<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12
</TABLE>
PAXSON COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
PAXSON COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
(LOGO)
(PAXSON COMMUNICATION CORPORATION LOGO)
April 5, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Paxson Communications Corporation (the "Company"), which will be held at The
Ritz-Carlton Amelia Island, 4750 Amelia Island Parkway, Amelia Island, Florida
32034, on May 1, 2000, at 11:00 a.m., local time.
Please note that attendance at the Annual Meeting will be limited to
stockholders as of the record date (or their authorized representatives) and to
our invited guests. If your shares are registered in your name and you plan to
attend the Annual Meeting, please mark the appropriate box on the enclosed proxy
card and you will be pre-registered for the meeting (if your shares are held of
record by a broker, bank or other nominee and you plan to attend the meeting,
you must also pre-register by returning the registration card forwarded to you
by your bank or broker). Stockholders who are not pre-registered will only be
admitted to the Annual Meeting upon verification of stock ownership.
The notice of the meeting and proxy statement on the following pages
contain information concerning the business to be considered at the meeting.
Please give these proxy materials your careful attention. It is important that
your shares be represented and voted at the Annual Meeting regardless of the
size of your holdings. Accordingly, whether or not you plan to attend the Annual
Meeting, please complete, sign, and return the accompanying proxy card in the
enclosed envelope in order to make sure your shares will be represented at the
Annual Meeting. Stockholders who attend the Annual Meeting will have the
opportunity to vote in person.
Sincerely,
/s/ Lowell W. Paxson
LOWELL W. PAXSON
Chairman of the Board
<PAGE> 3
PAXSON COMMUNICATIONS CORPORATION
601 CLEARWATER PARK ROAD
WEST PALM BEACH, FLORIDA 33401-6233
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 1, 2000
The Annual Meeting of Stockholders of Paxson Communications Corporation
will be held at The Ritz-Carlton Amelia Island, 4750 Amelia Island Parkway,
Amelia Island, Florida 32034, on May 1, 2000, at 11:00 a.m., local time, for the
following purposes:
1. To approve an amendment to our Certificate of Incorporation to adopt a
classified board of directors so that only one-third of the directors
would be elected annually;
2. To elect nine directors to serve for terms of one to three years as set
forth in Proposal 1, or if Proposal 1 is not approved, until the next
annual meeting of stockholders, and until their successors have been
duly elected and qualified;
3. To approve the issuance of shares of our Class A Common Stock upon
conversion of shares of our 8% Series B Convertible Exchangeable
Preferred Stock and certain warrants issued to subsidiaries of National
Broadcasting Company, Inc., pursuant to the terms of such instruments;
4. To approve an amendment to our Certificate of Incorporation to increase
the total number of authorized shares of Common Stock from 197,500,000
shares to 327,500,000 shares, the number of authorized shares of Class A
Common Stock from 150,000,000 shares to 215,000,000 shares, and the
number of authorized shares of Class C Non-Voting Common Stock from
12,500,000 shares to 77,500,000 shares;
5. To ratify the appointment of PricewaterhouseCoopers LLP as our
independent certified public accountants for 2000; and
6. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on March 29, 2000,
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting.
Stockholders are requested to vote, date, sign and promptly return the
enclosed proxy in the envelope provided for that purpose, WHETHER OR NOT THEY
INTEND TO BE PRESENT AT THE MEETING.
By Order of the Board of Directors
/s/ ANTHONY L. MORRISON
Anthony L. Morrison, Secretary
West Palm Beach, Florida
April 5, 2000
<PAGE> 4
PAXSON COMMUNICATIONS CORPORATION
601 CLEARWATER PARK ROAD
WEST PALM BEACH, FLORIDA 33401-6233
PROXY STATEMENT
This proxy statement is first being sent to stockholders on or about April
5, 2000, in connection with the solicitation of proxies by the Board of
Directors of Paxson Communications Corporation (the "Company"), to be voted at
the Annual Meeting of Stockholders to be held on May 1, 2000, and at any
adjournment thereof (the "Meeting"). The Board of Directors has fixed the close
of business on March 29, 2000, as the record date of the determination of
stockholders entitled to notice of and to vote at the Meeting. At the close of
business on the record date, we had outstanding (i) 54,793,652 shares of $0.001
par value Class A Common Stock ("Class A Common Stock"), entitled to one vote
per share, (ii) 8,311,639 shares of $0.001 par value Class B Common Stock
("Class B Common Stock," and with the Class A Common Stock, collectively, the
"Common Stock"), entitled to ten votes per share, and (iii) 8,714 shares of
9 3/4% Series A Convertible Preferred Stock ("Series A Convertible Preferred
Stock"), entitled to 625 votes per share.
VOTING
Shares represented by duly executed proxies in the accompanying form
received by us prior to the Meeting will be voted at the Meeting in accordance
with the directions given. If a proxy card is signed and returned without
specifying a vote or an abstention on any proposal, it will be voted according
to the recommendation of the Board of Directors on that proposal. The Board of
Directors recommends a vote FOR the election of directors, the amendments to our
Certificate of Incorporation, and the other proposals described in this Proxy
Statement. The Board of Directors knows of no business to be transacted at the
Meeting other than the proposals set forth in this Proxy Statement. If other
matters are properly presented for action, it is the intention of the persons
named as proxies to vote on such matters according to their best judgment.
If you hold your shares through an intermediary you must provide
instructions on voting as requested by your bank or broker. A stockholder who
signs and returns a proxy may revoke it at any time before it is voted by taking
one of the following three actions: (i) giving written notice of the revocation
to the Secretary of the Company; (ii) executing and delivering a proxy with a
later date; or (iii) voting in person at the Meeting. Attendance at the Meeting
will not in itself constitute revocation of a proxy.
The presence in person or by proxy of the holders of shares of stock having
a majority of the votes which could be cast by all outstanding shares of stock
entitled to vote at the Meeting constitutes a quorum for the transaction of
business at the Meeting. The election of directors will require the affirmative
vote of a plurality of the votes cast at the Meeting, if a quorum is present.
The affirmative vote of at least a majority of the outstanding shares entitled
to vote cast in person or by properly executed proxy is required to approve
proposals 1 and 3, while the affirmative vote of at least a majority of the
votes cast in person or by properly executed proxy is required to approve the
other proposals to be considered at the Meeting. Votes cast by proxy or in
person at the Meeting will be tabulated by one or more inspectors of election
appointed at the Meeting, who will also determine whether a quorum is present
for the transaction of business. Abstentions and broker non-votes will be
counted as shares present at the Meeting for purposes of determining whether a
quorum is present. Because only a plurality is required for the election of
directors, abstentions or broker non-votes will have no effect on the election
of directors. As to other matters to be considered at the Meeting, abstentions
will be treated as votes AGAINST, and broker non-votes will not be counted as
shares voting for the purpose of determining whether a proposal has been
approved.
<PAGE> 5
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to our equity securities
beneficially owned on March 1, 2000, by (i) each director, (ii) each executive
officer named in the Summary Compensation Table, (iii) all of our directors and
executive officers as a group, and (iv) any person who we know to be the
beneficial owner of more than five percent of any class of our voting
securities. Beneficial ownership means sole or shared voting power or investment
power with respect to a security. We have been informed that all shares shown
are held of record with sole voting and investment power, except as otherwise
indicated.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF AGGREGATE
BENEFICIAL VOTING
CLASS OF STOCK NAME OF BENEFICIAL OWNER(1) OWNERSHIP % OF CLASS POWER(%)
- -------------- ---------------------------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Class A Common Stock National Broadcasting Company,
Inc.(2)........................... 63,928,159 53.8% 30.9%
Lowell W. Paxson(3)............... 22,739,543 41.5 15.9
Landmark Communications,
Inc.(4)........................... 4,668,297 8.5 3.3
Mario J. Gabelli(5)............... 2,953,650 5.4 2.1
James B. Bocock(6)................ 977,000 1.8 *
William E. Simon, Jr.(7).......... 913,125 1.6 *
Dean M. Goodman(6)................ 394,136 * *
Jeffrey Sagansky(6)............... 360,000 * *
J. Jay Hoker(6)................... 344,850 * *
Anthony L. Morrison(6)............ 272,800 * *
Seth A. Grossman(6)............... 87,175 * *
Bruce L. Burnham(6)............... 38,350 * *
James L. Greenwald(6)............. 22,000 * *
R. Brandon Burgess................ 0 * *
Keith G. Turner................... 0 * *
Harold N. Brook................... 0 * *
John E. Oxendine.................. 0 * *
All directors and executive
officers as a group(8)............ 26,223,204 45.1% 18.0%
Class B Common Stock Lowell W. Paxson.................. 8,311,639 100.0 58.3%
All directors and executive
officers as a group............... 8,311,639 100.0 58.3%
</TABLE>
- ---------------
* Less than 1%
(1) Unless otherwise specified in the footnotes to this table, the address of
each person in this table is c/o Paxson Communications Corporation, 601
Clearwater Park Road, West Palm Beach, Florida 33401-6233.
(2) Consists of 31,896,032 shares of Class A Common Stock issuable upon
conversion of shares of 8% Series B Convertible Exchangeable Preferred Stock
held by NBC Palm Beach Investment I, Inc., and 32,032,127 shares of Class A
Common Stock issuable upon exercise of outstanding warrants and held by NBC
Palm Beach Investment II, Inc. The holders' rights to acquire shares of
Class A Common Stock upon conversion and exercise, respectively, of such
securities, while currently exercisable, are subject to material conditions
precedent, including approval of the Federal Communications Commission.
According to information contained in a Schedule 13D filed with the
Securities and Exchange Commission (the "Commission"), dated September 15,
1999, each of such holders is a subsidiary of National Broadcasting Company,
Inc. ("NBC"), whose address is 30 Rockefeller Plaza, New York, New York
10112, and NBC and its parent entity, General Electric Company, Inc., each
disclaims beneficial ownership of such securities.
(3) Does not include 8,311,639 shares of Class B Common Stock, each share of
which is convertible into one share of Class A Common Stock. Mr. Paxson is
the beneficial owner of all his shares of Class A Common Stock and Class B
Common Stock through his control of Second Crystal Diamond, Limited
Partnership and Paxson Enterprises, Inc.
(4) According to information contained in an amendment to Schedule 13D filed
with the Commission, dated July 28, 1998, Landmark Communications, Inc.,
whose address is 150 Brambleton Avenue, Norfolk, Virginia 23510, acquired
such shares pursuant to an Asset
2
<PAGE> 6
Acquisition Agreement dated as of June 13, 1997 in connection with its sale
to the Company of the assets related to The Travel Channel, and holds such
shares for investment purposes.
(5) According to information contained in a Schedule 13D filed with the
Commission, dated February 8, 2000, various investment funds and other
entities controlled by or affiliated with Mario J. Gabelli and Marc J.
Gabelli, each of whose address is c/o Gabelli Asset Management, Inc., One
Corporate Center, Rye, New York 10580, acquired such shares for investment
for one or more accounts over which it has shared, sole or both investment
and voting power, for its own account, or both.
(6) Includes shares which may be acquired within 60 days through the exercise of
stock options granted under the Company's Stock Incentive Plans as follows:
Jeffrey Sagansky -- 360,000; James B. Bocock -- 977,000; Dean M.
Goodman -- 347,661; J. Jay Hoker -- 344,000; Anthony L. Morrison -- 242,250;
Seth A. Grossman -- 59,000; Bruce L. Burnham -- 26,250; James L.
Greenwald -- 22,000.
(7) Consists of shares which may be acquired upon the exercise of warrants and
conversion of Series A Convertible Preferred Stock held by an affiliate of
Mr. Simon.
(8) Includes 2,435,161 shares which may be acquired within 60 days through the
exercise of stock options granted under the Company's Stock Incentive Plans
and 913,125 shares which may be acquired upon the exercise of warrants and
conversion of Series A Convertible Preferred Stock held by an affiliate of
Mr. Simon.
POTENTIAL CHANGE IN CONTROL
On September 15, 1999, NBC, through subsidiaries, purchased shares of our
8% Series B Convertible Exchangeable Preferred Stock ("Series B Convertible
Preferred Stock") and common stock purchase warrants for an aggregate purchase
price of $415 million. Concurrently, NBC entered into an agreement with Mr.
Paxson, our Chairman and controlling stockholder, and certain of his affiliates,
pursuant to which NBC was granted the right to purchase all (but not less than
all) 8,311,639 shares of our outstanding Class B Common Stock beneficially owned
by Mr. Paxson, which shares are entitled to ten votes per share on all matters
submitted to a vote of our stockholders. The transactions with NBC are described
in more detail in this Proxy Statement under Proposal 3 below.
Pursuant to these agreements and the related agreements entered into in
connection with the transaction, NBC has the right to acquire voting and
operational control of the Company, subject to various conditions including
approval of the Federal Communications Commission ("FCC"). Exercise of these
rights by NBC would result in a change in control of the Company.
PROPOSAL 1 -- APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF
INCORPORATION TO CREATE A CLASSIFIED BOARD OF DIRECTORS
In connection with the NBC transaction described under Proposal 3 below, we
agreed to seek the approval of our stockholders of an amendment to our
Certificate of Incorporation providing for three-year staggered terms of the
members of the Board of Directors. The Board of Directors has therefore approved
and recommends that our stockholders approve an amendment to our Certificate of
Incorporation to add a new Article Thirteenth providing for the classification
of the Board of Directors into three classes with staggered three-year terms of
office and the ability of the stockholders to remove directors, with or without
cause, by majority vote (the "Classified Board Amendment").
The text of the Classified Board Amendment described in this Proposal is
set forth in Exhibit A to this Proxy Statement, in substantially the form in
which it will take effect if the Classified Board Amendment is approved by the
stockholders. The following description of the Classified Board Amendment is
qualified in its entirety by reference to Exhibit A. In addition, if the
Classified Board Amendment is approved by the stockholders, certain conforming
amendments will be made to the By-Laws of the Company.
Our certificate of incorporation does not currently contain any provisions
with respect to the term of service or removal of directors. The election of
directors is currently governed by our By-Laws, which provide that all directors
are to be elected annually for a term of one year. Delaware law permits
provisions in a certificate of incorporation or by-law approved by stockholders
that provide for a classified board of directors. The proposed Classified Board
Amendment would provide that our directors will be classified into three classes
(denominated Class I, Class II and Class III), which shall be as nearly equal in
number as possible. If the Classified Board Amendment is adopted, three
directors will be elected for a term expiring at the 2001
3
<PAGE> 7
Annual Meeting ("Class I" directors); three directors will be elected for a term
expiring at the 2002 Annual Meeting ("Class II" directors); and three directors
will be elected for a term expiring at the 2003 Annual Meeting ("Class III"
directors). At each Annual Meeting following this initial classification and
election, the successors to the class of directors whose terms expire at that
meeting would be elected for a term of office to expire at the third succeeding
Annual Meeting after their election and until their successors have been duly
elected and qualified. See "Election of Directors" as to the composition of each
class of directors if this proposal is adopted.
Under Delaware law, the Board of Directors may fill vacancies on a
classified board, and the directors so appointed will hold office until the next
election of the class to which the director was appointed. Delaware law also
provides that, unless a corporation's certificate of incorporation provides
otherwise, directors serving on a classified board of directors may be removed
only for cause. Presently, all of our directors are elected annually and any or
all may be removed, with or without cause, by a majority vote of the outstanding
shares entitled to vote with respect to an election of directors. The Board of
Directors believes that it is in our best interests to continue to provide the
holders of a majority of the shares entitled to vote with respect to the
election of directors with the ability to remove directors, with or without
cause, notwithstanding the adoption of a classified board of directors. Mr.
Paxson and his affiliates, who own a majority in total voting power of our
outstanding voting stock, have agreed with NBC that, should NBC determine that,
under the Communications Act of 1934 and the rules of the FCC, it is permitted
to have board appointment or similar rights, they will not vote their shares to
remove any NBC nominee from the Board of Directors.
The proposed Classified Board Amendment will significantly extend the time
required to effect a change in control of the Board of Directors and may
discourage hostile takeover bids for the Company. Currently, a change in control
of the Board of Directors can be made by stockholders holding a plurality of the
votes cast at a single Annual Meeting. If we implement a classified board of
directors, it will take at least two Annual Meetings to effectuate a change in
control of the Board of Directors, because only a minority of the directors will
be elected at each meeting. By preserving the ability of a majority of the
stockholders to remove any or all directors, with or without cause, at a special
meeting or by written consent, as described in the preceding paragraph (subject
to Mr. Paxson's obligations with respect to NBC nominees serving as directors),
these effects are somewhat mitigated.
Because of the additional time required to change control of the Board of
Directors, the Classified Board Amendment will tend to perpetuate present
management. Without the ability to obtain immediate control of the Board of
Directors, a takeover bidder will not be able to take action to remove other
impediments to its acquisition of the Company. Because the Classified Board
Amendment will increase the amount of time required for a takeover bidder to
obtain control of the Company without the cooperation of the Board of Directors,
even if the takeover bidder were to acquire a majority of our outstanding stock,
it will tend to discourage certain tender offers, perhaps including some tender
offers that stockholders may feel would be in their best interests. The
Classified Board Amendment will also make it more difficult for the stockholders
to change the composition of the Board of Directors even if the stockholders
believe such a change would be desirable.
In order to be adopted, this proposal must receive the affirmative vote of
at least a majority of the outstanding shares entitled to vote, present in
person or represented by proxy. Mr. Paxson and his affiliates, who own a
majority in total voting power of our outstanding voting stock, have agreed with
NBC to vote their shares in favor of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THIS
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO PROVIDE FOR A
CLASSIFIED BOARD OF DIRECTORS.
PROPOSAL 2 -- ELECTION OF DIRECTORS
At the Annual Meeting, nine directors are to be elected. If Proposal 1 is
approved, nine directors will be elected for the staggered terms set forth
below. If Proposal 1 is not approved, nine directors will be elected to hold
office until the next Annual Meeting of Stockholders or until their successors
have been elected and
4
<PAGE> 8
qualified. The nine nominees for election as directors are Lowell W. Paxson,
Jeffrey Sagansky, William E. Simon, Jr., Bruce L. Burnham, James L. Greenwald,
Brandon Burgess, Keith G. Turner, Harold Brook and John E. Oxendine, all of whom
are currently members of the Board of Directors. Messrs. Burgess, Turner and
Brook are employees of NBC and are proposed for election as Class III directors
for three year terms expiring at the 2003 Annual Meeting. Messrs. Burnham,
Greenwald and Oxendine are proposed for election as Class II directors for two
year terms expiring at the 2002 Annual Meeting. Messrs. Paxson, The persons
named in the enclosed proxy card have advised that, unless otherwise directed on
the proxy card, they intend to vote FOR the election of the designated nominees,
and that should any nominee become unable or unwilling to accept nomination or
election for any reason, votes will be cast for a substitute nominee designated
by the Board of Directors, which has no reason to believe the nominees named
will be unable or unwilling to serve if elected.
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
DIRECTOR
NOMINEE AGE POSITION, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE
- ------- --- --------------------------------------------------------------------- --------
<S> <C> <C> <C>
CLASS I DIRECTORS (TERM EXPIRING AT ANNUAL MEETING IN 2001)
Lowell W. Paxson....... 65 Chairman of the Board since 1991 and Chief Executive Officer of the 1991
Company from 1991 to 1998. President, Home Shopping Network, Inc.
from 1985 to 1990.
William E. Simon, 48 Vice Chairman of the Company since 1998. Executive Director, William 1998
Jr................... E. Simon & Sons, LLC, a private investment firm and merchant bank,
from 1988 to present. Director and Chairman, GeoLogistics
Corporation.
Jeffrey Sagansky....... 48 President and Chief Executive Officer of the Company since 1998. 1998
Co-President, Sony Pictures Entertainment, a producer of film and
video programming, from 1996 to 1997. Executive Vice President, Sony
Corporation of America, from 1994 to 1996.
CLASS II DIRECTORS (TERM EXPIRING AT ANNUAL MEETING IN 2002)
Bruce L. Burnham....... 66 President of The Burnham Group since 1993, a firm providing 1996
consulting and marketing services to the retail industry. Director,
Forcenergy, Inc., and J.B. Rudolph, Inc.
James L. Greenwald..... 73 Chairman and Chief Executive Officer from 1975 to 1994 of Katz 1996
Communications, Inc., a broadcast advertising representative sales
firm; Chairman Emeritus since 1994. Director, Granite Broadcasting
Company and Source Media, Inc.
John E. Oxendine....... 57 President and Chief Executive Officer since 1998 of Blackstar, Inc.; 2000
Chairman and Chief Executive Officer since 1999 of Broadcast Capital,
Inc.; Chairman from 1994 to 1998 of Blackstar LLC; Chairman and Chief
Executive Officer 1987 to 1998 of Blackstar Communications, Inc. All
of such entities are owners and operators of, or investors in,
broadcast television stations.
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
DIRECTOR
NOMINEE AGE POSITION, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE
- ------- --- --------------------------------------------------------------------- --------
<S> <C> <C> <C>
CLASS III DIRECTORS (TERM EXPIRING AT ANNUAL MEETING IN 2003)
R. Brandon Burgess..... 32 Vice President and Chief Financial Officer, Business Development and 1999
New Media, of NBC since 2000; Vice President and CFO, Television
Network, of NBC from 1999 to 2000; Director of Business Development
and International Business of NBC from 1998 to 1999; Manager of
Corporate Strategy and Mergers and Acquisitions of Pepsico, Inc. a
beverage company, from 1995 to 1998.
Keith G. Turner........ 46 President, Television Network Sales of NBC since 1998; Vice 1999
President, Sports Sales and Television Network Sales of NBC from 1990
to 1998.
Harold N. Brook........ 43 Executive Vice President, NBC Entertainment and NBC Studios Business 2000
Affairs since 1997; Senior Vice President, Business Affairs of NBC
from 1993 to 1997.
</TABLE>
OTHER EXECUTIVE OFFICERS
Dean M. Goodman, 52, has been the President of the Company's PAX TV network
television operations since 1998. Mr. Goodman was president of the Company's
inTV and Network-Affiliated Television divisions from 1995 to 1997. From 1993 to
1995, Mr. Goodman was general manager of the Company's Miami, Florida radio
station group.
Anthony L. Morrison, 38, is the Company's Executive Vice President,
Secretary and Chief Legal Officer, serving in these capacities since 1995. Prior
to that time he was an attorney in private practice with the O'Melveny & Meyers
law firm, concentrating his practice on complex commercial financings.
Seth A. Grossman, 34, was named Chief Financial Officer of the Company in
December 1999. Mr. Grossman has also served as Senior Vice President, Corporate
Development since 1997. From 1995 to 1997, he was the Company's Director of
Finance.
Kenneth M. Gamache, 37, is a Senior Vice President of the Company, and has
served as the Company's Controller and principal accounting officer since 1993.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During 1999, the Board of Directors held seven meetings. Each incumbent
director attended at least 75% of the total number of Board meetings and
meetings of committees of which he is a member. In addition, the Board of
Directors took action 18 times during 1999 by unanimous written consent in lieu
of a meeting, as permitted by applicable state law.
The Compensation Committee consists of James L. Greenwald and Bruce L.
Burnham. The Compensation Committee recommends to the Board both base salary
levels and bonuses for the Chief Executive Officer and the other officers of the
Company. See "Board Compensation Committee Report on Executive Compensation."
The Compensation Committee also reviews and makes recommendations with respect
to our existing and proposed compensation plans, and serves as the committee
responsible for administering the our Stock Incentive Plans. During 1999, the
Compensation Committee met informally in conjunction with each of the meetings
of the Board of Directors, and held two separate Committee meetings. In making
recommendations regarding compensation and related matters, the Compensation
Committee has independently received and reviewed reports of professional
compensation consultants.
The Audit Committee consists of Bruce L. Burnham, James L. Greenwald and
William E. Simon, Jr. Mr. Burnham is the chairman of the Committee. The duties
of the Audit Committee are to recommend to the Board of Directors the selection
of independent certified public accountants, to meet with our independent
6
<PAGE> 10
certified public accountants to review the scope and results of the audit, and
to consider various accounting and auditing matters related to our system of
internal controls, financial management practices and other matters. During
1999, the Audit Committee met four times.
We do not have a nominating committee. This function is performed by the
Board of Directors.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive an annual retainer
of $24,000 and are paid fees of $1,500 for each board meeting attended, $1,000
for each committee meeting attended and $500 for each meeting chaired. All
directors receive reimbursement of reasonable out-of-pocket expenses incurred in
connection with meetings of the Board of Directors. In February 1999, Mr.
Burnham and Mr. Greenwald were each granted options to purchase 5,750 shares of
Class A Common Stock at an exercise price of $3.42 per share and in April 1999
Mr. Burnham and Mr. Greenwald were each granted options to purchase 50,000
shares at an exercise price of $7.25 per share, vesting over a five year period.
No other directors receive separate compensation for services rendered as a
director, including those directors who are employed by us.
CERTAIN TRANSACTIONS INVOLVING DIRECTORS AND OFFICERS
NBC Transactions. On September 15, 1999, NBC entered into an agreement
with us pursuant to which subsidiaries of NBC acquired $415 million of Series B
Convertible Preferred Stock, which is convertible into 31,896,032 shares of our
Class A Common Stock, and common stock purchase warrants entitling the holder to
purchase 32,032,127 shares of Class A Common Stock. NBC also entered into an
agreement with Mr. Paxson, our Chairman and controlling stockholder, and certain
of his affiliates, pursuant to which NBC was granted the right to purchase all
(but not less than all) 8,311,639 shares of our Class B Common Stock
beneficially owned by Mr. Paxson, which shares are entitled to ten votes per
share on all matters submitted to a vote of our stockholders and are convertible
into an equal number of shares of Class A Common Stock. During December 1999 and
March 2000, the Board of Directors appointed Messrs. Burgess, Turner and Brook,
employees of NBC, to fill vacancies on the Board of Directors. Each of these
persons currently serves as a director of the Company and is standing for
reelection. Apart from their service as employees of NBC, we are not aware of
any interest of Messrs. Burgess, Turner and Brook in our transactions with NBC.
DP Media. DP Media, Inc., CAP Communications, Inc. and RDP Communications,
Inc. (collectively herein, "DP Media"), are companies beneficially owned by
family members of Mr. Paxson. During the past several years, we have engaged in
numerous transactions with DP Media involving television station purchases and
sales, time brokerage and affiliation agreements and other matters.
In February 1999, DP Media acquired two television stations, which are PAX
TV affiliates, indirectly from us for consideration including the assumption of
notes payable to us of approximately $30.5 million. These notes were repaid
during August 1999. During 1999, Mr. Paxson served as guarantor on approximately
$31.4 million in bank loans made to DP Media, which guaranty was secured by a
pledge of approximately 6.1 million shares of Class A Common Stock owned by an
affiliate of Mr. Paxson. Mr. Paxson's guaranties were terminated in connection
with DP Media's refinancing of its indebtedness during August 1999.
During 1999, we had affiliation agreements with DP Media under which we
provided the DP Media station affiliates with programming and paid a fixed
monthly affiliation fee, and the affiliates retained a portion of the
advertising airtime during our network programming. We also provided DP Media
with accounting, sales and technical services under services agreements which
required the DP Media station affiliates to deposit all advertising revenues
generated during the network programming as well as the monthly affiliation fee
into an account from which they paid operating costs and interest. We were
entitled to receive 90% of the excess of the revenues deposited into such
account over the costs and expenses paid from the account. We also served as the
network, national and regional sales representative for the DP Media station
affiliates and received a commission of 15% for sales revenue generated. During
1999, we recorded $404,000 of commissions
7
<PAGE> 11
under our services agreements with DP Media. Effective March 1, 2000, these
agreements with DP Media for each station other than WWDP (the second Boston
area station) were replaced by time brokerage agreements which will remain in
effect pending the completion of our acquisition of DP Media, as described
below. During 1999, we recorded time brokerage and affiliation fees expense
related to stations owned by DP Media of approximately $13.6 million.
On November 21, 1999, we agreed 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. As part of the acquisition, we expect to spend an additional $38
million to consummate the acquisition of WBPX and the two satellite stations.
WBPX is currently an affiliate of our PAX TV television network 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 we
provide services for under various services agreements, serve the following
markets: Battle Creek, Michigan, Raleigh, North Carolina, Hartford, Connecticut,
Boston, Massachusetts (two stations - WBPX, Boston, Massachusetts, and WWDP,
Norwell, Massachusetts), St. Louis, Missouri, Washington, D.C., Milwaukee,
Wisconsin and Indianapolis, Indiana. In conjunction with the acquisition
agreement, we 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. On March 3, 2000, we agreed in principle
with DP Media to convert the asset sale transaction into a purchase by us of all
of the capital stock of DP Media for a purchase price of $7,500,000. Prior to
the purchase, DP Media shall transfer the assets of WWDP to a newly formed
entity in which we will hold a non-voting interest. We will 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, and shall receive 45% of the net proceeds
from the sale of the station.
The Christian Network, Inc. We have entered into several agreements with
The Christian Network, Inc. and certain of its for-profit subsidiaries
(individually and collectively referred to herein as "CNI"). The Christian
Network, Inc. is a section 501(c)(3) not-for-profit corporation to which Mr.
Paxson has been a substantial contributor and of which he was a member of the
Board of Stewards through 1993.
On September 10, 1999, we entered into a Master Agreement with CNI for
overnight programming and use of a portion of our digital capacity in exchange
for CNI's providing public interest programming. The Master Agreement has a term
of 50 years 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 our stations.
Pursuant to the Master Agreement, we broadcast CNI overnight programming on each
of our stations seven days a week from 1:00 a.m. to 6:00 a.m. When digital
programming in multiple channels begins, we are obligated to 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.
We entered into an agreement with CNI in May 1994 (the "CNI Agreement")
under which we agreed that, if the tax exempt status of CNI were jeopardized by
virtue of its relationship with us, we would take certain actions to ensure that
CNI's tax exempt status would no longer be so jeopardized. These steps could
include rescission of one or more transactions or additional payments by us. We
believe that our agreements with CNI have been on terms as favorable to CNI as
it would obtain in arm's length transactions, and we intend any future
agreements with CNI to be as favorable to CNI as CNI would obtain in arm's
length transactions. Accordingly, if our activities with CNI are consistent with
the terms governing our relationship, we should not be required to take any
actions under the CNI Agreement. We cannot be sure, however, that we will not be
required to take any actions under the CNI Agreement which might have a material
cost to us.
We have contracted with CNI to lease CNI's television production and
distribution facility, the Worship Channel Studio, for the purpose of producing
television programming for our television network. During the year ended
December 31, 1999, we incurred rental charges in connection with this agreement
of $195,000.
Aircraft Lease. During 1997, we entered into a three year lease with a
company owned by Mr. Paxson for a Boeing 727 aircraft. The lease provides for
monthly payments of $63,600. We incurred rental costs under the lease of
approximately $763,000 during 1999. We have also recorded leasehold improvements
of
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<PAGE> 12
approximately $310,000 (net of accumulated amortization) at December 31, 1999,
in connection with the lease.
During January 1999, we advanced $1,000,000 to Mr. Paxson, our Chairman,
which was repaid without interest four days after being made.
In May 1998, Mr. Simon was appointed our Vice Chairman. In connection with
this appointment, in June 1998 we issued to an affiliate of Mr. Simon fully
vested warrants to purchase 155,500 shares of Class A Common Stock at an
exercise price of $16 per share. In June 1998, the affiliate of Mr. Simon
purchased $10 million aggregate liquidation preference of our Series A
Convertible Preferred Stock and warrants to purchase 32,000 shares of Class A
Common Stock at an exercise price of $16 per share. In March, 2000, we reduced
the exercise price of the 187,500 warrants held by Mr. Simon's affiliate from
$16 per share to $12.60 per share.
During December 1996, we approved a program to extend loans to members of
our senior management to finance their purchase of shares of Class A Common
Stock in the open market. The loans are full recourse promissory notes bearing
interest at 5.75% per annum and are collateralized by a pledge of the shares of
Class A Common Stock purchased with the loan proceeds. We extended the maturity
date of all loans outstanding under this program until March 31, 2001. During
the year ended December 31, 1999, approximately $1.5 million of principal and
interest was paid to us under this program, and the loans outstanding to Mr.
Bocock and Mr. Hoker, former executive officers who are no longer employed by
us, and certain other members of senior management, were repaid in full. At
December 31, 1999, the outstanding balance of principal and accrued interest on
such loans to our Named Executive Officers was as follows: Mr. Goodman,
$614,355; Mr. Morrison, $322,661; Mr. Grossman, $147,600; and Mr. Gamache,
$181,926.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and officers and persons who own more than ten percent of our Common Stock to
file initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company with the Securities and
Exchange Commission and to furnish us with copies of all Section 16(a) reports
they file. Based on our review of the copies of such reports received by us, we
believe that during 1999, all persons required to file such reports met all
applicable SEC filing requirements.
EXECUTIVE COMPENSATION
The following table presents information concerning the compensation
received or accrued for services rendered during the fiscal years ended December
31, 1999, 1998 and 1997 for our Chief Executive Officer and our four most highly
compensated executive officers other than the Chief Executive Officer who were
serving as of December 31, 1999 and two additional executive officers who ceased
serving as such during 1999 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION NUMBER OF
-------------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY(1) BONUS COMPENSATION OPTIONS COMPENSATION(2)(3)
- ------------------ ---- ---------- ---------- ------------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey Sagansky.......... 1999 $600,000 $ -- $140,070(5) 2,000,000 $61,000
Chief Executive Officer 1998 379,615 -- 200,000(5) 1,200,000 --
and President
Lowell W. Paxson.......... 1999 493,798 -- -- 1,000,000 --
Chairman of the 1998 465,850 75,000 -- -- --
Board 1997 423,500 1,875,000 -- -- --
</TABLE>
9
<PAGE> 13
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION NUMBER OF
-------------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY(1) BONUS COMPENSATION OPTIONS COMPENSATION(2)(3)
- ------------------ ---- ---------- ---------- ------------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Dean M. Goodman........... 1999 315,000 -- 924,937(6) -- 13,600
President -- PAX TV 1998 315,000 100,000 -- 600,000 32,500
1997 300,000 1,099,000 -- -- 31,000
James B. Bocock (4)....... 1999 255,938 -- -- -- 26,594
Co-President and 1998 341,250 75,000 -- 200,000(4) 35,125
Chief Operating Officer 1997 325,000 1,885,000 -- -- 33,500
Jon Jay Hoker (4)......... 1999 223,500 -- 367,000(6) -- 16,750
President -- Paxson 1998 315,400 75,000 -- 500,000(4) 32,500
Television Group 1997 300,000 1,581,000 -- -- 26,200
Anthony L. Morrison....... 1999 223,438 -- 432,781(6) 99,000 20,688
Executive Vice 1998 196,875 75,000 -- 200,000 20,688
President,
Secretary and General 1997 187,500 626,500 -- -- 14,500
Counsel
Seth A. Grossman.......... 1999 177,292 -- -- 22,000 1,000
Chief Financial Officer; 1998 165,000 -- -- 100,000 1,000
Senior Vice President -- 1997 150,000 250,000 48,251(6) -- 1,000
Corporate Development
</TABLE>
- ---------------
(1) Includes amounts Named Executive Officers elected to defer pursuant to the
Company's Profit Sharing Plan.
(2) Includes contributions to supplemental retirement plans as follows: during
1999, Mr. Sagansky -- $60,000; Mr. Bocock -- $25,594; Mr.
Goodman -- $12,600; Mr. Hoker -- $15,750; Mr. Morrison -- $19,688; during
1998, Mr. Bocock -- $34,125; Mr. Goodman -- $31,500; Mr. Hoker -- $31,500;
Mr. Morrison -- $19,688; during 1997, Mr. Bocock -- $32,500; Mr.
Goodman -- $30,000; Mr. Hoker -- $25,200, and Mr. Morrison -- $13,500.
(3) Includes $1,000 Company contributions to the Profit Sharing Plan during each
year.
(4) Mr. Bocock resigned his employment with the Company effective October 1999;
Mr. Hoker ceased to be an executive officer of the Company in June 1999, and
resigned his employment with the Company effective January 2000.
(5) Consists of relocation allowance in 1998 and related tax reimbursement in
1999.
(6) Represents the difference between the price paid by the Named Executive
Officer upon the exercise of stock options and the fair market value of the
underlying Common Stock at the time of exercise.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF POTENTIAL REALIZABLE VALUES
COMMON STOCK AT ASSUMED ANNUAL RATES OF
UNDERLYING % OF TOTAL OPTIONS EXERCISE STOCK PRICE APPRECIATION FOR OPTION TERM(1)
OPTIONS GRANTED TO EMPLOYEES PRICE PER EXPIRATION -------------------------------------------
NAME GRANTED IN FISCAL YEAR SHARE DATE 0% 5% 10%
- ---- ------------ -------------------- --------- ---------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Jeffrey Sagansky..... 500,000 9.3 $10.00 9/15/09 $ 2,531,250 $ 7,267,613 $14,534,123
1,500,000 28.0 NA(2) 9/15/09 -- -- --
Lowell W. Paxson..... 333,333 6.1 $10.00 10/16/09 645,833 3,148,307 6,987,593
666,667 12.5 NA(2) 10/16/09 -- -- --
Dean M. Goodman...... -- -- -- -- -- -- --
James B. Bocock...... -- -- -- -- -- -- --
Jon Jay Hoker........ -- -- -- -- -- -- --
Anthony L. Morrison.. 99,000 1.8 $ 7.25 12/31/09 243,125 847,414 1,774,512
Seth A. Grossman..... 22,000 0.4 $ 7.25 12/31/09 93,500 252,610 496,717
</TABLE>
- ---------------
(1) Based upon the closing sale price on the grant date and the option exercise
price.
(2) The exercise price of that portion of the options vesting on the first
anniversary of the grant date (500,000 shares for Mr. Sagansky; 333,333
shares for Mr. Paxson) is $10 per share. The balance of the options have
variable exercise prices to be determined at future dates, as described
below under "Employment Agreements".
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<PAGE> 14
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED DECEMBER 31, 1999 AT DECEMBER 31, 1999(1)
ON VALUE ------------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE(2) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- --------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey Sagansky.......... -- $ -- 360,000 2,840,000 $3,937,500 $10,987,850
Lowell W. Paxson.......... -- -- -- 1,000,000 -- 645,833
Dean M. Goodman........... 102,700 924,937 227,661 600,000 1,709,303 3,042,300
James B. Bocock........... -- -- 1,077,000 -- 8,981,848 --
Jon Jay Hoker............. 50,000 367,000 344,000 -- 2,451,270 --
Anthony L. Morrison....... 50,000 432,781 149,900 344,100 1,181,406 1,881,069
Seth A. Grossman.......... -- -- 31,200 131,600 227,446 691,943
</TABLE>
- ---------------
(1) Based on the closing sale price of the Class A Common Stock of $11.9375 on
December 31, 1999.
(2) Excludes securities underlying options which vested January 1, 2000 as
follows: Mr. Goodman, 120,000 shares; Mr. Morrison, 92,350 shares; Mr.
Grossman, 27,800 shares.
10-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF SECURITIES MARKET PRICE EXERCISE PRICE NEW LENGTH OF ORIGINAL
UNDERLYING OPTIONS OF STOCK AT TIME AT TIME OF EXERCISE OPTION TERM REMAINING
NAME DATE REPRICED OF REPRICING(1) REPRICING PRICE AT DATE OF REPRICING
- ---- ------- -------------------- ----------------- -------------- -------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey Sagansky........ 9/15/99 360,000 $15.0625 $7.25 $1.00 8 years, 9 months
President and Chief 840,000 $15.0625 $7.25 $0.01 8 years, 9 months
Executive Officer
</TABLE>
- ---------------
(1) Closing sale price of the Class A Common Stock on September 15, 1999.
In September 1999, the Company entered into a new four year employment
agreement with Mr. Sagansky, its Chief Executive Officer. In connection with
this Agreement, the terms of Mr. Sagansky's existing options to purchase
1,200,000 shares of Class A Common Stock were amended to reduce the exercise
price of the 360,000 vested options from $7.25 per share to $1.00 per share and
to reduce the exercise price of the remaining 840,000 unvested options from
$7.25 per share to $0.01 per share, and Mr. Sagansky's rights under his prior
employment agreement to receive royalties on all original PAX TV television
programming were cancelled. See "Compensation Committee Report on Executive
Compensation."
STOCK INCENTIVE PLANS
We have established various stock incentive plans to provide incentives to
officers, employees and others who perform services for us through awards of
options and shares of restricted stock. Awards are granted under the plans at
the discretion of our 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.
The exercise price per share of Class A Common Stock deliverable upon the
exercise of each stock option granted under the Stock Incentive Plans is
determined by the Compensation Committee at the date the stock option is granted
and as provided in the terms of the Stock Incentive Plans. Stock options are
exercisable in whole or in part on such date or dates as are determined by the
Compensation Committee at the date of the grant. The Compensation Committee may,
in its sole discretion, accelerate the time at which any stock option may be
exercised. Stock options expire on the date or dates determined by the
Compensation Committee at the time the stock options are granted. Holders of
more than ten percent (10%) of the combined voting power of our capital stock
may be granted stock options, provided that if any of such options are intended
to be incentive stock options, the exercise price must be at least 110% of the
fair market value of Class A Common Stock as of the date of the grant and the
term of the option may not exceed five years.
Options granted under the Stock Incentive Plans may be exercised by the
participant to whom granted or by his or her legal representative. If a
participant's employment is terminated for cause, each option which has
11
<PAGE> 15
not been exercised shall terminate. As part of the severance arrangements with
four of our executive officers who ceased employment during 1999, we agreed to
accelerate the vesting of a portion of their options and to extend the
expiration dates of the options beyond the dates which would otherwise apply
upon cessation of employment.
The Compensation Committee also has the discretion to award restricted
stock, consisting of shares of Class A Common Stock which are subject to
forfeiture in whole or in part if the recipient's employment is terminated prior
to the end of the restrictive period. Participants who receive restricted stock
do not become 100% vested in their restricted stock until five years after the
effective date of the award. During the restricted period prior to vesting, the
participant may transfer the restricted stock to a trust for the benefit of the
participant or an immediate family member, but may not otherwise sell, assign,
transfer, give or otherwise dispose of, mortgage, pledge or encumber such
restricted stock. The Compensation Committee may, in its discretion, provide
that a participant shall be vested in whole or with respect to any portion of
the participant's award not previously vested if the participant's employment
with the Company is terminated because of death, disability or retirement. To
date, we have not awarded any restricted stock under the Stock Incentive Plans.
EXECUTIVE BONUS PLAN
Under our Executive Bonus Plan, members of our senior management approved
by the Compensation Committee may earn cash bonus compensation on an annual
basis in such amounts as are determined by the Committee, based upon the
achievement of operating and financial objectives and individual performance
criteria. The bonus calculation criteria are established on an annual basis by
the Committee, and generally consist of a set of Company operating and financial
performance objectives which must be met for any participant to be entitled to
receive a bonus, and individualized performance criteria and bonus levels for
each participant (generally expressed as a percentage of the participant's base
salary). Bonuses awarded with respect to a fiscal year are to be paid during the
following year. No bonuses were earned under the Executive Bonus Plan with
respect to the year ended December 31, 1999.
PROFIT SHARING PLAN
We have a profit sharing plan under Section 401(k) of the Internal Revenue
Code (the "Profit Sharing Plan"), which Plan provides that our employees must
complete one year of service in order to be eligible to defer salary and, if
available, receive matching contributions under the Section 401(k) portion of
the Profit Sharing Plan. Participants may elect to defer a specified percentage
of their compensation into the Profit Sharing Plan on a pre-tax basis. We may,
at our discretion, make matching contributions based on a percentage of deferred
salary contributions at a rate to be determined by certain of our officers,
which matching contributions may be paid in Company stock. In addition, we may
make supplemental profit sharing contributions in such amounts as certain of our
officers may determine. Participants earn a vested right to their profit sharing
contribution in increasing amounts over a period of five years. After five years
of service, the participant's right to his or her profit sharing contribution is
fully vested. Thereafter the participant may receive a distribution of the
entire value of his or her account at age 55, 62 or 65 or upon termination of
employment, death or disability.
EMPLOYMENT AGREEMENTS
Mr. Paxson is employed as our Chairman, in which capacity he serves as our
senior executive officer, pursuant to an employment agreement for a three year
term commencing October 16, 1999, and renewing thereafter for successive one
year periods so long as Mr. Paxson remains our "Single Majority Shareholder" as
such term is defined under the rules of the FCC. Mr. Paxson's base salary for
the first year under the agreement is $600,000, increasing 10% per year. Mr.
Paxson may receive an annual bonus of up to twice his base salary if we attain
revenue targets established by our Compensation Committee. In connection with
the employment agreement, we granted Mr. Paxson nonqualified options to purchase
1,000,000 shares of Class A Common Stock, which vest in equal installments over
a three year period. The exercise price for the options vesting on the first
anniversary is $10 per share, and the exercise price for options vesting on
subsequent anniversaries will be the lower of a range between $14 and $18 per
share or the fair market value of the
12
<PAGE> 16
common stock on the prior anniversary date. Mr. Paxson is eligible to
participate in all employee benefit plans and arrangements that are generally
available to other senior executives. The Board of Directors may terminate Mr.
Paxson's employment agreement before expiration for good cause, as defined in
the agreement, and Mr. Paxson may terminate the agreement for good reason, as
defined in the agreement. If Mr. Paxson dies, becomes permanently disabled,
terminates his employment for good reason or is terminated other than for good
cause during the term of the agreement, we will pay Mr. Paxson or his estate, as
the case may be, his then existing salary for the remaining term of the
agreement, in the case of disability, termination for good reason or termination
other than for good cause, or 18 months, in the case of death.
Mr. Sagansky is employed as our President and Chief Executive Officer
pursuant to an employment agreement entered into in September 1999 for a four
year term expiring September 15, 2003. Mr. Sagansky's base salary for the first
year under the agreement is $600,000, increasing 10% per year. Mr. Sagansky may
receive an annual bonus of up to twice his base salary if we attain revenue
targets established by our Compensation Committee, which shall be the same
revenue targets established for purposes of Mr. Paxson's bonus compensation. In
connection with the employment agreement, we granted Mr. Sagansky nonqualified
options to purchase 2,000,000 shares of Class A Common Stock, vesting in four
equal annual installments commencing September 15, 2000, and expiring in ten
years. The vesting of these options will be accelerated if, at any time after
Mr. Paxson ceases to be our FCC Single Majority Shareholder, Mr. Sagansky's
employment is terminated other than by reason of his death or disability and
other than for good cause (as defined in the agreement). The exercise price for
the options vesting on the first anniversary is $10 per share, and the exercise
price for options vesting on subsequent anniversaries will be the lower of a
range between $14 and $21 per share or the fair market value of the common stock
on the prior anniversary date. Mr. Sagansky is eligible to participate in all
employee benefit plans and arrangements that are generally available to other
senior executives. The Board of Directors may terminate Mr. Sagansky's
employment agreement before expiration for good cause, as defined in the
agreement, and Mr. Sagansky may terminate the agreement for good reason, as
defined in the agreement. If Mr. Sagansky dies, becomes permanently disabled,
terminates his employment for good reason or is terminated other than for good
cause during the term of the agreement, we will pay Mr. Sagansky or his estate,
as the case may be, his then existing salary for the remaining term of the
agreement, in the case of disability, termination for good reason or termination
other than for good cause, or 18 months, in the case of death.
Mr. Goodman is employed as President of PAX TV under a five year employment
agreement commencing January 1, 1998. Mr. Goodman is entitled to annual base
salary increases of at least 10% each January 1 and is eligible to receive an
annual bonus. Mr. Goodman is eligible to participate in all employee benefit
plans and arrangements that are generally available to other senior executives
and to receive such other cash and non-cash bonus awards and compensation
(including awards under the Stock Incentive Plans) as we may determine. We may
terminate Mr. Goodman's employment for good cause, as defined in the agreement.
If Mr. Goodman's employment is terminated by reason of his disability or other
than for good cause, or if Mr. Goodman terminates his employment for good
reason, as defined in the agreement, the Company will continue to pay Mr.
Goodman his base salary for the lesser of two years or the balance of the
employment term in the case of disability; and for the balance of the employment
term in all other cases. If Mr. Goodman dies, the Company will pay Mr. Goodman's
estate his then existing salary for a period of one year.
Mr. Morrison is employed as our Vice President and General Counsel under a
five year employment agreement commencing January 1, 1998. Mr. Morrison is
entitled to annual base salary increases of at least 10% each January 1 and is
eligible to receive an annual bonus. Mr. Morrison is eligible to participate in
all employee benefit plans and arrangements that are generally available to
other senior executives and to receive such other cash and non-cash bonus awards
and compensation (including awards under the Stock Incentive Plans) as we may
determine. We may terminate Mr. Morrison's employment for good cause, as defined
in the agreement. If Mr. Morrison's employment is terminated by reason of his
disability or other than for good cause, or if Mr. Morrison terminates his
employment for good reason, as defined in the agreement, we will continue to pay
Mr. Morrison his base salary for the lesser of two years or the balance of the
employment term in the case of disability; and for the balance of the employment
term in all other cases. If Mr. Morrison dies, we will pay his estate his then
existing salary for a period of one year.
13
<PAGE> 17
Mr. Grossman is employed as our Chief Financial Officer and Senior Vice
President, Corporate Development under a three year employment agreement
commencing June 1, 1999. Mr. Grossman is entitled to annual base salary
increases of at least 10% each January 1 and is eligible to receive an annual
bonus. Mr. Grossman is eligible to participate in all employee benefit plans and
arrangements that are generally available to other senior executives and to
receive such other cash and non-cash bonus awards and compensation (including
awards under the Stock Incentive Plans) as we may determine. We may terminate
Mr. Grossman's employment for cause, as defined in the agreement. If Mr.
Grossman's employment is terminated by reason of his death or disability or
other than for good cause, we will continue to pay Mr. Grossman his base salary
for the lesser of one year or the balance of the employment term.
The terms of each of the employment agreements described above, other than
that of Mr. Grossman, were approved by the Compensation Committee.
Notwithstanding anything to the contrary set forth in any of our previous
filings under the Securities Act of 1933 or the Securities Exchange Act of 1934
that might incorporate future filings, including this Proxy Statement, in whole
or in part, the following Compensation Committee Report on Executive
Compensation and the Performance Graph shall not be incorporated by reference
into any such filings.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors reviews and recommends
the salaries and other compensation of the executive officers of the Company,
including its Chairman and its Chief Executive Officer and other Named Executive
Officers, and is responsible for administering the Company's Executive Bonus
Plan and Stock Incentive Plans, and for reviewing proposed executive
compensation and other compensation plans and making recommendations to the
Board of Directors. The Committee consists entirely of independent directors who
are not officers or employees of the Company.
In making its recommendations as to executive compensation, the Committee
seeks to recommend a level of base compensation which is competitive with the
compensation offered to executives performing similar functions by others in the
Company's line of business, and to link a significant portion of an executive's
total potential cash compensation to the achievement of overall Company
operating and financial goals and individual performance criteria. In
administering the Executive Bonus Plan, the Committee establishes, on an annual
basis, overall Company operating and financial goals and individual performance
criteria which offer Company executives the opportunity to earn significant
bonus compensation. In formulating its recommendations as to awards under the
stock incentive plans, the Committee seeks to provide a means for Company
executives to realize substantial additional compensation based upon
appreciation in the public trading price of the Company's common stock, thereby
aligning the executives' interests with those of the Company's stockholders.
In September 1999, concurrently with the NBC investment transaction, the
Company entered into a new four year employment agreement with Mr. Sagansky, its
Chief Executive Officer. In connection with this Agreement, the terms of Mr.
Sagansky's existing options to purchase 1,200,000 shares of Class A Common Stock
were amended to reduce the exercise price of the 360,000 vested options from
$7.25 per share to $1.00 per share and to reduce the exercise price of the
remaining 840,000 unvested options from $7.25 per share to $0.01 per share, and
Mr. Sagansky's rights under his prior employment agreement to receive royalties
on all original PAX TV television programming were cancelled. Mr. Sagansky was
also granted options to purchase an additional 2,000,000 shares of Class A
Common Stock, vesting in four equal annual installments commencing September 15,
2000, and expiring in ten years. The exercise price for the options vesting on
the first anniversary is $10 per share, and the exercise price for options
vesting on subsequent anniversaries will be the lower of a range between $14 and
$21 per share or the fair market value of the common stock on the prior
anniversary date. See the description of this agreement under "Employment
Agreements" above. Mr. Sagansky's base salary and other terms of his new
employment agreement were arrived at through arms' length negotiations between
the Company and Mr. Sagansky, and reflected the Company's desire to provide
incentives to Mr. Sagansky to encourage him to remain employed with the Company
following conclusion of the transactions with NBC. The Committee's
recommendations as to the terms to be offered to Mr. Sagansky
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<PAGE> 18
were significantly influenced by its evaluation of the level of compensation
commanded by other chief executive officers and executives of Mr. Sagansky's
stature in the television broadcasting industry and the competition for Mr.
Sagansky's services. In formulating its recommendations as to Mr. Sagansky's
compensation, the Committee evaluated information provided by outside
compensation consultants retained by the Company.
In October 1999, the Company entered into a new three year employment
agreement with Mr. Paxson, its Chairman. In connection with this Agreement, Mr.
Paxson was granted options to purchase 1,000,000 shares of Class A Common Stock,
vesting in three annual installments commencing October 16, 2000, and expiring
in ten years. The exercise price for the options vesting on the first
anniversary is $10 per share, and the exercise price for options vesting on
subsequent anniversaries will be the lower of a range between $14 and $18 per
share or the fair market value of the common stock on the prior anniversary
date. See the description of this agreement under "Employment Agreements" above.
Mr. Paxson's base salary and other terms of his new employment agreement are
similar to those of Mr. Sagansky, and reflect the Company's desire to provide
incentives to Mr. Paxson to encourage him to remain employed with the Company
during the period prior to the date on which NBC may exercise certain rights to
acquire control of the Company. The Committee's recommendations as to the terms
to be offered to Mr. Paxson were significantly influenced by its evaluation of
the level of compensation commanded by other senior executives of Mr. Paxson's
stature in the television broadcasting industry. In formulating its
recommendations as to Mr. Paxson's compensation, the Committee evaluated
information provided by outside compensation consultants retained by the
Company.
Since the operating and financial performance objectives established by the
Compensation Committee for determination of bonus compensation for the 1999
fiscal year under the Executive Bonus Plan were not attained, the Committee
determined to award no bonus compensation under the Executive Bonus Plan to the
Company's executive officers, and therefore no bonus payments under this plan
will be made to the executive officers in 2000 in respect of the 1999 fiscal
year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee was composed of Mr. Burnham and Mr. Greenwald
during 1999. No executive officer of the Company served on the compensation
committee of another entity or on any other committee of the board of directors
of another entity performing similar functions during 1999.
* * * *
The foregoing report on executive compensation is provided by the following
non-employee directors, who constituted the Compensation Committee during 1999:
Bruce L. Burnham
James L. Greenwald
PERFORMANCE GRAPH
This graph compares the cumulative total return on our Class A Common Stock
as compared with the cumulative total return for the American Stock Exchange
Market Value Index and an industry peer group index compiled by us that consists
of several companies (the "Peer Group").(1) The graph assumes $100 invested at
the per share closing price of our Class A Common Stock on November 7, 1994, the
date we first became publicly traded. Similar calculations were made with
respect to the American Stock Exchange Market Value Index and the Peer Group for
the relevant periods assuming that all dividends were reinvested.
15
<PAGE> 19
<TABLE>
<CAPTION>
COMPANY NAME/INDEX 11/7/94 12/31/1994 12/31/1995 12/31/1996 12/31/1997 12/31/1998 12/31/1999
- ------------------ ------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PAXSON COMMUNICATIONS
CORP. $100.00 $86.42 $112.96 $ 57.41 $ 55.56 $ 68.06 $ 88.43
AMERICAN STOCK EXCHANGE
INDEX $100.00 $96.15 $121.55 $129.32 $151.78 $152.75 $194.43
PEER GROUP INDEX $100.00 $89.09 $123.20 $168.75 $268.02 $267.67 $450.01
</TABLE>
(1) The following companies comprise the Peer Group: Granite Broadcasting
Corp, Hearst-Argyle Television Inc., LIN Television Corp., Sinclair Broadcast
Group, Inc., Univision Communications, Inc. and Young Broadcasting, Inc.
Calculations for the Peer Group were weighted on the basis of their respective
market capitalizations.
16
<PAGE> 20
PROPOSAL 3 -- APPROVAL OF THE ISSUANCE OF CLASS A COMMON STOCK
UPON CONVERSION OF SERIES B CONVERTIBLE PREFERRED STOCK
AND EXERCISE OF WARRANT
On September 15, 1999, we entered into a strategic and financial
relationship with NBC pursuant to which NBC is expected to play an important
role in the Company's future and, subject to various conditions including FCC
approval, has the ability to acquire voting and operational control of the
Company. NBC acquired $415 million aggregate liquidation preference of our
Series B Convertible Preferred Stock and ten-year warrants to acquire 32,032,127
additional shares of Class A Common Stock. The Series B Convertible Preferred
Stock is convertible into 31,896,032 shares of the Company's Class A Common
Stock at an initial conversion price of $13.01 per share, increasing 8% per
annum. NBC's warrant to acquire 13,065,507 shares of Class A Common Stock
("Warrant A") is exercisable at a price of $12.60 per share.
Because the conversion price of the Series B Convertible Preferred Stock
and the exercise price of Warrant A are lower than the closing price of the
Class A Common Stock on the American Stock Exchange on September 15, 1999, and
the shares of Class A Common Stock issuable upon such conversion and exercise
each would constitute more than 20% of our currently outstanding Class A Common
Stock, the rules of the American Stock Exchange require that, as a condition to
listing on that exchange of the shares of Class A Common Stock so issuable, the
stockholders of the Company approve the issuance of these shares of Class A
Common Stock on the terms on which we have agreed to issue them. We agreed with
NBC to submit a proposal to our stockholders at the Annual Meeting seeking
approval of this matter. Mr. Paxson and his affiliates, who own a majority in
total voting power of our outstanding voting stock, have agreed with NBC to vote
their shares in favor of this proposal.
The Board of Directors has unanimously approved and recommends that our
stockholders approve the issuance of shares of Class A Common Stock upon
conversion of shares of Series B Convertible Preferred Stock, pursuant to the
terms set forth in the Certificate of Designation of the Series B Convertible
Preferred Stock, which is included as Exhibit B to this Proxy Statement, and the
issuance of shares of Class A Common Stock pursuant to the terms of the warrant
certificate evidencing Warrant A, which is included as Exhibit C to this Proxy
Statement.
A description of the material terms of the transaction with NBC is set
forth below. This information is a summary only and is not a complete statement
of the terms the material transaction agreements, which were included as
exhibits to the Company's Current Report on Form 8-K, dated September 15, 1999,
as filed with the Commission.
NBC TRANSACTION
On September 15, 1999 (the "Issue Date"), the Company and NBC entered into
an Investment Agreement (the "Investment Agreement"), pursuant to which
subsidiaries of NBC acquired (i) $415 million of Series B Convertible Preferred
Stock, which is convertible into 31,896,032 shares of the Company's Class A
Common Stock, (ii) Warrant A, entitling the holder to purchase 13,065,507 shares
of Class A Common Stock at a price of $12.60 per share, and (iii) a common stock
purchase warrant entitling the holder to purchase 18,966,620 shares of Class A
Common Stock ("Warrant B" and, collectively with Warrant A, the "Warrants") 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 three years
after the Issue Date of $22.50 per share.
Concurrently with the Investment Agreement, NBC entered into an agreement
with Lowell W. Paxson, our Chairman and controlling stockholder ("Mr. Paxson")
and certain affiliates of 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 our Class B Common Stock beneficially owned by Mr. Paxson, which
shares are entitled to ten votes per share on all matters submitted to a vote of
our stockholders and are convertible into an equal number of shares of Class A
Common Stock, at a price equal to the higher of (i) the average of the closing
sale prices of the
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<PAGE> 21
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 per share for any
exercise of the Call Right on or prior to the third anniversary of the Issue
Date and $20.00 per share for any exercise of the Call Right thereafter.
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 FCC. The Call Right
expires on the tenth anniversary of the Issue Date, or prior thereto under
certain conditions, and may not be exercised until the Warrants have been
exercised in full. Upon exercise of the Call Right, Mr. Paxson would cease to be
the controlling stockholder of the Company.
The Series B Convertible Preferred Stock is exchangeable, at the option of
the holder, subject to our debt and preferred stock covenants limiting
additional indebtedness but in any event not later than January 1, 2007, into
convertible debentures ranking on a parity with our other subordinated
indebtedness. Should NBC determine that its affiliates are prevented under the
Communications Act and the rules and regulations of the FCC from holding shares
of Class A Common Stock upon conversion of Series B Convertible Preferred Stock
or exercise of the Warrants, the Series B Convertible Preferred Stock held by
NBC's affiliate shall be convertible into, and the Warrants shall be exercisable
for, an equal number of shares of non-voting common stock of the Company.
Warrant B may not be exercised until Warrant A has been exercised in full, and
may not be exercised prior to February 1, 2002, to the extent that, after giving
effect to such exercise, Mr. Paxson or any of his affiliates (including family
members) would not constitute the "Single Majority Stockholder" of the Company
under applicable FCC rules (generally defined as the possession of the right to
vote securities having more than 50% of the total voting power of all
outstanding common stock and voting common stock equivalents) (the "FCC Single
Majority Stockholder"). After February 1, 2002, Warrant B may not be exercised
to the extent that, after giving effect to such exercise, Mr. Paxson or any of
his affiliates (including family members) would not constitute the FCC Single
Majority Stockholder of the Company unless Warrant B is exercised in full and
concurrently with such exercise the Call Right has also been exercised. NBC was
granted 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.
The Investment Agreement includes affirmative and negative covenants on the
Company's part, requires us to obtain the consent of NBC or its permitted
transferee with respect to a broad range of corporate actions, and grants NBC
certain rights with respect to our broadcast television operations. We agreed to
seek stockholder approval, at our next annual meeting, of (i) amendments to our
Certificate of Incorporation providing for a classified board of directors
serving three year staggered terms and the authorization of sufficient shares of
non-voting common stock to permit NBC (or an assignee) to exercise its right to
acquire non-voting common stock, as described in the preceding paragraph, (ii)
the election of directors for staggered terms, and (iii) the issuance of shares
of Class A Common Stock pursuant to the terms of the Series B Convertible
Preferred Stock and Warrant A to the extent necessary to satisfy American Stock
Exchange conditions for listing such shares. NBC also has the right to require
us to redeem its investment in the Series B Convertible Preferred Stock under
certain circumstances, including at any time that the FCC renders a final
decision which is not subject to further appeal within the FCC that its
investment in us and the acquisition of the other rights provided for in the
transaction agreements is "attributable" to NBC (as that 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 our compliance
with the covenants contained in our outstanding indebtedness and preferred
stock). NBC or its permitted transferee may continue to exercise certain of the
rights granted under the transaction agreements only so long as they hold Series
B Convertible Preferred Stock convertible into a number of shares of Class A
Common Stock, and shares of Class A Common Stock acquired upon exercise of the
Warrants, aggregating at least 21,500,000 shares of Class A Common Stock
(increasing to 26,000,000 shares 30 days after the Company's first Securities
and Exchange Commission filing showing positive net earnings per share for any
fiscal quarter).
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<PAGE> 22
NBC, the Company, Mr. Paxson and certain affiliates of Mr. Paxson also
entered into an agreement concurrently with the Investment Agreement, pursuant
to which, if permitted by the Communications Act and FCC rules and regulations,
we may nominate persons named by NBC for election to the Board of Directors and
Mr. Paxson and his affiliates will vote their shares in favor of the election of
such persons as directors. During December 1999 and March 2000, the Board of
Directors appointed Messrs. Burgess, Turner and Brook, employees of NBC, to fill
vacancies on the Board of Directors. Each of these directors is standing for
reelection, as set forth in Proposal 2 above. Mr. Paxson and his affiliates also
agreed to vote their shares in favor of the proposals we agreed to submit to our
stockholders at the Annual Meeting, as described in the preceding paragraph.
The material terms of the NBC transaction were negotiated over a period of
several months preceding the Issue Date. During the period of these
negotiations, the public trading price of our Class A Common Stock was generally
lower than the conversion price of the Series B Convertible Preferred Stock and
the exercise price of Warrant A ultimately agreed to with NBC. Further, as the
nature of the transaction we contemplated envisioned a long term strategic and
financial relationship which could ultimately lead to NBC's acquisition of
control of the Company, should FCC regulations permit, and involved a
significant cash investment by NBC, the negotiation of the conversion and
exercise prices of the securities to be acquired by NBC was not determined
solely by reference to the public trading price of the Class A Common Stock. At
the Issue Date, the public trading price of the Class A Common Stock had
increased over a short period of time to a price in excess of the conversion and
exercise prices agreed to with NBC. The Board of Directors, in the exercise of
its business judgment, determined that the transaction with NBC was in the best
interests of the Company and the parties closed the transaction on the Issue
Date. NBC's investment has given us needed capital to fund television station
acquisitions, capital expenditures, digital television upgrades, cable
distribution rights payments, programming development and working capital needs.
In order to be adopted, this proposal must receive the affirmative vote of
a majority of the shares present in person or represented by proxy and entitled
to vote on the proposal. Mr. Paxson and his affiliates, who own a majority in
total voting power of our outstanding voting stock, have agreed with NBC to vote
their shares in favor of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THIS
PROPOSAL TO APPROVE THE ISSUANCE OF SHARES OF CLASS A COMMON STOCK UPON
CONVERSION OF SERIES B CONVERTIBLE PREFERRED STOCK AND THE EXERCISE OF WARRANT
A.
PROPOSAL 4 -- APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
AND THE AUTHORIZED SHARES OF CLASS C NON-VOTING COMMON STOCK
In connection with the NBC transaction described under Proposal 3 above, we
agreed that, should NBC determine that its affiliates are prevented under the
Communications Act and the rules and regulations of the FCC from holding shares
of Class A Common Stock upon conversion of Series B Convertible Preferred Stock
or exercise of the Warrants, the Series B Convertible Preferred Stock held by
NBC's affiliate shall be convertible into, and the Warrants shall be exercisable
for, an equal number of shares of non-voting common stock of the Company. We
currently have 197,500,000 authorized shares of common stock, 150,000,000 of
which are designated Class A Common Stock, 35,000,000 of which are designated
Class B Common Stock and 12,500,000 of which are designated Class C Non-Voting
Common Stock. The Board of Directors has approved and recommends that our
stockholders approve an amendment to Article Fourth of our Certificate of
Incorporation to increase the number of authorized shares of our common stock by
increasing the number of authorized shares of Class C Non-Voting Common Stock
from 12,500,000 to 77,500,000, with a corresponding increase in the authorized
shares of Class A Common Stock (into which the Class C Non-Voting Common Stock
is convertible) from 150,000,000 to 215,000,000, and a corresponding increase in
the total authorized shares of common stock from 197,500,000 to 327,500,000 (the
"Authorized Capital Amendment"). The text of that portion of Article Fourth
proposed to be amended is set forth in Exhibit D to this Proxy Statement.
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<PAGE> 23
As described under Proposal 3 above, NBC acquired $415 million aggregate
liquidation preference of Series B Convertible Preferred Stock which is
convertible into 31,896,032 shares of our Class A Common Stock, and Warrants to
purchase an aggregate of 32,032,127 shares of our Class A Common Stock. NBC has
agreed that our Class C Non-Voting Common Stock is an acceptable alternative
should NBC elect to exercise its rights to cause its affiliates to acquire
non-voting common stock. We currently have authorized 12,500,000 shares of Class
C Non-Voting Common Stock, none of which is issued and outstanding.
Approximately 65,000,000 shares of Class C Non-Voting Common Stock would be
required to be available for issuance in order to enable NBC to exercise in full
its rights to acquire non-voting common stock. The Authorized Capital Amendment
would increase the authorized Class C Non-Voting Common Stock by 65,000,000
shares to a total of 77,500,000 shares, approximately 65,000,000 of which would
be reserved for possible future issuance to NBC's affiliates should NBC exercise
its right to cause its affiliates to acquire non-voting common stock. As the
Class C Non-Voting Common Stock is convertible on a share for share basis into
Class A Common Stock, the Authorized Capital Amendment would also increase the
authorized Class A Common Stock by 65,000,000 shares to a total of 215,000,000
shares, approximately 65,000,000 of which would be reserved for possible future
issuance upon conversion of shares of Class C Non-Voting Common Stock which
could be issued to NBC's affiliates.
Because substantially all of the additional authorized shares of Class C
Non-Voting Common Stock and Class A Common Stock would be reserved for issuance
in the event NBC were to exercise its rights to cause its affiliates to acquire
Class C Non-Voting Common Stock, these shares of Class C Non-Voting Common Stock
and Class A Common Stock would not be available for issuance or reservation for
other purposes, unless and until the reservation of such shares for NBC were no
longer necessary. To the extent NBC's affiliates acquire shares of Class A
Common Stock upon conversion of the Series B Convertible Preferred Stock or
exercise of the Warrants, the continued reservation of an equal number of shares
of Class C Non-Voting Common Stock would cease to be required. Further, should
the Warrants expire unexercised or the Series B Convertible Preferred Stock or
Warrants be transferred to third parties, it would no longer be necessary to
reserve shares of Class C Non-Voting Common Stock in respect of the conversion
or exercise thereof. Should the Warrants expire unexercised and to the extent
the Series B Convertible Preferred Stock were to be redeemed, it would no longer
be necessary to reserve shares of Class A Common Stock in respect of the
exercise or conversion of such securities. Authorized but unissued shares of
Class C Non-Voting Common Stock and Class A Common Stock as to which reservation
for NBC's purposes ceases to be necessary would be available for issuance,
without further action or authorization by the stockholders (except as may be
required by law or the rules of any stock exchange on which our securities may
then be listed), for corporate purposes which the Board of Directors may deem
desirable.
None of our outstanding shares of Common Stock have preemptive rights or
cumulative voting rights. The Authorized Capital Amendment will not change the
terms of our outstanding Common Stock. The rights of holders of Class C
Non-Voting Common Stock are identical to those of holders of our other classes
of Common Stock, except with respect to voting rights. The holders of Class C
Non-Voting Common Stock will have no right to vote on matters submitted to a
vote of stockholders, except that the approval of the holders of a majority of
the outstanding Class C Non-Voting Common Stock shall be required for (i) any
merger, asset sale or recapitalization where the holders of Class C Non-Voting
Common Stock would receive consideration per share different from that to be
received by the holders of the Class A and Class B Common Stock (except with
respect to the receipt of non-voting securities otherwise identical on a per
share basis which are convertible into voting securities on the same terms as
the Class C Non-Voting Common Stock is convertible into Class A Common Stock),
and (ii) any change to Article Fourth of the Certificate of Incorporation. The
Class C Non-Voting Common Stock is convertible into shares of Class A Common
Stock on a share for share basis.
In order to be adopted, this proposal must receive the affirmative vote of
a majority of the outstanding shares entitled to vote, present in person or
represented by proxy. Mr. Paxson and his affiliates, who own a
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<PAGE> 24
majority in total voting power of our outstanding voting stock, have agreed with
NBC to vote their shares in favor of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THIS
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO EFFECT AN
INCREASE IN AUTHORIZED COMMON STOCK.
PROPOSAL 5 -- APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed PricewaterhouseCoopers LLP, Fort
Lauderdale, Florida, to serve as our independent auditors for 2000, subject to
approval of our stockholders. Representatives of PricewaterhouseCoopers LLP are
expected to be present at the Annual Meeting to answer questions from
stockholders, and will have an opportunity to make a statement if they wish to
do so. The Board of Directors recommends a vote FOR the ratification of the
appointment of PricewaterhouseCoopers LLP as the Company's independent certified
public accountants for 2000.
OTHER INFORMATION
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Proposals of stockholders intended for presentation at the 2001 annual
meeting must be received by us on or before December 6, 2000, in order to be
included in our proxy statement and form of proxy for that meeting.
EXPENSES OF SOLICITATION
We will bear the expense of preparing, printing, and mailing proxy
materials to our stockholders. In addition to solicitations by mail, our
employees may solicit proxies on behalf of the Board of Directors in person or
by telephone. We will also reimburse brokerage houses and other nominees for
their expenses in forwarding proxy material to beneficial owners of our stock.
OTHER MATTERS
The financial statements, financial information and management discussion
and analysis of financial condition and results of operations set forth in our
1999 Annual Report are incorporated by reference. We will provide to any
stockholder upon written request a copy of our Annual Report on Form 10-K,
including the financial statements and the schedules thereto, for our fiscal
year ended December 31, 1999, as filed with the Securities and Exchange
Commission pursuant to Rule 13a-1 under the Securities Exchange Act of 1934. We
will not charge for copies of our annual report, but will assess a reasonable
charge for the exhibits, if requested.
By Order of the Board of Directors
/s/ ANTHONY L. MORRISON
Anthony L. Morrison, Secretary
West Palm Beach, Florida
April 5, 2000
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EXHIBIT A
PROPOSAL 1 -- PROPOSED AMENDMENT TO CERTIFICATE
OF INCORPORATION TO ADD NEW ARTICLE THIRTEENTH
RESOLVED, that the Company's Certificate of Incorporation be amended by
adding thereto a new Article Thirteenth to read as follows:
THIRTEENTH. The number of directors shall be determined by the Board
of Directors in accordance with the Bylaws. The directors shall be divided
into three classes, Class I, Class II and Class III, as nearly equal in
number as possible. The term of office for the Class I directors shall
expire at the annual meeting of the stockholders in 2001; the term of
office for the Class II directors shall expire at the annual meeting of the
stockholders in 2002; and the term of office for the Class III directors
shall expire at the annual meeting of the stockholders in 2003. At each
annual meeting of the stockholders commencing in 2001, the successors to
the directors whose terms are expiring shall be elected to a term expiring
at the third succeeding annual meeting of the stockholders. If the number
of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class
as nearly equal as possible, and any additional directors of any class
elected to fill a vacancy resulting from an increase in such class shall
hold office for a term that shall coincide with the remaining term of that
class, but in no case will a decrease in the number of directors shorten
the term of any incumbent director. A director shall hold office until the
annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office.
Directors may be removed at any time with or without cause by the vote of a
majority of the shares entitled to vote with respect to the election of
directors.
A-1
<PAGE> 26
EXHIBIT B
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF 8% SERIES B
CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
---------------------------------------------
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
---------------------------------------------
Paxson Communications Corporation (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
board of directors of the Corporation (the "Board of Directors") by its
Certificate of Incorporation, as amended (hereinafter referred to as the
"Certificate of Incorporation"), and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said Board of
Directors, on September 9, 1999, duly approved and adopted the following
resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, the Board of Directors does
hereby create, authorize and provide for the issuance of 8% Series B
Convertible Exchangeable Preferred Stock, par value $.001 per share, with a
liquidation preference of $10,000 per share, consisting of 41,500 shares,
having the designations, preferences, relative, participating, optional and
other special rights and the qualifications, limitations and restrictions
thereof that are set forth in the Certificate of Incorporation and in this
Resolution as follows:
(a) Designation. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Corporation a class of Preferred Stock
designated as the "8% Series B Convertible Exchangeable Preferred Stock." The
number of shares constituting such class shall be 41,500 and are referred to as
the "Series B Convertible Preferred Stock." The liquidation preference of the
Series B Convertible Preferred Stock shall be $10,000.00 per share.
(b) Rank. The Series B Convertible Preferred Stock shall, with respect to
dividends and distributions upon liquidation, winding up or dissolution of the
Corporation, rank (i) senior to all classes of Common Stock of the Corporation
and to each other class of Capital Stock of the Corporation or series of
Preferred Stock of the Corporation hereafter created, the terms of which do not
expressly provide that it ranks senior to, or on a parity with, the Series B
Convertible Preferred Stock as to dividends and distributions upon liquidation,
winding up or dissolution of the Corporation (collectively referred to, together
with all classes of Common Stock of the Corporation, as "Junior Securities");
(ii) on a parity with any class of Capital Stock of the Corporation or series of
Preferred Stock of the Corporation hereafter created the terms of which
expressly provide that such class or series will rank on a parity with the
Series B Convertible Preferred Stock as to dividends and distributions upon
liquidation, winding up or dissolution (collectively referred to as "Parity
Securities"), provided that any such Parity Securities not issued in accordance
with the requirements of paragraph (f)(i) hereof shall be deemed to be Junior
Securities and not Parity Securities; and (iii) junior to the Existing Preferred
Stock and to each other class of Capital Stock of the Corporation or series of
Preferred Stock of the Corporation hereafter created the terms of which
expressly provide that such class or series will rank senior to the Series B
Convertible Preferred Stock as to dividends and distributions upon liquidation,
winding up or dissolution of the Corporation (collectively referred to as
"Senior Securities"), provided that any such Senior Securities not issued in
accordance with the requirements of paragraph (f)(i) hereof shall be deemed to
be Junior Securities and not Senior Securities.
<PAGE> 27
(c) Dividends.
(i) Beginning on the Issue Date, the Holders of the outstanding shares
of Series B Convertible Preferred Stock shall be entitled to receive, when,
as and if declared by the Board of Directors, out of funds legally
available therefor, dividends on each share of Series B Convertible
Preferred Stock at the higher of (determined on a cumulative basis from the
Issue Date to the date of such determination) (x) a rate per annum equal to
8% of the Original Issue Price, which rate shall be adjusted on the fifth
anniversary of the Issue Date to equal the Cost of Capital Dividend Rate,
which rate shall remain in effect thereafter for so long as the Series B
Convertible Preferred Stock shall be outstanding, and (y) the aggregate
cash dividends per share paid on the Class A Common Stock from the Issue
Date to the date of such determination, multiplied by the number of shares
of Class A Common Stock into which each share of Series B Convertible
Preferred Stock is convertible. All dividends shall be cumulative, whether
or not earned or declared, on a daily basis from the Issue Date, but shall
be payable only at such time or times as may be fixed by the Board of
Directors or as otherwise provided herein. Dividends shall be payable to
the Holders of record as they appear on the stock books of the Corporation
on such dates as the Board of Directors may determine with respect to such
dividends. Dividends shall cease to accumulate in respect of shares of the
Series B Convertible Preferred Stock on the date of the redemption of such
shares unless the Corporation shall have failed to pay the relevant
redemption price on the date fixed for redemption.
(ii) All dividends paid with respect to shares of the Series B
Convertible Preferred Stock pursuant to paragraph (c)(i) shall be paid pro
rata to the Holders entitled thereto.
(iii) Dividends payable on the Series B Convertible Preferred Stock
for any period less than a year shall be computed on the basis of a 360-day
year of twelve 30-day months and the actual number of days elapsed in the
period for which payable.
(d) Liquidation Preference.
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the Holders of
shares of Series B Convertible Preferred Stock then outstanding shall be
entitled to be paid, out of the assets of the Corporation available for
distribution to its stockholders and before any distribution shall be made
or any assets distributed to the holders of any of the Junior Securities,
including, without limitation, the Common Stock of the Corporation, an
amount in cash equal to the greater of (A) the liquidation preference for
each share outstanding, plus without duplication, an amount in cash equal
to accumulated and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding up, and (B) the amount per share
payable upon liquidation, dissolution or winding up to the holders of
shares of the Corporation's Class A Common Stock (without deduction for the
liquidation preference otherwise payable pursuant to clause (A) hereof),
multiplied by the number of such shares into which the shares of Series B
Convertible Preferred Stock are then convertible. Except as provided in the
preceding sentence, Holders of Series B Convertible Preferred Stock shall
not be entitled to any distribution in the event of any liquidation,
dissolution or winding up of the affairs of the Corporation. If the assets
of the Corporation are not sufficient to pay in full the liquidation
payments payable to the Holders of outstanding shares of the Series B
Convertible Preferred Stock and all Parity Securities, then, (x) should the
holders of the Series B Convertible Preferred Stock be entitled to receive
the liquidation amount described in clause (A) above, the holders of all
such shares shall share equally and ratably in such distribution of assets
first in proportion to the full liquidation preference to which each is
entitled until such preferences are paid in full, and then in proportion to
their respective amounts of accumulated but unpaid dividends; and (y)
should the holders of the Series B Convertible Preferred Stock be entitled
to receive the liquidation amount described in clause (B) above, the
holders of all such shares shall share equally and ratably in such
distribution of assets in proportion to the full liquidation payments to
which each is entitled.
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets
of the Corporation nor the consolidation or merger of the Corporation with
or into one or more entities shall be deemed to be a liquidation,
dissolution or winding up of the affairs of the Corporation.
B-2
<PAGE> 28
(e) Redemption.
(i) Optional Redemption. (A) Commencing on the fifth anniversary of
the Issue Date, the Corporation may, at its option, at any time and from
time to time, redeem, in whole or in part, in the manner provided for in
paragraph (e)(ii) hereof, any or all of the outstanding shares of Series B
Convertible Preferred Stock, at a price per share equal to the Redemption
Price.
(B) In the event of a redemption pursuant to paragraph (e)(i)(A)
hereof of only a portion of the then outstanding shares of the Series B
Convertible Preferred Stock, the Corporation shall effect such redemption
on a pro rata basis according to the number of shares held by each Holder
of the Series B Convertible Preferred Stock, except that the Corporation
may redeem all shares held by any Holders of fewer than one share (or
shares held by Holders who would hold less than one share as a result of
such redemption), as may be determined by the Corporation, provided that no
optional redemption shall be authorized or made unless prior thereto full
accumulated and unpaid dividends are declared and paid in full, or declared
and a sum in cash set apart sufficient for such payment, on the Series B
Convertible Preferred Stock for all dividends prior to the Redemption Date.
(ii) Procedures for Redemption. (A) At least 90 days prior to the
date fixed for any redemption of the Series B Convertible Preferred Stock
pursuant to paragraph (e)(i), written notice (the "Redemption Notice")
shall be given by first class mail, postage prepaid, to each Holder of
record on the record date fixed for such redemption of the Series B
Convertible Preferred Stock at such Holder's address as it appears on the
stock books of the Corporation, provided that no failure to give such
notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Series B Convertible
Preferred Stock to be redeemed except as to the Holder or Holders to whom
the Corporation has failed to give said notice or to whom such notice was
defective. The Redemption Notice shall state:
(1) the Redemption Price;
(2) whether all or less than all the outstanding shares of the
Series B Convertible Preferred Stock are to be redeemed and the total
number of shares of the Series B Convertible Preferred Stock being
redeemed;
(3) the date fixed for redemption;
(4) that the Holder is to surrender to the Corporation, in the
manner, at the place or places and at the price designated, his
certificate or certificates representing the shares of Series B
Convertible Preferred Stock to be redeemed; and
(5) that dividends on the shares of the Series B Convertible
Preferred Stock to be redeemed shall cease to accumulate on such
Redemption Date unless the Corporation defaults in the payment of the
Redemption Price.
(B) Each Holder of Series B Convertible Preferred Stock shall
surrender the certificate or certificates representing such shares of
Series B Convertible Preferred Stock to the Corporation, duly endorsed (or
otherwise in proper form for transfer, as determined by the Corporation),
in the manner and at the place designated in the Redemption Notice, and on
the Redemption Date the full Redemption Price, for such shares shall be
payable in cash to the Person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall
be canceled and retired. In the event that less than all of the shares
represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares.
(C) On and after the Redemption Date, unless the Corporation defaults
in the payment in full of the Redemption Price, dividends on the Series B
Convertible Preferred Stock called for redemption shall cease to accumulate
on the Redemption Date, and all rights of the Holders of redeemed shares
shall terminate with respect thereto on the Redemption Date, other than the
right to receive the Redemption Price, without interest; provided, however,
that if a notice of redemption shall have been given as provided in
paragraph (ii)(A) above and the funds necessary for redemption (including
an amount in respect of
B-3
<PAGE> 29
all dividends that will accrue to the Redemption Date) shall have been
segregated and irrevocably deposited in trust for the equal and ratable
benefit of the Holders of the shares to be redeemed, then, at the close of
business on the day on which such funds are segregated and set aside, the
Holders of the shares to be redeemed shall cease to be stockholders of the
Corporation and shall be entitled only to receive the Redemption Price.
(iii) Redemption at the Option of the Holders. The Series B
Convertible Preferred Stock is subject to redemption at the option of
certain Holders in accordance with the terms and conditions set forth in
Article IX of the Investment Agreement.
(f) Voting Rights. Holders of Series B Convertible Preferred Stock shall
have no voting rights, except as required by the General Corporation Law of the
State of Delaware, and as expressly provided in this Certificate of Designation.
(i) (A) So long as any shares of the Series B Convertible Preferred
Stock are outstanding, the Corporation may not issue any additional shares
of Series B Convertible Preferred Stock, any new class of Parity Securities
or Senior Securities (or amend the provisions of any existing class of
capital stock to make such class of capital stock Parity Securities or
Senior Securities) without the approval of the holders of at least a
majority of the shares of Series B Convertible Preferred Stock then
outstanding, voting or consenting, as the case may be, together as one
class; provided, however, that the Corporation may, without the approval of
the holders of at least a majority of the shares of Series B Convertible
Preferred Stock then outstanding, voting or consenting, as the case may be,
together as one class: (I) issue a new class of Senior Securities (or amend
the provisions of any existing class of capital stock to make such class of
capital stock Senior Securities) at any time after the Common Stock Trading
Price first exceeds 120% of the Conversion Price (as then in effect) for 20
consecutive trading days; (II) issue additional shares of Existing
Preferred Stock, Parity Securities or Senior Securities, which Senior
Securities are pari passu with the Existing Preferred Stock, and which
Senior Securities or Parity Securities require cash dividends at a time and
in an amount not in excess of one percentage point greater than the
dividend rate borne by any series of the Existing Preferred Stock (as
existing on the Issue Date) and which does not prevent either the payment
of cash dividends on the Series B Convertible Preferred Stock or the
exchange of the Series B Convertible Preferred Stock for the New Exchange
Debentures, in an amount sufficient to acquire any series of the Existing
Preferred Stock in accordance with its terms on the Issue Date (including
any premium required to be paid), plus the amount of reasonable expenses
incurred by the Corporation in acquiring such series of Existing Preferred
Stock and issuing such additional Existing Preferred Stock, Parity
Securities or Senior Securities (as the case may be); with such shares
being issued no sooner than the date the Corporation repurchases, redeems
or otherwise retires such series of the Existing Preferred Stock; and (III)
issue additional shares of Existing Preferred Stock as dividends on the
Existing Preferred Stock in accordance with the certificates of designation
of the Existing Preferred Stock, as in existence on the Issue Date.
(B) So long as any shares of the Series B Convertible Preferred Stock
are outstanding, the Corporation shall not amend this Resolution so as to
affect materially and adversely the rights, preferences or privileges of
Holders of shares of Series B Convertible Preferred Stock without the
affirmative vote or consent of Holders of at least a majority of the issued
and outstanding shares of Series B Convertible Preferred Stock, voting or
consenting, as the case may be, as one class, given in person or by proxy,
either in writing or by resolution adopted at an annual or special meeting.
(C) While any of the Series B Convertible Preferred Stock is
outstanding, the Corporation shall not amend or modify the Indenture for
the New Exchange Debentures (the "New Exchange Indenture") in the form
executed by the parties thereto (except as expressly provided therein in
respect of amendments without the consent of Holders of New Exchange
Debentures) as permitted by Section 8.02 of the New Exchange Indenture to
be amended or modified by (I) a majority vote (x) without the affirmative
vote or consent of Holders of at least a majority of the shares of Series B
Convertible Preferred Stock then outstanding or, (y) if any New Exchange
Debentures are then outstanding, without the affirmative vote or consent
of, in the aggregate, Holders of at least a majority in liquidation
preference of the Series B
B-4
<PAGE> 30
Convertible Preferred Stock and holders of at least a majority in principal
amount of the New Exchange Debentures, or (II) unanimous consent, without
the consent of each Holder of Series B Convertible Preferred Stock and each
holder of New Exchange Debentures, in the case of each of clauses (I)(x)
and (y) and (II), voting or consenting, as the case may be, as one class,
and given in person or by proxy, either in writing or by resolution adopted
at an annual or special meeting (in the case of Holders of Series B
Convertible Preferred Stock and, in accordance with the terms of the New
Exchange Indenture, in the case of holders of New Exchange Debentures).
(D) Except as set forth in paragraph (f)(i)(A) above, the creation,
authorization or issuance of any shares of any Junior Securities, Parity
Securities or Senior Securities or the increase or decrease in the amount
of authorized Capital Stock of any class, including Preferred Stock, shall
not require the consent of Holders of Series B Convertible Preferred Stock
and shall not be deemed to affect adversely the rights, preferences or
privileges of Holders of Series B Convertible Preferred Stock.
(ii) Without the affirmative vote or consent of Holders of a majority
of the issued and outstanding shares of Series B Convertible Preferred
Stock, voting or consenting, as the case may be, as a separate class, given
in person or by proxy, either in writing or by resolution adopted at an
annual or special meeting, the Corporation shall not, in a single
transaction or series of related transactions, consolidate or merge with or
into, or sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of the Corporation's assets (as an entirety or
substantially as an entirety in one transaction or series of related
transactions) to, another Person (other than a Wholly-Owned Subsidiary
with, into or to another Wholly-Owned Subsidiary) or adopt a plan of
liquidation unless (A) either (I) the Corporation is the surviving or
continuing Person or (II) the Person (if other than the Corporation) formed
by such consolidation or into which the Corporation is merged or the Person
that acquires by conveyance, transfer or lease the properties and assets of
the Corporation substantially as an entirety or, in the case of a plan
liquidation, the Person to which assets of the Corporation have been
transferred shall be a corporation, partnership or trust organized and
existing under the laws of the United States or any State thereof or the
District of Columbia; (B) the Series B Convertible Preferred Stock shall be
converted into or exchanged for and shall become shares of such successor,
transferee or resulting Person with the same powers, preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereon, that the Series B
Convertible Preferred Stock had immediately prior to such transaction; (C)
immediately after giving effect to such transaction and the use of the
proceeds therefrom (on a pro forma basis, including giving effect to any
Indebtedness incurred or anticipated to be incurred in connection with such
transaction), the Corporation (in the case of clause (I) of the foregoing
clause (A)) or such Person (in the case of clause (II) of the foregoing
clause (A)) shall be able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under paragraph (l)(i)
hereof; (D) immediately after giving effect to such transactions, no Voting
Rights Triggering Event shall have occurred or be continuing; and (E) the
Corporation has delivered to the transfer agent for the Series B
Convertible Preferred Stock prior to the consummation of the proposed
transaction an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger or transfer complies with the terms
hereof and that all conditions precedent herein relating to such
transaction have been satisfied. For purposes of the foregoing, the
transfer (by lease, assignment, sale or otherwise, in a single transaction
or series of related transactions) of all or substantially all of the
properties and assets of one or more Subsidiaries of the Corporation, the
Capital Stock of which constitutes all or substantially all of the
properties and assets of the Corporation shall be deemed to be the transfer
of all or substantially all of the properties and assets of the
Corporation.
(iii) (A) If (I) the Corporation fails to discharge any redemption or
conversion obligation with respect to the Series B Convertible Preferred
Stock; (II) the Corporation fails to make a Change of Control Offer
(whether pursuant to the terms of paragraph (h)(v) or otherwise) following
a Change of Control if such Change of Control Offer is required by
paragraph (h) hereof or fails to purchase shares of Series B Convertible
Preferred Stock from Holders who elect to have such shares purchased
pursuant to the Change of Control Offer; (III) the Corporation breaches or
violates one of the provisions set forth in any of paragraphs (1)(i),
(1)(ii), (l)(iii) or (l)(iv) hereof and the breach or violation continues
for a
B-5
<PAGE> 31
period of 60 days or more after the Corporation receives notice thereof
specifying the default from the holders of at least 25% of the shares of
Series B Convertible Preferred Stock then outstanding; (IV) the Corporation
fails to pay at the final stated maturity (giving effect to any extensions
thereof) the principal amount of any Indebtedness of the Corporation or any
Restricted Subsidiary of the Corporation, or the final stated maturity of
any such Indebtedness is accelerated, if the aggregate principal amount of
such Indebtedness, together with the aggregate principal amount of any
other such Indebtedness in default for failure to pay principal at the
final stated maturity (giving effect to any extensions thereof) or which
has been accelerated, aggregates $10,000,000 or more at any time, in each
case, after a 20-day period during which such default shall not have been
cured or such acceleration rescinded; or (V) any event occurs or condition
exists which results in an increase in the dividend rate borne by the
Private Preferred Stock in accordance with the terms thereof, then in the
case of any of clauses (I)-(V) the number of directors constituting the
Board of Directors shall be adjusted by the number, if any, necessary to
permit the Holders of the then outstanding shares of Series B Convertible
Preferred Stock, voting separately and as one class, to elect the lesser of
two directors and that number of directors constituting 25% of the members
of the Board of Directors. Each such event described in clauses (I), (II),
(III), (IV), and (V) is a "Voting Rights Triggering Event." Holders of a
majority of the issued and outstanding shares of Series B Convertible
Preferred Stock, voting separately and as one class, shall have the
exclusive right to elect the lesser of two directors and that number of
directors constituting 25% of the members of the Board of Directors at a
meeting therefor called upon occurrence of such Voting Rights Triggering
Event, and at every subsequent meeting at which the terms of office of the
directors so elected by the Holders of the Series B Convertible Preferred
Stock expire (other than as described in (f)(iii)(B) below). The voting
rights provided herein shall be the exclusive remedy at law or in equity of
the holders of the Series B Convertible Preferred Stock for any Voting
Rights Triggering Event.
(B) The right of the Holders of Series B Convertible Preferred Stock
voting together as a separate class to elect members of the Board of
Directors as set forth in subparagraph (f)(iii)(A) above shall continue
until such time as in all other cases, the failure, breach or default
giving rise to such Voting Rights Triggering Event is remedied, cured
(including, but not limited to, in the case of clause (IV) of subparagraph
(f)(iii)(A) above through the issuance of Refinancing Indebtedness or the
waiver of any breach or default by the holder of such Indebtedness) or
waived by the holders of at least a majority of the shares of Series B
Convertible Preferred Stock then outstanding and entitled to vote thereon,
at which time (I) the special right of the Holders of Series B Convertible
Preferred Stock so to vote as a class for the election of directors and
(II) the term of office of the directors elected by the Holders of the
Series B Convertible Preferred Stock shall each terminate and the directors
elected by the holders of Common Stock or Capital Stock (other than the
Series B Convertible Preferred Stock), if applicable, shall constitute the
entire Board of Directors. At any time after voting power to elect
directors shall have become vested and be continuing in the Holders of
Series B Convertible Preferred Stock pursuant to paragraph (f)(iii) hereof,
or if vacancies shall exist in the offices of directors elected by the
Holders of Series B Convertible Preferred Stock, a proper officer of the
Corporation may, and upon the written request of the Holders of record of
at least 25% of the shares of Series B Convertible Preferred Stock then
outstanding addressed to the secretary of the Corporation shall, call a
special meeting of the Holders of Series B Convertible Preferred Stock, for
the purpose of electing the directors which such Holders are entitled to
elect. If such meeting shall not be called by a proper officer of the
Corporation within 20 days after personal service of said written request
upon the secretary of the Corporation, or within 20 days after mailing the
same within the United States by certified mail, addressed to the secretary
of the Corporation at its principal executive offices, then the Holders of
record of at least 25% of the outstanding shares of Series B Convertible
Preferred Stock may designate in writing one of their number to call such
meeting at the reasonable expense of the Corporation, and such meeting may
be called by the Person so designated upon the notice required for the
annual meetings of stockholders of the Corporation and shall be held at the
place for holding the annual meetings of stockholders. Any Holder of Series
B Convertible Preferred Stock so designated shall have, and the Corporation
shall provide, access to the lists of stockholders to be called pursuant to
the provisions hereof.
B-6
<PAGE> 32
(C) At any meeting held for the purpose of electing directors at which
the Holders of Series B Convertible Preferred Stock shall have the right,
voting together as a separate class, to elect directors as aforesaid, the
presence in person or by proxy of the Holders of at least a majority of the
outstanding shares of Series B Convertible Preferred Stock shall be
required to constitute a quorum of such Series B Convertible Preferred
Stock.
(D) Any vacancy occurring in the office of a director elected by the
Holders of Series B Convertible Preferred Stock may be filled by the
remaining directors elected by the Holders of Series B Convertible
Preferred Stock unless and until such vacancy shall be filled by the
Holders of Series B Convertible Preferred Stock.
(E) The provisions of this paragraph (f)(iii) shall apply only so long
as the Holder is able to elect directors as aforesaid pursuant to
applicable laws and regulations of the FCC as determined jointly by the
Holder and the Corporation.
(iv) In any case in which the Holders of Series B Convertible
Preferred Stock shall be entitled to vote pursuant to this paragraph (f) or
pursuant to Delaware law, each Holder of Series B Convertible Preferred
Stock entitled to vote with respect to such matter shall be entitled to one
vote for each share of Series B Convertible Preferred Stock held.
(g) Conversion.
(i) Shares of the Series B Convertible Preferred Stock will be
convertible at the option of the Holder thereof, at any time and from time
to time after the Issue Date, into (A) a number of shares of Class A Common
Stock or (B) in the case of the Initial Holder only, if the Initial Holder
determines in its sole discretion that it is prevented under applicable
laws and regulations of the FCC from holding shares of Class A Common Stock
issuable upon conversion of its shares of Series B Convertible Preferred
Stock, into a number of shares of non-voting Common Stock of the
Corporation (which upon disposition by the Initial Holder shall
automatically be converted into shares of Class A Common Stock), equal to
the Original Issue Price of the shares of Series B Convertible Preferred
Stock surrendered for conversion plus without duplication, an amount in
cash equal to accumulated and unpaid dividends thereon, divided by the
Conversion Price then in effect, except that, if shares of Series B
Convertible Preferred Stock are called for redemption, the conversion right
will terminate at the close of business on the Redemption Date. No
fractional shares or securities representing fractional shares will be
issued upon conversion; in lieu of fractional shares the Corporation will,
at its option, either round up the number of shares to be issued to the
nearest whole share or pay a cash adjustment based upon the current market
price of the Class A Common Stock at the close of business on the first
Business Day preceding the date of conversion. The Series B Convertible
Preferred Stock shall be converted by the holder thereof by surrendering
the certificate or certificates representing the shares of Series B
Convertible Preferred Stock to be converted, appropriately completed, to
the transfer agent for the Common Stock. The transfer agent shall issue one
or more certificates representing the Conversion Shares in the name or
names requested by the Holder. The transfer agent will deliver to the
Holder a new certificate representing the shares of Series B Convertible
Preferred Stock in excess of those being surrendered for conversion. The
conversion rights stated herein are subject to compliance by the holder
with all applicable laws and regulations, including, without limitation,
the Communications Act, and as a condition precedent to the Corporation's
obligation to issue Conversion Shares to the Initial Holder or its
Affiliates upon conversion of shares of Series B Convertible Preferred
Stock, the Corporation may require that such persons deliver to the
Corporation an opinion of legal counsel reasonably acceptable to the
Corporation to the effect that the issuance of Conversion Shares to such
persons or their designees upon conversion will not violate or conflict
with the Communications Act.
(ii) (A) In case the Corporation shall (I) pay a dividend or
distribution in shares of its Class A Common Stock on its shares of Class A
Common Stock, (II) subdivide its outstanding shares of Class A Common Stock
into a greater number of shares, (III) combine its outstanding shares of
Class A Common Stock into a smaller number of shares, or (IV) issue, by
reclassification of its shares of Class A Common Stock, any shares of its
capital stock (each such transaction being called a "Stock Transac-
B-7
<PAGE> 33
tion"), then and in each such case, the Conversion Price in effect
immediately prior thereto shall be adjusted so that the Holder of a share
of Series B Convertible Preferred Stock surrendered for conversion after
the record date fixing stockholders to be affected by such Stock
Transaction shall be entitled to receive upon conversion the number of
Conversion Shares which such Holder would have been entitled to receive
after the happening of such event had such share of Series B Convertible
Preferred Stock been converted immediately prior to such record date. Such
adjustment shall be made whenever any of such events shall happen, but
shall also be effective retroactively as to shares of Series B Convertible
Preferred Stock converted between such record date and the date of the
happening of any such event.
(B) If the Corporation shall, at any time or from time to time while
any shares of Series B Convertible Preferred Stock are outstanding, issue,
sell or distribute any right or warrant to purchase, acquire or subscribe
for shares of Class A Common Stock (including a right or warrant with
respect to any security convertible into or exchangeable for shares of
Class A Common Stock) generally to holders of Common Stock (including by
way of a reclassification of shares or a recapitalization of the
Corporation), for a consideration on the date of such issuance, sale or
distribution less than the Common Stock Trading Price of the shares of
Class A Common Stock underlying such rights or warrants on the date of such
issuance, sale or distribution, then and in each such case, the Conversion
Price shall be adjusted by multiplying such Conversion Price by a fraction,
the numerator of which shall be the sum of (I) the Common Stock Trading
Price per share of Common Stock on the first trading day after the date of
the public announcement of the actual terms (including the price terms) of
such issuance, sale or distribution multiplied by the number of shares of
Class A Common Stock outstanding immediately prior to such issuance, sale
or distribution plus (II) the aggregate Fair Market Value of the
consideration to be received by the Corporation in respect of the purchase
of the shares of Class A Common Stock underlying such right or warrant, and
the denominator of which shall be the Common Stock Trading Price per share
of Class A Common Stock on the trading day immediately preceding the public
announcement of the actual terms (including the price terms) of such
issuance, sale or distribution multiplied by the aggregate number of shares
of Class A Common Stock (I) outstanding immediately prior to such issuance,
sale or distribution plus (II) underlying such rights or warrants at the
time of such issuance. For the purposes of the preceding sentence, the
aggregate consideration receivable by the Corporation in connection with
the issuance, sale or distribution of any such right or warrant shall be
deemed to be equal to the sum of the aggregate offering price (before
deduction of reasonable underwriting discounts or commissions and expenses)
of all such rights or warrants.
(C) In the event the Corporation shall at any time or from time to
time while any shares of Series B Convertible Preferred Stock are
outstanding declare, order, pay or make a dividend or other distribution
generally to holders of Common Stock in stock or other securities or rights
or warrants to subscribe for securities of the Corporation or any of its
subsidiaries or evidences of indebtedness of the Corporation or any other
person or pay any Extraordinary Cash Dividend (other than any dividend or
distribution on the Class A Common Stock (I) referred to in paragraphs (A)
or (B) above or (II) if in conjunction therewith the Corporation declares
and pays or makes a dividend or distribution on each share of Series B
Convertible Preferred Stock which is the same as the dividend or
distribution that would have been made or paid with respect to such share
of Series B Convertible Preferred Stock had such share been converted into
shares of Class A Common Stock immediately prior to the record date for any
such dividend or distribution on the Class A Common Stock), then, and in
each such case, an appropriate adjustment to the Conversion Price shall be
made so that the Holder of each share of Series B Convertible Preferred
Stock shall be entitled to receive, upon the conversion thereof, the number
of shares of Class A Common Stock determined by multiplying (x) the number
of shares of Class A Common Stock into which such share was convertible on
the day immediately prior to the record date fixed for the determination of
stockholders entitled to receive such dividend or distribution by (y) a
fraction, the numerator of which shall be the Common Stock Trading Price
per share of Class A Common Stock as of such record date, and the
denominator of which shall be such Common Stock Trading Price per share of
Class A Common Stock less the Fair Market Value per share of Class A Common
Stock of such dividend or distribution (as determined in good faith by the
Board of Directors, as evidenced by a Board Resolution mailed to each
holder of Series B Convertible Preferred Stock). An adjustment made
pursuant to this paragraph
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(C) shall be made upon the opening of business on the next business day
following the date on which any such dividend or distribution is made and
shall be effective retroactively to the close of business on the record
date fixed for the determination of stockholders entitled to receive such
dividend or distribution.
(iii) No adjustment in the Conversion Price will be required to be
made in any case until cumulative adjustments amount to 1% or more of the
Conversion Price, but any such adjustment that would otherwise be required
to be made shall be carried forward and taken into account in any
subsequent adjustment. The Corporation may, to the extent permitted by law,
make such reductions in the Conversion Price in addition to those described
in paragraph (ii) above as it, in its sole discretion, shall determine to
be advisable in order that certain stock related distributions hereafter
made by the Corporation to its stockholders shall not be taxable to such
stockholders.
(iv) In the event of any capital reorganization (other than a capital
reorganization covered by paragraph (ii) (C) above) or reclassification of
outstanding shares of Common Stock (other than a reclassification covered
by paragraph (ii) (A) above), or in case of any merger, consolidation or
other corporate combination of the Corporation with or into another
corporation, or in case of any sale or conveyance to another corporation of
the property of the Corporation as an entirety or substantially as an
entirety (each of the foregoing being referred to as a "Transaction"), each
share of Series B Convertible Preferred Stock shall continue to remain
outstanding if the Corporation is the Surviving Person (as defined below)
of such Transaction, and shall be subject to all the provisions hereof, as
in effect prior to such Transaction, or if the Corporation is not the
Surviving Person, each share of Series B Convertible Preferred Stock shall
be exchanged for a new series of convertible preferred stock of the
Surviving Person, or in the case of a Surviving Person other than a
corporation, comparable securities of such Surviving Person, in either case
having economic terms as nearly equivalent as possible to, and with the
same voting and other rights as, the Series B Convertible Preferred Stock,
including entitling the holder thereof to receive, upon presentation of the
certificate therefor to the Surviving Person subsequent to the consummation
of such Transaction, the kind and amount of shares of stock and other
securities and property receivable (including cash) upon the consummation
of such Transaction by a holder of that number of shares of Class A Common
Stock into which one share of Series B Convertible Preferred Stock was
convertible immediately prior to such Transaction. In case securities or
property other than common stock shall be issuable or deliverable upon
conversion as aforesaid, then all references in this paragraph (iv) shall
be deemed to apply, so far as appropriate and as nearly as may be, to such
other securities or property.
Notwithstanding anything contained herein to the contrary, the
Corporation will not effect any Transaction unless, prior to the
consummation thereof, proper provision is made to ensure that the holders
of shares of Series B Convertible Preferred Stock will be entitled to
receive the benefits afforded by this paragraph (iv).
For purposes of this paragraph (iv), "Surviving Person" shall mean the
continuing or surviving Person of a merger, consolidation or other
corporate combination, the Person receiving a transfer of all or a
substantial part of the properties and assets of the Corporation, or the
Person consolidating with or merging into the Corporation in a merger,
consolidation or other corporate combination in which the Corporation is
the continuing or surviving Person, but in connection with which the Series
B Convertible Preferred Stock or Common Stock of the Corporation is
exchanged, converted or reclassified into the securities of any other
Person or cash or any other property.
(v) The Conversion Price shall initially equal $13.0110228131, and
shall increase from and after the Issue Date at a rate equal to the
dividend rate in effect from time to time on the Series B Convertible
Preferred Stock as set forth in paragraph (c)(i). The Conversion Price
shall be subject to adjustment as provided in this paragraph (g).
(vi) The Corporation shall cause the shares of Class A Common Stock
issuable upon conversion of the Series B Convertible Preferred Stock (or in
the case of the Initial Holder's election to convert into non-voting Common
Stock, upon conversion of such non-voting Common Stock) to be approved for
listing on the American Stock Exchange (or such other principal securities
exchange on which the
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<PAGE> 35
Class A Common Stock may at the time be listed for trading), subject to
official notification of issuance, prior to the date of issuance thereof.
Notwithstanding anything in this Resolution to the contrary, no Holders
shall be entitled to exercise the conversion rights set forth in this
paragraph (g) until such time as the conditions for listing of the Class A
Common Stock issuable upon conversion of the Series B Convertible Preferred
Stock on the American Stock Exchange (or such other principal securities
exchange on which the Class A Common Stock may be listed for trading) which
are set forth, as of the Issue Date, in Section 713 of the American Stock
Exchange Company Guide (or substantially similar provisions of such other
exchange, in each case as such exchange rules may be hereafter in effect
from time to time) have been satisfied, whether through stockholder
approval of the issuance of the Series B Convertible Preferred Stock or
otherwise.
(h) Change of Control.
(i) In the event of a Change of Control (the date of such occurrence
being the "Change of Control Date"), the Corporation shall notify the
Holders of the Series B Convertible Preferred Stock in writing of such
occurrence and shall make an offer to purchase (the "Change of Control
Offer") all then outstanding shares of Series B Convertible Preferred Stock
at a purchase price of 101% of the liquidation preference thereof plus,
without duplication, an amount in cash equal to all accumulated and unpaid
dividends thereon (such applicable purchase price being hereinafter
referred to as the "Change of Control Purchase Price").
(ii) Within 30 days following the Change of Control Date, the
Corporation shall (x) cause a notice of the Change of Control to be sent at
least once to the Dow Jones News Service or similar business news service
in the United States and (y) send by first class mail, postage prepaid, a
notice to each Holder of Series B Convertible Preferred Stock at such
Holder's address as it appears in the register maintained by the Transfer
Agent, which notice shall govern the terms of the Change of Control Offer.
The notice to the Holders shall contain all instructions and materials
necessary to enable such Holders to tender Series B Convertible Preferred
Stock pursuant to the Change of Control Offer. Such notice shall state:
(A) that a Change of Control has occurred, that the Change of
Control Offer is being made pursuant to this paragraph (h) and that all
Series B Convertible Preferred Stock validly tendered and not withdrawn
will be accepted for payment;
(B) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 30 Business Days nor
later than 60 Business Days from the date such notice is mailed, other
than as may be required by law) (the "Change of Control Payment Date");
(C) that any shares of Series B Convertible Preferred Stock not
tendered will continue to accumulate dividends;
(D) that, unless the Corporation defaults in making payment of the
Change of Control Purchase Price any share of Series B Convertible
Preferred Stock accepted for payment pursuant to the Change of Control
Offer shall cease to accumulate dividends after the Change of Control
Payment Date;
(E) that Holders accepting the offer to have any shares of Series B
Convertible Preferred Stock purchased pursuant to a Change of Control
Offer will be required to surrender their certificate or certificates
representing such shares, properly endorsed for transfer together with
such customary documents as the Corporation and the transfer agent may
reasonably require, in the manner and at the place specified in the
notice prior to the close of business on the Business Day preceding the
Change of Control Payment Date;
(F) that Holders will be entitled to withdraw their acceptance if
the Corporation receives, not later than the close of business on the
third Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the number of shares of Series B Convertible Preferred
Stock the Holder delivered for purchase and a
B-10
<PAGE> 36
statement that such Holder is withdrawing his election to have such
shares of Series B Convertible Preferred Stock purchased;
(G) that Holders whose shares of Series B Convertible Preferred
Stock are purchased only in part will be issued a new certificate
representing the number of shares of Series B Convertible Preferred
Stock equal to the unpurchased portion of the certificate surrendered;
and
(H) the circumstances and relevant facts regarding such Change of
Control.
(iii) The Corporation will comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
repurchase of the Series B Convertible Preferred Stock in connection with a
Change of Control Offer.
(iv) On the Change of Control Payment Date, the Corporation shall (A)
accept for payment the shares of Series B Convertible Preferred Stock
tendered pursuant to the Change of Control Offer, (B) promptly mail to each
Holder of shares so accepted payment in an amount in cash equal to the
Change of Control Purchase Price for such Series B Convertible Preferred
Stock, (C) execute and issue a new Series B Convertible Preferred Stock
certificate equal to any unpurchased shares of Series B Convertible
Preferred Stock represented by certificates surrendered and (D) cancel and
retire each surrendered certificate. Unless the Corporation defaults in the
payment for the shares of Series B Convertible Preferred Stock tendered
pursuant to the Change of Control Offer, dividends will cease to accumulate
with respect to the shares of Series B Convertible Preferred Stock tendered
and all rights of Holders of such tendered shares will terminate, except
for the right to receive payment therefor, on the Change of Control Payment
Date.
(v) If the purchase of the Series B Convertible Preferred Stock would
violate or constitute a default or be prohibited under the Credit Facility,
any then outstanding Senior Debt, the Existing Debt Indentures or the
Existing Preferred Stock, then, notwithstanding anything to the contrary
contained above, prior to complying with the foregoing provisions, but in
any event within 30 days following the Change of Control Date, the
Corporation shall, to the extent required to permit such purchase of the
Series B Convertible Preferred Stock, either (A) repay in full all
Indebtedness under the Credit Facility, such Senior Debt, the Existing
Notes and the Existing Exchange Debentures and, in the case of the Credit
Facility or such other Senior Debt, terminate all commitments outstanding
thereunder and effect the termination of any such prohibition under the
Existing Preferred Stock, or (B) obtain the requisite consents, if any,
under the Credit Facility, the instruments governing such Senior Debt, the
Existing Debt Indentures and the certificates of designation governing the
Existing Preferred Stock required to permit the repurchase of the Series B
Convertible Preferred Stock required by this paragraph (h). Until the
requirements of the immediately preceding sentence are satisfied, the
Corporation shall not make, and shall not be obligated to make, any Change
of Control Offer; provided that the Corporation's failure to comply with
this paragraph (h)(v) shall constitute a Voting Rights Triggering Event.
(i) Conversion or Exchange. Other than as set forth in paragraph (g)
above, the Holders of shares of Series B Convertible Preferred Stock shall not
have any rights hereunder to convert such shares into or exchange such shares
for shares of any other class or classes or of any other series of any class or
classes of Capital Stock of the Corporation.
(j) Reissuance of Series B Convertible Preferred Stock. Shares of Series B
Convertible Preferred Stock that have been issued and reacquired in any manner,
including shares purchased or redeemed or exchanged, shall (upon compliance with
any applicable provisions of the laws of Delaware) have the status of authorized
and unissued shares of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock; provided
that any issuance of such shares as Series B Convertible Preferred Stock must be
in compliance with the terms hereof.
(k) Business Day. If any payment or redemption shall be required by the
terms hereof to be made on a day that is not a Business Day, such payment or
redemption shall be made on the immediately succeeding Business Day.
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<PAGE> 37
(l) Certain Additional Provisions.
(i) Limitation on Incurrence of Additional Indebtedness. The
Corporation shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, incur any Indebtedness (including Acquired
Indebtedness) other than Permitted Indebtedness. Notwithstanding the
foregoing limitation, the Corporation and its Restricted Subsidiaries may
incur Indebtedness if on the date of the incurrence of such Indebtedness
(i) no Voting Rights Triggering Event shall have occurred and be continuing
or shall occur as a consequence thereof and (ii) after giving effect to the
incurrence of such Indebtedness and the receipt and application of the
proceeds thereof, the ratio of the Corporation's total Indebtedness to the
Corporation's Consolidated EBITDA (determined on a pro forma basis for the
last four full fiscal quarters of the Corporation for which financial
statements are available at the date of determination) is less than 7.0 to
1; provided, however, that if the Indebtedness which is the subject of a
determination under this provision is Acquired Indebtedness, or
Indebtedness incurred in connection with the simultaneous acquisition of
any Person, business, property or assets, then such ratio shall be
determined by giving effect (on a pro forma basis, as if the transaction
had occurred at the beginning of the four quarter period) to both the
incurrence or assumption of such Acquired Indebtedness or such other
Indebtedness by the Corporation and the inclusion in the Corporation's
Consolidated EBITDA of the Consolidated EBITDA of the acquired Person,
business, property or assets; and provided, further, that in the event that
the Consolidated EBITDA of the acquired Person, business, property or
assets reflects an operating loss, no amounts shall be deducted from the
Corporation's Consolidated EBITDA in making the determination described
above.
(ii) Limitation on Restricted Payments. (A) The Corporation shall
not, and shall not permit any of its Restricted Subsidiaries to, directly
or indirectly, make any Restricted Payment if at the time of such
Restricted Payment and immediately after giving effect thereto (I) any
Voting Rights Triggering Event shall have occurred and be continuing; or
(II) the Corporation could not incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with paragraph (l)(i)
above; or (III) the aggregate amount of Restricted Payments declared or
made after the Issue Date (the amount expended for such purposes, if other
than in cash, being the fair market value of such property as determined by
the Board of Directors in good faith) exceeds the sum of (x) 100% of the
Corporation's Cumulative Consolidated EBITDA minus 1.4 times the
Corporation's Cumulative Consolidated Interest Expense, plus (y) 100% of
the aggregate Net Proceeds and the fair market value of securities or other
property received by the Corporation from the issue or sale, after the
Issue Date, of Capital Stock (other than Disqualified Capital Stock of the
Corporation or Capital Stock of the Corporation issued to any Restricted
Subsidiary) of the Corporation or any Indebtedness or other securities of
the Corporation convertible into or exercisable or exchangeable for Capital
Stock (other than Disqualified Capital Stock) of the Corporation which have
been so converted or exercised or exchanged, as the case may be, plus (z)
$10,000,000.
(B) Notwithstanding the foregoing, these provisions will not prohibit:
(I) the payment of any dividend or the making of any distribution within 60
days after the date of its declaration if such dividend or distribution
would have been permitted on the date of declaration; or (II) the purchase,
redemption or other acquisition or retirement of any Capital Stock of the
Corporation or any warrants, options or other rights to acquire shares of
any class of such Capital Stock (x) solely in exchange for shares of
Qualified Capital Stock or other rights to acquire Qualified Capital Stock,
(y) through the application of the Net Proceeds of a substantially
concurrent sale for cash (other than to a Restricted Subsidiary) of shares
of Qualified Capital Stock or warrants, options or other rights to acquire
Qualified Capital Stock or (z) in the case of Disqualified Capital Stock,
solely in exchange for, or through the application of the Net Proceeds of a
substantially concurrent sale for cash (other than to a Restricted
Subsidiary) of, Disqualified Capital Stock that has a redemption date no
earlier than, is issued by the Corporation or the same Person as and
requires the payment of current dividends or distributions in cash no
earlier than, in each case, the Disqualified Capital Stock being purchased,
redeemed or otherwise acquired or retired and which Disqualified Capital
Stock does not prohibit cash dividends on the Series B Convertible
Preferred Stock or the exchange thereof for New Exchange Debentures.
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<PAGE> 38
(iii) Limitations on Transactions With Affiliates. (A) The
Corporation shall not, and shall not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate or holder of 10% or more of the Corporation's
Common Stock (an "Affiliate Transaction") or extend, renew, waive or
otherwise modify the terms of any Affiliate Transaction entered into prior
to the Issue Date unless (I) such Affiliate Transaction is between or among
the Corporation and its Wholly-Owned Subsidiaries; (II) such Affiliate
Transaction is between or among the Corporation and any of its
Subsidiaries, on the one hand, and the Initial Holder or any of its
Affiliates, on the other hand; or (III) the terms of such Affiliate
Transaction are fair and reasonable to the Corporation or such Restricted
Subsidiary, as the case may be, and the terms of such Affiliate Transaction
are at least as favorable as the terms which could be obtained by the
Corporation or such Restricted Subsidiary, as the case may be, in a
comparable transaction made on an arm's-length basis between unaffiliated
parties. In any Affiliate Transaction involving an amount or having a value
in excess of $1,000,000 which is not permitted under clause (I) above the
Corporation must obtain a Board Resolution certifying that such Affiliate
Transaction complies with clause (III) above. In any Affiliate Transaction
involving an amount or having a value in excess of $5,000,000 which is not
permitted under clause (I) above, unless such transaction is with a
Subsidiary in which no Affiliate has a minority interest, the Corporation
must obtain a valuation of the assets subject to such transaction by an
Independent Appraiser or a written opinion as to the fairness of such a
transaction from an independent investment banking firm or an Independent
Appraiser.
(B) The foregoing provisions shall not apply to (I) any Restricted
Payment that is not prohibited by the provisions described in paragraph (1)
(ii) above, (II) any transaction approved by the Board of Directors with an
officer or director of the Corporation or of any Subsidiary in his or her
capacity as officer or director entered into in the ordinary course of
business, including compensation and employee benefit arrangements with any
officer or director of the Corporation or of any Subsidiary that are
customary for public companies in the broadcasting industry, or (III)
modifications of the Existing Preferred Stock.
(iv) Limitation on Preferred Stock of Restricted Subsidiaries. The
Corporation shall not permit any Restricted Subsidiary to issue any
Preferred Stock (except to the Corporation or to a Restricted Subsidiary)
or permit any Person (other than the Corporation or a Restricted
Subsidiary) to hold any such Preferred Stock unless the Corporation or such
Restricted Subsidiary would be entitled to incur or assume Indebtedness in
compliance with paragraph (l)(i) above in an aggregate principal amount
equal to the aggregate liquidation value of the Preferred Stock to be
issued.
(v) Reports. The Corporation shall provide to the holders of Series B
Convertible Preferred Stock, within 15 days after it files them with the
Commission, copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the foregoing as
the Commission may by rules and regulations prescribe) which the
Corporation files with the Commission pursuant to Section 13 or 15(d) of
the Exchange Act. In the event that the Corporation is no longer required
to furnish such reports to its securityholders pursuant to the Exchange
Act, the Corporation will provide to the Holders copies of all annual and
quarterly reports and other information which the Corporation would have
been required to file with the Commission pursuant to Sections 13 and 15(d)
of the Exchange Act had it been so subject without cost to the Holders.
(m) Exchange.
(i) Requirements. The outstanding shares of Series B Convertible
Preferred Stock are exchangeable, in whole or in part, on a pro rata basis,
at the option of the Holder, for the New Exchange Debentures to be
substantially in the form of Exhibit A to the New Exchange Indenture, a
copy of which is on file with the secretary of the Corporation; provided,
however, that each partial exchange shall be with respect to shares of
Series B Convertible Preferred Stock outstanding with an aggregate
liquidation preference of not less than $50,000,000 or all such shares
remaining outstanding, if less; and provided, further, that any such
exchange prior to January 1, 2007, may only be made if (A) there shall be
no contractual
B-13
<PAGE> 39
impediment to such exchange; (B) such exchange would be permitted under the
terms of the Existing Preferred Stock (or any other Preferred Stock of the
Company issued to fund redemption of any Existing Preferred Stock with
substantially similar terms as the Existing Preferred Stock so redeemed),
to the extent then outstanding, and immediately after giving effect to such
exchange, no Default or Event of Default (as defined in the New Exchange
Indenture) would exist under the New Exchange Indenture, no default or
event of default would exist under the Credit Facility or the Existing Debt
Indentures and no default or event of default under any other material
instrument governing Indebtedness outstanding at the time (including
Indebtedness incurred to refinance any of the Credit Facility or the
Existing Debt Indentures on substantially comparable terms) would be caused
thereby; and (C) the New Exchange Indenture has been qualified under the
Trust Indenture Act of 1939, as amended, if such qualification is required
at the time of such exchange. The exchange rate shall be $1.00 principal
amount of New Exchange Debentures for each $1.00 of liquidation preference
and accumulated and unpaid dividends of Series B Convertible Preferred
Stock, including, to the extent necessary, New Exchange Debentures in
principal amounts less than $1,000, provided that the Corporation shall
have the right, at its option, to pay cash in an amount equal to the
principal amount of that portion of any New Exchange Debenture that is not
an integral multiple of $1,000 instead of delivering a New Exchange
Debenture in a denomination of less than $1,000.
(ii) Exchange Procedures. (A) At least 30 days prior to the Exchange
Date, the Holder shall give the Corporation written notice by first-class
mail, postage prepaid, to the Corporation's principal office, which notice
shall state: (I) the Exchange Date, and (II) the number of shares and
aggregate liquidation preference of the Series B Convertible Preferred
Stock to be exchanged. On or before the Exchange Date, each Holder of
Series B Convertible Preferred Stock shall surrender to the Corporation the
certificate or certificates representing such shares of Series B
Convertible Preferred Stock. The Corporation shall cause the New Exchange
Debentures to be executed on the Exchange Date and, upon surrender of the
certificates for any shares of Series B Convertible Preferred Stock so
exchanged, duly endorsed (or otherwise in proper form for transfer, as
determined by the Corporation), such shares shall be exchanged by the
Corporation for New Exchange Debentures. In the event that any certificate
surrendered pursuant to this paragraph (m) represents shares in excess of
those being surrendered for exchange, the Corporation shall issue a new
certificate representing the unexchanged portion of shares of Series B
Convertible Preferred Stock. Dividends on the shares of Series B
Convertible Preferred Stock to be exchanged shall cease to accrue on the
Exchange Date whether or not certificates for shares of Series B
Convertible Preferred Stock are surrendered for exchange on such Exchange
Date unless the Corporation shall default in the delivery of New Exchange
Debentures. The Corporation shall pay interest on the New Exchange
Debentures from the Exchange Date whether or not certificates for shares of
Series B Convertible Preferred Stock are surrendered for exchange on such
Exchange Date.
(B) If notice has been given as aforesaid, and if before the Exchange
Date (I) the New Exchange Indenture shall have been duly executed and
delivered by the Corporation and the trustee thereunder and (II) all New
Exchange Debentures necessary for such exchange shall have been duly
executed by the Corporation and delivered to the trustee under the New
Exchange Indenture with irrevocable instructions to authenticate the New
Exchange Debentures necessary for such exchange, then the rights of the
Holders of Series B Convertible Preferred Stock so exchanged as
stockholders of the Corporation shall cease (except the right to receive
New Exchange Debentures and, if the Corporation so elects, cash in lieu of
any New Exchange Debenture not an integral multiple of $1,000), and the
Person or Persons entitled to receive the New Exchange Debentures issuable
upon exchange shall be treated for all purposes as the registered Holder or
Holders of such New Exchange Debentures as of the Exchange Date.
(iii) No Exchange in Certain Cases. Notwithstanding the foregoing
provisions of this paragraph (m), the Corporation shall not be obligated to
exchange the Series B Convertible Preferred Stock for New Exchange
Debentures if such exchange, or any term or provision of the New Exchange
Indenture or the New Exchange Debentures, or the performance of the
Corporation's obligations under the New Exchange Indenture or the New
Exchange Debentures, shall violate any applicable law or if, at the time of
such exchange, the Corporation is insolvent or if it would be rendered
insolvent by such exchange.
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<PAGE> 40
(n) Definitions. As used in this Certificate of Designation, the following
terms shall have the following meanings (with terms defined in the singular
having comparable meanings when used in the plural and vice versa), unless the
context otherwise requires:
"Acquired Indebtedness" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a
Restricted Subsidiary or assumed in connection with the acquisition of
assets from such Person.
"Affiliate" means, for any Person, a Person who, directly or
indirectly, through one or more intermediaries controls, or is controlled
by, or is under common control with, such other Person. The term "control"
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise. With
respect to the Corporation, Affiliate will also include any Permitted
Holders or Persons controlled by the Permitted Holders.
"Affiliate Transaction" shall have the meaning ascribed to it in
paragraph (1)(iii) hereof.
"Asset Sale" means the sale, transfer or other disposition (other than
to the Corporation or any of its Restricted Subsidiaries) in any single
transaction or series of related transactions involving assets with a fair
market value in excess of $2,000,000 of (a) any Capital Stock of or other
equity interest in any Restricted Subsidiary other than in a transaction
where the Corporation or a Restricted Subsidiary receives therefor one or
more media properties with a fair market value equal to the fair market
value of the Capital Stock issued, transferred or disposed of by the
Corporation or the Restricted Subsidiary (with such fair market values
being determined by the Board of Directors), (b) all or substantially all
of the assets of the Corporation or of any Restricted Subsidiary, (c) real
property or (d) all or substantially all of the assets of any media
property, or part thereof, owned by the Corporation or any Restricted
Subsidiary, or a division, line of business or comparable business segment
of the Corporation or any Restricted Subsidiary; provided that Asset Sales
shall not include sales, leases, conveyances, transfers or other
dispositions to the Corporation or to a Restricted Subsidiary or to any
other Person if after giving effect to such sale, lease, conveyance,
transfer or other disposition such other Person becomes a Restricted
Subsidiary, or the sale of all or substantially all of the assets of the
Corporation or a Restricted Subsidiary in a transaction complying with
f(ii), in which case only the assets not so sold shall be deemed an Asset
Sale.
"Board of Directors" shall have the meaning ascribed to it in the
first paragraph of this Resolution.
"Board Resolution" means a copy of a resolution certified pursuant to
an Officers' Certificate to have been duly adopted by the Board of
Directors of the Corporation and to be in full force and effect.
"Business Day" means any day except a Saturday, a Sunday, or any day
on which banking institutions in New York, New York are required or
authorized by law or other governmental action to be closed.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other
equivalents (however designated) of capital stock, including each class of
common stock and preferred stock of such Person and (ii) with respect to
any Person that is not a corporation, any and all partnership or other
equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligation
of such Person to pay rent or other amounts under a lease to which such
Person is a party that is required to be classified and accounted for as
capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount
of such obligations at such date, determined in accordance with GAAP.
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"Cash Equivalents" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date
of acquisition thereof and, at the time of acquisition, having one of the
two highest ratings obtainable from either Standard & Poor's Corporation
("S&P") or Moody's Investors Service, Inc. ("Moody's"); (iii) commercial
paper maturing no more than one year from the date of creation thereof and,
at the time of acquisition, having a rating of at least A-1 from S&P or at
least P-1 from Moody's; (iv) certificates of deposit or bankers'
acceptances maturing within one year from the date of acquisition thereof
issued by any commercial bank organized under the laws of the United States
of America or any state thereof or the District of Columbia or any U.S.
branch of a foreign bank having at the date of acquisition thereof combined
capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any
bank meeting the qualifications specified in clause (iv) above; and (vi)
investments in money market funds which invest substantially all their
assets in securities of the types described in clauses (i) through (v)
above.
"Certificate of Incorporation" shall have the meaning ascribed to it
in the first paragraph of this Resolution.
A "Change of Control" of the Corporation will be deemed to have
occurred at such time as (i) any Person (including a Person's Affiliates),
other than a Permitted Holder, becomes the beneficial owner (as defined
under Rule 13d-3 or any successor rule or regulation promulgated under the
Exchange Act) of 50% or more of the total voting power of the Corporation's
Common Stock, (ii) any Person (including a Person's Affiliates), other than
a Permitted Holder, becomes the beneficial owner of more than 33 1/3% of
the total voting power of the Corporation's Common Stock, and the Permitted
Holders beneficially own, in the aggregate, a lesser percentage of the
total voting power of the Common Stock of the Corporation than such other
Person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors of the Corporation, (iii) there shall be consummated any
consolidation or merger of the Corporation in which the Corporation is not
the continuing or surviving corporation or pursuant to which the Common
Stock of the Corporation would be converted into cash, securities or other
property, other than a merger or consolidation of the Corporation in which
the holders of the Common Stock of the Corporation outstanding immediately
prior to the consolidation or merger hold, directly or indirectly, at least
a majority of the voting power of the Common Stock of the surviving
corporation immediately after such consolidation or merger, (iv) during any
period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of the Corporation (together with
any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Corporation has been
approved by a majority of the directors then still in office who either
were directors at the beginning of such period or whose election or
recommendation for election was previously so approved) cease to constitute
a majority of the Board of Directors or (v) any "change in control" occurs
(as defined at such time) with respect to the Existing Preferred Stock or
any issue of Disqualified Capital Stock.
"Change of Control Date" shall have the meaning ascribed to it in
paragraph (h)(i) hereof.
"Change of Control Offer" shall have the meaning ascribed to it in
paragraph (h)(i) hereof.
"Change of Control Payment Date" shall have the meaning ascribed to it
in paragraph (h)(ii) hereof.
"Change of Control Purchase Price" shall have the meaning ascribed to
it in paragraph (h)(i) hereof.
"Class A Common Stock" means the Class A Common Stock, par value $.001
per share, of the Corporation.
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"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and
whether voting or non-voting) of, such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Common Stock Trading Price" on any date means, with respect to the
Class A Common Stock, the Closing Price for the Class A Common Stock on
such date. The "Closing Price" on any date shall mean the last sale price
for the Class A Common Stock, regular way, or, in case no such sale takes
place on such date, the average of the closing bid and asked prices,
regular way, for the Class A Common Stock in either case as reported in the
principal consolidated transaction reporting system with respect to the
principal national securities exchange on which the Class A Common Stock is
listed or admitted to trading or, if the Class A Common Stock is not listed
or admitted to trading on any national securities exchange, the last quoted
price, or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the principal
automated quotation system that may then be in use or, if the Class A
Common Stock is not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker
making a market in the Class A Common Stock selected by the Board of
Directors or, in the event that no trading price is available for the Class
A Common Stock, the fair market value of the Class A Common Stock, as
determined in good faith by the Board of Directors.
"Communications Act" means the Communications Act of 1934, as amended
(including, without limitation, the Cable Communications Policy Act of 1984
and the Cable Television Consumer Protection and Competition Act of 1992)
and all rules and regulations of the FCC, in each case as from time to time
in effect.
"Consolidated EBITDA" means, for any Person, for any period, an amount
equal to (a) the sum of Consolidated Net Income for such period, plus, to
the extent deducted from the revenues of such Person in determining
Consolidated Net Income, (i) the provision for taxes for such period based
on income or profits and any provision for taxes utilized in computing a
loss in Consolidated Net Income above, plus (ii) Consolidated Interest
Expense, net of interest income earned on cash or cash equivalents for such
period (including, for this purpose, dividends on the Existing Preferred
Stock and any Redeemable Dividends in each case only to the extent that
such dividends were deducted in determining Consolidated Net Income), plus
(iii) depreciation for such period on a consolidated basis, plus (iv)
amortization of intangibles and broadcast program licenses for such period
on a consolidated basis, minus (b) scheduled payments relating to broadcast
program license liabilities, except that with respect to the Corporation
each of the foregoing items shall be determined on a consolidated basis
with respect to the Corporation and its Restricted Subsidiaries only;
provided, however, that, for purposes of calculating Consolidated EBITDA
during any fiscal quarter, cash income from a particular Investment of such
Person shall be included only if cash income has been received by such
Person as a result of the operation of the business in which such
Investment has been made in the ordinary course without giving effect to
any extraordinary, unusual and non-recurring gains.
"Consolidated Interest Expense" means, with respect to any Person, for
any period, the aggregate amount of interest which, in conformity with
GAAP, would be set forth opposite the caption "interest expense" or any
like caption on an income statement for such Person and its Subsidiaries on
a consolidated basis, including, but not limited to, Redeemable Dividends,
whether paid or accrued, on Subsidiary Preferred Stock, imputed interest
included in Capitalized Lease Obligations, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, the net costs associated with hedging obligations,
amortization of other financing fees and expenses, the interest portion of
any deferred payment obligation, amortization of discount or premium, if
any, and all other non-cash interest expense (other than interest amortized
to cost of sales) plus, without duplication, all net capitalized interest
for such period and all interest incurred or paid under any guarantee of
Indebtedness (including a guarantee of principal, interest or any
combination thereof) of
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<PAGE> 43
any Person, all time brokerage fees relating to financing of radio or
television stations which the Corporation has an agreement or option to
acquire, plus the amount of all dividends or distributions paid on
Disqualified Capital Stock (other than dividends paid or payable in shares
of Capital Stock of the Corporation).
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the net income (or loss) of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided, however, that (a) the net income of any
Person (the "other Person") in which the Person in question or any of its
Subsidiaries has less than a 100% interest (which interest does not cause
the net income of such other Person to be consolidated into the net income
of the Person in question in accordance with GAAP) shall be included only
to the extent of the amount of dividends or distributions paid to the
Person in question or to the Subsidiary, (b) the net income of any
Subsidiary of the Person in question that is subject to any restriction or
limitation on the payment of dividends or the making of other distributions
(other than pursuant to the Existing Exchange Debentures or the Existing
Notes) shall be excluded to the extent of such restriction or limitation,
(c) (i) the net income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition and (ii)
any net gain (but not loss) resulting from an Asset Sale by the Person in
question or any of its Subsidiaries other than in the ordinary course of
business shall be excluded, (d) extraordinary, unusual and non-recurring
gains and losses shall be excluded, (e) losses associated with discontinued
and terminated operations in an amount not to exceed $1,000,000 per annum
shall be excluded and (f) all non-cash items (including, without
limitation, cumulative effects of changes in GAAP and equity entitlements
granted to employees of the Corporation and its Restricted Subsidiaries)
increasing and decreasing Consolidated Net Income and not otherwise
included in the definition of Consolidated EBITDA shall be excluded.
"Conversion Price" has the meaning ascribed to it in paragraph (g)(v)
hereof.
"Conversion Shares" means (i) the number of shares of Class A Common
Stock or (ii) in the case of the Initial Holder only, if the Initial Holder
determines in its sole discretion that it is prevented under the
Communications Act from holding shares of Class A Common Stock issuable
upon conversion of its shares of Series B Convertible Preferred Stock, the
number of shares of non-voting Common Stock of the Corporation (which upon
disposition by the Initial Holder shall automatically be converted into
shares of Class A Common Stock) into which the Series B Convertible
Preferred Stock is from time to time convertible.
"Corporation" shall have the meaning ascribed to it in the first
paragraph of this Resolution.
"Cost of Capital Dividend Rate" means a rate per annum equal to the
dividend rate on the Series B Convertible Preferred Stock at which the
Series B Convertible Preferred Stock would trade at its liquidation
preference on such date of determination. The Cost of Capital Dividend Rate
shall be determined by a nationally recognized independent investment
banking firm (i) if the Corporation is publicly traded on a national
exchange, chosen in the sole discretion of the Corporation, and (ii) if the
Corporation is not publicly traded on a national exchange, chosen in the
sole discretion of the Holder.
"Credit Facility" means the Second Amended and Restated Credit
Agreement dated as of April 28, 1998, among the Corporation, the financial
institutions party thereto in their capacities as lenders thereunder and
Union Bank of California, N.A., as agent, as the same may be amended from
time to time, and any one or more agreements evidencing the refinancing,
modification, replacement, renewal, restatement, refunding, deferral,
extension, substitution, supplement, reissuance or resale thereof.
"Cumulative Consolidated EBITDA" means, with respect to any Person, as
of any date of determination, Consolidated EBITDA from the Issue Date to
the end of such Person's most recently ended full fiscal quarter prior to
such date, taken as a single accounting period.
"Cumulative Consolidated Interest Expense" means, with respect to any
Person, as of any date of determination, Consolidated Interest Expense plus
any cash dividends paid on Senior Securities or Parity Securities not
already reflected in Consolidated Interest Expense, in each case from the
Issue Date to the
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<PAGE> 44
end of such Person's most recently ended full fiscal quarter prior to such
date, taken as a single accounting period.
"Disqualified Capital Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures
(excluding any maturity as the result of an optional redemption by the
issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof, in whole or in part, on or prior to December 31, 2009. Without
limitation of the foregoing, Disqualified Capital Stock shall be deemed to
include (i) any Preferred Stock of a Restricted Subsidiary, (ii) any
Preferred Stock of the Corporation, with respect to either of which, under
the terms of such Preferred Stock, by agreement or otherwise, such
Restricted Subsidiary or the Corporation is obligated to pay current
dividends or distributions in cash during the period prior to December 31,
2009; and (iii) as long as the Series B Convertible Preferred Stock remains
outstanding, Senior Securities and Parity Securities; provided, however,
that (i) Preferred Stock of the Corporation or any Restricted Subsidiary
that is issued with the benefit of provisions requiring the Corporation to
make an offer to purchase such Preferred Stock in the event of a change of
control of the Corporation or Restricted Subsidiary shall not be deemed to
be Disqualified Capital Stock solely by virtue of such provisions; (ii) the
Existing Preferred Stock and the Series B Convertible Preferred Stock, as
in effect on the Issue Date, shall not be considered Disqualified Capital
Stock; and (iii) Capital Stock paid as dividends on Preferred Stock
existing on the Issue Date or subsequently issued, in each case in
accordance with the terms of such Preferred Stock at the time it was
issued, shall not be considered Disqualified Capital Stock.
"Exchange Date" means the date of original issuance of the New
Exchange Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Existing Debt Indentures" means the Existing Exchange Indentures and
the Existing Indenture.
"Existing Exchange Debentures" means the 12 1/2% Exchange Debentures
due 2006 (if issued) and the 13 1/4% Exchange Debentures due 2006 (if
issued) issued under the Existing Exchange Indentures.
"Existing Exchange Indentures" means the indentures dated October 4,
1996, and June 10, 1998, between the Corporation, the guarantors thereto
and The Bank of New York, as trustee, which govern the Existing Exchange
Debentures.
"Existing Indenture" means the indenture dated as of September 28,
1995 among the Corporation and The Bank of New York, as trustee which
governs the Existing Notes.
"Existing Notes" means the 11 5/8% Senior Subordinated Notes due 2002
issued under the Existing Indenture.
"Existing Preferred Stock" means the Junior Cumulative Compounding
Redeemable Preferred Stock, $.001 par value, 12% dividend rate per annum,
of which 33,000 shares are outstanding as of the Issue Date with a
liquidation preference of $1,000 per share; the 12 1/2% Cumulative
Exchangeable Preferred Stock, $.001 par value, of which 204,847 shares are
outstanding as of the Issue Date with a liquidation preference of $1,000
per share; the 13 1/4% Cumulative Junior Exchangeable Preferred Stock, par
value $.001 per share, of which 22,571 shares are outstanding as of the
Issue Date with a liquidation preference of $10,000 per share; and the
9 3/4% Series A Convertible Preferred Stock, $.001 par value, of which
8,304 shares are outstanding as of the Issue Date with a liquidation
preference of $10,000 per share.
"Extraordinary Cash Dividend" means cash dividends with respect to the
Class A Common Stock the aggregate amount of which in any fiscal year
exceeds 10% of Consolidated EBITDA of the Corporation and its subsidiaries
for the fiscal year immediately preceding the payment of such dividend.
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<PAGE> 45
"Fair Market Value" of any consideration other than cash or of any
securities shall mean the amount which a willing buyer would pay to a
willing seller in an arm's length transaction as determined by an
independent investment banking or appraisal firm experienced in the
valuation of such securities or property selected in good faith by the
Board of Directors or a committee thereof.
"FCC" means the Federal Communications Commission and any successor
governmental entity performing functions similar to those performed by the
Federal Communications Commission on the Issue Date.
"GAAP" means generally accepted accounting principles consistently
applied as in effect in the United States from time to time.
"Holder" means a holder of shares of Series B Convertible Preferred
Stock as reflected in the stock books of the Corporation.
"incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to
GAAP or otherwise, of any such Indebtedness or other obligation on the
balance sheet of such Person (and "incurrence," "incurred," "incurrable"
and "incurring" shall have meanings correlative to the foregoing); provided
that a change in GAAP that results in an obligation of such Person that
exists at such time becoming Indebtedness shall not be deemed an incurrence
of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any
Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only
to a portion thereof) or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property (excluding, without limitation, any balances that
constitute accounts payable or trade payables and other accrued liabilities
arising in the ordinary course of business, including, without limitation,
any and all programming broadcast obligations) if and to the extent any of
the foregoing indebtedness would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, and shall also include, to
the extent not otherwise included, (i) any Capitalized Lease Obligations,
(ii) obligations secured by a Lien to which the property or assets owned or
held by such Person are subject, whether or not the obligation or
obligations secured thereby shall have been assumed (provided, however,
that if such obligation or obligations shall not have been assumed, the
amount of such Indebtedness shall be deemed to be the lesser of the
principal amount of the obligation or the fair market value of the pledged
property or assets), (iii) guarantees of items of other Persons which would
be included within this definition for such other Persons (whether or not
such items would appear upon the balance sheet of the guarantor), (iv) all
obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (v) in the case of the
Corporation, Disqualified Capital Stock of the Corporation or any
Restricted Subsidiary and (vi) obligations of any such Person under any
Interest Rate Agreement applicable to any of the foregoing (if and to the
extent such Interest Rate Agreement obligations would appear as a liability
upon a balance sheet of such Person prepared in accordance with GAAP). The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above
and, with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, provided that
(i) the amount outstanding at any time of any Indebtedness issued with
original issue discount is the principal amount of such Indebtedness less
the remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP and (ii)
Indebtedness shall not include any liability for federal, state, local or
other taxes. Notwithstanding any other provision of the foregoing
definition, any trade payable arising from the purchase of goods or
materials or for services obtained in the ordinary course of business or
contingent obligations arising out of customary indemnification agreements
with respect to the sale of assets or securities shall not be deemed to be
"Indebtedness" of the Corporation or any Restricted Subsidiaries for
purposes of this
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<PAGE> 46
definition. Furthermore, guarantees of (or obligations with respect to
letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"Independent Appraiser" means an appraiser of national reputation in
the United States (i) which does not, and whose directors, executive
officers and Affiliates do not, have a direct or indirect financial
interest in excess of 5% of fully diluted outstanding voting securities of
the Corporation at the time of determination and (ii) which, in the
judgment of the Corporation, is independent from the Corporation as
evidenced by an Officer's Certificate.
"Initial Holder" means National Broadcasting Company, Inc.
"Interest Rate Agreement" means, for any Person, any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect the party indicated therein
against fluctuations in interest rates.
"Investment" means, directly or indirectly, any advance, account
receivable (other than an account receivable arising in the ordinary course
of business), loan or capital contribution to (by means of transfers of
property to others, payments for property or services for the account or
use of others or otherwise), the purchase of any stock, bonds, notes,
debentures, partnership or joint venture interests or other securities of,
the acquisition, by purchase or otherwise, of all or substantially all of
the business or assets or stock or other evidence of beneficial ownership
of, any Person or the making of any investment in any Person. Investments
shall exclude extensions of trade credit on commercially reasonable terms
in accordance with normal trade practices and repurchases or redemptions of
the Existing Notes, the Existing Exchange Debentures, the Existing
Preferred Stock or the Series B Convertible Preferred Stock by the
Corporation.
"Investment Agreement" means the Investment Agreement, dated September
15, 1999, entered into by and among the Corporation and National
Broadcasting Company, Inc.
"Issue Date" means the date of original issuance of the Series B
Convertible Preferred Stock.
"Junior Securities" shall have the meaning ascribed to it in paragraph
(b) hereof.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale
or other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Major Asset Sale" means an Asset Sale or series of related Asset
Sales involving assets with a fair market value in excess of $25,000,000.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by
the Corporation, an Asset Sale or a Major Asset Sale, the aggregate net
proceeds received by the Corporation, after payment of expenses,
commissions and the like incurred in connection therewith, whether such
proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the Board of Directors, at the time
of receipt) and (b) in the case of any exchange, exercise, conversion or
surrender of outstanding securities of any kind for or into shares of
Capital Stock of the Corporation which is not Disqualified Capital Stock,
the net book value of such outstanding securities on the date of such
exchange, exercise, conversion or surrender (plus any additional amount
required to be paid by the holder to the Corporation upon such exchange,
exercise, conversion or surrender, less any and all payments made to the
holders, e.g., on account of fractional shares and less all expenses
incurred by the Corporation in connection therewith).
"New Exchange Debentures" shall mean the Convertible Exchange
Debentures due 2009 (if issued) issued under the New Exchange Indenture.
"New Exchange Indenture" shall have the meaning ascribed to it in
paragraph (f)(i)(C) hereof.
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<PAGE> 47
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing, or otherwise
relating to, any Indebtedness.
"Officers' Certificate" means a certificate signed by two officers or
by an officer and either an Assistant Treasurer or an Assistant Secretary
of the Corporation which certificate shall include a statement that, in the
opinion of such signers all conditions precedent to be performed by the
Corporation prior to the taking of any proposed action have been taken. In
addition, such certificate shall include (i) a statement that the
signatories have read the relevant covenant or condition, (ii) a brief
statement of the nature and scope of such examination or investigation upon
which the statements are based, (iii) a statement that, in the opinion of
such signatories, they have made such examination or investigation as is
reasonably necessary to express an informed opinion and (iv) a statement as
to whether or not, in the opinion of the signatories, such relevant
conditions or covenants have been complied with.
"Opinion of Counsel" means an opinion of counsel that, in such
counsel's opinion, all conditions precedent to be performed by the
Corporation prior to the taking of any proposed action have been taken.
Such opinion shall also include the statements called for in the second
sentence under "Officers' Certificate".
"Original Issue Price" means $10,000 per share of Series B Convertible
Preferred Stock.
"Parity Securities" shall have the meaning ascribed to it in paragraph
(b) hereof.
"Permitted Holders" means collectively Lowell W. Paxson, his spouse,
children or other lineal descendants (whether adoptive or biological) and
any revocable or irrevocable inter vivos or testamentary trust or the
probate estate of any such individual, so long as one or more of the
foregoing individuals is the principal beneficiary of such trust or probate
estate.
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness under the New Exchange Debentures and the
guarantees related thereto, including any New Exchange Debentures issued
in accordance with the New Exchange Indenture as payment of interest on
the New Exchange Debentures;
(ii) Indebtedness under the Existing Exchange Debentures, and the
guarantees related thereto, including any Existing Exchange Debentures
issued in accordance with the Existing Exchange Indentures as payment of
interest on the Existing Exchange Debentures;
(iii) Indebtedness incurred pursuant to any Credit Facility in an
aggregate principal amount at any time outstanding not to exceed
$25,000,000;
(iv) all other Indebtedness of the Corporation and its Restricted
Subsidiaries outstanding on the Issue Date, including, without
limitation, the Existing Notes, reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(v) Obligations under Interest Rate Agreements of the Corporation
covering Indebtedness of the Corporation or any of its Restricted
Subsidiaries; provided, however, that such Interest Rate Agreements are
entered into to protect the Corporation and its Restricted Subsidiaries
from fluctuations in interest rates on Indebtedness incurred in
accordance with paragraph (l)(i) hereof to the extent the notional
principal amount of such Interest Rate Agreement does not exceed the
principal amount of the Indebtedness to which such Interest Rate
Agreement relates;
(vi) Indebtedness of a Restricted Subsidiary to the Corporation or
to a Restricted Subsidiary for so long as such Indebtedness is held by
the Corporation or a Restricted Subsidiary, in each case subject to no
Lien held by a Person other than the Corporation or a Restricted
Subsidiary; provided that if as of any date any Person other than the
Corporation or a Restricted Subsidiary owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness, such date
shall be deemed
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<PAGE> 48
the incurrence of Indebtedness not constituting Permitted Indebtedness
by the issuer of such Indebtedness;
(vii) Indebtedness of the Corporation to a Restricted Subsidiary
for so long as such Indebtedness is held by a Restricted Subsidiary, in
each case subject to no Lien; provided that (a) any Indebtedness of the
Corporation to any Restricted Subsidiary is unsecured and subordinated,
pursuant to a written agreement, to the Corporation's Obligations under
the New Exchange Indenture and the New Exchange Debentures and (b) if as
of any date any Person other than a Restricted Subsidiary owns or holds
any such Indebtedness or any Person holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness
not constituting Permitted Indebtedness by the Corporation;
(viii) Purchase Money Indebtedness and Capitalized Lease
Obligations incurred to acquire property in the ordinary course of
business which Indebtedness and Capitalized Lease Obligations do not in
the aggregate exceed 5% of the Corporation's consolidated total assets
at any one time;
(ix) Refinancing Indebtedness; and
(x) Additional Indebtedness of the Corporation in an aggregate
principal amount not to exceed $10,000,000 at any one time outstanding.
"Permitted Investments" means, for any Person, Investments made on or
after the Issue Date consisting of:
(i) Investments by the Corporation, or by a Restricted Subsidiary,
in the Corporation or a Restricted Subsidiary;
(ii) Cash Equivalents;
(iii) Investments by the Corporation, or by a Restricted
Subsidiary, in a Person (or in all or substantially all of the business
or assets of a Person) if as a result of such Investment (a) such Person
becomes a Restricted Subsidiary, (b) such Person is merged, consolidated
or amalgamated with or into, or transfers or conveys substantially all
of its assets to, or is liquidated into, the Corporation or a Restricted
Subsidiary or (c) such business or assets are owned by the Corporation
or a Restricted Subsidiary;
(iv) reasonable and customary loans made to employees not to exceed
$5,000,000 in the aggregate at any one time outstanding;
(v) an Investment that is made by the Corporation or a Restricted
Subsidiary in the form of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities that are
issued by a third party to the Corporation or a Restricted Subsidiary
solely as partial consideration for the consummation of an Asset Sale or
pursuant to the arrangements described in Section 7.5 of the Investment
Agreement;
(vi) time brokerage and other similar agreements (which term shall
include in any event all local marketing agreements, joint sales
agreements and similar agreements, however denominated) under which
separately owned and licensed broadcast properties enter into
cooperative arrangements and which may include an option to acquire the
broadcast property at a future date;
(vii) accounts receivable of the Corporation and its Restricted
Subsidiaries generated in the ordinary course of business;
(viii) loans and guarantees of loans by third-party lenders to
third parties in connection with the acquisition of media properties,
secured by substantially all of such Person's assets (to the extent
permitted by the rules of the FCC), which are made in conjunction with
the execution of a time brokerage agreement;
(ix) options on media properties entered into in connection with
the execution of time brokerage agreements; and
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(x) additional Investments of the Corporation and its Restricted
Subsidiaries from time to time of an amount not to exceed $75,000,000.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemption or upon liquidation.
"Private Preferred Stock" means the Junior Cumulative Compounding
Redeemable Preferred Stock, $.001 par value, 12% dividend rate per annum,
of which 33,000 shares are outstanding with a liquidation preference of
$1,000 per share.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the
cost of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection
therewith.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Redeemable Dividend" means, for any dividend or distribution with
regard to Disqualified Capital Stock, the quotient of the dividend or
distribution divided by the difference between one and the maximum
statutory federal income tax rate (expressed as a decimal number between 1
and 0) then applicable to the issuer of such Disqualified Capital Stock.
"Redemption Date" means, with respect to any shares of Series B
Convertible Preferred Stock, the date on which such shares of Series B
Convertible Preferred Stock are redeemed by the Corporation.
"Redemption Notice" shall have the meaning ascribed to it in paragraph
(e)(ii) hereof.
"Redemption Price" means the higher of (i) the Original Issue Price
plus all accrued and unpaid dividends through and including the date of
redemption, and (ii) 80% (representing a liquidity discount) of the average
of the Common Stock Trading Price for the ten consecutive trading days
ending on the trading day prior to the date of the Redemption Notice,
multiplied by the number of Conversion Shares per share of Series B
Convertible Preferred Stock.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire,
or to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part, "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means any refinancing by the Corporation or
any Restricted Subsidiary of Indebtedness that does not (i) result in an
increase in the aggregate principal amount of Indebtedness of such Person
as of the date of such proposed refinancing (plus the amount of any premium
required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by the
Corporation in connection with such refinancing) or (ii) create
Indebtedness with (a) a Weighted Average Life to Maturity that is less than
the Weighted Average Life to Maturity of the Indebtedness being refinanced
or (b) a final maturity earlier than the final maturity of the Indebtedness
being refinanced; provided that (x) if such Indebtedness being refinanced
is Indebtedness of the Corporation, then such Refinancing Indebtedness
shall be Indebtedness solely of the Corporation and (y) if such
Indebtedness being Refinanced is subordinate or junior to the New Exchange
Debentures, then such Refinancing Indebtedness shall be subordinate to the
New Exchange Debentures at least to the same extent and in the same manner
as the Indebtedness being Refinanced.
"Restricted Payment" means (i) the declaration or payment of any
dividend or the making of any other distribution (other than dividends or
distributions payable in Qualified Capital Stock) on shares of Parity
Securities or Junior Securities, (ii) any purchase, redemption, retirement
or other acquisition for value of any Junior Securities, or any warrants,
rights or options to acquire shares of Junior Securities, other than
through the exchange of such Junior Securities or any warrants, rights or
options to acquire
B-24
<PAGE> 50
shares of any class of such Junior Securities for Qualified Capital Stock
or warrants, rights or options to acquire Qualified Capital Stock, (iii)
the making of any Investment (other than a Permitted Investment), (iv) any
designation of a Restricted Subsidiary as an Unrestricted Subsidiary on the
basis of the fair market value of such Subsidiary utilizing standard
valuation methodologies and approved by the Board of Directors, excluding
any such Subsidiary with a fair market value equal to or less than $500, or
(v) forgiveness of any Indebtedness of an Affiliate of the Corporation to
the Corporation or a Restricted Subsidiary.
"Restricted Subsidiary" means a Subsidiary of the Corporation other
than an Unrestricted Subsidiary and includes all of the Subsidiaries of the
Corporation existing as of the Issue Date. The Board of Directors of the
Corporation may designate any Unrestricted Subsidiary or any Person that is
to become a Subsidiary as a Restricted Subsidiary if immediately after
giving effect to such action (and treating any Acquired Indebtedness as
having been incurred at the time of such action), the Corporation could
have incurred at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to paragraph (l)(i) above.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Senior Debt" means the principal of and premium, if any, and interest
(including, without limitation, interest accruing or that would have
accrued but for the filing of a bankruptcy, reorganization or other
insolvency proceeding whether or not such interest constitutes an allowed
claim in such proceeding) on, and any and all other fees, expense
reimbursement obligations, indemnities and other amounts due pursuant to
their terms of all agreements, documents and instruments providing for,
creating, securing or evidencing or otherwise entered into in connection
with (a) all Indebtedness of the Corporation owed under the Credit
Facility, (b) all obligations of the Corporation with respect to any
Interest Rate Agreement, (c) all obligations of the Corporation to
reimburse any bank or other person in respect of amounts paid under letters
of credit, acceptances or other similar instruments, (d) all other
Indebtedness of the Corporation which does not provide that it is to rank
pari passu with or subordinate to the New Exchange Debentures and (e) all
deferrals, renewals, extensions and refundings of, and amendments,
modifications and supplements to, any of the Senior Debt described above.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will
not include (i) Indebtedness of the Corporation to any of its Subsidiaries,
(ii) Indebtedness represented by the New Exchange Debentures, (iii) any
Indebtedness which by the express terms of the agreement or instrument
creating, evidencing or governing the same is junior or subordinate in
right of payment to any item of Senior Debt, (iv) any trade payable arising
from the purchase of goods or materials or for services obtained in the
ordinary course of business or (v) Indebtedness incurred in violation of
paragraph (l)(i) hereof.
"Senior Securities" shall have the meaning ascribed to it in paragraph
(b) hereof.
"Series B Convertible Preferred Stock" shall have the meaning ascribed
to it in paragraph (a) hereof.
"Subsidiary", with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such
Person or (ii) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person.
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Corporation which is classified
after the Issue Date as an Unrestricted Subsidiary by a resolution adopted
by the Board of Directors; provided that a Subsidiary organized or acquired
after the Issue Date may be so classified as an Unrestricted Subsidiary
only if such classification is not in violation of the covenant set forth
under paragraph (l)(i) above. The transfer agent for the Series B
Convertible Preferred Stock shall be given prompt notice by the Corporation
of each resolution adopted by the Board of Directors under this provision,
together with a copy of each such resolution adopted.
"Voting Rights Triggering Event" shall have the meaning ascribed to it
in paragraph (f)(iii) hereof.
B-25
<PAGE> 51
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount of such Indebtedness into (b)
the total of the product obtained by multiplying (i) the amount of each
then remaining installment, sinking fund, serial maturity or other required
payment of principal, including payment at final maturity, in respect
thereof, by (ii) the number of years (calculated to the nearest one-
twelfth) which will elapse between such date and the making of such
payment.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary all of the
outstanding voting securities (other than directors' qualifying shares) of
which are owned, directly or indirectly, by the Corporation.
IN WITNESS WHEREOF, said Paxson Communications Corporation has caused this
Certificate to be signed this 15th day of September, 1999.
PAXSON COMMUNICATIONS
CORPORATION
By: /s/ JEFFREY SAGANSKY
------------------------------------
Name: Jeffrey Sagansky
Title: President and Chief Executive
Officer
B-26
<PAGE> 52
EXHIBIT C
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS,
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER AGREES THAT (1)
IT WILL NOT, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT
IS TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE
COMPANY A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE COMPANY), (C) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE ACT, (D) PURSUANT TO
THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF
AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
AND (2) WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY PRIOR TO THE RESALE RESTRICTION TERMINATION DATE, IF THE PROPOSED
TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE
REGISTRATION REQUIREMENTS OF THE ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE ACT. THIS SECURITY IS SUBJECT TO THE TERMS OF A
STOCKHOLDER AGREEMENT, DATED AS OF SEPTEMBER 15, 1999, AMONG PAXSON
COMMUNICATIONS CORPORATION, NATIONAL BROADCASTING COMPANY, INC. AND THE OTHER
PARTIES NAMED THEREIN (THE "STOCKHOLDER AGREEMENT").
Class A Common Stock Purchase Warrant
Date of Issuance: September 15, 1999
Warrant No. 1999-A
PAXSON COMMUNICATIONS CORPORATION
WARRANT CERTIFICATE
Paxson Communications Corporation (the "Company"), for value received,
hereby certifies that NBC Palm Beach Investment II, Inc., a wholly-owned
subsidiary of National Broadcasting Company, Inc. (the "Investor"), or
registered assigns (the "Holder"), is entitled, subject to the terms of this
Warrant (the "Warrant") as set forth below, to purchase from the Company, during
the Exercise Period (as defined in Section 1), a maximum of 13,065,507 shares
(the "Warrant Shares") of Class A Common Stock of the Company, par value $.001
per share (the "Class A Common Stock") at a price of $12.60 per share (the
"Exercise Price"). The number of Warrant Shares and the Exercise Price are
subject to adjustment from time to time as hereinafter provided.
The Warrant is issued under and in accordance with that certain Investment
Agreement between the Company and the Investor, dated September 15, 1999 (the
"Investment Agreement"), and is subject to the terms and provisions contained in
the Investment Agreement, which are incorporated herein by reference and made a
part hereof. The Warrant and the Warrant Shares are entitled to the benefits of
that certain Registration Rights Agreement, dated September 15, 1999, between
the Company and the Investor (the "Registration Rights Agreement"). Copies of
the Investment Agreement, the Stockholder Agreement and the
<PAGE> 53
Registration Rights Agreement may be obtained for inspection by the Holder at
the principal office of the Company upon prior written request to the Company.
Section 1. Exercise. Subject to the terms hereof, the Holder shall have
the right, which may be exercised at any time during the period (the "Exercise
Period") commencing as of September 15, 1999 (the "Issue Date") and continuing
until the earlier of (i) the termination of the Investor Rights (as defined in
the Investment Agreement), and (ii) 5:00 p.m., New York City time, on September
15, 2009 (the "Expiration Date"), to purchase from the Company the number of
fully paid and nonassessable Warrant Shares which the Holder may at the time be
entitled to receive on exercise of the Warrant and payment of the Exercise Price
then in effect for such Warrant Shares. Notwithstanding the foregoing, if in the
written opinion of counsel to the Company reasonably acceptable to the Holder
approval of the Federal Communications Commission (the "FCC") is required before
the Company may issue Warrant Shares upon the exercise of the Warrant, the
Company may defer the issuance of such Warrant Shares until such time as
approval of the FCC is obtained or is no longer required. The Company shall
promptly notify the Holder in writing of any event which requires it to suspend
exercise of the Warrant pursuant to the preceding sentence and of the
termination of any such suspension. To the extent the Warrant is not exercised
prior to the Expiration Date, it shall become void and all rights hereunder
shall cease as of such time.
If this Warrant is transferred, in whole or in part (except for transfers
to affiliates of the Investor who are domestic subsidiaries of the Investor's
ultimate parent corporation ("Control Group Affiliates")), it shall expire to
the extent of the transferred portion 30 days after the later of (A) the date of
such transfer and (B) the date on which this Warrant first became exercisable
with respect to the transferred portion hereof. This Warrant shall not be
exercisable by the Investor and its affiliates during any Involuntary Redemption
Period or Default Redemption Period, as such terms are defined in the Investment
Agreement, or from and after the date the Investor elects to cause the Company
to effectuate a Company Sale pursuant to Section 9.5 of the Investment
Agreement.
Should a Holder which is a Control Group Affiliate determine, in its sole
discretion, that it is prevented under applicable laws and regulations of the
FCC from holding shares of Class A Common Stock issuable upon exercise of this
Warrant, then, subject to adoption and approval of the stockholder proposal
described in clause (iii) of the definition of "Stockholder Proposal" in the
Stockholder Agreement, such Holder shall have the option to acquire shares of
non-voting common stock of the Company upon exercise of this Warrant, on the
same terms and conditions of exercise as are applicable to Class A Common Stock
hereunder.
The Warrant may be exercised, in whole or in part, at the election of the
Holder, upon surrender at the principal office of the Company of the certificate
or certificates evidencing the Warrant with the form of election to purchase
attached as Exhibit A duly completed and signed ("Purchase Form"), and upon
payment to the Company of the Exercise Price, as it may be adjusted as herein
provided, for the number of Warrant Shares in respect of which the Warrant is
then exercised; provided that the Warrant shall be exercisable in part only for
a minimum of 1,000,000 Warrant Shares per exercise, or if less, the entire
number of Warrant Shares which the Holder is entitled to purchase hereunder.
Payment of the aggregate Exercise Price shall be made by wire transfer of
immediately available funds to such account as the Company may specify. The
Exercise Price shall be subject to adjustment as provided in Section 9.
Subject to the provisions of Section 4 hereof, upon surrender of the
Warrant and payment of the Exercise Price, the Company shall issue and cause to
be delivered with all reasonable dispatch to or upon the written order of the
Holder a certificate or certificates for the number of Warrant Shares issuable
upon the exercise of the Warrant together with cash as provided in Section 10.
Such certificate or certificates shall be deemed to have been issued and the
Holder shall be deemed to have become a holder of record of such Warrant Shares
as of the date of the surrender of the Warrant and payment of the Exercise
Price.
In the event that this Warrant is exercised in respect of fewer than all of
the Warrant Shares issuable on such exercise at any time prior to the Expiration
Date, a new certificate evidencing the remaining Warrant or Warrants will be
issued, and the Company shall countersign and deliver the required new Warrant
Certificate or Certificates. When surrendered upon exercise of the Warrant, this
Warrant Certificate shall be cancelled and disposed of by the Company.
C-2
<PAGE> 54
Section 2. Registration. The Company shall number and register the
Warrant Certificate on the books of the Company maintained at its principal
office. Warrant Certificates shall be manually countersigned by the Company by a
duly authorized officer and shall not be valid for any purpose unless so
countersigned. The Company may deem and treat the Holders of the Warrant
Certificate as the absolute owners thereof (notwithstanding any notation of
ownership or other writing thereon made by anyone) for all purposes, and the
Company shall not be affected by any notice to the contrary.
Section 3. Transfer and Exchange of Warrants. THIS WARRANT IS SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY SET FORTH IN THE STOCKHOLDER AGREEMENT, AND MAY
BE TRANSFERRED ONLY IN COMPLIANCE WITH THE PROVISIONS THEREOF. Subject to the
foregoing and the limitations of Section 4, the Company shall from time to time
register the transfer of the Warrant upon the records to be maintained by it for
that purpose, upon surrender of this Warrant Certificate duly endorsed or
accompanied (if so required by it) by a written instrument or instruments of
transfer in form satisfactory to it, duly executed by the registered Holder or
by the duly appointed legal representative thereof or by a duly authorized
attorney; provided that this Warrant may be transferred only with respect to a
minimum of 1,000,000 Warrant Shares per transfer. Subject to the terms hereof,
this Certificate may be exchanged for another certificate or certificates
entitling the Holder to purchase a like aggregate number of Warrant Shares as
the Certificate surrendered then entitles the Holder to purchase; provided that
each such new certificate shall be in minimum denominations of 1,000,000 Warrant
Shares. A Holder desiring to exchange this Certificate shall make such request
in writing delivered to the Company, and shall surrender, duly endorsed or
accompanied (if so required by the Company) by a written instrument or
instruments of transfer in form satisfactory to the Company, this Warrant
Certificate to be so exchanged.
Upon registration of transfer, the Company shall issue to the transferees
and countersign a new Warrant Certificate or Certificates and deliver by
certified mail such new Warrant Certificate or Certificates to the persons
entitled thereto. No service charge shall be made for any exchange or
registration of transfer of Warrant Certificates, but the Company may require
payment of a sum sufficient to cover any stamp or other tax or other
governmental charge that is imposed in connection with any such exchange or
registration of transfer.
Section 4. Registration of Transfers and Exchanges. Subject to Section 3
hereof, when Warrants represented by this Certificate are presented to the
Company with a request to register the transfer of the Warrants, or to exchange
such Warrants for an equal number of Warrants of other authorized denominations,
the Company shall register the transfer or make the exchange as requested if the
requirements set forth in Section 3 and the following requirements are
satisfied:
(I) the Certificate shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Company, duly executed
by the Holder or his attorney duly authorized in writing; and
(II) if the offer and sale of the Warrants have not been registered
pursuant to an effective Registration Statement under the Securities Act of
1933, as amended (the "Securities Act"), the Certificate shall be
accompanied by the following additional information and documents, as
applicable:
(A) if such Warrants are being delivered to the Company by a Holder
for registration in the name of such Holder, without transfer, a
certification from such Holder to that effect (in substantially the form
of EXHIBIT B hereto); or
(B) if such Warrants are being transferred pursuant to an exemption
from registration in accordance with Rule 144 ("Rule 144") or Regulation
S ("Regulation S"), in each case, under the Securities Act, a
certification to that effect (in substantially the form of EXHIBIT B
hereto); or
(C) if such Warrants are being transferred to an institutional
"accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act (an "Institutional Accredited Investor")),
delivery of a certification to that effect (in substantially the form of
EXHIBIT B hereto) and a Transferee Certificate for Institutional
Accredited Investors in substantially the form of EXHIBIT C hereto and
an opinion of counsel and/or other information satisfactory to the
Company to the effect that such transfer is in compliance with the
Securities Act; or
C-3
<PAGE> 55
(D) if such Warrants are being transferred in reliance on another
exemption from the registration requirements of the Securities Act, a
certification to that effect (in substantially the form of Exhibit B
hereto) and an opinion of counsel reasonably satisfactory to the Company
to the effect that such transfer is in compliance with the Securities
Act.
Section 5. Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the initial issuance of Warrant Shares upon the exercise
of the Warrant; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue of any Warrant Certificates or any certificates for Warrant Shares in a
name other than that of the registered holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant Certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
Section 6. Mutilated or Missing Warrant Certificate. In case this Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the Company will
issue and countersign, in exchange and substitution for and upon cancellation of
the mutilated Warrant Certificate, or in lieu of and substitution for the
Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like
tenor and representing an equivalent number of Warrants, but only upon receipt
of evidence satisfactory to the Company of such loss, theft or destruction of
the Warrant Certificate and an indemnification agreement satisfactory to the
Company with respect to such loss, theft or destruction. Applicants for such
substitute Warrant Certificate(s) shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
Section 7. Reservation of Warrant Shares. The Company will at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Class A Common Stock or its authorized and issued
Class A Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of the Warrant, the
maximum number of shares of Class A Common Stock which may then be deliverable
upon the exercise of the Warrant. Following approval of the Stockholder
Proposal, the Company will at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued
non-voting common stock for the purpose of enabling it to satisfy any obligation
to issue such non-voting common stock upon exercise of the Warrant, the maximum
number of shares of non-voting common stock which may then be deliverable upon
the exercise of the Warrant.
The transfer agent for the Class A Common Stock (the "Transfer Agent") and
every subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of the Warrant will be irrevocably authorized and
directed at all times to reserve such number of authorized shares as shall be
required for such purpose. The Company will keep a copy of this Warrant
Certificate on file with the Transfer Agent and with every subsequent transfer
agent for any shares of the Company's capital stock issuable upon the exercise
of the Warrant. The Company will supply such Transfer Agent with duly executed
certificates for such purposes and will provide or otherwise make available any
cash which may be payable as provided in Section 10. The Company will furnish
such Transfer Agent a copy of all notices of adjustments and certificates
related thereto transmitted to each holder pursuant to Section 11 hereof.
The Company covenants that all Warrant Shares which may be issued upon
exercise of the Warrant in accordance with the terms of the Warrant Certificate
will, upon payment of the Exercise Price therefor and issue, be validly
authorized and issued, fully paid, nonassessable, free of preemptive rights and
free from all taxes, liens, charges and security interests with respect to the
issuance thereof. The Company will take no action to increase the par value of
the Class A Common Stock to an amount in excess of the Exercise Price, and the
Company will not enter into any agreements inconsistent with the rights of the
Holder hereunder. The Company will use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations hereunder. The Company shall not take any action reasonably within
its control, including the hiring of a broker to solicit exercises, which would
render unavailable an exemption from registration under
C-4
<PAGE> 56
the Securities Act which might otherwise be available with respect to the
issuance of Warrant Shares upon exercise of the Warrant.
Section 8. Obtaining Stock Exchange Listings. The Company will from time
to time take all action which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of the Warrant, will be listed
on the principal securities exchanges and markets within the United States of
America on which other shares of Class A Common Stock are then listed. In the
event that, at any time during the period in which the Warrant is exercisable,
the Class A Common Stock is not listed on any principal securities exchanges or
markets within the United States of America, the Company will use its best
efforts to permit the Warrant Shares to be designated PORTAL securities in
accordance with the rules and regulations adopted by the National Association of
Securities Dealers, Inc. relating to trading in the Private Offering, Resales
and Trading through Automated Linkages market.
Section 9. Adjustment of Number of Warrant Shares Issuable and Exercise
Price. The number of shares of Class A Common Stock issuable upon the exercise
of the Warrant (the "Exercise Rate") and the Exercise Price are subject to
adjustment from time to time upon the occurrence of the events enumerated in
this Section 9.
(a) Adjustment for Change in Capital Stock. If the Company (1) pays a
dividend or makes a distribution on its Class A Common Stock in shares of its
Class A Common Stock; (2) subdivides its outstanding shares of Class A Common
Stock into a greater number of shares; (3) combines its outstanding shares of
Class A Common Stock into a smaller number of shares; or (4) issues, by
reclassification of its shares of Class A Common Stock, any shares of its
capital stock; then and in each such case the Exercise Rate in effect
immediately prior to such action shall be adjusted so that the holder of any
Warrant thereafter exercised shall be entitled to receive, upon exercise of the
Warrant, the number of shares of Class A Common Stock or other securities of the
Company which such holder would have owned immediately following such action if
the Warrant had been exercised immediately prior to such action; provided,
however, that notwithstanding the foregoing, upon the occurrence of an event
described in clause (1) above which otherwise would have given rise to an
adjustment, no adjustment shall be made if the Company includes the Holder in
such distribution pro rata according to the number of shares of Common Stock
issued and outstanding as if the Warrant Shares were issued and outstanding.
Any adjustment hereunder shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification
(each such time, the "Time of Determination"). Such adjustment shall be made
successively whenever any event listed above shall occur.
If after an adjustment the Holder upon exercise of the Warrant may receive
shares of two or more classes of capital stock of the Company, the Board of
Directors of the Company shall determine the allocation of the adjusted Exercise
Price and Exercise Rate between the classes of capital stock. After such
allocation, the Exercise Price and Exercise Rate of each class of capital stock
shall thereafter be subject to adjustment on terms comparable to those
applicable to the Class A Common Stock in this Section.
(b) Adjustment for Certain Issuances of Class A Common Stock. If the
Company issues or distributes to all holders of its Class A Common Stock any
rights or warrants to purchase, acquire or subscribe for shares of Class A
Common Stock (including a right or warrant with respect to any security
convertible into or exchangeable for shares of Class A Common Stock) at a price
per share of Class A Common Stock less than
C-5
<PAGE> 57
the Common Stock Trading Price at the Time of Determination, the Exercise Rate
shall be adjusted in accordance with the formula:
E' = E x O + N
-------
O + N x P
------
M
where:
<TABLE>
<S> <C> <C>
E' = the adjusted Exercise Rate.
E = the Exercise Rate immediately prior to the Time of
Determination for any such distribution.
O = the number of Fully Diluted Shares (as defined in Section
9(m)) outstanding at the Time of Determination for any such
issuance or distribution.
N = the number of additional shares of the Class A Common Stock
issued or issuable upon exercise of such rights, options or
warrants.
P = the sum of the consideration per share received for the
issuance of such rights, options or warrants and the
exercise price per share of such rights, options or
warrants.
M = the Common Stock Trading Price per share of the Class A
Common Stock at the Time of Determination for any such
issuance, sale or distribution.
</TABLE>
The adjustment shall be made successively whenever any such rights, options
or warrants are issued or distributed and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
the rights, options or warrants. If at the end of the period during which any
such rights, options or warrants are exercisable, not all rights, options or
warrants shall have been exercised, the Exercise Rate shall be immediately
readjusted to what it would have been if "N" in the above formula had been the
number of shares actually issued.
(c) Adjustment for Other Distributions. If the Company distributes to all
holders of its Class A Common Stock (i) any securities of the Company or rights,
options or warrants to purchase or subscribe for securities of the Company
(other than those dividends and distributions referred to in Sections 9(a) and
9(b) above), (ii) any evidences of indebtedness of the Company or any other
person, or (iii) any Extraordinary Cash Dividend, the Exercise Rate shall be
adjusted in accordance with the formula:
E' = E x M
-----
M - F
where:
<TABLE>
<S> <C> <C>
E' = the adjusted Exercise Rate.
E = the current Exercise Rate on the record date mentioned
below.
M = the Common Stock Trading Price per share of Class A Common
Stock on the record date mentioned below.
F = the fair market value on the record date mentioned below of
the indebtedness, assets (including the Extraordinary Cash
Dividend), rights, options or warrants distributable with
respect to one share of Class A Common
</TABLE>
The adjustment shall be made successively whenever any such distribution is
made and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution.
Notwithstanding the foregoing provisions of this Section 9(c), an event which
would otherwise give rise to an adjustment pursuant to this Section 9(c) shall
not give rise to such an adjustment if the Company includes the Holder in such
distribution pro rata to the number of shares of Class A Common Stock issued and
outstanding after giving effect to the Warrant Shares as if they were issued and
outstanding.
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<PAGE> 58
(d) Adjustment of Exercise Price. Whenever the number of Warrant Shares
purchasable upon the exercise of the Warrant is adjusted, as herein provided,
the Exercise Price per Warrant Share payable upon exercise of the Warrant shall
be adjusted (calculated to the nearest $.0001) so that it shall equal the price
determined by multiplying the Exercise Price immediately prior to such
adjustment by a fraction, the numerator of which shall be the number of Warrant
Shares purchasable upon the exercise of the Warrant immediately prior to such
adjustment, and the denominator of which shall be the number of Warrant Shares
so purchasable immediately thereafter.
(e) Definitions.
"Common Stock Trading Price" on any date means, with respect to the Class A
Common Stock, the Closing Price for the Class A Common Stock on such date. The
"Closing Price" on any date shall mean the last sale price for the Class A
Common Stock, regular way, or, in case no such sale takes place on such date,
the average of the closing bid and asked prices, regular way, for the Class A
Common Stock in either case as reported in the principal consolidated
transaction reporting system with respect to the principal securities exchange
on which the Class A Common Stock is listed or admitted to trading or, if the
Class A Common Stock is not listed or admitted to trading on any securities
exchange, the last quoted price, or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
principal automated quotation system that may then be in use or, if the Class A
Common Stock is not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Class A Common Stock selected by the Board of Directors of the Company
or, in the event that no trading price is available for the Class A Common
Stock, the fair market value of the Class A Common Stock, as determined in good
faith by the Board of Directors of the Company.
"Extraordinary Cash Dividend" means cash dividends with respect to the
Class A Common Stock the aggregate amount of which in any fiscal year exceeds
10% of Adjusted EBITDA (as defined in the certificate of designation for the
Company's Series A Convertible Preferred Stock as in existence on the date
hereof) of the Company and its subsidiaries for the fiscal year immediately
preceding the payment of such dividend.
"Fair market value" of any consideration other than cash or of any
securities shall mean the amount which a willing buyer would pay to a willing
seller in an arm's length transaction as determined by an independent investment
banking or appraisal firm experienced in the valuation of such securities or
property selected in good faith by the Board of Directors of the Company or a
committee thereof.
(g) When De Minimis Adjustment May Be Deferred. No adjustment in the
Exercise Rate need be made unless the adjustment would require an increase or
decrease of at least 1.0% in the Exercise Rate. Notwithstanding the foregoing,
any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment, provided that no such adjustment shall be
deferred beyond the date on which a Warrant is exercised. All calculations under
this Section 9 shall be made to the nearest cent or to the nearest 1/100th of a
share, as the case may be.
(h) When No Adjustment Required. If an adjustment is made upon the
establishment of a record date for a distribution subject to subsections (a),
(b) or (c) hereof and such distribution is subsequently cancelled, the Exercise
Rate then in effect shall be readjusted, effective as of the date when the Board
of Directors determines to cancel such distribution, to that which would have
been in effect if such record date had not been fixed.
(i) Notice of Adjustment. Whenever the Exercise Rate or Exercise Price is
adjusted, the Company shall provide the notices required by Section 11 hereof.
(j) When Issuance or Payment May Be Deferred. In any case in which this
Section 9 shall require that an adjustment in the Exercise Rate be made
effective as of a record date for a specified event, the Company may elect to
defer until the occurrence of such event (i) issuing to the Holder of any
Warrant exercised after such record date the Warrant Shares and other capital
stock of the Company, if any, issuable upon such exercise over and above the
Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise on the basis of the Exercise Rate prior to such adjustment, and
(ii) paying to such Holder any amount in cash in lieu of a fractional share
pursuant to Section 10; provided, however, that the Company shall
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<PAGE> 59
deliver to the Holder a due bill or other appropriate instrument evidencing such
Holder's right to receive such additional Warrant Shares, other capital stock
and cash upon the occurrence of the event requiring such adjustment.
(k) Reorganizations. In the event of any capital reorganization or
reclassification of outstanding shares of Class A Common Stock (other than in
the cases referred to in Sections 9(a), (b) or (c) hereof), or in case of any
merger, consolidation or other corporate combination of the Company with or into
another corporation (other than a merger or consolidation in which the Company
is the continuing corporation and which does not result in any reclassification
of the outstanding shares of Class A Common Stock into shares of stock or other
securities or property), or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety (each of the foregoing being referred to as a "Reorganization"), there
shall thereafter be deliverable upon exercise of the Warrants (in lieu of the
number of shares of Class A Common Stock theretofore deliverable) the number of
shares of stock or other securities or property to which a holder of the number
of shares of Class A Common Stock that would otherwise have been deliverable
upon the exercise of the Warrants would have been entitled upon such
Reorganization if the Warrants had been exercised in full immediately prior to
such Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a duly adopted resolution certified by the
Company's Secretary or Assistant Secretary, shall be made in the application of
the provisions herein set forth with respect to the rights and interests of the
Holder so that the provisions set forth herein shall thereafter be applicable,
as nearly as possible, in relation to any shares or other property thereafter
deliverable upon exercise of the Warrants.
The Company shall not effect any such Reorganization unless prior to or
simultaneously with the consummation thereof the successor corporation (if other
than the Company) resulting from such Reorganization or the corporation
purchasing or leasing such assets or other appropriate corporation or entity
shall expressly assume the obligation to deliver to the Holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions, the
Holder may be entitled to purchase, and all other obligations and liabilities
under the Warrant.
The foregoing provisions of this Section 9(k) shall apply to successive
Reorganization transactions.
(l) Form of Warrants. Irrespective of any adjustments in the number or
kind of shares purchasable upon the exercise of the Warrant, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in this Warrant as initially issued.
(m) Miscellaneous. For purposes of this Section 9 the term "Class A Common
Stock" shall mean (i) the shares of stock designated as the Class A Common
Stock, par value $.001 per share, of the Company as of the date of this Warrant,
and (ii) shares of any other class of stock resulting from successive changes or
reclassification of such shares consisting solely of changes in par value, or
from par value to no par value, or from no par value to par value. For purposes
of this Section 9 the term "Fully Diluted Shares" shall mean (i) the shares of
Class A Common Stock outstanding as of a specified date, and (ii) shares of
Class A Common Stock into or for which rights, options, warrants or other
securities outstanding as of such date are exercisable or convertible (other
than this Warrant and that certain Warrant 1999-B issued by the Company to the
Holder, dated September 15, 1999). In the event that at any time, as a result of
an adjustment made pursuant to this Section 9, the Holder shall become entitled
to purchase any securities of the Company other than, or in addition to, shares
of Class A Common Stock, thereafter the number or amount of such other
securities so purchasable upon exercise of the Warrants shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Warrant Shares contained in
subsections (a) through (j) of this Section 9, inclusive, and the provisions of
Sections 1, 5, 7 and 10 with respect to the Warrant Shares or the Class A Common
Stock shall apply on like terms to any such other securities.
(n) Certain Events. If any change in the outstanding Common Stock of the
Company or any other event occurs as to which the provisions of this Section 9
are not strictly applicable or, if strictly applicable, would not fairly protect
the purchase rights of the Holder in accordance with such provisions, then the
Board of Directors of the Company shall make such adjustments to the Exercise
Rate, the Exercise Price or the
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<PAGE> 60
application of such provisions as may be necessary to protect such purchase
rights as aforesaid and to assure that the Holder, upon exercise for the same
aggregate Exercise Price, shall receive the total number, class and kind of
shares as it would have owned had the Warrant been exercised prior to the event
and had the Holder continued to hold such shares until after the event requiring
adjustment.
Section 10. Fractional Interests. The Company shall not be required to
issue fractional Warrant Shares on the exercise of the Warrant. If more than one
Warrant Certificate shall be presented for exercise in full at the same time by
the same Holder, the number of full Warrant Shares which shall be issuable upon
the exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrant so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 10,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the Common Stock Trading Price on
the trading day immediately preceding the date the Warrant is presented for
exercise, multiplied by such fraction.
Section 11. Notices to Holder. Upon any adjustment pursuant to Section 9
hereof, the Company shall give prompt written notice of such adjustment to the
Holder at its address appearing on the records of the Company within ten days
after such adjustment, by first class mail, postage prepaid, and shall deliver
to the Holder a certificate of the Chief Financial Officer of the Company,
accompanied by the report thereon by a firm of independent public accountants
selected by the Board of Directors of the Company (who may be the regular
accountants for the Company), setting forth in reasonable detail (i) the number
of Warrant Shares purchasable upon the exercise of the Warrant and the Exercise
Price of the Warrant after such adjustment(s), (ii) a brief statement of the
facts requiring such adjustment(s) and (iii) the computation by which such
adjustment(s) was made. Where appropriate, such notice may be given in advance
and included as a part of the notice required under the other provisions of this
Section 11.
In case:
(a) the Company proposes to take any action that would require an
adjustment to the Exercise Rate or the Exercise Price pursuant to Section 9
hereof; or
(b) of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of
the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of Class
A Common Stock issuable upon exercise of the Warrants (other than a change
in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or a tender
offer or exchange offer for shares of Class A Common Stock; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall give prompt written notice to the Holder at its address
appearing on the records of the Company, at least 30 days (or 20 days in any
case specified in clause (a) above) prior to the applicable record date
hereinafter specified, or the date of the event in the case of events for which
there is no record date, by first-class mail, postage prepaid, stating (i) the
date as of which the holders of record of shares of Class A Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, or (ii) the initial expiration date set forth in any tender offer or
exchange offer for shares of Class A Common Stock, or (iii) the date on which
any such consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up is expected to become effective or be consummated, and the date as
of which it is expected that holders of record of shares of Class A Common Stock
shall be entitled to exchange such shares for securities or other property, if
any, deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up. The failure by the Company to
give such notice or any defect therein shall not affect the legality or validity
of any distribution, right, option, warrant, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any action.
The Company shall give prompt written notice to the Holder of any
determination to make a distribution or dividend to the holders of its Class A
Common Stock of any assets (including cash), debt securities, preferred stock,
or any rights or warrants to purchase debt securities, preferred stock, assets
or other securities (other than Class A Common Stock, or rights, options, or
warrants to purchase Class A Common Stock) of
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<PAGE> 61
the Company, which notice shall state the nature and amount of such planned
dividend or distribution and the record date therefor, and shall be received by
the Holder at least 30 days prior to such record date therefor.
Nothing contained in this Warrant Certificate shall be construed as
conferring upon the Holder the right to vote or to consent or to receive notice
as shareholders in respect of the meetings of shareholders or the election of
Directors of the Company or any other matter, or any rights whatsoever as
shareholders of the Company.
Section 12. Notices to the Company. Any notice or demand to be given or
made by the Holder to or on the Company shall be sufficiently given or made when
received at the office of the Company expressly designated by the Company as its
office for purposes of this Certificate, as follows:
Paxson Communications Corporation
601 Clearwater Park Road
West Palm Beach, Florida 33401
Attention: General Counsel
Section 13. Supplements and Amendments. The Warrant may not be
supplemented or amended without the written approval of both the Holder and the
Company.
Section 14. Successors. All the covenants and provisions of this
Certificate by or for the benefit of the Company or the Holder shall bind and
inure to the benefit of their respective successors and assigns hereunder.
Section 15. Termination. This Certificate and the Warrants represented
hereby shall terminate on the Expiration Date. Notwithstanding the foregoing,
this Certificate will terminate on any earlier date if all Warrants have been
exercised pursuant hereto.
Section 16. Governing Law. The Warrant Certificate shall be deemed to be
a contract made under the laws of the State of New York.
Section 17. Benefits of This Certificate. Nothing in this Certificate
shall be construed to give to any person or corporation other than the Company
and the registered Holder any legal or equitable right, remedy or claim
hereunder; but this Certificate shall be for the sole and exclusive benefit of
the Company and the registered Holder.
IN WITNESS WHEREOF, Paxson Communications Corporation has caused this
Certificate to be duly executed by the undersigned.
Dated: September 15, 1999
PAXSON COMMUNICATIONS
CORPORATION
By: /s/ LOWELL W. PAXSON
------------------------------------
Name: Lowell W. Paxson
Title: Chairman
By: /s/ JEFFREY SAGANSKY
------------------------------------
Name: Jeffrey Sagansky
Title: President
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<PAGE> 62
EXHIBIT A
[FORM OF ELECTION TO PURCHASE]
(TO BE EXECUTED UPON EXERCISE OF WARRANT)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase shares of
Class A Common Stock and herewith tenders payment for such shares to the order
of Paxson Communications Corporation in the amount of $ in accordance
with the terms hereof. The undersigned requests that a certificate for such
shares be registered in the name of , whose address is
and that such shares be delivered to whose address
is . If said number of shares is less than all of the shares of
Class A Common Stock purchasable hereunder, the undersigned requests that a new
Warrant Certificate representing the remaining balance of such shares be
registered in the name of , whose address is , and
that such Warrant Certificate be delivered to , whose address is
.
Signature:
Date:
Signature Guaranteed:
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<PAGE> 63
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to purchase Class A
Common Stock (the "Securities")
of Paxson Communications Corporation
This Certificate relates to Securities held by
(the "Transferor").
The Transferor has requested that the Company by written order exchange or
register the transfer of Warrants.
In connection with such request and in respect of each such Security, the
Transferor does hereby certify that the Transferor is familiar with the Warrant
Certificate relating to the above captioned Securities and the restrictions on
transfers thereof as provided in Sections 3 and 4 of such Warrant Certificate,
and that the transfer of these Securities does not require registration under
the Securities Act of 1933, as amended (the " Securities Act") because*:
[ ] Such Security is being acquired for the Transferor's own account,
without transfer.
[ ] Such Security is being transferred pursuant to an exemption from
registration under the Securities Act in accordance with Rule 144 or
Regulation S promulgated under the Securities Act.
[ ] Such Security is being transferred to an institutional
"accredited investor" (within the meaning of subparagraphs (a)(1), (2), (3)
or (7) of Rule 501 under the Securities Act).
[ ] Such Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the
Securities Act other than Rule 144 or Regulation S under the Securities
Act. An opinion of counsel to the effect that such transfer does not
require registration under the Securities Act accompanies this certificate.
--------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
------------------------------------
[Authorized Signatory]
Date:
* Check applicable box.
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<PAGE> 64
EXHIBIT C
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
,
First Union National Bank,
Charlotte, North Carolina
1525 West W.T. Harris Blvd.
Building 3C3
Charlotte, North Carolina 28288-1153
Attention: Corporate Trust Administration
Re: Paxson Communications Corporation
(the "Company"), Warrants to Purchase
Class A Common Stock (the "Securities")
Ladies and Gentlemen:
In connection with our proposed purchase of the Securities, we confirm
that:
1. We understand that the Securities have not been registered under
the Securities Act of 1933, as amended (the "Securities Act") and, unless
so registered, may not be sold except as permitted in the following
sentence. We agree to offer, sell or otherwise transfer such Securities
while the offer and sale thereof have not been registered under the
Securities Act only (a) to the Company or any of its subsidiaries, (b)
pursuant to a registration statement which has been declared effective
under the Securities Act, (c) pursuant to an exemption from registration
under Rule 144 under the Securities Act; (d) pursuant to offers and sales
that occur outside the United States within the meaning of Regulation S
under the Securities Act, (e) to an institutional "accredited investor"
within the meaning of subparagraphs (a)(1), (2), (3) or (7) of Rule 501
under the Securities Act that is purchasing for his own account or for the
account of such an institutional "accredited investor," or (f) pursuant to
any other available exemption from the registration requirements of the
Securities Act. The foregoing restrictions on resale shall apply so long as
transfer of a Security is not permitted without registration under the
Securities Act. We understand that the Securities purchased by us will bear
a legend to the foregoing effect.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and we
are acquiring the Securities for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution in violation
of the Securities Act and we have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of our investment in the Securities, and we and any accounts for
which we are acting are each able to bear the economic risk of our or its
investment for an indefinite period.
3. We are acquiring the Securities purchased by us for our own
account.
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<PAGE> 65
4. You and your counsel are entitled to rely upon this letter and you
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
--------------------------------------
(Name of Purchaser)
By:
--------------------------------------
Date:
--------------------------------------
Upon transfer the Securities would be registered in the name of the new
beneficial owner as follows:
Name:
- -------------------------------------------------
Address:
- -----------------------------------------------
Taxpayer ID Number:
---------------------------------------------
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<PAGE> 66
EXHIBIT D
PROPOSAL 4 -- PROPOSED AMENDMENT TO ARTICLE FOURTH
OF CERTIFICATE OF INCORPORATION
RESOLVED, that Article Fourth of the Company's Certificate of Incorporation
be amended to increase the number of authorized shares of common stock of the
Company to 327,500,000, to increase the number of authorized shares of Class A
Common Stock to 215,000,000, and to increase the number of authorized shares of
Class C Non-Voting Common Stock to 77,500,000, and to read in pertinent part as
follows:
FOURTH. The amount of the total authorized capital stock of this
Corporation shall be 327,500,000 shares of Common Stock, with a par value
of $0.001 per share, and 1,000,000 shares of preferred stock, with a par
value of $0.001 per share.
Of the 327,500,000 shares of Common Stock which the Corporation is
authorized to issue:
(a) 215,000,000 shares ("Class A Common") will be designated "Class
A Common Stock,"
(b) 35,000,000 shares ("Class B Common" and, together with Class A
Common, "Voting Common") will be designated "Class B Common Stock," and
(c) 77,500,000 shares ("Class C Common") will be designated "Class
C Non-Voting Common Stock."
D-1
<PAGE> 67
PROXY PAXSON COMMUNICATIONS CORPORATION
601 CLEARWATER PARK ROAD
WEST PALM BEACH, FLORIDA 33401-6233
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Anthony L. Morrison and William L. Watson, or
either of them, as Proxies, each with the power to appoint his or her
substitute, and hereby authorizes them or their substitutes to represent and to
vote, as designated below, all the shares of stock of Paxson Communications
Corporation held of record by the undersigned on March 29, 2000, at the annual
meeting of stockholders to be held on May 1, 2000, or any adjournment thereof.
1. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO ADOPT A CLASSIFIED BOARD OF DIRECTORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF DIRECTORS
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY (except as
marked to the contrary below)
To vote for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW)
Lowell W. Paxson, William E. Simon, Jr., Jeffrey Sagansky,
Bruce L. Burnham, James L. Greenwald, John E. Oxendine,
R. Brandon Burgess, Keith G. Turner, Harold N. Brook
3. PROPOSAL TO APPROVE THE ISSUANCE OF SHARES OF CLASS A COMMON STOCK UPON
CONVERSION OF SHARES OF SERIES B CONVERTIBLE PREFERRED STOCK AND EXERCISE
OF WARRANTS ISSUED TO SUBSIDIARIES OF NATIONAL BROADCASTING COMPANY, INC.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK TO
327,500,000 SHARES, THE AUTHORIZED SHARES OF CLASS A COMMON STOCK TO
215,000,000 SHARES AND THE AUTHORIZED SHARES OF CLASS C NON-VOTING
COMMON STOCK TO 77,500,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 68
(CONTINUED FROM OTHER SIDE)
6. In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF ALL DIRECTORS AND FOR PROPOSALS 1, 3, 4 AND 5.
Dated ________________, 2000
________________________________________
Signature
________________________________________
Signature if held jointly
PLEASE SIGN EXACTLY AS NAME APPEARS
BELOW. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. When signing
as attorney, as executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
