereto shall enter into such Noncompetition
Agreements and Four Million Dollars ($4,000,000) of the Second Closing Purchase
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Price shall be allocated to the covenants of Sellers set forth in the
Noncompetition Agreement for each respective Station as follows: WDPX -
$1,600,000; WPXU - $1,400,000; and WPXG - $1,000,000.
6.11 TIME BROKERAGE AGREEMENTS. Buyers shall be solely responsible for
all costs and expenses relating to or arising from the commencement of Buyers'
programming on the Stations and the performance by Buyers of their other
obligations under the Time Brokerage Agreements. No act or omission of either
Buyers, on the one hand, or Sellers, on the other hand, or their respective
agents during the effective period of the Time Brokerage Agreements shall
constitute or result in a breach or default by the other party of any
representation, warranty or covenant of such other party contained in this
Agreement.
SECTION 7. CONDITIONS TO OBLIGATIONS OF BUYERS AND SELLERS AT THE CLOSINGS
7.1 CONDITIONS TO OBLIGATIONS OF BUYERS AT THE FIRST CLOSING. All
obligations of Buyers at the First Closing are subject at Buyers' option to the
fulfillment prior to or at the First Closing Date of each of the following
conditions:
(a) Representations and Warranties. All representations and
warranties of Sellers contained in Section 3 of this Agreement shall be true
and complete at and as of the First Closing Date as though made at and as of
that time except for (i) any inaccuracy that does not have or would not
reasonably be expected to have a Material Adverse Effect on the Assets taken as
a whole or the business of the Stations taken as a whole (with the
understanding that a consummation of the transactions contemplated to occur at
the First Closing notwithstanding any such inaccuracy of Sellers'
representations or warranties shall not constitute a waiver of Buyers' rights
under Section 10.2 hereof), (ii) any representation or warranty that is
expressly stated only as of a specified earlier date, in which case such
representation or warranty shall be true as of such earlier date, (iii) changes
in any representation or warranty that are contemplated by this Agreement or
(iv) changes in any representation or warranty as a result of any act or
omission of Buyers or their agents.
(b) Covenants and Conditions. Sellers shall have performed
and complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by them prior to or on the First
Closing Date, except to the extent such noncompliance would not have a Material
Adverse Effect on the Assets taken as a whole or the business of the Stations
taken as a whole or results from any act or omission of Buyers or their agents
(with the understanding that a consummation of the transactions contemplated to
occur at the First Closing notwithstanding any such noncompliance shall not
constitute a waiver of Buyers' rights under Section 10.2 hereof).
(c) Consents. All Consents, other than the FCC Consents,
designated as "material" on Schedule 3.3 (the "Material Consents") shall have
been obtained and delivered to Buyers without any material adverse change in
the terms or conditions of any agreement or any governmental license, permit,
or other authorization.
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(d) Deliveries. Sellers shall have made or stand willing to
make all the deliveries to Buyers set forth in Section 8.2.
7.2 CONDITIONS TO OBLIGATIONS OF SELLERS AT THE FIRST CLOSING. All
obligations of Sellers at the First Closing are subject at Sellers' option to
the fulfillment prior to or at the First Closing Date of each of the following
conditions:
(a) Representations and Warranties. All representations and
warranties of Buyers contained in Section 4 of this Agreement shall be true and
complete at and as of the First Closing Date as though made at and as of that
time, except for (i) any inaccuracy that does not have or would not reasonably
be expected to have a material adverse effect on Buyers' ability to perform
their obligations hereunder (with the understanding that a consummation of the
transactions contemplated to occur at the First Closing notwithstanding any
such inaccuracy of Buyers' representations or warranties shall not constitute a
waiver of Sellers' rights under Section 10.3 hereof), (ii) any representation
or warranty that is expressly stated only as of a specified earlier date, in
which case such representation or warranty shall be true as of such earlier
date and (iii) changes in any representation or warranty that are contemplated
by this Agreement.
(b) Covenants and Conditions. Buyers shall have performed and
complied with in all material respects all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by them
prior to or on the First Closing Date (with the understanding that a
consummation of the transactions contemplated to occur at the First Closing
notwithstanding any such noncompliance shall not constitute a waiver of
Sellers' rights under Section 10.3 hereof).
(c) Deliveries. Buyers shall have made or stand willing to
make all the deliveries set forth in Section 8.3.
7.3 CONDITIONS TO OBLIGATIONS OF BUYERS AT THE SECOND CLOSING. All
obligations of Buyers at the Second Closing are subject at Buyers' option to
the fulfillment prior to or at the Second Closing Date of each of the following
conditions:
(a) Representations and Warranties. All representations and
warranties of Sellers contained in Sections 3.1, 3.2, 3.3, 3.4, 3.8, 3.11,
3.12, 3.13, 3.14, 3.16, 3.18, 3.19 and 3.20 (as such Section 3.20 applies only
to the subsections of Section 3 listed in this sentence) of this Agreement
shall be true and complete at and as of the Second Closing Date as though made
at and as of that time except for (i) any inaccuracy that does not have or
would not reasonably be expected to have a Material Adverse Effect on the
Assets taken as a whole or the business of the Stations taken as a whole (with
the understanding that a consummation of the transactions contemplated hereby
notwithstanding any such inaccuracy of Sellers' representations or warranties
shall not constitute a waiver of Buyers' rights under Section 10.2 hereof),
(ii) any such representation or warranty that is expressly stated only as of a
specified earlier date, in which case such representation or warranty shall be
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true as of such earlier date, (iii) changes in any such representation or
warranty that are contemplated by this Agreement or (iv) changes in any such
representation or warranty as a result of any act or omission of Buyers or
their agents.
(b) Covenants and Conditions. Sellers shall have performed
and complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by them prior to or on the Second
Closing Date, except to the extent such noncompliance would not have a Material
Adverse Effect on the Assets taken as a whole or the business of the Stations
taken as a whole or results from any act or omission of Buyers or their agents
(with the understanding that a consummation of the transactions contemplated
hereby notwithstanding any such noncompliance shall not constitute a waiver of
Buyers' rights under Section 10.2 hereof).
(c) FCC Consents. The FCC Consents shall have been granted
without the imposition on Buyers of any conditions that need not be complied
with by Buyers under Section 6.1 hereof, and Sellers shall have complied with
any conditions imposed on them by the FCC Consents.
(d) Time Brokerage Agreements. The Time Brokerage Agreements
shall be in full force and effect.
(e) Deliveries. Sellers shall have made or stand willing to
make all the deliveries to Buyers set forth in Section 8.4.
7.4 CONDITIONS TO OBLIGATIONS OF SELLERS AT THE SECOND CLOSING. All
obligations of Sellers at the Second Closing are subject at Sellers' option to
the fulfillment prior to or at the Second Closing Date of each of the following
conditions:
(a) FCC Consents. The FCC Consents shall have been granted
without the imposition on Sellers of any conditions that need not be complied
with by Sellers under Section 6.1 hereof, and Buyers shall have complied with
any conditions imposed on them by the FCC Consents.
(b) Deliveries. Buyers shall have made or stand willing to
make all the deliveries set forth in Section 8.4(e).
7.5 SEPARATE CLOSINGS. Notwithstanding any provision of this Agreement
to the contrary, if, on or prior to the date that would otherwise be the Second
Closing Date pursuant to Section 8.1(b), the conditions precedent to the
completion of the Second Closing set forth in Sections 7.3 and 7.4 above have
been satisfied with respect to less than all of the Stations, the parties shall
nevertheless complete the Second Closing in accordance with the terms hereof
with respect to the Station or Stations for which such conditions have been
satisfied on such date as is determined pursuant to Section 8.1(b). The parties
shall thereafter complete the Second Closing for the remaining Station or
Stations at such time as the conditions set forth in Sections 7.3 and 7.4 above
have been satisfied with respect to such Station or Stations on such date as is
determined pursuant to Section 8.1(b). For the purpose of this Section 7.5, the
Second Closing Purchase Price shall be divided among the Stations as follows:
WDPX(TV) - $4,000,000; WPXG(TV) - $2,000,000 and WPXU(TV) - $2,000,000.
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SECTION 8. CLOSINGS AND CLOSING DELIVERIES
8.1 CLOSINGS.
(a) First Closing Date. Subject to the satisfaction or, to
the extent permissible by law, waiver (by the party for whose benefit the First
Closing condition is imposed) on the date scheduled for the First Closing, of
the conditions precedent set forth in Sections 7.1 and 7.2, as appropriate, the
First Closing shall take place at 10:00 a.m. on April 23, 1999.
(b) Second Closing Date. Subject to the satisfaction or, to
the extent permissible by law, waiver (by the party for whose benefit the
Second Closing condition is imposed) on the date scheduled for the Second
Closing, of the conditions precedent set forth in Sections 7.3 and 7.4, as
appropriate, the Second Closing for each Station shall take place at 10:00 a.m.
on a date to be set by Sellers on at least five (5) business days' written
notice to Buyers that is within ten (10) business days after the FCC Consent
for such Station shall have been granted; provided, however, if any Petition to
Deny (a "Petition") shall have been filed against any Application and such
Petition contains one or more allegations regarding the basic qualifications of
the Assignor or Assignee therein that pose a reasonable risk of reversal of
such FCC Consent based on the Act or the FCC's rules, policies or decisions
then in effect, the Second Closing for the affected Station shall occur on a
date set by Sellers on at least five (5) business days' written notice to
Buyers that is not earlier than the date the FCC Consent for such Station shall
have become a Final Order and not later than ten (10) business days following
the date upon which the FCC Consent for such Station shall have become a Final
Order. Time is of the essence with respect to this Agreement.
(c) Closing Place. The Closings shall be held at the offices
of Dow, Lohnes & Albertson, PLLC, 1200 New Hampshire Avenue, N.W., Suite 800,
Washington, D.C. 20036, or any other place that is agreed upon by Buyer and
Sellers.
8.2 DELIVERIES BY SELLERS AT THE FIRST CLOSING. Prior to or on the
First Closing Date, Sellers shall deliver to Buyers the following, in form and
substance reasonably satisfactory to Buyers and their counsel:
(a) Transfer Documents. Duly executed bills of sale, warranty
deeds, motor vehicle titles, assignments, and other transfer documents which
shall be sufficient to vest good and marketable title to the Assets (other than
the FCC Licenses) in the name of the applicable Buyer, free and clear of all
mortgages, liens, restrictions, encumbrances and claims, except for Permitted
Liens;
(b) Consents. Executed instruments evidencing receipt of the
Material Consents (other than the FCC Consents) and, to the extent obtained,
any other Consents;
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(c) Officer's Certificate. A certificate, dated as of the
First Closing Date, executed by Sellers, certifying compliance by Sellers with
the conditions set forth in Sections 7.1(a) and (b);
(d) Legal Opinion. An opinion of Sellers' counsel
substantially in the form of Exhibit B annexed hereto which can be relied upon
by Buyers and their lenders;
(e) Resolutions. Copies of appropriate resolutions of
Sellers' boards of directors authorizing this Agreement and the consummation of
the transactions contemplated herein; and
(f) Conditional Assignment. An executed consent to the
Conditional Assignment in the form of Exhibit C hereto.
8.3 DELIVERIES BY BUYERS AT THE FIRST CLOSING. Prior to or on the
First Closing Date, Buyers shall deliver to Sellers the following, in form and
substance reasonably satisfactory to Sellers and their counsel:
(a) First Closing Purchase Price. The First Closing Purchase
Price, as adjusted pursuant to Section 2.4(b);
(b) Assumption Agreements. Appropriate assumption agreements
pursuant to which the applicable Buyers shall assume and undertake to perform
Sellers' obligations under the Licenses (other than the FCC Licenses) and
Assumed Contracts as provided in Section 2.6;
(c) Officer's Certificate. A certificate, dated as of the
First Closing Date, executed by Buyers, certifying compliance by Buyers with
the conditions set forth in Sections 7.2(a) and (b); and
(d) Legal Opinion. An opinion of Buyers' counsel
substantially in the form of Exhibit D annexed hereto.
8.4 DELIVERIES BY SELLERS AT THE SECOND CLOSING. Prior to or on the
Second Closing Date, Sellers shall deliver to Buyers the following, in form and
substance reasonably satisfactory to Buyers and their counsel:
(a) Transfer Document. A duly executed assignment which shall
be sufficient to transfer to the applicable Buyer the FCC Licenses free and
clear of all mortgages, liens, restrictions, encumbrances and claims;
(b) Officer's Certificate. A certificate, dated as of the
Second Closing Date, executed by Sellers certifying compliance by Sellers of
the conditions set forth in Sections 7.3(a) and (b);
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(c) Noncompetition Agreements. The Noncompetition Agreements
in the form of Exhibits A-1, A-2 and A-3 annexed hereto, executed by the
respective Seller named therein; and
(d) Legal Opinion. An opinion of Sellers' counsel
substantially in the form of Exhibit B hereto which can be relied upon by
Buyers and their lenders.
(e) Secondary Affiliation Agreements. The Secondary
Affiliation Agreements in the forms of Exhibits E-1, E-2 and E-3 hereto for the
applicable Station, duly executed by PAX NET, Inc.
8.5 DELIVERIES BY BUYERS AT THE SECOND CLOSING. Prior to or on the
Second Closing Date, Buyers shall deliver to Sellers the following, in form and
substance reasonably satisfactory to Sellers and their counsel:
(a) Second Closing Purchase Price. The Second Closing
Purchase Price, as adjusted pursuant to Section 2.4(c), and, if applicable,
payable as provided in Section 7.5;
(b) Assumption Agreement. An appropriate assumption agreement
pursuant to which the applicable Buyers shall assume and undertake to perform
Sellers' obligations under the FCC Licenses as provided in Section 2.6;
(c) Noncompetition Agreements. The Noncompetition Agreements
in the form of Exhibits A-1, A-2 and A-3 annexed hereto, executed by the
respective Buyer named therein; and
(d) Legal Opinion. An opinion of Buyers' counsel
substantially in the form of Exhibit D hereto.
(e) Secondary Affiliation Agreements. The Secondary
Affiliation Agreements in the forms of Exhibits E-1, E-2 and E-3 hereto for the
applicable Station, duly executed by the applicable Seller.
SECTION 9. TERMINATION
9.1 TERMINATION BY SELLERS. This Agreement may be terminated by
Sellers, if Sellers are not then in material default, upon written notice to
Buyers, upon the occurrence of any of the following:
(a) Judgments. If, on the date that would otherwise be the
Second Closing Date, there is in effect any judgment, decree, or order that
would prevent or make unlawful the Second Closing.
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(b) Conditions. If Buyers have failed to satisfy any
condition of the Second Closing set forth in Section 7.4 of this Agreement
within thirty (30) days after Buyers received written notice of such failure
from Sellers.
9.2 TERMINATION BY BUYERS. This Agreement may be terminated by Buyers,
if Buyers are not then in material default, upon written notice to Sellers,
upon the occurrence of any of the following:
(a) Judgments. If, on the date that would otherwise be the
Second Closing Date, there is in effect any judgment, decree, or order that
would prevent or make unlawful the Second Closing.
(b) Upset Date. If the Second Closing shall not have occurred
by April 23, 2002.
(c) Breach. If Sellers have failed to cure any material
breach of any of their representations, warranties or covenants within thirty
(30) days after Sellers received written notice of such breach from Buyers.
(d) Time Brokerage Agreements. If the Time Brokerage
Agreements are terminated by Sellers in accordance with their terms.
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 Assets. If this Agreement is
terminated by Buyers due to Sellers' material breach of this Agreement, Buyers
shall have all rights and remedies available at law or equity.
SECTION 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION;
CERTAIN REMEDIES
10.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations
and warranties contained in this Agreement shall be deemed continuing
representations and warranties and shall survive the First Closing for a period
of twelve months and any claim for a breach of a representation or warranty
must be brought prior to the expiration of such twelve month period. Any claim
for indemnification in respect of a covenant or agreement of Buyers or Sellers
hereunder to be performed on or before the First Closing shall be made prior to
the date which is twelve months from the First Closing Date. Any claim for
indemnification in respect of a covenant or agreement of Buyers or Sellers
hereunder to be performed on or before the Second Closing shall be made prior
to the date which is twelve (12) months from the Second Closing Date.
Notwithstanding the foregoing, the covenants and agreements in this Agreement
to be performed after the First Closing shall survive the First Closing until
fully performed.
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<PAGE> 40
10.2 INDEMNIFICATION BY SELLERS. Subject to Sections 10.1 and 10.4,
Sellers hereby agree to indemnify and hold Buyers harmless against and with
respect to, and shall reimburse Buyers for:
(a) Any and all losses, liabilities, or damages resulting
from any untrue representation, breach of warranty, or nonfulfillment of any
covenant by Sellers contained in this Agreement or in any certificate,
document, or instrument delivered to Buyers under this Agreement, except to the
extent that any untrue representation, breach of warranty or nonfulfillment of
any covenant results from any act or omission of Buyers or their agents.
(b) Any and all obligations of Sellers not assumed by Buyers
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 resulting
from the operation or ownership of the Stations prior to the First Closing,
including any liabilities arising under the Licenses or the Assumed Contracts
which relate to events occurring prior the First Closing Date, except to the
extent that any such loss, liability or damage results from any act or omission
of Buyers or their agents.
(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 BUYERS. Subject to Sections 10.1 and 10.4,
Buyers hereby agree to indemnify and hold Sellers harmless against and with
respect to, and shall reimburse Sellers for:
(a) Any and all losses, liabilities, or damages resulting
from any untrue representation, breach of warranty, or nonfulfillment of any
covenant by Buyers contained in this Agreement or in any certificate, document,
or instrument delivered to Sellers under this Agreement.
(b) Any and all obligations of Sellers assumed by Buyers
pursuant to this Agreement.
(c) Any and all losses, liabilities or damages resulting from
or act or omission of Buyers or their agents on and after the First 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.
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<PAGE> 41
10.4 LIMITATIONS. No indemnification shall be required to be made by
any party hereto until the aggregate amount of all indemnification claims
against such indemnifying party exceeds $100,000; provided, that once such
claims exceed $100,000, such indemnifying party shall be required to indemnify
the other party with respect to all indemnifiable claims, including
indemnifiable claims for the initial $100,000; provided further, that the
foregoing threshold shall not apply to any fines or other sanctions imposed by
the FCC for operation of the Stations prior to the Second Closing or any breach
by Sellers or Buyers of their respective representations, warranties or
covenants hereunder (that do not warrant a termination of this Agreement under
Section 9.1 or 9.2) that are identified in writing by the non-breaching party
on or prior to the applicable Closing Date. The previous limitation shall not
apply to the prorations to the Purchase Price under Section 2.4.
Notwithstanding anything to the contrary contained herein, in no event shall
Sellers' obligations for indemnification under this Agreement exceed in the
aggregate $4,000,000, and Buyers hereby waive and release any recourse against
Sellers for indemnification above $4,000,000. The indemnification provisions in
this Section 10 sets forth the exclusive remedies of the parties hereto
following the Second Closing for a breach of a representation, warranty or
covenant under this Agreement or any other claims relating to this Agreement.
10.5 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 five days 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 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, 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
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<PAGE> 42
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 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 will make every effort 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, members, employees,
and representatives of any Claimant although for the purpose of the procedures
set forth in this Section 10.5, any indemnification claims by such parties
shall be made by and through the Claimant.
10.6 SPECIFIC PERFORMANCE. The parties recognize that if Sellers
breach this Agreement and refuse to perform under the provisions of this
Agreement, monetary damages alone would not be adequate to compensate Buyers
for their injury. Buyers shall therefore be entitled to obtain specific
performance of the terms of this Agreement. If any action is brought by Buyers
to enforce this Agreement, Sellers shall waive the defense that there is an
adequate remedy at law. The parties recognize that if Buyers breach this
Agreement and refuse to perform under the provisions of this Agreement,
monetary damages alone would not be adequate to compensate Sellers for their
injury. Sellers shall therefore be entitled to obtain specific performance of
the terms of this Agreement. If any action is brought by Sellers to enforce
this Agreement, Buyers shall waive the defense that there is an adequate remedy
at law.
10.7 CLOSING DELAY. If the Second Closing shall not have occurred on
or before the first anniversary of the First Closing Date, Buyers shall assign
their rights and interests under this Agreement to a third party in accordance
with the requirements of Section 11.3(b) of this Agreement no later than thirty
(30) days following the first anniversary of the First Closing Date (the
"Assignment Deadline"). On the Assignment Deadline, Buyers shall pay to Sellers
in cash by wire transfer of same-day funds in accordance with wire instructions
provided by Sellers an amount equal to Four Million Dollars ($4,000,000). Until
such time as the Second Closing shall have occurred, Buyers shall pay to
Sellers in cash by wire transfer of same-day funds (a) an additional One
Million Dollars ($1,000,000) at the end of each of the first three successive
90-day periods following the Assignment Deadline and (b) an additional Five
Hundred Thousand Dollars ($500,000) at the end of the fourth successive 90-day
period following the Assignment Deadline until the total of all payments made
by Buyers to Sellers pursuant to this Section 10.7 shall equal Seven Million
Five Hundred Thousand Dollars ($7,500,000) (the "Closing Delay Payments"). The
aggregate amount of all Closing Delay Payments made to Sellers pursuant to this
Section 10.7 shall be credited against the amount of the Second Closing
Purchase Price.
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<PAGE> 43
10.8 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 hereof.
SECTION 11. MISCELLANEOUS
11.1 FEES AND EXPENSES. Buyers and Sellers shall each pay one-half of
all filing fees required by the FCC and required under the HSR Act. Except as
provided in the preceding sentence, Sellers shall pay all federal, state and
local sales or transfer taxes arising from the conveyance of the Assets to
Buyers. 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. 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 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, (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 Sellers: Paxson Communications Corporation
601 Clearwater Park Road
West Palm Beach, FL 33401-6233
Attention: Mr. Lowell W. Paxson
With a copy to: John R. Feore, Jr., Esq.
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, DC 20036-6802
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<PAGE> 44
If to Buyer: ACME Television Holdings, LLC
Suite 202
10829 Olive Blvd.
St. Louis, MO 63141
Attention: Mr. Douglas E. Gealy
-AND-
ACME Television of Tennessee, LLC
Suite 202
2101 East 4th Street
Santa Ana, CA 92705
Attention: Mr. Thomas Allen,
Executive Vice President
With a copy to: Lewis J. Paper, Esq.
Dickstein, Shapiro, Morin & Oshinsky, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037-1526
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
11.2.
11.3 BENEFIT AND BINDING EFFECT. Neither party hereto may assign this
Agreement without the prior written consent of the other party hereto;
provided, however, that (a) Sellers may assign some or all of their rights
hereunder (but not their obligations) to an escrow agent or other person or
entity serving as an Intermediary under the Code, and (b) at any time following
the First Closing, Buyers may, upon written notice to Sellers, assign their
rights and interests under this Agreement to any party that is legally and
financially qualified to purchase the Stations and perform Buyers' obligations
under this Agreement so long as Buyers' assignee executes and delivers to
Sellers an assignment and assumption agreement pursuant to which Buyers'
assignee agrees to perform all of Buyers' obligations hereunder. Under no
circumstance shall Sellers have any obligation to amend or modify in any
respect the terms of this Agreement or their rights, interests or remedies
hereunder, and no such assignment shall deprive Sellers of the benefit of
Sellers' bargain set forth herein. No such assignment by Buyers shall release
ACME Holdings from the ACME Guaranty (as defined in Section 11.13 below). This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
11.4 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
Sellers, any additional bills of sale, deeds, or other transfer documents that,
in the reasonable opinion of Buyers, may be necessary to ensure, complete, and
evidence the full and effective transfer of the Assets to Buyers pursuant to
this Agreement.
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<PAGE> 45
11.5 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).
11.6 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.
11.7 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.
11.8 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 Buyers and Sellers with respect to the subject matter hereof. This
Agreement supersedes all prior and contemporaneous negotiations between the
parties including, without limitation, the letter of intent dated March 22,
1999, 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.
11.9 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 11.9.
11.10 PRESS RELEASE. Prior to the Second Closing, 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, that nothing contained herein shall prevent either party
from promptly making all filings with governmental authorities or securities
exchanges as may, in its judgement be required or advisable in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby or by law or the rules and regulations of any
securities exchange.
11.11 LIKE-KIND EXCHANGE. Sellers may assign some or all of their
rights (but not their obligations) under this Agreement to an escrow agent or
other person or entity serving as an Intermediary under United States Treasury
Regulations promulgated under Section 1031 of the Code; provided that (a) such
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<PAGE> 46
assignment shall not deprive Buyers of their rights or benefits, or relieve
Sellers of any obligations or liabilities, under this Agreement, and (b) Buyers
shall not be obligated to incur any expense or other obligations or liabilities
in connection therewith and (c) such assignment shall be made no later than the
Second Closing. Sellers intend any such exchange to constitute a like-kind
exchange pursuant to Section 1031 of the Code. However, nothing in this
Agreement shall be construed as a representation or warranty of any party to
any other party as to the tax characterization of the transaction.
11.12 GUARANTY OF PCC.
(a) PCC irrevocably guarantees (the "PCC Guaranty"), as
principal and not as surety, to Buyers, the full and prompt performance by
Sellers of all of their obligations under Section 10.2 of this Agreement,
subject, however, to the limitations and qualifications set forth in Section
10.1, 10.4 and 10.5 hereof. Subject to such limitations, the PCC Guaranty shall
apply and survive until all obligations of Sellers under Section 10.2 of this
Agreement are performed and satisfied in accordance with the terms hereof and
thereof.
(b) PCC hereby represents and warrants to Buyers 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 PCC Guaranty according to
its terms; (ii) the execution, delivery and performance of this PCC 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 PCC 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 PCC 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 PCC
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.
11.13 GUARANTY OF ACME TELEVISION HOLDINGS, LLC.
(a) ACME Holdings irrevocably guarantees (the "ACME
Guaranty"), as principal and not as surety, to Sellers, the full and prompt
performance by Buyers of all of their obligations under this Agreement. The
ACME Guaranty shall apply and survive until all obligations of Buyers under
this Agreement are performed and satisfied in accordance with the terms hereof
and thereof.
(b) ACME Holdings hereby represents and warrants to Sellers
as follows: (i) ACME Holdings is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware
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<PAGE> 47
and has the requisite limited liability company power and authority to execute,
deliver and perform this ACME Guaranty according to its terms; (ii) the
execution, delivery and performance of this ACME Guaranty and the consummation
of the transactions contemplated hereby by ACME Holdings have been duly
authorized by all necessary limited liability company action on the part of
ACME Holdings; (iii) this ACME Guaranty has been duly executed and delivered by
ACME Holdings and constitutes the legal, valid and binding obligation of ACME
Holdings enforceable against ACME Holdings in accordance with its terms, except
as the enforceability of this ACME 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 ACME Guaranty: (1) do not require
the consent of any third party, (2) do not conflict with the Operating
Agreement or Certificate of ACME Holdings, 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 ACME
Holdings or any material contract or agreement to which ACME Holdings is a
party or by which ACME Holdings may be bound.
11.14 CONSENT TO JURISDICTION. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the United States District Court for
the District of Delaware and the Superior Court of New Castle County, Delaware
and/or Chancery Court of New Castle County, Delaware for the purposes of any
suit, action or other proceeding arising out of this Agreement or any
transaction contemplated hereby. Each of the parties hereto agrees, to the
extent permitted under applicable rules of procedure, to commence any action,
suit or proceeding relating hereto either in the United States District Court
for the District of Delaware, or if such suit, action or other proceeding may
not be brought in such court for jurisdictional reasons, in the Superior Court
of New Castle County, Delaware and/or Chancery Court of New Castle County,
Delaware. Each of the parties hereto further agrees that service of any
process, summons, notice or document by U.S. certified mail, return receipt
requested, or overnight delivery service (with confirmation of receipt) to such
party's respective address set forth above shall be effective service of
process for any action, suit or proceeding in Delaware with respect to any
matters to which it has submitted to jurisdiction in this Section 11.14. Each
of the parties hereto irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in (i) the Superior Court of
New Castle County, Delaware and/or Chancery Court of New Castle County,
Delaware, or (ii) the United States District Court for the District of
Delaware, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient form.
11.15 BULK TRANSFER LAWS. Notwithstanding any other provision of this
Agreement, Buyers hereby waive compliance by Sellers with the provisions of any
so-called Bulk Transfer Law of any jurisdiction in connection with the
transactions contemplated hereby. Sellers shall indemnify and hold harmless
Buyers against any and all liabilities which may be asserted by third
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<PAGE> 48
parties against Buyers as a result of noncompliance with any such Bulk Transfer
Law, other than liabilities which Buyers shall have expressly assumed pursuant
to this Agreement.
11.16 COUNTERPARTS. This Agreement may be signed in counterparts with
the same effect as if the signature on each counterpart were upon the same
instrument.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the day and year first above written.
PAXSON COMMUNICATIONS ACME TELEVISION OF OHIO, LLC
CORPORATION
ACME TELEVISION LICENSES OF
OHIO, LLC
By:
--------------------------------- ACME TELEVISION OF WISCONSIN,
Name: LLC
Title:
ACME TELEVISION LICENSES OF
PAXSON COMMUNICATIONS WISCONSIN, LLC
LICENSE COMPANY, LLC
ACME TELEVISION OF ILLINOIS,
PAXSON COMMUNICATIONS OF LLC
GREEN BAY-14, INC.
ACME TELEVISION LICENSES OF
ILLINOIS, LLC
PAXSON COMMUNICATIONS OF
DAYTON-26, INC. By:
-------------------------------
PAXSON DAYTON LICENSE, INC. Name:
Title:
PAXSON COMMUNICATIONS OF
DECATUR-23, INC.
ACME TELEVISION HOLDINGS, LLC JOINS
IN THE EXECUTION OF THIS ASSET
PAXSON DECATUR LICENSE, INC. PURCHASE AGREEMENT SOLELY FOR THE
PURPOSE OF ITS AGREEMENT SET FORTH
IN SECTION 11.13.
By:
---------------------------------
Name:
Title: ACME TELEVISION HOLDINGS, LLC
By:
-------------------------------
Name:
Title:
-43-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000923877
<NAME> PAXSON COMMUNICATIONS CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 43,088
<SECURITIES> 0
<RECEIVABLES> 38,185
<ALLOWANCES> 4,088
<INVENTORY> 0
<CURRENT-ASSETS> 150,835
<PP&E> 226,875
<DEPRECIATION> 54,405
<TOTAL-ASSETS> 1,390,360
<CURRENT-LIABILITIES> 144,318
<BONDS> 228,495
556,524
0
<COMMON> 61
<OTHER-SE> 147,539
<TOTAL-LIABILITY-AND-EQUITY> 1,390,360
<SALES> 109,634
<TOTAL-REVENUES> 109,634
<CGS> 0
<TOTAL-COSTS> 261,009
<OTHER-EXPENSES> 59,112
<LOSS-PROVISION> 4,554
<INTEREST-EXPENSE> 21,717
<INCOME-PRETAX> (113,980)
<INCOME-TAX> 41,242
<INCOME-CONTINUING> (72,738)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (107,862)
<EPS-BASIC> (1.76)
<EPS-DILUTED> (1.76)
</TABLE>
