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Delaware | 20-3012824 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
Robert S. Prather, Jr. President and Chief Operating Officer Gray Television, Inc. 4370 Peachtree Road, N.E. Atlanta, Georgia 30319 (404) 504-9828 | Arnold S. Jacobs, Esq. Proskauer Rose LLP 1585 Broadway New York, New York 10036- 8299 (212) 969-3210 | Robert S. Prather, Jr. President and Chief Executive Officer Bull Run Corporation 4370 Peachtree Road, N.E. Atlanta, Georgia 30319 (404) 266-8333 | Marlon F. Starr, Esq. Troutman Sanders LLP 600 Peachtree Street, N.E. Suite 5200 Atlanta, Georgia 30308 (404) 885-3000 |
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• | each share of Bull Run common stock will be converted into TCM common stock; | |
• | each share of Bull Run preferred stock held by J. Mack Robinson and any transferee of Mr. Robinson will be converted into TCM preferred stock or TCM common stock depending on which series of Bull Run preferred stock is being converted; | |
• | each share of Bull Run preferred stock held by a preferred shareholder (other than Mr. Robinson and any transferee of Mr. Robinson) will be converted into $1,000 in cash; and | |
• | the cash advances made by Mr. Robinson to Bull Run will be converted into TCM preferred stock. |
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Robert S. Prather, Jr. | |
President and Chief Executive Officer | |
Bull Run Corporation |
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• | each share of Bull Run common stock will be converted into TCM common stock; | |
• | each share of Bull Run preferred stock held by J. Mack Robinson and any transferee of Mr. Robinson will be converted into TCM preferred stock or TCM common stock depending on which series of Bull Run preferred stock is being converted; | |
• | each share of Bull Run preferred stock held by a preferred shareholder (other than Mr. Robinson and any transferee of Mr. Robinson) will be converted into $1,000 in cash; | |
• | the cash advances made by Mr. Robinson to Bull Run will be converted into shares of TCM preferred stock. |
Robert S. Prather, Jr. President and Chief Operating Officer Gray Television, Inc. | Robert S. Prather, Jr. President and Chief Executive Officer Triple Crown Media, Inc. |
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1. a proposal to approve and adopt the Agreement and Plan of Merger, or the Merger Agreement, dated as of August 2, 2005, by and among Triple Crown Media, Inc., BR Acquisition Corp. and Bull Run Corporation and the merger provided for by the Merger Agreement, pursuant to which Bull Run Corporation will be merged with and into BR Acquisition Corp., with BR Acquisition Corp. surviving the merger; and | |
2. such other business and matters or proposals as may properly come before the meeting, or any adjournments or postponements thereof. |
By Order of the Board of Directors, | |
Robert S. Prather, Jr. | |
President and Chief Executive Officer | |
Bull Run Corporation |
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EX-23.1 CONSENT OF PRICEWATERHOUSECOOPERS LLP / TRIPLE CROWN MEDIA, INC. | ||||||||
EX-23.2 CONSENT OF PRICEWATERHOUSECOOPERS LLP / BULL RUN CORPORATION |
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Annex A | — | Separation and Distribution Agreement, as amended | ||
Annex B | — | Tax Sharing Agreement | ||
Annex C | — | Lease Agreement | ||
Annex D | — | Agreement and Plan of Merger | ||
Annex E | — | Opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc. | ||
Annex F | — | Opinion of SunTrust Robinson Humphrey | ||
Annex G | — | Article 13 of the Georgia Business Corporation Code | ||
Annex H | — | Amended and Restated Certificate of Incorporation of TCM | ||
Annex I | — | By-laws of TCM |
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Q: | Why am I receiving this proxy statement/prospectus/information statement? | |
A: | This proxy statement/prospectus/information statement is (1) a proxy statement of Bull Run for its special meeting of shareholders at which Bull Run shareholders will vote on the Agreement and Plan of Merger dated as of August 2, 2005, by and among TCM, BR Acquisition Corp. and Bull Run, or the Merger Agreement, and the merger, (2) a prospectus of TCM for the issuance of the shares of TCM common stock in the spin-off and the merger and (3) an information statement of Gray relating to the spin-off of its wholly-owned subsidiary, TCM. | |
Q: | On what are the Bull Run shareholders being asked to vote? | |
A: | The Bull Run shareholders are being asked to approve and adopt the Merger Agreement, the merger provided for by the Merger Agreement and any other business that may come before the Bull Run special meeting, including the adjournment of the Bull Run special meeting to another time or place to permit further solicitation of proxies if necessary to obtain additional votes in favor of the merger proposal. | |
Q: | Why are the Bull Run shareholders being asked to vote to approve the Merger Agreement and the merger since it is expected to be approved by the officers and directors of Bull Run without the affirmative vote of any other shareholder of Bull Run? | |
A: | The shareholders of Bull Run are being asked by the Bull Run board of directors to vote on the merger, even though the officers and directors of Bull Run have orally advised Bull Run’s management that they intend to vote their shares of Bull Run common stock and Bull Run preferred stock in favor of the approval of the Merger Agreement and the merger in order to determine whether the shareholders agree with the recommendation of the Bull Run Special Committee and the Bull Run board of directors and to determine whether management will have the support of the shareholders on a going-forward basis. | |
Q: | When will the merger be completed? | |
A: | If the Merger Agreement and the merger are approved and adopted by the Bull Run shareholders, TCM and Bull Run expect to complete the merger as soon as possible after the satisfaction or waiver (where permissible) of the other conditions to the merger, which are described in the Merger Agreement. |
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Q: | Are there risks involved in the spin-off and the merger? | |
A: | Yes, risks are associated with the spin-off, the merger, TCM’s businesses and Bull Run’s businesses. You should carefully consider these risks, which are described in greater detail in “Risk Factors” beginning on page 32. | |
Q: | What is the historical relationship between Gray and Bull Run? | |
A: | Bull Run formerly held a significant investment in Gray, as well as in other sports, media and marketing companies. From time to time over the years prior to 2003, Bull Run had partially divested its equity position in Gray. In August 2003, Bull Run sold its remaining investment in Gray (representing approximately 4.0% of Gray’s outstanding common stock and warrants to purchase additional shares of Gray common stock). J. Mack Robinson, Robert S. Prather, Jr., and Hilton H. Howell, Jr. are members of both the Gray and Bull Run board of directors. In addition, Mr. Robinson is the Chairman and the Chief Executive Officer of Gray and the Chairman of Bull Run, and Mr. Prather is the President and Chief Executive Officer of Bull Run and the President and Chief Operating Officer of Gray. In October 2004, the University of Kentucky jointly awarded a sports marketing agreement to Gray and Host Communications, Inc., Bull Run’s wholly-owned operating subsidiary, which is referred to in this proxy statement/prospectus/information statement as Host. Gray and Host will share equally in the cost of the license fees and any associated revenues generated over the term of the agreement. Gray will continue to be a party to this agreement after the spin-off and the merger, as this agreement will not be transferred by Gray to TCM. See “Material Contracts between Gray and Bull Run” beginning on page 127. All of the prior transactions between Gray and Bull Run were approved by independent members of the respective boards of directors or a special committee appointed by the respective boards of directors comprised solely of independent directors. |
Q: | What is the spin-off? | |
A: | The spin-off is designed to separate Gray’s newspaper publishing business, which is referred to in this proxy statement/prospectus/information statement as the Newspaper Publishing Business, and the GrayLink wireless business, which is referred to in this proxy statement/prospectus/information statement as the GrayLink Wireless Business, from its television broadcasting business. Gray intends to accomplish this result by contributing all of the membership interests of Gray Publishing, LLC, or Gray Publishing, a Delaware limited liability company, and certain other assets to TCM. Gray Publishing owns and operates the Newspaper Publishing Business, which consists of five daily newspapers. In addition, Gray Publishing owns all of the membership interests of GrayLink, LLC, a Delaware limited liability company, which owns and operates the GrayLink Wireless Business, which is a provider of wireless services, primarily traditional paging services in non-metropolitan areas in three states and which owns and operates 14 retail locations in those states. Following the separation, Gray will distribute all of the shares of TCM common stock to the shareholders of Gray. | |
Q: | Why is Gray distributing the shares of TCM common stock to its shareholders? | |
A: | Gray believes that its shareholders will benefit from the distribution of the shares of TCM common stock for the following reasons: |
• | as a result of the spin-off, Gray and TCM should each be better able to focus financial and operational resources on its own businesses and executing its own strategic plan; | |
• | as a result of the spin-off, Gray and TCM are each expected to have greater strategic and financial flexibility to support future growth opportunities; | |
• | each business is in a different stage of development and therefore attracts different types of investors; |
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• | financial markets should be able to evaluate Gray and TCM more effectively as two separate companies, which is expected to maximize shareholder value over the long term for both Gray and TCM; | |
• | the spin-off should allow Gray and TCM to each develop incentive programs for management and other professionals that are tailored to its own businesses and are tied to the market performance of its respective common stock; and | |
• | after the spin-off, Gray and TCM should each have greater capital planning flexibility, and the Newspaper Publishing Business and the GrayLink Wireless Business will no longer have to compete with Gray’s television broadcasting business to secure funding for investments. |
Q: | What will be the relationship between TCM and Gray after the spin-off? | |
A: | After the spin-off, Gray will not own any TCM capital stock. TCM has entered into, or prior to the spin-off will enter into, agreements with Gray that will govern the spin-off and various interim relationships between Gray and TCM. See “Relationship between Gray and TCM after the Spin-Off” beginning on page 128 for a more complete discussion of the obligations of Gray and TCM to each other after the spin-off. | |
Q: | What will the Gray shareholders receive in the spin-off? | |
A: | In the spin-off, each Gray shareholder will receive: |
• | one share of TCM common stock for every 10 shares of Gray common stock that was owned on the distribution date for the spin-off; and | |
• | one share of TCM common stock for every 10 shares of Gray Class A common stock that was owned on the distribution date for the spin-off. |
Q: | What do Gray shareholders have to do to receive their shares of TCM common stock? | |
A: | Nothing. Gray shareholders need not take any action in order to receive their shares of TCM common stock in the spin-off. | |
Q: | Is the spin-off taxable to the holders of Gray common stock or Gray Class A common stock for United States federal income tax purposes? | |
A: | TCM expects the spin-off to qualify for nonrecognition treatment under Section 355 of the Internal Revenue Code of 1986, as amended, or the Code. In general, if Section 355 applies, no income, gain or loss will be recognized by the holders of Gray common stock or Gray Class A common stock for U.S. federal income tax purposes as a result of the spin-off, except with respect to any cash received instead of a fractional share of TCM common stock. See “The Spin-Off — Material U.S. Federal Income Tax Consequences of the Spin-Off” beginning on page 51 for a more complete discussion of the material U.S. federal income tax consequences of the spin-off to holders of Gray common stock and Gray Class A common stock. |
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Q: | Why are the Bull Run Special Committee and Bull Run’s board of directors recommending that Bull Run shareholders vote in favor of the adoption and approval of the Merger Agreement and the merger? | |
A: | The special committee of Bull Run’s board of directors, which is referred to in this proxy statement/prospectus/information statement as the Bull Run Special Committee, and Bull Run’s board of directors believe that the shareholders of Bull Run should vote in favor of the Merger Agreement and the merger for the following reasons: |
• | TCM should provide a stronger financial base from which to grow TCM’s Newspaper Publishing Business and Bull Run’s core businesses — Collegiate Marketing and Production Services and Association Management Services — and should enable Bull Run to generate new contracts and relationships and acquire sports and collegiate marketing firms and association management firms; | |
• | Bull Run’s clients, partner universities, and other parties should have greater confidence in Bull Run’s ability to perform and satisfy its agreements because of TCM’s size and financial strength; | |
• | the new financial structure of the combined company reduces the overall leverage of Bull Run compared to TCM, and thus reduces the leverage risks for Bull Run shareholders and should provide funding for additional growth in Bull Run’s core businesses and TCM’s Newspaper Publishing Business, and Bull Run’s shareholders should benefit from these growth prospects; | |
• | TCM should maximize the benefits of Bull Run’s existing infrastructure, including expenses arising by virtue of being a public company, such as Securities and Exchange Commission, or SEC, compliance costs, auditors, insurance, information technology and human resources functions, as well as the net operating loss carryforwards for federal income tax purposes, which may be used following the merger (subject to certain limitations); | |
• | TCM should benefit from Bull Run’s experienced management team; | |
• | TCM’s other subsidiaries are expected to be able to share some sales and editorial resources in ways that enable both Bull Run and those subsidiaries to maximize their profitability and to assist them in attracting and retaining key personnel; | |
• | TCM should be able to use its expanded benefit programs to retain key personnel essential for growth in Bull Run’s core businesses and TCM’s Newspaper Publishing Business; | |
• | the merger has been approved and recommended by a committee of independent directors; | |
• | Bull Run’s board of directors and the Bull Run Special Committee have received a fairness opinion from SunTrust Capital Markets, Inc. through its SunTrust Robinson Humphrey Capital Markets Division, or SunTrust Robinson Humphrey; | |
• | the merger is expected to qualify as a reorganization for income tax purposes; and | |
• | Bull Run’s board of directors and the Bull Run Special Committee believe that the terms of the Merger Agreement are in the best interests of the Bull Run shareholders. |
Q: | Why did the Gray Special Committee, the TCM Special Committee and Gray’s and TCM’s board of directors vote in favor of the adoption and approval of the Merger Agreement and the merger? | |
A: | Gray’s board of directors, TCM’s board of directors, the special committee of Gray’s board of directors, which is referred to in this proxy statement/prospectus/information statement as the Gray Special Committee, and the special committee of TCM’s board of directors, or the TCM Special Committee, in reaching their respective decisions to approve and adopt the Merger Agreement and the merger, |
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consulted with management, as well as their financial and legal advisors, and considered a variety of factors, including the following: |
• | information concerning the business, operations, financial condition, earnings and prospects of each of TCM and Bull Run as separate entities and on a combined basis; | |
• | the potential for synergies and revenue enhancement with TCM and Bull Run; | |
• | the enhanced strategic, market and growth prospects of the combined company beyond that achievable by TCM alone given Bull Run’s existing infrastructure to support complementary printing businesses, relationships in new markets for TCM and opportunities for both joint and cross marketing and common branding; | |
• | Bull Run has the general and administrative infrastructure necessary for the operation of a public company, which TCM would have had to develop, and incur the costs to develop, if it did not merge with Bull Run; | |
• | that the experienced Bull Run management team could manage the combined businesses, and that TCM would not be required to hire a management team; | |
• | the combined company should have a higher market capitalization than TCM or Bull Run individually, which should allow the combined company to have increased access to debt and equity markets; | |
• | the combined company’s anticipated future financial performance; | |
• | the opportunity for the Gray shareholders (through the ownership of TCM common stock) to participate in a larger company with more businesses, and, as stockholders of the combined company, to benefit from future growth of the combined company; | |
• | the opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc., which we refer to in this proxy statement/prospectus/information statement as HL Financial, as to the fairness, from a financial point of view, as of the date of such opinion and based upon the assumptions, factors and limitations set forth in such opinion, to TCM of the consideration to be paid to Bull Run’s shareholders in the merger; | |
• | the treatment of the merger as a reorganization for U.S. federal income tax purposes; and | |
• | the belief that the terms of the Merger Agreement, including the parties’ representations, warranties and covenants are reasonable and that the Merger Agreement provides for an equitable valuation of TCM and Bull Run. |
Q: | What will the Bull Run shareholders receive in the merger? | |
A: | Pursuant to the Merger Agreement, at the effective time of the merger: |
• | each share of Bull Run common stock will be converted into 0.0289 shares of TCM common stock; | |
• | each share of Bull Run Series D preferred stock will be converted into one share of TCM Series A redeemable, convertible preferred stock; | |
• | each share of Bull Run Series E preferred stock held by J. Mack Robinson and any transferee of Mr. Robinson will be converted into one share of TCM Series A redeemable, convertible preferred stock; | |
• | each share of Bull Run Series E preferred stock held by a Series E preferred shareholder (other than Mr. Robinson and any transferee of Mr. Robinson) will be converted into $1,000 in cash; | |
• | each share of Bull Run Series F preferred stock will be converted into 22.56 shares of TCM common stock; |
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• | the surviving corporation will pay to each Bull Run Series E preferred shareholder (other than Mr. Robinson and any transferee of Mr. Robinson) cash in an amount equal to the accrued and unpaid dividends due to such shareholder; | |
• | all accrued and unpaid dividends (through July 1, 2005) on each outstanding share of Bull Run Series D preferred stock and Bull Run Series E preferred stock held by Mr. Robinson and any transferee of Mr. Robinson, will be converted into the number of shares of TCM Series A redeemable, convertible preferred stock determined by dividing the accrued and unpaid dividends due on such shares by $1,000; | |
• | all accrued and unpaid dividends (through July 1, 2005) on each outstanding share of Bull Run Series F preferred stock will be converted into an aggregate of 12,698 shares of TCM common stock; and | |
• | the cash advances in the aggregate amount of $6,050,000 made by Mr. Robinson to Bull Run will be converted into 6,050 shares of TCM Series B redeemable, convertible preferred stock. |
Q: | What will the TCM stockholders receive in the merger? | |
A: | The Gray shareholders, who will become TCM stockholders immediately prior to the merger, will not receive anything in the merger. | |
Q: | Is the merger taxable to Bull Run’s shareholders and/or TCM’s common stockholders for United States federal income tax purposes? | |
A: | TCM and Bull Run expect the merger to qualify as a reorganization within the meaning of Section 368(a) of the Code. In general, if the merger so qualifies, no gain or loss will be recognized by Bull Run common shareholders or Bull Run Series F preferred shareholders for U.S. federal income tax purposes as a result of the merger, except with respect to any cash received instead of a fractional share of TCM common stock. The merger will not result in any tax consequences to the TCM common stockholders. The merger will be a taxable transaction to the holders of Bull Run Series E preferred stock who receive cash in exchange for their shares. The federal income tax consequences of the merger to Bull Run shareholders who receive TCM Series A redeemable, convertible preferred stock in exchange for shares of Bull Run Series D preferred stock and Bull Run Series E preferred stock depend on whether the TCM Series A redeemable, convertible preferred stock, the Bull Run Series D preferred stock, and the Bull Run Series E preferred stock are treated as nonqualified preferred stock under the Code. See “The Merger — Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 100 for a more complete discussion of the material U.S. federal income tax consequences of the merger to holders of Bull Run common and preferred stock. |
Q: | When will the Bull Run Special Meeting be held? | |
A: | The Bull Run special meeting will be held at Bull Run’s corporate offices, 4370 Peachtree Road, N.E., Atlanta, GA 30319, on December 30, 2005, at 9:00 a.m., Eastern Time, and at any adjournments or postponements thereof. Bull Run’s board of directors has fixed the close of business on November 10, 2005, as the record date for determining holders of Bull Run’s common stock and preferred stock entitled to notice of, and to vote at, the special meeting. Each share of Bull Run common stock and Bull Run preferred stock is entitled to one vote. | |
Bull Run’s board of directors, consistent with the approval and recommendation of the Bull Run Special Committee, has unanimously determined that the merger is in the best interests of Bull Run |
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and its shareholders, and has unanimously approved and adopted the Merger Agreement and the merger.The Bull Run Special Committee and Bull Run’s board of directors unanimously recommend that the Bull Run shareholders vote in favor of the proposal to approve and adopt the Merger Agreement and the merger. |
Q: | Who is eligible to vote at the Bull Run special meeting? | |
A: | Holders of Bull Run common stock and Bull Run preferred stock are eligible to vote their shares of Bull Run common stock and Bull Run preferred stock at the Bull Run special meeting if they were holders of record of those shares at the close of business on November 10, 2005, the record date for the special meeting. | |
Q: | If I am a Bull Run shareholder, how can I vote? | |
A: | If you hold shares of Bull Run common stock or Bull Run preferred stock on the record date, you may submit a proxy for the special meeting by: |
• | completing, signing, dating and returning the proxy card in the pre-addressed envelope provided; | |
• | calling the toll-free number listed on the proxy card; | |
• | accessing the Internet site listed on the proxy card; or | |
• | voting in person at the special meeting. |
Q: | How will my proxy be exercised with respect to the proposal regarding the merger? | |
A: | All valid proxies received before the Bull Run special meeting will be voted, and where a Bull Run shareholder specifies by means of his or her proxy a choice with respect to the merger proposal, the shares will be voted in accordance with the specification so made. | |
Q: | What if I am a Bull Run shareholder, and I do not vote, abstain from voting or do not instruct my broker how to vote? | |
A: | If you are a Bull Run shareholder, and you do not vote, abstain from voting or do not instruct your broker to vote your shares, it will have the same effect as a vote against the merger proposal. | |
Q: | What happens if I am a Bull Run shareholder, and I do not indicate how to vote on my proxy card? | |
A: | If you are a Bull Run shareholder, and you sign and send in your proxy card and do not indicate how you want to vote, your proxy will be counted as a vote “FOR” approval and adoption of the Merger Agreement and approval of the merger. | |
Q: | If I am a Bull Run shareholder, can I change my vote after I have mailed my proxy card? | |
A: | Yes. If you are a record holder of Bull Run common stock or Bull Run preferred stock and have mailed your proxy card, you can change your vote in any of the following ways: |
• | sending a written notice to Bull Run’s corporate secretary that is received prior to the Bull Run special meeting stating that you revoke your proxy; | |
• | signing a new proxy card and returning it by mail to Bull Run’s transfer agent so that it is received prior to the Bull Run special meeting; or | |
• | attending the Bull Run special meeting and voting in person. |
Q: | How will voting on any other business be conducted at the Bull Run special meeting? | |
A: | Bull Run does not know of any other business to be considered at the Bull Run special meeting other than the merger proposal described in this proxy statement/prospectus/information statement. If any other business is properly presented at the Bull Run special meeting, a signed proxy card will give authority to Robert S. Prather, Jr. and Frederick J. Erickson to vote on such matters in their discretion. |
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Q: | What if my shares of Bull Run common stock are held in “street name” by my broker? | |
A: | If your shares of Bull Run common stock are held in “street name” by your broker, your broker will vote your shares with respect to the merger proposal only if you provide written instructions to your broker on how to vote. Therefore, it is important that you provide your broker with instructions. If you do not provide your broker with instructions, your broker will not be authorized to vote with respect to the merger proposal. To ensure that your broker receives your instructions, Bull Run requests that you promptly send your broker your instructions in the envelope enclosed with this proxy statement/prospectus/information statement. | |
If your shares are held in street name by your broker and you wish to vote in person at the special meeting, you must contact your broker and request a document called a “legal proxy.” You must bring the legal proxy to the Bull Run special meeting in order to vote in person. | ||
If you do not give voting instructions to your broker with respect to the merger proposal, you will, in effect, be voting against the merger proposal, unless you appear in person at the Bull Run special meeting with a valid legal proxy from your broker and vote in favor of the merger proposal. | ||
Q: | What should I do if I am a Bull Run shareholder and I have received more than one set of voting materials? | |
A: | Please complete, sign, date and return each proxy card and voting instruction card that you receive. You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus/information statement and multiple proxy cards or voting instruction cards. For example, if you hold shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. Similarly, if your shares are held in more than one name, you will receive more than one proxy or voting instruction card. | |
Q: | Will the Bull Run shareholders be entitled to dissenters’ rights? | |
A: | Yes. Under the Georgia Business Corporation Code, or GBCC, the holders of Bull Run preferred stock are entitled to dissenters’ rights with respect to the merger, and if the merger is completed and they have complied with the requirements of the GBCC, to receive payment in cash for the fair value of their shares of Bull Run preferred stock. In addition, on August 2, 2005, Bull Run’s board of directors voluntarily and unanimously determined to grant dissenters’ rights with respect to the merger to the holders of Bull Run common stock. Holders of Bull Run common stock would not otherwise have been entitled to dissenters’ rights under the GBCC. Therefore, all Bull Run shareholders will be entitled to exercise dissenters’ rights with respect to the merger. See “Dissenters’ Rights” beginning on page 205 for more information concerning these rights and the procedures to be followed to exercise them. |
Q: | What law will govern the rights of TCM’s stockholders? | |
A: | The rights of TCM’s stockholders will be governed by the Delaware General Corporation Law, TCM’s amended and restated certificate of incorporation and TCM’s by-laws. | |
Q: | Where will the shares of TCM common stock trade? | |
A: | Currently, there is no public market for TCM common stock. TCM has applied to have the TCM common stock listed on the Nasdaq National Market. See “The Merger — Market for TCM Common Stock” beginning on page 104 for a more complete discussion of the public market for TCM common stock following the spin-off. |
Q: | What do Gray shareholders have to do to receive their shares of TCM common stock? | |
A: | Gray shareholders do not need to take any action in order to receive their shares of TCM common stock in the spin-off. If you hold your shares of Gray common stock or Gray Class A common stock in your own name, your share certificates for TCM common stock will be mailed to you. If you hold your |
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Gray shares through your stockbroker, bank, or other nominee, you probably are not a shareholder of record and your receipt of TCM common stock depends on your arrangements with the nominee that holds your shares of Gray common stock or Gray Class A common stock. TCM anticipates that stockbrokers and banks generally will credit their customers’ accounts with TCM common stock, but if you are a Gray shareholder you should check with your stockbroker, bank, or other nominee. | ||
Q: | If I am a Gray shareholder, what will happen to my existing shares of Gray common stock and Gray Class A common stock? | |
A: | Nothing. The Gray common stock and Gray Class A common stock will continue to be listed on the New York Stock Exchange under the symbols “GTN” and “GTN.A”, respectively. Gray expects that Gray common stock and Gray Class A common stock will continue to trade on a regular basis through and after the distribution date. The spin-off will not affect the aggregate number of outstanding shares of Gray common stock or Gray Class A common stock or any rights of the holders of Gray common stock or Gray Class A common stock. | |
Q: | Should Bull Run shareholders send in their Bull Run stock certificates now? | |
A: | No. Bull Run shareholders should not send in their Bull Run stock certificates now. Following the merger, a letter of transmittal will be sent to Bull Run shareholders informing them where to deliver their Bull Run stock certificates. | |
Q: | Who do I contact if I have any questions? | |
A: | If you are a Bull Run shareholder and you have any questions about the merger, the Bull Run special meeting or any other matter described in this proxy statement/prospectus/information statement, or if you need assistance in voting your shares, please contact Bull Run’s proxy solicitor: |
MacKenzie Partners, Inc. | |
105 Madison Avenue | |
New York, New York 10016 | |
Phone: (212) 929-5405 |
Bull Run Corporation | |
4370 Peachtree Road, N.E. | |
Atlanta, Georgia 30319 | |
Attention: Frederick J. Erickson | |
Phone: (704) 602-3107 |
Mellon Investor Services, LLC | |
Overpeck Centre | |
85 Challenger Road | |
Ridgefield Park, New Jersey 07660 | |
Phone: (888) 835-2869 |
Gray Television, Inc. | |
4370 Peachtree Road, NE | |
Atlanta, Georgia 30319 | |
Attention: Investor Relations | |
Phone: (404) 504-9828 |
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• | one share of TCM common stock for every 10 shares of Gray common stock that was owned on the distribution date for the spin-off; and | |
• | one share of TCM common stock for every 10 shares of Gray Class A common stock that was owned on the distribution date for the spin-off. |
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• | the registration of TCM common stock under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and under the Securities Act of 1933, as amended, or the Securities Act; | |
• | the listing of TCM common stock on the Nasdaq National Market; | |
• | the receipt by Gray and Bull Run of an opinion of King & Spalding LLP, special tax counsel to Gray, to the effect that the spin-off will qualify as a divisive reorganization described in Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended, or the Code; | |
• | the approval by the Bull Run shareholders of the Merger Agreement and merger; | |
• | the receipt by Gray’s board of directors, TCM’s board of directors, the special committee of Gray’s board of directors, or the Gray Special Committee and the TCM Special Committee of a favorable opinion from a nationally recognized independent valuation firm regarding the solvency of TCM after giving effect to the spin-off, the merger and the Refinancing; | |
• | the receipt by TCM of an opinion of King & Spalding LLP, special tax counsel to TCM, to the effect that the merger will qualify as a reorganization under Section 368(a) of the Code; and | |
• | the receipt by Bull Run of an opinion of Troutman Sanders LLP, counsel to Bull Run, to the effect that the merger will qualify as a reorganization under Section 368(a) of the Code. |
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• | a separation and distribution agreement; | |
• | a tax sharing agreement; and | |
• | a lease agreement. |
• | each share of Bull Run common stock will be converted into 0.0289 shares of TCM common stock; | |
• | each share of Bull Run Series D preferred stock will be converted into one share of TCM Series A redeemable, convertible preferred stock; | |
• | each share of Bull Run Series E preferred stock held by J. Mack Robinson and any transferee of Mr. Robinson will be converted into one share of TCM Series A redeemable, convertible preferred stock; | |
• | each share of Bull Run Series E preferred stock held by a Series E preferred shareholder (other than Mr. Robinson and any transferee of Mr. Robinson) will be converted into $1,000 in cash; | |
• | each share of Bull Run Series F preferred stock will be converted into 22.56 shares of TCM common stock; | |
• | the surviving corporation will pay to each Bull Run Series E preferred shareholder (other than Mr. Robinson and any transferee of Mr. Robinson) cash in an amount equal to the accrued and unpaid dividends due to each such shareholder; | |
• | all accrued and unpaid dividends (through July 1, 2005) on each outstanding share of Bull Run Series D preferred stock and Bull Run Series E preferred stock held by Mr. Robinson and any transferee of Mr. Robinson, will be converted into the number of shares of TCM Series A redeemable, convertible preferred stock determined by dividing the accrued and unpaid dividends due on such shares by $1,000; | |
• | all accrued and unpaid dividends (through July 1, 2005) on each outstanding share of Bull Run Series F preferred stock will be converted into an aggregate of 12,698 shares of TCM common stock; and | |
• | the cash advances in the aggregate amount of $6,050,000 made by Mr. Robinson to Bull Run will be converted into 6,050 shares of TCM Series B redeemable, convertible preferred stock. |
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• | the holders of a majority of the outstanding shares of Bull Run common stock entitled to vote, voting separately as a class, on the merger vote in favor of approval and adoption of the Merger Agreement and the merger; | |
• | the holders of at least a majority of the outstanding shares of Bull Run Series D preferred stock, voting separately as a class, approve and adopt the Merger Agreement and the merger; | |
• | the holders of at least a majority of the outstanding shares of Bull Run Series E preferred stock, voting separately as a class, approve and adopt the Merger Agreement and the merger; and | |
• | the holders of at least a majority of the outstanding shares of Bull Run Series F preferred stock, voting separately as a class, approve and adopt the Merger Agreement and the merger. |
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• | the fair value and present saleable value of TCM’s assets would exceed TCM’s stated liabilities and identified contingent liabilities; | |
• | TCM should be able to pay its debts as they become absolute and mature; and | |
• | the capital remaining in TCM would not be unreasonably small for the business in which TCM is engaged, as management has indicated it is proposed to be conducted following the consummation of the spin-off, the merger and the Refinancing. |
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• | before the vote is taken at the Bull Run special meeting, deliver to Bull Run, written notice of such shareholder’s intent to demand payment for such shareholder’s shares if the proposed action is effectuated; and | |
• | not vote such shareholder’s shares in favor of the proposed merger. |
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• | is the Chairman of Bull Run’s board of directors, the beneficial owner of (1) approximately 59% of the issued and outstanding Bull Run common stock, (2) 100% of the issued and outstanding Bull Run Series D preferred stock, (3) approximately 69% of the issued and outstanding Bull Run Series E preferred stock and (4) 100% of the issued and outstanding Bull Run Series F preferred stock; | |
• | is the Chairman and Chief Executive Officer of Gray, and the beneficial owner of approximately 31% of the combined voting power of Gray’s two classes of common stock; | |
• | holds options to purchase 35,000 shares of Bull Run common stock that will be converted into options to purchase 1,012 shares of TCM common stock in the merger; | |
• | is the proposed Chairman of the board of directors of TCM following the merger; | |
• | will be released of his personal guaranty of Bull Run’s debt to Bull Run’s bank lenders (approximately $58.9 million as of October 31, 2005) in connection with the proposed Refinancing; | |
• | waived the receipt of the shares of Bull Run common stock payable to Mr. Robinson as compensation for the period January 26, 2005 through the closing of the merger for his personal guaranty of Bull Run’s debt (approximately 1,116,533 shares of Bull Run common stock as of October 31, 2005); | |
• | has the option to purchase the entire loan outstanding under Bull Run’s bank credit facility, and thereby can become the holder of the debt currently payable by Bull Run to the bank and the related lien on Bull Run’s assets; | |
• | is married to Harriett J. Robinson, a member of Gray’s board of directors; | |
• | has made $6,050,000 of cash advances to Bull Run that will be converted into TCM Series B redeemable, convertible preferred stock in the merger; |
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• | has a substantial ownership interest in Atlantic American Corporation, a publicly traded company, which is the parent of Georgia Casualty & Surety Co., from which TCM intends to obtain workers’ compensation insurance coverage at an annual cost of approximately $200,000; and | |
• | his affiliates own $8,240,000 out of $39,640,000 of the Gray Series C convertible preferred stock. The conversion price for the Gray Series C convertible preferred stock is being adjusted from $14.39 to $13.07 upon the consummation of the spin-off. See “The Spin-off-Treatment of Gray Series C Preferred Sock” beginning on page 54 for more information. |
• | is the President, Chief Executive Officer and a director of Bull Run and the beneficial owner of (1) approximately 6% of the issued and outstanding Bull Run common stock and (2) 1% of the issued and outstanding Bull Run Series E preferred stock; | |
• | holds options to purchase 77,272 shares of Bull Run common stock that will be converted into options to purchase 2,233 shares of TCM common stock in the merger; | |
• | is the President, Chief Operating Officer and a director of Gray and beneficial owner of approximately 3% of the combined voting power of Gray’s two classes of common stock; and | |
• | is the current President and Chief Executive Officer of TCM and the proposed Chairman of TCM following the merger. |
• | is a Vice President, the Secretary and a director of Bull Run and the beneficial owner of approximately 7% of the issued and outstanding Bull Run common stock; | |
• | holds options to purchase 7,500 shares of Bull Run common stock that will be converted into options to purchase 217 shares of TCM common stock in the merger; | |
• | is the Vice Chairman and a director of Gray and the beneficial owner of approximately 8% of the combined voting power of Gray’s two classes of common stock; | |
• | is a proposed director of TCM following the merger; | |
• | is President and Chief Executive Officer and a director of Atlantic American Corporation, a publicly traded company, which is the parent of Georgia Casualty & Surety Co. (of which Mr. Howell is a director), from which TCM intends to obtain workers’ compensation insurance at an annual cost of approximately $200,000; and | |
• | is J. Mack Robinson’s son-in-law. |
• | is the President and Chief Executive Officer of Host, a wholly-owned subsidiary of Bull Run, and the beneficial owner of approximately 0.3% of the issued and outstanding Bull Run common stock; | |
• | is a consultant to Gray and will receive $116,667 from Gray during the year ended December 31, 2005; | |
• | is the beneficial owner of approximately 0.02% of the combined voting power of Gray’s two classes of common stock; and | |
• | is the proposed Chief Executive Officer and President and a proposed director of TCM following the merger. |
• | each is a current director of Bull Run and a member of the Bull Run Special Committee; | |
• | each is a proposed director of TCM following the merger; |
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• | Gerald N. Agranoff is the beneficial owner of approximately 0.1% of the issued and outstanding Bull Run common stock and holds options to purchase 4,000 shares of Bull Run common stock that will be converted into options to purchase 116 shares of TCM common stock in the merger; | |
• | James W. Busby is the beneficial owner of approximately 3% of issued and outstanding Bull Run common stock and holds options to purchase 3,000 shares of Bull Run common stock that will be converted into options to purchase 87 shares of TCM common stock in the merger; and | |
• | Monte C. Johnson is the beneficial owner of approximately 0.4% of the issued and outstanding Bull Run common stock and approximately 1.0% of the issued and outstanding Bull Run Series E preferred stock and holds options to purchase 8,772 shares of Bull Run common stock that will be converted into options to purchase 254 shares of TCM common stock in the merger. |
• | is the Chief Financial Officer, Vice President — Finance, Treasurer and Assistant Secretary of Bull Run and the beneficial owner of approximately 0.2% of the issued and outstanding Bull Run common stock and holds options to purchase 15,000 shares of Bull Run common stock that will be converted into options to purchase 434 shares of TCM common stock in the merger; and | |
• | is the proposed Chief Financial Officer of TCM following the merger. |
• | is the founder of Host and a former director of Bull Run; | |
• | is the beneficial owner of approximately 7% of the issued and outstanding Bull Run common stock; and | |
• | will obtain the release of his pledge of $3.0 million of cash to Bull Run’s lenders in connection with the proposed Refinancing. |
• | beneficially owned (1) approximately 74% of the outstanding Bull Run common stock, (2) all of the outstanding Bull Run Series D preferred stock, (3) approximately 71% of the outstanding Bull Run Series E preferred stock and (4) all of the outstanding Bull Run Series F preferred stock, and, therefore, the officers and directors of Bull Run can approve the Merger Agreement and the merger without the affirmative vote of any other shareholder of Bull Run; | |
• | following the merger, BR Acquisition Corp., as the surviving corporation in the merger, will indemnify, and maintain directors’ and officers’ insurance policies for the benefit of, the former directors and officers of Bull Run for events occurring before the merger, including events that are related to the Merger Agreement; | |
• | the members of the TCM Special Committee and the members of the Gray Special Committee have each received a retainer of $15,000 and the chairman of each such committee has received an additional $5,000; | |
• | the members of the Bull Run Special Committee will each receive a retainer of $15,000 and the chairman of such committee will receive an additional $5,000, whether or not the merger is consummated; | |
• | pursuant to a letter agreement, or the Indemnity Letter, TCM has agreed to indemnify each person who has been selected to be a director of TCM upon the consummation of the merger, or the Director Designees, for any liabilities that any of the Director Designees may incur by reason of such status, to the same extent that TCM would have been obligated to indemnify any of the Director Designees had they been directors of TCM for the period beginning on September 13, 2005 through the date on which each of the Director Designees becomes a director of TCM; |
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• | Gray has agreed to guaranty the full performance of all of TCM’s indemnification and contribution obligations arising under the DGCL, TCM’s amended and restated certificate of incorporation and by-laws and any resolution adopted by TCM’s board of directors to TCM’s officers and directors in respect of actions or omissions of such persons occurring at or prior to the consummation of the spin-off and the merger; and | |
• | Gray has agreed to guaranty the full performance of all of TCM’s indemnification and contribution obligations arising under the DGCL, TCM’s amended and restated certificate of incorporation, TCM’s bylaws, any resolutions of TCM’s board of directors and the Indemnity Letter to TCM’s Director Designees in respect of actions or omissions by such persons occurring between September 13, 2005 and the date on which each of the Director Designees becomes a director of TCM. |
• | Section 203 of the DGCL, which prohibits business combinations with interested stockholders for three years following the time that such stockholders become interested stockholders does not apply to J. Mack Robinson’s acquisition of shares of TCM common stock in either the spin-off or the merger. |
• | each outstanding unvested nonqualified stock option of Gray granted prior to the distribution date that is held by an employee of the Newspaper Publishing Business and the GrayLink Wireless Business that will be transferred to TCM will become fully vested upon the consummation of the spin-off; | |
• | Gray and Host are parties to a rights-sharing agreement pursuant to which (1) Host participates jointly with Gray under the terms of an agreement with one university in the marketing, selling and broadcasting of certain collegiate sporting events and in related programming, production and other associated activities and (2) Host and Gray share the revenues and expenses derived from the agreement, including the rights fees, equally; and | |
• | the law firms representing Gray, TCM and Bull Run (other than the law firms representing the Bull Run Special Committee and the TCM Special Committee) in connection with the Transactions have in the past represented other parties to the Transactions regarding unrelated matters. |
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• | if as a result of TCM’s failure to sell or swap The Goshen News, Gray is not able to consummate the acquisition of Target, Parent would be entitled, under the terms of the stock purchase agreement, to retain Gray’s deposit $8.5 million, and TCM would be obligated to indemnify Gray for the amount of the deposit plus any other actual losses incurred by Gray as a result of the failure to consummate the acquisition; and | |
• | if Gray obtained a temporary waiver from the FCC and the acquisition of Target has closed, and TCM thereafter fails to sell or swap The Goshen News within the waiver period specified by the FCC, Gray could be subject to FCC penalties, including fines and the loss of FCC licenses, and TCM would be obligated to indemnify Gray for any actual losses incurred by Gray as a result of any such FCC penalties. |
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Nine Months Ended | ||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||
2002(1) | 2003 | 2004 | 2004 | 2005 | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Revenues | $ | 50,803 | $ | 51,302 | $ | 52,883 | $ | 38,789 | $ | 40,057 | ||||||||||
Operating income | 10,565 | 11,114 | 11,532 | 8,458 | 8,425 | |||||||||||||||
Cumulative effect of accounting change, net of income tax benefit of $4,541(1) | (7,423 | ) | -0- | -0- | -0- | -0- | ||||||||||||||
Net income (loss) | (824 | ) | 6,929 | 7,255 | 5,243 | 5,216 | ||||||||||||||
Pro forma basic and diluted income (loss) from continuing operations per share(2) (unaudited) | (0.17 | ) | 1.42 | 1.49 | 1.08 | 1.07 | ||||||||||||||
Cash dividends declared per common share | -0- | -0- | -0- | -0- | -0- |
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As of December 31, | As of September 30, | |||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2005 | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Total assets | $ | 37,696 | $ | 37,818 | $ | 39,240 | $ | 38,304 | $ | 38,222 | ||||||||||
Long-term debt (including current portion) | 124 | 56 | -0- | 2 | -0- | |||||||||||||||
Owner’s net investment | 30,375 | 29,254 | 29,800 | 29,820 | 28,809 |
(1) | Upon adoption of Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets,” TCM recorded a non-cash charge of approximately $11.9 million ($7.4 million after income taxes) as a cumulative effect of accounting change. |
(2) | The pro forma (basic and diluted) income (loss) from continuing operations per share gives effect to the issuance of 4,871,080 shares of TCM common stock in the spin-off as if it had occurred at the beginning of the periods presented. |
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Two Months Ended | Year Ended | |||||||||||||||||||
August 31, | August 31, | |||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Total revenue | $ | 7,853 | $ | 4,591 | $ | 64,129 | $ | 55,779 | $ | 61,879 | ||||||||||
Loss from continuing operations | (3,490 | ) | (3,946 | ) | (28,444 | ) | (7,137 | ) | (5,141 | ) | ||||||||||
Net loss | (3,428 | ) | (5,355 | ) | (37,986 | ) | (14,611 | ) | (5,290 | ) | ||||||||||
Net loss available to common stockholders | (3,473 | ) | (5,448 | ) | (39,135 | ) | (16,848 | ) | (5,290 | ) | ||||||||||
Net loss from continuing operations available to common stockholders per basic and diluted common share | (0.98 | ) | (1.07 | ) | (7.42 | ) | (2.01 | ) | (0.81 | ) | ||||||||||
Cash dividends declared per common share | -0- | -0- | -0- | -0- | -0- |
Year Ended June 30, | ||||||||
2001 | 2002 | |||||||
(Dollars in thousands) | ||||||||
Statement of Operations Data: | ||||||||
Total revenue | $ | 96,136 | $ | 93,813 | ||||
Loss from continuing operations | (16,143 | ) | (32,278 | ) | ||||
Net loss | (18,704 | ) | (34,558 | ) | ||||
Net loss available to common stockholders | (18,704 | ) | (34,954 | ) | ||||
Net loss from continuing operations available to common stockholders per basic and diluted common share | (4.57 | ) | (8.96 | ) | ||||
Cash dividends declared per common share | -0- | -0- |
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As of June 30, | As of August 31, | |||||||||||||||||||||||
2001 | 2002 | 2002 | 2003 | 2004 | 2005 | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||
Working capital (deficit) | $ | (16,951 | ) | $ | (26,827 | ) | $ | (32,252 | ) | $ | (12,034 | ) | $ | (19,146 | ) | $ | (26,229 | ) | ||||||
Investment in affiliated companies | 50,399 | 25,115 | 25,013 | -0- | -0- | -0- | ||||||||||||||||||
Total assets | 201,061 | 151,007 | 143,780 | 73,812 | 60,942 | 64,676 | ||||||||||||||||||
Amounts due to (due from) related parties | 68 | (100 | ) | (127 | ) | 96 | 9,290 | 11,786 | ||||||||||||||||
Long-term obligations(1) | 107,693 | 98,091 | 93,091 | 72,641 | 64,625 | 61,625 | ||||||||||||||||||
Redeemable preferred stock, noncurrent liability | -0- | -0- | -0- | -0- | 24,296 | 22,082 | ||||||||||||||||||
Stockholders’ equity (deficit) | 37,604 | (1,274 | ) | (2,188 | ) | (27,002 | ) | (56,551 | ) | (59,061 | ) |
(1) | Includes debt and capital leases. |
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Year Ended | Nine Months Ended | ||||||||
December 31, | September 30, | ||||||||
2004 | 2005 | ||||||||
(Dollars in thousands, | |||||||||
except per share amounts) | |||||||||
Pro Forma Combined Statement of Operations Data: | |||||||||
Net revenues | $ | 106,704 | $ | 74,656 | |||||
Net income (loss) from continuing operations | (2,085 | ) | (1,105 | ) | |||||
Net income (loss) available to common stockholders per share, basic and diluted | (0.61 | ) | (0.37 | ) | |||||
Shares used in per share calculation, basic and diluted | 5,128 | 5,128 | |||||||
Pro Forma Combined Balance Sheet Data: | |||||||||
Cash and cash equivalents | $ | 638 | |||||||
Total assets | 159,611 | ||||||||
Stockholder’s deficit | (11,683 | ) |
(1) | See “Combined Company Unaudited Pro Forma Condensed Financial Information” beginning on page 153 of this proxy statement/prospectus/information statement. |
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Year Ended | Nine Months Ended | ||||||||
December 31, | September 30, | ||||||||
2004 | 2005 | ||||||||
(Dollars in thousands, | |||||||||
except per share data) | |||||||||
Pro forma per common share data (unaudited): | |||||||||
Net income per basic and diluted share(1) | $ | 1.49 | $ | 1.07 | |||||
Basic net book value per share | $ | 6.12 | $ | 5.91 | |||||
Weighted average common basic and diluted shares outstanding | 4,871 | 4,871 |
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Year Ended | Nine Months Ended | ||||||||
December 31, | September 30, | ||||||||
2004 | 2005 | ||||||||
(Dollars in thousands, | |||||||||
except per share data) | |||||||||
Historical per common share data (unaudited): | |||||||||
Net loss available to common shareholders per basic and diluted share | $ | (1.69 | ) | $ | (0.87 | ) | |||
Basic book value per share | $ | (8.37 | ) | $ | (8.61 | ) | |||
Weighted average common basic and diluted shares outstanding | 5,095 | 6,824 |
Year Ended | Nine Months Ended | ||||||||
December 31, | September 30, | ||||||||
2004 | 2005 | ||||||||
(Dollars in thousands, | |||||||||
except per share data) | |||||||||
Pro forma combined per common share data (unaudited): | |||||||||
Net loss per combined company’s basic and diluted share(1) | $ | (0.61 | ) | $ | (0.37 | ) | |||
Net book value per combined company’s share as of September 30, 2005 | $ | (2.28 | ) | ||||||
Weighted average common basic and diluted shares outstanding | 5,128 | 5,128 |
Year Ended | Nine Months Ended | ||||||||
December 31, | September 30, | ||||||||
2004 | 2005 | ||||||||
Pro forma combined per common share data (unaudited): | |||||||||
Net loss per combined company’s basic and diluted share(1)(2) | $ | (0.02 | ) | $ | (0.01 | ) | |||
Net book value per combined company’s share as of September 30, 2005(2) | $ | (0.07 | ) |
(1) | The net income per basic and diluted share gives effect to the issuance of 4,871,080 shares of TCM common stock in the spin-off as if it had occurred at the beginning of the periods presented. |
(2) | Based upon an exchange ratio of 0.0289. |
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• | the challenge of effecting integration while carrying on the ongoing businesses; | |
• | the necessity of coordinating geographically separate organizations; and | |
• | integrating personnel with diverse business backgrounds. |
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• | was insolvent, | |
• | was rendered insolvent by reason of the spin-off, | |
• | was engaged in a business or transaction for which Gray’s remaining assets constituted unreasonably small capital, or | |
• | intended to incur, or believed it would incur, debts beyond its ability to pay such debts as they matured, |
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• | local economic conditions in general; | |
• | the economic condition of the retail segments of the communities that TCM’s publications serve; | |
• | the popularity of TCM’s publications; | |
• | the size and demographic characteristics of the local population; | |
• | pricing fluctuations in local and national advertising; | |
• | the activities of TCM’s competitors, including increased competition from other forms of advertising-based mediums; and | |
• | changing consumer lifestyles. |
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• | diverting management’s attention; | |
• | assuming liabilities; | |
• | incurring significant additional capital expenditures, transaction and operating expenses and non-recurring acquisition-related charges; | |
• | experiencing an adverse impact on TCM’s earnings from the amortization or impairment of acquired goodwill and other intangible assets; | |
• | failing to integrate the operations, facilities and personnel of the acquired newspapers and publications; | |
• | entering new markets with which TCM is not familiar; and | |
• | failing to retain key personnel of the acquired newspapers and publications. |
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• | in preparing this information, adjustments and allocations were made because Gray did not account for Gray Publishing as, and Gray Publishing never operated as, a stand-alone business for any periods presented; and | |
• | the information does not reflect many changes that will occur in TCM’s funding and operations as a result of the spin-off and the merger. |
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• | if as a result of TCM’s failure to sell or swap The Goshen News, Gray is not able to consummate the acquisition of Target, Parent would be entitled, under the terms of the stock purchase agreement, to retain Gray’s deposit of $8.5 million, and TCM would be obligated to indemnify Gray for the amount of the deposit plus any other actual losses incurred by Gray as a result of the failure to consummate the acquisition; and | |
• | if Gray obtained a temporary waiver from the FCC and the acquisition of Target has closed, and TCM thereafter fails to sell or swap The Goshen News within the waiver period specified by the FCC, Gray could be subject to FCC penalties, including fines and the loss of FCC licenses, and TCM would be obligated to indemnify Gray for any actual losses incurred by Gray as a result of any such FCC penalties. |
• | variations in TCM’s quarterly results; | |
• | announcements of technological innovations by TCM or by its competitors; | |
• | introductions of new products or new pricing policies by TCM or by its competitors; |
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• | acquisitions or strategic alliances by TCM or by its competitors; | |
• | recruitment or departure of key personnel; | |
• | the gain or loss of significant customers; | |
• | changes in the estimates of TCM’s operating performance or changes in recommendations by any securities analysts that elect to follow its common stock; and | |
• | market conditions in TCM’s industry, the industries of TCM’s customers, and the economy as a whole. |
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• | as a result of the spin-off, both Gray and TCM should be better able to focus financial and operational resources on its own businesses and executing its own strategic plan; | |
• | as a result of the spin-off, both Gray and TCM are expected to have greater strategic and financial flexibility to support future growth opportunities; | |
• | each business is in a different stage of development and therefore attracts different types of investors; | |
• | financial markets should be able to evaluate Gray and TCM more effectively as two separate companies, which is expected to maximize shareholder value over the long term for both Gray and TCM; | |
• | the spin-off should allow Gray and TCM to develop incentive programs for management and other professionals that are tailored to its own businesses and are tied to the market performance of its respective common stock; and | |
• | after the spin-off, Gray and TCM should each have greater capital planning flexibility, and the Newspaper Publishing Business and the GrayLink Wireless Business will no longer have to compete with Gray’s television broadcasting business to secure funding for investments. |
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• | one share of TCM common stock for every 10 shares of Gray common stock that was owned as of the distribution date for the spin-off; and | |
• | one share of TCM common stock for every 10 shares of Gray Class A common stock that was owned as of the distribution date for the spin-off. |
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• | the fair value and present saleable value of TCM’s assets would exceed TCM’s stated liabilities and identified contingent liabilities; | |
• | TCM should be able to pay its debts as they become absolute and mature; and | |
• | the capital remaining in TCM would not be unreasonably small for the business in which TCM is engaged, as management has indicated it is proposed to be conducted following the consummation of the spin-off, the merger and the Refinancing. |
• | the registration of TCM common stock under the Exchange Act and the Securities Act; | |
• | the listing of TCM common stock on the Nasdaq National Market; | |
• | the receipt by Gray and Bull Run of an opinion of King & Spalding LLP, special tax counsel to Gray, to the effect that the spin-off will qualify as a divisive reorganization described in Sections 368(a)(1)(D) and 355 of the Code; | |
• | the approval by the Bull Run shareholders of the Merger Agreement and merger; | |
• | the receipt by Gray’s board of directors, TCM’s board of directors, the Gray Special Committee and the TCM Special Committee of a favorable opinion from a nationally recognized independent valuation firm regarding the solvency of TCM after giving effect to the spin-off, the merger and the Refinancing; |
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• | the receipt by TCM of an opinion of King & Spalding LLP, special tax counsel to TCM, to the effect that the merger will qualify as a reorganization under Section 368(a) of the Code; and | |
• | the receipt by Bull Run of an opinion of Troutman Sanders LLP, counsel to Bull Run, to the effect that the Merger will qualify as a reorganization under Section 368(a) of the Code. |
• | entities treated as partnerships for U.S. federal income tax purposes or Gray shareholders who hold their shares through entities treated as partnerships for U.S. federal income tax purposes; | |
• | certain U.S. expatriates; | |
• | Gray shareholders who hold Gray stock as part of a straddle, appreciated financial position, hedge, synthetic security, conversion transaction or other integrated investment; | |
• | Gray shareholders whose functional currency is not the U.S. dollar; | |
• | Gray shareholders who acquired Gray stock through the exercise of employee stock options or otherwise as compensation; | |
• | Gray shareholders subject to the U.S. alternative minimum tax; | |
• | foreign persons and entities; | |
• | financial institutions; | |
• | insurance companies; | |
• | tax-exempt entities; | |
• | dealers in securities or foreign currencies; and | |
• | traders in securities that mark-to-market. |
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• | Gray shareholders will not recognize any income, gain or loss as a result of the spin-off, except as discussed below with respect to any cash they may receive instead of a fractional share of TCM common stock. | |
• | The holding period for shares of TCM common stock received by Gray shareholders in the spin-off will include the period for which they held the underlying shares of Gray stock. | |
• | A Gray shareholder’s aggregate tax basis for shares of TCM common stock received in the spin-off will be determined by allocating to shares of TCM common stock, on the basis of the relative fair market values of Gray stock and TCM common stock at the time of the spin-off, a portion of the tax basis of such shareholder’s shares of Gray stock. The tax basis of the shares of Gray stock will be decreased by the amount allocated to the shares of TCM common stock. | |
• | The receipt of cash instead of a fractional share of TCM common stock generally will be treated as a sale of the fractional share, and a Gray shareholder generally will recognize gain or loss equal to the difference between the amount of cash received and the tax basis of the fractional share, as determined above. The gain or loss will be long-term capital gain or loss if the shareholder’s holding period for the fractional share, as determined above, is more than one year. |
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• | each share of Bull Run common stock will be converted into 0.0289 shares of TCM common stock; | |
• | each share of Bull Run Series D preferred stock will be converted into one share of TCM Series A redeemable, convertible preferred stock; | |
• | each share of Bull Run Series E preferred stock held by J. Mack Robinson and any transferee of Mr. Robinson will be converted into one share of TCM Series A redeemable, convertible preferred stock; | |
• | each share of Bull Run Series E preferred stock held by a Series E preferred shareholder (other than Mr. Robinson and any transferee of Mr. Robinson) will be converted into $1,000 in cash; | |
• | each share of Bull Run Series F preferred stock will be converted into 22.56 shares of TCM common stock; | |
• | the surviving corporation will pay to each Bull Run Series E preferred shareholder (other than Mr. Robinson and any transferee of Mr. Robinson) cash in an amount equal to the accrued and unpaid dividends due to such shareholder; | |
• | all accrued and unpaid dividends (through July 1, 2005) on each outstanding share of Bull Run Series D preferred stock and Bull Run Series E preferred stock held by Mr. Robinson and any transferee of Mr. Robinson, will be converted into the number of shares of TCM Series A redeemable, convertible preferred stock determined by dividing the accrued and unpaid dividends due on such shares by $1,000; | |
• | all accrued and unpaid dividends (through July 1, 2005) on each outstanding share of Bull Run Series F preferred stock will be converted into an aggregate of 12,698 shares of TCM common stock; and | |
• | the cash advances in the aggregate amount of $6,050,000 made by Mr. Robinson to Bull Run million will be converted into 6,050 shares of TCM Series B redeemable, convertible preferred stock. |
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• | the holders of a majority of the outstanding shares of Bull Run common stock entitled to vote, voting separately as a class, on the merger vote in favor of approval and adoption of the Merger Agreement and the merger; | |
• | the holders of at least a majority of the outstanding shares of Bull Run Series D preferred stock, voting separately as a class, approve and adopt the Merger Agreement and the merger; | |
• | the holders of at least a majority of the outstanding shares of Bull Run Series E preferred stock, voting separately as a class, approve and adopt the Merger Agreement and the merger; and | |
• | the holders of at least a majority of the outstanding shares of Bull Run Series F preferred stock, voting separately as a class, approve and adopt the Merger Agreement and the merger. |
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• | that all assets necessary to the conduct of the TCM business would be transferred to TCM upon the consummation of the transactions contemplated by the separation and distribution agreement; | |
• | Gray would take commercially reasonable efforts to preserve substantially intact the TCM business as it was conducted by Gray until the consummation of the merger; | |
• | Gray would not take any action that, pursuant to the terms of the non-solicitation provisions of the Merger Agreement, TCM would not be permitted to take; |
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• | TCM would have no liability in respect of any employee benefit plan maintained by Gray; and | |
• | Gray would, until the effectiveness of the merger, guarantee the due and punctual payment of any liability of TCM to Bull Run arising from a breach by TCM of any of the terms of the Merger Agreement. |
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• | the limited merger consideration available for distribution to the holders of common stock other than Mr. Robinson and his affiliates, although this discussion was tempered by the Bull Run Special Committee’s acknowledgment that it was unlikely, given Bull Run’s capital structure, that any other transaction might provide any greater benefit to them; | |
• | whether the newspaper business conducted by TCM was in fact synergistic with Bull Run’s core business; and | |
• | most significantly, that the Bull Run Special Committee, the Bull Run board of directors and SunTrust Robinson Humphrey were unable to evaluate the actual performance of TCM as a stand-alone entity and were required to evaluate the merger based on projections prepared by TCM. |
• | seeking another merger partner or acquisition within the industry, | |
• | raising equity through the sale of Bull Run stock, whether in a private or public offering; and | |
• | requesting Mr. Robinson to advance additional funds. |
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• | the June 28 Term Sheet plus the conversion, before the merger, of the amount of J. Mack Robinson’s aggregate advances to Bull Run into common stock; | |
• | the conversion, before the merger, of all of Bull Run’s preferred stock into common stock; | |
• | the exchange of all of Bull Run’s preferred stock for redeemable preferred stock to be issued by TCM; and | |
• | the exchange of all of Bull Run’s preferred stock for convertible redeemable preferred stock to be issued by TCM. |
• | potential returns for Bull Run’s shareholders; | |
• | potential returns for TCM’s shareholders; and | |
• | TCM’s leverage and credit profile. |
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• | the relative ownership percentage of TCM by TCM’s stockholders and Bull Run’s shareholders following the merger; | |
• | the treatment of Bull Run’s outstanding preferred stock and certain other obligations; and | |
• | the terms of the TCM convertible preferred stock to be issued in the merger. |
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• | an agreement to differentiate the exchange treatment of the Bull Run preferred stock held, on the one hand, by Mr. Robinson and his affiliates and, on the other hand, by third parties, to provide the third parties with the face value of their stock in cash which, in the aggregate amount, was approximately $2.7 million, and the payment of all accrued dividends thereon; | |
• | the conversion, before the merger, of the Bull Run Series F preferred stock owned by Mr. Robinson and his affiliates, which had a value of approximately $2.3 million including accrued dividends, into Bull Run common stock at a conversion price of $1.28 per share; | |
• | the conversion, before the merger, of Mr. Robinson’s advances to Bull Run in the approximate amount of $6.1 million into Bull Run common stock; and | |
• | the exchange of all of Mr. Robinson’s and his affiliates’ preferred stock, having an approximate aggregate value of $20.9 million including accrued dividends, for TCM convertible preferred stock having a 4% annual dividend and a 40% conversion premium. |
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• | approved the terms of the separation, and approved the form, terms and provisions of the separation and distribution agreement; | |
• | approved the form, terms and provisions of the tax sharing agreement; | |
• | approved the form, terms and provisions of the lease agreement; | |
• | determined that the merger on the terms discussed at the meeting was fair to, and in the best interests of, TCM and Gray, its sole stockholder, and declared the merger to be advisable, and approved the Merger Agreement; | |
• | approved the Transactions so that Section 203 would not apply to Mr. Robinson’s acquisition of TCM common stock in the spin-off and the merger; | |
• | approved the acquisition by Mr. Robinson of TCM common stock in connection with the spin-off and the merger for purposes of exempting such acquisition from the provisions of Section 16(b) of the Exchange Act, pursuant to an exemption provided in Rule 16b-3 of the Rules and Regulations under the Exchange Act; and | |
• | recommended that TCM’s board of directors approve the foregoing. |
• | approved the merger, and the form, terms and provisions of the Merger Agreement; | |
• | approved the form, terms and provisions of the side letter agreement from Gray to Bull Run; | |
• | recommended to Gray’s board of directors that the conversion price for the Gray Series C preferred stock should be adjusted in accordance with the recommendation of BAS; and | |
• | recommended that Gray’s board of directors approve the foregoing. |
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• | approved the terms of the separation, and approved the form, terms and provisions of the separation and distribution agreement; | |
• | approved the form, terms and provisions of the tax sharing agreement; | |
• | approved the form, terms and provisions of the lease agreement; | |
• | determined that the merger on the terms discussed at the meeting was fair to, and in the best interests of, TCM and Gray, its sole stockholder, and declared the merger to be advisable, and approved the Merger Agreement; and | |
• | approved in principle the commitment letter from Wachovia Bank, Wachovia Capital Markets, Bank of America and BAS and Gray based on the presentations made by representatives of those entities; | |
• | ratified the formation of BR Acquisition Corp., a wholly-owned subsidiary; | |
• | approved the spin-off and the merger so that Section 203 would not apply to Mr. Robinson’s acquisition of TCM common stock in the spin-off and the merger; and | |
• | approved the acquisition by Mr. Robinson of TCM common stock in connection with the spin-off and the merger for purposes of exempting such acquisition from the provisions of Section 16(b) of the Exchange Act, pursuant to an exemption provided in Rule 16b-3 of the Rules and Regulations under the Exchange Act. |
• | determined that the spin-off was in the best interests of Gray and its shareholders, approved the terms of the spin-off and approved the form, terms and provisions of the separation and distribution agreement; | |
• | as the sole stockholder of TCM, approved the merger, and the form, terms and provisions of the Merger Agreement; | |
• | approved the form, terms and provisions of the tax sharing agreement; | |
• | approved the form, terms and provisions of the lease agreement; | |
• | approved the form, terms and provisions of the guaranty agreement relating to TCM; |
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• | approved the form, terms and provisions of the side letter; and | |
• | determined that the recommendation of BAS was reasonable that the conversion price for the Gray Series C convertible preferred stock should be adjusted to $13.07 per share upon the consummation of the spin-off based upon the expected reduction in equity value of Gray following the spin off. |
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• | the revenues of The Goshen News for the year ended December 31, 2004 and for the nine months ended September 30, 2005 represented only 11% of the total revenues of TCM during such periods; | |
• | the disposition of The Goshen News most likely will not occur until after the spin-off, and therefore, TCM’s management and board of directors would have control over the terms of the disposition; | |
• | TCM will receive either cash or another newspaper, which is expected to have similar financial results and circulation numbers, in exchange for The Goshen News, and therefore the total assets of TCM will likely be very similar both before and after the disposition; and | |
• | at the current time, neither TCM nor Bull Run has sufficient information in order to determine either (i) the amount of cash that would be received upon a sale of The Goshen News or (ii) the newspaper that it would receive in exchange for The Goshen News. | |
• | TCM should provide a stronger financial base from which to grow TCM’s Newspaper Publishing Business and Bull Run’s core businesses — Collegiate Marketing and Production Services and Association Management Services — and should enable Bull Run to generate new contracts and relationships and acquire sports and collegiate marketing firms, association management firms; | |
• | Bull Run’s clients, partner universities, and other parties should have greater confidence in Bull Run’s ability to perform and satisfy its agreements because of TCM’s size and financial strength; | |
• | the new financial structure of the combined company reduces the overall leverage of Bull Run compared to TCM and thus, reduces the leverage risk for Bull Run shareholders and should provide funding for additional growth in Bull Run’s core businesses and TCM’s Newspaper Publishing Business and Bull Run shareholders should benefit from the growth prospects; | |
• | TCM should maximize the benefits of Bull Run’s existing corporate infrastructure, including expenses arising by virtue of being a public company, such as Securities and Exchange Commission compliance costs, auditors, insurance, information technology and human resources functions, as well as the net operating loss carryforwards for federal income tax purposes, which may be used following the merger (subject to certain limitations); | |
• | TCM should benefit from Bull Run’s experienced management team; |
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• | TCM’s other subsidiaries are expected to be able to share some sales and editorial resources in ways that enable both Bull Run and those subsidiaries to maximize their profitability and to assist them in attracting and retaining key personnel; | |
• | TCM will be able to use its expanded benefit programs to retain key personnel essential for growth in Bull Run’s core businesses and TCM’s Newspaper Publishing Business; | |
• | the merger has been approved and recommended by a committee of independent directors; | |
• | Bull Run’s board of directors and the Bull Run Special Committee have received a fairness opinion from SunTrust Robinson Humphrey (SunTrust Robinson Humphrey will receive compensation of $500,000 in exchange for rendering financial advisory services in connection with the merger. Of this total, $150,000 is contingent upon consummation of the merger); | |
• | the merger is expected to qualify as a reorganization for federal income tax purposes; and | |
• | Bull Run’s board of directors and the Bull Run Special Committee believe that the terms of the Merger Agreement are in the best interests of the Bull Run shareholders. |
• | the limited merger consideration available for distribution to the holders of common stock other than Mr. Robinson and his affiliates, although this factor was tempered by the Bull Run Special Committee’s acknowledgment that it was unlikely, given Bull Run’s capital structure, that any other transaction might provide any greater benefit to them; | |
• | whether the newspaper business conducted by TCM was in fact synergistic with Bull Run’s core business; and | |
• | most significantly, that the Bull Run Special Committee, the Bull Run board of directors and SunTrust Robinson Humphrey were unable to evaluate the actual performance of TCM as a standalone entity and were required to evaluate the merger based on projections prepared by TCM. |
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Material and Information Considered with Respect to the Merger |
• | reviewed drafts of the agreements related to the merger, including the Merger Agreement; | |
• | reviewed and analyzed a draft of the financing commitment letter from Wachovia Bank, National Association and Bank of America, N.A. dated July 29, 2005; | |
• | reviewed certain publicly available information, including filings with the SEC, press releases, and news articles concerning Bull Run and Gray Television that SunTrust Robinson Humphrey believed to be relevant to its analysis; | |
• | reviewed and analyzed certain historical and projected financial and operating data concerning Bull Run and the publishing and paging operations of Gray (“Triple Crown Media” or “TCM”), furnished to SunTrust Robinson Humphrey by Bull Run and Gray, respectively; | |
• | conducted discussions with members of management of Bull Run, Gray and TCM concerning their respective businesses, operations, assets, present conditions and future prospects; | |
• | reviewed the historical market prices and trading activities for the common stock of Bull Run and compared them with those of selected publicly-traded reference companies that SunTrust Robinson Humphrey deemed relevant; | |
• | compared the historical and projected financial results and present financial condition of Bull Run and TCM with those of selected publicly-traded reference companies that SunTrust Robinson Humphrey deemed relevant; | |
• | reviewed the financial terms of the merger with financial terms, to the extent publicly available, of selected reference merger and acquisition transactions that SunTrust Robinson Humphrey deemed relevant; | |
• | performed certain financial analyses with respect to Bull Run’s and TCM’s pro forma financial condition and projected future operating performance; and | |
• | reviewed other financial statistics and undertook other analyses and investigations as SunTrust Robinson Humphrey deemed appropriate, including, but not limited to, a review of historical and projected working capital and capital expenditure requirements, historical leverage statistics for Bull Run and TCM, and projected leverage statistics for TCM upon consummation of the merger. |
Projected Financial Information of TCM and Bull Run |
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Year Ending December 31, | |||||||||||||||||||||
2005P(2) | 2006P | 2007P | 2008P | 2009P | |||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
Revenue | �� | ||||||||||||||||||||
Publishing(3) | $ | 48,875 | $ | 50,830 | $ | 52,863 | $ | 54,978 | $ | 57,177 | |||||||||||
Wireless(4) | 6,532 | 6,532 | 6,532 | 6,532 | 6,532 | ||||||||||||||||
Total Revenue | $ | 55,407 | $ | 57,362 | $ | 59,395 | $ | 61,510 | $ | 63,709 | |||||||||||
EBITDA(5) | $ | 15,696 | $ | 16,857 | $ | 18,080 | $ | 19,368 | $ | 20,724 |
(1) | The projections were prepared as of April 8, 2005. The projections for the year ending December 31, 2005 are based on actual unaudited results of operations for the two months ended February 28, 2005 plus preliminary estimates of the results of operations for the month ended March 31, 2005 and projected results of operations prepared by individual operating unit management for the period from April 1, 2005 through December 31, 2005. Projections for the years ending December 31, 2006, 2007, 2008 and 2009 were derived by applying certain growth assumptions as discussed below to TCM’s 2005 projection of expected results. |
(2) | Excludes nonrecurring costs to be incurred in connection with the spin-off, the merger and the Refinancing. |
(3) | Publishing revenue for the years ending December 31, 2006 through 2009 assumes an aggregate annual growth rate of 4% per annum. This growth rate considered the following general assumptions (but did not give specific weight to any individual assumption): |
• | the scope of daily operations would approximate the same level of activity as anticipated in 2005; | |
• | no acquisitions or divestitures of any of the businesses; | |
• | annual inflation rates would remain relatively low consistent with historical trends of the past several years and therefore not significantly enhance any inherent ability of TCM to increase prices; |
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• | total revenues would grow at a relatively faster rate at the suburban Atlanta papers (Gwinnett Daily Post, Rockdale Citizen and Newton Citizen) than the non-suburban Atlanta papers (Albany Herald and Goshen News) due to the relatively faster growth of the population and retail trade in the Atlanta metropolitan area in comparison to Albany, Georgia and/or Goshen, Indiana; | |
• | retail advertising revenue and classified advertising revenue would grow at a relatively faster rate at the suburban Atlanta papers than the non-suburban Atlanta papers due to the relatively faster growth of the population, retail trade and general business expansion in the Atlanta metropolitan area in comparison to Albany, Georgia and/or Goshen, Indiana; | |
• | circulation revenue would likely decline modestly assuming future subscription price increases would not necessarily offset modest reductions in the aggregate number of subscribers reflecting in turn the overall industry trend of declining subscriber bases; and | |
• | certain circulation distribution agreements between the Gwinnett Daily Post and certain cable operators in Gwinnett County, Georgia are renewed in the ordinary course on terms and conditions to TCM substantially the same as currently existing agreements. |
(4) | Wireless revenue for the years ending December 31, 2006 through 2009 assumes aggregate revenue remains consistent with anticipated results for 2005. The assumed consistency in revenue considered the following general assumptions (but did not give specific weight to any individual assumption): |
• | the scope of daily operations would approximate the same level of activity as anticipated in 2005; | |
• | no acquisitions or divestitures of any of the businesses; | |
• | annual inflation rates would remain relatively low consistent with historical trends of the past several years and therefore not significantly enhance any inherent ability of TCM to increase prices; | |
• | continuing price competition from cellular service providers would reduce TCM’s relative ability to significantly increase pricing of traditional paging services; | |
• | subscriptions to traditional paging services would continue to decline but at a relatively slower rate in comparison to recent historical trends reflecting a “core base” of subscribers that would likely retain traditional paging services due to personal preference and/or a business need for such service; | |
• | unit sales volume relating to the resale of cellular services and products would continue to increase and offset any continuing declines in revenues associated traditional paging services; and | |
• | continuing price competition from other cellular service providers would reduce TCM’s relative ability to significantly increase unit sales pricing of cellular services or products except possibly for cellular services or products providing consumers significant expansion of functionality. |
(5) | The EBITDA projections were derived by subtracting projected operating expenses before interest, taxes, depreciation, amortization, gain/loss on disposition of assets and corporate overhead from the projected revenues. The resulting value, which TCM provided to the financial advisors to the respective special committees and labeled “EBITDA” while a non-GAAP term, is often used in media companies as a metric for valuation of the business. TCM did not prepare any projections with respect to net income, income from operations nor the following expenses interest, taxes, depreciation and amortization and the respective financial advisors to the special committees did not require TCM to provide such projected information. Accordingly, it is not possible to reconcile the EBITDA projection to projected net income. Aggregate operating expenses before depreciation, and amortization, is assumed to grow at the rate of 2% per annum over the projection period. This expense growth rate considered the following general assumptions (but did not give specific weight to any individual assumption): |
• | the aggregate scope of daily operations would approximate the same level of activity as anticipated in 2005 and there would be no significant change to the total number of persons employed by TCM; |
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• | no acquisitions or divestitures of any of the businesses; | |
• | annual inflation rates would remain relatively low consistent with historical trends of the past several years and not significantly impact TCM’s operations; and | |
• | modest annual improvements in operating and/or staff efficiencies would help to mitigate the overall growth rate of expenses. |
Year Ending August 31, | ||||||||||||||||
2005P(2) | 2006P(3) | 2007P(4) | 2008P(5) | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenue | $ | 62,670 | $ | 70,437 | $ | 78,183 | $ | 85,615 | ||||||||
EBITDA(6) | 3,576 | 5,986 | 7,875 | 9,338 | ||||||||||||
Net income (loss) available for common stockholders | $ | (4,962 | ) | $ | (2,645 | ) | $ | (676 | ) | $ | 837 |
(1) | The projections were prepared as of May 2005. Projections for the fiscal year ended August 31, 2005 were based on the actual unaudited financial results for the eight months ended April 30, 2005 plus projected results for the last four months of the fiscal year. Projections for the fiscal years ending August 31, 2006, 2007 and 2008 were derived from Bull Run’s projection of expected results to be derived from each university and athletic conference contract within the Collegiate Marketing and Production Services segment and each contract for Association Management Services. Projected interest expense for the fiscal years ending August 31, 2006, 2007 and 2008 assumes substantially the same capital structure as at the time of the projections with no change in interest rates. Preferred stock dividends accrued for the fiscal years ending August 31, 2006, 2007 and 2008 assumes substantially the same capital structure as at the time of the projections. Debt issue cost amortization for the fiscal years ending August 31, 2006, 2007 and 2008 assumes continuation of the compensation arrangement with J. Mack Robinson, as guarantor of Bull Run’s bank debt. |
(2) | Excludes nonrecurring costs to be incurred in connection with the merger. Includes expected impact of a new association management contract commencing May 1, 2005. |
(3) | Excludes the remainder of nonrecurring costs to be incurred in connection with the merger. Recognizes that certain costs incurred in 2005, such as certain inefficiencies incurred during the set-up and transition of a new press and compensation costs for positions eliminated during 2005, will not recur in 2006. Includes the effects of new multi-media marketing rights and associated costs under a multi-year contract extension with a university, signed in 2005, taking effect in 2006. Percentage growth in revenue under multi-year collegiate marketing relationships assumed to exceed the rate at which rights fee expenses increase, as has historically been the case. Includes the full fiscal year effects of the new association management contract commencing May 1, 2005. Includes growth in revenue and profitability under two marketing rights agreements with universities with which the relationships are in their second year. Includes growth in commercial printing and publishing revenues due to a more experienced sales force and aided by a new press added in 2005. |
(4) | Assumes renewal of two key contracts scheduled to expire after 2006 (both of which are under negotiation for multi-year extensions). The loss of either or both of these key contracts would have an adverse effect on projected revenues for the period. Assumes addition of one new collegiate marketing contractual relationship. Percentage growth in revenue under multi-year collegiate marketing |
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relationships is assumed to exceed the rate at which rights fee expenses increase, as has historically been the case. Focus on core business since August 2004 discontinuation of a segment results in creative revenue-enhancement opportunities within the existing client base and improvements in the percentage of available broadcast inventory sold. Includes growth in commercial printing and publishing revenues aided by a new press added in 2005, as well as growth in Internet-related services. | |
(5) | Assumes renewal of two key contracts scheduled to expire after 2007 (one of which is now under negotiation for a multi-year extension). The loss of either or both of these key contracts would have an adverse effect on projected revenues for the period. Assumes addition of one new collegiate marketing contractual relationship. Percentage growth in revenue under multi-year collegiate marketing relationships exceeds the rate at which rights fee expenses increase, as has historically been the case. Focus on core business since August 2004 discontinuation of a segment results in creative revenue-enhancement opportunities within the existing client base and improvements in the percentage of available broadcast inventory sold. Includes continued growth in commercial printing and publishing revenues aided by a new press added in 2005, as well as growth in Internet-related services. Assumes new association management contractual relationship to be added six months into the 2008 fiscal year. |
(6) | EBITDA means income from operations plus depreciation and amortization expenses deducted in deriving income from operations. EBITDA should not be considered as an alternative to net income before income taxes, cash flows from operating activities or any other measures of financial performance calculated in accordance with accounting principles generally accepted in the United States as those items are used to measure operating performance, liquidity or ability to service debt obligations. Set forth below is a reconciliation of projected net income (loss) available to common stockholders to the projection of the non-GAAP term “EBITDA”: |
Year Ending August 31, | ||||||||||||||||||
2005P | 2006P | 2007P | 2008P | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
Projected Amounts for the Periods Presented | ||||||||||||||||||
Net income (loss) available to common stockholders | $ | (4,962 | ) | $ | (2,645 | ) | $ | (676 | ) | $ | 837 | |||||||
Add (subtract): | ||||||||||||||||||
Preferred dividends | 2,026 | 1,987 | 1,987 | 1,987 | ||||||||||||||
Discontinued operations | (15 | ) | ||||||||||||||||
Interest expense | 4,339 | 4,060 | 4,030 | 4,030 | ||||||||||||||
Debt issue cost amortization | 1,208 | 1,208 | 1,208 | 1,208 | ||||||||||||||
Net change in value of derivative instruments | (412 | ) | ||||||||||||||||
Depreciation expense | 674 | 658 | 608 | 558 | ||||||||||||||
Amortization of acquisition intangibles | 718 | 718 | 718 | 718 | ||||||||||||||
EBITDA | $ | 3,576 | $ | 5,986 | $ | 7,875 | $ | 9,338 | ||||||||||
General |
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• | the merger would be consummated in accordance with the terms of the Merger Agreement and related documents without any waiver of any material terms or conditions by Bull Run, Gray or TCM; | |
• | the merger would be treated as a reorganization for income tax purposes; | |
• | the pro forma combined business of TCM would be solvent upon the consummation of the merger; and | |
• | all material governmental, regulatory or other consents or approvals (contractual or otherwise) necessary for the consummation of the merger would be obtained without requiring any restrictions, including any divestiture requirements or amendments or modifications, that would have a material adverse effect on Bull Run, Gray, TCM or the expected benefits of the merger. |
Analysis of Transaction Structure |
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• | Stock Price Trading History — an analysis of the historical trading patterns for Bull Run’s common stock over various historical time periods. This analysis provides the range of market values that have been placed on Bull Run’s common stock and summarizes any shifts in trading volume during such time periods, providing an indication of the stock market’s perception of and interest level in Bull Run’s common stock. | |
• | Market Analysis of Selected Publicly-Traded Reference Companies — an analysis of the public market value of selected companies that were deemed relevant by SunTrust Robinson Humphrey based on the industry in which Bull Run competes, its principal competitors and business risk profile. This analysis provides an indication of the value that investors may be willing to pay as a multiple of certain of each selected company’s operating and financial metrics such as revenues, earnings before interest, taxes, depreciation and amortization (“EBITDA”) and earnings before interest and taxes (“EBIT”), and net income. | |
• | Analysis of Selected Reference Merger and Acquisition Transactions — an analysis of the consideration paid for target companies in selected merger and acquisition transactions that were deemed relevant by SunTrust Robinson Humphrey based on the industry in which Bull Run operates, its principal competitors and business risk profile. This analysis provides an indication of the value that an acquirer may be willing to pay in a change of control transaction as a multiple of certain of the target company’s operating and financial metrics such as revenues, EBITDA and EBIT. | |
• | Premiums Paid Analysis — an analysis of the premiums paid to the underlying stock price for publicly-traded target companies in selected merger and acquisition transactions that were deemed relevant by SunTrust Robinson Humphrey. This analysis provides an indication of the potential premium that an acquirer may be willing to pay for control of the target company. | |
• | Discounted Cash Flow Analysis — an analysis of the projected cash flows of Bull Run discounted back to present value based on a risk-adjusted discount rate. This analysis provides an indication of the value of Bull Run based on its ability to achieve its projected financial results. |
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Analysis of Bull Run |
Stock Price Trading History |
Market Analysis of Selected Publicly-Traded Reference Companies |
Diversified Publishing/Media Companies | ||
Banta Corporation (BN) | Cenveo, Inc. (CVO) | |
Dex Media, Inc. (DEX) | Martha Stewart Living Omnimedia, Inc. (MSO) | |
Naspers Limited (NPSN) | PRIMEDIA, Inc. (PRM) | |
R.R. Donnelley & Sons Company (RRD) | Westwood One (WON) | |
Marketing Services Companies | ||
ADVO, Inc. (AD) | aQuantive, Inc. (AQNT) | |
Envoy Communications Group, Inc. (ECGI) | Harte Hanks, Inc. (HHS) | |
Next, Inc. (NXTI) | Omnicom Group (OMC) | |
Valassis Communications, Inc. (VCI) | ||
Marketing and Advertising Firms | ||
Clear Channel Communications, Inc. (CCU) | The Interpublic Group of Companies, Inc. (IPG) | |
Publicis Groupe (PUB) | WPP Group, PLC (WPPGY) |
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Mean | Median | ||||||||
Multiple of | Multiple of | ||||||||
Selected | Selected | ||||||||
Reference | Reference | ||||||||
Transactions | Transactions | ||||||||
Firm Value to: | |||||||||
LTM Revenues | 2.37 | x | 1.76 | x | |||||
2005E Revenues | 2.61 | 1.95 | |||||||
2006E Revenues | 2.52 | 1.81 | |||||||
2007E Revenues | 2.64 | 2.47 | |||||||
LTM EBITDA | 9.9 | 10.8 | |||||||
2005E EBITDA | 9.7 | 10.1 | |||||||
2006E EBITDA | 9.5 | 10.0 | |||||||
2007E EBITDA | 9.2 | 9.4 | |||||||
LTM EBIT | 15.9 | 13.8 | |||||||
2005E EBIT | 12.6 | 12.6 | |||||||
2006E EBIT | 11.7 | 11.8 | |||||||
2007E EBIT | 11.3 | 12.0 | |||||||
Equity Value to: | |||||||||
LTM Net Income | 22.8 | x | 23.2 | ||||||
2005E Net Income | 20.4 | 20.3 | |||||||
2006E Net Income | 16.7 | 17.0 | |||||||
2007E Net Income | 19.6 | 16.7 |
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Analysis of Selected Reference Merger and Acquisition Transactions |
Acquirer | Target | |
Burton Capital Management, LLC | Cenveo, Inc. | |
Interpublic Group of Companies, Inc. | boede+partners, Inc. | |
WPP Group PLC | Focus Media SL | |
WPP Group PLC | Guangzhou Newsun Insight Advertising Co. | |
WPP Group PLC | Grey Global Group, Inc. | |
WPP Group PLC | Effort Ogilvy | |
WPP Group PLC | NCT Ventures LLC | |
Parkwood Holdings PLC | Clear Channel Communications, Inc. | |
WPP Group PLC | Quinn Gillespie & Associates LLC | |
Dentsu, Inc. | Publicis Groupe SA | |
WPP Group PLC | Cordiant Communications Group PLC | |
Omnicom Group, Inc. | Taterka | |
Publicis Groupe SA | Bcom3 Group Inc. | |
Omnicom Group, Inc. | Cawley Nea Ltd. | |
Moore Wallace, Inc. | Nielsen Co. | |
WPP Group PLC | Delfo srl | |
Omnicom Group, Inc. | MSGI Security Solutions, Inc. | |
PRIMEDIA, Inc. | Emap PLC | |
WPP Group PLC | Impact Information Pty Ltd. | |
WPP Group PLC | Finsbury Ltd | |
WPP Group PLC | Springbok Technologies Inc. | |
Grey Global Group, Inc. | Read-Poland Associates | |
Colleagues Group Ltd. | Moore Wallace, Inc. | |
Interpublic Group of Companies | True North Communications Inc. | |
Omnicom Group, Inc. | Capsula Comunicacao Ltda. |
Mean | Median | ||||||||
Multiple of | Multiple of | ||||||||
Selected | Selected | ||||||||
Reference | Reference | ||||||||
Transactions | Transactions | ||||||||
Firm Value to: | |||||||||
LTM Revenues | 1.16 | x | 1.12 | x | |||||
LTM EBITDA | 10.2 | 10.2 | |||||||
LTM EBIT | 14.2 | 14.8 |
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Premiums Paid Analysis |
Purchase Price Premium | ||||||||||||
Prior to Announcement | ||||||||||||
1 Day | 5 Days | 30 Days | ||||||||||
Mean Premium | 21.3 | % | 24.4 | % | 30.0 | % | ||||||
Median Premium | 17.0 | 18.5 | 25.0 |
Discounted Cash Flow Analysis |
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Implied Common Stock Value | |||||||||||||||||
Mean | Median | High | Low | ||||||||||||||
($ in millions) | |||||||||||||||||
Selected Reference Company Analysis | |||||||||||||||||
Using Mean Multiples | $ | 7.3 | $ | 0.0 | $ | 109.8 | $ | 0.0 | |||||||||
Using Median Multiples | $ | 3.4 | $ | 0.0 | $ | 96.7 | $ | 0.0 | |||||||||
Selected Reference Transaction Analysis | |||||||||||||||||
Using Mean Multiples | $ | 0.0 | $ | 0.0 | $ | 0.0 | $ | 0.0 | |||||||||
Using Median Multiples | $ | 0.0 | $ | 0.0 | $ | 0.0 | $ | 0.0 | |||||||||
Premiums Paid Analysis | |||||||||||||||||
Using Mean Premiums | $ | 6.3 | $ | 6.3 | $ | 7.1 | $ | 5.6 | |||||||||
Using Median Premiums | $ | 6.0 | $ | 6.0 | $ | 6.7 | $ | 5.3 | |||||||||
Discounted Cash Flow Analysis | |||||||||||||||||
EBITDA Terminal Value Approach | $ | 0.3 | $ | 0.0 | $ | 6.5 | $ | 0.0 | |||||||||
Perpetual Growth Terminal Value Approach | $ | 1.5 | $ | 0.0 | $ | 21.3 | $ | 0.0 |
Analysis of Triple Crown Media |
Market Analysis of Selected Publicly-Traded Reference Companies |
Journal Register Company (JRC) | Knight-Ridder, Inc. (KRI) | |
Lee Enterprises, Inc. (LEE) | The McClatchy Company (MNI) |
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Mean | Median | ||||||||
Multiple of | Multiple of | ||||||||
Selected | Selected | ||||||||
Reference | Reference | ||||||||
Transactions | Transactions | ||||||||
Firm Value to: | |||||||||
LTM Revenues | 2.76 | x | 2.94 | x | |||||
2005E Revenues | 2.48 | 2.53 | |||||||
2006E Revenues | 2.42 | 2.60 | |||||||
2007E Revenues | 2.39 | 2.59 | |||||||
LTM EBITDA | 10.7 | 10.4 | |||||||
2005E EBITDA | 9.8 | 9.4 | |||||||
2006E EBITDA | 9.6 | 9.2 | |||||||
2007E EBITDA | 9.9 | 9.6 | |||||||
LTM EBIT | 13.1 | 13.5 | |||||||
2005E EBIT | 12.4 | 11.9 | |||||||
2006E EBIT | 11.0 | 11.0 | |||||||
2007E EBIT | 9.7 | 9.7 | |||||||
Equity Value to: | |||||||||
LTM Net Income | 18.1 | 17.9 | |||||||
2005E Net Income | 17.9 | 17.7 | |||||||
2006E Net Income | 16.0 | 15.8 | |||||||
2007E Net Income | 15.5 | 16.4 |
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Analysis of Selected Reference Merger and Acquisition Transactions |
Acquiror | Target | |
Indian Express, Ltd. | Mid-Day Multimedia, Ltd. | |
The New York Times Co. | About, Inc. | |
Lee Enterprises, Inc | Pulitzer, Inc. | |
Journal Register Co. | 21st Century Newspapers, Inc. | |
McClatchy Co. | Pacific-Sierra Publishing | |
Hellman & Friedman LLC | Axel Springer AG | |
Bank of America Corp. | Janton Oyj | |
Harris Associates LP | John Fairfax Holdings Ltd. | |
Hollinger International, Inc. | News Communications, Inc. | |
Lee Enterprises, Inc. | Howard Publications, Inc. | |
General Electric Co. | Midland & General Direct Ltd. | |
Liberty Group Publishing, Inc. | Mid Illinois Newspapers, Inc. | |
Gannett Co., Inc. | Central Newspapers Inc. | |
Pulitzer, Inc. | Journal Register Co. | |
Gannett Co., Inc. | News Communications & Media PLC | |
Tribune Co. | Times Mirror Co. |
Mean | Median | ||||||||
Multiple of | Multiple of | ||||||||
Selected | Selected | ||||||||
Reference | Reference | ||||||||
Transactions | Transactions | ||||||||
Firm Value to: | |||||||||
LTM Revenues | 2.76 | x | 3.10 | x | |||||
LTM EBITDA | 14.0 | 13.9 | |||||||
LTM EBIT | 22.3 | 17.2 |
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Discounted Cash Flow Analysis |
Implied Common Stock Value | |||||||||||||||||
Mean | Median | High | Low | ||||||||||||||
($ in millions) | |||||||||||||||||
Selected Reference Company Analysis | |||||||||||||||||
Using Mean Multiples | $ | 87.5 | $ | 89.4 | $ | 109.4 | $ | 78.3 | |||||||||
Using Median Multiples | $ | 86.6 | 88.6 | $ | 119.2 | $ | 76.9 | ||||||||||
Selected Reference Transaction Analysis | |||||||||||||||||
Using Mean Multiples | $ | 133.3 | $ | 116.5 | $ | 174.0 | $ | 109.5 | |||||||||
Using Median Multiples | $ | 122.9 | $ | 116.0 | $ | 127.9 | $ | 116.0 | |||||||||
Discounted Cash Flow Analysis | |||||||||||||||||
EBITDA Terminal Value Approach | $ | 79.8 | $ | 78.8 | $ | 123.1 | $ | 45.4 |
Pro Forma Transaction Analysis |
Market Analysis of Selected Publicly-Traded Reference Companies |
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Diversified Media Companies | ||
Clear Channel Communications, Inc. (CCU) | Dex Media, Inc. (DEX) | |
Lamar Advertising Company (LAMR) | PRIMEDIA, Inc. (PRM) | |
RH Donnelley (RHD) | Westwood One (WON) | |
Marketing Services Companies | ||
ADVO, Inc. (AD) | Harte Hanks, Inc. (HHS) | |
Omnicom Group (OMC) | ||
Pureplay Publishers | ||
Journal Register Company (JRC) | Knight-Ridder, Inc. (KRI) | |
Lee Enterprises, Inc. (LEE) | The McClatchy Company (MNI) |
Mean | Median | ||||||||
Multiple of | Multiple of | ||||||||
Selected | Selected | ||||||||
Reference | Reference | ||||||||
Transactions | Transactions | ||||||||
Firm Value to: | |||||||||
2005E Revenues | 2.53 | x | 2.68 | x | |||||
2006E Revenues | 2.32 | 2.60 | |||||||
2007E Revenues | 2.21 | 2.59 | |||||||
2005E EBITDA | 10.5 | 10.1 | |||||||
2006E EBITDA | 10.1 | 10.2 | |||||||
2007E EBITDA | 10.0 | 9.6 | |||||||
2005E EBIT | 13.2 | 12.5 | |||||||
2006E EBIT | 12.3 | 11.5 | |||||||
2007E EBIT | 12.0 | 13.6 |
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Analysis of Selected Reference Merger and Acquisition Transactions |
Acquiror | Target | |
Burton Capital Management, LLC | Cenveo, Inc. | |
Interpublic Group of Companies, Inc. | boede+partners, Inc. | |
WPP Group PLC | Focus Media SL | |
WPP Group PLC | Guangzhou Newsun Insight Advertising Co. | |
WPP Group PLC | Grey Global Group, Inc. | |
WPP Group PLC | Effort Ogilvy | |
WPP Group PLC | NCT Ventures LLC | |
Parkwood Holdings PLC | Clear Channel Communications, Inc. | |
WPP Group PLC | Quinn Gillespie & Associates LLC | |
Dentsu, Inc. | Publicis Groupe SA | |
WPP Group PLC | Cordiant Communications Group PLC | |
Omnicom Group, Inc. | Taterka | |
Publicis Groupe SA | Bcom3 Group Inc. | |
Omnicom Group, Inc. | Cawley Nea Ltd. | |
Moore Wallace, Inc. | Nielsen Co. | |
WPP Group PLC | Delfo srl | |
Omnicom Group, Inc. | MSGI Security Solutions, Inc. | |
PRIMEDIA, Inc. | Emap PLC | |
WPP Group PLC | Impact Information Pty Ltd. | |
Indian Express, Ltd. | Mid-Day Multimedia, Ltd. | |
The New York Times, Co. | Kohlberg Kravis Roberts & Co. | |
Lee Enterprises, Inc | Pulitzer, Inc. | |
Journal Register Co. | 21st Century Newspapers, Inc. | |
McClatchy Co. | Pacific-Sierra Publishing | |
Hellman & Friedman LLC | Axel Springer AG | |
Bank of America Corp | Janton Oyj | |
Harris Associates LP | John Fiarfax Holdings Ltd. | |
Hollinger International, Inc. | News Communications, Inc. | |
Lee Enterprises, Inc. | Howard Publications, Inc. |
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Acquiror | Target | |
General Electric Co. | Midland & General Direct Ltd. | |
Liberty Group Publishing, Inc. | Mid Illinois Newspapers, Inc. | |
Gannett Co., Inc. | Central Newspapers Inc. | |
Pulitzer, Inc. | Journal Register Co. | |
Gannett Co., Inc. | News Communications & Media PLC | |
Tribune Co. | Times Mirror Co. | |
WPP Group PLC | Finsbury Ltd | |
WPP Group PLC | Springbok Technologies Inc. | |
Grey Global Group, Inc. | Read-Poland Associates | |
Colleagues Group Ltd. | Moore Wallace, Inc. | |
Interpublic Group of Companies | True North Communications Inc. | |
Omnicom Group, Inc. | Capsula Comunicacao Ltda. |
Mean | Median | ||||||||
Multiple of | Multiple of | ||||||||
Selected | Selected | ||||||||
Reference | Reference | ||||||||
Transactions | Transactions | ||||||||
Firm Value to: | |||||||||
LTM Revenues | 2.20 | x | 2.28 | x | |||||
LTM EBITDA | 12.4 | 11.3 | |||||||
LTM EBIT | 19.3 | 16.8 |
Discounted Cash Flow Analysis |
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Implied Common Stock Value | |||||||||||||||||
Mean | Median | High | Low | ||||||||||||||
($ in millions) | |||||||||||||||||
Selected Reference Company Analysis | |||||||||||||||||
Using Mean Multiples | $ | 87.5 | $ | 117.4 | $ | 164.8 | $ | 58.4 | |||||||||
Using Median Multiples | $ | 86.5 | $ | 107.9 | $ | 216.3 | $ | 48.0 | |||||||||
Selected Reference Transaction Analysis | |||||||||||||||||
Using Mean Multiples | $ | 120.3 | $ | 118.9 | $ | 148.3 | $ | 93.7 | |||||||||
Using Median Multiples | $ | 103.7 | $ | 112.1 | $ | 127.1 | $ | 72.1 | |||||||||
Discounted Cash Flow Analysis | |||||||||||||||||
EBITDA Terminal Value Approach | $ | 89.6 | $ | 87.0 | $ | 173.7 | $ | 24.6 | |||||||||
Perpetual Growth Terminal Value Approach | $ | 48.8 | $ | 22.1 | $ | 192.9 | $ | 0.0 |
Implied Common Stock Value | |||||||||||||||||
Mean | Median | High | Low | ||||||||||||||
($ in million) | |||||||||||||||||
Selected Reference Company Analysis | |||||||||||||||||
Using Mean Multiples | $ | 3.4 | $ | 4.6 | $ | 6.4 | $ | 2.3 | |||||||||
Using Median Multiples | $ | 3.4 | $ | 4.2 | $ | 8.4 | $ | 1.9 | |||||||||
Selected Reference Transaction Analysis | |||||||||||||||||
Using Mean Multiples | $ | 4.7 | $ | 4.6 | $ | 5.8 | $ | 3.6 | |||||||||
Using Median Multiples | $ | 4.0 | $ | 4.4 | $ | 4.9 | $ | 2.8 | |||||||||
Discounted Cash Flow Analysis | |||||||||||||||||
EBITDA Terminal Value Approach | $ | 3.5 | $ | 3.4 | $ | 6.7 | $ | 1.0 | |||||||||
Perpetual Growth Terminal Value Approach | $ | 1.9 | $ | 0.9 | $ | 7.5 | $ | 0.0 |
Analysis of Pro Forma Leverage of NewCo |
Information Regarding SunTrust Robinson Humphrey |
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• | information concerning the business, operations, financial condition, earnings and prospects of each of TCM and Bull Run as separate entities and on a combined basis; | |
• | the potential for synergies and revenue enhancement with TCM and Bull Run, including: |
• | TCM would be able to utilize the excess capacity of Bull Run’s printing operations to produce sales and promotion materials for its advertisers; | |
• | TCM would be able to leverage the design capabilities of Bull Run’s Integrated Media Group and content professionals at TCM’s newspapers to develop leading edge Web sites for TCM’s newspapers and client’s of Bull Run’s Collegiate Marketing and Production Services Business and Association Management Services Business; and | |
• | TCM would be able to utilize Bull Run’s broadcast center to produce cost effective promotions for its newspapers, publications and clients. |
• | the enhanced strategic and market position of the combined company beyond that achievable by TCM alone given Bull Run’s existing infrastructure to support complementary printing businesses, relationships in new markets for TCM and opportunities for both joint and cross marketing and common branding; | |
• | Bull Run has the general and administrative infrastructure necessary for the operation of a public company, which TCM would have had to develop and incur the costs to develop if it did not merge with Bull Run; | |
• | that the experienced Bull Run management team could manage the combined businesses, and that TCM would not be required to hire a management team; | |
• | the increase in the market capitalization of the combined company, which should allow the combined company to have increased access to debt and equity markets; | |
• | the combined company’s anticipated future financial performance; | |
• | the opportunity for the Gray shareholders (through the ownership of TCM common stock) to participate in a larger company with more businesses, and, as stockholders of the combined company, to benefit from future growth of the combined company; | |
• | the opinion of HL Financial, as to the fairness, from a financial point of view, as of the date of such opinion and based upon the assumptions, factors and limitations set forth in such opinion, to TCM of the consideration to be paid to Bull Run’s shareholders in the merger (noting that |
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HL Financial will receive a portion of its advisory fees contingent upon completion of the spin-off and the merger); | ||
• | the treatment of the merger as a reorganization for U.S. federal income tax purposes; and | |
• | the belief that the terms of the Merger Agreement, including the parties’ representations, warranties and covenants are reasonable and that the Merger Agreement provides for an equitable valuation for TCM and Bull Run. |
• | the possibility that the expected benefits from the merger might not be fully realized; | |
• | the challenges of integrating Bull Run’s businesses with TCM’s businesses; | |
• | the possible disruption that might result from the announcement of the merger and the diversion of management’s attention in connection with the merger; | |
• | the increase in leverage as compared to TCM on a stand-alone basis giving effect to the planned refinancing; | |
• | the dilution to the Gray shareholders that will own TCM common stock following the distribution as a result of the issuance of TCM common stock to Bull Run shareholders in the merger; and | |
• | the possibility that the merger may not be consummated and the potential adverse consequences if the merger is not completed. |
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(i) EV to EBITDA, for the latest 12 months, or LTM EBITDA, the next fiscal year, or NFY EBITDA, and the following projected fiscal year, or NFY+1 EBITDA; and | |
(ii) EV to EBIT, for the latest 12 months, or LTM EBIT, the next fiscal year, or NFY EBIT, and the following projected fiscal year, or NFY+1 EBIT. |
TCM Market Multiple Analysis |
EV/ EBITDA | EV/ EBIT | |||||||||||||||||||||||||
LTM | NFY | NFY+1 | LTM | NFY | NFY+1 | |||||||||||||||||||||
Low | 9.4 | x | 9.3 | x | 9.0 | x | Low | 10.8 | x | 10.8 | x | 10.1x | ||||||||||||||
High | 16.2 | x | 13.4 | x | 11.4 | x | High | 25.5 | x | 22.2 | x | 16.6x | ||||||||||||||
Median | 10.5 | x | 9.8 | x | 9.3 | x | Median | 12.9 | x | 12.7 | x | 12.1x | ||||||||||||||
Mean | 11.4 | x | 10.6 | x | 9.8 | x | Mean | 14.7 | x | 13.5 | x | 12.2x |
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Bull Run Market Multiple Analysis |
EV/ EBITDA | EV/ EBIT | |||||||||||||||||||||||||
LTM | NFY | NFY+1 | LTM | NFY | NFY+1 | |||||||||||||||||||||
Low | 4.9 | x | 9.2 | x | 9.1 | x | Low | 6.4 | x | 12.6 | x | 11.8x | ||||||||||||||
High | 13.1 | x | 12.5 | x | 12.1 | x | High | 16.7 | x | 17.0 | x | 16.2x | ||||||||||||||
Median | 11.0 | x | 11.5 | x | 10.8 | x | Median | 12.8 | x | 13.4 | x | 12.6x | ||||||||||||||
Mean | 10.6 | x | 11.3 | x | 10.6 | x | Mean | 12.9 | x | 14.5 | x | 13.4x |
NewCo Market Multiple Analysis |
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• | TCM, HL Financial utilized certain financial projections of TCM that were prepared by TCM’s management for the fiscal years ending December 31, 2005, 2006, 2007, 2008 and 2009; | |
• | Bull Run, HL Financial utilized certain financial projections of Bull Run that were prepared by Bull Run’s management for the fiscal years ending August 31, 2005, 2006, 2007 and 2008; and | |
• | NewCo, HL Financial utilized TCM and Bull Run management projections for the fiscal years ending December 31, 2005, 2006, 2007, 2008 and 2009. |
• | free cash flows for the fiscal years ending 2005 through 2009; plus | |
• | terminal value resulted in the following indicated EV range for each of TCM, Bull Run and NewCo: for TCM, $139.0 million to $162.6 million; for Bull Run, $83.7 million to $96.8 million; and for NewCo, $231.2 million to $258.9 million. |
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Acquiror | Target | Date Announced | ||
Fortress Investment Group | Liberty Group Publishing | May 11, 2005 | ||
Lee Enterprises | Pulitzer Inc. | January 30, 2005 | ||
Journal Register Company | 21st Century Newspapers Inc. | July 6, 2004 | ||
McClatchy | Merced Sun Star | December 4, 2003 | ||
Dow Jones & Company | The Record of Stockton | April 16, 2003 | ||
The New York Times Company | International Herald Tribune | October 22, 2002 | ||
Eagle-Tribune | Essex County Newspapers | April 11, 2002 | ||
CNHI | Ottaway Newspapers | February 21, 2002 | ||
Lee Enterprises | Howard Publications | February 12, 2002 |
EV/ EBITDA | ||||
LTM | ||||
Low | 10.0x | |||
High | 16.2x | |||
Median | 12.0x | |||
Mean | 12.5x |
Determination of TCM’s Equity Value. |
Determination of Bull Run’s Equity Value. |
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Determination of NewCo’s Equity Value. |
Analysis of TCM’s Equity Contribution. |
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• | the financial and other information provided to HL Financial by the management of Gray, TCM and Bull Run, including financial projections, was accurate, complete and reasonably prepared and reflected the best currently available estimates of the financial results and condition of each of these entities; | |
• | no material changes have occurred that would impact the accuracy of the information provided to HL Financial between the date the information was provided and the date of HL Financial’s opinion; and | |
• | there were no facts or information regarding Gray, TCM, Bull Run or NewCo that would cause the information supplied to HL Financial to be incomplete or misleading in any material respect. |
• | the tax or legal consequences of the merger; | |
• | the realizable value of TCM and Bull Run common stock or the prices at which NewCo’s common stock may trade after consummation of the spin-off and the merger; or | |
• | the fairness of any aspect of the spin-off or the merger not expressly addressed in its opinion. |
• | underlying business decision of Gray, its board of directors (or any committee thereof), its securityholders or any other party to proceed with or effect the spin-off; | |
• | underlying business decision of TCM, its board of directors (or any committee thereof), its securityholders or any other party to proceed with or effect the merger; |
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• | the fairness of any portion or aspect of the spin-off or the merger not expressly addressed in its opinion; or | |
• | tax or legal consequences of the spin-off or the merger to either Gray or TCM their respective security holders, or any other party. |
• | the fair value and present fair saleable value of TCM’s assets would exceed TCM’s stated liabilities and identified contingent liabilities; | |
• | TCM should be able to pay its debts as they become absolute and mature; and | |
• | the capital remaining in TCM would not be unreasonably small for the business in which TCM is engaged, as management has indicated it is proposed to be conducted following the consummation of the spin-off, the merger and the Refinancing. |
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• | entities treated as partnerships for U.S. federal income tax purposes or Bull Run shareholders who hold their shares through entities treated as partnerships for U.S. federal income tax purposes; | |
• | certain U.S. expatriates; | |
• | Bull Run shareholders who hold Bull Run stock as part of a straddle, appreciated financial position, hedge, synthetic security, conversion transaction or other integrated investment; | |
• | Bull Run shareholders whose functional currency is not the U.S. dollar; | |
• | Bull Run shareholders who acquired Bull Run stock through the exercise of employee stock options or otherwise as compensation; | |
• | Bull Run shareholders subject to the U.S. alternative minimum tax; | |
• | foreign persons and entities; | |
• | financial institutions; | |
• | insurance companies; | |
• | tax-exempt entities; | |
• | dealers in securities or foreign currencies; and | |
• | traders in securities that mark-to-market. |
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General |
• | No gain or loss will be recognized as a result of exchanging shares of Bull Run common stock or Bull Run Series F preferred stock for shares of TCM common stock in the merger (except with respect to cash received instead of a fractional share of TCM common stock). | |
• | The aggregate tax basis of the shares of TCM common stock received by a Bull Run shareholder in the merger (before reduction for the basis in any fractional share of TCM common stock for which cash is received) will be the same as the aggregate tax basis of the shares of Bull Run common stock or Bull Run Series F preferred stock exchanged therefor. | |
• | The holding period of the shares of TCM common stock received by a Bull Run shareholder in the merger will include the holding period of the shares of Bull Run common stock or Bull Run Series F preferred stock surrendered in exchange therefor. | |
• | A Bull Run shareholder who receives cash instead of a fractional share of TCM common stock generally will recognize capital gain or loss based on the amount of such cash and the tax basis that such holder would have had in the fractional share. Such gain or loss will be long-term capital gain or loss if the holding period for the fractional share of TCM common stock (as determined above) would have been more than one year at the time of the merger. | |
• | A Bull Run shareholder who receives cash in exchange for shares of Bull Run Series E preferred stock, but who does not own any Bull Run common stock (and therefore does not receive any TCM common stock in the merger), will be treated as having the shares of Bull Run Series E preferred stock redeemed in a transaction governed by Section 302 of the Code. Such a shareholder generally will recognize taxable gain or loss based on the difference between the amount of cash received for the shares of Bull Run Series E preferred stock and the shareholder’s adjusted tax basis in those shares. Any gain or loss recognized by such a shareholder generally will constitute capital gain or loss and will constitute long-term capital gain or loss if the holding period for the shares of Bull Run Series E preferred stock is more than one year at the time of the merger. | |
• | A Bull Run shareholder who receives cash in exchange for shares of Bull Run Series E preferred stock and also receives shares of TCM common stock in the merger will be required to recognize any gain realized with respect to the exchange of the shareholder’s Bull Run Series E preferred stock but will not be permitted to recognize any loss. The amount of gain required to be recognized will equal the excess, if any, of the amount of cash received in exchange for such shareholder’s shares of Bull Run Series E preferred stock and such shareholder’s aggregate adjusted tax basis in those shares. The gain, if any, recognized by such a shareholder generally will constitute capital gain and will constitute long-term capital gain if the holding period for the shares of Bull Run Series E preferred stock is more than one year at the time of the merger. |
Shareholder Reporting Requirements |
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Backup Withholding |
Bull Run Shareholders Receiving Shares of TCM Series A Redeemable, Convertible Preferred Stock |
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• | deliver to Bull Run before the vote is taken at the special meeting of shareholders of Bull Run written notice of such shareholder’s intent to demand payment for such shareholder’s shares if the proposed action is effectuated; and | |
• | not vote such shareholder’s shares in favor of the proposed action. |
• | the further registration under the Securities Act of the transfer of shares of the TCM common stock by any such affiliate; | |
• | compliance with Rule 145 promulgated under the Securities Act (permitting limited sales under certain circumstances); or | |
• | the availability of another exemption from registration. |
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• | each share of Bull Run common stock outstanding immediately prior to the effective time shall be cancelled and extinguished and thereafter will be converted into 0.0289 of a share of TCM common stock; | |
• | each share of Bull Run Series D preferred stock outstanding immediately prior to the effective time shall be cancelled and extinguished and thereafter will be converted into one share of TCM Series A redeemable, convertible preferred stock; | |
• | each share of Bull Run Series E preferred stock held by J. Mack Robinson and any transferee of Mr. Robinson outstanding immediately prior to the effective time shall be cancelled and extinguished and thereafter will be converted into one share of TCM Series A redeemable, convertible preferred stock; | |
• | each share of Bull Run Bull Run Series E preferred stock (other than those held by Mr. Robinson and any transferee of Mr. Robinson) outstanding immediately prior to the effective time shall be cancelled and extinguished and thereafter will be converted into $1,000 in cash; | |
• | each share of Bull Run Series F preferred stock outstanding immediately prior to the effective time shall be cancelled and extinguished and thereafter will be converted into 22.56 shares of TCM common stock; | |
• | the surviving corporation will pay to each Bull Run Series E preferred shareholder (other than Mr. Robinson and any transferee of Mr. Robinson) cash in an amount equal to the accrued and unpaid dividends due to each such shareholder; | |
• | all accrued and unpaid dividends (through July 1, 2005) on each outstanding share of Bull Run Series D preferred stock and Bull Run Series E preferred stock held by Mr. Robinson and any transferee of Mr. Robinson, will be converted into the number of shares of TCM Series A redeemable, convertible preferred stock determined by dividing the accrued and unpaid dividends due on such shares by $1,000; |
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• | all accrued and unpaid dividends (through July 1, 2005) on each outstanding share of Bull Run Series F preferred stock, will be converted into an aggregate of 12,698 shares of TCM common stock; and | |
• | the cash advances in the aggregate amount of $6,050,000 made by Mr. Robinson to Bull Run will be converted into 6,050 shares of TCM Series B redeemable, convertible preferred stock. |
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• | organization, qualification to do business and good standing of Bull Run and its subsidiaries; | |
• | absence of any material violations of the articles of incorporation and by-laws of Bull Run and the equivalent organizational documents of its subsidiaries; | |
• | Bull Run’s capital structure, ownership of subsidiary capital stock and dividends; | |
• | corporate power and authorization to enter into the Merger Agreement and consummate the transactions contemplated by the Merger Agreement, and the enforceability of the Merger Agreement; | |
• | the approval and recommendation of the Merger Agreement and the merger by the Bull Run Special Committee and Bull Run’s board of directors; | |
• | absence of any conflict with, or violation of, the articles of incorporation and by-laws of Bull Run and equivalent organizational documents of its subsidiaries, or any applicable legal requirements resulting from the execution of the Merger Agreement or the completion of the merger; | |
• | governmental and regulatory approvals required to complete the merger; | |
• | filings and reports with the SEC and financial statements; | |
• | accuracy of information about Bull Run in the registration statement on Form S-4; |
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• | compliance with applicable legal requirements and possession of, and compliance with, all permits required for the operation of business; | |
• | the absence of certain changes and events, including any material adverse effect on Bull Run, since August 31, 2004; | |
• | liabilities and obligations; | |
• | litigation; | |
• | employee benefit plans; | |
• | employees and labor relations; | |
• | taxes; | |
• | environmental matters; | |
• | payments required to be made to brokers and agents on account of the merger; | |
• | material contracts and the effect of entering into and carrying out the obligations of the Merger Agreement on the material contracts; | |
• | good and valid title to, or valid leasehold interests in, all material tangible properties and assets used in its business, and the absence of encumbrances; | |
• | insurance; | |
• | tax matters relating to the merger constituting a reorganization within the meaning of Section 368(a) of the Code; | |
• | the vote of Bull Run shareholders required to complete the merger; | |
• | the inapplicability of state takeover statutes to the merger during the pendency of the Merger Agreement; and | |
• | the receipt of a fairness opinion from SunTrust Robinson Humphrey relating to the merger. |
• | organization, qualification to do business and good standing of TCM and BR Acquisition Corp.; | |
• | absence of any material violations of the organizational documents of TCM and BR Acquisition Corp.; | |
• | TCM’s capital structure and ownership of subsidiary capital stock; | |
• | authorization of the TCM common stock to be issued in the merger; | |
• | corporate power and authorization to enter into the Merger Agreement and consummate the transactions contemplated by the Merger Agreement, and the enforceability of the Merger Agreement; | |
• | the approval and recommendation of the Merger Agreement and the merger by the TCM Special Committee, TCM’s board of directors, the board of directors of BR Acquisition Corp., the sole stockholder of TCM and the sole shareholder of BR Acquisition Corp. | |
• | absence of any conflict with, or violation of, the organizational documents of TCM and BR Acquisition Corp., or any applicable legal requirements resulting from the execution of the Merger Agreement or the completion of the merger; | |
• | governmental and regulatory approvals required to complete the merger; |
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• | financial statements; | |
• | accuracy of information about TCM in the registration statement on Form S-4; | |
• | compliance with applicable legal requirements and possession of, and compliance with, all permits required for the operation of the business; | |
• | the absence of certain changes and events, including any material adverse effects on TCM, since December 31, 2004; | |
• | liabilities and obligations; | |
• | litigation; | |
• | employees and labor relations; | |
• | taxes; | |
• | environmental matters; | |
• | payments, if any, required to be made to brokers and agents on account of the merger; | |
• | material contracts and the effect of entering into and carrying out the obligations of the Merger Agreement on the material contracts; | |
• | good and valid title to, or valid leasehold interests in, all material tangible properties and assets used in its business and the absence of encumbrances; | |
• | interim operations of BR Acquisition Corp; | |
• | tax matters relating to the merger constituting a reorganization within the meaning of Section 368(a) of the Code; | |
• | employee benefit plans; and | |
• | the receipt of an opinion from HL Financial as to the fairness, from a financial point of view, as of the date of such opinion and based upon the assumptions, factors and limitations set forth in such opinion, to TCM of the consideration to be paid to Bull Run’s shareholders in the merger. |
• | amend or otherwise change Bull Run’s articles of incorporation or by-laws or any of the equivalent organizational documents of its subsidiaries; |
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• | issue, sell, pledge, dispose of or encumber, or authorize the issuance, sale, pledge, disposition or encumbrance of, any shares of capital stock of any class, or any options (including, without limitation, any options), warrants, convertible or exchangeable securities, or other rights of any kind to acquire any shares of Bull Run capital stock, or any other ownership interest, of Bull Run or any of its subsidiaries or affiliates except (1) pursuant to the terms of options that are outstanding as of the date of the Merger Agreement, (2) upon conversion of the Bull Run preferred stock outstanding as of the date of the Merger Agreement or (3) new options for the exercise of up to an aggregate of 150,000 shares of Bull Run common stock; | |
• | sell, lease, license, pledge, dispose of or encumber any assets of Bull Run or any of its subsidiaries (except (1) dispositions in the ordinary course of business and in a manner consistent with past practice and that, in the aggregate, are not material in amount and (2) dispositions of obsolete or worthless assets); | |
• | (1) amend or change the period (or permit any acceleration, amendment or change) of exercisability of any options or authorize cash payments in exchange for any such options or (2) authorize cash payments in exchange for any such options; | |
• | (1) declare, set aside, make or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of any Bull Run capital stock, except that a wholly-owned subsidiary of Bull Run may declare and pay a dividend to its parent, (2) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any shares of its capital stock or (3) amend the terms of, repurchase, redeem or otherwise acquire any of its securities, or propose to do any of the foregoing; | |
• | sell, transfer, license, sublicense or otherwise dispose of, or allow any rights to lapse with respect to, any intellectual property other than in the ordinary course of business or amend or modify any existing agreements with respect to any intellectual property, other than in the ordinary course of business, in each case so long as such action does not involve material intellectual property; | |
• | (1) acquire any corporation, partnership or other business organization or division thereof; (2) incur any indebtedness for borrowed money or other obligation or liability of any kind (other than accounts payable incurred in the ordinary course of business), or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person, or make any loans or advances to any person that exceed an aggregate of $5,000,000; (3) enter into or amend any contract or agreement other than in the ordinary course of business; (4) authorize or make any capital expenditures or purchase of fixed assets that, quarterly, exceed, $150,000 or, in the aggregate, exceed $250,000; or (5) terminate any material contract or amend any of its material terms; | |
• | except as required by applicable law or the terms of an agreement existing on the date of the Merger Agreement, increase the compensation, bonus or other benefits payable or to become payable to any of Bull Run’s or its subsidiaries’ officers, directors or employees, grant any severance or termination pay or rights to, or enter into any employment or severance agreement with, any of Bull Run’s or its subsidiaries’ officers, directors or employees, increase any benefits payable under existing severance or termination pay policies or employment agreements or establish, adopt, enter into or, except as required by law, terminate or amend, any employee benefit plan; | |
• | take any action, other than as required by generally accepted accounting principles, to change accounting policies, principles, methods or practices (including, without limitation, procedures with respect to reserves, revenue recognition, capitalization of development costs, payments of accounts payable and collection of accounts receivable); | |
• | make any tax election inconsistent with past practice or settle or compromise any tax liability, in excess of the amount accrued in the most recent financial statements of Bull Run; |
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• | (1) commence, pay, discharge, settle or satisfy any lawsuits, claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of liabilities reflected or reserved against in Bull Run’s most recent financial statements or incurred in the ordinary course of business and consistent with past practice or (2) waive any material benefits of any confidentiality, standstill or similar agreements to which Bull Run or any of its subsidiaries is a party; | |
• | permit any material increase in the number of employees employed by Bull Run or any of its subsidiaries on the date of the Merger Agreement; | |
• | terminate or fail to renew any material permit; | |
• | enter into any collective bargaining agreement or union contract with any labor organization or union; | |
• | except in the ordinary course of business and in a manner consistent with past practice, accelerate or defer any material obligation or payment by or to Bull Run; or | |
• | take or fail to take, or agree in writing or otherwise to take or fail to take, any of the actions described in above, or that would result in any of the conditions to the merger set forth in the Merger Agreement not being satisfied. |
• | initiate, solicit, seek, encourage knowingly, entertain, support or take any action to facilitate any inquiries or the making of any offer or proposal which constitutes or is reasonably likely to lead to any takeover proposal; | |
• | engage in negotiations or discussions with, or provide any non-public information or data concerning Bull Run to, any person (other than TCM, BR Acquisition Corp. and any of their affiliates or representatives) relating to any takeover proposal, whether made before or after the date of the Merger Agreement; or | |
• | enter into any letter of intent, agreement in principle, acquisition agreement or any other agreement with respect to any takeover proposal; provided, however, that Bull Run may, in response to an unsolicited bona fide written takeover proposal by any person, provide such non-public information or data or engage in negotiations or discussions with such person, if, prior to taking such actions: |
• | the proposal did not result from a breach of the Merger Agreement; | |
• | the Bull Run Special Committee determines in good faith, after consultation with legal counsel, that the failure to take such action is reasonably likely to result in a breach of its fiduciary duties under applicable law; | |
• | the Bull Run Special Committee determines in good faith that such takeover proposal is reasonably likely to be or result in a superior proposal (as defined below); | |
• | Bull Run receives from such person an executed confidentiality agreement; | |
• | Bull Run has previously notified TCM of the takeover proposal; and | |
• | the Bull Run shareholders have not approved and adopted the Merger Agreement and the merger. |
• | any proposal or offer for a merger, share exchange, consolidation or other business combination concerning Bull Run or any of its subsidiaries; |
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• | any proposal or offer to Bull Run or any of its shareholders to acquire in any manner, directly or indirectly, any material part of the assets or 10% or more of the equity securities, as outstanding as of the date of the Merger Agreement, of TCM or any of its subsidiaries; | |
• | any proposal or offer with respect to any recapitalization or restructuring concerning Bull Run or any of its subsidiaries; or | |
• | any proposal or offer with respect to any other transaction similar to any of the foregoing relating to Bull Run or any of its subsidiaries. |
• | withdraw, qualify or modify or propose to withdraw, qualify or modify, in a manner adverse to TCM, its approval or recommendation of the Merger Agreement and the merger; | |
• | approve or recommend, or propose to approve or recommend, a superior proposal; or | |
• | cause Bull Run to enter into any letter of intent, agreement in principle, acquisition agreement or other agreement with respect to any superior proposal unless: |
• | an unsolicited, written superior proposal has been made and has not been withdrawn; | |
• | the Bull Run Special Committee has complied with its obligations under the Merger Agreement; | |
• | the Bull Run Special Committee has concluded in good faith, after consultation with legal counsel, that, in light of such superior proposal, the failure of the Bull Run Special Committee to take any of the actions described above is reasonably likely to result in a breach of its fiduciary duties to Bull Run’s shareholders under applicable law; |
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• | the special meeting of the shareholders of Bull Run has not occurred; | |
• | the Bull Run Special Committee provides TCM with at least five business days’ prior notice of its proposal to take any of the actions described above during which time TCM may make, and in such event Bull Run shall consider, a counterproposal to such superior proposal, and Bull Run shall and shall cause its legal advisors to, negotiate with TCM with respect to the terms and conditions of any such counterproposal; and | |
• | the superior proposal does not impose any “break-up” or other fees or options or rights to acquire assets or securities, or any other obligations that would survive the effective time, on Bull Run or any subsidiary unless and until the Merger Agreement is terminated in accordance with its terms. |
• | initiate, solicit, seek, encourage knowingly, entertain, support or take any action to facilitate any inquiries or the making of any offer or proposal which constitutes or is reasonably likely to lead to any TCM takeover proposal (as defined below); | |
• | engage in negotiations or discussions with, or provide any non-public information or data concerning TCM to, any person (other than Bull Run and any of their affiliates or representatives) relating to any TCM takeover proposal, whether made before or after the date of the Merger Agreement; or | |
• | enter into any letter of intent, agreement in principle, acquisition agreement or any other agreement with respect to any TCM takeover proposal; provided, however, that TCM may, in response to an unsolicited bona fide written TCM takeover proposal by any person, provide such non-public information or data or engage in negotiations or discussions with such person, if, prior to taking such actions: |
• | the proposal did not result from a breach of the Merger Agreement; | |
• | the TCM Special Committee determines in good faith, after consultation with legal counsel, that the failure to take such action is reasonably likely to result in a breach of its fiduciary duties under applicable law; | |
• | the TCM Special Committee determines in good faith that such TCM takeover proposal is reasonably likely to be or result in a TCM superior proposal (as defined below); | |
• | TCM receives from such person an executed confidentiality agreement; and | |
• | TCM has previously notified Bull Run of the TCM takeover proposal. |
• | any proposal or offer for a merger, share exchange, consolidation or other business combination concerning TCM or any of its subsidiaries; | |
• | any proposal or offer to TCM or any of its stockholders to acquire in any manner, directly or indirectly, any material part of the assets or 10% or more of the equity securities, as outstanding as of the date of the Merger Agreement, of Bull Run or any of its subsidiaries; | |
• | any proposal or offer with respect to any recapitalization or restructuring concerning TCM or any of its subsidiaries; or | |
• | any proposal or offer with respect to any other transaction similar to any of the foregoing relating to TCM or any of its subsidiaries. |
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• | take, or cause to be taken, all actions, and do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective the transactions contemplated hereby as promptly as practicable; | |
• | obtain from any governmental entity or any other third party any consents, licenses, permits, waivers, approvals, authorizations or orders required to be obtained or made by Bull Run or TCM or any of their respective subsidiaries in connection with the authorization, execution and delivery of the Merger Agreement and the consummation of the Merger and transactions contemplated thereby; and | |
• | as promptly as practicable, make all necessary filings, and thereafter make any other required submissions, with respect to the Merger Agreement and the merger required under the Securities Act and the Exchange Act, and any other applicable U.S. federal or state securities laws, Nasdaq regulations and any other applicable law. Bull Run and TCM shall cooperate with each other in connection with the making of all such filings. |
• | Gray shall have transferred substantially all of the membership interests of Gray Publishing to TCM; | |
• | Gray and TCM shall have executed and delivered the separation and distribution agreement and the tax sharing agreement; | |
• | Gray shall have completed the spin-off to its shareholders; |
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• | the Form S-4 shall have been declared effective by the SEC under the Securities Act and shall not be the subject of any stop order or proceedings seeking a stop order and all state securities or blue sky laws necessary to carry out the transaction shall have been obtained and be in effect; | |
• | the Merger Agreement and the merger shall have been approved and adopted by the Bull Run shareholders; | |
• | all other consents, approvals, orders or authorizations of, or registrations, declarations or filings with, any governmental entity required to consummate the merger shall have been filed, made or obtained; | |
• | all notices to, and consents, approvals or waivers under the agreements and instruments specified in the Merger Agreement shall have been given or obtained; | |
• | there shall not have been any action taken, or any law enacted, promulgated, issued or deemed applicable to the merger by any governmental entity, that would (1) prohibit the surviving corporation’s ownership or operation of all or a material portion of Bull Run’s business or assets, or compel the surviving corporation or TCM to dispose of or hold separately all or a material portion of Bull Run’s or TCM’s business or assets, as a result of the merger; (2) render TCM or BR Acquisition Corp. unable to consummate the merger; or (3) impose or confirm material limitations on the ability of TCM or BR Acquisition Corp. effectively to exercise full rights of ownership of shares of the capital stock of the surviving corporation, including without limitation, the right to vote any such shares on all matters properly presented to the shareholders of the surviving corporation; | |
• | no judgment, order, injunction, decree or ruling issued by any governmental entity restraining, enjoining or otherwise prohibiting the consummation of the merger shall have been issued and then be in effect nor shall there have been any law enacted, enforced or deemed applicable to the merger that makes the consummation of the merger illegal; and | |
• | the shares of TCM common stock to be issued or reserved that constitute the merger consideration shall be approved for listing on Nasdaq, subject to official notice of issuance. |
• | the representations and warranties of Bull Run made in the Merger Agreement shall be true and correct (except for such representations and warranties that are qualified by their terms by a reference to materiality or to material adverse effect, which representations and warranties as so qualified shall be true and correct in all respects) as of the closing date as though such representations and warranties were made on and as of the closing date, except for those representations and warranties that address matters only as of a particular date, which representations and warranties shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or to material adverse effect, which representations and warranties as so qualified shall be true and correct in all respects) only as of such date, and TCM shall have received a certificate signed on behalf of Bull Run by the Chief Executive Officer and Chief Financial Officer of Bull Run to such effect; | |
• | Bull Run shall have performed or complied in all material respects with all agreements and covenants required by the Merger Agreement to be performed or complied with by it on or prior to the effective time, and TCM shall have received a certificate signed on behalf of the Chief Executive Officer and Chief Financial Officer of Bull Run to such effect; | |
• | Bull Run shareholders entitled to receive, in the aggregate, not more than 5% of the merger consideration shall have demanded appraisal for their shares in accordance with Article 13 of the GBCC; |
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• | at or prior to the effective time, the shareholder agreement specified in the Merger Agreement shall have been terminated; | |
• | all corporate actions, proceedings, instruments, and documents required to carry out the transactions contemplated by the Merger Agreement or incidental to the Merger Agreement and all other related legal matters shall have been reasonably satisfactory to and approved by counsel to TCM and such counsel shall have been furnished with such certified copies of such corporate actions and proceedings and such other instruments and documents as it shall have reasonably requested; and | |
• | TCM shall have received a legal opinion of King & Spalding LLP, dated as of the closing date, and subject to the customary assumptions and qualifications, to the effect that the merger will qualify as a “reorganization” under Section 368(a) of the Code; | |
• | the TCM Special Committee and TCM’s board of directors shall have received a favorable opinion from a nationally recognized independent valuation firm with respect to the solvency of TCM, after giving effect to the spin-off, the merger and the Refinancing; and | |
• | Bull Run’s indebtedness for borrowed money at the effective time shall not exceed $69.1 million plus up to an additional $5.0 million (it being understood and agreed that the cash advances in the aggregate of $6,050,000 by J. Mack Robinson to Bull Run shall not be considered indebtedness for borrowed money). |
• | the representations and warranties of TCM set forth in the Merger Agreement shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or to material adverse effect, which representations and warranties as so qualified shall be true and correct in all respects) as of the closing date as though such representations and warranties were made on and as of the closing date, except for those representations and warranties that address matters only as of a particular date, which representations and warranties shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or to material adverse effect, which representations and warranties as so qualified shall be true and correct in all respects) only as of such date, and Bull Run shall have received a certificate signed on behalf of TCM by the Chief Executive Officer and Chief Financial Officer of TCM to such effect; | |
• | each of TCM and BR Acquisition Corp. shall have performed or complied in all material respects with all agreements and covenants required by the Merger Agreement to be performed or complied with by it on or prior to the closing date, and Bull Run shall have received a certificate signed on behalf of TCM by the Chief Executive Officer and Chief Financial Officer of TCM to such effect; | |
• | all corporate actions, proceedings, instruments and documents required to carry out the transactions contemplated by the Merger Agreement or incidental to the Merger Agreement and all other related legal matters shall have been reasonably satisfactory to and approved by counsel to the Bull Run Special Committee and such counsel shall have been furnished with such certified copies of such corporate actions and proceedings and such other instruments and documents as it shall have reasonably requested; | |
• | Bull Run shall have received a legal opinion of Troutman Sanders LLP, dated as of the closing date, and subject to the customary assumptions and qualifications, to the effect that the merger will qualify as a “reorganization” under Section 368(a) of the Code; | |
• | Bull Run shall have received the written opinion of its financial advisor, in customary form and based on customary assumptions, to the effect that the merger consideration to be received by the unaffiliated Bull Run common shareholders pursuant to the merger is fair to such Bull Run shareholders from a financial point of view, which opinion shall not have been withdrawn; |
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• | TCM and its subsidiaries shall have obtained policies of fire and casualty, liability and other forms of insurance in such amounts, with such deductibles and against such risks and losses as are, in TCM’s judgment, reasonable for the assets and properties of TCM and its subsidiaries and customary in TCM’s industry; | |
• | TCM’s indebtedness for borrowed money at the effective time shall not exceed $40.0 million, which shall include the amount of money that TCM is required to distribute to Gray pursuant to the separation and distribution agreement; and | |
• | Bull Run shall have received a copy of the solvency opinion received by TCM, which shall be in form and substance reasonably satisfactory to Bull Run. |
• | by mutual written consent duly authorized by TCM’s board of directors, the TCM Special Committee, the board of directors of BR Acquisition Corp., Bull Run’s board of directors and the Bull Run Special Committee; or | |
• | by either the TCM Special Committee or the Bull Run Special Committee if a governmental entity shall have (1) issued a non-appealable final judgment, order, injunction, decree or ruling or taken any other action or (2) enacted, enforced or deemed applicable to the merger a law in final form, in each case having the effect of permanently restraining, enjoining, prohibiting or making illegal the consummation of the merger (provided that the party seeking to terminate the Merger Agreement shall have used commercially reasonable efforts to have any such judgment, order, injunction, decree, ruling or other action vacated or lifted); or | |
• | by the TCM Special Committee, (1) upon a breach of any representation, warranty, covenant or agreement of Bull Run, provided that, if such breach is curable prior to the expiration of 30 days from notice to Bull Run of its occurrence, and for so long as Bull Run continues to exercise commercially reasonable efforts to cure such breach, the TCM Special Committee may not terminate the Merger Agreement until the expiration of such 30-day period (but in no event shall the preceding proviso be deemed to extend the date beyond the 12-month anniversary of the execution of the Merger Agreement), or (2) if satisfaction of any of the conditions to closing set forth in Merger Agreement is or becomes impossible (other than through the failure of TCM or BR Acquisition Corp. to comply with its obligations under the Merger Agreement); or | |
• | by the Bull Run Special Committee, (1) upon a breach of any representation, warranty, covenant or agreement of TCM or BR Acquisition Corp., provided that, if such breach is curable prior to the expiration of 30 days from notice to TCM of its occurrence, and for so long as TCM continues to exercise commercially reasonable efforts to cure such breach, the Bull Run Special Committee may not terminate the Merger Agreement until the expiration of such 30-day period (but in no event shall the preceding proviso be deemed to extend the date beyond the 12-month anniversary of the execution of the Merger Agreement), or (2) if satisfaction of any of the conditions to closing set forth in Merger Agreement is or becomes impossible (other than through the failure of Bull Run to comply with its obligations under the Merger Agreement); or | |
• | by either the Bull Run Special Committee or the TCM Special Committee, if the Merger has not been consummated by the 12 month anniversary of the execution of the Merger Agreement (provided that the failure to consummate the merger by such date was not the result of any act or failure to act by the party seeking to terminate the Merger Agreement); or | |
• | by TCM, if Bull Run’s board of directors or the Bull Run Special Committee shall have failed to recommend or withdrawn, or modified or changed in a manner adverse to TCM its approval or recommendation of the Merger Agreement or the merger or shall have recommended a superior |
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proposal, or Bull Run shall have entered into a definitive agreement in respect of a takeover proposal with a person other than TCM or its subsidiaries (or Bull Run’s board of directors or the Bull Run Special Committee resolves to do any of the foregoing); or | ||
• | by Bull Run, if Bull Run’s board of directors or the Bull Run Special Committee authorizes Bull Run, subject to complying with its obligations under the Merger Agreement, to enter into a binding agreement concerning a transaction that constitutes a superior proposal; | |
• | by either the Bull Run Special Committee or the TCM Special Committee if the shareholders of Bull Run do not approve and adopt the Merger Agreement and the merger; | |
• | by either TCM or Bull Run, if the separation and distribution agreement is terminated; or | |
• | by Bull Run, if any material amendment or modification of the separation and distribution agreement to the disadvantage of TCM had been made or if the separation and distribution agreement is breached in any material respect. |
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1. a proposal to approve and adopt the Agreement and Plan of Merger, dated as of August 2, 2005, by and among TCM, BR Acquisition Corp. and Bull Run and the merger provided for by the Merger Agreement, pursuant to which Bull Run will merge with and into BR Acquisition Corp., with BR Acquisition Corp. surviving the merger; and | |
2. such other business and matters or proposals as may properly come before the meeting or any adjournments or postponements thereof. |
• | attending the Bull Run special meeting; | |
• | the Internet, as directed on the enclosed proxy card; | |
• | the telephone, as directed on the enclosed proxy card; or | |
• | completing and mailing the enclosed proxy card. |
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• | the holders of a majority of the outstanding shares of Bull Run common stock entitled to vote on the merger must vote for the approval and adoption of the Merger Agreement and the merger; | |
• | the holders of at least a majority of the outstanding shares of Bull Run Series D preferred stock, voting separately as a class, must vote for the approval and adoption the Merger Agreement and the merger; | |
• | the holders of at least a majority of the outstanding shares of Bull Run Series E preferred stock, voting separately as a class, must vote for the approval and adoption the Merger Agreement and the merger; and | |
• | the holders of at least a majority of the outstanding shares of Bull Run Series F preferred stock, voting separately as a class, must vote for the approval and adoption the Merger Agreement and the merger. |
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• | deliver to Bull Run before the vote is taken at the special meeting of shareholders of Bull Run written notice of such shareholder’s intent to demand payment for such shareholder’s shares if the proposed action is effectuated; and | |
• | not vote such shareholder’s shares in favor of the proposed action. |
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• | is the Chairman of Bull Run’s board of directors, the beneficial owner of (1) approximately 59% of the issued and outstanding Bull Run common stock, (2) 100% of the issued and outstanding Bull Run Series D preferred stock, (3) approximately 69% of the issued and outstanding Bull Run Series E preferred stock and (4) 100% of the issued and outstanding Bull Run Series F preferred stock; | |
• | is the Chairman and Chief Executive Officer of Gray, and the beneficial owner of approximately 31% of the combined voting power of Gray’s two classes of common stock; | |
• | holds options to purchase 35,000 shares of Bull Run common stock that will be converted into options to purchase 1,012 shares of TCM common stock in the merger; | |
• | is the proposed Chairman of the board of directors of TCM following the merger; | |
• | will be released of his personal guaranty of Bull Run’s debt to Bull Run’s bank lenders (approximately $58.9 million as of October 31, 2005) in connection with the proposed Refinancing; | |
• | waived the receipt of the shares of Bull Run common stock payable to Mr. Robinson as compensation for the period January 26, 2005 through the closing of the merger for his personal guaranty of Bull Run’s debt (approximately 1,116,533 shares of Bull Run common stock as of October 31, 2005); | |
• | has the option to purchase the entire loan outstanding under Bull Run’s bank credit facility, and thereby become the holder of the debt currently payable by Bull Run to the bank and the related lien on Bull Run’s assets; | |
• | is married to Harriett J. Robinson, a member of Gray’s board of directors; | |
• | has made $6,050,000 million of cash advances to Bull Run that will be converted into TCM Series B redeemable, convertible preferred stock in the merger; | |
• | has a substantial ownership interest in Atlantic American Corporation, a publicly traded company, which is the parent of Georgia Casualty & Surety Co., from which TCM intends to obtain workers’ compensation insurance coverage at an annual cost of approximately $200,000; and | |
• | his affiliates own $8,240,000 out of $39,640,000 of the Gray Series C convertible preferred stock. The conversion price for the Gray Series C convertible preferred stock is being adjusted from $14.39 to $13.07 upon the consummation of the spin-off. See “The Spin-off — Treatment of Gray Series C Preferred Stock” beginning on page 54 for more information. |
• | is the President, Chief Executive Officer and a director of Bull Run and the beneficial owner of (1) approximately 6% of the issued and outstanding Bull Run common stock and (2) 1% of the issued and outstanding Bull Run Series E preferred stock; | |
• | holds options to purchase 77,272 shares of Bull Run common stock that will be converted into options to purchase 2,233 shares of TCM common stock in the merger; | |
• | is the President, Chief Operating Officer and a director of Gray and beneficial owner of approximately 3% of the combined voting power of Gray’s two classes of common stock; and |
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• | is the current President and Chief Executive Officer of TCM and the proposed Chairman of TCM following the merger. |
• | is a Vice President, the Secretary and a director of Bull Run and the beneficial owner of approximately 7% of the issued and outstanding Bull Run common stock; | |
• | holds options to purchase 7,500 shares of Bull Run common stock that will be converted into options to purchase 217 shares of TCM common stock in the merger; | |
• | is the Vice Chairman and a director of Gray and the beneficial owner of approximately 8% of the combined voting power of Gray’s two classes of common stock; | |
• | is a proposed director of TCM following the merger; | |
• | is President and Chief Executive Officer and a director of Atlantic American Corporation, a publicly traded company, which is the parent of Georgia Casualty & Surety Co. (of which Mr. Howell is a director), from which TCM intends to obtain workers’ compensation insurance at an annual cost of approximately $200,000; and | |
• | is J. Mack Robinson’s son-in-law. |
• | is the President and Chief Executive Officer of Host, a wholly-owned subsidiary of Bull Run, and the beneficial owner of approximately 0.3% of the issued and outstanding Bull Run common stock; | |
• | is a consultant to Gray and will receive $116,667 from Gray during the year ended December 31, 2005; | |
• | is the beneficial owner of approximately 0.02% of the combined voting power of Gray’s two classes of common stock; and | |
• | is the proposed Chief Executive Officer and President and a proposed director of TCM following the merger. |
• | each is a current director of Bull Run and a member of the Bull Run Special Committee; | |
• | each is a proposed director of TCM following the merger; | |
• | Gerald N. Agranoff is the beneficial owner of approximately 0.1% of the issued and outstanding Bull Run common stock and holds options to purchase 4,000 shares of Bull Run common stock that will be converted into options to purchase 116 shares of TCM common stock in the merger; | |
• | James W. Busby is the beneficial owner of approximately 3% of issued and outstanding Bull Run common stock and holds options to purchase 3,000 shares of Bull Run common stock that will be converted into options to purchase 87 shares of TCM common stock in the merger; and | |
• | Monte C. Johnson is the beneficial owner of approximately 0.4% of the issued and outstanding Bull Run common stock and approximately 1.0% of the issued and outstanding Bull Run Series E preferred stock and holds options to purchase 8,772 shares of Bull Run common stock that will be converted into options to purchase 254 shares of TCM common stock in the merger. |
• | is the Chief Financial Officer, Vice President — Finance, Treasurer and Assistant Secretary of Bull Run and the beneficial owner of approximately 0.2% of the issued and outstanding Bull Run common stock and holds options to purchase 15,000 shares of Bull Run common stock that will be converted into options to purchase 434 shares of TCM common stock in the merger; and |
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• | is the proposed Chief Financial Officer of TCM following the merger. |
• | is the founder of Host and a former director of Bull Run; | |
• | is the beneficial owner of approximately 7% of the issued and outstanding Bull Run common stock; and | |
• | will obtain the release of his pledge of $3.0 million of cash to Bull Run’s lenders in connection with the proposed Refinancing. |
• | beneficially owned (1) approximately 74% of the outstanding Bull Run common stock, (2) all of the outstanding Bull Run Series D preferred stock, (3) approximately 71% of the outstanding Bull Run Series E preferred stock and (4) all of the outstanding Bull Run Series F preferred stock, and, therefore, the officers and directors of Bull Run can approve the Merger Agreement and the merger without the affirmative vote of any other shareholder of Bull Run; | |
• | following the merger, BR Acquisition Corp., as the surviving corporation in the merger, will indemnify, and maintain directors’ and officers’ insurance policies for the benefit of, the former directors and officers of Bull Run for events occurring before the merger, including events that are related to the Merger Agreement; | |
• | the members of the TCM Special Committee and the members of the Gray Special Committee have each received a retainer of $15,000 and the chairman of each such committee has received an additional $5,000; | |
• | the members of the Bull Run Special Committee will each receive a retainer of $15,000 and the chairman of such committee will receive an additional $5,000, whether or not the merger is consummated; | |
• | pursuant to the Indemnity Letter, TCM has agreed to indemnify each person who has been selected as a proposed director of TCM upon the consummation of the merger, or the Director Designees, for any liabilities that any of the Director Designees may incur by reason of such status, to the same extent that TCM would have been obligated to indemnify any of the Director Designees had they been directors of TCM for the period beginning on September 13, 2005 through the date on which each of the Director Designees becomes a director of TCM; | |
• | Gray has agreed to guaranty the full performance of all of TCM’s indemnification and contribution obligations arising under the DGCL, TCM’s amended and restated certificate of incorporation and by-laws and any resolution adopted by TCM’s board of directors to TCM’s officers and directors in respect of actions or omissions of such persons occurring at or prior to the consummation of the spin-off and the merger; and | |
• | Gray has agreed to guaranty the full performance of all of TCM’s indemnification and contribution obligations arising under the DGCL, TCM’s amended and restated certificate of incorporation, TCM’s bylaws, any resolutions of TCM’s board of directors and the Indemnity Letter to TCM’s Director Designees in respect of actions or omissions by such persons occurring between September 13, 2005 and the date on which each of the Director Designees becomes a director of TCM. |
• | Section 203 of the DGCL, which prohibits business combinations with interested stockholders for three years following the time that such stockholders become interested stockholders does not apply to J. Mack Robinson’s acquisition of shares of TCM common stock in either the spin-off or the merger. |
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• | each outstanding unvested nonqualified stock option of Gray granted prior to the distribution date that is held by an employee of the Newspaper Publishing Business and the GrayLink Wireless Business that will be transferred to TCM will become fully vested upon the consummation of the spin-off; | |
• | Gray and Host are parties to a rights-sharing agreement pursuant to which (1) Host participates jointly with Gray under the terms of a contract with one university in the marketing, selling and broadcasting of certain collegiate sporting events and in related programming, production and other associated activities and (2) Host and Gray share the revenues and expenses derived from the agreement, including the rights fees, equally; and | |
• | the law firms representing Gray, TCM and Bull Run (other than the law firms representing the Bull Run Special Committee and the TCM Special Committee) in connection with the Transactions have in the past represented other parties to the Transactions regarding unrelated matters. |
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• | the execution and delivery of the separation and distribution agreement and the consummation of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action on the part of Gray, and no other corporate proceedings on the part of Gray are necessary; and | |
• | upon the consummation of the transactions contemplated by the separation and distribution agreement, TCM shall have all the assets (tangible and intangible) necessary for the conduct of the business of TCM and its subsidiaries in the manner in which it was conducted by Gray on the date of the separation and distribution agreement and as such business is proposed to be conducted by TCM, except for the retained assets specified in the separation and distribution agreement; and | |
• | except as required by applicable laws, TCM will have no liability for any liabilities arising under any employee benefit plan currently, formerly, or in the future maintained by Gray. |
• | Gray, TCM and their respective subsidiaries shall conduct the business of Gray Publishing in the ordinary course of business and in a manner consistent with past practice and shall use commercially reasonable efforts to preserve substantially intact such business; | |
• | Gray shall perform its obligations and agreements as set forth in the separation and distribution agreement necessary to effect the separation if and when all conditions to the Merger Agreement and separation and distribution agreement have been satisfied or waived; and | |
• | Gray will not take any action which TCM would not be permitted to take under Section 5.04(e) of the Merger Agreement. |
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• | the separation and distribution agreement; | |
• | the tax sharing agreement; | |
• | the lease agreement; and | |
• | the guaranty agreement. |
• | all cash and cash equivalents; | |
• | any right, title, or interest in any tax refund, credit, or benefit to which Gray or any of its subsidiaries is entitled in accordance with the terms of the separation and distribution agreement or of the tax sharing agreement; | |
• | any right, title, or interest in the intercompany assets; and | |
• | Gray Publishing’s or any of its subsidiaries rights under any agreement, commitment or order as to which consent to assignment is required but has not been obtained. |
• | all liabilities for which Gray is liable in accordance with the terms of the tax sharing agreement; and | |
• | any liability or obligation of Gray Publishing or GrayLink, LLC, as applicable, in respect of intercompany debt. |
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• | the registration of TCM common stock under the Exchange Act and the Securities Act; | |
• | the listing of TCM common stock on the Nasdaq National Market; | |
• | the receipt by Gray and Bull Run of an opinion of King & Spalding LLP, special tax counsel to Gray, to the effect that the separation and distribution will qualify as a division reorganization described in Sections 368(a)(i)(D) and 355 of the Code; | |
• | the approval by the Bull Run shareholders of the Merger Agreement and the merger; | |
• | the receipt by TCM’s board of directors, Gray’s board of directors, the TCM Special Committee and the Gray Special Committee of a favorable opinion from a nationally recognized independent valuation firm regarding the solvency of TCM after giving effect to the spin-off, the merger and the Refinancing; | |
• | the receipt by TCM of an opinion of King & Spalding LLP, special tax counsel to TCM, to the effect that the merger will qualify as a reorganization under Section 368(a) of the Code; and | |
• | the receipt by Bull Run of an opinion of Troutman Sanders LLP, counsel to Bull Run, to the effect that the merger will qualify as a reorganization under Section 368(a) of the Code. |
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• | all present and future capital stock or other membership, equity, ownership or profit interest of or in each of the present and future domestic subsidiaries of TCM and each of the guarantors; | |
• | substantially all of the tangible and intangible properties and assets of TCM and the guarantors; | |
• | all present and future intercompany debt of TCM and the guarantors; and | |
• | all proceeds and products of the property and assets described above. |
• | the absence of any change or disruption in the loan syndication, financial, banking or capital markets that could reasonably be expected to have a material adverse effect on the syndication of the credit facilities; | |
• | the satisfaction of Wachovia Bank and Bank of America that after the date of the commitment letter and the earlier of (1) the completion of the syndication of the credit facilities or (2) 90 days after the closing date of the spin-off, merger, the other transactions contemplated thereby, the credit facilities and the refinancing, none of Bull Run, TCM or any of their respective subsidiaries shall have syndicated or issued, attempted to syndicate or issue, or announced the syndication or issuance of, any debt or equity facility or security (including convertible debt or equity) of any of them, including renewals or refinancings thereof, other than the credit facilities contemplated by the commitment letter; and |
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• | since December 31, 2004, there not having occurred any material adverse condition or change in or affecting, or the occurrence of any circumstance or condition that could reasonably be expected to result in a material adverse change in or affecting, the business, operations, condition (financial or otherwise), assets or liabilities or prospects of Gray, Bull Run, TCM or their respective subsidiaries, taken as a whole). |
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High | Low | ||||||||
Fiscal Year Ended August 31, 2003 | |||||||||
First Quarter ended November 30, 2002 | $ | 7.20 | $ | 4.30 | |||||
Second Quarter ended February 28, 2003 | 10.20 | 3.00 | |||||||
Third Quarter ended May 31, 2003 | 5.70 | 3.00 | |||||||
Fourth Quarter ended August 31, 2003 | 3.78 | 2.74 | |||||||
Fiscal Year Ended August 31, 2004 | |||||||||
First Quarter ended November 30, 2003 | $ | 3.61 | $ | 1.01 | |||||
Second Quarter ended February 29, 2004 | 1.80 | .51 | |||||||
Third Quarter ended May 31, 2004 | .65 | .48 | |||||||
Fourth Quarter ended August 31, 2004 | .50 | .18 | |||||||
Fiscal Year Ended August 31, 2005 | |||||||||
First Quarter ended November 30, 2004 | $ | .85 | $ | .23 | |||||
Second Quarter ended February 29, 2005 | .70 | .36 | |||||||
Third Quarter ended May 31, 2005 | .91 | .60 | |||||||
Fourth Quarter ended August 31, 2005 | .90 | .38 | |||||||
Fiscal Year Ended August 31, 2006 | |||||||||
First Quarter ending November 30, 2005 (through October 31, 2005) | $ | .40 | $ | .33 |
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TCM | Merger and | ||||||||||||||||||||||||
Spin-Off | Post | Refinancing | Pro | ||||||||||||||||||||||
TCM | Adjustments | Spin-Off | Bull Run | Adjustments | Forma | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||
Cash and cash equivalents | $ | 330 | $ | (330 | )(a) | $ | -0- | $ | 800 | $ | 47,610 | (d) | |||||||||||||
(45,000 | )(g) | ||||||||||||||||||||||||
(2,772 | )(e) | $ | 638 | ||||||||||||||||||||||
330 | (330 | ) | -0- | 800 | (162 | ) | $ | 638 | |||||||||||||||||
Long Term Debt: | |||||||||||||||||||||||||
Current portion of long term debt | -0- | -0- | -0- | 8,440 | (8,440 | )(d) | |||||||||||||||||||
TCM senior first lien credit facility, current portion | 900 | (d) | 900 | ||||||||||||||||||||||
Long Term debt | -0- | -0- | -0- | 61,625 | (61,625 | )(d) | -0- | ||||||||||||||||||
TCM senior first lien credit facility, long term | -0- | -0- | -0- | -0- | 89,100 | (d) | 89,100 | ||||||||||||||||||
TCM senior second lien credit facility, long term | -0- | -0- | -0- | -0- | 30,000 | (d) | 30,000 | ||||||||||||||||||
-0- | -0- | -0- | 70,065 | 49,935 | 120,000 | ||||||||||||||||||||
Preferred Stock: | |||||||||||||||||||||||||
Bull Run Series D preferred stock, $0.01 par value (authorized 100 shares; issued and outstanding 12.5 shares; $12,497 liquidation value) | -0- | -0- | -0- | 12,497 | (12,497 | )(f) | -0- | ||||||||||||||||||
Bull Run Series E preferred stock, $0.01 par value (authorized 25 shares; issued and outstanding 7.6 shares; $7,585 liquidation value) | -0- | -0- | -0- | 7,585 | (7,585 | )(f) | -0- | ||||||||||||||||||
Bull Run Series F preferred stock, $0.01 par value (authorized 25 shares; issued and outstanding 2.0 shares; $2,000 liquidation value) | -0- | -0- | -0- | 2,000 | (2,000 | )(f) | -0- | ||||||||||||||||||
TCM Series B redeemable, convertible preferred stock, $0.001 par value (authorized 20 shares; issued and outstanding 6.05 shares; $6,050 liquidation value) | -0- | -0- | -0- | -0- | 3,000 | (e)(h) | 3,000 | ||||||||||||||||||
-0- | -0- | -0- | 22,082 | (19,082 | ) | 3,000 | |||||||||||||||||||
TCM Series A redeemable, convertible preferred stock, $0.001 par value (authorized 50 preferred shares; issued and outstanding 20.89 shares; $21,290 liquidation value) | -0- | -0- | -0- | -0- | 15,000 | (e) | 15,000 | ||||||||||||||||||
-0- | -0- | -0- | -0- | 15,000 | 15,000 | ||||||||||||||||||||
Stockholder’s equity: | |||||||||||||||||||||||||
Owner’s net investment | 28,809 | (5 | )(c) | ||||||||||||||||||||||
(330 | )(a) | ||||||||||||||||||||||||
(28,474 | )(b) | -0- | -0- | -0- | -0- | ||||||||||||||||||||
TCM common stock, $0.001 par value (authorized 25,000 shares; issued 5,128) | -0- | 5 | (c) | 5 | -0- | -0- | 5 | ||||||||||||||||||
Bull Run common stock, $0.01 par value (authorized 100,000 shares; issued 6,887) | -0- | -0- | -0- | 69 | (69 | )(f) | -0- | ||||||||||||||||||
Additional paid in capital | -0- | -0- | -0- | 84,471 | (84,471 | )(f) | |||||||||||||||||||
4,818 | (e) | 4,818 | |||||||||||||||||||||||
Accumulated deficit | -0- | (16,506 | )(b) | (16,506 | ) | (143,841 | ) | 143,841 | (f) | (16,506 | ) | ||||||||||||||
Total stockholder’s equity (deficit) | 28,809 | (45,310 | ) | (16,501 | ) | (59,301 | ) | 64,119 | (11,683 | ) | |||||||||||||||
Total Capitalization | $ | 29,139 | $ | (45,640 | ) | $ | (16,501 | ) | $ | 33,646 | $ | 109,810 | $ | 126,955 | |||||||||||
(a) | Gray will retain all TCM cash at the date of the spin-off. |
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(b) | TCM will accrue a distribution payable to Gray in the estimated amount of $45.0 million, which includes an estimated $5.0 million of fees and expenses relating to the spin-off and the merger. | |
(c) | The spin-off of TCM, including the issuance of shares of TCM common stock to the shareholders of Gray, representing one share of TCM common stock for every 10 shares of Gray common stock and one share of TCM common stock for every 10 shares of Gray Class A common stock: |
Gray Shares Outstanding Pre-Merger (as of October 31, 2005): | |||||
Common Shares | 42,957,777 | ||||
Class A Common Shares | 5,753,020 | ||||
Total | 48,710,797 | ||||
Exchange Ratio (10 Gray Shares Owned to Equal One TCM share) | 0.1000 | x | |||
TCM common stock owned by Gray shareholders | 4,871,080 | ||||
(d) | TCM intends to refinance the debt of the surviving corporation in the merger by entering into a $140.0 million senior secured credit facilities. The pro forma adjustments to refinance the credit facility, adjust related interest expense, annual fees and debt acquisition costs are described in the following tables: |
Bank and Other Financing: | September 30, 2005 | ||||
(Dollars in thousands) | |||||
Combined debt to be issued: | |||||
TCM bank senior first lien credit facility, term loan | $ | 89,100 | |||
TCM bank senior first lien credit facility, term loan (current portion) | 900 | ||||
TCM senior first lien credit facility, revolver | -0- | ||||
TCM senior second lien credit facility, term loan | 30,000 | ||||
Previously existing debt: | |||||
Bull Run bank credit facilities, current portion | (7,500 | ) | |||
Bull Run bank credit facilities, non-current | (51,432 | ) | |||
Bull Run subordinated notes, current portion | (940 | ) | |||
Bull Run bank subordinated notes, non-current | (10,193 | ) | |||
Debt issue costs: | |||||
TCM senior first lien credit facility, term loan ($90.0 million at 1.75%) | (1,575 | ) | |||
TCM senior second lien credit facility ($30.0 million at 2.50%) | (750 | ) | |||
Net cash provided | $ | 47,610 | |||
As part of the $140.0 million senior secured credit facilities, TCM would have a revolving credit facility (with a subfacility for letters of credit in an amount of up to $10.0 million) in an aggregate principal amount of up to $20.0 million available at the closing date. | ||
(e) | Purchase consideration was determined based on estimates of the fair value of TCM common stock and TCM Series A redeemable, convertible preferred stock and TCM Series B redeemable, convertible preferred stock. The $18.75 per share estimated fair value of TCM common stock issued as partial consideration for the merger was derived from a review of the range of equity valuations of TCM, pre-merger, included in the summaries of the fairness opinions of the respective financial advisors to the TCM Special Committee and to the Bull Run Special Committee contained in this proxy statement/prospectus/information statement. The value of the TCM Series A redeemable, convertible preferred stock and TCM Series B redeemable, convertible preferred stock was based on a combination of (1) an analysis of the security terms, using pricing models and consideration of the possible discounts due to the illiquid nature of the securities and (2) the underlying implied value of TCM common stock immediately after the merger based on a review of the range of equity valuations of TCM, post-merger, included in the summaries of the fairness opinions of the respective financial |
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advisors to the TCM Special Committee and to the Bull Run Special Committee contained in this proxy statement/prospectus/information statement. The estimates of fair value of the TCM common stock, TCM Series A redeemable, convertible preferred stock and TCM Series B redeemable, convertible preferred stock are subject to change based on final determinations of the fair value of each instrument as of the closing date. These values represent preliminary estimates. Final amounts will be based on the results of an independent valuation report. The estimated purchase consideration is as follows: |
Registrant’s | ||||||||
Shares Issued | ||||||||
in the Merger | Value | |||||||
(Dollars in | ||||||||
thousands) | ||||||||
Shares of TCM common stock issued in exchange for Bull Run common stock | 199,114 | $ | 3,734 | |||||
Shares of TCM common stock issued in exchange for Bull Run Series F preferred stock and dividends thereon (through July 1, 2005) | 57,855 | 1,085 | ||||||
Cash paid to Bull Run Series E preferred non-affiliate stockholders | 2,772 | |||||||
Fair value of TCM Series A redeemable, convertible preferred stock issued in exchange for Bull Run Series D preferred stock and Bull Run Series E preferred stock held by affiliates ($21,290 liquidation value) | 15,000 | |||||||
Fair value of TCM Series B redeemable, convertible preferred stock issued to affiliates ($6,050 liquidation value) | 3,000 | |||||||
Estimated total merger consideration | $ | 25,591 | ||||||
(f) | To eliminate all existing Bull Run common and preferred equity, accrued dividends payable and cash advances by a shareholder prior to recording purchase accounting for the transaction. | |
(g) | A pro forma adjustment has been recognized to present the payment of the estimated $45.0 million distribution to Gray, subsequent to the refinancing of BRAC’s debt. | |
(h) | Based on the provisions of SFAS 150,Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, the TCM 6% Series B redeemable, convertible preferred stock has been recorded as a debt security in the pro forma balance sheet as of September 30, 2005. |
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Nine Months | ||||||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||||||||||
2000 | 2001 | 2002(1) | 2003 | 2004 | 2004 | 2005 | ||||||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||
Revenues | $ | 49,628 | $ | 48,765 | $ | 50,803 | $ | 51,302 | $ | 52,883 | $ | 38,789 | $ | 40,057 | ||||||||||||||
Operating income | 7,268 | 6,471 | 10,565 | 11,114 | 11,532 | 8,458 | 8,425 | |||||||||||||||||||||
Cumulative effect of accounting change, net of income tax benefit of $4,541(1) | -0- | -0- | (7,423 | ) | -0- | -0- | -0- | -0- | ||||||||||||||||||||
Net income (loss) | 4,431 | 3,983 | (824 | ) | 6,929 | 7,255 | 5,243 | 5,216 | ||||||||||||||||||||
Pro forma basic and diluted income (loss) from continuing operations per share(2) (unaudited) | 0.91 | 0.82 | (0.17 | ) | 1.42 | 1.49 | 1.08 | 1.07 | ||||||||||||||||||||
Cash dividends declared per common share | -0- | -0- | -0- | -0- | -0- | -0- | -0- |
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As of December 31, | As of September 30, | |||||||||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2004 | 2005 | ||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||
Total assets | $ | 55,323 | $ | 50,825 | $ | 37,696 | $ | 37,818 | $ | 39,240 | $ | 38,304 | $ | 38,222 | ||||||||||||||
Long-term debt (including current portion) | 335 | 186 | 124 | 56 | -0- | 2 | -0- | |||||||||||||||||||||
Owner’s Net Investment | 44,637 | 40,509 | 30,375 | 29,254 | 29,800 | 29,820 | 28,809 |
(1) | Upon adoption of Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets,” TCM recorded a non-cash charge of approximately $11.9 million ($7.4 million after income taxes) as a cumulative effect of accounting change. |
(2) | The pro forma (basic and diluted) income (loss) from continuing operations per share gives effect to the issuance of 4,871,080 shares of TCM common stock in the spin-off as if it had occurred at the beginning of the periods presented. |
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Introduction |
Overview |
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Newspaper Publishing, GrayLink Wireless and Other Revenues |
Year Ended December 31, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2005 | |||||||||||||||||||||||||||||||||||||
Amount | % | Amount | % | Amount | % | Amount | % | Amount | % | ||||||||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||
Newspaper publishing | |||||||||||||||||||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||||||||||||
Retail | $ | 21,953 | 43.2 | % | $ | 22,998 | 44.8 | % | $ | 24,489 | 46.3 | % | $ | 17,316 | 44.6 | % | $ | 18,328 | 45.8 | % | |||||||||||||||||||||
Classifieds | 12,590 | 24.8 | % | 12,515 | 24.4 | % | 13,284 | 25.1 | % | 10,042 | 25.9 | % | 10,691 | 26.7 | % | ||||||||||||||||||||||||||
Circulation | 6,040 | 11.9 | % | 6,113 | 11.9 | % | 6,030 | 11.4 | % | 4,552 | 11.7 | % | 4,143 | 10.3 | % | ||||||||||||||||||||||||||
Other | 1,031 | 2.0 | % | 793 | 1.6 | % | 951 | 1.8 | % | 687 | 1.8 | % | 905 | 2.3 | % | ||||||||||||||||||||||||||
$ | 41,614 | 81.9 | % | $ | 42,419 | 82.7 | % | $ | 44,754 | 84.6 | % | $ | 32,597 | 84.0 | % | $ | 34,067 | 85.1 | % | ||||||||||||||||||||||
GrayLink wireless | |||||||||||||||||||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||||||||||||
Lease, sales and service | $ | 9,189 | 18.1 | % | $ | 8,883 | 17.3 | % | $ | 8,129 | 15.4 | % | $ | 6,192 | 16.0 | % | $ | 5,990 | 14.9 | % | |||||||||||||||||||||
Total | $ | 50,803 | 100.0 | % | $ | 51,302 | 100.0 | % | $ | 52,883 | 100.0 | % | $ | 38,789 | 100.0 | % | $ | 40,057 | 100.0 | % | |||||||||||||||||||||
Nine Months Ended September 30, 2005 compared to Nine Months Ended September 30, 2004 |
• | Newspaper publishing revenues increased 5% to $34.1 million. Retail advertising revenue and classified advertising revenue each increased 6% and were the primary contributors to the increase in newspaper publishing revenues. The increase in retail advertising revenue was due largely to a combination of account development and readership growth at The Gwinnett Daily Post and Rockdale/Newton Citizen. Of the total increase in retail advertising, approximately $1.2 million of the aggregate increase in retail advertising is attributable to an expansion by 41,000 copies of the Sunday edition of The Gwinnett Daily Post beginning in August 2004. The increase in classified |
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advertising revenue was due to increases in help wanted advertisements. Circulation revenue decreased 9% primarily reflecting a decrease in the number of subscriptions at our newspapers, excluding The Gwinnett Daily Post. | ||
• | GrayLink wireless revenue decreased 3% to $6.0 million from $6.2 million for the nine months ended September 30, 2005 compared to the same period of 2004. Our GrayLink wireless business had approximately 34,000 and 45,000 pagers in service at September 30, 2005 and 2004, respectively. The number of pagers in service decreased as a result of increased competition from other communication services and products such as cellular telephones. The number of pagers in service has declined over the past several years. The decrease in revenue from the sale and leasing of pagers has been partially offset by reselling cellular telephone services. Paging revenue, excluding the reselling cellular telephone services, accounted for approximately $4.7 million of total GrayLink wireless revenue in 2005 compared to $5.2 million in 2004. The trend of generally decreasing GrayLink paging revenue is expected to continue in the future. |
• | Newspaper publishing expenses, before depreciation and amortization, increased 10% to $25.3 million. |
• | Newsprint expenses increased 10% to $4.2 million. The increase in newsprint expense was primarily due to the increase in average cost per metric ton of standard newsprint by $50 per metric ton since September 30, 2004. Total usage was approximately 7,879 metric tons and the $50 per metric ton average price increase represents approximately $434,000. | |
• | Newspaper publishing payroll expenses increased 5% to $12.4 million. The increase in payroll expense is attributable to expansion of staff at the suburban Atlanta papers to support the expanded operations of those papers. | |
• | Newspaper publishing transportation service costs increased 9% to approximately $3.2 million in the nine months ended September 30, 2005 compared to $2.9 million for the nine months ended September 30, 2004. The increase between the periods reflects general increases in fuel costs and the expanded distribution of the Sunday edition of The Gwinnett Daily Post. | |
• | Newspaper publishing repairs and maintenance expense increased 93% to approximately $331,000 in the nine months ended September 30, 2005 compared to $172,000 for the nine months ended September 30, 2004. The increase in expense was primarily the result of repairs to a printing press and other production equipment at The Gwinnett Daily Post. | |
Depreciation of property and equipment totaled $1.0 million and $1.3 million for the nine months ended September 30, 2005 and 2004, respectively. The decrease in depreciation was due to older assets becoming fully depreciated. | ||
• | There was no amortization of intangible assets during the nine months ended September 30, 2005 compared to $55,000 for the nine months ended September 30, 2004. The decrease in amortization expense was due to certain definite lived intangible assets that were acquired in prior years, becoming fully amortized in 2004. | |
• | Gain on disposal of assets of $473,000 was recorded for the nine months ended September 30, 2005, and a loss of $250,000 was recorded for the corresponding period of 2004. The gain in the current year was principally the result of a third quarter gain of $652,000 on the sale of a paging license partially offset by losses on the disposal of other assets in the ordinary course of business. |
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Year Ended December 31, 2004 compared to Year Ended December 31, 2003 |
• | Newspaper publishing revenues increased 6% to $44.8 million. Retail advertising revenue and classified advertising revenue both increased 6% and were the primary contributors to the increase in these revenues. The increase in retail advertising revenue was due largely to a combination of account development and readership growth at The Gwinnett Daily Post. Of the total increase in retail advertising, approximately 49% is attributable to new advertising accounts developed at the Gwinnett Daily Post and an additional 33% of the aggregate increase in retail advertising is attributable to an expansion by 40,000 copies of the Sunday edition of the same paper beginning in August 2004. The increase in classified advertising revenue was due to increases in help wanted advertisements. | |
• | GrayLink wireless revenue decreased 8% to $8.1 million. The decrease was due primarily to price competition and a reduction of units in service. Our GrayLink wireless business had approximately 41,000 and 53,000 pagers in service at December 31, 2004 and 2003, respectively. The number of pagers in service decreased as a result of increased competition from other communication services and products such as cellular telephones. The number of pagers in service has declined over the past several years. The decrease in revenue from the sale and leasing of pagers has been partially offset by reselling cellular telephone services, which accounted for approximately $2.2 million of revenue in 2004 compared to $1.8 million in 2003. The trend of decreasing GrayLink wireless revenue is expected to continue in the future. |
• | Newspaper publishing expenses, before depreciation and amortization, increased 7% to $31.5 million. |
• | Newsprint expenses increased 18% to $5.2 million. The increase in newsprint expense was primarily due to the increase in average cost per metric ton of standard newsprint by $51 per metric ton over the course of 2004. Total usage was approximately 11,000 metric tons and the $51 per metric ton average price increase represents approximately $561,000 of the increase in newsprint costs. The expansion of the Sunday delivery of The Gwinnett Daily Post by approximately 40,000 copies beginning in August 2004 also contributed to the increase in newsprint by approximately $143,000. | |
• | Newspaper publishing long term lease expense totaled $419,000 and $338,000 for the years ended December 31, 2004 and 2003, respectively. The increase in long term lease expense was the result of a real property lease for the new printing plant net of a sublease for the previous facility. | |
• | Newspaper publishing bad debt expense totaled $301,000 and $146,000 for the years ended December 31, 2004 and 2003, respectively. The increase in bad debt expense was primarily the result of several larger advertisers becoming uncollectible in 2004 due to bankruptcy filings. |
• | GrayLink wireless operating expenses, before depreciation and amortization, totaled $6.4 million compared to $6.6 million for the years ended December 31, 2004 and 2003, respectively reflecting the decline in GrayLink wireless revenues. | |
• | Depreciation of property and equipment totaled $1.5 million and $1.9 million for the years ended December 31, 2004 and 2003, respectively. The decrease in depreciation was due to older assets becoming fully depreciated. | |
• | Amortization of intangible assets totaled $55,000 and $425,000 for the years ended December 31, 2004 and 2003, respectively, a decrease of $370,000, or 87%. The decrease in amortization expense was due to certain definite lived intangible assets that were acquired in prior years, becoming fully amortized. |
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• | Loss on disposal of assets of $403,000 were recorded for the year ended December 31, 2004, and $386,000 for the year ended December 31, 2003. These amounts reflect disposals of equipment during the respective periods. The loss in 2004 increased over the same period of the prior year due primarily to increased disposals of pagers. |
Year Ended December 31, 2003 compared to Year Ended December 31, 2002 |
• | Newspaper publishing revenues increased 2% to $42.4 million as a result of an increase in retail advertising of 5%. The increase in retail advertising revenue is attributable primarily to account development and new business in the metro Atlanta market. Classified and circulation revenues were generally consistent between the two years. Classified advertising continued to be adversely impacted by a decline in help wanted advertising stemming from competitive pressures of internet based classified listings. | |
• | GrayLink wireless revenue decreased 3% to $8.9 million. The decrease was due primarily to price competition and a reduction of units in service. Our GrayLink wireless business had approximately 53,000 and 66,000 pagers in service at December 31, 2003 and 2002, respectively. The number of units in service decreased as a result of increased competition from other communication services and products such as cellular telephones. The decrease in revenue from the sale and leasing of pagers has been partially offset by reselling cellular telephone services, which accounted for approximately $1.8 million of revenue in 2003 compared to $1.3 million in 2002. |
• | Newspaper publishing expenses, before depreciation and amortization, were generally consistent between the periods with modest increases in payroll and newsprint and lease expenses offset by reductions in other operating expenses. |
• | Newspaper publishing payroll expenses increased approximately 2.5% to $15.6 million reflecting pay increases for the employees of the newspapers. | |
• | Newsprint expense was $4.4 million and $4.3 million for the years ended December 31, 2003 and 2002, respectively. The increase in newsprint cost was the result of an increase in the average price per metric ton of 3%. | |
• | Newspaper publishing repairs and maintenance expense was $259,000 and $360,000 for the years ended December 31, 2003 and 2002, respectively. The decrease in expense was primarily the result of repairs to printing equipment in 2002 and no similar repair costs in 2003. | |
• | Newspaper publishing long term lease expense totaled $338,000 and $265,000 for the years ended December 31, 2003 and 2002, respectively. The increase in long term lease expense was the result of a real property lease for a new printing plant for the suburban Atlanta newspapers. | |
• | Newspaper publishing transportation and other professional service costs decreased approximately $200,000 between the periods reflecting cost savings derived from relocating the printing plant for the suburban Atlanta newspapers to a newly leased facility. |
• | GrayLink wireless operating expenses, before depreciation and amortization, was consistent between the periods reflecting our cost control over operating expenses given the declining revenues discussed above. |
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• | Depreciation of property and equipment totaled $1.9 million and $2.2 million for the years ended December 31, 2003 and 2002, respectively. The decrease in depreciation was due to older assets becoming fully depreciated. | |
• | Loss on disposal of assets for the year ended December 31, 2003 and 2002 was $386,000 and $88,000, respectively. These amounts reflect disposals of equipment during the respective periods. The loss in 2003 increased over the prior year amount due primarily to increased disposals of pagers. |
General |
Nine Months Ended | ||||||||
September 30, | ||||||||
2004 | 2005 | |||||||
(Unaudited) | ||||||||
(Dollars in thousands) | ||||||||
Net cash provided by operating activities | 7,749 | 6,416 | ||||||
Net cash used in investing activities | (3,140 | ) | (551 | ) | ||||
Net cash used in financing activities | (4,730 | ) | (6,207 | ) | ||||
Net increase (decrease) in cash and cash equivalents | (121 | ) | (342 | ) | ||||
Nine Months Ended | ||||||||
September 30, | ||||||||
2004 | 2005 | |||||||
(Unaudited) | ||||||||
(Dollars in thousands) | ||||||||
Cash and cash equivalents | 416 | 330 | ||||||
Long-term debt including current portion | -0- | -0- |
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Year Ended | ||||||||
December 31, | ||||||||
2003 | 2004 | |||||||
(Dollars in thousands) | ||||||||
Net cash provided by operating activities | $ | 10,386 | $ | 10,221 | ||||
Net cash used in investing activities | (1,828 | ) | (3,321 | ) | ||||
Net cash used in financing activities | (8,118 | ) | (6,765 | ) | ||||
Net increase in cash and cash equivalents | $ | 440 | $ | 135 | ||||
December 31, | ||||||||
2003 | 2004 | |||||||
Cash and cash equivalents | $ | 537 | $ | 672 | ||||
Long-term debt including current portion | 56 | -0- |
Off-Balance Sheet Arrangements |
Year | Total | |||
2005 | $ | 902 | ||
2006 | 744 | |||
2007 | 505 | |||
2008 | 357 | |||
2009 | 290 | |||
Thereafter | 1,077 | |||
$ | 3,875 | |||
Tabular Disclosure of Contractual Obligations as of December 31, 2004 |
Payment Due by Period | ||||||||||||||||||||
Less Than | More Than | |||||||||||||||||||
1 Year | 1-3 Years | 3-5 Years | 5 Years | |||||||||||||||||
Contractual Obligations | Total | (2005) | (2006-2007) | (2008-2009) | (After 2009) | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Operating lease obligations(1) | $ | 3,875 | $ | 902 | $ | 1,249 | $ | 647 | $ | 1,077 |
(1) | Operating lease obligations represent payment obligations under non-cancelable lease agreements classified as operating leases and disclosed pursuant to Statements of Financial Accounting Standards |
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No. 13, “Accounting for Leases”, as may be modified or supplemented. These amounts are not recorded as liabilities as of the current balance sheet date. |
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Valuation and Impairment Testing of Intangible Assets |
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151
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152
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153
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TCM | Merger and | ||||||||||||||||||||||||
Spin-Off | Post | Refinancing | Pro | ||||||||||||||||||||||
TCM | Adjustments | Spin-Off | Bull Run | Adjustments | Forma | ||||||||||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||||||||||||
Operating revenues: | |||||||||||||||||||||||||
Publishing | $ | 34,067 | $ | (4,502 | )(c) | $ | 29,565 | $ | -0- | $ | -0- | $ | 29,565 | ||||||||||||
Wireless | 5,990 | -0- | 5,990 | -0- | -0- | 5,990 | |||||||||||||||||||
Collegiate marketing and production services | -0- | -0- | -0- | 32,320 | -0- | 32,320 | |||||||||||||||||||
Association management services | -0- | -0- | -0- | 6,781 | -0- | 6,781 | |||||||||||||||||||
40,057 | (4,502 | ) | 35,555 | 39,101 | -0- | 74,656 | |||||||||||||||||||
Expenses: | |||||||||||||||||||||||||
Publishing | 25,289 | (2,924 | )(c) | 22,365 | -0- | -0- | 22,365 | ||||||||||||||||||
Wireless | 4,686 | -0- | 4,686 | -0- | -0- | 4,686 | |||||||||||||||||||
Collegiate marketing and production services | -0- | -0- | -0- | 32,076 | -0- | 32,076 | |||||||||||||||||||
Association management services | -0- | -0- | -0- | 5,257 | -0- | 5,257 | |||||||||||||||||||
Corporate overhead | 1,083 | -0- | 1,083 | 1,560 | -0- | 2,643 | |||||||||||||||||||
Depreciation and amortization | 1,047 | (70 | )(c) | 977 | 1,017 | 788 | (j) | ||||||||||||||||||
(538 | )(j) | 2,244 | |||||||||||||||||||||||
Gain on disposal of assets, net | (473 | ) | -0- | (473 | ) | -0- | -0- | (473 | ) | ||||||||||||||||
31,632 | (2,994 | ) | 28,638 | 39,910 | 250 | 68,798 | |||||||||||||||||||
Operating income | 8,425 | (1,508 | ) | 6,917 | (809 | ) | (250 | ) | 5,858 | ||||||||||||||||
Other (income) expense: | |||||||||||||||||||||||||
Interest expense | -0- | -0- | -0- | 3,002 | (3,002 | )(h) | |||||||||||||||||||
6,671 | (h) | 6,671 | |||||||||||||||||||||||
TCM Series B 6% redeemable, convertible preferred stock, interest expense | -0- | -0- | -0- | -0- | 323 | (i) | 323 | ||||||||||||||||||
Annual financing fees | -0- | -0- | -0- | -0- | 131 | (h) | 131 | ||||||||||||||||||
Interest expense, related parties | -0- | -0- | -0- | 1,676 | (1,676 | )(h) | -0- | ||||||||||||||||||
Debt issue cost amortization, related parties | -0- | -0- | -0- | 102 | (102 | )(h) | -0- | ||||||||||||||||||
Debt issue cost amortization, other | 355 | (355 | )(h) | ||||||||||||||||||||||
272 | (h) | 272 | |||||||||||||||||||||||
Miscellaneous expense | -0- | -0- | -0- | 16 | -0- | 16 | |||||||||||||||||||
-0- | -0- | -0- | 5,151 | 2,262 | 7,413 | ||||||||||||||||||||
Income (loss) from continuing operations before provision for (benefit from) income taxes | 8,425 | (1,508 | ) | 6,917 | (5,960 | ) | (2,512 | ) | (1,555 | ) | |||||||||||||||
Provision for (benefit from) income taxes | 3,209 | (588 | )(c) | 2,621 | -0- | (3,071 | )(l) | (450 | ) | ||||||||||||||||
Net income (loss) from continuing operations | $ | 5,216 | $ | (920 | ) | $ | 4,296 | $ | (5,960 | ) | $ | 559 | $ | (1,105 | ) | ||||||||||
Basic and diluted loss per share | (n) | $ | (0.37 | ) | |||||||||||||||||||||
Weighted average number of common shares outstanding | (n) | 5,128 | |||||||||||||||||||||||
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TCM | Merger and | ||||||||||||||||||||||||
Spin-Off | Post | Bull | Refinancing | Pro | |||||||||||||||||||||
TCM | Adjustments | Spin-Off | Run | Adjustments | Forma | ||||||||||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||||||||||||
Operating revenues: | |||||||||||||||||||||||||
Publishing | $ | 44,754 | $ | (5,964 | )(c) | $ | 38,790 | $ | -0- | $ | -0- | $ | 38,790 | ||||||||||||
Wireless | 8,129 | -0- | 8,129 | -0- | -0- | 8,129 | |||||||||||||||||||
Collegiate marketing and production services | -0- | -0- | -0- | 51,451 | -0- | 51,451 | |||||||||||||||||||
Association management services | -0- | -0- | -0- | 8,334 | -0- | 8,334 | |||||||||||||||||||
52,883 | (5,964 | ) | 46,919 | 59,785 | -0- | 106,704 | |||||||||||||||||||
Expenses: | |||||||||||||||||||||||||
Publishing | 31,546 | (3,830 | )(c) | 27,716 | -0- | -0- | 27,716 | ||||||||||||||||||
Wireless | 6,433 | -0- | 6,433 | -0- | -0- | 6,433 | |||||||||||||||||||
Collegiate marketing and production services | -0- | -0- | -0- | 48,852 | -0- | 48,852 | |||||||||||||||||||
Association management services | -0- | -0- | -0- | 6,569 | -0- | 6,569 | |||||||||||||||||||
Corporate overhead | 1,400 | -0- | 1,400 | 1,011 | -0- | 2,411 | |||||||||||||||||||
Depreciation and amortization | 1,569 | (178 | )(c) | 1,391 | 5,200 | (1,075 | )(j) | ||||||||||||||||||
1,050 | (j) | 6,566 | |||||||||||||||||||||||
Loss on disposal of assets, net | 403 | 5 | (c) | 408 | -0- | -0- | 408 | ||||||||||||||||||
41,351 | (4,003 | ) | 37,348 | 61,632 | (25 | ) | 98,955 | ||||||||||||||||||
Operating income (loss) | 11,532 | (1,961 | ) | 9,571 | (1,847 | ) | 25 | 7,749 | |||||||||||||||||
Other (income) expense: | |||||||||||||||||||||||||
Interest expense | 3 | -0- | 3 | 4,407 | (4,407 | )(h) | |||||||||||||||||||
8,895 | (h) | 8,898 | |||||||||||||||||||||||
TCM Series B 6% redeemable, convertible preferred stock, interest expense | -0- | -0- | -0- | -0- | 422 | (i) | 422 | ||||||||||||||||||
Annual financing fees | -0- | -0- | -0- | -0- | 175 | (h) | 175 | ||||||||||||||||||
Interest expense, related party | 861 | (861 | )(h) | -0- | |||||||||||||||||||||
Debt issue cost amortization, related parties | -0- | -0- | -0- | 856 | (856 | )(h) | -0- | ||||||||||||||||||
Debt issue cost amortization, other | -0- | -0- | -0- | 292 | (292 | )(h) | |||||||||||||||||||
362 | (h) | 362 | |||||||||||||||||||||||
Miscellaneous (income) expense | (37 | ) | 1 | (c) | (36 | ) | 137 | -0- | 101 | ||||||||||||||||
Net change in value of derivative instrument | -0- | -0- | -0- | (1,335 | ) | -0- | (1,335 | ) | |||||||||||||||||
(34 | ) | 1 | (33 | ) | 5,218 | 3,438 | 8,623 | ||||||||||||||||||
Income (loss) from continuing operations before provision for (benefit from) income taxes | 11,566 | (1,962 | ) | 9,604 | (7,065 | ) | (3,413 | ) | (874 | ) | |||||||||||||||
Provision for (benefit from) income taxes | 4,311 | (765 | ) | 3,546 | -0- | (2,335 | )(l) | 1,211 | |||||||||||||||||
Net income (loss) from continuing operations | $ | 7,255 | $ | (1,197 | ) | $ | 6,058 | $ | (7,065 | ) | $ | (1,078 | ) | $ | (2,085 | ) | |||||||||
Basic and diluted loss per share | (n) | $ | (0.61 | ) | |||||||||||||||||||||
Weighted average number of common shares outstanding | (n) | 5,128 | |||||||||||||||||||||||
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TCM | Merger and | ||||||||||||||||||||||||
Spin-Off | Post | Refinancing | Pro | ||||||||||||||||||||||
TCM | Adjustments | Spin-Off | Bull Run | Adjustments | Forma | ||||||||||||||||||||
(Dollars in thousands except per share data) | |||||||||||||||||||||||||
ASSETS | |||||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||||
Cash and cash equivalents | $ | 330 | $ | (330 | )(d) | $ | -0- | $ | 800 | $ | 47,610 | (h) | |||||||||||||
(45,000 | )(m) | ||||||||||||||||||||||||
(2,772 | )(g) | $ | 638 | ||||||||||||||||||||||
Accounts receivable, net | 5,966 | (525 | )(c) | 5,441 | 12,943 | -0- | 18,384 | ||||||||||||||||||
Inventories | 904 | (77 | )(c) | 827 | 793 | -0- | 1,620 | ||||||||||||||||||
Current assets held for sale | -0- | 642 | (c) | 642 | -0- | -0- | 642 | ||||||||||||||||||
Other current assets | 210 | (20 | )(c) | 190 | 1,722 | -0- | 1,912 | ||||||||||||||||||
Total current assets | 7,410 | (310 | )(c) | 7,100 | 16,258 | (162 | ) | 23,196 | |||||||||||||||||
Property and equipment, net | 9,967 | (1,345 | )(c) | 8,622 | 2,718 | -0- | 11,340 | ||||||||||||||||||
FCC licenses | 4,006 | -0- | 4,006 | -0- | -0- | 4,006 | |||||||||||||||||||
Goodwill | 16,779 | (11,997 | )(c) | 4,782 | 40,364 | (40,364 | )(f) | ||||||||||||||||||
67,849 | (g) | 72,631 | |||||||||||||||||||||||
Definite lived intangibles | -0- | -0- | -0- | 7,531 | (7,531 | )(f) | |||||||||||||||||||
15,000 | (g) | 15,000 | |||||||||||||||||||||||
Other | 60 | -0- | 60 | 949 | 2,325 | (h) | 3,334 | ||||||||||||||||||
Noncurrent assets held for sale | -0- | 13,342 | (c) | 13,342 | -0- | -0- | 13,342 | ||||||||||||||||||
Deferred income taxes | -0- | -0- | -0- | 3 | 20,400 | (g) | |||||||||||||||||||
(3,641 | )(k) | 16,762 | |||||||||||||||||||||||
Total assets | 38,222 | (310 | ) | 37,912 | 67,823 | 53,876 | 159,611 | ||||||||||||||||||
LIABILITIES AND STOCKHOLDER’S EQUITY | |||||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||||
Accounts payable and accrued expenses | 2,474 | (204 | )(c) | 2,270 | 17,152 | (4,318 | )(e) | 15,104 | |||||||||||||||||
Deferred revenue | 2,003 | (576 | )(c) | 1,427 | 9,009 | -0- | 10,436 | ||||||||||||||||||
Accrued fees payable, related party | -0- | -0- | -0- | 1,172 | -0- | 1,172 | |||||||||||||||||||
Advances from stockholder | -0- | -0- | -0- | 6,050 | (6,050 | )(e) | -0- | ||||||||||||||||||
Distribution payable to Gray | -0- | 45,000 | (b) | 45,000 | -0- | (45,000 | )(m) | -0- | |||||||||||||||||
Net current liabilities of discontinued segment | -0- | -0- | -0- | 538 | -0- | 538 | |||||||||||||||||||
Current portion of long term debt | -0- | -0- | -0- | 8,440 | (8,440 | )(h) | |||||||||||||||||||
900 | (h) | 900 | |||||||||||||||||||||||
Current liabilities related to assets held for sale | -0- | 1,156 | (c) | 1,156 | -0- | -0- | 1,156 | ||||||||||||||||||
Federal and state income taxes | 2,482 | (376 | )(c) | 2,106 | -0- | -0- | 2,106 | ||||||||||||||||||
Total current liabilities | 6,959 | 45,000 | 51,959 | 42,361 | (62,908 | ) | 31,412 | ||||||||||||||||||
Long term debt | -0- | -0- | -0- | 61,625 | (61,625 | )(h) | -0- | ||||||||||||||||||
Senior first lien credit facility | -0- | -0- | -0- | -0- | 89,100 | (h) | 89,100 | ||||||||||||||||||
Senior second lien credit facility | -0- | -0- | -0- | -0- | 30,000 | (h) | 30,000 | ||||||||||||||||||
Deferred income taxes | 2,336 | (1,608 | )(c) | 728 | -0- | 2,913 | (g) | ||||||||||||||||||
(3,641 | )(k) | -0- | |||||||||||||||||||||||
Noncurrent liabilities related to assets held for sale | -0- | 1,608 | (c) | 1,608 | -0- | -0- | 1,608 | ||||||||||||||||||
Other long term liabilities | 118 | -0- | 118 | 226 | -0- | 344 | |||||||||||||||||||
Net long term liabilities of discontinued segment | -0- | -0- | -0- | 830 | -0- | 830 | |||||||||||||||||||
Redeemable preferred stock: | |||||||||||||||||||||||||
Bull Run Series D preferred stock | -0- | -0- | -0- | 12,497 | (12,497 | )(e) | -0- | ||||||||||||||||||
Bull Run Series E preferred stock | -0- | -0- | -0- | 7,585 | (7,585 | )(e) | -0- | ||||||||||||||||||
Bull Run Series F preferred stock | -0- | -0- | -0- | 2,000 | (2,000 | )(e) | -0- | ||||||||||||||||||
TCM Series B 6% redeemable, convertible preferred stock | -0- | -0- | -0- | -0- | 3,000 | (g) | 3,000 | ||||||||||||||||||
Total liabilities | 9,413 | 45,000 | 54,413 | 127,124 | (25,243 | ) | 156,294 | ||||||||||||||||||
TCM Series A 4% redeemable, convertible preferred stock | -0- | -0- | -0- | -0- | 15,000 | (g) | 15,000 | ||||||||||||||||||
-0- | -0- | -0- | -0- | 15,000 | 15,000 | ||||||||||||||||||||
Stockholders’ equity: | |||||||||||||||||||||||||
Owner’s net investment | 28,809 | (5 | )(a) | ||||||||||||||||||||||
(330 | )(d) | ||||||||||||||||||||||||
(28,474 | )(b) | -0- | -0- | -0- | -0- | ||||||||||||||||||||
TCM Common stock, par value $0.001 | -0- | 5 | (a) | 5 | -0- | -0- | 5 | ||||||||||||||||||
Common stock, Bull Run | -0- | -0- | -0- | 69 | (69 | )(e) | -0- | ||||||||||||||||||
Additional paid in capital | -0- | -0- | -0- | 84,471 | (84,471 | )(e) | |||||||||||||||||||
4,818 | (g) | 4,818 | |||||||||||||||||||||||
Accumulated deficit | (16,506 | )(b) | (16,506 | ) | (143,841 | ) | 143,841 | (e) | (16,506 | ) | |||||||||||||||
Total stockholder’s equity (deficit) | 28,809 | (45,310 | ) | (16,501 | ) | (59,301 | ) | 64,119 | (11,683 | ) | |||||||||||||||
Total liabilities and stockholder’s equity | $ | 38,222 | $ | (310 | ) | $ | 37,912 | $ | 67,823 | $ | 53,876 | $ | 159,611 | ||||||||||||
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Gray Shares Outstanding Pre-Merger (as of October 31, 2005): | |||||
Common Shares | 42,957,777 | ||||
Class A Common Shares | 5,753,020 | ||||
Total | 48,710,797 | ||||
Exchange Ratio (10 Gray Shares Owned to Equal One TCM share) | 0.1000 | x | |||
TCM common stock owned by Gray shareholders | 4,871,080 | ||||
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Registrant’s | ||||||||
Shares | ||||||||
Issued in the | ||||||||
Merger | Value | |||||||
(Dollars in thousands) | ||||||||
Shares of TCM common stock issued in exchange for Bull Run common stock | 199,114 | $ | 3,734 | |||||
Shares of TCM common stock issued in exchange for Bull Run Series F preferred stock | 57,855 | 1,085 | ||||||
Cash paid to Bull Run Series E preferred non-affiliate stockholders | 2,772 | |||||||
Fair value of TCM Series A redeemable, convertible preferred stock issued in exchange for Bull Run Series D preferred stock and Bull Run Series E preferred stock held by affiliates ($21,290 liquidation value) | 15,000 | |||||||
Fair value of TCM Series B redeemable, convertible preferred stock issued to affiliates ($6,050 liquidation value) | 3,000 | |||||||
Estimated total merger consideration | $ | 25,591 | ||||||
(Dollars in thousands) | ||||
Fair value of tangible assets acquired | $ | 19,925 | ||
Liabilities assumed | (24,605 | ) | ||
Bull Run debt assumed | (70,065 | ) | ||
Identifiable intangible assets | 15,000 | |||
Deferred tax liability on net increase in identifiable intangible assets | (2,913 | ) | ||
Deferred tax asset | 20,400 | |||
Goodwill | 67,849 | |||
$ | 25,591 | |||
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September 30, | |||||
2005 | |||||
(Dollars in thousands) | |||||
Bank and other financing: | |||||
Combined debt to be issued: | |||||
TCM bank senior first lien credit facility, term loan | $ | 89,100 | |||
TCM bank senior first lien credit facility, term loan, current portion | 900 | ||||
TCM senior first lien credit facility, revolver | -0- | ||||
TCM senior second lien credit facility, term loan | 30,000 | ||||
Previously existing debt: | |||||
Bull Run bank credit facilities, current portion | (7,500 | ) | |||
Bull Run bank credit facilities, noncurrent | (51,432 | ) | |||
Bull Run subordinated notes, current portion | (940 | ) | |||
Bull Run bank subordinated notes, noncurrent | (10,193 | ) | |||
Debt issue costs: | |||||
TCM senior first lien credit facility, term loan ($90.0 million at 1.75%) | (1,575 | ) | |||
TCM senior second lien credit facility ($30.0 million at 2.50%) | (750 | ) | |||
Net cash provided | $ | 47,610 | |||
Nine | |||||||||
Months | |||||||||
Year Ended | Ended | ||||||||
December 31, | September 30, | ||||||||
2004 | 2005 | ||||||||
(Dollars in thousands) | |||||||||
Interest expense: | |||||||||
Bull Run interest expense, to be eliminated: | $ | (4,407 | ) | $ | (3,002 | ) | |||
Bull Run interest expense, related party, to be eliminated: | $ | (861 | ) | $ | (1,676 | ) | |||
TCM senior first lien credit facility (LIBOR plus 2.75%) | $ | 5,940 | $ | 4,455 | |||||
TCM senior second lien credit facility (LIBOR plus 6.00%) | 2,955 | 2,216 | |||||||
Total interest expense to be recognized | $ | 8,895 | $ | 6,671 | |||||
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Nine Months | |||||||||
Year Ended | Ended | ||||||||
December 31, | September 30, | ||||||||
2004 | 2005 | ||||||||
(Dollars in thousands) | |||||||||
Debt issue cost amortization: | |||||||||
Bull Run debt issue cost amortization, to be eliminated | $ | (292 | ) | $ | (355 | ) | |||
Bull Run debt issue cost amortization, related party, to be eliminated | $ | (856 | ) | $ | (102 | ) | |||
TCM senior first lien credit facility (1.75% of $90.0 Million, amortized over 6 years) | $ | 262 | $ | 197 | |||||
TCM senior second lien credit facility (2.5% of $30.0 Million, amortized over 7.5 years) | 100 | 75 | |||||||
Total debt issue cost amortization to be recognized | $ | 362 | $ | 272 | |||||
Annual bank fees, new credit facility | $ | 175 | $ | 131 | |||||
Nine Months | |||||||||
Year Ended | Ended | ||||||||
December 31, | September 30, | ||||||||
2004 | 2005 | ||||||||
(Dollars in thousands) | |||||||||
Amortization of definite lived intangible assets: | |||||||||
Bull Run amortization expense, to be eliminated | $ | (1,075 | ) | $ | (538 | ) | |||
TCM amortization to be recognized | $ | 1,050 | $ | 788 | |||||
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Nine Months | ||||||||
Year Ended | Ended | |||||||
December 31, | September 30, | |||||||
2004 | 2005 | |||||||
TCM pro forma shares issued to Gray shareholders | 4,871,080 | 4,871,080 | ||||||
TCM pro forma shares issued to Bull Run shareholders | 256,969 | 256,969 | ||||||
Total pro forma common shares issued and outstanding | 5,128,049 | 5,128,049 | ||||||
Nine Months | |||||||||
Year Ended | Ended | ||||||||
December 31, | September 30, | ||||||||
2004 | 2005 | ||||||||
(Dollars in thousands, except | |||||||||
per share amounts) | |||||||||
Net income (loss) from continuing operations | $ | (2,085 | ) | $ | (1,105 | ) | |||
Preferred dividends: | |||||||||
TCM Series A 4.0% redeemable, convertible preferred stock including interest method accretion of purchase accounting discount | (1,068 | ) | (814 | ) | |||||
Net income (loss) available to common stockholders | $ | (3,153 | ) | $ | (1,919 | ) | |||
Basic and diluted earnings (loss) per share | $ | (0.61 | ) | $ | (0.37 | ) | |||
Weighted average common shares outstanding | 5,128 | 5,128 | |||||||
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• | Drive revenue growth at existing publications by expanding the advertising base of the Newspaper Publishing Business. TCM intends to continuously seek to utilize its distribution capability in the markets that the Newspaper Publishing Business serves to expand its advertising base by targeting new advertisers for its publications and introducing new products that attract businesses that do not typically advertise in its publications. These products include shoppers and niche publications and inserts covering subjects such as children and parenting, employment, health, senior living and real estate, that are of interest to residents of particular geographic areas and members of particular demographic groups. | |
• | Increase circulation at existing publications through innovative marketing and expansion. TCM intends to increase circulation unit sales of its newspapers through internal expansion of its newspapers or zoned editions of its newspapers into existing and contiguous markets. TCM intends to expand certain of its publications, such as its football publications into the markets that are served by its newspapers. TCM successfully has used creative alliances with cable companies to expand the circulation of its newspapers and increase value for advertisers and TCM will continue to explore other innovative ways to increase readership and circulation in all its markets and for all of its publications. In addition, TCM intends to use its printing company to produce sales promotional materials, such as print banners, signs, bus wraps and posters for its newspapers and publications and their respective advertisers. | |
• | Expand TCM’s penetration of existing contracts and add new clients in the Collegiate Marketing and Production Services Business. TCM intends to seek to add additional premier properties to its portfolio of clients through increased marketing. TCM intends to seek additional work in the areas of broadcast production and distribution, signage, promotional and printed materials and corporate sponsorships. These additional relationships also will allow TCM the opportunity to leverage its administrative infrastructure in the Collegiate Marketing and Production Services Business over a larger base of business and achieve economies of scale. | |
• | Drive revenue growth at existing Collegiate Marketing and Production Services Business clients. TCM intends to maintain Host’s strong relationships with existing collegiate clients and expand the scope of Host’s services with those universities and organizations. | |
• | Increase the number of clients of the Association Management Services Business. TCM intends to leverage Host’s existing excellent reputation in the Association Management Services Business and actively pursue opportunities to manage other associations. | |
• | Maintain reader loyalty at existing publications. TCM will seek to maintain reader loyalty through excellent editorial content, including the proper mix of local and national news in its newspapers and high-quality presentation. TCM’s goal is to produce newspapers that are complete enough that they are the only newspaper readers need to read but also unique enough so readers of other newspapers will find TCM’s newspapers compelling and essential. |
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• | Pursue selective acquisitions of sports marketing, association management and regional newspaper companies that fit TCM’s business model. TCM intends to complement its growth through selective and opportunistic acquisitions of sports marketing, association management and regional newspaper companies with a record of customer loyalty, strong client base and potential opportunities for revenue enhancements and increases in profitability through cost reductions and synergies with its existing operations. | |
• | Tailor the growth strategies TCM deploys at each of its publications. TCM intends to continue to evaluate and deploy growth strategies that are appropriate to each publication, taking into account local market conditions, including competition from other publishers, synergistic opportunities represented by clustered publications, partnering opportunities with local cable television systems and demographic trends. One of TCM’s distinctions is its willingness to use innovation and creativity to continually explore ways of growing its publications by maximizing its existing resources. In growing TCM’s publications, it also seeks to minimize the risk and cost to TCM. | |
• | Leverage the design capabilities of TCM’sIntegrated Media Group and content professionals at TCM’s newspapers to develop leading edge Web sites. TCM plans to utilize its Integrated Media Group to work with the content professionals at its newspapers to develop leading edge Web sites for TCM’s newspapers and the clients of the Collegiate Marketing and Production Services Business and Association Management Services Business. | |
• | Utilize TCM’s broadcast center to produce cost effective promotions for its newspapers, publications and clients. TCM’s marketing efforts for its newspapers and publications traditionally have not utilized the broadcast media. However, with TCM’s broadcast center, it now will be able to develop cost effective promotions for its newspapers and publications. In addition, TCM will now be able to offer these services to the advertisers that have placed advertisements in its newspapers and publications. | |
• | Retain existing subscribers for the GrayLink Wireless Business’ traditional paging services. TCM intends to continue to focus its subscriber retention efforts on customer service and sales to business subscribers of its paging services. | |
• | Expand sales of wireless services, equipment and accessories. TCM intends to continue to seek to expand its sales of cellular and personal communication phone services through alliance and dealer agreements with large telecommunication carriers, equipment and accessories at existing and new locations in Alabama, Florida and Georgia. | |
• | Continuously improve operational excellence. TCM intends to continue to optimize its operations in order to enhance its competitive advantage. |
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Industry Background |
• | newspaper advertising accounted for approximately 18.6% of all media advertising expenditures in the United States; | |
• | approximately 54.1% of the total adult population in the United States read a daily newspaper and 62.5% of the total adult population in the United States read a Sunday newspaper; and | |
• | more than 55 million newspapers are sold daily, with an average of 2.3 readers per copy and on Sunday more than 58 million newspapers are sold with an average of 2.4 readers per copy. |
Year | Morning | Evening | Sunday | |||||||||
2001 | 46,821,480 | 8,756,566 | 59,090,364 | |||||||||
2002 | 46,617,163 | 8,568,994 | 58,780,299 | |||||||||
2003 | 46,930,215 | 8,255,136 | 58,494,695 |
1. | Source: Newspaper Association of America. |
Total Newspaper | ||||
Year | Advertising | |||
(Dollars in millions) | ||||
2001 | 44,305 | |||
2002 | 44,102 | |||
2003(2) | 44,939 |
1. | Sources: Newspaper Association of America, U.S. Department of Commerce. |
2. | Preliminary data. |
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Operations |
Year | Year | Principal | Daily | Sunday | Non-Daily | |||||||||||||||||||
Newspapers | Originated | Acquired | Location | Circulation(3) | Circulation(3) | Distribution(1) | ||||||||||||||||||
The Albany Herald | 1891 | (2) | Albany, GA | 24,700 | 25,900 | 38,500 | ||||||||||||||||||
Rockdale Citizen | 1953 | 1994 | Conyers, GA | 8,400 | 12,700 | — | ||||||||||||||||||
Newton Citizen | 2004 | (4) | Covington, GA | 5,400 | ||||||||||||||||||||
Gwinnett Daily Post | 1970 | (5) | 1995 | Lawrenceville, GA | 62,800 | 103,800 | — | |||||||||||||||||
The Goshen News(6) | 1837 | 1999 | Goshen, IN | 16,600 | 16,200 | — |
(1) | Non-Daily Distribution includes both paid and free distribution. Non-Daily Distribution reflects the averages according to the most recently released internal audit reports. |
(2) | The Albany Herald was originated in 1891 by local businessman H.M McIntosh and the newspaper remained in the McIntosh family until it was sold in 1948 to James H. Gray. Mr. Gray published the newspaper until his death in 1986. During his tenure, he founded a local television station and purchased other media properties to form the original assets of Gray Television, Inc. |
(3) | Circulation averages are derived from TCM’s internal records as of September 30, 2005. These internal records are subject to periodic independent audit but have not been audited as of September 30, 2005. |
(4) | In 2004, TCM began publication of the Newton Citizen. |
(5) | The Gwinnett Daily Post was originally a weekly newspaper. In 1995, TCM began publishing the Gwinnett Daily Post on a daily basis. |
(6) | For information regarding the possible sale of The Goshen News or the swap of The Goshen News for another newspaper, see “ — Recent Developments” on page 173. |
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Advertising |
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Nine Months Ended | |||||||||||||||||||||
Year Ended December 31, | September 30, | ||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2005 | |||||||||||||||||
(Unaudited) | |||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
Retail | $ | 21,953 | $ | 22,998 | $ | 24,489 | $ | 17,316 | $ | 18,328 | |||||||||||
Classifieds | 12,590 | 12,515 | 13,284 | 10,041 | 10,691 | ||||||||||||||||
Circulation | 6,040 | 6,113 | 6,030 | 4,553 | 4,143 | ||||||||||||||||
Other | 1,031 | 793 | 951 | 687 | 905 | ||||||||||||||||
Total | $ | 41,614 | $ | 42,419 | $ | 44,754 | $ | 32,597 | $ | 34,067 | |||||||||||
Circulation |
December 31, | September 30, | |||||||||||||
2002 | 2005 | (Decrease) | ||||||||||||
Daily circulation | ||||||||||||||
Gwinnett Daily Post | 65,000 | 62,800 | (3.4 | )% | ||||||||||
The Albany Herald | 28,000 | 24,700 | (11.8 | )% | ||||||||||
The Goshen News | 17,000 | 16,600 | (2.3 | )% | ||||||||||
Rockdale Citizen/ Newton Citizen | 15,000 | 13,800 | (8.0 | )% | ||||||||||
Total | 125,000 | 117,900 | (5.7 | )% | ||||||||||
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• | improve the content of its newspapers, which can include focusing on local news, features and the reduction of factual errors; | |
• | evaluate the markets that it operates in, and may expand its newspapers or zoned editions of its newspapers into existing and contiguous markets; and | |
• | implement creative and interactive programs and promotions. |
Job Printing |
Online Operations |
Newspaper | Website | |
The Albany Herald | www.albanyherald.com | |
Gwinnett Daily Post | www.gwinnettdailypost.com | |
Rockdale Citizen | www.rockdalecitizen.com | |
Newton Citizen | www.newtoncitizen.com | |
The Goshen News | www.goshennews.com |
Editorial |
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Printing and Distribution |
Newsprint |
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Traditional Paging |
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• | large, national paging companies; | |
• | regional carriers like TCM that operate in regional markets in the United States that can also offer service outside of their network coverage area through inter-carrier agreements with other carriers; and | |
• | small, single market carriers. |
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• | personalized automated answering services, which allow a subscriber to record a message that greets callers who reach the subscriber’s voice mailbox; | |
• | customized greetings for the subscriber’s pager; | |
• | live dispatch operator services; | |
• | the ability to send and receive messages from the GrayLink Wireless website located atwww.GrayLink.com; | |
• | annual loss protection, which allows subscribers of leased paging devices to limit their cost of replacement upon loss or destruction of the device; and | |
• | maintenance services, which are offered to subscribers who own their paging devices. |
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Newspaper Industry. |
Paging Industry. |
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Newspaper Publishing Business |
Lease | ||||||||||||||||
Owned or | Approximate | Expiration | ||||||||||||||
Property Location | Use | Leased | Size (Sq. Ft.) | Date | ||||||||||||
Albany, GA | Offices and production facility for | Owned | 83,000 | — | ||||||||||||
The Albany Herald | ||||||||||||||||
Conyers, GA | Offices forRockdale Citizen | Owned | 20,000 | — | ||||||||||||
Covington, GA | Offices forNewton Citizen | Leased | 3,750 | 5/01/2007 | ||||||||||||
Lawrenceville, GA | Offices and production | Leased | 72,000 | 12/20/2013 | ||||||||||||
facility forGwinnett Daily | ||||||||||||||||
Post and Rockdale | ||||||||||||||||
Citizen/Newton Citizen | ||||||||||||||||
Duluth, GA | Circulation distribution center | Leased | 8,011 | 9/30/2007 | ||||||||||||
Goshen, IN(1) | Offices and production | Owned | 21,000 | — | ||||||||||||
facility forThe Goshen News |
(1) | For information regarding the possible sale of The Goshen News or the swap of The Goshen News for another newspaper, see “ — Recent Developments” on page 173. |
GrayLink Wireless Business |
Lease | ||||||||||||||||
Owned or | Approximate | Expiration | ||||||||||||||
Property Location | Use | Leased | Size (Sq. Ft.) | Date | ||||||||||||
Dothan, Alabama | Retail store | Leased | 750 | 3/1/08 | ||||||||||||
Tallahassee, Florida | Retail store | Leased | 1,800 | 2/08 | ||||||||||||
Retail store | Leased | 1,400 | 11/05 | |||||||||||||
Corporate offices | Leased | 3,094 | 04/07 | |||||||||||||
Panama City, Florida | Retail store | Leased | 1,184 | 06/07 | ||||||||||||
Panama City Beach, Florida | Retail store | Leased | 1,820 | 11/06 | ||||||||||||
Gainesville, Florida | Retail store | Leased | 1,461 | 10/31/06 | ||||||||||||
Chiefland, Florida | Retail store | Leased | 800 | (1 | ) | |||||||||||
Columbus, Georgia | Retail Store | Leased | 1,600 | 7/09 | ||||||||||||
Retail Store | Leased | 2,000 | 02/06 | |||||||||||||
Albany, Georgia | Retail store | Leased | 1,780 | 05/06 | ||||||||||||
Thomasville, Georgia | Retail store | Leased | 1,500 | 02/06 | ||||||||||||
Valdosta, Georgia | Retail store | Leased | 1,928 | 02/08 | ||||||||||||
Macon, Georgia | Retail store | Leased | 1,400 | 12/07 | ||||||||||||
Augusta, Georgia | Retail store | Leased | 1,517 | 09/07 |
(1) | The lease for the retail store in Chiefland, Florida expired in October 2005. TCM is now leasing the location on a month-to-month basis. |
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• | the production of radio and television broadcasts of certain athletic events and coaches’ shows; | |
• | sale of advertising during radio and television broadcasts of games and coaches’ shows; | |
• | sale of media advertising and venue signage; | |
• | sale of “official sponsorship” rights to corporations; | |
• | publishing, printing and vending of game-day and other programs; | |
• | creative design of materials, video production, and construction and management of Internet websites; and | |
• | coaches’ endorsements and pay-per-view telecasts. |
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Name | Age | Position After the Spin-Off and the Merger | ||||
Robert S. Prather, Jr. | 61 | Director, Chairman | ||||
Thomas J. Stultz | 54 | Director, President and Chief Executive Officer | ||||
Gerald N. Agranoff | 58 | Director | ||||
James W. Busby | 51 | Director | ||||
Hilton H. Howell, Jr. | 43 | Director | ||||
Monte C. Johnson | 68 | Director |
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Name | Age | Position | ||||
Robert S. Prather, Jr. | 61 | Chairman and Director | ||||
Thomas J. Stultz | 54 | President and Chief Executive Officer and Director | ||||
Frederick J. Erickson | 46 | Chief Financial Officer and Secretary | ||||
Roberto Chomat, Jr. | 55 | President — GrayLink Wireless |
Estimated Annual | ||||||
Name | Position | Cash Compensation | ||||
Robert S. Prather, Jr. | Chairman | — | ||||
Thomas J. Stultz | President and Chief Executive Officer | $ | 325,000 | |||
Frederick J. Erickson | Chief Financial Officer | $ | 210,000 | |||
Roberto Chomat, Jr. | President, GrayLink Wireless | $ | 186,000 |
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Long Term | |||||||||||||||||||||||||
Compensation Awards | |||||||||||||||||||||||||
Annual Compensation | Restricted | Securities | |||||||||||||||||||||||
Stock | Underlying | All Other | |||||||||||||||||||||||
Name and Position | Year | Salary ($) | Bonus ($) | Awards | Options (#) | Compensation ($) | |||||||||||||||||||
Robert S. Prather, Jr.(1) | 2005 | 0 | (2) | 0 | 0 | 0 | 0 | ||||||||||||||||||
Chairman | 2004 | 738,143 | (2) | 650,000 | (3) | 13,530 | (4) | 50,000 | (5) | 50,545 | (6) | ||||||||||||||
2003 | 651,528 | (2) | 275,000 | (3) | 1,420,750 | (4) | 41,000 | (5) | 41,346 | (6) | |||||||||||||||
2002 | 220,000 | (2) | 275,000 | (3) | 0 | 177,000 | (5) | 23,045 | (6) | ||||||||||||||||
Thomas J. Stultz(8) | 2005 | 289,423 | 0 | 0 | 0 | 0 | |||||||||||||||||||
President and Chief | 2004 | 313,389 | (9) | 100,000 | 0 | 0 | 8,397 | (10) | |||||||||||||||||
Executive Officer | 2003 | 265,000 | 150,000 | 0 | 0 | 8,116 | (10) | ||||||||||||||||||
2002 | 255,000 | 150,000 | 0 | 32,500 | 7,866 | (10) | |||||||||||||||||||
Frederick J. Erickson(11) | 2005 | 210,000 | 0 | 0 | 0 | 0 | |||||||||||||||||||
Chief Financial Officer | 2004 | 179,808 | 0 | 0 | 0 | 1,570 | (7) | ||||||||||||||||||
2003 | 166,807 | 0 | 0 | 0 | 5,004 | (7) | |||||||||||||||||||
Robert Chomat, Jr.(12) | 2004 | 180,000 | 133,798 | 0 | 0 | 20,022 | (13) | ||||||||||||||||||
President-GrayLink | 2003 | 174,000 | 32,617 | 0 | 0 | 18,719 | (13) | ||||||||||||||||||
Wireless | 2002 | 168,000 | 28,000 | 0 | 10,000 | 18,436 | (13) |
(1) | During fiscal 2005, 2004, 2003 and 2002, Mr. Prather was employed by Gray and Bull Run. Mr. Prather is currently the Chief Executive Officer of TCM. Following the effective time of the merger, Mr. Prather will become TCM’s Chairman. | |
(2) | During Gray’s fiscal year ending December 31, 2005, Gray is paying Mr. Prather’s salary at the annual rate of $750,000. $88,143 and $650,000 of Mr. Prather’s salary in fiscal 2004 was paid by Bull Run and Gray, respectively. $201,528 and $450,000 of Mr. Prather’s salary in fiscal 2003 was paid by Bull Run and Gray, respectively. In fiscal 2002, Mr. Prather was paid $220,000 by Gray. | |
(3) | Mr. Prather’s bonuses in fiscal 2004, 2003 and 2002 were paid by Gray. | |
(4) | The restricted stock awards to Mr. Prather in fiscal 2004 and 2003 were granted by Gray. | |
(5) | The stock options in fiscal 2004, 2003 and 2002 were granted to Mr. Prather by Gray. | |
(6) | For fiscal 2004, includes term life insurance of $8,849 (Gray), long term disability insurance premium payments of $2,249 (Gray), matching contributions by Gray’s 401(k) plan of $6,000, directors’ fees of $17,700 (Gray) and employer contributions to defined contribution retirement plan of $1,247 (Bull Run). For fiscal 2003, includes term life insurance of $3,096 (Gray), long-term disability insurance premiums of $2,249 (Gray), matching contribution by Gray’s 401(k) plan of $4,455, directors’ fees of $25,500 (Gray) and employer contributions to defined contribution retirement plan of $6,046. For fiscal 2002, includes term life insurance premiums of $3,096 (Gray), long term disability insurance premiums of $2,249 (Gray), and directors’ fees of $17,700 (Gray). | |
(7) | Consists of contributions by Bull Run to a defined contribution retirement plan. |
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(8) | During fiscal 2003 and 2002, and until August 2004, Mr. Stultz was employed by Gray. Since August 2004, Mr. Stultz has been employed by Bull Run. | |
(9) | $300,000 and $13,389 of Mr. Stultz’s salary for fiscal 2004 was paid by Gray and Bull Run, respectively. |
(10) | For fiscal 2004, includes matching contributions by Gray to its 401(k) plan of $4,500, term life insurance premiums of $2,075 (Gray) and long-term disability insurance premium payments of $1,822 (Gray). For fiscal 2003, includes matching contributions by Gray to its 401(k) plan of $4,500, term life insurance premiums of $1,794 (Gray) and long-term disability insurance premium payments of $1,822 (Gray). For fiscal 2002, includes matching contributions by Gray to its 401(k) plan of $4,250, term life insurance premiums of $1,794 (Gray) and long-term disability insurance premium payments of $1,822 (Gray). |
(11) | During fiscal 2005, 2004 and 2003, Mr. Erickson was employed by Bull Run. |
(12) | During fiscal 2004, 2003 and 2002, Mr. Chomat was employed by Gray. |
(13) | For fiscal 2004, includes matching contributions by Gray to its 401(k) plan of $4,500, automobile allowance of $10,200 (Gray), term life insurance premiums of $2,694 (Gray) and long-term disability insurance premium payments of $2,628 (Gray). For fiscal 2003, includes matching contributions by Gray to its 401(k) plan of $4,500, automobile allowance of $10,200 (Gray), term life insurance premiums of $1,391 (Gray) and long-term disability insurance premium payments of $2,628 (Gray). For fiscal 2002, includes matching contributions by Gray to its 401(k) plan of $4,250, automobile allowance of $10,200, term life insurance premiums of $1,358 (Gray) and long-term disability insurance premium payments of $2,628 (Gray). |
Individual Grants | Potential Realizable | |||||||||||||||||||||||
Value at Assumed Annual | ||||||||||||||||||||||||
Number of | Rates of Stock Price | |||||||||||||||||||||||
Securities | Percent of Total | Appreciation for | ||||||||||||||||||||||
Underlying | Options Granted | Exercise | Option Term | |||||||||||||||||||||
Options | to Employees in | Price per | Expiration | |||||||||||||||||||||
Name | Granted | Fiscal Year | Share | Date | 5% | 10% | ||||||||||||||||||
Robert S. Prather, Jr. | 50,000 | 100 | % | 14.06 | 11/19/2007 | $ | 194,226 | $ | 429,189 | |||||||||||||||
Thomas J. Stultz | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Frederick J. Erickson | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Roberto Chomat, Jr. | 0 | 0 | 0 | 0 | 0 | 0 |
(1) | The options were granted at the fair value of the Gray common stock on the date of grant and have ten-year terms. |
(2) | Potential gains are net of the exercise price, but before taxes associated with the exercise. Amounts represent hypothetical gains that could be achieved for the respective options if exercised at the end of the option term. The assumed 5% and 10% rates of stock price appreciation are provided in accordance with the rules of the Securities and Exchange Commission, or the SEC and do not represent TCM’s estimate or projection of the future price of Gray common stock. Actual gains, if any, on stock option exercises will depend upon the future market prices of Gray common stock. |
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Value of Unexercised | ||||||||||||||||||||||||||||
Number of Unexercised | In-the-Money | |||||||||||||||||||||||||||
Class of | Shares | Options at Fiscal Year-End | Options at Fiscal Year-End | |||||||||||||||||||||||||
Common | Acquired | Value | ||||||||||||||||||||||||||
Name | Stock | on Exercise | Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||||||||||||||
Robert S. Prather, Jr. | Class A | 0 | 0 | 9,337 | 0 | 0 | 0 | |||||||||||||||||||||
Common | 50,000 | $ | 54,000 | 277,000 | 91,000 | $ | 1,324,090 | $ | 195,000 | |||||||||||||||||||
Thomas J. Stultz | Common | 32,500 | $ | 98,600 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Frederick J. Erickson | — | — | — | — | — | — | — | |||||||||||||||||||||
Roberto Chomat, Jr. | Common | 2,500 | $ | 25,313 | 10,000 | 0 | $ | 42,700 | 0 |
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• | each of the named executive officers; | |
• | each of TCM’s proposed directors; | |
• | all of the proposed directors and executive officers as a group; and | |
• | each person or entity that is expected to own more than 5% of TCM common stock. |
Shares Beneficially | ||||||||||||||||
Shares Beneficially | Owned After the | |||||||||||||||
Owned After the | Spin-Off and | |||||||||||||||
Spin-Off | the Merger | |||||||||||||||
Name | Number | Percent | Number | Percent | ||||||||||||
J. Mack Robinson | 318,773 | 6.5 | 434,806 | (1) | 8.5 | |||||||||||
Harriet J. Robinson | 318,773 | 6.5 | 414,524 | (2) | 8.1 | |||||||||||
Robert S. Prather, Jr. | 34,702 | * | 46,365 | (3) | * | |||||||||||
Gerald N. Agranoff | 0 | — | 188 | (4) | * | |||||||||||
James W. Busby | 0 | — | 6,070 | (5) | * | |||||||||||
Frederick J. Erickson | 0 | — | 467 | (6) | * | |||||||||||
Hilton H. Howell, Jr. | 103,168 | 2.1 | 116,838 | (7) | 2.3 | |||||||||||
Monte C. Johnson | 0 | — | 760 | (8) | * | |||||||||||
Thomas J. Stultz | 951 | * | 951 | * | ||||||||||||
Roberto Chomat, Jr. | 1,894 | * | 1,894 | (9) | * | |||||||||||
All current and proposed directors and executive officers as a group (9 persons) | 447,513 | 9.2 | 608,339 | (10) | 11.9 | |||||||||||
Mario J. Gabelli | 510,309 | (11) | 10.6 | 510,309 | (11) | 9.9 |
* | Less than 1% |
(1) | Includes (1) options to purchase 1,012 shares of TCM common stock, which are exercisable within 60 days of October 31, 2005; (2) 71,787 shares of TCM common stock held by Mr. Robinson’s spouse; (3) 110,613 shares of TCM common stock held by Mr. Robinson’s spouse as trustee under a trust for their children; (4) 8,977 shares of TCM common stock held by Delta Fire and Casualty Insurance; (4) 20,538 shares of TCM common stock held by Delta Life Insurance; (5) 24,377 shares of TCM common stock held by Bankers Fidelity Life Ins. Co.; (6) 15,608 shares of TCM common stock held by Georgia Casualty & Surety Co.; (7) 9,400 shares of TCM common stock held by Associated Casualty Ins. Co.; (8) 5,000 shares of TCM common stock held by American Southern Insurance Co.; (9) 7,690 shares of TCM common stock held by Gulf Capital Services, Ltd.; (10) 7,689 shares of TCM common stock held by the Robinson-Prather Partnership; (11) 1,237 shares of TCM common stock held by the Robin M. Robinson Partnership; (12) 1,685 shares of TCM common stock held by Jill E. Robinson Trust; and (13) 555 shares of TCM common stock held by JMR Foundation. Mr. Robinson is an officer, director and a principal or sole shareholder of each of Delta Fire and Casualty Insurance, Delta Life Insurance, Bankers Fidelity Life Ins. Co., Georgia Casualty & Surety Co., Associated Casualty Ins. Co., and American Southern Insurance Co. Messrs. Prather and Robinson have the exclusive control of the day-to-day |
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operations of the Robinson-Prather Partnership, including the power to vote or dispose of the shares of TCM common stock owned by the Robinson-Prather Partnership. Each general partner disclaims beneficial ownership of the shares of TCM common stock owned by Robinson-Prather Partnership, except to the extent of his pecuniary interest in such shares of TCM common stock, which is less than the amount disclosed. Mr. Robinson’s spouse is the trustee for the Jill E. Robinson Trust and Robin M. Robinson Trust. | ||
(2) | Includes (1) options to purchase 1,012 shares of TCM common stock held by Mrs. Robinson’s spouse, which are exercisable within 60 days of October 31, 2005; (2) 148,638 shares of TCM common stock held by Mrs. Robinson’s spouse; (3) 110,613 shares of TCM common stock held by Mrs. Robinson as trustee under a trust for her children; (4) 6,875 shares of TCM common stock held by Delta Fire and Casualty Insurance; (4) 14,580 shares of TCM common stock held by Delta Life Insurance; (5) 22,171 shares of TCM common stock held by Bankers Fidelity Life Ins. Co.; (6) 13,835 shares of TCM common stock held by Georgia Casualty & Surety Co.; (7) 9,400 shares of TCM common stock held by Associated Casualty Ins. Co.; (8) 5,000 shares of TCM common stock held by American Southern Insurance Co.; (9) 7,690 shares of TCM common stock held by Gulf Capital Services, Ltd.; (10) 1,237 shares of TCM common stock held by Robin M. Robinson Trust; and (11) 1,685 shares of TCM common stock held by Jill E. Robinson Trust. Mrs. Robinson is a director of each of Delta Fire and Casualty Insurance, Delta Life Insurance, Bankers Fidelity Life Ins. Co., Georgia Casualty & Surety Co., Associated Casualty Ins. Co., and American Southern Insurance Co. Mrs. Robinson is the trustee of the Jill E. Robinson Trust and Robin M. Robinson Trust. | |
(3) | Includes (1) options to purchase 2,233 shares of TCM common stock, which are exercisable within 60 days of October 31, 2005; (2) 43 shares of TCM common stock held by Mr. Prather’s spouse; and (3) 7,689 shares of TCM common stock held by the Robinson-Prather Partnership. Messrs. Prather and Robinson have the exclusive control of the day-to-day operations of the Robinson-Prather Partnership, including the power to vote or dispose of the shares of common stock owned by the Robinson-Prather Partnership. Each general partner disclaims beneficial ownership of the shares of TCM common stock owned by Robinson-Prather Partnership, except to the extent of his pecuniary interest in such shares of TCM common stock, which is less than the amount disclosed. | |
(4) | Includes options to purchase 116 shares of TCM common stock, which are exercisable within 60 days of October 31, 2005. | |
(5) | Includes (1) options to purchase 87 shares of TCM common stock, which are exercisable within 60 days of October 31, 2005; and (2) 20 shares of TCM common stock held by Mr. Busby’s minor children. | |
(6) | Includes options to purchase 434 shares of TCM common stock, which are exercisable within 60 days of October 31, 2005. | |
(7) | Includes (1) options to purchase 217 shares of TCM common stock, which are exercisable within 60 days of October 31, 2005; (2) 50 shares of TCM common stock held by Mr. Howell’s spouse as custodian for her minor child; (3) 5,858 shares of TCM common stock held by Mr. Howell’s spouse; (4) 8,977 shares of TCM common stock held by Delta Fire and Casualty Insurance; (5) 24,377 shares of TCM common stock held by Bankers Fidelity Life Ins. Co.; (6) 15,608 shares of TCM common stock held by Georgia Casualty & Surety Co.; (7) 20,538 shares of TCM common stock held by Delta Life Insurance Co.; (8) 9,700 shares of TCM common stock held by Associated Casualty Ins. Co.; and (9) 5,000 shares of TCM common stock held by American Southern Insurance Co. Mr. Howell is an officer and a director of each of Delta Fire and Casualty Insurance, Bankers Fidelity Life Ins. Co., Georgia Casualty & Surety Co., Delta Life Insurance Co., Associated Casualty Ins. Co., and American Southern Insurance Co. | |
(8) | Includes options to purchase 254 shares of TCM common stock, which are exercisable within 60 days of October 31, 2005. |
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(9) | Includes (1) 1,728 shares of TCM common stock held jointly with Mr. Chomat’s spouse; and (2) 166 shares of TCM common stock held in Mr. Chomat’s 401(k) plan. |
(10) | Includes options to purchase 2,765 shares of TCM common stock, which are exercisable within 60 days of October 31, 2005. The address for each director and executive officer is c/o Triple Crown Media, Inc., 546 East Main Street, Lexington, Kentucky 40508. |
(11) | Includes (1) 141,280 shares of TCM common stock held by Gabelli Funds, LLC; (2) 355,632 shares of TCM common stock held by Gamco Investors, Inc.; (3) 4,077 shares of TCM common stock held by Gabelli Securities, Inc.; (4) 3,450 shares of TCM common stock held by Gabelli Advisors, Inc.; and (5) 5,870 shares of TCM common stock held by MJG Associates, Inc. The address of Mr. Gabelli is One Corporate Center, Rye, New York 10580. |
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Series A Redeemable, Convertible Preferred Stock |
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Series B Redeemable, Convertible Preferred Stock |
General |
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Number of Directors; Filling Vacancies |
Stockholder Action |
Advance Notice for Stockholder Proposals and Director Nominations |
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• | a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting; | |
• | the name and record address of the stockholder proposing such business; | |
• | the number of shares of TCM common stock, which are beneficially owned by the stockholder; and | |
• | any material interest of the stockholder in the proposed business. |
• | the name, age, business address and residence address of the nominee (including such nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); | |
• | the principal occupation or employment of the nominee; | |
• | the number of shares of TCM common stock, which are beneficially owned by the nominee; | |
• | any other information relating to the nominee that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Exchange Act, as now or hereafter amended; | |
• | the name and record address of the stockholder proposing the nominee; and | |
• | the number of shares of TCM common stock, which are beneficially owned by such stockholder. |
Preferred Stock |
Delaware Business Combination Statute |
• | prior to such time, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; |
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• | upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding certain shares); or | |
• | at or subsequent to such time the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 662/3% of the outstanding voting stock that is not owned by the interested stockholder. |
• | any person that is the owner of 15% or more of the outstanding voting stock of the corporation, or is an affiliate or associate of the corporation and was the owner of 15% of more of the outstanding voting stock of the corporation at any time within three years immediately prior to the relevant date; and | |
• | the affiliates and associates of any such person. |
• | mergers and sales or other dispositions of 10% or more of the assets of the corporation with or to an interested stockholder; | |
• | certain transactions resulting in the issuance or transfer to the interested stockholder of any stock of the corporation or its subsidiaries; | |
• | certain transactions that would result in increasing the proportionate share of the stock of the corporation or its subsidiaries owned by the interested stockholders; and | |
• | receipt by the interested stockholder of the benefit, except proportionately as a stockholder, of any loans, advances, guarantees, pledges, or other financial benefits. |
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Bull Run | TCM | |
The authorized capital stock of Bull Run consists of 25,000,000 shares of common stock and 5,000,000 shares of preferred stock, par value $.01 per share. | TCM’s authorized capital stock consists of 25,000,000 shares of common stock and 150,000 shares of preferred stock, par value $0.001 per share. |
Bull Run | TCM | |
The number of directors on Bull Run’s board shall consist of between three and seven natural persons. The exact number of directors within the specified minimum and maximum shall be fixed by resolution of Bull Run’s board of directors from time to time. | The number of directors on TCM’s board of directors shall be determined from time to time by resolution of TCM’s board of directors. |
Bull Run | TCM | |
For Bull Run, any vacancy occurring on the board of directors, including a vacancy resulting from an increase in the number of directors, may be filled by Bull Run’s shareholders, by the remaining directors, or if the remaining directors constitute less than a quorum, by the affirmative vote of a majority of the remaining directors. | For TCM, any newly created directorship or any vacancy occurring in TCM’s board of directors for any reason may be filled by a majority of the remaining members of TCM’s board of directors, although such a majority is less than a quorum, or a plurality of the votes cast at a meeting of TCM’s stockholders called for the purpose of electing directors. |
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Bull Run | TCM | |
There are no provisions in Bull Run’s by-laws relating to the nomination of directors by Bull Run’s shareholders. | TCM’s by-laws allow its stockholders to nominate candidates for election to TCM’s board of directors at any annual or special meeting of stockholders at which TCM’s board of directors has determined that directors will be elected. However, nominations of persons for election as directors may only be made pursuant to timely notice in writing to TCM’s secretary. Such stockholder’s notice to the secretary of a proposed nomination is required to set forth, as to each person whom the stockholder proposes to nominate for election or re-election as a director, • the name, age, business address and residence address of the nominee (including such nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), • the principal occupation or employment of the nominee, • the number of shares of TCM common stock, which are beneficially owned by the nominee, and any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Exchange Act, as now or hereafter amended. | |
Such notice is required to further set forth, as to the stockholder giving the notice, • the name and record address of such stockholder and • the number of shares of TCM common stock, which are beneficially owned by such stockholder. | ||
To be timely, a stockholder’s notice of nomination must be delivered to, or mailed and received at, TCM’s principal executive offices, not less than 90 days nor more than 120 days prior to the meeting; provided, however, that in the event that less than 105 days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. |
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Bull Run | TCM | |
The by-laws of Bull Run provide that shareholders may take any action by written consent without a meeting. | TCM’s amended and restated certificate of incorporation provides that stockholder action may be taken only at an annual or special meeting of stockholders. |
Bull Run | TCM | |
Bull Run’s by-laws provide that special meetings of the shareholders may be called at any time only by the board of directors, by the chairman of the board, by the president or by the holders of at least 25% of the outstanding Bull Run common stock. | TCM’s by-laws provide that a special meeting of stockholders may be called at any time by TCM’s board of directors. TCM’s stockholders do not have the ability to call a special meeting of the stockholders. |
Bull Run | TCM | |
There are no provisions in Bull Run’s by-laws relating to shareholder proposals. | TCM’s by-laws allow its stockholders to propose business to be brought before any annual or special meeting of stockholders. However, proposals only may be made by a stockholder who has given timely written notice to TCM’s secretary. A stockholder’s notice to the secretary is required to set forth with respect to each matter the stockholder proposes to bring before the meeting: • a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting; • the name and record address of the stockholder proposing such business; • the number of shares of the corporation, which are beneficially owned by the stockholder; and • any material interest of the stockholder in such business. | |
To be timely, a stockholder’s notice of other business must be delivered to, or mailed and received at, TCM’s principal executive offices, not less than 90 days nor more than 120 days prior to the meeting; provided, however, that in the event that less than 105 days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. |
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Bull Run | TCM | |
Bull Run’s by-laws provide that except as permitted by law, Bull Run may not make any distribution to its shareholders, if after giving effect to such distribution, Bull Run would not be able to pay its debts as they become due in the usual course of business or Bull Run’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if Bull Run were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of the shareholders whose preferential rights are superior to those receiving the distribution. | Under Delaware law, TCM’s board of directors may declare and pay dividends upon TCM’s shares of capital stock, either out of its surplus, or in the case there shall be no such surplus, out of TCM’s net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. |
Bull Run | TCM | |
Bull Run’s articles of incorporation eliminate the personal liability of directors to the corporation or its shareholders for monetary damages for breach of any duty of care or other duty as a director, except for liability for • any appropriation, in violation of his duties, of any business opportunity of the corporation, • acts or omissions which involve intentional misconduct or a knowing violation of law or • voting for or assenting to any distribution made in violation of the GBCC or Bull Run’s articles of incorporation. | TCM’s amended and restated certificate of incorporation eliminates the personal liability of its directors to TCM and its stockholders for monetary damages for any action taken, or any failure to take any action as a director, to the fullest extent permitted by the DGCL or any other applicable law as currently in effect or as it may be amended. In addition, TCM’s amended and restated certificate of incorporation provides that any future repeal or amendment of its terms will not eliminate or reduce any rights of directors existing under TCM’s amended and restated certificate of incorporation in respect to any matter accruing or any cause of action, suit or claim accruing or arising prior to such repeal or amendment. |
Bull Run | TCM | |
Under the GBCC, a corporation may indemnify an individual who is a party to a proceeding because he or she is or was a director against liability incurred in the proceeding if: • such individual conducted himself or herself in good faith; and • such individual reasonably believed: • in the case of conduct in his or her official capacity, that such conduct was in the best interests of the corporation; • in all other cases, that such conduct was at least not opposed to the best interests of the corporation; and • in the case of any criminal proceeding, that the individual had no reasonable cause to believe such conduct was unlawful. | The DGCL permits a corporation to indemnify officers and directors for actions taken in good faith and in a manner they reasonably believed to be in, or not opposed to, the best interests of the corporation, and with respect to any criminal action, which they had no reasonable cause to believe was unlawful. TCM’s amended and restated certificate of incorporation and by-laws provide that any person who was or is made or is threatened to be made a party in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of TCM, while a director or officer of TCM, is or was serving at the request of TCM as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or |
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Bull Run | TCM | |
Bull Run’s by-laws provide that any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, formal or informal (including any action by or in the right of Bull Run), by reason of the fact that such person is or was a director, officer, employee or agent of Bull Run, or is or was serving at the request of Bull Run as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified by Bull Run against expenses (including reasonable attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action or proceeding, if such person acted in a manner he believed in good faith to be in the best interest of Bull Run (and with respect to any criminal action or proceeding, if such person had no reasonable cause to believe such person’s conduct was unlawful), to the maximum extent permitted by, and in a manner provided by, the GBCC. The by-laws further provide that they shall in no way limit or otherwise affect the indemnification provided for in Bull Run’s articles of incorporation or in any contract to which Bull Run is a party. The GBCC provides that a corporation may, before final disposition of a proceeding, advance funds to pay for or reimburse the reasonable expenses incurred by a director who is a party to a proceeding because he or she is a director if he or she delivers to the corporation: • a written affirmation of his or her good faith belief that he or she has met the relevant standard of conduct described in the GBCC or that the proceeding involves conduct for which liability has been eliminated under a provision of the articles of incorporation as; and • his or her written undertaking to repay any funds advanced if it is ultimately determined that the director is not entitled to indemnification. | nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such person to the fullest extent permitted by the DGCL. The indemnification rights conferred by TCM are not exclusive of any other right to which persons seeking indemnification may have or acquire under any statute, provision of TCM’s amended and restated certificate of incorporation, by-laws, agreement, vote of stockholders or disinterested directors or otherwise. Additionally, TCM’s by-laws provide that TCM shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by such person in defending any proceeding in advance of its final disposition, provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by such person to repay all amounts advanced if it should be ultimately determined that such person is not entitled to be indemnified under TCM’s by-laws or otherwise. |
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• | must deliver to Bull Run before the vote is taken at the special meeting of shareholders of Bull Run on the Merger Agreement and the merger written notice of such shareholder’s intent to demand payment for such shareholder’s shares if the proposed action is effectuated; and | |
• | must not vote such shareholder’s shares in favor of the proposed action. |
• | Bull Run’s balance sheet as of the end of a fiscal year ending not more than 16 months before the date of payment, an income statement for that year, a statement of changes in shareholders’ equity for that year, and the latest available interim financial statements, if any; |
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• | a statement of the surviving corporation’s estimate of the fair value of the shares; and | |
• | an explanation of how the interest was calculated. |
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• | any breach of their duty of loyalty to TCM or its shareholders; | |
• | any acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; | |
• | any transaction from which a director derived an improper personal benefit; and | |
• | any unlawful dividend, under a provision of the DGCL that makes directors personally liable and that expressly sets forth a willful or negligence standard with respect to such liability. |
• | conducted himself or herself in good faith; | |
• | and in a manner reasonably believed to be in or not opposed to the corporation’s best interest; and | |
• | in the case of any criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful. |
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• | Annual Report on Form 10-K for the year ended August 31, 2005; and | |
• | Current Report on Form 8-K filed November 14, 2005. |
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December 31, | |||||||||||||||
September 30, | |||||||||||||||
2003 | 2004 | 2005 | |||||||||||||
(Unaudited) | |||||||||||||||
(In thousands) | |||||||||||||||
ASSETS | |||||||||||||||
Current assets: | |||||||||||||||
Cash and cash equivalents | $ | 537 | $ | 672 | $ | 330 | |||||||||
Trade accounts receivable, less allowance for doubtful accounts of $147, $214 and $175 (unaudited), respectively | 6,098 | 6,458 | 5,966 | ||||||||||||
Inventories | 1,521 | 1,101 | 904 | ||||||||||||
Other current assets | 178 | 177 | 210 | ||||||||||||
Total current assets | 8,334 | 8,408 | 7,410 | ||||||||||||
Property and equipment: | |||||||||||||||
Land | 564 | 560 | 560 | ||||||||||||
Buildings and improvements | 6,423 | 6,418 | 6,549 | ||||||||||||
Equipment | 19,707 | 19,020 | 20,337 | ||||||||||||
26,694 | 25,998 | 27,446 | |||||||||||||
Accumulated depreciation | (18,937 | ) | (16,832 | ) | (17,479 | ) | |||||||||
7,757 | 9,166 | 9,967 | |||||||||||||
Federal Communication Commission (“FCC”) licenses | 4,829 | 4,829 | 4,006 | ||||||||||||
Goodwill | 16,779 | 16,779 | 16,779 | ||||||||||||
Other intangible assets, net | 55 | -0- | -0- | ||||||||||||
Other | 64 | 58 | 60 | ||||||||||||
Total Assets | $ | 37,818 | $ | 39,240 | $ | 38,222 | |||||||||
LIABILITIES AND OWNER’S NET INVESTMENT | |||||||||||||||
Current liabilities: | |||||||||||||||
Trade accounts payable | $ | 678 | $ | 868 | $ | 798 | |||||||||
Employee compensation and benefits | 1,522 | 1,417 | 1,060 | ||||||||||||
Other accrued expenses | 318 | 360 | 616 | ||||||||||||
Federal and state income taxes | 3,183 | 3,081 | 2,482 | ||||||||||||
Deferred revenue | 2,275 | 2,061 | 2,003 | ||||||||||||
Notes payable | 56 | -0- | -0- | ||||||||||||
Total current liabilities | 8,032 | 7,787 | 6,959 | ||||||||||||
Deferred income taxes | 532 | 1,653 | 2,336 | ||||||||||||
Other | -0- | -0- | 118 | ||||||||||||
Total liabilities | 8,564 | 9,440 | 9,413 | ||||||||||||
Commitments and contingencies (Note E) | |||||||||||||||
Owner’s Net Investment: | |||||||||||||||
Gray Television, Inc. net investment | 29,254 | 29,800 | 28,809 | ||||||||||||
Total Liabilities and Owner’s Net Investment | $ | 37,818 | $ | 39,240 | $ | 38,222 | |||||||||
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Nine Months Ended | ||||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2005 | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||||
Operating revenues: | ||||||||||||||||||||||
Publishing | $ | 41,614 | $ | 42,419 | $ | 44,754 | $ | 32,597 | $ | 34,067 | ||||||||||||
Wireless | 9,189 | 8,883 | 8,129 | 6,192 | 5,990 | |||||||||||||||||
50,803 | 51,302 | 52,883 | 38,789 | 40,057 | ||||||||||||||||||
Expenses: | ||||||||||||||||||||||
Operating expenses before depreciation, amortization and loss on disposal of assets, net: | ||||||||||||||||||||||
Publishing | 29,539 | 29,461 | 31,546 | 23,092 | 25,289 | |||||||||||||||||
Wireless | 6,654 | 6,625 | 6,433 | 4,580 | 4,686 | |||||||||||||||||
Corporate and administrative | 1,318 | 1,358 | 1,400 | 1,050 | 1,083 | |||||||||||||||||
Depreciation | 2,210 | 1,933 | 1,514 | 1,304 | 1,047 | |||||||||||||||||
Amortization of intangible assets | 429 | 425 | 55 | 55 | 0 | |||||||||||||||||
Loss (gain) on disposals of assets, net | 88 | 386 | 403 | 250 | (473 | ) | ||||||||||||||||
40,238 | 40,188 | 41,351 | 30,331 | 31,632 | ||||||||||||||||||
Operating income | 10,565 | 11,114 | 11,532 | 8,458 | 8,425 | |||||||||||||||||
Miscellaneous income, net | 114 | 53 | 37 | 37 | 0 | |||||||||||||||||
Interest expense | (40 | ) | (30 | ) | (3 | ) | (2 | ) | 0 | |||||||||||||
Income before income taxes and cumulative effect of accounting change | 10,639 | 11,137 | 11,566 | 8,493 | 8,425 | |||||||||||||||||
Income tax expense | 4,040 | 4,208 | 4,311 | 3,250 | 3,209 | |||||||||||||||||
Net income before cumulative effect of accounting change | 6,599 | 6,929 | 7,255 | 5,243 | 5,216 | |||||||||||||||||
Cumulative effect of accounting change, net of income tax benefit of $4,541 | (7,423 | ) | -0- | -0- | 0 | 0 | ||||||||||||||||
Net income (loss) | $ | (824 | ) | $ | 6,929 | $ | 7,255 | $ | 5,243 | $ | 5,216 | |||||||||||
Pro Forma basic and diluted per share information (Unaudited): | ||||||||||||||||||||||
Net income (loss) per share | $ | (0.17 | ) | $ | 1.42 | $ | 1.49 | $ | 1.08 | $ | 1.07 | |||||||||||
Weighted average shares outstanding | 4,871 | 4,871 | 4,871 | 4,871 | 4,871 |
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(In thousands) | ||||
Balance, December 31, 2001 | $ | 40,509 | ||
Net loss | (824 | ) | ||
Net Transfers to Gray Television, Inc. | (9,310 | ) | ||
Balance, December 31, 2002 | $ | 30,375 | ||
Net income | 6,929 | |||
Net transfers to Gray Television, Inc. | (8,050 | ) | ||
Balance, December 31, 2003 | $ | 29,254 | ||
Net income | 7,255 | |||
Net transfers to Gray Television, Inc. | (6,709 | ) | ||
Balance, December 31, 2004 | $ | 29,800 | ||
Net income (unaudited) | 5,216 | |||
Net transfers to Gray Television, Inc. (unaudited) | (6,207 | ) | ||
Balance, September 30, 2005 (unaudited) | $ | 28,809 | ||
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Nine Months Ended | |||||||||||||||||||||||
Year Ended December 31, | September 30, | ||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2005 | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Operating activities | |||||||||||||||||||||||
Net income (loss) | $ | (824 | ) | $ | 6,929 | $ | 7,255 | $ | 5,243 | $ | 5,216 | ||||||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||||||||||
Depreciation | 2,210 | 1,933 | 1,514 | 1,304 | 1,047 | ||||||||||||||||||
Amortization of intangible assets | 429 | 425 | 55 | 55 | -0- | ||||||||||||||||||
Deferred income taxes | 1,029 | 973 | 1,121 | 658 | 683 | ||||||||||||||||||
Cumulative effect of change in accounting principle, net of tax | 7,423 | -0- | -0- | -0- | -0- | ||||||||||||||||||
Loss (gain) on disposal of assets, net | 88 | 386 | 403 | 250 | (473 | ) | |||||||||||||||||
Other | (1 | ) | 12 | 1 | (6 | ) | (1 | ) | |||||||||||||||
Changes in operating assets and liabilities: | |||||||||||||||||||||||
Trade accounts receivable | 216 | (235 | ) | (360 | ) | 433 | 492 | ||||||||||||||||
Inventories | (415 | ) | (343 | ) | 420 | 565 | 196 | ||||||||||||||||
Other current assets | 7 | (31 | ) | 1 | (69 | ) | (34 | ) | |||||||||||||||
Trade accounts payable | (151 | ) | 13 | 190 | 126 | (70 | ) | ||||||||||||||||
Employee compensation and benefits | 278 | 124 | (105 | ) | (352 | ) | (357 | ) | |||||||||||||||
Other accrued expenses | (247 | ) | 118 | 42 | 281 | 256 | |||||||||||||||||
Income taxes payable | 864 | 197 | (102 | ) | (651 | ) | (599 | ) | |||||||||||||||
Deferred revenue | (166 | ) | (115 | ) | (214 | ) | (88 | ) | 60 | ||||||||||||||
Net cash provided by operating activities | 10,740 | 10,386 | 10,221 | 7,749 | 6,416 | ||||||||||||||||||
Investing activities | |||||||||||||||||||||||
Purchases of property and equipment | (1,313 | ) | (1,809 | ) | (3,381 | ) | (3,190 | ) | (2,035 | ) | |||||||||||||
Proceeds from asset sales | 43 | 6 | 55 | 50 | 1,484 | ||||||||||||||||||
Other | -0- | (25 | ) | 5 | -0- | -0- | |||||||||||||||||
Net cash used in investing activities | (1,270 | ) | (1,828 | ) | (3,321 | ) | (3,140 | ) | (551 | ) | |||||||||||||
Financing activities | |||||||||||||||||||||||
Net transfers to Gray Television, Inc. | (9,310 | ) | (8,050 | ) | (6,709 | ) | (4,676 | ) | (6,207 | ) | |||||||||||||
Repayments of borrowings on debt | (63 | ) | (68 | ) | (56 | ) | (54 | ) | -0- | ||||||||||||||
Net cash used in financing activities | (9,373 | ) | (8,118 | ) | (6,765 | ) | (4,730 | ) | (6,207 | ) | |||||||||||||
Increase (decrease) in cash and cash equivalents | 97 | 440 | 135 | (121 | ) | (342 | ) | ||||||||||||||||
Cash and cash equivalents at beginning of year | -0- | 97 | 537 | 537 | 672 | ||||||||||||||||||
Cash and cash equivalents at end of year | $ | 97 | $ | 537 | $ | 672 | $ | 416 | $ | 330 | |||||||||||||
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A. | Description of Business and Summary of Significant Accounting Policies |
Basis of Presentation |
Unaudited Interim Financial Information |
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Revenue Recognition |
Barter Transactions |
Nine Months Ended | ||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2005 | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Trade barter revenue | $ | 497 | $ | 427 | $ | 455 | $ | 338 | $ | 284 | ||||||||||
Trade barter expense | (554 | ) | (540 | ) | (508 | ) | (382 | ) | (479 | ) | ||||||||||
$ | (57 | ) | $ | (113 | ) | $ | (53 | ) | $ | (44 | ) | $ | (195 | ) | ||||||
Use of Estimates |
Cash and Cash Equivalents |
Allowance for Doubtful Accounts Receivable |
December 31, | ||||||||
2003 | 2004 | |||||||
Balance at beginning of period | $ | 186 | $ | 147 | ||||
Provision for bad debts | 160 | 305 | ||||||
Write-offs | (199 | ) | (238 | ) | ||||
Balance at end of period | $ | 147 | $ | 214 | ||||
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Inventories |
December 31, | ||||||||||||
September 30, | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
(Unaudited) | ||||||||||||
Publishing inventory | $ | 974 | $ | 718 | $ | 550 | ||||||
Wireless inventory | 547 | 383 | 354 | |||||||||
$ | 1,521 | $ | 1,101 | $ | 904 | |||||||
Property and Equipment |
Income Taxes |
Pro Forma Earnings Per Share (Unaudited) |
Stock-Based Compensation |
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Nine Months Ended | |||||||||||||||||||||
Year Ended December 31, | September 30, | ||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2005 | |||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Net income (loss) available to common stockholders, as reported | $ | (30,371 | ) | $ | 10,737 | $ | 41,013 | $ | 27,024 | $ | 4,767 | ||||||||||
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects | (877 | ) | (1,477 | ) | (908 | ) | (799 | ) | (911 | ) | |||||||||||
Net income (loss) available to common stockholders, pro forma | $ | (31,248 | ) | $ | 9,260 | $ | 40,105 | $ | 26,225 | $ | 3,856 | ||||||||||
Net income (loss) available to common stockholders per share: | |||||||||||||||||||||
Basic, as reported | $ | (1.37 | ) | $ | 0.21 | $ | 0.83 | $ | 0.54 | $ | 0.10 | ||||||||||
Basic, pro forma | $ | (1.41 | ) | $ | 0.18 | $ | 0.81 | $ | 0.53 | $ | 0.08 | ||||||||||
Diluted, as reported | $ | (1.37 | ) | $ | 0.21 | $ | 0.82 | $ | 0.54 | $ | 0.10 | ||||||||||
Diluted, pro forma | $ | (1.41 | ) | $ | 0.18 | $ | 0.80 | $ | 0.52 | $ | 0.08 |
Concentration of Credit Risk |
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Valuation and Impairment Testing of Intangible Assets |
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Gray Television, Inc. Net Investment |
Recent Accounting Pronouncements |
B. | Corporate and Administrative Expense |
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C. | Benefit Plans |
Long Term Incentive Plan |
Gray Long Term Incentive Plan |
Year Ended December 31, | |||||||||||||||||||||||||
2002 | 2003 | 2004 | |||||||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||||||||
Average | Average | Average | |||||||||||||||||||||||
Options | Exercise Price | Options | Exercise Price | Options | Exercise Price | ||||||||||||||||||||
Stock options outstanding — beginning of year | 19 | $ | 17.81 | 19 | $ | 17.81 | 19 | $ | 17.81 | ||||||||||||||||
Options granted | -0- | -0- | -0- | ||||||||||||||||||||||
Options exercised | -0- | -0- | -0- | ||||||||||||||||||||||
Options forfeited | -0- | -0- | -0- | ||||||||||||||||||||||
Options expired | -0- | -0- | -0- | ||||||||||||||||||||||
Stock options outstanding — end of year | 19 | $ | 17.81 | 19 | $ | 17.81 | 19 | $ | 17.81 | ||||||||||||||||
Exercisable at end of year | 19 | $ | 17.81 | 19 | $ | 17.81 | 19 | $ | 17.81 |
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Year Ended December 31, | |||||||||||||||||||||||||
2002 | 2003 | 2004 | |||||||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||||||||
Average | Average | Average | |||||||||||||||||||||||
Options | Exercise Price | Options | Exercise Price | Options | Exercise Price | ||||||||||||||||||||
Stock options outstanding — beginning of year | 1,634 | $ | 11.81 | 2,632 | $ | 10.47 | 2,245 | $ | 10.49 | ||||||||||||||||
Options granted | 1,520 | 10.02 | 177 | 11.44 | 151 | 14.07 | |||||||||||||||||||
Options exercised | (78 | ) | 10.16 | (279 | ) | 9.82 | (525 | ) | 10.56 | ||||||||||||||||
Options forfeited | (96 | ) | 11.96 | (159 | ) | 9.53 | (61 | ) | 9.18 | ||||||||||||||||
Options expired | (348 | ) | 14.44 | (126 | ) | 14.09 | (57 | ) | 12.75 | ||||||||||||||||
Stock options outstanding — end of year | 2,632 | $ | 10.47 | 2,245 | $ | 10.49 | 1,753 | $ | 10.75 | ||||||||||||||||
Exercisable at end of year | 1,078 | $ | 11.10 | 770 | $ | 10.80 | 1,435 | $ | 10.31 | ||||||||||||||||
Weighted-average fair value of options granted during the year | $ | 3.35 | $ | 3.15 | $ | 3.44 |
As of December 31, 2004 | ||||||||||||||||||||||||
Weighted | ||||||||||||||||||||||||
Weighted | Average | |||||||||||||||||||||||
Exercise Price | Average | Average | Number of | Exercise Price | ||||||||||||||||||||
per Share | Number of | Exercise | Remaining | Options | per Share of | |||||||||||||||||||
Options | Price per | Contractual | Outstanding That | Options That are | ||||||||||||||||||||
High | Low | Outstanding | Share | Life | are Exercisable | Exercisable | ||||||||||||||||||
(In thousands) | (In years) | (In thousands) | ||||||||||||||||||||||
$8.89 | $ | 10.12 | 783 | $ | 9.57 | 1.6 | 730 | $ | 9.58 | |||||||||||||||
$10.75 | $ | 11.23 | 690 | $ | 11.02 | 2.2 | 690 | $ | 11.02 | |||||||||||||||
$12.50 | $ | 14.19 | 280 | $ | 13.37 | 3.3 | 15 | $ | 12.92 | |||||||||||||||
1,753 | 1,435 | |||||||||||||||||||||||
Pension Plan |
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Gray Pension Plan: |
December 31, | |||||||||
2003 | 2004 | ||||||||
Change in projected benefit obligation: | |||||||||
Projected benefit obligation at beginning of year | $ | 13,153 | $ | 14,423 | |||||
Service cost | 1,257 | 2,184 | |||||||
Interest cost | 845 | 1,035 | |||||||
Actuarial (gains) losses | (405 | ) | 4,661 | ||||||
Benefits paid | (427 | ) | (487 | ) | |||||
Projected benefit obligation at end of year | $ | 14,423 | $ | 21,816 | |||||
Change in plan assets: | |||||||||
Fair value of plan assets at beginning of year | $ | 9,466 | $ | 11,331 | |||||
Actual return on plan assets | 969 | 559 | |||||||
Company contributions | 1,323 | 1,592 | |||||||
Benefits paid | (427 | ) | (487 | ) | |||||
Fair value of plan assets at end of year | $ | 11,331 | $ | 12,995 | |||||
Funded status: | |||||||||
Under-funded status of the plan | $ | (3,092 | ) | $ | (8,821 | ) | |||
Unrecognized net actuarial loss | 887 | 5,740 | |||||||
Unrecognized net transition amount | -0- | -0- | |||||||
Unrecognized prior service cost | -0- | -0- | |||||||
Net liability | (2,205 | ) | (3,081 | ) | |||||
Unfunded accumulated benefit obligation at end of year | $ | (1,163 | ) | (5,311 | ) | ||||
Additional minimum liability | NA | $ | (2,230 | ) | |||||
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Year Ended | |||||||||
December 31, | |||||||||
2003 | 2004 | ||||||||
Weighted-average assumptions used to determine net periodic benefit cost: | |||||||||
Discount rate | 6.75 | % | 6.75 | % | |||||
Expected long-term rate of return on plan assets | 7.00 | % | 7.00 | % | |||||
Estimated rate of increase in compensation levels | 5.00 | % | 5.00 | % |
As of | |||||||||
December 31, | |||||||||
2003 | 2004 | ||||||||
Weighted-average assumptions used to determine benefit obligations: | |||||||||
Discount rate | 6.75 | % | 5.75 | % | |||||
Estimated rate of increase in compensation levels | 5.00 | % | 5.00 | % |
Nine Months | |||||||||||||||||||||
Ended | |||||||||||||||||||||
Year Ended December 31, | September 30, | ||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2005 | |||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Components of net periodic pension cost: | |||||||||||||||||||||
Service cost | $ | 1,267 | $ | 1,257 | $ | 2,184 | $ | 1,639 | $ | 2,191 | |||||||||||
Interest cost | 763 | 845 | 1,035 | 776 | 975 | ||||||||||||||||
Expected return on plan assets | (624 | ) | (672 | ) | (806 | ) | (605 | ) | (707 | ) | |||||||||||
Recognized net actuarial (gain) loss | (27 | ) | -0- | 55 | 41 | 359 | |||||||||||||||
Net periodic pension cost | $ | 1,379 | $ | 1,430 | $ | 2,468 | $ | 1,851 | $ | 2,818 | |||||||||||
Amount | |||||
Estimated future benefit payments for subsequent ten years: | |||||
2005 | $ | 527 | |||
2006 | 542 | ||||
2007 | 570 | ||||
2008 | 611 | ||||
2009 | 671 | ||||
2010-2014 | $ | 4,397 |
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As of | |||||||||
December 31, | |||||||||
2003 | 2004 | ||||||||
Asset Category: | |||||||||
Insurance general account | 43 | % | 43 | % | |||||
Equity accounts | 24 | % | 21 | % | |||||
Fixed income account | 19 | % | 21 | % | |||||
Cash equivalents | 14 | % | 15 | % | |||||
Total | 100 | % | 100 | % | |||||
Target Range | |||||
Investment type: | |||||
Equity funds | 20% to 70% | ||||
Fixed income funds | 35% to 70% | ||||
Cash equivalents | 1% to 30% |
Capital Accumulation Plan 401(k) Profit Sharing Plan |
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Nine Months | |||||||||||||||||||||
Ended | |||||||||||||||||||||
Year Ended December 31, | September 30, | ||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2005 | |||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Contributions to the Capital Accumulation Plan: | |||||||||||||||||||||
Matching contributions | $ | 200 | $ | 189 | $ | 186 | $ | 136 | $ | 153 | |||||||||||
Voluntary contributions | $ | 87 | $ | 95 | $ | 184 | $ | 67 | $ | 69 |
D. | Income Taxes |
Year Ended December 31, | |||||||||||||
2002 | 2003 | 2004 | |||||||||||
Current: | |||||||||||||
Federal | $ | 2,535 | $ | 2,724 | $ | 2,686 | |||||||
State and local | 476 | 511 | 504 | ||||||||||
Deferred | 1,029 | 973 | 1,121 | ||||||||||
$ | 4,040 | $ | 4,208 | $ | 4,311 | ||||||||
December 31, | ||||||||||
2003 | 2004 | |||||||||
Deferred tax liabilities: | ||||||||||
Net book value of property and equipment | $ | 1,118 | $ | 1,147 | ||||||
FCC licenses, goodwill and other intangibles | -0- | 588 | ||||||||
Total deferred tax liabilities | 1,118 | 1,735 | ||||||||
Deferred tax assets: | ||||||||||
Allowance for doubtful accounts | 56 | 82 | ||||||||
FCC licenses, goodwill and other intangibles | 474 | -0- | ||||||||
Liability under health and welfare plan | 56 | -0- | ||||||||
Total deferred tax assets | 586 | 82 | ||||||||
Deferred tax liabilities, net | $ | 532 | $ | 1,653 | ||||||
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Year Ended December 31, | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
Statutory federal rate applied to income before income taxes and cumulative effect of accounting change | $ | 3,618 | $ | 3,787 | $ | 3,933 | ||||||
State and local taxes, net of federal tax benefit | 314 | 337 | 333 | |||||||||
Other items, net | 108 | 84 | 45 | |||||||||
$ | 4,040 | $ | 4,208 | $ | 4,311 | |||||||
E. | Commitments and Contingencies |
Year | Total | |||
2005 | $ | 902 | ||
2006 | 744 | |||
2007 | 505 | |||
2008 | 357 | |||
2009 | 290 | |||
Thereafter | 1,077 | |||
$ | 3,875 | |||
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F. | Goodwill and Intangible Assets |
Net Balance at | Acquisitions | Net Balance at | |||||||||||||||||||
December 31, | and | December 31, | |||||||||||||||||||
2002 | Adjustments | Impairments | Amortization | 2003 | |||||||||||||||||
Goodwill: | |||||||||||||||||||||
Publishing | $ | 16,779 | $ | -0- | $ | -0- | $ | -0- | $ | 16,779 | |||||||||||
Wireless | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||
$ | 16,779 | $ | -0- | $ | -0- | $ | -0- | $ | 16,779 | ||||||||||||
FCC licenses: | |||||||||||||||||||||
Wireless | $ | 4,829 | $ | -0- | $ | -0- | $ | -0- | $ | 4,829 | |||||||||||
$ | 4,829 | $ | -0- | $ | -0- | $ | -0- | $ | 4,829 | ||||||||||||
Definite lived intangible assets: | |||||||||||||||||||||
Publishing | $ | 475 | $ | -0- | $ | -0- | $ | (425 | ) | $ | 50 | ||||||||||
Wireless | 5 | -0- | -0- | -0- | 5 | ||||||||||||||||
$ | 480 | $ | -0- | $ | -0- | $ | (425 | ) | $ | 55 | |||||||||||
Total intangible assets net of accumulated amortization. | $ | 22,088 | $ | -0- | $ | -0- | $ | (425 | ) | $ | 21,663 | ||||||||||
Net Balance at | Acquisitions | Net Balance at | |||||||||||||||||||
December 31, | and | December 31, | |||||||||||||||||||
2003 | Adjustments | Impairments | Amortization | 2004 | |||||||||||||||||
Goodwill: | |||||||||||||||||||||
Publishing | $ | 16,779 | $ | -0- | $ | -0- | $ | -0- | $ | 16,779 | |||||||||||
Wireless | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||
$ | 16,779 | $ | -0- | $ | -0- | $ | -0- | $ | 16,779 | ||||||||||||
FCC licenses: | |||||||||||||||||||||
Wireless | $ | 4,829 | $ | -0- | $ | -0- | $ | -0- | $ | 4,829 | |||||||||||
$ | 4,829 | $ | -0- | $ | -0- | $ | -0- | $ | 4,829 | ||||||||||||
Definite lived intangible assets: | |||||||||||||||||||||
Publishing | $ | 50 | $ | -0- | $ | -0- | $ | (50 | ) | $ | -0- | ||||||||||
Wireless | 5 | -0- | -0- | (5 | ) | -0- | |||||||||||||||
$ | 55 | $ | -0- | $ | -0- | $ | (55 | ) | $ | -0- | |||||||||||
Total intangible assets net of accumulated amortization | $ | 21,663 | $ | -0- | $ | -0- | $ | (55 | ) | $ | 21,608 | ||||||||||
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As of December 31, 2003 | As of December 31, 2004 | |||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||
Gross | Amortization | Net | Gross | Amortization | Net | |||||||||||||||||||
Intangible assets not subject to amortization: | ||||||||||||||||||||||||
FCC licenses | $ | 7,326 | $ | (2,497 | ) | $ | 4,829 | $ | 7,326 | $ | (2,497 | ) | $ | 4,829 | ||||||||||
Goodwill | 18,778 | (1,999 | ) | 16,779 | 18,778 | (1,999 | ) | 16,779 | ||||||||||||||||
$ | 26,104 | $ | (4,496 | ) | $ | 21,608 | $ | 26,104 | $ | (4,496 | ) | $ | 21,608 | |||||||||||
Other definite lived intangible assets subject to amortization | $ | 3,110 | $ | (3,055 | ) | $ | 55 | $ | 3,105 | $ | (3,105 | ) | $ | -0- | ||||||||||
Total intangibles | $ | 29,214 | $ | (7,551 | ) | $ | 21,663 | $ | 29,209 | $ | (7,601 | ) | $ | 21,608 | ||||||||||
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Nine Months Ended | |||||||||||||||||||||
Year Ended December 31, | September 30, | ||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2005 | |||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Operating revenues: | |||||||||||||||||||||
Publishing | $ | 41,614 | $ | 42,419 | $ | 44,754 | $ | 32,597 | $ | 34,067 | |||||||||||
Wireless | 9,189 | 8,883 | 8,129 | 6,192 | 5,990 | ||||||||||||||||
Total operating revenues | $ | 50,803 | $ | 51,302 | $ | 52,883 | $ | 38,789 | $ | 40,057 | |||||||||||
Operating income: | |||||||||||||||||||||
Publishing | $ | 9,391 | $ | 10,173 | $ | 10,988 | $ | 7,894 | $ | 7,059 | |||||||||||
Wireless | 1,174 | 941 | 544 | 564 | 1,366 | ||||||||||||||||
Total operating income | 10,565 | 11,114 | 11,532 | 8,458 | 8,425 | ||||||||||||||||
Miscellaneous income, net | 114 | 53 | 37 | 37 | -0- | ||||||||||||||||
Interest expense | (40 | ) | (30 | ) | (3 | ) | (2 | ) | -0- | ||||||||||||
Income before income taxes and cumulative effect of accounting change | $ | 10,639 | $ | 11,137 | $ | 11,566 | $ | 8,493 | $ | 8,425 | |||||||||||
Depreciation and amortization expense: | |||||||||||||||||||||
Publishing | $ | 1,585 | $ | 1,500 | $ | 992 | |||||||||||||||
Wireless | 1,054 | 858 | 577 | ||||||||||||||||||
Total depreciation and amortization expense | $ | 2,639 | $ | 2,358 | $ | 1,569 | |||||||||||||||
Loss on disposal of assets, net: | |||||||||||||||||||||
Publishing | $ | 20 | $ | 161 | $ | 43 | |||||||||||||||
Wireless | 68 | 225 | 360 | ||||||||||||||||||
Total loss on disposal of assets, net | $ | 88 | $ | 386 | $ | 403 | |||||||||||||||
Capital expenditures: | |||||||||||||||||||||
Publishing | $ | 491 | $ | 1,343 | $ | 2,987 | |||||||||||||||
Wireless | 822 | 466 | 394 | ||||||||||||||||||
Total capital expenditures | $ | 1,313 | $ | 1,809 | $ | 3,381 | |||||||||||||||
Identifiable assets: | |||||||||||||||||||||
Publishing | $ | 28,906 | $ | 29,513 | $ | 31,969 | |||||||||||||||
Wireless | 8,790 | 8,305 | 7,271 | ||||||||||||||||||
Total identifiable assets | $ | 37,696 | $ | 37,818 | $ | 39,240 | |||||||||||||||
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H. | Subsequent Event — Sale of Certain FCC Licenses |
I. | Merger of Bull Run Corporation into TCM |
J. | Certain Relationships |
K. | Subsequent Event — Required Divestiture of The Goshen News (unaudited) |
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• | as a result of the Separation and Distribution, Gray and TCM will be better able to focus financial and operational resources on its own business and executing its own strategic plan; | |
• | as a result of the Separation and Distribution, Gray and TCM are expected to have greater strategic and financial flexibility to support future growth opportunities; | |
• | each business is in a different stage of development and therefore attracts different types of investors; | |
• | two separate public companies will enable financial markets to evaluate Gray and TCM more effectively, which is expected to maximize shareholder value over the long term for both Gray and TCM; | |
• | the Separation and Distribution will allow Gray and TCM to develop incentive programs for management and other professionals that are tailored to its own business and are tied to the market performance of its own common stock; |
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• | after the Separation and Distribution, Gray and TCM should have greater capital planning flexibility and the Newspaper Publishing Business and Graylink Wireless Business will no longer have to compete with Gray’s television broadcasting business to secure funding for investments; and | |
• | that TCM would possess sufficient scale and business fundamentals to operate as a stand-alone entity. |
(a) all of the membership interests of Gray Publishing; | |
(b) all of the contracts, agreements and arrangements listed on Schedule 1.1(b) (collectively, the “Assigned Contracts”); and | |
(c) all right, title and interest in or to the improved and unimproved land listed or described on Schedule 1.1(c), and all buildings, structures, erections, improvements, appurtenances, and fixtures situated on or forming part of such land, together with all privileges, easements and rights-of-way related thereto (the “Assigned Real Property”). |
(a) Cash. All cash and cash equivalents. | |
(b) Tax Refunds. Any right, title, or interest in any tax refund, credit, or benefit to which Gray or any of its Subsidiaries is entitled in accordance with the terms of this Agreement or of the Tax Sharing Agreement. | |
(c) Intercompany Assets. Any right, title, or interest in the intercompany assets set forth on Schedule 1.2(c). |
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(d) Contracts. Gray Publishing’s or any of its subsidiaries’ rights under any agreement, commitment or order as to which consent to assignment is required but has not been obtained, subject to the provisions of Section 6.1(b); |
(i) Taxes. Any liability or obligation of Gray Publishing or Graylink, as applicable to pay taxes, as set forth in the Tax Sharing Agreement. | |
(ii) Intercompany Debt. Any liability or obligation of Gray Publishing or Graylink, as applicable, in respect of the intercompany debt set forth on Schedule 1.2(c). |
(a) Secretary’s Certificate. A certificate executed by the Secretary of Gray substantially in the form attached to this Agreement as Exhibit A; | |
(b) Assignment and Assumption Agreement. A duly executed Assignment and Assumption Agreement substantially in the form attached hereto as Exhibit B (the “Assignment and Assumption Agreement”); | |
(c) Tax Sharing Agreement. A duly executed Tax Sharing Agreement substantially in the form attached hereto as Exhibit C (the “Tax Sharing Agreement”); | |
(d) Real Property Lease. A duly executed Real Property lease Agreement substantially in the form attached hereto as Exhibit D (the “Real Property Lease”); | |
(e) Contribution Agreement. A duly executed contribution Agreement substantially in the form attached to this Agreement as Exhibit E (the “Contribution Agreement”); |
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(f) Officer Resignations. Resignations of each person who is an officer of Gray Publishing, Graylink or any of their respective subsidiaries, immediately prior to the Separation Date, and who will not be an employee of TCM from and after the Separation Date; and | |
(g) Other Agreements. Such other agreements, documents, or instruments as the parties may agree are necessary or desirable in order to achieve the purposes hereof, including, without limitation, those documents referred to in Section 6.1. |
(a) Secretary’s Certificate. A certificate executed by the Secretary of TCM substantially in the form attached to this Agreement as Exhibit F; | |
(b) Assignment and Assumption Agreement. A duly executed Assignment and Assumption Agreement; | |
(c) Tax Sharing Agreement. A duly executed Tax Sharing Agreement; | |
(d) Real Property Lease. A duly executed Real Property Lease; | |
(e) Contribution Agreement. A duly executed Contribution Agreement; and | |
(f) Other Agreements. Such other agreements, documents, or instruments as the parties may agree are necessary or desirable in order to achieve the purposes hereof, including, without limitation, those documents referred to in Section 6.1. |
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(a) SEC Filings. Gray and TCM shall prepare, and Gray shall mail, prior to the Distribution Date, to the holders of Gray Common Stock, a proxy statement/ prospectus/ information statement containing such information concerning TCM, the Newspaper Publishing Business and Graylink Wireless Business and the Separation and the Distribution and such other matters as Gray and TCM shall reasonably determine are necessary and as may be required by law. Gray and TCM shall prepare, and TCM shall file with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 to register the shares of TCM Common Stock to be issued in the Distribution under the Securities Act. Gray and TCM shall use all commercially reasonable efforts to respond to any comments of the SEC and to cause such registration statement to be declared effective under the Securities Act as promptly as practicable after such registration statement is filed with the SEC. TCM shall prepare and file with the SEC a registration statement on Form 8-A to register the shares of TCM Common Stock under the Exchange Act. | |
(b) Blue Sky. Gray and TCM shall take and shall cause any of their Subsidiaries to take all such actions as may be necessary or appropriate under the securities or blue sky laws of any applicable states in connection with the Distribution. | |
(c) Nasdaq National Market. TCM shall prepare and file, and shall use its commercially reasonable efforts to have approved, an application for listing of the TCM Common Stock to be issued in the Distribution on the Nasdaq National Market, subject to official notice of issuance. | |
(d) Advisors. Gray and TCM shall participate in the preparation of materials and presentations as their respective advisors shall deem necessary or desirable. | |
(e) Satisfaction of Conditions. Gray and TCM shall take and shall cause all of their respective Subsidiaries to take all reasonable steps necessary and appropriate to cause the conditions set forth in Section 3.3 to be satisfied and to effect the Distribution on the Distribution Date. | |
(f) Termination of Letter Agreement. Gray and TCM shall use their commercially reasonable efforts to cause the Letter Agreement, dated July 20, 2004, by and between Gray Television, Inc. and Thomas Stultz to be terminated. |
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(i) Governmental Approvals. Any material governmental approvals and consents required to permit the valid consummation of the Distribution shall have been obtained without any conditions being imposed that would have a Material Adverse Effect on Gray or TCM. | |
(ii) Consents. Gray shall have obtained the consent, approval, or waiver of each Person set forth on Schedule 3.3(e)(ii). |
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GRAY TELEVISION, INC. |
By: | /s/ Robert S. Prather, Jr. |
Name: Robert S. Prather, Jr. |
Title: | President and Chief Operating Officer |
TRIPLE CROWN MEDIA, INC. |
By: | /s/ James C. Ryan |
Name: James C. Ryan |
Title: | Chief Financial Officer and Secretary |
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“Section 6.7 Acquisition of Michiana Telecasting Corp. | |
If, prior to the Separation, and in connection with Gray’s acquisition of Michiana Telecasting Corp., an Indiana corporation (“Michiana”), Gray Publishing (a) sells The Goshen News, the net proceeds from the sale will be retained by Gray Publishing in the Separation, or (b) swaps The Goshen News for another newspaper, that newspaper will be retained by Gray Publishing in the Separation, and as a result will be an asset of TCM following the Separation. If, after the Separation, Gray acquires Michiana, TCM shall cause Gray Publishing to sell The Goshen News or swap The Goshen News for another newspaper, which would not result in a violation of the FCC’s cross ownership rules, upon the written request of Gray (the “Written Request”); provided that such request is made in connection with Gray’s acquisition of Michiana and is necessary to comply with the FCC’s cross ownership rules. The Written Request shall specify the date by which the sale or swap must be completed, which date shall not be less than 60 days from the date of the Written Request.” |
“TCM shall indemnify, defend, and hold harmless Gray and its Subsidiaries, and each of their respective directors, officers, employees, counsel, and agents (the “Gray Indemnitees”) from and against any and all Indemnifiable Losses incurred or suffered by any Gray Indemnitee in connection with any Action or threatened Action and arising out of or due to, directly or indirectly, (i) the Newspaper Publishing Business, (ii) Graylink Wireless Business, (iii) the Assigned Contracts, (iv) the Assigned Real Property, or (v) any failure to perform, or violation of, any provision of this Agreement or any Ancillary Agreement that is to be performed or complied with by TCM or its Subsidiaries, including any failure by TCM to cause Gray Publishing to sell or swap The Goshen News within the time period specified in a Written Request.” |
GRAY TELEVISION, INC. |
By: | /s/Robert S. Prather, Jr. |
Name: Robert S. Prather, Jr. |
Title: | President and Chief Operating Officer |
TRIPLE CROWN MEDIA, INC. |
By: | /s/James C. Ryan |
Name: James C. Ryan |
Title: | Chief Financial Officer and Secretary |
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(i) Upon the issuance of a notice of proposed adjustment or similar stage in the proceedings, the Indemnitor shall assume the conduct of all further proceedings, with counsel selected by it, at the Indemnitor’s sole expense, insofar as the proceedings relate to a Proposed Tax Adjustment, and |
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thereafter the Indemnitor and the Controlling Party shall jointly be responsible for the conduct of proceedings to contest such Proposed Tax Adjustment. | |
(ii) In the event that the Controlling Party receives a notice of deficiency from the Internal Revenue Service, or a similar notice from any other Taxing Authority, and such notice includes one or more Proposed Tax Adjustments, then: |
(A) upon receiving a written request from the Indemnitor, given no later than a date reasonably necessary to permit preparation and timely filing of a petition in the United States Tax Court for redetermination of the deficiency relating to the Proposed Tax Adjustment, or a court of similar jurisdiction with respect to a Proposed Tax Adjustment imposed by any other Taxing Authority, the Controlling Party shall timely file such petition (at the Indemnitor’s sole expense); or | |
(B) If (1) the Indemnitor does not request the Controlling Party to file a petition for redetermination of the deficiency pursuant to subsection 5.02(c)(ii)(A) hereof, (2) the Indemnitor requests that the Controlling Party file a claim for refund of Taxes relating to a Proposed Tax Adjustment, and (3) the Indemnitor provides the Controlling Party with sufficient funds to pay the deficiency relating to the Proposed Tax Adjustment, then the Controlling Party (at the Indemnitor’s sole expense) shall file a claim for refund thereof and, if the claim is denied, bring an action in a court of competent jurisdiction seeking such refund. | |
(C) In the event that a judgment of the United States Tax Court or other court of competent jurisdiction results in an adverse determination with respect to the Proposed Tax Adjustment, then the Indemnitor shall have the right to cause the Controlling Party to appeal from such adverse determination at the Indemnitor’s sole expense. | |
(D) The Indemnitor and its representatives, at the Indemnitor’s sole expense, shall be entitled to the extent permitted by law to participate in (1) all conferences, meetings, or proceedings with any Taxing Authority, the subject matter of which is a Proposed Tax Adjustment, and (2) all appearances before any court, the subject matter of which is a Proposed Tax Adjustment. The right to participate referred to in this subsection 5.02(c)(ii)(D) hereof shall include matters such as the submission and content of documentation, memoranda of fact and law and briefs, the conduct of oral arguments or presentations, the selection of witnesses, and the negotiation of stipulations of fact with respect to a Proposed Tax Adjustment. |
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GRAY TELEVISION, INC. |
By: | /s/ Robert S. Prather, Jr. |
Name: Robert S. Prather, Jr. |
Title: | President and Chief Operating |
Officer | |
TRIPLE CROWN MEDIA, INC. |
By: | /s/ James C. Ryan |
Name: James C. Ryan |
Title: | Chief Financial Officer and |
Secretary |
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(i) hot and cold domestic water; | |
(ii) heat and air conditioning in season; | |
(iii) routine maintenance, including repair, and when necessary replacement, of equipment and fixtures that serves the Premises; | |
(iii) electricity to operate all equipment and machinery necessary for the conduct of Tenant’s business; and |
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(a) execute estoppel certificates addressed to any mortgagee or prospective mortgagee of Landlord certifying as to such facts (if true) and agreeing to such notice provisions and other matters as such mortgagee(s) or purchaser(s) may reasonably require; and | |
(b) deliver to Landlord such information regarding the business, affairs, net worth and financial condition of Tenant as Landlord may reasonably request. |
(a) Tenant fails to pay any installment of Rent when due, and such failure continues for ten (10) days after the date that Landlord gives notice of such failure to Tenant; |
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(b) Tenant fails to pay any installment of Real Estate Taxes, Electrical Charges, or any other payment when due, and such failure continues for ten (10) days after the date that Landlord gives notice of such failure to Tenant; | |
(c) Tenant defaults in the observance or performance of any other covenant of this Lease on Tenant’s part to be observed or performed and Tenant fails to remedy such default within thirty (30) days after Landlord gives Tenant notice thereof, except that if (i) such default cannot be remedied with reasonable diligence during such period of thirty (30) days, (ii) Tenant takes reasonable steps during such period of thirty (30) days to commence Tenant’s remedying of such default, and (iii) Tenant prosecutes diligently Tenant’s remedying of such default to completion, then an Event of Default shall not occur by reason of such default, provided that Tenant completes its remedying of such default within one hundred twenty (120) days after the date that Landlord gives Tenant such notice; | |
(d) (i) The making by Tenant of any general assignment or general arrangement for the benefit of creditors; |
(ii) The filing by or against Tenant of a petition to have Tenant adjudged a bankrupt, or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Tenant, the same is dismissed within ten days); | |
(iii) The appointment of a trustee or receiver to take possession of substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in the Lease; or | |
(iv) The attachment, execution or other judicial seizure of substantially all of Tenant’s assets located at Premises, or Tenant’s interest in the Lease. |
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LANDLORD: | |
GRAY PUBLISHING, LLC |
By: |
Name: | |
Title: | |
TENANT: | |
GRAY TELEVISION, INC. |
By: |
Name: | |
Title: |
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(a) “1994 Directors’ Plan”shall have the meaning specified in Section 2.06(d). | |
(b) “1994 Plan”shall have the meaning specified in Section 2.06(d). | |
(c) “affiliate”of a person means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned person. | |
(d) “Agreement”shall mean this Agreement and Plan of Merger, together with all exhibits attached hereto, the Company Disclosure Letter and the TCM Disclosure Letter. | |
(e) “Ancillary Agreements”means any certificates or supporting documents contemplated or delivered pursuant thereto and pursuant to this Agreement. | |
(f) “Articles of Merger”shall have the meaning specified in Section 2.02. |
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(g) “Assets”means all the properties, assets and contract rights (including, without limitation, cash, cash equivalents, accounts receivable, inventory, equipment, office furniture and furnishings, trade names, trademarks and patents, contracts, agreements, licenses and real estate) of the Company and its subsidiaries, whether tangible or intangible, real, personal or mixed. | |
(h) “books and records”means, with respect to any person, all books and records, including, without limitation, corporate records (such as minute books, seals, stock ledgers and similar items), manuals, price lists, mailing lists, lists of customers, slides and promotional materials, purchasing materials, personnel records, quality control records and procedures, research and development files, financial and accounting records (exclusive of records maintained by the Company’s independent accountants), environmental records and litigation files (regardless of the media in which stated), in each case principally relating to or used by such person. | |
(i) “Blue Sky Laws”shall have the meaning specified in Section 3.05(b). | |
(j) “business day”means any day other than a day on which banks in Atlanta, Georgia are required or authorized to be closed. | |
(k) “Cash Advance”means the cash advances in the aggregate of $6,050,000 made by J. Mack Robinson to the Company. | |
(l) “CERCLA”shall have the meaning specified in Section 3.15(b). | |
(m) “Certificate”shall have the meaning specified in Section 2.06(c). | |
(n) “Closing”shall have the meaning specified in Section 2.01. | |
(o) “Closing Date”shall have the meaning specified in Section 2.01. | |
(p) “Code”shall have the meaning specified in the Recitals. | |
(q) “Common Stock Exchange Ratio”shall have the meaning specified in Section 2.06(c)(i). | |
(r) “Company”shall mean Bull Run Corporation, a Georgia corporation. | |
(s) “Company Articles of Incorporation”means the Articles of Incorporation of the Company, as amended, in effect as of the date of this Agreement. | |
(t) “Company Board”shall have the meaning specified in the Recitals. | |
(u) “Company By-Laws”shall have the meaning specified in Section 3.02. | |
(v) “Company Capital Stock”means collectively, the Company Common Stock and the Company Preferred Stock. | |
(w) “Company Common Stock”shall have the meaning specified in Section 2.06(a). | |
(x) “Company Disclosure Letter”shall have the meaning specified in Article III. | |
(y) “Company ERISA Affiliate”shall have the meaning specified in Section 3.12(a). | |
(z) “Company Financial Advisor”means SunTrust Robinson Humphrey. | |
(aa) “Company Material Adverse Effect”means a material and adverse effect on the operation of the Company taken as a whole; provided, however, that the following shall not be taken into account in determining whether there has been or would be a “Material Adverse Effect”: (i) any adverse changes or developments resulting from conditions affecting the United States economy generally; (ii) any acts of war, insurrection, sabotage or terrorism; (iii) any adverse change or developments that are primarily caused by conditions affecting the media and advertising industries generally; and (iv) any adverse changes or developments arising primarily out of, or resulting primarily from, actions taken by any party in connection with (but not in breach of) this Agreement and the transactions contemplated hereunder, or which are primarily attributable to the announcement of this Agreement and the transactions contemplated hereby or the identity of TCM. |
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(bb) “Company Option Plans”shall have the meaning specified in Section 2.06(d). | |
(cc) “Company Permits”shall have the meaning specified in Section 3.08(b). | |
(dd) “Company Plan”shall have the meaning specified in Section 3.12(a). | |
(ee) “Company Preferred Stock”means collectively, the Series D Preferred, the Series E Preferred and the Series F Preferred. | |
(ff) “Company Proxy Statement”shall have the meaning specified in Section 3.07. | |
(gg) “Company Real Property”shall have the meaning set forth in Section 3.15(a). | |
(hh) “Company Representatives”shall have the meaning specified in Section 5.03(a). | |
(ii) “Company SEC Reports”shall have the meaning specified in Section 3.06(a). | |
(jj) “Company Special Committee”shall have the meaning specified in the Recitals. | |
(kk) “Company Stockholder”means each holder of record (as of the Effective Time) of the Company Capital Stock. | |
(ll) “Company Stockholders’ Action”shall have the meaning specified in Section 3.04(a). | |
(mm) “Company Stockholders’ Meeting”shall have the meaning specified in Section 5.02(c). | |
(nn) “Company Stockholders’ Vote Condition”shall have the meaning specified in Section 3.21. | |
(oo) “Company Terminating Breach”shall have the meaning specified in Section 7.01(c). | |
(pp) “control”(including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities or debt which is convertible into voting securities, by contract, credit arrangement or otherwise; provided, however, that the ownership, either alone or through or together with any subsidiary, directly or indirectly, of more than 10% of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of a corporation or other legal entity shall be deemed to constitute “control” of such corporation or other legal entity. | |
(qq) “D&O Insurance”shall have the meaning specified in Section 5.11(b). | |
(rr) “Dissenting Stockholder”means any Company Stockholder exercising dissenters’ rights pursuant to Article 13 of Georgia Law. | |
(ss) “Effective Time”shall have the meaning specified in Section 2.02. | |
(tt) “Encumbrances”means any lien, pledge, hypothecation, claim, infringement, charge, mortgage, security interest, encumbrance, prior assignment, infringement, interference, option, right of first refusal, preemptive right, community property interest or restriction of any nature whatsoever (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset). | |
(uu) “Environment”means any surface or subsurface physical medium or natural resource, including, air, land, soil, surface waters, ground waters, stream and river sediments, and biota. | |
(vv) “Environmental Laws”means any federal, state, local or common law, rule, regulation, ordinance, code, order or judgment (including the common law and any judicial or administrative interpretations, guidances, directives, policy statements or opinions) relating to the injury to, or the pollution or protection of human health and safety or the Environment. |
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(ww) “Environmental Liabilities”means any liability or obligation arising under Environmental Laws to the extent arising from any condition existing or any act or omission occurring prior to the Effective Time, including, without limitation, any claims, demands, assessments, judgments, orders, causes of action, notices of actual or alleged violations or liability (including such notices regarding the disposal or release of Hazardous Substances on the Real Property or elsewhere), proceedings and any associated costs, assessments, investigations, losses, damages (including punitive damages), obligations, liabilities, awards, fines, sanctions, penalties, or amounts paid in settlement (including reasonable costs, fees and expenses of attorneys, accountants, consultants and other agents of such person). | |
(xx) “ERISA”shall have the meaning specified in Section 3.12(a). | |
(yy) “Exchange Act”shall have the meaning specified in Section 3.05(b). | |
(zz) “Exchange Agent”shall have the meaning specified in Section 2.07(a). | |
(aaa)“Existing Stockholder Agreement”means that certain Stockholders’ Agreement dated as of December 17, 1999 by and among Hilton H. Howell, Jr., Douglas L. Jarvie, Robinson-Prather Partnership, W. James Host and Charles L. Jarvie. | |
(bbb)“Form S-4”shall have the meaning specified in Section 5.02(a). | |
(ccc) “GAAP”means generally accepted accounting principles. | |
(ddd)“Georgia Law”shall have the meaning specified in the Recitals. | |
(eee)“Governmental Entity”means any foreign governmental or United States federal, state or local governmental, administrative or regulatory authority, commission, body, agency, court or any judicial body or other authority. | |
(fff)“Gray”means Gray Television, Inc., a Georgia corporation. | |
(ggg)“Gray Side Letter”means the letter agreement dated August 2, 2005 between Gray and the Company. | |
(hhh)“Hazardous Substances”means any materials or substances, pollutants, contaminants, contaminants or wastes regulated by or defined under any Environmental Law, including, without limitation, petroleum, petroleum products, petroleum derived substances, radioactive materials, asbestos, polychlorinated biphenyls, radon and lead based paint. | |
(iii) “Indebtedness for Borrowed Money”means with respect to any person, all indebtedness in respect of money borrowed, including without limitation all capital leases, and the deferred purchase price of any property or asset, evidenced by a promissory note, bond, indenture or similar written obligation for the payment of money, other than trade payables and accrued expenses incurred in the ordinary course of business. | |
(jjj) information “made available” shall be limited to that information to which access has been granted by the applicable party for review by another party to this Agreement, by placing such information in a data room or otherwise, and shall not include information obtained or discovered through channels other than the providing party such as the Internet or public filings. | |
(kkk)“IRS”shall have the meaning specified in Section 3.12(c). | |
(lll)“Laws”shall have the meaning specified in Section 3.08(a). | |
(mmm)“Merger”shall have the meaning specified in the Recitals. | |
(nnn)“Merger Consideration”means, collectively, (i) the aggregate number of shares of TCM Common Stock to be issued in exchange for the Company Common Stock and to be reserved for Options in accordance with Section 5.06, (ii) the aggregate number of shares of TCM Series A Preferred Stock to be issued in exchange for the Series D Preferred and the Series E Preferred held |
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by the Series E Affiliated Stockholders, (iii) the aggregate amount of cash to be paid in exchange for the Series E Preferred held by Series E Preferred stockholders (other than Series E Affiliated Stockholders); (iv) the aggregate number of shares of TCM Series A Preferred Stock to be issued in exchange for the accrued and unpaid dividends (through July 1, 2005) on the Series D Preferred and Series E Preferred held by Series E Affiliated Stockholders; (v) the repayment of the Cash Advance; and (vi) the aggregate number of shares of TCM Common Stock to be issued in exchange for the Series F Preferred Stock and all accrued and unpaid dividends thereon (through July 1, 2005). | |
(ooo)“Merger Sub”shall have the meaning specified in the Introduction. | |
(ppp)“Nasdaq”means the Nasdaq National Market. | |
(qqq)“Option”shall have the meaning specified in Section 2.06(d). | |
(rrr)“ordinary course of business”means any action taken by a person that: (i) is consistent in nature, scope and magnitude with the past practices of such person and is taken in the ordinary course of the normal, day-to-day operations of such person; and (ii) does not require authorization by the board of directors or stockholders of such person (or by any person or group of persons exercising similar authority). | |
(sss)“Permitted Encumbrance”shall have the meaning specified in Section 3.18. | |
(ttt)“person”means an individual, corporation, partnership, association, trust, unincorporated organization or other entity or group (as defined in Section 13(d)(3) of the Exchange Act). | |
(uuu)“Refinancing”means a financing in which TCM receives funded debt of at least $120.0 million. | |
(vvv) “Rule 145 Affiliate”shall have the meaning specified in Section 6.04. | |
(www)“Rule 145 Affiliate Agreement”shall have the meaning specified in Section 6.04. | |
(xxx) “SEC”shall have the meaning specified in Section 3.06(a). | |
(yyy)“Securities Act”shall have the meaning specified in Section 3.05(b). | |
(zzz)“Separation and Distribution Agreement”means that certain Separation and Distribution Agreement dated as of August 2, 2005 by and among Gray and TCM attached hereto as Exhibit A. | |
(aaaa)“Series D Preferred”means the Series D Convertible Preferred Stock, par value $0.01 per share, of the Company. | |
(bbbb)“Series E Affiliated Stockholder”means J. Mack Robinson and any transferee of J. Mack Robinson. | |
(cccc) “Series E Preferred”means the Series E Convertible Preferred Stock, par value $0.01 per share, of the Company. | |
(dddd)“Series E Preferred Stockholder”mean a holder of Series E Preferred. | |
(eeee)“Series F Dividend Amount”means the aggregate of $290,000. | |
(ffff)“Series F Preferred”means the Series F Convertible Preferred Stock, par value $0.01 per share, of the Company. | |
(gggg)“Solvency Opinion”shall have the meaning specified in Section 6.02(g). | |
(hhhh)“Spin-off”means the separation of Gray’s newspaper publishing business and Graylink Wireless business from its other businesses, which result will be accomplished by: (i) Gray contributing all of the membership interests of Gray Publishing, LLC to TCM; and (ii) Gray subsequently distributing all of the shares of TCM Common Stock to its stockholders, in each case in accordance with the Separation and Distribution Agreement. |
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(iiii) “subsidiary” or “subsidiaries”of any person means any corporation, partnership, joint venture or other legal entity of which such person (either alone or through or together with any other subsidiary) owns, directly or indirectly, more than 50% of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. | |
(jjjj)“Superior Proposal”shall have the meaning specified in Section 5.03(b). | |
(kkkk)“Surviving Corporation”shall have the meaning specified in Section 2.01. | |
(llll)“Surviving Corporation Common Stock”shall have the meaning specified in Section 2.06(b). | |
(mmmm)“Takeover Proposal”shall have the meaning specified in Section 5.03(b). | |
(nnnn)“Takeover Proposal Interest”shall have the meaning specified in Section 5.03(a). | |
(oooo)“Tax” or “Taxes”shall mean taxes, fees, levies, duties, tariffs, imposts and governmental impositions or charges of any kind in the nature of (or similar to) taxes, payable to any federal, state, provincial, local or foreign taxing authority, including, without limitation, (i) income, franchise, profits, gross receipts, ad valorem, net worth, value added, sales, use, service, real or personal property, special assessments, capital stock, license, payroll, withholding, employment, social security, workers’ compensation, unemployment compensation, utility, severance, production, excise, stamp, occupation, premiums, windfall profits, transfer and gains taxes and (ii) interest, penalties, additional taxes and additions to tax imposed with respect thereto. | |
(pppp)“Tax Sharing Agreement”means that certain Tax Sharing Agreement dated as of August 2, 2005 by and among Gray and TCM attached hereto as Exhibit B. | |
(qqqq)“Tax Returns”shall mean returns, reports and information statements with respect to Taxes required to be filed with the IRS or any other taxing authority, domestic or foreign, including, without limitation, consolidated, combined and unitary tax returns. | |
(rrrr)“TCM”means Triple Crown Media, Inc., a Delaware corporation. | |
(ssss)“TCM Audited Financial Statements”shall have the meaning specified in Section 4.07. | |
(tttt)“TCM Board”shall have the meaning specified in the Recitals. | |
(uuuu)“TCM Capital Stock”means the TCM Common Stock and the TCM Preferred Stock. | |
(vvvv) “TCM Common Stock”means the common stock of TCM, par value $0.001 per share. | |
(wwww)“TCM Confidentiality Agreement”shall mean the confidentiality agreement dated June 1, 2005 between TCM, Gray and the Company. | |
(xxxx) “TCM Disclosure Letter”shall have the meaning specified in Article IV. | |
(yyyy)“TCM Financial Advisor”means Houlihan Lokey Howard & Zukin Financial Advisors, Inc. and its affiliates. | |
(zzzz)“TCM Financial Statements”shall have the meaning specified in Section 4.07. | |
(aaaaa)“TCM Interim Financial Statements”shall have the meaning specified in Section 4.07. | |
(bbbbb)“TCM Material Adverse Effect”means a material and adverse effect on the operation of TCM taken as a whole; provided, however, that the following shall not be taken into account in determining whether there has been or would be a “Material Adverse Effect”: (i) any adverse changes or developments resulting from conditions affecting the United States economy generally; (ii) any acts of war, insurrection, sabotage or terrorism; (iii) any adverse changes or developments that are primarily caused by conditions affecting the newspaper publishing and paging industries generally; and (iv) any adverse changes or developments arising primarily out of, or resulting |
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primarily from, actions taken by any party in connection with (but not in breach of) this Agreement and the transactions contemplated hereunder, or which are primarily attributable to the announcement of this Agreement and the transactions contemplated hereby or the identity of the Company. | |
(ccccc) “TCM Material Contracts”shall have the meaning specified in Section 4.17. | |
(ddddd)“TCM Permits”shall have the meaning specified in Section 4.09(b). | |
(eeeee)“TCM Preferred Stock”means collectively, the TCM Series A Preferred Stock and the TCM Series B Preferred Stock. | |
(fffff)“TCM Real Property”shall have the meaning specified in Section 4.15(a). | |
(ggggg)“TCM Representatives”shall have the meaning specified in Section 5.03(e). | |
(hhhhh)“TCM Series A Preferred Stock”mean the Series A convertible preferred stock of TCM, par value $0.001 per share. | |
(iiiii) “TCM Series B Preferred Stock”mean the Series B convertible preferred stock of TCM, par value $0.001 per share. | |
(jjjjj)“TCM Special Committee”shall have the meaning specified in the Recitals. | |
(kkkkk)“TCM Superior Proposal”shall have the meaning specified in Section 5.03(f). | |
(lllll)“TCM Takeover Proposal”shall have the meaning specified in Section 5.03(f). | |
(mmmmm)“TCM Takeover Proposal Interest”shall have the meaning specified in Section 5.03(e). | |
(nnnnn)“TCM Terminating Breach”shall have the meaning specified in Section 7.01(d). | |
(ooooo)“Transaction”means the Spin-off and the Merger. | |
(ppppp)“Transaction Expenses”shall have the meaning specified in Section 5.09(a). |
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(a) Cancellation of Shares of Company Common Stock and Company Preferred Stock. Each share of common stock, par value $0.01 per share of the Company (“Company Common Stock”) held by the Company as treasury stock (or by any subsidiary of the Company) and each share of Company Preferred Stock held by the Company as treasury stock (or by any subsidiary of the Company) immediately prior to the Effective Time shall automatically be canceled and retired and cease to exist, and no consideration or payment shall be delivered therefor or in respect thereof. | |
(b) Capital Stock of Merger Sub. Each share of capital stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one fully paid and non-assessable share of common stock, par value $0.001 per share of the Surviving Corporation (“Surviving Corporation Common Stock”), with the same rights, powers and privileges as the shares so converted and shall constitute the only outstanding shares of capital stock of the Surviving Corporation. Each stock certificate of Merger Sub evidencing ownership of any such shares shall remain outstanding and evidence ownership of shares of Surviving Corporation Common Stock. | |
(c) Conversion of Company Capital Stock. Subject to Sections 2.08 and 5.06, pursuant to this Agreement and by virtue of the Merger and without any action on the part of the Company, Merger Sub, TCM or the holders of the Company Capital Stock: |
(i) each share of Company Common Stock outstanding immediately prior to the Effective Time shall be cancelled and extinguished and thereafter represent the right to receive 0.0289 of a share of TCM Common Stock (the “Common Stock Exchange Ratio”); | |
(ii) each share of Series D Preferred outstanding immediately prior to the Effective Time shall be cancelled and extinguished and thereafter represent the right to receive one share of TCM Series A Preferred Stock; | |
(iii) each share of Series E Preferred held by a Series E Affiliated Stockholder and outstanding immediately prior to the Effective Time shall be cancelled and extinguished and thereafter represent the right to receive one share of TCM Series A Preferred Stock; |
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(iv) each share of Series E Preferred held by a Series E Preferred stockholder (other than a Series E Affiliated Stockholder) and outstanding immediately prior to the Effective Time shall be cancelled and extinguished and thereafter represent the right receive $1,000; and | |
(v) each share of Series F Preferred Stock outstanding immediately prior to Effective Time shall be cancelled and extinguished and thereafter represent the right to receive 22.56 shares of TCM Common Stock. |
As of the Effective Time, all such shares shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each holder of a certificate that immediately prior to the Effective Time represented any such shares (a “Certificate”) shall cease to have any rights with respect thereto, except the right to receive the applicable Merger Consideration with respect thereto and any cash in lieu of fractional shares of TCM Capital Stock upon surrender of such Certificate in accordance with Section 2.07, without interest. The right of any Company Stockholder to receive its portion of the Merger Consideration in accordance with this Section 2.06(c) shall be subject to and reduced by the amount of any withholding that is required under applicable tax law. | |
(d) Stock Options. All options to purchase Company Common Stock granted pursuant to the Company’s 1994 Long Term Incentive Plan, as amended (the “1994 Plan”), or the Company’s Non-Employee Directors’ 1994 Stock Option Plan (the “1994 Directors’ Plan”) (collectively, the “Company Option Plans”) or pursuant to any other arrangement adopted by the Company Board to provide options or other rights to purchase Company Common Stock to directors, officers, employees or consultants of the Company (in any such case, an “Option”) then outstanding (whether vested or unvested) shall be subject to the provisions of Section 5.06. | |
(e) Accrued and Unpaid Dividends. Pursuant to this Agreement, (i) at the Effective Time, the Surviving Corporation shall pay each Series E Preferred stockholder (other than a Series E Affiliated Stockholder) an amount equal to the accrued and unpaid dividends due to each such stockholder, (ii) all accrued and unpaid dividends (through July 1, 2005) on each outstanding share of Series D Preferred and Series E Preferred held by a Series E Affiliated Stockholder shall be converted at the Effective Time into the number of shares of TCM Series A Preferred Stock determined by dividing the accrued and unpaid dividends due on such shares by 1,000; provided that no fractional shares of TCM Series A Preferred Stock shall be issued upon conversion and, upon such conversion, the actual number of shares of TCM Series A Preferred Stock ultimately issued to any holder shall have been rounded down to the nearest whole number of shares, and (iii) all accrued and unpaid dividends (through July 1, 2005) on the outstanding Series F Preferred shall be converted at the Effective Time into the number of shares of TCM Common Stock determined by multiplying 0.0289 by the product of the Series F Dividend Amount divided by $0.66; provided that no fractional shares of TCM Common Stock shall be issued upon conversion and, upon such conversion, the actual number of shares of TCM Common Stock ultimately issued to any holder shall have been rounded down to the nearest whole number of shares. | |
(f) Cash Advance. Pursuant to this Agreement, at the Effective Time, the Cash Advance shall be converted into 6,050 shares of TCM Series B Preferred Stock. |
(a) Exchange Agent. At or promptly following the Effective Time, TCM shall deposit with Mellon Investor Services, LLC (the “Exchange Agent”), for the benefit of the Company Stockholders, for exchange in accordance with this Section 2.07, through the Exchange Agent, (i) the certificates representing shares of TCM Common Stock issuable pursuant to Section 2.06(c)(i) in exchange for outstanding shares of Company Common Stock, (ii) the certificates representing shares of TCM Series A Preferred Stock issuable pursuant to Section 2.06(c)(ii), Section 2.06(c)(iii) and 2.06(e)(ii), (iii) the cash payable pursuant to Section 2.06(c)(iv), (iv) the TCM Common Stock |
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issuable pursuant to Section 2.06(c)(v) and Section 2.06(e)(iii), and (v) the TCM Series B Preferred Stock issuable pursuant to Section 2.06(f). | |
(b) Exchange Procedures. As soon as reasonably practicable after the Effective Time and in any event no later than five (5) business days thereafter, the Exchange Agent shall mail to each holder of record (as of the Effective Time) of a Certificate whose shares were converted pursuant to Section 2.06(c) into the applicable Merger Consideration (plus cash in lieu of fractional shares, if any, of TCM Common Stock as provided in Section 2.07(e)) (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates held by such person shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as TCM may reasonably specify), and (ii) instructions for effecting the surrender of the Certificates in exchange for the applicable Merger Consideration (plus cash in lieu of fractional shares, if any, of TCM Common Stock as provided in Section 2.07(e)). Upon surrender of a Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by TCM, together with such letter of transmittal, duly completed and validly executed, and such other documents as may reasonably be required by the Exchange Agent, the holder of such Certificate shall be entitled to receive in exchange therefor the applicable Merger Consideration plus cash in lieu of fractional shares, if any, pursuant to Section 2.07(e), and the Certificate so surrendered shall immediately be cancelled. In the event of a transfer of ownership of Company Capital Stock that is not registered in the transfer records of the Company, the applicable Merger Consideration issued (and if applicable, paid) in exchange therefor plus cash in lieu of fractional shares, if any, pursuant to Section 2.07(e) may be issued and paid to a person other than the person in whose name the Certificate so surrendered is registered, if such Certificate is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes with respect to such transfer have been paid. Until surrendered as contemplated by this Section 2.07(b), each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the applicable Merger Consideration plus cash in lieu of fractional shares, if any, pursuant to Section 2.07(e). | |
(c) Distributions with Respect to Unexchanged Shares. No dividends or other distributions declared or made after the Effective Time with respect to shares of TCM Capital Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of TCM Capital Stock represented thereby until the holder of record of such Certificate surrenders such Certificate. Subject to applicable Law, following surrender of any such Certificate, there shall be issued and paid to the record holder of the Certificate, (i) the applicable Merger Consideration, (ii) the amount of any cash payable in lieu of a fractional share of TCM Common Stock to which such holder is entitled pursuant to Section 2.07(e), without interest and (iii) the amount of dividends or other distributions with a record date after the Effective Time payable with respect to such whole shares of TCM Capital Stock, without interest. | |
(d) No Registration of Transfers. From and after the Effective Time there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of any Company Capital Stock that was outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Exchange Agent for any reason, they shall be cancelled and exchanged as provided in this Article II. | |
(e) No Fractional Shares. No certificate or scrip representing fractional shares of TCM Common Stock shall be issued upon the surrender for exchange of Certificates, and such fractional share interests will not entitle the owner thereof to vote or to any other rights of a stockholder of TCM. Fractional shares of TCM Common Stock will be aggregated and sold in the market by the Exchange Agent at the then prevailing prices. The aggregated net cash proceeds of those sales will be distributed ratably to each holder of shares of Company Common Stock exchanged pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of TCM Common Stock (after taking into account all Certificates delivered by such holder). No interest will be payable upon any such cash payment. The parties acknowledge that payment of the cash consideration in lieu |
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of issuing fractional shares of TCM Common Stock was not separately bargained for consideration but merely represents a mechanical rounding off for purposes of simplifying the corporate and accounting problems that would otherwise be caused by the issuance of fractional shares of TCM Common Stock. | |
(f) Return of Merger Consideration. Subject to Section 2.07(g), any portion of the Merger Consideration that remains undistributed to the Company Stockholders for 180 days after the Effective Time shall be delivered to TCM, upon demand, and any Company Stockholder who has not exchanged such Company Stockholder’s shares of Company Capital Stock for such Company Stockholder’s portion of the applicable Merger Consideration shall thereafter look only to TCM, as an unsecured creditor for payment of its claim for the applicable Merger Consideration or any cash in lieu of fractional shares and any dividends or distributions with respect thereto. | |
(g) No Liability. To the extent permitted by applicable Law, none of TCM, Merger Sub, the Company, the Surviving Corporation or the Exchange Agent shall be liable to any Person for any portion of the Merger Consideration payable at Closing (or dividends or distributions with respect thereto) required to be delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. | |
(h) Withholding Rights. Each of TCM, the Surviving Corporation and the Exchange Agent shall be entitled to deduct and withhold from the Merger Consideration otherwise payable pursuant to this Agreement such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local, provincial or foreign tax law. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Company Capital Stock in respect of which such deduction and withholding was made. | |
(i) Lost, Stolen or Destroyed Certificates. If any Certificate shall have been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Certificate, upon the making of an affidavit of that fact by the holder thereof, such portion of the applicable Merger Consideration; provided, however, that the Surviving Corporation may, in its sole discretion and as a condition precedent to the issuance and delivery thereof, require the owner of such lost, stolen or destroyed Certificate to deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against the Surviving Corporation with respect to the Certificate alleged to have been lost, stolen or destroyed. |
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(a) any agreement or series of related agreements requiring aggregate payments by or to the Company or any of its subsidiaries of more than $100,000; | |
(b) any agreement with or for the benefit of any current or former officer or director, holder of any security, employee or consultant of TCM or any of its subsidiaries under which TCM or any of its subsidiaries has any obligations as of the date hereof and that (i) involves an obligation of TCM or any of its subsidiaries to make payments exceeding $100,000 in any year, (ii) contains non-competition provisions imposing restrictions on TCM or an executive officer or key employee of TCM, or (iii) involves any severance or termination payments or other similar obligation; | |
(c) any agreement with any labor union or association representing any employee of TCM or any of its subsidiaries; | |
(d) any agreement for the purchase of any materials, supplies, equipment, merchandise or services that contains an escalation clause or that obligates TCM or any of its subsidiaries to purchase all or substantially all of its requirements of a particular product or service from a supplier or to make periodic minimum purchases of a particular product or service from a supplier, that is not terminable on not more than 30 days’ notice (without penalty or premium) and that involves future payments by TCM of more than $100,000; | |
(e) any agreement for the sale of any of the assets, properties or securities of TCM or any of its subsidiaries (other than in the ordinary course of business) or for the grant to any person of any option, right of first refusal or preferential or similar right to purchase any such assets, properties or securities; | |
(f) any agreement of surety, guarantee or indemnification, other than agreements in the ordinary course of business with respect to obligations in an aggregate amount not in excess of $150,000; | |
(g) any agreement with customers or suppliers for the sharing of fees, the rebating of charges or other similar arrangements; | |
(h) any agreement relating to the acquisition by TCM or any of its subsidiaries of any operating business or the capital stock of any other person; | |
(i) any agreement requiring the payment to any person of a brokerage or sale commission or a finder’s or referral fee (other than arrangements to pay commissions or fees to employees or agents in the ordinary course of business or as set forth in Section 4.09 of this Agreement); | |
(j) any agreement, note or other document relating to or evidencing outstanding indebtedness of TCM or any of its subsidiaries for borrowed money (including capitalized lease obligations) in excess of $100,000; | |
(k) any lease, sublease or other agreement under which TCM or any of its subsidiaries is lessor or lessee of any real property or equipment or other tangible property that involves the future payment by the Company of more than $100,000; | |
(l) any agreement with a change of control provision or otherwise requiring any consent, approval, waiver or other action by any person in connection with the Spin-off or the Merger; | |
(m) any phantom stock plan or bonus, incentive or similar agreement, arrangement or understanding; | |
(n) any agreement involving the assignment, transfer, license (whether as licensee or licensor), pledge or Encumbrance of intellectual property of TCM or any of its subsidiaries; | |
(o) any distribution or sales representative agreement or agreement appointing any agent; | |
(p) any other material agreement whether or not made in the ordinary course of business; and |
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(q) any agreement that would be required to be filed as an exhibit to a periodic report if TCM was required to filed reports under the Exchange Act. |
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(a) amend or otherwise change the Company Articles of Incorporation or Company By-Laws or any of the Company’s subsidiaries’ equivalent organizational documents; | |
(b) issue, sell, pledge, dispose of or encumber, or authorize the issuance, sale, pledge, disposition or encumbrance of, any shares of capital stock of any class, or any options (including, without limitation, any Options), warrants, convertible or exchangeable securities, or other rights of any kind to acquire any shares of Company Capital Stock, or any other ownership interest (including, without limitation, any phantom interest), of the Company or any of its subsidiaries or affiliates except (A) pursuant to the terms of Options that are outstanding as of the date of this Agreement, (B) upon conversion of the Company Preferred Stock outstanding as of the date of this Agreement and (C) new Options for the exercise of up to an aggregate of 150,000 shares of Company Common Stock; | |
(c) sell, lease, license, pledge, dispose of or encumber any assets of the Company or any of its subsidiaries (except (i) dispositions in the ordinary course of business and in a manner consistent with past practice and that, in the aggregate, are not material in amount and (ii) dispositions of obsolete or worthless assets); | |
(d) (i) amend or change the period (or permit any acceleration, amendment or change) of exercisability of any Options or (ii) authorize cash payments in exchange for any such Options (except for Options that are subject to agreements existing on the date hereof that provide for mandatory acceleration of vesting as a result of the Merger and that have not been waived); | |
(e) (i) declare, set aside, make or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of any of its capital stock, except that a wholly owned subsidiary of the Company may declare and pay a dividend to its parent, (ii) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any shares of its capital stock or (iii) amend the terms of, repurchase, redeem or otherwise acquire any of its securities, or propose to do any of the foregoing; | |
(f) sell, transfer, license, sublicense or otherwise dispose of, or allow any rights to lapse with respect to, any intellectual property other than in the ordinary course of business or amend or modify any existing agreements with respect to any intellectual property, other than in the ordinary course of business, in each case so long as such action does not involve material intellectual property; | |
(g) (i) acquire (by merger, consolidation or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof; (ii) incur any Indebtedness for Borrowed Money or other obligation or liability of any kind (other than accounts payable incurred in the ordinary course of business), or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person, or make any loans or advances to any person, that exceed an aggregate of $5,000,000; (iii) enter into or amend any contract or agreement other than in the ordinary course of business; (iv) authorize or make any capital expenditures or purchase of fixed assets that, quarterly, exceed, $150,000 or, in the aggregate, exceed $250,000; (v) terminate any Material Contract or amend any of its material terms (other than amendments designed to remedy defaults thereunder); or (vi) enter into or amend any contract, agreement, commitment or arrangement to effect any of the matters prohibited by this Section 5.01(g); |
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(h) except as required by applicable Law or the terms of an agreement existing on the date hereof, increase the compensation, bonus or other benefits payable or to become payable to any of the Company’s or its subsidiaries’ officers, directors or employees, grant any severance or termination pay or rights to, or enter into any employment or severance agreement with, any of the Company’s or its subsidiaries’ officers, directors or employees, increase any benefits payable under existing severance or termination pay policies or employment agreements or establish, adopt, enter into or, except as required by law, terminate or amend, any Company Plan, except, in each case, for general increases, grants or agreements for non-executive employees in the ordinary course of business and in a manner consistent with past practice; | |
(i) take any action, other than in the ordinary course of business and in a manner consistent with past practice as required by changes in GAAP, to change accounting policies, principles, methods or practices (including, without limitation, procedures with respect to reserves, revenue recognition, capitalization of development costs, payments of accounts payable and collection of accounts receivable); | |
(j) make any Tax election inconsistent with past practice or settle or compromise any Tax liability, in excess of the amount accrued in the most recent financial statements contained in the Company SEC Reports; | |
(k) (i) commence, pay, discharge, settle or satisfy any lawsuits, claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of liabilities reflected or reserved against in the most recent financial statements contained in the Company SEC Reports or incurred in the ordinary course of business and consistent with past practice or (ii) waive any material benefits of any confidentiality, standstill or similar agreements to which the Company or any of its subsidiaries is a party; | |
(l) permit any material increase in the number of employees employed by the Company or any of its subsidiaries on the date hereof; | |
(m) terminate or fail to renew any material Company Permit; | |
(n) enter into any collective bargaining agreement or union contract with any labor organization or union; | |
(o) except in the ordinary course of business and in a manner consistent with past practice, accelerate or defer any material obligation or payment by or to the Company; or | |
(p) take or fail to take, or agree in writing or otherwise to take or fail to take, any of the actions described in Section 5.01(a) through (o) above, or that would result in any of the conditions to the Merger set forth in this Agreement not being satisfied. |
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(a) Gray shall have transferred all of the membership interests of Gray Publishing, LLC to TCM; | |
(b) Gray and TCM have executed and delivered the Separation and Distribution Agreement and the Tax Sharing Agreement; | |
(c) Gray shall have completed the Spin-off; | |
(d) the Form S-4 shall have been declared effective by the SEC under the Securities Act and shall not be the subject of any stop order or proceedings seeking a stop order and all state securities or Blue Sky Laws necessary to carry out the transactions contemplated hereby shall have been obtained and be in effect; | |
(e) the Company Stockholders’ Action shall have been approved and adopted by the stockholders of the Company in satisfaction of the Company Stockholders’ Vote Condition at the Company Stockholders’ Meeting or by written consent in accordance with Georgia Law and the Company Articles of Incorporation; | |
(f) all other consents, approvals, orders or authorizations of, or registrations, declarations or filings with, any Governmental Entity required to consummate the Spin-off and to consummate the Merger shall have been filed, made or obtained, except for such consents, approvals, orders or authorizations that involve an immaterial amount of assets and that do not provide for any penalties or fines due to the failure to receive such consents, approvals, orders or authorizations (it being understood that the parties shall use commercially reasonable efforts to put in place a structure in order to provide Merger Sub and indirectly, TCM, with the benefit of such assets); | |
(g) all notices to, and consents, approvals or waivers of, all persons under the agreements, instruments or documents listed in Schedule 6.01(g) shall have been given or obtained in a form and manner reasonably acceptable to TCM and the Company; | |
(h) there shall not have been any action taken, or any Law enacted, promulgated, issued or deemed applicable to the Merger by any Governmental Entity, that would (i) prohibit the Surviving Corporation’s ownership or operation of all or a material portion of the Company’s business or assets, or compel the Surviving Corporation or TCM to dispose of or hold separately all or a material portion of the Company’s or TCM’s business or assets, as a result of the Merger; (ii) render TCM or Merger Sub unable to consummate the Merger; or (iii) impose or confirm material limitations on the ability of TCM or Merger Sub effectively to exercise full rights of ownership of shares of the capital stock of the Surviving Corporation, including without limitation, the right to vote any such shares on all matters properly presented to the stockholders of the Surviving Corporation; | |
(i) no judgment, order, injunction, decree or ruling issued by any Governmental Entity restraining, enjoining or otherwise prohibiting the consummation of the Merger shall have been issued and then be in effect (provided that the parties hereto shall use their commercially reasonable efforts to have any such judgment, order, injunction, decree or ruling vacated or lifted), nor shall there have been any Law enacted, enforced or deemed applicable to the Merger that makes the consummation of the Merger illegal; and | |
(j) the shares of TCM Common Stock to be issued or reserved that constitute the Merger Consideration shall be approved for listing on Nasdaq, subject to official notice of issuance. |
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(a) The representations and warranties of the Company set forth in this Agreement shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or to Company Material Adverse Effect, which representations and warranties as so qualified shall be true and correct in all respects) as of the Closing Date as though such representations and warranties were made on and as of the Closing Date, except for those representations and warranties that address matters only as of a particular date, which representations and warranties shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or to Company Material Adverse Effect, which representations and warranties as so qualified shall be true and correct in all respects) only as of such date, and TCM shall have received a certificate signed on behalf of the Company by the Chief Executive Officer and Chief Financial Officer of the Company to such effect; | |
(b) the Company shall have performed or complied in all material respects with all agreements and covenants required by this Agreement and by each Ancillary Agreement to be performed or complied with by it on or prior to the Effective Time, and TCM shall have received a certificate signed on behalf of the Company by the Chief Executive Officer and Chief Financial Officer of the Company to such effect; | |
(c) Company Stockholders entitled to receive, in the aggregate, not more than 5% of the Merger Consideration shall have demanded appraisal for their shares in accordance with Article 13 of Georgia Law; | |
(d) at or prior to the Effective Time, the Existing Stockholder Agreement shall have been terminated, and TCM shall have received evidence of such termination reasonably satisfactory to it; | |
(e) all corporate actions, proceedings, instruments, and documents required to carry out the transactions contemplated hereby or incidental hereto and all other related legal matters shall have been reasonably satisfactory to and approved by counsel for TCM and such counsel shall have been furnished with such certified copies of such corporate actions and proceedings and such other instruments and documents as it shall have reasonably requested; and | |
(f) TCM shall have received a legal opinion of King & Spalding LLP, dated as of the Closing Date, and subject to the customary assumptions and qualifications, to the effect that the Merger will qualify as a “reorganization” under Section 368(a) of the Code; | |
(g) the special committee of the Board of Directors of TCM and the Board of Directors of TCM shall have received the opinion of a nationally recognized independent valuation firm to the effect that, as of the date of such opinion, based upon and subject to the assumptions, factors and limitations set forth in such opinion, assuming the Spin-off, Merger and Refinancing have been consummated as proposed, immediately after giving effect to the Transaction and the Refinancing, and on a pro forma basis: (A) the fair value and present saleable value of TCM’s assets would exceed TCM’s stated liabilities and identified contingent liabilities, (B) TCM should be able to pay its debts as they become absolute and mature and (C) the capital remaining in TCM would not be unreasonably small for the business in which TCM is engaged, as management has indicated it is proposed to be conducted following the consummation of the Spin-off, Merger and the Refinancing (the “Solvency Opinion”); and | |
(h) Bull Run’s Indebtedness for Borrowed Money at the Effective Time shall not exceed $69.1 million plus any Indebtedness for Borrowed Money incurred by Bull Run pursuant to Section 5.01(g)(ii) (it being understood and agreed that the Cash Advance shall not be considered Indebtedness for Borrowed Money). |
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(a) The representations and warranties of TCM set forth in this Agreement shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or to TCM Material Adverse Effect, which representations and warranties as so qualified shall be true and correct in all respects) as of the Closing Date as though such representations and warranties were made on and as of the Closing Date, except for those representations and warranties that address matters only as of a particular date, which representations and warranties shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or to TCM Material Adverse Effect, which representations and warranties as so qualified shall be true and correct in all respects) only as of such date, and the Company shall have received a certificate signed on behalf of TCM by the Chief Executive Officer and Chief Financial Officer of TCM to such effect; | |
(b) each of TCM and Merger Sub shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing Date, and the Company shall have received a certificate signed on behalf of TCM by the Chief Executive Officer and Chief Financial Officer of TCM to such effect; | |
(c) all corporate actions, proceedings, instruments and documents required to carry out the transactions contemplated hereby or incidental hereto and all other related legal matters shall have been reasonably satisfactory to and approved by counsel for the Company Special Committee and such counsel shall have been furnished with such certified copies of such corporate actions and proceedings and such other instruments and documents as it shall have reasonably requested; | |
(d) the Company shall have received a legal opinion of Troutman Sanders LLP, dated as of the Closing Date, and subject to the customary assumptions and qualifications, to the effect that the Merger will qualify as a “reorganization” under Section 368(a) of the Code; | |
(e) the Company shall have received the written opinion of the Company Financial Advisor, in customary form and based on customary assumptions, to the effect that the Merger Consideration to be received by the Company Stockholders pursuant to the Merger is fair to the Company Stockholders from a financial point of view, which opinion shall not have been withdrawn; | |
(f) TCM and its subsidiaries shall have obtained policies of fire and casualty, liability and other forms of insurance in such amounts, with such deductibles and against such risks and losses as are, in TCM’s reasonable judgment, appropriate for the assets and properties of TCM and its subsidiaries and customary in TCM’s industry; | |
(g) TCM’s Indebtedness for Borrowed Money at the Effective Time shall not exceed $40.0 million, which shall include the amount of money that TCM is required to distribute to Gray pursuant to Section 6.5 of the Separation and Distribution Agreement; and | |
(h) the Company shall have received a copy of the Solvency Opinion, which shall be in form and substance reasonably satisfactory to the Company. |
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�� (a) by mutual written consent duly authorized by the TCM Board, TCM Special Committee, board of directors of Merger Sub, the Company Board and the Company Special Committee; or | |
(b) by either the TCM Special Committee or the Company Special Committee, if a Governmental Entity shall have (i) issued a non-appealable final judgment, order, injunction, decree or ruling or taken any other action or (ii) enacted, enforced or deemed applicable to the Merger a Law in final form, in each case having the effect of permanently restraining, enjoining, prohibiting or making illegal the consummation of the Merger (provided that the party seeking to terminate pursuant to this Section 7.01(b) shall have used commercially reasonable efforts to have any such judgment, order, injunction, decree, ruling or other action vacated or lifted); or | |
(c) by the TCM Special Committee, (i) upon a breach of any representation, warranty, covenant or agreement of the Company set forth in this Agreement such that the conditions set forth in Section 6.02(a) or 6.02(b) would not be satisfied (a “Company Terminating Breach”), provided that, if such Company Terminating Breach is curable prior to the expiration of 30 days from notice to the Company of its occurrence through the exercise of the Company’s commercially reasonable efforts, and for so long as the Company continues to exercise such commercially reasonable efforts, the TCM Special Committee may not terminate this Agreement under this Section 7.01(c) until the expiration of such 15-day period (but in no event shall the preceding proviso be deemed to extend the date set forth in Section 7.01(e)), or (ii) if satisfaction of any of the conditions set forth in Section 6.02 is or becomes impossible (other than through the failure of TCM or the Merger Sub to comply with its obligations under this Agreement); or | |
(d) by the Company Special Committee, (i) upon a breach of any representation, warranty, covenant or agreement of TCM or Merger Sub set forth in this Agreement such that the conditions set forth in Section 6.03(a) or 6.03(b) would not be satisfied (a “TCM Terminating Breach”), provided that, if such TCM Terminating Breach is curable prior to the expiration of 30 days from notice to TCM of its occurrence through the exercise of TCM’s commercially reasonable efforts, and for so long as TCM continues to exercise such commercially reasonable efforts, the Company Special Committee may not terminate this Agreement under this Section 7.01(d) until the expiration of such 30-day period (but in no event shall the preceding proviso be deemed to extend the date set forth in Section 7.01(e)), or (ii) if satisfaction of any of the conditions set forth in Section 6.03 is or becomes impossible (other than through the failure of the Company to comply with its obligations under this Agreement); or | |
(e) by either the Company Special Committee or the TCM Special Committee, if the Merger has not been consummated by the 12-month anniversary of the execution of this Agreement (provided that the failure to consummate the Merger by such date was not the result of any act or failure to act by the party seeking to terminate this Agreement pursuant to this Section 7.01(e)); or | |
(f) by TCM, if the Company Board and the Company Special Committee shall have failed to recommend or shall be withdrawn, or modified or changed in a manner adverse to TCM its approval or recommendation of this Agreement or the Merger or shall have recommended a Superior Proposal, or the Company shall have entered into a definitive agreement in respect of a Takeover Proposal with a Person other than TCM or its subsidiaries (or the Company Board or the Company Special Committee resolves to do any of the foregoing); or |
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(g) by the Company, if the Company Board and the Company Special Committee authorizes the Company, subject to complying with Section 5.03 of this Agreement, to enter into a binding agreement concerning a transaction that constitutes a Superior Proposal; | |
(h) by either the TCM Special Committee or the Company Special Committee, if the Stockholder Vote Condition shall not have been satisfied by reason of the failure to obtain the required vote at the Company Stockholders’ Meeting; | |
(i) by either TCM or the Company, if the Separation and Distribution Agreement is terminated; or | |
(j) by the Company, if any material amendment or modification of the Separation and Distribution Agreement to the disadvantage of TCM had been made or if the Separation and Distribution Agreement is breached in any material respect. |
Triple Crown Media, Inc. | |
4370 Peachtree Road | |
Atlanta, Georgia 30319 | |
Fax No.: (404) 261-9607 | |
Attention: James C. Ryan |
Proskauer Rose LLP | |
1585 Broadway | |
New York, New York 10036 | |
Fax No.: (212) 969-2900 | |
Attention: Arnold S. Jacobs, Esq. |
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Chorey, Taylor & Feil | |
3399 Peachtree Road, N.E. | |
Suite 1700, The Lenox Building | |
Atlanta, Georgia 30326-1148 | |
Fax No.: (404) 841-3221 | |
Attention: John Taylor, Esq. |
Bull Run Corporation | |
Special Committee of the Board of Directors | |
1251 Avenue of the Americas | |
Suite 810 | |
New York, New York 10020 | |
Fax No.: (212) 575-1073 | |
Attention: Gerald N. Agranoff |
Tannenbaum Helpern Syracuse & Hirschtritt LLP | |
900 Third Avenue | |
New York, New York 10022-4775 | |
Fax No.: (212) 508-4775 | |
Attention: Stephen Rosenberg, Esq. |
Troutman Sanders LLP | |
600 Peachtree Street, N.E., Suite 5200 | |
Atlanta, Georgia 30308 | |
Fax No.: (404) 962-6740 | |
Attention: Marlon F. Starr, Esq. |
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TRIPLE CROWN MEDIA, INC. |
By: | /s/ Robert S. Prather, Jr. |
Name: Robert S. Prather, Jr. |
Title: | President and Chief Executive Officer |
BR ACQUISITION CORP. |
By: | /s/ James C. Ryan |
Name: James C. Ryan |
Title: | Treasurer and Secretary |
BULL RUN CORPORATION |
By: | /s/ Frederick J. Erickson |
Name: Frederick J. Erickson |
Title: | Vice President — Finance |
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Triple Crown Media, Inc. and | |
Gray Television, Inc. |
Triple Crown Media, Inc. and | |
Gray Television, Inc. |
(1) the spin-off of TCM to Gray’s shareholders (the “Spin-Off”) in a transaction pursuant to which (i) each holder of Gray’s common stock, no par value per share (the “Common Stock”) and Gray’s Class A common stock, no par value per share (together with the Common Stock, the “Gray Common Stock”) will receive 0.1 shares of TCM common stock, par value $0.001 per share (the “TCM Common Stock”), for each share of Gray Common Stock that it owns (the “Spin-Off Consideration”) and (ii) TCM will incur indebtedness to Gray in the amount of $40 million (the “TCM Debt”); | |
(2) concurrently with the Spin-Off, the merger of Bull Run Corporation (“Bull Run”) with and into a wholly-owned subsidiary of TCM, whereby (i) each holder of Bull Run’s common stock, par value $0.01 per share (the “Bull Run Common Stock”), will receive 0.0289 shares of TCM Common Stock in exchange for its shares of Bull Run Common Stock, representing in the aggregate approximately 5.0% of the outstanding shares of TCM on a fully-diluted basis, (ii) J. Mack Robinson or his affiliates (each, an “Affiliated Stockholder”) will (A) receive an aggregate of approximately $20.9 million of Series A Preferred Stock, par value $0.001 per share, of TCM (the “Series A Preferred Stock”) in exchange for the shares of Series D Preferred Stock, par value $0.01 per share, of Bull Run, then held by such Affiliated Stockholder (which represent all of the issued and outstanding shares of Series D Preferred Stock), plus all accrued but unpaid dividends thereon, and shares of Series E Preferred Stock, par value $0.01 per share, of Bull Run (the “Bull Run Series E Preferred Stock”) then held by such Affiliated Stockholder, plus all accrued but unpaid dividends thereon, and (B) release Bull Run from a $6.05 million advance previously made to Bull Run, in exchange for $6.05 million of Series B Preferred Stock, par value $0.001 per share, of TCM (the “Series B Preferred Stock”), (iii) each share of Series F Preferred Stock, par value $0.01 per share, of Bull Run (the “Bull Run Series F Preferred Stock”), plus all accrued and unpaid dividends thereon, will be converted into shares of Bull Run Common Stock prior to the Merger, at the |
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Triple Crown Media, Inc. and | |
Gray Television, Inc. |
applicable conversion price, (iv) each holder of shares of Bull Run Series E Preferred Stock that is not an Affiliated Stockholder will receive an amount in cash equal to $1,000 per share of Bull Run Series E Preferred Stock then held by such holder, plus all accrued but unpaid dividends thereon, and (v) TCM will assume up to $69.15 million of Bull Run’s indebtedness; and | |
(3) the refinancing of TCM’s indebtedness concurrently with the merger described in (2) above. |
1. reviewed Gray’s annual reports to shareholders on Form 10-K for the fiscal years ended December 31, 2002 through 2004 and quarterly report on Form 10-Q for the three months ended March 31, 2005; | |
2. reviewed Gray’s articles of incorporation, as amended and restated from time to time, including, without limitation, the description of the Gray Common Stock; | |
3. reviewed TCM’s historical financial statements for the fiscal years ended December 31, 2000 to 2004 and interim financial statements for the six months ended June 30, 2005 which Gray’s management has identified as being the most current financial statements available; | |
4. reviewed Bull Run’s annual reports to shareholders on Form 10-K for the fiscal years ended August 31, 2002 through 2004, quarterly report on Form 10-Q for the nine months ended May 31, 2005, and draft interim financial statements for the ten months ended June 30, 2005 which Bull Run’s management has identified as being the most current financial statements available; | |
5. reviewed TCM’s projected income statements prepared by management for the fiscal years ended December 31, 2005 through 2010; | |
6. reviewed Bull Run’s projected financial statements prepared by management for the fiscal years ended August 31, 2005 through 2008; | |
7. spoken with certain members of the management of Gray, TCM and Bull Run regarding the operations, financial condition, future prospects and projected operations and performance of the TCM and Bull Run and regarding the Transaction; | |
8. visited certain facilities and business offices of Gray, TCM and Bull Run; |
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Triple Crown Media, Inc. and | |
Gray Television, Inc. |
9. reviewed the following agreements and documents to be delivered at the closing of the Transaction: |
a. the Agreement and Plan of Merger by and between TCM, BR Acquisition Corp., and Bull Run (the “Merger Agreement”), draft dated August 1, 2005; | |
b. the Separation and Distribution Agreement by and between Gray and TCM, draft dated August 1, 2005; | |
c. the Tax Sharing Agreement; | |
d. the Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock and the Certificate of Designation, Preferences and Rights of Series B Convertible Preferred Stock, drafts dated August 1, 2005; | |
e. the commitment letter from Wachovia Bank and Bank of America dated July 29, 2005 pertaining to the Refinancing; |
10. reviewed a draft of TCM’s Registration Statement on Form S-4 dated July, 28 2005; | |
11. reviewed certain materials prepared by Bank of America Securities for the Board of Directors of Gray in connection with the Transaction; | |
12. reviewed the respective historical market prices and trading volumes for publicly traded securities of Gray and Bull Run; | |
13. reviewed certain other publicly available financial data for certain companies that we deemed relevant and publicly available transaction prices paid in other transactions that we deemed relevant for companies in related industries to TCM and Bull Run; and | |
14. conducted such other financial studies, analyses and inquiries as we have deemed appropriate. |
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Triple Crown Media, Inc. and | |
Gray Television, Inc. |
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Triple Crown Media, Inc. and | |
Gray Television, Inc. |
(a) the allocation of the Spin-Off Consideration between the Common Stock and the Class A Common Stock is fair, from a financial point of view, to the holders (other than the Affiliated Stockholders) of each such class of common stock; | |
(b) the Spin-Off is fair, from a financial point of view, to the holders (other than the Affiliated Stockholders) of the Common Stock and the Class A Common Stock that receive the Spin-Off Consideration in the Spin-Off; and | |
(c) the consideration to be paid to the shareholders of Bull Run in connection with the Merger is fair, from a financial point of view, to TCM. |
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Very truly yours, | |
/s/ SUNTRUST ROBINSON HUMPHREY | |
SUNTRUST ROBINSON HUMPHREY | |
SUNTRUST CAPITAL MARKETS, INC. |
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(1) “Beneficial shareholder” means the person who is a beneficial owner of shares held in a voting trust or by a nominee as the record shareholder. | |
(2) “Corporate action” means the transaction or other action by the corporation that creates dissenters’ rights under Code Section 14-2-1302. | |
(3) “Corporation” means the issuer of shares held by a dissenter before the corporate action, or the surviving or acquiring corporation by merger or share exchange of that issuer. | |
(4) “Dissenter” means a shareholder who is entitled to dissent from corporate action under Code Section 14-2-1302 and who exercises that right when and in the manner required by Code Sections 14-2-1320 through 14-2-1327. | |
(5) “Fair value,” with respect to a dissenter’s shares, means the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action. | |
(6) “Interest” means interest from the effective date of the corporate action until the date of payment, at a rate that is fair and equitable under all the circumstances. | |
(7) “Record shareholder” means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation. | |
(8) “Shareholder” means the record shareholder or the beneficial shareholder. |
(1) Consummation of a plan of merger to which the corporation is a party: |
(A) If approval of the shareholders of the corporation is required for the merger by Code Section 14-2-1103 or the articles of incorporation and the shareholder is entitled to vote on the merger, unless: |
(i) The corporation is merging into a subsidiary corporation pursuant to Code Section 14-2-1104; | |
(ii) Each shareholder of the corporation whose shares were outstanding immediately prior to the effective time of the merger shall receive a like number of shares of the surviving corporation, with designations, preferences, limitations, and relative rights identical to those previously held by each shareholder; and | |
(iii) The number and kind of shares of the surviving corporation outstanding immediately following the effective time of the merger, plus the number and kind of shares issuable as a result of the merger and by conversion of securities issued pursuant to the |
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merger, shall not exceed the total number and kind of shares of the corporation authorized by its articles of incorporation immediately prior to the effective time of the merger; or |
(B) If the corporation is a subsidiary that is merged with its parent under Code Section 14-2-1104; |
(2) Consummation of a plan of share exchange to which the corporation is a party as the corporation whose shares will be acquired, if the shareholder is entitled to vote on the plan; | |
(3) Consummation of a sale or exchange of all or substantially all of the property of the corporation if a shareholder vote is required on the sale or exchange pursuant to Code Section 14-2-1202, but not including a sale pursuant to court order or a sale for cash pursuant to a plan by which all or substantially all of the net proceeds of the sale will be distributed to the shareholders within one year after the date of sale; | |
(4) An amendment of the articles of incorporation with respect to a class or series of shares that reduces the number of shares of a class or series owned by the shareholder to a fraction of a share if the fractional share so created is to be acquired for cash under Code Section 14-2-604; or | |
(5) Any corporate action taken pursuant to a shareholder vote to the extent that Article 9 of this chapter, the articles of incorporation, by-laws, or a resolution of the board of directors provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their shares. |
(1) In the case of a plan of merger or share exchange, the holders of shares of the class or series are required under the plan of merger or share exchange to accept for their shares anything except shares of the surviving corporation or another publicly held corporation which at the effective date of the merger or share exchange are either listed on a national securities exchange or held of record by more than 2,000 shareholders, except for scrip or cash payments in lieu of fractional shares; or | |
(2) The articles of incorporation or a resolution of the board of directors approving the transaction provides otherwise. |
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(1) Must deliver to the corporation before the vote is taken written notice of his intent to demand payment for his shares if the proposed action is effectuated; and | |
(2) Must not vote his shares in favor of the proposed action. |
(1) State where the payment demand must be sent and where and when certificates for certificated shares must be deposited; | |
(2) Inform holders of uncertificated shares to what extent transfer of the shares will be restricted after the payment demand is received; | |
(3) Set a date by which the corporation must receive the payment demand, which date may not be fewer than 30 nor more than 60 days after the date the notice required in subsection (a) of this Code section is delivered; and | |
(4) Be accompanied by a copy of this article. |
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(1) The corporation’s balance sheet as of the end of a fiscal year ending not more than 16 months before the date of payment, an income statement for that year, a statement of changes in shareholders’ equity for that year, and the latest available interim financial statements, if any; | |
(2) A statement of the corporation’s estimate of the fair value of the shares; | |
(3) An explanation of how the interest was calculated; | |
(4) A statement of the dissenter’s right to demand payment under Code Section 14-2-1327; and | |
(5) A copy of this article. |
(1) The dissenter believes that the amount offered under Code Section 14-2-1325 is less than the fair value of his shares or that the interest due is incorrectly calculated; or |
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(2) The corporation, having failed to take the proposed action, does not return the deposited certificates or release the transfer restrictions imposed on uncertificated shares within 60 days after the date set for demanding payment. |
(1) The shareholder may demand the information required under subsection (b) of Code Section 14-2-1325, and the corporation shall provide the information to the shareholder within ten days after receipt of a written demand for the information; and | |
(2) The shareholder may at any time, subject to the limitations period of Code Section 14-2-1332, notify the corporation of his own estimate of the fair value of his shares and the amount of interest due and demand payment of his estimate of the fair value of his shares and interest due. |
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(1) Against the corporation and in favor of any or all dissenters if the court finds the corporation did not substantially comply with the requirements of Code Sections 14-2-1320 through 14-2-1327; or | |
(2) Against either the corporation or a dissenter, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this article. |
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1. That the name of the Corporation is Triple Crown Media, Inc. and that the Corporation was originally incorporated pursuant to the DGCL on April 29, 2005. | |
2. That the Board of Directors duly adopted resolutions approving the amendment and restatement of the Certificate of Incorporation of the Corporation pursuant to Sections 242 and 245 of the DGCL. | |
3. The Certificate of Incorporation of the Corporation shall be amended and restated in its entirety as follows: |
FIRST. The name of the corporation is Triple Crown Media, Inc. (hereinafter, the “Corporation”). | |
SECOND. The address of the Corporation’s registered office in the State of Delaware is 2711 Centerville Road, Suite 400, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is Corporation Service Company. | |
THIRD. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. | |
FOURTH. The Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the Corporation is authorized to issue is Twenty Five Million One Hundred Fifty Thousand (25,150,000) shares, each with a par value of $0.001 per share. Twenty Five Million (25,000,000) shares shall be Common Stock and One Hundred Fifty Thousand (150,000) shares shall be Preferred Stock. | |
The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized, within the limitations and restrictions stated in this Certificate of Incorporation, to determine or alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock and the number of shares constituting any such series and the designation thereof, or any of them; and to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series. | |
FIFTH. To the fullest extent permitted by the General Corporation Law of Delaware or any other applicable law as now in effect or as it may hereafter be amended, a director of the |
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Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for any action taken, or any failure to take any action, as a director. | |
SIXTH. The Corporation shall indemnify, to the fullest extent permitted by law, any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she or his or her testator or intestate is or was a director or officer of the Corporation or any predecessor of the Corporation or serves or served any other enterprise as a director or officer at the request of the Corporation or any predecessor to the Corporation. | |
SEVENTH. Neither any amendment nor repeal of this Article SEVENTH, nor the adoption of any provision of the Corporation’s Certificate of Incorporation inconsistent with this Article SEVENTH, shall eliminate or reduce the effect of this Article SEVENTH in respect of any matter occurring, or any cause of action, suit or claim accruing or arising or that, but for this Article SEVENTH, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. | |
EIGHTH. The Board of Directors is authorized to adopt, amend or repeal the Bylaws of the Corporation. | |
NINTH. No action shall be taken by the stockholders of the Corporation other than at an annual or special meeting of the stockholders, upon due notice and in accordance with the Corporation’s Bylaws. |
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TRIPLE CROWN MEDIA, INC. |
By: | /s/ JAMES C. RYAN |
James C. Ryan | |
Chief Financial Officer and Secretary |
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Item 20. | Indemnification of Directors and Officers. |
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Item 21. | Exhibits and Financial Statement Schedules. |
Exhibit | ||||
Number | Description | |||
2 | .1 | Agreement and Plan of Merger dated as of August 2, 2005 by and among Triple Crown Media, Inc., BR Acquisition Corp. and Bull Run Corporation† | ||
3 | .1 | Amended and Restated Certificate of Incorporation† | ||
3 | .2 | By-laws† | ||
5 | .1 | Opinion regarding legality of Proskauer Rose LLP† | ||
8 | .1 | Opinion of King & Spalding LLP to Gray Television, Inc. regarding the material federal income tax consequences of the spin-off† | ||
8 | .2 | Opinion of King & Spalding LLP to Triple Crown Media, Inc. regarding the material federal income tax consequences of the merger† | ||
8 | .3 | Opinion of Troutman Sanders LLP to Bull Run Corporation regarding the material federal income tax consequences of the merger† | ||
10 | .1 | Separation and Distribution Agreement dated as of August 2, 2005 between Triple Crown Media, Inc. and Gray Television, Inc.† | ||
10 | .2 | Tax Sharing Agreement dated as of August 2, 2005 between Triple Crown Media, Inc. and Gray Television, Inc.† | ||
10 | .3 | Lease Agreement between Gray Publishing, LLC and Gray Television, Inc.† | ||
10 | .4 | Guaranty dated June 13, 2005 by Gray Television, Inc.† | ||
10 | .5 | Amendment No. 1 to the Guaranty dated October 18, 2005.† | ||
10 | .6 | Guaranty dated October 18, 2005 by Gray Television, Inc.† | ||
10 | .7 | Amendment No. 1 to Separation and Distribution Agreement dated as of November 18, 2005.† | ||
21 | .1 | Subsidiaries† | ||
23 | .1 | Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm of Triple Crown Media, Inc. | ||
23 | .2 | Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm of Bull Run Corporation | ||
23 | .3 | Consent of Proskauer Rose LLP (included in Exhibit 5.1)† | ||
23 | .4 | Consent of King & Spalding LLP (included in Exhibit 8.1)† | ||
23 | .5 | Consent of King & Spalding LLP (included in Exhibit 8.2)† | ||
23 | .6 | Consent of Troutman Sanders LLP (included in Exhibit 8.3)† | ||
23 | .7 | Consent of Houlihan Lokey Howard & Zukin Financial Advisors, Inc. (included in Exhibit 99.1)* | ||
24 | .1 | Power of attorney† | ||
99 | .1 | Solvency Opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc.* | ||
99 | .2 | [Intentionally omitted.] | ||
99 | .3 | [Intentionally omitted.] | ||
99 | .4 | Form of Bull Run Corporation Proxy Card† | ||
99 | .5 | Consent of Persons Named as About to Become a Director† | ||
99 | .6 | Letter of Indemnity to Director Designees dated October 17, 2005 by TCM† |
† | Previously filed. |
* | To be filed by amendment. |
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Item 22. | Undertakings. |
(a) (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933. | |
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement. | |
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fideoffering thereof. | |
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. | |
(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. | |
(c) (1) The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. | |
(2) The registrant undertakes that every prospectus (i) that is filed pursuant to paragraph (c)(1) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act of 1933, and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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(d) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. |
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TRIPLE CROWN MEDIA, INC. |
By: | /s/ Robert S. Prather, Jr. |
Name: Robert S. Prather, Jr. |
Title: | President and Chief Executive Officer |
Signature | Title | |||
/s/ Robert S. Prather, Jr. | President and Chief Executive Officer and Director (Principal Executive Officer) | |||
/s/ * | Chief Financial Officer (Principal Accounting and Financial Officer) | |||
/s/ * | Director | |||
/s/ * | Director | |||
/s/ * | Director | |||
*By: | /s/ Robert S. Prather, Jr. Attorney-in-fact |
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