| STOCKHOLDERS' EQUITY | NOTE 11: STOCKHOLDERS’ EQUITY The holders of common stock are entitled to one vote per share on all matters to be voted on by stockholders. Holders of common stock will share in any dividend declared by the Board of Directors of the Company (the “Board”) . In the event of the Company’s liquidation, dissolution or winding up, all holders of common stock are entitled to share ratably in any assets available for distribution to holders of common stock. Agreement and Plan of Merger On February 16, 2021, the Company entered into a Merger Agreement pursuant to which the Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of TELLC (the “Merger”). TELLC is the acquirer and is an affiliate of Alden Funds, the Company’s largest shareholder. Subject to the terms and conditions set forth in the Merger Agreement, at the closing of the Merger, each share of common stock, par value $0.01 per share (other than treasury stock or common stock held by TELLC or any of its affiliates) issued and outstanding immediately as of the closing (other than dissenting shares) will be converted into the right to receive $17.25 in cash, without interest (the “Merger Consideration”). The consummation of the Merger (the “Closing”) is subject to certain customary mutual conditions, including (i) the approval of the Company’s stockholders holding two-thirds of the outstanding shares of common stock not owned by TELLC and its affiliates, (ii) the expiration or termination of any waiting period applicable to the closing of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) and (iii) the absence of any order of any U.S. court that prohibits, renders illegal or permanently enjoins the consummation of the Merger. The obligation of each party to consummate the Merger is also conditioned upon (i) the accuracy of the representations and warranties of the other party as of the date of the Merger Agreement and as of the Closing (subject to customary materiality qualifiers), (ii) compliance by the other party in all material respects with its pre-Closing obligations under the Merger Agreement and (iii) in TELLC’s case, the absence of a material adverse effect with respect to the Company. The Company and TELLC have each made customary representations, warranties and covenants in the Merger Agreement. Subject to certain exceptions, the Company has agreed, among other things, to covenants relating to the conduct of its business during the interim period between the execution of the Merger Agreement and the consummation of the Merger. The parties have also agreed to use their respective reasonable best efforts to obtain governmental and regulatory approvals. In addition, subject to certain exceptions, the Company has agreed to covenants relating to (i) the submission of the Merger Agreement to the Company’s stockholders at a special meeting thereof for approval, (ii) the recommendation by the Board in favor of the adoption by the Company’s stockholders of the Merger Agreement and (iii) non-solicitation obligations of the Company relating to alternative acquisition proposals. Either the Company or TELLC may terminate the Merger Agreement if (i) TELLC, Merger Sub and the Company agree by mutual written consent to do so, (ii) the Merger has not been consummated on or before December 31, 2021 (the “End Date”), (iii) any court has issued an order permanently restraining, enjoining or otherwise prohibiting the Merger and such order or other action is, or has become, final and non-appealable, (iv) the approval of the Company’s stockholders is not obtained at a meeting of the Company’s stockholders called for the purpose of adopting the Merger Agreement or (v) the other party breaches any representation, warranty or covenant that results in the failure of the related closing condition to be satisfied, subject to a cure period in certain circumstances. In addition, the Company may, under certain circumstances, terminate the Merger Agreement in order for the Company to enter concurrently into a definitive written agreement with respect to an unsolicited superior acquisition proposal, subject to the Company having first complied with certain matching rights and other obligations set forth in the Merger Agreement. Additionally, TELLC may, under certain circumstances, terminate the Merger Agreement if (i) the Board changes or adversely modifies its recommendation that the Company’s stockholders vote in favor of adopting the Merger Agreement or (ii) the Company materially breaches its non-solicitation obligations and such breach results in an alternative transaction proposal. If the Merger Agreement is terminated (i) by the Company in order for the Company to enter into a definitive written agreement with respect to an unsolicited superior acquisition proposal, (ii) by TELLC because (a) the Board changes or adversely modifies its recommendation that the Company’s stockholders vote in favor of adopting the Merger Agreement or (b) the Company materially breaches its non-solicitation obligations and such breach results in an alternative transaction proposal, or (iii) by (x) either party because the Merger was not consummated on or before the End Date (as it may be extended) or approval of the Company’s stockholders was not obtained or (y) by TELLC if the Company commits a breach of any representation, warranty or covenant that results in the failure of the related closing condition to be satisfied (subject to a cure period in certain circumstances), but only if, in the case of this clause (iii), an alternative acquisition proposal was previously made and, within 12 months after termination of the Merger Agreement, the Company enters into an agreement for an alternative transaction or an acquisition transaction is consummated, then, in each case, the Company will be obligated to pay to TELLC a one-time fee equal to $20.0 million in cash. If the Merger Agreement is terminated by the Company (i) if TELLC breaches any representation, warranty or covenant that results in the failure of the related closing condition to be satisfied, subject to a cure period in certain circumstances or (ii) if the conditions to TELLC’s obligations to consummate the Merger are satisfied or waived, and TELLC does not consummate the Merger when required by the Merger Agreement, then TELLC will be obligated to pay to the Company a one-time liquidated damages amount equal to $50.0 million in cash. Pursuant to the Merger Agreement, TELLC agreed to vote all of its shares of common stock in favor of the adoption of the Merger Agreement and the approval of the transactions contemplated thereby, including the Merger, so long as the Board has not changed or adversely modified its recommendation in favor of the Merger Agreement. The Merger Agreement also prohibits TELLC from transferring any of its shares of common stock, subject to certain exceptions. Alden Global Opportunities Master Fund, L.P. and Alden Global Value Recovery Master Fund, L.P. (each, a “Guarantor”), have entered into a Limited Guarantee dated February 16, 2021 (the “Limited Guarantee”) with the Company to guarantee TELLC’s obligation to pay the liquidated damages amount to the Company and certain other specified payments to the Company, subject to the terms and obligations set forth in the Limited Guarantee. The Guarantors have also entered into an equity commitment letter dated as of February 16, 2021 (the “Equity Commitment Letter”) with TELLC pursuant to which the Guarantors have made an equity commitment of $375.0 million to TELLC to fund the payment of the aggregate Merger Consideration. The Company is a third-party beneficiary of the Equity Commitment Letter and has the right to specifically enforce the Guarantors’ obligations thereunder, if the conditions to TELLC’s obligations to consummate the Merger are satisfied or waived, and the Merger is consummated substantially simultaneously. Concurrent with the signing of the Merger Agreement, Alden Funds has signed a non-binding term sheet to sell The Baltimore Sun to Sunlight for All Institute, a public charity formed by Stewart Bainum Jr.. Significant Shareholders Alden Funds Alden Funds beneficially owned 11,554,306 shares of Tribune common stock, which represented 31.4% of the outstanding shares of Tribune common stock as of March 28, 2021. During November 2019, the Alden Funds acquired 11,544,213 shares of the Company’s common stock. Of those shares, 9,071,529 shares were purchased from Merrick Media and Michael W. Ferro, previously the Company’s non-executive Chairman of the Board, in a private transaction and the remaining shares were purchased on the open market. On July 1, 2020, the Company entered into an Amended and Restated Cooperation Agreement (the “Amended and Restated Cooperation Agreement”) with the Alden Funds and Alden Global Capital LLC regarding the composition of the Board and related matters. The Amended and Restated Cooperation Agreement provides that the Board will increase the size of the Board to seven directors and appoint Randall D. Smith to fill the resulting vacancy. The Board had been reduced to six members at the 2020 annual shareholders meeting when two of the Board members retired. The Amended and Restated Cooperation Agreement further provides, among other things, that: • Until the earlier of June 16, 2021 or the first business day following the Company’s 2021 annual meeting of stockholders, which will be held on or before June 15, 2021 (the “Amended Cooperation Period”), the size of the Board will not be increased above seven members. • During the Amended Cooperation Period , the Alden Funds and their affiliates will be subject to customary standstill restrictions, including (among others) refraining from (i) acquiring securities of the Company if it would result in their ownership of more than 33.0% of the Company’s outstanding shares of common stock, $0.01 par value (“Common Stock”); (ii) soliciting proxies to vote any securities of the Company; (iii) forming or participating in a “group” in connection with the Company’s voting securities or (iv) otherwise acting alone, or in concert with others, to seek to control or knowingly influence the management, Board or policies of the Company; provided that such prohibitions terminate if (a) a person or group that owns more than 10.0% of the issued and outstanding Common Stock (a “Related Party Investor”) (x) submits a valid stockholders proposal (other than a precatory proposal) at a meeting of the Company’s stockholders or (y) submits a valid notice of nomination to nominate on or more persons for election to the Board at a meeting of the Company’s stockholders; (b) the Company enters into a material agreement with any Related Party Investor, other than a Related Party Agreement or alters, amends or modifies in any way a Related Party Agreement, other than on terms no less favorable to the Company than would be obtainable through arms’-length negotiations with a hypothetically similarly situated bona fide third-party; (c) the Company amends, waives or fails to enforce, the terms of any voting agreement or standstill agreement between the Company and a Related Party Investor other than such amendments or waivers that, taken as a whole, make the agreement more restrictive on the Related Party Investor; (d) any of Ms. Dana Goldsmith Needleman, Mr. Christopher Minnetian, Mr. Randall D. Smith and their successors designated by the Alden Funds are not nominated for election at, or are not elected at, the Company’s 2021 annual stockholder meeting; or (e) on the date that (1) the Company executes a definitive agreement providing for the acquisition of a majority of the outstanding shares of common stock or a majority of the consolidated assets of the Company and its subsidiaries or (2) is 10 business days after commencement of a tender offer that, if consummated, would result in the offeror acquiring a majority of the outstanding shares of common stock and the Board has not recommended against acceptance of such tender offer. The prohibitions described in clause (i) of the Standstill Restrictions above will also terminate on the date that any person or group, other than the Alden Funds and their affiliates, acquires beneficial ownership of shares of common stock that results in such person or group beneficially owning 30.0% or more of the Company’s then-outstanding shares of common stock. • During the Amended Cooperation Period, the Alden Funds will (a) vote their shares of common stock in favor of any Company director or any nominee designated by the Compensation, Nominating and Corporate Governance Committee of the Board and against the removal of any Company director and (b) not deposit any shares of common stock that they own or have the right to vote into a voting trust or subject them to a voting agreement or similar arrangement. Nant Capital, LLC Dr. Patrick Soon-Shiong, a former director of the Company, together with Nant Capital, beneficially own 8,743,619 shares of Tribune common stock, which represented 23.7% of the outstanding shares of Tribune common stock as of March 28, 2021. California Capital Equity, LLC (“CalCap”) directly owns all of the equity interests of Nant Capital, and CalCap may be deemed to have beneficial ownership of the shares held by Nant Capital. Dr. Soon-Shiong directly owns all of the equity interests of CalCap and may be deemed to beneficially own and share voting power and investment power with Nant Capital over all shares of Tribune common stock beneficially owned by Nant Capital. Under the Securities Purchase Agreement dated May 22, 2016, among the Company, Nant Capital and Dr. Patrick Soon-Shiong (“Nant Purchase Agreement”), Nant Capital and Dr. Soon-Shiong and their respective affiliates are prohibited from transferring shares of the Company’s common stock if the transfer would result in a person beneficially owning more than 4.9% of the Company’s then-outstanding shares of common stock following the transfer, as well as transfers to a material competitor of the Company in any of the Company’s then-existing primary geographical markets. Rights Agreement On July 27, 2020, the Board declared a dividend of one preferred stock purchase right (a “Right”) for each outstanding share of common stock, par value $0.01 per share of the Company. The dividend was payable on August 7, 2020, to holders of record as of the close of business on that date. The Board has adopted the Rights Agreement to reduce the likelihood that a potential acquirer would gain (or seek to influence or change) control of the Company through acquisitions from other stockholders, open market accumulation or other tactics without paying an appropriate premium for the Company’s shares. In general terms and subject to certain exceptions, it works by imposing a significant penalty upon any person or group (including a group of persons that are acting in concert with each other) that acquires 10.0% or more of the outstanding common stock of the Company without the approval of the Board. The Rights will expire on July 27, 2021, unless earlier exercised, exchanged, amended or redeemed. The Rights Agreement, which is described more fully in the Company’s Current Report on Form 8-K dated July 28, 2020, includes antidilution provisions designed to prevent efforts to diminish the effectiveness of the Rights. On February 16, 2021 in connection with the transactions contemplated by the Merger Agreement, the Company entered into an Amendment No. 1 (“Amendment No. 1”) to the Rights Agreement. Amendment No. 1 provides, among other things, that (i) neither the approval, execution, delivery or performance of the Merger Agreement or the other contracts or instruments related thereto, nor the announcement or the consummation of the Merger, will (a) cause the Rights to become exercisable, (b) cause TELLC, Merger Sub or any of their Affiliates or Associates (as defined in the Rights Agreement) to become an Acquiring Person (as defined in the Rights Agreement) or (c) give rise to a Stock Acquisition Date (as defined in the Rights Agreement), Distribution Date (as defined in the Rights Agreement) or Section 9(a)(ii) Event (as defined in the Rights Agreement), (ii) the Company Rights will expire in their entirety, and the Rights Agreement will terminate, immediately prior to the Effective Time (but only if the Effective Time occurs) without any consideration payable therefor or in respect thereof, and (iii) the “Acting in Concert” (as defined in the Rights Agreement) provisions of the Rights Agreement will be removed. On April 23, 2021, the Company entered into an Amendment No. 2 (“Amendment No. 2”) to the Rights Agreement. Amendment No. 2 provides, among other things, that (1) the definition of “Passive Investor” shall be amended to replace “and” with “or” between romanettes (ii) and (iii) thereof and (2) the definition of “Specified Percentage” shall be amended to replace “10%” with “15%.” The Company entered into Amendment No. 2 in connection with the court approved settlement of litigation concerning the Rights Agreement. The Company settled plaintiff’s legal costs totaling $2.4 million related to the litigation. Stock Repurchases On March 13, 2019, the Board authorized $25.0 million to be used for stock repurchases for 24 months from the date of authorization. The authorization expired on March 12, 2021 and no repurchases were made. |
