SCHEDULE 14A
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INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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PAXSON COMMUNICATIONS CORPORATION
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(Name of Registrant as Specified In Its Charter)
PAXSON COMMUNICATIONS CORPORATION
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(LOGO)
(PAXSON COMMUNICATION CORPORATION LOGO)
April 2, 2002
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
Pierre, Fifth Avenue at 61st Street, New York, New York 10021, on May 3, 2002,
at 11:30 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
PAXSON COMMUNICATIONS CORPORATION
601 CLEARWATER PARK ROAD
WEST PALM BEACH, FLORIDA 33401-6233
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 3, 2002
The Annual Meeting of Stockholders of Paxson Communications Corporation
will be held at The Pierre, Fifth Avenue at 61st Street, New York, New York
10021, on May 3, 2002, at 11:30 a.m., local time, for the following purposes:
1. To elect three Class II directors to serve for a term of three years,
and until their successors have been duly elected and qualified;
2. To ratify the appointment of PricewaterhouseCoopers LLP as our
independent certified public accountants for 2002; and
3. 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 27, 2002,
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 2, 2002
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
2, 2002, 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 3, 2002, and at any
adjournment thereof (the "Meeting"). The Board of Directors has fixed the close
of business on March 27, 2002, 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) 56,542,077 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) 10,566 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 the Class II directors and the
appointment of PricewaterhouseCoopers LLP as our independent certified public
accountants for 2002. 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. If you sign and
return a proxy, you may revoke it at any time before it is voted by taking one
of the following three actions: (i) giving written notice of the revocation to
the Secretary of the Company; (ii) executing and delivering a proxy with a later
date; or (iii) voting in person at the Meeting. Attendance at the Meeting will
not in itself constitute revocation of a proxy.
The presence in person or by proxy of the holders of shares of stock having
a majority of the votes which could be cast by all outstanding shares of stock
entitled to vote at the Meeting constitutes a quorum for the transaction of
business at the Meeting. The election of directors will require the affirmative
vote of a plurality of the votes cast at the Meeting, if a quorum is present.
The affirmative vote of at least a majority of the votes cast in person or by
properly executed proxy is required to approve each of the 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. Lowell W. Paxson, our Chairman
and the beneficial owner of a majority of the voting power of our outstanding
stock, has advised us that he intends to vote all shares which he is entitled to
vote in favor of the proposals being submitted at the Meeting, therefore
approval of the proposals by our stockholders is assured.
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to our equity securities
beneficially owned on March 1, 2002, 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.
AMOUNT AND
NATURE OF AGGREGATE
BENEFICIAL VOTING
CLASS OF STOCK NAME OF BENEFICIAL OWNER(1) OWNERSHIP % OF CLASS POWER(%)
-------------- ---------------------------------- ---------- ---------- ------------
Class A Common Stock National Broadcasting Company,
Company, Inc.(2).................. 63,928,159 53.1% 30.4%
Lowell W. Paxson(3)............... 21,141,594 37.0 14.5
Mario J. Gabelli(4)............... 6,716,922 11.9 4.6
Merrill Lynch & Co., Inc.(5)...... 4,042,217 7.2 2.8
Jeffrey Sagansky(6)............... 1,960,000 3.4 1.3
Henry J. Brandon(7)............... 1,067,961 1.9 *
Dean M. Goodman(6)................ 691,636 1.2 *
Anthony L. Morrison(6)............ 472,250 * *
Seth A. Grossman(6)............... 217,825 * *
Bruce L. Burnham(6)............... 65,850 * *
James L. Greenwald(6)............. 49,500 * *
John E. Oxendine(6)............... 20,000 * *
All directors and executive
officers as a group (11
persons)(8)....................... 25,736,616 41.8% 17.1%
Class B Common Stock Lowell W. Paxson.................. 8,311,639 100% 56.9%
All directors and executive
officers as a group............... 8,311,639 100% 56.9%
---------------
* 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 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 those
securities, although currently exercisable, are subject to material
conditions, including compliance with the rules of the Federal
Communications Commission. This amount does not include shares of Class B
Common Stock beneficially owned by Mr. Paxson that NBC Palm Beach Investment
II, Inc. has the right to acquire. 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) Includes 666,666 shares which may be acquired within 60 days through the
exercise of stock options; 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 reported shares,
other than 666,766 shares of Class A 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 January 18, 2002, 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 they have shared or sole investment and
voting power or for their own account.
(5) The address of Merrill Lynch & Co., Inc., is World Financial Center, North
Tower, 250 Vesey Street, New York, New York 10381.
2
(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 - 960,000; Dean M. Goodman - 645,161; Anthony L. Morrison -
441,700; Seth A. Grossman - 189,650; Bruce L. Burnham - 53,750; James L.
Greenwald - 49,500; John E. Oxendine - 20,000; also includes 1,000,000
shares which may be acquired by Mr. Sagansky within 60 days through the
exercise of additional stock options.
(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
William E. Simon & Sons, LLC, a private investment firm with which Mr.
Brandon is employed as a principal; Mr. Brandon disclaims beneficial
ownership of all of these shares.
(8) Includes 2,409,761 shares which may be acquired within 60 days through the
exercise of stock options granted under the Company's Stock Incentive Plans,
1,666,666 shares which may be acquired within 60 days through the exercise
of additional stock options granted to Mr. Paxson and Mr. Sagansky, and
1,067,961 shares which may be acquired upon the exercise of warrants and
conversion of Series A Convertible Preferred Stock held by an affiliate of
William E. Simon & Sons, LLC, a private investment firm with which Mr.
Brandon is employed.
POTENTIAL CHANGE IN CONTROL
On September 15, 1999, NBC, through subsidiaries, purchased $415 million
aggregate liquidation preference of shares of our 8% Series B Convertible
Exchangeable Preferred Stock, which are convertible into 31,896,032 shares of
Class A Common Stock, and acquired warrants to purchase an additional 32,032,127
shares of Class A Common Stock. 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.
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 our 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 our company.
In December 2001, we commenced a binding arbitration proceeding against NBC
in which we asserted that NBC has breached its agreements with us and has
breached its fiduciary duty to us and to our shareholders. We have asserted that
NBC's proposed acquisition of Telemundo Communications Group, Inc. ("Telemundo
Group") violates the terms of the agreements governing the investment and
partnership between us and NBC. We also made two filings with the FCC, one of
which requests a declaratory ruling as to whether conduct by NBC, including
NBC's influence and apparent control over certain members of our board of
directors selected by NBC (all of whom have since resigned from our board), has
caused NBC to have an attributable interest in us in violation of FCC rules or
has infringed upon our rights as an FCC license holder. The second FCC filing
seeks to deny FCC approval of NBC's acquisition of the Telemundo Group's
television stations.
The initiation of these proceedings by us casts significant uncertainty
over the future direction of our relationship with NBC. The hearing in the
arbitration proceeding is currently scheduled to occur in April 2002, and we
expect that, under the applicable arbitration rules, the arbitrator will render
a decision by the end of May 2002. If we do not prevail in the arbitration
proceeding, and our position expressed in the FCC filings is not accepted by the
FCC, NBC could consummate the acquisition of the Telemundo Group and thereby
render it highly unlikely that NBC would be able to acquire control of our
company.
3
PROPOSAL 1 -- ELECTION OF CLASS II DIRECTORS
Our Board of Directors is divided into three classes. A class of directors
is elected each year to serve for a three year term and until their successors
are elected and qualified. Any director appointed by the Board of Directors to
fill a vacancy on the Board serves the balance of the unexpired term of the
class of directors in which the vacancy occurred. The current term of our Class
II directors will expire at the Meeting. The terms of the Class I directors
(Messrs. Paxson, Sagansky and Brandon) expire upon the election and
qualification of directors at the Annual Meeting of Stockholders to be held in
2004. Our Class III directors, all of whom were employees of NBC, resigned
during November and December, 2001, and we currently have no Class III
directors. The terms of any Class III directors who may be appointed by the
Board of Directors will expire upon the election and qualification of directors
at the Annual Meeting of Stockholders to be held in 2003.
The Board of Directors has nominated Bruce L. Burnham, James L. Greenwald
and John E. Oxendine each of whom currently serves as a Class II director, for
election as Class II directors. The Class II directors elected at the Meeting
will serve for a term of three years expiring upon the election and
qualification of their successors at our Annual Meeting of Stockholders to be
held in 2005 or until their earlier resignation or removal.
Each of the nominees has indicated his willingness to serve, if elected.
Should any nominee become unable or unwilling to accept nomination or election
for any reason, the persons named as proxies may cast votes 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
NOMINEES LISTED BELOW.
Biographical and other information concerning our directors and the
nominees for election at the Meeting is set forth below.
NOMINEES FOR ELECTION AS CLASS II DIRECTORS (TERM TO EXPIRE AT THE ANNUAL
MEETING IN 2005)
DIRECTOR
NOMINEE AGE POSITION, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE
------- --- --------------------------------------------------------------------- --------
Bruce L. Burnham....... 68 President of The Burnham Group since 1993, a firm providing 1996
consulting and marketing services to the retail industry.
James L. Greenwald..... 75 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....... 59 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.
4
DIRECTOR
NOMINEE AGE POSITION, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE
------- --- --------------------------------------------------------------------- --------
CLASS I DIRECTORS CONTINUING IN OFFICE (TERM TO EXPIRE AT THE ANNUAL MEETING IN 2004)
Lowell W. Paxson....... 66 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.
Jeffrey Sagansky....... 50 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.
Henry J. Brandon(1).... 44 Principal, William E. Simon & Sons, LLC, a private investment firm 2001
and merchant bank, since 1995.
CLASS III DIRECTORS CONTINUING IN OFFICE (TERM TO EXPIRE AT THE ANNUAL MEETING IN 2003)
None; seats are currently vacant.
---------------
(1) William E. Simon, Jr., resigned as a member of the Board of Directors
effective September 7, 2001. On that same date, the Board of Directors
elected Henry J. Brandon as a Class I director to fill the vacancy on the
Board left by Mr. Simon's resignation.
OTHER EXECUTIVE OFFICERS
Dean M. Goodman, 54, has been our Executive Vice President and Chief
Operating Officer since September 2001 and the President of our PAX TV network
television operations since 1998. Mr. Goodman was president of our inTV and
Network-Affiliated Television divisions from 1995 to 1997. From 1993 to 1995,
Mr. Goodman was general manager of our Miami, Florida radio station group.
Anthony L. Morrison, 40, has served as our Executive Vice President,
Secretary and Chief Legal Officer since 1995. Prior to that time he was an
attorney in private practice with the O'Melveny & Myers law firm, concentrating
his practice on commercial financings.
Seth A. Grossman, 37, has served as our Executive Vice President and Chief
Strategic Officer since 2000. Mr. Grossman also served as our Senior Vice
President and Chief Financial Officer from December 1999 until August 2000. From
1997 to December 1999, he was our Senior Vice President, Corporate Development
and from 1995 to 1997, he was our Director of Finance.
Thomas E. Severson, Jr., 38, has served as our Senior Vice President and
Chief Financial Officer since 2000. From 1995 until 2000, Mr. Severson was
employed by Sinclair Broadcast Group, Inc., in various finance and accounting
positions, most recently serving as Vice President and Chief Accounting Officer.
Ronald L. Rubin, 36, has served as our Vice President, Chief Accounting
Officer and Corporate Controller since 2001. From 1996 until 2001, Mr. Rubin was
employed by AutoNation, Inc., in various finance and accounting positions, most
recently serving as Vice President and Corporate Controller.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During 2001, the Board of Directors held six meetings. Other than Keith G.
Turner, 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 nine times during 2001 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. Mr. Greenwald is the chairman of the Compensation Committee. The
Compensation Committee recommends to the Board both base salary levels and
bonuses for the Chief Executive Officer and our other officers. 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 our Stock Incentive Plans. During 2001, the Compensation
5
Committee met informally in conjunction with each of the meetings of the Board
of Directors, and held two separate Committee meetings.
The Audit Committee consists of Bruce L. Burnham, James L. Greenwald and
John E. Oxendine. Mr. Burnham is the chairman of the Audit Committee. Each of
the members of the Audit Committee is an independent director as defined under
the rules of the American Stock Exchange and the Audit Committee operates under
a written charter adopted by the Board of Directors. 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 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 2001, the
Audit Committee met ten times.
The Company does not have a nominating committee. This function is
performed by the Board of Directors.
COMPENSATION OF DIRECTORS
Directors who are not our employees 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 September 2001, Mr.
Burnham and Mr. Greenwald each received options to purchase 50,000 shares of
Class A Common Stock at an exercise price of $7.25 per share, vesting ratably
over a four year period commencing in May 2001. In connection with his
commencement of service as a director, Mr. Oxendine received options to purchase
50,000 shares of Class A Common Stock at the same exercise price, vesting
ratably over a five year period commencing in March 2000. In April 1999, Mr.
Burnham and Mr. Greenwald each received a 50,000 share option grant at the same
exercise price, vesting ratably over five years. No other directors receive
separate compensation from us for services rendered as a director, including
directors who are employed by us.
CERTAIN TRANSACTIONS INVOLVING DIRECTORS AND OFFICERS
NBC Transactions. On September 15, 1999, the Company, NBC and Mr. Paxson,
our Chairman and controlling stockholder, entered into a series of agreements
which created a significant strategic and financial relationship between the two
companies and under which, subject to various conditions including FCC approval,
NBC has the ability to acquire voting and operational control of our Company. We
also entered into an agreement with NBC pursuant to which NBC serves as our
exclusive sales representative to sell our PAX TV Network advertising time for
agreed compensation. We have also entered into joint sales agreements with NBC
with respect to 13 of our stations serving 11 markets also served by an NBC
owned and operated station, and with 35 independently owned NBC affiliated
stations serving our markets. Prior to their resignation in November and
December 2001, directors Burgess, Turner and Wilson, employees of NBC, served as
Class III Directors of the Company. Apart from their service as employees of
NBC, we are not aware of any interest of Messrs. Burgess, Turner and Wilson in
our transactions with NBC.
DP Media. 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, Inc. and certain related corporations
(collectively, "DP Media") which were then beneficially owned by family members
of Mr. Paxson. 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 with DP Media to convert the asset sale
transaction into a purchase by us of all of the capital stock of DP Media. In
June 2000, we completed the acquisition of DP Media for aggregate consideration
of $113.5 million, including the $106 million previously advanced. DP Media's
assets included a 32% equity interest in a limited liability company controlled
by the former stockholders of DP Media, which owns television station WWDP in
Norwell, Massachusetts. We have the right to require a sale of WWDP, which is
6
not a PAX TV network affiliate, if the station is not sold within a specified
period, and the right to 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. If and when our
stations begin digital programming in multiple channels, 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. We utilize this facility
primarily as our network operations center and originate our PAX TV network
signal from this location. During the year ended December 31, 2001, we incurred
rental charges in connection with this agreement of $205,000.
In March 1999, we entered into a three year agreement with CNI to license
CNI's programming. During the year ended December 31, 2001, we paid license fees
in connection with this agreement of $215,000.
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 provided for
monthly payments of $63,600. The lease expired in December 2000 without being
renewed.
Officer Loans. 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, 2003.
At March 1, 2002, the outstanding balances on such loans to our Named Executive
Officers were as follows: Mr. Goodman, $685,006; Mr. Morrison, $370,917; and Mr.
Grossman, $164,574.
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
("Reporting Persons") 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 and written representations from certain Reporting
Persons, we believe that during 2001, all required reports were filed on a
timely basis, except that each of Mr. Greenwald and Mr. Morrison filed a late
Form 5 reflecting option grants and Mr. Severson failed to file a Form 5
reflecting option grants which were subsequently reported in a Form 4 filing.
7
EXECUTIVE COMPENSATION
The following table presents information concerning the compensation
received or accrued for services rendered during the fiscal years ended December
31, 2001, 2000 and 1999 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, 2001 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION NUMBER OF
----------------------------------- SECURITIES ALL OTHER
OTHER ANNUAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION OPTIONS (2)(3)(4)
--------------------------- ---- --------- -------- ------------ ------------ ------------
Jeffrey Sagansky.......... 2001 $660,000 $330,000 $ -- 0 $69,640
Chief Executive Officer, 2000 610,000 75,000 -- 0 63,276
President 1999 600,000 -- 140,070(5) 2,000,000 62,912
Lowell W. Paxson.......... 2001 660,000 -- -- 0 4,913
Chairman of the Board 2000 610,000 75,000 -- 0 --
1999 493,798 -- -- 1,000,000 --
Dean M. Goodman........... 2001 433,650 130,095 -- 150,000 43,771
Executive Vice President, 2000 412,997 30,975 1,023,273(6) 0 44,270
Chief Operating Officer 1999 315,000 -- 924,937(6) 0 15,426
Anthony L. Morrison....... 2001 288,750 86,625 165,584(6) 150,000 29,477
Executive Vice President, 2000 275,000 10,313 -- 0 29,756
Chief Legal Officer 1999 223,438 -- 432,781(6) 99,000 21,897
Seth A. Grossman.......... 2001 247,500 37,125 -- 125,000 1,000
Executive Vice President, 2000 219,750 80,363 -- 0 1,000
Chief Strategic Officer 1999 177,292 -- -- 22,000 1,000
---------------
(1) Includes amounts Named Executive Officers elected to defer under our Profit
Sharing Plan.
(2) Includes contributions to supplemental retirement plans as follows: during
2001, Mr. Sagansky -- $66,000; Mr. Goodman -- $41,300; Mr.
Morrison -- $27,500; during 2000, Mr. Sagansky -- $60,000; Mr.
Goodman -- $41,300; Mr. Morrison -- $27,500; during 1999, Mr.
Sagansky -- $60,000; Mr. Goodman -- $12,600; Mr. Morrison -- $19,688.
(3) Includes $1,000 Company contributions to the Profit Sharing Plan during
1999, 2000 and 2001.
(4) Includes cost of term life insurance equivalent for life insurance policies
as follows: during 2001, Mr. Sagansky -- $2,640; Mr. Paxson -- $4,913; Mr.
Goodman -- $1,471; Mr. Morrison -- $977; during 2000, Mr.
Sagansky -- $2,276; Mr. Goodman -- $1,970; Mr. Morrison -- $1,256; during
1999, Mr. Sagansky -- $1,912; Mr. Goodman -- $1,826; Mr. Morrison -- $1,209.
(5) Consists of tax reimbursement in 1999 related to relocation allowance in
1998.
(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.
8
OPTION GRANTS IN LAST FISCAL YEAR
The table below presents information regarding each of the Named Executive
Officers who was granted options to purchase shares of our Class A Common Stock
during the year ended December 31, 2001.
POTENTIAL REALIZABLE VALUES
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SHARES OF OPTIONS GRANTED STOCK APPRECIATION FOR OPTION
COMMON STOCK TO EMPLOYEES EXERCISE TERM(1)
UNDERLYING OPTIONS IN FISCAL PRICE EXPIRATION ----------------------------------
NAME GRANTED YEAR PER SHARE DATE 0% 5% 10%
---- ------------------ --------------- --------- ---------- -------- ---------- ----------
Dean M. Goodman....... 150,000 6.5% $7.25 7/31/2011 $735,000 $1,881,160 $3,639,596
Anthony L. Morrison... 150,000 6.5% 7.25 7/31/2011 735,000 1,881,160 3,639,596
Seth A. Grossman...... 125,000 5.4% 7.25 7/31/2011 612,500 1,567,634 3,032,996
---------------
(1) Based on the closing price on the grant date and the option exercise price.
2001 AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to stock options
exercised by the Named Executive Officers during the fiscal year ended December
31, 2001 and stock options held as of December 31, 2001 by each Named Executive
Officer.
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 2001 DECEMBER 31, 2001(1)
ACQUIRED ON VALUE ------------------------------ ------------------------------
NAME EXERCISE REALIZED EXERCISABLE(2) UNEXERCISABLE EXERCISABLE UNEXERCISABLE(3)
---- ----------- ---------- -------------- ------------- ----------- ----------------
Jeffrey Sagansky......... -- $ -- 1,960,000 1,240,000 $9,891,000 $2,505,600
Lowell W. Paxson......... -- -- 666,666 333,334 150,000 474,296
Dean M. Goodman.......... -- -- 525,161 352,500 2,169,457 1,128,000
Anthony L. Morrison...... 20,000 165,584 381,900 242,100 1,892,330 774,720
Seth A. Grossman......... -- -- 165,250 122,550 685,064 392,160
---------------
(1) Based on the closing sale price of the Class A common stock of $10.45 on
December 31, 2001.
(2) Excludes securities underlying options which vested January 1, 2002 as
follows: Mr. Goodman, 120,000 shares; Mr. Morrison, 59,800 shares; Mr.
Grossman, 24,400 shares.
(3) Certain options held by Mr. Sagansky which are not currently exercisable
have variable exercise prices to be determined at future dates, as described
above under "Employment Agreements," and are therefore not treated as "in
the money" for purposes of the amounts shown in this column.
STOCK INCENTIVE PLANS
We established our Stock Incentive Plan, 1996 Stock Incentive Plan and 1998
Stock Incentive Plan (collectively, the "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
Stock Incentive 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 Stock Incentive Plans generally vest
over a four or five year period and expire ten years after the date of grant. As
of December 31, 2001, 643,978 shares of Class A Common Stock were available for
additional awards under the Stock Incentive Plans.
The exercise price per share of Class A Common Stock, vesting schedule and
expiration date of each stock option granted under the Stock Incentive Plans is
determined by the Compensation Committee at the date the option is granted and
as provided in the terms of the Plans. The Compensation Committee may, in its
sole discretion, accelerate the time at which any stock option may be exercised.
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
9
exceed five years. Options granted under the Stock Incentive Plans may be
exercised by the participant to whom granted or by his or her legal
representative. If a participant's employment is terminated for cause, each
option which has not been exercised shall terminate.
The Compensation Committee also has the discretion to award restricted
stock, consisting of shares of Class A Common Stock which vest over a period
determined by the Committee and are subject to forfeiture in whole or in part if
the recipient's employment is terminated prior to the end of 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 us 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 operating and financial
performance objectives which we must meet 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.
PROFIT SHARING PLAN
We have a profit sharing plan under Section 401(k) of the Internal Revenue
Code under which our employees must complete six months of service in order to
be eligible to defer salary and, if available, receive matching contributions
under the Section 401(k) portion of the plan. Participants may elect to
contribute a specified percentage of their compensation to the 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, a 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 current base
salary under the agreement is $726,000, increasing 10% per year. Mr. Paxson may
receive an annual bonus of up to twice his base salary if we attain financial
targets established by our Compensation Committee. Mr. Paxson declined to accept
the bonus which would otherwise have been payable to him under his agreement and
our Executive Bonus Plan with respect to our 2001 fiscal year. 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 and expire ten years from the date of
grant. The exercise price for options which vested in October 2000 is $10 per
share, for options which vested in October 2001 is $12.03 per share and for
options vesting in October 2002 is $9.03 per share. Mr. Paxson is eligible to
participate in all employee benefit plans and arrangements that are generally
available to our other senior executives. The Board of Directors may terminate
Mr. Paxson's employment agreement before expiration for good cause, and Mr.
Paxson may
10
terminate the agreement for good reason, each 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 current base salary under
the agreement is $693,000, increasing 10% per year. Mr. Sagansky may receive an
annual bonus of up to twice his base salary if we attain financial targets
established by our Compensation Committee, which shall be the same 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 ten years from the date
of grant. 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
options which vested in September 2000 is $10 per share, for options which
vested in September 2001 is $11.68 per share, for options vesting in September
2002 is $10.85 per share, and for options vesting in September 2003 is the lower
of $21 per share or the average of the closing sale price of the common stock
over the 45 trading days preceding September 15, 2002. Mr. Sagansky is eligible
to participate in all employee benefit plans and arrangements that are generally
available to our other senior executives. The Board of Directors may terminate
Mr. Sagansky's employment agreement before expiration for good cause, and Mr.
Sagansky may terminate the agreement for good reason, each 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 our Executive Vice President and Chief Operating
Officer under a four year employment agreement commencing January 1, 2001. Mr.
Goodman is eligible to receive an annual bonus, to participate in all employee
benefit plans and arrangements that are generally available to our other senior
executives and to receive such other cash and non-cash bonus awards and
compensation (including awards under our Stock Incentive Plans) as we may
determine. We may terminate Mr. Goodman's employment for cause, as defined in
the agreement. If Mr. Goodman's employment is terminated by reason of his death
or disability or other than for cause, or if Mr. Goodman terminates his
employment for cause, as defined in the agreement, we will continue to pay Mr.
Goodman his base salary for the lesser of one year or the balance of the
employment term.
Mr. Morrison is employed as our Executive Vice President and Chief Legal
Officer under a four year employment agreement commencing January 1, 2001. Mr.
Morrison is eligible to receive an annual bonus, to participate in all employee
benefit plans and arrangements that are generally available to our other senior
executives and to receive such other cash and non-cash bonus awards and
compensation (including awards under our Stock Incentive Plans) as we may
determine. We may terminate Mr. Morrison's employment for cause, as defined in
the agreement. If Mr. Morrison's employment is terminated by reason of his death
or disability or other than for cause, or if Mr. Morrison terminates his
employment for cause, as defined in the agreement, we will continue to pay Mr.
Morrison his base salary for the lesser of one year or the balance of the
employment term.
Mr. Grossman is employed as our Executive Vice President and Chief
Strategic Officer under a four year employment agreement commencing January 1,
2001. Mr. Grossman is eligible to receive an annual bonus, to participate in all
employee benefit plans and arrangements that are generally available to our
other senior executives and to receive such other cash and non-cash bonus awards
and compensation (including awards under our 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
11
disability or other than for cause, or if Mr. Grossman terminates his employment
for cause, as defined in the agreement, 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 were
approved by our Compensation Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee was composed of Mr. Burnham and Mr. Greenwald
during 2001. None of our executive officers 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 2001.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, 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
This report is submitted by the Compensation Committee of the Board of
Directors, which is currently comprised of Mr. Burnham and Mr. Greenwald, each
of whom is a non-employee director of the Company.
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.
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.
For the 2001 fiscal year, the Committee established target levels of
adjusted earnings before interest, taxes, depreciation and amortization
("EBITDA") as the financial performance goals to be used to determine bonus
compensation under the Executive Bonus Plan. Based upon the Company's actual
adjusted EBITDA for the 2001 fiscal year, the participants in the Executive
Bonus Plan were entitled to receive bonus compensation of between 5% and 50% of
annual base compensation. Bonus compensation earned with respect to the 2001
fiscal year will be paid over the first six months of 2002.
During 2001, the Company entered into new four year employment agreements
with each of Mr. Goodman, Mr. Morrison and Mr. Grossman. In connection with
these agreements, these executive officers were granted options to purchase
150,000, 150,000 and 125,000 shares, respectively, of Class A
12
Common Stock, at an exercise price of $7.25 per share, vesting over four year
periods commencing January 1, 2001.
Submitted by the Compensation Committee
James L. Greenwald, Chairman
Bruce L. Burnham
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on our
Class A Common Stock from December 31, 1996 through December 31, 2001 with the
cumulative total return of 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 comparison assumes $100 was invested at the per share
closing price of our Class A Common Stock on December 31, 1996. 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.
(PERFORMANCE GRAPH)
COMPANY NAME/INDEX 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
------------------------------------------------------------------------------------------------------------
PAXSON COMMUNICATIONS CORP.-CLASS A $100.00 $96.77 $118.55 $154.04 $154.03 $134.84
AMERICAN STOCK EXCHANGE INDEX $100.00 $125.32 $134.49 $176.81 $165.72 $150.84
PEER GROUP INDEX $100.00 $158.83 $158.61 $266.66 $208.53 $202.03
---------------
(1) The following companies comprise the Peer Group: Granite Broadcasting Corp.,
Hearst-Argyle Television Inc., LIN Television Corp. (included through
December 31, 1997 only, as the company was acquired during 1998), 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.
13
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following Audit
Committee Report shall not be incorporated by reference into any such filings.
AUDIT COMMITTEE REPORT
This report is submitted by the Audit Committee of the Board of Directors,
which is currently comprised of three independent directors and operates under a
written charter adopted by the Board of Directors. The members of the committee
are Bruce L. Burnham, James L. Greenwald and John E. Oxendine. Mr. Burnham is
the chairman of the Audit Committee. The Audit Committee recommends to the Board
of Directors the selection of the Company's independent accountants, subject to
stockholder ratification.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an audit of the Company's consolidated financial statements in
accordance with auditing standards generally accepted in the United States of
America and to issue a report thereon. The Audit Committee's responsibility is
to monitor and oversee these processes.
In this context, the Audit Committee has met and discussed the fiscal 2001
audited financial statements with management and the independent accountants.
Management represented to the Audit Committee that the Company's consolidated
financial statements were prepared in accordance with accounting principles
generally accepted in the United States of America, and the Audit Committee has
reviewed and discussed the consolidated financial statements with management and
the independent accountants. The Audit Committee discussed with the independent
accountants matters required to be discussed by Statement on Auditing Standards
No. 61, entitled Communications with Audit Committees.
The Company's independent accountants also provided to the Audit Committee
the written disclosures and the letter required by Independence Standards Board
Standard No. 1, entitled Independence Discussions with Audit Committees, and the
Audit Committee discussed with the independent accountants that firm's
independence.
Based on the Audit Committee's discussion with management and the
independent accountants and the Audit Committee's review of the representation
of management and the report of the independent accountants to the Audit
Committee, the Audit Committee recommends that the Board of Directors include
the audited financial statements for fiscal 2001 in the Company's Annual Report
on Form 10-K for the year ended December 31, 2001 filed with the Securities and
Exchange Commission.
Submitted by the Audit Committee
Bruce L. Burnham, Chairman
James L. Greenwald
John E. Oxendine
PROPOSAL 2 -- RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed PricewaterhouseCoopers LLP to audit
our consolidated financial statements for the year ended December 31, 2002.
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.
AUDIT FEES
The aggregate fees billed to us by PricewaterhouseCoopers LLP for its
services in connection with the audit of our annual consolidated financial
statements for the fiscal year ended December 31, 2001, and its review of the
quarterly financial statements included in our reports on Form 10-Q filed during
the 2001 fiscal year were $270,000.
14
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
For our fiscal year ended December 31, 2001, PricewaterhouseCoopers LLP was
not engaged to and did not provide any of the professional services described in
Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X.
ALL OTHER FEES
The aggregate fees billed by PricewaterhouseCoopers LLP for services
rendered to us during the year ended December 31, 2001, other than those
described above, were $592,155, consisting of the following:
Audit related services...................................... $342,700
Income tax compliance and related services.................. $220,925
Internal audit services..................................... $ 28,530
Audit related services include the issuance of consents and "comfort letters"
with respect to our refinancing transactions, audits of our employee benefit
plan and financial statements of former subsidiaries and consultations on
accounting matters during the year.
COMPATIBILITY OF FEES
The Audit Committee of the Board of Directors has considered the provision
of non-audit services by PricewaterhouseCoopers LLP and the fees paid to them
for such services, and believes that the provision of such services and the fees
charged are compatible with PricewaterhouseCoopers LLP's maintenance of their
independence.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS FOR 2002.
OTHER INFORMATION
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Proposals of stockholders intended for presentation at the 2003 annual
meeting must be received by us on or before December 1, 2002, 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
2001 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, 2001, as filed with the Securities and Exchange
Commission pursuant to Rule 13a-1 under the Securities Exchange Act of 1934. We
15
will not charge for copies of our annual report, but will assess a reasonable
charge for copies of the exhibits, if requested.
By Order of the Board of Directors
/s/ ANTHONY L. MORRISON
Anthony L. Morrison, Secretary
West Palm Beach, Florida
April 2, 2002
16
o FOLD AND DETACH HERE o
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 Adam K. Weinstein, 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 27, 2002, at the annual
meeting of stockholders to be held on May 3, 2002, or any adjournment thereof.
1. ELECTION OF CLASS II DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY (except as
marked to the contrary below)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE
NOMINEE'S NAME IN THE LIST BELOW)
Bruce L. Burnham, James L. Greenwald, John E. Oxendine
2. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR 2002.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued and to be signed on other side)
o FOLD AND DETACH HERE o
(Continued from other side)
3. 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 CLASS II DIRECTORS AND FOR PROPOSAL 2.
Dated
------------------------, 2002
-------------------------------------
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.