<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
PAXSON COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(I) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
(LOGO)
(PAXSON COMMUNICATION CORPORATION LOGO)
March 29, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Paxson Communications Corporation (the "Company"), which will be held at The
Ritz-Carlton, 280 Vanderbilt Beach Road, Naples, Florida 34108, on April 30,
1999, at 11:00 a.m., local time.
Please note that attendance at the Annual Meeting will be limited to
stockholders as of the record date (or their authorized representatives) and to
invited guests of the Company. If your shares are registered in your name and
you plan to attend the Annual Meeting, please mark the appropriate box on the
enclosed proxy card and you will be pre-registered for the meeting (if your
shares are held of record by a broker, bank or other nominee and you plan to
attend the meeting, you must also pre-register by returning the registration
card forwarded to you by your bank or broker). Stockholders who are not
pre-registered will only be admitted to the Annual Meeting upon verification of
stock ownership.
The notice of the meeting and proxy statement on the following pages
contain information concerning the business to be considered at the meeting.
Please give these proxy materials your careful attention. It is important that
your shares be represented and voted at the Annual Meeting regardless of the
size of your holdings. Accordingly, whether or not you plan to attend the Annual
Meeting, please complete, sign, and return the accompanying proxy card in the
enclosed envelope in order to make sure your shares will be represented at the
Annual Meeting. Stockholders who attend the Annual Meeting will have the
opportunity to vote in person.
The continuing interest of the stockholders in the business of the Company
is gratefully acknowledged. We hope many will attend the meeting.
Sincerely,
/s/ Lowell W. Paxson
LOWELL W. PAXSON
Chairman of the Board
<PAGE> 3
PAXSON COMMUNICATIONS CORPORATION
601 CLEARWATER PARK ROAD
WEST PALM BEACH, FLORIDA 33401-6233
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 30, 1999
The Annual Meeting of Stockholders of Paxson Communications Corporation
will be held at The Ritz-Carlton, 280 Vanderbilt Beach Road, Naples, Florida
34108, on April 30, 1999, at 11:00 a.m., local time, for the following purposes:
1. To elect six directors;
2. To ratify the adoption of the Company's 1998 Stock Incentive Plan;
3. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent certified public accountants for 1999; and
4. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on March 1, 1999, as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting.
Stockholders are requested to vote, date, sign and promptly return the
enclosed proxy in the envelope provided for that purpose, WHETHER OR NOT THEY
INTEND TO BE PRESENT AT THE MEETING.
By Order of the Board of Directors
/s/ ANTHONY L. MORRISON
Anthony L. Morrison, Secretary
West Palm Beach, Florida
March 29, 1999
<PAGE> 4
PAXSON COMMUNICATIONS CORPORATION
601 CLEARWATER PARK ROAD
WEST PALM BEACH, FLORIDA 33401-6233
PROXY STATEMENT
This proxy statement is first being sent to stockholders on or about March
29, 1999, in connection with the solicitation of proxies by the Board of
Directors of Paxson Communications Corporation (the "Company"), to be voted at
the Annual Meeting of Stockholders to be held on April 30, 1999, and at any
adjournment thereof (the "Meeting"). The Board of Directors has fixed the close
of business on March 1, 1999, as the record date of the determination of
stockholders entitled to notice of and to vote at the Meeting. At the close of
business on the record date, the Company had outstanding (i) 52,633,015 shares
of $0.001 par value Class A Common Stock ("Class A Common Stock"), entitled to
one vote per share, (ii) 8,311,639 shares of $0.001 par value Class B Common
Stock ("Class B Common Stock," and with the Class A Common Stock, collectively,
the "Common Stock"), entitled to ten votes per share, and (iii) 7,913 shares of
Series A Convertible Preferred Stock ("Convertible Preferred Stock"), entitled
to 625 votes per share.
VOTING
Shares represented by duly executed proxies in the accompanying form
received by the Company prior to the Meeting will be voted at the Meeting in
accordance with the directions given. If a proxy card is signed and returned
without specifying a vote or an abstention on any proposal, it will be voted
according to the recommendation of the Board of Directors on that proposal. The
Board of Directors recommends a vote FOR the election of directors and the other
proposals described in this Proxy Statement. The Board of Directors knows of no
business to be transacted at the Meeting other than the proposals set forth in
this Proxy Statement. If other matters are properly presented for action, it is
the intention of the persons named as proxies to vote on such matters according
to their best judgment.
Stockholders who hold their shares through an intermediary must provide
instructions on voting as requested by their bank or broker. A stockholder who
signs and returns a proxy may revoke it at any time before it is voted by taking
one of the following three actions: (i) giving written notice of the revocation
to the Secretary of the Company; (ii) executing and delivering a proxy with a
later date; or (iii) voting in person at the Meeting. Attendance at the Meeting
will not in itself constitute revocation of a proxy.
The presence in person or by proxy of the holders of shares of stock having
a majority of the votes which could be cast by all outstanding shares of stock
entitled to vote at the Meeting constitutes a quorum for the transaction of
business at the Meeting. The election of directors will require the affirmative
vote of a plurality of the votes cast at the Meeting, if a quorum is present.
The affirmative vote of at least a majority of the votes cast in person or by
properly executed proxy is required to approve the other proposals to be
considered at the Meeting. Votes cast by proxy or in person at the Meeting will
be tabulated by one or more inspectors of election appointed at the Meeting, who
will also determine whether a quorum is present for the transaction of business.
Abstentions and broker non-votes will be counted as shares present at the
Meeting for purposes of determining whether a quorum is present. Because only a
plurality is required for the election of directors, abstentions or broker
non-votes will have no effect on the election of directors. As to other matters
to be considered at the Meeting, abstentions will be treated as votes AGAINST,
and broker non-votes will not be counted as shares voting for the purpose of
determining whether a proposal has been approved.
<PAGE> 5
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to the Company's equity
securities beneficially owned on March 17, 1999, by (i) each director, (ii) each
executive officer named in the Summary Compensation Table, (iii) all directors
and executive officers of the Company as a group, and (iv) any person who is
known by the Company to be the beneficial owner of more than five percent of any
class of the Company's voting securities. Beneficial ownership means sole or
shared voting power or investment power with respect to a security. The Company
has been informed that all shares shown are held of record with sole voting and
investment power, except as otherwise indicated.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF AGGREGATE
BENEFICIAL VOTING
CLASS OF STOCK NAME OF BENEFICIAL OWNER(1) OWNERSHIP % OF CLASS POWER
- -------------- ------------------------------------ ---------- ---------- ---------
<S> <C> <C> <C> <C>
Class A Common
Stock............. Lowell W. Paxson(2)................. 23,357,543 39.2 16.4%
Landmark Communications, Inc.(3).... 4,668,297 7.8 3.3%
James B. Bocock(4).................. 1,014,850 1.7 *
William E. Simon, Jr.(5)............ 846,915 1.4 *
Dean M. Goodman(4).................. 376,836 * *
Jon Jay Hoker(4).................... 366,325 * *
Jeffrey Sagansky.................... -0- * *
Bruce L. Burnham(4)................. 25,850 * *
James L. Greenwald(4)............... 9,500 * *
All directors and executive officers
as a group(6)....................... 26,333,069 44.1 18.4%
Class B Common Stock Lowell W. Paxson.................... 8,311,639 100.0 58.2%
All directors and executive officers
as a group.......................... 8,311,639 100.0 58.2%
</TABLE>
- ---------------
* Less than 1%
(1) Unless otherwise specified in the footnotes to this table, the address of
each person in this table is c/o Paxson Communications Corporation, 601
Clearwater Park Road, West Palm Beach, Florida 33401-6233.
(2) Does not include 8,311,639 shares of Class B Common Stock, each share of
which is convertible into one share of Class A Common Stock. Mr. Paxson is
the beneficial owner of all his shares of Class A Common Stock and Class B
Common Stock through his control of Second Crystal Diamond, Limited
Partnership and Paxson Enterprises, Inc.
(3) According to information contained in an amendment to Schedule 13D filed
with the Securities and Exchange Commission (the "Commission"), dated July
28, 1998, Landmark Communications, Inc., whose address is 150 Brambleton
Avenue, Norfolk, Virginia 23510, acquired such shares pursuant to an Asset
Acquisition Agreement dated as of June 13, 1997 in connection with its sale
to the Company of the assets related to The Travel Channel, and on July 10,
1998, the one year holding period for such shares ended although the shares
continue to be held for investment purposes.
(4) Includes shares which may be acquired within 60 days through the exercise of
stock options granted under the Company's Stock Incentive Plans as follows:
James B. Bocock -- 957,000; Dean M. Goodman -- 330,361; Jon Jay
Hoker -- 319,000; Bruce L. Burnham -- 13,750; James L. Greenwald -- 9,500.
(5) Represents 187,500 shares which may be acquired upon the exercise of
warrants and shares which may be acquired upon the conversion of Convertible
Preferred Stock held by an affiliate of Mr. Simon.
(6) Includes 1,814,011 shares which may be acquired within 60 days through the
exercise of stock options granted under the Company's Stock Incentive Plans
and 846,915 shares which may be acquired upon the exercise of warrants held
by an affiliate of Mr. Simon and shares which may be acquired upon the
conversion of Convertible Preferred Stock.
PROPOSAL 1 -- ELECTION OF DIRECTORS
At the Annual Meeting, six directors are to be elected to hold office until
the 2000 Annual Meeting of Stockholders and until their successors have been
elected and qualified. The six nominees for election as directors are Lowell W.
Paxson, Jeffrey Sagansky, James B. Bocock, William E. Simon, Jr., Bruce L.
2
<PAGE> 6
Burnham and James L. Greenwald, all of whom are currently members of the Board
of Directors. Information concerning each of the nominees is set forth below.
The persons named in the enclosed proxy card have advised that, unless
otherwise directed on the proxy card, they intend to vote FOR the election of
the designated nominees, and that should any nominee become unable or unwilling
to accept nomination or election for any reason, votes will be cast for a
substitute nominee designated by the Board of Directors, which has no reason to
believe the nominees named will be unable or unwilling to serve if elected.
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
DIRECTOR
NOMINEE AGE POSITION, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE
- ------- --- --------------------------------------------------------------------- --------
<S> <C> <C> <C>
Lowell W. Paxson....... 64 Chairman of the Board since 1991 and Chief Executive Officer of the 1991
Company from 1991 to 1998. President, Home Shopping Network, Inc.
from 1985 to 1990.
William E. Simon, 47 Vice Chairman of the Company since 1998. Executive Director, William 1998
Jr. ................. E. Simon & Sons, LLC, a private investment firm and merchant bank,
from 1988 to present. Director and Chairman, GeoLogistics
Corporation.
Jeffrey Sagansky....... 47 Chief Executive Officer of the Company since 1998. Co-President, Sony 1998
Pictures Entertainment, a producer of film and video programming,
from 1996 to 1997. Executive Vice President, Sony Corporation of
America, from 1994 to 1996.
James B. Bocock........ 54 Co-President since 1998 and Chief Operating Officer since 1991 of the 1994
Company. President of the Company from 1991 to 1998.
Bruce L. Burnham....... 65 President of The Burnham Group since 1993, a firm providing 1996
consulting and marketing services to the retail industry. Director,
Forcenergy, Inc., and J.B. Rudolph, Inc.
James L. Greenwald..... 72 Chairman and Chief Executive Officer from 1975 to 1994 of Katz 1996
Communications, Inc., a broadcast advertising representative sales
firm; Chairman Emeritus since 1994. Director, Granite Broadcasting
Company and Source Media, Inc.
</TABLE>
OTHER EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
EXECUTIVE OFFICER AGE POSITION, BUSINESS EXPERIENCE AND DIRECTORSHIPS
- ----------------- --- -----------------------------------------------
<S> <C> <C>
Dean M. Goodman..... 51 President, PAX TV since 1998. President from 1995 to 1997 of
the Company's inTV and Paxson Network-Affiliated Television
divisions. General Manager from 1993 to 1995 of the
Company's Miami radio group.
Jon Jay Hoker....... 60 President, Paxson Television Station Group since 1997.
President from 1995 to 1997 of the Company's Paxson Radio
division. President from 1994 to 1995 of Paxson Networks,
Inc. President from 1985 to 1994 of Hoker Broadcasting, a
radio station owner/operator.
Anthony L. 37 Vice President, Secretary and General Counsel of the Company
Morrison.......... since 1995. Attorney with the New York office of O'Melveny &
Meyers from 1990 to 1995.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
EXECUTIVE OFFICER AGE POSITION, BUSINESS EXPERIENCE AND DIRECTORSHIPS
- ----------------- --- -----------------------------------------------
<S> <C> <C>
Kenneth M. 36 Acting Chief Financial Officer since 1999, Vice President
Gamache........... since 1997 and Controller since 1993.
Seth Grossman....... 33 Senior Vice President, Corporate Development since 1998,
Vice President, Corporate Development from 1997 to 1998, and
Director of Finance from 1995 to 1997.
</TABLE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During 1998, the Company's Board of Directors held six meetings. Each
incumbent director attended at least 75% of the total number of Board meetings
and meetings of committees of which he is a member. In addition, the Board of
Directors took action 27 times during 1998 by unanimous written consent in lieu
of a meeting, as permitted by applicable state law.
Since April 1998, the Compensation Committee has consisted of James L.
Greenwald and Bruce L. Burnham. Prior to April 1998, Mr. Paxson was the only
member of the Compensation Committee. The Compensation Committee recommends to
the Board both base salary levels and bonuses for the Chief Executive Officer
and the other officers of the Company. See "Board Compensation Committee Report
on Executive Compensation." The Compensation Committee also reviews and makes
recommendations with respect to the Company's existing and proposed compensation
plans, and serves as the committee responsible for administering the Company's
Stock Incentive Plans. During 1998, the Compensation Committee met informally in
conjunction with each of the meetings of the Board of Directors, and held a
formal separate Committee meeting. In making recommendations regarding
compensation and related matters, the Compensation Committee has independently
received and reviewed reports of professional compensation consultants.
The Audit Committee consists of Bruce L. Burnham, James L. Greenwald and
William E. Simon, Jr. Mr. Burnham is the chairman of the Committee. The duties
of the Audit Committee are to recommend to the Board of Directors the selection
of independent certified public accountants, to meet with the Company's
independent certified public accountants to review the scope and results of the
audit, and to consider various accounting and auditing matters related to the
Company, including its system of internal controls and financial management
practices. During 1998, the Audit Committee held four meetings.
The Company does not have a nominating committee. This function is
performed by the Board of Directors.
COMPENSATION OF DIRECTORS
All directors receive reimbursement of reasonable out-of-pocket expenses
incurred in connection with meetings of the Board of Directors. In February
1999, Mr. Burnham and Mr. Greenwald were each granted options to purchase 5,750
shares of Class A Common Stock at an exercise price of $3.42 per share in
consideration for their services as directors of the Company during 1998. No
other directors receive separate compensation for services rendered as a
director.
TRANSACTIONS INVOLVING DIRECTORS AND OFFICERS
In May 1998, Mr. Simon was appointed Vice Chairman of the Board. In
connection with this appointment, an affiliate of Mr. Simon's received fully
vested warrants to purchase 155,500 shares of Class A Common Stock at an
exercise price of $16 per share. The warrants were valued at approximately
$622,000, which was recorded as stock-based compensation at the time the
warrants were issued.
In June 1998, an affiliate of Mr. Simon purchased $10 million aggregate
liquidation preference of the Company's Convertible Preferred Stock and warrants
to purchase 32,000 shares of Class A Common Stock at an exercise price of $16
per share. In connection with the Company's offering of $75 million of
Convertible Preferred Stock in June 1998, the affiliate of Mr. Simon received a
consulting fee of $500,000 and an underwriting fee of $550,000 for the placement
of shares of Convertible Preferred Stock. The Company recorded such fees as
issuance costs in connection with the sale of the Convertible Preferred Stock.
During January 1999, the Company advanced $1,000,000 to Mr. Paxson, its
Chairman, which was repaid without interest four days after being made.
4
<PAGE> 8
During December 1996, the Company extended loans to certain of its key
employees, including its executive officers, to finance the purchase by such
persons of shares of Class A Common Stock on the open market. The loans are the
personal obligations of each borrower and are secured by a pledge of the shares
of Class A Common Stock purchased with the loan proceeds. Each loan accrues
interest at a fixed annual rate of 5.75% and is due and payable in full, with
all accrued and unpaid interest, upon the earlier of March 31, 1999, or the sale
of the shares of Class A Common Stock pledged as security for the loan. The
Company intends to extend the maturity date of the loans for an additional two
years. As of December 31, 1998, the outstanding balance of principal and accrued
interest on such loans to the Company's Executive Officers was as follows: Mr.
Bocock, $540,318; Mr. Goodman, $543,289; Mr. Hoker, $434,076; Mr. Morrison,
$285,337; Mr. Gamache, $160,881; and Mr. Grossman, $130,526. In addition, Arthur
D. Tek, a former director, Vice President and Chief Financial Officer of the
Company, had an outstanding loan balance under this program of $358,188.63 at
December 31, 1998 which indebtedness was satisfied during March 1999 upon his
resignation as an officer and director of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers and persons who own more than ten percent of the Common
Stock of the Company to file initial reports of ownership and reports of changes
in ownership of Common Stock and other equity securities of the Company with the
Securities and Exchange Commission and to furnish the Company with copies of all
Section 16(a) reports they file. Based on its review of the copies of such
reports received by it, the Company believes that during 1999, each of Messrs.
Sagansky, Bocock, Goodman, Hoker, Tek, Morrison, Gamache and Grossman failed to
timely file a report on Form 5 reflecting their holdings and Mr. Gamache failed
to timely file a Form 4 reflecting his sale of 5,000 shares of Class A Common
Stock.
EXECUTIVE COMPENSATION
The following table presents certain information concerning the
compensation received or accrued for services rendered during the fiscal years
ended December 31, 1998, 1997 and 1996 for the Company's Chief Executive Officer
and four most highly compensated executive officers other than the Chief
Executive Officer who were serving as of December 31, 1998 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION NUMBER OF
-------------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY(1) BONUS COMPENSATION OPTIONS COMPENSATION(2)(3)
- ------------------ ---- ---------- ---------- ------------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey Sagansky.......... 1998 $379,615 $ -0- $200,000(5) 1,200,000 $ -0-
Chief Executive
Officer and President(4)
Lowell W. Paxson.......... 1998 465,850 75,000 -0- -0- -0-
Chairman of the 1997 423,500 1,875,000 -0- -0- -0-
Board(4) 1996 385,000 -0- -0- -0- -0-
James B. Bocock........... 1998 341,250 75,000 -0- 200,000 35,125
Co-President and 1997 325,000 1,885,000 -0- -0- 33,500
Chief Operating Officer 1996 275,000 -0- 415,140(6) 225,000 14,750
Dean M. Goodman........... 1998 315,000 100,000 -0- 600,000 32,500
President -- PAX TV 1997 300,000 1,099,000 -0- -0- 31,000
1996 250,000 101,200 289,340(6) 150,000 13,500
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION NUMBER OF
-------------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY(1) BONUS COMPENSATION OPTIONS COMPENSATION(2)(3)
- ------------------ ---- ---------- ---------- ------------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Jon Jay Hoker............. 1998 315,000 75,000 -0- 500,000 32,500
President -- Paxson 1997 300,000 1,581,000 -0- -0- 26,200
Television Group 1996 250,000 50,000 201,280(6) 150,000 13,500
</TABLE>
- ---------------
(1) Includes amounts Named Executive Officers elected to defer pursuant to the
Company's Profit Sharing Plan.
(2) Includes contributions to supplemental retirement plans as follows: during
1998, Mr. Bocock -- $34,125; Mr. Goodman -- $31,500; and Mr.
Hoker -- $31,500; during 1997, Mr. Bocock -- $32,500; Mr.
Goodman -- $30,000; Mr. Hoker -- $25,200; during 1996: Mr.
Bocock -- $13,750; Mr. Goodman -- $12,500; and Mr. Hoker -- $12,500.
(3) Includes $1,000 Company contributions to the Profit Sharing Plan during
1998, 1997 and 1996 for each of Messrs. Bocock, Goodman and Hoker.
(4) Mr. Sagansky joined the Company as Chief Executive Officer and President in
May, 1998; Mr. Paxson served as Chief Executive Officer until May 1998.
(5) Consists of relocation allowance provided to Mr. Sagansky.
(6) Represents the difference between the price paid by the Named Executive
Officer upon the exercise of stock options and the fair market value of the
underlying Common Stock at the time of exercise.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF POTENTIAL REALIZABLE VALUES
COMMON STOCK AT ASSUMED ANNUAL RATES OF
UNDERLYING % OF TOTAL OPTIONS EXERCISE STOCK PRICE APPRECIATION FOR OPTION TERM
OPTIONS GRANTED TO EMPLOYEES PRICE PER EXPIRATION ------------------------------------------
NAME GRANTED(1) IN FISCAL YEAR SHARE DATE 0%(3) 5% 10%
- ---- ------------ -------------------- --------- ---------- ---------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Jeffrey Sagansky..... 1,200,000 19.1% $7.25 6/12/08 $4,800,000 $13,290,077 $26,315,523
Lowell W. Paxson..... -0- -0- -- -- -- -- --
James B. Bocock...... 200,000 3.2% $7.25 6/12/08 800,000 2,215,013 4,385,921
Dean M. Goodman...... 600,000 9.6% $7.25 6/12/08 2,400,000 6,645,039 13,157,762
Jon Jay Hoker........ 500,000 8.0% $7.25 6/12/08 2,000,000 5,537,532 10,964,801
</TABLE>
- ---------------
(1) All Options were granted pursuant to a five year vesting schedule commencing
January 1, 1998, except that Mr. Sagansky's options vest over a four year
period commencing June 30, 1998.
(2) Based upon the difference between the closing sale price on the grant date
and the option exercise price.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED DECEMBER 31, 1998 AT DECEMBER 31, 1998(1)
ON VALUE ------------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE(2) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- --------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey Sagansky............. -0- $-0- -0- 1,200,000 $ -0- $2,325,000
Lowell W. Paxson............. -0- -0- -0- -0- -0- -0-
James B. Bocock.............. -0- -0- 892,000 335,000 5,144,610 1,166,113
Dean M. Goodman.............. -0- -0- 240,361 690,000 1,386,282 1,681,575
Jon Jay Hoker................ -0- -0- 269,000 500,000 1,551,458 968,750
</TABLE>
- ---------------
(1) Based on the public trading price of the Class A Common Stock of $9.1875 on
December 31, 1998.
(2) Excludes securities underlying options which vested January 1, 1999 as
follows: Mr. Bocock -- 65,000; Mr. Goodman -- 90,000; and Mr.
Hoker -- 50,000.
STOCK INCENTIVE PLANS
The Company has established various stock incentive plans to provide
incentives to officers, employees and others who perform services for the
Company through awards of options and shares of restricted stock.
6
<PAGE> 10
Awards granted under the plans are at the discretion of the Company's
Compensation Committee and may be in the form of either incentive or
nonqualified stock options or awards of restricted stock. Options granted under
the plans generally vest over a five year period and expire ten years after the
date of grant. At December 31, 1998, 1,176,436 shares of Class A Common Stock
were available for additional awards under the plans.
The exercise price per share of Class A Common Stock deliverable upon the
exercise of each stock option granted under the Stock Incentive Plans is
determined by the Compensation Committee at the date the stock option is granted
and as provided in the terms of the Stock Incentive Plans. Stock options are
exercisable in whole or in part on such date or dates as are determined by the
Compensation Committee at the date of the grant. The Compensation Committee may,
in its sole discretion, accelerate the time at which any stock option may be
exercised. Stock options expire on the date or dates determined by the
Compensation Committee at the time the stock options are granted. Holders of
more than ten percent (10%) of the combined voting power of the capital stock of
the Company may be granted stock options, provided that if any of such options
are intended to be incentive stock options, the exercise price must be at least
110% of the fair market value of Class A Common Stock as of the date of the
grant and the term of the option may not exceed five years.
Options granted under the Stock Incentive Plans may be exercised by the
participant to whom granted or by his or her legal representative. If a
participant's employment is terminated for cause, each option which has not been
exercised shall terminate.
The Compensation Committee also has the discretion to award restricted
stock, consisting of shares of Class A Common Stock which are subject to
forfeiture in whole or in part if the recipient's employment with the Company is
terminated prior to the end of the restrictive period. Participants who receive
restricted stock do not become 100% vested in their restricted stock until five
years after the effective date of the award. During the restricted period prior
to vesting, the participant may transfer the restricted stock to a trust for the
benefit of the participant or an immediate family member, but may not otherwise
sell, assign, transfer, give or otherwise dispose of, mortgage, pledge or
encumber such restricted stock. The Compensation Committee may, in its
discretion, provide that a participant shall be vested in whole or with respect
to any portion of the participant's award not previously vested if the
participant's employment with the Company is terminated because of death,
disability or retirement. To date, the Committee has not awarded any restricted
stock under the Stock Incentive Plans.
EXECUTIVE BONUS PLAN
The Company adopted an Executive Bonus Plan during 1998 pursuant to which
members of the Company's senior management selected by the Compensation
Committee may earn cash bonus compensation on an annual basis in such amounts as
are determined by the Committee, based upon the achievement of Company operating
and financial objectives and individual performance criteria. The bonus
calculation criteria are established on an annual basis by the Committee, and
generally consist of a set of Company operating and financial performance
objectives which must be met for any participant to be entitled to receive a
bonus, and individualized performance criteria and bonus levels for each
participant (generally expressed as a percentage of the participant's base
salary). Bonuses awarded with respect to a fiscal year are to be paid during the
following year. No bonuses were earned under the Executive Bonus Plan with
respect to the year ended December 31, 1998.
PROFIT SHARING PLAN
The Company has a profit sharing plan under Section 401(k) of the Internal
Revenue Code (the "Profit Sharing Plan"). The Profit Sharing Plan provides that
employees of the Company must complete one year of service in order to be
eligible to defer salary and, if available, receive matching contributions under
the Section 401(k) portion of the Profit Sharing Plan. Participants may elect to
defer a specified percentage of their compensation into the Profit Sharing Plan
on a pre-tax basis. The Company may, at its sole discretion, make matching
contributions based on a percentage of deferred salary contributions at a
percentage rate to be determined by certain officers of the Company, which
matching contributions may be in Company stock. In
7
<PAGE> 11
addition, the Company may make supplemental profit sharing contributions in such
amounts as certain officers of the Company may determine. Participants earn a
vested right to their profit sharing contribution in increasing amounts over a
period of five years. After five years of service, the participant's right to
his or her profit sharing contribution vests 100%. Thereafter the participant
may receive a distribution of the entire value of his or her account at age 55,
62 or 65 or upon termination of employment, death or disability.
EMPLOYMENT AGREEMENTS
Mr. Paxson is employed as Chairman of the Board of the Company pursuant to
an employment agreement for a five and one-half year period commencing on June
30, 1994, unless sooner terminated. Mr. Paxson's base salary under the agreement
was $465,850 in 1998, increasing to $500,000 in 1999. In addition to base
salary, Mr. Paxson may receive an annual bonus at the discretion of, and in an
amount set by, members of the Compensation Committee that are not employees of
the Company. Mr. Paxson's employment agreement is renewable for successive
one-year terms, subject to good faith negotiation of the renewal terms. Mr.
Paxson is eligible to participate in all employee benefit plans and arrangements
that are generally available to other senior executives, and is entitled to
vacation days in an amount determined annually by the Board of Directors after
good faith negotiation. Mr. Paxson is reimbursed for all reasonable expenses
incurred by him in the discharge of his duties, including entertainment and
travel. Mr. Paxson's employment agreement is terminable by the Board of
Directors before expiration for good cause, as defined in the agreement, or by
Mr. Paxson for good reason, as defined in the agreement. In the event of Mr.
Paxson's permanent disability or death, the Company will pay Mr. Paxson, or his
estate, as the case may be, his then existing salary for the remaining term of
the agreement, in the case of disability, or one year, in the case of death.
Mr. Sagansky is employed as President and Chief Executive Officer of the
Company for a four year term expiring June 30, 2002 pursuant to an employment
agreement entered into in June 1998, when he first joined the Company. The
agreement provides for Mr. Sagansky to receive a base salary of $600,000 with
10% increases each July 1 (commencing July 1, 1999) and an annual bonus of up to
twice his base salary based on the Company's achievement of targeted financial
results. Mr. Sagansky was granted options to purchase 1,200,000 shares of Class
A Common Stock at an exercise price of $7.25 per share, which become exercisable
at the rate of 30% after the first year of employment, 25% after each of the
second and third years, and 20% after the fourth year. Pursuant to the
agreement, Mr. Sagansky received a $200,000 housing and relocation allowance
during 1998. The Company has agreed to pay Mr. Sagansky 5% of any syndication
fees and foreign sales received by the Company for any Company-developed
programming. Mr. Sagansky is eligible to participate in all employee benefit
plans and arrangements that are generally available to other senior executives
and is reimbursed for all reasonable expenses incurred in the discharge of his
duties, including entertainment and travel. The Company may terminate Mr.
Sagansky's employment for good cause, as defined in the agreement. If Mr.
Sagansky's employment is terminated by reason of his disability or other than
for good cause, or if Mr. Sagansky terminates his employment for good reason, as
defined in the agreement, the Company will continue to pay Mr. Sagansky his base
salary, plus annual increases, and Mr. Sagansky will continue to be entitled to
coverage under employee benefit plans, for the balance of the employment term,
and except in the case of disability, Mr. Sagansky will continue to be entitled
to receive any annual bonuses he would otherwise have received had he remained
employed by the Company for the balance of the employment term. If Mr. Sagansky
dies, the Company will pay Mr. Sagansky's estate his then existing salary for a
period of one year and a pro rata bonus for the calendar year in which Mr.
Sagansky dies.
Mr. Bocock is employed as Co-President and Chief Operating Officer of the
Company for a five year term commencing January 1, 1998, pursuant to an
employment agreement entered into in June 1998. The agreement provides for Mr.
Bocock to receive a base salary of $341,250 with at least 10% increases each
January 1 (commencing January 1, 1999) and an annual bonus. Mr. Bocock is
eligible to participate in all employee benefit plans and arrangements that are
generally available to other senior executives and to receive such other cash
and non-cash bonus awards and compensation (including awards under the Stock
Incentive Plans) as the Company may determine, and is reimbursed for all
reasonable expenses incurred in the discharge of his duties, including
entertainment and travel. The Company may terminate Mr. Bocock's employment for
good cause, as defined in the agreement. If Mr. Bocock's employment is
terminated by reason
8
<PAGE> 12
of his disability or other than for good cause, or if Mr. Bocock terminates his
employment for good reason, as defined in the agreement, the Company will
continue to pay Mr. Bocock his base salary for the balance of the employment
term. If Mr. Bocock dies, the Company will pay Mr. Bocock's estate his then
existing salary for a period of one year.
Mr. Goodman is employed as President of PAX TV for a five year term
commencing January 1, 1998, pursuant to an employment agreement entered into in
June 1998. The agreement provides for Mr. Goodman to receive a base salary of
$315,000 with at least 10% increases each January 1 (commencing January 1, 1999)
and an annual bonus. Mr. Goodman is eligible to participate in all employee
benefit plans and arrangements that are generally available to other senior
executives and to receive such other cash and non-cash bonus awards and
compensation (including awards under the Stock Incentive Plans) as the Company
may determine, and is reimbursed for all reasonable expenses incurred in the
discharge of his duties, including entertainment and travel. The Company may
terminate Mr. Goodman's employment for good cause, as defined in the agreement.
If Mr. Goodman's employment is terminated by reason of his disability or other
than for good cause, or if Mr. Goodman terminates his employment for good
reason, as defined in the agreement, the Company will continue to pay Mr.
Goodman his base salary for the lesser of two years or the balance of the
employment term in the case of disability; and for the balance of the employment
term in all other cases. If Mr. Goodman dies, the Company will pay Mr. Goodman's
estate his then existing salary for a period of one year.
Mr. Hoker is employed as President of Paxson Television Station Group for a
five year term commencing January 1, 1998, pursuant to an employment agreement
entered into in June 1998. The agreement provides for Mr. Hoker to receive a
base salary of $315,000 with at least 10% increases each January 1 (commencing
January 1, 1999) and an annual bonus. Mr. Hoker is eligible to participate in
all employee benefit plans and arrangements that are generally available to
other senior executives and to receive such other cash and non-cash bonus awards
and compensation (including awards under the Stock Incentive Plans) as the
Company may determine, and is reimbursed for all reasonable expenses incurred in
the discharge of his duties, including entertainment and travel. The Company may
terminate Mr. Hoker's employment for good cause, as defined in the agreement. If
Mr. Hoker's employment is terminated by reason of his disability or other than
for good cause, or if Mr. Hoker terminates his employment for good reason, as
defined in the agreement, the Company will continue to pay Mr. Hoker his base
salary for the lesser of two years or the balance of the employment term in the
case of disability; and for the balance of the employment term in all other
cases. If Mr. Hoker dies, the Company will pay Mr. Hoker's estate his then
existing salary for a period of one year.
The terms of each of the employment agreements entered into with Mr.
Bocock, Mr. Hoker and Mr. Goodman was approved by the Compensation Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of April 17, 1998, Mr. Burnham and Mr. Greenwald became the sole members
of the Compensation Committee. Prior to that date, Mr. Paxson, Chairman of the
Board of the Company, served as the only member of the Compensation Committee.
The Company has entered into certain transactions and relationships with Mr.
Paxson, members of his immediate family and others as described below.
DP Media, Inc., CAP Communications, Inc. and RDP Communications of
Indianapolis, Inc. During August 1998, RDP Communications of Indianapolis, Inc.
("RDP"), a company beneficially owned by members of Mr. Paxson's family, entered
into an asset purchase agreement to acquire certain assets relating to the
business and operation of television station WIPX in Bloomington, Indiana. The
Company joined in the execution of the asset purchase agreement for the purpose
of guaranteeing RDP's performance under such agreement. The Company has advanced
$1.75 million to RDP in connection with this acquisition and expects to be
repaid these amounts at the closing of the acquisition transaction. RDP is
currently operating WIPX pursuant to a time brokerage agreement and airing PAX
TV programming under an affiliation agreement with the Company.
In connection with RDP's acquisition of WIPX, and the Company's guarantee
of RDP's performance under the related asset purchase agreement, the seller is
alleging that RDP is in material breach of certain
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<PAGE> 13
obligations under the agreement. RDP is currently negotiating with the seller in
connection with the financing of such acquisition by the seller. The Company
believes that the ultimate resolution of this matter will not have a material
adverse effect on the Company's financial position or results of operations.
During May 1998, the Company sold television station WPXE for $6 million to
DP Media, Inc. ("DP Media"), a company owned by the shareholders of RDP. Upon
its acquisition by DP Media, WPXE became a PAX TV affiliate. No significant gain
or loss was recorded in connection with this transaction.
During December 1997 and January 1998, the Company sold its interest in
television stations WPXS and WZPX, serving the St. Louis, Missouri and Grand
Rapids, Michigan markets for $4.8 million and $7 million, respectively, to DP
Media. During June 1997, the Company financed DP Media's purchase of WRPX from
Roberts Broadcasting through a loan of approximately $10 million which was
subsequently repaid. During May 1997, the Company sold WWPX to DP Media for $2.5
million. Upon their acquisition by DP Media, the previously described stations
became PAX TV affiliates. No significant gain or loss was recorded in connection
with these transactions.
As described below, in February 1999, CAP Communications, Inc. ("CAP
Communications"), an entity owned by the shareholders of RDP and DP Media,
acquired stations WHPX and WBPX, PAX TV affiliates.
Under the affiliation agreements with DP Media, CAP Communications and RDP
for the stations described above, which are for a term of ten years, the Company
provides the DP Media, CAP Communications and RDP affiliates with programming
from 6:00 am to 1:00 am, Monday through Sunday, and pays a fixed monthly
affiliation fee. These affiliates retain a portion of the advertising airtime
during the Company's network programming. At December 31, 1998, the Company's
minimum commitments under its affiliation agreements with DP Media, CAP
Communications and RDP aggregated approximately $95.1 million. At December 31,
1998, the Company had advanced DP Media approximately $250,000 under the
affiliation agreements. See The Christian Network, Inc. below.
The Company also provides DP Media, CAP Communications and RDP with certain
accounting, sales and technical services. Under the services agreements, the DP
Media, CAP Communications and RDP affiliates are required to deposit all
advertising revenues generated during the network programming as well as the
monthly affiliation fee into an account from which they pay operating costs and
interest. The Company is entitled to receive 90% of the excess of the revenues
deposited into such account over the costs and expenses paid from such account.
During 1998, the Company recorded no revenues under its service agreements with
DP Media, CAP Communications and RDP.
The Company also has commercial representation agreements with the DP
Media, CAP Communications and RDP affiliates, which are for terms of ten years.
Under these agreements, the Company serves as the network, national and regional
sales representative for the DP Media, CAP Communications and RDP affiliates and
receives a commission of 15% for such sales revenue generated. The Company has
an assignable right of first refusal to acquire the DP Media and CAP
Communications affiliates at their fair market value, in the event that DP Media
or CAP Communications wishes to sell such affiliates and has received a formal
written offer from a third party.
At December 31, 1998, Mr. Paxson served as a guarantor on approximately
$31.4 million of bank loans made to DP Media.
During 1998, the Company recorded time brokerage and affiliation fees
expense related to stations owned by DP Media and RDP of approximately $5.7
million.
The Christian Network, Inc. The Company has entered into several
agreements with The Christian Network, Inc. and certain of its for-profit
subsidiaries (individually and collectively referred to herein as "CNI"). The
Christian Network, Inc. is a section 501(c)(3) not-for-profit corporation to
which Mr. Paxson has been a substantial contributor and of which he was a member
of the Board of Stewards through 1993.
At December 31, 1998, the Company has approximately $15.5 million of
advances to CNI relating to CNI's acquisition of WBPX in Boston, a PAX TV
affiliate. In April 1998, DP Media contracted to acquire WBPX for $18 million,
including the assumption of CNI's obligations to the Company. In February 1999,
DP
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<PAGE> 14
Media assigned its rights under the contract to acquire WBPX to CAP
Communications which completed the acquisition of WBPX.
The Company and CNI entered into an agreement in May 1994 (the "CNI
Agreement") under which the Company agreed that, if the tax exempt status of CNI
were jeopardized by virtue of its relationship with the Company and its
subsidiaries, the Company would take certain actions to ensure that CNI's tax
exempt status would no longer be so jeopardized. Such steps could include, but
not be limited to, rescission of one or more transactions or payment of
additional funds by the Company. The Company believes that all of its agreements
with CNI have been on terms as favorable to CNI as it would obtain in arm's
length transactions. The Company intends any future agreements with CNI to be as
favorable to CNI as CNI would obtain in arm's length transactions. Accordingly,
if the Company's activities with CNI are consistent with the terms governing
their relationship, the Company believes that it will not be required to take
any actions under the CNI Agreement. There can be no assurance, however, that
the Company will not be required to take any actions under the CNI Agreement at
a material cost to the Company.
CNI and the Company have contracted for the Company to lease CNI's
television production and distribution facility, the Worship Channel Studio, for
the purpose of producing television programming for the Company's television
network. During the year ended December 31, 1998, the Company incurred rental
charges in connection with this agreement of $252,000.
WHPX. In April 1998, DP Media entered into a contract to acquire WHPX from
Roberts Broadcasting for $250,000 plus the assumption of the note payable to the
Company for $15 million. In February 1999, DP Media assigned its rights under
the contract to acquire WHPX in Hartford, a PAX TV affiliate, to CAP
Communications, which completed the acquisition.
Aircraft Lease. During 1997, the Company entered into a three year lease
with a company owned by Mr. Paxson for a Boeing 727 aircraft. The lease provides
for monthly payments of $63,600. The Company incurred rental costs under the
lease of approximately $763,000 during 1998. Additionally, the Company has
recorded leasehold improvements of approximately $347,000 at December 31, 1998,
in connection with the lease.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings, including this Proxy Statement,
in whole or in part, the following Compensation Committee Report on Executive
Compensation and the Performance Graph shall not be incorporated by reference
into any such filings.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
administering the Executive Bonus Plan and the Company's Stock Incentive Plans,
and for reviewing proposed executive compensation and other Company compensation
plans and making recommendations to the Board of Directors.
In making its recommendations as to executive compensation, the Committee
seeks to recommend a level of base compensation which is competitive with the
compensation offered to executives performing similar functions by others in the
Company's line of business, and to link a significant portion of an executive's
total potential cash compensation to the achievement of overall Company
operating and financial goals and individual performance criteria. In
administering the Executive Bonus Plan, the Committee establishes, on an annual
basis, overall Company operating and financial goals and individual performance
criteria which offer Company executives the opportunity to earn significant
bonus compensation, in most cases as much as or more than base annual salary. In
formulating its recommendations as to awards under the stock incentive plans,
the Committee seeks to provide a means for Company executives to realize
substantial additional compensation based upon appreciation in the public
trading price of the Company's common stock, thereby aligning the executives'
interests with those of the Company's stockholders.
During 1998, the Company engaged Mr. Sagansky as its Chief Executive
Officer pursuant to a four year employment agreement. Mr. Sagansky's base salary
and other employment terms were arrived at through arms' length negotiations
between the Company and Mr. Sagansky in connection with his employment as
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<PAGE> 15
Chief Executive Officer. The Committee's recommendations as to the terms to be
offered to Mr. Sagansky were significantly influenced by its evaluation of the
level of compensation commanded by other chief executive officers and executives
of Mr. Sagansky's stature in the television broadcasting industry and the
competition for Mr. Sagansky's services. The base salary of Mr. Paxson, who
served as the Company's Chief Executive Officer prior to the engagement of Mr.
Sagansky, is fixed pursuant to the terms of an employment agreement entered into
during 1994.
During 1998, the Company entered into five year employment agreements (four
years for Mr. Sagansky) with each of its senior executive officers other than
Mr. Paxson. The base salary levels and minimum annual increases of the Company's
executive officers are specified in their respective employment agreements
although the Compensation Committee may, in its sole discretion, provide for
annual base salary increases in excess of the specified minimum increases. In
making its recommendations with respect to the base salary levels in the
employment agreements entered into during 1998, the Committee considered such
factors as the executive's prior performance in the service of the Company,
compensation information with respect to senior executives performing similar
duties for businesses similar to that engaged in by the Company, and the
recommendations of professional consultants engaged by the Company to assist in
formulating compensation policy and establishing compensation levels for the
Company's senior management.
Since the operating and financial performance objectives established by the
Compensation Committee for determination of bonus compensation for the 1998
fiscal year under the Executive Bonus Plan were not attained, the Committee
determined to award no bonus compensation under the Executive Bonus Plan to the
Company's executive officers, and therefore no bonus payments under this plan
will be made to the executive officers in 1999 in respect of the 1998 fiscal
year.
Compensation Committee
/s/ BRUCE L. BURNHAM
--------------------------------------
Bruce L. Burnham
/s/ JAMES L. GREENWALD
--------------------------------------
James L. Greenwald
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<PAGE> 16
PERFORMANCE GRAPH
The following graph is a comparison of the cumulative total returns for the
Company's common stock as compared with the cumulative total return for the
American Stock Exchange Market Value Index and a peer group index (the "Peer
Group Index"). The Securities and Exchange Commission rules permit the Company
to select a peer group in good faith with which to compare its stock performance
by selecting a group of companies in lines of business similar to its own. The
Company has selected a peer group for the 1998 fiscal year consisting of
companies whose primary business is television broadcasting. The current Peer
Group Index consists of the common stocks of Granite Broadcasting Corp.,
Hearst-Argyle Television Inc., LIN Television Corp., Sinclair Broadcast Group,
Inc., Univision Communications Inc. and Young Broadcasting, Inc., which are
actively traded on the NASDAQ Stock Market and the New York Stock Exchange.
The cumulative return of the Company was computed by dividing the
difference between the price of the Company's common stock at the end and the
beginning of the measurement period (November 7, 1994 to December 31, 1998) by
the price of the Company's common stock at the beginning of the measurement
period. The total return calculations are based upon an assumed $100 investment
on November 7, 1994, the date the Company first became publicly traded. Similar
calculations were made with respect to the American Stock Exchange Market Value
Index and the Peer Group Index for the relevant periods assuming that all
dividends were reinvested. In addition, the calculations for members of the peer
group were weighted on the basis of their respective market capitalizations.
[PERFORMANCE CHART]
The Company cautions that the stock price performance shown in the graph
above should not be considered indicative of potential future stock price
performance.
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<PAGE> 17
PROPOSAL 2 -- ADOPTION OF THE PAXSON COMMUNICATIONS
CORPORATION 1998 STOCK INCENTIVE PLAN
The Company adopted its Stock Incentive Plan in 1994 and its 1996 Stock
Incentive Plan in 1996 (collectively, the "Stock Incentive Plans") as a means of
enabling the Company to provide stock-based incentive compensation by granting
stock options and restricted stock awards (collectively referred to herein as
"awards") to employees of the Company. The Board believes that the Stock
Incentive Plans have proven to be of substantial value to the Company because
they have enabled the Company to offer long-term performance-based
compensation -- such as stock options -- that motivates employees and others to
contribute to the financial success of the Company. A total of 4,143,575 shares
of Class A Common Stock were made available for the granting of awards under the
Stock Incentive Plans.
In early 1998, the Board of Directors determined that insufficient shares
remained available for future awards under the Stock Incentive Plans for the
Company to be able to provide meaningful stock-based incentive compensation to
those persons in a position to contribute to the success of the Company
including the substantial number of new employees engaged in connection with the
launch of PAX TV. The Board therefore adopted the 1998 Stock Incentive Plan (the
"1998 Plan") in June 1998, whereby an additional 7,200,000 shares of Class A
Common Stock were made available for awards of stock options and restricted
stock, and directed that the 1998 Plan be submitted to the stockholders of the
Company for approval at the next annual meeting.
The purpose of the 1998 Plan is to promote the interests of the Company and
its stockholders by providing persons performing services for the Company with
additional incentives to increase their efforts on the Company's behalf and to
remain in the employ or service of the Company through the award of stock
options and shares of restricted stock, and to increase recipients' proprietary
interest in the Company and thereby align their interests with those of the
Company's stockholders. The material terms of the 1998 Plan are substantially
identical to those of the prior Stock Incentive Plans.
Of the 7,200,000 shares of Class A Common Stock to be made available for
awards under the 1998 Plan, awards of stock options with respect to 6,067,500 of
such shares have been made to date. The table below shows certain information
with respect to awards under the 1998 Plan which have been made prior to the
date hereof.
SUMMARY OF NEW PLAN BENEFITS
<TABLE>
<CAPTION>
NUMBER
OF
NAME AND POSITION DOLLAR VALUE(1) SHARES
- ----------------- --------------- ---------
<S> <C> <C>
Jeffrey Sagansky............................................ $ 4,800,000 1,200,000
Chief Executive Officer and President
Lowell W. Paxson............................................ -0- -0-
Chairman of the Board
James B. Bocock............................................. 800,000 200,000
Co-President and Chief Operating Officer
Dean M. Goodman............................................. 2,400,000 600,000
President -- PAX TV
Jon Jay Hoker............................................... 2,000,000 500,000
President Television Group
Executive Group............................................. 11,600,000 2,900,000
Non-Executive Directors..................................... -0- -0-
Non-Executive Officers...................................... 4,600,000 1,150,000
Employee Group.............................................. 8,070,000 2,017,500
</TABLE>
- ---------------
(1) Based upon the difference between the closing sale price on the grant date
and the option exercise price.
A SUMMARY OF THE PRINCIPAL FEATURES OF THE 1998 STOCK INCENTIVE PLAN IS
PROVIDED BELOW, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF THE 1998 STOCK INCENTIVE PLAN WHICH IS INCLUDED AS EXHIBIT A TO THIS PROXY
STATEMENT.
14
<PAGE> 18
GENERAL
Awards granted under the 1998 Plan may consist of options ("Options") to
purchase a specified number of shares of Class A Common Stock at a stated price
per share, which may include options which qualify as "incentive stock options"
("ISOs") pursuant to the Internal Revenue Code of 1986, as amended (the "Code"),
shares of Class A Common Stock which are subject to certain restrictions and a
risk of forfeiture of such shares to the Company ("Restricted Stock"), or
combination of the foregoing. Within certain limits, the Board has the right to
alter, amend or revoke the 1998 Plan. The Board of Directors may not, however,
without the approval of the stockholders, alter or amend the 1998 Plan to
increase the maximum number of shares of Class A Common Stock that may be issued
under the 1998 Plan, materially increase the benefits accruing to participants
or materially modify the requirements as to eligibility for participation in the
1998 Plan.
SHARES AVAILABLE FOR ISSUANCE
When the 1998 Plan was adopted by the Board of Directors in June 1998,
7,200,000 shares of Class A Common Stock became available for awards under the
1998 Plan, representing approximately 12% of the currently outstanding shares of
Class A Common Stock (after giving effect to the issuance of such additional
shares). Authority to grant awards under the 1998 Plan will continue until the
1998 Plan is terminated by the Board of Directors, subject to the continued
availability of shares for the granting of awards under the 1998 Plan. The
shares of Class A Common Stock subject to Options which expire unexercised or
are terminated or which are included in awards of Restricted Stock which are
forfeited to the Company shall again become available for the granting of awards
under the 1998 Plan. In the event of certain changes in the number or kind of
outstanding shares of Class A Common Stock, an appropriate adjustment will be
made with respect to existing and future awards. The proceeds received by the
Company from the sale of stock under the 1998 Plan will be added to the general
funds of the Company. The closing sale price per share of the Class A Common
Stock on March 17, 1999, was $9.
ELIGIBILITY; ADMINISTRATION
All persons who perform services for the Company, whether as a director,
officer, employee, consultant or other independent contractor, all persons who
have in the past performed such services, and all persons performing services
relating to the Company in their capacity as an employee or independent
contractor of a corporation or other entity providing such services to the
Company shall be eligible to receive awards under the 1998 Plan, provided that
only employees of the Company shall be eligible to receive ISOs. The 1998 Plan
will be administered by the Compensation Committee of the Board. The Committee
shall have the power to interpret the provisions of the 1998 Plan, to select the
eligible persons who are to receive awards under the 1998 Plan, to determine the
type of award, the amount thereof and all other terms of each award and to make
all other decisions with respect to the 1998 Plan and any awards granted
thereunder.
STOCK OPTION AWARDS
Granting of Options. The Compensation Committee is authorized to grant
Options to eligible persons ("Optionees"), which may be either ISOs or
non-qualified stock options ("NSOs"). All ISOs are intended to comply with the
provisions of the Code applicable to ISOs. The term of an ISO cannot exceed ten
years, and the exercise price of any ISO must be equal to or greater than the
Fair Market Value of the shares of Class A Common Stock on the date of the
grant. Any ISOs granted to a holder of 10% or more of the combined voting power
of the capital stock of the Company must have an exercise price equal to or
greater than 110% of the fair market value of the Class A Common Stock on the
date of grant and may not have a term exceeding five years from the grant date.
For purposes of the 1998 Plan, "Fair Market Value" generally means the closing
sale price of the Class A Common Stock on the preceding trading day on the
principal national securities exchange on which the Class A Common Stock is
traded. The exercise price of NSOs shall be determined by the Committee on the
date the NSO is granted, and may be less than Fair Market Value.
Exercisability. Options shall become exercisable in whole or in part by
the Optionee during such period as the Compensation Committee shall determine at
the date of grant. The Committee may, in its sole discretion, accelerate the
time at which any Option becomes exercisable.
15
<PAGE> 19
Termination. Each option shall expire on such date or dates as the
Compensation Committee shall determine at the time the Option is granted. Upon
termination of an Optionee's employment with the Company (including by reason of
the Optionee's death), each unexercised Option (whether or not then exercisable)
shall terminate and be forfeited, except that any such Options which are then
exercisable shall remain exercisable for such period after termination of the
Optionee's employment as the Committee may have determined at the time the
Option was granted, which period may extend beyond the stated term of the
Option. The Committee may alter the foregoing and permit Options to remain
exercisable for longer periods, except that in the case of ISOs, the period
after termination of employment during which the ISO shall continue to be
exercisable shall not exceed the maximum such period permitted under the Code.
If an Optionee's employment or affiliation with the Company is terminated for
cause (as defined in the 1998 Plan), all of such person's Options shall
immediately terminate.
Payment of Exercise Price. Payment for shares of Class A Common Stock
purchased upon exercise of an Option must be made in full at the time of
purchase. Payment may be made in cash, by the transfer to the Company of shares
of Class A Common Stock owned by the Optionee valued at Fair Market Value on the
date of transfer, any combination of those payment methods, or in such other
manner as may be authorized by the Compensation Committee.
TAX CONSEQUENCES
The following discussion addresses certain federal tax consequences in
connection with the 1998 Plan. State tax treatment is subject to individual
state laws and is not reviewed in this discussion.
Incentive Stock Options. An ISO results in no taxable income to the
Optionee or deduction to the Company at the time it is granted or exercised. If
the Optionee retains the stock received as a result of the exercise of an ISO
for at least two years from the date of the grant and one year from the date of
exercise, then any gain on the sale of such stock will be treated as long-term
capital gain. If the shares are disposed of during this period, the Option will
be treated as an NSO. The Company receives a tax deduction only if the shares
are disposed of during such period. The deduction is equal to the amount of
taxable income to the Optionee.
Non-Qualified Stock Options. An NSO results in no taxable income to the
Optionee or deduction to the Company at the time it is granted. Upon exercising
such an Option, the Optionee will realize taxable compensation in the amount of
the difference between the option price and the then Fair Market Value of the
shares. Subject to the applicable provisions of the Code, a deduction for
federal income tax purposes will be allowable to the Company in the year of
exercise in an amount equal to the taxable compensation realized by the
Optionee.
Restricted Stock Awards. No income will be recognized by the recipient of
Restricted Stock so long as such award is subject to a substantial risk of
forfeiture. Generally, at the time the substantial risk of forfeiture terminates
with respect to a Restricted Stock award, the then Fair Market Value of the
stock will constitute ordinary income to the recipient. Subject to the
applicable provisions of the Code, a deduction for federal income tax purposes
will be allowable to the Company in an amount equal to the income recognized by
the recipient.
ACCOUNTING TREATMENT
The Company accounts for the issuance of stock-based compensation including
stock options and restricted stock awards, using the intrinsic value method
which requires the accrual of compensation cost to the extent that the market
price of the Common Stock on the grant date exceeds the exercise price. In
addition, the Company makes pro forma disclosures of net income and earnings per
share as if the fair value method had been applied.
Options. Under the 1998 Plan, the issuance of Options will result in
compensation expense only to the extent the exercise price of the Option is less
than the Fair Market Value of the Class A Common Stock on the grant date.
Restricted Stock. Restricted Stock awarded to employees results in
compensation expense equal to the Fair Market Value of the Class A Common Stock
on the date that the substantial risk of forfeiture of such award lapses.
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Accounting for Income Taxes. The compensation cost related to Options and
Restricted Stock awards recorded for financial statement purposes may differ
form the deduction for income tax purposes. The income tax effect of the
difference, if any, generally would be adjusted through additional paid-in
capital.
APPROVAL BY STOCKHOLDERS
The 1998 Plan was adopted by the Board of Directors in June 1998, and to
date options to purchase an aggregate of 6,067,500 shares of Class A Common
Stock have been awarded under the Plan. The adoption of the Plan, and prior
option awards, are not conditioned upon stockholder ratification or approval of
the 1998 Plan. The Board of Directors has directed that the 1998 Plan be
submitted for stockholder approval at the Meeting so that future awards under
the 1998 Plan may qualify as "performance-based compensation" under Section
162(m) of the Code, which generally limits to one million dollars the annual
corporate federal income tax deduction for compensation paid to the chief
executive officer or any of the four other highest paid officers of a
publicly-held corporation. The Company intends that stock options granted in the
future under the 1998 Plan will qualify for the performance-based compensation
exclusion from this deduction limitation. In order for stock options granted
under the 1998 Plan to qualify as performance-based compensation, among other
requirements, the material terms of the 1998 Plan must be approved by the
Company's stockholders. Approval of the 1998 Plan requires the affirmative vote
of a majority of the outstanding shares represented at the Meeting and entitled
to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PAXSON
COMMUNICATIONS CORPORATION 1998 STOCK INCENTIVE PLAN. UNLESS OTHERWISE INDICATED
BY YOUR PROXY VOTE, THE SHARES WILL BE VOTED FOR APPROVAL OF THE PAXSON
COMMUNICATIONS CORPORATION 1998 STOCK INCENTIVE PLAN.
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PROPOSAL 3 -- RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company's Board of Directors has appointed PricewaterhouseCoopers LLP,
Fort Lauderdale, Florida, as independent accountants to audit the consolidated
financial statements of the Company for the year ending December 31, 1999.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the
Annual Meeting of Stockholders with the opportunity to make a statement if they
desire to do so and to respond to appropriate questions posed by stockholders.
The Company has not had any changes in or disagreements with its independent
accountants on accounting or financial disclosure issues. The Board of Directors
recommends a vote FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as the Company's independent certified public
accountants for 1999.
OTHER INFORMATION
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals of stockholders intended for presentation at the 2000 annual
meeting must be received by the Company on or before December 15, 1999, in order
to be included in the Company's proxy statement and form of proxy for that
meeting.
EXPENSES OF SOLICITATION
The expense of preparing, printing, and mailing proxy materials to
stockholders of the Company will be borne by the Company. In addition to
solicitations by mail, regular employees of the Company may solicit proxies on
behalf of the Board of Directors in person or by telephone. The Company will
also reimburse brokerage houses and other nominees for their expenses in
forwarding proxy material to beneficial owners of the Company's stock.
OTHER MATTERS
The financial statements, financial information and management discussion
and analysis of financial condition and results of operations set forth in the
Company's 1998 Annual Report are incorporated by reference. The Company will
provide to any stockholder, upon the written request of any such person, a copy
of the Company's Annual Report on Form 10-K, including the financial statements
and the schedules thereto, for its fiscal year ended December 31, 1998, as filed
with the Securities and Exchange Commission pursuant to Rule 13a-1 under the
Securities Exchange Act of 1934. No charge will be made for copies of such
annual report; however, a reasonable charge for the exhibits will be made.
By Order of the Board of Directors
/s/ ANTHONY L. MORRISON
Anthony L. Morrison, Secretary
West Palm Beach, Florida
March 29, 1999
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PAXSON COMMUNICATIONS CORPORATION
1998 STOCK INCENTIVE PLAN
1. PURPOSE. The purpose of this 1998 Stock Incentive Plan (the "Plan") is to
further the interests of Paxson Communications Corporation, a Delaware
corporation, its Subsidiaries and its shareholders by providing incentives
in the form of grants of stock options and restricted stock to key
employees and other persons who contribute materially to the success and
profitability of the Company. Also, the Plan will assist the Company in
attracting and retaining key persons.
2. DEFINITIONS. The following definitions will apply to the Plan:
A. "AWARD" means, individually or collectively, a grant under the Plan of
a Nonqualified Stock Option, an Incentive Stock Option, a Stock
Appreciation Right, or Restricted Stock.
B. "BOARD" means the board of directors of Paxson Communications
Corporation.
C. "CAUSE" means, except as otherwise may be provided under any agreement
under which any award or grant is made under this Plan, (i) Recipient's
arrest for the commission of (A) a felony, (B) two (2) offenses for
operating a motor vehicle while impaired by or under the influence of
alcohol or illegal drugs, (C) any criminal act with respect to
Recipient'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 (D) 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; (ii) Recipient's taking of any action or
inaction which would cause the Company to be in default under any
material contract, lease or other agreement; (iii) Recipient's
dependence on alcohol or illegal drugs; (iv) Recipient's 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
or such other officer or employee to which Recipient reports; (v)
Recipient's misappropriation, conversion or embezzlement of the assets
of the Company or any affiliate of the Company; and (vi) a material
breach of any Employment Agreement between Recipient and the Company.
D. "CODE" means the Internal Revenue Code of 1986, as amended.
E. "COMMITTEE" means the Compensation Committee appointed by the Board. If
the Board does not appoint a Compensation Committee or in the case of
any Award to members of the Committee, "Committee" means the Board.
F. "COMMON STOCK" means the Class A Common Stock, par value $.001 per
share of Paxson Communications Corporation, or such other class of
shares or securities as to which the Plan may be applicable pursuant to
Section 10 of the Plan.
G. "COMPANY" means Paxson Communications Corporation and its Subsidiaries.
H. "DATE OF GRANT" means the date on which the Option or Restricted Stock,
whichever is applicable, is granted.
I. "DISABILITY" means "disability" as defined in the Company's long term
disability plan or policy.
J. "ELIGIBLE PERSON" means any person who performs or has in the past
performed services for the Company, whether as a director, officer,
Employee, consultant or other independent contractor, and any person
who performs services relating to the Company as an employee or
independent contractor of a corporation or other entity that provides
services to the Company.
K. "EMPLOYEE" means any person employed on an hourly or salaried basis by
the Company.
L. "FAIR MARKET VALUE" means, with respect to the Common Stock, (i) if the
Common Stock is listed for trading on a national securities exchange,
the closing sale price, regular way, of the Common Stock on the
principal national securities exchange on which the Common Stock is
listed for trading on the trading day next preceding the date as of
which Fair Market Value is being determined, or if
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no sale is reported on such date, the average of the closing bid and
asked prices of the Common Stock on such exchange on such date, (ii) if
the Common Stock is not listed for trading on any national securities
exchange but is listed or quoted on the NASDAQ Stock Market, the
closing sale price of the Common Stock on the trading day next
preceding the date as of which Fair Market Value is being determined as
reported in NASDAQ, or if no sale is reported on such date, the average
of the closing bid and asked prices of the Common Stock on such day as
reported in NASDAQ, and (iii) if the Common Stock is not publicly
traded on the date as of which Fair Market Value is being determined,
Fair Market Value shall be as determined by the Board, using such
factors as the Board considers relevant, such as the price at which
recent sales have been made, the book value of the Common Stock, and
the Company's current and projected earnings.
M. "INCENTIVE STOCK OPTION" means a stock option, granted pursuant to this
Plan or any other Company plan, that satisfies the requirements of
Section 422 of the Code and that entitles the Recipient to purchase
stock of the Company.
N. "NONQUALIFIED STOCK OPTION" means a stock option, granted pursuant to
the Plan, that is not an Incentive Stock Option and that entitles the
Recipient to purchase stock of the Company.
O. "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option.
P. "OPTION AGREEMENT" means a written agreement, between the Company and a
Recipient, that sets out the terms and restrictions of an Option Award.
Q. "OPTION SHAREHOLDER" means an Employee who has acquired Shares upon
exercise of an Option.
R. "OPTION SHARES" means Shares that a Recipient receives upon exercise of
an Option.
S. "PERIOD OF RESTRICTION" means the period beginning on the Date of Grant
of a Restricted Stock Award and ending on the date on which all
restrictions applicable to the Shares subject to such Award expire.
T. "PLAN" means this Paxson Communications Corporation 1998 Stock
Incentive Plan, as amended from time to time.
U. "RECIPIENT" means an individual who receives an Award.
V. "RESTRICTED STOCK" means an Award granted pursuant to Section 7 of the
Plan consisting of Shares subject to such terms and restrictions as
shall be established by the Committee.
W. "RESTRICTED STOCK AGREEMENT" means a written agreement between the
Company and a Recipient setting forth the terms and restrictions of an
Award of Restricted Stock.
X. "SHARE" means a share of the Common Stock, as adjusted in accordance
with Section 9 of the Plan.
Z. "SUBSIDIARY" means any corporation 50 percent or more of the voting
securities of which are owned directly or indirectly by the Company at
any time during the existence of the Plan.
3. ADMINISTRATION. The Committee will administer the Plan. The Committee has
the exclusive power to select the Recipients of Awards pursuant to the
Plan, to establish the terms of the Awards granted to each Recipient, and
to make all other determinations necessary or advisable under the Plan. The
Committee has the sole discretion to determine whether the performance of
an Eligible Person warrants an Award under the Plan, and to determine the
size and type of the Award. The Committee has full and exclusive power to
construe and interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to the Plan, and to take all actions necessary or
advisable for the Plan's administration. The Committee, in the exercise of
its powers, may correct any defect or supply any omission, or reconcile any
inconsistency in the Plan, or in any Agreement, in the manner and to the
extent it deems necessary or expedient to make the Plan fully effective. In
exercising this power, the Committee may retain counsel at the expense of
the Company. The Committee also has the power to determine the duration and
purposes of leaves of absence which may be granted to a Recipient without
constituting a termination of the Recipient's employment for purposes of
the Plan. Any of the Committee's determinations will be final
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and binding on all persons. A member of the Committee will not be liable
for performing any act or making any determination in good faith.
4. SHARES SUBJECT TO PLAN. Subject to the provisions of Section 9 of the
Plan, the maximum aggregate number of Shares that may be subject to Awards
under the Plan is 7,200,000. If an unexercised Award expires or becomes
unexercisable, the unpurchased Shares subject to such Award will be
available for other Awards under the Plan.
5. ELIGIBILITY. Any Eligible Person that the Committee in its sole discretion
designates is eligible to receive an Award under the Plan. Only an Employee
may receive an Incentive Stock Option. The Committee's grant of an Award to
a Recipient in any year does not entitle the Recipient to an Award in any
other year. Furthermore, the Committee may grant different Awards to
different Recipients. The Committee may consider such factors as it deems
pertinent in selecting Recipients and in determining the types and sizes of
their Awards. Recipients may include persons who previously received stock,
stock options, stock appreciation rights, or other benefits under the Plan
or another plan of the Company or a Subsidiary, whether or not the
previously granted benefits have been fully exercised or vested. An Award
will not enlarge or otherwise affect a Recipient's right, if any, to
continue to serve the Company and its Subsidiaries in any capacity, and
will not restrict the right of the Company or a Subsidiary to terminate at
any time the Recipient's employment.
6. OPTIONS. The Committee may grant Options to purchase Common Stock to
Recipients in such amounts as the Committee determines in its sole
discretion; provided that, subject to the provisions of Section 9 of the
Plan, (i) during any 12-month period, the Committee may not grant to any
Recipient Options to purchase more than a total of 2,000,000 Shares, (ii)
the Committee may not grant Options such that during any 12-month period
the aggregate number of Shares with respect to which Options first become
exercisable ("vest") during such period, in accordance with the vesting
schedules established by the Committee as of the Date of Grant, exceeds 5%
of the Company's total issued and outstanding shares of common stock,
determined in accordance with the rules of the American Stock Exchange, and
(iii) the Committee may not grant Options such that during any five year
period the aggregate number of Shares with respect to which Options vest
during such period, in accordance with the vesting schedules established by
the Committee as of the Date of Grant, exceeds 10% of the Company's total
issued and outstanding shares of common stock, determined in accordance
with the rules of the American Stock Exchange. An Option may be in the form
of an Incentive Stock Option or a Nonqualified Stock Option. The Committee
may grant an Option alone or in addition to another Award. Each Option will
satisfy the following requirements:
A. WRITTEN AGREEMENT. Each Option granted to a Recipient will be
evidenced by an Option Agreement. The terms of the Option Agreement
need not be identical for different Recipients. The Option Agreement
will contain such provisions as the Committee deems appropriate and
will include a description of the substance of each of the requirements
in this Section 6.
B. NUMBER OF SHARES. Each Option Agreement will specify the number of
Shares that the Recipient may purchase upon exercise of the Option.
C. EXERCISE PRICE.
I. INCENTIVE STOCK OPTION. Except as provided in subsection 6.l. of
the Plan, the exercise price of each Share subject to an Incentive
Stock Option will equal the exercise price designated by the
Committee, but will not be less than the Fair Market Value on the
Date of Grant.
II. NONQUALIFIED STOCK OPTION. The exercise price of each Share
subject to a Nonqualified Stock Option will equal the exercise
price designated by the Committee.
D. DURATION OF OPTION.
I. INCENTIVE STOCK OPTION. Except as otherwise provided in this
Section 6, an Incentive Stock Option will expire on the earlier of
the tenth anniversary of the Date of Grant or the date set by the
Committee on the Date of Grant.
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II. NONQUALIFIED STOCK OPTION. Except as otherwise provided in this
Section 6, a Nonqualified Stock Option will expire on the tenth
anniversary of its Date of Grant or, at such earlier or later date
set by the Committee on the Date of Grant.
E. VESTING OF OPTION. Each Option Agreement will specify the vesting
schedule applicable to the Option. The Committee, in its sole
discretion, may accelerate the vesting of any Option at any time. An
unexercised Option that is not fully vested will become fully vested if
the Recipient of the Option dies or terminates employment with the
Company because of Disability.
F. DEATH.
I. INCENTIVE STOCK OPTION. If a Recipient dies, an Incentive Stock
Option granted to the Recipient will expire on the one-year
anniversary of the Recipient's death, or if earlier, the date
specified in subsection 6.d. of the Plan, unless the Committee sets
an earlier expiration date on the Date of Grant.
II. NONQUALIFIED STOCK OPTION. If a Recipient dies, a Nonqualified
Stock Option granted to the Recipient will expire on the one-year
anniversary of the Recipient's death, or if earlier, the date
specified in subsection 6.d. of the Plan, unless the Committee sets
an earlier or later expiration date on the Date of Grant, or a
later expiration date subsequent to the Date of Grant but prior to
the one-year anniversary of the Recipient's death.
G. DISABILITY.
I. INCENTIVE STOCK OPTION. If the Recipient terminates employment
with the Company because of his Disability, an Incentive Stock
Option granted to the Recipient will expire on the one-year
anniversary of the Recipient's last day of employment, or, if
earlier, the date specified in subsection 6.d. of the Plan.
II. NONQUALIFIED STOCK OPTION. If the Recipient terminates employment
with the Company because of his Disability, a Nonqualified Stock
Option granted to the Recipient will expire on the one-year
anniversary of the Recipient's last day of employment, or, if
earlier, the date specified in subsection 6.d. of the Plan, unless
the Committee sets an earlier or later expiration date on the Date
of Grant or a later expiration date subsequent to the Date of Grant
but prior to the one-year anniversary of the Recipient's last day
of employment.
H. RETIREMENT OR INVOLUNTARY TERMINATION.
I. INCENTIVE STOCK OPTION. If the Recipient terminates employment
with the Company as a result of his retirement in accordance with
the Company's normal retirement policies, or if the Company
terminates the Recipient's employment other than for Cause, an
Incentive Stock Option granted to the Recipient will expire 90 days
following the last day of the Recipient's employment, or, if
earlier, the date specified in subsection 6.d. of the Plan, unless
the Committee sets an earlier expiration date on the Date of Grant.
II. NONQUALIFIED STOCK OPTION. If the Recipient terminates employment
with the Company as a result of his retirement in accordance with
the Company's normal retirement policies, or if the Company
terminates the Recipient's employment other than for Cause, a
Nonqualified Stock Option granted to the Recipient will expire 180
days following the last day of the Recipient's employment, or, if
earlier, the date specified in subsection 6.d. of the Plan, unless
the Committee sets an earlier or later expiration date on the Date
of Grant or a later expiration date subsequent to the Date of Grant
but prior to 180 days following the Recipient's last day of
employment.
I. TERMINATION OF SERVICE. If the Recipient's employment with the
Company terminates for any reason other than the reasons described in
Sections 6.f., 6.g., 6.h., or 6.j. of the Plan, an Option granted to
the Recipient will expire 30 days following the last day of the
Recipient's employment with the Company, or, if earlier, the date
specified in subsection 6.d. of the Plan, unless the
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<PAGE> 26
Committee sets an earlier or later expiration date on the Date of
Grant or a later expiration date subsequent to the Date of Grant but
prior to the 30th day following the Recipient's last day of
employment. The Committee may not delay the expiration of an Incentive
Stock Option more than 90 days after termination of the Recipient's
employment. During any delay of the expiration date, the Option will
be exercisable only to the extent it is exercisable on the date the
Recipient's employment terminates, subject to any adjustment under
Section 9 of the Plan.
J. CAUSE. Notwithstanding any provisions set forth in the Plan, if the
Company terminates the Recipient's employment for Cause, any
unexercised portion(s) of the Recipient's Option(s) will expire
immediately upon the earlier of the occurrence of the event that
constitutes Cause or the last day the Recipient is employed by the
Company.
K. CONDITIONS REQUIRED FOR EXERCISE. An Option is exercisable only to the
extent it is vested according to the terms of the Option Agreement.
Furthermore, an Option is exercisable only if the issuance of Shares
upon exercise would comply with applicable securities laws. Each
Agreement will specify any additional conditions required for the
exercise of the Option.
L. TEN PERCENT SHAREHOLDERS. An Incentive Stock Option granted to an
individual who, on the Date of Grant, owns stock possessing more than
10 percent of the total combined voting power of all classes of stock
of either the Company or any parent or Subsidiary, will have an
exercise price of 110 percent of Fair Market Value on the Date of Grant
and will be exercisable only during the five-year period immediately
following the Date of Grant. For purposes of calculating stock
ownership of any person, the attribution rules of Code Section 424(d)
will apply, and any stock that such person may purchase under
outstanding options will not be considered.
M. MAXIMUM OPTION GRANTS. The aggregate Fair Market Value, determined on
the Date of Grant, of Shares with respect to which any Incentive Stock
Options under the Plan and all other plans of the Company or its
Subsidiaries become exercisable by any individual for the first time in
any calendar year will not exceed $100,000.
N. METHOD OF EXERCISE. An Option will be deemed exercised when the person
entitled to exercise the Option (i) delivers written notice to the
President of the Company (or his delegate, in his absence) of the
decision to exercise, (ii) concurrently tenders to the Company full
payment for the Shares to be purchased pursuant to the exercise, and
(iii) complies with such other reasonable requirements as the Committee
establishes pursuant to Section 9 of the Plan. Payment for Shares with
respect to which an Option is exercised may be made (i) in cash, (ii)
by certified check, (iii) in the form of Common Stock having a Fair
Market Value equal to the exercise price, or (iv) by delivery of a
notice instructing the Company to deliver the Shares to a broker
subject to the broker's delivery of cash to the Company equal to the
exercise price. No person will have the rights of a shareholder with
respect to Shares subject to an Option granted under the Plan until a
certificate or certificates for the Shares have been delivered to him.
A partial exercise of an Option will not affect the holder's right to
exercise the remainder of the Option from time to time in accordance
with the Plan.
O. LOAN FROM COMPANY TO EXERCISE OPTION. The Committee may, in its
discretion and subject to the requirements of applicable law, recommend
to the Company that it lend the Recipient the funds needed by the
Recipient to exercise an Option. The Recipient will apply to the
Company for the loan, completing the forms and providing the
information required by the Company. The loan will be secured by such
collateral as the Company may require, subject to its underwriting
requirements and the requirements of applicable law. The Recipient will
execute a promissory note and any other documents deemed necessary by
the Company.
P. DESIGNATION OF BENEFICIARY. Each Recipient may file with the Company a
written designation of a beneficiary to receive the Recipient's Options
in the event of the Recipient's death prior to full exercise of such
Options. If the Recipient does not designate a beneficiary, or if the
designated beneficiary does not survive the Recipient, the Recipient's
estate will be his beneficiary. Recipients may, by written notice to
the Company, change a beneficiary designation.
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Q. TRANSFERABILITY OF OPTION.
I. NONQUALIFIED STOCK OPTION. To the extent permitted by tax,
securities or other applicable laws to which the Company, the Plan,
Recipients or Eligible Persons are subject, and unless provided
otherwise by the Committee on the Date of Grant, a Recipient who
receives a Nonqualified Stock Option may transfer such Option to
(i) the Recipient's spouse, child, stepchild, grandchild, parent,
stepparent, grandparent, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, (ii)
a trust for the benefit of the Recipient's spouse, child,
stepchild, grandchild, parent, stepparent, grandparent, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, or (iii) a partnership whose
partners consist solely of two or more of the Recipient, the
Recipient's spouse, child, stepchild, grandchild, parent,
stepparent, grandparent, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law.
II. INCENTIVE STOCK OPTION. An Incentive Stock Option granted under
the Plan is not transferable except by will or the laws of descent
and distribution. During the lifetime of the Recipient, all rights
of the Incentive Stock Option are exercisable only by the
Recipient.
7. RESTRICTED STOCK. The Committee may grant Awards of Restricted Stock to
Recipients in such amounts as the Committee determines in its sole
discretion. The Committee may grant Awards of Restricted Stock alone or in
addition to another Award. Each Restricted Stock Award granted to a
Recipient will satisfy the following requirements:
A. WRITTEN AGREEMENT. Each Restricted Stock Award granted to a Recipient
will be evidenced by a Restricted Stock Agreement. The terms of the
Restricted Stock Agreement need not be identical for each Recipient.
The Restricted Stock Agreement will specify the Period(s) of
Restriction. In addition, the Restricted Stock Agreement will include a
description of the substance of each of the requirements in this
Section 7 and will contain such provisions as the Committee deems
appropriate.
B. NUMBER OF SHARES. Each Restricted Stock Agreement will specify the
number of Shares of Restricted Stock granted to the Recipient.
C. TRANSFERABILITY. Shares of Restricted Stock may not be sold,
transferred, pledged, assigned or otherwise alienated or hypothecated
until the end of the applicable Period of Restriction, or upon earlier
satisfaction of any other conditions, as specified in the Restricted
Stock Agreement.
D. OTHER RESTRICTIONS. The Committee will impose on Shares of Restricted
Stock any other restrictions that the Committee deems advisable,
including, without limitation, vesting restrictions, restrictions based
upon the achievement of specific Company-wide, Subsidiary, or
individual performance goals, and/or restrictions under applicable
federal or state securities laws, and may place legends on the
certificates representing Restricted Stock to give appropriate notice
of such restrictions. The Committee may also require that Recipients
make cash payments at the time of grant or upon expiration of the
Period of Restriction in an amount not less than the par value of the
Shares of Restricted Stock.
E. CERTIFICATE LEGEND. In addition to any legends placed on certificates
pursuant to subsection 7.d. of the Plan, each certificate representing
Restricted Stock will bear the following legend:
The sale or other transfer of the Shares represented by this
certificate, whether voluntary, involuntary, or by operation of
law, is subject to certain restrictions on transfer as set forth in
the Paxson Communications Corporation 1998 Stock Incentive Plan, as
amended, and in a Restricted Stock Agreement dated . A copy of the
Plan and the Restricted Stock Agreement may be obtained from the
Chief Financial Officer of Paxson Communications Corporation.
F. REMOVAL OF RESTRICTIONS. Except as otherwise provided in this Section
7, Restricted Stock will become freely transferable by the Recipient
after the Period of Restriction expires. The Recipient
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will be entitled to removal of the legend required by subsection 7.e.
of the Plan following the expiration of the Period of Restriction.
G. VOTING RIGHTS. During the Period of Restriction, Recipients holding
Restricted Stock may exercise full voting rights with respect to such
Shares.
H. DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
Recipients holding Restricted Stock will be entitled to receive all
dividends and other distributions payable to the holders of the Common
Stock generally. If any such dividends or distributions are paid in
Shares, such Shares will be subject to the same restrictions on
transferability and risks of forfeiture as the Shares of Restricted
Stock with respect to which they were paid.
I. DEATH. The restrictions on a Recipient's Restricted Stock will
terminate on the date of the Recipient's death.
J. DISABILITY. If a Recipient terminates employment with the Company
because of his total and permanent Disability, the restrictions on the
Recipient's Restricted Stock will expire on the Recipient's last day of
employment.
K. TERMINATION OF SERVICE. If a Recipient ceases employment for any
reason other than death or Disability, the Recipient will forfeit
immediately to the Company all nonvested Restricted Stock held by the
Recipient. The Committee may, in its sole discretion and upon such
terms and conditions as it deems proper, provide for termination of the
restrictions on Restricted Stock following termination of employment.
L. DESIGNATION OF BENEFICIARY. Each Recipient may file with the Company a
written designation of a beneficiary to receive the Recipient's
Restricted Stock in the event of the Recipient's death prior to removal
of all restrictions thereon. If the Recipient does not designate a
beneficiary, or if the designated beneficiary does not survive the
Recipient, the Recipient's estate will be his beneficiary. Recipients
may, by written notice to the Company, change a beneficiary
designation.
8. TAXES; COMPLIANCE WITH LAW; APPROVAL OF REGULATORY BODIES; LEGENDS. The
Company will have the right to withhold from payments otherwise due and
owing to the Recipient or his beneficiary or to require the Recipient or
his beneficiary to remit to the Company in cash upon demand an amount
sufficient to satisfy any federal (including FICA and FUTA amounts), state
or local withholding tax requirements at the time the Recipient or his
beneficiary recognizes income for federal, state or local tax purposes with
respect to any Award under the Plan.
The Committee may grant Awards and the Company may deliver Shares under the
Plan only in compliance with all applicable federal and state laws and
regulations and the rules of all stock exchanges on which the Company's
stock is listed at any time. An Option is exercisable only if either (i) a
registration statement pertaining to the Shares to be issued upon exercise
of the Option has been filed with and declared effective by the Securities
and Exchange Commission and remains effective on the date of exercise, or
(i) an exemption from the registration requirements of applicable securities
laws is available. The Plan does not require the Company, however, to file
such a registration statement or to assure the availability of such
exemptions. Any certificate issued to evidence Shares issued under the Plan
may bear such legends and statements, and will be subject to such transfer
restrictions, as the Committee deems advisable to assure compliance with
federal and state laws and regulations and with the requirements of this
Section 8. No Option may be exercised, and Shares may not be issued under
the Plan, until the Company has obtained the consent or approval of every
regulatory body, federal or state, having jurisdiction over such matters as
the Committee deems advisable.
Each person who acquires the right to exercise an Option or to ownership of
Shares by transfer, bequest or inheritance may be required by the Committee
to furnish reasonable evidence of ownership of the Option as a condition to
his exercise of the Option or receipt of Shares. In addition, the Committee
may require such consents and releases of taxing authorities as the
Committee deems advisable.
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<PAGE> 29
With respect to persons subject to Section 16 of the Securities Exchange Act
of 1934 ("1934 Act"), transactions under the Plan are intended to comply
with all applicable conditions of Rule 16b-3 under the 1934 Act, as such
Rule may be amended from time to time, or its successor under the 1934 Act.
To the extent any provision of the Plan or action by the Committee or the
Company fails to so comply, it will be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee.
9. ADJUSTMENT UPON CHANGE OF SHARES. If a reorganization, merger,
consolidation, reclassification, recapitalization, combination or exchange
of shares, stock split, stock dividend, rights offering, or other expansion
or contraction of the Common Stock occurs, the Committee will equitably
adjust the number and class of Shares for which Awards are authorized to be
granted under the Plan, the number and class of Shares then subject to
Awards previously granted to Employees under the Plan, and the price per
Share payable upon exercise of each Award outstanding under the Plan. To
the extent deemed equitable and appropriate by the Board, subject to any
required action by shareholders, any Award will pertain to the securities
and other property to which a holder of the number of Shares of stock
covered by the Award would have been entitled to receive in connection with
any merger, consolidation, reorganization, liquidation or dissolution.
10. LIABILITY OF THE COMPANY. Neither the Company nor any parent or Subsidiary
of the Company that is in existence or hereafter comes into existence will
be liable to any person for any tax consequences incurred by a Recipient or
other person with respect to an Award.
11. AMENDMENT AND TERMINATION OF PLAN. The Board may alter, amend, or
terminate the Plan from time to time without approval of the shareholders
of the Company. The Board may, however, condition any amendment on the
approval of the shareholders of the Company if such approval is necessary
or advisable with respect to tax, securities or other laws applicable to
the Company, the Plan, Recipients or Eligible Persons. Any amendment,
whether with or without the approval of shareholders of the Company, that
alters the terms or provisions of an Award granted before the amendment
(unless the alteration is expressly permitted under the Plan) will be
effective only with the consent of the Recipient of the Award or the holder
currently entitled to exercise the Award.
12. EXPENSES OF PLAN. The Company will bear the expenses of administering the
Plan.
13. DURATION OF PLAN. Awards may be granted under the Plan only during the ten
years immediately following the original effective date of the Plan.
14. NOTICES. All notices to the Company will be in writing and will be
delivered to Anthony L. Morrison, Esq., Vice President, Secretary and
General Counsel, Paxson Communications Corporation, 601 Clearwater Park
Road, West Palm Beach, Florida 33401. All notices to a Recipient will be
delivered personally or mailed to the Recipient at his address appearing in
the Company's personnel records. The address of any person may be changed
at any time by written notice given in accordance with this Section 14.
15. APPLICABLE LAW. The validity, interpretation, and enforcement of the Plan
are governed in all respects by the laws of Delaware and the United States
of America.
16. EFFECTIVE DATE. The effective date of the Plan will be the earlier of (i)
the date on which the Board adopts the Plan or (ii) the date on which the
Shareholders approve the Plan.
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PROXY PAXSON COMMUNICATIONS CORPORATION
601 CLEARWATER PARK ROAD
WEST PALM BEACH, FLORIDA 33401-6233
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Anthony L. Morrison and William L. Watson,
or either of them, as Proxies, each with the power to appoint his or her
substitute, and hereby authorizes them or their substitutes to represent and to
vote, as designated below, all the shares of stock of Paxson Communications
Corporation held of record by the undersigned on March 1, 1999, at the annual
meeting of stockholders to be held on April 30, 1999, or any adjournment
thereof.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below
[ ] WITHHOLD AUTHORITY (except as marked to the contrary below)
To vote for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW)
Lowell W. Paxson, William E. Simon, Jr., Jeffrey Sagansky, James B. Bocock,
Bruce L. Burnham, James L. Greenwald
2. RATIFY THE ADOPTION OF THE COMPANY'S 1998 STOCK INCENTIVE PLAN;
3. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
<PAGE> 31
(CONTINUED FROM OTHER SIDE)
4. In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2.
Dated , 1999
----------------------
------------------------------------
Signature
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Signatures if held jointly
PLEASE SIGN EXACTLY AS NAME APPEARS
BELOW. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. When
signing as attorney, as executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
