In the United States Bankruptcy Court for the Southern District of Texas Houston Division
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IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION
§ In re: § Chapter 11 § MARSHALL BROADCASTING § Case No. 19-36743 (DRJ) GROUP, INC. § § Relates to Docket No. 15 Debtor. § §
PRELIMINARY OBJECTION OF MISSION BROADCASTING, INC. TO EMERGENCY MOTION OF THE DEBTOR FOR INTERIM AND FINAL ORDER AUTHORIZING THE USE OF CASH COLLATERAL AND RELATED RELIEF
Mission Broadcasting, Inc. (“Mission”), by and through its undersigned counsel, files this preliminary objection to the motion of Marshall Broadcasting Group (the “Debtor”) seeking interim and final orders authorizing the use of cash collateral (the “Cash Collateral Motion”) (Dkt.
No. 15) and represents as follows:
Introduction
1. Mission is the Debtor’s largest creditor with a secured claim of roughly $49 million.
Mission wants the Debtor’s business to continue as a going concern and is willing to consent to the use of its cash collateral pending a final hearing, but (a) only in an amount and for those purposes that are necessary to avoid immediate and irreparable harm to the estate and (b) only if it is provided adequate protection as required under 11 U.S.C. § 363(c)(2) and (e). Mission, as explained below, has concerns about the budget, including the vagueness of the line-items. Those concerns are amplified by the serious financial misconduct that arose before the case was filed, including numerous instances where insiders used the Debtor’s cash for extravagant expenditures on clothing, international vacations, sports and entertainment tickets, vehicles, contributions to spousal trusts, donations to social clubs, and other expenses that appear to be entirely unrelated to
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the business. Moreover, $5,000,000 was transferred out of a Debtor bank account on the eve of bankruptcy, which has allegedly been (or is supposed to be) returned to the estate.
Background
2. Before turning to the substance of the objection, we provide a brief explanation of the business relationships among the Debtor, Mission and Nexstar Media Group and its affiliates
(“Nexstar”) to place the objection in proper context. Nexstar is America’s largest local television and media company with 197 full power stations (including partner stations) in 115 markets addressing nearly 63% of US television households. Mission is a television broadcasting company with 19 full power stations in 18 markets in 11 states. The Debtor owns and operates three television stations that it bought from Nexstar, one in December 2014 and the other two in January
2015. The Debtor and Mission each have their own certain service agreements with Nexstar, including shared services agreements, pursuant to which Nexstar provides critical operational services, including master control and traffic services, news production, technical maintenance, security, and accounts receivable processing, in exchange for a monthly fee. Additionally, Mission provides treasury, accounting and cash management services (other than collecting receivables) for the Debtor pursuant to a “Business Services Agreement,” dated May 1, 2015. Notwithstanding their respective agreements with Nexstar, the Debtor and Mission maintain complete responsibility and control over their respective programming, finances, personnel and operations of their respective stations.
3. The business relationships among the Debtor, Mission and Nexstar also extend to their funded debt obligations. As of the filing date, the Debtor owes at least $49,013,808.90 (the
“MBG Debt”) under a Credit Agreement (the “MBG Credit Agreement”) dated as of January 17,
2017 (as amended from time to time). The MBG Debt matured on November 29, 2019 and
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payment was guaranteed by Nexstar. Moreover, a default by the Debtor would cross-default to a series of other credit agreements with Nexstar and Mission and their respective lenders with respect to aggregate principal obligations of more than $8.5 billion.
4. To avoid a cross-default, Nexstar was prepared to honor its guarantee of the MBG
Debt. Nexstar, however, is restricted under federal regulations from owning the MBG Debt.1 To address this restriction, Nexstar transferred its guarantee obligation to Mission, and Mission (as designee of Nexstar) honored the guarantee on December 2, 2019 by paying an amount equal to the MBG Debt to the then-existing lenders under the MBG Credit Agreement. By its payment under the guarantee, Mission became subrogated, by operation of law, to all of the claims, liens, rights and interests of the original lenders under the MBG Credit Agreement.
5. Prior to the filing of this case, Mission had initiated a process for a public sale of the equity of the Debtor under Article 9 of the UCC. Mission, as secured creditor, is prepared to credit bid to preserve the value of the Debtor’s business, maintain jobs and maximize its recovery in this case.
Objection
The Cash Collateral Budget is Unacceptably Vague
6. Mission is the only secured creditor of the Debtor with a prepetition claim of approximately $49 million secured by a first priority, validly perfected lien on substantially all of the Debtor’s assets, including “cash collateral” as defined under 11 U.S.C. § 363(a). Attempts to
1 Nexstar is prohibited from owning the Debtor’s licenses under Federal Communications Commission (“FCC”) regulations which, subject to certain exceptions, prohibit ownership of two stations in a single local market. Nexstar is also prohibited from owning the MBG Debt under the same FCC regulations, because the ownership of such indebtedness would result in the licenses being attributed to Nexstar as though Nexstar owned them.
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negotiate a consensual order were unsuccessful. As a result, the Court should deny the Cash
Collateral Motion until such time as the Debtor provides an explanation as to why the expenses listed on the proposed budget are necessary to avoid immediate and irreparable harm to the estate pending a final hearing as required under Bankruptcy Rule 4001(b)(2). Mission has concerns about the vagueness of certain of the disbursement line-items, including (a) $250,000 for
“operating expenses,” (b) $142,000 for “film payments,” and (c) $100,000 for “legal and professional fees.” Mission is also concerned that payments in the proposed budget improperly include payments to creditors on account of prepetition claims, for expenses unrelated to the business, for professionals that have not yet been retained and for friends and relatives of insiders that are not necessary to operate the business.
Concerns About Abuse Are Supported by Prior Misconduct
7. Mission’s concerns are heightened because of pre-petition misconduct by Mr.
Pluria Marshall, Jr. -- the Debtor’s Chief Executive Officer and Chairman of its Board of Directors.
Prior to filing, Mr. Marshall used the Debtor’s cash for extravagant expenditures on clothing, international vacations, sports and entertainment tickets, and vehicles. These expenditures include golf tournaments, numerous tickets to professional basketball games, recurring expenses for tickets at the Staples Center in Los Angeles (where Mr. Marshall lives), and trips to South Africa, Mexico,
London, and Dubai.2 This year, Mr. Marshall directed the Debtor to deposit approximately
$46,000 into a Spousal Lifetime Access Trust, and just in November 2019, used corporate assets to make a $25,000 donation to a social club of which Mr. Marshall is a member. None of these appear to be legitimate business expenses and Mr. Marshall has failed to provide supporting
2 The Debtor does not have operations outside of the United States. The three television stations it owns are located in Odessa, Texas, Shreveport, Louisiana, and Davenport, Iowa.
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documentation demonstrating that they are.3 Most recently, on the eve of bankruptcy, Mr.
Marshall transferred $5,000,000 from the Debtor’s account payable account to the bank account of another company owned by Mr. Marshall. While Mission recognizes that the transfer might have been attributable to bankruptcy planning, and the Debtor’s counsel has indicated that
$5,000,000 has been (or will be) returned to the Debtor’s estate, that fact has not yet been confirmed. The movement of cash between companies owned by Mr. Marshall is obviously alarming and deeply troubling. The Debtor should be admonished that use of funds for any purpose and in any amount not reflected on the cash collateral budget is prohibited.
Refusal To Recognize Appointment of Independent Director
8. To address its concerns about mismanagement and collateral dissipation, Mission
(prior to the bankruptcy filing) unilaterally exercised its attorney-in-fact and voting proxy rights under a Pledge Agreement, dated January 17, 2017, to appoint a director to the Debtor’s board of directors. Mission carefully and thoughtfully exercised this power in a way to avoid triggering a
“change of control,” which would require the prior approval of the FCC. The director (the
“Collateral Preservation Director”) was vested with approval rights over certain transactions outside the ordinary course of business (the “Collateral Preservation Matters”). The appointment and precise scope of these approval rights is set forth in the Shareholders’ Agreement attached hereto as Ex. A. Compounding concerns about mismanagement and misuse of collateral, the
Debtor has refused to recognize the Collateral Preservation Director’s appointment.
Lack of Adequate Protection
9. Finally, Mission objects to the Cash Collateral Motion because the Debtor fails to
3 These expenditures are also the subject of counterclaims brought by Nexstar against Mr. Pluria Marshall, Jr. in a pending action in New York State Supreme Court.
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provide “adequate protection.” Mission believes that net cash flow will be negative during the interim period and has the right to be protected from the dollar-for-dollar diminution of its interests in Cash Collateral. The Debtor has the burden of proof on the issue of adequate protection pursuant to 11 U.S.C. § 363(p)(1).
10. In the Cash Collateral Motion, the Debtor proposes to provide Mission with replacement liens in its post-petition assets with the same nature, extent, priority, and validity as
Mission’s pre-petition security interest. Dkt. 15 ¶ 15. Replacement liens, however, are insufficient to constitute adequate protection because Mission’s approximately $49 million claim is already secured by a first priority lien on substantially all of the Debtor’s assets. Providing a secured creditor with only a replacement lien on assets upon which it already has a lien cannot constitute adequate protection. See In re Goode, 235 B.R. 584, 589 (E.D. Tex. 1999); In re LTAP US, LLLP,
2011 WL 671761 *3 (Bankr. D. Del. 2011) (“Providing [the secured creditor] with a replacement lien on assets against which it already has a lien is illusory.”).
11. Additionally, the Debtor suggests that Mission is adequately protected by an equity cushion. However, this is based purely on conclusory (and inherently speculative) statements in
Mr. Marshall’s First Day Declaration. The assertion is not substantiated by documentary evidence.
See Declaration of Pluria Marshall, Jr., Dkt. 18 ¶ 6. The Debtor even concedes in its Cash
Collateral Checklist filed with the Motion that the lender’s oversecured status is “Unknown.” Dkt.
15, Ex. B ¶ 2(g). An equity cushion must as “nearly as possible under the circumstances of the case provide the creditor with the value of his bargained for rights.” In re Swedeland Development
Group, Inc., 16 F.3d 552, 564 (3d Cir. 1994) (en banc) (internal quotations omitted). An equity cushion is not adequate when, as here, it is “based largely on the speculative outcome of yet undetermined events.” In re Panther Mountain Land Development, LLC, 438 B.R. 169, 192
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(Bankr. E.D. Ark. 2010) (finding no adequate protection where the equity cushion calculation was based on undetermined factors including interest rate, date of sale, and amount needed to fund the debtor’s plan); In re Packard Square LLC, 574 B.R. 107, 123 (Bankr. E.D. Mich. 2017) (finding no adequate protection where the calculation of the equity cushion was based on speculative projections of the property’s future value after completion of construction).
12. Mission believes that it would be adequately protected if cash collateral use was authorized pursuant to an approved budget subject to an interim order acceptable to Mission and the Debtor were to recognize the appointment and approval rights of the Collateral Preservation
Director.
CONCLUSION
Now that Marshall Broadcasting Company is a chapter 11 debtor, Mission takes some comfort that, as a fiduciary, the officers and directors of a debtor-in-possession will be required to operate with complete transparency. But, Mr. Marshall’s prior actions demonstrate the critical importance of a detailed Cash Collateral budget that must be carefully and fully investigated to ensure that Mr. Marshall will not use estate assets for personal gain or for purposes unrelated to the Debtor’s business. To be clear, Mission wants the Debtor’s business to continue as a going concern and is willing to consent to use of its Cash Collateral pending a final hearing, but only in an amount and for those purposes that are necessary to avoid immediate and irreparable harm to the estate and subject to an acceptable interim order providing adequate protection.
WHEREFORE, for all of the reasons set forth herein, Mission respectfully requests that
Court (A) deny the Cash Collateral Motion unless and until the Debtor (i) demonstrates that the
Cash Collateral will be used for purposes that are necessary to avoid immediate and irreparable harm to the estate and (ii) provides Mission with adequate protection and (B) grant such other and
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further relief as is just or necessary. 4
Dated: December 9, 2019 JACKSON WALKER, LLP
By: /s/Matthew Cavenaugh_ Bruce Ruzinsky Matthew Cavenaugh Victoria Argeroplos 1401 McKinney, Suite 1900 Houston, TX 77010 Phone: 713-752-4200 Email: [email protected] [email protected] [email protected]
and
PROSKAUER ROSE LLP
David M. Hillman Michael T. Mervis Lucy F. Kweskin
Eleven Times Square New York, NY 10036 Tel: (212) 969-3000 Fax: (212) 969-2900 Email: [email protected] [email protected] [email protected]
Counsel to Mission Broadcasting, Inc.
4 Mission reserves the right to supplement this objection.
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CERTIFICATE OF SERVICE
I hereby certify and verify that on December 9, 2019, the forgoing instrument was served via CM/ECF to all parties registered to receive electronic notice.
/s/ Matthew D. Cavenaugh Matthew D. Cavenaugh
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Exhibit A Shareholders Agreement
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Case 19-36743 Document 22-1 Filed in TXSB on 12/09/19 Page 2 of 15 EXECUTION VERSION
SHAREHOLDERS’ AGREEMENT OF MARSHALL BROADCASTING GROUP, INC.
a Texas for-profit corporation
This Shareholders’ Agreement of Marshall Broadcasting Group, Inc. (the “Corporation”), dated as of December 2, 2019 (this “Agreement), is adopted, executed, agreed and entered into by the sole shareholder of the Corporation (acting through its proxy and attorney-in-fact) in accordance with the terms and provisions of the Texas Business Organizations Code (the “TBOC”).
RECITALS
WHEREAS, reference is made to (i) that certain Credit Agreement, dated as of January 17, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “MBG Credit Agreement”), by and among the Corporation, as borrower, the lenders from time to time parties thereto (the “Lenders”) and Bank of America, N.A., as the administrative agent (the “Administrative Agent”) and the collateral agent, (ii) that certain Pledge Agreement, dated as of January 17, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Shareholder Pledge Agreement”), by Pluria Marshall, Jr. (the “Pledgor”) and Bank of America, N.A., in its capacity as collateral agent and (iii) that certain Guarantee and Security Agreement, dated as of January 17, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Guarantee”), by and among Nexstar Media Group, Inc. (“Nexstar Media”), Nexstar Broadcasting, Inc. (“Nexstar Broadcasting”), certain other direct or indirect subsidiaries of Nexstar Media from time to time parties thereto (collectively, with the other signatories thereto under the heading “Grantors” on the signature pages thereof and such other entities from time to time parties thereto pursuant to Section 12.15 thereof, collectively, “Nexstar”) and Bank of America, N.A., as collateral agent pursuant to which, among other things, Nexstar guaranteed those of the Obligations identified as “Secured Obligations” in the MBG Credit Agreement.
WHEREAS, all capitalized terms used but not defined herein shall have the meanings set forth in the Credit Agreement.
WHEREAS, Nexstar designated, delegated and transferred its Guaranty, under and as defined in the Guarantee, (such Guaranty, the “MBG Guaranty”) to Mission Broadcasting, Inc. (“Mission”) pursuant to the Guarantee Designation Agreement, dated as of November 27, 2019.
WHEREAS, the Corporation defaulted under the MBG Credit Agreement by failing to repay approximately $49,013,808.90 in principal and interest plus other fees and expenses (collectively, and as more particularly set forth in the MBG Credit Agreement the, “MBG Debt”), which matured according to its terms on November 29, 2019 (the “Maturity Date”).
WHEREAS, as a result of the Corporation’s failure to pay the MBG Debt on the Maturity Date, Mission was obligated to honor the MBG Guaranty and on December 2, 2019 paid Lenders an amount equal to the MBG Debt (the “Guaranty Payment”).
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WHEREAS, as a result of the Guaranty Payment to the Lenders, Mission became subrogated, by operation of law, to the rights of the Lenders under the MBG Credit Agreement and related collateral documents, including the Pledge Agreement (collectively, the “Debt and Collateral Documents”).
WHEREAS, the Guaranty Payment by Mission, and related transfer of the Debt and Collateral Documents to Mission, was confirmed by the Lenders in that certain “Payment Confirmation and Transfer Statement,” dated as of the date hereof.
WHEREAS, Mission, pursuant to the MBG Credit Agreement, has been duly appointed as the collateral agent (acting in such capacity, the “Collateral Agent”) under the Debt and Collateral Documents as of December 2, 2019 and, as such, was vested with the attorney-in-fact irrevocably granted to the Collateral Agent by Pledgor.
WHEREAS, concurrently with the execution of this Agreement, Mission, as the sole Lender under the MBG Credit Agreement and as Collateral Agent, has delivered to the board of directors of the Corporation (the “Board”) and to the Pledgor a notice (the “Notice”) (i) notifying the Corporation and the Pledgor of (a) the existence and continuation of certain Defaults and Events of Default under the MBG Credit Agreement; and (b) the Guaranty Payment and (ii) reserving all rights, remedies, powers and privileges available to Mission, as Collateral Agent and as sole Lender under the Debt and Collateral Documents.
WHEREAS, pursuant to Section 8(b)(i) of the Pledge Agreement, as a result of the occurrence and continuance of such Events of Default and upon delivery of the Notice, all rights of the Pledgor to exercise voting and other consensual rights which he would otherwise be entitled to exercise pursuant to Section 8(a)(i) of the Pledge Agreement ceased and the rights described in Proxy (as defined below) thereupon became immediately vested in Mission (as the Collateral Agent).
WHEREAS, on the date hereof, under and pursuant to the MBG Credit Agreement and the Pledge Agreement, Mission has, without taking legal title to any of the Pledged Collateral (as defined in the Pledge Agreement), exercised its attorney-in fact rights granted therein pertaining to the Pledged Collateral (the “Power of Attorney”) to execute an irrevocable proxy in writing on the date hereof appointing Mission as proxy to vote and take any other action on behalf of the sole shareholder of the Corporation, a signed copy of which is attached hereto as Appendix I (the “Proxy”).
WHEREAS, pursuant to (i) Section 21.367 of the TBOC a shareholder may vote in person or by proxy executed in writing by the shareholder, (ii) Section 34 of the Corporation’s original bylaws adopted on May 19, 2014 (the “Original Bylaws”) the presence by proxy of the holders of a majority of the shares entitled to vote at any meeting of shareholders shall constitute a quorum for the transaction of business and (iii) Section 42 of the Original Bylaws a proxy may be executed by written authorization signed by the shareholders’ attorney in fact, giving the proxy holder(s) the power to vote the shareholders’ shares.
WHEREAS, pursuant to (i) Section 6.201 of the TBOC the shareholders of a corporation may take action without holding a meeting, providing notice, or taking a vote if each shareholder
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entitled to vote on the action signs a written consent stating the action taken and (ii) Section 38 of the Original Bylaws any action which may be taken at a meeting of the shareholders may be taken without a meeting or notice of meeting if authorized by a consent in writing signed by all of the shareholders entitled to vote in a meeting for such purpose and filed with the Secretary of the Corporation.
WHEREAS, pursuant to Section 21.101(a) of the TBOC the shareholders of a corporation may enter into an agreement that (i) restricts the discretion or powers of the board of directors, (ii) establishes the individuals who shall serve as directors of the corporation, (iii) determines the term of office of a director of the corporation, (iv) governs, in general or with regard to specific matters, the exercise or division of voting power by and between the directors of a corporation, including use of disproportionate voting rights, and (v) otherwise governs the exercise of corporate powers, the management of the business and affairs of the corporation, or the relationship among the shareholders, the directors, and the corporation as if the corporation were a partnership or in a manner that would otherwise be appropriate only among partners and not contrary to public policy.
WHEREAS, pursuant to Section 21.401 of the TBOC the exercise of powers by a board of directors of a Texas corporation is expressly qualified by a shareholders’ agreement entered into pursuant to Section 21.101 of the TBOC.
WHEREAS, pursuant to Section 21.101(b) of the TBOC a shareholders’ agreement is valid if it is contained in (i) the bylaws of a corporation if approved by all of the shareholders at the time of the agreement or (ii) a written agreement that is signed by all of the shareholders at the time of the agreement and made known to the corporation.
WHEREAS, Section 21.058 of the TBOC provides that unless the certificate of formation or a bylaw adopted by the shareholders of a corporation provides otherwise, a corporation's shareholders may amend, repeal, or adopt the corporation's bylaws regardless of whether the bylaws may also be amended, repealed, or adopted by the corporation's board of directors.
WHEREAS, (i) the Corporation’s certificate of formation dated May 19, 2014 is silent with respect to (a) amending the Corporation’s bylaws and (b) the number of authorized directors of the Corporation and (ii) Section 52 of the Original Bylaws provide that such bylaws may be amended by the vote or written consent of holders of a majority of the outstanding shares entitled to vote.
WHEREAS, pursuant to that certain written consent of the sole shareholder of the Corporation, which has been approved, adopted and confirmed by the sole shareholder of the Corporation (acting through its proxy and attorney-in-fact), on the date hereof (the “Written Consent”) the Original Bylaws have been amended and repealed and substituted bylaws have been adopted by the Corporation (the “Amended and Restated Bylaws”).
WHEREAS, the Amended and Restated Bylaws expressly incorporate the terms and provisions set forth in this Agreement.
WHEREAS, this Agreement, which constitutes a valid and enforceable agreement under law, (i) is contained in the Amended and Restated Bylaws, (ii) has been approved by the sole
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shareholder of the Corporation (acting through its proxy and attorney-in-fact), on the date hereof and (iii) has been made known to the Corporation by the Notice referenced above.
WHEREAS, pursuant to Section 21.403 of the TBOC the number of directors of a corporation shall be set by, or in the manner provided by, the certificate of formation or bylaws of the corporation.
WHEREAS, pursuant to Section 4 of the Amended and Restated Bylaws the Corporation shall have three (3) directors.
WHEREAS, pursuant to Section 21.410 of the TBOC and Section 6 of the Amended and Restated Bylaws a vacancy occurring in the board of directors of a corporation after the issuance of shares may be filled by election of the shareholders.
WHEREAS, pursuant to the Written Consent and the terms of this Agreement, W. Lawrence Patrick (the “Collateral Preservation Director”) has been appointed to the Board.
WHEREAS, each of the Power of Attorney and the Proxy provide Mission with the legal authority to enter into this Agreement, as proxy and attorney-in-fact for the sole shareholder of the Corporation.
NOW, THEREFORE, the sole shareholder of the Corporation (acting through its proxy and attorney-in-fact), intending to legally bind the corporation and the directors of the Corporation, hereto agrees as follows:
1. Term; Termination. The term of this Agreement shall be indefinite. This Agreement may be terminated only by a written instrument executed by the sole shareholder of the Corporation (acting through its proxy and attorney-in-fact).
2. Collateral Preservation Director.
(a) The Collateral Preservation Director is hereby appointed to the Board to fill the vacancy resulting from the increase in the size of the Board.
(b) The terms and obligations of the Corporation set forth in the engagement letter between the Corporation and the Collateral Preservation Director (substantially in the form attached hereto as Appendix II) is hereby approved and authorized and represents a legally binding obligation of the Corporation.
3. Quorum Requirements. A majority of the authorized number of directors, which majority shall include the Collateral Preservation Director, shall constitute a quorum for the transaction of business by the Board, except to adjourn as provided by Section 15 of the Amended and Restated Bylaws.
4. Approval Rights of the Board.
(a) The following specified matters (collectively, the “Collateral Preservation Matters”) shall require the prior approval of the Board, and the Board shall not have any
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authority, discretion, power or vote in respect of the Collateral Preservation Matters without the prior written consent of the Collateral Preservation Director:
(i) the payment of dividends;
(ii) the entry into any transaction or making of any expenditure that, in the reasonable judgment of the Collateral Preservation Director, may directly or indirectly constitute waste, fraud or abuse, including, but not limited to:
A. any expenditures and/or reimbursements by the Corporation of any personal expenses of any director, officer, employee or shareholder of the Corporation or any of their respective affiliates, acquaintances, relatives or friends.
B. any travel expenditures in excess of $5,000 for any individual company-related travel, or of $10,000 in the aggregate over any three-month period;
C. any expenditures to acquire any personal property, service or other benefit (e.g., a vehicle, clothing, new furniture for executive offices, entertainment, artwork, etc.) that will be used primarily by management or the sole shareholder, in excess of $1,000 individually or $50,000 in the aggregate over a 12-month period;
D. any donation in excess of $1,000 individually or $25,000 in the aggregate over a 12-month period;
E. transactions or entry into any agreement with a value of more than $50,000 over a 12-month period with any third-party vendor with whom the Corporation did not have an existing contractual relationship as of the date hereof, other than in the ordinary course of business; and
F. incurrence of any indebtedness over a cumulative amount equal to $100,000;
(iii) (A) the establishment of the annual operating, cash flow and capital expenditure budget (the “annual budget”) of the Corporation; provided that if the Collateral Preservation Director does not approve an annual budget, the annual budget for the upcoming year shall default to the previous fiscal year’s budget, adjusted for inflation (B) any change to the fiscal year of the Corporation such that the fiscal year would end on a date other than December 31;
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(iv) (A) the entry into or renewal, or amendment or modification in any material respect of any contract regarding employment, consulting or severance with any current or former directors, officers, consultants or employees of the Corporation or (B) the grant of any salary, wage or other increase in compensation or benefits to any current or former director, officer, consultant or employee of the Corporation in excess of an amount equal to 10% above payments made to such persons in the immediately preceding fiscal year; provided that if the Collateral Preservation Director does not approve such an increase, the salary, wage, or other compensation or benefits for such director, officer, consultant or employee shall default to the salary, wage, or other compensation or benefits provided for in the previous fiscal year’s budget, adjusted for inflation;
(v) the entry into any new line or business, the entry into any joint venture or partnership or the formation of any new subsidiaries;
(vi) any change to any of the organizational documents of the Corporation;
(vii) the payment, loan or advance (other than the payment of salary and benefits in the ordinary course of business) of any amounts to, or sell, transfer or lease any of its assets to, or enter into any other transactions with, any director, officer, employee or shareholder of the Corporation, or any of their respective affiliates, acquaintance, relative or friend;
(viii) the sale or acquisition of any asset of or by the Corporation with a fair market value of over $250,000, other than in the ordinary course of business; and
(ix) (a) the filing of any case, action or proceeding before any court or governmental authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or other relief of debtors, (b) the appointment of a receiver, liquidator, assignee, trustee, custodian or sequestrator (or other similar official) of it or any substantial part of its property or (c) the making of any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other similar arrangement in respect of its creditors generally or any substantial portion of its creditors.
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(b) In order to carry out fully the intent and effectuate the purpose of this Section 4, the Collateral Preservation Director be, and hereby is, authorized and empowered in the name and on behalf of the Corporation to enforce the matters that are the subject of this Section 4, including, but not limited to, by the commencement of judicial proceedings in the name of the Corporation to enjoin, or otherwise recover, any transfer or other disposition (voluntary or involuntary) of the property of the Corporation where such transfer or other disposition (voluntary or involuntary) was made (or threatened to be made) without the required approval of the Collateral Preservation Director as required hereunder and the retention of counsel to do the foregoing.
5. Board Committees. Committees shall be composed of two or more members of the Board, one of which must be the Collateral Preservation Director, and shall have such powers of the Board as may be expressly delegated to them by resolution of the Board; provided, that any corporate action requiring the approval of the Collateral Preservation Director cannot be delegated to any committee of the Board. The Board may designate one or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee; provided, that, if the Collateral Preservation Director is the absent member, the Board may not designate another director as an alternative member of the committee.
6. Severability. If one or more provisions of this Agreement are invalid, illegal, or incapable of being enforced by any rule of law or public policy, in whole or in part, the scope of such provisions shall be reduced the extent necessary to make them enforceable (or, if such reduction is not possible for any reason, such provisions shall be severed from this Agreement entirely) without effect upon the balance of this Agreement.
7. Governing Law. THIS AGREEMENT AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF TEXAS, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE CONFLICT OF LAW RULES OR REQUIREMENTS.
8. Jurisdiction. THE SOLE SHAREHOLDER OF THE CORPORATION (ACTING THROUGH ITS PROXY AND ATTORNEY-IN-FACT), IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, AND AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION, LITIGATION OR PROCEEDING SHALL BE BROUGHT EXCLUSIVELY IN SUCH COURTS.
9. Amendments. This Agreement may be modified, altered, supplemented or amended at any time by a written instrument executed by the sole shareholder of the Corporation (acting through its proxy and attorney-in-fact).
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10. Execution. This Agreement may be executed by facsimile, telecopy, electronic portable document format (“pdf”) or other reproduction, and such execution shall be considered valid, binding and effective for all purposes.
[Signature page follows.]
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IN WITNESS WHEREOF, the undersigned has duly executed this Agreement effective as of the date set forth below.
PLURIA MARSHALL, JR.
By: MISSION BROADCAS'fING, INC. , as Collateral Agent (exercising, as Collateral Agent, the voting rights of Plurla Marshall, Jrfs equity interest in MARSHALL BROADCASTING GROUP, INC. as granted under and pursuant to (i) the Pledge Agreement, dated January 17, 2017 by Pluria Marshall, Jr. and the collatinal agent patty thereto and specifically not as title holder or legal owner of any stock or other equity interests in MARSHALL BROADCASTING GROUP, INC. and (ii) the irrevocable proxy in respect of the equity interests of MARSHALL BROADCASTING CiROUP, INC. dated December 2, 2019 signed in vniting by MISSION BROADCASTING, INC, as attorney-in-fact for Pluria Marshall, Jr. and specifically not as title holder or legal owner of any stock or other equity interests in MARSHALL BROADCASTING GROUP, INC. )
By: Name: Dennis P. Thatcher Title: President Date of Execution: December 2, 2019
' I Shareholders sthrreeinent nf Marshall Broadcostinx Grasp, Inc I Case 19-36743 Document 22-1 Filed in TXSB on 12/09/19 Page 11 of 15
Appendix I
Proxy
[Attached]
Case 19-36743 Document 22-1 Filed in TXSB on 12/09/19 Page 12 of 15 Case 19-36743 Document 22-1 Filed in TXSB on 12/09/19 Page 13 of 15
Appendix II
Engagement Letter
[Attached]
Case 19-36743 Document 22-1 Filed in TXSB on 12/09/19 Page 14 of 15
199 Carter View Drive Cody, WY 82414 [email protected] www.patcomm.com
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Via E‐Mail
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M o thl fee fo this assig e t is Fou tee Thousa d Dolla s $ , . I additio , I ill su it o thl e pe se ei u se e t e uests fo easo a le t a el a d out‐of‐po ket e pe ses. Copies of do u e ted ai fa e, hotel a d othe e pe ses ill e p o ided. Pa e t of p ofessio al fee shall e due o the last da of ea h o th of this assig e t i a ea s. E pe se ei u se e t fo s also ill e su itted o the last da of ea h o th. Pa e t of all easo a le fees is due i ediatel upo thei e eipt.
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Ag eed to a d A epted this __ da of De e e ,
B : MI““ION BROADCA“TING, INC., as Collate al Age t e e isi g, as Collate al Age t, the oti g ights of Plu ia Ma shall, J .’s e uit i te est i MAR“HALL BROADCA“TING GROUP, INC. as g a ted u de a d pu sua t to i the Pledge Ag ee e t, dated Ja ua , Plu ia Ma shall, J . a d the ollate al age t pa t the eto a d spe ifi all ot as title holde o legal o e of a sto k o othe e uit i te ests i MAR“HALL BROADCA“TING GROUP, INC. a d ii the i e o a le p o i espe t of the e uit i te ests of MAR“HALL BROADCA“TING GROUP, INC. dated De e e ___, sig ed i iti g MI““ION BROADCA“TING, INC. as atto e ‐i ‐ fa t fo Plu ia Ma shall, J . a d spe ifi all ot as title holde o legal o e of a sto k o othe e uit i te ests i MAR“HALL BROADCA“TING GROUP, INC.
B : ______Na e: De is P. That he Title: P eside t