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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-13452
PAXSON COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 59-3212788
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
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601 CLEARWATER PARK ROAD, WEST PALM BEACH, FLORIDA 33401
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (561) 659-4122
Securities Registered Pursuant to Section 12(b) of the Act:
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NAME OF EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Class A Common Stock, $0.001 par value American Stock Exchange
11 5/8% Senior Subordinated Notes American Stock Exchange
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of common stock held by non-affiliates of the
registrant as of March 1, 2000 is $324,833,000 computed by reference to the
closing price for such shares on the American Stock Exchange.
The number of shares outstanding of each of the registrant's classes of
common stock, as of March 1, 2000 was: 54,790,702 shares of Class A Common
Stock, $0.001 par value, and 8,311,639 shares of Class B Common Stock, $0.001
par value.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the definitive Proxy Statement for the Registrant's Annual Meeting
of Stockholders to be held on May 1, 2000.
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TABLE OF CONTENTS
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Item 1. Business.................................................... 1
Item 2. Properties.................................................. 21
Item 3. Legal Proceedings........................................... 22
Item 4. Submission of Matters to a Vote of Security Holders......... 22
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 22
Item 6. Selected Financial Data..................................... 23
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 24
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 30
Item 8. Financial Statements and Supplementary Data................. 30
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................... 30
Item 10. Directors and Executive Officers of the Registrant.......... 31
Item 11. Executive Compensation...................................... 31
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 31
Item 13. Certain Relationships and Related Transactions.............. 31
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 31
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ITEM 1. BUSINESS
GENERAL
Paxson Communications Corporation (the "Company") is a network television
broadcasting company whose principal business is the ownership and operation of
the largest broadcast television station group in the United States through
which it broadcasts PAX TV, the Company's family friendly programming. The
Company commenced its television operations in early 1994 in anticipation of
deregulation of the broadcast industry. In response to federal regulatory
changes increasing limits on broadcast television station ownership and
mandating cable carriage of local television stations, the Company has expanded
rapidly, through acquisitions and construction of television stations, to
establish the largest owned and operated broadcast television station group in
the United States. The PAX TV Network reaches US television households through a
distribution system comprised of broadcast television stations, cable television
systems in markets not served by a PAX TV station and nationwide through
satellite television providers. According to Nielsen Television Index ("NTI"),
as of February 2000, the PAX TV Network reached 77% of US primetime television
households through broadcast, cable and satellite distribution. Upon completion
of pending transactions, the PAX TV Network will include 116 broadcast
television stations, consisting of 68 of the 73 stations which are currently
owned and operated by the Company, or in which the Company has an economic
interest, and 48 non-owned or operated PAX TV affiliates. The stations which the
Company will own, operate or have an economic interest in will reach 19 of the
top 20 markets and 42 of the top 50 markets.
The Company launched its PAX TV programming on August 3l, 1998. PAX TV is
the brand name for the programming that the Company provides seven days per week
through its television programming distribution system. PAX TV programming
consists of original family-friendly traditional entertainment programs as well
as syndicated programs that have had, or are having, successful first runs on
television in terms of audience ratings. The Company's strategy for PAX TV and
its station group is to combine many of the favorable attributes of traditional
television networks and network-affiliated television stations under one
operation.
Similar to traditional television networks, the Company provides
advertisers with nationwide reach through its extensive television distribution
system. Since the Company owns and operates most of its television distribution
system, it also receives advertising revenue from the entire broadcast day,
unlike a traditional network, which receives advertising revenue only from
commercials aired during limited network programming hours. Further, the
Company's station group achieves various economies of scale due to its size and
centralized operations, resulting in programming, promotional, research,
engineering, accounting and administrative expenses that are substantially lower
per station than those of a typical network-affiliated station.
NBC TRANSACTION
On September 15, 1999 (the "Issue Date"), the Company and National
Broadcasting Company, Inc. ("NBC") entered into an Investment Agreement (the
"NBC Investment Agreement"), pursuant to which NBC acquired $415 million of a
new series of the Company's convertible exchangeable preferred stock which is
convertible into 31,896,032 shares of the Company's Class A Common Stock. In
addition, NBC acquired warrants to purchase from the Company up to 32,032,127
shares of Class A Common Stock. Concurrently with the NBC Investment Agreement,
NBC entered into an agreement with Lowell W. Paxson, the Company's Chairman and
controlling stockholder ("Mr. Paxson") and certain entities controlled by Mr.
Paxson, pursuant to which NBC was granted the right (the "Call Right") to
purchase all (but not less than all) 8,311,639 shares of Class B Common Stock of
the Company beneficially owned by Mr. Paxson, which shares of Class B Common
Stock are entitled to ten votes per share on all matters submitted to a vote of
the Company's stockholders. Exercise of the warrants and the Call Right is
subject to compliance with applicable provisions of the Communications Act of
1934, as amended (the "Communications Act"), and the rules and regulations of
the Federal Communications Commission (the "FCC"). The Call Right may not be
exercised until the warrants have been exercised in full and, upon exercise of
the Call Right, Mr. Paxson would no longer be the controlling stockholder of the
Company.
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The NBC Investment Agreement includes affirmative and negative covenants of
the Company, requires the Company to obtain the consent of NBC with respect to
certain corporate actions, and grants NBC certain rights with respect to the
broadcast television operations of the Company. NBC also has the right to
require the Company to redeem its investment in preferred stock of the Company
under certain circumstances, including at any time that the FCC renders a final
decision not subject to further appeal within the FCC that NBC's investment in
the Company and the acquisition of the other rights provided for in the
transaction agreements is "attributable" to NBC (as such term is defined under
applicable rules of the FCC), or for a period of 60 days beginning with the
third anniversary of the Issue Date and on each anniversary of the Issue Date
thereafter, or in case of certain events of default under the transaction
agreements, subject in each case to certain conditions (including compliance by
the Company with the covenants contained in the terms of its outstanding
indebtedness and preferred stock).
NBC, the Company, Mr. Paxson and certain entities controlled by Mr. Paxson
also entered into a Stockholder Agreement concurrently with the NBC Investment
Agreement, pursuant to which, so long as not prohibited by the Communications
Act and FCC rules and regulations, the Company may nominate persons named by NBC
for election to the Company's board of directors and Mr. Paxson and his
affiliates will vote their shares of Common Stock in favor of the election of
such persons as directors of the Company. Should no NBC nominee be serving as a
member of the Company's board of directors, then NBC may appoint two observers
to attend all board meetings. During December 1999 and March 2000, the Company's
board of directors elected three NBC nominees to fill newly-created vacancies on
the board. Mr. Paxson and his affiliates have also agreed to vote their shares
of Common Stock in favor of certain proposals expected to be submitted for a
vote of the stockholders of the Company at its next annual stockholders meeting
on May 1, 2000. These proposals will include amendments to the Company's
certificate of incorporation to provide for a classified board of directors
serving three year terms and the authorization of additional shares of
non-voting common stock sufficient to permit the Company to reserve such shares
for issuance to NBC and its assignees should they exercise their rights to
convert shares of Series B Convertible Preferred Stock and exercise the Warrants
for such non-voting shares of common stock in lieu of shares of Class A Common
Stock.
The NBC Investment Agreement and the related agreements entered into by the
Company and NBC reflect the commencement of a significant strategic and
financial relationship between the two companies pursuant to which NBC is
expected to play an important role in the future of the Company and, subject to
various conditions including FCC approval, has the ability to acquire voting and
operational control of the Company. These agreements contemplate a number of
arrangements between NBC and the Company which are intended to strengthen the
Company's core broadcast group and PAX TV network operations, as well as more
fully develop the Company's other assets and business opportunities. For
example, the Company and NBC entered into an agreement whereby NBC will serve as
the Company's exclusive sales representative to sell the Company's network
advertising time for agreed compensation. The Company's stations in each of the
Providence, Rhode Island and Washington, D.C. markets are operating under joint
services arrangements with the NBC station. In each of the corresponding
markets, the parties are negotiating additional joint services agreements
("JSA") involving their respective stations serving the same markets.
BUSINESS STRATEGY
The Company's strategy is to maximize its cash flow by centralizing many
functions that traditionally are managed at the local station level, optimizing
the mix of network, national and local advertising sales to achieve the highest
possible rates and providing viewers with a schedule of high-quality destination
programming. The principal components of the Company's business strategy are as
follows:
- Maintain a Centralized, Low-Cost Operating Structure. The Company
centralizes many station functions, including programming, promotions,
advertising, research, engineering, accounting and sales traffic control
at the Company's headquarters. The Company's stations average only 12
employees, compared to an average of 100 employees at network-affiliated
stations, and an average of 60 employees at independent stations in
markets of similar size to the Company's. Unlike other stations, the
Company's stations do not purchase programming individually. As part of
its low-cost operating strategy, the Company promotes the PAX TV brand
and each of its local television stations by utilizing
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a centralized advertising and promotional program. All advertisements and
other promotional material share the same basic content but are
customized to identify and highlight each local market. Management
believes that the Company is able to obtain volume discounts on the
procurement of print and other media advertising used to promote PAX TV
programming and the Company's television stations.
- Integrate PAX TV Network Operations with NBC. The Company continues to
seek opportunities to improve all facets of its operations by integrating
many of its core network functions with NBC network operations in the
areas of sales, planning and programming as well as certain aspects of
marketing and promotions. In addition, the Company is integrating with
NBC its network research, collections and inventory management functions
in order to participate in certain efficiencies and advantages enjoyed by
the larger corresponding areas of NBC's operations. The Company believes
that these operating relationships with NBC should increase the Company's
core advertising revenues and streamline its network operations. The
Company has also commenced operating two stations under joint services
arrangements with NBC stations in the same markets, and intends to enter
into additional joint services arrangements and agreements with NBC same
market stations.
- Achieve Local Television Station Operating Improvements by Implementing
Joint Services Agreements. The Company believes it can improve the
operations of certain of its local stations by entering into JSAs with
broadcast stations in corresponding markets. The Company has entered into
JSAs with third parties in Shreveport, Louisiana, Cedar Rapids, Iowa and
Greenville, North Carolina. In addition, the Company's stations in the
Providence, Rhode Island and Washington, D.C. television markets have
commenced operating under joint services arrangements with NBC owned and
operated stations in those markets, and the Company expects to enter into
JSAs with respect to such stations and with the NBC owned and operated
stations in the following additional markets: New York, New York; Los
Angeles, California; Chicago, Illinois; Philadelphia, Pennsylvania;
Dallas, Texas; Miami, Florida; Hartford, Connecticut; Raleigh-Durham,
North Carolina; and Birmingham, Alabama.
The Company also expects to seek to enter into JSAs with NBC affiliates
in each of the markets where the Company has an owned and operated
station. While specific terms of each JSA may vary depending upon market
considerations and the attributes of the Company station and the
corresponding NBC owned or network-affiliated station involved in the
arrangement, the Company expects each JSA to share the following basic
terms: first, the local NBC owned or network-affiliated station will
provide local and national spot advertising sales management and
representation to the PAX TV station, which should allow the Company's
stations to benefit from the strength of the JSA partner's sales
organization and existing advertising relationships; second, the local
NBC owned or network-affiliated station will have the opportunity to
provide local news and syndicated programming to supplement and enhance
the PAX TV station's network programming lineup; and third, the JSAs will
provide for the integration and co-location of the PAX TV station
operations with the corresponding NBC owned or network-affiliated station
partner in an effort to reduce costs through operating efficiencies and
economies of scale. While the Company intends to negotiate and commence
JSA arrangements for each of its stations as promptly as practical, the
time required to complete negotiations and commence JSA operations with
respect to any Company station will vary based upon a number of factors,
including the complexities arising from the market considerations and the
attributes of the Company station and the corresponding NBC owned or
affiliated station to be involved in the JSA.
- Achieve Programming Economies of Scale and Original Programming
Efficiencies. The Company achieves economies of scale as it purchases
syndicated PAX TV programming for all of its stations. The Company
provides programming centrally and is able to deliver its programming by
satellite to its stations 24 hours per day, seven days per week. Each
station offers substantially the same programming schedule. Generally,
the Company has negotiated license agreements entitling it to exclusive
nationwide distribution rights for a fixed cost, independent of the
number of households which will receive such programming. These
programming rights allow the Company to supply PAX TV programming to its
owned and operated television stations, as well as to independently owned
PAX TV affiliated
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television stations, satellite providers and cable television systems. By
utilizing a centralized programming acquisition strategy, the Company has
incurred programming costs per station significantly lower than those of
comparable television stations in similar markets.
The Company also seeks to achieve cost efficiencies in the development of
original programming for PAX TV. The Company believes it can develop
successful original entertainment programming for PAX TV at substantially
lower costs than those typically incurred by other broadcast networks for
original entertainment programming and at costs comparable to those of
syndicated programming currently aired on PAX TV. The Company believes it
can reduce original entertainment program production costs by employing
innovative development and production techniques, such as the development
of program concepts without the use of pilots, and by entering into
production arrangements with foreign production companies with which the
Company can share production costs, gain access to lower cost production
labor and participate in tax incentives intended to reduce program
production costs. In addition, the Company believes it can sell foreign
and other distribution rights to its original PAX TV programming for up
to 50% of the program's production costs, while retaining all of the
domestic exploitation rights to such programming.
- Provide Quality, Proven Family-Friendly Programming. The Company is
building the brand recognition of, and attracting viewers to, PAX TV by
offering its growing library of original family programming and
syndicated family-oriented programming which is free of excessive
violence, explicit sex and foul language, and which achieved successful
audience ratings during its original network run. Certain of the
syndicated programs purchased by the Company (Touched By An Angel,
Diagnosis Murder) are still in production, and their new episodes
continue to attract significant viewership. The Company has generally
sought to purchase one-hour dramas since management believes that such
programming is more cost efficient than programs of shorter duration. As
the brand recognition of PAX TV continues to grow, management believes
that PAX TV will reach viewers as a "destination channel" to which
viewers turn regularly for family-friendly programming, and that PAX TV
will continue to attract advertisers who want to reach the broad and
desirable viewer demographics attracted by such programming.
- Continue Airing Profitable Long-Form Paid Programming. The Company
continues to carry a reduced but still significant schedule of long-form
paid programming, including religious programming, traditional
entertainment programming needing distribution and infomercials,
primarily during the day on weekends and during certain hours of weekday
mornings. Long-form paid programming still provides a significant and
stable base of revenue for the Company as it further develops the
entertainment component of its PAX TV strategy.
- Expand and Improve PAX TV Distribution. According to NTI data as of
February 2000, PAX TV reaches approximately 77% of all US primetime
television households. The Company intends to continue expanding the
distribution of its PAX TV programming service through the addition of
newly acquired and constructed owned or operated television stations, as
well as affiliated broadcast television stations, cable systems and
satellite television providers. The Company intends to expand its
distribution to reach as many U.S. television households as possible in
an economically beneficial manner. The Company has entered into
agreements with many of the country's leading cable television multiple
system operators or MSOs, whereby the Company receives carriage of its
PAX TV programming on each of these entities' television distribution
systems in certain markets or television households not currently served
by the Company's broadcast television station group. The Company also
continues to seek to improve the channel positioning of its broadcast
television stations on local cable systems across the country through
negotiation with MSOs and to expand the cable carriage of its stations'
signals through enforcement of the rules and regulations of the Federal
Communications Commission pertaining to the mandatory carriage of
broadcast television stations. See "Federal Regulation of Broadcasting --
Must Carry/Retransmission Consent".
- Develop the Company's Broadcast Station Group's Digital Television
Platform. The Company currently owns and operates the largest broadcast
television station group in the United States and
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intends to explore the most effective use of digital broadcast technology
for each of its stations. Upon completion of the construction of the
Company's digital broadcast facilities, the Company believes that it will
be able to provide a significant broadband platform on which to multicast
additional television networks and provide data casting and wireless
services, including data and full motion video. While the Company
believes that proposed alternative and supplemental uses of the Company's
analog and digital spectrum will continue to grow in number, the
viability and success of each such proposed alternative or supplemental
use of spectrum involves a number of contingencies and uncertainties,
including, the development of new or enhanced technologies and the
willingness of consumers to adopt and use such wireless services.
Furthermore, the Company cannot predict what future actions the FCC or
Congress may take with respect to regulatory control of these services.
Accordingly, there can be no assurance that the Company's efforts to take
advantage of digital technology will be commercially successful.
PAXSON COMMUNICATIONS CORPORATION BROADCAST PROPERTY SUMMARY
The Company's PAX TV programming reaches approximately 77% of US prime time
television households through the stations listed below which the Company owns
or operates or in which the Company has an economic interest, as well as
approximately 14.6 million US television households reached through supplemental
cable and satellite carriage.
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MARKET STATION BROADCAST
MARKET NAME RANK CALL LETTERS CHANNEL ECONOMIC INTEREST
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New York 1 WPXN 31 Owned & Operated
Los Angeles 2 KPXN 30 Owned & Operated
Chicago 3 WCPX 38 Owned & Operated
Philadelphia 4 WPPX 61 Owned & Operated
San Francisco 5 KKPX 65 Owned & Operated
Boston(1) 6 WPXB 60 Owned & Operated
Boston(1) 6 WWDP 46 45% Owned- PA
Boston(3 stations) 6 WBPX 68 Affiliate - PA
Dallas 7 KPXD 68 Owned & Operated
Washington D.C. 8 WPXW 66 Owned & Operated
Washington D.C. 8 WWPX 60 Affiliate - PA
Detroit 9 WPXD 31 Owned & Operated
Atlanta 10 WPXA 14 Owned & Operated
Houston 11 KPXB 49 Owned & Operated
Seattle 12 KWPX 33 Owned & Operated
Cleveland 13 WVPX 23 Owned & Operated
Tampa 14 WXPX 66 Owned & Operated
Minneapolis 15 KPXM 41 Owned & Operated
Miami 16 WPXM 35 Owned & Operated
Phoenix 17 KPPX 51 49% Owned & TBA - PA
Phoenix 17 KBPX 13 Owned & Operated
Denver 18 KPXC 59 Owned & Operated
Sacramento 20 KSPX 29 TBA - PA
St. Louis 21 WPXS 13 Affiliate - PA
Orlando 22 WOPX 56 Owned & Operated
Portland, OR 23 KPXG 22 Owned & Operated
Indianapolis 25 WIPX 63 Affiliate - PA
Hartford 27 WHPX 26 Affiliate - PA
Raleigh-Durham 29 WFPX 62 Owned & Operated
Raleigh-Durham 29 WRPX 47 Affiliate - PA
Nashville 30 WNPX 28 Owned & Operated
Milwaukee 31 WPXE 55 Affiliate - PA
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MARKET STATION BROADCAST
MARKET NAME RANK CALL LETTERS CHANNEL ECONOMIC INTEREST
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Kansas City 33 KPXE 50 Owned & Operated
Salt Lake City 36 KUPX 16 Owned & Operated
Grand Rapids 37 WZPX 43 Affiliate - PA
San Antonio 38 KPXL 44 Owned & Operated
Birmingham 39 WPXH 44 Owned & Operated
Norfolk 40 WPXV 49 Owned & Operated
New Orleans 41 WPXL 49 TBA - PA
Buffalo 42 WPXJ 51 Owned & Operated
Memphis 43 WPXX 50 TBA - PA
West Palm Beach 44 WPXP 67 90% Owned & Operated
Oklahoma City 45 KOPX 62 Owned & Operated
Greensboro 47 WGPX 16 Owned & Operated
Louisville 48 WBNA 21 TBA - RFR
Albuquerque 49 KAPX 14 Owned & Operated
Providence 50 WPXQ 69 50% Owned & Operated
Wilkes Barre 51 WQPX 64 Owned & Operated
Albany 53 WYPX 55 Owned & Operated
Fresno-Visalia 55 KPXF 61 Owned & Operated
Little Rock 57 KYPX 42 Owned & Operated
Charleston, WV 58 WLPX 29 Owned & Operated
Tulsa 59 KTPX 44 Owned & Operated
Mobile 62 Ch. 61 61 PA
Knoxville 63 WPXK 54 Owned & Operated
Lexington 67 WAOM 67 PA
Roanoke 68 WPXR 35 Owned & Operated
Des Moines 70 KFPX 39 Owned & Operated
Honolulu 71 KPXO 66 Owned & Operated
Spokane 72 KGPX 31 Owned & Operated
Syracuse 74 WSPX 56 Owned & Operated
Shreveport 75 KPXJ 21 Owned & Operated
Portland-Auburn, ME 80 WMPX 23 Owned & Operated
Cedar Rapids 88 KPXR 48 Owned & Operated
Greenville-N.Bern 105 WEPX 38 Owned & Operated
Montgomery 113 WPMM 22 PA
Wausau 136 WTPX 46 PA
Odessa 151 Ch. 30 30 PA
Puerto Rico(3 stations)(1) NR WJPX 24 Owned & Operated
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TBA Time-Brokerage Agreement
PA Pending Acquisition
RFR Right First Refusal
(1) Presently airing long-form paid programming exclusively
Acquisition of DP Media. On November 21, 1999 the Company entered into
agreements to purchase the television station assets (eight stations and a
contractual right to acquire a television station, WBPX, and two full power
satellite stations serving the Boston, Massachusetts market) of DP Media, Inc.,
and its subsidiaries (collectively referred to herein as "DP Media"), which
companies are beneficially owned by family members of the Company's principal
stockholder, Mr. Lowell W. Paxson. As part of that acquisition, the Company will
expend an additional $38 million to consummate the acquisition of WBPX, which
station is currently a PAX TV Network affiliate and is being operated by DP
Media under a time brokerage agreement with the seller of the station. The
television stations to be acquired, eight of which have been airing PAX TV
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Network programming under affiliation agreements, and all of which the Company
provides services for under various services agreements, are in the Battle
Creek, Michigan, Raleigh, North Carolina, Hartford, Connecticut, Boston,
Massachusetts (two stations), St. Louis, Missouri, Washington, D.C., Milwaukee,
Wisconsin and Indianapolis, Indiana markets. In conjunction with the asset
purchase agreement, on November 22, 1999 the Company advanced approximately $106
million to DP Media pursuant to a secured loan agreement, which was used to
repay DP Media's outstanding indebtedness to third party lenders. Effective
March 1, 2000, the affiliation agreements and services agreements between the
Company and DP Media for each DP Media station other than the second Boston
station ("WWDP") were replaced by time brokerage agreements which will remain in
effect pending the completion of the acquisition of the stations by the Company.
On March 3, 2000, the Company and DP Media agreed in principal to convert their
asset sale transaction into a purchase by the Company of all of the capital
stock of DP Media for a purchase price of $7,500,000. Prior to such purchase, DP
Media shall transfer the assets of WWDP to a newly formed company ("Newco"). The
Company shall hold a non-voting interest in Newco and shall have the right to
require a sale of WWDP, which is not a PAX TV Network affiliate, if the station
is not sold within a specified period. The Company shall receive 45% of the net
proceeds from the sale of WWDP.
COMPETITION
The Company's PAX TV network and its television stations compete with the
other broadcast television networks and the other television broadcasting
stations in their respective market areas. In addition, PAX TV and the Company's
broadcast television stations compete with other traditional advertising media,
including cable television networks, newspapers, radio, magazines, outdoor
advertising, transit advertising, and direct mail marketing, as well as newly
developing Internet advertising alternatives and digital television programming
services. Competition in the broadcast television network industry occurs on a
national basis and not with respect to any specific market. Competition within
the television broadcast station industry occurs primarily in individual market
areas, so a station in one market does not generally compete with stations in
other market areas. In addition, both PAX TV and the Company's television
stations face competition from, respectively, other broadcast networks and other
stations in each of the Company's station markets with substantial financial
resources, including, in certain instances, networks and stations whose
programming is directed to the same demographic groups as PAX TV programming. In
addition to management experience, factors that are material to competitive
positions include a station's rank in its market, authorized power, assigned
frequency, audience characteristics, local program acceptance and the
programming characteristics of other stations in the market area.
Although the television broadcasting industry is highly competitive, some
barriers to entry exist. The operation of a television broadcasting station
requires a license from the FCC, and the number of television stations that can
operate in a given market is limited by the availability of stations that the
FCC will license in that market. The television broadcasting industry
historically has grown in terms of total revenue, despite the introduction of
new technologies for the delivery of entertainment and information, such as
cable and direct satellite. There is no assurance that market fragmentation
resulting from the application of new media technologies, such as digital
television, will not have an adverse effect on the television broadcasting
industry.
TELEVISION STATION PROGRAMMING AND OPERATING AGREEMENTS
In addition to its owned and operated television stations, the Company
provides programming and certain operating services for stations owned by third
parties pursuant to time brokerage agreements (each a "TBA") and affiliation
agreements. In certain circumstances, the Company has entered into TBAs to
program and operate a station that the Company is acquiring or has the right to
acquire. In addition to the TBA or affiliation agreement, the Company may have a
minority interest in such station pending the completion of such acquisition.
Time Brokerage Agreements. The Company has entered into TBAs with third
parties pursuant to which the Company enjoys many, but not all, of the benefits
of operating a television station while not owning or controlling the FCC
license. The Company is currently operating, or will operate upon completion of
construction, pursuant to time brokerage agreements the following stations:
KPPX, Phoenix, Arizona; KSPX,
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Sacramento, California; WPXL New Orleans, Louisiana; WPXX, Memphis, Tennessee;
and WBNA, Louisville, Kentucky. The Company also has an option to acquire each
of these stations. The Company may in the future enter into other time brokerage
agreements to operate stations prior to their acquisition or to enable the
Company to operate additional television stations that it might not be able to
own under current FCC multiple station ownership restrictions.
Affiliation Agreements. To further the nationwide distribution of the PAX
TV Network, the Company has entered into affiliation agreements with stations in
markets where the Company does not otherwise own or operate a broadcast station
carrying its programming or have a cable distribution agreement providing for
carriage of PAX TV programming to the cable households in such market. These
affiliation agreements with third parties do not require the Company to pay cash
compensation to the affiliate, but the affiliate is entitled to sell a portion
of the non-network advertising time during the PAX TV Network programming hours.
While the majority of such third party affiliation agreements include the
distribution of the PAX TV Network's prime time programming (i.e., programming
aired on PAX TV between the hours of 8:00 PM and 11:00 PM, Eastern Standard
Time, Monday through Sunday), certain of such affiliates do not carry all of the
PAX TV Network programming and certain affiliates, due to issues related to
their specific markets, do not air PAX TV Network programming in the exact time
patterns during which the Company exhibits its programming.
FEDERAL REGULATION OF BROADCASTING
The FCC regulates television broadcast stations pursuant to the
Communications Act. The Communications Act permits the operation of television
broadcast stations only according to a license issued by the FCC upon a finding
that the grant of the license would serve the public interest, convenience and
necessity, and directs the FCC to issue licenses to provide a fair, efficient
and equitable distribution of broadcast service throughout the United States.
The Communications Act empowers the FCC, among other things, to determine
the frequencies, location and power of broadcast stations; to issue, modify,
renew and revoke station licenses; to approve the assignment or transfer of
control of broadcast licenses; to regulate the equipment used by stations; to
impose fees for processing applications; and to impose penalties for violations
of the Communications Act or FCC regulations. The FCC may revoke licenses for,
among other things, false statements made to the FCC or willful or repeated
violations of the Communications Act or of FCC rules. Legislation has been
introduced from time to time to amend the Communications Act in various respects
and the FCC from time to time considers new regulations or amendments to its
existing regulations. The Telecommunications Act of 1996 (the "1996 Act")
changed many provisions of the Communications Act and required the FCC to change
its existing rules and adopt new rules in several areas affecting broadcasting.
The following is a brief summary of certain provisions of the
Communications Act and the rules of the FCC. Reference should be made to the
Communications Act and the rules, orders, decisions and published policies of
the FCC for further information on FCC regulation of television broadcast
stations.
License Renewal. The Communications Act provides that a broadcast station
license may be granted to an applicant if the public interest, convenience and
necessity will be served thereby, subject to certain limitations. In making
licensing determinations, the FCC considers an applicant's legal, technical,
financial and other qualifications.
Television broadcasting licenses are generally granted and renewed for a
period of eight years, but may be renewed for a shorter period upon a finding by
the FCC that the "public interest, convenience and necessity" would be served
thereby. At the time the application is made for renewal of a television
license, parties in interest, as well as members of the public may apprise the
FCC of the service the station has provided during the preceding license term
and urge the grant or denial of the application. Under the 1996 Act, as
implemented in the FCC's rules, a competing application for authority to operate
a station and replace the incumbent licensee may not be filed against a renewal
application and considered by the FCC in deciding whether to grant a renewal
application. The statute modified the license renewal process to provide for the
grant of a renewal application upon a finding by the FCC that the licensee (1)
has served the public interest, convenience and necessity; (2) has committed no
serious violations of the Communications Act or the FCC's
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rules; and (3) has committed no other violations of the Communications Act or
the FCC's rules which would constitute a pattern of abuse. If the FCC cannot
make such a finding, it may deny a renewal application, and only then may the
FCC accept other applications to operate the station of the former licensee. In
the vast majority of cases, broadcast licenses are renewed by the FCC even when
petitions to deny are filed against broadcast license renewal applications. All
of the Company's existing licenses that have come up for renewal have been
renewed and are in effect. Such licenses are subject to renewal at various times
during 2004 and 2007. Although there can be no assurance that the Company's
licenses will be renewed, the Company is not aware of any facts or circumstances
that would prevent renewal.
Ownership Matters. The Communications Act requires the prior approval of
the FCC for the assignment of a broadcast license or the transfer of control of
a corporation or other entity holding a license. In determining whether to
approve an assignment of a broadcast license or a transfer of control of a
broadcast licensee, the FCC considers, among other things, the financial and
legal qualifications of the prospective assignee or transferee, including
compliance with FCC restrictions on alien ownership and control, compliance with
rules limiting the common ownership of certain attributable interests in
broadcast, cable and newspaper properties, and the character qualifications of
the transferee or assignee and the individuals or entities holding attributable
interests in them.
As detailed below, in August 1999, the FCC substantially revised its
multiple ownership and attribution rules. These rules became effective on
November 16, 1999, but may be modified or reconsidered in subsequent
proceedings. In three separate orders, the FCC revised its rules regarding
restrictions on television ownership, radio-television cross-ownership and
attribution of broadcast ownership interests. The three orders, which resolve
several rulemaking proceedings launched in the early 1990's, take into
consideration mandates in the 1996 Act which relaxed the radio ownership rules
and directed the FCC to consider similar deregulation for television. The FCC's
multiple ownership rules may limit the permissible acquisitions and investments
that the Company may make or the permissible investments that others may make in
the Company.
The FCC generally applies its ownership limits to attributable interests
held by an individual, corporation, partnership, or other association or entity.
In the case of corporations holding broadcast licenses, the interests of
officers, directors, and those who, directly or indirectly, have the right to
vote five percent or more of the corporation's stock are generally attributable,
as are positions as an officer or director of a license or a corporate parent of
a broadcast licensee. The FCC treats all partnership and limited liability
company interests as attributable, except for those limited partnership and
limited liability company interests that are insulated under FCC policies. For
insurance companies, certain regulated investment companies, and bank trust
departments, that hold stock for investment purposes only, stock interests
become attributable with the ownership of twenty percent or more of the voting
stock of the corporation holding or controlling broadcast licenses.
In cases in which one person or entity (such as Mr. Paxson in the case of
the Company) holds more than 50% of the combined voting power of the common
stock of a broadcasting corporation, a minority shareholder of the corporation
generally would not acquire an attributable interest in the corporation. If a
majority shareholder of a company (such as Mr. Paxson in the case of the
Company) were no longer to hold more than 50% of the combined voting power of
the common stock of the Company, the interests of minority shareholders that had
theretofore been considered non-attributable could become attributable, with the
result that any other media interests held by such shareholders would be
combined with the media interests of the Company for purposes of determining the
shareholders' compliance with FCC ownership rules.
In its recently revised rules, the FCC decided to treat certain
combinations of debt and equity interests as attributable if the interest meets
a two-part test. First, the combined equity and debt interest must exceed 33% of
a station licensee's total assets. Second, the party holding the equity/debt
interest must either (i) supply more than 15% of the station's total weekly
programming or (ii) have an attributable interest in another media entity,
whether TV, radio, cable or newspaper, in the same market. Non-voting equity and
insulated interests count toward the 33% equity/debt threshold. Under these new
rules, all non-conforming interests acquired before November 7, 1996, are
permanently grandfathered and thus do not constitute attributable ownership
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interests. Any nonconforming interests acquired after that date must be brought
into compliance by August 5, 2000.
Television National Ownership Rule. Under the Communications Act, no
individual or entity may have an attributable interest in television stations
reaching more than 35% of the national television viewing audience. The FCC
applies a 50% discount for purposes of calculating a UHF station's audience
reach. Under the new ownership rules, the FCC will count the audience in each
market only once. If a broadcast licensee has an attributable interest in a
second television station in each market -- whether by virtue of ownership, a
local marketing agreement or a parent-satellite operation -- the audience for
that market will not be counted twice for the purposes of determining compliance
with the national cap.
Television Duopoly Rule. The FCC's new TV duopoly rule permits parties to
own two TV stations without regard to signal contour overlap provided each of
the stations is located in a separate market referred to as designated market
area ("DMA"). In addition, the new rules permit parties in larger DMAs to own up
to two television stations in the same DMA so long as (a) at least eight
independently owned and operating full-power commercial and non-commercial
television stations remain in the market at the time of acquisition and (b) at
least one of the two stations is not among the four top-ranked stations in the
market based on audience share. In addition, without regard to numbers of
remaining or independently owned TV stations, the FCC will permit television
duopolies within the same DMA so long as the station's Grade A service contours
do not overlap. Satellite stations that the FCC has authorized to rebroadcast
the programming of a "parent" station will continue to be exempt from the
duopoly rule if located in the same DMA as the "parent" station. The FCC may
grant a waiver of the TV duopoly rule if one of the two television stations is a
"failing" station, or the proposed transaction would result in the construction
of a new television station.
Television Local Marketing and Joint Sales Agreements. Over the past few
years, a number of television stations, including certain of the Company's
television stations, have entered into agreements commonly referred to as local
marketing agreements (or time brokerage agreements) and joint sales agreements.
These agreements may take varying forms. Pursuant to a typical local marketing
agreement, separately owned and licensed television stations agree to enter into
cooperative arrangements of varying sorts, subject to compliance with the
requirements of antitrust laws and with the FCC's rules and policies. Under
these types of arrangements, separately-owned stations serving a common
geographic area agree to function cooperatively in terms of programming,
advertising sales, and similar functions, subject to the requirement that the
licensee of each station maintains independent control over the programming and
operations of its own station. Under a typical joint sales agreement, two
separately-owned stations agree to function cooperatively in advertising sales
only.
The FCC's revised attribution and TV duopoly rules apply to same-market
local marketing agreements involving more than 15% of the brokered station's
program time. Local marketing agreements currently in effect are exempt from the
TV duopoly rule for a limited period of time of either two or five years,
depending on the date of the adoption of the local marketing agreement. The new
rules do not apply to joint sales agreements; thus, these types of arrangements
remain non-attributable under the FCC's ownership rules.
The FCC has determined that issues of joint advertising sales should be
left to antitrust enforcement. Furthermore, the FCC has held that time brokerage
agreements do not constitute a transfer of control, standing alone, and are not
contrary to the Communications Act provided that the licensee of the station
maintains ultimate responsibility for and control over operations of its
broadcast station (including, specifically, control over station finances,
licensee personnel and programming) and complies with applicable FCC rules and
with antitrust laws.
Alien Ownership. Under the Communications Act, no FCC broadcast license
may be held by a corporation of which more than one-fifth of its capital stock
is owned or voted by aliens or their representatives or by a foreign government
or representative thereof, or by any corporation organized under the laws of a
foreign country (collectively "Aliens"). Furthermore, the Communications Act
provides that no FCC broadcast license may be granted to any corporation
controlled by any other corporation of which more than one-fourth of its capital
stock is owned of record or voted by Aliens if the FCC should find that the
public
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interest would be served by the refusal of such license. Restrictions on alien
ownership also apply, in modified form, to other types of business
organizations, including partnerships.
Radio/Television Cross-Ownership Rule. The FCC's radio/television
cross-ownership rule (the "one-to-a-market" rule) has until recently prohibited
common ownership or control of a radio station, whether AM, FM or both, and a
television station in the same market, subject to waivers in some circumstances.
The FCC's new radio-television cross-ownership rule permits cross-ownership of
stations in the same market based on the number of independently owned media
voices in the local market. In large markets (that is, markets with at least 20
independently owned media voices), a single entity may own up to one television
station and seven radio stations or, if permissible under the new TV duopoly
rule, two television stations and six radio stations. In a market that includes
at least ten other independently owned media voices, a single entity may own a
television station and up to four radio stations, and if permitted under the TV
duopoly rule, two television stations and up to four radio stations. A singe
entity may own one radio station and one television station in a market or one
radio station and two television stations, if permitted under the TV duopoly
rule, without regard to the number of media voices in the market.
Waivers of the new radio-television cross-ownership rule will be granted
only in situations where the station to be acquired is a failed station. In
contrast to the TV duopoly rule, the FCC has stated that it will not waive the
radio-television cross-ownership rule in situations of unbuilt stations.
Local Television/Cable Cross-Ownership Rule. While the 1996 Act eliminated
the statutory prohibition against the common ownership of a television station
and a cable system that serve the same local market, the FCC's rules still
contain this prohibition, although the FCC has initiated a proceeding to decide
whether to retain it.
Broadcast/Daily Newspaper Cross-Ownership Rule. The FCC's rules prohibit
the common ownership of a radio television broadcast station and a daily
newspaper in the same market. In 1993, Congress authorized the FCC to grant
waivers of the radio-newspaper cross-ownership rule to permit cross-ownership of
a radio station and a daily newspaper in a top 25 market with at least 30
independent media voices, provided the FCC finds the transaction in the public
interest. Under current policy, the FCC will grant a permanent waiver of the
radio-newspaper cross-ownership rule only in those circumstances in which the
effects of applying the rule would be "unduly harsh" (that is, the newspaper is
unable to sell the commonly owned station, the sale would be at an artificially
depressed price, or the local community could not support a separately-owned
newspaper and radio station). The FCC previously has granted only two permanent
waivers of this rule. The FCC has pending a notice of inquiry requesting comment
on possible changes to its policy for waiving the rule.
Biennial Review of Broadcast Ownership Rules. In March 1998, as required
by the 1996 Act, the FCC initiated a proceeding to review its broadcast
ownership rules. The proceeding did not propose to revise or repeal any existing
rule, but rather to solicit comment on whether any of the rules should be the
subject of a subsequent rulemaking to modify or repeal them. The rules on which
the FCC has requested comment include those on national television ownership and
dual network ownership.
Expansion of the Company's broadcast operations on both a local and
national level will continue to be subject to the FCC's ownership rules and any
changes that may be adopted. Any relaxation of the ownership rules may increase
the level of competition to the extent that any of the Company's competitors may
have greater resources and thereby may be in a superior position to take
advantage of such changes. Any restriction may also have an adverse effect on
the Company. The Company cannot predict the ultimate outcome of the FCC's
ownership proceedings or its impact on its business operations.
Programming and Operation. The Communications Act requires broadcasters to
present programming that responds to community problems, needs and interests and
to maintain certain records demonstrating such responsiveness.
Broadcast of obscene or indecent material is regulated by the FCC as well
as by state and federal law. Stations also must follow various rules promulgated
under the Communications Act that regulate, among other things, political
advertising, sponsorship identifications, the advertising of contests and
lotteries, and technical operations, including limits on radio frequency
radiation.
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Pursuant to the Children's Television Act of 1990, the FCC has adopted
rules limiting advertising in children's television programming and requiring
that television broadcast stations serve the educational and informational needs
of children. Pursuant to those rules, television stations are required to
broadcast a minimum of three hours per week of "core" children's educational
programming, which the FCC defines as programming that (i) is serving the
educational and informational needs of children 16 years of age and under and
has a significant purpose; (ii) is regularly scheduled, weekly and at least 30
minutes in duration; and (iii) is aired between the hours of 7:00 a.m. and 10:00
p.m. Furthermore, "core" children's educational programs, in order to qualify as
such, are required to be identified as educational and informational programs
over the air at the time they are broadcast, and are required to be identified
in the children's programming reports required to be placed in the stations'
public inspection files. Additionally, television stations are required to
identify and provide information concerning "core" children's programming to
publishers of program guides and listings.
The Communications Act and FCC rules also impose regulations regarding the
broadcasting of political advertisements by legally qualified candidates for
elective office. Among other things, (i) stations must provide "reasonable
access" for the purchase of time by legally qualified candidates for federal
office; (ii) stations must provide "equal opportunities" for the purchase of
equivalent amounts of comparable broadcast time by opposing candidates for the
same elective office; and (iii) during the 45 days preceding a primary or
primary run-off election and during the 60 days preceding a general or special
election, legally qualified candidates for elective office may be charged no
more than the station's "lowest unit charge" for the same class of
advertisement, length of advertisement and daypart.
Equal Employment Opportunity Requirements. The FCC's rules formerly
required that broadcast licensees develop and implement programs designed to
promote equal employment opportunities and submit reports on these matters on an
annual basis and at renewal time. In 1998, the United States Court of Appeals
for the District of Columbia Circuit declared these rules unconstitutional.
Subsequently, the FCC initiated a rulemaking to reestablish employment
regulations, and in January 2000, the FCC adopted new equal employment
opportunity rules for broadcasters. The FCC's new rules reaffirm the prior rule
prohibiting discrimination on the basis of race, religion, color, national
origin or gender and require broadcasters to maintain a recruitment outreach
program to ensure that all qualified applicants have the opportunity to apply
for job vacancies. Broadcasters are required to prepare reports concerning equal
employment opportunity outreach programs on an annual basis and to file those
reports with the FCC periodically throughout the license term. The FCC will
review the reports and a station's compliance midway through the license term
and in connection with the station's license renewal. Broadcasters also are
required to complete annual reports regarding their employment profile that will
be used by the FCC to monitor industry trends. The FCC's new rules are not yet
effective and therefore are subject to reconsideration and modification in
subsequent proceedings. At this time, the Company cannot predict the impact of
these new rules on it or its stations.
"Must Carry"/Retransmission Consent/Regulations. The Company believes that
the growth and success of its television station group depends materially upon
access to households served by cable television systems. The Communications Act
includes broadcast signal carriage requirements that allow local commercial
television broadcast stations to elect once every three years to require a cable
system to carry the station subject to certain exceptions, or to negotiate for
retransmission consent to carry the station. A cable system generally is
required to devote up to one-third of its activated channel capacity for the
mandatory carriage of local commercial television stations. Additionally, cable
systems are required to obtain retransmission consent for all distant commercial
television stations (except for commercial satellite-delivered independent
superstations such as WGN), commercial radio stations and certain low power
television stations. By electing the "must carry" rights, a broadcaster can
demand carriage on a specified channel on cable systems within its DMA, provided
the broadcaster's television signal can be delivered to the cable system
operator's cable head end at a specified strength. These "must carry" rights are
not absolute, and their exercise depends on variables such as the number of
activated channels on a cable system, the location and size of a cable system,
and the amount of duplicative programming on a broadcast station. Therefore,
under certain circumstances, a cable system can decline to carry a given
station. Alternatively, if a broadcaster chooses to exercise retransmission
consent rights, it can prohibit cable systems from carrying its signal or grant
the appropriate cable system the
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authority to retransmit the broadcast signal for a fee or other consideration.
The Company's television stations have generally elected the "must carry"
alternative. The Company's elections of retransmission or "must carry" status
will continue until the next election period which commences on January 1, 2003.
If the law were changed to eliminate or materially alter "must carry" rights,
the Company could suffer adverse effects.
The Company's television stations are also carried as distant signals on
cable systems which are located outside of the stations' markets. The stations
are carried pursuant to retransmission consent agreements which the Company has
entered into with the cable systems. Cable systems must remit a compulsory
license royalty fee to the United States Copyright Office ("Copyright Office")
to carry the Company's stations in these distant markets as required by the
Copyright Act of 1976, as amended (the "Copyright Act"). The Company recently
filed a request with the Copyright Office, which administers the compulsory
license, to change the Company's stations' status under the compulsory license
from "independent" to "network" signals, which would reduce the amount of
royalties that a larger cable system would be required to remit in order to
carry a Company station in a distant market. If the Copyright Office grants the
Company's request, such larger cable systems would be permitted to carry the
Company's stations at reduced royalty rates, and additional cable systems may
transmit the Company's stations in distant markets. The Company cannot determine
when the Copyright Office will act on its request, or whether it will receive a
favorable ruling. The Copyright Office recently requested comments from the
public regarding the Company's request.
Syndicated Exclusivity/Territorial Exclusivity. The FCC has imposed on
cable operators syndicated exclusivity rules and network non-duplication rules.
These syndicated exclusivity rules allow local broadcast stations to require
that cable operators black out certain syndicated non-network programming
carried on distant signals (that is, signals of broadcast stations, including
so-called super stations, which serve areas substantially removed from the cable
system's local community). The network non-duplication rules allow local
broadcast network affiliates to require that cable operators black out
duplicating network broadcast programming carried on more distant signals that
are not significantly viewed over the air.
Satellite Carriage of Television Broadcast Signals. In November 1999,
Congress passed legislation amending the Satellite Home Viewer Act which governs
the delivery of television broadcast signals by satellite companies. The
legislation authorizes for the first time the satellite delivery of local
broadcast signals to customers who reside within a television station's local
market. Satellite carriers may continue to retransmit any local broadcast signal
for the first six months that the legislation is effective but then must obtain
retransmission consent from the television station before continuing carriage.
Television stations must negotiate in good faith with satellite companies
regarding retransmission consent. Congress also has imposed on satellite
carriers "must-carry" obligations with respect to local television stations.
Beginning January 1, 2002, a satellite carrier delivering the signal of any
local television station also would be required to carry all stations licensed
to the carried station's local market. With respect to the delivery of
out-of-market, or distant, television broadcast signals to unserved customers,
the legislation permits satellite carriers to provide the signal of a distant
network affiliate to only those customers who cannot receive a signal of at
least Grade B intensity from the local network affiliate. The legislation
grandfathers for a period of five years from enactment current customers
residing within a station's Grade B contour but outside of its Grade A contour
who would otherwise be ineligible to receive distant network signals. The FCC
has commenced a rulemaking proceeding to consider rules implementing the new
legislation. The Company cannot predict the ultimate outcome of this proceeding
or its impact on its television stations.
Television stations also may be subject to a number of other federal, state
and local regulations, including regulations of the Federal Aviation
Administration affecting tower height, lighting and marking, and federal, state,
and local environmental and land use restrictions; general business regulation;
and a variety of local regulatory concerns.
FCC Inquiry on Broadcast of Commercial Matter. The FCC also has initiated
a notice of inquiry proceeding seeking comment on whether the public interest
would be served by establishing limits on the amount of commercial matter
broadcast by television stations. The Company cannot predict at this time
whether the FCC will propose any limits on commercial advertising at the
conclusion of its deliberation or the
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effect the imposition of limits on the commercial matter broadcast by television
stations would have upon the Company's operations.
Digital Television Service. The FCC has adopted rules for implementing
digital television ("DTV") in the United States. Implementation of DTV service
is intended to improve the technical quality of television broadcasts. In
anticipation of the implementation of DTV operations, the FCC has adopted
technical DTV standards and other rules necessary to protect the public
interest. Each existing television station was allotted a second channel for its
DTV operations. Each station must return one of its two channels at the end of
the DTV transition period currently scheduled to end in 2006. The transition
period could be extended in certain areas depending generally on the level of
DTV market penetration.
The FCC has adopted rules permitting DTV licensees to offer "ancillary or
supplementary services" on newly-available DTV spectrum, so long as such
services are consistent with the FCC's DTV standards, do not derogate required
DTV services, and are regulated in the same manner as similar non-DTV services.
Local broadcasters will be initiating DTV service at different times. A
station may begin DTV service as soon as it has received its FCC permit and is
ready with equipment and other necessary preparations. The FCC has established a
schedule by which broadcasters must begin DTV service absent extenuating
circumstances that may affect individual stations. The Company's stations
applied for their DTV permits before November 1, 1999 and must initiate some DTV
service by May 1, 2002.
The FCC has adopted other rules to implement DTV service. The FCC imposes
certain fees on DTV licensees for the transmission of non-broadcast services
(such as paid subscription services) over their DTV spectrum. The FCC also has
initiated rulemaking proceedings to examine: (1) whether, and the extent to
which, "must carry" obligations should be applied to DTV service; (2) the extent
to which additional public interest obligations should be imposed on DTV
licensees; and (3) various DTV tower siting issues.
The FCC currently is conducting a rulemaking proceeding to determine
mandatory carriage and retransmission consent requirements for digital broadcast
television stations on cable systems during and following the transition from
analog to digital broadcasting. The Company cannot predict the ultimate outcome
of the FCC's digital cable carriage proceeding or the impact it would have on
the Company's television stations.
The FCC also has commenced a proceeding to consider additional public
interest obligations for television stations as they transition to digital
broadcast television operation. The FCC is considering various proposals that
would require DTV stations to use digital technology to increase program
diversity, political discourse, access for disabled viewers and emergency
warnings and relief. If these proposals are adopted, the Company's stations may
be required to increase their current level of public interest programming which
generally does not generate as much revenue from commercial advertisers.
Class A Low Power Television. In November 1999, Congress passed the
Community Broadcasters Protection Act of 1999, which directs the FCC to offer a
new Class A status to qualifying low power television stations. To qualify, low
power television stations must meet certain programming and operational criteria
and were required to notify the FCC of their eligibility by January 28, 2000.
The FCC must adopt rules regarding the new Class A service by the end of March
2000, after which qualifying stations are required to submit a formal
application. The FCC has commenced a proceeding to consider rules governing the
protection against full power and other low power television stations that could
limit the Company's ability to modify its television facilities in the future
and could affect any pending applications for new or modified facilities. Class
A stations will not be protected from interference from DTV stations proposing
to maximize their DTV service, provided the DTV stations notified the FCC of
their intent to maximize facilities no later than December 31, 1999, and file a
maximization application by May 1, 2000.
Proposed Changes. Congress and the FCC have under consideration, and may
in the future adopt, new laws, regulations and policies regarding a wide variety
of matters that could, directly or indirectly, affect the operation, ownership
and profitability of the Company and its television broadcast stations, result
in the loss of audience share and advertising revenue for the Company's
television broadcast stations and affect the ability of the Company to acquire
additional broadcast stations or finance such acquisitions. Such matters include
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proposals to impose additional or increased spectrum use or other fees upon
licensees; proposals to change rules relating to political broadcasting,
technical and frequency allocation matters, and DTV; proposals to restrict or
prohibit the advertising of alcoholic beverages; changes in the FCC's multiple
ownership, alien ownership, and attribution rules and policies; proposals to
allow telephone companies to deliver audio and video programming through
existing telephone lines; and proposals to limit the tax deductibility of
advertising expenses. The Company cannot predict what other matters may be
considered in the future, nor can it judge in advance what impact, if any, the
implementation of any of these proposals or changes might have on its business.
EMPLOYEES
As of December 31, 1999, the Company had approximately 870 full-time
employees and 120 part-time employees. The substantial majority of the Company's
employees are not represented by labor unions. The Company considers its
relations with its employees to be good.
SEASONALITY
Seasonal revenue fluctuations are common within the television broadcasting
industry and result primarily from fluctuations in advertising expenditures.
Generally, the Company believes that television advertisers spend relatively
more for commercial advertising time in the fourth and second calendar quarters
and spend relatively less during the first calendar quarter of each year.
TRADEMARKS AND SERVICE MARKS
The Company has thirteen federally registered trademarks and service marks
with another eighty-two applications pending. It does not own any patents or
patent applications.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED CONSIDERATIONS
This Report contains forward-looking statements that reflect the Company's
current views with respect to future events and financial performance. These
forward-looking statements are made pursuant to the "safe harbor" provisions of
the Securities Litigation Reform Act of 1995 and involve risks and
uncertainties, including those identified below, which could cause actual
results to differ materially from historical results or those anticipated.
Statements as to what the Company "believes", "intends", "expects", or
"anticipates", and other similarly anticipatory expressions are generally
forward-looking statements and are made only as of the date of this Report. All
statements herein, other than those consisting solely of historical facts, that
address activities, events or developments that the Company expects or
anticipates will or may occur in the future, including such things as business
strategy, measures to implement strategy, competitive strengths, goals,
projected revenues, costs and other financial results, references to future
success and other events may be forward-looking statements. Statements herein
are based on certain assumptions and analysis made by the Company in light of
its experience and its perception of historical trends, current conditions and
potential future developments, as well as other factors it believes are
appropriate in the circumstances. Whether actual results, events and
developments will conform with the Company's expectations is subject to a number
of risks and uncertainties and important factors that could cause actual
results, events and developments to differ materially from those referenced in,
contemplated by or underlying any forward-looking statements herein, many of
which are beyond the control of the Company. The Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events, or otherwise. Readers are
cautioned not to place undue reliance on these forward-looking statements.
Factors to consider in evaluating any forward-looking statements and the other
information contained herein and which could cause actual results to differ from
those anticipated in the forward-looking statements or otherwise adversely
affect the Company's business include those set forth below.
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High Level of Indebtedness; Restrictions Imposed by Terms of Indebtedness and
Preferred Stock
The Company is highly leveraged. At December 31, 1999, the Company had
$388.4 million of total debt as well as $949.8 million of redeemable securities.
The Company may incur additional indebtedness to finance acquisitions, capital
expenditures and for other corporate purposes. The Company's ability to incur
indebtedness is subject to restrictions in the terms of the Company's Senior
Secured Revolving Credit Facility (the "Credit Facility"), the Company's
Equipment Purchase Credit Facility (the "Equipment Facility"), and the indenture
(the "Indenture") governing the Company's 11 5/8% Senior Subordinated Notes (the
"Notes"), as well as the terms of the Company's Junior Cumulative Compounding
Redeemable Preferred Stock (the "Junior Redeemable Preferred Stock"), the
Company's redeemable 12 1/2% Cumulative Exchangeable Preferred Stock (the
"Exchangeable Preferred Stock"), the Company's redeemable 13 1/4% Cumulative
Junior Exchangeable Preferred Stock (the "Junior Exchangeable Preferred Stock"),
the Company's 9 3/4% Series A Convertible Preferred Stock (the "Series A
Convertible Preferred Stock") and the Company's 8% Series B Convertible
Exchangeable Preferred Stock (the "Series B Convertible Preferred Stock", and
collectively with the Junior Redeemable Preferred Stock, the Exchangeable
Preferred Stock, the Junior Exchangeable Preferred Stock and the Series A
Convertible Preferred Stock, the "Preferred Stock").
The level of the Company's indebtedness could have important consequences
to the Company, including: (i) a significant amount of the Company's cash flow
from operations must be dedicated to debt service and will not be available for
other purposes; (ii) the Company's ability to obtain additional financing in the
future, if needed, may be limited; (iii) the Company's leveraged position and
covenants contained in the Credit Facility, the Equipment Facility and the
Indenture (or any replacements thereof) could limit its ability to expand and
make capital improvements and acquisitions; and (iv) the Company's level of
indebtedness could make it more vulnerable to economic downturns, limit its
ability to withstand competitive pressures and limit its flexibility in reacting
to changes in its industry and economic conditions generally. Many of the
Company's competitors currently operate on a less leveraged basis and may have
significantly greater operating and financing flexibility than the Company.
The Credit Facility, the Equipment Facility, the Indenture and the
Preferred Stock contain certain covenants that restrict, among other things, the
Company's ability to incur additional indebtedness, incur liens, make
investments, pay dividends or make certain other restricted payments, consummate
certain asset sales, consolidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets. Currently, such covenants prevent the Company from incurring additional
indebtedness other than limited amounts of certain types of permitted
indebtedness (e.g., purchase money indebtedness), although refinancing of
existing debt is not prohibited. In addition, the Credit Facility and the
Equipment Facility require the Company to comply with certain financial ratios
and tests, under which the Company is required to achieve certain financial and
operating results commencing March 31, 2001. If the Company defaults under the
Credit Facility or the Equipment Facility, the lenders may terminate their
lending commitments and declare the indebtedness under the Credit Facility or
Equipment Facility immediately due and payable. If this were to happen there is
no assurance that the Company would have sufficient assets to pay indebtedness
then outstanding. If the Company is unable to service its indebtedness or
satisfy its dividend or redemption obligations with respect to its Preferred
Stock, it will be forced to adopt an alternative strategy that may include
actions such as reducing or delaying capital expenditures, selling assets,
restructuring or refinancing its indebtedness or seeking additional equity
capital. There is no assurance that any of these strategies could be effected on
satisfactory terms, if at all.
Risks Associated with Operating PAX TV
The success of the Company's PAX TV operations is largely dependent upon
the Company's ability to provide popular programming and to sell advertising.
The Company seeks to provide programming which attracts viewers in targeted
demographic groups in sufficient numbers to generate audience ratings that
advertisers will find attractive, and to convert those audience ratings and
viewer demographics into advertising revenues sufficient to achieve profitable
operations. While PAX TV audience ratings and the Company's advertising revenues
have generally been increasing since the launch of PAX TV on August 31, 1998,
there can be no assurance that the Company's programming will attract sufficient
targeted viewership or that the
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<PAGE> 19
Company will be able to generate sufficient advertising revenue for its PAX TV
operations to achieve profitability. Since the Company owns and operates most of
the stations carrying its PAX TV programming, including nearly all of those
operating in the nation's largest television markets, the Company's business
model is different from those of traditional television and cable networks and
television station groups and cannot be measured against traditional methods of
operation. The success of the Company's business plan for PAX TV will depend,
among other things, upon the Company's ability to sell advertising at targeted
rates, continue to attract advertising clients, improve the visibility and
distribution of PAX TV and continue to sell time for infomercials and other
long-form paid programming during weekday mornings and weekends. There can be no
assurance that the Company's costs will not prove excessive in relation to its
advertising revenues or that the Company's operational strategy for PAX TV will
prove successful.
Reliance on Television Programming
One of the Company's most significant operating cost components is
television programming. Acquisitions of program rights may be made several years
in advance and may require multi-year commitments, making it difficult to
accurately predict how a program will perform in relation to its cost. In some
instances, programs must be replaced before their costs have been fully
amortized, resulting in write-offs that increase station operating costs. There
can be no assurance that the Company will not be exposed in the future to
increased programming costs which may materially adversely affect the Company's
operating results. Additionally, the Company intends to provide original
programming for airing on PAX TV, which will involve incurring production,
talent and other ancillary costs. There is no assurance that the Company's
original programming will be commercially successful.
Risks Associated with Operating PAX TV Stations under Joint Services
Agreements
In addition to the three stations the Company operates under JSAs with
third parties in Shreveport, Louisiana, Cedar Rapids, Iowa, and Greenville,
North Carolina, the Company commenced operating two stations under joint
services arrangements with NBC owned and operated stations in the Providence,
Rhode Island, and Washington, D.C., television markets and the Company expects
to enter into JSA's with each of the other NBC owned and operated stations and
NBC affiliates in markets in which the Company has a station. Each JSA will be
individually negotiated depending upon the attributes of the Company station and
the corresponding NBC owned or network-affiliated station involved in the
arrangement. There can be no assurance that the Company will be able to
successfully negotiate and enter into JSAs with the NBC owned and operated
stations and the NBC affiliates or another operator of a broadcast television
station in each of the markets in which the Company owns and operates a
television station. While the Company believes that each of the stations which
enters into a JSA should experience an improvement in overall operating
performance through a combination of improved revenues and operating cost
reductions, there can be no assurance that such operating improvements, if any,
will be realized. In addition, if a JSA proves to be unsuccessful in a
particular market, the Company may incur significant costs to transfer its JSA
to another broadcast television station operator or resume operating
independently.
"Must Carry" Regulations
The Company believes that the growth and success of its television station
group depends materially upon access to households served by cable television
systems. Pursuant to the 1992 Cable Act, each broadcaster is required to elect,
every three years, to exercise either certain "must carry" or retransmission
consent rights in connection with carriage of their signals by cable systems in
their local market. By electing the "must carry" rights, a broadcaster can
demand carriage on a specified channel on cable systems within its DMA, provided
the broadcaster's television signal can be delivered to the cable system
operator's cable head end at a specified strength. These "must carry" rights are
not absolute, and their exercise depends on variables such as the number of
activated channels on a cable system, the location and size of a cable system,
and the amount of duplicative programming on a broadcast station. Therefore,
under certain circumstances, a cable system can decline to carry a given
station. Alternatively, if a broadcaster chooses to exercise retransmission
consent rights, it can prohibit cable systems from carrying its signal or grant
the appropriate cable system the authority
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<PAGE> 20
to retransmit the broadcast signal for a fee or other consideration. The
Company's television stations generally elected "must carry" on local cable
systems for the three year election period which commenced January 1, 2000. The
required election date for the next three year election period commencing
January 1, 2003 will be October 1, 2002. If the law were changed to eliminate or
materially alter "must carry" rights, the Company could suffer adverse effects.
The Company's television stations are also carried as distant signals on
cable systems which are located outside of the stations' markets. The stations
are carried pursuant to retransmission consent agreements which the Company has
entered into with the cable systems. Cable systems must remit a compulsory
license royalty fee to the United States Copyright Office ("Copyright Office")
to carry the Company's stations in these distant markets as required by the
Copyright Act of 1976, as amended (the "Copyright Act"). The Company recently
filed a request with the Copyright Office, which as administers the compulsory
license, to change the Company's station's status under the compulsory license
from "independent" to "network" signals, which would reduce the amount of
royalties that a larger cable system would be required to remit in order to
carry a Company station in a distant market. If the Copyright Office grants the
Company's request, such larger cable systems would be permitted to carry the
Company's stations at reduced royalty rates, and additional cable systems may
transmit the Company's stations in distant markets. The Company cannot determine
when the Copyright Office will act on its request, or whether it will receive a
favorable ruling. The Copyright Office recently requested comments from the
public regarding the Company's request.
Satellite Carriage of Television Broadcast Signals. In November 1999,
Congress passed legislation amending the Satellite Home Viewer Act which governs
the delivery of television broadcast signals by satellite companies. The
legislation authorizes for the first time the satellite delivery of local
broadcast signals to customers who reside within a television station's local
market. Satellite carriers may continue to retransmit any local broadcast signal
for the first six months that the legislation is effective but then must obtain
retransmission consent from the television station before continuing carriage.
Television stations must negotiate in good faith with satellite companies
regarding retransmission consent. Congress also has imposed on satellite
carriers "must-carry" obligations with respect to local television stations.
Beginning January 1, 2002, a satellite carrier delivering the signal of any
local television station also would be required to carry all stations licensed
to the carried station's local market. With respect to the delivery of
out-of-market, or distant, television broadcast signals to unserved customers,
the legislation permits satellite carriers to provide the signal of a distant
network affiliate to only those customers who cannot receive a signal of at
least Grade B intensity from the local network affiliate. The legislation
grandfathers for a period of five years from enactment current customers
residing within a station's Grade B contour but outside of its Grade A contour
who would otherwise be ineligible to receive distant network signals. The FCC
has commenced a rulemaking proceeding to consider rules implementing the new
legislation. The Company cannot predict the ultimate outcome of this proceeding
or its impact on its television stations.
Proposed Changes. Congress and the FCC have under consideration, and may
in the future adopt, new laws, regulations and policies regarding a wide variety
of matters that could, directly or indirectly, affect the operation, ownership
and profitability of the Company and its television broadcast stations, result
in the loss of audience share and advertising revenue for the Company's
television broadcast stations and affect the ability of the Company to acquire
additional broadcast stations or finance such acquisitions. Such matters include
proposals to impose additional or increased spectrum use or other fees upon
licensees; proposals to change rules relating to political broadcasting;
technical and frequency allocation matters, and DTV; proposals to restrict or
prohibit the advertising of alcoholic beverages; changes in the FCC's multiple
ownership, alien ownership, and attribution rules and policies; proposals to
allow telephone companies to deliver audio and video programming through
existing phone lines; and proposals to limit the tax deductibility of
advertising expenses. The Company cannot predict what other matters may be
considered in the future, nor can it judge in advance what impact, if any, the
implementation of any of these proposals or changes might have on its business.
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<PAGE> 21
Dependence on Key Personnel
The Company's business depends upon the efforts, abilities and expertise of
its executive officers and other key employees, including Lowell W. Paxson, its
Chairman and Jeffrey Sagansky, its Chief Executive Officer. If certain of these
executive officers were to leave the Company, the Company's operating results
could be adversely affected. In addition, in the event of Mr. Paxson's death,
the Company may be required, in certain circumstances, to make an offer to
repurchase the Notes and to redeem its Preferred Stock. There is no assurance
that if such an event were to occur, the Company would have, or would have
access to, sufficient funds to satisfy such repurchase or redemption
obligations.
Ability to Manage Growth
Since inception, the Company has experienced rapid growth, primarily
through acquisitions. Rapidly growing businesses frequently encounter unforeseen
expenses and delays in completing acquisitions, as well as difficulties and
complications in integrating acquired operations without disruption to overall
operations. In addition, such rapid growth may adversely affect the Company's
operating results because of many factors, including capital requirements,
transitional management and operating adjustments, and interest costs associated
with acquisition debt. There can be no assurance that the Company will
successfully integrate acquired operations or successfully manage the costs
often associated with rapid growth.
Competition
The Company's television stations are located in highly competitive
markets. The financial success of each of the Company's television stations
depends, to a significant degree, upon its audience ratings, its share of the
overall television sales within its geographic market, the economic health of
the market and the popularity of its programming. The audience ratings and
advertising of such individual stations are subject to change and any adverse
change in a particular market could have a material adverse effect on the
revenue and cash flow of the Company. The Company's television stations compete
for audience share and advertising revenue directly with other television
stations and with other media within their respective markets. In addition, to
the extent that many of the Company's competitors have, or may in the future
obtain, greater resources than the Company, its ability to compete successfully
in its broadcasting markets may be impeded. There can be no assurance that the
Company will be able to obtain or maintain significant audience ratings and
advertising revenue. See "Competition."
Industry and Economic Conditions
The profitability of the Company's television stations is subject to
various factors that influence the television broadcasting industry as a whole,
including changes in audience tastes, priorities of advertisers, new laws and
governmental regulations and policies, changes in broadcast technical
requirements, technological changes, proposals to eliminate the tax
deductibility of expenses incurred by advertisers and changes in the willingness
of financial institutions and other lenders to finance television station
acquisitions and operations. The Company's broadcasting revenue is likely to be
adversely affected by a recession or downturn in the United States economy or
other events or circumstances that adversely affect advertising activity. In
addition, the Company's operating results in individual geographic markets could
be adversely affected by local or regional economic downturns.
SAG/AFTRA Risk
Approximately 22% of the Company's 1999 revenues relate to network
commercial spot advertisements aired on the PAX TV Network. The Company believes
substantially all of such network spot advertisements were produced by
advertisers or their advertising agencies (the "Advertising Community") using
performers who are members of the Screen Actors Guild ("SAG") and the American
Federation of Television and Radio Artists (collectively, the "Guilds"). When
such network commercials are aired on broadcast and cable television networks,
the performers are entitled to be paid by the Advertising Community certain
royalty payments (referred to within the industry as "residual payments") which
are determined under the collective
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<PAGE> 22
bargaining agreements (the "Guild Agreements") entered into by the Guilds and
the Advertising Community. Under the Guild Agreements, the residual payments
required to be paid by the Advertising Community in connection with
advertisements aired on cable networks are substantially lower than the
residuals required to be paid in connection with advertising aired on broadcast
networks. To date, the Company believes that a substantial portion, if not most
of the network commercial spot advertising time purchased on the PAX TV Network
by the Advertising Community was purchased under the assumption that the
residual payment obligations the Advertising Community incurred in connection
with airing such advertising spots on PAX TV were to be calculated under the
rates applicable to cable networks, not those applicable to broadcast networks.
The Company believes that commercials aired on the PAX TV Network should give
rise to residuals payments under the residual rates applicable to cable networks
in light of the Company's audience ratings performance to date, the dependence
of the Company's broadcast stations on cable carriage under the FCC's must carry
rules and the fact that approximately 18.5% of the PAX TV networks distribution
is solely on cable households through cable carriage agreements. The advertising
trade association representing the Advertising Community has expressed their
support, both verbally and in writing to the Company and the Guilds, of the
Company's position on this matter. However, notwithstanding the foregoing, the
Guilds have notified the Advertising Community that commercials aired on the PAX
TV Network are subject to the broadcast network residual rates. In response to
this development, the Company has held discussions with the Guilds to
demonstrate that advertising commercials aired on the PAX TV Network should be
subject to residual rates normally applicable to cable networks. In addition,
the Guilds and the Advertising Community have commenced the collective
bargaining process to negotiate and enter into new Guild Agreements covering
this and other commercial advertising industry matters. While the Guilds have in
the past granted residual rate relief to broadcast television programming which
generates relatively low viewer ratings, including relief granted to certain
broadcast television networks for their low rated overnight programming, the
Company has no assurance that the Guilds and the Advertising Community will
reach an agreement which resolves this issue in favor of the Company. The
Company believes that this development with the Guilds should adversely affect
only its network spot advertising business; all of its other network, national
and local advertising revenues should be unaffected. While the Company believes
it can substitute other forms of advertising to mitigate the effect of this
development, the Company is unable to predict or estimate the magnitude of the
effect of this development on its network spot business.
Risks Associated with NBC Investment
On September 15, 1999, the Company entered into a series of agreements with
NBC pursuant to which NBC made a significant investment in the Company and
acquired rights to purchase additional Company securities, the exercise of which
would result in NBC owning a majority of the total outstanding voting power of
the Company. See "Business - NBC Transaction" above.
The NBC Investment Agreement includes affirmative and negative covenants of
the Company and provisions requiring the Company to obtain the consent of NBC or
its permitted transferee with respect to certain corporate actions, including
the approval of annual budgets, expenditures materially in excess of budgeted
amounts, certain programming acquisitions, material amendments to the Company's
certificate of incorporation or bylaws, sale of a Company television station
serving any of the top 20 markets or as a result of which the national household
coverage of the Company's PAX TV network would fall below 70%, material asset
sales or purchases, any business combination where the Company would not be the
surviving corporation or as a result of which there would be a change of control
of the Company, issuance or sale of any capital stock (subject to certain agreed
exceptions) or stock split or recombination, any increase in the size of the
Company's board of directors (other than an increase of up to two directors
resulting from provisions of the Company's outstanding preferred stock),
entering into any joint sales, joint services, time brokerage, local marketing
or similar agreement as a result of which Company stations with national
household coverage of 20% or more would be subject to such agreements, and other
matters. NBC was also granted certain rights with respect to the broadcast
television operations of the Company, including, among other things, the right
to require the conversion of Company television stations to NBC network
affiliates (subject to certain conditions and to the Company's right to decline
such conversion if as a result the national household coverage of the Company's
PAX TV network would fall below 70%), a right of first refusal on a proposed
sale of a Company
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<PAGE> 23
television station, the right to require Company television stations to carry
NBC network programming which is preempted by NBC network affiliates, and the
right to negotiate on behalf of the Company to acquire interests in new media
companies in exchange for advertising airtime on Company stations. In addition,
three representatives of NBC have been elected to the Company's board of
directors. NBC is therefore in a position to exert significant influence over
the management and policies of the Company and, through the exercise of its
contractual rights, to prevent the Company from taking actions which Company
management may otherwise desire to take.
Pursuant to the NBC Investment Agreement, NBC has the right, at any time
that the FCC renders a final decision that NBC's investment in the Company is
"attributable" to NBC (as such term is defined under applicable rules of the
FCC), or for a period of 60 days beginning with the third anniversary of the
Issue Date and on each anniversary of the Issue Date thereafter, to require the
Company (or an assignee selected by the Company) to redeem the Series B
Convertible Preferred Stock then held by NBC at a price equal to the aggregate
liquidation preference thereof plus accrued and unpaid dividends thereon to the
date of redemption. The Company will have one year in which to effect such a
redemption, and its redemption obligation will be subject to the covenants
contained in the terms of its outstanding debt and preferred stock limiting its
ability to effect such a redemption. NBC also has the right, in case of certain
events of default, to require the Company or its assignee to redeem the Series B
Convertible Preferred Stock and shares of Class A Common Stock acquired upon
conversion thereof then held by NBC at the higher of (i) the aggregate
liquidation preference thereof plus accrued and unpaid dividends thereon or (ii)
an amount per share of Class A Common Stock equal to the 45 day trailing average
of the closing sale prices of the Class A Common Stock. The Company will have
six months to effect such a redemption, and its redemption obligation will be
subject to the covenants contained in the terms of its outstanding debt and
preferred stock limiting its ability to effect such a redemption.
Should the Company fail to effect a required redemption within the
applicable period, NBC will generally be permitted to transfer without
restriction all Company securities acquired pursuant to the NBC Investment
Agreement, the Call Right, NBC's contractual rights described above, and NBC's
other rights under the NBC Investment Agreement and the related transaction
agreements (provided that the warrants and the Call Right shall expire, to the
extent not exercised, upon the later of 30 days after such transfer or the date
they would otherwise first become exercisable pursuant to their respective
terms). Should the Company fail to effect a redemption triggered by an event of
default on its part, NBC will also have the right to exercise in full the
warrants and the Call Right without regard to the limitations on exercisability
prior to February 1, 2002 otherwise applicable and, to the extent the minimum
exercise price provisions of such instruments would otherwise be applicable, at
a reduced minimum exercise price. Should NBC not exercise such rights, the
Company shall have another 30 day period in which to effect a redemption,
failing which, NBC may require the Company to effect, at the Company's option, a
public sale or liquidation of the Company, after which time NBC shall not be
permitted to exercise the warrants or the Call Right.
There is no assurance that, should NBC exercise any of the redemption
rights described above, the Company would have access to sufficient funds to pay
the redemption price for the securities to be redeemed, or that the Company
would be able to identify another party willing to purchase such securities at
the required redemption prices thereof. If NBC were to exercise any of its
redemption rights described above and the Company were unable to complete the
redemption, the Company would be unable to prevent NBC's transfer of a
controlling interest in the Company to a third party selected by NBC in its
discretion or the ultimate public sale or liquidation of the Company. The
occurrence of any of these events could have a material adverse effect upon the
Company and upon the value of the Company's securities held by other persons.
ITEM 2. PROPERTIES
The Company's corporate headquarters is in West Palm Beach, Florida. The
types of properties required to support PAX TV and each of the Company's
existing or to be acquired television stations include a satellite up-link
facility, offices, studios and transmitter sites. The Company's satellite
up-link facility is located on leased property in Clearwater, Florida. A
station's studio is generally housed with its office in a downtown or business
district. A station's transmitter site generally is located in a manner that
provides the maximum
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<PAGE> 24
market coverage the station can enjoy subject to its license. The studios and
offices of the Company's stations and its corporate headquarters are located in
leased or owned facilities. The Company's studio and office leases have
expiration dates that range from one to ten years. The Company either owns or
leases its transmitter and antenna sites. In several cases, the Company leases
the land on which it has constructed its own tower and transmitter building
allowing the Company to lease tower space to third parties. The Company's
transmitter and antenna site leases have expiration dates that range generally
from two to twenty years. The Company does not anticipate any difficulties in
renewing those leases that expire within the next several years or in leasing
other space, if required. No one property is material to the Company's overall
operations. The Company believes that its properties are in good condition and
suitable for its operations. The Company owns substantially all of the equipment
used in its television broadcasting business.
ITEM 3. LEGAL PROCEEDINGS
In October, November, and December 1999, complaints were filed in the 15th
Judicial Circuit Court in Palm Beach County, Florida, in the Court of Chancery
of the State of Delaware and in Superior Court of the State of California
against certain of the Company's officers and directors by alleged stockholders
of the Company alleging breach of fiduciary duty by the directors in approving
the transactions with NBC which occurred in September 1999. The complaints
allege that the directors failed to pursue acquisition negotiations with a party
other than NBC, which transaction would have provided the Company's stockholders
with a substantial premium over the then market price of the Company's common
stock, and instead completed the NBC Investment Agreement and related
transactions. The Company believes the suits to be wholly without merit and
intends to vigorously defend its actions on these matters.
In May 1998, a complaint was filed against certain of the Company's
officers by a shareholder of the Company alleging breach of fiduciary duty by
the directors in approving payment of certain bonuses to members of the
Company's management in connection with the 1997 sale of the Company's Radio
Segment and seeking damages on behalf of the Company. This suit was settled in
November 1999 by the payment by the Company of $600,000, for which amount the
Company was indemnified by its insurers.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of the period covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Class A Common Stock is listed on the American Stock Exchange
under the symbol PAX. The following table sets forth, for the periods indicated,
the high and low last sales price per share for the Class A Common Stock.
<TABLE>
<CAPTION>
1999 1998
------------- ------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter.................................. 10 1/16 7 5/8 11 3/16 7 9/16
Second Quarter................................. 14 1/4 7 7/8 13 7/16 9 15/16
Third Quarter.................................. 17 7/16 10 1/2 12 3/4 9 3/16
Fourth Quarter................................. 13 13/16 9 5/8 9 1/4 6 1/8
</TABLE>
On March 1, 2000, the closing sale price of the Class A Common Stock on the
American Stock Exchange was $10.1875 per share. As of that date, there were
approximately 489 holders of record of the Class A Common Stock.
The Company has not paid cash dividends and does not intend for the
foreseeable future to declare or pay any cash dividends on any of its classes of
Common Stock and intends to retain earnings, if any, for the future
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<PAGE> 25
operation and expansion of the Company's business. Any determination to declare
or pay dividends will be at the discretion of the Company's board of directors
and will depend upon the Company's future earnings, results of operations,
financial condition, capital requirements, contractual restrictions under the
Company's debt instruments, considerations imposed by applicable law and other
factors deemed relevant by the board of directors. In addition, the terms of the
Credit Facility, the Equipment Facility, the Indenture and the Preferred Stock
contain restrictions on the declaration of dividends with respect to the Common
Stock.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data as of
and for each of the years in the five year period ended December 31, 1999. This
information is qualified in its entirety by, and should be read in conjunction
with, the consolidated financial statements and the notes thereto which are
included elsewhere in this report. The following data, insofar as it relates to
each of the years presented, has been derived from annual financial statements,
including the consolidated balance sheets at December 31, 1999 and 1998, and the
related consolidated statements of operations and of cash flows for the three
years ended December 31, 1999, and notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............................................. $ 248,362 $ 134,196 $ 88,421 $ 62,333 $ 31,784
Operating loss........................................ (225,251) (135,531) (21,935) (3,895) (7,997)
Loss from continuing operations before extraordinary
item................................................ (160,372) (89,470) (36,504) (30,436) (22,705)
Income (loss) from discontinued operations(a)......... -- 1,182 251,193 4,217 (142)
Extraordinary item.................................... -- -- -- -- 10,626
Net income (loss)..................................... (160,372) (88,288) 214,689 (26,219) (33,473)
Net income (loss) attributable to common stock(b)..... $ (314,579) $ (137,955) $ 188,412 $ (48,127) $ (46,770)
BASIC AND DILUTED PER SHARE DATA:(C)
Loss from continuing operations before extraordinary
item................................................ $ (5.10) $ (2.31) $ (1.17) $ (1.20) $ (1.05)
Discontinued operations............................... -- 0.02 4.67 0.10 --
Extraordinary item.................................... -- -- -- -- (0.31)
Net income (loss)..................................... $ (5.10) $ (2.29) $ 3.50 $ (1.10) $ (1.36)
Cash dividends declared............................... -- -- -- -- --
Weighted average shares outstanding -- basic and fully
diluted............................................. 61,737,576 60,360,384 53,808,472 43,836,526 34,429,517
BALANCE SHEET DATA:
Working capital....................................... $ 237,855 $ 1,807 $ 86,944 $ 76,201 $ 74,388
Total assets.......................................... 1,690,087 1,542,786 1,057,113 543,182 293,832
Current portion of long-term debt..................... 18,698 529 496 645 431
Long-term debt and notes.............................. 369,723 373,469 350,258 231,063 239,859
Total redeemable securities........................... 949,807 521,401 210,987 184,710 57,176
Total common stockholders' equity..................... $ 96,721 $ 247,673 $ 367,744 $ 106,775 $ (17,479)
</TABLE>
- ---------------
(a) Includes a gain on disposal of discontinued operations of $1.2 million and
$254.7 million in 1998 and 1997, respectively, net of applicable income
taxes. See Note 4 to the Consolidated Financial Statements for additional
discussion on the disposition of the Network-Affiliated Television and
Paxson Radio segments during 1997.
(b) Includes dividends and accretion on redeemable preferred stock and
redeemable common stock warrants, as applicable.
(c) The Company computes per share data in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share". Due to losses
from continuing operations, the effect of stock options and warrants is
antidilutive. Accordingly, the Company's presentation of diluted earnings
per share is the same as that of basic earnings per share.
23
<PAGE> 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Paxson Communications Corporation (the "Company") is a network television
broadcasting company whose principal business is the ownership and operation of
the largest broadcast television station group in the United States through
which it broadcasts PAX TV, the Company's family friendly programming. The
Company commenced its television operations in early 1994 in anticipation of
deregulation of the broadcast industry. In response to federal regulatory
changes increasing limits on broadcast television station ownership and
mandating cable carriage of local television stations, the Company has expanded
rapidly, through acquisitions and construction of television stations, to
establish the largest owned and operated broadcast television station group in
the United States. The PAX TV Network reaches US television households through a
distribution system comprised of broadcast television stations, cable television
systems in markets not served by a PAX TV station and nationwide through
satellite television providers. According to Nielsen Television Index ("NTI"),
as of February 2000, the PAX TV Network reached 77% of US primetime television
households through broadcast, cable and satellite distribution. Upon completion
of pending transactions, the PAX TV Network will include 116 broadcast
television stations, consisting of 68 of the 73 stations which are currently
owned and operated by the Company, or in which the Company has an economic
interest, and 48 non-owned or operated PAX TV affiliates. The stations which the
Company will own, operate or have an economic interest in will reach 19 of the
top 20 markets and 42 of the top 50 markets.
During the third quarter of 1999, the Company advanced funds to a
subsidiary of DP Media, Inc., which, along with CAP Communications, Inc. ("CAP
Communications"), and RDP Communications, Inc. (collectively referred to herein
as "DP Media") are companies beneficially owned by family members of the
Company's principal stockholder, Mr. Lowell W. Paxson. The Company has
significant operating relationships with DP Media. The funds advanced to DP
Media were utilized to fund operating cash flow needs. As a result of the
Company's significant operating relationships with DP Media and its funding of
DP Media's operating cash flow needs, the assets and liabilities of DP Media,
together with their results of operations from the date of the advance, have
been included in the Company's consolidated financial statements for the year
ended December 31, 1999. On November 21, 1999 the Company entered into
agreements to purchase the eight television stations of DP Media as well as DP
Media's contractual right to acquire a television station, WBPX, and two full
power satellite stations, serving the Boston, Massachusetts market. As part of
that acquisition, the Company will expend an additional $38 million to
consummate the acquisition of WBPX, which station is currently a PAX TV Network
affiliate and is being operated by DP Media under a time brokerage agreement
with the seller of the station. The television stations to be acquired, eight of
which have been airing PAX TV Network programming under affiliation agreements,
and all of which the Company provides services for under various services
agreements, are in the Battle Creek, Michigan, Raleigh, North Carolina,
Hartford, Connecticut, Boston, Massachusetts (two stations), St. Louis,
Missouri, Washington, D.C., Milwaukee, Wisconsin and Indianapolis, Indiana
markets. In conjunction with the asset purchase agreement, on November 22, 1999
the Company advanced approximately $106 million to DP Media pursuant to a
secured loan agreement, which was used to repay DP Media's outstanding
indebtedness to third party lenders. Effective March 1, 2000, the affiliation
agreements and services agreements between the Company and DP Media for each DP
Media station other than the second Boston station ("WWDP") were replaced by
time brokerage agreements which will remain in effect pending the completion of
the acquisition of the stations by the Company. On March 3, 2000, the Company
and DP Media agreed in principal to convert their asset sale transaction into a
purchase by the Company of all of the capital stock of DP Media for a purchase
price of $7,500,000. Prior to such purchase, DP Media shall transfer the assets
of WWDP to a newly formed company ("Newco"). The Company shall hold a non-voting
interest in Newco and shall have the right to require a sale of WWDP, which is
not a PAX TV Network affiliate, if the station is not sold within a specified
period. The Company shall receive 45% of the net proceeds from the sale of WWDP.
In connection with the NBC transaction described in Note 2 to the
accompanying financial statements, the Company and NBC entered into a Network
Sales Agreement whereby NBC will provide network sales, sales marketing and
research services for the PAX TV network. The Company's television stations
serving the Washington, D.C. and Providence, Rhode Island markets are operating
under joint services arrangements with
24
<PAGE> 27
the NBC stations serving the same markets. Under such joint services
arrangements the NBC stations sell all non-network advertising of the Company's
stations and receive commission compensation for such sales, each Company
station agrees to carry one hour per day of NBC syndicated programming (subject
to compliance with the Company's family friendly programming content standards)
and certain Company station operations will be integrated with the corresponding
functions of the related NBC station.
On September 10, 1999, the Company and The Christian Network, Inc. ("CNI")
entered into a Master Agreement for overnight programming and use of a portion
of the Company's digital capacity in exchange for CNI's providing public
interest programming. The Master Agreement has a 50 year term and is
automatically renewable for successive ten year periods unless CNI ceases to
exist, commences action to liquidate, ceases family values programming or the
FCC revokes the licenses of a majority of the Company's stations. Pursuant to
the Master Agreement, the Company broadcasts CNI overnight programming on each
of its stations seven days a week from 1:00AM to 6:00AM. When digital
programming begins, the Company will make a digital channel available for CNI's
use. CNI will have the right to use the digital channel for 24 hour CNI digital
programming.
In connection with its anticipated migration to digital broadcast
facilities, the Company is evaluating the remaining useful lives and residual
values of the equipment which would be affected by such migration. The Company
anticipates that its evaluation of useful lives as described above will result
in a decrease in the estimated remaining useful lives of the affected assets
and, as a result, accelerate the depreciation of such assets. The Company will
account for this change in accounting estimate on a prospective basis.
The Company's operating data throughout the periods discussed have been
affected significantly by the timing and mix of television station acquisitions
throughout such periods and the costs incurred to launch and support PAX TV. The
Company's primary operating costs include commissions on revenues, employee
salaries, administrative expenses, and payments with respect to syndicated
program rights, cable distribution, ratings services and promotional
advertising.
The Company's business is subject to various risks and uncertainties which
may significantly reduce revenues and increase operating expenses. For example,
a reduction in expenditures by television advertisers in the Company's markets
may result in lower revenues. The Company may be unable to reduce expenses,
including syndicated program rights fees and certain variable expenses, in an
amount sufficient in the short term to offset lost revenues caused by poor
market conditions. The broadcasting industry continues to undergo rapid
technological change, which may increase competition within the Company's
markets as new delivery systems, such as direct broadcast satellite and computer
networks, attract customers. The changing nature of audience tastes and viewing
habits may affect the continued attractiveness of the Company's broadcasting
stations to advertisers upon whom the Company is dependent for its revenue.
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount (contingent or otherwise) of assets and liabilities
at the date of the financial statements and the reported amount of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
See "Business -- Forward-Looking Statements and Associated Considerations"
for a discussion of certain factors which could influence the Company's future
performance and prospects.
DISCONTINUED OPERATIONS
During 1997, the Company sold two business segments, Radio and
Network-Affiliated Television. Losses from operations of these segments in 1997,
net of tax, were $3.6 million. Radio and Network-Affiliated Television net
losses were $2.7 million and $937,000 in 1997, respectively. In connection with
the disposal of the Radio and Network Affiliated Television segments in 1997,
the Company recorded gains of $186.1 million and $68.7 million, respectively,
net of applicable income taxes. Net proceeds from the sale of these segments
were approximately $722.0 million. The Company deferred payment of taxes on
these gains by exchanging the Radio assets for like-kind television station
assets under a 1031 tax deferred exchange. If the Internal Revenue
25
<PAGE> 28
Service ("IRS") were to successfully challenge the Company on this position, the
Company believes its net operating loss carry-forwards are sufficient to offset
any potential current tax liabilities.
During 1998, the Company recognized an additional gain of $1.2 million on
the sale of its Radio segment, net of applicable income taxes of $2.2 million.
This gain reflects an adjustment of $2.7 million of estimated costs attributable
to the segment disposal and the recovery of a $3 million loan related to the
billboard operations of Radio, which was charged off against the gain in 1997.
An additional $2.3 million of income taxes were recorded within discontinued
operations in 1998, as a result of certain adjustments by the IRS reducing the
Company's net operating loss carry-forwards relating to the historical results
of the Radio segment.
RESULTS OF CONTINUING OPERATIONS
The following table sets forth, for the periods indicated, selected
financial information as a percentage of revenues.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
------------------------
1999 1998 1997
----- ------ -----
<S> <C> <C> <C>
Revenues........................................... 100.0% 100.0% 100.0%
----- ------ -----
Expenses:
Operating.......................................... 50.3 43.3 15.8
Selling, general and administrative................ 68.1 100.9 50.1
Time brokerage and affiliation fees................ 5.7 11.7 19.2
Stock-based compensation........................... 6.8 7.8 3.8
Compensation associated with Paxson Radio asset
sales............................................ -- -- 11.0
Adjustment of programming to net realizable
value............................................ 28.4 -- --
Depreciation and amortization...................... 31.4 37.3 24.9
----- ------ -----
Total operating expenses........................... 190.7 201.0 124.8
----- ------ -----
Operating loss..................................... (90.7) (101.0) (24.8)
Other Income (expense):
Interest expense................................... (20.2) (31.2) (42.7)
Interest income.................................... 3.5 11.2 10.7
Other expenses, net................................ (3.2) (2.0) (6.4)
Gain on sale of Travel Channel and television
stations......................................... 23.9 38.4 --
Equity in loss of unconsolidated investment........ (0.9) (9.9) (2.8)
----- ------ -----
Loss from continuing operations before income
taxes............................................ (87.6) (94.5) (66.0)
Income tax benefit................................. 23.0 27.8 24.7
----- ------ -----
Loss from continuing operations.................... (64.6) (66.7) (41.3)
===== ====== =====
</TABLE>
Years Ended December 31, 1999 and 1998
Consolidated revenues for 1999 increased 85% (or $114.2 million) to $248.4
million from $134.2 million for 1998. This increase was primarily due to
increased advertising revenues as a result of greater distribution of the
Company's programming and the first full year of PAX TV operations since its
launch on August 31, 1998.
Expenses for 1999 increased 76% (or $203.9 million) to $473.6 million. The
largest increase in expense relates to the second quarter programming rights
adjustment to net realizable value of $70.5 million, reflecting a decrease in
programming value due to lower anticipated future usage, ratings and related
revenues for these programs. Other significant expense increases included
programming rights amortization of $60.4 million, reflecting twelve months usage
during 1999 versus four months in 1998, selling, general and administrative
26
<PAGE> 29
costs of $33.8 million which have risen due to the launch of PAX TV and
increased sales commissions which rise in proportion to revenues, increased
stock-based compensation of $6.4 million and higher depreciation and
amortization of $27.9 million.
The Company has issued options to purchase shares of Class A Common Stock
to certain members of management and employees pursuant to its stock
compensation plans. As of December 31, 1999, there were 8,891,061 options
outstanding under these plans and, in addition to these options, the Company has
granted options to purchase 3,100,000 shares of Class A Common Stock to members
of senior management and others as discussed in Note 16 of the Consolidated
Financial Statements. Further, the Company recognized total stock based
compensation expense, including amounts recorded in income (loss) from
discontinued operations, of approximately $16.8 million, $9.8 million and $6.5
million in 1999, 1998 and 1997, respectively, and expects that approximately $20
million of compensation expense will be recognized over the remaining vesting
period of the outstanding options.
In October 1999, the Company amended the terms of substantially all of its
outstanding employee stock options to provide for certain accelerated vesting of
the options in the event of termination of employment with the Company as a
result of the consolidation of Company operations or functions with those of NBC
or within six months preceding or three years following a change in control of
the Company. Were such events to occur, the Company could be required to
recognize stock-based compensation expense at earlier dates or in greater
amounts than currently expected.
Interest expense for 1999 increased 20% to $50.3 million, due to a greater
level of senior debt and higher rates throughout the period as well as the
consolidation of DP Media interest expense for the fourth quarter. At December
31, 1999, total debt and senior subordinated notes were $388.4 million, compared
with $374 million in the prior year.
Interest income for 1999 decreased to $8.6 million or 43% less than the
same period in 1998, primarily due to lower levels of cash and cash equivalents
resulting from the use of the proceeds of the Radio Segment sale in 1997 and the
June 1998 preferred stock sales to fund acquisitions and operating requirements.
Gain on sale of the Travel Channel and television stations reflects the
Company's sale of its interests in the Travel Channel, the transfer of the
Company's interest in KWOK and the sale of four television stations.
Included in Other expense, net, is a loss of $4.5 million, the Company's
estimate of advances and costs related to the planned acquisition of a
Pittsburgh television station which were determined to be unrecoverable due to
the termination of the acquisition contract.
Because the Series B Convertible Preferred Stock issued in conjunction with
the NBC transaction was issued with a conversion price per share that was less
than the closing price of the Class A Common Stock at the date of issuance, the
Company recognized a beneficial conversion feature in connection with the
issuance of the stock equal to the amount of the discount multiplied by the
number of shares into which the Series B Convertible Preferred Stock is
convertible. The full amount of the beneficial conversion feature, approximately
$65.5 million, has been reflected in the accompanying statement of operations as
a dividend during the third quarter and has been allocated to additional paid-in
capital in the accompanying balance sheet.
Years Ended December 31, 1998 and 1997
Consolidated revenues for 1998 increased 52% (or $45.8 million) to $134.2
million from $88.4 million for 1997. This increase was primarily due to
television station acquisitions, new time brokerage operations and the launch of
the PAX TV network. The PAX TV network revenues accounted for $22.8 million of
the increase. WPXN in New York, which has been operated by the Company since
June 30, 1997 (acquired in February 1998), accounted for $7.6 million of the
increase.
Expenses for 1998 increased 144% (or $159.3 million) to $269.7 million. The
increase was due to higher operating expenses, such as programming and technical
costs of $12.7 million and program rights amortization of $31.4 million,
incurred in connection with the launch of PAX TV, increased selling, general and
administrative costs, such as commissions and bad debt provisions which rise in
proportion to revenues of
27
<PAGE> 30
$11.5 million, increased promotion costs of $28.8 million to advertise the
launch of PAX TV, other selling, general and administrative costs of $50.9
million, which were higher primarily due to additional employees hired and
regional sales offices added, the majority of which were incurred in connection
with the launch of PAX TV and costs associated with operating new television
stations, increased stock based compensation of $7.0 million, and higher
depreciation and amortization, primarily related to assets acquired, of $28.0
million. Included in 1997 operating expenses was $9.7 million of compensation
associated with Radio segment asset sales.
Interest expense for 1998 increased to $41.9 million or 11%, primarily due
to a greater level of senior debt throughout the period. At December 31, 1998,
total debt and senior subordinated notes were $374 million, compared with $350.8
million in the prior year.
Interest income for 1998 increased to $15.0 million or 58%, primarily due
to higher levels of cash and cash equivalents and cash held by qualified
intermediary resulting from segment asset sales and the June 1998 preferred
stock sales.
Gain on sale of television stations reflects the Company's sale of its
interests in stations WPXE, WNGM, and WOAC during 1998 for aggregate
consideration of $79.5 million. The Company realized a gain of approximately
$51.6 million on these station sales. Of the proceeds received, approximately
$17.6 million was used to exercise the Company's options to acquire WOAC and
WNGM.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at December 31, 1999 and December 31, 1998
was $237.9 million and $1.8 million, respectively, and the ratio of current
assets to current liabilities was 2.66:1 and 1.01:1 on such dates, respectively.
The increase in working capital is primarily due to the proceeds from the Series
B Convertible Preferred Stock sale in September 1999.
Cash used in operating activities was $181.8, $150.6 and $76.0 million for
1999, 1998 and 1997, respectively. The increase in cash used primarily reflects
the increase in operating costs incurred in connection with the operation of PAX
TV and the related cable distribution rights and programming rights payments.
Cash used in investing activities of $160.5, $168.5 and $21.8 million for 1999,
1998 and 1997, respectively, primarily reflects the proceeds from the sale of
the Travel Channel and television stations, the cash investment of Radio segment
sale proceeds held by qualified intermediary in the prior year, the acquisitions
of and investments in broadcast properties and advances to DP Media under the DP
Media purchase agreement and purchases of equipment for acquired and existing
properties. Cash provided by financing activities of $418.1, $285.9 and $118.7
million in 1999, 1998 and 1997, respectively, primarily reflects the proceeds
from preferred stock sales and borrowings under the Credit Facility and the
Equipment Facility, net of repayments and loan origination costs incurred.
Non-cash activity relates to stock based compensation, stock issued for the
Travel Channel, KPXR, and WPXW acquisitions, a note payable incurred with the
WYPX acquisition and accretion of discount on the Notes, as well as dividends on
the Company's redeemable preferred stock, the beneficial conversion feature on
issuance of convertible preferred stock and stock issued for cable distribution
rights.
Under the Company's amended and restated $122 million Senior Credit
Facility, which matures June 2002, the Company had approximately $8.2 million in
escrow as of December 31, 1999 to fund future interest payments. In March 2000,
the Senior Credit Facility was amended to extend the commencement date of
certain financial covenant compliance obligations to March 31, 2001 with
additional extensions through December 31, 2001 under certain conditions. In
exchange for this extension, the Company agreed to deposit in an escrow account
one year of interest and will deposit in escrow its December 31, 2000 principal
payment on September 30, 2000, and its March 31, 2001 principal payment on
December 31, 2000. Amounts placed in such escrow account will be applied by the
lenders against scheduled interest and principal payments when due under the
Senior Credit Facility.
In August 1998, the Company entered into the $50 million Equipment
Facility, which matures the first business day of October 2003. In March 2000,
the Equipment Facility was amended to increase the maximum borrowings thereunder
to $65 million and extend the draw down period through December 31, 2000. In
28
<PAGE> 31
addition, the commencement date of certain financial covenant compliance
obligations and initial scheduled principal payments have been extended to
December 31, 2001. In exchange for these amendments, the borrowing rates under
the Equipment Facility have been increased. All borrowings under the Equipment
Facility are secured by the equipment purchased with the proceeds drawn. At
December 31, 1999, the Company had borrowings of approximately $36 million
outstanding under the Equipment Facility. Subsequent to December 31, 1999, the
Company has borrowed an additional $623,200. The Company intends to use the
Equipment Facility to fund the majority of its capital expenditure needs through
December 2000.
The Company has generated operating losses since the launch of PAX TV. The
Company is beginning to implement new network sales strategies in cooperation
with NBC and intends to enter into JSAs in markets where NBC and PAX TV both
have stations and to enter into JSAs with other broadcasters in additional
markets in order to increase revenue and reduce expenses. The Company is unable
to predict how quickly these JSAs may be implemented or the timing or magnitude
of their effects on the Company's operating results.
The Company's primary capital requirements are for the funds required to
complete announced acquisitions of broadcasting properties, capital expenditures
on existing and acquired properties, syndicated programming rights payments,
cable carriage and promotion payments, interest and debt service payments on
indebtedness and the Company's working capital requirements. The Notes require
semi-annual interest payments at a fixed rate.
As of December 31, 1999, the Company's programming contracts require
collective payments by the Company of approximately $295.1 million as follows
(in thousands):
<TABLE>
<CAPTION>
OBLIGATIONS
FOR PROGRAM
PROGRAM RIGHTS
RIGHTS COMMITMENTS TOTAL
----------- ----------- --------
<S> <C> <C> <C>
2000......................................... 82,907 15,210 98,117
2001......................................... 63,648 16,862 80,510
2002......................................... 43,768 20,142 63,910
2003......................................... 4,737 24,249 28,986
2004......................................... -- 15,627 15,627
2005......................................... -- 7,920 7,920
-------- -------- --------
$195,060 $100,010 $295,070
======== ======== ========
</TABLE>
The Company has also committed to purchase at similar terms additional
future series episodes of its licensed programs should they be made available.
As of December 31, 1999, obligations for cable distribution rights require
collective payments by the Company of approximately $23.8 million over such
periods as follows (in thousands):
<TABLE>
<S> <C>
2000........................................................ $14,712
2001........................................................ 6,403
2002........................................................ 2,120
2003........................................................ 180
2004........................................................ 180
Thereafter.................................................. 180
-------
$23,775
Less: Amount representing interest.......................... (2,391)
-------
Present value of cable rights payable....................... $21,384
=======
</TABLE>
During 1999, the Company deferred certain obligations for cable
distribution rights payments by offering cable system operators the option of
taking their payments in common stock of the Company. In October 1999, one cable
system operator elected to acquire approximately 710,000 shares of common stock
in lieu of cash of approximately $5.5 million. In connection with this
transaction, the Company recorded an additional
29
<PAGE> 32
$3 million of cable distribution rights for the excess of the market value of
the common stock at the time of issuance over the option exercise price.
As of December 31, 1999, the Company had agreements to purchase significant
assets of, or to enter into time brokerage and financing arrangements with
respect to broadcast properties totaling $113.7 million, net of deposits and
advances and excluding proposed transactions with DP Media. The completion of
such acquisitions or investments in broadcast properties is subject to a variety
of factors and the satisfaction of various conditions, including the receipt of
regulatory approvals, and there can be no assurance that any of such investments
will be completed.
The Company's liquidity is significantly affected by its operating
performance and commitments for programming, cable distribution and acquisitions
as described above, and by its current debt service and working capital
requirements. The Company is also subject to certain minimum liquidity
requirements under the terms of the Equipment Facility.
In September 1999, the Company issued shares of Series B Convertible
Preferred Stock and common stock purchase warrants to NBC for gross proceeds of
$415 million. The Company believes that its available cash balances will provide
it with sufficient liquidity to fund its capital requirements through the year
2000.
The FCC has mandated that each licensee of a full power broadcast TV
station, which was allotted a second digital television channel in addition to
the current analog channel, complete the build-out of its digital broadcast
service by May 2002. Despite the current uncertainty that exists in the
broadcasting industry with respect to standards for digital broadcast services,
planned formats and usage, it is the Company's intention to comply with the
FCC's timing requirements for the broadcast of digital television. The Company
has already commenced migration to digital broadcasting in certain of its
markets and will continue to do so throughout its required time period. Due to
such uncertainty with respect to standards, formats and usage, however, the
Company cannot currently predict with reasonable certainty the amount it will
likely have to spend in aggregate to complete the digital conversion of its
stations, but does anticipate spending at least $70 million. It is likely that
the capital necessary to complete the digital conversion will come from cash on
hand as well as the monetization of certain assets and the potential incurrence
of additional indebtedness.
YEAR 2000 CONSIDERATIONS
The "Year 2000 issue" was the result of computer programs that were written
using two digits rather than four digits to identify the applicable year. As of
December 31, 1999, however, all of the Company's critical systems were Year 2000
compliant and functioned properly. The Company experienced no disruption to
business from either internal or external Year 2000 issues.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA
The response to this item is submitted in a separate section of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
30
<PAGE> 33
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item regarding directors and officers is
incorporated by reference from the definitive Proxy Statement being filed by the
Company for the Annual Meeting of Stockholders to be held on May 1, 2000.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated by reference from the
definitive Proxy Statement being filed by the Company for the Annual Meeting of
Stockholders to be held on May 1, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is incorporated by reference from the
definitive Proxy Statement being filed by the Company for the Annual Meeting of
Stockholders to be held on May 1, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is incorporated by reference from the
definitive Proxy Statement being filed by the Company for the Annual Meeting of
Stockholders to be held on May 1, 2000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of the report:
1. The financial statements filed as part of this report are listed
separately in the Index to Consolidated Financial Statements and Financial
Statement Schedule on page F-1 of this report.
2. The Financial Statement Schedule filed as part of this report is
listed separately in the Index to Consolidated Financial Statements and
Financial Statement Schedule on page F-1 of this report.
3. For Exhibits see Item 14(c), below. Each management contract or
compensatory plan or arrangement required to be filed as an exhibit hereto
is listed in Exhibits Nos. 10.27, 10.28, 10.157, 10.199, 10.202, 10.205,
10.207, and 10.208 of Item 14(c) below.
(b) Reports on Form 8-K.
None.
(c) List of Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <C> <S>
3.1.1 -- Certificate of Incorporation of the Company(2)
3.1.2 -- Certificate of Designations of the Company's Junior
Cumulative Compounding Redeemable Preferred Stock(2)
3.1.4 -- Certificate of Designations of the Company's 12 1/2%
Cumulative Exchangeable Preferred Stock(5)
3.1.6 -- Certificate of Designation of the Company's 9 3/4% Series A
Convertible Preferred Stock(14)
3.1.7 -- Certificate of Designation of the Company's 13 1/4%
Cumulative Junior Exchangeable Preferred Stock(14)
3.1.8 -- Certificate of Designation of the Company's 8% Series B
Convertible Exchangeable Preferred Stock (19)
</TABLE>
31
<PAGE> 34
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <C> <S>
3.2 -- Bylaws of the Company(4)
4.1 -- Indenture dated as of September 28, 1995, by and between the
Company, the guarantors named therein and The Bank of New
York, as Trustee, with respect to the Senior Subordinated
Notes(3)
4.2 -- Indenture dated as of October 4, 1996, by and between the
Company, the Guarantors named therein and the Bank of New
York, as Trustee, with respect to the Exchange Debentures(5)
4.3 -- Credit Agreement, dated as of December 19, 1995, among PCC,
the Lenders named therein, and Union Bank, as Agent(3)
4.3.1 -- Amended and Restated Credit Agreement, dated November 19,
1996, among Paxson Communications Corporation, the Lenders
named therein and Union Bank of California, N.A.,as the
Agent(8)
4.3.2 -- Second amendment, dated May 2, 1997, with respect to the
Amended and Restated Credit Agreement, dated as of November
19, 1996, among Paxson Communications Corporation, the
Lenders named therein and Union Bank of California, N.A., as
Agent(9)
4.3.3 -- Third amendment, dated May 30, 1997, with respect to the
Amended and Restated Credit Agreement, dated as of November
19, 1996, among Paxson Communications Corporation, the
Lenders named therein and Union Bank of California, N.A., as
Agent(10)
4.3.4 -- Fourth amendment, dated September 25, 1997, with respect to
the Amended and Restated Credit Agreement, dated as of
November 19, 1996, among Paxson Communications Corporation,
the Lenders named therein and Union Bank of California,
N.A., as Agent(11)
4.3.5 -- Credit agreement, dated July 11, 1997, among Travel Channel
Acquisition Corporation, the several Lenders from Time to
Time Parties Hereto and Union Bank of California, N.A., as
the Agent(11)
4.3.6 -- Fifth Amendment, dated as of October 31, 1997, to the
Amended and Restated Credit Agreement, dated as of November
19, 1996, among Paxson Communications Corporation, the
lenders from time to time party thereto and Union Bank of
California, N.A., as Agent(12)
4.3.7 -- Sixth Amendment, dated March 11, 1998, with respect to the
Amended and Restated Credit Agreement, dated as of November
19, 1996, among Paxson Communications Corporation, the
Lenders from time to time party thereto and Union Bank of
California, N.A., as Agent(12)
4.4 -- Investment Agreement, dated as of September 15, 1999, by and
between Paxson Communications Corporation and National
Broadcasting Company, Inc.(19)
4.4.1 -- Stockholder Agreement, dated as of September 15, 1999, among
Paxson Communications Corporation, National Broadcasting
Company, Inc., Lowell W. Paxson, Second Crystal Diamond
Limited Partnership and Paxson Enterprises, Inc.(19) 4.4.2
4.4.3 -- Class A Common Stock Purchase Warrant, dated September 15,
1999, with respect to up to 18,966,620 shares of Class A
Common Stock(19)
4.4.5 -- Form of Indenture with respect to the Company's 8% Exchange
Debentures due 2009(19)
4.4.6 -- Registration Rights Agreement, dated September 15, 1999,
between Paxson Communications Corporation and National
Broadcasting Company, Inc.(19)
4.5 -- Indenture dated as of June 10, 1998, by and between the
Company, the Guarantors named therein and the Bank of New
York, as Trustee, with respect to the New Exchange
Debentures(14)
9.1 -- Amended and Restated Stockholders Agreement, dated as of
December 22, 1994, by and among the Company and certain
stockholders thereof(2)
9.2 -- Agreement, dated March 26, 1996, amending the Amended and
Restated Stockholders Agreement, dated as of December 22,
1994, by and among the Company and certain Stockholders
thereof and certain related agreements(4)
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <C> <S>
10.1 -- Securities Purchase Agreement, dated as of September 22,
1995, by and among the Company, the Guarantors named therein
and the Initial Purchasers named therein(3)
10.3 -- Stock Purchase Agreement, dated as of December 22, 1994, by
and among the Company and certain purchasers of the Company
securities(2)
10.4 -- Amended and Restated Stockholders Agreement, dated as of
December 22, 1994, by and among the Company and certain
stockholders thereof (incorporated by reference to Exhibit
9.1)(2)
10.4.1 -- Agreement, dated March 26, 1996, amending the Amended and
Restated Stockholders Agreement, by and among the Company
and certain stockholders thereof and certain related
agreements (incorporated by reference to Exhibit 9.2)(4)
10.5 -- Exchange and Consent Agreement, dated as of December 22,
1994, by and among the Company and certain stockholders
thereof(2)
10.27 -- Paxson Communications Corp. Profit Sharing Plan(1)
10.28 -- Paxson Communications Corp. Stock Incentive Plan(1)
10.54 -- Indenture, dated as of September 28, 1995, among the
Company, the Guarantors named therein and The Bank of New
York, as Trustee with respect to the Senior Subordinated
Notes (incorporated by reference to Exhibit 4.1)(3)
10.55 -- Original Note No. 1 for $115,000,000 CUSIP No. 704231-AA-7,
with Guarantee of Guarantors listed therein(3)
10.56 -- Original Note No. 2 for $115,000,000, CUSIP No. 704231-AA-7,
with Guarantee of Guarantors listed therein(4)
10.57 -- Form of New Note with Form of New Guarantee(3)
10.58 -- Registration Rights Agreement, dated as of September 28,
1995, by and among the Company, the Guarantors named therein
and each of the Purchasers referred to therein(3)
10.83 -- Lease Agreement, dated June 14, 1994, between Paxson
Communications of Tampa-66, Inc. and The Christian Network,
Inc. for lease of production and distribution facilities at
WFCT-TV(4)
10.128 -- Purchase Agreement, dated July 31, 1996, by and among
America 51, L.P., Paxson Communications of Phoenix-51, Inc.,
and Hector Garcia Salvatierra for Television Station Channel
51, Tolleson, Arizona(6)
10.134 -- Loan Agreement, dated September 6, 1996, by and between
Ponce-Nicasio Broadcasting, A Limited Partnership and Paxson
Communications of Sacramento-29, Inc. for Television Station
KCMY-TV, Sacramento, California(6)
10.135 -- Option Agreement, dated September 6, 1996, by and between
Ponce-Nicasio Broadcasting, A Limited Partnership and Paxson
Communications of Sacramento for Television Station KCMY-
TV, Sacramento, California(6)
10.148 -- Amended and Restated Promissory Note, dated April 16, 1996,
by and between Ocean State Television, L. L. C. and Paxson
Communications of Providence-69, Inc.(8)
10.151 -- Option Purchase Agreement, dated February 14, 1997, by and
between Paxson Communications of Raleigh-Durham-47, Inc.,
and D P. Media, Inc.(8)
10.157 -- Paxson Communications Corporation 1996 Stock Incentive
Plan(7)
10.162 -- Assignment and acceptance agreement, dated April 18, 1997,
among WQED Pittsburgh and Paxson Communications of
Pittsburgh-40, Inc.(9)
10.183 -- Stock Purchase Agreement, dated September 9, 1997, by and
among Channel 46 of Tucson, Inc., Paxson Communications of
Tucson-46, Inc. and Sungilt Corporation, Inc.(11)
</TABLE>
33
<PAGE> 36
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <C> <S>
10.186 -- Option Agreement, dated November 14, 1997, by and between
Paxson Communications Corporation and Flinn Broadcasting
Corporation for Television station WCCL-TV, New Orleans,
Louisiana(12)
10.187 -- Option Agreement, dated November 14, 1997, by and between
Paxson Communications Corporation and Flinn Broadcasting
Corporation for Television station WFBI-TV, Memphis,
Tennessee(12)
10.193 -- Asset Exchange Agreement, dated January 26, 1998, by and
among Paxson Communications of Chicago-38, Inc., Christian
Communications of Chicagoland, Inc., and Paxson
Communications Corporation(12)
10.193.1 -- Programming Agreement by and between Paxson Communications
of Chicago-38, Inc. and Christian Communications of
Chicagoland Inc.(12)
10.194 -- Asset Purchase Agreement, dated March 19, 1998, by and
between Paxson Communications of Atlanta-14, Inc. and SKMD
Broadcasting Partnership and USA Station Group of Maryland,
Inc.(13)
10.196 -- Membership Purchase Agreement, dated January 14, 1998, by
and among Dr. Joseph A. Zavaletta, South Texas Vision,
L.L.C., Paxson Communications of San Antonio-26, Inc., and
Paxson Communications Corporation for television station
Channel 26, Uvalde, Texas(13)
10.199 -- Employment Agreement, dated as of June 11, 1998, by and
between the Company and Dean M. Goodman(15)
10.202 -- Paxson Communications Corporation 1998 Stock Incentive
Plan(14)
10.203 -- Interest Transfer Agreement, dated February 4, 1999, between
Discovery Communications, Inc., Project Discovery, Inc., The
Travel Channel, LLC, Discovery Ventures, LLC, Paxson
Communications Corporation and Travel Channel Acquisition
Corporation(16)
10.204 -- Asset Purchase Agreement by and among Paxson Communications
of New York-43, Inc. and Paxson New York License, Inc. and
Shop at Home, Inc. dated as of February 26, 1999(16)
10.205 -- Employment Agreement, dated April 14, 1999, by and between
the Company and John F. DeLorenzo(17)
10.205.1 -- Employment Separation Agreement, dated November 24, 1999, by
and between the Company and John F. DeLorenzo
10.206 -- Asset Purchase Agreement, dated April 23, 1999, by and among
Paxson Communications Corporation, Paxson Communications
License Company, LLC, Paxson Communications of Green Bay-14,
Inc., Paxson Communications of Dayton-26, Inc., Paxson
Dayton License, Inc., Paxson Communications of Decatur-23,
Inc., and Paxson Decatur License, Inc., and ACME Television
of Ohio, LLC, ACME Television Licenses of Ohio, LLC, ACME
Television of Wisconsin, LLC, ACME Television Licenses of
Wisconsin, LLC, ACME Television of Illinois, LLC, and ACME
Television Licenses of Illinois, LLC for WDPX (TV),
Springfield, OF, WPXG(TV), Suring, WI and WPXU(TV), Decatur,
IL(17)
10.207 -- Employment Agreement, dated September 15, 1999, by and
between the Company and Jeffrey Sagansky(18)
10.208 -- Employment Agreement, dated October 16,1999, by and between
the Company and Lowell W. Paxson
10.209 -- Asset Purchase Agreement by and between Paxson
Communications Corporation and DP Media dated November 22,
1999.
10.210 -- Asset Purchase Agreement dated April 30, 1999, by and
between DP Media of Boston, Inc. and Boston University
Communications, Inc. for television stations WABU (TV),
Boston, MA WZBU (TV), Vineyard Haven, MA WNBU (TV), Concord,
NH and Low Power television station W67BA (TV) Dennis, MA
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <C> <S>
10.211 -- Employment Termination and Release Agreement, dated March
11, 1999, by and between the Company and Arthur D. Tek
10.212 -- Employment Separation Agreement, dated September 2, 1999, by
and between the Company and James B. Bocock
10.213 -- Employment Separation Agreement, dated June 22, 1999, by and
between the Company and Jon Jay Hoker
10.214 -- Employment Agreement, dated June 1, 1999, by and between the
Company and Seth A. Grossman
10.215 -- Employment Agreement, dated June 11, 1998, by and between
the Company and Anthony L. Morrison
21 -- Subsidiaries of the Company
23 -- Consent of PricewaterhouseCoopers LLP
27 -- Financial Data Schedule (for SEC use only)
99.1 -- Tax Exemption Savings Agreement between the Company and The
Christian Network, Inc., dated May 15, 1994(4)
</TABLE>
- ---------------
(1) Filed with the Company's Registration Statement on Form S-4, filed
September 26, 1994, Registration No. 33-84416 and incorporated herein by
reference.
(2) Filed with the Company's Annual Report on Form 10-K, dated March 31, 1995,
and incorporated herein by reference.
(3) Filed with the Company's Registration Statement on Form S-4, as amended,
filed January 23, 1996, Registration No. 33-63765 and incorporated herein
by reference.
(4) Filed with the Company's Registration Statement on Form S-1, as amended,
filed January 26, 1996, Registration No. 333-473 and incorporated herein by
reference.
(5) Filed with the Company's Registration Statement on Form S-3, as amended,
filed August 15, 1996, Registration No. 333-10267 and incorporated herein
by reference.
(6) Filed with the Company's Quarterly Report on Form 10-Q, dated September 30,
1996, and incorporated herein by reference.
(7) Filed with the Company's Registration Statement on Form S-8, filed January
22, 1997, Registration No. 333-20163 and incorporated herein by reference.
(8) Filed with the Company's Annual Report on Form 10-K, dated December 31,
1996, and incorporated herein by reference.
(9) Filed with the Company's Quarterly Report on Form 10-Q, dated March 31,
1997, and incorporated herein by reference.
(10) Filed with the Company's Quarterly Report on Form 10-Q, dated June 30,
1997, and incorporated herein by reference.
(11) Filed with the Company's Quarterly Report on Form 10-Q, dated September 30,
1997, and incorporated herein by reference.
(12) Filed with the Company's Annual Report on Form 10-K, dated December 31,
1997, and incorporated herein by reference.
(13) Filed with the Company's Quarterly Report on Form 10-Q, dated March 31,
1998 and incorporated herein by reference.
(14) Filed with the Company's Registration Statement on Form S-4, as amended,
filed July 23, 1998, Registration No. 333-59641 and incorporated herein by
reference.
(15) Filed with the Company's Quarterly Report on Form 10-Q, dated June 30,
1998, and incorporated herein by reference.
(16) Filed with the Company's Annual Report on Form 10-K, dated December 31,
1998, and incorporated herein by reference.
35
<PAGE> 38
(17) Filed with the Company's Quarterly Report on Form 10-Q, dated June 30,
1999, and incorporated herein by reference.
(18) Filed with the Company's Quarterly Report on Form 10-Q, dated September 30,
1999, and incorporated herein by reference.
(19) Filed with the Company's Form 8-K dated September 15, 1999 and incorporated
herein by reference.
(d) The financial statement schedule filed as part of this report is
listed separately in the Index to Financial statements beginning on
page F-1 of this report.
36
<PAGE> 39
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized, in the City of West Palm
Beach, State of Florida, on March 13, 2000.
PAXSON COMMUNICATIONS
CORPORATION
By: /s/ LOWELL W. PAXSON
--------------------------------------
Lowell W. Paxson
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ LOWELL W. PAXSON Chairman of the Board, Director March 13, 2000
- -----------------------------------------------------
Lowell W. Paxson
/s/ JEFFREY SAGANSKY Chief Executive Officer, March 13, 2000
- ----------------------------------------------------- President and Director
Jeffrey Sagansky (Principal Executive Officer)
/s/ SETH A. GROSSMAN Senior Vice President and Chief March 13, 2000
- ----------------------------------------------------- Financial Officer (Principal
Seth A. Grossman Financial Officer)
/s/ KENNETH M. GAMACHE Senior Vice President and March 13, 2000
- ----------------------------------------------------- Controller (Principal
Kenneth M. Gamache Accounting Officer)
/s/ WILLIAM E. SIMON, JR Vice Chairman, Director March 13, 2000
- -----------------------------------------------------
William E. Simon, Jr.
/s/ BRUCE L. BURNHAM Director March 13, 2000
- -----------------------------------------------------
Bruce L. Burnham
/s/ JAMES L. GREENWALD Director March 13, 2000
- -----------------------------------------------------
James L. Greenwald
/s/ KEITH G. TURNER Director March 13, 2000
- -----------------------------------------------------
Keith G. Turner
/s/ BRANDON BURGESS Director March 13, 2000
- -----------------------------------------------------
Brandon Burgess
/s/ HAROLD BROOK Director March 13, 2000
- -----------------------------------------------------
Harold Brook
/s/ JOHN E. OXENDINE Director March 13, 2000
- -----------------------------------------------------
John E. Oxendine
</TABLE>
37
<PAGE> 40
PAXSON COMMUNICATIONS CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statement of Changes in Common Stockholders'
Equity.................................................... F-5
Consolidated Statements of Cash Flows....................... F-6 -- F-7
Notes to Consolidated Financial Statements.................. F-8 -- F-36
Financial Statement Schedule -- Schedule II-Valuation and
Qualifying Accounts....................................... F-37
</TABLE>
F-1
<PAGE> 41
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Paxson Communications Corporation
In our opinion, the consolidated financial statements referred to under
Items 14(a)(1) and (2) on page 31 and listed in the accompanying index on page
F-1 present fairly, in all material respects, the financial position of Paxson
Communications Corporation and its subsidiaries at December 31, 1999 and 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
March 13, 2000
F-2
<PAGE> 42
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 125,189 $ 49,440
Short-term investments.................................... 124,987 --
Restricted cash and short-term investments................ 8,158 18,096
Accounts receivable, less allowance for doubtful accounts
of $4,255 and $3,953, respectively...................... 40,069 21,391
Program rights............................................ 79,686 81,867
Prepaid expenses and other current assets................. 2,777 2,947
---------- ----------
Total current assets............................... 380,866 173,741
Property and equipment, net................................. 189,908 178,975
Intangible assets, net...................................... 916,145 827,973
Program rights, net......................................... 130,016 214,331
Investments in broadcast properties......................... 40,347 74,683
Investment in cable network................................. -- 42,531
Other assets, net........................................... 32,805 30,552
---------- ----------
Total assets....................................... $1,690,087 $1,542,786
========== ==========
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 13,875 $ 25,738
Accrued interest.......................................... 7,862 8,391
Obligations for cable distribution rights................. 14,712 50,914
Obligations for satellite distribution rights............. 2,947 --
Obligations for program rights............................ 82,907 84,820
Income taxes payable...................................... 2,010 1,542
Current portion of long-term debt......................... 18,698 529
---------- ----------
Total current liabilities.......................... 143,011 171,934
Deferred income taxes....................................... -- 58,109
Obligations for cable distribution rights, net of current
portion................................................... 6,672 15,400
Obligations for satellite distribution rights, net of
current portion........................................... 12,000 --
Obligations for program rights, net of current portion...... 112,153 154,800
Long-term debt.............................................. 141,029 145,164
Senior subordinated notes, net.............................. 228,694 228,305
Mandatorily redeemable preferred stock...................... 949,807 521,401
Commitments and contingencies (Note 21)..................... -- --
Class A common stock, $0.001 par value; one vote per share;
150,000,000 shares authorized, 54,577,784 and 52,608,765
shares issued and outstanding............................. 55 53
Class B common stock, $0.001 par value; ten votes per share;
35,000,000 shares authorized and 8,311,639 shares issued
and outstanding........................................... 8 8
Common stock warrants and call option....................... 68,245 1,582
Stock subscription notes receivable......................... (1,270) (2,813)
Additional paid-in capital.................................. 417,652 318,935
Deferred option plan compensation........................... (20,026) (16,728)
Accumulated deficit......................................... (367,943) (53,364)
---------- ----------
Total liabilities, mandatorily redeemable preferred
stock and common stockholders' equity............ $1,690,087 $1,542,786
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 43
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenues................................................ $ 248,362 $ 134,196 $ 88,421
----------- ----------- -----------
Expenses:
Operating.......................................... 124,938 58,139 13,993
Selling, general and administrative................ 169,245 135,467 44,288
Time brokerage and affiliation fees................ 14,257 15,699 16,961
Stock-based compensation........................... 16,814 10,413 3,370
Compensation associated with Paxson Radio asset
sales............................................ -- -- 9,700
Adjustment of programming to net realizable
value............................................ 70,499 -- --
Depreciation and amortization...................... 77,860 50,009 22,044
----------- ----------- -----------
473,613 269,727 110,356
----------- ----------- -----------
Operating loss.......................................... (225,251) (135,531) (21,935)
Other income (expense):
Interest expense................................... (50,286) (41,906) (37,728)
Interest income.................................... 8,570 14,992 9,495
Other expenses, net................................ (7,855) (2,744) (5,722)
Gain on sale of Travel Channel and television
stations......................................... 59,453 51,603 --
Equity in loss of unconsolidated investment........ (2,260) (13,273) (2,493)
----------- ----------- -----------
Loss from continuing operations before income tax
benefit............................................... (217,629) (126,859) (58,383)
Income tax benefit...................................... 57,257 37,389 21,879
----------- ----------- -----------
Loss from continuing operations......................... (160,372) (89,470) (36,504)
----------- ----------- -----------
Discontinued operations:
Loss from discontinued operations, net of
applicable income taxes.......................... -- -- (3,555)
Gain on disposal of discontinued operations, net of
applicable income taxes.......................... -- 1,182 254,748
----------- ----------- -----------
-- 1,182 251,193
----------- ----------- -----------
Net (loss) income....................................... (160,372) (88,288) 214,689
Dividends and accretion on redeemable preferred stock... (88,740) (49,667) (26,277)
Beneficial conversion feature on issuance of convertible
preferred stock....................................... (65,467) -- --
----------- ----------- -----------
Net (loss) income attributable to common stock.......... $ (314,579) $ (137,955) $ 188,412
=========== =========== ===========
Basic and diluted (loss) earnings per share:
Loss from continuing operations......................... $ (5.10) $ (2.31) $ (1.17)
Discontinued operations................................. -- 0.02 4.67
----------- ----------- -----------
Net (loss) income....................................... $ (5.10) $ (2.29) $ 3.50
=========== =========== ===========
Weighted average shares outstanding..................... 61,737,576 60,360,384 53,808,472
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 44
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON
STOCK STOCK DEFERRED RETAINED
COMMON STOCK WARRANTS SUBSCRIPTION ADDITIONAL OPTION EARNINGS
----------------- AND CALL NOTES PAID-IN PLAN (ACCUMULATED
CLASS A CLASS B OPTION RECEIVABLE CAPITAL COMPENSATION DEFICIT)
------- ------- -------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996............. $40 $ 8 $ 9,198 $(1,873) $209,622 $ (6,398) $(103,821)
Stock issued for acquisitions............ 6 66,119
Exercise of common stock warrants........ 4 (6,882) 6,878
Deferred option plan compensation........ 2,263 (2,263)
Stock-based compensation................. 6,456
Stock options exercised.................. 1 914
Increase in stock subscription notes
receivable............................. (940)
Dividends on redeemable preferred
stock.................................. (24,943)
Accretion on redeemable preferred
stock.................................. (1,334)
Net income............................... 214,689
--- ---- ------- ------- -------- -------- ---------
Balance at December 31, 1997............. 51 8 2,316 (2,813) 285,796 (2,205) 84,591
Stock issued for acquisitions............ 1 5,249
Issuance of common stock warrants........ 1,582
Exercise of common stock warrants........ 1 (2,316) 2,315
Deferred option plan compensation........ 24,314 (24,314)
Stock-based compensation................. 9,791
Stock options exercised.................. 1,261
Dividends on redeemable and convertible
preferred stock........................ (47,399)
Accretion on redeemable preferred
stock.................................. (2,268)
Net loss................................. (88,288)
--- ---- ------- ------- -------- -------- ---------
Balance at December 31, 1998............. 53 8 1,582 (2,813) 318,935 (16,728) (53,364)
Stock issued for cable distribution
rights................................. 1 8,478
Stock issued for acquisition............. 500
Issuance of common stock warrants and
Class B common stock call option....... 66,663
Deferred option plan compensation........ 20,112 (20,112)
Repayment of stock subscription
receivable 1,543
Stock-based compensation................. 16,814
Stock options exercised.................. 1 4,160
Beneficial conversion feature on issuance
of convertible preferred stock......... 65,467 (65,467)
Dividends on redeemable and convertible
preferred stock........................ (79,005)
Accretion on redeemable preferred
stock.................................. (9,735)
Net loss................................. (160,372)
--- ---- ------- ------- -------- -------- ---------
Balance at December 31, 1999............. $55 $ 8 $68,245 $(1,270) $417,652 $(20,026) $(367,943)
=== ==== ======= ======= ======== ======== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 45
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
--------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income......................................... $(160,372) $(88,288) $ 214,689
Adjustments to reconcile net (loss) income to net cash
used in operating activities:
Depreciation and amortization........................... 77,860 50,009 35,511
Stock-based compensation................................ 16,814 10,413 6,456
Program rights amortization............................. 91,799 31,422 704
Payments for cable distribution rights.................. (30,713) (19,905) --
Program rights payments and deposits.................... (125,916) (62,076) (37,485)
Provision for doubtful accounts......................... 6,164 4,214 2,011
Adjustment of programming to net realizable value....... 70,499 -- --
Deferred income tax benefit............................. (58,109) (42,143) (21,879)
Loss on sale or disposal of assets...................... 4,483 3,852 3,794
Gain on sale of Travel Channel and television
stations.............................................. (59,453) (51,603) --
Equity in loss of unconsolidated investment............. 2,260 13,273 2,493
Gain on disposal of discontinued operations, net........ -- (1,182) (254,748)
Changes in assets and liabilities:
Decrease (increase) in restricted cash and short-term
investments........................................ 17,638 (1,096) (17,000)
(Increase) decrease in accounts receivable............ (21,036) (20,791) 5,173
Decrease (increase) in prepaid expenses and other
current assets..................................... 394 (188) (1,632)
Decrease (increase) in other assets................... 1,425 2,050 (5,353)
(Decrease) increase in accounts payable and accrued
liabilities........................................ (14,305) 20,002 (10,591)
(Decrease) increase in accrued interest............... (1,708) (85) 1,816
Increase in current income taxes payable.............. 468 1,542 --
--------- -------- ---------
Net cash used in operating activities.............. (181,808) (150,580) (76,041)
--------- -------- ---------
Cash flows from investing activities:
Increase in short-term investments........................ (124,987) -- --
Acquisitions of broadcasting properties................... (65,589) (591,368) (253,805)
Decrease (increase) in investments in broadcast
properties.............................................. 10,780 (15,659) (8,026)
Decrease (increase) in deposits on broadcast properties... 4,214 29,399 (26,917)
Collection of notes receivable from CAP Communications,
Inc..................................................... 30,644 -- --
Cash held by qualified intermediary....................... -- 418,950 (418,950)
Purchases of property and equipment....................... (34,609) (82,922) (44,474)
Distribution received from (made to) unconsolidated
investment.............................................. -- 3,170 (5,342)
Advance to DP Media, Inc.................................. (105,997) -- --
DP Media cash balance upon consolidation.................. 4,310 -- --
Proceeds from sales of discontinued operations............ 1,600 1,000 721,978
Proceeds from sales of Travel Channel and television
stations................................................ 119,126 68,944 13,764
--------- -------- ---------
Net cash used in investing activities.............. (160,508) (168,486) (21,772)
--------- -------- ---------
Cash flows from financing activities:
Proceeds from issuance of exchangeable and convertible
preferred stock, net.................................... 406,500 261,706 --
Proceeds from issuance of long-term debt.................. 15,812 23,411 120,000
Repayments of long-term debt.............................. (9,780) (513) (1,270)
Preferred stock dividends paid............................ (171) -- --
Proceeds from exercise of common stock options, net....... 4,161 1,261 915
Repayment of (increase in) stock subscription notes
receivable.............................................. 1,543 -- (940)
--------- -------- ---------
Net cash provided by financing activities.......... 418,065 285,865 118,705
--------- -------- ---------
Increase (decrease) in cash and cash equivalents............ 75,749 (33,201) 20,892
Cash and cash equivalents, beginning of year................ 49,440 82,641 61,749
--------- -------- ---------
Cash and cash equivalents, end of year...................... $ 125,189 $ 49,440 $ 82,641
========= ======== =========
</TABLE>
F-6
<PAGE> 46
PAXSON COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
--------- -------- ---------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid for interest.................................... $ 44,076 $ 38,849 $ 33,896
========= ======== =========
Cash paid for income taxes................................ $ 1,346 $ 2,239 $ 975
========= ======== =========
Non-cash operating, investing and financing activities:
Accretion of discount on Senior Subordinated Notes........ $ 389 $ 346 $ 304
========= ======== =========
Issuance of common stock in connection with
acquisitions............................................ $ 500 $ 5,250 $ 66,125
========= ======== =========
Beneficial conversion feature on issuance of convertible
preferred stock......................................... $ 65,467 $ -- $ --
========= ======== =========
Dividends accrued on redeemable preferred stock........... $ 79,005 $ 47,399 $ 24,943
========= ======== =========
Discount accretion on redeemable securities............... $ 9,735 $ 2,268 $ 1,334
========= ======== =========
Sale of broadcast property for note receivable............ $ -- $ -- $ 15,000
========= ======== =========
Satellite distribution.................................... $ 15,000 $ -- $ --
========= ======== =========
Sale of KWOK in exchange for WCPX......................... $ 30,000 $ -- $ --
========= ======== =========
Issuance of common stock in payment of obligations for
cable distribution rights............................... $ 8,479 $ -- $ --
========= ======== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE> 47
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Paxson Communications Corporation (the "Company"), a Delaware corporation,
was organized in December 1993. The Company owns and operates television
stations nationwide, and on August 31, 1998, launched PAX TV. PAX TV is the
brand name for the programming that the Company broadcasts through its owned,
operated and affiliated television stations, as well as certain cable system
affiliates.
The consolidated financial statements include the accounts of the Company
and its majority owned subsidiaries and those of DP Media, Inc., as discussed
below. All intercompany balances and transactions have been eliminated.
Two former business segments, Paxson Radio and Paxson Network-Affiliated
Television, have been classified as discontinued operations in the accompanying
consolidated statements of operations for all periods presented as a result of
the Company's sale of these operations during 1997 (see Note 4).
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
SHORT-TERM INVESTMENTS
Short-term investments consist of marketable government securities with
original maturities of one year or less. All short-term investments are
classified as trading and are recorded at fair value.
RESTRICTED CASH AND SHORT-TERM INVESTMENTS
Restricted cash and short-term investments consist of cash and other liquid
securities held in an escrow account to be applied to the payment of interest
due in connection with the Company's senior credit facility (see Note 13).
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated using the straight line method over their estimated useful lives
as follows (see Note 7):
<TABLE>
<S> <C>
Broadcasting towers and equipment........................... 6-13 years
Office furniture and equipment.............................. 5-10 years
Buildings and building improvements......................... 15-40 years
Leasehold improvements...................................... Term of lease
Aircraft, vehicles and other................................ 5 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
F-8
<PAGE> 48
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INTANGIBLE ASSETS
Intangible assets are capitalized at cost and amortized using the straight
line method over their estimated useful lives as follows (see Note 8):
<TABLE>
<S> <C>
FCC licenses and goodwill................................... 25 years
Cable distribution rights................................... Generally 7 years
Covenants not to compete.................................... Generally 3 years
Favorable lease and other contracts......................... Contract term
</TABLE>
INVESTMENTS IN BROADCAST PROPERTIES
Investments in broadcast properties represent the Company's financing of
television station acquisitions by third party licensees, purchase options or
other investments in entities owning television broadcasting stations or
construction permits. In connection with a number of these agreements, the
Company has obtained the right to provide programming for the related stations
pursuant to time brokerage agreements ("TBAs") and has options to purchase
certain of the related station assets and Federal Communications Commission
("FCC") licenses at various amounts and terms (see Notes 10 and 21).
PROGRAM RIGHTS
Program rights are carried at the lower of unamortized cost or estimated
net realizable value. Program rights and the related liabilities are recorded at
the contractual amounts when the programming is available to air, and are
amortized over the licensing agreement term using the greater of the straight
line per run or straight line over the license term method. The estimated costs
of programming which will be amortized during the next year are included in
current assets; program rights obligations which will be paid within the next
year are included in current liabilities.
During 1999, the Company wrote down certain of its program rights by a
total of approximately $70.5 million to its expected net realizable value. The
write down was a result of the Company's ongoing evaluation of its anticipated
future usage of its programming, and the anticipated future ratings and related
advertising revenues to be generated in connection with the Company's
programming, all relative to the carrying value of the related program rights.
CABLE DISTRIBUTION RIGHTS
Cable distribution rights are amortized over seven years using the straight
line method. Obligations for cable distribution rights which will be paid within
the next year are included in current liabilities. The Company has agreements
under which it receives cable carriage of its PAX TV programming on certain
cable systems in markets not currently served by the Company's broadcast
television station group. The Company pays fees based on the number of cable
television subscribers reached and in certain instances provides local
advertising airtime during PAX TV programming. Cable distribution rights are
recorded at the present value of the Company's future obligation when the
Company receives affidavits of subscribers delivered.
SATELLITE DISTRIBUTION RIGHTS
Satellite distribution rights are amortized over seven years using the
straight line method. An estimate of the advertising credit that will be
utilized within the next year is included in current liabilities. During January
1999, the Company entered into an agreement with a satellite television provider
for carriage on its system in exchange for advertising credits on PAX TV
equaling $15 million. The advertising credit is provided on an available time
basis at the then prevailing rates not to exceed $7.5 million per year.
F-9
<PAGE> 49
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LONG-LIVED ASSETS
The Company reviews long-lived assets, identifiable intangibles and
goodwill and reserves for impairment whenever events or changes in circumstances
indicate that, based on estimated undiscounted future cash flows, the carrying
amount of the assets may not be fully recoverable. It is possible that the
estimated life of certain long-lived assets will be reduced significantly in the
near term due to the anticipated industry migration from analog to digital
broadcasting.
REVENUE RECOGNITION
Revenue is recognized as commercial spots are aired and air time is
provided.
TIME BROKERAGE AGREEMENTS
The Company operates certain stations under TBAs whereby the Company has
agreed to provide the station with programming and sells and retains all
advertising revenue during such programming. The broadcast station licensee
retains responsibility for ultimate control of the station in accordance with
FCC policies. The Company pays a fixed fee to the station owner as well as
certain expenses of the station and performs other functions. The Company
currently operates 5 stations under TBAs which expire from 2000 through 2006.
The financial results of TBA operated stations are included in the Company's
statements of operations from the date of commencement of the TBA.
STOCK-BASED COMPENSATION
The Company's employee stock option plans are accounted for using the
intrinsic value method. Stock-based compensation to non-employees is accounted
for using the fair market value method. The Company also provides disclosure of
certain pro forma information as if the Company's employee stock option plans
were accounted for using the fair market value method (see Note 16).
INCOME TAXES
The Company records deferred income taxes using the liability method. Under
the liability method, deferred tax assets and liabilities are recognized for the
expected future tax consequences of temporary differences between the financial
statement and income tax bases of the Company's assets and liabilities. An
allowance is recorded, based upon currently available information, when it is
more likely than not that any or all of a deferred tax asset will not be
realized. The provision for income taxes includes taxes currently payable, if
any, plus the net change during the year in deferred tax assets and liabilities
recorded by the Company.
PER SHARE DATA
Basic and diluted loss per share from continuing operations was computed by
dividing the loss from continuing operations less dividends and accretion on
redeemable preferred stock by the weighted average number of common shares
outstanding during the period. Because of losses from continuing operations, the
effect of stock options and warrants is antidilutive. Accordingly, the Company's
presentation of diluted earnings per share is the same as that of basic earnings
per share.
At December 31, 1999, 1998 and 1997, respectively, there were outstanding
11,991,061, 9,341,662 and 3,605,461 stock options; 32,427,627, 395,500 and
917,749 Class A and B common stock warrants; and at December 31, 1999 and 1998,
37,342,282 and 4,945,625 shares of Class A common stock were reserved for
possible future issuance in connection with the Series A and B Convertible
Preferred Stock issues outstanding. These securities, which could potentially
dilute earnings per share in the future, were not included in the computation of
diluted earnings per share, because to do so would have been antidilutive for
the periods presented.
F-10
<PAGE> 50
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year's financial
statements to conform with the 1999 presentation.
2. NBC TRANSACTION:
Effective September 15, 1999 (the "Issue Date"), the Company entered into
an Investment Agreement (the "Investment Agreement") with National Broadcasting
Company, Inc. ("NBC"), pursuant to which NBC purchased shares of convertible
exchangeable preferred stock (the "Series B Convertible Preferred Stock"), and
common stock purchase warrants from the Company for an aggregate purchase price
of $415 million. Further, the Company's principal shareholder, Mr. Lowell W.
Paxson ("Mr. Paxson") and certain entities controlled by Mr. Paxson granted NBC
the right (the "Call Right") to purchase all (but not less than all) 8,311,639
shares of Class B Common Stock of the Company beneficially owned by Mr. Paxson.
The common stock purchase warrants issued to NBC consist of a warrant to
purchase up to 13,065,507 shares of Class A Common Stock at an exercise price of
$12.60 per share ("Warrant A") and a warrant to purchase up to 18,966,620 shares
of Class A Common Stock ("Warrant B") at an exercise price equal to the average
of the closing sale prices of the Class A Common Stock for the 45 consecutive
trading days ending on the trading day immediately preceding the warrant
exercise date (provided that such price shall not be more than 17.5% higher or
17.5% lower than the six month trailing average closing sale price), subject to
a minimum exercise price during the first three years after the Issue Date of
$22.50 per share. The Warrants are exercisable for ten years from the Issue
Date, subject to certain conditions and limitations.
The Call Right has a per share exercise price equal to the higher of (i)
the average of the closing sale prices of the Class A Common Stock for the 45
consecutive trading days ending on the trading day immediately preceding the
exercise of the call Right (provided that such price shall not be more than
17.5% higher or 17.5% lower than the six month trailing average closing sale
prices), and (ii) $22.50 for any exercise of the Call Right on or prior to the
third anniversary of the Issue Date and $20.00 for any exercise of the Call
Right thereafter. The owners of the shares which are subject to the Call Right
may not transfer such shares prior to the sixth anniversary of the Issue Date,
and may not convert such shares into any other securities of the Company
(including shares of Class A Common Stock). Exercise of the Call Right is
subject to compliance with applicable provisions of the Communications Act of
1934, as amended (the "Communications Act"), and the rules and regulations of
the FCC. The Call Right may not be exercised until Warrant A and Warrant B have
been exercised in full. The Call Right expires on the tenth anniversary of the
Issue Date, or prior thereto under certain circumstances.
The Company has valued the common stock purchase warrants issued to NBC and
the Call Right at $66.7 million. The Company recorded this value along with
transaction costs as a reduction of the face value of the Series B Convertible
Preferred Stock and will accrete such discount as preferred stock dividends over
three years using the interest method. The Company has recorded approximately
$6.7 million of accretion expense related to the Series B Convertible Preferred
Stock through December 31, 1999 (see Note 17).
The Series B Convertible Preferred Stock was issued with a conversion price
per share that was less than the closing price of the Class A Common Stock at
the Issue Date. As a result, the Company recognized a beneficial conversion
feature in connection with the issuance of the stock equal to the difference
between the
F-11
<PAGE> 51
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
closing price and the conversion price multiplied by the number of shares
issuable upon conversion of the Series B Convertible Preferred Stock. The full
amount of the beneficial conversion feature, approximately $65.5 million, has
been reflected in the accompanying statement of operations as a preferred stock
dividend during 1999 and has been allocated to additional paid-in capital in the
accompanying balance sheet.
The Investment Agreement requires the Company to obtain the consent of NBC
or its permitted transferee with respect to certain corporate actions, as set
forth in the Investment Agreement, and grants NBC certain rights with respect to
the network operations of the Company. NBC was also granted certain demand and
piggyback registration rights with respect to the shares of Class A Common Stock
issuable upon conversion of the Series B Convertible Preferred Stock (or
conversion of any exchange debentures issued in exchange therefor), exercise of
the Warrants or conversion of the Class B Common Stock subject to the Call
Right.
NBC, the Company, Mr. Paxson and certain entities controlled by Mr. Paxson
also entered into a Stockholder Agreement, pursuant to which, if permitted by
the Communications Act and FCC rules and regulations, the Company may nominate
persons named by NBC for election to the Company's board of directors and Mr.
Paxson and his affiliates agreed to vote their shares of common stock in favor
of the election of such persons as directors of the Company. Should no NBC
nominee be serving as a member of the Company's board of directors, then NBC may
appoint two observers to attend all board meetings. Mr. Paxson and his
affiliates have also agreed to vote their shares of common stock in favor of
certain proposals expected to be submitted for a vote of the stockholders of the
Company at its next annual stockholders meeting prior to May 15, 2000. These
proposals will include amendments to the Company's certificate of incorporation
to provide for a classified board of directors serving three year terms and the
authorization of additional shares of non-voting common stock sufficient to
permit the Company to reserve such shares for issuance to NBC and its assignees
should they exercise their rights to convert shares of Series B Convertible
Preferred Stock and exercise the Warrants for such non-voting shares of common
stock in lieu of shares of Class A Common Stock. The Stockholder Agreement
further provides that the Company shall not, without the prior written consent
of NBC, enter into certain agreements or adopt certain plans, as set forth in
the Stockholder Agreement, which would be breached or violated upon the
acquisition of the Company securities by NBC or its affiliates or would
otherwise restrict or impede the ability of NBC or its affiliates to acquire
additional shares of capital stock of the Company.
3. DP MEDIA:
During the third quarter of 1999, the Company advanced funds to a
subsidiary of DP Media, Inc., which, along with CAP Communications, Inc. ("CAP
Communications"), and RDP Communications, Inc. (collectively referred to herein
as "DP Media") are companies beneficially owned by family members of Mr. Paxson.
The Company has significant operating relationships with DP Media. The funds
advanced to DP Media were utilized to fund operating cash flow needs. As a
result of the Company's significant operating relationships with DP Media and
its funding of DP Media's operating cash flow needs, the assets and liabilities
of DP Media, together with their results of operations from the date of the
advance, have been included in the Company's consolidated financial statements
for the year ended December 31, 1999.
In consolidating DP Media, at December 31, 1999, the Company recorded
current assets of approximately $4.3 million, property, plant and equipment of
approximately $22.2 million, intangible assets of approximately $72.2 million
and other assets of approximately $2.6 million reflecting negative minority
interest upon consolidation. Further, the Company has recorded current
liabilities of approximately $1.3 million.
On November 21, 1999 the Company entered into an agreement to purchase the
eight television stations of DP Media, as well as DP Media's contractual right
to acquire a television station in the Boston, Massachusetts market. The Company
will also expend an additional $38 million to consummate DP Media's
F-12
<PAGE> 52
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
acquisition of WBPX (formerly, WABU), and two full power satellite stations
serving the Boston, Massachusetts market, which is currently a PAX TV affiliate
and is being operated by DP Media under a time brokerage agreement with the
seller of the station. The television stations, eight of which have been airing
PAX TV Network programming under affiliation agreements, are in Battle Creek,
Michigan, Raleigh, North Carolina, Hartford, Connecticut, Boston, Massachusetts
(two stations), St. Louis, Missouri, Washington, D.C., Milwaukee, Wisconsin and
Indianapolis, Indiana markets. In conjunction with the asset purchase agreement,
on November 22, 1999, the Company advanced approximately $106 million to DP
Media, pursuant to a secured loan agreement, which loan was used to repay DP
Media's outstanding indebtedness to third party lenders. On March 3, 2000, the
Company and DP Media agreed in principal to convert their asset sale transaction
into a purchase by the Company of all of the capital stock of DP Media for a
purchase price of $7,500,000. Prior to such purchase, DP Media shall transfer
the assets of its station serving the Boston market ("WWDP" formerly WBPX) to a
newly formed company ("Newco"). The Company shall hold a non-voting interest in
Newco and shall have the right to require a sale of WWDP, which is not a PAX TV
Network affiliate, if the station is not sold within a specified period. The
Company shall receive 45% of the net proceeds from the sale of WWDP.
In August 1999, CAP Communications repaid notes receivable to the Company
of $15.5 million and $15.0 million in connection with its acquisition of WWDP in
Boston and WHPX in Hartford. Both WWDP and WHPX had been recorded by the Company
as investments in broadcast properties and have been reflected in the
accompanying consolidated balance sheet as of December 31, 1999 at the Company's
approximate historical cost. (See Note 5 and Note 10.)
During August 1998, the Company advanced $1.75 million to DP Media in
connection with its acquisition of WIPX in Bloomington, Indiana and was repaid
these amounts at the closing of the acquisition transaction.
During 1997 and 1998, the Company sold DP Media five television stations
for aggregate consideration of approximately $30.3 million. The stations, which
serve the Grand Rapids, Raleigh, Washington, D.C., St. Louis and Milwaukee
markets became PAX TV affiliates upon their acquisition by DP Media. No
significant gain or loss was recorded in connection with these transactions.
Under the affiliation agreements with DP Media, the Company pays DP Media a
fixed monthly affiliation fee and the affiliates retain a portion of the
advertising airtime during the Company's network programming. At December 31,
1998, the Company had advanced DP Media approximately $250,000 under the
affiliation and services agreements.
The Company has also executed services and commercial representation
agreements with DP Media. Under these agreements, which were terminated as of
March 1, 2000, the Company was entitled to receive 90% of the excess of
advertising revenues over the affiliated station's operating costs and interest.
Further, the Company served as the network, national and regional sales
representative for the affiliated stations and received a commission of 15% for
such sales. During 1999, the Company recorded $404,000 of commissions under its
services and commercial representation agreements with DP Media. Effective as of
March 1, 2000, the affiliation agreements and services agreements between the
Company and DP Media for each market other than second Boston station, WWDP,
were replaced by time brokerage agreements which will remain in effect pending
the completion of the acquisition of DP Media by the Company.
During 1997, the Company granted 33,000 fully vested non-qualified stock
options with a fair value of approximately $299,000 to the President and Vice
President of DP Media, members of Mr. Paxson's family, as consideration for past
services as former employees of the Company.
During 1999, 1998 and 1997, the Company recorded time brokerage and
affiliation fees expense related to stations owned by DP Media and RDP of
approximately $13.6 million, $5.7 million and $1.6 million, respectively.
F-13
<PAGE> 53
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Subsequent to the consolidation of DP Media during the third quarter of
1999, all intercompany transactions with DP Media were eliminated.
4. DISCONTINUED OPERATIONS:
During 1997, the Company sold its Network-Affiliated Television segment as
well as substantially all of its Radio segment assets for aggregate
consideration of approximately $721 million. The Company realized a gain of
approximately $255 million from these sales, net of applicable income taxes,
brokerage and closing costs and other estimated costs. The Network-Affiliated
Television and Radio operations generated revenues of approximately $90.5
million for the year ended December 31, 1997. Included in operating expenses are
approximately $9.7 million of cash bonuses paid to certain members of the
Company's management in connection with their efforts in assimilating, operating
and arranging for the sale of the radio stations and related properties.
The sale of certain Radio assets was structured as a tax deferred exchange,
permitting the Company to defer a substantial portion of the gain for tax
purposes to the extent the sales proceeds were reinvested in like kind
broadcasting properties before the end of the first quarter of 1998.
The results of operations for the Radio and Network-Affiliated Television
segments, net of applicable income taxes, have been presented as discontinued
operations in the accompanying Consolidated Statements of Operations for all
periods presented.
During 1998, the Company recognized an additional gain of $1.2 million on
the sale of its Radio segment, net of applicable income taxes of $2.2 million.
This gain reflects a reduction of $2.7 million of estimated costs attributable
to the segment disposal and the recovery of a $3 million loan by the billboard
operations of Radio, which was charged off against the gain in 1997. An
additional $2.3 million of income taxes were recorded within discontinued
operations in 1998 as a result of certain adjustments by the Internal Revenue
Service reducing the Company's net operating loss carryforwards relating to the
historical results of the Radio segment.
5. CERTAIN TRANSACTIONS WITH RELATED PARTIES:
The Company has entered into certain operating and financing transactions
with related parties as described below.
THE CHRISTIAN NETWORK, INC.
The Company has entered into several agreements with The Christian Network,
Inc. and certain of its for profit subsidiaries (individually and collectively
referred to herein as "CNI"). The Christian Network, Inc. is a section 501(c)(3)
not-for-profit corporation to which Mr. Paxson, the majority stockholder of the
Company, has been a substantial contributor and of which he was a member of the
Board of Stewards through 1993.
On September 10, 1999, the Company and The Christian Network, Inc. ("CNI")
entered into a Master Agreement for overnight programming and use of a portion
of the Company's digital capacity in exchange for CNI's providing public
interest programming. The Master Agreement has a 50 year term and is
automatically renewable for successive ten year periods unless CNI ceases to
exist, commences action to liquidate, ceases family values programming or the
FCC revokes the licenses of a majority of the Company's stations. Pursuant to
the Master Agreement, the Company broadcasts CNI overnight programming on each
of its stations seven days a week from 1:00AM to 6:00AM. When digital
programming begins, the Company will make a digital channel available for CNI's
use. CNI will have the right to use the digital channel for 24 hour CNI digital
programming.
F-14
<PAGE> 54
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Investments in Broadcast Properties. At December 31, 1998 the Company had
approximately $15.5 million of advances to CNI relating to CNI's acquisition of
WWDP in Boston, a PAX TV affiliate at that time. These amounts were recorded as
investments in broadcast properties in the accompanying consolidated balance
sheets. In April 1998 DP Media contracted to acquire WWDP for $18 million,
including the assumption of CNI's obligations to the Company. In February of
1999 DP Media's acquisition of WWDP from CNI was completed.
During 1997, the Company acquired television stations from CNI in the
Miami, Orlando and Tampa markets, for total consideration of approximately $14
million.
CNI Agreement. The Company and CNI entered into an agreement in May 1994
(the "CNI Agreement") under which the Company agreed that, if the tax exempt
status of CNI were jeopardized by virtue of its relationships with the Company
and its subsidiaries, the Company would take certain actions to ensure that
CNI's tax exempt status would no longer be so jeopardized. Such steps could
include, but not be limited to, rescission of one or more transactions or
payment of additional funds by the Company. If the Company's activities with CNI
are consistent with the terms governing their relationship, the Company believes
that it will not be required to take any actions under the CNI Agreement.
However, there can be no assurance that the Company will not be required to take
any actions under the CNI Agreement at a material cost to the Company.
Worship Channel Studio. 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 years ended December 31, 1999, 1998
and 1997, the Company incurred rental charges in connection with this agreement
of $195,000, $252,000 and $231,000, respectively.
AIRCRAFT LEASE
During 1997, the Company entered into a three year aircraft lease with a
company which is owned by Mr. Paxson. The lease is for a Boeing 727 aircraft
with monthly payments of approximately $64,000. In connection with such lease,
the Company incurred rental costs of approximately $763,000, $763,000 and
$382,000 during the years ended December 31, 1999, 1998 and 1997, respectively.
Additionally, the Company has recorded leasehold improvements of approximately
$310,000, net of accumulated amortization at December 31, 1999 in connection
with the lease.
BOARD OF DIRECTORS
The Company has entered into transactions with certain members of its Board
of Directors.
Vice Chairman of the Board of Directors. In May 1998, the Board of
Directors of the Company elected a Vice Chairman of the Board. In connection
with this appointment, in June 1998, an affiliate of the Vice Chairman received
fully vested warrants to acquire 155,500 shares of Class A common stock at an
exercise price of $16 per share (see Note 17). 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 the Vice Chairman also purchased $10 million
of the Company's mandatorily redeemable 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 such stock, the
affiliate of the Vice Chairman also received a consulting fee of $500,000 and an
underwriting fee of $550,000 for the placement of additional shares of
mandatorily redeemable convertible preferred stock. The Company recorded such
fees as issuance costs in connection with the sale of the preferred stock. In
March 2000 the Company reduced the exercise price of the 187,500 warrants held
by the affiliate of the Vice Chairman from $16.00 per
F-15
<PAGE> 55
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
share to $12.60 per share. The estimated incremental fair value of such warrants
amounting to $139,125 will be recognized in the first quarter of year 2000.
Stockholders Agreement. Certain entities controlled by Mr. Paxson and
entities which are affiliates of a former director of the Company are parties to
a stockholders agreement whereby the parties to such agreement were granted
registration rights with respect to certain shares of common stock held by such
parties and the right of first refusal to acquire a pro rata share of any new
securities the Company may issue. Additionally, the stockholders agreement
grants certain cosale rights in the event that Mr. Paxson should sell more than
a predetermined percentage of his ownership interest in the Company.
6. ACQUISITION OF TELEVISION STATIONS AND THE TRAVEL CHANNEL
The Company also owned a 30% interest in The Travel Channel, L.L.C. ("The
Travel Channel"), a cable television network joint venture with Discovery
Communications, Inc. In February 1999, the Company sold its 30% interest in The
Travel Channel for aggregate consideration of approximately $55 million and
realized a pre-tax gain of approximately $17 million. The results of operations
of The Travel Channel, L.L.C. have been included in the Company's December 31,
1999 and 1998 consolidated statement of operations using the equity method of
accounting through the date of sale.
During 1999, the Company acquired the assets of five television stations
(including construction permits), for total consideration of approximately $65.6
million. During 1998, the Company acquired the assets of twenty six television
stations (including construction permits), for total consideration of
approximately $591.4 million. As of December 31, 1999, the Company broadcasts
PAX TV via a total of 116 owned, operated or affiliated stations.
In February 1999, the Company completed its acquisition of WCPX in Chicago
by transferring its interest in KWOK in San Francisco as partial consideration
for WCPX. In connection with the transfer of ownership of KWOK, the Company
recognized a pre-tax gain of approximately $23.8 million.
During 1999, the Company sold its interests in four stations for aggregate
consideration of approximately $61.0 million and realized pre-tax gain of
approximately $18.7 on these sales.
During 1998, the Company sold its interests in three stations for aggregate
consideration of $79.5 million and realized a gain of approximately $51.6
million. Of the proceeds received, approximately $17.6 million was used to
exercise the Company's options to acquire WOAC and WNGM.
7. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Broadcasting towers and equipment........................... $212,550 $184,482
Office furniture and equipment.............................. 19,552 14,436
Buildings and leasehold improvements........................ 20,982 13,395
Land and land improvements.................................. 5,986 6,084
Aircraft, vehicles and other................................ 3,832 3,674
-------- --------
262,902 222,071
Accumulated depreciation.................................... (72,994) (43,096)
-------- --------
Property and equipment, net................................. $189,908 $178,975
======== ========
</TABLE>
Depreciation expense aggregated approximately $28.4 million, $20.7 million
and $19.1 million for the years ended December 31, 1999, 1998 and 1997,
respectively.
F-16
<PAGE> 56
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with its anticipated migration to digital broadcast
facilities, the Company is evaluating the remaining useful lives and residual
values of the equipment which would be affected by such migration. The Company
anticipates that its evaluation of useful lives will result in a decrease in the
estimated remaining useful lives of the affected assets and as a result it will
accelerate the depreciation of such assets. The Company will account for this
change in accounting estimate on a prospective basis.
8. INTANGIBLE ASSETS:
Intangible assets consist of the following (in thousands):
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
FCC licenses and goodwill................................... $ 892,674 $777,960
Cable distribution rights................................... 93,003 86,218
Satellite distribution rights............................... 15,004 --
Covenants not to compete.................................... 5,574 5,924
Favorable lease and other contracts......................... 511 496
---------- --------
1,006,766 870,598
Accumulated amortization.................................... (90,621) (42,625)
---------- --------
Intangible assets, net...................................... $ 916,145 $827,973
========== ========
</TABLE>
Amortization expense related to intangible assets aggregated $49.5 million,
$29.3 million and $15.2 million for the years ended December 31, 1999, 1998 and
1997, respectively.
9. OTHER ASSETS:
Other assets consist of the following (in thousands):
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Programming deposits........................................ $16,314 $10,759
Loan origination costs...................................... 15,129 14,951
Escrow funds for station acquisitions....................... 2,917 6,775
Other....................................................... 6,454 3,731
------- -------
40,814 36,216
Accumulated amortization.................................... (8,009) (5,664)
------- -------
$32,805 $30,552
======= =======
</TABLE>
Amortization expense related to other assets aggregated approximately
$5,000, $52,000 and $1.2 million for the years ended December 31, 1999, 1998 and
1997, respectively. Additionally, during the years ended December 31, 1999, 1998
and 1997, the Company recorded amortization of loan origination costs of $2.5
million, $2.1 million and $1.8 million, respectively, and classified such
amortization as interest expense.
F-17
<PAGE> 57
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. INVESTMENTS IN BROADCAST PROPERTIES:
Investments in broadcast properties consist of (in thousands):
<TABLE>
<CAPTION>
ENTITY STATIONS MARKETS 1999 1998
- ------ -------- ------- ------- -------
<S> <C> <C> <C> <C>
Flinn Investments......................... WPXL, WPXX New Orleans, LA; $16,075 $16,075
Memphis, TN
Ponce-Nicasio Broadcasting................ KSPX Sacramento, CA 8,879 8,834
America 51, L.P........................... KPPX Phoenix, AZ 5,698 5,510
B&C Communications........................ WOAM Lexington, KY 4,284 --
CNI/DP Media (Note 5)..................... WBPX Boston, MA -- 15,573
South Texas Vision, L.L.C................. KPXL San Antonio, TX -- 5,474
Cocola Broadcasting....................... KWOK San Francisco, CA -- 4,526
DP Media.................................. WHPX Hartford, CT -- 5,083
Other..................................... 5,411 13,608
------- -------
$40,347 $74,683
======= =======
</TABLE>
Included in Other expenses, net is a loss of $4.5 million, reflecting the
Company's estimate of advances and costs related to the planned acquisition of a
Pittsburgh television station which were determined to be unrecoverable due to
the termination of the acquisition contract.
During February 1997, the Company sold WHPX to Roberts Broadcasting in
exchange for a $15 million note receivable and entered into a five year time
brokerage agreement to operate the station. The Company deferred the gain on the
sale of $12.1 million. 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 the fourth quarter of 1998 the
Company reversed its sale accounting and netted the deferred gain with the note
receivable. At December 31, 1998, the Company's interest in WHPX was reflected
at its original cost within investments in broadcast properties. At December 31,
1999, the balance is reflected at its original cost in Property, Plant and
Equipment and Intangible Assets due to the consolidation of DP Media.
During 1998, the Company paid approximately $10 million to buy out the
affiliation agreements with third parties of WPXL and WPXX, two stations which
the Company has contracted to purchase from Flinn Investments. These amounts, as
well as an escrow deposit and other acquisition costs in connection with the
purchase of WPXL and WPXX, have been included in investments in broadcast
properties as of December 31, 1999 and 1998.
11. PROGRAM RIGHTS:
Program rights consist of the following (in thousands):
<TABLE>
<CAPTION>
1999 1998
--------- --------
<S> <C> <C>
Program rights.............................................. $ 400,737 $327,620
Accumulated amortization.................................... (191,035) (31,422)
--------- --------
209,702 296,198
Less current portion........................................ (79,686) (81,867)
--------- --------
Program rights, net......................................... $ 130,016 $214,331
========= ========
</TABLE>
Program rights amortization expense aggregated $91.8 million and $31.4
million for the years ended December 31, 1999 and 1998, respectively. During
1999, the Company wrote down to net realizable value certain of its program
rights by a total of approximately $70.5 million.
F-18
<PAGE> 58
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1999, the Company's programming contracts require
collective payments by the Company of approximately $295.1 million as follows
(in thousands):
<TABLE>
<CAPTION>
PROGRAM
OBLIGATIONS FOR RIGHTS
PROGRAM RIGHTS COMMITMENTS TOTAL
---------------- ----------- --------
<S> <C> <C> <C>
2000............................................ $ 82,907 $ 15,210 $ 98,117
2001............................................ 63,648 16,862 80,510
2002............................................ 43,768 20,142 63,910
2003............................................ 4,737 24,249 28,986
2004............................................ -- 15,627 15,627
2005............................................ -- 7,920 7,920
-------- -------- --------
$195,060 $100,010 $295,070
======== ======== ========
</TABLE>
The Company has also committed to purchase at similar terms additional
future episodes of these programs should they be made available.
12. OBLIGATIONS FOR CABLE DISTRIBUTION RIGHTS:
As of December 31, 1999, obligations for cable distribution rights require
collective payments by the Company of approximately $23.8 million as follows (in
thousands):
<TABLE>
<S> <C>
2000........................................................ $14,712
2001........................................................ 6,403
2002........................................................ 2,120
2003........................................................ 180
2004........................................................ 180
Thereafter.................................................. 180
-------
23,775
Less: Amount representing interest.......................... (2,391)
-------
Present value of obligations for cable distribution
rights.................................................... $21,384
=======
</TABLE>
F-19
<PAGE> 59
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. LONG-TERM DEBT:
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Senior Credit Facility, maturing June 30, 2002, interest at
LIBOR plus 2.75% or base rate plus 1.75%, at the Company's
option (9.2288% at December 31, 1999), quarterly principal
payments commencing December 2000......................... $122,000 $122,000
Equipment facility, maturing October 1, 2003, interest at
the Index Rate, as defined, plus 2.0% per annum, LIBOR
plus 3.0% per annum or the commercial paper rate plus 3.0%
per annum, at the Company's option (8.55% at December 31,
1999), quarterly principal payments commencing July 2000,
secured by purchased assets............................... 36,003 21,411
Other....................................................... 1,724 2,282
-------- --------
159,727 145,693
Less current portion........................................ (18,698) (529)
-------- --------
$141,029 $145,164
======== ========
</TABLE>
In May 1998, the Company and its lenders modified certain terms of its
Senior Credit Facility to reduce the aggregate facility amount to $122 million
and the margin to 1.75% over base rate, or 2.75% over LIBOR. Further, the
Company's obligation to maintain certain financial ratios required under the
Senior Credit Facility was deferred until March 31, 2000.
In conjunction with the May 1998 amendment of the Company's Senior Credit
Facility, the Company placed approximately $22.4 million in an interest bearing
escrow account to prefund approximately eighteen months of interest under this
facility. These funds are used to make quarterly interest payments due under the
facility. As of December 31, 1999, approximately $8.2 million remains in escrow.
In March 2000 the Company and its Lenders reached an agreement to amend its
Senior Credit Facility to extend the commencement of its quarterly covenant
ratio test dates to March 31, 2001 with additional extensions through December
31, 2001 under certain conditions. In exchange for this extension, the Company
agreed to increase the borrowing rates to 2.00% over base rate or 3.00% over
LIBOR and maintain one year of interest in escrow. Additionally, the Company
will place its December 31, 2000 principal payment in an escrow account on
September 30, 2000, and place its March 31, 2001 principal payment in an escrow
account on December 31, 2000.
In August 1998, the Company entered into a $50 million equipment credit
facility (the "Equipment Facility"). Interest on outstanding borrowings is
payable monthly in arrears. Under the Equipment Facility, the Company pays a
commitment fee of 0.5% on the unused portion of the credit line. Subsequent to
December 31, 1999, the Company has borrowed an additional $623,000 under the
Equipment Facility.
In March 2000, the Company and its lender amended the Equipment Facility to
increase the maximum borrowings available thereunder to $65 million and extend
the drawdown period through December 31, 2000. In addition, initial scheduled
principal payments have been extended to commence on April 1, 2001. In exchange
for these amendments, each of the borrowing rates under the Equipment Facility
has been increased by 0.25%.
Under the amended Senior Credit Facility and the amended Equipment
Facility, the Company is required to maintain certain financial ratios
commencing March 31, 2001. In addition, these credit facilities contain a number
of covenants that restrict, among other things, the Company's ability to incur
additional
F-20
<PAGE> 60
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
indebtedness, incur liens, make investments, pay dividends or make other
restricted payments, consummate certain asset sales, consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of
substantially all of the assets of the Company.
As discussed in Note 3, the Company advanced approximately $106 million to
DP Media, pursuant to a secured loan agreement, which was used to repay DP
Media's outstanding indebtedness to third party lenders. The Company believes
that such repayment of DP Media's debt, together with the agreement to acquire
DP Media's television station assets, resolves certain potential covenant
compliance matters created by the inclusion of the liabilities of DP Media in
the consolidated financial statements of the Company.
Aggregate maturities of long-term debt at December 31, 1999 are as follows
(in thousands):
<TABLE>
<S> <C>
2000........................................................ $ 18,698
2001........................................................ 64,160
2002........................................................ 64,186
2003........................................................ 12,180
2004........................................................ 57
Thereafter.................................................. 446
--------
$159,727
========
</TABLE>
14. SENIOR SUBORDINATED NOTES:
On September 28, 1995, the Company issued $230 million of senior
subordinated notes (the "Notes") at a discount, netting proceeds of
approximately $227.3 million to the Company. At December 31, 1999, the
unamortized discount was approximately $1.3 million ($1.7 million in 1998).
Interest on the Notes accrues at 11.625% to yield an effective rate per annum of
11.875%. Interest payments are payable semiannually on each April 1 and October
1. The principal balance is due at maturity on October 1, 2002.
The Notes contain certain covenants which, among other things, restrict
additional indebtedness, payment of dividends, stock issuance of subsidiaries,
certain investments and transfers or sales of assets, and provide for the
repurchase of the Notes in the event of a change in control of the Company. The
Notes are general unsecured obligations of the Company subordinate in right of
payment to all existing and future senior indebtedness of the Company and senior
in right to all future subordinated indebtedness of the Company.
The Notes are redeemable at the option of the Company on October 1, 2000
and 2001 at a redemption price of 102% and 100%, respectively, of the
outstanding principal amount, plus accrued interest.
15. INCOME TAXES:
Income tax benefit (expense) included in the consolidated statements of
operations follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- ---------
<S> <C> <C> <C>
Continuing operations................................... $57,257 $37,389 $ 21,879
Discontinued operations................................. -- -- 1,337
From disposal of discontinued operations................ -- (4,505) (118,963)
------- ------- ---------
$57,257 $32,884 $ (95,747)
======= ======= =========
</TABLE>
F-21
<PAGE> 61
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The benefit (provision) for federal and state income taxes for the three
years ended December 31, 1999, 1998 and 1997 is as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- --------
<S> <C> <C> <C>
CURRENT
Federal............................................. $ 975 $ -- $ --
State............................................... (1,827) (4,754) --
------- ------- --------
$ (852) $(4,754) $ --
======= ======= ========
DEFERRED
Federal............................................. $51,293 $33,676 $(85,669)
State............................................... 6,816 3,962 (10,078)
------- ------- --------
$58,109 $37,638 $(95,747)
======= ======= ========
</TABLE>
Deferred tax assets and deferred tax liabilities reflect the tax effect of
differences between financial statement carrying amounts and tax bases of assets
and liabilities as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards....................... $ 125,699 $ 56,033
Programming rights..................................... 18,667
Deferred compensation.................................. 13,199 10,645
Other.................................................. 3,637 4,241
--------- ---------
161,202 70,919
Deferred tax asset valuation allowance................. (27,429) (3,071)
--------- ---------
133,773 67,848
Deferred tax liabilities:
Basis difference on fixed and intangible assets........ (133,773) (125,957)
--------- ---------
Net deferred tax liabilities...................... $ -- $ (58,109)
========= =========
</TABLE>
The reconciliation of income tax benefit attributable to continuing
operations, computed at the U.S. federal statutory tax rate, to the provision
for income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Tax benefit at U.S. federal statutory tax rate....... $(76,170) $(43,132) $(19,850)
State income tax benefit, net of federal tax......... (6,426) (320) (2,335)
Non deductible items................................. 1,198 2,364 306
Valuation allowance.................................. 24,358 -- --
Other................................................ (217) 3,699 --
-------- -------- --------
Benefit for income taxes............................. $(57,257) $(37,389) $(21,879)
======== ======== ========
</TABLE>
During the year ended December 31, 1999, the Company recognized a deferred
tax benefit to the extent that the Company had offsetting deferred tax
liabilities. The Company has recorded a valuation allowance for its net deferred
tax assets at December 31, 1999, as it believes it is more likely than not that
it will be unable to utilize its deferred tax assets.
The tax deferral of the gain upon the sale of Paxson Radio could be
contested by the Internal Revenue Service ("IRS"). Based on the advise of
counsel, management believes that, in the event of a challenge by the IRS of
these tax positions, it is more likely than not that the Company would prevail.
Should the IRS successfully challenge the Company on these matters, the Company
believes its NOLs are sufficient to offset any potential current tax
liabilities.
F-22
<PAGE> 62
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has net operating loss carryforwards for income tax purposes
subject to certain carryforward limitations of approximately $330.7 million at
December 31, 1999 expiring through 2019. A portion of the net operating losses,
amounting to approximately $7.9 million, are limited to annual utilization as a
result of a change in ownership occurring when the Company acquired the
subsidiary. The Company has recorded a valuation allowance in connection with
the deferred tax asset relating to the net operating losses subject to
limitation. Additionally, further limitations on the utilization of the
Company's net operating tax loss carryforwards could result in the event of
certain changes in the Company's ownership.
16. EMPLOYEE BENEFIT PLANS AND EMPLOYMENT AGREEMENTS:
SAVINGS AND PROFIT SHARING PLAN
The Company has retirement savings and cafeteria plans pursuant to Sections
401(k) and 125 of the Internal Revenue Code which cover substantially all of the
Company's employees. Employer contributions to the retirement savings plan are
discretionary. For the plan years ended December 31, 1999, 1998 and 1997, the
Company made retirement savings contributions of approximately $0, $100,000 and
$68,000, respectively. Under the cafeteria plan, employees may elect to
participate in health, dental, life and disability insurance benefit plans
funded through employee payroll deductions.
DEFERRED COMPENSATION PLAN
During 1996, the Company established a supplemental deferred compensation
plan for certain key executives. Under this program, participants may defer
certain amounts of their base compensation and receive a corresponding match by
the Company. Participants vest 100% in the company match after five years of
service. Upon retirement, participants shall be eligible to receive from the
Company certain amounts based on the initial deferral and the Company match.
Certain amounts are also due if a participant terminates employment (other than
by his voluntary action or discharge for cause) before attaining retirement age.
The participants in this plan are general creditors of the Company with respect
to the benefits under the plan. The expense associated with this program was
approximately $171,000, $140,000 and $131,000 for 1999, 1998 and 1997,
respectively. The cash surrender value of the insurance policies and the total
liability under this program at December 31, 1999 is approximately $510,000 and
$668,000, respectively.
LIFE INSURANCE
The Company maintains a life insurance agreement for the benefit of Mr.
Paxson and his spouse (the "Insureds") whereby the Company contributes to the
payment of premiums on the policy. Upon the death of the survivor of the
Insureds, the Company will be repaid its premium advance. The policy owner will
retain all remaining proceeds. Premiums paid with respect to this policy were
approximately $176,000 in 1999, 1998 and 1997.
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. 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,
1999, 424,936 shares of Class A common stock were available for additional
awards under the plans.
F-23
<PAGE> 63
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition to the options granted under its stock inventive plans, the
Company has granted nonqualified options to purchase 3,100,000 shares of Class A
common stock to members of senior management and others. See Employment
Agreements below.
When options are granted to employees, a non-cash charge representing the
difference between the exercise price and the fair market value of the common
stock underlying the vested options on the date of grant is recorded as
stock-based compensation expense with the balance deferred and amortized over
the remaining vesting period. For the years ended December 31, 1999, 1998 and
1997, the Company recognized approximately $19.6 million, $9.8 million and $6.5
million, respectively, of stock-based compensation expense and expects to
recognize an additional expense of approximately $20.0 million over the next
five years as such outstanding options vest. These amounts include stock options
granted pursuant to the Company's stock incentive plans and other stock options
the Company has granted. In 1997 and 1996, the Company classified $3.1 million
and $943,000, respectively, of stock-based compensation within discontinued
operations.
During 1999 the Company modified the terms of certain stock options in
connection with the termination of employment of the holders. Included in
stock-based compensation expense is $2.1 million reflecting the additional
intrinsic value of those awards at the date of modification.
In October 1999, the Company amended the terms of substantially all of its
outstanding employee stock options to provide for certain accelerated vesting of
the options in the event of termination of employment with the Company as a
result of the consolidation of Company operations or functions with those of NBC
or within six months preceding or three years following a change in control of
the Company. Were such events to occur, the Company could be required to
recognize stock-based compensation expense at earlier dates or in greater
amounts than currently expected.
A summary of the Company's 1994, 1996 and 1998 stock option plans as of
December 31, 1999 and 1998 and changes during the three years ending December
31, 1999 is presented below:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
---------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year... 9,341,662 $5.86 3,605,461 $3.28 3,590,693 $3.41
Granted.......................... 2,364,000 7.25 6,279,500 7.23 348,018 2.07
Forfeited........................ (1,612,500) 7.21 (228,000) 6.36 (65,800) 3.42
Exercised........................ (1,202,101) 3.46 (315,299) 3.22 (267,450) 3.42
---------- ----- --------- ----- --------- -----
Outstanding, end of year......... 8,891,061 $6.31 9,341,662 $5.86 3,605,461 $3.28
========== ===== ========= ===== ========= =====
Weighted average fair value of
options granted during the
year.......................... $6.90 $9.14 $8.39
===== ===== =====
</TABLE>
The majority of the Company's option grants have been at exercise prices of
$7.25 and $3.42, prices which have historically been below the fair market value
of the underlying common stock at the date of grant.
F-24
<PAGE> 64
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about employee and director
stock options outstanding and exercisable under the Company's stock incentive
plans at December 31, 1999:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE NUMBER
OUTSTANDING AT REMAINING EXERCISABLE AT
DECEMBER 31, CONTRACTUAL DECEMBER 31,
EXERCISE PRICES 1999 LIFE 1999
--------------- -------------- ----------- --------------
<S> <C> <C> <C>
$0.01........................................... 840,000 8 --
$1.00........................................... 360,000 8 360,000
$3.42........................................... 2,184,561 5 2,033,461
$7.25........................................... 5,506,500 9 1,288,925
--------- ---------
8,891,061 3,682,386
========= =========
</TABLE>
FAIR VALUE DISCLOSURES
Had compensation expense for the Company's stock option grants (including
options granted outside of the Company's stock incentive plans) been determined
using the fair value method the Company's net income (loss) and net income
(loss) per share would have been as follows (in thousands except per share
data):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
--------- --------- --------
<S> <C> <C> <C>
Net (loss) income:
As reported........................................ $(314,579) $(137,955) $188,413
Pro forma.......................................... (319,919) (144,743) 187,298
Basic and diluted net (loss) income per share:
Net (loss) income per share
As reported..................................... $ (5.10) $ (2.29) $ 3.50
Pro forma....................................... (5.18) (2.40) 3.48
</TABLE>
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option pricing model assuming a dividend yield of 0.0%,
expected volatility range of 50% to 73%, and risk free interest rates of 4.98%
to 6.9% and weighted average expected option terms of .5 to 7.5 years.
EMPLOYMENT AGREEMENTS
Mr. Paxson entered into a new employment agreement with the Company
effective October 1999 for a three year term. The agreement provides that Mr.
Paxson's base salary will be $600,000 increasing 10% annually. In addition to
his base salary, Mr. Paxson may receive an annual bonus at the discretion of,
and in an amount set by, the Compensation Committee of the Board of Directors.
Mr. Paxson also received options to purchase 1,000,000 shares of Class A
common stock, which vest at a rate of 333,333 shares per year (333,334 on the
third year) and expire in ten years. The exercise price for options vesting on
the first anniversary is $10. The exercise price for options vesting on
subsequent anniversaries will be the lower of a range between $14 and $18, or
the fair market value of the common stock on the prior anniversary date. The
Company recognized stock-based compensation expense related to this new grant of
approximately $135,000 for the year ended December 31, 1999.
Mr. Sagansky, the Company's Chief Executive Officer, entered into a new
employment agreement effective September 1999 for a term of four years. The
agreement provides that Mr. Sagansky's base salary will be $600,000 increasing
10% annually. In addition to his base salary, Mr. Sagansky may receive an annual
bonus at the discretion of, and in an amount set by, the Compensation Committee
of the Board of Directors.
F-25
<PAGE> 65
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In conjunction with the new employment agreement, the Compensation
Committee of the Board of Directors reduced the per share exercise price of the
CEO's existing 840,000 unvested stock options to $.01 and 360,000 vested stock
options to $1.00. The Company recognized stock based compensation of
approximately $8.2 million for the year ended December 31, 1999 related to these
options. In conjunction with the option repricing, the CEO's rights under his
prior employment agreement to receive royalties on all original PAX TV
television programming were cancelled.
The CEO also received options to purchase an additional 2,000,000 shares of
Class A common stock, which vest at the rate of 500,000 shares per year and
expire in ten years. The exercise price for options vesting on the first
anniversary is $10. The exercise price for options vesting on subsequent
anniversaries will be the lower of a range between $14 and $21, or the fair
market value of the common stock on the prior anniversary date. The Company
recognized stock-based compensation expense related to this new grant of
approximately $738,000 for the year ended December 31, 1999.
The options granted outside of the Company's stock incentive plans have a
weighted average remaining contractual life of 10 years. None of these options
are exercisable at December 31, 1999. The options granted to Mr. Paxson and Mr.
Sagansky which vest subsequent to the first year are being accounted for as
variable plans. Accordingly, although the Company records a periodic estimate of
the stock-based compensation expense under these variable plans, the ultimate
compensation expense for such options will not be determined until their vesting
dates.
NOTES RECEIVABLE FROM THE SALE OF STOCK
During December 1996, the Company approved a program under which it
extended loans to certain members of management for the purchase of Company
common stock in the open market by those individuals. The loans are full
recourse promissory notes bearing interest at 5.75% per annum and are
collateralized by the shares of stock purchased with the loan proceeds. The
Company extended the maturity of all outstanding loans under this program until
March 31, 2001. During the year ended December 31, 1999, approximately $1.5
million of principal and interest was repaid to the Company under this program.
The outstanding principal balance on such loans was approximately $1.3 million
and $2.8 million at December 31, 1999 and 1998, respectively, and is reflected
as stock subscription notes receivable in the accompanying balance sheets.
F-26
<PAGE> 66
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. REDEEMABLE PREFERRED STOCK:
The following represents a summary of the changes in the Company's
mandatorily redeemable preferred stock during the three years ended December 31,
1999 (in thousands):
<TABLE>
<CAPTION>
JUNIOR
EXCHANGEABLE CONVERTIBLE
JUNIOR EXCHANGEABLE PREFERRED CONVERTIBLE EXCHANGEABLE
PREFERRED PREFERRED STOCK PREFERRED PREFERRED
STOCK 12% STOCK 12 1/2% 13 3/4% STOCK 9 3/4% STOCK 8% TOTAL
--------- ------------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996..................... $36,781 $147,929 $184,710
Accretion.................. 666 668 1,334
Accrual of cumulative
dividends................ 5,165 19,778 24,943
------- -------- -------- ------- -------- --------
Balance at December 31,
1997..................... 42,612 168,375 210,987
Issuances.................. -- -- $190,000 $70,747 260,747
Accretion.................. 681 670 646 271 2,268
Accrual of cumulative
dividends................ 5,803 22,472 14,986 4,138 47,399
------- -------- -------- ------- -------- --------
Balance at December 31,
1998..................... 49,096 191,517 205,632 75,156 521,401
Issuances.................. -- -- -- -- $339,837 339,837
Accretion.................. 697 673 1,164 486 6,715 9,735
Accrual of cumulative
dividends................ 6,519 25,371 29,430 8,002 9,683 79,005
Cash dividends............. (171) -- -- -- -- (171)
------- -------- -------- ------- -------- --------
Balance at December 31,
1999..................... $56,141 $217,561 $236,226 $83,644 $356,235 $949,807
======= ======== ======== ======= ======== ========
</TABLE>
CONVERTIBLE EXCHANGEABLE PREFERRED STOCK 8%
Pursuant to the Investment Agreement, NBC acquired $415 million aggregate
liquidation preference of a new series of the Company's convertible exchangeable
preferred stock which accrues cumulative dividends from the Issue Date at an
annual rate of 8% and is convertible (subject to adjustment under the terms of
the Certificate of Designation relating to the Series B Convertible Preferred
Stock) into 31,896,032 shares of the Company's Class A Common Stock at an
initial conversion price of $13.01 per share, which increases at a rate equal to
the dividend rate.
The Series B Convertible Preferred Stock is mandatorily redeemable in
September 2002 or annually thereafter through September 2009. The Series B
Convertible Preferred Stock also has redemption rights prior to September 2002
under certain circumstances related to the attribution to NBC of its investment
in the Company under rules established by the FCC. The Company's mandatory
redemption obligations in respect of the Series B Convertible Preferred Stock is
subject to the Company's compliance with the terms under its existing debt and
preferred stock agreements as well as the existence of funds on hand to
consummate such redemption.
The Series B Convertible Preferred Stock is exchangeable, at the option of
the holder, subject to the Company's debt and preferred stock covenants limiting
additional indebtedness but in any event not later than January 1, 2007, into
convertible debentures of the Company ranking on a parity with the Company's
other subordinated indebtedness. Should NBC determine that the rules and
regulations of the FCC prohibit it from
F-27
<PAGE> 67
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
holding shares of Class A Common Stock, NBC may convert the Series B Convertible
Preferred Stock held by it into an equal number of shares of non-voting common
stock of the Company, which non-voting common stock shall be immediately
convertible into Class A Common Stock upon transfer by NBC.
Convertible exchangeable preferred stock dividends in arrears aggregated
approximately $9.7 million at December 31, 1999.
JUNIOR PREFERRED STOCK 12%
At December 31, 1999 and 1998, the Company had 33,000 shares of $0.001 par
value Junior Preferred Stock authorized, issued and outstanding. Holders of the
Junior Preferred Stock are entitled to cumulative dividends at an annual rate of
12% prior to December 22, 2001, 13% from December 23, 2001 to December 22, 2002,
and 14% per annum thereafter. Semi-annual dividend payments commenced December
31, 1999.
The Junior Preferred Stock is currently redeemable, at the option of the
Company, at par plus unpaid, deferred, and accrued dividends. The shares are
subject to mandatory redemption on December 22, 2003. During 1999, the Company
paid dividends of approximately $171,000.
Junior Preferred Stock dividends in arrears aggregated approximately $26.1
million and $19.8 million at December 31, 1999 and 1998, respectively.
CUMULATIVE EXCHANGEABLE PREFERRED STOCK 12 1/2%
At December 31, 1999, the Company has authorized 440,000 shares of $0.001
par value Cumulative Exchangeable Preferred Stock (the "Exchangeable Preferred
Stock") of which 217,649 and 192,797 were issued and outstanding as of December
31, 1999 and 1998, respectively. Holders of Exchangeable Preferred Stock are
entitled to cumulative dividends at an annual rate of 12.5% of the liquidation
preference, payable semi-annually in cash or additional shares beginning April
30, 1997.
The Company is required to redeem all of the then outstanding Exchangeable
Preferred Stock on October 31, 2006 at a price equal to the aggregate
liquidation preference thereof plus accumulated and unpaid dividends to the date
of redemption. Additionally, the Exchangeable Preferred Stock is redeemable at
the option of the Company on or after October 31, 2001 at the redemption prices
set forth below (expressed as a percentage of liquidation preference):
<TABLE>
<CAPTION>
TWELVE MONTH PERIOD
BEGINNING OCTOBER 31,
- ---------------------
<S> <C>
2001................................................. 106.250%
2002................................................. 104.167%
2003................................................. 102.083%
2004 and thereafter.................................. 100.000%
</TABLE>
Upon a change of control, the Company is required to offer to purchase the
Exchangeable Preferred Stock at a price equal to 101% of the liquidation
preference thereof plus accumulated and unpaid dividends.
The Company may, provided it is not contractually prohibited from doing so,
exchange the outstanding Exchangeable Preferred Stock for 12.5% Exchange
Debentures due 2006. Additionally, the Company has agreed to exchange all
outstanding Exchangeable Preferred Stock for 12.5% Exchange Debentures within 60
days from the date on which the Company is no longer contractually prohibited
from effecting such exchange. The Exchange Debentures have redemption features
similar to those of the Exchangeable Preferred Stock.
F-28
<PAGE> 68
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During 1999, 1998 and 1997, the Company paid dividends of approximately
$24.9 million, $22.0 million and $20.8 million, respectively, by the issuance of
additional shares of Exchangeable Preferred Stock. Accrued Exchangeable
Preferred Stock dividends since the last dividend payment date aggregated
approximately $4.5 million and $4.0 million at December 31, 1999 and 1998,
respectively.
JUNIOR EXCHANGEABLE PREFERRED STOCK 13 1/4%
During 1998, the Company issued 20,000 shares of Cumulative Junior
Exchangeable Preferred Stock (the "Junior Preferred Stock") with an aggregate
$200 million liquidation preference for gross proceeds of an equivalent amount.
At December 31, 1999 and 1998, the Company has authorized 72,000 shares of
$0.001 par value Junior Preferred Stock of which 24,043 and 21,170 were issued
and outstanding, respectively. Holders of the Junior Preferred Stock are
entitled to cumulative dividends at an annual rate of 13 1/4%, payable semi-
annually in cash or additional shares beginning November 15, 1998 and
accumulating from the issue date. If dividends for any period ending after May
15, 2003 are paid in additional shares of Junior Preferred Stock, the dividend
rate will increase by 1% per annum for such dividend payment period.
The Company is required to redeem all of the then outstanding Junior
Preferred Stock on November 15, 2006, at a price equal to the aggregate
liquidation preference thereof plus accumulated and unpaid dividends to the date
of redemption. The Junior Preferred Stock is redeemable at the Company's option
at any time on or after May 15, 2003, at the redemption prices set forth below
(expressed as a percentage of liquidation preference) plus accumulated and
unpaid dividends to the date of redemption:
<TABLE>
<CAPTION>
TWELVE MONTH PERIOD
BEGINNING MAY 15,
- -------------------
<S> <C>
2003................................................... 106.625%
2004................................................... 103.313%
2005 and thereafter.................................... 100.000%
</TABLE>
Prior to May 15, 2001, the Company may use the proceeds of certain public
stock offerings or major asset sales to redeem up to an aggregate of 35% of the
shares of Junior Preferred Stock outstanding at 113.25% of the aggregate
liquidation preference of such shares, plus accumulated and unpaid dividends.
Upon a change of control, the Company is required to offer to purchase the
Junior Preferred Stock at a price equal to 101% of the liquidation preference
thereof plus accumulated and unpaid dividends.
The Company may, provided it is not contractually prohibited from doing so,
exchange the outstanding Junior Preferred Stock on any dividend payment date for
13 1/4% Exchange Debentures due 2006. The Exchange Debentures have redemption
features similar to those of the Junior Preferred Stock.
During 1999 and 1998, the Company paid dividends of approximately $28.9
million and $11.5 million, respectively, by the issuance of additional shares of
Junior Preferred Stock. Accrued Junior Preferred Stock dividends since the last
dividend payment date aggregated approximately $4.0 million and $3.5 million at
December 31, 1999 and 1998, respectively.
CONVERTIBLE PREFERRED STOCK 9 3/4%
During 1998, the Company issued 7,500 shares of Series A Convertible
Preferred Stock ("Convertible Preferred Stock") with an aggregate liquidation
preference of $75 million, and warrants to purchase 240,000 shares of Class A
common stock. At December 31, 1999 and 1998, the Company had authorized 17,500
shares of $0.001 par value Convertible Preferred Stock of which 8,714 and 7,913
were issued and outstanding, respectively. Of the gross proceeds of $75 million,
approximately $960,000 was allocated to the value of the warrants, which are
exercisable at a price of $16 per share through June 2003. Holders of the
Convertible Preferred Stock are entitled to receive cumulative dividends at an
annual rate of 9 3/4%, payable quarterly beginning September 30, 1998 and
accumulating from the issue date. The Company may pay dividends either
F-29
<PAGE> 69
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
in cash, in additional shares of Convertible Preferred Stock, or (subject to an
increased dividend rate) by the issuance of shares of Class A common stock equal
in value to the amount of such dividends.
During 1999 and 1998, the Company paid dividends of approximately $8.0
million and $4.1 million, respectively, by the issuance of additional shares of
Convertible Preferred Stock. At December 31, 1999 and 1998, there were no
accrued and unpaid dividends on the Convertible Preferred Stock.
The Company is required to redeem the Convertible Preferred Stock on
December 31, 2006, at a price equal to the aggregate liquidation preference
thereof plus accumulated and unpaid dividends to the date of redemption. The
Convertible Preferred Stock is redeemable by the Company at any time on or after
June 30, 2003, at the redemption prices set forth below (expressed as a
percentage of liquidation value) plus accumulated and unpaid dividends to the
date of redemption:
<TABLE>
<CAPTION>
TWELVE MONTH PERIOD
BEGINNING JUNE 30,
- -------------------
<S> <C>
2003................................................... 104.00%
2004................................................... 102.00%
2005 and thereafter.................................... 100.00%
</TABLE>
Upon a change of control, the Company is required to offer to purchase the
Convertible Preferred Stock at a price equal to the liquidation preference
thereof plus accumulated and unpaid dividends. The Convertible Preferred Stock
ranks junior to all other existing classes of preferred stock (including the
Junior Preferred Stock). The Convertible Preferred Stock contains restrictions,
primarily based on the trading price of the common stock, on the issuance of
additional preferred stock ranking senior to the Convertible Preferred Stock.
Each share of Convertible Preferred Stock is convertible into shares of
Class A common stock at an initial conversion price of $16 per share, at any
time on or after June 30, 1999, or immediately in the event of a change in
control or major asset sale or at any time after the date as of which the
average of the common stock trading price for five consecutive trading days
equals or exceeds $25.00. If the Convertible Preferred Stock is called for
redemption, the conversion right will terminate at the close of business on the
date fixed for redemption.
Holders of the Convertible Preferred Stock will have voting rights on all
matters submitted for a vote to the Company's common stockholders and will be
entitled to one vote for each share of Class A common stock into which their
Convertible Preferred Stock is convertible.
F-30
<PAGE> 70
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REDEMPTION FEATURES OF PREFERRED STOCK
The following table presents the redemption value of the five classes of
preferred stock outstanding at December 31, 1999 should the Company elect to
redeem the preferred stock in the indicated year, assuming no dividends are paid
prior to redemption, unless required (in thousands):
<TABLE>
<CAPTION>
JUNIOR CONVERTIBLE CONVERTIBLE
JUNIOR EXCHANGEABLE EXCHANGEABLE PREFERRED EXCHANGEABLE
PREFERRED PREFERRED PREFERRED STOCK PREFERRED
STOCK 12%(1) STOCK 12 1/2%(2) STOCK 13 1/4%(3) 9 3/4%(4) STOCK 8%(5)
------------ ---------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
2000.......................... $59,102 $ -- $ -- $ -- $ --
2001.......................... 59,102 300,495 -- -- --
2002.......................... 59,102 332,708 -- -- --
2003.......................... 59,102 326,182 407,905 133,228 --
2004.......................... -- 319,659 395,340 143,880 582,383
</TABLE>
- ---------------
(1) Mandatorily redeemable on December 22, 2003; redeemable by the Company prior
to that date.
(2) Mandatorily redeemable on October 31, 2006; redeemable by the Company on or
after October 31, 2001. See previous discussion for earlier redemption
features on up to 35% of the shares.
(3) Mandatorily redeemable on November 15, 2006; redeemable by the Company on or
after May 15, 2003.
(4) Mandatorily redeemable on December 31, 2006; redeemable by the Company on or
after June 30, 2003.
(5) Mandatorily redeemable in September 2002 and annually thereafter through
September 2009, and prior to such dates under certain circumstances related
to the attribution of NBC's investment in the Company under rules
established by the FCC. The Company has the right to redeem the Series B
Convertible Preferred Stock in whole or in part commencing in September 2004
at the redemption value of such shares plus accrued and unpaid dividends.
COVENANTS UNDER PREFERRED STOCK AGREEMENTS
The preferred stock contains certain covenants which, among other things,
restrict additional indebtedness, payment of dividends, transactions with
related parties, certain investments and transfers or sales of assets.
18. COMMON STOCK WARRANTS:
CLASS A AND B COMMON STOCK WARRANTS
In connection with the NBC transaction as discussed elsewhere herein, NBC
also acquired a warrant to purchase up to 13,065,507 shares of Class A Common
stock at an exercise price of $12.60 per share ("Warrant A") and a warrant to
purchase up to 18,966,620 shares of Class A Common Stock ("Warrant B") at an
exercise price equal to the average of the closing sale prices of the Class A
Common Stock for the 45 consecutive trading days ending on the trading day
immediately preceding the warrant exercise date (provided that such price shall
not be more than 17.5% higher or 17.5% lower than the six month trailing average
closing sale price) subject to a minimum exercise price during the first three
years after the Issue Date of $22.50 per share. The Warrants are exercisable for
ten years from the Issue Date, subject to certain conditions and limitations.
In connection with the Series A Convertible Preferred Stock sale in June
1998, the Company issued warrants to purchase 240,000 shares of Class A common
stock at an exercise price of $16. The warrants were valued at $960,000.
In June 1998, the Company issued to an affiliate of a newly appointed
member of its Board of Directors five year warrants entitling the holder to
purchase 155,500 shares of Class A common stock at an exercise
F-31
<PAGE> 71
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
price of $16.00 per share. The Company recorded $622,000 of stock-based
compensation expense in connection with this issuance. See Note 5.
CLASS C COMMON STOCK WARRANTS
During 1996 and 1997, subsequent to a modification of their original terms,
4,853,628 Class C common stock purchase warrants were exercised for 4,853,220
shares of Class A common stock.
19. COMMON STOCK:
The Company has authorized 12,500,000 shares of Class C common stock with a
par value of $0.001 per share. No shares of the Company's Class C common stock
were issued or outstanding at December 31, 1999, 1998 or 1997.
Class A common stock and Class B common stock will vote as a single class
on all matters submitted to a vote of the stockholders, with each share of Class
A common stock entitled to one vote and each share of Class B common stock
entitled to ten votes; Class C common stock is non-voting. Each share of Class B
common stock is convertible, at the option of its holder, into one share of
Class A common stock at any time. Under certain circumstances, Class C common
stock may be converted, at the option of the holder, into Class A common stock.
20. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair value of financial instruments has been determined by
the Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting data
to develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The fair value estimates presented herein
are based on pertinent information available to management as of December 31,
1999. Although management is not aware of any factors that would significantly
affect the estimated fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements since that
date and current estimates of fair value may differ significantly from the
amounts presented herein. The following methods and assumptions were used to
estimate the fair value of each class of financial instruments for which it is
practicable to estimate such value:
Cash and cash equivalents, short-term investments, restricted cash and
short-term investments, accounts receivable, accounts payable and accrued
expenses. The fair values approximate the carrying values due to their short
term nature.
Investments in broadcast properties. The fair value of investments in
broadcast properties is estimated based on recent market sale prices for
comparable stations and/or markets. The fair value approximates the carrying
value.
Long-term debt and senior subordinated notes. The fair value of the
Company's long-term debt is estimated based on current market rates and
instruments with the same risk and maturities. The fair value of the Company's
long-term debt approximates its carrying value. The fair market value of the
Company's senior subordinated notes is estimated based on year end quoted market
prices for such securities. At December 31, 1999, the estimated fair market
value of the Company's senior subordinated notes was approximately $239.2
million.
F-32
<PAGE> 72
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Mandatorily redeemable securities. The fair market value of the Company's
mandatorily redeemable preferred stock (excluding accrued dividends) is
estimated based on quoted market prices except for the Junior Preferred Stock
12% and the Convertible Exchangeable Preferred Stock 8% which are estimated at
the Company's carrying value as no quoted market prices are available for these
securities. The estimated fair market value of the Company's mandatorily
redeemable preferred stock is as follows (in thousands):
<TABLE>
<S> <C>
Junior Preferred 12%........................................ $ 56,141
Exchangeable Preferred 12 1/2%.............................. 222,003
Junior Exchangeable Preferred 13 1/4%....................... 245,840
Convertible Preferred 9 3/4%................................ 93,022
Convertible Exchangeable Preferred 8%....................... 356,235
----------
$ 973,241
==========
</TABLE>
21. COMMITMENTS AND CONTINGENCIES:
The Company incurred total operating expenses of approximately $15.2
million, $10.8 million and $4.7 million for the years ended December 31, 1999,
1998 and 1997, respectively, under operating leases for broadcasting facilities
and equipment. Future minimum annual payments under these non-cancelable
operating leases and employment agreements, as of December 31, 1999, are as
follows (in thousands):
<TABLE>
<S> <C>
2000........................................................ $15,586
2001........................................................ 12,235
2002........................................................ 11,947
2003........................................................ 10,439
2004........................................................ 6,416
Thereafter.................................................. 28,171
-------
$84,794
=======
</TABLE>
At December 31, 1999, the Company had entered into certain affiliation and
time brokerage agreements which required certain minimum payments as follows (in
thousands):
<TABLE>
<S> <C>
2000........................................................ $3,926
2001........................................................ 3,128
2002........................................................ 240
2003........................................................ 240
2004........................................................ 240
------
$7,774
======
</TABLE>
F-33
<PAGE> 73
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INVESTMENT COMMITMENTS
The Company has agreements to purchase significant assets of, or to enter
into time brokerage and financing arrangements with respect to, the following
properties, which are subject to various conditions, including the receipt of
regulatory approvals. The completion of each of the investments discussed below
is subject to a variety of factors and to the satisfaction of various
conditions, and there can be no assurance that any of such investments will be
completed.
<TABLE>
<CAPTION>
PURCHASE PRICE
STATION MARKET SERVED (IN THOUSANDS)
- ------- ------------- --------------
<S> <C> <C>
WBPX...................................... Boston, MA(1) $ 40,000
WPXX/WPXL................................. Memphis, TN/New Orleans, LA(2) 40,000
KSPX...................................... Sacramento, CA(3) 17,000
WCPX...................................... Chicago, IL(4) 15,000
KPPX...................................... Phoenix, AZ(5) 12,111
WAOM...................................... Lexington, KY 8,000
Channel 61................................ Mobile, AL 6,750
WBNA...................................... Louisville, KY 3,000
Channel 22................................ Montgomery, AL 1,550
WAZW...................................... Wausau, WI 888
Less: advances and escrow deposits........ (30,603)
--------
Total investment commitments.............. $113,696
========
</TABLE>
In addition to the above amounts the Company has agreed to purchase
stations from DP Media (see Note 3).
- ---------------
(1) Formerly WABU, and includes two full power satellite stations.
(2) The Company has a $4 million escrow deposit on these stations.
(3) The Company has loaned an aggregate of $8.5 million to the station owner and
began operating the station pursuant to a time brokerage agreement on
October 1, 1996, pending completion of the acquisition of the station. The
loan will be applied to the purchase price at the date of closing.
(4) The Company has acquired WCPX for $120 million, the Company's interests in
KWOK and up to $15 million of contingent payments to be determined based
upon the seller's ability to deliver its programming to the Chicago market
via cable carriage post closing. As of December 31, 1999, the Company has
funded approximately $5.3 million of this cable carriage commitment. The
Company transferred its interest in KWOK during February 1999.
(5) The Company had acquired a 49% interest in this station as of December 31,
1999.
LEGAL PROCEEDINGS
The Company is involved in litigation from time to time in the ordinary
course of its business. In the opinion of management, the ultimate resolution of
these matters will not have a material effect on the Company's consolidated
financial position or results of operations and cash flows.
In October, November and December 1999, complaints were filed in the 15th
Judicial Circuit Court in Palm Beach County, Florida, in the Court of Chancery
of the State of Delaware and in Superior Court of the State of California
against certain of the Company's officers and directors by alleged stockholders
of the Company alleging breach of fiduciary duty by the directors in approving
the transactions with NBC which occurred in September 1999. The complaints
allege that the directors failed to pursue acquisition negotiations with a party
other than NBC, which transaction would have provided the Company's stockholders
with a substantial premium over the then market price of the Company's common
stock and instead completed the
F-34
<PAGE> 74
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NBC Investment Agreement and related transactions. The Company believes the
suits to be wholly without merit and intends to vigorously defend its actions on
these matters.
In May 1998, a complaint was filed against certain of the Company's
officers by a shareholder of the Company alleging breach of fiduciary duty by
the directors in approving payment of certain bonuses to members of the
Company's management in connection with the 1997 sale of the Company's Radio
Segment and seeking damages on behalf of the Company. This suit was settled in
November 1999 by the payment by the Company of $600,000 for which amount the
Company was indemnified by its insurers.
OTHER
See also Notes 3, 11, 12 and 15.
22. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE 1999 QUARTERS ENDED
------------------------------------------------------
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
------------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Total revenue............................... $ 80,677 $ 58,051 $ 57,855 $ 51,779
Expenses, excluding depreciation,
amortization and stock-based
compensation.............................. 81,058 78,522 148,468 70,891
Depreciation and amortization............... 21,016 19,488 18,730 18,626
Stock-based compensation.................... 3,101 9,419 2,147 2,147
----------- ----------- ----------- -----------
Operating loss.............................. $ (24,498) $ (49,378) $ (111,490) $ (39,885)
=========== =========== =========== ===========
Net loss attributable to common stock....... $ (76,958) $ (129,759) $ (82,732) $ (25,130)
=========== =========== =========== ===========
Basic and diluted earnings per share:
Loss from continuing operations........... $ (1.23) $ (2.10) $ (1.35) $ (0.41)
Net loss.................................. $ (1.23) $ (2.10) $ (1.35) $ (0.41)
Weighted average common shares
outstanding............................... 62,668,330 61,887,000 61,420,661 60,954,281
=========== =========== =========== ===========
Stock price(1)
High................................... $ 13 13/16 $ 17 7/16 $ 14 1/4 $ 10 1/16
Low.................................... $ 9 5/8 $ 10 1/2 $ 7 7/8 $ 7 5/8
</TABLE>
- ---------------
(1) The Company's Class A common stock is listed on the American Stock Exchange
under the symbol PAX.
F-35
<PAGE> 75
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
FOR THE 1998 QUARTERS ENDED
------------------------------------------------------
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
------------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Total revenue............................... $ 42,753 $ 29,402 $ 30,376 $ 31,665
Expenses, excluding depreciation,
amortization and stock-based
compensation.............................. 84,557 63,182 33,888 27,678
Depreciation and amortization............... 21,553 10,098 10,408 7,950
Stock-based compensation.................... 2,424 2,902 4,780 307
----------- ----------- ----------- -----------
Operating loss.............................. $ (65,781) $ (46,780) $ (18,700) $ (4,270)
=========== =========== =========== ===========
Income (loss) from continuing operations.... $ (60,766) $ (36,571) $ 5,225 $ 2,642
Discontinued operations..................... 1,182 -- -- --
----------- ----------- ----------- -----------
Net income (loss)........................... $ (59,584) $ (36,571) $ 5,225 $ 2,642
=========== =========== =========== ===========
Net loss attributable to common stock....... $ (76,383) $ (53,011) $ (4,121) $ (4,440)
=========== =========== =========== ===========
Basic and diluted earnings per share:
Loss from continuing operations........... $ (1.28) $ (0.87) $ (0.07) $ (0.07)
Discontinued operations................... $ 0.02 $ -- $ -- $ --
Net loss.................................. $ (1.26) $ (0.87) $ (0.07) $ (0.07)
Weighted average common shares
outstanding............................... 60,844,515 60,740,230 59,921,236 59,588,768
=========== =========== =========== ===========
Stock price(1)
High................................... $ 9 1/4 $ 12 3/4 $ 13 7/16 $ 11 3/16
Low.................................... $ 6 1/8 $ 9 3/16 $ 9 15/16 $ 7 9/16
</TABLE>
- ---------------
(1) The Company's Class A common stock is listed on the American Stock Exchange
under the symbol PAX.
F-36
<PAGE> 76
SCHEDULE II
PAXSON COMMUNICATIONS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- -------- ---------- ----------
ADDITIONS
--------------------
CHARGED
BALANCE AT TO BALANCE AT
BEGINNING COSTS AND END OF
OF YEAR EXPENSES OTHER DEDUCTIONS YEAR
---------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1999
Allowance for doubtful accounts..... $ 3,953 $6,164 $ -- $ (5,862)(1) $ 4,255
======= ====== ======= ======== =======
Deferred tax assets valuation
allowance......................... $ 3,071 $ -- $24,358(2) $ -- $27,429
======= ====== ======= ======== =======
For the year ended December 31, 1998
Allowance for doubtful accounts..... $ 912 $4,214 $ -- $ (1,173)(1) $ 3,953
======= ====== ======= ======== =======
Deferred tax assets valuation
allowance......................... $ 3,071 $ -- $ -- $ -- $ 3,071
======= ====== ======= ======== =======
For the year ended December 31, 1997
Allowance for doubtful accounts..... $ 1,577 $2,011 $ -- $ (2,676)(3) $ 912
======= ====== ======= ======== =======
Deferred tax assets valuation
allowance......................... $23,615 $ -- $ -- $(20,544)(2) $ 3,071
======= ====== ======= ======== =======
</TABLE>
- ---------------
(1) Write off of uncollectible receivables.
(2) Valuation allowance for net deferred tax assets due to uncertainty
surrounding the Company's utilization of future tax benefits.
(3) Reflects the impact of the sale of Network-Affiliated Television and Paxson
Radio receivables in connection with the sales of these segments during 1997
of approximately $1.5 million as well as the write off of uncollectible
receivables of $1.2 million.
F-37
<PAGE> 1
EXHIBIT 10.205.1
EMPLOYMENT SEPARATION AGREEMENT
This EMPLOYMENT SEPARATION AGREEMENT made as of this 24th day of
November, 1999, (this "Agreement") by and between Paxson Communications
Corporation, with its principal place of business at 601 Clearwater Park Road,
West Palm Beach, Florida 33401-6233, and its subsidiaries, divisions and
affiliated entities (collectively, "Paxson") and John F. DeLorenzo, an
individual, currently residing at the address set forth under such individual's
signature below (collectively including any entity to which he may assign his
rights under this Agreement or his estate, "DeLorenzo" and collectively with
Paxson referred to herein as the "Parties").
WHEREAS, Paxson and DeLorenzo are parties to that certain Employment
Agreement dated as of April 14, 1999 (the "Employment Agreement"); and
WHEREAS, Paxson and DeLorenzo desire to end DeLorenzo's employment
relationship with Paxson on or before December 31, 1999, in accordance with the
terms of this Agreement and provide for a settlement and termination of their
respective obligations under the Employment Agreement.
NOW THEREFORE, for value received and in consideration of the mutual
agreements and waivers contained herein, the Parties agree as follows:
1. SEPARATION. DeLorenzo agrees that his employment with Paxson will end
on or before December 31, 1999; provided however, that in the event
the Company elects to employ DeLorenzo past December 15, 1999, it
shall provide written notice to DeLorenzo on or before December 3,
1999, in which case DeLorenzo shall be entitled to his regular
compensation and benefits through December 31, 1999 (in addition to
any other severance compensation provided for herein), notwithstanding
the fact that his employment with the Company may terminate before
December 31, 1999. If no such written notice is received by DeLorenzo
on or before December 3, 1999, his employment hereunder shall
terminate as of December 15, 1999. The date of DeLorenzo's employment
ending, which date shall be on or before December 31, 1999, shall be
referred to herein as the "Termination Date". DeLorenzo agrees that on
the Termination Date he will immediately return to Paxson all property
(including keys, access cards, etc.) and documents (including all
copies of documents) which DeLorenzo obtained from Paxson or from any
of its customers or employees during the term of his employment with
Paxson.
<PAGE> 2
2. OBLIGATIONS OF THE PARTIES. In full settlement of Paxson's obligations
to DeLorenzo under the Employment Agreement and in consideration of
the agreements and waivers under Sections 3 and 4 hereof, Paxson and
DeLorenzo agree as follows:
1. Paxson shall continue to pay DeLorenzo his current base
salary and benefits through the Termination Date, or if such
date is not during the month of November, 1999, then the
Company shall continue to pay DeLorenzo such base salary and
benefits through December 31, 1999, regardless of the actual
Termination Date, such payments to be made in the manner
customary to which Paxson has been making payments to
DeLorenzo during the course of his employment. DeLorenzo
shall be paid any accrued and unpaid or reimbursed salary or
expenses through the Termination Date.
2. Paxson shall pay DeLorenzo a severance payment in lieu of any
other severance under the Employment Agreement (other than
the stock options provided for herein) (but exclusive of any
amounts payable to DeLorenzo as contemplated by Section 1)
equal to six (6) months of his base salary in effect as of
the Termination Date. Such severance payment shall to be paid
in the manner customary to which Paxson has been making
salary payments to DeLorenzo during the course of his
employment but in any event the entire amount of severance
shall be paid in full on or before March 31, 2000.
3. Paxson and DeLorenzo hereby agree that, (i) effective on the
Termination Date, DeLorenzo shall automatically be vested in
60,000 of the 180,000 unvested stock options granted under
the Employment Agreement, which options have an exercise
price of $7.25 per share; (ii) effective upon the expiration
of the Age Discrimination Waiver Effective Date, DeLorenzo
shall, automatically and without any further action required
by Paxson or DeLorenzo, be vested in an additional 10,000 of
such 180,000 unvested stock options granted under the
Employment Agreement which options have an exercise price of
$7.25 per share, and (iii) effective upon the Termination
Date, 110,000 of such 180,000 unvested stock options granted
under the Employment Agreement shall lapse and no longer be
eligible for vesting to DeLorenzo. Concurrently with the
execution hereof, the Company and DeLorenzo shall enter into
a Stock Option Grant Agreement substantially in the form of
Exhibit C hereto, and an Addendum and Modification to
Non-Qualified Stock Option Agreement incorporating the
changes to the stock option grant to reflect the revised
terms of the stock options described herein. The Company and
DeLorenzo acknowledge that the stock options shall be
exercisable for a 180 day period commencing on the
Termination Date, if such date occurs during the Company's
"trading window" for senior executives, or the date on which
the next trading window opens for senior executives, in each
case as notified by the Company to DeLorenzo, and that
DeLorenzo would be subject to SEC Rule 144 filing
requirements for the period commencing 90 days after the
Termination Date.
4. Each of the parties agree that, the Employment Agreement
shall be terminated and of no further force and effect on and
after the Termination Date, except that, notwithstanding the
foregoing, DeLorenzo's right to indemnification as an officer
and/or director of the Company, under the terms of any
agreement between Paxson and DeLorenzo, the
<PAGE> 3
organizational documents of Paxson or applicable law, shall
continue and survive hereunder to the same extent as if
DeLorenzo remained an officer or director of the Company.
5. DeLorenzo hereby agrees to execute and distribute the
Resignation Letter attached hereto as Exhibit A.
3. WAIVER AND RELEASE BY PAXSON. Paxson agrees that, in exchange for
DeLorenzo's performance of its obligations under the Agreement, Paxson
hereby completely and irrevocably releases and forever discharges
DeLorenzo from any and all claims, charges, complaints, liabilities,
obligations, promises, agreements, controversies, damages, suits,
rights, demands, actions, causes of action, grievances, costs, losses,
debts, expenses (including attorneys fees and costs)of any kind or
nature that Paxson once had or now has or may have prior to the
Termination Date whether or not arising out of the employment or
separation of employment with DeLorenzo, and whether now known or
unknown to Paxson suspected or unsuspected, fixed or contingent,
existing or occurring as of the date this Agreement becomes effective.
Paxson further agrees that it will not bring any such charges, claims
or actions against DeLorenzo in the future arising from events
occurring prior to the Termination Date hereof.
4. WAIVER AND RELEASE BY DELORENZO. DeLorenzo agrees that, in exchange
for Paxson's performance of its obligations under the Agreement:
1. DeLorenzo's release/waiver of claims. DeLorenzo (on his own
behalf and on behalf of his heirs or personal representatives
or any other person who may be entitled to make a claim on
DeLorenzo's behalf or through him) hereby completely releases
and discharges Paxson from any and all claims, charges,
actions and causes of action of any kind or nature that
DeLorenzo once had or now has whether arising out of his
employment or separation of employment with Paxson, and
whether such claims are now known or unknown to DeLorenzo;
provided, however, nothing herein shall limit DeLorenzo's
right to indemnification as an officer and/or director of the
Company.
2. DeLorenzo's release of all claims. Paxson and DeLorenzo
realize that there are many laws and regulations relating to
employment relationships, including Title VII of the Civil
Rights Act of 1964, as amended; the Age Discrimination in
Employment Act of 1967, as amended; the Americans with
Disabilities Act of 1990; the National Labor Relations Act,
as amended; the Civil Rights Act of 1866, as amended; the
Employee Retirement and Income Security Act; and various
state constitution provisions and human rights laws as well
as the laws of contract and tort. DELORENZO INTENDS BY
SIGNING THIS AGREEMENT TO RELEASE ANY AND ALL OTHER RIGHTS
AND CLAIMS THAT HE MAY HAVE AGAINST PAXSON UNDER ALL SUCH
LAWS OR REGULATIONS.
3. Waiver of Age Discrimination Claims. Notwithstanding anything
to the contrary contained herein, DeLorenzo's waiver and
release under the Age Discrimination in Employment Act of
1967, shall only be effected as follows:
<PAGE> 4
(1) DeLorenzo shall deliver to Paxson a fully executed
waiver letter substantially in the form of Exhibit B
annexed hereto (the "Age Discrimination Waiver
Letter") no sooner than 21 days after the date
hereof and no later than 25 days after the date
hereof.
(2) The Age Discrimination Waiver Letter shall be
revocable by DeLorenzo for seven days (the
"Revocation Period") following his delivery thereof
to Paxson in accordance with Section 4c(i) hereof
and such revocation shall be made by DeLorenzo by
sending a written letter of revocation by certified
mail, return receipt requested, to Anthony L.
Morrison, General Counsel, _ Paxson Communications
Corporation, 601 Clearwater Park Road, West Palm
Beach, Florida 33401.
(3) If DeLorenzo does not revoke the Age Discrimination
Waiver Letter in accordance with the terms of
Section 4c(ii) hereof on or before the expiration of
the Revocation Period, then the Age Discrimination
Waiver Letter shall, automatically and without any
further act by DeLorenzo, become final and binding
upon DeLorenzo and Paxson on the first day
succeeding the expiration of the Revocation Period
(such date referred to herein as the "Age
Discrimination Waiver Effective Date"). In
delivering the Age Discrimination Waiver Letter, it
is the express intent of DeLorenzo to waive his
rights under, and in accordance with the
requirements of, the Age Discrimination in
Employment Act of 1967 and that in the event of any
failure or ineffectiveness of such waiver, Paxson
shall not have received the benefits intended to be
conferred upon it by DeLorenzo in exchange for the
benefits conferred by Paxson to DeLorenzo under
Section 2 hereof. Accordingly, DeLorenzo agrees that
in the event the Age Discrimination Waiver Letter is
deemed ineffective or unenforceable arising out of
any action or inaction by DeLorenzo, then the Age
Discrimination Waiver Effective Date shall be deemed
not to have occurred and the benefits conferred upon
DeLorenzo under Section 2 hereof shall be forfeited
and, in addition to any other remedies Paxson may
have at law or in equity with respect thereto,
Paxson may, in order to effect such forfeiture,
reduce the number of vested but unexercised options
held by DeLorenzo at the time of any such
forfeiture.
5. INFORMED, VOLUNTARY SIGNATURE.
1. DeLorenzo and Paxson each agree that he or it has had a full
and fair opportunity to review this Agreement and signs it
knowingly, voluntarily, and without duress or coercion.
Further, in executing this agreement, DeLorenzo and Paxson each
agree that he or it has not relied on any representation or
statement not set forth in this document.
<PAGE> 5
2. DeLorenzo and Paxson each agree that he or it was given a copy
of the Agreement and, before signing it, he had an opportunity
to consult an attorney of his own choosing, in fact, he did
consult with his own attorney before signing it.
3. This Agreement shall not become effective and the agreements
of the parties hereto shall not be enforceable in accordance
with the terms hereof until each Party has signed and
delivered to the other Party a fully executed copy of this
Agreement.
6. NO ADMISSION. The parties agree that this Agreement does not
constitute any admission by DeLorenzo or by Paxson of any (i)
violation of any statute, law, regulation, order or other applicable
authority, or (ii) breach of contract, actual or implied.
7. CONFIDENTIALITY. The Parties agree that they will not at any time or
in any manner talk about, write about, disclose or otherwise publicize
(except by mutual consent, not to be unreasonably withheld or as
required by applicable law): (a) the terms or existence of this
Agreement or its negotiation, execution or implementation; or (b)
Paxson's proprietary and trade secret information. Each of the Company
and DeLorenzo agree not to make any disparaging statements about the
other after the date hereof.
8. MISCELLANEOUS.
1. This agreement shall be interpreted and enforced in
accordance with the laws of the United States of America and
the State of Florida.
2. This Agreement and its attachments represent the sole and
entire agreement between the Parties and supersedes any and
all prior agreements, negotiations and discussions between
the parties and/or their respective counsel with respect to
the subject matters covered in this Agreement.
3. Each party will bear its own attorneys' fees and costs
incurred in connection with DeLorenzo's separation from
Paxson.
4. In the event any of the Paxson contact persons identified in
this Agreement are not available contact shall be made
directly to Lowell W. Paxson. DeLorenzo acknowledges and
agrees that contacts with Paxson representatives other than
as provided for herein shall be ineffective and shall not be
deemed, constructive or actual notice of any kind.
5. If one or more paragraph(s) of this Agreement are ruled
invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision of the Agreement, which
shall remain in full force and effect.
6. As used in this agreement, the term "Paxson" shall mean
Paxson Communications Corporation as well as its
subsidiaries, divisions, and affiliated organizations as well
as
<PAGE> 6
their respective successors and assigns together with their
directors, officers, employees, agents, attorneys,
representatives, shareholders and their respective heirs and
personal representatives.
7. This agreement may not be modified orally but only by a
writing signed by both parties to this Agreement.
8. Any dispute regarding this Agreement shall be decided by
arbitration by a single arbitrator in West Palm Beach,
Florida, in accordance with the Expedited Arbitration Rules
of the American Arbitration Association then obtaining unless
the parties mutually agree otherwise; and, provided further,
that both parties will be entitled to all rights of discovery
in connection with such arbitration, including, without
limitation, all discovery rights described in the Florida
Rules of Civil Procedure. This undertaking to arbitrate shall
be specifically enforceable. The decision rendered by the
arbitrator will be final and judgement may be entered upon it
in accordance with appropriate laws in any court having
jurisdiction thereof.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties as of the first date written above.
PAXSON COMMUNICATIONS CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
JOHN F. DELORENZO
735 North Lake Way
Palm Beach, Florida 33480
<PAGE> 1
EXHIBIT 10.208
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of this 16th day
of October, 1999 (the "Effective Date"), by and between Paxson Communications
Corporation, a Delaware corporation with its principal place of business at 601
Clearwater Park Road, West Palm Beach, Florida 33401-6233 (the "Company") and
Lowell W. Paxson, an individual whose address is 780 S. Ocean Boulevard, Palm
Beach, Florida 33480 (the "Executive") (collectively, the "Parties").
The Executive is the owner of a majority of the total voting power of
the outstanding common stock of the Company. The Company desires to employ the
Executive as its Chairman ("Chairman"), and the Parties desire to enter into
this agreement to secure the Executive's employment during the term hereof, all
on the terms and conditions set forth herein.
NOW, THEREFORE, the Parties agree as follows:
1. TITLE. The Company hereby employs the Executive and the Executive
agrees to serve the Company as Chairman, headquartered principally in
the Company's West Palm Beach, Florida offices, on the terms and
conditions hereinafter set forth.
2. EMPLOYMENT TERM. The term of the Executive's employment by the Company
pursuant to this Agreement shall be three years, commencing on the
Effective Date and terminating on the anniversary of the Effective Date
in 2002, unless renewed as set forth below or sooner terminated
pursuant to Paragraph 8 hereof (the "Term of Employment"). So long as
the Executive remains the FCC Single Majority Shareholder of the
Company (as such term is defined under applicable law and the rules and
regulations of the Federal Communications Commission (the "FCC")), the
Term of Employment shall automatically renew for successive one year
periods, commencing on the third anniversary of the Effective Date and
each anniversary of the Effective Date thereafter. In the event this
Agreement is terminated after the Executive ceases to be the FCC Single
Majority Shareholder of the Company, the Executive shall hold the
honorary title of Chairman Emeritus, but shall have no further
employment duties or responsibilities hereunder.
3. DUTIES. The Executive shall serve as the Chairman of the Company, with
such duties and responsibilities as are commensurate with such position
as described in the bylaws of the Company, and, subject to election as
a director by the Company's stockholders, shall also act as the
chairman of the Company's Board of Directors. The Executive shall
report to the Board of Directors and shall be the senior executive
officer of the Company, with all power, authority and responsibilities
customarily attendant to such position, including supervision of the
Chief Executive Officer and President of the Company in the performance
of his duties and responsibilities with respect to all operations and
management of the Company, its subsidiaries and any entity controlled
by the Company (collectively, the "Paxson Group").
1
<PAGE> 2
The Executive shall render his services under this Agreement loyally
and faithfully, to the best of his abilities and in substantial
conformance with all laws and all written Company rules and policies
which apply to senior executives and of which the Executive has notice.
Except as expressly modified herein, the Executive shall be subject to
all of the Company's written policies, including conflicts of interest,
as well as the following:
(a) The Executive will comply with all Company and professional
standards governing the Executive's objectivity in the
performance of the Executive's duties. The Executive will not,
without the prior approval of the Compensation Committee of
the Company's Board of Directors (the "Compensation
Committee"), accept any gift, compensation or gratuity (which
excludes business meals and entertainment received by the
Executive in the ordinary course of business) from any person
or entity with which the Paxson Group or any of their
broadcast properties is or may be in competition or in any
instance where there is a stated or implied expectation of
favorable treatment of that person or entity. The Executive
will not, without the prior written approval of the
Compensation Committee, take advantage of any business
opportunity or situation or engage in any enterprise or
venture of which the Paxson Group has an interest on his or
her own behalf, if said business opportunity or situation,
enterprise or venture is related in any material way to the
business of the Paxson Group.
(b) In performing his duties under this Agreement, the Executive
shall conduct himself with due regard to social conventions,
public morals and standards of decency, and will not cause or
permit any situation or occurrence which would tend to
degrade, scandalize, bring into public disrepute, or otherwise
lower the community standing of the Executive.
4. (a) BASE SALARY. The Company shall pay the Executive a base
salary (the "Base Salary"), to be paid on the same payroll
cycle as other executive officers of the Company, at an
initial annual rate of $600,000. The Base Salary shall be
increased annually during the Term of Employment, effective on
each anniversary of the Effective Date, by an amount equal to
10% of the Base Salary in effect for the most recently ended
twelve months (i.e., cumulatively).
(b) ANNUAL BONUS. In addition to the Base Salary, the Executive
shall be eligible to earn a bonus for each of the whole or
partial calendar years during the Term of Employment, subject
to (i) the satisfaction of annual performance benchmarks for
"minimum revenues," "target revenues" or "excess revenues,"
established by the Compensation Committee of the Board of
Directors, and (ii) the Executive being actively employed by
the Company on December 31 of such calendar year (except for
any bonus for the partial calendar year during which the Term
of Employment expires or is terminated), unless the
Executive's employment has terminated due to the Executive's
death, Good Reason, Disability or other than for Good Cause,
pursuant to subparagraphs (a), (c), (d) or (e) of Paragraph 8.
2
<PAGE> 3
The bonus shall be equal to the following percentages of the
Base Salary paid to the Executive in the preceding calendar
year: (A) 50% of Base Salary upon the attainment of the
"minimum revenues" benchmark; (B) 100% of Base Salary upon the
attainment of the "target revenues" benchmark; or (C) 200% of
Base Salary upon the attainment of the "excess revenues"
benchmark. The benchmarks shall be established by the
Compensation Committee. Any bonus compensation earned shall be
payable within the first six months of the calendar year
following the year to which the bonus applies, and will be
prorated for any partial calendar year during the Term of
Employment on the basis of the Executive's period of service
during such year.
(c) OPTIONS. The Company shall grant the Executive non-qualified
stock options (the "Options") to purchase an aggregate of
1,000,000 shares of Class A Common Stock of the Company, which
shall become exercisable (i.e., "vest") at a rate of 333,333
shares on each anniversary of the Effective Date (333,334 on
the third such anniversary) during the Term of Employment and
expiring on the tenth anniversary of the Effective Date. The
option exercise prices shall be (i) for Options vesting on the
first anniversary of the Effective Date, $10.00 per share,
(ii) for Options vesting on the second anniversary of the
Effective Date, the lower of $14 per share or the Fair Market
Value of the Class A Common Stock as of the anniversary of the
Effective Date in 2000, and (iii) for Options vesting on the
third anniversary of the Effective Date, the lower of $18 per
share or the Fair Market Value of the Class A Common Stock on
the anniversary of the Effective Date in 2001. The Options
shall be governed by the terms of a Stock Option Agreement,
substantially in the form attached hereto as Exhibit A, which
the Executive agrees to execute upon grant of the Options.
Notwithstanding any other provision of this Agreement, if, at
any time after the Executive ceases to be the FCC Single
Majority Shareholder of the Company, the Executive's
employment under this Agreement is terminated other than by
reason of Executive's death or Disability and other than for
Good Cause (each as defined below), then the Executive shall
retain all Options which have vested prior to the date of
termination and any unvested Options shall be forfeited. For
purposes of the Options, the "Fair Market Value" of the Class
A Common Stock on any date shall be equal to the arithmetic
average of the closing sale prices of the Class A Common Stock
for the 45 consecutive trading days ending on the trading day
immediately preceding the date of determination on the
principal securities exchange on which the Class A Common
Stock is listed for trading.
(d) WITHHOLDING. The Company will have the right to withhold from
payments otherwise due and owing to the Executive, an amount
sufficient to satisfy any required federal, state, and/or local
income and payroll taxes and any other amounts required by law
to be withheld.
3
<PAGE> 4
5. EMPLOYEE BENEFITS. During the Term of Employment, the Executive shall
be eligible to participate, on the same basis as other members of the
Company's senior executive group, in all employee benefit plans and
arrangements sponsored or maintained by the Company for the benefit of
its employees generally and for its senior executive group (which for
this purpose means any one or more senior executives), including,
without limitation, the Supplemental Executive Retirement Plan, all
group insurance plans (term life, medical and disability) and
retirement plans, as long as any such plan or arrangement remains
generally applicable to its senior executive group.
6. BUSINESS EXPENSES. The Executive shall be reimbursed for all reasonable
expenses incurred by him in the discharge of his duties, including, but
not limited to, expenses for entertainment and travel, provided the
Executive shall account for and substantiate all such expenses in
accordance with the Company's written policies for its senior executive
group (which for this purpose means any one or more senior executives).
The Executive shall be entitled to the use of Company aircraft in
accordance with past practices, and to first class commercial air
transportation and hotel accommodations.
7. FREEDOM TO CONTRACT. The Executive represents and warrants that he has
the right to enter into this Agreement, is eligible for employment by
the Company and that no other written or verbal agreements exist which
would be in conflict with or prevent performance of any portion of this
Agreement. The Executive further agrees to hold the Company harmless
from any and all liability arising out of any prior contractual
obligations entered into by the Executive. The Executive represents and
warrants that he has not made and will not make any contractual or
other commitments that would conflict with or prevent his performance
of any portion of this Agreement or conflict with the full enjoyment by
the Company of the rights herein granted.
8. TERMINATION. Notwithstanding the provisions of Paragraph 2 of this
Agreement, the Executive's employment under this Agreement and the Term
of Employment hereunder shall terminate on the earliest of the
following dates:
(a) DEATH. Upon the date of the Executive's death. In such event,
the Company shall pay to the Executive's legal representatives
or named beneficiaries (as the Executive may designate from
time to time in a writing delivered to the Company), (x) the
Executive's Base Salary in effect on the date of death for an
eighteen (18) month period following the date of the
Executive's death (payable in accordance with the Company's
normal payroll practices during such period), (y) any bonus
earned but not paid as of the date of death, and (z) a pro
rata bonus for the calendar year in which the Executive died
equal to the bonus the Executive would have earned for such
year if he had remained actively employed with the Company
through the end of such calendar year and had continued to
receive his Base Salary through the end of such period
4
<PAGE> 5
multiplied by a fraction, the numerator of which shall be the
total number of days of the calendar year which have lapsed as
of the date of his death and the denominator of which is 365.
The Executive's estate and legal representatives,
beneficiaries and assigns shall retain all Options which shall
fully and immediately vest as of the date of the Executive's
death.
(b) GOOD CAUSE. Subject to the notice and cure provisions set
forth below, upon the date specified in a written notice from
the Board of Directors terminating the Executive's employment
for "Good Cause," consistent with the provisions of this
subparagraph (b). The term "Good Cause" as used in this
Agreement shall mean the occurrence of any of the following
events:
(i) the Executive's conviction of the commission of (A) a
felony, (B) any criminal act with respect to the Executive's
employment (including any criminal act involving a violation
of the Communications Act of 1934, as amended, or regulations
promulgated by the FCC), or (C) any act contrary to law that
materially threatens to result in suspension, revocation, or
adverse modification of any FCC license of any broadcast
station owned by the Paxson Group or that would subject any
such broadcast station to a material fine or forfeiture;
(ii) the Executive's demonstrable gross negligence in taking
any action, or omitting to take any action, which act or
omission would cause any member of the Paxson Group to be in
default under any material contract, lease or other agreement;
(iii) the Executive's dependence on alcohol or illegal drugs;
(iv) the Executive's willful failure or refusal to perform
according to or follow the lawful written policies and
directives of the Board of Directors (which shall be
consistent with Paragraph 3);
(v) the Executive's misappropriation, conversion or
embezzlement of the material assets of any member of the
Paxson Group;
(vi) the Executive's willful material breach of this
Agreement, including engaging in action in violation of
Paragraph 10;
(vii) the Executive making any representation in this
Agreement which is false in any material respect when made; or
(viii) the Executive's voluntary termination of his employment
without Good Reason (as defined below).
Except in the event of Executive's voluntary termination of
his employment, should the Company propose to terminate the
Executive's employment for Good Cause under this subparagraph
(b), the Company shall notify the Executive in writing of its
5
<PAGE> 6
intention to terminate his employment and the specific
reason(s) therefor, and the Executive, on at least ten
business days' notice, shall have an opportunity to respond
thereto in writing; and if the basis for such termination is
susceptible of being cured by the Executive, the Company shall
afford the Executive a period of at least ten additional
business days to effect such cure, and the Executive's
employment may not be terminated until such period has expired
and the Executive has failed to effect such cure.
In the event of termination for Good Cause, the Company will
be released from all further obligation to the Executive under
this Agreement, except for (i) the payment of such Base Salary
as may have been earned but not paid prior to termination,
(ii) Executive's right to exercise any vested stock Options,
pursuant to his Stock Option Agreement, and (iii) any accrued
benefits under the Company's employee benefit plans in
accordance with the terms of those plans.
(c) GOOD REASON. Upon the date specified in a written notice from
the Executive terminating his employment for "Good Reason",
consistent with the provisions of this subparagraph (c). For
purposes of this subparagraph (c), "Good Reason" shall mean
that the Company has breached any of the material terms,
conditions and provisions of this Agreement. In such case, the
Executive shall notify the Company in writing of his intention
to terminate his employment and the specific reason(s)
therefor, and the Company, on at least ten business days'
notice, shall have an opportunity to respond thereto in
writing; and if the basis for such termination is susceptible
of being cured by the Company, the Executive shall afford the
Company a period of at least ten additional business days to
effect such cure, and the Executive may not terminate his
employment until such period has expired and the Company has
failed to effect such cure. In the event of such termination
for Good Reason, the Company shall (w) continue to pay the
Executive the Base Salary, including annual increases therein,
for the remainder of the original Term of Employment, or the
remainder of any one year renewal thereof, if termination
occurs during such renewal period, payable in accordance with
the Company's normal payroll practices during such period, (x)
pay the Executive any bonus earned but not paid as of the date
of termination, (y) pay the Executive any other bonus the
Executive would have earned under subparagraph 4(b) had he
remained actively employed through the original Term of
Employment or the balance of any one year renewal thereof, if
termination occurs during such renewal period (subject to the
Company's satisfaction of the benchmarks for the relevant
calendar years), and (z) provide continued coverage under any
Company employee benefit plans in which the Executive
participates as of the date of termination (on the same terms
and conditions then in effect) through the original Term of
Employment or the balance of any one year renewal thereof, if
termination occurs during such renewal period, and, except as
expressly provided in Paragraph 4(c) above, the Options shall
vest as provided in Paragraph 4(c) as though Executive's
employment had not been terminated.
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<PAGE> 7
(d) OTHER THAN GOOD CAUSE. Upon the date specified in a written
notice from the Board of Directors terminating the Executive's
employment for any reason other than Good Cause, death or
Disability (as defined in Paragraph 8(e) below), or in the
event no date is specified in the notice, upon the date on
which the notice is delivered to the Executive. In the event
of the termination of the Executive's employment pursuant to
this subsection (d), the Company shall (w) continue to pay the
Executive the Base Salary, including annual increases therein,
for the remainder of the original Term of Employment or the
remainder of any one year renewal thereof, if termination
occurs during such renewal period (payable in accordance with
the Company's normal payroll practices during such period),
(x) pay the Executive any bonus earned but not paid as of the
date of termination, (y) pay the Executive any other bonus the
Executive would have earned under subparagraph 4(b) had he
remained actively employed through the original Term of
Employment or the remainder of any one year renewal thereof,
if termination occurs during such renewal period (subject to
the Company's satisfaction of the benchmarks for the relevant
calendar years), and (z) provide continued coverage under any
Company employee benefit plans in which the Executive
participates as of such date of termination (on the same terms
and conditions then in effect) through the original Term of
Employment or the remainder of any one year renewal thereof,
if termination occurs during such renewal period, and, except
as expressly provided in Paragraph 4(c) above, the Options
shall vest as provided in Paragraph 4(c) as though Executive's
employment had not been terminated.
(e) DISABILITY. Upon the date specified in a written notice from
the Board of Directors terminating the Executive's employment
for "Disability." For purposes of this Agreement, the term
"Disability" shall mean that, due to illness or injury, the
Executive is unable to perform and exercise the essential
functions required of him under this Agreement, for either (i)
four consecutive months or longer, or (ii) a total of four
months or longer in any twelve month period. The Compensation
Committee shall determine whether the Executive has a
Disability based on written physician reports provided to the
Compensation Committee under the following procedures. The
Compensation Committee and the Executive shall each choose a
physician to supply a report regarding whether the Executive
should be deemed to have a Disability under the terms of this
subparagraph 8(e). If the reports of these two physicians
reach contrary conclusions regarding whether the Executive
should be deemed to have a Disability, the two physicians
shall select a third physician to prepare and provide to the
Compensation Committee another report regarding whether the
Executive should be deemed to have Disability under the terms
of this subparagraph 8(e). The Executive shall cooperate fully
with each such physician preparing a report to the
Compensation Committee under the terms of this subparagraph
8(e) by, among other things, executing any necessary releases
to grant such physician access to any and all of Executive's
medical records reasonably deemed by such physician to be
relevant to such determination, authorizing or requiring
physicians and any other health care professionals who have
treated or dealt with Executive to consult with such physician
regarding any matter reasonably deemed by such physician to be
relevant to such determination and submitting to such physical
or mental examinations or testing as may be reasonably deemed
by such physician to be relevant to such determination. The
Parties acknowledge and agree that any determination by the
Compensation Committee that the Executive has a Disability,
which is used as a basis for termination of the Executive's
employment pursuant to this Paragraph 8(e), shall be subject
to the arbitration provisions of Paragraph 12 below. In the
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<PAGE> 8
event of the termination of the Executive's employment by
reason of Executive's Disability, the Company shall (x)
continue to pay the Executive the Base Salary, including
annual increases therein, for the remainder of the original
Term of Employment or the remainder of any one year renewal
thereof, if termination occurs during such renewal period
(payable in accordance with the Company's normal payroll
practices during such period), (y) pay the Executive any bonus
earned but not paid as of the date of termination, and (z)
provide continued coverage under any Company employee benefit
plans in which the Executive participates as of such date of
termination (on the same terms and conditions then in effect)
through the original Term of Employment or the remainder of
any one year renewal thereof, if termination occurs during
such renewal period, and the Options shall vest as provided in
Paragraph 4(c) above as though Executive's employment had not
been terminated.
(f) TERM. Upon the expiration of the Term of Employment. In the
event of the termination of the Executive's employment upon
the expiration of the Term of Employment, the Company shall be
obligated to pay the Executive a prorated portion of any bonus
the Executive would have earned under subparagraph 4(b) had he
remained actively employed through the calendar year in which
the Term of Employment expires, equal to the bonus otherwise
payable multiplied by a fraction, the numerator of which is
the number of days in the relevant calendar year included in
the Term of Employment and the denominator of which is 365
(subject to the Company's satisfaction of the benchmarks for
such calendar year which are relevant to the bonus
calculation), and will be released from all further obligation
to the Executive pursuant to this Agreement, except for such
compensation as may have been earned but not paid prior to
termination.
Following the termination of the Term of Employment and the Executive's
employment under this Agreement, the Company will have no further
liability to the Executive hereunder and no further payments will be
made to him, except (i) as provided in subparagraphs (a) through (f)
above, (ii) to the extent that the Executive qualifies for benefits
under any employee benefit plan available to the Executive as provided
in Paragraph 5, and (iii) for the Executive's rights under the Stock
Option Agreement. In the event the Executive's employment is terminated
8
<PAGE> 9
for Good Reason, other than for Good Cause or for Disability, pursuant
to subparagraphs 8(c),(d) or (e), respectively, the Executive's right
to continue to participate in any Company employee benefit plan shall
not be affected by the Executive's termination of employment, except
(i) the Company may substitute for its contribution to any
tax-qualified retirement plan on behalf of the Executive, an equivalent
contribution to a non-qualified retirement plan, and (ii) the Company
may terminate any welfare plan coverage to the extent the applicable
insurance carrier refuses to continue to provide such coverage under
the group insurance policy, in which event the Company shall have the
option of providing the Executive with comparable coverage under
individual insurance policies, to the extent such policies are
available, provided that if the Executive's employment is terminated by
the Company for other than Good Cause pursuant to Paragraph 8(d) or the
Executive terminates his employment with the Company for Good Reason,
the Company shall be obligated to continue to provide benefits
comparable to such welfare plan coverage regardless of whether or not
insurance policies are available to provide such benefits. The Company
shall not have the right to reduce any payments the Executive is
entitled to hereunder by any payments the Executive receives from any
other source of employment (whether before, during or after the Term of
Employment), and the Executive shall not have any duty to mitigate the
damages the Company will incur in making any payments hereunder to the
Executive following his termination of employment with the Company.
Upon the date of the termination of the Executive's employment pursuant
to subparagraph (c), (d) or (e) above, in consideration of (i) the
payments to be made to the Executive pursuant to such subparagraph and
as a condition to the payment thereof, and (ii) the Company's
undertaking to make no derogatory or disparaging statement about the
Executive to any unrelated (to the Paxson Group) third party, the
Executive acknowledges that all such payments, if made in accordance
with this Agreement, shall constitute complete satisfaction of all
obligations owed by the Company to the Executive pursuant to this
Agreement (other than any benefits Executive has accrued under the
Company's employee benefit plans) and shall further constitute the
Executive's sole remedy against the Company; the Executive agrees that
if this provision becomes applicable he will execute a general release
to reflect these terms.
9. INSURANCE. If the Company desires at any time or from time to time
during the Term of Employment to apply in its own name or otherwise,
but at its own expense, for life, health, accident or other insurance
covering the Executive, the Company may do so and may take out such
insurance for any sum which the Company may deem necessary to protect
its interests hereunder. The Executive will have no right, title or
interest in or to such insurance, but will, nevertheless, assist the
Company in procuring and maintaining the same by submitting from time
to time to customary medical, physical and other examinations and
signing such applications, statements and other instruments as may
reasonably be required by the insurance company or companies issuing
such policies. The Company acknowledges that the Executive has made no
representation that he is insurable for these purposes.
10. RESTRICTIVE COVENANTS.
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<PAGE> 10
(a) FCC COMPLIANCE. The Executive represents that he does not
currently have, and warrants that during the Term of
Employment he will not have, or be involved with any
investment ownership interest or outside activity (such as a
board membership) which would result in either he or the
Company being in violation of the rules and regulations of the
FCC or the Communications Act of 1934, as amended.
(b) EXCLUSIVE SERVICES. During the Executive's employment with the
Company, the Executive shall not: (i) engage in any other
business activity that would interfere with his
responsibilities or the performance of his duties under this
Agreement; (ii) have any interest or involvement, directly or
indirectly, in any capacity (including as employee, director,
consultant, owner, lessor, manager, or lender), in any
business enterprise that competes with the Paxson Group or
that otherwise has interests in conflict with the Paxson
Group, including without limitation, any television broadcast,
cable television network, or television programming service.
The Executive will not, during the Term of Employment, solicit
offers for the Executive's services, negotiate with potential
employers, enter into any oral or written agreement for the
Executive's services, give or accept any option for the
Executive's services, enter into the employment of, perform
services for, or grant or receive future rights of any kind
relating to the Executive's services to or from any person or
entity whatsoever other than the Company.
(c) RESTRICTION ON COMPETITION. For a period of one year after
termination of the Executive's employment pursuant to this
Agreement (the "Restricted Period"), the Executive shall not,
and shall not permit any of his affiliates to, directly or
indirectly, (i) acquire a Material Interest in any broadcast
television station license or any entity owning, operating or
controlling one or more broadcast television stations, or (ii)
acquire any interest in any broadcast television station
license or any such entity, in conjunction with which
Executive or any of his affiliates controls or renders
services to the station owner, including service as an
officer, partner, consultant or employee thereof, or is
otherwise actively involved with the business of such station
owner. A "Material Interest" shall consist of the beneficial
ownership of 10% or more of the common equity interests
(including securities convertible into or exercisable for
common equity) of a person.
(d) EXCEPTIONS. None of the provisions of this Paragraph 10 shall
prohibit the Executive from owning a minority interest in DP
Media, Inc., an owner of multiple broadcast television
stations, or prohibit the Executive's family members and their
spouses from owning interests in DP Media. The Executive may
own up to one percent (1%) of the issued and outstanding
common stock of any entity whose common stock is traded on a
nationally recognized stock exchange, and may, with the prior
approval of the Board of Directors of the Company (which shall
not be unreasonably withheld), sit on the boards of directors
of other entities, and such activities shall be deemed not to
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be violations of the provisions of subparagraphs 10(b) and (c)
above.
(e) NONINTERFERENCE. The Executive agrees that from the date of
this Agreement through the first anniversary of the date the
Executive's employment with the Company terminates, the
Executive will not, directly or indirectly, whether as sole
proprietor, partner, lessor, venturer, stockholder, director,
officer, employee, consultant or in any other capacity as
principal or agent or through any person, subsidiary,
affiliate or employee acting as nominee or agent, engage or
participate in any of the following actions:
(i) Influencing or attempting to influence any person or
entity who is a contracting party with any member of
the Paxson Group to terminate any written or oral
agreement with such member of the Paxson Group; or
(ii) Hiring or attempting to hire for employment or as an
independent contractor any person who is actively
employed (or in the preceding six months was actively
employed) by any member of the Paxson Group or
attempting to influence any such person to terminate
employment with any member of the Paxson Group.
(f) CONFIDENTIALITY. The Executive covenants and agrees that both
during the Term of Employment and thereafter he will not
disclose to any third party or use in any way (other than in
connection with the performance of his duties under this
Agreement) any confidential information, business secrets, or
business opportunity of the Company or its affiliates,
including, without limitation, advertiser lists, rate cards,
programming information, programming plans, marketing,
advertising and promotional ideas and strategies, marketing
surveys and analyses, ratings reports, budgets, research, or
financial, purchasing, planning, employment or personnel data
and information. Immediately upon termination of the
Executive's employment with the Company for any reason, or at
any other time upon the Company's request, the Executive will
return to the Company or destroy all memoranda, notes, records
or other documents compiled by the Executive or made available
to the Executive during the Term of Employment concerning the
business of the Company or its affiliates, all other
confidential information and all personal property of the
Company or its affiliates, including, without limitation, all
files, audio or video tapes, recordings, records, documents,
drawings, specifications, lists, equipment, supplies,
promotional material, scripts, keys, phone or credit cards and
similar items and all copies thereof or extracts therefrom.
(g) ENFORCEMENT. The Executive agrees that the restrictive
covenants contained in this Paragraph 10 are a material part
of the Executive's obligations under this Agreement for which
the Company has agreed to compensate the Executive as provided
in this Agreement. The Executive agrees that the injury the
Company will suffer in the event of the breach by the
Executive of any clause of this Paragraph 10 will cause the
Company irreparable injury that cannot be adequately
compensated by monetary damages alone. Therefore, the
Executive agrees that the Company, without limiting any other
11
<PAGE> 12
legal or equitable remedies available to it, shall be entitled
to obtain equitable relief by injunction or otherwise from any
court of competent jurisdiction, including, without
limitation, injunctive relief to prevent the Executive's
failure to comply with the terms and conditions of Paragraph
10.
11. INTANGIBLE PROPERTY. The Executive will not at any time during or after
the Term of Employment have or claim any right, title or interest in
any trade name, trademark, or copyright belonging to or used by any
entity in the Paxson Group and shall not have or claim any right, title
or interest in any material or matter of any sort prepared for or used
in connection with the programming, advertising, broadcasting, or
promotion of any entity of the Paxson Group, whatever the Executives'
involvement with such matters may have been, and whether procured,
produced, prepared, published or broadcast in whole or in part by the
Executive, it being the intention of the Parties that the Executive
shall, and hereby does, recognize that the Paxson Group now has and
shall hereafter have and retain the sole and exclusive rights in any
and all such trade names, trademarks, copyrights (all the Executive's
work in this regard being a work for hire for the Company under the
copyright laws of the United States), character names, material and
matter as described above; provided that nothing in this Agreement
shall be construed to limit the Executive from using his personal name
in connection with any business venture or in any other manner
whatsoever. Should the Company and its successors, assigns and
licensees cease material use for a period of six months of the names
and marks PAX, PAXNET and other marks currently or in the future used
by the Company and including the letters "PAX," then the Company and
its successors and assigns shall assign to the Executive all licenses
with respect to such names and marks and transfer and assign to the
Executive all of their respective right, title and interest in and to
said names and marks, all registrations thereof and all goodwill
associated therewith. The Executive shall cooperate fully with the
Company during his employment and thereafter in the securing of trade
name, patent, trademark or copyright protection or other similar rights
in the United States and in foreign countries and shall give evidence
and testimony and execute and deliver to the Company all papers
reasonably requested by it in connection therewith, provided however
that the Company shall reimburse the Executive for reasonable expenses
related thereto.
12. ARBITRATION. Any dispute regarding this Agreement shall be decided by
arbitration in West Palm Beach, Florida, in accordance with the
Expedited Arbitration Rules of the American Arbitration Association
then obtaining unless the Parties mutually agree otherwise; and,
provided further, that both Parties will be entitled to all rights of
discovery in connection with such arbitration, including, without
limitation, all discovery rights described in the Florida Rules of
Civil Procedure. Any such arbitration shall be submitted to three
arbitrators from the Panel of Arbitrators of the American Arbitration
Association. The three arbitrators shall be selected in the following
fashion: (i) the Executive and the Company each shall select an
arbitrator from the Panel of Arbitrators of the American Arbitration
Association; and (ii) such two arbitrators by mutual agreement shall
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select a third arbitrator from such Panel of Arbitrators. This
undertaking to arbitrate shall be specifically enforceable. The
decision rendered by the arbitrator will be final and judgment may be
entered upon it in accordance with appropriate laws in any court having
jurisdiction thereof. Notwithstanding the foregoing, the Company may
seek injunctive relief in accordance with Paragraph 10 of this
Agreement.
13. INDEMNIFICATION. The Company shall indemnify and hold the Executive
harmless, to the maximum extent permitted by law, against claims,
judgments, fines, amounts paid in settlement of and reasonable expenses
(including reasonable attorneys fees) incurred by the Executive in
connection with the defense of any claim, action or proceeding in which
he is a party by reason of his position with the Company, provided such
liability does not arise as a result of the Executive's gross
negligence. The Executive shall notify the Company promptly upon
learning of any claim, action or proceeding for which the Executive
intends to assert his right to indemnification under this Paragraph,
and the Company shall have the right to control the defense of any such
claim, action or proceeding on behalf of the Executive, including any
decision regarding the terms (if any) of settlement of such claim,
action or proceeding, provided that unless otherwise agreed to by the
Executive, any such settlement shall include statements that the
Executive does not admit any wrongdoing and the Company does not admit
any wrongdoing on the part of the Executive. The Company shall not
agree to any settlement of a claim, action or proceeding for which it
is indemnifying the Executive until it first has informed and consulted
with the Executive regarding the terms of such settlement, but the
Company shall not need the consent of the Executive to such settlement
(so long as the settlement complies with the immediately preceding
sentence). The Company's indemnification of the Executive under this
Paragraph shall indefinitely survive the termination or expiration of
this Agreement.
14. MISCELLANEOUS.
(a) WAIVER OR MODIFICATION. Any waiver by either Party of a breach
of any provision of this Agreement shall not operate as, or to
be, construed to be a waiver of any other breach of such
provision of this Agreement. The failure of a Party to insist
upon strict adherence to any term of this Agreement on one or
more occasions shall not be considered a waiver or deprive
that Party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
Neither this Agreement nor any part of it may be waived,
changed or terminated orally, and any waiver, amendment or
modification must be in writing and signed by each of the
Parties. Any waiver of any right of the Company hereunder or
any amendment hereof shall require the approval of the
Compensation Committee of the Board of Directors. Until such
approval or waiver has been obtained, no such waiver or
amendment shall be effective.
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<PAGE> 14
(b) SUCCESSORS AND ASSIGNS. The rights and obligations of the
Company under this Agreement shall be binding on and inure to
the benefit of the Company, its successors and permitted
assigns. The rights and obligations of the Executive under this
Agreement shall be binding on and inure to the benefit of the
heirs and legal representatives of the Executive. Neither Party
may assign this Agreement without the prior written consent of
the other.
(c) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall, when executed, be deemed to
be an original and all of which shall be deemed to be one and
the same instrument.
(d) GOVERNING LAW. This Agreement will be governed and construed
and enforced in accordance with the laws of the State of
Florida, without regard to its conflicts of law rules.
(e) ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the Parties relating to the subject matter of
this Agreement and supersedes all other prior written or oral
agreements, understandings or arrangements with respect to such
subject matter, including, without limitation, the employment
agreement between the Executive and the Company dated June 30,
1994. The Executive and the Company each acknowledges that, in
entering into this Agreement, he/it does not rely on any
statements or representations not contained in this Agreement.
(f) SEVERABILITY. Any term or provision of this Agreement which is
determined to be invalid or unenforceable by any court of
competent jurisdiction in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction and such
invalid or unenforceable provision shall be modified by such
court so that it is enforceable to the extent permitted by
applicable law.
(g) NOTICES. Except as otherwise specifically provided in this
Agreement, all notices and other communications required or
permitted to be given under this Agreement shall be in writing
and delivery thereof shall be deemed to have been made (i)
three business days following the date when such notice shall
have been deposited in first class mail, postage prepaid,
return receipt requested, to any comparable or superior postal
or air courier service then in effect, or (ii) transmitted by
hand delivery to, or (iii) transmitted by telegram, telex,
telecopier or facsimile transmission (with receipt confirmed
by telephone), to the party entitled to receive the same, at
the address indicated below or at such other address as such
party shall have specified by written notice to the other
party hereto given in accordance herewith:
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if to the Company: Paxson Communications Corporation
601 Clearwater Park Road
West Palm Beach, Florida 33401-6233
Attn: Chief Executive Officer
(tel) (561) 659-4122
(fax) (561) 655-9424
with a copy to: Paxson Communications Corporation
601 Clearwater Park Road
West Palm Beach, Florida 33401
Attn: General Counsel
(tel) (561) 659-4122
(fax) (561) 655-4754
if to the Executive: Lowell W. Paxson
780 S. Ocean Boulevard
Palm Beach, Florida 33480
(tel) (561) 659-4122
(fax) (561) 655-9424
(h) TITLES. The titles and headings of any paragraphs in this
Agreement are for reference only and shall not be used in
construing the terms of this Agreement.
(i) NO THIRD PARTY BENEFICIARIES. This Agreement does not create,
and shall not be construed as creating, any rights enforceable
by any person not a party to this Agreement.
(j) SURVIVAL. The covenants, agreements, representations and
warranties contained in this Agreement shall survive the
termination of the Term of Employment and the Executive's
termination of employment with the Company for any reason.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties as of the first date written above.
LOWELL W. PAXSON
--------------------------------
PAXSON COMMUNICATIONS CORPORATION
BY: /s/ JEFFREY SAGANSKY
-------------------------------
Jeffrey Sagansky
President and CEO
16
<PAGE> 1
EXHIBIT 10.209
ASSET PURCHASE AGREEMENT
BY AND AMONG
PAXSON COMMUNICATIONS CORPORATION
AND
D P MEDIA, INC.; D P MEDIA OF BATTLE CREEK, INC.; D P MEDIA LICENSE OF BATTLE
CREEK, INC.; D P MEDIA OF BOSTON, INC.; D P MEDIA LICENSE OF BOSTON, INC.; D P
MEDIA OF MARTINSBURG, INC.; D P MEDIA LICENSE OF MARTINSBURG, INC.; D P MEDIA OF
MILWAUKEE, INC.; D P MEDIA LICENSE OF MILWAUKEE, INC.; D P MEDIA OF RALEIGH
DURHAM, INC.; D P MEDIA LICENSE OF RALEIGH DURHAM, INC.; D P MEDIA OF ST. LOUIS,
INC.; D P MEDIA LICENSE OF ST. LOUIS, INC.; RDP COMMUNICATIONS, INC.; RDP
COMMUNICATIONS OF INDIANAPOLIS, INC.; RDP COMMUNICATIONS LICENSE OF
INDIANAPOLIS, INC.; CAP COMMUNICATIONS, INC.; CAP COMMUNICATIONS OF NEW LONDON,
INC.; CAP COMMUNICATIONS LICENSE OF NEW LONDON, INC.; CAP COMMUNICATIONS OF
BOSTON, INC.; CHANNEL 66 OF TAMPA, INC.; AND CHANNEL 46 OF BOSTON, INC.
NOVEMBER 21, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. DEFINITIONS....................................................................................3
SECTION 2. PURCHASE AND SALE OF ASSETS...................................................................11
2.1 Agreement to Sell and Buy.....................................................................11
2.2 Excluded Assets...............................................................................11
2.3 Assumption of Liabilities and Obligations.....................................................12
2.4 Purchase Price................................................................................12
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLERS.....................................................16
3.1 Organization, Standing, and Authority.........................................................16
3.2 Authorization and Binding Obligation..........................................................16
3.3 Absence of Conflicting Agreements.............................................................16
3.4 Licenses......................................................................................17
3.5 Contracts.....................................................................................17
3.6 Consents......................................................................................18
3.7 Reports.......................................................................................18
3.8 Taxes.........................................................................................18
3.9 Claims and Legal Actions......................................................................19
3.10 Compliance with Laws..........................................................................19
3.11 Insurance.....................................................................................19
3.12 Real Property Interests.......................................................................19
3.13 Title to Properties...........................................................................19
3.14 Financial Statements..........................................................................19
3.15 Undisclosed Liabilities.......................................................................20
3.16 Accounts Receivable...........................................................................20
3.17 Capital.......................................................................................20
3.18 Tangible Personal Property....................................................................21
3.19 Loan Documents................................................................................21
3.20 Environmental Matters.........................................................................21
3.21 Personnel and Benefits; Labor.................................................................22
3.22 Intangibles...................................................................................24
3.23 Full Disclosure...............................................................................24
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.......................................................24
4.1 Organization, Standing, and Authority.........................................................24
4.2 Authorization and Binding Obligation..........................................................24
4.3 Absence of Conflicting Agreements.............................................................25
4.4 Buyer Qualifications..........................................................................25
4.5 Full Disclosure...............................................................................25
SECTION 5. OPERATIONS PRIOR TO CLOSING...................................................................25
5.1 Generally.....................................................................................25
5.2 Compensation..................................................................................25
5.3 Contracts.....................................................................................25
5.4 Disposition of Assets.........................................................................26
5.5 Encumbrances..................................................................................26
5.6 Rights........................................................................................26
5.7 Insurance.....................................................................................26
5.8 Access to Information.........................................................................26
5.9 Consents......................................................................................26
5.10 Books and Records.............................................................................26
5.11 Compliance with Laws..........................................................................26
5.12 Mergers.......................................................................................26
5.13 Indebtedness and Obligations..................................................................26
5.14 Amendments....................................................................................27
5.15 Securities....................................................................................27
5.16 Maintenance of Assets.........................................................................27
5.17 Preservation of Business......................................................................27
5.18 Licenses......................................................................................27
5.19 No Inconsistent Action........................................................................27
SECTION 6. SPECIAL COVENANTS AND AGREEMENTS..............................................................28
6.1 FCC Consents..................................................................................28
6.2 Risk of Loss..................................................................................28
6.3 Confidentiality...............................................................................29
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6.4 Cooperation...................................................................................29
6.5 Restricted Payment............................................................................29
6.6 HSR Act Filing................................................................................29
6.7 Environmental Reports.........................................................................30
6.8 Stock Purchase................................................................................30
6.9 Fair Market Value Determination...............................................................30
6.10 Boston Purchase...............................................................................31
6.11 Cure..........................................................................................32
6.12 Control of the Station........................................................................32
6.13 Sales Tax Filings.............................................................................32
6.14 Access to Books and Records...................................................................32
6.15 Appraisal.....................................................................................33
SECTION 7. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLERS AT CLOSING.....................................33
7.1 Conditions to Obligations of Buyer............................................................33
7.2 Conditions to Obligations of Sellers..........................................................34
SECTION 8. CLOSING AND CLOSING DELIVERIES................................................................34
8.1 Closing.......................................................................................34
8.2 Deliveries by Sellers.........................................................................35
8.3 Deliveries by Buyer...........................................................................36
SECTION 9. TERMINATION...................................................................................36
9.1 Termination by Sellers........................................................................36
9.2 Termination by Buyer..........................................................................37
9.3 Rights on Termination.........................................................................38
9.4 Option........................................................................................38
9.5 Limitation....................................................................................39
SECTION 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; CERTAIN REMEDIES.................39
10.1 Representations and Warranties................................................................39
10.2 Indemnification by Sellers....................................................................40
10.3 Indemnification by Buyer......................................................................40
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10.4 Procedure for Indemnification.................................................................41
10.5 Limitations on Indemnification................................................................42
10.6 Specific Performance..........................................................................42
10.7 Attorneys' Fees...............................................................................42
SECTION 11. MISCELLANEOUS.................................................................................42
11.1 Fees and Expenses.............................................................................42
11.2 Arbitration...................................................................................42
11.3 Notices.......................................................................................43
11.4 Benefit and Binding Effect....................................................................44
11.5 Further Assurances............................................................................44
11.6 Governing Law.................................................................................45
11.7 Headings......................................................................................45
11.8 Gender and Number.............................................................................45
11.9 Entire Agreement..............................................................................45
11.10 Waiver of Compliance; Consents................................................................45
11.11 Press Release.................................................................................45
11.12 Consent to Jurisdiction and Service of Process................................................45
11.13 No Recourse...................................................................................46
11.14 Revised Schedules.............................................................................46
11.15 Counterparts..................................................................................46
11.16 Time Brokerage Agreement Fee..................................................................47
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LIST OF SCHEDULES AND EXHIBITS
Schedule 2.2 -- Excluded Assets
Schedule 3.3 -- Sellers' Consents
Schedule 3.4 -- Licenses
Schedule 3.5 -- Contracts
Schedule 3.8 -- Tax Matters
Schedule 3.9 -- Litigation
Schedule 3.11 -- Insurance
Schedule 3.12 -- Real Property
Schedule 3.13 -- Exception to Title
Schedule 3.15 -- Liabilities
Schedule 3.18 -- Tangible Personal Property
Schedule 3.21 -- Personnel and Benefits; Labor
Schedule 3.22 -- Intangibles
Schedule 4.3 -- Buyer's Consents
Schedule 8.2(h) -- Opinion of Sellers' Counsel
Schedule 8.3(d) -- Opinion of Buyer's Counsel
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is dated as of the 21st day of November,
1999, by and among D P MEDIA, INC., a Florida corporation (the "Company"); each
subsidiary of the Company listed under the heading "Sellers" on the signature
pages hereto (such subsidiaries, together with the Company, are individually, a
"Seller" and collectively, the "Sellers"), and PAXSON COMMUNICATIONS
CORPORATION, a Delaware corporation ("Buyer").
R E C I T A L S
A. The Company owns all of the issued and outstanding capital
stock of:
(i) D P Media of Raleigh Durham, Inc., a Florida corporation
("D P Raleigh Durham"), which, in turn, owns all of the issued and outstanding
capital stock of D P Media License of Raleigh Durham, Inc., a Florida
corporation ("Raleigh License"), which, together with D P Raleigh Durham owns
and operates television station WRPX(TV), Rocky Mount, North Carolina
("WRPX(TV)"), pursuant to licenses issued to Raleigh License by the Federal
Communications Commission ("FCC");
(ii) D P Media of Martinsburg, Inc., a Florida corporation ("D
P Martinsburg"), which, in turn, owns all of the issued and outstanding capital
stock of D P Media License of Martinsburg, Inc., a Florida corporation
("Martinsburg License"), which, together with D P Martinsburg, owns and operates
television station WWPX(TV), Martinsburg, West Virginia ("WWPX(TV)"), pursuant
to licenses issued to Martinsburg License by the FCC;
(iii) D P Media of St. Louis, Inc., a Florida corporation ("D
P St. Louis"), which, in turn, owns all of the issued and outstanding capital
stock of D P Media License of St. Louis, Inc., a Florida corporation ("St. Louis
License"), which, together with D P St. Louis, owns and operates television
station WPXS(TV), Mt. Vernon, Illinois, and low power television station K40FF,
St. Louis, Missouri (collectively, "WPXS(TV)"), pursuant to licenses issued to
St. Louis License by the FCC;
(iv) D P Media of Battle Creek, Inc., a Florida corporation
("D P Battle Creek"), which, in turn, owns all of the issued and outstanding
capital stock of D P Media License of Battle Creek, Inc., a Florida corporation
("Battle Creek License"), which, together with D P Battle Creek, owns and
operates television station WZPX(TV), Battle Creek, Michigan ("WZPX(TV)"),
pursuant to licenses issued to Battle Creek License by the FCC;
(v) D P Media of Milwaukee, Inc., a Florida corporation ("D P
Milwaukee"), which, in turn, owns all of the issued and outstanding capital
stock of D P Media License of Milwaukee, Inc., a Florida corporation ("Milwaukee
License"), which, together with D P Milwaukee, owns and operates television
<PAGE> 8
station WPXE(TV), Kenosha, Wisconsin ("WPXE(TV)"), pursuant to licenses issued
to Milwaukee License by the FCC;
(vi) RDP Communications, Inc., a Florida corporation ("RDP"),
which, in turn, owns all of the issued and outstanding capital stock of RDP
Communications of Indianapolis, Inc., a Florida corporation ("RDP
Indianapolis"), which, in turn, is the owner of all of the issued and
outstanding capital stock of RDP Communications License of Indianapolis, Inc., a
Florida corporation ("Indianapolis License"), which, together with RDP
Indianapolis, owns and operates television station WIPX(TV), Bloomington,
Indiana ("WIPX(TV)"), pursuant to licenses issued to Indianapolis License by the
FCC;
(vii) CAP Communications, Inc., a Florida corporation ("CAP"),
which, in turn, owns all of the issued and outstanding capital stock of CAP
Communications of New London, Inc., a Florida corporation ("CAP New London"),
which, in turn, owns all of the issued and outstanding capital stock of CAP
Communications License of New London, Inc., a Florida corporation ("New London
License"), which, together with CAP New London, owns and operates television
station WHPX(TV), New London, Connecticut ("WHPX(TV)"), pursuant to licenses
issued to New London License by the FCC;
(viii) CAP, which, in turn, also owns all of the issued and
outstanding capital stock of CAP Communications of Boston, Inc., a Florida
corporation ("CAP Boston"), which, in turn, owns all of the issued and
outstanding capital stock of Channel 66 of Tampa, Inc., a Florida corporation
("Channel 66"), which, in turn, owns all of the issued and outstanding capital
stock of Channel 46 of Boston, Inc., a Florida corporation ("Norwell License"),
which, together with CAP Boston and Channel 66, own and operate television
station WWDP(TV), Norwell, Massachusetts ("WWDP(TV)"), pursuant to licenses
issued to Norwell License by the FCC; and
(ix) D P Media of Boston, Inc., a Florida corporation ("D P
Boston"), which, in turn, owns all of the issued and outstanding capital stock
of D P Media License of Boston, Inc., a Florida corporation ("Boston License"),
which is the proposed assignee of the licenses issued by the FCC for television
stations WBPX(TV), Boston, Massachusetts ("WBPX(TV)"), WDPX(TV), Vineyard Haven,
Massachusetts ("WDPX(TV)"), WPXG(TV), Concord; New Hampshire ("WPXG(TV)"), and
low power television station W33BZ, Dennis, Massachusetts ("W33BZ").
B. Buyer shall loan to the Company One Hundred Five Million Nine
Hundred Ninety-Seven Thousand Sixteen and 37/100 Dollars ($105,997,016.37)
pursuant to the terms of a Credit Agreement dated as of the date hereof between
Buyer and the Company (the "Credit Agreement"), and the Company shall deliver to
Buyer its Promissory Note in the principal amount of such loan (the "Note").
C. Buyer and National Broadcasting Company, Inc. ("NBC") are
parties to an Investment Agreement dated as of September 15, 1999, which
requires, among other things, that Buyer obtain NBC's consent to the
transactions contemplated by this Agreement and various agreements contemplated
hereby. Subject to the condition described in Section 6.9, NBC has provided such
consent.
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D. Sellers desire to sell, and Buyer desires to buy,
substantially all of the assets used or useful in the business or operations of
the Stations, for the price and on the terms and conditions set forth in this
Agreement.
A G R E E M E N T S
In consideration of the above recitals and of the mutual agreements and
covenants contained in this Agreement, Buyer and Sellers intending to be bound
legally, agree as follows:
SECTION 1. DEFINITIONS
The following terms, as used in this Agreement, shall have the meanings
set forth in this Section:
"AAA" means the American Arbitration Association.
"Accounts Receivable" means the rights of Sellers as of the Closing
Date to payment for (i) the sale of advertising and program time broadcast on
the Stations prior to the Closing Date, and (ii) other goods and services
provided by Sellers with respect to the Stations prior to the Closing Date.
"Affiliate" means (a) any Person that directly or indirectly, through
one or more intermediaries, controls, is controlled by or is under common
control with another Person, or (b) an officer or director of an affiliate
within the meaning of (a) above.
"Appraisal Trigger Date" has the meaning set forth in Section 9.4(b).
"Arbitration Panel" has the meaning set forth in Section 2.4.
"Assets" means the assets of Sellers as specified in Section 2.2.
"Asset Subsidiaries" means D P Raleigh Durham, D P Martinsburg, D P St.
Louis, D P Battle Creek, D P Milwaukee, D P Boston, RDP Indianapolis, CAP New
London, CAP Boston and Channel 66 collectively, and "Asset Subsidiary" means any
one of the Asset Subsidiaries individually.
"Assumed Contracts" means (i) those Contracts listed on SCHEDULE 3.5
that are specifically designated as Contracts that will be assumed by Buyer at
Closing, (ii) Contracts entered into in the ordinary course of business with
advertisers for the sale of advertising or program time on the Stations for cash
at rates consistent with past practices and which may be cancelled by the
Stations without penalty on not more than thirty (30) days' notice, (iii) other
Contracts entered into by the Company or any Subsidiary between the date hereof
and the Closing Date in the ordinary course of business consistent with past
practices that do not involve obligations or liabilities in excess of Five
Thousand Dollars ($5,000) for each such Contract or Fifty Thousand Dollars
($50,000) for all such Contracts in the aggregate, and (iv) Contracts entered
into by Sellers between the date hereof and Closing that Buyer agrees to assume
in writing (the Contracts described in clauses (ii), (iii) and (iv) are
collectively, the "Permitted Contracts").
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"Battle Creek License" has the meaning set forth in the Recitals.
"Borrower's Security Agreement" means the Security and Pledge Agreement
dated as of November 21, 1999, by and between the Company and Buyer.
"Boston Affiliation Agreement" means the PAX TV Network Affiliation
Agreement dated as of the date hereof, by and between Paxson Communications
Corporation d/b/a PAX NET, Inc. and D P Boston and Boston License.
"Boston Escrow Agreement" means the Escrow Agreement dated as of April
30, 1999, by and among D P Boston, Boston University Communications, Inc. and
First Union National Bank.
"Boston License" has the meaning set forth in the Recitals.
"Boston Purchase Agreement" means the Asset Purchase Agreement dated as
of April 30, 1999, by and between D P Boston and Boston University
Communications, Inc.
"Boston Purchase Documents" means collectively, the Boston Purchase
Agreement, the Boston Escrow Agreement and the Boston Time Brokerage Agreement.
"Boston Time Brokerage Agreement" means the Time Brokerage Agreement
dated as of April 30, 1999, by and between D P Boston and Boston University
Communications, Inc.
"Boston University" has the meaning set forth in Section 6.10.
"Buyer" has the meaning set forth in the Preamble.
"Buyer Ancillary Agreements" means the Time Brokerage Agreements,
Boston Affiliation Agreement, Loan Documents, and all other agreements and
instruments to be executed and delivered by Buyer pursuant hereto.
"Cancelled Debt" has the meaning set forth in Section 2.3.
"CAP" has the meaning set forth in the Recitals.
"CAP Boston" has the meaning set forth in the Recitals.
"CAP New London" has the meaning set forth in the Recitals.
"Cash Balance" has the meaning set forth in Section 2.4.
"Channel 66" has the meaning set forth in the Recitals.
"Claimant" has the meaning set forth in Section 10.4.
"Closing" means the consummation of the purchase and sale of the Assets
pursuant to this Agreement in accordance with the provisions of Section 8.
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"Closing Date" means the date on which the Closing occurs, as
determined pursuant to Section 8.
"Company" has the meaning set forth in the Preamble.
"Company Material Adverse Effect," when used in Section 3 hereof, means
one or more events or circumstances that have resulted or could reasonably be
expected to result in loss, liability or damages with respect to the Assets or
the business, operations or financial condition of one or more Stations in an
amount in excess of Twenty-Five Thousand Dollars ($25,000) and, when used in
clause (iii) of Section 7.1(a), Section 7.1(e) and Section 9.2(g) hereof, means
one or more events or circumstances that have resulted or could reasonably be
expected to result in loss, liability or damages with respect to the Assets or
the business, operations or financial condition of one or more Stations in an
amount in excess of Two Hundred Fifty Thousand Dollars ($250,000), provided that
any loss, liability or damages to the Assets or to one or more of the Stations
directly or indirectly attributable to Buyer or an Affiliate of Buyer under one
or more of the Time Brokerage Agreements, the Programming Agreement or under the
Boston Affiliation Agreement, as defined below, shall not constitute a Company
Material Adverse Effect.
"Company Member" has the meaning set forth in Section 2.4(a).
"Consents" means all consents, permits, approvals or notices to or
filings with governmental authorities and other third parties necessary to
transfer the Assets to Buyer or otherwise to consummate the transactions
contemplated by this Agreement.
"Contracts" means, other than the Company's Lease Agreement for its
corporate headquarters located in Palm Beach, Florida, all contracts, leases,
non-governmental licenses, and other agreements (including leases for personal
or real property and employment agreements), written or oral (including any
amendments and other modifications thereto) to which the Company or any
Subsidiary is a party or which are binding upon the Company or any Subsidiary
and which relate to or affect the Assets or the business or operations of the
Stations, and (i) which are in effect on the date of this Agreement or (ii)
which are entered into by the Company or any Subsidiary between the date of this
Agreement and the Closing Date in accordance with Section 5.3 hereof.
"Deficit Capital Amount" has the meaning set forth in Section 3.17.
"DOJ" means the United States Department of Justice.
"D P Battle Creek" has the meaning set forth in the Recitals.
"D P Boston" has the meaning set forth in the Recitals.
"D P Martinsburg" has the meaning set forth in the Recitals.
"D P Milwaukee" has the meaning set forth in the Recitals.
"D P Raleigh Durham" has the meaning set forth in the Recitals.
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"D P St. Louis" has the meaning set forth in the Recitals.
"DPC Trust" means The Devon Paxson Irrevocable Children's Trust,
Roslyck Paxson as sole Trustee.
"Existing Phase I Reports" has the meaning set forth in Section 6.7.
"Fair Market Value" has the meaning set forth in Section 6.9.
"FCC" has the meaning set forth in the Recitals.
"FCC Consents" means actions by the FCC granting its consents to the
assignment of the FCC Licenses from the applicable License Subsidiary to Buyer.
"FCC Licenses" means all Licenses issued by the FCC to the Company or
any Subsidiary in connection with the business or operations of the Stations.
"Final Order" and "Final Orders" mean an action or actions by the FCC
that have not been reversed, stayed, enjoined, set aside, annulled, or
suspended, and with respect to which no requests are pending for administrative
or judicial review, reconsideration, appeal, or stay, and the time for filing
any such requests and the time for the FCC to set aside the action or actions on
its own motion have expired.
"Financial Statements" has the meaning set forth in Section 3.14.
"FTC" means the United States Federal Trade Commission.
"GAAP" means generally accepted accounting principles, as in effect
from time to time, applied on a consistent basis.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnifying Party" has the meaning set forth in Section 10.4.
"Indemnity Period" has the meaning set forth in Section 10.1.
"Independent Member" has the meaning set forth in Section 2.4(a).
"Indianapolis License" has the meaning set forth in the Recitals.
"Intangibles" means all copyrights, trademarks, trade names, service
marks, service names, licenses, patents, permits, jingles, proprietary
information, technical information and data, machinery and equipment warranties,
and other similar intangible property rights and interests applied for, issued
to, or owned by the Company or any Subsidiary or under which the Company or any
Subsidiary is licensed or franchised and that are used or useful in the business
and operations of any Station, together with any additions thereto between the
date of this Agreement and the Closing Date.
"IRS" means the United States Internal Revenue Service.
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"JLP Trust" means The Private Capital Group of STI Capital Management,
N.A. as Trustee of The Julie Louise Paxson Support Trust dated November 1, 1994.
"Licenses" means all licenses, permits, and other authorizations issued
by the FCC, the Federal Aviation Administration, or any other federal, state, or
local governmental authority in connection with the conduct of the business or
operations of the Stations, together with any additions thereto between the date
of this Agreement and the Closing Date.
"License Subsidiaries" means Raleigh License, Martinsburg License, St.
Louis License, Battle Creek License, Milwaukee License, Indianapolis License,
New London License, Boston License and Norwell License collectively, and
"License Subsidiary" means
any one of the License Subsidiaries individually.
"Limited Recourse Agreement" means the Limited Recourse Guaranty and
Pledge Agreement dated as of November 21, 1999, made by the shareholders of the
Company to and with Buyer.
"Loan Documents" means collectively, the Credit Agreement, Note,
Borrower's Security Agreement, Limited Recourse Agreement, Subordination
Agreement and Subsidiary Guaranty.
"Martinsburg License" has the meaning set forth in the Recitals.
"Milwaukee License" has the meaning set forth in the Recitals.
"NBC" means the National Broadcasting Company, Inc.
"NBC Advisors" has the meaning set forth in Section 6.9.
"NBC Member" has the meaning set forth in Section 2.4(a).
"NBC Valuation Report" has the meaning set forth in Section 6.9.
"NBC Valuation Report Deadline" has the meaning set forth in Section
6.9.
"New Liabilities" has the meaning set forth in Section 11.14.
"New London License" has the meaning set forth in the Recitals.
"Norwell License" has the meaning set forth in the Recitals.
"Note" has the meaning set forth in the Recitals.
"Option" has the meaning set forth in Section 9.4(a).
"Option Purchase Agreement" has the meaning set forth in
Section 9.4(a).
"Panel Valuation Report" has the meaning set forth in Section 2.4.
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<PAGE> 14
"Party" and "Parties" have the meanings set forth in Section 2.4.
"Permitted Contracts" has the meaning set forth in the definition of
"Assumed Contracts."
"Person" means an individual, corporation, association, partnership,
joint venture, trust, estate, limited liability company, limited liability
partnership, or other entity or organization.
"Petition" has the meaning set forth in Section 8.1.
"Phase II Report" has the meaning set forth in Section 6.7.
"Prepayment" has the meaning set forth in Section 2.4(d).
"Programming Agreement" means the Programming Agreement dated as of
June 7, 1999, between Buyer D/B/A PAXNET, Inc. and Norwell License.
"Purchase Price" means the purchase price specified in Section 2.3.
"Raleigh License" has the meaning set forth in the Recitals.
"Real Property Interests" means, other than the Company's interests in
its corporate headquarters located in Palm Beach, Florida, all interests in real
property, including fee estates, leaseholds and subleaseholds, purchase options,
easements, licenses, rights to access, and rights of way, and all buildings and
other improvements thereon, owned or held by any Subsidiary that are used or
useful in the business or operations of any Station, together with any additions
thereto between the date of this Agreement and the Closing Date.
"Reduction Notice" has the meaning set forth in Section 11.14.
"RDP" has the meaning set forth in the Recitals.
"RDP Indianapolis" has the meaning set forth in the Recitals.
"RPC Trust" means The Roslyck Paxson Irrevocable Children's Trust,
Devon Paxson as sole Trustee.
"Second Option Period" has the meaning set forth in Section 9.4(b).
"Seller" and "Sellers" have the meanings set forth in the Preamble.
"Seller Ancillary Agreements" means the Time Brokerage Agreements,
Boston Affiliation Agreement, Loan Documents, and all other agreements and
instruments to be executed and delivered by Sellers thereto or hereto.
"Sellers Statement" has the meaning set forth in Section 2.4(f).
"Signing Date" has the meaning set forth in Section 11.14.
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<PAGE> 15
"St. Louis License" has the meaning set forth in the Recitals.
"Stations" means collectively, WRPX(TV), WWPX(TV), WPXS(TV), WZPX(TV),
WPXE(TV), WIPX(TV), WHPX(TV), and WWDP(TV) collectively, and "Station" means any
one of the Stations individually.
"Subordination Agreement" means the Subordination Agreement dated as of
November 21, 1999, by and among Sellers, Buyer and the shareholders of the
Company.
"Subsidiaries" means collectively, RDP, CAP, the Asset Subsidiaries and
License Subsidiaries and "Subsidiary" means RDP, CAP, any Asset Subsidiary or
License Subsidiary, individually.
"Subsidiary Guaranty" means the Subsidiary Guaranty, Security and
Pledge Agreement dated as of November 21, 1999, made by Sellers to and with
Buyer.
"Tangible Personal Property" means, other than the tangible personal
property located at the Company's corporate headquarters in Palm Beach, Florida,
all machinery, equipment, tools, vehicles, furniture, leasehold improvements,
office equipment, plant, inventory, spare parts, and other tangible personal
property owned or held by the Company and any Subsidiary that is used or useful
in the conduct of the business or operations of any Station, together with any
additions thereto between the date of this Agreement and the Closing Date.
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means all
federal, state, local or foreign income, gross receipts, windfall profits,
severance, property, production, sales, use, license, excise, franchise,
capital, transfer, employment, withholding and other taxes and assessments,
together with any interest, additions or penalties with respect thereto and any
interest with respect to such additions or penalties.
"Tax Returns" means all federal, state, local and foreign income and
franchise Tax returns and Tax reports (including any attached schedules) and
other Tax statements and other similar filings required to be filed, including,
any information return, claim for refund, amended return or declaration of
estimated Tax.
"Termination Notice" has the meaning set forth in Section 11.14.
"Time Brokerage Agreements" means collectively, the Time Brokerage
Agreement dated as of November 21, 1999, between Raleigh License and a
subsidiary of Buyer; the Time Brokerage Agreement dated as of November 21, 1999,
between Martinsburg License and a subsidiary of Buyer; the Time Brokerage
Agreement dated as of November 21, 1999, between St. Louis License and a
subsidiary of Buyer; the Time Brokerage Agreement dated as of November 19, 1999,
between Battle Creek License and a subsidiary of Buyer; the Time Brokerage
Agreement dated as of November 21, 1999, between Milwaukee License and a
subsidiary of Buyer; the Time Brokerage Agreement dated as of November 21, 1999,
between Indianapolis License and a subsidiary of Buyer; the Time Brokerage
Agreement dated as of November 21, 1999, between New London License and a
subsidiary of Buyer; and the Time Brokerage Agreement dated as of November 21,
1999, between Norwell License and a subsidiary of Buyer.
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"Time Brokerage Agreements Fee" has the meaning set forth in Section
11.16.
"TLP Trust" means The Private Capital Group of STI Capital Management,
N.A. as Trustee of The Todd Lowell Paxson Support Trust dated November 1, 1994.
"To the best knowledge of the Company" means to the actual knowledge of
Devon Paxson, Roslyck Paxson or Robert Heon following reasonable inquiry.
"Trust Agreements" means collectively, the Trust Agreement for the TLP
Trust; the Trust Agreement for the JLP Trust; the Trust Agreement for the DPC
Trust; the Trust Agreement for the RPC Trust.
"Trusts" means collectively, the DPC Trust, the JLP Trust, the RPC
Trust and the TLP Trust.
"Updated Reports" has the meaning set forth in Section 6.7.
"Verified Capital Amount" has the meaning set forth in Section 3.17.
"W33BZ" has the meaning set forth in the Recitals.
"WBPX(TV)" has the meaning set forth in the Recitals.
"WDPX(TV)" has the meaning set forth in the Recitals.
"WEBZ(FM) Distribution" has the meaning set forth in Section 2.2(a).
"WHPX(TV)" has the meaning set forth in the Recitals.
"WIPX(TV)" has the meaning set forth in the Recitals.
"WPXE(TV)" has the meaning set forth in the Recitals.
"WPXG(TV)" has the meaning set forth in the Recitals.
"WPXS(TV)" has the meaning set forth in the Recitals.
"WRPX(TV)" has the meaning set forth in the Recitals.
"WWDP(TV)" has the meaning set forth in the Recitals.
"WWPX(TV)" has the meaning set forth in the Recitals.
"WZPX(TV)" has the meaning set forth in the Recitals.
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SECTION 2. PURCHASE AND SALE OF ASSETS
2.1 AGREEMENT TO SELL AND BUY. Subject to the terms and conditions
set forth in this Agreement, each Seller hereby agrees to sell, transfer, and
deliver to Buyer on the Closing Date, and Buyer agrees to purchase on the
Closing Date, all of the tangible and intangible assets used or useful in
connection with the conduct of the business or operations of each Station,
together with any additions thereto between the date of this Agreement and the
Closing Date, but excluding the assets described in Section 2.2, free and clear
of any claims, liabilities, security interests, mortgages, liens, pledges,
conditions, charges, or encumbrances of any nature whatsoever, other than liens
granted to Buyer pursuant to the Loan Documents, including the following:
(a) the Tangible Personal Property;
(b) the Real Property Interests;
(c) the Licenses;
(d) the Assumed Contracts;
(e) the Intangibles;
(f) all of the Company's and each Subsidiary's proprietary
information, technical information and data, machinery and equipment warranties,
maps, computer discs and tapes, plans, diagrams, blueprints, and schematics,
including filings with the FCC relating to the business and operation of any
Station;
(g) all choses in action of the Company and each Subsidiary
relating to any Station;
(h) all books and records of each Station, including
executed copies of the Contracts and all records required by the FCC to be
kept by each Station;
(i) all Accounts Receivable arising on or prior to the
Closing Date; and
(j) the Company's and each Subsidiary's cash, cash
equivalents, and marketable securities on hand as of the Closing, and all
other cash in any of the Company's and each Subsidiary's bank accounts any and
all insurance policies, bonds, letters of credit, or other similar items, any
cash surrender value in regard thereto, and any and all claims receivable under
any and all insurance policies.
2.2 EXCLUDED ASSETS. The Assets shall exclude the following
assets:
(a) any amount paid to D P Media of Panama City, Inc. and D
P Media License of Panama City, Inc. upon the assignment of the licenses for
radio station WEBZ(FM), Panama City, Florida, to Jacor Licensee of Louisville
II, Inc. (the "WEBZ(FM) Distribution");
(b) all or any portion of the Time Brokerage Agreements Fee;
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(c) all books and records that any Seller is required by law
to retain and that pertain to such Seller's corporate organization;
(d) any pension, profit-sharing or employee benefit plans,
and any collective bargaining agreements; and
(e) all property listed on SCHEDULE 2.2 hereto.
2.3 ASSUMPTION OF LIABILITIES AND OBLIGATIONS. As of the Closing
Date, Buyer shall assume and undertake to pay, discharge, and perform all
obligations and liabilities of Sellers under the Licenses and the Assumed
Contracts insofar as they relate to the time on and after the Closing Date, and
arise out of events related to Buyer's ownership of the Assets or its operation
of a Station on or after the Closing Date. Buyer shall not assume any other
obligations or liabilities of Seller, including (i) any obligations or
liabilities under any Contract not included in the Assumed Contracts, (ii) any
obligations or liabilities under the Assumed Contracts relating to the period
prior to the Closing Date, unless such obligation relates to Buyer's programming
of the Stations under the Time Brokerage Agreements, the Programming Agreement
or the Boston Affiliation Agreement, (iii) any claims or pending litigation or
proceedings relating to the operation of a Station prior to the Closing, unless
such obligation relates to Buyer's programming of the Stations under the Time
Brokerage Agreements, the Programming Agreement or the Boston Affiliation
Agreement, (iv) any obligations or liabilities arising under capitalized leases
or other financing agreements, (v) any obligations or liabilities arising under
agreements entered into other than in the ordinary course of business, (vi) any
obligations or liabilities of any Seller under any employee pension, retirement,
health and welfare or other benefit plans or collective bargaining agreements,
(vii) any obligation to any employee of any Station for severance benefits,
vacation time, or sick leave accrued prior to the Closing Date, or (viii) any
obligations or liabilities caused by, arising out of, or resulting from any
action or omission of any Seller prior to the Closing, and all such obligations
and liabilities shall remain and be the obligations and liabilities solely of
Sellers.
2.4 PURCHASE PRICE.
(a) AMOUNT. The purchase price for the Assets (the "Purchase
Price") shall be determined in accordance with the provisions of this
Section 2.4(a).
(i) NEGOTIATED PRICE. As soon as practicable following
the date hereof, NBC shall notify the Company in writing of a proposed purchase
price for the Stations, and thereafter the Company and NBC shall negotiate in
good faith and use commercially reasonable efforts to agree upon, no later than
December 30, 1999, the purchase price for the Assets. Buyer and the Company
agree that, commencing on the date hereof, NBC and NBC's Advisors shall have the
access rights set forth in Section 6.9 for the purpose of negotiating the
purchase price as contemplated by this Section 2.4(a)(i). If NBC and the Company
agree upon the purchase price on or before December 30, 1999, such purchase
price shall be set forth in an amendment to this Agreement signed by Buyer,
Sellers and NBC. Buyer, Sellers and NBC agree that such agreed upon purchase
price shall be the Purchase Price for all purposes under this Agreement and the
remaining provisions of this Section 2.4(a) shall have no force or effect.
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(ii) ARBITRATION PANEL. If, on or before December 30,
1999, NBC and the Company have not agreed on the purchase price and this
Agreement has not been amended in accordance with the procedure set forth in
Section 2.4(a)(i), NBC, Buyer and the Company (individually, a "Party" and
collectively, the "Parties") agree that the Purchase Price shall be determined
by a panel of three (3) individuals (the "Arbitration Panel"). NBC shall select
one member of the Arbitration Panel (the "NBC Member"), the Company shall select
one member of the Arbitration Panel (the "Company Member"), and the third member
of the Arbitration Panel (the "Independent Member") shall be selected by the NBC
Member and the Company Member. Both the NBC Member and the Company Member shall
be selected by January 14, 2000, and each Party shall provide to the other
prompt written notice of the identity of its designee. If the NBC Member and the
Company Member have not selected the Independent Member on or before January 28,
2000, the Independent Member shall be selected no later than February 11, 2000,
in accordance with the procedures for the selection of independent arbitrators
set forth in the Commercial Arbitration Rules of the American Arbitration
Association ("AAA"). Any request to the AAA for the selection of the Independent
Member may be submitted by either the NBC Member or the Company Member after
January 28, 2000, and shall be submitted to the AAA in Washington, D.C. Each
member of the Arbitration Panel, whether selected by the Parties, jointly by the
NBC Member and the Company Member or designated by the AAA, shall have
experience in the valuation of broadcast properties, but, other than the
Independent Member, need not be a professional arbitrator, and shall not be, or
have been during the past twelve (12) months, an employee, officer, director of,
or a consultant or provider of other services to, any Party or any Affiliate of
any Party.
(iii) VALUATION MATERIALS. On or before February 18,
2000, each Party shall submit to the Arbitration Panel such Party's proposed
fair market value of the Assets and any written materials that such Party deems
appropriate to support such value. Each Party shall simultaneously furnish to
the other Parties a copy of all such written materials submitted to the
Arbitration Panel. At any time on or before March 10, 2000, the Arbitration
Panel may request additional written information from any Party with respect to
such Party's valuation proposal, which information must be submitted to the
Arbitration Panel within five (5) business days after the request. Each Party
shall simultaneously furnish to the other Parties a copy of any such additional
written information.
(iv) PURCHASE PRICE DETERMINATION. The Purchase Price
shall be the value of the Stations as of the date hereof as determined by the
Arbitration Panel, taking into account the written submissions supplied by the
Parties pursuant to Section 2.4(a)(iii). The value of the Stations shall be
determined on a going-concern basis taking into account all relevant factors,
including among other things, the value of the Stations' Assets (but not the
assets listed in Section 2.2 hereof), the Stations' obligations and liabilities,
including the Stations' obligations and liabilities under their existing
affiliation and services agreements, the Verified Capital Amount, the return the
Company could have reasonably expected, the circumstances under which Buyer and
Sellers entered into this Agreement, and exclusive of any brokers' fees or
commissions. Such value shall be determined in accordance with standard
appraisal techniques in use at the time of the determination, taking into
account applicable market and economic factors in effect as of the date hereof
and such other factors that might reasonably affect the sales price of the
Stations. The value shall not be reduced by any portion of the indebtedness
represented by the Note. The Arbitration Panel shall notify each Party in
writing of the value of the Stations determined in accordance with the
requirements of this Section 2.4(a) as soon as practicable, but in no event
later than April 7, 2000, and shall specify in reasonable detail the basis for
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such determination (the "Panel Valuation Report"). The Arbitration Panel's
determination of the Purchase Price shall be final and binding upon the Parties
for all purposes under this Agreement. The cost and expenses of the Arbitration
Panel shall be paid one-half by Buyer and one-half by Sellers.
(b) PURCHASE PRICE COLLARS. Notwithstanding the requirements of
Section 2.4(a), but subject to the requirements of Section 3.17, (i) if the
Purchase Price determined by the Arbitration Panel is less than the sum of the
principal amount of the Note and Seven Million Five Hundred Thousand Dollars
($7,500,000), the Purchase Price shall be the sum of such amounts, and (ii) if
the Purchase Price determined by the Arbitration Panel is more than the sum of
the principal amount of the Note and Twenty-Five Million Dollars ($25,000,000),
the Purchase Price shall be the sum of such amounts.
(c) PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by
Buyer to Sellers at Closing as follows:
(i) Upon the Closing, the entire outstanding indebtedness of
the Company to Buyer, including amounts for principal interest and other
obligations under the Note, shall be forgiven by Buyer and the entire amount of
such indebtedness (the "Cancelled Debt") shall be applied as a credit against
the payment of the Purchase Price.
(ii) Upon the Closing, Buyer shall pay to Sellers by wire
transfer of immediately available funds pursuant to wire instructions provided
by Sellers to Buyer at least two (2) business days prior to Closing an amount in
cash equal to the Purchase Price less the amount of the Cancelled Debt (the
"Cash Balance") adjusted as provided in Sections 2.4(d) and (e) below.
(d) PREPAYMENTS UNDER PROGRAMMING AGREEMENTS. For each Contract
regarding the sale of program time on any Station in effect at Closing that
cannot be cancelled by the applicable Station upon thirty (30) days notice or
less and for which any Seller has received payment thereunder for any portion of
the period following the Closing Date (the amount of such payment is the
"Prepayment"), an amount equal to the Prepayment shall be applied as a partial
credit against the Cash Balance payable to Sellers at Closing.
(e) PRORATIONS. The Purchase Price shall be increased or decreased
as required to effectuate the proration of expenses with respect to the business
or operations of the Stations, other than those expenses for which Buyer is
obligated to reimburse Sellers under the Time Brokerage Agreements. All expenses
arising from the operation of a Station, including business and license fees,
utility charges, real and personal property taxes and assessments levied against
the Assets, property and equipment rentals, applicable copyright or other fees,
sales and service charges, taxes (except for taxes arising from the transfer of
the Assets under this Agreement), FCC annual regulatory fees and similar prepaid
and deferred items, shall be prorated between Buyer and Sellers in accordance
with the principle that Sellers shall be responsible for all expenses, costs,
and liabilities allocable to the period prior to the Closing Date (subject to
reimbursement by Buyer to the extent provided in the Time Brokerage Agreements),
and Buyer shall be responsible for all expenses, costs, and obligations
allocable to the period on and after the Closing Date. Notwithstanding the
preceding sentence, there shall be no adjustment for, and Sellers shall remain
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solely liable with respect to, any Contracts not included in the Assumed
Contracts, subject to Section 2.3, and any other obligation or liability not
being assumed by Buyer in accordance with Section 2.3.
(f) DETERMINATION OF ADJUSTMENTS. The Cash Balance, taking into
account the adjustments contemplated by Section 2.4(d) and (e), will be
determined in accordance with the following procedures:
(i) Sellers shall prepare and deliver to Buyer not later
than three (3) business days before the Closing Date a preliminary settlement
statement which shall set forth Sellers' good faith estimate of the adjustment
to the Cash Balance under Section 2.4(d) and (e). The preliminary settlement
statement shall contain all information reasonably necessary to determine the
adjustment to the Cash Balance under Section 2.4(d) and (e), to the extent such
adjustment can be determined or estimated as of the date of the preliminary
settlement statement, and such other information as may be reasonably requested
by Buyer. Buyer and Sellers shall use their good faith efforts to agree upon the
adjustments under Section 2.4(d) and (e) prior to the Closing. The Cash Balance
payable at Closing shall be increased or decreased, as applicable, based on the
adjustments set forth in the preliminary settlement statement, except that any
adjustments set forth in the preliminary settlement statement to which Buyer
objects in good faith shall be deemed omitted from such preliminary settlement
statement and shall instead be determined as part of the post-closing
adjustments under this Section 2.4(f).
(ii) No later than forty-five (45) days after the Closing
Date, Buyer shall deliver to Sellers a statement setting forth Buyer's
determination of the adjustments to the Cash Balance pursuant to this Section
2.4(f). If Sellers dispute Buyer's determination of such adjustments, Sellers
shall deliver to Buyer within forty-five (45) days after their receipt of
Buyer's statement a statement setting forth their determination of the amount of
the adjustments (the "Sellers Statement"). If Sellers notify Buyer of their
acceptance of Buyer's statement, or if Sellers fail to deliver the Sellers
Statement within the 45-day period specified in the preceding sentence, Buyer's
determination of the adjustments shall be conclusive and binding on the parties
as of the last day of the 45-day period.
(iii) Buyer and Sellers shall use good faith efforts to
resolve any dispute involving the determination of the adjustments required by
this Section 2.4(f). If the parties are unable to resolve the dispute within
fifteen (15) days following the delivery of the Sellers Statement, Buyer and
Sellers shall jointly designate an independent certified public accountant, who
shall be knowledgeable and experienced in accounting for television broadcasting
stations, within forty-five (45) days following delivery of Sellers Statement,
to resolve the dispute. If Sellers and Buyer fail to agree to the appointment of
such certified public accountant within said forty-five (45) day period, either
party may submit to the American Arbitration Association for the appointment of
such accountant under the commercial arbitration rules of the American
Arbitration Association. The accountant's resolution of the dispute shall be
final and binding on the parties, and a judgment may be entered thereon in any
court of competent jurisdiction. Any fees of such accountant shall be split
equally between the parties.
(iv) If the Cash Balance as finally determined pursuant to
this Section 2.4(f) exceeds the Cash Balance paid by Buyer on the Closing Date
(the "Estimated Cash Balance"), Buyer shall pay to Sellers, in immediately
available funds within five days after the date on which the Cash Balance is
finally determined pursuant to this Section 2.4(f), the difference between the
Cash Balance as finally determined and the Estimated Cash Balance. If the Cash
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Balance as finally determined pursuant to this Section 2.4(f) is less than the
Estimated Cash Balance, Sellers shall pay to Buyer, in immediately available
funds within five (5) days after the date on which the Cash Balance is finally
determined pursuant to this Section 2.4(f), the difference between the Cash
Balance as finally determined and the Estimated Cash Balance.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, hereby represent and warrant to Buyer
as follows:
3.1 ORGANIZATION, STANDING, AND AUTHORITY. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Florida. Each Subsidiary is duly organized, validly
existing, and in good standing under the laws of the State of Florida and each
Asset Subsidiary is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its respective Assets or the conduct of
its respective business or operations requires such qualification. Each Seller
has all requisite power and authority (i) to own, lease, and use its respective
Assets as now owned, leased, and used, and (ii) to execute and deliver this
Agreement and to perform and comply with all of the terms, covenants, and
conditions to be performed and complied with by it hereunder.
3.2 AUTHORIZATION AND BINDING OBLIGATION. The execution, delivery
and performance of this Agreement and the Seller Ancillary Agreements by each
Seller, as applicable, have been duly authorized and approved by all necessary
action of such Seller and do not require any further authorization or consent.
This Agreement and each Seller Ancillary Document are legal, valid and binding
agreements of each Seller, as applicable, enforceable in accordance with their
respective terms, except in each case as such enforceability may be limited by
bankruptcy, moratorium, insolvency, reorganization or other similar laws
affecting or limiting the enforcement of creditors' rights generally and except
as such enforceability is subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.3 ABSENCE OF CONFLICTING AGREEMENTS. Subject to obtaining the
Consents listed on SCHEDULE 3.3 and the FCC Consents, subject to providing the
Trusts with sufficient notice of the Closing under Florida law, and subject to
the termination or expiration of the waiting period under the HSR Act applicable
to the transactions contemplated hereby, the execution, delivery, and
performance of this Agreement and the Seller Ancillary Agreements (with or
without the giving of notice, the lapse of time, or both): (i) do not require
the consent of any third party; (ii) will not conflict with any provision of the
Trust Agreements or the Articles of Incorporation or Bylaws of the Company or
any Subsidiary; (iii) will not conflict with, result in a breach of, or
constitute a default under, any law, judgment, order, ordinance, injunction,
decree, rule, regulation, or ruling of any court or governmental instrumentality
applicable to the Company or any Subsidiary; (iv) will not conflict with,
constitute grounds for termination of, result in a breach of, constitute a
default under, or accelerate or permit the acceleration of any performance
required by the terms of, any agreement, instrument, license, or permit to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary may be bound, except for such conflicts, terminations, breaches,
defaults or accelerations that have not had and could not reasonably be expected
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<PAGE> 23
to have a Company Material Adverse Effect; and (v) will not create any claim,
liability, mortgage, lien, pledge, condition, charge, or encumbrance of any
nature whatsoever upon any of the Assets.
3.4 LICENSES. SCHEDULE 3.4 is a true and complete list of each FCC
License and each other License that is material to the business or operations of
each Station. Sellers shall deliver to Buyer true and complete copies of the
Licenses (including any amendments and other modifications thereto), except
Licenses of auxiliary stations, listed on SCHEDULE 3.4. The Licenses listed on
SCHEDULE 3.4 have been validly issued to the respective License Subsidiary
identified on SCHEDULE 3.4, and each such License Subsidiary is the authorized
legal holder thereof. The Licenses listed on SCHEDULE 3.4 comprise all of the
Licenses required from any governmental or regulatory authority for the lawful
conduct of the business and operations of each Station in the manner and to the
full extent they are now conducted, except for such Licenses the failure of
which to obtain have not had and could not reasonably be expected to have a
Company Material Adverse Effect. None of the Licenses listed on SCHEDULE 3.4 is
subject to any restriction or condition that would limit the operation of any
Station as now operated, other than such restrictions or conditions that appear
on the face of such Licenses or are generally applicable to television
broadcasting stations under the rules and regulations of the FCC. The Licenses
listed on SCHEDULE 3.4 are in full force and effect, and the conduct of the
business and operations of each Station is in accordance therewith, except for
such noncompliance that have not had and could not reasonably be expected to
have a Company Material Adverse Effect. Sellers have no reason to believe that
any of the FCC Licenses would not be renewed by the FCC in the ordinary course.
No action is pending or, to the best knowledge of the Company, threatened by or
before the FCC to revoke, terminate or modify in any materially adverse respect
any of the FCC Licenses, and there is no order to show cause, notice of
violation, notice of apparent liability or notice of forfeiture outstanding or,
to the best knowledge of the Company, threatened with respect to any Station.
Except as set forth on SCHEDULE 3.4, Sellers require no waiver of any FCC rule
or policy to obtain the FCC Consents.
3.5 CONTRACTS. SCHEDULE 3.5 is a true and complete list of all
Contracts, other than Contracts entered into by any Seller in the ordinary
course of business, prior to the date hereof (i) for the sale of advertising
time on the Stations for cash at rates consistent with past practices that can
be terminated by a Station without premium or penalty on no more than thirty
(30) days notice (it being understood that SCHEDULE 3.5 shall include a list of
all long-form advertising and other program time sales Contracts in effect on
the date hereof) and (ii) other than the Contracts described in clause (i),
Contracts that do not involve obligations or liabilities in excess of Five
Thousand Dollars ($5,000) for each such Contract and Fifty Thousand Dollars
($50,000) for all such Contracts in the aggregate. The Company shall deliver to
Buyer true and complete copies of all written Contracts and true and complete
memoranda of all oral Contracts (including any amendments and other
modifications to such Contracts) listed on SCHEDULE 3.5. Other than the
Contracts listed on SCHEDULE 3.5 or any other Schedule to this Agreement and the
Contracts that are not required to be listed on SCHEDULE 3.5, and except as
noted on SCHEDULE 3.5, neither the Company nor any Subsidiary requires any
contract, lease, or other agreement to enable it to carry on its business as now
conducted. All of the Contracts are in full force and effect. There is not under
any Contract any default by the Company or any Subsidiary or, to the best
knowledge of the Company, any other party thereto or any event that, after
notice or lapse of time, or both, could constitute a default, except for such
defaults that have not had and could not reasonably be expected to have a
Company Material Adverse Effect. The Company is not aware of any intention by
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any party to any Contract (i) to terminate such contract or amend the terms
thereof, (ii) to refuse to renew the Contract upon expiration of its term, or
(iii) to renew the Contract upon expiration only on terms and conditions which
are more onerous than those now existing.
3.6 CONSENTS. Except for Consents described in SCHEDULE 3.3, the
FCC Consents and the expiration or termination of any waiting period required
under the HSR Act, no consent, approval, permit, or authorization of, or
declaration to or filing with any governmental or regulatory authority, or any
other third party is required (i) to consummate this Agreement and the
transactions contemplated hereby, (ii) to permit Sellers to assign or transfer
the Assets to Buyer, or (iii) to enable Buyer to conduct the business and
operations of each Station in essentially the same manner as such business and
operations are now conducted.
3.7 REPORTS. All material returns, reports, and statements
required to be filed by the Company or any Subsidiary with the FCC have been
filed, and all reporting requirements of the FCC and other governmental
authorities having jurisdiction over the Company, each Subsidiary and each
Station have been complied with by the Company or such Subsidiary, except for
such noncompliance that have not had and could not reasonably be expected to
have a Company Material Adverse Effect. All of such returns, reports, and
statements are substantially complete and correct as filed. All annual
regulatory fees payable with respect to the FCC Licenses have been timely paid
to the FCC.
3.8 TAXES.
(a) The Company has filed or has caused to be filed in a
timely manner all required Tax Returns with the appropriate governmental
authorities in all jurisdictions in which such Tax Returns are required to be
filed by the Company and its Subsidiaries (except Tax Returns listed on SCHEDULE
3.8 for which the filing date has been extended and such extension period has
not expired), and all Taxes shown on such Tax Returns have been properly accrued
or paid to the extent such Taxes have become due and payable. The Company shall
deliver to Buyer true, correct and complete copies of the Tax Returns (in the
form filed) listed in SCHEDULE 3.8. The Financial Statements reflect an adequate
reserve in accordance with GAAP (without regard to any amounts reserved for
deferred taxes) for all unpaid Taxes payable by the Company and its Subsidiaries
for all Tax periods and portions thereof through the date of such Financial
Statements.
(b) Except as disclosed in SCHEDULE 3.8, the Company and its
Subsidiaries have not executed any waiver or extension of any statute of
limitations on the assessment or collection of any Tax or with respect to any
liability arising therefrom. Except as disclosed in SCHEDULE 3.8, none of the
federal, state or local income Tax Returns filed by the Company and its
Subsidiaries has been audited by any taxing authority. Except as disclosed in
SCHEDULE 3.8, (i) neither the IRS nor any other taxing authority is asserting,
or threatening to assert any deficiency or claim for additional Taxes against,
or any adjustment of Taxes relating to, the Company and its Subsidiaries and no
basis exists for any such deficiency, claim or adjustment, and (ii) there are no
proposed reassessments of any property owned by the Company and its Subsidiaries
or other proposals that could affect the Taxes of the Company and its
Subsidiaries. There are no material Tax liens on any assets of the Company and
its Subsidiaries, other than liens for current Taxes not yet due and payable and
liens for Taxes that are being contested in good faith by appropriate
proceedings.
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3.9 CLAIMS AND LEGAL ACTIONS. Except as listed on SCHEDULE 3.9 and
proceedings generally affecting the broadcast industry, there is no claim, legal
action, counterclaim, suit, arbitration, governmental investigation or other
legal or administrative proceeding, nor any order, decree or judgment, in
progress or pending or, to the best knowledge of the Company, threatened against
or relating to the Company or any Subsidiary with respect to the Assets nor do
Sellers know or have reason to be aware of any basis for the same.
3.10 COMPLIANCE WITH LAWS. The Company and each Subsidiary have
complied with the Licenses and all federal, state, and local laws, rules,
regulations, and ordinances applicable or relating to the ownership and
operation of the Assets and each Station, except for such noncompliance that
have not had and could not reasonably be expected to have a Company Material
Adverse Effect. To the best knowledge of the Company, neither the ownership or
use of the Assets nor the conduct of the business or operations of any Station
as currently conducted conflicts with the rights of any other person or entity.
3.11 INSURANCE. SCHEDULE 3.11 is a true and complete list in all
material respects of all insurance policies of the Company and each Subsidiary
that insure any part of the Assets or the business of a Station. All policies of
insurance listed in SCHEDULE 3.11 are in full force and effect.
3.12 REAL PROPERTY INTERESTS. SCHEDULE 3.12 contains a complete and
accurate description, in all material respects, of the Real Property Interests.
The Real Property Interests listed on SCHEDULE 3.12 comprise all material real
property interests necessary to conduct the business and operations of each
Station as now conducted. Each Subsidiary, as applicable, has good and
marketable fee simple title, insurable at standard rates, to all fee estates
(including the improvements thereon) included in the Real Property Interests,
free and clear of all liens, mortgages, pledges, covenants, easements and other
claims and encumbrances, except for liens for real estate taxes not yet due and
payable and liens granted to Buyer pursuant to the Loan Documents. With respect
to each leasehold interest included in the Real Property Interests, so long as
the applicable Subsidiary fulfills its obligations under the lease therefor,
such Subsidiary has enforceable rights to nondisturbance and quiet enjoyment.
All towers, guy anchors, and buildings and other improvements included in the
Assets are located entirely on the Real Property Interests. Sellers shall
deliver to Buyer true and complete copies of all deeds pertaining to the Real
Property Interests. To the best knowledge of Sellers, all Real Property
Interests (including the improvements thereon) are in good condition and repair
(ordinary wear and tear excepted) consistent with its present use.
3.13 TITLE TO PROPERTIES. Except as disclosed in SCHEDULE 3.13, the
Company or the Subsidiaries, as applicable, have good and marketable title to
all of the Assets, and the Assets are subject to no mortgages, pledges, liens,
security interests, encumbrances, or other charges or rights of others of any
kind or nature except for liens for current taxes not yet due and payable and
liens granted to Buyer pursuant to the Loan Documents.
3.14 FINANCIAL STATEMENTS. The Company shall furnish Buyer with
true and complete copies of audited financial statements of the Company and each
Subsidiary containing audited financial statements for the fiscal year ended
December 31, 1998, and an unaudited balance sheet for the nine months ended
September 30, 1999 (collectively, the "Financial Statements"). The audited
Financial Statements have been prepared from the books and records of the
Company and each Subsidiary, have been prepared in accordance with GAAP and
maintained throughout the periods indicated, accurately reflect in all material
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respects the books, records, and accounts of the Company and each Subsidiary
(which books, records, and accounts are complete and correct in all material
respects ), and present fairly in all material respects the financial condition
of the Company and each Subsidiary as of their respective dates and the results
of operations for the periods then ended. The unaudited Financial Statements
have been prepared from the books and records of the Company and each
Subsidiary, have been prepared in a manner consistent with the audited Financial
Statements, accurately reflect in all material respects the books, records, and
accounts of the Company and each Subsidiary, and present fairly in all material
respects the financial condition of the Company and each Subsidiary as of their
respective dates and the results of operations for the periods then ended.
3.15 UNDISCLOSED LIABILITIES. Except as disclosed on SCHEDULE 3.15,
neither the Company nor any Subsidiary has any material debt, liability or
obligation, whether accrued, absolute, contingent or otherwise, including any
liability or obligation on account of taxes or any governmental charges,
penalty, interest or fines, except: (i) those liabilities reflected in the
Financial Statements; or (ii) liabilities incurred in the ordinary course of
business (other than contingent liabilities) since August 5, 1999, that do not
exceed in the aggregate Fifty Thousand Dollars ($50,000).
3.16 ACCOUNTS RECEIVABLE. All Accounts Receivable have arisen from
bona fide transactions in the ordinary course of business. Assuming that
commercially reasonable efforts are made to collect the Accounts Receivable, all
Accounts Receivable reflected on the Financial Statements are good and
collectible in the ordinary course of business at the aggregate recorded amounts
thereof, net of doubtful accounts.
3.17 CAPITAL. The shareholders of the Company have contributed to
the Company capital contributions in cash in an aggregate amount of no less than
Seven Million Five Hundred Thousand Dollars ($7,500,000), and no portion of such
capital contributions have been distributed by the Company as of the date
hereof. Upon reasonable written notice to the Company, NBC shall have the right
to conduct an audit, at Buyer's expense, of the Company's books and records in
order to confirm the amount of such capital contributions (the "Verified Capital
Amount"). Sellers shall afford to NBC and to NBC's Advisors (as defined in
Section 6.9) access to all books and records of the Company necessary to enable
NBC to conduct such audit. NBC shall cause such audit to be completed as soon as
practicable following the date the Company provides or makes available to NBC
and NBC's Advisors such books and records. The results of such audit shall
indicate the auditor's determination of the Verified Capital Amount and shall
specify in reasonable detail the basis for such determination. If the audit
demonstrates that the Verified Capital Amount is more than Seven Million Five
Hundred Thousand Dollars ($7,500,000) (the amount of such excess is the "Excess
Capital Amount"), the dollar amounts specified in Section 2.4(b)(i) and (ii)
shall be increased by the amount of the Excess Capital Amount. If the audit
demonstrates that the Verified Capital Amount is less than Seven Million Five
Hundred Thousand Dollars ($7,500,000) (the amount of such difference shall be
the "Deficit Capital Amount"), the dollar amounts specified in Section 2.4(b)(i)
and (ii) shall be reduced by the Deficit Capital Amount.
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3.18 TANGIBLE PERSONAL PROPERTY. SCHEDULE 3.18 sets forth an
accurate and complete list in all material respects of all material items of
Tangible Personal Property. The Tangible Personal Property listed on SCHEDULE
3.18 comprises all material items of tangible personal property necessary to
conduct the business and operations of each Station as now conducted. The
Company or each Subsidiary, as applicable, owns and has good title to each item
of Tangible Personal Property, and none of the Tangible Personal Property is
subject to any lien, charge or encumbrance, other than liens for current taxes
not yet due and payable and the liens granted to Buyer pursuant to the Loan
Documents. Each item of Tangible Personal Property listed on SCHEDULE 3.18 is
available for immediate use in the business and operations of each Station. All
items of transmitting and studio equipment included in the Tangible Personal
Property listed on SCHEDULE 3.18 (i) have been maintained in a manner consistent
with generally accepted standards of good engineering practice and (ii) will
permit each Station and any auxiliary broadcast facilities related to each
Station to operate in accordance with the terms of the FCC Licenses and the
rules and regulations of the FCC and with all other applicable federal, state
and local statutes, rules and regulations, except for such noncompliance that
have not had and could not reasonably be expected to have a Company Material
Adverse Effect.
3.19 LOAN DOCUMENTS. The Loan Documents are in full force and, to
the best knowledge of the Company, there exists no Event of Default (as defined
in the Credit Agreement) under the Loan Documents or any event which, with the
lapse of any applicable grace period or the giving of notice, or both, would
constitute an Event of Default under the Loan Documents.
3.20 ENVIRONMENTAL MATTERS.
(a) To the best knowledge of the Company, the Company and
the Subsidiaries have complied with all laws, rules, and regulations of all
federal, state, and local governments (and all agencies thereof) concerning the
environment, public health and safety, and employee health and safety, except
for such noncompliance that has not had and could not reasonably be expected to
have a Company Material Adverse Effect, and no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, demand, or notice has been filed or
commenced against the Company or any Subsidiary in connection with the ownership
or operation of a Station alleging any failure to comply with any such law,
rule, or regulation.
(b) To the best knowledge of the Company, based solely on
environmental surveys conducted by Dames & Moore for the Company, true and
complete copies of such surveys have been delivered to Buyer, neither the
Company nor any Subsidiary has any liability relating to its ownership and
operation of a Station (and there is no basis related to the past or present
operations, properties, or facilities of the Company or any Subsidiary for any
present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against the Company or any Subsidiary giving
rise to any such liability) under any law, rule, or regulation of any federal,
state, or local government (or agency thereof) concerning release or threatened
release of hazardous substances, public health and safety, or pollution or
protection of the environment, except for such liability has not had and that
could not reasonably be expected to have a Company Material Adverse Effect.
(c) To the best knowledge of the Company, based solely on
environmental surveys conducted by Dames & Moore for the Company, true and
complete copies of such surveys have been delivered to Buyer, neither the
Company nor any Subsidiary has any liability relating to its ownership and
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operation of a Station (and neither the Company nor any Subsidiary has handled
or disposed of any substance, arranged for the disposal of any substance, or
owned or operated any property or facility in any manner that could form the
basis for any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand (under the common law or pursuant to
any statute) against the Company or any Subsidiary giving rise to any such
liability) for damage to any site, location, or body of water (surface of
subsurface), except for such liability that has not had and could not reasonably
be expected to have a Company Material Adverse Effect.
(d) To the best knowledge of the Company, based solely on
environmental surveys conducted by Dames & Moore for the Company, true and
complete copies of such surveys have been delivered to Buyer, neither the
Company nor any Subsidiary has any liability relating to its ownership and
operation of a Station (and neither the Company nor any Subsidiary has exposed
any employee to any substance or condition that could form the basis for any
present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand (under the common law or pursuant to statute)
against the Company or any Subsidiary giving rise to any such liability) for any
illness or personal injury to any employee, except for such liability that has
not had and could not reasonably be expected to have a Company Material Adverse
Effect.
(e) To the best knowledge of the Company, in connection with
its ownership or operation of each Station, the Company and each Subsidiary, as
applicable, has obtained and complied with all of the terms and conditions of
all permits, licenses, and other authorizations which are required under, and
has complied with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which are
contained in, all federal, state, and local laws, rules, and regulations
(including all codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety,
worker health and safety, and pollution or protection of the environment,
including laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes,
except for such noncompliance that has not had and could not reasonably be
expected to have a Company Material Adverse Effect.
(f) No pollutant, contaminant, or chemical, industrial,
hazardous, or toxic material or waste has ever been manufactured, buried,
stored, spilled, leaked, discharged, emitted, or released in any material amount
by the Company or any Subsidiary in connection with its ownership and operation
of a Station.
3.21 PERSONNEL AND BENEFITS; LABOR.
(a) All Employee Plans and Compensation Arrangements of the
Company or any Subsidiary are listed in SCHEDULE 3.21, and complete and accurate
copies of any such written Employee Plans and Compensation Arrangements (or
related insurance policies) shall be furnished to Buyer, along with copies of
any employee handbooks or similar documents describing such Employee Plans and
Compensation Arrangements. SCHEDULE 3.21 also contains a true and complete list
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in all material respects of all employees of each Station, their job
description, date of hire and salary.
(b) Each Employee Plan and Compensation Arrangement has been
administered in compliance in all material respects with its own terms and with
the provisions of ERISA (as defined in subsection (f) below), the Code, the Age
Discrimination in Employment Act and any other applicable federal or state laws.
Neither the Company nor any Subsidiary is aware of the existence of any
governmental audit or examination of any Employee Plan or Compensation
Arrangement or of any facts which would reasonably lead the Company or such
Subsidiary to believe that any such audit or examination is pending or
threatened. No action, suit or claim (other than routine claims for benefits)
with respect to any Employee Plan or Compensation Arrangement is pending or, to
the best knowledge of the Company or its Subsidiaries, threatened.
(c) Except as set forth on SCHEDULE 3.21, neither the
Company nor any Subsidiary contributes to or is required to contribute to any
Multi-employer Plan (as defined in subsection (e) below) with respect to the
employees of a Station.
(d) For purposes of this Agreement, the following terms
shall have the meaning indicated: (i) "Employee Plan" shall mean any pension,
profit-sharing, deferred compensation, vacation, bonus, incentive, medical,
vision, dental, disability, life insurance or any other employee benefit plan as
defined in Section 3(3) of ERISA to which the Company, a Subsidiary or any
entity related to the Company (under the terms of Section 414(b), (c), (m) or
(o) of the Code) contributes or to which the Company, a Subsidiary or any entity
related to the Company (under the terms of Sections 414(b), (c), (m) or (o) of
the Code) sponsors, maintains or otherwise is bound which provides benefits to
persons employed or previously employed at a Station; (ii) "Code" shall mean the
Internal Revenue Code of 1986, as amended, any successor thereto and any
regulations promulgated thereunder; (iii) "Compensation Arrangement" shall mean
any plan or compensation arrangement other than an Employee Plan, whether
written or unwritten, which provides to employees, former employees, officers,
directors and shareholders of the Company, any Subsidiary or any entity related
to the Company (under the terms of Section 414(b), (c), (m) or (o) of the Code)
employed or previously employed at each Station any compensation or other
benefits, whether deferred or not, in excess of base salary or wages, including,
but not limited to, any bonus or incentive plan, stock rights plan, deferred
compensation arrangement, life insurance, stock purchase plan, severance pay
plan and any other employee fringe benefit plan; (iv) "ERISA" shall mean the
Employee Retirement Income Security Act of 1974, as amended, any successor
thereto and any regulations promulgated thereunder; and (v) "Multi-employer
Plan" means a plan, as defined in ERISA Section 3(37), to which the Company, any
Subsidiary or any entity related to the Company (under the terms of Section
414(b) or (c) of the Code) contributes or is required to contribute.
(e) Except as set forth on SCHEDULE 3.21, neither the
Company nor any Subsidiary is a party or subject to any collective bargaining
agreement with respect to any Station. Neither the Company nor any Subsidiary
has any written or oral contracts of employment with any employee of any
Station, other than those listed in SCHEDULE 3.21. To the best knowledge of the
Company, the Company and each Subsidiary has complied in all material respects
with all laws, rules, and regulations relating to the employment of labor,
including those related to wages, hours, collective bargaining, occupational
safety, discrimination, and the payment of social security and other payroll
related taxes, except for such noncompliance that has not had and could not
reasonably be expected to have a Company Material Adverse Effect, and neither
the Company nor any Subsidiary has received any notice alleging that it has
failed to comply in any material respect with any such laws, rules, or
regulations. Except as set forth on SCHEDULE 3.21, no controversies, disputes,
or proceedings are pending or, to the best knowledge of the Company, threatened,
between the Company or a Subsidiary and any employee (singly or collectively) of
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any Station. No labor union or other collective bargaining unit represents or
claims to represent any of the employees of any Station. To the best knowledge
of the Company, there is no union campaign being conducted to represent any
employees of any Station or to solicit cards from employees to authorize a union
to request a National Labor Relations Board certification election with respect
to any employees at any Station.
3.22 INTANGIBLES. SCHEDULE 3.22 is a true and complete list in all
material respects of all material Intangibles (exclusive of those listed in
SCHEDULE 3.4), all of which are valid and uncontested and free and clear of
liens, charges or other encumbrances other than liens granted to Buyer pursuant
to the Loan Documents. To the best knowledge of the Company, neither the Company
nor any Subsidiary is infringing upon or otherwise acting adversely to any
trademarks, trade names, service marks, service names, copyrights, patents,
patent applications, know-how, methods, or processes owned by any other person
or persons, and there is no claim or action pending or, to the best knowledge of
the Company, threatened with respect thereto. The Intangibles listed on SCHEDULE
3.22 comprise all material intangible property interests necessary to conduct
the business and operations of each Station as now conducted.
3.23 FULL DISCLOSURE. No representation or warranty made by the
Company in this Agreement or in any certificate, document, or other instrument
furnished or to be furnished by the Company pursuant hereto contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact and required to make any statement made herein or therein not
misleading.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
4.1 ORGANIZATION, STANDING, AND AUTHORITY. Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware. Buyer has all requisite power and authority to execute and
deliver this Agreement and the documents contemplated hereby, and to perform and
comply with all of the terms, covenants, and conditions to be performed and
complied with by Buyer hereunder.
4.2 AUTHORIZATION AND BINDING OBLIGATION. The execution, delivery,
and performance of this Agreement and the Buyer Ancillary Agreements by Buyer
have been duly authorized and approved by all necessary actions on the part of
Buyer. This Agreement and the Buyer Ancillary Agreements have been duly executed
and delivered by Buyer and constitute the legal, valid, and binding obligations
of Buyer, enforceable against Buyer in accordance with their terms, except as
the enforceability of this Agreement may be affected by bankruptcy, insolvency,
or similar laws affecting creditors' rights generally and, except as such
enforceability is subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
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4.3 ABSENCE OF CONFLICTING AGREEMENTS. Subject to obtaining the
Consents listed on SCHEDULE 4.3 and the FCC Consents, and subject to the
termination or expiration of the waiting period under the HSR Act applicable to
the transactions contemplated hereby, the execution, delivery, and performance
by Buyer of this Agreement and the Buyer Ancillary Agreements (with or without
the giving of notice, the lapse of time, or both): (i) do not require the
consent of any third party; (ii) will not conflict with the Certificate of
Incorporation or Bylaws of Buyer; (iii) will not conflict with, result in a
breach of, or constitute a default under, any law, judgment, order, injunction,
decree, rule, regulation, or ruling of any court or governmental
instrumentality; or (iv) will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, or accelerate
or permit the acceleration of any performance required by the terms of, any
agreement, instrument, license, or permit to which Buyer is a party or by which
Buyer may be bound, such that Buyer could not acquire the Assets.
4.4 BUYER QUALIFICATIONS. Subject to receipt of the waivers
described on SCHEDULE 4.3, Buyer is legally, financially and otherwise qualified
to acquire and own the FCC Licenses.
4.5 FULL DISCLOSURE. No representation or warranty made by Buyer
in this Agreement or in any certificate, document, or other instrument furnished
or to be furnished by Buyer pursuant hereto contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
and required to make any statement made herein or therein not misleading.
SECTION 5. OPERATIONS PRIOR TO CLOSING
5.1 GENERALLY. Between the date of this Agreement and the Closing
Date, the Company and each Subsidiary shall operate the business of the Stations
diligently in the ordinary course of business in accordance with its past
practices (except where such conduct would conflict with the following covenants
or with the Company's or Subsidiaries' other obligations under this Agreement
and the Loan Documents and except where such conduct has been expressly
delegated to Buyer under the terms of the Time Brokerage Agreements, the Boston
Affiliation Agreement or Programming Agreement), and in accordance with the
other covenants in this Section 5.
5.2 COMPENSATION. The Company shall not increase in any respect
the compensation, bonuses, or other benefits payable or to be payable to any
person employed in connection with the conduct of the business of the Stations,
except in the ordinary course of business consistent with past practices.
5.3 CONTRACTS. Except for Permitted Contracts, neither the Company
nor any Subsidiary shall, without the prior written consent of Buyer, which
consent shall not be unreasonably withheld, (i) enter into any contract or
commitment relating to the Assets or the business or operations of the Stations,
(ii) amend or terminate any Contract (or waive any material right thereunder),
or (iii) incur any obligation (including obligations relating to the borrowing
of money or the guaranteeing of indebtedness) that will not be satisfied prior
to or on the Closing Date. Prior to the Closing Date, the Company shall deliver
to Buyer a list of all Contracts entered into between the date of this Agreement
and the Closing Date, together with copies of such Contracts.
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5.4 DISPOSITION OF ASSETS. Neither the Company nor any Subsidiary
shall sell, assign, lease, or otherwise transfer or dispose of any of the Assets
that, individually or in the aggregate, are valued at the time of disposition in
excess of Fifteen Thousand Dollars ($15,000).
5.5 ENCUMBRANCES. The Company shall not create, assume or permit
to exist any claim, liability, mortgage, lien, pledge, condition, charge, or
encumbrance of any nature whatsoever upon the Assets, except for (i) liens and
liabilities arising under the Loan Documents, (ii) liens for current taxes not
yet due and payable, (iii) mechanics' liens and other similar liens created in
the ordinary course of business that do not adversely affect in any material
respect the value or current use and enjoyment of the Assets, and (iv) existing
encumbrances (other than encumbrances securing monetary obligations) on certain
Real Property Interests which do not adversely affect the use or value of the
Real Property Interests.
5.6 RIGHTS. The Company shall not knowingly waive any material
right relating to any of the Assets.
5.7 INSURANCE. The Company shall maintain in full force and effect
policies of insurance of the same type, character, and coverage as the policies
currently carried with respect to the business, operations and assets of the
Company and each Subsidiary.
5.8 ACCESS TO INFORMATION. The Company shall give Buyer and its
authorized representatives reasonable access to the Assets and to all other
properties, equipment, books, records of the Stations, for the purpose of audit
and inspection.
5.9 CONSENTS. The Company shall use commercially reasonable
efforts to obtain the Consents without any change in the terms or conditions of
any Contract or the License to which any Consent relates that could be
materially less advantageous to the Company than those pertaining under the
Contract or License as in effect on the date of this Agreement. The Company
shall promptly advise Buyer of any difficulties experienced in obtaining any of
the Consents and of any conditions proposed, considered, or requested for any of
the Consents. Upon Buyer's request, the Company shall cooperate with Buyer and
use its commercially reasonable efforts to obtain from the lessors under each
lease included in the Real Property Interests such estoppel certificates as
Buyer may request.
5.10 BOOKS AND RECORDS. The Company and each Subsidiary shall
maintain its books and records substantially in accordance with past practices.
5.11 COMPLIANCE WITH LAWS. The Company and each Subsidiary shall
comply with all laws, rules, and regulations applicable or relating to the
Assets or the ownership and operation of the Stations, except for such
noncompliance that could not reasonably be expected to have a Company Material
Adverse Effect.
5.12 MERGERS. Neither the Company nor any Subsidiary shall
reorganize, liquidate or merge or consolidate with any other entity.
5.13 INDEBTEDNESS AND OBLIGATIONS. Except for indebtedness under
the Loan Documents, neither the Company nor any Subsidiary shall incur
indebtedness for borrowed money. The Company and each Subsidiary shall pay all
of its respective obligations as such obligations become due, consistent with
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past practices, so that all such obligations shall be current, consistent with
past practices, as of the Closing Date. Without limiting the generality of the
foregoing, the Company and each Subsidiary shall perform their respective
obligations under the Loan Documents.
5.14 AMENDMENTS. Neither the Company nor any Subsidiary shall
amend, change, or modify its Articles of Incorporation or Bylaws.
5.15 SECURITIES. Except as provided in the Loan Documents, neither
the Company nor any Subsidiary will, and will not agree to, (a) issue, sell, or
otherwise dispose of any of its shares of capital stock; (b) acquire (through
redemption or otherwise) any of its shares of capital stock; (c) grant any
options, warrants, or other rights to acquire any of its shares of capital
stock; or (d) issue, sell, or otherwise dispose of any stock options, bonds,
notes, or other securities.
5.16 MAINTENANCE OF ASSETS. The Company and each Subsidiary shall
maintain all of the Assets in good condition (ordinary wear and tear excepted),
consistent with their overall condition on the date of this Agreement, and use,
operate and maintain all of the Assets in a reasonable manner. If any loss,
damage, impairment, confiscation, or condemnation of or to any of the Assets
occurs, other than any loss, damage or impairment resulting from actions taken
by Buyer or its Affiliates under the Time Brokerage Agreements, Boston
Affiliation Agreement or Programming Agreement, the Company and each Subsidiary
shall, at the discretion of Buyer, repair, replace, or restore the Assets to
their prior condition as represented in this Agreement as soon thereafter as
possible, and the Company and each Subsidiary shall use the proceeds of any
claim under any insurance policy to repair, replace, or restore any of the
Assets that are lost, damaged, impaired, or destroyed.
5.17 PRESERVATION OF BUSINESS. The Company and each Subsidiary
shall use commercially reasonable efforts consistent with its past practices to
preserve the business and organization of the Stations not expressly delegated
to Buyer under the Time Brokerage Agreements, Boston Affiliation Agreement and
Programming Agreement and use its commercially reasonable efforts to keep
available to the Stations their present employees and to preserve the audience
of the Stations and the Stations' present relationships with suppliers,
advertisers, and others having business relations with the Stations.
5.18 LICENSES. Neither the Company nor any Subsidiary shall cause
or permit, by any act or failure to act, any of the Licenses to expire or to be
revoked, suspended or adversely modified or take any action that could
reasonably be expected to cause the FCC or any other governmental authority to
institute proceedings for the suspension, revocation or adverse modification of
any of the Licenses. Each Subsidiary shall prosecute with due diligence any
applications to any governmental authority in connection with the operation of a
Station.
5.19 NO INCONSISTENT ACTION. Neither Buyer, the Company, nor any
Subsidiary shall take any action that is inconsistent with their respective
obligations under this Agreement, the Seller Ancillary Agreements, or the Buyer
Ancillary Agreements, as applicable, or that could hinder or delay in any
material respect the consummation of the transactions contemplated hereby or
thereby. Without limiting the generality of the foregoing, each Seller covenants
that it will not (a) solicit, initiate or encourage the submission of any
proposal or offer relating to any (i) liquidation, dissolution or
recapitalization, (ii) merger or consolidation, (iii) pledge, acquisition or
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sale of securities, (iv) transfer or assignment of any FCC License, (v) sale,
lease or disposition of substantially all of the assets, or (vi) similar
transaction or business combination, in each case involving the Company or any
Subsidiary, or (b) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any party to do or seek any of the
foregoing.
SECTION 6. SPECIAL COVENANTS AND AGREEMENTS
6.1 FCC CONSENTS.
(a) The assignment of the FCC Licenses as contemplated by
this Agreement is subject to the prior consent and approval of the FCC.
(b) Sellers and Buyer shall prepare and, within five (5)
business days after the date of this Agreement, file with the FCC appropriate
applications for the FCC Consents. The parties shall thereafter prosecute such
applications with all reasonable diligence and otherwise use their respective
best efforts to obtain the FCC Consents as expeditiously as practicable. Each
party agrees to comply with any condition imposed on it by the FCC Consents,
except that no party shall be required to comply with a condition if (i) the
condition was imposed on it as the result of a circumstance the existence of
which does not constitute a breach by that party of any of its representations,
warranties, or covenants hereunder, and (ii) compliance with the condition would
have a material adverse effect upon it. Buyer and Sellers shall oppose any
petitions to deny or other objections filed with respect to the applications for
the FCC Consents and any requests for reconsideration or judicial review of the
FCC Consents.
(c) If the Closing shall not have occurred for any reason
within the original effective periods of the FCC Consents, and neither Sellers
nor Buyer shall have terminated this Agreement under Section 9, the parties
shall jointly request an extension of the effective period of the FCC Consents.
No extension of the effective period of the FCC Consents shall limit the
exercise by either Buyer or Sellers of their right to terminate the Agreement
under Section 9.
6.2 RISK OF LOSS.
(a) The risk of any loss, damage, impairment, confiscation,
or condemnation of any of the Assets, other than any loss, damage or impairment
resulting from actions taken (or if required, not taken) by Buyer pursuant to
the Time Brokerage Agreements, the Boston Affiliation Agreement or the
Programming Agreement, from any cause whatsoever shall be borne by Sellers and
the Company at all times prior to the Closing.
(b) If any damage or destruction of the Assets or any other
event occurs which (i) causes any Station to cease broadcasting operations for a
period of five (5) or more consecutive days or (ii) prevents in any material
respect signal transmission by any Station in the normal and usual manner (so
that Station transmission is not substantially in accordance with the Station's
operating parameters as set forth in its FCC License) during all or any portion
of ten (10) or more days during any consecutive 30-day period prior to the
Closing Date, unless such damage, destruction or cessation is caused by actions
taken (or, if required, not taken) by Buyer, Buyer, in its sole discretion, may
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(x) terminate this Agreement forthwith without any further obligations hereunder
upon written notice to Sellers, provided that such termination notice from Buyer
is delivered to Sellers within thirty (30) days of the first (1st) day upon
which Buyer could exercise its termination rights or such rights shall be deemed
waived by Buyer, or (y) proceed to consummate the transaction contemplated by
this Agreement and complete the restoration and replacement of the Assets after
the Closing Date, in which event Sellers shall deliver to Buyer all insurance
proceeds received in connection with such damage, destruction or other event.
6.3 CONFIDENTIALITY. Except as necessary for the consummation of
the transactions contemplated by this Agreement, and except as and to the extent
required by law, including, without limitation, disclosure requirements of
federal or state securities laws and the rules and regulations of securities
markets and the FCC, each party will keep confidential any information obtained
from the other party in connection with the transactions contemplated by this
Agreement. If this Agreement is terminated, each party will return to the other
party all information obtained by such party from the other party in connection
with the transactions contemplated by this Agreement.
6.4 COOPERATION. Buyer and Sellers shall cooperate fully with each
other and their respective counsel and accountants in connection with any
actions required to be taken as part of their respective obligations under this
Agreement, and Buyer and Sellers shall execute such other documents as may be
necessary and desirable to the implementation and consummation of this
Agreement, and otherwise use their commercially reasonable efforts to consummate
the transaction contemplated hereby and to fulfill their obligations under this
Agreement. Without limiting the generality of the foregoing, Buyer shall
cooperate with Sellers and use commercially reasonable efforts to minimize to
the extent feasible the Taxes payable by Sellers as a result of the consummation
of the transaction contemplated hereby; PROVIDED, HOWEVER, Buyer shall not be
required to incur any obligation or liability as a result of such efforts.
6.5 RESTRICTED PAYMENT. No Seller shall make any distribution or
payment of cash or property, or both, directly or indirectly to any partner,
stockholder, member or other equityholder of any Seller or of any of their
respective Affiliates for any reason whatsoever, including, without limitation,
salaries (other than the salaries expressly permitted by the terms of the Time
Brokerage Agreements and Boston Affiliation Agreement), loans, debt repayment,
consulting fees, expense reimbursements and dividends, distributions, put, call
or redemption payments and any other payments in respect of equity interests.
Buyer acknowledges and agrees that any payment of the WEBZ(FM) Distribution to
any partner, shareholder, member or other equityholder of any Seller or its
Affiliates shall not be prohibited by this Section 6.5 or any other provision of
this Agreement, and the WEBZ(FM) Distribution shall not reduce the Verified
Capital Amount for any purpose under this Agreement.
6.6 HSR ACT FILING. Sellers and Buyer agree to (a) file, or cause
to be filed, with the U.S. Department of Justice ("DOJ") and Federal Trade
Commission ("FTC") all filings, if any, which are required in connection with
the transactions contemplated hereby under the HSR Act within ten (10) business
days of the date of this Agreement; (b) submit to the other party, prior to
filing, their respective HSR Act filings to be made hereunder, and to discuss
with the other any comments the reviewing party may have; (c) cooperate with
each other in connection with such HSR Act filings, which cooperation shall
include furnishing the other with any information or documents in such party's
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possession that may be reasonably required in connection with such filings; (d)
promptly file, after any request by the FTC or DOJ and appropriate negotiation
with the FTC and DOJ, any information or documents requested by the FTC or DOJ;
and (e) furnish each other with any correspondence from or to, and notify each
other of any other communications with, the FTC or DOJ which relate to the
transactions contemplated hereunder, and to the extent practicable, to permit
each other to participate in any conferences with the FTC or DOJ.
6.7 ENVIRONMENTAL REPORTS.
(a) The Company has delivered to Buyer copies of each Phase
I and other environmental report that has been obtained by the Company with
respect to the Real Property Interests (collectively, the "Existing Phase I
Reports").
(b) Buyer, at its election and cost, may obtain no later
than forty-five (45) days from the date hereof, any updates of the Existing
Phase I Reports (the "Updated Reports") and a Phase II environmental report for
any Real Property Interest owned by the Company or any Subsidiary with respect
to the Stations to the extent expressly recommended in any Existing Phase I
Report or any Updated Report (a "Phase II Report"). The Company shall cooperate
with Buyer and use commercially reasonable efforts to assist Buyer in obtaining
the Phase II Reports as soon as practicable. The Existing Phase I Reports, any
Updated Reports and any Phase II Reports are hereinafter referred to as the
"Assessments." Buyer shall promptly deliver to the Company a copy of each
Assessment received by Buyer and shall promptly notify the Company of any
environmental condition or defect with respect to the Assets that Buyer may
discover prior to the Closing.
6.8 STOCK PURCHASE. Upon written notice to Buyer delivered no
later than fifteen (15) days following the determination of the Purchase Price
pursuant to Section 2.4(a)(i) or, if the Purchase Price is not determined
pursuant to Section 2.4(a)(i), no later than fifteen (15) days following the
Company's receipt of the Panel Valuation Report, the Company shall have the
right to propose to Buyer that Buyer acquire all of the issued and outstanding
capital stock of the Company in lieu of the Assets, in accordance with the terms
of a Stock Purchase Agreement that provides to Buyer the same rights and
benefits to which Buyer is entitled under the terms of this Agreement. If the
Company notifies Buyer of such proposal within such time period, Buyer and
Sellers shall negotiate in good faith the terms and conditions of such Stock
Purchase Agreement; PROVIDED, HOWEVER, that Buyer shall have no obligation to
agree to any such proposal if Buyer determines, in its sole discretion, that
such proposal shall cause Buyer to incur any obligation or liability that Buyer
is not required to incur by the terms of this Agreement, including any
obligation or liability that would result in adverse tax consequences to Buyer
(other than adverse tax consequences arising from a change in the basis of the
Assets to be acquired by Buyer pursuant to the terms hereof).
6.9 FAIR MARKET VALUE DETERMINATION. If the Purchase Price is
determined pursuant to Section 2.4(a)(iv) (it being understood that the
requirements of this Section 6.9 shall have no effect if the Purchase Price is
determined pursuant to Section 2.4(a)(i)), Buyer, Sellers and NBC acknowledge
and agree that Buyer's obligation to consummate the purchase of the Assets is
subject to the reasonable determination by NBC in accordance with the
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requirements of this Section 6.9 that the Fair Market Value of the Stations
equals or exceeds the amount of the Purchase Price. If NBC determines in the
good faith exercise of commercially reasonable business judgment that the Fair
Market Value of the Stations is less than the amount of the Purchase Price, NBC
shall notify Buyer in writing the basis for such determination (the "NBC
Valuation Report") as soon as reasonably practicable but in no event later than
fifteen (15) days following the date NBC shall have received the Panel Valuation
Report (the "NBC Valuation Report Deadline"), and NBC shall simultaneously
provide a copy of the NBC Valuation Report to the Company. The NBC Valuation
Report shall set forth in reasonable detail the basis for NBC's determination of
the Fair Market Value of the Stations. If NBC either (i) provides the NBC
Valuation Report to Buyer and the Fair Market Value of the Stations set forth
therein equals or exceeds the amount of the Purchase Price or (ii) fails to
provide the NBC Valuation Report to Buyer on or before the NBC Valuation Report
Deadline, the Closing condition set forth in Section 7.1(i) shall be deemed to
be irrevocably satisfied and, Buyer's termination right in Section 9.2(j) shall
have no force or effect. If NBC provides an NBC Valuation Report to Buyer on or
before the NBC Valuation Report Deadline, and the Fair Market Value of the
Stations set forth therein is less than the amount of the Purchase Price, Buyer
shall have the right to terminate this Agreement pursuant to Section 9.2(j). For
the purpose of this Section 6.9, "Fair Market Value" of the Stations shall be
equal to the appraised value of the Assets of the Stations as of the date hereof
(it being understood that the Fair Market Value shall not include the value of
any assets described in Section 2.2) on a going concern basis taking into
account, among other things, the Stations' obligations and liabilities, other
than the Stations' obligations and liabilities under the Time Brokerage
Agreements, the Boston Affiliation Agreement and the Programming Agreement, the
Verified Capital Amount and exclusive of any broker's fee or commission. The
Fair Market Value shall be determined in accordance with standard appraisal
techniques in use at the time of the determination taking into account
applicable market and economic factors in effect on the date hereof and such
other factors that might reasonably affect the sales price of the Stations. The
Fair Market Value shall not be reduced by any portion of the indebtedness
represented by the Note. Sellers, the Company and Buyer shall afford to NBC and
to NBC's financial advisors, legal counsel, accountants, consultants and other
authorized representatives (collectively, the "NBC Advisors") access to all
properties, personnel, books, records, projections and other materials
reasonably necessary to enable NBC to determine the Fair Market Value of the
Stations pursuant to this Section 6.9. Sellers, the Company and Buyer shall
furnish to NBC or an NBC Advisor as promptly as practicable copies of any such
books, records, projections or other materials as NBC or an NBC Advisor shall
reasonably request.
6.10 BOSTON PURCHASE. The Boston Purchase Documents are in full
force and effect. D P Boston and Boston License are in compliance with the
Boston Purchase Documents in all material respects and are not in material
breach or default thereunder. To the best knowledge of the Company, Boston
University Communications, Inc. ("Boston University") is in compliance with the
Boston Purchase Documents in all material respects and is not in material breach
or default thereunder. To the best knowledge of the Company, as of the date
hereof, no event has occurred or condition exists that, with notice or the
passage of time or both, could reasonably be expected to result in a material
breach or default under the Boston Purchase Documents by either party thereto.
The Company shall cause D P Boston and Boston License to use commercially
reasonable efforts to (i) maintain the Boston Purchase Documents in full force
and effect in accordance with their terms, (ii) comply in all material respects
with the terms of the Boston Purchase Documents applicable to it, (iii) cause
all conditions precedent to the consummation of the Boston Purchase Agreement to
be satisfied as soon as reasonably practicable, including the grant of the
satellite waiver request regarding the FCC multiple ownership rules, which is in
the application to acquire WBPX(TV), WDPX(TV), WPXG(TV) and W33BZ, and (iv)
consummate the closing under the Boston Purchase Agreement on the earliest date
permitted thereunder. Without Buyer's prior written consent, which consent shall
not be unreasonably withheld, neither the Company, D P Boston nor any other
Affiliate of the Company shall (i) agree to amend or modify in any material
respect the terms or conditions of the Boston Purchase Documents, (ii) waive any
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conditions of closing or other material right or remedy under the Boston
Purchase Documents or (iii) authorize Boston University under the terms of the
Boston Purchase Documents to acquire or enter into any new contract or agreement
which is not terminable by D P Boston on thirty (30) days notice. In the event
that the transactions contemplated by the Boston Purchase Agreement are
consummated prior to the Closing, WBPX(TV), WDPX(TV), WPXG(TV) and W33BZ shall
each constitute a "Station" for purposes of this Agreement, and all of the
assets, properties, rights and interests acquired by D P Boston and Boston
License pursuant to the Boston Purchase Agreement shall constitute "Assets" for
purposes of this Agreement. Upon Buyer's reasonable prior notice and, with the
consent of Boston University, if and to the extent such consent is required by
the terms of the Boston Purchase Documents, D P Boston shall assign to Buyer all
of its rights and interests under the Boston Purchase Documents, and Buyer shall
assume all of D P Boston's obligations under the Boston Purchase Documents, in
exchange for forgiveness of that portion of the indebtedness then outstanding
under the Loan Documents that is attributable to any deposit or advance paid by
D P Boston to Boston University pursuant to the Boston Purchase Agreement and in
accordance with customary assignment and assumption agreements reasonably
acceptable to Sellers and Buyer.
6.11 CURE. For all purposes under this Agreement, the existence or
occurrence of any events or circumstances that constitute or cause a material
breach of a representation or warranty of Sellers or Buyer (including, without
limitation, under the information disclosed in the Schedules hereto) on the date
such representation or warranty is made shall be deemed not to constitute a
breach of such representation or warranty if such event or circumstance is cured
in all material respects on or prior to the Closing Date.
6.12 CONTROL OF THE STATION. Without limiting the parties' rights
and obligations under the Time Brokerage Agreements, the Programming Agreement
and the Boston Affiliation Agreement, prior to Closing, Buyer shall not,
directly or indirectly, control, supervise, direct, or attempt to control,
supervise, or direct, the operations of any Station; such operations, including
complete control and supervision of all of the Stations' programs, employees,
and policies, shall be the sole responsibility of Sellers until the Closing.
6.13 SALES TAX FILINGS. Sellers shall continue to file state and
local sales tax returns with respect to the Stations in accordance with Sellers'
past practices and shall concurrently deliver copies of all such returns to
Buyer.
6.14 ACCESS TO BOOKS AND RECORDS. Sellers shall provide Buyer
access and the right to copy for a period of three years from the Closing Date
any books and records relating to the Assets that are not included in the
Assets. Buyer shall provide Sellers access and the right to copy for a period of
three years from the Closing Date any books and records relating to the Assets.
Sellers shall deliver to Buyer no later than February 28, 2000, audited
financial statements of the Company and its Subsidiaries as of December 31,
1999, and for the one (1) year period ending December 31, 1999, and shall make
available for Buyer's review all workpapers prepared in connection with such
audit.
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6.15 APPRAISAL. If Buyer and Sellers cannot agree on an allocation
of the Purchase Price, Buyer and Sellers agree to allocate the Purchase Price
for tax and recording purposes in accordance with an appraisal to be conducted
by an appraisal firm selected and paid for by Buyer with experience in the
valuation and appraisal of television station assets.
SECTION 7. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLERS AT CLOSING
7.1 CONDITIONS TO OBLIGATIONS OF BUYER. All obligations of Buyer
at the Closing are subject at Buyer's option to the fulfillment prior to or at
the Closing Date of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Sellers contained in this Agreement shall be true and correct at
and as of the Closing Date as though made at and as of that time, except (i) for
changes expressly permitted or contemplated by the terms of this Agreement or
the schedules hereto, (ii) insofar as any such representation or warranty was
true and complete as of the date hereof but shall not be true and complete as of
the Closing Date as a result of actions taken (or, if required, not taken) by
Buyer pursuant to any Time Brokerage Agreement, the Boston Affiliation Agreement
or the Programming Agreement, and (iii) inaccuracies in any such representation
or warranty that have not had, and could not reasonably be expected to cause, a
Company Material Adverse Effect or have a material adverse effect on the ability
of Sellers to consummate the transactions contemplated by this Agreement in
accordance with its terms; PROVIDED, HOWEVER, that for the purpose of this
Section 7.1(a) only, in determining whether there has been a Company Material
Adverse Effect under clause (iii), the representations and warranties in Section
3 shall be read as if such provisions did not include any "Company Material
Adverse Effect" or other materiality qualifier.
(b) COVENANTS AND CONDITIONS. The Company and each
Subsidiary shall have performed and complied with in all material respects all
covenants, agreements, and conditions required by this Agreement to be performed
or complied with by them prior to or on the Closing Date.
(c) CONSENTS. All Consents designated as "material" on
SCHEDULE 3.3 shall have been obtained and delivered to Buyer without any
material adverse change in the terms or conditions of any Assumed Contract or
License.
(d) DELIVERIES. Sellers shall have made or stand willing to
make all the deliveries to Buyer set forth in Section 8.2.
(e) ADVERSE CHANGE. Between the date of this Agreement and
the Closing Date, there shall have been no Company Material Adverse Effect,
other than any Company Material Adverse Effect resulting from actions taken by
Buyer pursuant to the Time Brokerage Agreements or the Boston Affiliation
Agreement.
(f) HSR ACT. The waiting period under the HSR Act shall have
expired or been terminated without unresolved action by the DOJ or the FTC to
prevent the Closing.
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(g) TIME BROKERAGE AGREEMENTS. Each Subsidiary, as
applicable, shall have complied in all material respects with their respective
obligations under each Time Brokerage Agreement and the Boston Affiliation
Agreement.
(h) FCC CONSENTS. The FCC Consents shall have been granted
without the imposition on Buyer of any conditions that need not be complied with
by Buyer under Section 6.1 and, if required by Section 8.1(b), the FCC Consents
shall have become Final Orders.
(i) VALUATION. The Fair Market Value of the Stations shall
have been determined to equal or exceed the amount of the Purchase Price in
accordance with the requirements of Section 6.9.
(j) LOAN DOCUMENTS. There shall exist no Event of Default
under the Loan Documents or any event which, with the lapse of any applicable
grace period or the giving of notice, or both, would constitute an Event of
Default under the Loan Documents.
7.2 CONDITIONS TO OBLIGATIONS OF SELLERS. All obligations of
Sellers at the Closing are subject at Sellers' option to the fulfillment prior
to or at the Closing Date of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at and as of the Closing Date as though made at and as of that
time.
(b) COVENANTS AND CONDITIONS. Buyer shall have performed and
complied with in all material respects all covenants, agreements, and conditions
required by this Agreement to be performed or complied with by it prior to or on
the Closing Date.
(c) DELIVERIES. Buyer shall have made or stand willing to
make all the deliveries set forth in Section 8.3.
(d) HSR ACT. The waiting period under the HSR Act shall have
expired or been terminated without unresolved action by the DOJ or the FTC to
prevent the Closing.
(e) TIME BROKERAGE AGREEMENTS. Each subsidiary of Buyer
party thereto shall have complied in all material respects with its obligations
under each Time Brokerage Agreement, the Programming Agreement and the Boston
Affiliation Agreement.
(f) FCC CONSENTS. The FCC Consents shall have been granted
without the imposition on Sellers of any condition that need not be complied
with by Sellers pursuant to Section 6.1 hereof.
SECTION 8. CLOSING AND CLOSING DELIVERIES
8.1 CLOSING.
(a) CLOSING DATE. Subject to satisfaction or, to the extent
permissible by law, waiver (by the party for whose benefit the condition is
imposed), of the conditions described in Sections 7.1 and 7.2, the closing of
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the transactions contemplated by this Agreement (the "Closing") shall take
place, commencing at 10:00 a.m., Eastern time, on a date (the "Closing Date") on
or after June 1, 2000, to be set by Buyer upon no less than five (5) business
days notice to Sellers in writing that is not earlier than the tenth (10th)
business day, and not later than the fifteenth (15th) business day, after the
last grant date of the FCC Consents. If Buyer fails to notify Sellers of the
Closing Date pursuant to the preceding sentence, the Closing Date shall occur on
the date that is the fifteenth (15th) business day after the last grant date of
the FCC Consents.
(b) POSTPONEMENT. Notwithstanding the requirement of Section
8.1(a) above, if any petition to deny (a "Petition") shall have been filed
against an application for the FCC Consents and the Petition contains one or
more allegations regarding the basic qualifications of Sellers or Buyer that
pose a reasonable risk of reversal of such FCC Consent, based on the
Communications Act of 1934, as amended, or the FCC's rules, policies or
decisions then in effect, Buyer may, at its election, upon written notice to
Sellers, postpone the Closing to a date to be agreed upon by Buyer and Sellers
in writing that is not earlier than the fifth (5th) business day, and not later
than the tenth (10th) business day, after such date the FCC Consent shall have
become a Final Order. If the parties cannot agree upon the Closing Date pursuant
to the preceding sentence, the Closing Date shall occur on the date that is the
tenth (10th) business day after the date such FCC Consent shall have become a
Final Order. In the event that a Petition is filed and Buyer elects not to
postpone the Closing and the Closing occurs before the FCC Consent shall have
become a Final Order, if the FCC Consent is reversed pursuant to a Final Order
and the sole basis for such reversal is a finding by the FCC that Buyer is not
qualified to hold the FCC Licenses that are the subject of the FCC Consent,
Buyer shall indemnify Sellers in accordance with Section 10 hereof for all
reasonable expenses incurred by Sellers as a result of the reversal of the FCC
Consent.
(c) CLOSING PLACE. The Closing shall be held at the offices
of Dow, Lohnes & Albertson, 1200 New Hampshire Avenue, N.W., Suite 800,
Washington, D.C. 20036, or any other place that is agreed upon by Buyer and
Sellers.
8.2 DELIVERIES BY SELLERS. Prior to or on the Closing Date,
Sellers shall deliver to Buyer the following, in form and substance reasonably
satisfactory to Buyer and its counsel:
(a) TRANSFER DOCUMENTS. Duly executed warranty bills of
sale, deeds, motor vehicle titles, assignments, and other transfer documents
which shall be sufficient to vest good and marketable title to the Assets in the
name of Buyer, free and clear of all claims, liabilities, security interests,
mortgages, liens, pledges, conditions, charges or encumbrances, except for liens
for current taxes not yet due and payable.
(b) ESTOPPEL CERTIFICATES. Estoppel certificates of the
lessors of all leasehold interests included in the Real Property Interests
substantially in the form of SCHEDULE 8.2(B).
(c) ARTICLES OF INCORPORATION. A copy of the Articles of
Incorporation of the Company, certified, as of a date not earlier than ten (10)
days prior to the Closing Date, by the Secretary of State of Florida.
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(d) BYLAWS. A copy of the Bylaws of the Company certified,
as of the Closing Date, by its Secretary.
(e) OFFICER'S CERTIFICATE. A certificate, dated as of the
Closing Date, executed on behalf of Sellers by a duly authorized officer
thereof, certifying the satisfaction of the conditions contained in Sections
7.1(a) and (b).
(f) LENDERS CERTIFICATES. Such certificates and
confirmations to Buyer's investors or lenders as Buyer may reasonably request in
connection with obtaining financing for the performance of its payment
obligations hereunder.
(g) CONSENTS. Copies of all instruments evidencing the
Consents.
(h) OPINION OF COUNSEL. An opinion of Sellers' counsel dated
as of the Closing Date, substantially in the form of SCHEDULE 8.2(H).
8.3 DELIVERIES BY BUYER. Prior to or on the Closing Date, Buyer
shall deliver to Sellers the following, in form and substance reasonably
satisfactory to Sellers and their counsel:
(a) PURCHASE PRICE. The Note marked "cancelled" and the Cash
Balance.
(b) OFFICER'S CERTIFICATE. A certificate, dated as of the
Closing Date, executed on behalf of Buyer by a duly authorized officer thereof,
certifying the satisfaction of the conditions contained in Sections 7.2(a) and
(b).
(c) ASSUMPTION AGREEMENTS. Appropriate assumption agreements
pursuant to which Buyer shall assume and undertake to perform Sellers'
obligations under the Licenses and Assumed Contracts insofar as they relate to
the time on and after the Closing Date and arise out of events related to
Buyer's ownership of the Assets or its operation of the Stations on or after the
Closing Date.
(d) OPINION OF COUNSEL. An opinion of Buyer's counsel dated
as of the Closing Date, substantially in the form of Schedule 8.3(d).
SECTION 9. TERMINATION
9.1 TERMINATION BY SELLERS. This Agreement may be terminated by
Sellers, if Sellers and the Company are not then in material default, upon
written notice to Buyer, upon the occurrence of any of the following:
(a) CONDITIONS. If, on the date that would otherwise be the
Closing Date, Sellers shall have notified Buyer in writing that one or more of
the conditions precedent to the obligations of Sellers set forth in Section 7.2
of this Agreement have not been satisfied or waived in writing by Sellers and
such condition or conditions shall not have been satisfied by Buyer or waived in
writing by Sellers within twenty (20) days following such notice.
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(b) JUDGMENTS. If, on the date that would otherwise be the
Closing Date, Sellers shall have notified Buyer that there is in effect any
judgment, decree, or order that would prevent or make unlawful the Closing and
such judgment, decree or order shall not have been satisfied by Buyer within
twenty (20) days following such notice.
(c) UPSET DATE. If the Closing shall not have occurred by
November 21, 2001; PROVIDED, HOWEVER, that Buyer may extend the date set forth
in this Section 9.1(c) for one additional two (2) year period by providing
written notice of such extension to Sellers no later than August 21, 2001.
(d) BREACH. If Buyer is in material breach of its
representations, warranties or covenants contained herein and such breach is not
cured prior to the date upon which the Closing is scheduled to occur.
(e) TAX CONSEQUENCES. At any time following the date the
Purchase Price is determined pursuant to Section 2.4(a)(i), or, if the Purchase
Price is not determined pursuant to Section 2.4(a)(i), at any time following the
date Sellers shall have received the Panel Valuation Report, if the Company or
its controlling shareholders determine, based on advice of tax counsel or its
other advisors, that the consummation of the transactions contemplated hereby
creates a risk of adverse tax consequences to the Company or its shareholders.
9.2 TERMINATION BY BUYER. This Agreement may be terminated by
Buyer, if Buyer is not then in material default of its obligations hereunder,
upon written notice to Sellers, upon the occurrence of any of the following:
(a) CONDITIONS. If, on the date that would otherwise be the
Closing Date, Buyer shall have notified Sellers in writing that one or more of
the conditions precedent to the obligations of Buyer set forth in Section 7.1 of
this Agreement have not been satisfied or waived in writing by Buyer and such
condition or conditions shall not have been satisfied by Sellers or the Company
or waived in writing by Buyer within twenty (20) days following such notice.
(b) JUDGMENTS. If, on the date that would otherwise be the
Closing Date, Buyer shall have notified Sellers that there is in effect any
judgment, decree, or order that would prevent or make unlawful the Closing and
such judgment, decree or order shall not have been satisfied by Sellers or the
Company within twenty (20) days following such notice.
(c) UPSET DATE. If the Closing shall not have occurred by
November 21, 2001.
(d) BREACH. If Sellers or the Company are in material breach
of their representations, warranties or covenants contained herein and such
breach is not cured prior to the date upon which the Closing is scheduled to
occur.
(e) EVENT OF DEFAULT. There shall have occurred and be
continuing an Event of Default under the Loan Documents.
(f) DAMAGE OR DESTRUCTION. In accordance with the terms of
Section 6.2.
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(g) ENVIRONMENTAL LIABILITY. If any Assessment reveals any
environmental hazards or defects or any condition that could reasonably be
expected to result in significant environmental damages or substantial clean-up
costs, such conditions have had or could reasonably be expected to have a
Company Material Adverse Effect, and such hazards, defects or conditions are not
remedied prior to the Closing Date.
(h) TAX CONSEQUENCES. At any time following the date the
Purchase Price is determined pursuant to Section 2.4(a)(i), or, if the Purchase
Price is not determined pursuant to Section 2.4(a)(i), at any time following the
date Buyer shall have received the Panel Valuation Report, if Buyer determines,
based on advice of tax counsel or its other advisors, that the consummation of
the transactions contemplated hereby creates a risk of adverse tax consequences
to Buyer.
(i) FAIRNESS OPINION. At any time following the date the
Purchase Price is determined pursuant to Section 2.4(a)(i), or, if the Purchase
Price is not determined pursuant to Section 2.4(a)(i), at any time following the
date Buyer shall have received the Panel Valuation Report, if Buyer is unable to
obtain, prior to the Closing Date, a written opinion from an independent
investment banking firm, in form and substance reasonably satisfactory to Buyer,
as to the fairness of the transaction contemplated hereby to Buyer and its
shareholders. Buyer agrees to use commercially reasonable efforts to obtain such
an opinion.
(j) VALUATION. At any time following the date the Purchase
Price is determined pursuant to Section 2.4(a)(i), or, if the Purchase Price is
not determined pursuant to Section 2.4(a)(i), at any time following the date
Buyer shall have received the Panel Valuation Report, if the Fair Market Value
of the Stations, as determined pursuant to Section 6.9, shall have been
determined to be less than the amount of the Purchase Price.
9.3 RIGHTS ON TERMINATION. If this Agreement is terminated
pursuant to Section 9.1 or Section 9.2 and neither party is in material breach
of any provision of this Agreement, the parties hereto shall have no liability
to each other as a result of such termination. If this Agreement is terminated
by Buyer due to Sellers' or the Company's material breach of their obligations
hereunder, Buyer shall have all rights and remedies available at law or equity,
including the right to seek specific performance as set forth in Section 10.5
hereof. If this Agreement is terminated by Sellers due to Buyer's material
breach of its obligations hereunder, Sellers shall have all rights and remedies
available at law.
9.4 OPTION.
(a) If this Agreement is terminated pursuant to this Section
9 for any reason other than a material breach by Buyer of its obligations
hereunder, the Time Brokerage Agreements, the Boston Affiliation Agreement and
the Programming Agreement (if then in effect) shall remain in full force and
effect in accordance with their respective terms for a period, in the case of
each such agreement, not to exceed ten (10) years from the date hereof, and
Buyer and Sellers shall enter into an Option Agreement effective as of the date
of termination of this Agreement, pursuant to which Sellers shall grant Buyer an
exclusive, irrevocable and freely assignable option (the "Option") to purchase
the Assets (including, without limitation, D P Boston's rights and interests
under the Boston Purchase Documents) for an amount equal to the Purchase Price,
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which shall be paid by Buyer as provided in Section 2.4(c)(i) and (ii) hereof,
and otherwise in accordance with the terms and conditions of an Asset Purchase
Agreement in the form and substance of this Agreement (the "Option Purchase
Agreement"); PROVIDED, HOWEVER, that the Option Purchase Agreement shall not
include the termination rights contained in Sections 9.1(e), 9.2(h), 9.2(i) or
9.2(j) of this Agreement. At any time following the execution of this Agreement,
either Buyer or Sellers may request that the other enter into an Option
Agreement evidencing the parties' agreements set forth in this Section 9.4.
(b) In the event that Buyer does not exercise the Option
within four (4) years from the initial date of the Option Agreement (the
"Appraisal Trigger Date"), either Buyer or Sellers shall have the right to cause
an adjustment to the Purchase Price contained in the Option Purchase Agreement.
If either Buyer or Sellers elects to exercise such right, Sellers and Buyer
shall each appoint one appraiser (NBC shall also have the right to appoint one
appraiser if, at the time of the selection of the appraisers, NBC holds a
non-controlling interest in Buyer, and Buyer agrees to pay the cost of NBC's
appraisal). The appraisers shall have experience in the valuation and appraisal
of broadcast properties. Each appraiser shall have ninety (90) days from the
date of its appointment to render a written appraisal of the fair market value
of the Stations in accordance with the requirements of Section 2.4(a)(iv). The
average of the appraisals shall become the new purchase price for the Assets,
which new purchase price shall be included in and made a part of the Option
Purchase Agreement to be executed by the parties upon Buyer's exercise of the
Option between the Appraisal Trigger Date and the date that is four (4) years
thereafter (the "Second Option Period"). In the event that Buyer does not
exercise the Option prior to the expiration of the Second Option Period, the
parties shall have the right to again select appraisers to determine the fair
market value of the Stations in accordance with the procedures set forth in this
Section 9.4(b). The average of the fair market value of the Stations as
determined by each such appraisal shall become the new purchase price for the
Assets, which new purchase price shall be included in and made a part of the
Option Purchase Agreement to be executed by the parties upon Buyer's exercise of
the Option between the end of the Second Option Period and the expiration of the
Option. The determination of the appraisers notwithstanding, in no event shall
the new purchase price for the Assets included in the Option Purchase Agreement
be less than the amount set forth in Section 2.4(b)(i).
9.5 LIMITATION. Buyer may not rely on the failure of any condition
precedent set forth in Section 7.1 to be satisfied, and Seller may not rely on
the failure of any condition precedent set forth in Section 7.2 to be satisfied,
as a ground for refusing to perform their respective obligations to be performed
by them at the Closing or for termination of this Agreement by such party if
such failure was caused by such party's failure to act in good faith or a breach
of or failure to perform its representations, warranties, covenants or other
obligations in accordance with the terms hereof.
SECTION 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION;
CERTAIN REMEDIES
10.1 REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement shall be deemed continuing
representations and warranties and shall survive the Closing for a period of
three (3) years (the "Indemnity Period"), except that the representations and
warranties contained in Section 3.8 shall survive until the expiration of the
applicable statute of limitations. No claim for indemnification may be asserted
after the expiration of the Indemnity Period, except for claims based on the
breach of any representation or warranty in Section 3.8. Notwithstanding
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anything herein to the contrary, any representation or warranty which is the
subject of a claim for indemnification which is asserted in writing prior to the
expiration of the Indemnity Period shall survive with respect to such claim for
indemnification until the final resolution thereof. Any investigations by or on
behalf of any party hereto shall not constitute a waiver as to enforcement of
any representation, warranty, or covenant contained in this Agreement.
10.2 INDEMNIFICATION BY SELLERS. Notwithstanding the Closing and
regardless of any investigation made at any time by and on behalf of Buyer or
any information Buyer may have, Sellers hereby agree to indemnify and hold Buyer
harmless against and with respect to, and shall reimburse Buyer for:
(a) Any and all losses, liabilities, or damages resulting
from any untrue representation, breach of warranty, or nonfulfillment of any
covenant by Sellers contained in this Agreement or in any certificate, document,
or instrument delivered to Buyer under this Agreement.
(b) Any and all obligations of Sellers not assumed by
Buyer pursuant to this Agreement, including any liabilities arising at any time
under any Contract not included in the Assumed Contracts.
(c) Any loss, liability, obligation, or cost resulting
from the failure of the parties to comply with the provisions of any bulk sales
law applicable to the transfer of the Assets.
(d) Any and all losses, liabilities, or damages resulting
from the operation or ownership of the Stations prior to the Closing, including
any liabilities arising under the Licenses or the Assumed Contracts which relate
to events occurring prior the Closing Date, except for losses, liabilities or
damages resulting from Buyer's conduct.
(e) Any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs, and expenses, including reasonable legal
fees and expenses, incident to any of the foregoing or incurred in investigating
or attempting to avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
10.3 INDEMNIFICATION BY BUYER. Notwithstanding the Closing, and
regardless of any investigation made at any time by or on behalf of Sellers or
any information Sellers may have, Buyer hereby agrees to indemnify and hold
Sellers harmless against and with respect to, and shall reimburse Sellers for:
(a) Any and all losses, liabilities, or damages resulting
from any untrue representation, breach of warranty, or nonfulfillment of any
covenant by Buyer contained in this Agreement or in any certificate, document,
or instrument delivered to Sellers under this Agreement.
(b) Any and all obligations of Sellers assumed by Buyer
pursuant to this Agreement, including obligations arising under the Assumed
Contracts and Licenses after the Closing Date.
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(c) Any and all losses, liabilities, or damages resulting
from the operation or ownership of the Stations on and after the Closing, or
resulting or arising from Buyer's conduct under the Time Brokerage Agreements,
Boston Affiliation Agreement or Programming Agreement.
(d) Any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs and expenses, including reasonable legal
fees and expenses, incident to any of the foregoing or incurred in investigating
or attempting to avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
10.4 PROCEDURE FOR INDEMNIFICATION. The procedure for
indemnification shall be as follows:
(a) The party claiming indemnification (the "Claimant")
shall promptly give notice to the party from which indemnification is claimed
(the "Indemnifying Party") of any claim, whether between the parties or brought
by a third party, specifying in reasonable detail the factual basis for the
claim. If the claim relates to an action, suit, or proceeding filed by a third
party against Claimant, such notice shall be given by Claimant within five (5)
days after written notice of such action, suit, or proceeding was given to
Claimant.
(b) With respect to claims solely between the parties,
following receipt of notice from the Claimant of a claim, the Indemnifying Party
shall have thirty (30) days to make such investigation of the claim as the
Indemnifying Party deems necessary or desirable. For the purposes of such
investigation, the Claimant agrees to make available to the Indemnifying Party
and/or its authorized representatives the information relied upon by the
Claimant to substantiate the claim. If the Claimant and the Indemnifying Party
agree at or prior to the expiration of the thirty-day period (or any mutually
agreed upon extension thereof) to the validity and amount of such claim, the
Indemnifying Party shall immediately pay to the Claimant the full amount of the
claim. If the Claimant and the Indemnifying Party do not agree within the
thirty-day period (or any mutually agreed upon extension thereof), the Claimant
may seek appropriate remedy under the arbitration provisions of this Agreement.
(c) With respect to any claim by a third party as to
which the Claimant is entitled to indemnification under this Agreement, the
Indemnifying Party shall have the right at its own expense, to participate in or
assume control of the defense of such claim, and the Claimant shall cooperate
fully with the Indemnifying Party, subject to reimbursement for actual
out-of-pocket expenses incurred by the Claimant as the result of a request by
the Indemnifying Party. If the Indemnifying Party elects to assume control of
the defense of any third-party claim, the Claimant shall have the right to
participate in the defense of such claim at its own expense. If the Indemnifying
Party does not elect to assume control or otherwise participate in the defense
of any third party claim, it shall be bound by the results obtained by the
Claimant with respect to such claim.
(d) If a claim, whether between the parties or by a third
party, requires immediate action, the parties will make every effort to reach a
decision with respect thereto as expeditiously as possible.
(e) The indemnification rights provided in Sections 10.2
and 10.3 shall extend to the shareholders, directors, officers, employees, and
representatives of any Claimant although for the purpose of the procedures set
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forth in this Section 10.4, any indemnification claims by such parties shall be
made by and through the Claimant.
10.5 LIMITATIONS ON INDEMNIFICATION. No indemnification shall be
required to be made hereunder by an Indemnifying Party until the aggregate
amount of all indemnification claims against the Indemnifying Party exceeds
Fifty Thousand Dollars ($50,000), PROVIDED that once such claims exceed Fifty
Thousand Dollars ($50,000), the Indemnifying Party shall be required to
indemnify the Claimant with respect to all indemnifiable claims, including
indemnifiable claims for the initial Fifty Thousand Dollars ($50,000).
Notwithstanding anything to the contrary contained herein, in no event shall any
Indemnifying Party's obligations for indemnification under this Agreement exceed
in the aggregate the difference between the total cash amount received by the
Company at Closing less the Verified Capital Amount (such difference is the
"Indemnification Limit"), and Buyer hereby waives and releases any recourse
against Sellers, and Sellers each hereby waive and release any recourse against
Buyer, for indemnification above the Indemnification Limit.
10.6 SPECIFIC PERFORMANCE. The parties recognize that if Sellers
breach this Agreement and refuse to perform under the provisions of this
Agreement, monetary damages alone would not be adequate to compensate Buyer for
its injury. Buyer shall therefore be entitled, in addition to any other remedies
that may be available, including money damages, to obtain specific performance
of the terms of this Agreement. If any action is brought by Buyer to enforce
this Agreement, Sellers shall waive the defense that there is an adequate remedy
at law.
10.7 ATTORNEYS' FEES. In the event of a default by any party which
results in a lawsuit or other proceeding for any remedy available under this
Agreement, the prevailing party shall be entitled to reimbursement from the
other party of its reasonable legal fees and expenses.
SECTION 11. MISCELLANEOUS
11.1 FEES AND EXPENSES. Except as otherwise provided in this
Agreement, each party shall pay its own expenses incurred in connection with the
authorization, preparation, execution, and performance of this Agreement,
including all fees and expenses of counsel, accountants, agents, and
representatives, except that Buyer and Sellers shall each pay one-half of (i)
the filing fees required by the FCC in connection with the applications for the
FCC Consents, (ii) the filing fees required by the FTC under the HSR Act, and
(iii) any federal, state, or local sales or transfer tax arising in connection
with the conveyance of the Assets by Sellers to Buyer pursuant to this
Agreement. Each party shall be responsible for all fees or commissions payable
to any finder, broker, advisor, or similar person retained by or on behalf of
such party.
11.2 ARBITRATION. Except as otherwise provided to the contrary
below, any dispute arising out of or related to this Agreement that Sellers and
Buyer are unable to resolve by themselves shall be settled by arbitration in
Washington, D.C. by a panel of three (3) neutral arbitrators who shall be
selected in accordance with the procedures set forth in the commercial
arbitration rules of the American Arbitration Association. The persons selected
as arbitrators shall have prior experience in the broadcasting industry but need
not be professional arbitrators. Before undertaking to resolve the dispute, each
arbitrator shall be duly sworn faithfully and fairly to hear and examine the
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matters in controversy and to make a just award according to the best of his or
her understanding. The arbitration hearing shall be conducted in accordance with
the commercial arbitration rules of the American Arbitration Association. The
written decision of a majority of the arbitrators shall be final and binding on
Sellers and Buyer. The costs and expenses of the arbitration proceeding shall be
assessed among Sellers and Buyer in a manner to be decided by a majority of the
arbitrators, and the assessment shall be set forth in the decision and award of
the arbitrators. Judgment on the award, if it is not paid within thirty days,
may be entered in any court having jurisdiction over the matter. No action at
law or suit in equity based upon any claim arising out of or related to this
Agreement shall be instituted in any court by Sellers or Buyer against the other
except (i) an action to compel arbitration pursuant to this Section, (ii) an
action to enforce the award of the arbitration panel rendered in accordance with
this Section, or (iii) a suit for specific performance pursuant to Section 10.5.
11.3 NOTICES. All notices, demands, and requests required or
permitted to be given under the provisions of this Agreement shall be (a) in
writing, (b) delivered by personal delivery, or sent by commercial delivery
service or registered or certified mail, return receipt requested, (c) deemed to
have been given on the date of personal delivery or the date set forth in the
records of the delivery service or on the return receipt, and (d) addressed as
follows:
If to Buyer: Paxson Communications Corporation
601 Clearwater Park Road
West Palm Beach, FL 33401
Attention: Lowell W. Paxson
-and-
Paxson Communications Corporation
601 Clearwater Park Road
West Palm Beach, FL 33401
Attention: General Counsel
With a copy to: John R. Feore, Jr., Esq.
Dow, Lohnes & Albertson
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, D.C. 20036
and
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, NY 10112
Attention: Larry Rutkowski and
Bruce Campbell, Esq.
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If to Sellers or the Company: D P, Media Inc.
231 Bradley Place, Suite 204
Palm Beach, FL 33480
Attention: Devon Paxson
With a copy to: Alan C. Campbell, Esquire
Irwin, Campbell & Tannenwald
1730 Rhode Island Avenue, NW
Suite 200
Washington, DC 20036
and
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, NY 10112
Attention: Larry Rutkowski and
Bruce Campbell, Esq.
and
Robert H. Waltuch, Esq.
Holland and Knight
400 North Ashley Drive
Suite 2300
Tampa, FL 33602
or to any other or additional persons and addresses as the parties may from time
to time designate in a writing delivered in accordance with this Section 11.3.
11.4 BENEFIT AND BINDING EFFECT. No party hereto may assign this
Agreement without the prior written consent of the other parties hereto;
PROVIDED, HOWEVER, that Buyer may assign its rights and obligations under this
Agreement, in whole or in part, to one or more subsidiaries or commonly
controlled affiliates of Buyer without seeking or obtaining Sellers' prior
approval, provided that such assignment shall not constitute a release of
Buyer's obligations hereunder, and Buyer may collaterally assign its rights and
interests hereunder to its lenders without seeking or obtaining Sellers' prior
approval. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
11.5 FURTHER ASSURANCES. The parties shall take any actions and
execute any other documents that may be necessary or desirable to the
implementation and consummation of this Agreement, including, in the case of
Sellers, any additional bills of sale, deeds or other transfer documents that,
in the reasonable opinion of Buyer, may be necessary to ensure, complete, and
evidence the full and effective transfer of the Assets to Buyer pursuant to this
Agreement.
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11.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED,
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA (WITHOUT REGARD
TO THE CHOICE OF LAW PROVISIONS THEREOF).
11.7 HEADINGS. The headings in this Agreement are included for ease
of reference only and shall not control or affect the meaning or construction of
the provisions of this Agreement.
11.8 GENDER AND NUMBER. Words used in this Agreement, regardless of
the gender and number specifically used, shall be deemed and construed to
include any other gender, masculine, feminine, or neuter, and any other number,
singular or plural, as the context requires.
11.9 ENTIRE AGREEMENT. This Agreement, the schedules hereto, and
all documents, certificates, and other documents to be delivered by the parties
pursuant hereto, collectively represent the entire understanding and agreement
among Buyer and Sellers with respect to the subject matter hereof. This
Agreement supersedes all prior negotiations between the parties and cannot be
amended, supplemented, or changed except by an agreement in writing that makes
specific reference to this Agreement and which is signed by the party against
which enforcement of any such amendment, supplement, or modification is sought.
11.10 WAIVER OF COMPLIANCE; CONSENTS. Except as otherwise provided
in this Agreement, any failure of any of the parties to comply with any
obligation, representation, warranty, covenant, agreement, or condition herein
may be waived by the party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver or failure
to insist upon strict compliance with such obligation, representation, warranty,
covenant, agreement, or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section 11.10.
11.11 PRESS RELEASE. Prior to the Closing, no party hereto shall
publish any press release, make any other public announcement or otherwise
communicate with any news media concerning this Agreement or the transactions
contemplated hereby without the prior written consent of the other party;
PROVIDED, HOWEVER, that nothing contained herein shall prevent any party from
promptly making all filings with governmental authorities as may, in its
reasonable judgement be required or advisable in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
11.12 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All judicial
proceedings permitted by the terms hereof and brought against Buyer or Sellers
that arise out of or relate to this Agreement may be brought in any state or
federal court of competent jurisdiction in the State of Florida and, by
execution and delivery of this Agreement, Buyer and Sellers each accept for
itself and in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts and waives any defense of
forum non conveniens and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement. Sellers and, prior to the Closing,
the Company, designate and appoint Devon Paxson, and Buyer and, after the
Closing, the Company, designate and appoint Lowell W. Paxson, and such other
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persons as may hereafter be selected by Buyer or Sellers, as their respective
agent to receive on their behalf service of all process in any such proceedings
in any such court, such service being hereby acknowledged by Buyer and Sellers
to be effective and binding service in every respect. A copy of any such process
so served shall be sent to Buyer and Sellers in accordance with Section 11.3. If
any agent appointed by Buyer or Sellers refuses to accept service, Buyer and
Sellers hereby agree that service upon it by mail shall constitute sufficient
notice. Nothing herein shall affect the right to serve process in any other
manner permitted by law or shall limit the right of either party to bring
proceedings against the other in the courts of any other jurisdiction.
11.13 NO RECOURSE. Buyer and Sellers hereby agree that no Person
shall have any recourse hereunder or under any documents or instruments
delivered in connection herewith (including, without limitation, the Buyer
Ancillary Agreements and Seller Ancillary Agreements) against NBC or any current
or future director, officer, employee, or agent of NBC, whether by any legal or
equitable proceeding or arbitration, or by virtue of any statute, regulation or
other applicable law, or otherwise.
11.14 REVISED SCHEDULES. Notwithstanding anything to the contrary
contained herein, if Sellers have not, as of the date hereof (the "Signing
Date"), completed and/or delivered one or more of the Schedules referred to in
this Agreement and required to be delivered by them pursuant hereto or has not
delivered one or more of the documents required to be delivered by them pursuant
hereto, then Sellers shall be permitted to complete and deliver such Schedules
or documents to Buyer after the Signing Date, but in no event later than
December 3, 1999; PROVIDED, HOWEVER, that Sellers shall not have the right to
complete or otherwise modify Schedules 2.2, 3.4, 3.8, 3.9, 3.13, 3.15 and 3.22,
which Schedules are correct and complete in the form attached hereto. Buyer
shall be deemed to have accepted any such revised or newly delivered Schedules
and/or documents unless, by no later than 5:00 p.m., Eastern Standard Time, on
December 10, 1999, it shall have delivered to Sellers a notice signed by an
officer of Buyer to the effect that such revised or newly delivered Schedules
and/or documents reflect matters that could reasonably be expected to result in
an increase in the obligations of Buyer hereunder or under the Buyer Ancillary
Agreements (other than obligations under Contracts not relating to indebtedness
for borrowed money entered into by a Seller in the ordinary course of business
prior to the date hereof and that satisfy the representations and warranties
contained in the last three sentences of Section 3.5) or any losses, liabilities
or damages to Buyer (collectively, the "New Liabilities"), and, as a result,
Buyer elects, in its sole discretion, to either terminate this Agreement (a
"Termination Notice") or reduce the Cash Balance by an amount equal to the New
Liabilities (a "Reduction Notice"). If Buyer delivers to Sellers a Termination
Notice in accordance with the preceding sentence, this Agreement shall be
terminated effective as of the date Sellers receive the Termination Notice. If
Buyer delivers to Seller a Reduction Notice, the amount of the Cash Balance
shall be reduced by the amount of the New Liabilities. If approval of such
revised or newly delivered Schedules and/or documents is granted or is deemed
granted, any Schedules attached hereto as of the Signing Date and delivered by
Sellers which have subsequently been revised shall be deemed to be amended in
accordance with such revised Schedules as of the Signing Date and such
late-delivered Schedules and/or documents shall be deemed delivered by Sellers
as of the Signing Date.
11.15 COUNTERPARTS. This Agreement may be signed in counterparts
with the same effect as if the signature on each counterpart were upon the same
instrument.
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11.16 TIME BROKERAGE AGREEMENT FEE. Upon the earlier to occur of (i)
the termination of this Agreement for any reason other than a material breach by
Sellers of their representations, warranties, covenants or agreements hereunder,
(ii) the failure of the Closing to take place within one (1) year from execution
of this Agreement for any reason other than a material breach by Sellers of
their representations, warranties, covenants or agreements hereunder, and (iii)
the parties' failure to close the transactions contemplated by this Agreement
within forty (40) days of the date of FCC Consent, unless such failure to close
is a result of Sellers' material breach of their representations, warranties or
covenants hereunder, Buyer shall be required to make, commencing upon the
occurrence of such event, a payment to Sellers pursuant to the Time Brokerage
Agreements and the Boston Affiliation Agreement in an amount per annum, in the
aggregate for all Time Brokerage Agreements and the Boston Affiliation
Agreement, equal to five percent (5%) of the Verified Capital Amount, payable in
advance in twelve equal monthly payments (the "Time Brokerage Agreements Fee").
Such payments of Time Brokerage Agreement Fees shall continue to be paid for the
duration of the Time Brokerage Agreements.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the day and year first above written.
<TABLE>
<CAPTION>
<S> <C>
SELLERS: D P MEDIA, INC.; D P MEDIA OF BATTLE CREEK, INC.; D P MEDIA LICENSE OF BATTLE CREEK, INC.;
D P MEDIA OF BOSTON, INC.; D P MEDIA LICENSE OF BOSTON, INC.; D P MEDIA OF MARTINSBURG,
INC.; D P MEDIA LICENSE OF MARTINSBURG, INC.; D P MEDIA OF MILWAUKEE, INC.; D P MEDIA
LICENSE OF MILWAUKEE, INC.; D P MEDIA OF RALEIGH DURHAM, INC.; D P MEDIA LICENSE OF RALEIGH
DURHAM, INC.; D P MEDIA OF ST. LOUIS, INC.; D P MEDIA LICENSE OF ST. LOUIS, INC.; RDP
COMMUNICATIONS, INC.; RDP COMMUNICATIONS OF INDIANAPOLIS, INC.; RDP COMMUNICATIONS LICENSE
OF INDIANAPOLIS, INC.; CAP COMMUNICATIONS, INC.; CAP COMMUNICATIONS OF NEW LONDON, INC.;
CAP COMMUNICATIONS LICENSE OF NEW LONDON, INC.; CAP COMMUNICATIONS OF BOSTON, INC.; CHANNEL
66 OF TAMPA, INC.; and CHANNEL 46 OF BOSTON, INC.
By: ______________________________
Name: Devon Paxson
Title: Vice President
BUYER: PAXSON COMMUNICATIONS CORPORATION
By: ______________________________
Name:
Title:
NATIONAL BROADCASTING COMPANY, INC. HEREBY JOINS IN THE EXECUTION OF THIS ASSET PURCHASE
AGREEMENT SOLELY FOR THE PURPOSE OF AGREEING TO THE PROVISIONS OF SECTIONS 2.4, 6.9 AND
11.13 HEREOF.
NATIONAL BROADCASTING COMPANY, INC.
By: _____________________________
Name:
Title:
</TABLE>
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EXHIBIT 10.210
================================================================================
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
D P MEDIA OF BOSTON, INC.
AND
BOSTON UNIVERSITY COMMUNICATIONS, INC.
FOR
TELEVISION STATIONS
WABU(TV), BOSTON, MA,
WZBU(TV), VINEYARD HAVEN, MA,
WNBU(TV), CONCORD, NH,
AND
LOW POWER TELEVISION STATION
W67BA(TV), DENNIS, MA
* * *
APRIL 30, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
SECTION 1. DEFINITIONS....................................................................................1
SECTION 2. PURCHASE AND SALE OF ASSETS....................................................................4
2.1 Agreement to Sell and Buy......................................................................4
2.2 Excluded Assets................................................................................5
2.3 Purchase Price.................................................................................6
2.4 Payment of Purchase Price......................................................................7
2.5 Assumption of Liabilities and Obligations......................................................7
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER.......................................................8
3.1 Organization, Standing, and Authority..........................................................8
3.2 Authorization and Binding Obligation...........................................................8
3.3 Absence of Conflicting Agreements..............................................................9
3.4 Governmental Licenses..........................................................................9
3.5 Title to and Condition of Real Property........................................................9
3.6 Title to and Condition of Tangible Personal Property..........................................10
3.7 Contracts.....................................................................................11
3.8 Consents......................................................................................11
3.9 Intangibles...................................................................................11
3.10 Financial Statements..........................................................................11
3.11 Insurance.....................................................................................12
3.12 Reports.......................................................................................12
3.13 Personnel.....................................................................................12
3.14 Taxes.........................................................................................14
3.15 Claims and Legal Actions......................................................................14
3.16 Environmental Matters.........................................................................15
3.17 Compliance with Laws..........................................................................16
3.18 Conduct of Business in Ordinary Course........................................................16
3.19 Transactions with Affiliates..................................................................17
3.20 Broker........................................................................................17
3.21 Full Disclosure...............................................................................17
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.......................................................17
4.1 Organization, Standing, and Authority.........................................................17
4.2 Authorization and Binding Obligation..........................................................17
4.3 Absence of Conflicting Agreements.............................................................18
4.4 Broker........................................................................................18
4.5 Full Disclosure...............................................................................18
4.6 Consents......................................................................................18
4.7 Claims and Legal Actions......................................................................18
SECTION 5. OPERATIONS OF THE STATIONS PRIOR TO CLOSING...................................................19
5.1 Generally.....................................................................................19
5.2 Compensation..................................................................................19
5.3 Contracts.....................................................................................19
5.4 Disposition of Assets.........................................................................19
5.5 Encumbrances..................................................................................19
5.6 Licenses......................................................................................20
5.7 Rights........................................................................................20
5.8 Access to Information.........................................................................20
5.9 Maintenance of Assets.........................................................................20
5.10 Insurance.....................................................................................20
5.11 Consents......................................................................................20
5.12 Books and Records.............................................................................21
5.13 Notification..................................................................................21
5.14 Financial Information.........................................................................21
5.15 Compliance with Laws..........................................................................21
5.16 Financing Leases..............................................................................21
5.17 Programming...................................................................................21
5.18 Preservation of Business......................................................................21
5.19 Trade Agreements..............................................................................21
SECTION 6. SPECIAL COVENANTS AND AGREEMENTS..............................................................22
6.1 FCC Consent...................................................................................22
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6.2 Control of the Stations.......................................................................22
6.3 Risk of Loss..................................................................................23
6.4 Confidentiality...............................................................................23
6.5 Environmental Audit...........................................................................23
6.6 Engineering Study.............................................................................23
6.7 Cooperation...................................................................................24
6.8 Bulk Sales Law................................................................................24
6.9 Sales Tax Filings.............................................................................24
6.10 Access to Books and Records...................................................................24
6.11 Appraisal.....................................................................................24
6.12 Noncompetition Agreement......................................................................24
6.13 HSR Act Filing................................................................................24
6.14 Call Sign Change..............................................................................25
6.15 No Inconsistent Action........................................................................25
6.16 Studio Facilities.............................................................................25
6.17 Notices of Breach.............................................................................26
6.18 University Matters............................................................................26
SECTION 7. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER AT CLOSING......................................26
7.1 Conditions to Obligations of Buyer............................................................26
7.2 Conditions to Obligations of Seller...........................................................27
SECTION 8. CLOSING AND CLOSING DELIVERIES................................................................28
8.1 Closing.......................................................................................28
8.2 Deliveries by Seller..........................................................................29
8.3 Deliveries by Buyer...........................................................................29
SECTION 9. TERMINATION...................................................................................30
9.1 Termination by Seller.........................................................................30
9.2 Termination by Buyer..........................................................................30
9.3 Rights on Termination.........................................................................31
9.4 Escrow Deposit................................................................................31
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9.5 Disposition of WBPX(TV).......................................................................32
SECTION 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; CERTAIN REMEDIES.................34
10.1 Representations and Warranties................................................................34
10.2 Indemnification by Seller.....................................................................34
10.3 Indemnification by Buyer and Its Subsidiary...................................................34
10.4 Procedure for Indemnification.................................................................35
10.5 Limitations...................................................................................36
10.6 Specific Performance..........................................................................36
10.7 Attorneys' Fees...............................................................................37
SECTION 11. MISCELLANEOUS.................................................................................37
11.1 Fees and Expenses.............................................................................37
11.2 Notices.......................................................................................37
11.3 Benefit and Binding Effect....................................................................38
11.4 Further Assurances............................................................................38
11.5 Governing Law.................................................................................38
11.6 Headings......................................................................................38
11.7 Gender and Number.............................................................................38
11.8 Entire Agreement..............................................................................38
11.9 Waiver of Compliance; Consents................................................................39
11.10 Press Release.................................................................................39
11.11 Consent to Jurisdiction.......................................................................39
11.12 Counterparts..................................................................................40
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LIST OF SCHEDULES
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Schedule 2.2 -- Certain Excluded Assets
Schedule 3.3 -- Consents
Schedule 3.4 -- Licenses
Schedule 3.5 -- Real Property
Schedule 3.6 -- Tangible Personal Property
Schedule 3.7 -- Contracts
Schedule 3.9 -- Intangibles
Schedule 3.10 -- Financial Statements
Schedule 3.11 -- Insurance Policies
Schedule 3.13 -- Employee Matters
Schedule 3.16 -- Environmental Matters
Schedule 6.12 -- Form of Noncompetition Agreement
Schedule 8.2(a) -- Form of Bill of Sale
Schedule 8.2(b) -- Form of Estoppel Certificate
Schedule 8.2(f)(A) -- Form of Corporate Opinion of Seller's Counsel
Schedule 8.2(f)(B) -- Form of FCC Opinion of Seller's Counsel
Schedule 8.3(b) -- Forms of Assignment and Assumption Agreement
Schedule 8.3(d) -- Form of Opinion of Buyer's Counsel
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is dated as of the 30th day of April,
1999, by and between D P Media of Boston, Inc., a Florida corporation ("Buyer"),
and Boston University Communications, Inc., a Massachusetts corporation
("Seller").
R E C I T A L S
A. Seller is the licensee of and owns and operates television
stations WABU(TV), Channel 68, Boston, Massachusetts ("WABU"); WZBU(TV), Channel
58, Vineyard Haven, Massachusetts ("WZBU"); WNBU(TV), Channel 21, Concord, New
Hampshire ("WNBU"); and low power television station W67BA(TV), Channel 67,
Dennis, Massachusetts (individually, a "Station" and collectively, the
"Stations") pursuant to licenses issued by the Federal Communications Commission
("FCC").
B. Contemporaneously with the execution and delivery of this
Asset Purchase Agreement, Buyer and Seller have entered into the Time Brokerage
Agreement, pursuant to which Buyer agrees to provide programming for broadcast
on the Stations effective as of the Commencement Date, as defined in the Time
Brokerage Agreement (the "TBA Effective Date").
C. Seller desires to sell, and Buyer desires to buy,
substantially all the assets that are used or useful in the business or
operations of the Stations, for the price and on the terms and conditions set
forth in this Agreement.
A G R E E M E N T S
In consideration of the above recitals and of the mutual agreements and
covenants contained in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Buyer and Seller, intending to be bound legally, agree as follows:
SECTION 1. DEFINITIONS
The following terms, as used in this Agreement, shall have the meanings
set forth in this Section:
"Accounts Receivable" means all rights of Seller to payment arising
from or relating to the operations of the Stations, including rights to payment
for the sale of commercial announcements broadcast on the Stations.
"Assets" means the assets to be sold, transferred, or otherwise
conveyed to Buyer under this Agreement, as defined in Section 2.1.
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"Assumed Contracts" means (i) all Contracts listed in Schedule 3.7 that
are specifically designated on Schedule 3.7 as Contracts that are to be assumed
by Buyer upon its purchase of the Stations, (ii) any Contracts entered into by
Seller between the date of this Agreement and the Closing Date that Buyer agrees
to assume pursuant to Section 5.3, and (iii) any Contracts entered into by
Seller in the ordinary course of business during the period from the date hereof
until the day prior to the TBA Effective Date which do not involve liabilities
or obligations in excess of $5,000 individually or $50,000 in the aggregate.
"Assumed Liabilities" has the meaning set forth in Section 2.5 hereof.
"Buyer's Accounts" means all Accounts Receivable which arise or accrue
on or after the TBA Effective Date other than the Studio Lease Receivables.
"Closing" means the consummation of the purchase and sale of the Assets
pursuant to this Agreement in accordance with the provisions of Section 8.
"Closing Date" means the date on which the Closing occurs, as
determined pursuant to Section 8.
"Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to transfer the Assets to Buyer or
otherwise to consummate the transactions contemplated by this Agreement.
"Contracts" means all contracts, leases, non-governmental licenses, and
other agreements (including leases for personal or real property and employment
agreements), written or oral (including any amendments and other modifications
thereto) to which Seller is a party or which are binding upon Seller and which
relate to or affect the Assets or the business or operations of one or more
Stations, and (i) which are in effect on the date of this Agreement or (ii)
which are entered into by Seller between the date of this Agreement and the
Closing Date.
"Escrow Agent" means First Union National Bank of Florida.
"Escrow Agreement" means the Escrow Agreement dated as of the date
hereof among Buyer, Seller and the Escrow Agent.
"Excluded Assets" has the meaning set forth in Section 2.2 hereof.
"FCC" means the Federal Communications Commission.
"FCC Consent" means action by the FCC granting its consent to the
assignment of the FCC Licenses to Buyer as contemplated by this Agreement.
"FCC Licenses" means all Licenses issued by the FCC to Seller in
connection with the business or operations of each Station.
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"Final Order" means an action by the FCC that has not been reversed,
stayed, enjoined, set aside, annulled, or suspended, and with respect to which
no requests are pending for administrative or judicial review, reconsideration,
appeal, or stay, and the time for filing any such requests and the time for the
FCC to set aside the action on its own motion have expired.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the regulations of the Federal Trade Commission
thereunder.
"Intangibles" means all copyrights, trademarks, trade names, service
marks, service names, licenses, patents, permits, jingles, proprietary
information, technical information and data, machinery and equipment warranties,
and other similar intangible property rights and interests (and any goodwill
associated with any of the foregoing) applied for, issued to, or owned by Seller
or under which Seller is licensed or franchised, to the extent transferable to
Buyer, and which are used exclusively in the business and operations of one or
more Stations, together with any additions thereto between the date of this
Agreement and the Closing Date.
"Licenses" means all licenses, permits, and other authorizations issued
by the FCC, the Federal Aviation Administration, or any other federal, state, or
local governmental authorities to Seller in connection with the conduct of the
business or operations of one or more Stations, together with any additions
thereto between the date of this Agreement and the Closing Date.
"Purchase Price" means the purchase price specified in Section 2.3.
"Real Property" means all real property and interests in real property,
including fee estates, leaseholds and subleaseholds (other than the Studio
Lease), purchase options, easements, licenses, rights to access, and rights of
way, and all buildings and other improvements thereon, and other real property
interests owned or held by Seller which are used or useful in the business or
operations of one or more Stations, together with any additions thereto between
the date of this Agreement and the Closing Date.
"Seller's Accounts" means (i) all Accounts Receivable from the
operation of the Stations which arise or accrue prior to the TBA Effective Date,
(ii) all Studio Lease Receivables, (iii) all other amounts payable to Seller in
respect of the operation of one or more Stations (other than Buyer's Accounts),
and (iv) all amounts payable to Seller pursuant to the terms of this Agreement,
the Time Brokerage Agreement or any other agreement contemplated hereby or
thereby.
"Studio Lease" means the Lease between Phillip C. Haughey, Trustee of
the Tara Realty Trust and Arlington Broadcast Group, Inc., dated May 22, 1985,
pursuant to which Seller leases the WABU studio and office premises on Soldiers
Field Road, Boston, Massachusetts.
"Studio Lease Receivables" means any and all amounts now or hereafter
payable to Seller in respect of the Studio Lease, whether in connection with the
termination thereof or otherwise.
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"Tangible Personal Property" means all machinery, equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant, inventory,
spare parts, and other tangible personal property owned by Seller which are used
principally in the conduct of the business or operations of one or more
Stations, together with any additions thereto between the date of this Agreement
and the Closing Date.
"Time Brokerage Agreement" means the Time Brokerage Agreement between
Buyer and Seller, dated as of the date hereof, with respect to the Stations, as
amended from time to time.
"To Seller's knowledge," "to the knowledge of Seller," "known to
Seller" or similar phrases mean, except as otherwise expressly provided herein,
to the actual knowledge of Seller following reasonable inquiry by the officers
of Seller, the Stations' General Manager or Chief Engineer, but without any
inquiry to or investigation by any third party.
SECTION 2. PURCHASE AND SALE OF ASSETS
2.1 AGREEMENT TO SELL AND BUY. Subject to the terms and conditions
set forth in this Agreement, Seller hereby agrees to sell, transfer, and deliver
to Buyer on the Closing Date, and Buyer agrees to purchase and accept from
Seller, all of Seller's right, title and interest in, to and under the following
tangible and intangible assets, together with any additions thereto between the
date of this Agreement and the Closing Date (collectively, the "Assets"), but in
each case excluding the assets described in Section 2.2, free and clear of any
claims, liabilities, security interests, mortgages, liens, pledges, conditions,
charges, or encumbrances of any nature whatsoever (except for liens for current
taxes not yet due and payable), including the following:
(a) The Tangible Personal Property;
(b) The Real Property;
(c) The Licenses;
(d) The Assumed Contracts;
(e) The Intangibles;
(f) All of Seller's proprietary information, technical
information and data, machinery and equipment warranties, maps, computer discs
and tapes, plans, diagrams, blueprints, and schematics, including filings with
the FCC relating to the business and operation of each Station;
(g) The Buyer's Accounts;
(h) All choses in action of Seller relating to one or
more Stations, if and to the extent such choses in action relate to the
ownership, use or condition of the Assets following the Closing; and
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(i) All books and records relating to the business or
operations of each Station, including, to the extent in Seller's possession,
executed copies of the Assumed Contracts, and all records required by the FCC to
be kept by each Station.
2.2 EXCLUDED ASSETS. Notwithstanding any provision of this
Agreement to the contrary, the Assets shall exclude the following assets
(collectively, the "Excluded Assets"):
(a) All of Seller's cash on hand as of the Closing and
all other cash, cash equivalents or investments in any of Seller's bank, savings
or investment accounts; all of Seller's insurance policies, letters of credit,
or other similar items and cash surrender value in regard thereto; and all of
Seller's stocks, bonds, certificates of deposit, money market instruments,
mutual funds and other investments;
(b) All of Seller's corporate minute books, stock
transfer books and corporate records; all duplicated records of any books,
records, accounts and information of Seller relating to Seller's operation of
the Stations prior to the Closing; copies of all records prepared by or on
behalf of Seller in connection with the sale of the Stations; all records and
documents relating to any Excluded Assets; all of Seller's "off-the-shelf"
software which by its terms is not assignable; and all of Seller's rights under
or pursuant to this Agreement or any other document or instrument contemplated
hereby;
(c) Any pension, profit-sharing, or employee benefit
plans (including all assets of such plans), and any collective bargaining
agreements relating to the Stations or their employees;
(d) All property listed on Schedule 2.2 hereto;
(e) The Studio Lease and all of Seller's rights
thereunder;
(f) All of Seller's Accounts;
(g) All Tangible Personal Property of Seller disposed of
or consumed (including in respect of ordinary wear and tear) in the ordinary
course of business and in accordance with the terms hereof between the date
hereof and the Closing Date;
(h) All Contracts that expire in accordance with their
terms prior to the Closing Date or are terminated with the prior approval of
Buyer;
(i) All logos, slogans, copyrights, trademarks and
service marks relating to Trustees of Boston University, a corporation created
by an Act of the Massachusetts Legislature (the "University"), and all contracts
and other arrangements between Seller and the University, other than the program
contract relating to the Beanpot Tournament;
(j) BUCI Productions, Inc. and all rights and other
assets thereof, including, without limitation, the programs entitled "lil'
iguana" and "Story Shop"; and
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(k) The call letters "WABU".
2.3 PURCHASE PRICE. The Purchase Price for the Assets and the
covenants of Seller set forth in the Noncompetition Agreement referred to in
Section 6.12 shall be Forty Million Dollars ($40,000,000), adjusted as provided
below:
(a) Prorations. The Purchase Price shall be increased or
decreased as required to effectuate the proration of expenses, other than those
expenses of Buyer which Buyer is obligated to pay under the Time Brokerage
Agreement and those expenses of Seller for which Buyer is obligated to reimburse
Seller under the Time Brokerage Agreement. Except as otherwise provided in the
Time Brokerage Agreement, all expenses arising from the operation of the
Stations, including business and license fees, utility charges, real and
personal property taxes and assessments levied against the Assets, property and
equipment rentals, applicable copyright or other fees, sales and service
charges, taxes (except for taxes arising from the transfer of the Assets under
this Agreement), FCC annual regulatory fees and similar prepaid and deferred
items, shall be prorated between Buyer and Seller in accordance with the
principle that Seller shall be responsible for all expenses, costs, and
liabilities allocable to the period prior to the Closing Date (subject to
reimbursement by Buyer to the extent provided in the Time Brokerage Agreement),
and Buyer shall be responsible for all expenses, costs, and obligations
allocable to the period on and after the Closing Date. Notwithstanding the
preceding sentence, there shall be no adjustment for, and Seller shall remain
solely liable with respect to, any Contracts not included in the Assumed
Contracts and any other obligation or liability not being assumed by Buyer in
accordance with Section 2.5.
(b) Manner of Determining Adjustments. Any adjustments
and prorations pursuant to Section 2.3(a) will, insofar as feasible, be
determined and paid on the Closing Date, with final settlement and payment by
the appropriate party occurring no later than ninety (90) days after the Closing
Date or such other date as the parties shall mutually agree upon. The Purchase
Price, taking into account the adjustments and prorations pursuant to Section
2.3(a) will be determined finally in accordance with the following procedures:
(i) Seller shall prepare and deliver to Buyer
not later than five (5) business days before the Closing Date a
preliminary settlement statement which shall set forth Seller's good
faith estimate of the adjustments to the Purchase Price under Section
2.3(a). The preliminary settlement statement (1) shall contain all
information reasonably necessary to determine the adjustments to the
Purchase Price under Section 2.3(a), to the extent such adjustments can
be determined or estimated as of the date of the preliminary settlement
statement, and such other information as may be reasonably requested by
Buyer, and (2) shall be certified by Sellers to be true and complete in
all material respects to the best of Seller's knowledge as of the date
thereof. Buyer and Seller shall use their good faith efforts to agree
upon the adjustments under Section 2.3(a) hereof prior to the Closing.
The Purchase Price payable at Closing under Section 2.3 shall be
increased or decreased, as applicable, based on the adjustments set
forth in the preliminary settlement statement, except that any
adjustments set forth in the preliminary settlement statement to which
Buyer objects in good faith shall be deemed
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omitted from such preliminary settlement statement and shall instead be
determined as part of the post-closing adjustments under this Section
2.3(b).
(ii) No later than forty-five (45) days after the
Closing Date, Buyer will deliver to Seller a statement setting forth
Buyer's determination of the Purchase Price as adjusted pursuant to
Section 2.3(a). If Seller disputes the amount of the Purchase Price
determined by Buyer, it shall deliver to Buyer within forty-five (45)
days after its receipt of Buyer's statement a statement setting forth
its determination of the amount of the Purchase Price (the "Seller
Statement"). If Seller notifies Buyer of its acceptance of Buyer's
statement, or if Seller fails to deliver its statement within the
45-day period specified in the preceding sentence, Buyer's
determination of the Purchase Price shall be conclusive and binding on
the parties as of the last day of the 45-day period.
(iii) Buyer and Seller shall use good faith
efforts to resolve any dispute involving the determination of the
Purchase Price. If the parties are unable to resolve the dispute within
fifteen (15) days following the delivery of Seller's Statement, Buyer
and Seller shall jointly designate an independent certified public
accountant, who shall be knowledgeable and experienced in accounting
for television broadcasting stations within forty-five (45) days
following delivery of Seller's Statement, to resolve the dispute. If
Seller and Buyer fail to agree to the appointment of such certified
public accountant within said forty-five (45) day period, either party
may submit to the American Arbitration Association for the appointment
of such accountant under the commercial arbitration rules of the
American Arbitration Association. The accountant's resolution of the
dispute shall be final and binding on the parties, and a judgment may
be entered thereon in any court of competent jurisdiction. Any fees of
such accountant shall be split equally between the parties.
(iv) If the Purchase Price as finally determined
pursuant to this Section 2.3(b) exceeds the Purchase Price paid by
Buyer on the Closing Date (the "Estimated Purchase Price"), Buyer shall
pay to Seller, in immediately available funds within five days after
the date on which the Purchase Price is finally determined pursuant to
this Section 2.3(b), the difference between the Purchase Price and the
Estimated Purchase Price. If the Purchase Price as finally determined
pursuant to this Section 2.3(b) is less than the Estimated Purchase
Price, Seller shall pay to Buyer, in immediately available funds within
five days after the date on which the Purchase Price is finally
determined pursuant to this Section 2.3(b), the difference between the
Purchase Price and the Estimated Purchase Price.
2.4 PAYMENT OF PURCHASE PRICE. The Purchase Price, as adjusted,
shall be paid by Buyer to Seller at Closing by wire transfer of same-day funds
pursuant to wire instructions which shall be delivered by Seller to Buyer, at
least two (2) days prior to the Closing Date.
2.5 ASSUMPTION OF LIABILITIES AND OBLIGATIONS. As of the Closing
Date, Buyer shall assume and undertake to pay, discharge, and perform all
obligations and liabilities of Seller under the Licenses and the Assumed
Contracts insofar as they relate to the time on or after the
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Closing Date, and arise out of events related to Buyer's ownership of the Assets
or its operation of the Stations on or after the Closing Date (collectively, the
"Assumed Liabilities"); provided, however, that the total amount of obligations
and liabilities under the programming agreements listed in Schedule 3.7 (as in
effect on the date hereof), whether in cash, barter or otherwise, that Buyer is
required to assume at Closing shall in no event exceed Nine Million Dollars
($9,000,000) in the aggregate for all such programming agreements. Buyer shall
not assume any other obligations or liabilities of Seller, including (i) any
obligations or liabilities under any Contract not included in the Assumed
Contracts or relating to any Excluded Asset, (ii) any obligations or liabilities
under the Assumed Contracts relating to the period prior to the Closing Date,
(iii) any claims or pending litigation or proceedings relating to the operation
of any Station prior to the Closing, (iv) any obligations or liabilities arising
under capitalized leases or other financing agreements, (v) any obligations or
liabilities arising under agreements (other than any Assumed Contracts) entered
into other than in the ordinary course of business, (vi) any obligations or
liabilities of Seller under any employee pension, retirement, health and welfare
or other benefit plans or collective bargaining agreements, (vii) any obligation
to any employee of the Stations for severance benefits, vacation time, or sick
leave accrued prior to the Closing Date, or (viii) any obligations or
liabilities caused by, arising out of, or resulting from any action or omission
of Seller prior to the Closing, and all such obligations and liabilities shall
remain and be the obligations and liabilities solely of Seller.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 ORGANIZATION, STANDING, AND AUTHORITY. Seller is a corporation
duly organized, validly existing, and in good standing under the laws of The
Commonwealth of Massachusetts and is duly qualified to conduct business as a
foreign corporation in the State of New Hampshire. Seller has all requisite
power and authority (i) to own, lease, and use the Assets as now owned, leased,
and used, (ii) to conduct the business and operations of the Stations as now
conducted, and (iii) to execute and deliver this Agreement, the Escrow Agreement
and the documents contemplated hereby and thereby, and to perform and comply
with all of the terms, covenants, and conditions to be performed and complied
with by Seller hereunder and thereunder. Seller is not a participant in any
joint venture or partnership with any other person or entity with respect to any
part of the operations of any Station or any of the Assets.
3.2 AUTHORIZATION AND BINDING OBLIGATION. The execution, delivery,
and performance of this Agreement and the Escrow Agreement by Seller have been
duly authorized by all necessary actions on the part of Seller and, to the
extent required, its sole shareholder. This Agreement and the Escrow Agreement
have been duly executed and delivered by Seller and constitute the legal, valid,
and binding obligations of Seller, enforceable against it in accordance with
their respective terms except as the enforceability of this Agreement and the
Escrow Agreement may be affected by bankruptcy, insolvency, or similar laws
affecting creditors' rights generally, and by judicial discretion in the
enforcement of equitable remedies.
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3.3 ABSENCE OF CONFLICTING AGREEMENTS. Subject to obtaining the
Consents listed on Schedule 3.3 and the expiration or termination of the waiting
period under the HSR Act, the execution, delivery, and performance of this
Agreement and the Escrow Agreement and the documents contemplated hereby and
thereby (with or without the giving of notice, the lapse of time, or both): (i)
do not require the consent of any third party; (ii) will not conflict with any
provision of the Articles of Organization or Bylaws of Seller; (iii) will not
conflict with, result in a breach of, or constitute a default under, any law,
judgment, order, ordinance, injunction, decree, rule, regulation, or ruling of
any court or governmental instrumentality; (iv) will not conflict with,
constitute grounds for termination of, result in a breach of, constitute a
default under, or accelerate or permit the acceleration of any performance
required by the terms of, any agreement, instrument, license, or permit to which
Seller is a party or by which Seller may be bound; and (v) will not create any
claim, liability, mortgage, lien, pledge, condition, charge, or encumbrance of
any nature whatsoever upon any of the Assets.
3.4 GOVERNMENTAL LICENSES. Schedule 3.4 includes a true and
complete list of the Licenses. Seller has delivered to Buyer true and complete
copies of the Licenses (including any amendments and other modifications
thereto). The Licenses have been validly issued, and Seller is the authorized
legal holder thereof. The Licenses listed on Schedule 3.4 comprise all of the
licenses, permits, and other authorizations required from any governmental or
regulatory authority for the lawful conduct of the business and operations of
each Station in the manner and to the full extent they are now conducted, and
none of the Licenses is subject to any restriction or condition not set forth on
the face thereof that would limit the full operation of any Station as now
operated, other than conditions or restrictions generally applicable to
television broadcasting stations or generally applicable to television
broadcasting stations in the Boston market. The Licenses are in full force and
effect, and the conduct of the business and operations of each Station is in
accordance therewith. Seller has no reason to believe that any of the Licenses
would not be renewed by the FCC or other granting authority in the ordinary
course. Schedule 3.4 includes an accurate and complete list of all cable systems
for which Seller made a must-carry election for the current must-carry election
period and on which one of the Stations is currently carried. Schedule 3.4 also
includes a list of those cable systems in the Boston, Massachusetts market on
which none of the Stations is currently carried. All agreements with cable
systems regarding carriage of the Stations' signals and copyright
indemnification are set forth in Schedule 3.7.
3.5 TITLE TO AND CONDITION OF REAL PROPERTY. Set forth on Schedule
3.5 is a list of all Real Property as to which Seller is a party to a real
property lease, license or other Contract in connection with the operation of
one or more Stations, other than the Studio Lease (collectively, "Leased
Properties"), together with a brief description thereof (each, a "Real Estate
Lease"). Seller has provided to Buyer a correct and complete copy of the Studio
Lease. Schedule 3.5 includes a complete copy of each Real Estate Lease and any
amendments, renewals or assignments thereof. Each Real Estate Lease is in full
force and effect and is valid, binding and enforceable in accordance with its
terms, except as such enforceability may be affected by bankruptcy, insolvency
or similar laws affecting creditors' rights generally and by judicial discretion
in the enforcement of equitable remedies. There is not under any Real Estate
Lease any material default by Seller thereunder and, to Seller's knowledge, any
material default
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thereunder by any other party thereto. No event has occurred and is continuing
which, with due notice or lapse of time or both, would constitute a material
default or event of default by Seller under any Real Estate Lease. Seller's
possession of the Leased Properties has not been disturbed and no claim has been
asserted against Seller adverse to Seller's interests in the Leased Properties.
Except as set forth in Schedule 3.5, to Seller's knowledge, each structure
located on each Leased Property has been adequately maintained and is in good
condition and repair consistent with the uses to which it is presently being
put. Except as set forth on Schedule 3.5, Seller's use of the Leased Properties,
and, to Seller's knowledge, all structures, improvements and fixtures on the
Leased Properties and the current use of the Leased Properties by other parties,
conforms in all material respects, to any and all applicable federal, state and
local laws, reclamation laws, zoning, land use, subdivision, wetlands, building,
health and safety and other ordinances, laws, rules and regulations. Except as
set forth on Schedule 3.5, no notice from any governmental body or other person
has been served upon, or received by, Seller and, to Seller's knowledge, no such
notice has been served upon or received by any other party that owns or occupies
the Leased Properties, claiming any violation of any such ordinance, law, rule
or regulation, or requiring any substantial work, repairs, reclamation,
construction, alterations or installation on or in connection with any Leased
Property or any structure, improvement or fixture thereon which has not been
complied with in all material respects. Except as set forth on Schedule 3.5, no
notice from any governmental body or other person has been served upon or
received by Seller claiming that any right of access or other right enjoyed by
Seller as a result of its leasehold interests in the Leased Properties is being
modified or terminated in any material respect. To Seller's knowledge, there is
no violation of any covenant, restriction or other agreement or understanding,
oral or written, affecting or relating to title or use of any Leased Property.
To Seller's knowledge, there are no pending or threatened condemnation or
similar proceedings or assessments affecting any of the Leased Properties,
lawsuits by adjoining landowners or others, nor, to Seller's knowledge, is any
such proceeding contemplated by any person or governmental authority.
3.6 TITLE TO AND CONDITION OF TANGIBLE PERSONAL PROPERTY. Schedule
3.6 lists all material items of Tangible Personal Property. The Tangible
Personal Property listed on Schedule 3.6 comprises all material items of
tangible personal property necessary to conduct the business and operations of
each Station as now conducted. Except as described in Schedule 3.6, Seller owns
and has good title to each item of Tangible Personal Property, and none of the
Tangible Personal Property owned by Seller is subject to any security interest,
mortgage, pledge, conditional sales agreement, or other lien or encumbrance,
except for liens for current taxes not yet due and payable. Each item of
Tangible Personal Property is available for immediate use in the business and
operations of the Station or Stations to which such item relates. All items of
transmitting and studio equipment included in the Tangible Personal Property (i)
have been maintained in a manner consistent with generally accepted standards of
good engineering practice, and (ii) will permit each Station and any auxiliary
broadcast facilities related to such Station to operate in accordance with the
terms of the FCC Licenses and the rules and regulations of the FCC, and with all
other applicable federal, state, and local statutes, ordinances, rules, and
regulations.
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3.7 CONTRACTS. Schedule 3.7 is a true and complete list of all
Contracts, except contracts with advertisers for the sale of advertising time on
the Stations for cash at prevailing rates and which have not been prepaid and
which may be canceled by Seller without penalty on not more than thirty days'
notice. Seller has delivered to Buyer true and complete copies of all written
Contracts, true and complete memoranda of all oral Contracts (including any
amendments and other modifications to such Contracts), and a schedule
summarizing Seller's obligations under trade and barter agreements relating to
each Station. Other than the Contracts listed on Schedule 3.7 and the
advertising contracts described in the first sentence of this Section 3.7,
Seller requires no contract, lease, or other agreement to enable it to carry on
its business as now conducted. All of the Assumed Contracts are in full force
and effect, and are valid, binding, and enforceable in accordance with their
terms. There is not under any Assumed Contract any default by Seller or, to
Seller's knowledge, (i) any other party thereto or (ii) any event that, after
notice or lapse of time or both, could reasonably be expected to constitute a
default. Seller has not been notified in writing of any intention by any party
to any Assumed Contract (i) to terminate such contract or amend the terms
thereof, (ii) to refuse to renew the Assumed Contract upon expiration of its
term, or (iii) to renew the Assumed Contract upon expiration only on terms and
conditions which are more onerous than those now existing. Except for the need
to obtain the Consents listed in Schedule 3.3, Seller has full legal power and
authority to assign its rights under the Assumed Contracts to Buyer in
accordance with this Agreement, and such assignment will not affect the
validity, enforceability, or continuation of any of the Assumed Contracts.
3.8 CONSENTS. Except for the FCC Consent provided for in Section
6.1, the other Consents described in Schedule 3.3, and the expiration or
termination of the waiting period under the HSR Act, no consent, approval,
permit, or authorization of, or declaration to or filing with any governmental
or regulatory authority, or any other third party is required (i) for Seller to
consummate this Agreement and the transactions contemplated hereby, or (ii) to
permit Seller to assign or transfer the Assets to Buyer.
3.9 INTANGIBLES. Schedule 3.9 is a true and complete list of all
Intangibles (exclusive of those listed in Schedule 3.4), all of which are valid
and in good standing and uncontested. Seller has delivered to Buyer copies of
all documents establishing or evidencing all Intangibles. Seller has not
received any written assertion from any third party that Seller is infringing
upon or otherwise acting adversely to any trademarks, trade names, service
marks, service names, copyrights, patents, patent applications, know-how,
methods or processes owned by any other person or persons, and there is no claim
or action pending, or to the knowledge of Seller threatened, with respect
thereto. The Intangibles listed on Schedule 3.9 comprise all intangible property
interests necessary to conduct the business and operations of the Stations as
now conducted.
3.10 FINANCIAL STATEMENTS. Schedule 3.10 hereto contains true and
complete copies of financial statements including balance sheets, statements of
operations and a statement of cash flow for the fiscal year ending June 30, 1998
(the "FYE Statements") and for the eight-month period ending February 28, 1999
(the "Interim Statements" and, together with the FYE Statements, the "Financial
Statements"). The Financial Statements have been prepared from the
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books and records of Seller, have been prepared in accordance with generally
accepted accounting principles consistently applied (except that the Interim
Statements do not contain certain footnotes and are subject to year-end
adjustments required under GAAP), reflect the books, records, and accounts of
the Stations (which books, records, and accounts are complete and correct in all
material respects), and present fairly the financial condition of the Stations
as at their respective dates and the results of operations for the periods then
ended. None of the Financial Statements fails to disclose any material
contingent liabilities required to be reflected thereon in accordance with
generally accepted accounting principles.
3.11 INSURANCE. Schedule 3.11 is a true and complete list of all
insurance policies of Seller that insure any part of the Assets or the business
or operations of the Stations. All policies of insurance listed in Schedule 3.11
are in full force and effect. The insurance policies listed in Schedule 3.11
insure the Assets and the business and operations of the Stations in accordance
with reasonable industry standards. During the past three years, no insurance
policy of Seller on the Assets or any Station has been canceled by the insurer
and no application of Seller for insurance has been rejected by any insurer.
3.12 REPORTS. All returns, reports, and statements that each
Station is currently required to file with the FCC or with any other
governmental agency have been filed, and all reporting requirements of the FCC
and other governmental authorities having jurisdiction over Seller and any
Station have been complied with. All of such returns, reports, and statements
are substantially complete and correct as filed. Seller has timely paid to the
FCC all annual regulatory fees payable with respect to the FCC Licenses.
3.13 PERSONNEL.
(a) All of Seller's Employee Plans and Compensation
Arrangements are listed in Schedule 3.13, and complete and accurate copies of
any such written Employee Plans and Compensation Arrangements (or related
insurance policies) have been furnished to Buyer, along with copies of any
employee handbooks or similar documents describing such Employee Plans and
Compensation Arrangements. Descriptions of any unwritten Employee Plans or
Compensation Arrangements also are provided in Schedule 3.13. Schedule 3.13 also
contains a true and complete list of all employees of each Station, their job
description, date of hire, salary and amount and date of last salary increase.
(b) Each Employee Plan and Compensation Arrangement has
been administered in compliance with its own terms and in material compliance
with the provisions of ERISA, the Code, the Age Discrimination in Employment Act
and any other applicable Federal or state laws. Seller is not aware of the
existence of any governmental audit or examination of any Employee Plan or
Compensation Arrangement or of any facts which would lead it to believe that any
such audit or examination is pending or threatened. There exists no action, suit
or claim (other than routine claims for benefits) with respect to any Employee
Plan or Compensation Arrangement pending or, to the best knowledge of Seller,
threatened against any of such plans or arrangements.
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(c) Seller does not contribute to and is not required to
contribute to any Multi-employer Plan with respect to the employees of the
Stations, and neither Seller nor any other trade or business under common
control with Seller (within the meaning of Sections 414(b), (c), (m) or (o) of
the Code) has incurred or reasonably expects to incur any "withdrawal
liability," as defined under Section 4201 et seq. of ERISA.
(d) Except as described in Schedule 3.13, neither Seller
nor any other trade or business under common control with Seller (within the
meaning of Sections 414(b), (c), (m) or (o) of the Code) sponsors, maintains or
contributes to any Employee Plan or Compensation Arrangement that provides
retiree medical or retiree life insurance coverage to former employees of Seller
at the Stations.
(e) Except as described in Schedule 3.13, with respect to
each Employee Plan and, to the extent applicable, each Compensation Arrangement:
(i) each Employee Plan that is intended to be tax-qualified, and each amendment
thereto, is the subject of a favorable determination letter, and no plan
amendment that is not the subject of a favorable determination letter would
affect the validity of an Employee Plan's letter; (ii) no prohibited
transaction, within the definition of section 4975 of the Code or Title 1, Part
4 of ERISA, has occurred which would subject Seller to any liability; and (iii)
all contributions, premiums or payments accrued, in whole or in part, under each
Employee Plan or Compensation Arrangement or with respect thereto as of the
Closing will be paid by the Seller prior to the Closing, including, but not
limited to, contributions thereto with respect to the plan year ending
immediately prior to the Closing.
(f) For purposes of this Agreement, the following terms
shall have the meaning indicated: (i) "Employee Plan" shall mean any pension,
profit-sharing, deferred compensation, vacation, bonus, incentive, medical,
vision, dental, disability, life insurance or any other employee benefit plan as
defined in Section 3(3) of ERISA to which Seller or any entity related to Seller
(under the terms of Section 414(b), (c), (m) or (o) of the Code) contributes or
to which Seller or any entity related to Seller (under the terms of Sections
414(b), (c), (m) or (o) of the Code) sponsors, maintains or otherwise is bound
which provides benefits to persons employed or previously employed at the
Stations; (ii) "Code" shall mean the Internal Revenue Code of 1986, as amended,
any successor thereto and any regulations promulgated thereunder; (iii)
"Compensation Arrangement" shall mean any plan or compensation arrangement other
than an Employee Plan, whether written or unwritten, which provides to
employees, former employees, officers, directors and shareholders of Seller or
any entity related to Seller (under the terms of Section 414(b), (c), (m) or (o)
of the Code) employed or previously employed at the Stations any compensation or
other benefits, whether deferred or not, in excess of base salary or wages,
including, but not limited to, any bonus or incentive plan, stock rights plan,
deferred compensation arrangement, life insurance, stock purchase plan,
severance pay plan and any other employee fringe benefit plan; (iv) "ERISA"
shall mean the Employee Retirement Income Security Act of 1974, as amended, any
successor thereto and any regulations promulgated thereunder; and (v)
"Multi-employer Plan" means a plan, as defined in ERISA Section 3(37), to which
Seller or any entity related to Seller (under the terms of Section 414(b) or (c)
of the Code) contributes or is required to contribute.
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(g) Seller is not a party to or subject to any collective
bargaining agreements with respect to any Station. Except as set forth on
Schedule 3.13, Seller has no written or oral contracts of employment with any
employee of any Station. Seller has complied in all material respects with all
laws, rules, and regulations relating to the employment of labor, including
those related to wages, hours, collective bargaining, occupational safety,
discrimination, and the payment of social security and other payroll related
taxes, and Seller has not received any notice alleging that it has failed to
comply in any material respect with any such laws, rules, or regulations. No
controversies, disputes, or proceedings are pending or, to the best of Seller's
knowledge, threatened, between Seller and any employee (singly or collectively)
of any Station. No labor union or other collective bargaining unit represents or
claims to represent any of the employees of any Station. To the best of Seller's
knowledge, there is no union campaign being conducted to represent any employees
of any Station or to solicit cards from employees to authorize a union to
request a National Labor Relations Board certification election with respect to
any employees at any Station.
3.14 TAXES. Seller has filed or caused to be filed all federal
income tax returns and all other federal, state, county, local, or city tax
returns which are required to be filed, and it has paid or caused to be paid all
taxes shown on those returns or on any tax assessment received by it to the
extent that such taxes have become due, or has set aside on its books adequate
reserves (segregated to the extent required by generally accepted accounting
principles) with respect thereto. There are no governmental investigations or
other legal, administrative, or tax proceedings pursuant to which Seller is or
could reasonably be expected to be made liable for any taxes, penalties,
interest, or other charges, the liability for which could reasonably be expected
to extend to Buyer as transferee of the business of the Stations, and no event
has occurred that could reasonably be expected to impose on Buyer any transferee
liability for any taxes, penalties, or interest due or to become due from
Seller.
3.15 CLAIMS AND LEGAL ACTIONS. Except for any FCC rulemaking
proceedings generally affecting the broadcasting industry, there is no claim,
legal action, counterclaim, suit, arbitration, governmental investigation or
other legal, administrative, or tax proceeding, nor any order, decree or
judgment, in progress or pending, or to the knowledge of Seller threatened,
against Seller with respect to its ownership or operation of any Station or
otherwise against the Assets or the business or operations of any Station, or
which questions the validity or propriety of this Agreement, the Time Brokerage
Agreement or any other agreement, document or instrument to be executed and
delivered by Seller pursuant hereto, or which seeks to delay or enjoin any of
the transactions contemplated hereby or thereby, or which, if adversely
determined, would reasonably be expected to prevent Seller from consummating, or
have a material adverse effect on Seller's ability to consummate, the
transactions contemplated hereby or thereby. In particular, but without limiting
the generality of the foregoing, there are no applications, complaints or
proceedings pending or, to the best of its knowledge, threatened (i) before the
FCC relating to the business or operations of any Station other than rule making
proceedings which affect the television industry generally, (ii) before any
federal or state agency relating to the business or operations of any Station
involving charges of illegal discrimination under any federal or state
employment laws or regulations, or (iii) before any federal, state, or local
agency
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relating to the business or operations of any Station involving zoning issues
under any federal, state, or local zoning law, rule, or regulation.
3.16 ENVIRONMENTAL MATTERS. Except in each case as would not (i)
create any lien on any of the Assets, (ii) impair in any material respect
Buyer's use of the Assets or Buyer's operation of one or more Stations after the
Closing or (iii) impose any liability on Buyer in excess of $25,000 as
transferee of the Assets, and except as set forth on Schedule 3.16:
(a) Seller has complied in all material respects with all
laws, rules, and regulations of all federal, state, and local governments (and
all agencies thereof) concerning the environment, public health and safety, and
employee health and safety, and no charge, complaint, action, suit, proceeding,
hearing, investigation, claim, demand, or notice has been filed or commenced
against Seller in connection with its ownership or operation of any Station
alleging any failure to comply with any such law, rule, or regulation.
(b) To the best of Seller's knowledge, Seller has no
liability relating to its ownership and operation of any Station under any law,
rule, or regulation of any federal, state, or local government (or agency
thereof) concerning release or threatened release of hazardous substances,
public health and safety, or pollution or protection of the environment.
(c) To the best of Seller's knowledge, Seller has no
liability relating to its ownership and operation of any Station (and Seller has
not handled or disposed of any substance, arranged for the disposal of any
substance, or owned or operated any property or facility in any manner that
could form the basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand (under the common law or
pursuant to any statute) against Seller giving rise to any such liability) for
damage to any site, location, or body of water (surface of subsurface) or for
illness or personal injury.
(d) To the best of Seller's knowledge, Seller has no
liability relating to its ownership and operation of any Station under any law,
rule, or regulation of any federal, state, or local government (or agency
thereof) concerning employee health and safety.
(e) To the best of Seller's knowledge, Seller has no
liability relating to its ownership and operation of any Station for any illness
or personal injury to any employee.
(f) In connection with its ownership or operation of each
Station, Seller has obtained and been in compliance in all material respects
with all of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in, all federal,
state, and local laws, rules, and regulations (including all codes, plans,
judgments, orders, decrees, stipulations, injunctions, and charges thereunder)
relating to public health and safety, worker health and safety, and pollution or
protection of the environment, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes into ambient air, surface
water, ground water, or lands or otherwise relating
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<PAGE> 22
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
(g) No pollutant, contaminant, or chemical, industrial,
hazardous, or toxic material or waste has ever been manufactured, buried,
stored, spilled, leaked, discharged, emitted, or released by Seller in
connection with its ownership and operation of any Station or, to the best of
Seller's knowledge, by any other party on any Real Property.
(h) For the purpose of this Section 3.16, the phrase "to
the best of Seller's knowledge" means to Seller's actual knowledge following a
reasonable investigation by appropriate employees of Seller with respect to the
use of the Assets and the operation of each Station, but without the performance
of any environmental survey or assessment by an environmental consultant or any
other inquiry to or investigation by any third party.
3.17 COMPLIANCE WITH LAWS. Seller has complied in all material
respects with the Licenses and all federal, state, and local laws, rules,
regulations, and ordinances applicable or relating to the ownership and
operation of each Station. Neither the ownership or use of the properties of any
Station nor the conduct of the business or operations of any Station conflicts
with the rights of any other person or entity.
3.18 CONDUCT OF BUSINESS IN ORDINARY COURSE. Since the date of the
Interim Statements, Seller has conducted the business and operations of each
Station only in the ordinary course and has not:
(a) Suffered any material adverse change in the business,
assets, or properties of any Station, including any damage, destruction, or loss
affecting any assets used or useful in the conduct of the business of any
Station;
(b) Made any material increase in compensation payable or
to become payable to any of the employees of any Station, or any bonus payment
made or promised to any employee of any Station, or any material change in
personnel policies, employee benefits, or other compensation arrangements
affecting the employees of any Station, other than as reflected on Schedule
3.13;
(c) Made any sale, assignment, lease, or other transfer
of any Station's properties other than in the normal and usual course of
business with suitable replacements being obtained therefor;
(d) Canceled any debts owed to or claims held by Seller
with respect to any Station, except in the normal and usual course of business;
(e) Suffered any material write-down of the value of any
Assets or any material write-off as uncollectable of any Accounts Receivable of
any Station; or
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(f) Transferred or granted any right under, or entered
into any settlement regarding the breach or infringement of, any license,
patent, copyright, trademark, trade name, franchise, or similar right, or
modified any existing right relating to any Station.
3.19 TRANSACTIONS WITH AFFILIATES. Other than (i) receipt by Seller
of various general and administrative overhead services from the University or
other affiliates of Seller, including legal, accounting and finance services and
employee benefits which, individually and in the aggregate, do not impose any
material liability or obligation on Seller, (ii) the provision by Seller to its
affiliate, BUCI Productions, Inc., of certain funding and support services, all
as previously disclosed by Seller to Buyer, or (iii) as otherwise set forth in
the notes to Seller's FYE Statements, Seller has not been involved in any
business arrangement relating to any Station with any affiliate of Seller, and
no affiliate of Seller owns any property or right, tangible or intangible, which
is required for the conduct of the business of any Station. As used in this
paragraph, "affiliate" has the meaning set forth in Rule 12b-2 promulgated under
the Securities and Exchange Act of 1934.
3.20 BROKER. Neither Seller nor any person acting on Seller's
behalf has incurred any liability for any finders' or brokers' fees or
commissions in connection with the transactions contemplated by this Agreement.
3.21 FULL DISCLOSURE. No representation or warranty made by Seller
in this Agreement or in any Exhibit or Schedule hereto contains any untrue
statement of a material fact, or omits any material fact required to make the
statements contained herein or therein not misleading.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION, STANDING, AND AUTHORITY. Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Florida and at Closing will be duly qualified to conduct business as a
foreign corporation in The Commonwealth of Massachusetts and State of New
Hampshire. Buyer has all requisite power and authority to execute and deliver
this Agreement and the Escrow Agreement and the documents contemplated hereby
and thereby, and to perform and comply with all of the terms, covenants, and
conditions to be performed and complied with by Buyer hereunder and thereunder.
4.2 AUTHORIZATION AND BINDING OBLIGATION. The execution, delivery,
and performance of this Agreement and the Escrow Agreement by Buyer have been
duly authorized by all necessary actions on the part of Buyer. This Agreement
and the Escrow Agreement have been duly executed and delivered by Buyer and
constitute the legal, valid, and binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms except as the
enforceability of this Agreement and the Escrow Agreement may be affected by
bankruptcy, insolvency, or similar laws affecting creditors' rights generally
and by judicial discretion in the enforcement of equitable remedies.
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<PAGE> 24
4.3 ABSENCE OF CONFLICTING AGREEMENTS. Subject to obtaining the
Consents and the expiration or termination of the waiting period under the HSR
Act, the execution, delivery, and performance by Buyer of this Agreement and the
Escrow Agreement and the documents contemplated hereby and thereby (with or
without the giving of notice, the lapse of time, or both): (i) do not require
the consent of any third party; (ii) will not conflict with the Articles of
Incorporation or Bylaws of Buyer; (iii) will not conflict with, result in a
breach of, or constitute a default under, any law, judgment, order, injunction,
decree, rule, regulation, or ruling of any court or governmental
instrumentality; or (iv) will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, or accelerate
or permit the acceleration of any performance required by the terms of, any
agreement, instrument, license, or permit to which Buyer is a party or by which
Buyer may be bound, such that Buyer could not acquire or operate the Assets.
4.4 BROKER. Neither Buyer nor any person acting on Buyer's behalf
has incurred any liability for any finders' or brokers' fees or commissions in
connection with the transactions contemplated by this Agreement, except for a
commission payable by Buyer to Media Venture Partners to be paid in full by
Buyer, and as to which obligation Buyer hereby indemnifies Seller.
4.5 FULL DISCLOSURE. No representation or warranty made by Buyer
in this Agreement or in any Exhibit or Schedule hereto contains any untrue
statement of a material fact, or omits to state any material fact required to
make the statements contained herein or therein not misleading.
4.6 CONSENTS. Except for the FCC Consent provided for in Section
6.1 and the expiration or termination of the waiting period under the HSR Act,
no consent, approval, permit, or authorization of, or declaration to or filing
with any governmental or regulatory authority, or any other third party is
required (i) for Buyer to consummate this Agreement and the transactions
contemplated hereby, or (ii) to permit Buyer to purchase or accept the Assets
from Seller.
4.7 CLAIMS AND LEGAL ACTIONS. Except for any FCC rulemaking
proceedings generally affecting the broadcasting industry, there is no claim,
legal action, counterclaim, suit, arbitration, governmental investigation or
other legal, administrative, or tax proceeding, nor any order, decree or
judgment, in progress or pending, or, to the knowledge of Buyer, threatened,
against Buyer with respect to its assets, its business or its operations, or
with respect to its proposed ownership or operation of any Station (whether
under the Time Brokerage Agreement or otherwise), or which questions the
validity or propriety of this Agreement, the Time Brokerage Agreement or any
other agreement, document or instrument to be executed and delivered by Buyer
pursuant hereto, or which seeks to delay or enjoin any of the transactions
contemplated hereby or thereby, or which, if adversely determined, would
reasonably be expected to prevent Buyer from consummating, or have a material
adverse effect on Buyer's ability to consummate, the transactions contemplated
hereby or thereby.
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<PAGE> 25
SECTION 5. OPERATIONS OF THE STATIONS PRIOR TO CLOSING
Except to the extent that responsibility for any of the following
actions or matters is delegated in whole or part to Buyer under the Time
Brokerage Agreement, Seller agrees that, between the date of this Agreement and
the Closing Date:
5.1 GENERALLY. Seller shall operate each Station diligently in the
ordinary course of business in accordance with its past practices (except where
such conduct would conflict with the following covenants or with Seller's other
obligations under this Agreement), and in accordance with the other covenants
in this Section 5.
5.2 COMPENSATION. Seller shall not increase the compensation,
bonuses, or other benefits payable or to be payable to any person employed in
connection with the conduct of the business or operations of any Station,
except in accordance with past practices.
5.3 CONTRACTS. Except with the prior approval of Buyer, which
approval shall not be unreasonably withheld or delayed, and except for
Contracts, other than Contracts involving trade or barter arrangements, entered
into by Seller in the ordinary course of business during the period from the
date hereof until the day prior to the TBA Effective Date which do not involve
liabilities or obligations in excess of $5,000 individually and $50,000 in the
aggregate, Seller will not enter into any contract or commitment relating to
any Station or the Assets, or amend or terminate any Contract, other than as
expressly provided in Schedule 3.7, the Studio Lease and any other Contract
that is not included in the Assumed Contracts, or waive any material right
thereunder, or incur any obligation (including obligations relating to the
borrowing of money or the guaranteeing of indebtedness) that will be binding on
Buyer after Closing. Seller shall notify Buyer in writing of any approval
requested by Seller pursuant to this Section 5.3. Buyer shall respond to any
such request in writing as soon as practicable but in no event later than ten
(10) business days following Buyer's receipt of such request from Seller. If
Buyer fails to respond to Seller's request on or before the end of such period,
Seller's request shall be deemed to have been approved by Buyer. Prior to the
Closing Date, Seller shall deliver to Buyer a list of all Assumed Contracts
entered into between the date of this Agreement and the Closing Date, together
with copies of such Assumed Contracts.
5.4 DISPOSITION OF ASSETS. Seller shall not sell, assign, lease, or
otherwise transfer or dispose of any of the Assets, except where no longer used
or useful in the business or operations of the Stations or in connection with
the acquisition of replacement property of equivalent kind and value.
5.5 ENCUMBRANCES. Seller shall not create, assume or permit to exist
any claim, mortgage, lien, pledge, condition, charge, or encumbrance of any
nature whatsoever upon the Assets, except for (i) liens disclosed on Schedule
3.5 and Schedule 3.6, which shall be removed prior to the Closing Date, (ii)
liens for current taxes not yet due and payable, and (iii) mechanics' liens and
other similar liens, which shall be removed prior to the Closing Date.
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<PAGE> 26
5.6 LICENSES. Seller shall not cause or permit, by any act or
failure to act, any of the Licenses to expire or to be revoked, suspended, or
modified, or take any action that could cause the FCC or any other governmental
authority to institute proceedings for the suspension, revocation, or adverse
modification of any of the Licenses. Seller shall not fail to prosecute with
reasonable diligence any applications to any governmental authority in
connection with the operation of any Station.
5.7 RIGHTS. Seller shall not waive any material right relating to
any Station or any of the Assets. Seller shall not cause, by any act or failure
to act, any cable system located within the Stations' Designated Market Area to
refuse to carry any Station's signal.
5.8 ACCESS TO INFORMATION. Seller shall give Buyer and its counsel,
accountants, engineers, and other authorized representatives reasonable access
to the Assets and to all other properties, equipment, books, records,
Contracts, and documents relating to the Stations during normal business hours
for the purpose of audit and inspection, including inspections incident to the
environmental study described in Section 6.5 and the engineering study
described in Section 6.6, and will furnish or cause to be furnished to Buyer or
its authorized representatives all information with respect to the affairs and
business of the Stations that Buyer may reasonably request (including any
financial reports and operations reports produced with respect to the affairs
and business of the Stations).
5.9 MAINTENANCE OF ASSETS. Seller shall maintain all of the Assets
in accordance with past practices (ordinary wear and tear excepted), and use,
operate, and maintain all of the Assets in a reasonable manner and in
accordance with the terms of the FCC Licenses, all rules and regulations of the
FCC and generally accepted standards of good engineering practice. Seller shall
maintain inventories of spare parts and expendable supplies at levels
consistent with past practices. If any loss, damage, impairment, confiscation,
or condemnation of or to any of the Assets occurs, other than any loss, damage
or impairment resulting from actions taken (or not taken, although required to
be taken) by Buyer under the Time Brokerage Agreement, Seller shall repair,
replace, or restore the Assets to their prior condition as represented in this
Agreement as soon thereafter as possible, and Seller shall use the proceeds of
any claim under any insurance policy solely to repair, replace, or restore any
of the Assets that are lost, damaged, impaired, or destroyed.
5.10 INSURANCE. Seller shall maintain the existing insurance
policies on the Stations and the Assets.
5.11 CONSENTS. Seller shall use its best efforts to obtain the
Consents and the estoppel certificates described in Section 8.2(b), without any
change in the terms or conditions of any Assumed Contract or License that could
be less advantageous in any material respect to the Station to which such
Assumed Contract or License relates than those pertaining under the Assumed
Contract or License as in effect on the date of this Agreement. Seller shall
promptly advise Buyer of any difficulties experienced in obtaining any of the
Consents and of any conditions proposed, considered, or requested for any of
the Consents. Upon Buyer's request, Seller shall cooperate with Buyer and use
commercially reasonable efforts to obtain from the
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lessors under each Real Property lease such estoppel certificates and consents
to the collateral assignment of the lessee's interest under each such lease as
Buyer's lenders may reasonably request.
5.12 BOOKS AND RECORDS. Seller shall maintain its books and records
relating to the Stations in accordance with past practices.
5.13 NOTIFICATION. Seller shall promptly notify Buyer in writing of
any unusual or material developments with respect to the business or operations
of any Station, and of any material change in any of the information contained
in Seller's representations and warranties contained in Section 3 of this
Agreement.
5.14 FINANCIAL INFORMATION. Seller shall furnish to Buyer within
twenty days after the end of each month ending between the date of this
Agreement and the Closing Date a statement of income and expense and a
statement of operating cash flow for the month just ended and such other
financial information (including information on payables and receivables) as
Buyer may reasonably request. All financial information delivered by Seller to
Buyer pursuant to this Section shall be prepared from the books and records of
Seller, shall reflect the books, records, and accounts of the Stations, and
shall present fairly the financial condition of the Stations as at their
respective dates and the results of operations for the periods then ended.
5.15 COMPLIANCE WITH LAWS. Seller shall comply in all material
respects with all laws, rules, and regulations applicable or relating to the
ownership and operation of each Station.
5.16 FINANCING LEASES. Seller will satisfy at or prior to Closing
all outstanding obligations under capital and financing leases with respect to
any of the Assets and obtain good title to the Assets leased by Seller pursuant
to those leases so that those Assets shall be transferred to Buyer at Closing
free of any interest of the lessors.
5.17 PROGRAMMING. Seller shall not make any material changes in the
Stations' broadcast hours or make any material change in the Stations'
programming policies, except such changes as in the good faith judgment of the
Seller are required by the public interest.
5.18 PRESERVATION OF BUSINESS. Seller shall use its best efforts to
preserve the business of the Stations and the Stations' present relationships
with suppliers and others having business relations with them, to the end that
the business, operations, and prospects of the Stations shall be unimpaired at
the Closing Date. The ordinary and customary operating practices of the
Stations shall be maintained.
5.19 TRADE AGREEMENTS. Seller shall take such actions as are
required to reduce Seller's obligations under the trade and barter agreements
listed in Attachment C to Schedule 3.7 hereto (the "Existing Trade Agreements")
so that the total obligations of Seller under the Existing Trade Agreements as
of the TBA Effective Date shall not exceed the total value of all goods or
services to be received by Seller under the Existing Trade Agreements.
Notwithstanding any provision of this Agreement or the Time Brokerage Agreement
to the contrary, Buyer shall not be required to assume on the TBA Effective
Date or the Closing Date
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any of Seller's obligations under the Existing Trade Agreements to the extent
such obligations, as of the TBA Effective Date or Closing Date, exceed the
value of goods or services to be received by Seller under the Existing Trade
Agreements, as of the TBA Effective Date or Closing Date.
SECTION 6. SPECIAL COVENANTS AND AGREEMENTS
6.1 FCC CONSENT.
(a) The assignment of the FCC Licenses in connection with the
purchase and sale of the Assets pursuant to this Agreement shall be subject to
the prior consent and approval of the FCC.
(b) Seller and Buyer shall promptly prepare an appropriate
application for the FCC Consent and shall file the application with the FCC
within five (5) business days of the execution of this Agreement. The parties
shall prosecute the application with all reasonable diligence and otherwise use
their commercially reasonable efforts to obtain a grant of the application as
expeditiously as practicable. Each party agrees to comply with any condition
imposed on it by the FCC Consent, except that no party shall be required to
comply with a condition if (1) the condition was imposed on it as the result of
a circumstance the existence of which does not constitute a breach by the party
of any of its representations, warranties, or covenants under this Agreement,
and (2) compliance with the condition would have a material adverse effect upon
it. Buyer and Seller shall oppose any requests for reconsideration or judicial
review of the FCC Consent. If the Closing shall not have occurred for any
reason within the original effective period of the FCC Consent, and neither
party shall have terminated this Agreement under Section 9, the parties shall
jointly request one or more extensions of the effective period of the FCC
Consent. No extension of the FCC Consent shall limit the exercise by either
party of its rights under Section 9.
(c) Seller acknowledges that Buyer's portion of the application
for the FCC Consent shall include a request for temporary waiver of the FCC's
so-called duopoly rule (47 C.F.R. 73.3555(b)) to permit Buyer's common
ownership of WABU and Buyer's existing Television Station WBPX(TV), Norwell,
Massachusetts, pending Buyer's disposition of WBPX(TV) and/or a commitment that
Buyer will, on or before the Closing Date, assign to an independent trustee the
licenses issued by the FCC for WBPX(TV) and transfer to the trustee such other
assets of WBPX(TV) as the FCC may require pending Buyer's disposition of
WBPX(TV) (collectively, the "Waivers"). Buyer shall use all commercially
reasonable efforts, at its sole expense, to prosecute the Waivers.
6.2 CONTROL OF THE STATIONS. Prior to Closing, Buyer shall not,
directly or indirectly, control, supervise, direct, or attempt to control,
supervise, or direct, the operations of the Stations; such operations,
including complete control and supervision of all programs, employees, and
policies of each Station, shall be the sole responsibility of Seller until the
Closing.
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6.3 RISK OF LOSS.
(a) The risk of any loss, damage, impairment, confiscation, or
condemnation of any of the Assets, other than any loss, damage or impairment
resulting from actions taken (or not taken, although required to be taken) by
Buyer pursuant to the Time Brokerage Agreement, from any cause whatsoever shall
be borne by Seller at all times prior to the Closing.
(b) If any damage or destruction of the Assets or any other
event occurs (other than as a result of actions taken, or not taken although
required to be taken, by Buyer under the Time Brokerage agreement) which (i)
causes WABU to cease broadcasting operations for a period of three or more
consecutive days or (ii) prevents in any material respect signal transmission
by WABU in the normal and usual manner and Seller fails to restore or replace
the Assets so that normal and usual transmission is resumed within seven days
of the damage, destruction or other event, Buyer, in its sole discretion, may
(x) terminate this Agreement forthwith without any further obligations
hereunder upon written notice to Seller, in which event all funds held by the
Escrow Agent pursuant to the Escrow Agreement, including all interest and other
proceeds from the investment of such funds, shall be immediately returned to
Buyer, (y) postpone the Closing for a period not to exceed thirty (30) days,
during which period Seller shall complete the restoration and replacement of
the Assets prior to the Closing Date, or (z) proceed to consummate the
transaction contemplated by this Agreement and complete the restoration and
replacement of the Assets after the Closing Date, in which event Seller shall
deliver to Buyer all insurance proceeds received in connection with such
damage, destruction or other event.
6.4 CONFIDENTIALITY. Except as necessary for the consummation of the
transaction contemplated by this Agreement, including Buyer's obtaining of
financing related hereto, and except as and to the extent required by law,
including, without limitation, disclosure requirements of federal or state
securities laws and the rules and regulations of securities markets, each party
will keep confidential any information obtained from the other party in
connection with the transactions contemplated by this Agreement. If this
Agreement is terminated, each party will return to the other party all
information obtained by the such party from the other party in connection with
the transactions contemplated by this Agreement.
6.5 ENVIRONMENTAL AUDIT. Buyer may, at its option and expense,
retain an environmental consultant to be selected by Buyer to perform a Phase I
environmental survey of the properties of each Station. If the survey discloses
any material environmental hazard or material possibility of future liability
for environmental damages or clean-up costs, Buyer shall so notify Seller as
soon as practicable, and in any event prior to June 1, 1999.
6.6 ENGINEERING STUDY. Buyer may, at its option and expense, retain
an engineering firm to conduct a proof of performance study of each Station and
to prepare a report on such Station's compliance with customary engineering
practices and all applicable FCC rules, regulations, prescribed practices, and
technical standards. If the survey discloses any material deficiencies in the
operations or equipment of any Station, Buyer shall so notify Seller as soon as
practicable, and in any event prior to June 1, 1999.
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6.7 COOPERATION. Buyer and Seller shall cooperate fully with each
other and their respective counsel and accountants in connection with any
actions required to be taken as part of their respective obligations under this
Agreement, and Buyer and Seller shall execute such other documents as may be
necessary and desirable to the implementation and consummation of this
Agreement, and otherwise use their commercially reasonable efforts to
consummate the transaction contemplated hereby and to fulfill their obligations
under this Agreement. Notwithstanding the foregoing, neither party shall have
any obligation (i) to expend funds to obtain any of the Consents or (ii) to
agree to any adverse change in any License or Assumed Contract to obtain a
Consent required with respect thereto.
6.8 BULK SALES LAW. Any loss, liability, obligation, or cost
suffered by Seller or Buyer as the result of the failure of Seller or Buyer to
comply with the provisions of any bulk sales law applicable to the transfer of
the Assets as contemplated by this Agreement shall be borne by Seller.
6.9 SALES TAX FILINGS. Seller (with the assistance of Buyer's staff
under the Time Brokerage Agreement) shall continue to file Massachusetts and
New Hampshire sales tax returns that are due prior to the Closing with respect
to the Stations in accordance with Seller's past practices and shall
concurrently deliver copies of all such returns to Buyer.
6.10 ACCESS TO BOOKS AND RECORDS. Seller shall provide Buyer access
and the right to copy for a period of three (3) years from the Closing Date (or
such longer period as may be required for tax purposes) any books and records
relating to the Assets that are not included in the Assets. Buyer shall provide
Seller access and the right to copy for a period of three (3) years from the
Closing Date (or such longer period as may be required for tax purposes) any
books and records relating to the Assets.
6.11 APPRAISAL. Buyer and Seller agree to allocate the Purchase Price
for tax and recording purposes in accordance with an appraisal to be conducted
by an appraisal firm selected and paid for by Buyer with experience in the
valuation and appraisal of television station assets.
6.12 NONCOMPETITION AGREEMENT. At Closing, Buyer and Seller shall
enter into a Noncompetition Agreement in the form of Schedule 6.12 and Eight
Hundred Thousand Dollars ($800,000) of the Purchase Price shall be allocated to
the covenants of Seller set forth therein on the Closing Date.
6.13 HSR ACT FILING. Seller and Buyer agree to (a) file, or cause to
be filed, with the U.S. Department of Justice ("DOJ") and Federal Trade
Commission ("FTC") all filings, if any, which are required in connection with
the transactions contemplated hereby under the HSR Act within ten (10) business
days of the date of this Agreement; (b) submit to the other party, prior to
filing, their respective HSR Act filings to be made hereunder, and to discuss
with the other any comments the reviewing party may have; (c) cooperate with
each other in connection with such HSR Act filings, which cooperation shall
include furnishing the other with any information or documents in such party's
possession that may be reasonably required in connection with such filings; (d)
promptly file, after any request by the FTC or DOJ, any information or documents
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requested by the FTC or DOJ; and (e) furnish each other with any correspondence
from or to, and notify each other of any other communications with, the FTC or
DOJ which relates to the transactions contemplated hereunder, and to the extent
practicable, to permit each other to participate in any conferences with the FTC
or DOJ.
6.14 CALL SIGN CHANGE. Upon request of Buyer, Seller shall apply to
the FCC for authority to change the call letters of the Stations (with the
consent of the FCC) to such call letters that Buyer shall reasonably designate
and shall request that such change shall be effective as of the TBA Effective
Date or such other date specified by Buyer. Seller must coordinate with Buyer
any proposed changes to the call letters of the Stations before taking any
action to change such letters.
6.15 NO INCONSISTENT ACTION. Neither party shall take any action that
is inconsistent with its obligations under this Agreement or the Time Brokerage
Agreement or that could hinder or delay the consummation of the transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, Seller covenants that neither it nor any of its directors, officers
or agents will, (a) solicit, initiate or encourage the submission of any
proposal or offer relating to any (i) liquidation, dissolution or
recapitalization, (ii) merger or consolidation, (iii) acquisition or sale of
securities, (iv) transfer or assignment of any FCC License (v) sale, lease or
disposition of substantially all of the assets of Seller, or (vi) similar
transaction or business combination, in each case involving Seller or (b)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any party to do or seek any of the
foregoing. Seller shall notify Buyer as soon as practicable if any party makes
any proposal with respect to any of the foregoing. Notwithstanding any other
provision in this Agreement to the contrary, in the event that either party
violates its obligations in this Section 6.15, the other party shall have the
right to seek specific performance of the violating party's obligations
hereunder.
6.16 STUDIO FACILITIES.
(a) Buyer, its employees and agents shall be permitted to
access and occupy the Stations' existing studio and office facilities leased by
Seller pursuant to the Studio Lease and to use and operate the Assets,
including all broadcasting facilities and equipment, located thereon; provided,
however, that Buyer shall be required to vacate such facilities, upon ninety
(90) days' written notice from Seller that is provided to Buyer no sooner than
the TBA Effective Date (such date of termination is the "Termination Date"). If
the Closing has not occurred as of the Termination Date, Buyer shall remove the
Assets from the premises leased by Seller under the Studio Lease and deliver
such Assets to Buyer's replacement studio and office building, if such building
is available on the Termination Date, or store such Assets in an appropriate
storage facility. All Assets removed by Buyer from the Studio Lease premises
shall be returned to Seller promptly following any termination of this
Agreement in accordance with its terms.
(b) Buyer shall keep Seller informed of Buyer's actions with
respect to obtaining a replacement studio and office building for the Stations.
If this Agreement is terminated in accordance with its terms, Seller shall have
the right to notify Buyer no later than
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ten (10) business days following such termination of Seller's election either
to (i) assume, effective as of the date of such termination, any lease entered
into by Buyer for a replacement studio and office facility for the Stations
(the "New Studio Lease"), in which event Buyer shall assign the New Studio
Lease to Seller pursuant to an assignment and assumption agreement reasonably
acceptable to Buyer and Seller, or (ii) occupy and use any such facility for a
period not to exceed ninety (90) days from the termination of this Agreement in
exchange for Seller's reimbursement of the rent and other payments made by
Buyer pursuant to the terms of the New Studio Lease for such 90-day period, in
which event Buyer shall permit Seller to so occupy such facility and shall
cooperate with Seller in connection therewith. Unless the New Studio Lease by
its terms permits such assignment without the landlord's consent, Buyer shall
use its best efforts to obtain the prior approval of the landlord under any New
Studio Lease to the assignment and assumption of the New Studio Lease pursuant
to Section 6.16(b)(i).
6.17 NOTICES OF BREACH. Buyer shall notify Seller in writing promptly
upon the occurrence of any event known to Buyer that would cause or constitute
a material breach of any of Seller's representations or warranties in Section 3
hereof. Seller shall notify Buyer in writing promptly upon the occurrence of
any event known to Seller that would cause or constitute a material breach of
any of Buyer's representations or warranties in Section 4 hereof.
6.18 UNIVERSITY MATTERS.
(a) As of the TBA Effective Date, Buyer will establish for WABU
an intern program for University students that is consistent with Buyer's
conduct of the business and operation of WABU.
(b) At the University's request, Buyer shall cooperate with the
University and, after taking Buyer's own business interests into account,
consider broadcasting on the Stations University commencement exercises and
intercollegiate sports programs. After taking the University's own business
interests into account, the University will first offer any such programming to
Buyer. Buyer shall thereafter notify the University as soon as reasonably
practicable whether Buyer shall broadcast any such programs.
SECTION 7. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER AT CLOSING
7.1 CONDITIONS TO OBLIGATIONS OF BUYER. All obligations of Buyer at
the Closing are subject at Buyer's option to the fulfillment prior to or at the
Closing Date of each of the following conditions:
(a) Representations and Warranties. All representations and
warranties of Seller contained in this Agreement shall be true and complete in
all material respects at and as of the Closing Date as though made at and as of
that time.
(b) Covenants and Conditions. Seller shall have performed and
complied in all material respects with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
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(c) Consents. All Consents required for Seller's performance
hereunder shall have been obtained and delivered to Buyer without any adverse
change in the terms or conditions of any Assumed Contract or any governmental
license, permit, or other authorization.
(d) FCC Consent. The FCC Consent shall have been granted
without the imposition on Buyer of any material conditions not already
specified on the FCC Licenses or that need not be complied with by Buyer under
Section 6.1 hereof, Seller shall have complied with any conditions imposed on
it by the FCC Consent, and the FCC Consent shall have become a Final Order;
provided, however, that Buyer acknowledges that Buyer shall not be permitted to
refuse to perform its obligations at the Closing as a result of the imposition
of any condition in the FCC Consent that requires Buyer to dispose of WBPX(TV).
(e) Governmental Authorizations. Seller shall be the holder of
all Licenses and there shall not have been any modification of any License that
could reasonably be expected to have an adverse effect on any Station or the
conduct of its business and operations. No proceeding shall be pending or
threatened the effect of which could be to revoke, cancel, fail to renew,
suspend, or modify adversely any License.
(f) Deliveries. Seller shall have made or stand willing to make
all the deliveries to Buyer set forth in Section 8.2.
(g) Adverse Change. Between the date of this Agreement and the
Closing Date, there shall have been no material adverse change in the assets or
properties of the Stations, including any material damage, destruction, or loss
affecting any such assets or properties used or useful in the conduct of the
business of the Stations other than as a result of actions taken (or not taken,
although required to be taken) by Buyer pursuant to the Time Brokerage
Agreement.
(h) HSR Act. The waiting period under the HSR Act shall have
expired without unresolved action by the DOJ or the FTC to prevent the Closing.
(i) Time Brokerage Agreement. The Time Brokerage Agreement
shall be in full force and effect, and Seller shall have complied in all
material respects with its obligations thereunder.
(j) Satellite Authorizations. The FCC shall have granted to
Buyer all waivers and authorizations required to operate WZBU and WNBU as
satellite stations of WABU pursuant to Section 73.3555, Note 5, of the FCC's
Rules (47 C.F.R. ss. 73.3555, Note 5) and such grants shall have become Final
Orders.
(k) Legal Proceedings. No injunction, restraining order or
decree of any nature of any court or governmental authority of competent
jurisdiction shall be in effect which restrains or prohibits Buyer from
consummating the transactions at the Closing.
7.2 CONDITIONS TO OBLIGATIONS OF SELLER. All obligations of Seller
at the Closing are subject at Seller's option to the fulfillment prior to or at
the Closing Date of each of the following conditions:
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(a) Representations and Warranties. All representations and
warranties of Buyer contained in this Agreement shall be true and complete in
all material respects at and as of the Closing Date as though made at and as of
that time.
(b) Covenants and Conditions. Buyer shall have performed and complied
in all material respects with all covenants, agreements, and conditions
required by this Agreement to be performed or complied with by it prior to or
on the Closing Date.
(c) Deliveries. Buyer shall have made or stand willing to make all
the deliveries set forth in Section 8.3.
(d) FCC Consent. The FCC Consent shall have been granted without the
imposition on Seller of any material conditions that need not be complied with
by Seller under Section 6.1 hereof and Buyer shall have complied with any
conditions imposed on it by the FCC Consent. All other consents required for
Buyer's performance hereunder shall have been obtained and delivered to Seller.
(e) HSR Act. The waiting period under the HSR Act shall have expired
without unresolved action by the DOJ or the FTC to prevent the Closing.
(f) Time Brokerage Agreement. The Time Brokerage Agreement shall be
in full force and effect, and Buyer shall have complied in all material
respects with its obligations thereunder.
(g) Legal Proceedings. No injunction, restraining order or decree of
any nature of any court or governmental authority of competent jurisdiction
shall be in effect which restrains or prohibits Seller from consummating the
transactions at the Closing.
SECTION 8. CLOSING AND CLOSING DELIVERIES
8.1 CLOSING.
(a) Closing Date. Subject to the satisfaction or waiver of all other
conditions precedent to the holding of the Closing, the Closing shall take
place at 10:00 a.m. on a date, to be set by Buyer on at least five days'
written notice to Seller, that is (1) not earlier than the first business day
after the FCC Consent is granted, and (2) not later than ten business days
following the date upon which the FCC Consent has become a Final Order, subject
to satisfaction or waiver of all other conditions precedent to the holding of
the Closing. If Buyer fails to specify the date for Closing prior to the fifth
business day after the date upon which the FCC Consent becomes a Final Order,
the Closing shall take place on the tenth business day after the date upon
which the FCC Consent becomes a Final Order.
(b) Closing Place. The Closing shall be held at the offices of Irwin,
Campbell & Tannenwald, P.C., 1730 Rhode Island Avenue, N.W., Suite 200,
Washington, D.C. 20036, or any other place that is agreed upon by Buyer and
Seller.
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8.2 DELIVERIES BY SELLER. Prior to or on the Closing Date, Seller
shall deliver to Buyer the following, in form and substance reasonably
satisfactory to Buyer and its counsel:
(a) Transfer Documents. A duly executed bill of sale dated as of
the Closing Date substantially in the form of Schedule 8.2(a) hereto, motor
vehicle titles, assignment, and other transfer documents which shall be
sufficient to vest good and marketable title to the Assets in the name of
Buyer, free and clear of all claims, liabilities, security interests,
mortgages, liens, pledges, conditions, charges or encumbrances, except for
liens for current taxes not yet due and payable;
(b) Estoppel Certificates. Estoppel certificates of the lessors
of all leasehold and subleasehold interests included in the Real Property
Leases that are obtained pursuant to Section 5.11, substantially in the form of
Schedule 8.2(b) hereto;
(c) Consents. A manually executed copy of any instrument
evidencing receipt of any Consent;
(d) Officer's Certificate. A certificate, dated as of the
Closing Date, executed on behalf of Seller by an officer of Seller, certifying
(1) that the representations and warranties of Seller contained in this
Agreement are true and complete in all material respects as of the Closing Date
as though made on and as of that date; and (2) that Seller has in all material
respects performed and complied with all of its obligations, covenants, and
agreements set forth in this Agreement to be performed and complied with on or
prior to the Closing Date;
(e) Licenses, Contracts, Business Records, Etc. Copies of all
Licenses, Assumed Contracts, blueprints, schematics, working drawings, plans,
projections, engineering records, and all files and records used by Seller in
connection with its operations;
(f) Opinion of Counsel. Opinions of Seller's counsel dated as of
the Closing Date, substantially in the forms of Schedule 8.2(f)(A) and
8.2(f)(B) hereto; and
(g) Noncompetition Agreement. The Noncompetition Agreement in
the form of Schedule 6.12, duly executed on behalf of Seller.
8.3 DELIVERIES BY BUYER. Prior to or on the Closing Date, Buyer
shall deliver to Seller the following, in form and substance reasonably
satisfactory to Seller and its counsel:
(a) Purchase Price. The Purchase Price as provided in Sections
2.3 and 2.4;
(b) Assumption Agreements. Assumption Agreements dated as of the
Closing Date substantially in the form of Schedule 8.3(b) hereto, pursuant to
which Buyer shall assume and undertake to perform the Assumed Liabilities;
(c) Officer's Certificate. A certificate, dated as of the
Closing Date, executed on behalf of Buyer by an officer of Buyer, certifying
(1) that the representations and warranties of Buyer contained in this
Agreement are true and complete in all material respects as of the
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Closing Date as though made on and as of that date, and (2) that Buyer has in
all material respects performed and complied with all of its obligations,
covenants, and agreements set forth in this Agreement to be performed and
complied with on or prior to the Closing Date;
(d) Opinion of Counsel. An opinion of Buyer's counsel dated as
of the Closing Date, substantially in the form of Schedule 8.3(d) hereto.
(e) Noncompetition Agreement. The Noncompetition Agreement in
the form of Schedule 6.12 duly executed by Buyer and the payment of Eight
Hundred Thousand Dollars ($800,000) to Seller thereunder.
SECTION 9. TERMINATION
9.1 TERMINATION BY SELLER. This Agreement may be terminated by
Seller and the purchase and sale of the Stations abandoned, if Seller is not
then in material default hereunder, upon written notice to Buyer, upon the
occurrence of any of the following:
(a) Conditions. If on the date that would otherwise be the
Closing Date any of the conditions precedent to the obligations of Seller set
forth in this Agreement have not been satisfied or waived in writing by Seller.
(b) Judgments. If there shall be in effect on the date that
would otherwise be the Closing Date any judgment, decree, or order that would
prevent or make unlawful the Closing.
(c) Upset Date. If the Closing shall not have occurred by
December 31, 2000.
(d) Breach. Without limiting Seller's rights under the other
provisions of this Section 9, if Buyer has failed to cure any material breach
of any of its representations, warranties or covenants under this Agreement or
the Time Brokerage Agreement within thirty days after Buyer received written
notice of such breach from Seller.
9.2 TERMINATION BY BUYER. This Agreement may be terminated by Buyer
and the purchase and sale of the Stations abandoned, if Buyer is not then in
material default, upon written notice to Seller, upon the occurrence of any of
the following:
(a) Conditions. If on the date that would otherwise be the
Closing Date any of the conditions precedent to the obligations of Buyer set
forth in this Agreement have not been satisfied or waived in writing by Buyer.
(b) Judgments. If there shall be in effect on the date that
would otherwise be the Closing Date any judgment, decree, or order that would
prevent or make unlawful the Closing.
(c) Upset Date. If the Closing shall not have occurred by
December 31, 2000.
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(d) Interruption of Service. If any damage or destruction of the
Assets occurs and, as a result thereof, Buyer is permitted to terminate this
Agreement pursuant to Section 6.3(b) hereof.
(e) Environmental Hazards. Upon written notice to Seller given
no later than July 1, 1999, if Buyer shall have notified Seller on or before
June 1, 1999 of material environmental hazards or the material possibility of
environmental damages or clean-up costs, as indicated in the environmental
study described in Section 6.5, and the cause thereof shall not have been
remedied prior to June 30, 1999.
(f) Technical Deficiencies. Upon written notice to Seller given
no later than July 1, 1999, if Buyer shall have notified Seller on or before
June 1, 1999 of material deficiencies in the operations or equipment of any
Station, as indicated in the engineering study described in Section 6.6, and
the cause thereof shall not have been remedied prior to June 30, 1999.
(g) Breach. Without limiting Buyer's rights under the other
provisions of this Section 9, if Seller has failed to cure any material breach
of any of its representations, warranties or covenants under this Agreement or
the Time Brokerage Agreement within thirty days after Seller received written
notice of such breach from Buyer.
9.3 RIGHTS ON TERMINATION. If this Agreement is terminated pursuant
to Section 9.1 or Section 9.2 and neither party is in material breach of this
Agreement, the parties hereto shall not have any further liability to each
other with respect to the purchase and sale of the Assets. If this Agreement is
terminated by Seller due to Buyer's material breach of this Agreement, then the
payment to Seller of the Escrow Fund (as defined below) pursuant to Section 9.4
below shall be liquidated damages and shall constitute full payment and the
exclusive remedy for any damages suffered by Seller by reason of Buyer's
material breach of this Agreement. Seller and Buyer agree in advance that
actual damages would be difficult to ascertain and that the amount of the
Escrow Fund is a fair and equitable amount to reimburse Seller for damages
sustained due to Buyer's material breach of this Agreement. If this Agreement
is terminated by Buyer pursuant to Section 9.2(d), (e) or (f), and Seller is
not (other than in connection with matters related to the events and
circumstances associated with such termination provisions) in material default
of its representations, warranties or covenants hereunder, the Escrow Fund
shall be returned to Buyer, and Seller shall have no further obligation or
liability to Buyer hereunder. Except as set forth in the immediately preceding
sentence, if this Agreement is terminated by Buyer due to Seller's material
breach of this Agreement, Buyer shall have all rights and remedies available at
law or equity.
9.4 ESCROW DEPOSIT. Buyer has deposited with the Escrow Agent the
sum of Two Million Dollars ($2,000,000) in accordance with the Escrow
Agreement. All such funds deposited with the Escrow Agent shall be held and
disbursed in accordance with the terms of the Escrow Agreement and the
following provisions:
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(a) At the Closing, all amounts held by the Escrow Agent pursuant to
the Escrow Agreement, including any interest or other proceeds from the
investment of funds held by the Escrow Agent (the "Escrow Fund"), shall be
disbursed to or at the direction of Buyer.
(b) If this Agreement is terminated pursuant to Section 9.1 or 9.2 and
Buyer is not in material breach of this Agreement, the Escrow Fund shall be
disbursed to or at the direction of Buyer.
(c) If this Agreement is terminated by Seller due to Buyer's material
breach of this Agreement or because of Buyer's inability to obtain financing as
of the Closing Date, then (i) the Escrow Fund shall be disbursed to or at the
direction of Seller or, if Seller shall have received the First Advance
pursuant to Section 9.5 below, the First Advance shall be retained by Seller,
in either case as liquidated damages under Section 9.3 above, and (ii) if
Seller shall have received the Second Advance pursuant to Section 9.5 below,
Seller shall immediately return the Second Advance to Buyer.
9.5 DISPOSITION OF WBPX(TV).
(a) Buyer shall use commercially reasonable efforts to dispose
of WBPX(TV) as soon as practicable but in no event later than the expiration of
any deadline imposed by the FCC for such disposition, as such deadline may be
extended by the FCC. Notwithstanding the requirement in the preceding sentence,
if (i) the FCC shall require Buyer to dispose of WBPX(TV) prior to or
concurrently with Buyer's purchase of one or more of the Stations (the
"Disposition Requirement"), (ii) Buyer shall not have satisfied the Disposition
Requirement on or before the date the Closing is scheduled to occur pursuant to
Section 8.1(a) (the "Initial Closing Date"), and (iii) each of the conditions
set forth in Section 7.1 (other than any condition relating to the Disposition
Requirement) shall have been satisfied prior to or on the Initial Closing Date,
Buyer and Seller shall jointly instruct the Escrow Agent to deliver to Seller
by wire transfer of same-day funds the Escrow Fund (as defined in Section
9.4(a)) (such payment is the "First Advance"). If Buyer fails to execute and
deliver the instructions for the First Advance as required by the preceding
sentence or if Seller does not receive the Escrow Fund from the Escrow Agent
(or an amount equal thereto from Buyer) within five (5) business days from the
Initial Closing Date, this Agreement may be terminated by Seller, if Seller is
not then in material default hereunder, upon written notice to Buyer, and the
Escrow Fund shall be disbursed to or at the direction of Seller as liquidated
damages under Section 9.3.
(b) In consideration for the payment of the First Advance to
Seller, Seller shall not be permitted to terminate this Agreement as a result
of Buyer's failure to satisfy the Disposition Requirement, and the deadline for
Buyer's satisfaction of the Disposition Requirement shall be extended until the
date that is six (6) months from the Initial Closing Date (the "First Extension
Deadline"), during which period Buyer shall continue to use commercially
reasonable efforts to satisfy the Disposition Requirement as soon as
practicable but in no event later than the First Extension Deadline. If Buyer
shall not have satisfied the Disposition Requirement on or before the First
Extension Deadline and each of the conditions set forth in Section 7.1 (other
than any condition relating to the Disposition Requirement) shall have been
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satisfied prior to or on the First Extension Deadline, Buyer shall pay to
Seller by wire transfer of same-day funds (in accordance with wire transfer
instructions provided by Seller to Buyer) Five Million Dollars ($5,000,000)
(such payment is the "Second Advance") no later than three (3) business days
following the First Extension Deadline. If Buyer fails to pay the Second
Advance as required by the preceding sentence, this Agreement may be terminated
by Seller, if Seller is not then in material default hereunder, upon written
notice to Buyer, and Seller shall be permitted to retain the Escrow Fund as
liquidated damages under Section 9.3.
(c) In consideration for the payment of the Second Advance to
Seller, Seller shall not be permitted to terminate this Agreement as a result
of Buyer's failure to satisfy the Disposition Requirement, and the deadline for
Buyer's satisfaction of the Disposition Requirement shall be extended until the
date that is the later of (i) six (6) months from the First Extension Deadline
and (ii) the upset date specified in Sections 9.1(c) and 9.2(c) (such later
date is the "Second Extension Deadline"), during which period Buyer shall
continue to use commercially reasonable efforts to satisfy the Disposition
Requirement as soon as practicable but in no event later than the Second
Extension Deadline. If Buyer shall not have satisfied the Disposition
Requirement on or before the Second Extension Deadline and each of the
conditions set forth in Section 7.1 (other than any condition relating to the
Disposition Requirement) shall have been satisfied prior to or on the Second
Extension Deadline, Seller shall have the right to terminate this Agreement, if
Seller is not then in material default hereunder, upon written notice to Buyer,
in which event Seller shall be permitted to retain the First Advance and Second
Advance as liquidated damages under Section 9.3.
(d) The entire amount of the First Advance and Second Advance
received by Seller shall be applied as a credit toward the Purchase Price
payable by Buyer to Seller at the Closing. If Buyer terminates this Agreement
in accordance with Section 9.2 at any time following Seller's receipt of the
First Advance or the First Advance plus the Second Advance, as the case may be,
Seller shall return to Buyer no later than five (5) business days following
Seller's receipt of Buyer's notice of termination an amount equal to the First
Advance or the First Advance plus the Second Advance, as the case may be. Any
amount that Seller fails to pay pursuant to the preceding sentence shall bear
interest at the rate of ten percent (10%) per annum from the date such amount
is due until paid in full. Notwithstanding any provision of this Agreement to
the contrary, Buyer shall have no further obligation hereunder to dispose of
WBPX(TV) at any time following a change in the FCC's rules and regulations or
the issuance of a ruling by the FCC that would permit Buyer to simultaneously
own and operate the Stations and WBPX(TV).
(e) If Seller fails to join with Buyer in requesting any
required extension of the effective period of the FCC Consent that is
consistent with the provisions of this Section 9.5 or opposes any such
extension, Buyer shall have no further obligation under this Section 9.5,
Seller shall return to Buyer an amount equal to the First Advance or the First
Advance plus the Second Advance, as the case may be, and Buyer shall be
entitled to exercise all rights and remedies under this Agreement, including,
without limitation, the right to seek specific performance pursuant to Section
10.6. Nothing in this Section 9.5 shall limit Buyer's right to seek specific
performance pursuant to Section 10.6.
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SECTION 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION;
CERTAIN REMEDIES
10.1 REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement shall be deemed continuing
representations and warranties and shall survive the Closing for a period of
eighteen months. Any investigations by or on behalf of any party hereto shall
not constitute a waiver as to enforcement of any representation, warranty, or
covenant contained in this Agreement. No notice or information delivered by
Seller shall affect Buyer's right to rely on any representation or warranty
made by Seller or relieve Seller of any obligations under this Agreement as the
result of a breach of any of its representations and warranties.
10.2 INDEMNIFICATION BY SELLER. Notwithstanding the Closing, and
regardless of any investigation made at any time by or on behalf of Buyer or
any information Buyer may have, Seller hereby agrees to indemnify and hold
Buyer harmless against and with respect to, and shall reimburse Buyer for:
(a) Any and all losses, liabilities, or damages resulting from
any untrue representation, breach of warranty, or nonfulfillment of any
covenant by Seller contained in this Agreement or in any certificate, document,
or instrument delivered to Buyer under this Agreement.
(b) Any and all obligations of Seller not assumed by Buyer
pursuant to this Agreement, including any liabilities arising at any time under
any Contract not included in the Assumed Contracts.
(c) Any loss, liability, obligation, or cost resulting from the
failure of the parties to comply with the provisions of any bulk sales law
applicable to the transfer of the Assets.
(d) Any and all losses, liabilities, or damages resulting from
the operation or ownership of any Station prior to the Closing, including any
liabilities arising under the Licenses or the Assumed Contracts which relate to
events occurring prior the Closing Date, except to the extent that any such
losses, liabilities or damages result from any action taken (or not taken,
although required to be taken) by Buyer under the Time Brokerage Agreement.
(e) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs, and expenses, including reasonable legal fees
and expenses, incident to any of the foregoing or incurred in investigating or
attempting to avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
10.3 INDEMNIFICATION BY BUYER AND ITS SUBSIDIARY. Notwithstanding the
Closing, and regardless of any investigation made at any time by or on behalf
of Seller or any information Seller may have, each of Buyer and, in
consideration of the assignment by Buyer to Buyer's wholly-owned, direct
subsidiary, D P Media License of Boston, Inc. ("D P License"), of all of
Buyer's rights under this Agreement concerning the acquisition of the FCC
Licenses, DP License
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agrees to, jointly and severally, indemnify and hold Seller harmless against
and with respect to, and shall reimburse Seller for:
(a) Any and all losses, liabilities, or damages resulting from
any untrue representation, breach of warranty, or nonfulfillment of any
covenant by Buyer contained in this Agreement or in any certificate, document,
or instrument delivered to Seller under this Agreement.
(b) Any and all Assumed Liabilities.
(c) Any and all losses, liabilities, or damages resulting from
the operation or ownership of any Station or Asset on or after the Closing.
(d) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including reasonable legal fees and
expenses, incident to any of the foregoing or incurred in investigating or
attempting to avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
10.4 PROCEDURE FOR INDEMNIFICATION. The procedure for indemnification
shall be as follows:
(a) The party claiming indemnification (the "Claimant") shall
promptly give notice to the party from which indemnification is claimed (the
"Indemnifying Party") of any claim, whether between the parties or brought by a
third party, specifying in reasonable detail the factual basis for the claim.
If the claim relates to an action, suit, or proceeding filed by a third party
against Claimant, such notice shall be given by Claimant within five days after
written notice of such action, suit, or proceeding was given to Claimant.
(b) With respect to claims solely between the parties, following
receipt of notice from the Claimant of a claim, the Indemnifying Party shall
have thirty days to make such investigation of the claim as the Indemnifying
Party deems necessary or desirable. For the purposes of such investigation, the
Claimant agrees to make available to the Indemnifying Party and/or its
authorized representatives the information relied upon by the Claimant to
substantiate the claim. If the Claimant and the Indemnifying Party agree at or
prior to the expiration of the thirty-day period (or any mutually agreed upon
extension thereof) to the validity and amount of such claim, the Indemnifying
Party shall immediately pay to the Claimant the full amount of the claim. If
the Claimant and the Indemnifying Party do not agree within the thirty-day
period (or any mutually agreed upon extension thereof), the Claimant may seek
appropriate remedy at law or equity or under the arbitration provisions of this
Agreement, as applicable.
(c) With respect to any claim by a third party as to which the
Claimant is entitled to indemnification under this Agreement, the Indemnifying
Party shall have the right at its own expense, to participate in or assume
control of the defense of such claim, and the Claimant shall cooperate fully
with the Indemnifying Party, subject to reimbursement for actual out-of-pocket
expenses incurred by the Claimant as the result of a request by the
Indemnifying Party. If the Indemnifying Party elects to assume control of the
defense of any third-party claim,
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the Claimant shall have the right to participate in the defense of such claim
at its own expense. If the Indemnifying Party does not elect to assume control
or otherwise participate in the defense of any third party claim, it shall be
bound by the results obtained by the Claimant with respect to such claim.
(d) If a claim, whether between the parties or by a third party,
requires immediate action, the parties will make every effort to reach a
decision with respect thereto as expeditiously as possible.
(e) The indemnifications rights provided in Sections 10.2 and
10.3 shall extend to the shareholders, directors, officers, employees, and
representatives of any Claimant although for the purpose of the procedures set
forth in this Section 10.4, any indemnification claims by such parties shall be
made by and through the Claimant.
10.5 LIMITATIONS.
(a) No claim may be made against an Indemnifying Party pursuant
to its indemnification obligations set forth in Section 10.2 or 10.3 with
respect to any individual item of damage unless and until (i) the amount of
damages actually incurred by Claimant for any individual matter exceeds $5,000
and (ii) the aggregate of all such damages actually incurred by the Claimant
exceeds $200,000 (the "Threshold Amount") and, at such time as the Claimant's
damages exceed in the aggregate the Threshold Amount, the Claimant shall be
entitled to indemnification for the entire amount of such damages in excess of
$100,000. In the case of any claim for indemnification made by a Claimant to an
Indemnifying Party in which the Claimant asserts for the first time that the
Threshold Amount has been or will be exceeded after or upon satisfaction of the
claim for which the Claimant seeks indemnification, the Claimant shall set
forth in reasonable detail the damages, including the basis therefor, which
have exceeded or which, together with the claim being made, will exceed the
Threshold Amount. The Indemnifying Party's obligation to indemnify the Claimant
and hold it harmless under Section 10.2 or 10.3 shall in no event exceed in the
aggregate $5,000,000. Notwithstanding the foregoing, the limitations set forth
in this Section 10.5(a) shall not apply to claims for indemnification under
Sections 3.13, 3.14, 3.20, 4.4, 10.2(b), 10.2(c), 10.2(d), 10.3(b) and 10.3(c)
hereof or claims for fraud, including claims for costs and expenses incurred in
enforcing such claims.
(b) For purposes of determining the amount of damages incurred
by a Claimant, such damages shall be net of any insurance payment actually
received by the Claimant in compensation for the same damages for which
indemnification is sought and shall be reduced by the amount of any tax
benefits to be realized by the Claimant with respect to the matter which was
the basis for the damages for which indemnification is sought.
10.6 SPECIFIC PERFORMANCE. The parties recognize that if Seller
breaches this Agreement and refuses to perform under the provisions of this
Agreement, monetary damages alone would not be adequate to compensate Buyer for
its injury. Buyer shall therefore be entitled, in addition to any other
remedies that may be available, including money damages, to
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obtain specific performance of the terms of this Agreement. If any action is
brought by Buyer to enforce this Agreement, Seller shall waive the defense that
there is an adequate remedy at law.
10.7 ATTORNEYS' FEES. In the event of a default by either party which
results in a lawsuit or other proceeding for any remedy available under this
Agreement, the prevailing party shall be entitled to reimbursement from the
other party of its reasonable legal fees and expenses.
SECTION 11. MISCELLANEOUS
11.1 FEES AND EXPENSES. Any federal, state, or local sales or
transfer tax arising in connection with the conveyance of the Assets by Seller
to Buyer pursuant to this Agreement shall be paid by Seller. Buyer and Seller
shall each pay one-half of (i) all fees payable to the Escrow Agent, (ii) all
filing fees required by the FTC under the HSR Act, and (iii) all filing fees
required by the FCC in connection with the FCC Consent. Except as otherwise
provided in this Agreement, each party shall pay its own expenses incurred in
connection with the authorization, preparation, execution, and performance of
this Agreement and the Time Brokerage Agreement, including all fees and
expenses of counsel, accountants, agents, and representatives. Buyer shall pay
at the Closing all brokerage fees and commissions payable to Media Venture
Partners, and each party shall be responsible for all fees or commissions
payable to any other finder, broker, advisor, or similar person retained by or
on behalf of such party.
11.2 NOTICES. All notices, demands, and requests required or
permitted to be given under the provisions of this Agreement shall be (a) in
writing, (b) delivered by personal delivery, or sent by commercial delivery
service or registered or certified mail, return receipt requested, (c) deemed
to have been given on the date of personal delivery or the date set forth in
the records of the delivery service or on the return receipt, and (d) addressed
as follows:
If to Seller: Robert D. Gordon, President
Boston University Communications, Inc.
1660 Soldiers Field Road
Boston, MA 02135
With a copy to: Thomas J. Kelly, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
If to Buyer: Roslyck Paxson, President
D P Media of Boston, Inc.
c/o D P Media, Inc.
231 Bradley Place, Suite 204
Palm Beach, FL 33480
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<PAGE> 44
With a copy to: Alan C. Campbell, Esq.
Irwin Campbell & Tannenwald, P.C.
1730 Rhode Island Avenue, N.W.
Suite 200
Washington, D.C. 20036
or to any other or additional persons and addresses as the parties may from
time to time designate in a writing delivered in accordance with this Section
11.2.
11.3 BENEFIT AND BINDING EFFECT. Neither party hereto may assign this
Agreement without the prior written consent of the other party hereto;
provided, however, that Buyer may assign its rights and obligations under this
Agreement, in whole or in part, without seeking or obtaining Seller's prior
approval, to one or more subsidiaries or commonly controlled affiliates of
Buyer or any other party that Buyer reasonably determines is legally and
financially qualified to perform Buyer's obligations hereunder, so long as, in
connection with any such assignment, D P Media, Inc. guarantees the full and
prompt performance by such assignee of Buyer's obligations hereunder. Buyer may
collaterally assign its rights and interests hereunder to its senior lenders
without seeking or obtaining Seller's prior approval. Upon any permitted
assignment by Buyer or Seller in accordance with this Section 11.3, all
references to "Buyer" herein shall be deemed to be references to Buyer's
assignee and all references to "Seller" herein shall be deemed to be references
to Seller's assignee, as the case may be. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
11.4 FURTHER ASSURANCES. The parties shall take any actions and
execute any other documents that may be necessary or desirable to the
implementation and consummation of this Agreement, including, in the case of
Seller, any additional bills of sale, deeds, or other transfer documents that,
in the reasonable opinion of Buyer, may be necessary to ensure, complete, and
evidence the full and effective transfer of the Assets to Buyer pursuant to
this Agreement.
11.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED, AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO THE CHOICE OF LAW PROVISIONS THEREOF).
11.6 HEADINGS. The headings in this Agreement are included for ease
of reference only and shall not control or affect the meaning or construction
of the provisions of this Agreement.
11.7 GENDER AND NUMBER. Words used in this Agreement, regardless of
the gender and number specifically used, shall be deemed and construed to
include any other gender, masculine, feminine, or neuter, and any other number,
singular or plural, as the context requires.
11.8 ENTIRE AGREEMENT. This Agreement, the schedules, hereto, and all
documents, certificates, and other documents to be delivered by the parties
pursuant hereto, collectively
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represent the entire understanding and agreement between Buyer and Seller with
respect to the subject matter hereof. This Agreement supersedes all prior
negotiations between the parties and cannot be amended, supplemented, or
changed except by an agreement in writing that makes specific reference to this
Agreement and which is signed by the party against which enforcement of any
such amendment, supplement, or modification is sought.
11.9 WAIVER OF COMPLIANCE; CONSENTS. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any
obligation, representation, warranty, covenant, agreement, or condition herein
may be waived by the party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver or failure
to insist upon strict compliance with such obligation, representation,
warranty, covenant, agreement, or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section 11.9.
11.10 PRESS RELEASE. Neither party shall publish any press release,
make any other public announcement or otherwise communicate with any news media
concerning this Agreement or the transactions contemplated hereby without the
prior written consent of the other party; provided, however, that nothing
contained herein shall prevent either party from promptly making all filings
with governmental authorities as may, in its judgement be required or advisable
in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
11.11 CONSENT TO JURISDICTION. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the United States District Court for
the Southern District of New York and the New York County Supreme Court for the
State of New York for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
the parties hereto agrees, to the extent permitted under applicable rules of
procedure, to commence any action, suit or proceeding relating hereto either in
the United States District Court for the Southern District of New York, or if
such suit, action or other proceeding may not be brought in such court for
jurisdictional reasons, in the New York County Supreme Court for the State of
New York. Each of the parties hereto further agrees that service of any
process, summons, notice or document by U.S. certified mail, return receipt
requested, or overnight delivery service (with confirmation of receipt) to such
party's respective address set forth above shall be effective service of
process for any action, suit or proceeding in New York with respect to any
matters to which it has submitted to jurisdiction in this Section 11.11. Each
of the parties hereto irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in (i) the New York County
Supreme Court for the State of New York, or (ii) the United States District
Court for the Southern District of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient form.
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11.12 COUNTERPARTS. This Agreement may be signed in counterparts with
the same effect as if the signature on each counterpart were upon the same
instrument.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the day and year first above written.
D P MEDIA OF BOSTON, INC.
By: /s/
--------------------------------
Name:
Title:
BOSTON UNIVERSITY COMMUNICATIONS, INC.
By:
--------------------------------
Name:
Title:
<PAGE> 48
IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the day and year first above written.
D P MEDIA OF BOSTON, INC.
By:
--------------------------------
Name:
Title:
BOSTON UNIVERSITY COMMUNICATIONS, INC.
By: /s/
--------------------------------
Name:
Title:
<PAGE> 49
D P MEDIA LICENSE OF
BOSTON, INC. HEREBY JOINS
IN THE EXECUTION OF THIS
ASSET PURCHASE AGREEMENT
FOR THE PURPOSE OF
AGREEING TO THE PROVISIONS
OF SECTION 10 HEREOF.
D P MEDIA LICENSE OF BOSTON, INC.
By: /s/ Roslyck Paxson
------------------------------
Name: Roslyck Paxson
Title: President
<PAGE> 1
EXHIBIT 10.211
EMPLOYMENT TERMINATION AND RELEASE AGREEMENT
This EMPLOYMENT TERMINATION AND RELEASE AGREEMENT made as of this 11th
day of March, 1999, (this "Agreement") by and between Paxson Communications
Corporation, with its principal place of business at 601 Clearwater Park Road,
West Palm Beach, Florida 33401-6233, and its subsidiaries, divisions and
affiliated entities (collectively, "Paxson") and Arthur D. Tek, an individual,
currently residing at the address set forth under such individual's signature
below (the "Executive" and collectively with Paxson referred to herein as the
"Parties").
WHEREAS, Paxson and Tek are parties to (i) that certain Employment
Agreement dated as of June 11, 1998 (the "Employment Agreement"); (ii) that
certain Supplemental Executive Retirement Plan (the "SERP Agreement") and Split
Dollar Agreement (together with the SERP Agreement, the "Deferred Compensation
Agreements") each dated as of July 15, 1996; and (iii) that certain Promissory
Note (the "Note") and Pledge Agreement (the "Pledge Agreement" and together
with the Note, the "Loan Documents"), each dated December 16, 1996 and issued
by Employee to Paxson; and
WHEREAS, Paxson and Tek desire to end Tek's employment relationship
with Paxson in an amicable manner on or about March 12, 1999, in accordance
with the terms of this Agreement and provide for a settlement and termination
of their respective obligations under the Employment Agreement, the Deferred
Compensation Agreements, and the Loan Documents.
NOW THEREFORE, for value received and in consideration of the mutual
agreements and waivers contained herein, the Parties agree as follows:
1. SEPARATION. Tek agrees that his employment with Paxson will end on the
date (the "Termination Date") which is the earlier of (i) a date
specified by Tek, which shall be no earlier than March 12, 1999, in a
notice delivered by Tek to the Company that he has entered into an
employment agreement that requires his termination of employment with
Paxson no later than such date specified by Tek; and (ii) a date
specified by Paxson, which date shall be no later than 3 months after
the date hereof. Tek agrees that on the Termination Date he will
immediately return to Paxson all property (including keys, access
cards, etc.) and documents (including all copies of documents) which
Tek obtained from Paxson or from any of its customers or employees.
2. OBLIGATIONS OF THE PARTIES. In full settlement of Paxson's obligations
to Tek under the Employment Agreement and the Deferred Compensation
Agreements and Tek's obligations to Paxson under the Loan Documents,
and in consideration of the agreements and waivers under Sections 3
and 4 hereof, Paxson and Tek agree as follows:
<PAGE> 2
1. On the Termination Date, the obligations of Tek to Paxson
under the Loan documents are deemed satisfied and paid in
full. In connection therewith, Paxson shall return the Note
to Tek marked "canceled/paid in full" and Paxson shall
promptly take all reasonable steps requested by Tek to cause
the release of the collateral pledged under the Pledge
Agreement, including delivering a notice thereof to Merrill
Lynch under the Stock Account Agreement (as defined under the
Pledge Agreement). Paxson and Tek agree that the cancellation
of the Note results in cancellation indebtedness income to
Tek and not additional compensation under any employment
arrangement. Both of the Parties agree to respect this
characterization for all tax purposes.
2. Paxson hereby agrees that, effective upon the Termination
Date, Tek shall, automatically and without any further action
required by Paxson or Tek, be vested in 25,000 of the 50,000
unvested (prior to the date hereof) stock options issued to
Tek under the Paxson Communications Corporation 1996 Plan,
which options have an exercise price of $3.42/share.
3. Paxson hereby agrees that, effective upon on the Age
Discrimination Waiver Effective Date (as defined in Section 4
hereof), Tek shall, automatically and without any further
action required by Paxson or Tek, be vested in the remaining
25,000 unvested (after giving effect to the preceding
paragraph) stock options issued to Tek under the Paxson
Communications Corporation 1996 Plan, which options have an
exercise price of $3.42/share.
4. Paxson hereby agrees that notwithstanding anything to the
contrary contained in any of the plans governing, or
agreements evidencing, the options granted to Tek by the
Company, each of the vested options held by Tek, including
those vested after giving effect to paragraphs 2b and 2c
hereof, may be exercised by Tek on or before December 31,
2000.
5. Each of the parties agree that, the Employment Agreement,
Deferred Compensation Agreements and Loan Documents shall be
terminated and of no further force and effect on and after
the Termination Date, except that, notwithstanding the
foregoing, Tek's right to indemnification as an officer or
director of the Company, under the terms of any agreement
between Paxson and Tek, the organizational documents of
Paxson or applicable law, shall be continue and survive
hereunder to the same extent as if Tek remained an officer or
director of the Company.
3. WAIVER AND RELEASE BY PAXSON. Paxson agrees that, in exchange for
Tek's performance of its obligations under the Agreement, Paxson
hereby completely releases and discharges Tek from any and all claims,
charges, actions and causes of action of any kind or nature that
Paxson once had or now has whether arising out of the employment or
separation of employment with Tek, and whether such claims are now
known or unknown to Paxson. Paxson further agrees that it will not
bring any such charges, claims or actions against Tek
<PAGE> 3
in the future arising from events occurring prior to the date hereof.
4. WAIVER AND RELEASE BY TEK. Tek agrees that, in exchange for Paxson's
performance of its obligations under the Agreement:
1. Tek's release/waiver of claims. Tek (on his own behalf and on
behalf of his heirs or personal representatives or any other
person who may be entitled to make a claim on Tek's behalf or
through him) hereby completely releases and discharges Paxson
from any and all claims, charges, actions and causes of
action of any kind or nature that Tek once had or now has
whether arising out of his employment or separation of
employment with Paxson, and whether such claims are now known
or unknown to Tek.
2. Tek's release of all claims. Paxson and Tek realize that
there are many laws and regulations relating to employment
relationships, including Title VII of the Civil Rights Act of
1964, as amended; the Age Discrimination in Employment Act of
1967, as amended; the Americans with Disabilities Act of
1990; the National Labor Relations Act, as amended; the Civil
Rights Act of 1866, as amended; the Employee Retirement and
Income Security Act; and various state constitution
provisions and human rights laws as well as the laws of
contract and tort. TEK INTENDS BY SIGNING THIS AGREEMENT TO
RELEASE ANY AND ALL OTHER RIGHTS AND CLAIMS THAT HE MAY HAVE
AGAINST PAXSON UNDER ALL SUCH LAWS OR REGULATIONS.
3. Waiver of Age Discrimination Claims. Notwithstanding anything
to the contrary contained herein, Tek's waiver and release
under the Age Discrimination in Employment Act of 1967, shall
only be effected as follows:
(1) Tek shall deliver to Paxson a fully executed waiver
letter substantially in the form of Exhibit A
annexed hereto (the "Age Discrimination Waiver
Letter") no sooner than 21 days after the date
hereof and no later than 25 days after the date
hereof.
(2) The Age Discrimination Waiver Letter shall be
revocable by Tek for seven days (the "Revocation
Period") following his delivery thereof to Paxson in
accordance with Section 4c(i) hereof and such
revocation shall be made by Tek by sending a written
letter of revocation by certified mail, return
receipt requested, to Anthony L. Morrison, General
Counsel, c/o Paxson Communications Corporation, 601
Clearwater Park Road, West Palm Beach, Florida
33401.
(3) If Tek does not revoke the Age Discrimination Waiver
Letter in accordance with the terms of Section
4c(ii) hereof on or before the expiration of the
Revocation Period, then the Age Discrimination
Waiver Letter shall, automatically and without any
further act by Tek, become final and binding upon
Tek and Paxson on the first day succeeding the
expiration of the Revocation Period (such date
referred to herein as the "Age Discrimination Waiver
Effective Date"). In delivering the
<PAGE> 4
Age Discrimination Waiver Letter, it is the express
intent of Tek to waive his rights under, and in
accordance with the requirements of, the Age
Discrimination in Employment Act of 1967 and that in
the event of any failure or ineffectiveness of such
waiver, Paxson shall not have received the benefits
intended to be conferred upon it by Tek in exchange
for the benefits conferred by Paxson to Tek under
Section 2c hereof. Accordingly, Tek agrees that in
the event the Age Discrimination Waiver Letter is
deemed ineffective or unenforceable for any reason,
then the Age Discrimination Waiver Effective Date
shall be deemed not to have occurred and the
benefits conferred upon Tek under Section 2c hereof
shall be forfeited and, in addition to any other
remedies Paxson may have at law or in equity with
respect thereto, Paxson may, in order to effect such
forfeiture, reduce the number of vested but
unexercised options held by Tek at the time of any
such forfeiture.
5. INFORMED, VOLUNTARY SIGNATURE.
1. Tek agrees that he has had a full and fair opportunity to
review this Agreement and signs it knowingly, voluntarily,
and without duress or coercion. Further, in executing this
agreement, Tek agrees that he has not relied on any
representation or statement not set forth in this document.
2. Tek agrees that he was given a copy of the Agreement and,
before signing it, he had an opportunity to consult an
attorney of his own choosing, in fact, he did consult with
his own attorney before signing it.
3. This Agreement shall become effective and the agreements of
the Parties hereto enforceable in accordance with the terms
hereof until each Party has signed and delivered to the other
Party a fully executed copy of this Agreement.
6. NO ADMISSION. The parties agree that this Agreement does not
constitute any admission by Tek or by Paxson of any (i) violation of
any statute, law, regulation, order or other applicable authority, or
(ii) breach of contract, actual or implied.
7. CONFIDENTIALITY. The Parties agree that they will not at any time or
in any manner talk about, write about, disclose or otherwise publicize
(except as required by applicable law): (a) the terms or existence of
this Agreement or its negotiation, execution or implementation; or (b)
Paxson's proprietary and trade secret information.
8. MISCELLANEOUS.
1. This agreement shall be interpreted and enforced in
accordance with the laws of the United States of America and
the State of Florida.
<PAGE> 5
2. This Agreement and its attachments represent the sole and
entire agreement between the Parties and supersedes any and
all prior agreements, negotiations and discussions between
the parties and/or their respective counsel with respect to
the subject matters covered in this Agreement.
3. Each party will bear its own attorneys' fees and costs
incurred in connection with Tek's separation from Paxson.
4. In the event any of the Paxson contact persons identified in
this Agreement are not available contact shall be made
directly to Lowell W. Paxson. Tek acknowledges and agrees
that contacts with Paxson representatives other than as
provided for herein shall be ineffective and shall not be
deemed, constructive or actual notice of any kind.
5. If one or more paragraph(s) of this Agreement are ruled
invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision of the Agreement, which
shall remain in full force and effect.
6. As used in this agreement, the term "Paxson" shall mean
Paxson Communications Corporation as well as its
subsidiaries, divisions, and affiliated organizations as well
as their respective successors and assigns together with
their directors, officers, employees, agents, attorneys,
representatives, shareholders and their respective heirs and
personal representatives.
7. This agreement may not be modified orally but only by a
writing signed by both parties to this Agreement.
[The remainder of this page is blank.]
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties as of the first date written above.
PAXSON COMMUNICATIONS CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE> 1
EXHIBIT 10.212
EMPLOYMENT SEPARATION AGREEMENT
This EMPLOYMENT SEPARATION AGREEMENT made as of this 2nd day of
September, 1999, (this "Agreement") by and between Paxson Communications
Corporation, with its principal place of business at 601 Clearwater Park Road,
West Palm Beach, Florida 33401-6233, and its subsidiaries, divisions and
affiliated entities (collectively, "Paxson") and James B. Bocock, an
individual, currently residing at the address set forth under such individual's
signature below (collectively including any entity to which he may assign his
rights under this Agreement or his estate, "Bocock" and collectively with
Paxson referred to herein as the "Parties").
WHEREAS, Paxson and Bocock are parties to (i) that certain Employment
Agreement dated as of June 11, 1998 (the "Employment Agreement"); (ii) that
certain Supplemental Executive Retirement Plan (the "SERP Agreement") and Split
Dollar Agreement (together with the SERP Agreement, the "Deferred Compensation
Agreements") each dated as of July 15, 1996; and (iii) that certain Promissory
Note (the "Note") and Pledge Agreement (the "Pledge Agreement" and together
with the Note, the "Loan Documents"), each dated December 16, 1998 and issued
by Employee to Paxson; and
WHEREAS, Paxson and Bocock desire to end Bocock's employment
relationship with Paxson on or about September 10, 1999, in accordance with the
terms of this Agreement and provide for a settlement and termination of their
respective obligations under the Employment Agreement, the Deferred
Compensation Agreements, and the Loan Documents.
NOW THEREFORE, for value received and in consideration of the mutual
agreements and waivers contained herein, the Parties agree as follows:
1. SEPARATION. Bocock agrees that his employment with Paxson will end on
September 10, 1999 (the "Termination Date"). Bocock agrees that on the
Termination Date he will immediately return to Paxson all property
(including keys, access cards, etc.) and documents (including all
copies of documents) which Bocock obtained from Paxson or from any of
its customers or employees.
2. OBLIGATIONS OF THE PARTIES. In full settlement of Paxson's obligations
to Bocock under the Employment Agreement and the Deferred Compensation
Agreements and Bocock's obligations to Paxson under the Loan
Documents, and in consideration of the agreements and waivers under
Sections 3 and 4 hereof, Paxson and Bocock agree as follows:
1. Paxson shall continue to pay Bocock his current base salary
until September 30, 1999 in
<PAGE> 2
the manner customary to which Paxson has been making payments
to Bocock during the course of his employment.
2. Paxson shall pay Bocock a lump sum payment of those monies
owed Bocock pursuant to the SERP Agreement no later than
October 31, 1999.
3. As soon as permissible pursuant to the Company's policies
regarding insider trading, Bocock shall satisfy those
obligations to Paxson set forth under the Loan documents by
selling the shares of Paxson stock underlying the Loan;
provided, however, should Bocock determine to satisfy the
loan without disposing of the underlying collateral the
obligations to Paxson under the Loan documents must be
satisfied no later than September 30, 1999. In connection
therewith, Paxson shall return the Note to Bocock marked
"canceled/paid in full."
4. Paxson hereby agrees that, effective on the Termination Date,
Bocock shall, automatically and without any further action
required by Paxson or Bocock, be vested in those 90,000
unvested stock options (prior to the date hereof) which were
issued to Bocock under the Paxson Communications Corporation
1996 Plan, which options have an exercise price of
$3.42/share.
5. Paxson hereby agrees that, effective upon the expiration of
the Age Discrimination Waiver Effective Date, Bocock shall,
automatically and without any further action required by
Paxson or Bocock, be vested in 30,000 of the remaining
180,000 unvested stock options issued to Bocock under the
Paxson Communications Corporation 1998 Plan, which options
have an exercise price of $7.25/share. The remaining 150,000
unvested options, after giving effect to the foregoing
sentence, shall lapse and no longer be eligible for vesting
to Bocock.
6. Paxson hereby agrees that notwithstanding anything to the
contrary contained in any of the plans governing, or
agreements evidencing, the options granted to Bocock by the
Company, each of the vested options held by Bocock, including
those vested after giving effect to paragraphs 2d and 2e
hereof, may be exercised by Bocock on or before December 31,
2001.
7. Each of the parties agree that, the Employment Agreement,
Deferred Compensation Agreements and Loan Documents shall be
terminated and of no further force and effect on and after
the Termination Date, except that, notwithstanding the
foregoing, Bocock's right to indemnification as an officer
and/or director of the Company, under the terms of any
agreement between Paxson and Bocock, the organizational
documents of Paxson or applicable law, shall continue and
survive hereunder to the same extent as if Bocock remained an
officer or director of the Company.
8. Bocock hereby agrees to the assignment of all of his right,
title and interest in the Policy
<PAGE> 3
under the Split Dollar Agreement to Paxson as of the
Termination Date.
9. Bocock hereby agrees to execute and distribute the
Resignation Letter attached hereto as Exhibit A.
3. WAIVER AND RELEASE BY PAXSON. Paxson agrees that, in exchange for
Bocock's performance of its obligations under the Agreement, Paxson
hereby completely releases and discharges Bocock from any and all
claims, charges, actions and causes of action of any kind or nature
that Paxson once had or now has whether arising out of the employment
or separation of employment with Bocock, and whether such claims are
now known or unknown to Paxson. Paxson further agrees that it will not
bring any such charges, claims or actions against Bocock in the future
arising from events occurring prior to the date hereof.
4. WAIVER AND RELEASE BY BOCOCK. Bocock agrees that, in exchange for
Paxson's performance of its obligations under the Agreement:
1. Bocock's release/waiver of claims. Bocock (on his own behalf
and on behalf of his heirs or personal representatives or any
other person who may be entitled to make a claim on Bocock's
behalf or through him) hereby completely releases and
discharges Paxson from any and all claims, charges, actions
and causes of action of any kind or nature that Bocock once
had or now has whether arising out of his employment or
separation of employment with Paxson, and whether such claims
are now known or unknown to Bocock; provided, however,
nothing herein shall limit Bocock's right to indemnification
as an officer and/or director of the Company.
2. Bocock's release of all claims. Paxson and Bocock realize
that there are many laws and regulations relating to
employment relationships, including Title VII of the Civil
Rights Act of 1964, as amended; the Age Discrimination in
Employment Act of 1967, as amended; the Americans with
Disabilities Act of 1990; the National Labor Relations Act,
as amended; the Civil Rights Act of 1866, as amended; the
Employee Retirement and Income Security Act; and various
state constitution provisions and human rights laws as well
as the laws of contract and tort. BOCOCK INTENDS BY SIGNING
THIS AGREEMENT TO RELEASE ANY AND ALL OTHER RIGHTS AND CLAIMS
THAT HE MAY HAVE AGAINST PAXSON UNDER ALL SUCH LAWS OR
REGULATIONS.
3. Waiver of Age Discrimination Claims. Notwithstanding anything
to the contrary contained herein, Bocock's waiver and release
under the Age Discrimination in Employment Act of 1967, shall
only be effected as follows:
(1) Bocock shall deliver to Paxson a fully executed
waiver letter substantially in the form of Exhibit B
annexed hereto (the "Age Discrimination Waiver
Letter") no
<PAGE> 4
sooner than 21 days after the date hereof and no
later than 25 days after the date hereof.
(2) The Age Discrimination Waiver Letter shall be
revocable by Bocock for seven days (the "Revocation
Period") following his delivery thereof to Paxson in
accordance with Section 4c(i) hereof and such
revocation shall be made by Bocock by sending a
written letter of revocation by certified mail,
return receipt requested, to Anthony L. Morrison,
General Counsel, c/o Paxson Communications
Corporation, 601 Clearwater Park Road, West Palm
Beach, Florida 33401.
(3) If Bocock does not revoke the Age Discrimination
Waiver Letter in accordance with the terms of
Section 4c(ii) hereof on or before the expiration of
the Revocation Period, then the Age Discrimination
Waiver Letter shall, automatically and without any
further act by Bocock, become final and binding upon
Bocock and Paxson on the first day succeeding the
expiration of the Revocation Period (such date
referred to herein as the "Age Discrimination Waiver
Effective Date"). In delivering the Age
Discrimination Waiver Letter, it is the express
intent of Bocock to waive his rights under, and in
accordance with the requirements of, the Age
Discrimination in Employment Act of 1967 and that in
the event of any failure or ineffectiveness of such
waiver, Paxson shall not have received the benefits
intended to be conferred upon it by Bocock in
exchange for the benefits conferred by Paxson to
Bocock under Section 2 hereof. Accordingly, Bocock
agrees that in the event the Age Discrimination
Waiver Letter is deemed ineffective or unenforceable
arising out of any action or inaction by Bocock,
then the Age Discrimination Waiver Effective Date
shall be deemed not to have occurred and the
benefits conferred upon Bocock under Section 2
hereof shall be forfeited and, in addition to any
other remedies Paxson may have at law or in equity
with respect thereto, Paxson may, in order to effect
such forfeiture, reduce the number of vested but
unexercised options held by Bocock at the time of
any such forfeiture.
5. INFORMED, VOLUNTARY SIGNATURE.
1. Bocock agrees that he has had a full and fair opportunity to
review this Agreement and signs it knowingly, voluntarily,
and without duress or coercion. Further, in executing this
agreement, Bocock agrees that he has not relied on any
representation or statement not set forth in this document.
2. Bocock agrees that he was given a copy of the Agreement and,
before signing it, he had an opportunity to consult an
attorney of his own choosing, in fact, he did consult with
his own attorney before signing it.
<PAGE> 5
3. This Agreement shall become effective and the agreements of
the Parties hereto enforceable in accordance with the terms
hereof until each Party has signed and delivered to the other
Party a fully executed copy of this Agreement.
6. NO ADMISSION. The parties agree that this Agreement does not
constitute any admission by Bocock or by Paxson of any (i) violation
of any statute, law, regulation, order or other applicable authority,
or (ii) breach of contract, actual or implied.
7. CONFIDENTIALITY. The Parties agree that they will not at any time or
in any manner talk about, write about, disclose or otherwise publicize
(except as required by applicable law): (a) the terms or existence of
this Agreement or its negotiation, execution or implementation; or (b)
Paxson's proprietary and trade secret information.
8. MISCELLANEOUS.
1. This agreement shall be interpreted and enforced in
accordance with the laws of the United States of America and
the State of Florida.
2. This Agreement and its attachments represent the sole and
entire agreement between the Parties and supersedes any and
all prior agreements, negotiations and discussions between
the parties and/or their respective counsel with respect to
the subject matters covered in this Agreement.
3. Each party will bear its own attorneys' fees and costs
incurred in connection with Bocock's separation from Paxson.
4. In the event any of the Paxson contact persons identified in
this Agreement are not available contact shall be made
directly to Lowell W. Paxson. Bocock acknowledges and agrees
that contacts with Paxson representatives other than as
provided for herein shall be ineffective and shall not be
deemed, constructive or actual notice of any kind.
5. If one or more paragraph(s) of this Agreement are ruled
invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision of the Agreement, which
shall remain in full force and effect.
6. As used in this agreement, the term "Paxson" shall mean
Paxson Communications Corporation as well as its
subsidiaries, divisions, and affiliated organizations as well
as their respective successors and assigns together with
their directors, officers, employees, agents, attorneys,
representatives, shareholders and their respective heirs and
personal representatives.
7. This agreement may not be modified orally but only by a
writing signed by both parties to
<PAGE> 6
this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties as of the first date written above.
PAXSON COMMUNICATIONS CORPORATION
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
<PAGE> 1
EXHIBIT 10.213
June 22, 1999
J. Jay Hoker
2201 South Flagler
West Palm Beach, Florida 33401
Dear Jay:
This letter supplements and amends your Employment Agreement with Paxson
Communications Corporation (the "Company") dated as of June 11, 1998 (the
"Employment Agreement"). Effective July 6, 1999, your Employment Agreement
shall be deemed amended generally as required to give effect to following terms
and conditions:
1. Your employment duties will be changed to reflect that you will be
retained by the Company as a consultant and will be paid a retainer
fee in connection with making yourself available for such consulting
services at a rate of $6,000/month. Actual consulting services
preformed shall be subject to mutually acceptable compensation terms
and the retainer fee shall not be deemed to require you to perform any
consulting services not separately agreed to. You will continue to be
reimbursed for business expenses (travel, lodging, etc.) in accordance
with the Company's policies in effect from time to time.
2. The term of the consulting services to be provided by you hereunder
shall remain in effect through and including January 1, 2000, at which
time the Employment Agreement and the consulting services contemplated
hereunder shall terminate.
3. It is the intent of the parties that subject only to early termination
for cause, as defined under the Employment Agreement, your employment
shall otherwise be non-terminable prior to January 1, 2000 and you
shall be able to vest into the stock options currently scheduled to
vest during the calendar year ended December 31, 1999 under the terms
of your various Stock Option Grant Agreements. In addition, any vested
and unexercised stock options you hold as of January 1, 2000 shall be
exercisable by you or your estate until December 31, 2001
notwithstanding anything to the contrary in any stock option grant
agreement.
<PAGE> 2
J. Jay Hoker
March 7, 2000
Page 2
4. You shall be entitled to COBRA and any regular benefits that the
Company provides to terminated employees for a term of eighteen (18)
months beginning January 1, 2000. During the remaining term of your
employment, you will continue to be eligible to defer a percentage of
your monthly compensation, in accordance with the percentage you
elected earlier this year under the terms of the Company's deferred
compensation plan.
On behalf of the senior management of the Company, your contribution to the
success of Paxson has been significant and we are pleased that you will
continue to be available to us on a consulting basis.
Should you have any questions with regard to the foregoing, please do not
hesitate to contact me at 682-4205.
Sincerely,
Anthony L. Morrison
Executive Vice President, General Counsel
enclosure
Accepted and agreed this _____ day of June, 1999.
J. Jay Hoker
<PAGE> 1
EXHIBIT 10.214
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "AGREEMENT") is dated as of June 1,
1999, by and between Paxson Communications Management Company, Inc., a Florida
corporation ("PAXSON"), and Seth A. Grossman, an individual resident of the
State of Florida ("EMPLOYEE").
RECITALS
A. Paxson, a wholly owned subsidiary of Paxson Communications
Corporation ("PCC"), has been formed to provide managerial and administrative
services to the various businesses operated by PCC and its subsidiaries and
affiliates (collectively, the "PAXSON GROUP"), including the PAX Net network,
any other programming networks and various television stations owned or
otherwise held, operated or programmed by the Paxson Group.
B. Paxson desires to employ Employee to perform executive and
administrative duties for the Paxson Group while holding the "TITLED POSITION"
set forth in Schedule I annexed hereto.
C. Employee wishes to enter into this Agreement and to be employed by
Paxson as the Titled Position for the Paxson Group and to provide services to
Paxson on the terms and conditions set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement, the parties intending to be bound
legally, hereby agree as follows:
SECTION 1 EMPLOYMENT
1.1 Term of Employment. The term of this Agreement (the "Agreement
Term") shall be deemed to have commenced as of the "COMMENCEMENT DATE" set
forth in Schedule I hereof, and shall continue until the third (3rd)
anniversary of the Commencement Date, unless terminated sooner in accordance
with this Agreement.
1.2 Duties. Employee acknowledges, agrees and accepts employment by
Paxson in the Titled Position for the Paxson Group and in such capacity
Employee shall be responsible for the performance of the duties of the Titled
Position and for such other executive and administrative duties as may be
designated from time to time by the Responsible Officer or the Chairman of PCC.
Employee shall be provided by Paxson suitable office space for Employee in the
"EMPLOYMENT LOCATION", as identified on
<PAGE> 2
Schedule I annexed hereto, together with all reasonable support staff and
secretarial assistance, equipment, stationary, books and supplies, as
determined by the Responsible Officer. Employee shall use Employee's best
efforts during the term of employment hereunder to further, enhance and develop
the business of PCC, the Paxson Group and any networks or stations it may own
or operate. Subject to the direction of the "RESPONSIBLE OFFICER", as
identified in Schedule I annexed hereto, Employee shall perform such duties as
set forth in Schedule I annexed hereto under "EMPLOYMENT DUTIES." Except as
expressly modified herein, Employee shall be subject to all of the Paxson
Group's policies including payola, plugola and conflicts of interest, as well
as the following:
(a) Employee will comply with all Paxson Group and
professional standards governing Employee's objectivity in the
performance of Employee's duties, including restrictions on outside
activities, investments, business interests, or other involvements
which could compromise Employee's objectivity or create an impression
of conflict of interest. Employee will not knowingly, without the
prior approval of Employee's Responsible Officer on behalf of Paxson,
accept any gift, compensation, or gratuity (which excludes business
meals and entertainment received by Employee in the ordinary course of
business) from any person or entity with which the Paxson Group or any
of its broadcast properties is or may be in competition or in any
instance where there is a stated or implied expectation of favorable
treatment of that person or entity. Employee will not, without the
prior written approval of Employee's Responsible Officer, take
advantage of any business opportunity or situation or engage in any
enterprise or venture of which the Paxson Group may have an interest
on his or her own behalf, if said business opportunity or situation,
enterprise or venture is related in any way to or is similar to the
business of the Paxson Group.
(b) In performing the Employment Duties under this Agreement,
Employee shall conduct himself with due regard to social conventions,
public morals and standards of decency, and will not cause or permit
any situation or occurrence which would tend to degrade, scandalize,
bring into public disrepute, or otherwise lower the community standing
of Employee, or Paxson's public image.
1.3 Activities. Employee shall, except during vacation periods,
periods of illness, and leaves of absence approved by Paxson, devote full and
undivided business time, attention and energies to the duties and
responsibilities required by Paxson, as directed by the Responsible Officer.
During the Agreement Term, Employee shall not engage in any other business
activity which would conflict with Employee's duties without the prior written
approval of Employee's Responsible Officer on behalf of Paxson, which shall not
be unreasonably withheld; provided, however, that Paxson may withhold its
consent to any business activity by Employee that Paxson determines would
directly interfere, impair or hinder in any way Employee's ability to perform
or otherwise satisfy Employee's
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responsibilities and duties from time to time in effect, as the holder of the
Titled Position of the Paxson Group or otherwise, under this Agreement.
1.4 Delegation of Duties. Employee may not delegate the performance of
any of Employee's obligations or duties under this Agreement, or assign any of
Employee's rights under this Agreement, without the prior written consent of
Paxson, except that Employee may delegate duties to other employees of Paxson
where reasonable and customary in the ordinary course of Paxson's business and
consistent with the performance of the Titled Position.
SECTION 2 COMPENSATION AND BENEFITS
Beginning on the Commencement Date, Employee shall be compensated for
the performance of the Employment Duties performed under the terms hereof as
follows:
2.1 Base Salary. As compensation for the services performed by
Employee hereunder, Employee shall receive a Base Salary, as follows:
(a) Initial Base Salary. Paxson and Employee acknowledge and
agree that Employee's current Base Salary in effect for the current
Employment Year shall be the per year amount set forth in Schedule I.
For purposes of this Agreement, "EMPLOYMENT YEAR" means a calendar
year ended December 31.
(b) Increase in Base Salary. For each Employment Year after
the current Employment Year (each such year a "SUCCESSIVE EMPLOYMENT
YEAR"), Employee's Base Salary shall be subject to such increase, if
any, for each such Successive Employment Year as shall be as
determined by the Responsible Officer (subject to the approval of the
Chairman of the Board of PCC) in an amount not less than ten percent
(10%) in excess of the existing base salary, subject to any freeze or
moratorium generally in effect to all senior or comparable (in terms
of duties and compensation) management of PCC.
(c) Bonus. Employee shall be entitled to an annual bonus,
based upon Paxson Group performance, in the amount payable and as
described in Schedule I annexed hereto.
(d) Manner of Payment. Employee's Base Salary shall be paid,
at Paxson's option, either (i) in equal bi-monthly installments, or
(ii) in accordance with the customary payroll policies of Paxson with
respect to its management employees.
2.2 Other Cash and Non-Cash Compensation.
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(a) In addition to Employee's Base Salary, Employee may, as
determined from time to time, in the sole discretion of Paxson, be
eligible to receive or participate in cash and non-cash compensation
programs, including, without limitation, annual and special cash and
non-cash bonus awards, grants of stock options, restricted stock,
"phantom-equity" and stock appreciation rights (collectively,
"NON-CASH COMPENSATION"). Employee's rights in respect of any Non-Cash
Compensation shall be governed under the terms of a separate document
or documents, if any Non-Cash Compensation is to be awarded to
Employee. Under no circumstance should this provision be deemed to
constitute any express or implied right, entitlement or interest of
Employee to be awarded or participate in, or obligation, agreement or
requirement of Paxson, to award, provide or offer to Employee, any
form of Non-Cash Compensation, all of which rights, entitlements,
interests, obligations, agreements or understandings are hereby
expressly disclaimed.
2.3 Business Expenses. Upon proper substantiation and documentation by
Employee, Paxson shall reimburse Employee promptly for all reasonable travel,
entertainment and other similar business expenses incurred by Employee in the
performance of Employee's duties under this Agreement. Reimbursement of
expenses will be made in accordance with applicable policies of Paxson. All
extraordinary disbursements and expenditures by Employee, and any disbursements
and expenditures that are not provided for in any budget established by Paxson,
must be approved in advance by Paxson.
2.4 Vacation. Employee shall be entitled to a minimum of three weeks
of paid vacation during each Employment Year, together with personal time off
in accordance with Paxson's employee handbook as in effect from time to time.
2.5 Benefits. The compensation specified above shall be exclusive of
and in addition to any benefits that may be available to Employee under any
employee pension plan, group life insurance plan, hospitalization plan, medical
service plan, death benefit plan, or any other employee benefit plan applicable
generally to the employees of Paxson, in accordance with their respective
positions, and which may be in effect at any time or from time to time during
the term of Employee's employment.
2.6 Withholding. Paxson shall be responsible for withholding from
Employee's compensation FICA, FUTA and other payroll and income taxes, as
required by law and such other amounts as may be directed by Employee.
SECTION 3 TERMINATION OF EMPLOYMENT; PAYMENTS UPON INVOLUNTARY TERMINATION
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3.1 Events. Employee's employment shall terminate on the earliest of
the following dates:
(a) Death. The date of Employee's death. In that event,
Paxson shall pay to Employee's legal representatives or named
beneficiaries (as Employee may designate in writing from time to time)
any life insurance and death benefits of the type described in Section
2.5 to which Employee is entitled, plus the amounts set forth in
Section 3.2 hereof in respect of an Involuntary Termination.
(b) Disability. If Paxson gives Employee written notice of
the termination of employment by reason of Employee's Disability, a
date specified in the notice which shall be not less than thirty (30)
days after the date on which the notice is received by Employee. For
purposes of this Agreement, "DISABILITY" means complete and permanent
inability of Employee by reason of illness or accident to perform the
Employment Duties. In that event, Paxson shall pay to Employee, or
Employee's legal representatives (as Employee may designate in writing
from time to time) any disability insurance and benefits of the type
described in Section 2.5 to which Employee is entitled, plus the
amounts set forth in Section 3.2 hereof in respect of an Involuntary
Termination.
(c) Involuntary Paxson Termination. If Paxson gives Employee
written notice that Paxson has determined to terminate Employee's
employment for any reason other than for Cause or Disability and
including, in any event (i) the Company's election to change the place
of employment to a location not in Palm Beach County, Florida; (ii)
the Company's failure to remedy a breach of this Agreement upon
written notice from Employee; or (iii) if, within one year after a
Change of Control (as defined below), Paxson terminates Employee's
employment with Paxson without Cause (an "INVOLUNTARY PAXSON
TERMINATION"), a date specified in such notice which shall be not less
than thirty (30) days after the date on which such notice is received
by Employee. In that event, Paxson shall pay to Employee the amounts
set forth in Section 3.2 hereof in respect of an Involuntary
Termination.
For purposes of this Agreement, a "Change of Control" will
occur if (a) none of Lowell W. Paxson, his estate, his wife, his
lineal descendants, or any trust created for the sole benefit of any
one or more of them during their lifetimes, or any combination of any
of the foregoing, shall (i) own, directly or indirectly, at least 35
percent of the issued and outstanding capital stock of PCC or (ii)
have voting control, directly or indirectly, equal to at least 51
percent of the issued and outstanding capital stock of PCC entitled to
vote in the election of Board of Directors of PCC; (b) the approval by
the shareholders of PCC of a reorganization, merger, or consolidation,
in each case, with respect to which persons who were shareholders
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of PCC immediately prior to this reorganization, merger or
consolidation do not, immediately thereafter, own more than 50 percent
of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated
company's (or any successor entity's) then outstanding securities; or
(c) a liquidation or dissolution of PCC or of the sale of all or at
least 80 percent of PCC's assets.
(d) Employee's Voluntary Retirement. If Employee gives Paxson
written notice of a Voluntary Retirement, the date specified in such
notice which shall be not less than ninety (30) days after the date on
which the notice is received by Paxson. In that event, Paxson shall
pay to Employee the amounts, if any, set forth in Section 3.2 hereof
in respect to a Voluntary Termination. For purposes of this Agreement,
"VOLUNTARY RETIREMENT" shall mean separation from service under
conditions which would constitute normal retirement.
(e) Cause. If Paxson gives Employee written notice of
termination of employment for Cause, the date specified in such notice
which shall be not less than thirty (30) days after the date on which
the notice is received by Employee; provided that the event specified
in such notice giving rise to termination for Cause shall not have
been remedied or cured by Employee. In that event, Paxson shall pay to
Employee the amounts, if any, set forth in Section 3.2 hereof in
respect of a Voluntary Termination. An Employee shall be subject to
termination for "CAUSE" when the termination results from:
(i) Employee'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 Employee'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 Paxson or would
subject any such broadcast station to fine or forfeiture;
(ii) Employee's wilfully taking of any action or inaction the
intended or reasonably foreseeable result of which would
cause Paxson or any Station to be in default under any
material contract, lease or other agreement;
(iii) Employee's dependence on alcohol or illegal drugs;
(iv) Refusal to perform according to or follow the legal
policies and directives of the Responsible Officer and
failing to cure such failure within 90 days
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from receipt of written notice setting forth the specifics of
such unsatisfactory performance;
(v) Conduct which could be reasonably inferred to detract
from the public image of the Paxson Group;
(vi) Employee's misappropriation, conversion or embezzlement
of the assets of Paxson or any affiliate of Paxson;
(vii) A material breach of this Agreement by Employee; or
(viii) Any representation of Employee in Section 7 of this
Agreement being false when made.
(f) Employee's Voluntary Resignation. If Employee gives Paxson
notice of a voluntary resignation (a "VOLUNTARY RESIGNATION"), a date
specified in such notice which shall be not less than ninety (30) days
after the date on which the notice is received by Paxson. In that
event, Paxson shall pay to Employee the amounts, if any, set forth in
Section 3.2 hereof in respect of a Voluntary Termination.
3.2 Payments Upon Termination. For purposes of this Agreement an
"INVOLUNTARY TERMINATION" shall be deemed to have occurred hereunder upon
Employee's termination as a result of death, Disability, or Involuntary Paxson
Termination, under and pursuant to Subsections 3.1(a), (b), (c), and a
"VOLUNTARY TERMINATION" shall be deemed to have occurred hereunder upon
Employee's termination as a result of a Voluntary Retirement, termination for
Cause, or for Employee's Voluntary Resignation, under and pursuant to
Subsections 3.1(d), (e) and (f); inclusive. Upon an Involuntary Termination or
a Voluntary Termination Employee shall be entitled to the following
compensation:
(a) Involuntary Termination Compensation: If Employee's
employment is terminated for any reason other than as a
result of a Voluntary Termination, Employee (or, in the case
of a termination as a result of the death of Employee,
Employee's estate) will continue to be paid the Employee's
Base Salary then in effect for the lesser of (i) twelve (12)
months and (ii) the remaining portion of the Agreement Term.
In addition, Employee shall be paid within thirty (30) days
of any Involuntary Termination an amount in cash equivalent
to the accrued vacation and personal time of Employee through
the Involuntary Termination Date plus any unpaid portion of
any previously awarded annual bonus. Employee shall also be
entitled to any benefits for which Employee qualifies for
benefits under any employee benefit plan available to the
Employee.
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(b) Voluntary Termination Compensation. If Employee's employment
is terminated for any reason constituting a Voluntary
Termination, Paxson shall have no further liability to
Employee, and no further payments shall be made to Employee,
except to the extent expressly provided for in this Agreement
or to the extent that Employee qualifies for benefits under
any employee benefit plan available to Employee.
3.3 Further Payments. Following the termination of Employee's
employment pursuant to this Section 3, Paxson shall have no further liability
to Employee, and no further payment shall be made to Employee, except to the
extent expressly provided for in this Agreement or to the extent that Employee
qualifies for benefits under any employee benefit plan available to Employee.
SECTION 4 INTANGIBLES
4.1 Memoranda, Notes and Records. All memoranda, notes, names and
address lists, records or other documents made or compiled by Employee or made
available to Employee during the term of employment concerning the business of
any member of the Paxson Group and any and all copies thereof shall be
delivered to Paxson upon the termination of Employee's employment for whatever
reason or at any other time upon request. Employee shall not at any time during
Employee's employment, or after the termination of employment, use for
Employee's own benefit or for the benefit of others, or divulge to others, any
information, trade secrets, knowledge, or data of a secret or confidential
nature or otherwise not readily available to members of the general public that
concerns the business or affairs of any member of the Paxson Group and whether
or not acquired by the Employee during the term of employment by Paxson.
4.2 Rights in Intangible Assets. Employee recognizes and acknowledges
that all rights in the formats, programming, concepts, approaches, copy and
titles embodied in the operation of the Paxson Group or any particular station
or the PAX Net network or any other broadcast network, and all changes,
additions and amendments thereto which may occur during or after the Term
hereof, belong exclusively to Paxson. Employee hereby assigns any and all
rights or interests Employee may have therein to Paxson. Employee shall not at
any time during Employee's employment, or after the termination of employment,
have or claim any right, title or interest in any trade name, patent,
trademark, copyright or other similar rights belonging to or used by Paxson and
shall not have or claim any right, title or interest in any material or matter
of any sort prepared for or used in connection with the business or promotion
of Paxson, whether produced, prepared or published in whole or in part by
Employee or by Paxson.
SECTION 5 [Reserved]
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SECTION 6 ARBITRATION
Except as otherwise provided to the contrary below, any dispute arising our of
or related to this Agreement that Paxson and Employee are unable to resolve by
themselves shall be settled by arbitration in West Palm Beach, Florida, by a
panel of three (3) arbitrators. Paxson and Employee shall each designate one
disinterested arbitrator, and the two arbitrators so designated shall select
the third arbitrator. The persons selected as arbitrators need not be
professional arbitrators, and persons such as lawyers, accountants and bankers
shall be acceptable. Before undertaking to resolve the dispute, each arbitrator
shall be duly sworn faithfully and fairly to hear and examine the matters in
controversy and to make a just award according to the best of Employee's
understanding. The arbitration hearing shall be conducted in accordance with
the commercial arbitration rules of the American Arbitration Association. The
written decision of a majority of the arbitrators shall be final and binding on
Paxson and Employee. The costs and expenses of the arbitration proceeding shall
be assessed between Paxson and Employee in a manner to be decided by a majority
of the arbitrators, and the assessment shall be set forth in the decision and
award of the arbitrators. Judgment on the award, if it is not satisfied within
thirty (30) days, may be entered in any court having jurisdiction over the
matter. No action at law or suit in equity based upon any claim arising our of
or related to this Agreement shall be instituted in any court by Paxson or
Employee against the other except (i) an action to compel arbitration pursuant
to this Section, (ii) an action to enforce the award of the arbitration panel
rendered in accordance with this Section, or (iii) any other action which,
under applicable law, may not be made subject to binding arbitration.
SECTION 7 REPRESENTATIONS OF EMPLOYEE
To induce Paxson to enter into this Agreement and to employ Employee, Employee
represents and warrants to Paxson as of the date hereof and as of each date of
payment of any compensation under the terms hereof as follows:
7.1 Absence of Conflicting Agreements. The execution, delivery and
performance of this Agreement by Employee does not conflict with result in a
breach of, or constitute a default under any covenant not to compete or any
other agreement, instrument, or license, to which Employee is a party or by
which Employee is bound.
7.2 Conduct. Employee has not:
(a) Been convicted of any felony;
(b) Committed any criminal act with respect to Employee's current or
any
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prior employment (including any criminal act involving a violation of the
Communication Act of 1934, as amended, or regulations promulgated by the FCC),
or
(c) Knowingly committed any act that materially threatened to result
in suspension, revocation, or adverse modification of any FCC license of any
broadcast station or which subjected any broadcast station to fine or
forfeiture.
7.3 Chemical Dependence. Employee is not dependent on alcohol or
illegal drugs. Employee recognizes that Paxson shall have the right to conduct
random drug testing of its employees and that Employee may be called upon in
such a manner.
SECTION 8 MISCELLANEOUS
8.1 Governing Law. This Agreement shall be construed in accordance
with, and shall be governed by, the laws of the State of Florida.
8.2 Entire Agreement. This Agreement supersedes any prior employment
agreement between Paxson and Employee, whether written or oral, and is
effective as of the date first written above. The instrument contains the
entire understanding and agreement between the parties relating to the subject
matter hereof. Neither this Agreement nor any provision hereof may be waived,
modified, amended, changed or terminated, except by an agreement in writing
signed by the party against whom enforcement of any waiver, modification,
change, amendment or termination is sought.
8.3 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, and all such counterparts shall together
constitute a single Agreement.
8.4 Provisions Severable. To the extent that any provision of this
Agreement is invalid, illegal, or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired thereby.
8.5 Headings. The section headings of this Agreement are for
convenience only and shall not be used in interpreting or construing this
Agreement.
8.6 Assignment of Agreement and Change of Control. This Agreement may
be assigned by Paxson without the prior written consent of Employee. Employee
may not assign this Agreement or any of its right or interests herein to any
other party.
8.7 Notices. All notices, demands and requests required or permitted
to be given under the provisions of this Agreement shall be (i) in writing,
(ii) delivered by personal delivery, or sent by commercial delivery service,
registered or certified mail, return receipt requested, (iii) deemed to have
been given on the date of personal delivery or the date set
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forth in the records of the delivery service or on the return receipt, and (iv)
addressed as follows:
If to Paxson: Anthony L. Morrison, Esq.
601 Clearwater Park Road
West Palm Beach, Florida 33401-6233
If to Employee: at the address set forth under employees signature on the
last page hereof
or to any such other or additional persons and addresses as the parties may
from time to time designate in a writing delivered in accordance with this
Section 8.7.
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8.8 Waiver. The waiver by Paxson of a breach of any provision by
Employee or the failure of either Paxson or Employee to exercise any of the
rights set forth herein shall not operate or be construed as a waiver of any
subsequent breach by Employee or be deemed to be a waiver by said party of any
of its rights hereunder. No waiver by any party at any time, express or
implied, of any breach of any provision of this Agreement shall be deemed a
waiver of a breach of any other provision of this Agreement or a consent to any
subsequent breach of the same or other provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective on the day and year first written above.
WITNESS: PAXSON COMMUNICATIONS MANAGEMENT COMPANY, INC.
- -------
- -------------------------- By:
WITNESS:
- -------
- --------------------------
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EXHIBIT 10.215
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT made as of this 11th day of June, 1998, (this
"Agreement") by and between Paxson Communications Corporation, a Delaware
corporation with its principal place of business at 601 Clearwater Park Road,
West Palm Beach, Florida 33401-6233 ("Company") and Anthony L. Morrison, an
individual, currently residing at the address set forth under such individual's
signature below (the "Executive") (collectively, the "Parties").
WHEREAS, Company desires to employ Executive as Vice President, General Counsel
and Chief Legal Officer, and the Parties desire to enter into this agreement to
secure Executive's employment as Vice President, General Counsel and Chief
Legal Officer during the term hereof, all on the terms and conditions set forth
herein.
NOW, THEREFORE, the Parties agree as follows:
1. The Company agrees to employ the Executive and the Executive agrees to
serve the Company as Vice President, General Counsel and Chief Legal
Officer based primarily at the Company's West Palm Beach, Florida
offices, on the terms and conditions hereinafter set forth.
2. Employment of the Executive by the Company pursuant to this Agreement
will be for a five (5) year period commencing effective January 1,
1998, unless sooner terminated, pursuant to Paragraph 7 hereof (the
"Term of Employment").
3. Subject to the direction and control of the Chairman of the Board and
Chief Executive Officer, and such other senior executive officer as
the Chairman of the Board may direct to whom Executive will report,
the Executive shall have all of the power and authority inherent in
the position of Vice President, General Counsel and Chief Legal
Officer and shall supervise and be responsible for the operations and
management of the Company and its subsidiaries. The Executive shall
also have such other executive powers and duties, consistent with his
responsibilities as Vice President, General Counsel and Chief Legal
Officer, as may, from time to time, be prescribed by the Chairman of
the Board and Chief Executive Officer. The Executive agrees to render
his services under this Agreement loyally and faithfully,
<PAGE> 2
to the best of his abilities and in substantial conformance with all
laws, rules and Company policies, and in connection therewith, will
not improperly or without good cause, in the best interest of the
Company, disclose any trade secrets or other confidential information
of the Company. Without limiting the foregoing, except as expressly
modified herein, Executive shall be subject to all of the Company's
policies including payola, plugola and conflicts of interests, as well
as the following:
(1) Executive will comply with all the Company and professional
standards governing Executive's objectivity in the
performance of Executive's duties, including restrictions on
outside activities, investments, business interests, or other
involvements which could compromise Executive's objectivity
or create an impression of conflict of interest. Executive
will not, without the prior approval of the Chairman of the
Board or the Chief Executive Officer , accept any gift,
compensation, or gratuity (which excludes business meals and
entertainment received by Executive in the ordinary course of
business) from any person or entity with which the the
Company or any of its broadcast properties is or may be in
competition or in any instance where there is a stated or
implied expectation of favorable treatment of that person or
entity. Executive will not, without the prior written
approval of the Chairman of the Board or the Chief Executive
Officer, take advantage of any business opportunity or
situation or engage in any enterprise or venture of which the
the Company may have an interest on his or her own behalf, if
said business opportunity or situation, enterprise or venture
is related in any way to or is similar to the business of the
the Company.
(2) In performing Executive's duties under this Agreement,
Executive shall conduct himself with due regard to social
conventions, public morals and standards of decency, and will
not cause or permit any situation or occurrence which would
tend to degrade, scandalize, bring into public disrepute, or
otherwise lower the community standing of Executive or the
Company's public image.
4. Company will pay the Executive a base salary (the "Base Salary"), to
be paid on the same payroll cycle as other salaried employees of the
Company, at an annual rate for 1998 of $196,875, which Base Salary
shall be increased annually, effective
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January 1 of each year thereafter during the Term of Employment, by an
amount equal to not less than 10% of the Base Salary in effect for the
most recently ended calendar year. 1.
In addition to the Base Salary, the Executive agrees to participate in
the Company's Executive Bonus Plan and receive bonus awards from time
thereunder, subject to the satisfaction of the terms and conditions
set forth therein. Without limiting the foregoing, nothing shall
preclude Executive from receiving special cash bonus awards not
included within the Executive Bonus Plan, as determined from time in
the sole discretion of the Company. In addition to Executive's Base
Salary and participation in the Executive Bonus Plan, Executive may,
as determined from time to time, in the sole discretion of the
Company, be eligible to receive or participate in various non-cash
compensation programs, including, without limitation, annual and
special non-cash bonus awards, grants of stock options, restricted
stock, "phantom-equity" and stock appreciation rights (collectively,
"Non-Cash Bonus Awards"). Employee's rights in respect of any Non-Cash
Compensation shall be governed under the terms of a separate document
or documents, if any Non-Cash Compensation is to be awarded to
Employee.
The Company will have the right to withhold from payments otherwise
due and owing to Executive or to require the Executive to remit to the
Company in cash upon demand an amount sufficient to satisfy any
federal (including FICA and FUTA amounts), state, and/or local
withholding tax requirements at the time the Executive recognizes
income for federal, state, and/or local tax purposes with respect to
any payments to Executive under the terms hereof or under any other
compensation arrangements, including, Non-Cash Compensation. If any
excise tax withholding by the Company is required pursuant to Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code") on
an "excess parachute payment," as this term is defined in Section 4999
of the Code, in connection with any payments made under the terms
hereof, or under any other compensation arrangements, including, the
Executive Bonus Plan and any Non-Cash Compensation, the Company will
be required to pay compensation to the Executive ("Gross-Up Payment")
in an amount equal to the excise tax withholding required to be
withheld by the Company on such amounts paid to Executive and the
Gross-Up Payment itself. The Company then will withhold the Gross-Up
Payment to satisfy this withholding obligation. Except as
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otherwise provided by this Paragraph 4, the Company will not be liable
to Executive for any tax consequences incurred by Executive with
respect to payments to Executive under the terms hereof or under any
other compensation arrangements, including, Non-Cash Compensation.
5. During the Term of Employment, the Executive shall be eligible to
participate in all employee benefit plans and arrangements now in
effect or which may hereafter be established, which are generally
available to other senior executives of the Company, including,
without limitation, all life, group insurance and medical plans and
all disability, retirement and other employee benefit plans of the
Company, as long as any such plan or arrangement remains generally
applicable to other senior executives of the Company.
6. The Executive shall be reimbursed for all reasonable expenses incurred
by him in the discharge of his duties, including, but not limited to,
expenses for entertainment and travel. The Executive shall account to
the Company for all such expenses.
7. Notwithstanding the provisions of Paragraph 2 of this Agreement, the
Executive's Term of Employment pursuant to this Agreement shall
terminate on the earliest of the following dates:
(1) The date of the Executive's death. In such event, the Company
shall pay to the Executive's legal representatives or named
beneficiaries (as the Executive may designate from time to
time in a writing delivered to the Company) the Executive's
Base Salary for a one (1) year period following the date of
the Executive's death;
(2) If the Board of Directors chooses to give the Executive
notice of termination of his employment due to his
disability, as defined in the Company's Long Term Disability
Plan, a date specified in the notice which shall be not less
than thirty (30) days after the date on which the notice is
received by the Executive. In the event that the Executive's
employment is terminated due to his disability under this
subparagraph (b), the Executive or the Executive's legal
representative shall continue to be paid the Executive's Base
Salary then in effect for the lesser of (i) two years and
(ii) the remaining Term of Employment. If, prior to the
specified termination date in such notice by the
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Company, the Executive's illness or disability has terminated
and the Executive has resumed his duties under this
Agreement, the Executive shall be entitled to resume
employment under this Agreement as though such notice had not
been given. The opinion of the Executive's physician as to
disability shall be deemed presumptively valid;
(3) If the Board of Directors chooses to give the Executive
notice of termination of his employment for "good cause", a
date specified in the notice, consistent with the provisions
of subparagraph (c). The term "good cause" as used in this
Agreement shall mean the occurrence of any of the following
events:
(1) Executive's arrest for the commission of (A) a
felony, (B) any criminal act with respect to
Executive's employment (including any criminal act
involving a violation of the Communications Act of
1934, as amended, or regulations promulgated by the
Federal Communications Commission), or (C) any act
that materially threatens to result in suspension,
revocation, or adverse modification of any FCC
license of any broadcast station owned by any
affiliate of the Company or would subject any such
broadcast station to fine or forfeiture;
(2) Executive's taking of any action or inaction which
would cause the Company to be in default under any
material contract, lease or other agreement;
(3) Executive's dependence on alcohol or illegal drugs;
(4) Failure or refusal to perform according to or follow
the lawful policies and directives of the Chairman
of the Board or the Chief Executive Officer;
(5) Executive's misappropriation, conversion or
embezzlement of the assets of the Company or any
affiliate of the Company;
(6) A material breach of this Agreement by Executive,
including engaging in action in violation of
Paragraph 8 of this Agreement; or
(7) Any representation of Executive in Paragraph 9 of
this Agreement being false when made; or
(8) The Executive voluntarily, including retirement,
ceases his employ with the Company at a time when
the Company is not in material breach of this
Agreement.
5
<PAGE> 6
In the event of a termination under this subparagraph (c),
other than pursuant to clause (c)(vIII), the Company shall
notify the Executive of its intentions to terminate his
employment and the specific reason(s) therefore, and the
Executive, on at least ten (10) business days notice, shall
have had an opportunity to respond thereto; and, provided
further, if the basis for such termination is susceptible of
being cured by the Executive, the Company shall afford the
Executive a reasonable period, not to exceed 60 days, to
effect such cure, and the Executive's employment may not be
terminated during said period.
In the event of termination for good cause, the Company will
be released from all further obligation to the Executive
under this Agreement, except for such salary as may have been
earned or bonus award made but not paid prior to the
termination;
(4) The date on which the Board of Directors chooses to notify
the Executive that the Board of Directors, in its sole
discretion, has determined that it is in the best interest of
the Company to terminate the Executive's employment. In the
event of such termination, the Executive will continue to be
paid the Executive's Base Salary then in effect for the
lesser of (i) two years and (ii) the remaining Term of
Employment;
(5) On the date that the Executive terminates his employment for
Good Reason. For purposes of this subparagraph (e), "Good
Reason" shall mean that the Company has breached any of the
material terms, conditions and provisions of this Agreement.
In such case, the Executive shall notify the Company of his
intentions to terminate his employment and the specific
reason(s) therefor, and the Company, on at least ten (10)
business days notice, shall have an opportunity to respond
thereto; and, provided further, if the basis for such
termination is susceptible of being cured by the Company, the
Executive shall afford the Company a reasonable period, not
to exceed 60 days, to effect such cure, and the Executive may
not terminate his employment during said 60 day period. In
the event of such termination, the Executive will continue to
be paid Executive's Base Salary then in effect for the lesser
of (i) two years and (ii) the remaining Term of Employment;
6
<PAGE> 7
(6) If, within one year after a Change of Control (as defined
below), the Company terminates Executive's employment with
the Company without Cause, the Executive will continue to be
paid Executive's Base Salary then in effect for the lesser of
(i) two years and (ii) the remaining Term of Employment. For
purposes of this Agreement:
(1) A "Change of Control" will occur if (a) none of
Lowell W. Paxson, his estate, his wife, his lineal
descendants, or any trust created for the sole
benefit of any one or more of them during their
lifetimes, or any combination of any of the
foregoing, shall (i) own, directly or indirectly, at
least 35 percent of the issued and outstanding
capital stock of the Company or (ii) have voting
control, directly or indirectly, equal to at least
51 percent of the issued and outstanding capital
stock of the Company entitled to vote in the
election of Board of Directors of the Company; (b)
the approval by the shareholders of the Company of a
reorganization, merger, or consolidation, in each
case, with respect to which persons who were
shareholders of the Company immediately prior to
this reorganization, merger or consolidation do not,
immediately thereafter, own more than 50 percent of
the combined voting power entitled to vote generally
in the election of directors of the reorganized,
merged or consolidated company's (or any successor
entity's) then outstanding securities; or (c) a
liquidation or dissolution of the Company or of the
sale of all or at least 80 percent of the Company's
assets.
(7) The expiration of the Term of Employment as described in
Paragraph 2 of this Agreement.
Following the termination of the Executive's employment under
this Agreement upon the original stated Term of Employment,
the Company will have no further liability to the Executive
hereunder and no further payments will be made to him, except
as provided in subparagraphs (a) through (f) above or any
bonus awards not paid as of such termination, and except to
the extent that the Executive qualifies for benefits under
any employee benefit plan available to the Executive as
provided in Paragraph 5.
7
<PAGE> 8
8. Executive agrees that from the date of this Agreement until
the Covenant Termination Date (as defined in Paragraph 8(a)
below), Executive will not, directly or indirectly, whether
as sole proprietor, partner, lessor, venturer, stockholder,
director, officer, employee, consultant or in any other
capacity as principal or agent or through any person,
subsidiary, affiliate or employee acting as nominee or agent,
engage or participate in any of the following actions:
(1) Owning, leasing, managing, operating, controlling or
providing financial assistance (other than (i) in
connection with services provided by Executive as
the employee of a commercial or investment bank or
similar financial services business or consulting
business which extends credit to, makes investments
in, or provides financial advice or consulting
services to, broadcasting companies; (ii) as an
attorney in a practice of law) to any national (e.g.
reaching more than 30% of nationwide television
households) broadcast or cable television network or
television programming service;
(2) Influencing or attempting to influence any person or
entity who is a contracting party with the Company
or any subsidiary thereof (the "Paxson Group") to
terminate any written or oral agreement with such
member of the Paxson Group; or
(3) Hiring or attempting to hire for employment any
person who is employed by any member of the Paxson
Group or attempting to influence any such person to
terminate employment with any member of the Paxson
Group.
Nothing herein shall prohibit Executive from investing in any
broadcast company where such investment does not cause Executive to be
an "affiliate" of such entity under the terms of the Securities Act of
1993.
(2) "COVENANT TERMINATION DATE" means:
(1) If Executive's employment is terminated pursuant to a
termination for good reason pursuant to Paragraph
7(e), the earlier of (i) the last day
8
<PAGE> 9
of the 6th full calendar month after the termination
of employment and (ii) the expiration of the Term of
Employment.
(2) If Executive's employment is terminated pursuant to
a termination for good cause under Paragraph 7(c) or
a change of control under Paragraph 7(f), the last
day of the 12th full calendar month after the date
on which Executive's employment is terminated.
(3) If Executive's employment is terminated pursuant to
a termination for any reason other than by Executive
under Paragraph 7(e), or by Company under Paragraphs
7(c) and 7(f), the date on which Executive's
employment is terminated.
(3) Executive agrees that the Covenant Not to Compete is a
material part of Executive's obligations under this Agreement
for which the Company has agreed to compensate Executive as
provided in this Agreement. Accordingly, if Executive at any
time materially breaches this Covenant Not to Compete and the
Company is in compliance with all of its obligations
hereunder and under any other compensation agreements or
arrangements with Executive, then all rights of Executive to
compensation under this Agreement shall immediately
terminate, Company shall have no further liability to
Executive and no further payments (if any are otherwise
required to be made hereunder) shall be required to be made
to Executive.
(4) Executive expressly agrees that the services (s)he will
render are of a special and extraordinary character that
gives them a unique value; that the loss of such services
could not be reasonably or adequately compensated by an
action for damages; and that the Company may enforce this non
compete covenant without proof of actual damages. Executive
expressly agrees that his(her) services have special and
unique value to the Company and that the Company would be
irreparably injured by a breach of this Paragraph 8. Further,
Executive acknowledges the legitimate business interest of
the Company in the protection of its trade secrets,
confidential business lists and records, listener/client
goodwill and the training provided during employment.
Necessarily, then, any relationship of Executive with another
broadcast entity in the markets enumerated above during this
non-compete period would involve the transfer of one or all
of these items to that entity. The
9
<PAGE> 10
Executive agrees that the provisions in these paragraphs of
Paragraph 8 are reasonably necessary for the protection of
the Company's business; that they are not unreasonably
restrictive of his(her) rights; and that (s)he feels that any
of these restrictions placed upon him(her) are not
prejudicial to the public interest.
(5) If the covenant in this Paragraph 8 is held to be
unenforceable in any jurisdiction because of the duration or
scope thereof, the court making such determination shall have
the power to reduce the duration and/or scope of the
provision or covenant, and the provision or covenant in its
reduced form shall be enforceable; provided, however, that
the determination of such court shall not affect the
enforceability of this Paragraph 8 in any other jurisdiction.
9. To induce the Company to enter into this Agreement and to employ
Executive Executive, Executive represents and warrants to the Company
as of the date hereof and as of each date of payment of any
compensation under the terms hereof as follows:
(1) The execution, delivery and performance of this Agreement by
Executive does not conflict with result in a breach of, or
constitute a default under any covenant not to compete or any
other agreement, instrument, or license, to which Executive
is a party or by which Executive is bound.
(2) Executive has not:
(1) Been convicted of any felony;
(2) Committed any criminal act with respect to
Executive's current or any prior employment
(including any criminal act involving a violation of
the Communication Act of 1934, as amended, or
regulations promulgated by the FCC), or
(3) Committed any act that materially threatened to
result in suspension, revocation, or adverse
modification of any FCC license of any broadcast
station or which subjected any broadcast station to
fine or forfeiture.
(3) Executive is not dependent on alcohol or illegal drugs.
Executive recognizes that the Company shall have the right to
conduct random drug testing of its employees and that
Executive may be called upon in such a manner.
10
<PAGE> 11
10. Any dispute regarding this Agreement shall be decided by arbitration
by a single arbitrator in West Palm Beach, Florida, in accordance with
the Expedited Arbitration Rules of the American Arbitration
Association then obtaining unless the Parties mutually agree
otherwise; and, provided further, that both Parties will be entitled
to all rights of discovery in connection with such arbitration,
including, without limitation, all discovery rights described in the
Florida Rules of Civil Procedure. This undertaking to arbitrate shall
be specifically enforceable. The decision rendered by the arbitrator
will be final and judgment may be entered upon it in accordance with
appropriate laws in any court having jurisdiction thereof. During any
arbitration proceeding initiated by the Executive, the Company agrees,
to the extent that it may legally do so, to continue the Executive in
the Company's long-term disability, life and medical insurance plans.
11. Both during and after the Term of Employment, neither Party will
disclose the financial terms of this Agreement to persons not involved
in the operations of the business of the Company, except as required
by applicable law, regulation, the rules or regulations of a stock
exchange or association on which securities of the Company or any
parent company thereof are listed or legal process (including, without
limitation, oral questions, interrogatories, requests for information
or documents, subpoenas, civil investigative demands, orders,
judgments or decrees). As to persons involved in the operations of the
business of the Company, disclosure of such terms may be made only on
a need-to-know basis. This restriction shall not apply to members of
the Executive's immediate family nor to the Executive's professional
advisers, lenders and investors, provided such persons agree to keep
the financial terms confidential and not disclose them to third
parties.
12. Any waiver by either Party of a breach of any provision of this
Agreement shall not operate as to be construed to be a waiver of any
other breach of such provision of this Agreement. The failure of a
Party to insist upon strict adherence to any term of this Agreement on
one or more occasions shall not be considered a waiver or deprive that
Party of the right thereafter to insist upon strict adherence to that
term or any other term of this Agreement. Neither this Agreement nor
any part of it may be waived, changed or terminated orally, and any
amendment or modification must be in writing and signed by each of the
Parties. Any waiver of any right of the Company hereunder or any
amendment hereof shall require the approval of the
11
<PAGE> 12
members of the Compensation Committee of the Board of Directors who
are not employees of the Company or, if the Company does not have a
Compensation Committee or the Compensation Committee does not have any
members who are not employees of the Company, by the members of the
Board of Directors who are not employees of the Company. Until such
approval or waiver has been obtained, no such waiver or amendment
shall be effective.
13. The obligations and rights of the Executive under this Agreement shall
inure to the benefit of and shall be binding upon the heirs and legal
representatives of the Executive. Neither Party may assign this
Agreement without the prior written consent of the other.
14. This Agreement may be executed in any number of counterparts, each of
which shall, when executed, be deemed to be an original and all of
which shall be deemed to be one and the same instrument.
15. No action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or
agreements contained herein or made pursuant hereto.
16. This Agreement will be governed and construed and enforced in
accordance with the laws of the State of Florida.
17. This Agreement contains the entire understanding of the Parties
relating to the subject matter of this Agreement and supersedes all
other prior written or oral agreements. The Executive acknowledges
that, in entering into this Agreement, he does not rely on any
statements or representations not contained in this Agreement.
18. Any term or provision of this Agreement which is determined to be
invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement or affecting the
validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction.
12
<PAGE> 13
19. Except as otherwise specifically provided in this Agreement, all
notices and other communications required or permitted to be given
under this Agreement shall be in writing and delivery thereof shall be
deemed to have been made when such notice shall have been either (i)
deposited in first class mail, postage prepaid, return receipt
requested, or any comparable or superior postal or air courier service
then in effect, or (ii) transmitted by hand delivery, telegram, telex,
telecopier or facsimile transmission, to the party entitled to receive
the same at the address indicated below or at such other address as
such party shall have specified by written notice to the other party
hereto given in accordance herewith:
if to the Company: Lowell W. Paxson
Chairman
Paxson Communications Corporation
601 Clearwater Park Road
West Palm Beach, Florida 33401-6233
if to the Executive: address below Executive's signature below
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties as of the first date written above.
Name: Anthony L. Morrison
Address:
-------------------------------
PAXSON COMMUNICATIONS CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
13
<PAGE> 1
EXHIBIT 21
Paxson Communications Corporation
List of Subsidiaries
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF
INCORPORATION/
NAME ORGANIZATION
- ----- ---------------
<S> <C>
Florida
(except as noted)
America 51, L.P. (1) Delaware
Bud Hits, Inc.
Bud Songs, Inc.
Channel 29 of Charleston, Inc. Delaware
Channel 42 of Little Rock, Inc. Delaware
Channel 56 of Orlando, Inc.
Channel 64 of Scranton, Inc. Delaware
Clearlake Productions, Inc.
Cocola Media Corporation of Florida (f/k/a Cocola Broadcasting Companies)(3) Delaware
Cocola Media Corporation of San Francisco California
Hispanic Broadcasting, Inc.
Infomall Cable Network, Inc. Delaware
Infomall of Los Angeles, Inc.
Jetstar Development, Inc.
Ocean State Television, LLC (f/k/a Offshore Television Company, LLC)(2) Delaware LLC
PAX Hits Publishing, Inc. (f/k/a PAX Tunes, Inc.)
PAX Internet, Inc. (f/k/a - Excel Marketing Enterprises, Inc.)
PAX Net, Inc. Delaware
PAX Net Television Productions, Inc.
Paxson Akron License, Inc.
Paxson Albany License, Inc.
Paxson Albuquerque License, Inc.
Paxson Atlanta License, Inc.
Paxson Battle Creek License, Inc.
Paxson Birmingham License, Inc.
Paxson Boston License, Inc.
Paxson Boston-46 License, Inc.
Paxson Boston-68 License, Inc.
Paxson Buffalo License, Inc.
Paxson Cedar Rapids License, Inc.
Paxson Charleston License, Inc.
Paxson Chicago License, Inc.
Paxson Communications License Company, LLC Delaware LLC
Paxson Communications LPTV, Inc.
Paxson Communications Management Company
Paxson Communications of Akron-23, Inc.
Paxson Communications of Albany-55, Inc.
Paxson Communications of Albuquerque-14, Inc.
Paxson Communications of Atlanta-14, Inc.
Paxson Communications of Battle Creek-43, Inc.
Paxson Communications of Birmingham-44, Inc.
</TABLE>
1
<PAGE> 2
Paxson Communications Corporation
List of Subsidiaries
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF
INCORPORATION/
NAME ORGANIZATION
- ----- ---------------
<S> <C>
Florida
(except as noted)
Paxson Communications of Boston-46, Inc.
Paxson Communications of Boston-60, Inc.
Paxson Communications of Boston-68, Inc.
Paxson Communications of Buffalo-51, Inc.
Paxson Communications of Cedar Rapids-48, Inc.
Paxson Communications of Charleston-29, Inc.
Paxson Communications of Chicago-38, Inc.
Paxson Communications of Cleveland-67, Inc.
Paxson Communications of Dallas-68, Inc.
Paxson Communications of Davenport-67, Inc.
Paxson Communications of Dayton-26, Inc.
Paxson Communications of Decatur-23, Inc.
Paxson Communications of Denver-59, Inc.
Paxson Communications of Des Moines-39, Inc.
Paxson Communications of Detroit-31, Inc.
Paxson Communications of Fayetteville-62, Inc.
Paxson Communications of Fresno-61, Inc.
Paxson Communications of Green Bay-14, Inc.
Paxson Communications of Greensboro-16, Inc.
Paxson Communications of Greenville-38, Inc.
Paxson Communications of Hartford-18, Inc.
Paxson Communications of Honolulu-66, Inc. (f/k/a - Paxson Communications of Hawaii-66, Inc.)
Paxson Communications of Houston-49, Inc.
Paxson Communications of Indianapolis-63, Inc.
Paxson Communications of Jackson-51, Inc.
Paxson Communications of Jacksonville-35, Inc.
Paxson Communications of Kansas City-50, Inc.
Paxson Communications of Knoxville-54, Inc.
Paxson Communications of Lexington-67, Inc.
Paxson Communications of Little Rock-42, Inc.
Paxson Communications of Los Angeles-30, Inc.
Paxson Communications of Los Angeles-63, Inc.
Paxson Communications of Louisville-21, Inc.
Paxson Communications of Memphis-50, Inc.
Paxson Communications of Miami-35, Inc.
Paxson Communications of Milwaukee-55, Inc.
Paxson Communications of Minneapolis-41, Inc.
Paxson Communications of Mobile-61, Inc.
Paxson Communications of Montgomery-22, Inc.
Paxson Communications of Nashville-28, Inc. (formerly - Paxson Communications of Cookeville-28)
Paxson Communications of New London-26, Inc.
Paxson Communications of New Orleans-49, Inc.
</TABLE>
2
<PAGE> 3
Paxson Communications Corporation
List of Subsidiaries
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF
INCORPORATION/
NAME ORGANIZATION
- ----- ---------------
<S> <C>
Florida
(except as noted)
Paxson Communications of New York-31, Inc.
Paxson Communications of New York-43, Inc.
Paxson Communications of Norfolk-49, Inc.
Paxson Communications of Odessa-30, Inc.
Paxson Communications of Oklahoma City-62, Inc.
Paxson Communications of Orlando-56, Inc.
Paxson Communications of Philadelphia-61, Inc.
Paxson Communications of Phoenix-13, Inc.
Paxson Communications of Phoenix-51, Inc.
Paxson Communications of Pittsburgh-40, Inc.
Paxson Communications of Portland-22, Inc.
Paxson Communications of Portland-23, Inc.
Paxson Communications of Providence-69, Inc.
Paxson Communications of Raleigh-Durham-47, Inc.
Paxson Communications of Roanoke-38, Inc.
Paxson Communications of Sacramento-29, Inc.
Paxson Communications of Salt Lake City-30, Inc.
Paxson Communications of San Antonio-26, Inc.
Paxson Communications of San Jose-65, Inc.
Paxson Communications of San Juan, Inc.
Paxson Communications of Scranton-64, Inc.
Paxson Communications of Seattle-33, Inc.
Paxson Communications of Shreveport-21, Inc.
Paxson Communications of Spokane-34, Inc.
Paxson Communications of Springfield-34, Inc.
Paxson Communications of St. Croix-15, Inc.
Paxson Communications of St. Louis-13, Inc. (formerly - Paxson Communications of Minneapolis-45, Inc.)
Paxson Communications of Syracuse-56, Inc.
Paxson Communications of Tampa-66, Inc.
Paxson Communications of Tucson-46, Inc.
Paxson Communications of Tulsa-44, Inc.
Paxson Communications of Washington-60, Inc.
Paxson Communications of Washington-66, Inc.
Paxson Communications of Wausau-46, Inc.
Paxson Communications of West Palm Beach-67, Inc.
Paxson Communications Television, Inc.
Paxson Communications Unrestricted Holdings, Inc. Delaware
Paxson Dallas License, Inc.
Paxson Davenport License, Inc.
Paxson Dayton License, Inc.
Paxson Decatur License, Inc.
Paxson Denver License, Inc.
</TABLE>
3
<PAGE> 4
Paxson Communications Corporation
List of Subsidiaries
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF
INCORPORATION/
NAME ORGANIZATION
- ----- ---------------
<S> <C>
Florida
(except as noted)
Paxson Des Moines License, Inc.
Paxson Detroit License, Inc.
Paxson Development, Inc.
Paxson Fayetteville License, Inc.
Paxson Fresno License, Inc.
Paxson Green Bay License, Inc.
Paxson Greensboro License, Inc.
Paxson Greenville License, Inc.
Paxson Hartford License, Inc.
Paxson Hawaii License, Inc.
Paxson Houston License, Inc.
Paxson Indianapolis License, Inc.
Paxson Jackson License, Inc.
Paxson Jacksonville License, Inc.
Paxson Kansas City License, Inc.
Paxson Knoxville License, Inc.
Paxson Lexington License, Inc.
Paxson Little Rock License, Inc.
Paxson Los Angeles License, Inc.
Paxson Martinsburg License, Inc.
Paxson Merchandising & Licensing, Inc.
Paxson Miami-35 License, Inc.
Paxson Milwaukee License, Inc.
Paxson Minneapolis License, Inc.
Paxson Mobile License, Inc.
Paxson Montgomery License, Inc.
Paxson New York License, Inc.
Paxson Odessa License, Inc.
Paxson Oklahoma City License, Inc.
Paxson Orlando License, Inc.
Paxson Philadelphia License, Inc.
Paxson Phoenix License, Inc.
Paxson Pittsburgh License, Inc.
Paxson Portland License, Inc.
Paxson Productions, Inc.
Paxson Raleigh License, Inc.
Paxson Roanoke License, Inc.
Paxson Sacramento License, Inc.
Paxson Salem License, Inc.
Paxson Salt Lake City License, Inc.
Paxson San Jose License, Inc.
Paxson Scranton License, Inc.
Paxson Seattle License, Inc.
</TABLE>
4
<PAGE> 5
Paxson Communications Corporation
List of Subsidiaries
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF
INCORPORATION/
NAME ORGANIZATION
- ----- ---------------
<S> <C>
Florida
(except as noted)
Paxson Shreveport License, Inc.
Paxson Spokane License, Inc.
Paxson Sports of Miami, Inc.
Paxson Sports Ventures Company
Paxson Springfield License, Inc.
Paxson St. Croix License, Inc.
Paxson St. Louis License, Inc.
Paxson Syracuse License, Inc.
Paxson Tampa-66 License, Inc.
Paxson Television Productions, Inc. (f/k/a Paxson Live Link Productions, Inc.)
Paxson Television, Inc.
Paxson Tennessee License, Inc.
Paxson Tucson License, Inc.
Paxson Tulsa License, Inc.
Paxson Washington License, Inc.
Paxson Wausau License, Inc.
PCC Direct, Inc. (formerly Paxson Merchandising Ventures, Inc.)
Roberts Broadcasting Company of Albuquerque Delaware
S&E Network, Inc. Puerto Rico
South Texas Vision, LLC Texas LLC
Syracuse Minority Television, Inc. Delaware
The Infomall TV Network, Inc. Delaware
Travel Channel Acquisition Corporation Delaware
United Broadcast Group II, Inc. Texas
WinStar Christiansted, Inc. Delaware
WinStar Odessa, Inc. Delaware
WinStar Waterville, Inc. Delaware
(1) 49% interest
(2) 50% interest
(3) 90% interest
</TABLE>
5
<PAGE> 1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-60819, 333-20163 and 333-72623), of Paxson
Communications Corporation of our report dated March 13, 2000 relating to the
financial statements and financial statement schedules, which appears in this
Form 10-K.
PRICEWATERHOUSECOOPERS LLP
Fort Lauderdale, Florida
March 13, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000923877
<NAME> PAXSON COMMUNICATIONS CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 125,189
<SECURITIES> 124,987
<RECEIVABLES> 44,324
<ALLOWANCES> 4,255
<INVENTORY> 0
<CURRENT-ASSETS> 380,866
<PP&E> 262,902
<DEPRECIATION> 72,994
<TOTAL-ASSETS> 1,690,087
<CURRENT-LIABILITIES> 143,011
<BONDS> 228,694
949,807
0
<COMMON> 63
<OTHER-SE> 96,658
<TOTAL-LIABILITY-AND-EQUITY> 1,690,087
<SALES> 248,362
<TOTAL-REVENUES> 248,362
<CGS> 0
<TOTAL-COSTS> 473,613
<OTHER-EXPENSES> 57,908
<LOSS-PROVISION> 6,164
<INTEREST-EXPENSE> 50,286
<INCOME-PRETAX> (217,629)
<INCOME-TAX> 57,257
<INCOME-CONTINUING> (160,372)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (314,579)
<EPS-BASIC> (5.10)
<EPS-DILUTED> (5.10)
</TABLE>
