| Item 1.01 | Entry into a Material Definitive Agreement. |
Stock Purchase Agreement
On January 31, 2021, Gray Television, Inc., a Georgia corporation (the “Company” or “Gray”), entered into a stock purchase agreement (the “Purchase Agreement”) with Quincy Media, Inc., a privately owned Illinois corporation (“Quincy”), its stockholders signatory thereto (the “Sellers”) and Ralph M. Oakley, solely as representative of the Sellers, pursuant to which Gray will acquire all of the outstanding shares of capital stock of Quincy for $925,000,000 in cash, subject to certain adjustments, including, among other things, adjustments based on a determination of net working capital, cash, transaction expenses and indebtedness, as provided in the Purchase Agreement (the “Transaction”).
Pursuant to the Purchase Agreement, Quincy has agreed, among other things, (i) not to solicit, initiate or knowingly encourage alternative acquisition proposals from third parties and (ii) not to engage in any discussions or negotiations with any third parties regarding alternative acquisition proposals.
The Purchase Agreement contains customary representations, warranties and covenants for a transaction of this nature. A portion of the aggregate consideration payable in the Transaction will be held in escrow to secure the indemnification obligations of the Sellers. The Purchase Agreement also contains customary pre-closing covenants, including the obligation of Quincy to conduct its business in all material respects in the ordinary course and to refrain from taking certain specified actions without the consent of Gray.
The consummation of the Transaction is subject to the satisfaction or waiver of certain customary conditions, including, among others: (i) the receipt of approval from the Federal Communications Commission and the expiration or early termination of the waiting period applicable to the Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and (ii) the absence of certain legal impediments to the consummation of the Transaction.
To facilitate prompt regulatory approvals, Gray has elected to divest Quincy television stations in six markets in which Gray also owns a full-power television station. The divestitures may take the form of cash sales, swaps involving other television stations, or a combination of cash and swaps.
Either party may terminate the Purchase Agreement if the Transaction is not consummated on or before January 31, 2022, with an automatic extension to May 1, 2022 if necessary to obtain regulatory approval under the circumstances specified in the Purchase Agreement.
The Purchase Agreement provides that Gray must pay to the Sellers a termination fee of $25 million if the Purchase Agreement is terminated as a result of a failure to satisfy certain regulatory approvals set out in the Purchase Agreement.
The foregoing description of the Transaction and the Purchase Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Purchase Agreement, a copy of which is attached hereto as Exhibit 2.1 and is incorporated herein by reference. The Purchase Agreement has been attached to provide investors with information regarding its terms. It is not intended to provide any other factual information about Gray or Quincy. Moreover, certain representations and warranties in the Purchase Agreement were used for the purposes of allocating risk between Gray and Quincy rather than establishing matters as facts. In addition, investors are not third party beneficiaries under the Purchase Agreement. Accordingly, the representations and warranties in the Purchase Agreement should not be relied on as characterizations of the actual state of facts about Gray or Quincy.
Debt Commitment
On January 31, 2021, Gray entered into a financing commitment letter (the “Commitment Letter”) with Wells Fargo Bank, National Association (“Wells”) pursuant to which Wells has committed to provide debt financing for the full purchase price of the Transaction, with an incremental term loan facility in an aggregate principal amount of $925 million (the “Term Loan”). The Commitment Letter contains conditions to funding of the debt financing customary for commitments of this type. The Term Loan will be secured on a pari passu basis with the other obligations of the Company and its subsidiaries under the Company’s Fourth Amended and Restated Credit Agreement, dated as of January 2, 2019, by and among the Company, Wells, as Administrative Agent, and the lenders party thereto, as subsequently amended. Various economic terms of the debt financing are subject to change in the process of syndication.
