UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) January 7, 1997
Media General, Inc.
(Exact name of registrant as specified in its charter)
Virginia 1-6383 54-0850433
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
333 E. Grace St., Richmond, Virginia 23219
(Address of principal executive offices) (Zip Code)
(804) 649-6000
(Registrant's telephone number, including area code)
N/A
-----------
(Former name or former address, if changed since last report.)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On January 7, 1997, Media General, Inc. (the Company) acquired Park
Acquisitions, Inc., parent of Park Communications, Inc. (Park), from its sole
shareholders, Dr. Gary B. Knapp and Tomlin Family Trust II, of which Donald R.
Tomlin, Jr. is a trustee. The total consideration was approximately $715
million, which includes an estimate of $5 million in transaction costs, and was
derived principally as a multiple of cash flow. As a result of the merger, the
Company will assume approximately $476 million of Park's long-term debt which
will be prepaid at the earliest time allowed by the indenture agreements
(approximately 30 days). There are warrants outstanding which were issued with
the Park debt that give the holders the right to purchase 7% of Park's common
stock on a fully diluted basis. The Company anticipates acquiring these warrants
at fair value in early 1997. The purchase price, debt prepayment and anticipated
warrant redemption will be funded with borrowings under a seven-year $1.2
billion Credit Agreement with NationsBank of Texas, N.A.; First Union National
Bank of North Carolina; The Toronto-Dominion Bank; The Bank of Nova Scotia; Bank
of Tokyo-Mitsubishi Trust Company; Crestar Bank; Morgan Guaranty Trust Company
of New York; LTCB Trust Company; Suntrust Bank, Atlanta; Wachovia Bank of North
Carolina; Bank of America, Illinois; Bank of New York; The Dai-Ichi Kangyo Bank,
Ltd.; The Fuji Bank, Limited; The Industrial Bank of Japan, Limited; Mellon
Bank, N.A.; PNC Bank, N.A.; Royal Bank of Canada; Union Bank of Switzerland, New
York Branch; Credit Lyonnais Atlanta Agency; The Sanwa Bank, Limited Atlanta
Agency; ABN AMRO Bank N.V., New York Branch; Bank of Montreal, Chicago Branch;
Banque Nationale de Paris; Fleet Bank, N.A.; First National Bank of Maryland;
The Mitsubishi Trust and Banking Corporation; The Royal Bank of Scotland plc;
The Sakura Bank, Limited; The Sumitomo Bank, Limited; The Yasuda Trust and
Banking Company, Limited, New York Branch; Westdeutsche Landesbank; Signet Bank
and Corestates.
The acquisition of Park includes ten network affiliated television stations and
110 newspapers and related publications in geographically diverse markets
throughout the United States. The television stations are primarily located in
mid-sized southeastern markets. The newspapers include 28 daily and 82 weekly
newspapers in twelve states primarily located in the eastern United States for a
combined total paid daily circulation of approximately 242,000. The Company
intends to continue to use the majority of the acquired assets for the same or
similar purposes as previously used. The Company plans to exchange certain of
the assets for similar assets located in the Southeast. Also, the Company plans
to sell certain assets and purchase with the sale proceeds similar assets
located in the Southeast.
<PAGE>
Item 7. Financial Statements and Exhibits
(a) (1) Consolidated Financial Statements of Park Communications, Inc. and
Subsidiaries.
Reports of Independent Auditors.
Consolidated Balance Sheets as of December 31, 1995 and 1994.
Consolidated Statements of Income and Retained Earnings for the period from
May 11, 1995 to December 31, 1995, the period from January 1, 1995 to May
10, 1995 and the years ended December 31, 1994 and 1993.
Consolidated Statements of Cash Flows for the period from May 11, 1995 to
December 31, 1995, the period from January 1, 1995 to May 10, 1995 and the
years ended December 31, 1994 and 1993.
Notes to Consolidated Financial Statements.
(2) Condensed Consolidated Unaudited Financial Statements of Park
Communications, Inc. and Subsidiaries.
Condensed Consolidated Balance Sheet as of September 30, 1996.
Condensed Consolidated Statements of Income and Retained Earnings for the
nine months ended September 30, 1996, the period from May 11, 1995 to
September 30, 1995 and the period from January 1, 1995 to May 10, 1995.
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 1996, the period from May 11, 1995 to September 30, 1995 and
the period from January 1, 1995 to May 10, 1995.
Notes to Condensed Consolidated Unaudited Financial Statements.
(b) Pro Forma Combined Condensed Unaudited Financial Statements of Media
General, Inc.:
Pro Forma Combined Condensed Balance Sheet as of September 29, 1996.
Pro Forma Combined Condensed Statement of Operations for the year ended
December 31, 1995.
Pro Forma Combined Condensed Statement of Operations for the nine months
ended September 29, 1996.
Notes to Pro Forma Combined Condensed Financial Statements.
<PAGE>
(c) Exhibits
2.1 Agreement and Plan of Merger (Agreement) dated July 19, 1996, by
and among Media General, Inc., MG Acquisitions, Inc. and Park Acquisitions, Inc.
The schedules and similar attachments to this Agreement are omitted in
accordance with Item 601 (b) (2) of Regulation S-K. A listing of such schedules
and similar attachments is included with the Agreement and the Company hereby
undertakes to supply the Commission supplementally with a copy of any such
schedules and similar attachments upon request.
2.2 First Amendment to Agreement and Plan of Merger dated as of January
7, 1997, by and among Media General, Inc., MG Acquisitions, Inc. and Park
Acquisitions, Inc. The schedules and similar attachments to this Agreement are
omitted in accordance with Item 601 (b) (2) of Regulation S-K. A listing of such
schedules and similar attachments is included with the Agreement and the Company
hereby undertakes to supply the Commission supplementally with a copy of any
such schedules and similar attachments upon request.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Ernst & Young LLP
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Park Communications, Inc.
We have audited the accompanying consolidated balance sheet of Park
Communications, Inc. and Subsidiaries (a wholly-owned subsidiary of Park
Acquisitions, Inc.) as of December 31, 1995 and the related consolidated
statements of income and retained earnings and cash flows for the period from
May 11, 1995 to December 31, 1995 and for the period from January 1, 1995 to May
10, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As discussed in Note 2 to the consolidated financial statements, the
Company was acquired by Park Acquisitions, Inc. on May 11, 1995 in a transaction
accounted for as a purchase. The purchase price and an allocable portion of debt
have been "pushed down" to the financial statements of the Company and as a
result, the post-acquisition consolidated financial statements are not
comparable to the pre-acquisition consolidated financial statements.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Park
Communications, Inc. and Subsidiaries as of December 31, 1995 and the
consolidated results of their operations and their cash flows for the period
from May 11, 1995 to December 31, 1995 and for the period from January 1, 1995
to May 10, 1995 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Lexington, Kentucky
February 2, 1996, except for Note 13, as to which
the date is May 6, 1996
<PAGE>
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
Board of Directors
Park Communications, Inc.
We have audited the accompanying consolidated balance sheet of Park
Communications, Inc. and subsidiaries as of December 31, 1994 and the related
consolidated statements of income and retained earnings, and cash flows for each
of the two years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Park
Communications, Inc. and subsidiaries at December 31, 1994 and the consolidated
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1994 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the financial statements, in 1993 the Company
changed its method of accounting for income taxes, as required by FASB Statement
No. 109, "Accounting for Income Taxes."
ERNST & YOUNG LLP
Syracuse, New York
January 27, 1995
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
December 31 December 31
New Park Old Park
1995 1994
Assets (Note 6)
Current Assets:
Cash $ 19,026 $ 84,069
Short-term investments --- 59,431
Accounts receivable, less allowable
for doubtful accounts of $807
in 1995 and $1,598 in 1994 26,544 22,235
Inventory 1,265 1,170
Film contracts 2,717 2,446
Consulting/non-compete contracts --- 825
Other 2,844 3,597
-------- --------
Total current assets 52,396 173,773
-------- --------
Property, Plant & Equipment:
Land and improvements 13,475 13,431
Buildings and leasehold improvements 19,110 31,522
Newspaper equipment 12,037 23,752
Broadcast equipment 37,080 61,455
Furniture and fixtures 6,655 10,535
Autos and trucks 2,106 3,956
-------- --------
90,463 144,651
Less accumulated depreciation and
amortization (6,068) (68,909)
-------- --------
84,395 75,742
Intangible assets, net 635,447 109,797
Film contracts 2,787 2,777
Consulting/non-compete contracts --- 3,390
Other assets 7,757 1,307
---------- ---------
Total assets $ 782,782 $ 366,786
========== =========
Liabilities and Stockholder's Equity
Current Liabilities:
Current maturities of long-term debt $ 465 $ 713
Current maturities of film contracts 2,619 2,521
Accounts payable 3,313 2,539
Consulting/non-compete contracts 849 877
Interest 26,391 944
Income taxes 2,124 2,959
Accrued liabilities 4,075 4,027
Deferred income 3,156 2,909
-------- --------
Total current liabilities 42,992 17,489
Long-term debt 584,085 49,248
Deferred income 4,549 ---
Consulting/non-compete contracts 2,851 3,718
Deferred income taxes 165,733 10,601
-------- --------
Total liabilities 800,210 81,056
-------- --------
Commitments
Stockholder's Equity:
Common stock--$0.0001 par value in
1995 and no par value in 1994:
Authorized 15,000,000 shares
in 1995 and 32,000,000 shares
in 1994
Issued and outstanding 10,628,571
shares in 1995 and 20,961,205
in 1994 --- 3,494
Paid in capital --- 18,701
Retained earnings (17,428) 263,535
--------- ---------
Total stockholder's equity (17,428) 285,730
--------- ---------
Total liabilities and
stockholder's equity $ 782,782 $ 366,786
========= =========
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Period Year Ended December 31
New Park Old Park
Proforma 05/11/95- 01/01/95- Old Park
1995 12/31/95 05/10/95 1994 1993
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue:
Broadcasting revenue $ 76,769 $ 50,033 $ 26,736 $ 77,749 $ 62,460
Newspaper revenue 78,904 51,723 27,181 76,810 84,751
-------- ----------- ----------- -------- --------
Gross revenue 155,673 101,756 53,917 154,559 147,211
Less agency and national representative
commissions 11,361 7,360 4,001 12,128 9,867
-------- ----------- ----------- -------- --------
Net revenue 144,312 94,396 49,916 142,431 137,344
-------- ----------- ----------- -------- --------
Operating expenses:
Cost of sales (exclusive of depreciation
and amortization) 53,593 33,278 20,315 50,380 55,518
Selling, general and administrative 36,069 24,561 11,508 37,051 39,561
Depreciation 8,083 5,164 2,499 6,524 6,268
Amortization 8,756 5,594 786 2,541 2,725
Amortization of excess of cost over net
assets acquired 7,197 4,598 715 1,972 2,095
-------- ----------- ----------- -------- --------
113,698 73,195 35,823 98,468 106,167
-------- ----------- ----------- -------- --------
Operating income 30,614 21,201 14,093 43,963 31,177
Interest expense (65,689) (41,968) (67) (279) (233)
Interest income 1,355 866 3,181 5,561 4,952
Other expense (280) (179) (10,693) (2,352) (431)
-------- ----------- ----------- -------- --------
(Loss) income before income taxes (34,000) (20,080) 6,514 46,893 35,465
Provision (benefit) for income taxes (10,880) (6,494) 5,954 19,519 14,849
-------- ----------- ----------- -------- --------
(Loss) income from continuing operations (23,120) (13,586) 560 27,374 20,616
========
(Loss) income from discontinued operations,
net of income taxes (benefit) of ($2,114),
$243, $400 and ($597) respectively (3,842) 125 (69) (1,836)
----------- ----------- -------- --------
Net (loss) income (17,428) 685 27,305 18,780
Retained earnings, beginning of period --- 263,535 236,230 217,450
----------- ----------- -------- --------
Retained earnings, end of period $ (17,428) $ 264,220 $ 263,535 $ 236,230
=========== =========== ======== ========
Loss per share:
Continuing operations $ (2.18) $ (1.28)
========
Discontinued operations (0.36)
--------
Net loss $ (1.64)
========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Period Year Ended December 31
New Park Old Park
05/11/95- 01/01/95- Old Park
12/31/95 05/10/95 1994 1993
<S> <C> <C> <C> <C>
Operating Activities:
Net (loss) income $ (17,428) $ 685 $ 27,305 $18,780
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization 18,678 5,485 14,443 14,787
Amortization of film contract rights and consulting/
non-compete contracts included in operating
expenses 1,799 2,352 4,194 3,842
Payments on film contract liabilities (1,889) (2,117) (2,955) (2,757)
Payments on consulting/non-compete contracts (544) (351) (932) (1,225)
Provision for losses on accounts receivable (183) (69) 897 919
Provision for deferred income taxes (8,591) (369) 982 272
Loss (gain) on sale of property, plant and equipment (30) 856 48 291
Changes in operating assets and liabilities net of effects
from the purchase and disposal of companies:
Accounts receivable (1,706) (2,351) (2,126) (1,738)
Inventory and other assets (821) 605 181 277
Accounts payable and accrued liabilities 25,729 (295) (1,055) (1,139)
Deferred income 4,464 332 128 169
-------- -------- -------- ------
Net cash provided by operating activities 19,478 4,763 41,110 32,478
-------- -------- -------- ------
Investing Activities:
Purchase of short term-investments (38,400) --- (241,954) (62,586)
Proceeds from short term-investments 38,400 59,431 277,843 66,929
Purchases of property, plant and equipment (6,174) (2,000) (12,517) (5,621)
Purchase of acquired companies, net of cash acquired -- (19,184)
Proceeds from sale of property, plant and equipment 39 --- 448 86
Proceeds from sales of companies -- 6,336
(Increase) decrease in other assets (6,120) 671 455 (464)
-------- -------- -------- ------
Net cash provided by (used in) investing activities (12,255) 58,102 24,275 (14,504)
-------- -------- -------- ------
Financing Activities:
Additional loan proceeds 6,758 --- --- ---
Principal payments on long-term debt (3,622) (267) (2,757) (2,570)
Distribution to parent company (138,000) --- --- ---
Proceeds from issuance of common stock --- --- 209 144
-------- -------- -------- ------
Net cash used in financing activities (134,864) (267) (2,548) (2,426)
-------- -------- -------- ------
Increase (decrease) in cash (127,641) 62,598 62,837 15,548
Cash and cash equivalents, beginning of period 146,667 84,069 21,232 5,684
-------- -------- -------- ------
Cash and cash equivalents, end of period $ 19,026 $ 146,667 $ 84,069 $21,232
======== ======== ======== ======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements of Park Communications, Inc. (the
"Company" or "PCI") include the accounts of the Company and its
subsidiaries, all of which are wholly owned. The Company is a wholly owned
subsidiary of Park Acquisitions, Inc. ("Parent" or "PAI") (see Note 2) as of
May 11, 1995. All significant intercompany accounts and transactions have
been eliminated.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions (such as estimated lives of assets and allowance for doubtful
accounts) that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.
Cash and Cash Equivalents
For purposes of reporting consolidated cash flows, the Company considers
cash, balances with banks, and interest-bearing cash deposits in other
depository institutions with maturities of three months or less to be cash
equivalents.
Inventory Valuation
Inventories, consisting primarily of newsprint, are stated at the lower of
cost (primarily last-in; first-out method) or market. The effect of using
the last-in; first-out method (compared with the first-in; first-out
inventory method) is not considered significant.
Property, Plant, Equipment and Depreciation
Property, plant and equipment are stated at cost. Depreciation for financial
reporting purposes is provided on the straight-line method over the
estimated useful lives of the asset except for leasehold improvements, which
are amortized on the straight-line method over the lease period or the lives
of the improvements, whichever is shorter. Accelerated methods are used for
income tax reporting purposes whenever available. Deferred income taxes are
provided for this temporary difference between financial and income tax
reporting methods.
Investments
Effective January 1, 1994 the Company adopted Statements of Financial
Accounting Standard Board Statements No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS No. 115). SFAS No. 115
requires that all investments in debt securities that management has the
positive intent and ability to hold until maturity be classified as held to
maturity. All other debt securities are classified as available for sale.
Securities classified as available for sale are carried at market value.
Unrealized holding gains and losses for available for sale securities are
reported as a net amount in a separate component of stockholders' equity
until realized. Investments classified as held to maturity are carried at
amortized cost. The Company has analyzed its debt securities portfolio at
December 31, 1994 and based on this analysis has determined to classify all
debt securities as held to maturity due to management's intent and ability
to hold all debt securities so classified until maturity.
Film Contract Rights
Film contract rights and related liabilities are recorded at full contract
prices when purchased. The costs are charged to operations based on a
straight line basis over the life of the contracts.
Consulting/Non-Compete Contracts
Certain subsidiary companies have consulting/non-compete contracts expiring
through 2010. Prior to May 11, 1995, costs were amortized on a straight-line
basis over the terms of the related agreements. In connection with the
Acquisition, separate value was not assigned to those contracts. New Park
would not have entered into such contracts at the date of Acquisition (see
Note 2).
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Intangible Assets
Intangible assets are stated at cost and consist primarily of advertising
contracts, subscription lists and excess of cost over net assets acquired.
Intangible assets are being amortized by the straight-line method over
estimated lives ranging primarily from 7 to 40 years.
In the financial statements of Old Park, network contracts ($8,238,000)
acquired prior to October 31, 1970 were assigned a cost upon acquisition and
were not amortized since, in the opinion of management, there had been no
diminution of value of these acquired contracts. Also, excess of cost
($1,214,000) of businesses acquired prior to October 31, 1970 was not
amortized since, in the opinion of management, there had been no diminution
of value of these acquired businesses. Excess of cost incurred since October
31, 1970 was amortized by the straight-line method over a period of 40
years.
Carrying Value of Long Lived Asset
The Company has adopted the provisions of FASB Statement No. 121,
"Accounting For the Impairment of Long-Lived Assets and For Long-Lived
Assets to Be Disposed Of." The carrying value of long lived assets (tangible
and intangible) is reviewed if the facts and circumstances suggest that they
may be impaired. For purposes of this review, assets are grouped at the
operating company level which is the lowest level for which there are
identifiable cash flows. If this review indicates that such assets carrying
value will not be recoverable, as determined based on future expected,
undiscounted cash flows, the carrying value is reduced to fair market value.
Income Taxes
Effective January 1, 1993 the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
FASB Statement No. 109, "Accounting for Income Taxes." The cumulative effect
of the accounting change was not material to net income for 1993.
Deferred Income
Deferred income is recorded on subscriptions prepaid by customers. Such
income is recognized when earned.
2. Acquisition and Basis of Presentation
On May 11, 1995, PCI was sold to PAI (the Acquisition), a private investment
concern (organized August 4, 1994) owned by Gary B. Knapp and the Tomlin
Family Trust II, of which Donald R. Tomlin, Jr. is a trustee. A significant
portion of the purchase price was paid from the proceeds of a $573,427,000
loan. The remainder of the purchase price ($138,000,000) was derived from
existing cash-on-hand at PCI at closing of the Acquisition. On May 11, 1995,
additional loan proceeds of $2,629,000 were utilized to pay Acquisition
related expenses and $2,758,000 was placed in escrow to be utilized for
retirement of other long-term debt.
As a consequence of the change in ownership of PCI, under generally accepted
accounting principles, the Company is deemed, for financial reporting
purposes, to have become a new reporting entity effective with the change in
ownership. The portion of the debt allocable to the Company has been "pushed
down" to the financial statements of the Company, and the assets and
liabilities have been adjusted to reflect their fair market value as of May
11, 1995.
The accompanying financial statements reflect the operations of PCI prior to
the acquisition on May 11, 1995 (Old Park). Subsequent to that date the
financial statements reflect the operations of the Company utilizing the new
basis accounting (New Park).
The pro forma income statement for 1995 reflects the operations of the
Company under the new basis of accounting and assumes the transaction closed
on January 1, 1995. Depreciation, amortization and interest expense reflect
those costs that would be charged to operations for a full year based on the
revised balance sheet amounts at May 11, 1995 for property, plant and
equipment, intangible assets and the long-term debt "push down" to PCI.
Historical interest income in the pro forma presentation has been reduced to
give effect to the $138,000,000 paid to PCI stockholders as a portion of the
consideration for the Acquisition. Historical other expenses have been
adjusted to eliminate incremental expenses for selling the Company incurred
by Old Park. Pro forma income tax benefit has been computed at an effective
rate of 32%. Following is a summary of adjustments made to historical costs
of the assets and liabilities of the Company as of May 10, 1995, as a result
of applying "push down" acquisition accounting at that date to arrive at the
new basis for the Company:
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
<TABLE>
<CAPTION>
May 10,1995
Park Communications, Inc.
Without Merger With Merger
Adjustments Merger Adjustments
Old Park Adjustments New Park
(dollars in thousands)
<S> <C> <C> <C>
Assets
Current assets:
Cash $ 146,667 $ (135,242) $ 11,425
Accounts receivable, net 24,655 --- 24,655
Inventory 1,137 --- 1,137
Film contracts 2,557 --- 2,557
Consulting/non-compete contracts 792 (792) ---
Other 2,553 --- 2,553
------------- ------------- -------------
Total current assets 178,361 (136,034) 42,327
------------- -------------- -------------
Property, plant & equipment 135,346 (51,168) 84,178
Less accumulated depreciation and amortization 61,551 (61,551) ---
------------- -------------- -------------
Net property, plant & equipment 73,795 10,383 84,178
Intangible assets, net 107,403 540,431 647,834
Film contracts 2,453 --- 2,453
Consulting/non-compete contracts 3,110 (3,110) ---
Other assets 637 1,000 1,637
------------- ------------- -------------
Total assets $ 365,759 $ 412,670 $ 778,429
============= ============= =============
Liabilities and Stockholder's Equity
Current liabilities:
Current maturities of long-term debt $ 1,877 --- $ 1,877
Current maturities of film contracts 2,229 --- 2,229
Accounts payable 3,467 --- 3,467
Consulting/non-compete contracts 898 --- 898
Interest 29 --- 29
Income taxes 2,820 $ 1,012 3,832
Accrued liabilities 3,276 582 3,858
Deferred income 3,241 --- 3,241
------------- ------------- -------------
Total current liabilities 17,837 1,594 19,431
Long-term debt 2,467 578,814 581,281
Consulting/non-compete contracts 3,346 --- 3,346
Deferred income taxes 10,232 164,139 174,371
------------- ------------- -------------
Total liabilities 33,882 744,547 778,429
------------- ------------- -------------
Stockholder's Equity:
Common stock 3,889 (3,889) ---
Paid in capital 63,768 (63,768) ---
Retained earnings 264,220 (264,220) ---
------------- -------------- -------------
Total stockholder's equity 331,877 (331,877) ---
------------- -------------- -------------
Total liabilities and stockholder's equity $ 365,759 $ 412,670 $ 778,429
============= ============= =============
</TABLE>
3. Loss Per Share
Loss per share of common stock is computed on the weighted average number of
common shares outstanding during each year (dollars and shares in thousands
except per share amounts):
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Pro forma New Park
New Park Period
1995 05/11/95-
(Unaudited) 12/31/95
Primary:
Average shares 10,629 10,629
============= =============
Continuing operations $ (23,120) $ (13,586)
Discontinued operations (6,014) (3,842)
------------- -------------
Net loss $ (29,134) $ (17,428)
============= =============
Loss per share:
Continuing operations $ (2.18) $ (1.28)
Discontinued operations (0.56) (0.36)
-------------- -------------
Net loss $ (2.74) $ (1.64)
============== =============
Earnings per share has not been shown prior to May 11, 1995 because such
information is not meaningful.
4. Intangible Assets
Intangible assets are comprised of the following (dollars in thousands):
<TABLE>
<CAPTION>
December 31 December 31
New Park Old Park
Estimated Lives 1995 1994
------------------ ------------- -------------
<S> <C> <C> <C>
Advertiser contracts and subscription relationships 14-40 years $ 289,258 $ 42,240
Network contracts 40 14,183 10,688
FCC licenses and other intangibles 40 138,174 30,956
Excess of cost over net assets acquired 40 206,219 102,813
------------- -------------
Total intangibles 647,834 186,697
Less accumulated amortization 12,387 76,900
------------- -------------
$ 635,447 $ 109,797
============= =============
</TABLE>
The lives used to amortize the cost of intangible assets related to
advertiser and subscriber relationships represent the expected average lives
of such relationships based on actuarial analyses using a representative
sample of the companies' actual experience for periods prior to the
acquisition through December 31, 1994. These analyses took into
consideration economic life characteristics of the companies' current
advertiser relationships including retention and termination experience.
Other intangibles are being amortized over 40 years which is consistent with
industry practice and management's opinion that such intangible assets have
useful lives in excess of 40 years.
5. Dispositions and Discontinued Operations
On December 26, 1995, the Company announced its intention to sell all of its
radio station operations on an individual basis. The segment has produced
operating profits before interest expense, depreciation and amortization,
and the Company estimates that the stations will each generate operating
profit before interest expense, depreciation and amortization through the
date of disposition. The Company currently has signed agreements to sell
each of its radio station operations. The Company will realize gain on the
dispositions assuming the contemplated transactions receive FCC approval and
are consummated at the price and terms as set forth in the definitive
agreements/letters of intent which total approximately $230.0 million net of
selling expenses but before taxes. The Company estimates that all stations
will be sold by October 31, 1996. The results of operations of the radio
station operations are included in the single line of the income statement
labeled "(loss) income from discontinued operations." The corporate
operating expenses allocated to radio are $325,676 for the period of
5/11/95-12/31/95, $184,078 for the period of 1/1/95-5/10/95, $475,338 for
1994 and $403,021 for 1993. The following is a summary of identifiable
assets, liabilities and equity and the related revenues and operating income
of the radio station operations (dollars in thousands):
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Radio Station Operations:
<TABLE>
<CAPTION>
Period
New Park Old Park
05/11/95- 01/01/95- Old Park
12/31/95 05/10/95 1994 1993
--------- --------- --------- -------
<S> <C> <C> <C> <C>
Revenues $ 21,932 $ 11,137 $ 30,305 $ 24,861
========== =========== ======= ========
Operating income $ 2,184 $ 903 $ 3,698 $ 1,102
========== =========== ======= ========
</TABLE>
<TABLE>
<CAPTION>
New Park
12/31/95
<S> <C>
Assets:
Current assets $ 13,446
Property, plant, and equipment 21,171
Intangibles, net 120,103
Other assets 9
-----------
Total assets 154,729
-----------
Liabilities:
Current liabilities 16,100
Long-term debt 109,978
Deferred income taxes 33,410
-----------
Total liabilities 159,488
-----------
Net liabilities $ 4,759
===========
</TABLE>
On December 31, 1993, the Company sold newspaper publications in 13 of its
smaller markets. Of these, 11 were daily newspapers, all with paid
circulation under 6,000. The impact of the sale of these publications was
not material to net income in 1993. In 1995, the Company discontinued its
Research Triangle Park, Raleigh, North Carolina publication. The operating
losses (before depreciation and amortization) for these newspaper
publications were $145,000 in 1995 (pro forma), $235,000 in 1994 and
$273,000 in 1993.
6. Long-Term Debt
The Company's long-term debt is comprised of the following:
<TABLE>
<CAPTION>
December 31 December 31
New Park Old Park
1995 1994
------------- --------
(dollars in thousands)
<S> <C> <C>
Existing Credit Agreement $ 580,632 ---
Subordinated notes of certain newspaper subsidiaries due to former owners 360 $ 744
Promissory notes 1,077 1,400
6 7/8% Convertible subordinated debentures --- 45,351
Film contracts 5,100 4,987
------------- -------------
Total debt 587,169 52,482
Less: Current maturities of long-term debt 465 713
Current maturities of film contracts 2,619 2,521
------------- -------------
Long-term debt $ 584,085 $ 49,248
============= =============
</TABLE>
On May 11, 1995, PAI entered into an agreement (Existing Credit Agreement)
to borrow up to $593.8 million the proceeds of which were utilized to
finance the Acquisition and pay related expenses. The loan required that the
debt be directly assumed by PCI and its subsidiary companies and that they
be jointly and severally liable for the loan agreement. PAI, PCI and PCI's
subsidiaries' assets are pledged as collateral for the loan made pursuant to
the Existing Credit Agreement and PCI and its subsidiaries' cash flow is
utilized for debt service. Interest accrues at a base interest rate (Base
Rate) of 9.5% per annum, an additional interest rate (Additional Rate) of
1.0% per annum, plus a yield maintenance interest rate (YMI) of 3.0% per
annum. The Base Rate and Additional Rate interest are payable on October 1
and April 1. Principal payments are required only to the extent that PAI's
cash balances, as defined in the Existing Credit Agreement, exceeds $8.0
million (declining to $6.0 million at October 1, 1997) at each interest
payment date through October 1, 1997. Following is a table that outlines
these requirements:
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Cash
Interest Payment Date Reserve Amount
(dollars in thousands)
October 1, 1995 $ 8,000
April 1, 1996 8,000
October 1, 1996 7,000
April 1, 1997 7,000
October 1, 1997 and thereafter 6,000
Prepayment, in part or wholly, can be made at any time without penalty.
Ninety percent (90%) of the after tax proceeds as defined in the Existing
Credit Agreement of any asset sales of the Company are required to be
applied to the principal.
The YMI, which the Company is accruing, is payable upon achievement by PAI,
on or prior to May 11, 1998, of a Loan to Value Ratio (LTV) of 70% or less
(as defined in the Existing Credit Agreement). If the Company elects not to
pay the YMI when payable, then PAI would be required to issue to the lender
an exercisable warrant having the right to acquire non-voting common stock
in PAI in a sufficient amount to equal an 80% stockholder's equity interest.
On the earliest date that the Debt Service Coverage Ratio (DSC) as defined
in the Existing Credit Agreement is met, and either the LTV ratio is met or
by reason of non-payment of the YMI, the warrant is required to be issued,
the loan will become fully amortizable in equal annual amounts over the
remaining term ending on a maturity date of April 15, 2015 with interest at
10.5% per annum.
Substantially all of the Company's and its subsidiaries' tangible and
intangible assets are collateralized under the Existing Credit Agreement.
The Existing Credit Agreement contains covenants which, among other things,
limit or restrict payment of cash dividends, additional debt, repurchase of
common stock, capital expenditures, sales of the Company's common stock,
mergers, consolidations and sales of the Company's assets.
The subordinated notes are payable in various installments through 1998 with
interest primarily from 6% to 9%. The promissory notes are payable in
various installments through 1998 with interest at 8%.
On March 11, 1986, the Company issued $50,000,000 principal amount of 6 7/8%
convertible subordinated debentures due March 15, 2011 (the debentures). The
debentures were convertible at anytime prior to maturity, unless previously
redeemed, into shares of common stock of the Company at a conversion ratio
52.1739 shares of common stock for each $1,000 principal amount of
debentures. The debentures were called for redemption by the Company on
January 9, 1995, and subsequently redeemed.
Cash payments of interest were $24,049,000 for the period of May 11 to
December 31, 1995, $44,000 for the period of January 1 to May 10, 1995,
$3,788,000 in 1994 and $3,787,000 in 1993.
The aggregate annual maturities on long-term debt, assuming the Company
meets the LTV on May 11, 1998, payable over the next five years are as
follows (dollars in thousands):
Year Amount
1996 $ 3,084
1997 2,074
1998 181,006
1999 9,985
2000 10,969
The fair value of the Company's long-term debt approximates $628,537,000.
The fair value is estimated based on current rates offered to the Company
for debt of the same remaining maturities.
7. Income Taxes
The Company determines its income tax expense on the separate return method.
Federal and state income tax expense (benefit) is summarized as follows
(dollars in thousands):
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
<TABLE>
<CAPTION>
Period Year Ended Dec. 31
New Park Old Park
05/11/95- 01/01/95- Old Park
12/31/95 05/10/95 1994 1993
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Federal:
Current --- $ 5,176 $ 15,357 $ 11,989
Deferred $ (5,743) (347) 847 240
------------ ---------- ----------- -----------
(5,743) 4,829 16,204 12,229
------------ ---------- ----------- -----------
State:
Current --- 1,146 3,119 2,588
Deferred (751) (21) 196 32
------------ ----------- ----------- -----------
(751) 1,125 3,315 2,620
------------ ---------- ----------- -----------
Total income tax expense $ (6,494) $ 5,954 $ 19,519 $ 14,849
============ ========== =========== ===========
</TABLE>
The items comprising the differences in taxes on income computed at the U.S.
statutory rate and the amount provided by the Company are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
New Park Old Park
05/11/95- 01/01/95- Old Park
12/31/95 05/10/95 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Computed tax expense at U.S. statutory rate $ (7,028) $ 2,280 $ 16,485 $ 12,413
Increase in tax expense resulting from:
State income taxes, net of federal income tax (488) 731 2,155 1,703
Amortization not tax deductible 1,022 250 879 733
Non-deductible merger related expense --- 2,693 --- ---
---------- ---------- ---------- ----------
Total income tax expense (benefit) $ (6,494) $ 5,954 $ 19,519 $ 14,849
========== ========== ========== ==========
</TABLE>
Significant components of the Company's deferred tax liabilities and assets
are as follows (dollars in thousands):
<TABLE>
<CAPTION>
December 31 December 31
New Park Old Park
1995 1994
----------- -----------
<S> <C> <C>
Components of deferred taxes:
Network revenue $ (1,820) ---
Property, plant & equipment, intangible assets 172,933 $ 10,728
Net operating loss carry forwards (5,380) ----
Allowance for doubtful accounts and other (196) (699)
----------- -----------
Net deferred tax liabilities $ 165,537 $ 10,029
=========== ===========
Classification of deferred taxes:
Non-current liabilities $ 165,733 $ 10,601
Current assets (196) (572)
-------------- ----------
$ 165,537 $ 10,029
============= =========
</TABLE>
The Company has federal tax loss carryforwards of approximately $16.0
million that expire in 2010. Total cash payments of Federal and state income
taxes were $2,604,000 for the period May 11 to December 31, 1995, $4,434,000
for the period January 1 to May 10, 1995, $20,011,000 in 1994 and
$14,030,000 in 1993.
8. Leases
Certain operating facilities and equipment (see Note 9) are leased under
noncancellable operating agreements. Certain of the leases require the
Company or its subsidiaries to pay property taxes, insurance and maintenance
costs.
Lease expense related to the above and charged to operations was
approximately $739,000 for the period May 11 through December 31, 1995,
$417,000 for the period January 1 through May 10, 1995, $1,743,000 in 1994
and $2,019,000 in 1993.
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The aggregate minimum rentals through dates of expiration amount to
approximately $6,179,574 and the amounts payable over the next five years
are as follows (dollars in thousands):
Year Amount
---- -----------
1996 $ 796
1997 708
1998 660
1999 562
2000 397
Thereafter 3,057
-----------
$ 6,180
===========
9. Related Party Transactions
In 1993 and 1994, the Company, in the ordinary course of business, leased
and rented certain operating facilities and equipment from RHP Incorporated
and its subsidiaries. RHP Incorporated is wholly owned by the estate of Roy
H. Park, formerly the Chairman of the Board of PCI, who died on October 25,
1993. Such lease and rent payments were $977,000 in 1994 and $1,265,000 in
1993. In connection with these operating facilities, in 1994 the Company
purchased ten buildings and one tower from RHP Incorporated and its
subsidiaries at the appraised fair market value of $4,415,000 and such lease
and rent payments ceased as of the date of purchase.
Additionally, certain officers of the Company were compensated by RHP
Incorporated for the performance of part-time management services.
During 1994, the Company placed $85,298 of promotional advertising with Park
Outdoor Advertising of New York, Inc. which is controlled by Roy H. Park,
Jr., a Director of the Company prior to May 11, 1995.
10. Acquisitions
In December 1995, the Company entered into an agreement in principle to
purchase WHOA-TV, the ABC affiliate in Montgomery, Alabama. The purchase
price, which will not be material, will be accounted for under the purchase
method, and accordingly, its results of operations will be included in the
Consolidated Financial Statements from the date of acquisition (which is
anticipated in 1996).
11. Business Segments
The Company operates in two business segments: television broadcasting and
newspaper publishing. The Company operates a third segment, radio station
operations, which the Company has determined to divest and has presented as
a discontinued operation (see Note 5). Television broadcasting operations
involve the sale of time to advertisers, network revenue and other revenue
arising primarily from programming and production. Newspaper operations
involve the publication and distribution of both paid daily and paid
non-daily newspapers and advertising publications (shoppers) from which
revenue is derived primarily from the sale of advertising lineage and
circulation revenue.
The following is a summary of information by segment:
<TABLE>
<CAPTION>
Period
Pro forma New Park Old Park
(Unaudited) 05/11/95- 01/01/95- Old Park
1995 12/31/95 05/10/95 1994 1993
----------- --------- --------- --------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Gross Revenue:
Television broadcasting $ 76,769 $ 50,033 $ 26,736 $ 77,749 $ 62,460
Newspaper publishing 78,904 51,723 27,181 76,810 84,751
----------- ----------- ---------- ----------- -----------
$ 155,673 $ 101,756 $ 53,917 $ 154,559 $ 147,211
=========== =========== ========== =========== ===========
</TABLE>
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
<TABLE>
<CAPTION>
Period
Pro forma New Park Old Park
(Unaudited) 05/11/95- 01/01/95- Old Park
1995 12/31/95 05/10/95 1994 1993
----------- --------- --------- --------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Depreciation and amortization:
Television broadcasting $ 15,869 $ 10,138 $ 1,979 $ 5,221 $ 4,193
Newspaper publishing 8,167 5,218 2,021 5,816 6,895
----------- ----------- ---------- ----------- -----------
$ 24,036 $ 15,356 $ 4,000 $ 11,037 $ 11,088
=========== =========== ========== =========== ===========
Operating income:
Television broadcasting $ 15,556 $ 10,586 $ 8,722 $ 27,549 $ 19,697
Newspaper publishing 15,058 10,615 5,371 16,414 11,480
----------- ----------- ---------- ----------- -----------
$ 30,614 $ 21,201 $ 14,093 $ 43,963 $ 31,177
=========== =========== ========== =========== ===========
Additions to property, plant & equipment:
Television broadcasting $ 3,160 $ 2,145 $ 1,015 $ 7,794 $ 11,956
Newspaper publishing 2,122 1,691 431 3,458 1,512
----------- ----------- ---------- ----------- -----------
$ 5,282 $ 3,836 $ 1,446 $ 11,252 $ 13,468
=========== =========== ========== =========== ===========
Identifiable assets:
Television broadcasting $ 412,233 $ 95,146 $ 84,114 $ 81,733
Newspaper publishing 223,772 167,960 92,653 97,583
Discontinued operations 154,727 46,668 47,446 47,742
Corporate (7,950) 55,985 142,573 115,563
------------ ---------- ----------- -----------
$ 782,782 $ 365,759 $ 366,786 $ 342,621
=========== ========== =========== ===========
</TABLE>
Operating income is gross revenue less agency and national representative
commissions and operating expenses. Interest expense, interest income,
income taxes and other income (expense) have been excluded in computing
operating income.
Identifiable assets by industry segment represent those assets used in the
Company's operation of that segment. Corporate assets under Old Park
consisted principally of cash, cash equivalents and short-term investments.
12. Stockholder's equity
Following is a reconciliation of stockholder's equity:
<TABLE>
<CAPTION>
Common Stock Paid In Retained
Shares Amount Capital Earnings Total
-------- -------- --------- ---------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 20,700,167 $ 3,451 $ 13,781 $ 217,450 $ 234,682
Issue common stock 8,810 1 143 --- 144
Net income --- --- --- 18,780 18,780
------------- ------------ ----------- ------------ -----------
Balance, December 31, 1993 20,708,977 3,452 13,924 236,230 253,606
Issue common stock 9,950 2 208 --- 210
Conversion of debentures 242,278 40 4,569 --- 4,609
Net income --- --- --- 27,305 27,305
------------- ------------ ----------- ------------ -----------
Balance, December 31, 1994 20,961,205 3,494 18,701 263,535 285,730
Conversion of debentures 2,366,168 395 45,067 --- 45,462
Net income --- --- --- 685 685
------------- ------------ ----------- ------------ -----------
Balance, May 10, 1995 23,327,373 3,889 63,768 264,220 331,877
Merger adjustments (New Park) (23,327,373) (3,889) (63,768) (264,220) (331,877)
Issue common stock 10,628,571 --- --- --- ---
Net loss --- --- --- (17,428) (17,428)
------------- ------------ ----------- ------------- ------------
Balance, December 31, 1995 10,628,571 $ --- $ --- $ (17,428) $ (17,428)
============= ============ =========== ============= ============
</TABLE>
<PAGE>
13. Subsequent Event
On May 6, 1996, the Company's Board of Directors and sole stockholder
approved an amendment to the Company's certificate of incorporation to
authorize 15,000,000 shares of its Common Stock, and declare a stock split
of 106,285.7143 to 1. Such amendment will become effective on May 7, 1996.
All references in the consolidated financial statements to number of shares,
average number of shares outstanding and per share amounts have been
restated to reflect this amendment.
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
New Park
September 30
1996
<S> <C>
Assets
Current Assets:
Cash and cash equivalents $ 49,868
Accounts receivable, less allowance for doubtful accounts of $759 19,382
Inventory 937
Film contracts 2,198
Notes receivable related party 600
Other 2,189
--------------
Total current assets 75,174
--------------
Property, Plant & Equipment:
Property, Plant & Equipment 75,484
Less accumulated depreciation and amortization (11,954)
--------------
Net property, plant & equipment 63,530
Intangible assets, net 504,544
Film contracts 2,887
Other assets 24,621
--------------
$ 670,756
==============
Liabilities and Stockholder's Equity
Current Liabilities:
Current maturities of long-term debt 465
Current maturities of film contracts 2,929
Accounts payable 4,665
Consulting/non-compete contracts 785
Interest 22,083
Income taxes 15,338
Accrued liabilities 3,768
Deferred income 3,128
--------------
Total current liabilities 53,161
--------------
Long-term debt 468,000
Long-term film contracts 3,255
Deferred income 7,960
Consulting/non-compete contracts 2,209
Deferred income taxes 129,944
Other liabilities 790
--------------
Total liabilities 665,319
--------------
Commitments
Stockholder's Equity:
Common Stock - $.0001 par value:
Authorized 15,000,000 shares; Issued and outstanding 10,628,571 shares 1
Paid in capital 2,556
Retained earnings 2,880
--------------
Total stockholder's equity 5,437
--------------
$ 670,756
==============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
unaudited financial statements.
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income and Retained Earnings
(Dollars and Shares in Thousands Except Earnings Per Share)
(Unaudited)
<TABLE>
<CAPTION>
New Park Period
Nine Months Ended
Pro forma New Park Old Park
Sept. 30 Sept. 30 5/11/95- 1/01/95-
1996 1995 9/30/95 5/10/95
---- ---- ------- -------
<S> <C> <C> <C> <C>
Revenue:
Broadcasting revenue $ 57,377 $ 56,072 $ 29,336 26,736
Newspaper revenue 59,110 58,045 30,864 27,181
---------- ---------- ---------- ----------
Gross revenue 116,487 114,117 60,200 53,917
Less agency and national representative
commissions 8,408 8,333 4,332 4,001
---------- ---------- ---------- ----------
Net revenue 108,079 105,784 55,868 49,916
Operating expenses:
Cost of sales (exclusive of amortization and
depreciation) 44,570 40,582 20,267 20,315
Selling, general and administrative 32,641 26,484 14,976 11,508
Depreciation 6,867 6,062 3,124 2,499
Amortization 8,166 8,533 4,443 786
Amortization of excess of cost over net
assets acquired 3,202 3,261 1,834 715
---------- ---------- ---------- ----------
95,446 84,922 44,644 35,823
---------- ---------- ---------- ----------
Operating income 12,633 20,862 11,224 14,093
Interest expense (46,657) (49,117) (25,468) (67)
Interest income 1,127 1,016 699 3,181
Other income (expense) (1,811) (210) 68 (10,693)
---------- ---------- ---------- ----------
(Loss) income from continuing operations
before income taxes (34,708) (27,449) (13,477) 6,514
Provision (benefit) for income taxes (12,041) (9,379) (4,605) 5,954
---------- ---------- ---------- ----------
(Loss) income from continuing operations (22,667) $ (18,070) (8,872) 560
==========
(Loss) income from discontinued operations, net of
income taxes (benefit) of $(4,661) in 1996 and
$(3,056) in 1995 (6,379) (2,507) 125
Gain on sale of discontinued operations, net of income
taxes of $48,459 in 1996 49,354 --- ---
---------- ---------- ----------
Net income (loss) 20,308 (11,379) 685
Retained earnings (deficit), beginning of period (17,428) --- 263,535
---------- ---------- ----------
Retained earnings (deficit), end of period $ 2,880 $ (11,379) $ 264,220
========== ========== ==========
Earnings (loss) per share:
Continuing operations (2.05) (1.70)
Discontinued operations 3.89 ---
---------- ----------
Net earnings (loss) 1.84 (1.70)
========== ==========
Average shares 11,039 10,629
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
unaudited financial statements.
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Period
New Park New Park Old Park
September 30 5/11/95- 1/01/95-
1996 9/30/95 5/10/95
---------------- ---------- ------------
<S> <C> <C> <C>
Operating Activities:
Net income (loss) $ 20,308 $ (11,379) $ 685
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Gain on sale of discontinued operations, exclusive of
income tax (97,813) --- ---
Depreciation and amortization 20,384 11,363 5,485
Amortization of film contract rights and consulting/
non-compete contracts included in
operating expenses 2,846 1,195 2,352
Amortization of debt issue costs, debt discounts and
warrants 3,945 --- ---
Payments on film contract liabilities (2,290) (1,246) (2,117)
Payments on consulting/non-compete contracts (691) (336) (351)
Provision for losses on accounts receivable 387 623 (69)
Provision for deferred income taxes (35,789) (51) (369)
Loss on sale of property, plant and equipment 1,066 --- 856
Changes in operating assets and liabilities net of effects
from the purchase and disposal of companies:
Accounts receivable 6,775 1,218 (2,351)
Inventory and other assets 796 113 605
Accounts payable and accrued liabilities 20,380 19,601 (295)
Deferred income 3,383 (300) 332
---------- ---------- ---------
Net cash provided by (used in)
operating activities (56,313) 20,801 4,763
---------- ---------- ---------
Investing Activities:
Proceeds from (purchase of) short term investments --- (29,500) 59,431
Purchases of property, plant and equipment (9,875) (2,459) (2,000)
Proceeds from sale of property, plant, and equipment 425 --- ---
Advance to related party (600) --- ---
Proceeds from sales of discontinued operations, net
of selling expenses 228,510 --- ---
Increase in other assets (330) --- 671
---------- ---------- ---------
Net cash provided by (used in) investing
activities 218,130 (31,959) 58,102
---------- ---------- ---------
Financing Activities:
Proceeds from issuance of warrants 2,800 --- ---
Proceeds from new debt 525,151 5,000 ---
Debt issue costs (19,922) --- ---
Principal payments on long-term debt (639,004) (1,094) (267)
---------- ---------- ---------
Net cash used in financing activities (130,975) 3,906 (267)
---------- ---------- ---------
(Decrease) increase in cash 30,842 (7,252) 62,598
Cash and cash equivalents beginning of period 19,026 11,425 84,069
---------- ---------- ---------
Cash and cash equivalents end of period $ 49,868 $ 4,173 $ 146,667
========== ========== =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
unaudited financial statements.
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes To Condensed Consolidated Unaudited Financial Statements
1 Basis of Presentation
The accompanying condensed interim financial statements are unaudited; however,
in the opinion of the Company's management, all adjustments (which comprise only
normal and recurring accruals) necessary for a fair presentation of the interim
financial results have been included. The results for the interim periods are
not necessarily indicative of results to be expected for the entire year. These
financial statements and notes should be read in conjunction with the Company's
audited annual consolidated financial statements for the year ended December 31,
1995.
As discussed in the December 31, 1995 consolidated financial statements, the
Company was acquired by Park Acquisitions, Inc. on May 11, 1995 in a transaction
accounted for as a purchase. The purchase price and an allocable portion of debt
have been "pushed down" to the financial statements of the Company's wholly
owned subsidiaries, Park Broadcasting, Inc. and Park Newspapers, Inc., and, as a
result, the post-acquisition (New Park) consolidated financial statements are
not comparable to the pre-acquisition (Old Park) consolidated financial
statements.
2 Discontinued Operations
As of September 30, 1996, the Company has sold all of its radio stations.
The results of the radio division are included in the single line of the income
statement labeled "(Loss) income from discontinued operations." The gain on the
sale is included in the single line on the income statement labeled "Gain on
sale of discontinued operations." The corporate operating expenses allocated to
radio are $463,000 for the nine-month period ended September 30, 1996, $183,000
for the period of 1/1/95 - 5/10/95, and $200,000 for the period of 5/11/95 -
9/30/95. The following is a summary of revenue and income (loss) of the radio
broadcasting properties for the nine months ended September 30 (dollars in
thousands):
Nine Months Ended
1996 1995
------------ ------------
Revenue $ 14,023 $ 23,974
============ ============
Operating (loss) income $ (465) $ 2,391
============ ============
3. Refinancing
On May 13, 1996, Park Communications, Inc. (the "Company") refinanced its
existing debt through the issuance of three separate debt offerings and a short
term Senior Credit Facility. The Company issued $80.0 million in principal
amount of 13 3/4% Senior Pay-in-Kind Notes due 2004 (the "Offering"). Interest
on such notes (the "Notes") will be payable semi-annually in arrears on May 15
and November 15 of each year, commencing November 15, 1996. Through May 15,
1999, interest is payable at the option of the Company by the issuance of
additional notes in lieu of cash. After May 15, 1999, interest is payable in
cash. The Notes were issued with warrants entitling the holder to purchase one
share of Common Stock, par value $0.0001 per share, of the Company at an
exercise price of $0.01 per share. The warrants will be exercisable at any time
on or after the date of the occurrence of the earliest of: (i) immediately prior
to the occurrence of a Change of Control, (ii) the 180th day (or such fewer
number of days as determined by the Company in its sole discretion) after the
consummation of a Public Equity Offering, (iii) the 90th day after the
Registration Election Date (which is on or within a date 60 days after May 15,
2001), (iv) the approval by the holders of the capital stock of the Company of
any Plan of Liquidation of the Company and (v) the 180th day prior to May 15,
2004. The number of shares of Common Stock of the Company for which, and the
price per share at which, a warrant is exercisable are subject to adjustment
upon the occurrence of certain events as provided in the Warrant Agreement. Upon
exercise, the holders of warrants would be entitled in the aggregate to purchase
7% of the Common Stock of the Company on a fully diluted basis. In addition, in
the event the Company does not consummate a Public Equity Offering or one or any
series of substantially concurrent Strategic Equity Investments on or prior to
December 31, 1997, resulting in net proceeds to the Company of $40.0 million,
the Company will be obligated to issue warrants (contingent warrants) to the
holders of the Notes exercisable for 3% of the Common Stock of the Company on a
fully diluted basis as of the date of such issuance. The proceeds of the
Offering were allocated to the Notes and warrants based on their relative fair
values in the amounts of $77.2 and $2.8 million, respectively. The $2.8 million
allocated to the warrants were recorded as additional paid in capital on the
Company's financial statements. Concurrently with the Offering, Park Newspapers,
Inc. issued $155.0 million in principal amount of 11 7/8% Senior Notes due 2004
("Newspapers Notes") at an offering price of 100%, and Park Broadcasting, Inc.
issued $241.0 million in principal amount of 11 3/4% Senior Notes due 2004
("Broadcasting Notes") at
<PAGE>
an offering price of 97.49% or $235.0 million. Such discount on the Broadcasting
Notes will be amortized over the life of the Broadcasting Notes using the
effective yield method. Interest on the Broadcasting Notes and the Newspapers
Notes will be payable in cash semi-annually on May 15 and November 15 of each
year, commencing November 15, 1996.
The Company will be obligated to make an offer to repurchase all or a portion of
the Notes then outstanding at a price equal to 112% of the aggregate principal
amount thereof plus accrued and unpaid interest, if any, to the date of
repurchase with the net proceeds of any Public Equity Offering or Strategic
Equity Investment consummated on or prior to December 31, 1997, to the extent
that the proceeds therefrom have not been (or will not be pursuant to a notice
of redemption given) utilized to effect a redemption of the Notes and the amount
not so utilized exceeds $2.0 million. Upon a Change of Control Triggering Event,
each holder of the Notes will have the right to require the Company to offer to
purchase such holder's Notes at a price equal to 101% of the principal amount
plus accrued and unpaid interest, if any, to the date of purchase. In addition,
the Company will be obligated to offer to repurchase the Notes at 100% of their
principal amount plus accrued and unpaid interest, if any, to the date of
repurchase in the event of certain asset sales.
The Notes are collateralized by a first priority security interest in and lien
on the capital stock of Park Newspapers, Inc. and Park Broadcasting, Inc. The
Notes, Broadcast Notes and Newspaper Notes were issued under indentures
containing covenants which, among other things, limit or restrict the Company's
ability to incur additional indebtedness, pay cash dividends or make other
payments affecting restricted subsidiaries, sell assets, incur liens, make
capital contributions, change lines of business and enter into transactions with
affiliates.
In addition to the above offerings, the Company entered into a short term $58.0
million Senior Credit Facility with a consortium of lenders. Interest was
payable at a variable rate and the debt was due on November 13, 1996. Such
amount borrowed under the Senior Credit Facility was repaid entirely in May and
June of 1996 with the proceeds of the sale of certain Radio Station Assets.
Interest expense under the Senior Credit Facility of $2,657,000 has been
included in discontinued operations.
4. Sale of Company
On July 19, 1996, the stockholders of Park Acquisitions, Inc., the sole
stockholder of the Company, agreed to sell 100% of their stock in a cash merger
to Media General, Inc. for a total consideration of approximately $710.0
million. Consummation of the merger is subject to certain conditions, including
receipt of the consent of the Federal Communications Commission to the transfer
of control. The consent of FCC transfer of control occurred on December 10,
1996. The sale of the Company would constitute a change of control as
contemplated by the Notes and the related warrant agreement as discussed in
Note 3.
5. Commitments
The board of directors and shareholders of the Company, on July 22, 1996,
approved termination benefits totaling $2,917,000 to be paid to certain
employees. Such payments are contingent on the closing of the business
combination with Media General, Inc. and the employees remaining with the
Company through the consummation date. The Company's liability for termination
benefits will be recognized in the Company's financial statements when the
business combination is consummated.
6. Subsequent Events
On October 10, 1996, the Company exchanged (i) $236,000,000 in principal amount
of its Park Broadcasting, Inc. Series B 11 3/4% Senior Notes due 2004 (the "PBI
Series B Notes") for a like amount of its 11 3/4% Senior Notes due 2004 (the
"PBI Initial Notes"), (ii) $155,000,000 in principal amount of its Park
Newspapers, Inc. Series B 11 7/8% Senior Notes due 2004 (the "PNI Series B
Notes") for a like amount of its 11 7/8% Senior Notes due 2004 (the "PNI Initial
Notes"), and (iii) $80,000,000 in principal amount of its Park Communications,
Inc. Series B 13 3/4% Senior Pay-in-Kind Notes due 2004 (the "PCI Series B
Notes") for a like amount of its 13 3/4% Senior Pay-in-Kind Notes due 2004 (the
"PCI Initial Notes").
The exchange was made in connection with the Company's exchange offers made
pursuant to a Prospectus for each issue, dated September 6, 1996. The form and
term of the PBI Series B Notes, the PNI Series B Notes and the PCI Series B
Notes are the same as the form and terms of the PBI Initial Notes, the PNI
Initial Notes and the PCI Initial Notes, respectively, which they replace,
except that each Series B note bears the "Series B" designation and each issue
has been registered under the Securities Act of 1933, as amended, and therefore,
do not bear legends restricting their transfer. $5,000,000 in principal amount
of the PBI Initial Notes were not tendered by holders of the PBI Initial Notes
in their exchange offer and, therefore, remain outstanding.
7. Contingencies
<PAGE>
The Company is subject to lawsuits, investigations and claims arising out of the
normal course of its business, including those relating to commercial
transactions as set forth below.
The Company's Birmingham television station is one of 23 named defendants in a
class action lawsuit filed against all of the television stations in Alabama
based upon advertising placed during the general election of 1992. The complaint
alleged the defendant television stations overcharged the plaintiffs by failing
to give political candidates the "lowest unit rate" for campaign advertising.
The complaint seeks an unspecified amount of compensatory and punitive damages.
Although the case has been pending for nearly 5 years, it is still in the
initial stages and very little discovery has been undertaken. Legal counsel to
the Company has not been able to form an opinion on the merits of the claims due
to the early state of discovery. However, management believes that the outcome
of such claims will not have a material adverse effect on the Company's
financial position, results of operations or cash flows and intends to
vigorously contest the claims made by the plaintiffs in such litigation.
<PAGE>
Media General, Inc.
Pro Forma Combined Condensed Financial Statements
(Unaudited)
The following pro forma combined condensed unaudited balance sheet (balance
sheet) as of September 29, 1996, and the pro forma combined condensed unaudited
statements of operations for the year ended December 31, 1995, and for the nine
months ended September 29, 1996 (statements of operations), give effect to the
acquisition of Park Acquisitions, Inc., parent company of Park Communications,
Inc. (Park), by Media General, Inc. (the Company) of all the issued and
outstanding common stock for total consideration of approximately $715 million,
which includes an estimate of $5 million in transaction costs. The total
consideration represents the assumption of $476 million of Park long-term debt
and cash consideration of approximately $239 million. The acquisition has been
accounted for using the purchase method of accounting.
The pro forma combined condensed balance sheet presents the financial position
of the Company and Park as of September 29, 1996, assuming the acquisition
occurred as of that date. The pro forma combined condensed statements of
operations have been prepared assuming the acquisition occurred as of the
beginning of the periods presented.
The pro forma combined condensed financial statements are provided for
informational purposes only, and are not necessarily indicative of the past or
future results of operations or financial position of the Company that would
have occurred had the acquisition been consummated on the respective dates
assumed. The pro forma combined condensed financial statements have been
prepared on the basis of very preliminary estimates of the fair value of the
assets acquired and may change as the appraisals are completed and more facts
become known.
This information should be read in conjunction with the previously filed
historical consolidated financials statements and accompanying notes of Media
General, Inc. contained in its Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, and in its 1996 Quarterly Reports on Forms 10-Q and in
conjunction with the historical financial statements and accompanying notes of
Park Communications, Inc., included elsewhere in this Form 8-K.
<PAGE>
Media General, Inc.
Pro Forma Combined Condensed Balance Sheet
September 29, 1996
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Media
General, Pro Forma
Inc. Park* Adjustments Pro Forma
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,460 $ 49,868 $ (49,868) 1(e) $ 4,460
Accounts receivable - net 75,219 19,382 94,601
Inventories 19,570 937 20,507
Other 25,652 4,987 31,519 1(b) 68,687
6,529 1(d)
----------- ----------- ----------- -----------
Total current assets 124,901 75,174 (11,820) 188,255
----------- ----------- ----------- -----------
Investments in unconsolidated affiliates 109,565 --- 109,565
Property, plant and equipment - net 474,918 63,530 --- 538,448
Intangible assets - net and other assets 319,166 532,052 190,066 1(g) 1,024,090
(17,194) 1(d)
----------- ----------- ----------- -----------
$ 1,028,550 $ 670,756 $ 161,052 $ 1,860,358
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 21,798 $ 4,665 $ 26,463
Accrued expenses and other
liabilities 82,276 33,158 $ (22,083) 1(c) 93,351
Income taxes payable 3,651 15,338 18,989
----------- ----------- ----------- -----------
Total current liabilities 107,725 53,161 (22,083) 138,803
----------- ----------- ----------- -----------
Long-term debt 298,000 468,000 (468,000) 1(a)
715,000 1(a)
(49,868) 1(e) 1,068,215
83,000 1(b)
22,083 1(c)
Deferred income taxes 100,241 129,944 (51,497) 1(h) 178,688
Other liabilities and deferred credits 105,112 14,214 --- 119,326
Stockholders' equity 417,472 5,437 (5,437) 1(f) 355,326
(51,481) 1(b)
(10,665) 1(d)
----------- ----------- ----------- -----------
$ 1,028,550 $ 670,756 $ 161,052 $ 1,860,358
=========== =========== =========== ===========
</TABLE>
* For comparability, Park amounts, which are as of September 30, 1996, have
been reclassified to conform with Media General, Inc.'s presentation.
See notes to the pro forma combined condensed financial statements.
<PAGE>
Media General, Inc.
Pro Forma Combined Condensed Statement of Operations
For the year ended December 31, 1995
(In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Media New Park* Old Park*
General, 5/11/95- 1/1/95- Pro Forma
Inc. 12/31/95 5/10/95 Adjustments Pro Forma
---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $ 707,766 $ 94,396 $ 49,916 $ --- $ 852,078
---------- ---------- ---------- ---------- ----------
Operating Costs:
Production costs 391,940 33,278 20,315 445,533
Selling, distribution and
administrative 182,243 24,561 11,508 218,312
Depreciation and amortization 60,590 15,356 4,000 5,430 2(a) 85,376
---------- ---------- ---------- ---------- ----------
Total operating costs 634,773 73,195 35,823 5,430 749,221
---------- ---------- ---------- ---------- ----------
Operating income 72,993 21,201 14,093 (5,430) 102,857
---------- ---------- ---------- ---------- ----------
Other income (expense):
Interest expense (15,522) (41,968) (67) (13,806) 2(b) (71,363)
Investment income
- unconsolidated affiliates 19,034 --- --- 19,034
Other, net 5,204 687 (7,512) (4,047) 2(c) 4,924
10,592 2(d)
---------- ---------- ---------- ---------- ----------
Total other income (expense) 8,716 (41,281) (7,579) (7,261) (47,405)
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes 81,709 (20,080) 6,514 (12,691) 55,452
---------- ---------- ---------- ---------- ----------
Income taxes 28,477 (6,494) 5,954 (6,144) 2(e) 21,793
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing
operations $ 53,232 $ (13,586) $ 560 $ (6,547) $ 33,659
========== ========== ========== ========== ==========
Earnings per common share
and equivalent $ 2.01 $ 1.27
========== ==========
Weighted average common shares
and equivalents 26,482 26,482
</TABLE>
See notes to the pro forma combined condensed financial statements.
*For comparability, Park amounts have been reclassified to conform with
Media General, Inc.'s presentation.
<PAGE>
Media General, Inc.
Pro Forma Combined Condensed Statement of Operations
For the nine months ended September 29, 1996
(In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Media
General, Pro Forma
Inc. Park* Adjustments Pro Forma
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 565,435 $ 108,079 $ --- $ 673,514
---------- ---------- ---------- ----------
Operating costs:
Production costs 306,154 44,570 350,724
Selling, distribution and administrative 137,346 32,641 169,987
Depreciation and amortization 49,168 18,235 354 3(a) 67,757
---------- ---------- --------- ----------
Total operating costs 492,668 95,446 354 588,468
---------- ---------- --------- ----------
Operating income 72,767 12,633 (354) 85,046
---------- ---------- --------- ----------
Other income (expense):
Interest expense (16,340) (46,657) 4,776 3(b) (58,221)
Investment income - unconsolidated
affiliates 22,881 --- 22,881
Other, net 1,459 (684) (1,127)3(c) (352)
---------- ---------- --------- ----------
Total other income (expense) 8,000 (47,341) 3,649 (35,692)
---------- ---------- --------- ----------
Income (loss) before income taxes 80,767 (34,708) 3,295 49,354
---------- ---------- ---------- ----------
Income tax expense (benefit) 29,208 (12,041) 1,365 3(d) 18,532
---------- ---------- ---------- ----------
Income (loss) from continuing operations $ 51,559 $ (22,667) $ 1,930 $ 30,822
========== ========== ========== ==========
Earnings per common share
and equivalent $ 1.94 $ 1.16
========== ==========
Weighted average common shares
and equivalents 26,577 26,577
</TABLE>
See notes to the pro forma combined condensed financial statements.
*For comparability, Park amounts, which are for the nine months ended
September 30, 1996, have been reclassified to conform with
Media General, Inc.'s presentation
<PAGE>
Media General, Inc.
Notes to Pro Forma Combined Condensed Financial Statements
BALANCE SHEET
September 29, 1996 Adjustments:
1(a) Borrowings for cash payment of acquisition and the prepayment
of Park high-coupon long-term debt.
1(b) Based on the assumption the Park long-term debt assumed is
prepaid at the date of acquisition. Borrowings for prepayment
premium on Park long-term debt assumed and the related tax
benefit recorded as refundable income taxes. Prepayment
premium for debt is an extraordinary item.
1(c) Borrowings for payment of accrued interest on Park long-term
debt at time of its prepayment.
1(d) Write-off of debt issuance costs related to Park long-term
debt and the related tax benefit recorded as refundable income
taxes. Issuance costs related to prepayment of debt treated as
an extraordinary item.
1(e) Assumes cash acquired would have been used to reduce long-term
debt.
1(f) Elimination of Park's stockholders' equity.
1(g) Adjustment of identifiable intangibles to estimated fair
market value and adjustment to record the excess of
acquisition cost over the fair value of net assets acquired.
The allocation of purchase price is preliminary and may change
as appraisals are completed and more facts become known.
Assumes no fair market value adjustment of net property, plant
and equipment.
1(h) Adjustment of deferred income taxes relating to the fair
market value adjustment of identifiable intangible assets.
For purposes of these Pro Forma Combined Condensed Financial Statements the
purchase price was allocated as follows (in thousands):
<TABLE>
<S> <C>
Purchase price $ 715,000
Working capital acquired (22,013)
Property, plant and equipment
(historical amount acquired assumed to approximate fair market value) (63,530)
Identifiable intangibles, principally network affiliations (201,957)
Other assets acquired (27,508)
Other liabilities assumed 14,214
Deferred income taxes assumed, net of adjustment 78,447
-------------
Excess cost of business acquired over equity in net assets $ 492,653
=============
</TABLE>
STATEMENTS OF OPERATIONS
Adjustments for the twelve months ended December 31, 1995:
2(a) Increase in amortization expense resulting from adjustment of
intangibles to preliminary estimates of fair market value with
lives ranging from 10-40 years.
2(b) Adjustment of interest expense based on assumed borrowings of
approximately $770 million (which includes borrowings for the
assumed prepayment of Park's long-term debt, accrued interest
on such debt and related prepayment premiums) based on an
estimated average long-term interest rate of 7.25%.
2(c) Eliminate Park interest income earned on cash investments
based on the assumption all available cash would have been
used to reduce long-term debt.
2(d) Eliminate one-time selling expenses related to the sale of Old
Park.
2(e) Record income tax benefit at 37.925% on the pro forma
adjustments. The effective tax rate differs from the statutory
tax rate due primarily to non-deductible goodwill, state
income taxes and non-deductible selling expenses on sale of
Old Park.
Adjustments for the nine months ended September 29, 1996:
3(a) Increase in amortization expense resulting from adjustment of
intangibles to preliminary estimates of fair market value with
lives ranging from 10-40 years.
3(b) Adjustment of interest expense based on assumed borrowings of
approximately $770 million (which includes borrowings for the
assumed prepayment of Park's long-term debt, accrued interest
on such debt and related prepayment premium) based on an
estimated average long-term interest rate of 7.25%.
<PAGE>
3(c) Eliminate Park interest income earned on cash investments
based on the assumption all available cash would have been
used to reduce long-term debt.
3(d) Record income tax expense at 37.925% on the pro forma
adjustments. The effective tax rate differs from the statutory
tax rate due primarily to non-deductible goodwill and state
income taxes.
General
The Company plans to exchange certain of the Park properties for similar
properties located in the Southeast. Also, the Company plans to sell certain of
the Park properties and purchase with the sale proceeds similar properties
located in the Southeast. Management does not believe these transactions would
materially affect these pro forma financial statements as presented.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
January 21, 1997
/s/ MARSHALL N. MORTON
- ----------------------- ------------------------------------------
Marshall N. Morton, Senior Vice
President and Chief Financial Officer
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Merger Agreement"), dated as of
July 19, 1996, by and among (i) MEDIA GENERAL, INC., a Virginia corporation
("Parent"); (ii) MG ACQUISITIONS, INC., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Sub"); and (iii) PARK ACQUISITIONS, INC., a
Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved the merger of Sub with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof, at
the Effective Time (as defined in Section 1.3), Sub shall be merged with and
into the Company and the separate existence of Sub shall thereupon cease, and
the Company shall continue as the surviving corporation in the Merger (the
"Surviving Corporation") under the laws of the State of Delaware under the name
set forth in the Certificate of Incorporation of the Surviving Corporation.
1.2 Closing. Unless this Merger Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 9.1, and subject to the satisfaction or waiver of the conditions set
forth in Article VIII, the closing of the Merger (the "Closing") will take place
as promptly as practicable after satisfaction or waiver of the conditions set
forth in Sections 8.1(a) and 8.1(b), at the offices of Eckert Seamans Cherin &
Mellott, 600 Grant Street, Pittsburgh, Pennsylvania unless another date, time or
place is agreed to in writing by the parties hereto (the "Closing Date").
Notwithstanding the foregoing, if the FCC Waiver (as hereinafter defined) shall
not have been obtained, the Closing Date shall be that date, before the
Termination Date (as hereinafter defined), designated by Parent. Parent shall
provide the Company and the Stockholders (as hereinafter defined) at least seven
and not more than ten business days' prior written notice of the date which is
to be the Closing Date in accordance with this Section 1.2.
1.3 Effective Time of the Merger. The Merger shall become effective
upon the filing of a Certificate of Merger with the Secretary of State of
Delaware in accordance with the provisions of the Delaware General Corporation
Law (the "DGCL"), or at such other time as Sub and the Company shall agree
should be specified in the Certificate of Merger, which filing shall be made as
soon as practicable on the Closing Date. When used in this Merger Agreement, the
term "Effective Time" shall mean the time at which such certificate is accepted
for filing by the Secretary of State of Delaware or such time as otherwise
specified in the Certificate of Merger.
<PAGE>
1.4 Effect of the Merger. The Merger shall, from and after the
Effective Time, have all the effects provided by the DGCL. If at any time after
the Effective Time the Surviving Corporation shall consider or be advised that
any further deeds, conveyances, assignments or assurances in law or any other
acts are necessary, desirable or proper to vest, perfect or confirm, of record
or otherwise, in the Surviving Corporation, the title to any property or rights
of Sub or the Company (the "Constituent Corporations") to be vested in the
Surviving Corporation, by reason of, or as a result of, the Merger, or otherwise
to carry out the purposes of this Merger Agreement, the Constituent Corporations
agree that the Surviving Corporation and its proper officers and directors shall
execute and deliver all such deeds, conveyances, assignments and assurances in
law and do all things necessary, desirable or proper to vest, perfect or confirm
title to such property or rights in the Surviving Corporation and otherwise to
carry out the purposes of this Merger Agreement, and that the proper officers
and directors of the Surviving Corporation are fully authorized in the name of
each of the Constituent Corporations or otherwise to take any and all such
action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of Incorporation of
the Company as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation after the Effective
Time, provided that such Certificate of Incorporation shall be amended in
connection with the Merger (pursuant to Section 251 of the DGCL) in a form to be
mutually agreed to prior to Closing, until thereafter changed or amended as
provided therein or by applicable law.
2.2 By-laws. The By-laws of the Company as in effect immediately prior
to the Effective Time shall be the By-laws of the Surviving Corporation, until,
subject to Section 7.5, thereafter changed or amended as provided therein or by
applicable law.
2.3 Board of Directors; Officers. The directors of Sub immediately
prior to the Effective Time shall be the directors of the Surviving Corporation
and the officers of the Company immediately prior to the Effective Time shall be
the officers of the Surviving Corporation, in each case, until the earlier of
their respective resignations or the time that their respective successors are
duly elected or appointed and qualified.
2
<PAGE>
ARTICLE III
CONVERSION OF SHARES
3.1 Merger Consideration. As of the Effective Time, by virtue of the
Merger and without any action on the part of any stockholder of the Company or
Sub:
(a) The issued and outstanding shares of Common Stock of the
Company ("Company Common Stock") shall be converted into and represent the right
to receive an aggregate amount in cash determined pursuant to this Section
3.1(a) and subject to adjustment as provided in Sections 3.1(b), 3.1(c), 3.1(d),
3.1(e), 3.1(g) and 3.1(j) (such amount of cash being referred to herein as the
"Merger Consideration"). The Merger Consideration equals 93% of the difference
between (A) $710,000,000 as adjusted pursuant to this Section 3.1 (the "Total
Consideration") minus (B) the Target Debt Amount (as defined in Section 3.1(b)).
(b) The Total Consideration shall be (i) increased by the
amount by which the Debt Amount (as defined in this Section 3.1(b)) as of the
Closing Date, as set forth in the Estimated Closing Statement (as defined in
Section 3.1(i)) (the "Estimated Debt Amount"), is less than the Target Debt
Amount or (ii) decreased by the amount by which the Estimated Debt Amount
exceeds the Target Debt Amount. The "Debt Amount" shall mean, without
duplication, the aggregate amount of (i) long-term indebtedness of the Company
on a consolidated basis for borrowed money (excluding, however, the current
portion of such long-term indebtedness), (ii) capitalized leases as currently
recorded on the Company's books and (iii) non-current accrued interest, if any
(i.e., default interest). The "Target Debt Amount" shall mean $476,676,000,
which is the aggregate Debt Amount as of June 30, 1996.
(c) The Total Consideration also shall be (i) increased by the
amount by which the Working Capital (as defined in this Section 3.1(c)) of the
Company as of the Closing Date, as set forth in the Estimated Closing Statement
(the "Estimated Working Capital"), exceeds the Target Working Capital (as
defined in this Section 3.1(c)) or (ii) decreased by the amount by which the
Estimated Working Capital is less than the Target Working Capital. "Working
Capital" shall mean, on a consolidated basis, the difference between current
assets (exclusive of the current portion of deferred income taxes) and current
liabilities (inclusive of accrued and unpaid taxes, if any, and the current
portion of long-term indebtedness on a consolidated basis, but exclusive of
non-current accrued interest, if any (i.e., default interest), and the current
portion of deferred income taxes) determined in accordance with GAAP (as defined
in Section 4.5(a)). "Target Working Capital" shall mean the Working Capital of
the Company as of June 30, 1996 as reflected on the June Financial Statements
(as hereinafter defined), which the Company estimates will be $23,657,000. On
the Closing Date, the Company shall provide to Parent evidence satisfactory to
Parent in its reasonable discretion that (i) any tax payment obligation which
the Company has with respect to the sale of the Radio Stations (as hereinafter
defined) (including those Radio Stations sold after the date of this Merger
Agreement), after application of any available net operating losses of the
Company or its Subsidiaries, has been paid and (ii) any costs or expenses of the
Company or the Stockholders for which the Company is liable incurred in
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connection with the transactions contemplated by this Merger Agreement
have been paid on or before the Closing Date. In the event that any such taxes
or costs or expenses have not been so paid, the Total Consideration shall be
decreased by the aggregate amount of such unpaid items pursuant to Section
3.1(j)(ii).
(d) If the closing of the acquisition by the Company or its
Subsidiary of WHOA-TV, an ABC-affiliated television station in Montgomery,
Alabama (the "WHOA Acquisition"), pursuant to that certain Asset Purchase
Agreement dated as of February 29, 1996 among Montgomery Alabama Channel 32
Operating Limited Partnership, WHOA-TV, Inc. and Park of Montgomery I, Inc. (the
"WHOA Agreement"), has not occurred prior to the Effective Time, the Total
Consideration shall be decreased by an amount equal to the aggregate amount due
to the Sellers (as defined in the WHOA Agreement) under the WHOA Agreement at
the closing of such acquisition.
(e) The Total Consideration also shall be decreased by an
amount equal to the sum of the outstanding principal balance and all accrued but
unpaid interest on the Stockholder Notes (as defined in the Company Disclosure
Schedule) and increased by the amount of any capital expenditure approved by
Parent pursuant to Section 6.3.
(f) In the event of any adjustment to the Total Consideration
pursuant to Section 3.1(b), 3.1(c), 3.1(d), 3.1(e) or 3.1(g), the Merger
Consideration shall be that amount derived by substituting the adjusted Total
Consideration into the formula set forth in the last sentence of Section 3.1(a).
(g) The Total Consideration also shall be decreased by an
amount (the "Escrow Amount") equal to (i) $1,500,000, if the Total
Consideration, as adjusted as provided in Section 3.1(f), is less than or equal
to $710,000,000 or (ii) $2,500,000, if the Total Consideration, as adjusted as
provided in Section 3.1(f), is greater than $710,000,000. At the Effective Time,
Parent shall pay, or shall cause Sub to pay, the Escrow Amount to an escrow
agent (the "Escrow Agent") to be held in an escrow account (the "Escrow
Account") and disbursed by the Escrow Agent with respect to and upon completion
of the Final Closing Statement contemplated by Section 3.1(j) pursuant to an
escrow agreement which will be entered into within 30 days of the date hereof,
in form and substance reasonably acceptable to the Company, Parent and Sub (the
"Escrow Agreement").
(h) Each issued and outstanding share of common stock of Sub
shall be converted into and become one fully paid and nonassessable share of
common stock, $0.0001 par value, of the Surviving Corporation.
(i) Not later than five business days before the Closing Date,
the Company shall prepare and deliver to Parent a closing statement of the
Company substantially in the form of Exhibit A-1 hereto (the "Estimated Closing
Statement"), which shall be reasonably acceptable to Parent, and which shall set
forth the Company's best estimate of (i) the Estimated Debt Amount and (ii) the
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Estimated Working Capital. The Estimated Closing Statement shall fairly present
all financial information presented thereon.
(j) The Total Consideration shall be adjusted after the
Closing as provided in this Section 3.1(j):
(i) No more than sixty 60 days after the Closing Date,
Parent shall prepare and deliver to Dr. Gary B. Knapp
and Tomlin Family Trust II (collectively, the
"Stockholders") a final closing statement of the
Company, prepared on a basis consistent with the
accounting standards used for the preparation of the
Estimated Closing Statement, and substantially in the
form of Exhibit A-2 hereto (the "Final Closing
Statement"), which shall, based upon the books and
records of the Company, set forth (i) the actual Debt
Amount as of the Closing Date (the "Actual Debt
Amount") and (ii) the actual Working Capital of the
Company as of the Closing Date (the "Actual Working
Capital").
(ii) The Total Consideration shall be adjusted dollar for
dollar as follows:
(A) increased if and to the extent the Estimated
Debt Amount exceeds the Actual Debt Amount;
(B) decreased if and to the extent the Actual
Debt Amount exceeds the Estimated Debt
Amount;
(C) increased if and to the extent the Actual
Working Capital exceeds the Estimated
Working Capital;
(D) decreased if and to the extent the Estimated
Working Capital exceeds the Actual Working
Capital; and
(E) decreased as and to the extent provided in
the last sentence of Section 3.1(c).
(iii) In the event that the Total Consideration shall have
been increased pursuant to this Section 3.1(j), 93%
of the aggregate amount of such adjustment shall be
paid by Parent to the Stockholders within two
business days of the final determination of the Final
Closing Statement, 93% of the Escrow Amount shall be
paid to the Stockholders out of the Escrow Account
pursuant to the Escrow Agreement within such two-day
period and 7% of the Escrow Amount shall be paid to
Parent out of the Escrow Account pursuant to the
Escrow Agreement within such two-day period.
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(iv) In the event that the Total Consideration shall have
been decreased pursuant to this Section 3.1(j), the
aggregate amount of such adjustment shall be paid to
Parent, within two business days of the final
determination of the Final Closing Statement, out of
the Escrow Account pursuant to the Escrow Agreement.
In no event, however, shall Parent be entitled to, or
shall the Stockholders be liable for, any amount in
excess of the Escrow Amount. To the extent any amount
remains in the Escrow Account after the payment of
the amount due to Parent pursuant to this Section
3.1(j)(iv), such remaining amount shall be paid to
the Stockholders pursuant to the Escrow Agreement.
(v) The Stockholders may object to the Final Closing
Statement by written notice provided to Parent within
ten business days after receipt thereof. In the
event of a dispute between the Stockholders and
Parent, as to any matter set forth in the Final
Closing Statement, the Stockholders and Parent shall
use all reasonable efforts to resolve any such
dispute, but if a final resolution is not obtained
within 30 days after the Final Closing Statement is
delivered to the Stockholders, any remaining dispute
shall promptly be resolved by a nationally recognized
firm of independent public accountants, as shall be
mutually agreed upon by the Stockholders and Parent.
Such accounting firm may use such auditing procedures
as it may deem appropriate and the decision of such
accounting firm shall be binding and conclusive upon
the parties. The fees and expenses of such
accounting firm shall be borne one-half by the
Stockholders (which fees and expenses shall
constitute a decrease to the Total Consideration in
accordance with Section 3.1(j)(ii)) and one-half by
Parent.
(vi) Any payments required to be made pursuant to this
Section 3.1(j) shall bear interest from the Closing
Date through the date of payment in accordance with
the terms of the Escrow Agreement.
3.2 Payment.
(a) At the Effective Time, Parent shall pay, or shall cause
Sub to pay, to the holders of Company Common Stock the aggregate amount of cash
to which holders of Company Common Stock shall be entitled pursuant to Section
3.1(f), such payment to be made upon surrender by such holders of the stock
certificates formerly evidencing shares of Company Common Stock ("Common Stock
Shares").
(b) Each of the two Stockholders, upon surrender to Parent of
the stock certificates theretofore evidencing Common Stock Shares together with
any required documents of transfer (including without limitation the certificate
referred to in Section 8.3(v)), shall be entitled to receive in exchange
therefor one-half of the Merger Consideration with respect to such Common Stock
Shares. Upon such surrender, Parent shall promptly deliver, or cause Sub to
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deliver, the Merger Consideration, in accordance with the instructions provided
to Parent not less than two days before the Closing Date, and the certificates
so surrendered shall promptly be cancelled. Until surrendered, certificates
formerly evidencing Common Stock Shares shall be deemed for all purposes to
evidence only the right to receive the Merger Consideration. Except as provided
in the Escrow Agreement, no interest shall accrue or be paid on any cash
payable upon the surrender of certificates which immediately prior to the
Effective Time represented outstanding Common Stock Shares.
3.3 No Further Rights. From and after the Effective Time, holders of
certificates theretofore evidencing Common Stock Shares shall cease to have any
rights as stockholders of the Company, except as provided herein or by law.
3.4 Closing of the Company's Transfer Books. At the Effective Time,
the stock transfer books of the Company shall be closed and no transfer of
Common Stock Shares shall be made thereafter.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub that, except as
disclosed in the Company Disclosure Schedule which has been delivered to Parent
simultaneously with the execution of this Merger Agreement (the "Company
Disclosure Schedule"):
4.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and each of its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of the Company and each of its Subsidiaries has the requisite corporate
power and authority to carry on its business as it is now being conducted and is
duly qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified will not, individually or in the aggregate, have
a material adverse effect on the business, operations or financial condition of
the Company and its Subsidiaries taken as a whole (a "Company Material Adverse
Effect"). The Company has heretofore made available to Parent and Sub a complete
and correct copy of the Certificates of Incorporation and By-laws or comparable
organizational documents, each as amended to the date hereof, of the Company and
each of its Subsidiaries.
4.2 Capitalization.
(a) The authorized capital stock of the Company consists of
300 shares of Common Stock, $1.00 par value per share ("Common Stock"). Two
hundred shares of Common Stock are validly issued and outstanding, fully paid
and nonassessable and owned by the Stockholders, free and clear of any lien,
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charge, security interest, pledge, restriction or encumbrance of any kind or
nature (any of the foregoing being a "Lien"). There are no bonds, debentures,
notes or other indebtedness issued or outstanding having general voting rights
under ordinary circumstances. There are no options, warrants, calls or other
rights, agreements or commitments presently outstanding obligating the Company
to issue, deliver or sell shares of its capital stock, or obligating the Company
to grant, extend or enter into any such option, warrant, call or other such
right, agreement or commitment.
(b) All the outstanding shares of capital stock of each
Subsidiary of the Company are validly issued, fully paid and nonassessable and
owned by the Company or by a wholly-owned Subsidiary of the Company, free and
clear of any Lien. There are no existing options, warrants, calls or other
rights, agreements or commitments of any character relating to the sale,
issuance or voting of any shares of the issued or unissued capital stock of any
of the Subsidiaries of the Company which have been issued, granted or entered
into by the Company or any of its Subsidiaries.
(c) Except for the capital stock of its Subsidiaries, the
Company does not own, directly or indirectly, any capital stock or other
ownership interest in any corporation, partnership, joint venture or other
entity.
4.3 Authority Relative to This Merger Agreement. The Company has the
necessary corporate power and authority to execute and deliver this Merger
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Merger Agreement and the consummation of the transactions
contemplated hereby by the Company have been duly and validly authorized and
approved by the Company's Board of Directors and the holders of the required
percentage of Company Common Stock and no other corporate or stockholder
proceedings on the part of the Company are necessary to authorize or approve
this Merger Agreement or to consummate the transactions contemplated hereby.
This Merger Agreement has been duly executed and delivered by the Company, and
assuming the due authorization, execution and delivery by Parent and Sub,
constitutes the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms except as such enforceability may be
limited by general principles of equity or principles applicable to creditors
rights generally.
4.4 No Conflicts, Required Filings and Consents.
(a) None of the execution and delivery of this Merger
Agreement by the Company, the consummation by the Company of the transactions
contemplated hereby or compliance by the Company with any of the provisions
hereof will (i) conflict with or violate the Certificate of Incorporation or
By-laws of the Company or the comparable organizational documents of any of the
Company's Subsidiaries, (ii) subject to receipt or filing of the required
Consents referred to in Section 4.4(b), result in a violation of any statute,
ordinance, rule, regulation, order, judgment or decree applicable to the Company
or any of its Subsidiaries, or by which any of them or any of their respective
properties or assets may be bound or affected, or (iii) result in a violation or
breach of or constitute a default (or an event which with notice or lapse of
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time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of any Lien on any of the property or assets of Company or any of
Company's Subsidiaries (any of the foregoing referred to in clause (ii) or this
clause (iii) being a "Violation") pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any of their
respective properties may be bound or affected, except in the case of the
foregoing clause (ii) or (iii) for any such Violations which would not have a
Company Material Adverse Effect.
(b) None of the execution and delivery of this Merger
Agreement by the Company, the consummation by the Company of the transactions
contemplated hereby or compliance by the Company with any of the provisions
hereof will require any consent, waiver, license, approval, authorization, order
or permit or registration or filing with or notification to (any of the
foregoing being a "Consent"), any government or subdivision thereof, domestic,
foreign, multinational, or any administrative, governmental, or regulatory
authority, agency, commission, court, tribunal or body, domestic, foreign or
multinational (a "Governmental Entity"), except for (i) the filing of a
Certificate of Merger pursuant to the DGCL, (ii) compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (iii) such filings as may be required in connection with the taxes
described in Section 7.8, (iv) Consents from the Federal Communications
Commission ("FCC") in connection with the assignment or transfer of control of
the FCC licenses applicable to the Company's radio and television broadcast
operations (such licenses, a complete list of which will be provided in
connection with the application for the FCC Consents, being referred to herein
collectively as the "FCC Licenses," and such consents being referred to herein
collectively as the "FCC Consents"), and (v) Consents the failure of which to
obtain or make would not have a Company Material Adverse Effect.
4.5 Reports and Financial Statements.
(a) The audited consolidated balance sheets as of December 31,
1995, 1994 and 1993 and the related consolidated statements of income and
retained earnings for each of the years ended December 31, 1995, 1994 and 1993
(including the related notes and schedules thereto) of the Company, true and
complete copies of which have previously been delivered to Parent (the "Audited
Financial Statements"), present fairly, in all material respects, the
consolidated financial position and the consolidated results of operations and
cash flows of the Company and its consolidated Subsidiaries as of the dates or
for the periods presented therein in conformity with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
periods involved except as otherwise noted therein, including in the related
notes.
(b) The unaudited consolidated balance sheets and the related
statements of income and retained earnings of the Company for the period ended
March 31, 1996 (the "Interim Financial Statements"), true and complete copies of
which have previously been delivered to Parent, have been prepared in accordance
with GAAP on a basis consistent with the Audited Financial Statements (except as
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provided in the next sentence). The Interim Financial Statements present fairly,
in all material respects, the consolidated financial position, results of
operations and cash flows of the Company and its consolidated Subsidiaries for
all periods presented therein; subject, however, to the lack of footnotes which
otherwise would be required under GAAP and normal year-end adjustments, provided
that any such year-end adjustments that relate to any of the first three
quarters of the year shall have been reflected in the Interim Financial
Statements for such quarters.
(c) Except as disclosed in the Audited Financial Statements or
in the Interim Financial Statements, neither the Company nor any of its
Subsidiaries has any liabilities or any obligations of any nature whether or not
accrued, contingent or otherwise, that would be required by GAAP to be reflected
on a consolidated balance sheet of the Company and its Subsidiaries (including
the notes thereto), except for liabilities or obligations incurred in the
ordinary course of business since March 31, 1996 that would not have a Company
Material Adverse Effect.
4.6 Litigation. There is no suit, action or proceeding pending or, to
the knowledge of the Company, threatened against or affecting the Company or any
of its Subsidiaries that, individually or in the aggregate, is reasonably
expected to have a Company Material Adverse Effect, nor is there any judgment,
decree, injunction or order of any Governmental Entity or arbitrator outstanding
against the Company or any of its Subsidiaries that is reasonably expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
4.7 Absence of Certain Changes or Events. Except as contemplated by
this Merger Agreement, since March 31, 1996, the Company and its Subsidiaries
have conducted their businesses only in the ordinary course, and there has not
been (i) any change that would have a Company Material Adverse Effect, other
than changes relating to or arising from general economic, market or financial
conditions or generally affecting the industries in which the Company operates,
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of the
Company's capital stock, or any redemption, purchase or other acquisition of its
capital stock, (iii) any split, combination or reclassification of any of the
Company's capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for shares of
the Company's capital stock, (iv) except as previously disclosed to Parent and
Sub, any granting by the Company or any of its Subsidiaries to any executive
officer of the Company of any increase in compensation, except in the ordinary
course of business or as required under employment agreements in effect as of or
prior to the date of this Merger Agreement, (v) any granting by the Company or
any of its Subsidiaries to any such executive officer of any increase in
severance or termination pay, except as required under employment, severance or
termination agreements or plans in effect as of the date of this Merger
Agreement, (vi) any entry by the Company or any of its Subsidiaries into any
employment, severance or termination agreement with any such executive officer,
(vii) any damage, destruction or loss whether or not covered by insurance, that
is reasonably expected to have a Company Material Adverse Effect, or (viii) any
change in accounting methods, principles or practices by the Company or any of
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its Subsidiaries materially affecting its assets, liabilities or business,
except insofar as may have been required by a change in GAAP.
4.8 Employee Benefit Plans. There are no material employee benefit
plans, agreements or arrangements maintained by the Company or any of its
Subsidiaries, including "employee benefit plans," as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
plans, agreements or arrangements relating to former employees and retirees,
including, but not limited to, retiree medical and life insurance plans,
maintained by the Company or any of its Subsidiaries or collective bargaining
agreements to which the Company or any of its Subsidiaries is a party (together,
the "Company Benefit Plans"). No default exists with respect to the obligations
of the Company or any of its Subsidiaries under such Company Benefit Plans which
default, alone or in the aggregate, would have a Company Material Adverse
Effect. Since March 31, 1996, there have been no strikes, lockouts or work
stoppages or slowdowns, or, to the knowledge of the Company, labor
jurisdictional disputes or labor organizing activity occurring or, to the
knowledge of the Company, threatened with respect to the employees of the
Company or its Subsidiaries.
4.9 ERISA.
(a) All Company Benefit Plans which are subject to ERISA have
been administered in accordance, and are in compliance, with the applicable
provisions of ERISA, except where such failures to administer or comply would
not have a Company Material Adverse Effect. Each of the Company Benefit Plans
which is intended to meet the requirements of Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), has been determined by the
Internal Revenue Service to meet such requirements within the meaning of such
Section of the Code and no plan amendment that is not the subject of such a
determination would affect the validity of any Company Benefit Plan's letter.
None of the Company nor any of its Subsidiaries has engaged in any non-exempt
"prohibited transactions," as such term is defined in Section 4975 of the Code
or Section 406 of ERISA, involving the Company Benefit Plans which would subject
the Company, or its Subsidiaries to the penalty or tax imposed under Section
502(i) of ERISA or Section 4975 of the Code in an amount which would have a
Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries
nor any other entity required to be combined with the Company or any Subsidiary
of the Company under Section 4001 of ERISA or Section 414(b), (c), (m) or (o) of
the Code (an "ERISA Affiliate") has made a complete or partial withdrawal,
within the meaning of Section 4201 of ERISA, from any multi-employer plan which
has resulted in, or is reasonably expected to result in, any withdrawal
liability to the Company or any of its Subsidiaries except for any such
liability which would not have a Company Material Adverse Effect. Neither the
Company nor any of its Subsidiaries nor any ERISA Affiliate has engaged in any
transaction described in Section 4069 of ERISA within the last five years.
Except pursuant to the terms of the Company Benefit Plans, neither the execution
and delivery of this Merger Agreement nor the consummation of the transactions
contemplated hereby will (ix) result in any material payment (including, without
limitation, severance, unemployment compensation or golden parachute) becoming
due to any director or other employee of the Company, (x) materially increase
any benefits otherwise payable under any Company Benefit Plan or (xi) result in
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the acceleration of the time of payment or vesting of any such benefits to any
material extent.
(b) No notice of a "reportable event," within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Company Benefit Plan which is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA and
which is intended to meet the requirements of Section 401(a) of the Code (a
"Pension Plan"), or by any ERISA Affiliate except as would not be reasonably
expected to have a Company Material Adverse Effect. None of the Company, any of
its Subsidiaries nor any ERISA Affiliate has incurred any liability to the
Pension Benefit Guaranty Corporation (the "PBGC") in respect of any Company
Benefit Plan that remains unpaid or reasonably expects to incur any liability to
the PBGC, other than PBGC insurance premiums that are payable in the ordinary
course. No Company Benefit Plan sponsored or maintained by the Company or any
ERISA Affiliate has an "accumulated funding deficiency," as such term is defined
in Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether or not
waived, and otherwise has fully met the funding standards required under Title I
of ERISA and Section 412 of the Code. There are no unfunded liabilities with
respect to any Company Benefit Plan sponsored or maintained by the Company or
any ERISA Affiliate, i.e., the actuarial present value of all "benefit
liabilities" (determined within the meaning of Section 401(a)(2) of the Code)
under such Company Benefit Plan, whether or not vested, does not exceed the
current value of the assets of such Company Benefit Plan by more than $500,000.
No Company Benefit Plan is a multiemployer plan as defined in Section 3(37) of
ERISA.
(c) Neither the Company nor any of its Subsidiaries is a party
to any agreement, contract, arrangement or plan that has resulted or would
result, separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.
(d) Neither the Company nor any ERISA Affiliate sponsors,
maintains or contributes to any Company Benefit Plan that provides retiree
medical or retiree death benefit (other than through a Company Benefit Plan
qualified under Section 401(a) of the Code) coverage to former employees of the
Company or its Subsidiaries except as may otherwise be required under Section
601-09 of ERISA or Section 4980B of the Code.
4.10 Taxes. The Company and its Subsidiaries have duly filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions (including, but not
limited to, those filed on a consolidated, combined or unitary basis), required
to have been filed by the Company and its Subsidiaries prior to the date hereof,
except for such returns or reports (including extensions) the failure to file
which would not have a Company Material Adverse Effect. The Company and its
Subsidiaries have paid or, prior to the Effective Time will pay, all taxes,
interest and penalties shown on such returns or reports as being due or (except
to the extent the same are contested in good faith) claimed to be due to any
federal, state, local or other taxing authority. The Company and its
Subsidiaries have paid or made adequate provision in the financial statements of
the Company for all taxes payable in respect of all periods ending on or prior
to June 30, 1996 (including without limitation all taxes relating to the sales
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of Radio Stations which occurred on or prior to such date), except for such
taxes which would not have a Company Material Adverse Effect. All deficiencies
proposed, asserted or assessed against the Company or any of its Subsidiaries
have been paid or settled and there are no audits ongoing, pending or for which
the Company has received notification or agreed to extend the statute of
limitations.
4.11 Compliance with Applicable Laws.
(a) To the knowledge of the Company, the Company and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for them to own, lease or
operate their properties and assets and to carry on their businesses
substantially as now conducted (the "Company Permits"), except for such permits,
licenses, variances, exemptions, orders and approvals the failure of which to
hold would not have a Company Material Adverse Effect. To the knowledge of the
Company, the Company and its Subsidiaries are in substantial compliance with
applicable laws and the terms of the Company Permits, except for such failures
so to comply which would not have a Company Material Adverse Effect. To the
knowledge of the Company, the business operations of the Company and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for possible violations which,
individually or in the aggregate, would not have a Company Material Adverse
Effect.
(b) The Company does not know of any facts or circumstances
which would disqualify it under the Communications Act of 1934, as amended (the
"Communications Act"), from assigning or transferring control of the Company's
radio and television broadcast operations. There are no FCC notices of
violations or adverse orders against the Company or its Subsidiaries and, as of
the date hereof, there are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened before the FCC for the cancellation,
material involuntary modification or non-renewal of any FCC Licenses, except for
any such notice of violation, adverse order, action, suit or proceeding
generally affecting the industries in which the Company operates or which would
not, individually or in the aggregate, have a Company Material Adverse Effect
and except for FCC License renewal proceedings which the Company reasonably
expects will result in renewals of the FCC Licenses.
4.12 Voting Requirements. The affirmative vote of the holders of at
least fifty-one percent (51%) of the total number of votes entitled to be cast
by the holders of the outstanding Company Common Stock has been obtained with
respect to the Merger and is the only vote of the holders of any class or series
of the Company's capital stock necessary to adopt and approve this Merger
Agreement and the transactions contemplated by this Merger Agreement (including
the Merger).
4.13 State Takeover Statutes. The Board of Directors of the Company has
approved the Merger and this Merger Agreement, and such approval is sufficient
to render inapplicable to the Merger, this Merger Agreement, and the
transactions contemplated by this Merger Agreement the provisions of Section 203
of DGCL. To the knowledge of the Company, no other state takeover statute or
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similar statute or regulation, applies or purports to apply to the Merger, this
Merger Agreement, or any of the transactions contemplated by this Merger
Agreement.
4.14 Brokers. Except for Media Venture Partners, no broker or finder is
entitled to any broker's or finder's fee in connection with the transactions
contemplated by this Merger Agreement based upon arrangements made by or on
behalf of the Company.
4.15 Environmental Matters. Except as would not reasonably be expected
to have a Company Material Adverse Effect: (i) to the knowledge of the Company,
no real property currently or formerly owned or operated by the Company or any
current Subsidiary is contaminated with any Hazardous Substances to an extent or
in a manner or condition now requiring remediation under any Environmental Law;
(ii) no judicial or administrative proceeding is pending or to the knowledge of
the Company threatened relating to liability for any off-site disposal or
contamination; and (iii) the Company and its Subsidiaries have not received any
claims or notices alleging liability under any Environmental Law, and the
Company has no knowledge of any circumstances that could result in such claims.
"Environmental Law" means any applicable federal, state or local law,
regulation, order, decree, or judicial opinion or other agency requirement
having the force and effect of law and relating to noise, odor, Hazardous
Substance or the protection of the environment. "Hazardous Substance" means any
toxic or hazardous substance that is regulated by or under authority of any
Environmental Law, including any petroleum products, asbestos or polychlorinated
biphenyls.
4.16 Contracts. Neither the Company nor any of its Subsidiaries is in
violation of or in default under (nor does there exist any condition which upon
the passage of time or the giving of notice would cause such a violation of or
default under) any loan or credit agreement, note, bond, mortgage, indenture,
lease, permit, concession, franchise, license or any other contract, agreement,
arrangement or understanding, to which it is a party or by which it or any of
its properties or assets is bound, except as, individually or in the aggregate,
would not reasonably be expected to result in a Company Material Adverse Effect.
The Company and its Subsidiaries are in material compliance with all terms and
conditions of each asset purchase agreement for the sale of the Radio Stations,
and no party to any such agreement has notified the Company or any of its
Subsidiaries of any alleged breach of any such agreement or of any claim for
indemnification under any such agreement. All leases and material contracts in
respect of each Radio Station have been (or at the closing of the sale of such
Radio Station will be) assigned to the purchaser under the respective asset
purchase agreement. Under the WHOA Agreement, the aggregate amount due to the
Sellers at the closing of the WHOA Acquisition is equal to $6,000,000, minus
$4,500,000 (which is the amount the Company's Subsidiary paid for certain
secured debt of the Sellers in connection with such acquisition), and minus
amounts advanced from time to time by the Company or its Subsidiaries to the
Sellers prior to the closing of the WHOA Acquisition.
4.17 Title to Properties. The Company Disclosure Schedule lists all
real property owned or leased in the business or operations of the Company and
its Subsidiaries (collectively, the "Real Property"). Except as would not
reasonably be expected to have a Company Material Adverse Effect, the Company
and each of its Subsidiaries has good title to, or valid leasehold interests in,
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all of its properties and assets, except for such as are no longer used or
useful in the conduct of its businesses or as have been disposed of in the
ordinary course of business and except for defects in title, easements,
restrictive covenants, and similar encumbrances or impediments that, in the
aggregate, do not and will not materially interfere, with its ability to conduct
its business as currently conducted. All such assets and properties, other than
assets and properties in which the Company or any of its Subsidiaries has a
leasehold interest, are free and clear of all Liens except for Liens that, in
the aggregate, do not and will not materially interfere with the ability of the
Company and its Subsidiaries to conduct their business as currently conducted.
4.18 Intellectual Property. The Company and its Subsidiaries own, or
are validly licensed or otherwise have the right to use, all patents, patent
rights, trademarks, trademark rights, trade names, and trade name rights,
service marks, service mark rights, copyrights, and other proprietary
intellectual property rights and computer programs (collectively, "Intellectual
Property Rights") which are material to the conduct of the business of the
Company and its Subsidiaries taken as a whole. No claims are pending or, to the
knowledge of the Company, threatened that the Company or any of its Subsidiaries
is infringing or otherwise adversely affecting the rights of any Person with
regard to any Intellectual Property Right. To the knowledge of the Company, no
Person is infringing the rights of the Company or any of its Subsidiaries with
respect to any Intellectual Property Right except for any such infringements
which, individually or in the aggregate, would not have a Company Material
Adverse Effect.
4.19 Totality of the Assets. The items of tangible personal property
used or useful in the business or operations of the Company and its Subsidiaries
(collectively, the "Personal Property"), the Real Property, the Intellectual
Property Rights, the FCC Licenses and the contracts to which the Company and its
Subsidiaries are party constitute all of the assets necessary to conduct the
businesses and operations of the Company and its Subsidiaries as they are
currently conducted.
4.20 Disclosure. No statement of a material fact by the Company
contained in this Merger Agreement, and all agreements and documents related
hereto and all exhibits and schedules related hereto and thereto contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements herein or
therein contained not misleading. There is no significant fact presently known
to the Company or its Subsidiaries (other than matters of a general economic or
political nature which do not affect the Company or its Subsidiaries uniquely)
which could reasonably be expected to materially and adversely affect the
Company, which has not been set forth in this Merger Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
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Parent and Sub jointly and severally represent and warrant to the
Company that, except as disclosed in the Parent Disclosure Schedule which has
been delivered to the Company simultaneously with the execution of this Merger
Agreement (the "Parent Disclosure Schedule"):
5.1 Organization and Qualification. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia. Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Each of Parent and
Sub has the requisite corporate power and authority to carry on its business as
it is now being conducted and is duly qualified or licensed to do business, and
is in good standing, in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified will not,
individually or in the aggregate, have a material adverse effect on the
business, operations or financial condition of Parent and its Subsidiaries taken
as a whole, or have a material adverse effect on Parent's proposed arrangements
for financing the transactions contemplated by this Merger Agreement or on
Parent's ability to consummate such financing arrangements (a "Parent Material
Adverse Effect").
5.2 Ownership of Sub. Sub is a direct or indirect wholly-owned
subsidiary of Parent.
5.3 Authority Relative to This Merger Agreement. Each of Parent and Sub
has the necessary corporate power and authority to execute and deliver this
Merger Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Merger Agreement and the consummation of the
transactions contemplated hereby by Parent and Sub have been duly and validly
authorized and approved by the respective Boards of Directors of Parent and Sub
and by the sole stockholder of Sub and no other corporate proceedings on the
part of Parent or Sub are necessary to authorize and approve this Merger
Agreement or to consummate the transactions contemplated hereby. This Merger
Agreement has been duly executed and delivered by each of Parent and Sub, and
assuming the due authorization, execution and delivery by the Company,
constitutes the valid and binding obligation of Parent and Sub enforceable
against each of them in accordance with its terms except as such enforceability
may be limited by general principles of equity or principles applicable to
creditors rights generally.
5.4 No Conflicts; Required Filings and Consents.
(a) None of the execution and delivery of this Merger
Agreement by Parent or Sub, the consummation by Parent or Sub of the
transactions contemplated hereby or compliance by Parent or Sub with any of the
provisions hereof will (i) conflict with or violate the Certificate of
Incorporation or By-laws of Parent or Sub or the comparable organizational
documents of any of Parent's Subsidiaries, (ii) subject to receipt or filing of
the required Consents referred to in Section 4.4(b), conflict with or result in
a violation pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or Sub or any of Parent's Subsidiaries is a party or by which
Parent or Sub or any of Parent's Subsidiaries or any of their respective
properties may be bound or affected, except in the case of the foregoing clause
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(ii) for any such violations which would not have a Parent Material Adverse
Effect.
(b) None of the execution and delivery of this Merger
Agreement by Parent or Sub, the consummation by Parent or Sub of the
transactions contemplated hereby or compliance by Parent or Sub with any of the
provisions hereof will require any Consent of any Governmental Entity, except
for (i) the filing of a certificate of merger pursuant to the DGCL, (ii)
compliance with the HSR Act, (iii) such filings as may be required in connection
with the taxes described in Section 7.9, (iv) the FCC Consents in connection
with the assignment or transfer of control of the FCC Licenses, and (v) Consents
the failure of which to obtain or make would not have a Parent Material Adverse
Effect.
5.5 Litigation. As of the date hereof, there is no suit, action or
proceeding pending or, to the knowledge of Parent or Sub, threatened against or
affecting Parent, Sub or any of Parent's Subsidiaries that, individually or in
the aggregate, is reasonably expected to have a Parent Material Adverse Effect,
nor is there any judgment, decree, injunction or order of any Governmental
Entity or arbitrator outstanding against Parent, Sub or any of Parent's
Subsidiaries having, or which is reasonably expected to have, individually or in
the aggregate, a Parent Material Adverse Effect.
5.6 Voting Requirements. No vote of the holders of any class or series
of the capital stock of Parent is necessary to approve this Merger Agreement or
the transactions contemplated hereby.
5.7 Brokers. Except for the fees and expenses of any Person whose fees
will be paid by Parent, no broker or finder is entitled to any broker's or
finder's fee in connection with the transactions contemplated by this Merger
Agreement based upon arrangements made by or on behalf of Parent or Sub.
5.8 Financing. Parent and Sub reasonably believe that they will have
funds available as of the Closing Date sufficient to consummate the Merger and
the other transactions contemplated hereby on the terms contemplated by this
Merger Agreement, and that, at the Effective Time of the Merger, Parent and Sub
will have available all of the funds necessary (i) to satisfy their respective
obligations under this Merger Agreement, and (ii) to pay all the related fees
and expenses in connection with the foregoing.
5.9 FCC Applications. Parent and Sub are or will as of the Closing Date
be legally, financially and otherwise qualified to hold or control the entities
which hold and will hold the FCC Licenses and are not aware of any facts or
circumstances (other than facts or circumstances relating solely to the Company
or its Subsidiaries) that could reasonably be expected to prevent consent to the
FCC Applications, and Parent and Sub further represent and warrant that no
waiver of the FCC's rules is necessary to obtain the FCC Consents, except in
connection with the ownership and operation by the Company of WTVR-TV in
Richmond, Virginia, and possibly the ownership of WHOA-TV, Montgomery, Alabama.
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5.10 Due Diligence. Parent and Sub have conducted their own independent
investigation of the Company and its business, have been provided the
opportunity to obtain information concerning the Company and have had the
opportunity to ask questions of, and receive answers from, the senior executive
officers of the Company pertaining to the Company; provided, however, that such
due diligence shall not affect the representations and warranties of the Company
or otherwise qualify the obligations of the Company hereunder.
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ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
6.1 Conduct of Business by the Company Pending the Merger. From and
after the date hereof, prior to the Effective Time, except as contemplated by
this Merger Agreement (including Section 6.2) or by the Company's budgets and
plans heretofore made available to Parent and except for the matters set forth
in the Company Disclosure Schedule or unless Parent shall otherwise agree in
writing, the Company shall, and shall cause its Subsidiaries to, carry on their
respective businesses in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted, and to use all reasonable efforts to
conduct their business in a manner consistent with the budgets and plans
heretofore made available to Parent and shall, and shall cause its Subsidiaries
to, use all reasonable efforts to preserve intact their present business
organizations, keep available the services of their employees and preserve their
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with them to the end that their goodwill and
on-going businesses shall not be impaired in any material respect at the
Effective Time; provided, however, that (i) the resignation of one or more
officers of the Company or any of its Subsidiaries shall not be deemed a breach
of the foregoing requirement and (ii) the loss of one or more customers of the
Company or any of its Subsidiaries shall not be deemed a breach of the foregoing
requirement unless such loss would have a Company Material Adverse Effect.
Without limiting the generality of the foregoing, and except as contemplated by
this Merger Agreement (including Section 6.2) or by the Company's budgets and
plans heretofore made available to Parent and except for the matters set forth
in the Company Disclosure Schedule or unless Parent shall otherwise agree in
writing, prior to the Effective Time, the Company shall not and shall not permit
its Subsidiaries to:
(a) (i) declare, set aside, or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, other than
dividends and distributions by any direct or indirect Subsidiary of the Company
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 shares of its capital stock, or (iii) purchase, redeem
or otherwise acquire any shares of capital stock of the Company or any of its
Subsidiaries or any other equity securities thereof or any rights, warrants, or
options to acquire any such shares or other securities;
(b) except for issuances of capital stock of the Company's
Subsidiaries to the Company or a wholly-owned Subsidiary of the Company, issue,
deliver, sell, pledge or otherwise encumber any shares of its capital stock, any
other voting securities issued by the Company or any securities convertible
into, or any rights, warrants or options to acquire, any such shares or voting
securities;
(c) amend its Certificate of Incorporation, By-laws or other
comparable organizational documents;
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(d) acquire or agree to acquire (i) by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof, or (ii)
any assets that are material, individually or in the aggregate, to the Company
and its Subsidiaries taken as a whole, except, in any such case, in the ordinary
course of business, and except transactions between a wholly-owned Subsidiary of
the Company and the Company or another wholly-owned Subsidiary of the Company;
(e) subject to a Lien or sell, lease or otherwise dispose of
any of its material properties or assets, except in the ordinary course of
business and except transactions between a wholly-owned Subsidiary of the
Company and the Company or another wholly-owned Subsidiary of the Company;
(f) (i) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another Person or issue or sell any debt securities of
the Company or any of its Subsidiaries, guarantee any debt securities of another
Person (other than indebtedness to, guarantees of, or issuances or sales to the
Company or a wholly-owned Subsidiary of the Company) or enter into any "keep
well" or other agreement to maintain any financial condition of another Person,
except, in any such case, for borrowings or other transactions incurred in the
ordinary course of business or pursuant to existing indebtedness for borrowed
money, including to repay existing indebtedness pursuant to the terms thereof,
or (ii) except in the ordinary course of business, make any loans, advances or
capital contributions to, or investments in, any other Person, other than to the
Company or any direct or indirect Subsidiary of the Company or settle or
compromise any material claim or litigation;
(g) permit film payables to be more than one month past due or
permit other accounts payable to be paid outside the ordinary course of
business;
(h) enter into any local management agreement, time brokerage
agreement, joint sales agreement or any similar agreement with respect to any of
the television stations owned by the Subsidiaries of the Company;
(i) increase or otherwise change the rate or nature of the
compensation (including wages, salaries and bonuses) which is paid or payable to
any employee or independent contractor of the Company or its Subsidiaries,
except pursuant to existing Company Benefit Plans which have been disclosed to
Parent and except for normal scheduled increases in compensation which are made
in the ordinary course of business;
(j) adopt, or commit to adopt, any employee benefit plan or
compensation arrangement other than a Company Benefit Plan, and not to make
material amendments to any such Company Benefit Plan except to the extent
required by law or necessary to preserve the nature of the benefits provided
under such plan or arrangement;
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(k) enter into, renew or allow the renewal of any employment
or consulting agreement or other contract or arrangement with respect to the
performance of personal services for a term of more than one year or requiring
the payment of more than $75,000 in annual compensation; or
(l) authorize any of, or commit or agree to take any of, the
foregoing actions.
6.2 Control of the Stations. Prior to the Effective Time, control of
the Company's radio and television broadcast operations along with all of the
Company's other operations, shall remain with the Company. The Company, Parent
and Sub acknowledge and agree that neither Parent nor Sub nor any of their
respective employees, agents or representatives, directly or indirectly, shall,
or have any right to, control, direct or otherwise supervise, or attempt to
control, direct or otherwise supervise, such broadcast and other operations, it
being understood that supervision of all programs, equipment, operations and
other activities of such broadcast and other operations shall be the sole
responsibility, and at all times prior to the Effective Time remain with the
complete control and discretion, of the Company, subject to the terms of Section
6.1.
6.3 Capital Expenditures. To the extent the Company desires to make any
capital expenditures not in the ordinary course (i.e., capital expenses other
than for routine maintenance and minor administrative equipment) between the
date hereof and the Closing Date, the Company shall obtain the written consent
of Parent prior to making such expenditure and the Total Consideration as
adjusted in Section 3.1 shall be increased by such approved expenditure if it is
made by the Closing Date.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Access to Information. From the date hereof through the Effective
Time, the Company and its Subsidiaries shall afford to Parent and Parent's
accountants, counsel and other representatives reasonable access during normal
business hours (and at such other times as the parties may mutually agree) upon
reasonable prior notice and approval of the Company, which shall not be
unreasonably withheld, to its properties, books, contracts, commitments, records
and personnel and, during such period, shall furnish promptly to Parent all
information concerning its business, properties and personnel as Parent may
reasonably request, provided, that any inspection of properties or discussion
with personnel shall occur only if a representative of the Company is present.
Parent shall hold, and shall cause its employees, agents and representatives to
hold, in strict confidence all such information in accordance with the terms of
the Confidentiality Agreement entered into prior to the date hereof between
Parent and the Company, which shall remain in full force and effect in
accordance with the terms thereof, including, without limitation, in the event
of termination of this Merger Agreement. Parent and its accountants, counsel and
other representatives shall, in the exercise of the rights described in this
Section 7.1, not unduly interfere with the operation of the business of the
Company or its Subsidiaries.
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7.2 Filings; Tax Elections. The Company shall promptly provide Parent
copies of (i) all material filings made by the Company with any Governmental
Entity, including all filings made in connection with this Merger Agreement and
the transactions contemplated hereby, and (ii) all material notices and
communications received from any Governmental Entity. The Company shall, before
settling or compromising any material tax liability of the Company or any of its
Subsidiaries, consult with Parent and its advisors as to the positions that will
be taken or made with respect to such matter. The Company shall promptly provide
to Parent before the Effective Time a list of all material formal elections with
respect to federal and state income taxes made by the Company or its
Subsidiaries. After the date hereof, (a) no formal election with respect to the
Company's taxes will be made without the prior written consent of Parent (which
consent shall not unreasonably be withheld) and (b) the Company and its
Subsidiaries will pay or make adequate provision in the financial statements of
the Company for all taxes payable in respect of all periods commencing after
June 30, 1996 (including without limitation taxes relating to the sales of Radio
Stations which occur after such date).
7.3 Employee and Other Arrangements.
(a) From and after the Effective Time, Parent and Sub will,
and will cause the Surviving Corporation and each of its Subsidiaries to (i)
honor all Company Benefit Plans and all employment, severance, termination,
consulting and other similar contracts and agreements for the benefit of any
director, officer or other employee of the Company or any of its Subsidiaries to
which the Company or any such Subsidiary is a party or by which any of them is
bound (the "Employee Contracts") and (ii) to pay and perform each of the
obligations of the Company, its Subsidiaries or any of their respective
successors under each such Company Benefit Plan and Employee Contract, in each
case, in accordance with the terms thereof as in effect immediately prior to the
Effective Time. Notwithstanding the foregoing, nothing in this Merger Agreement
shall prevent Parent from amending, modifying or terminating any Company Benefit
Plan, compensation arrangement or Employee Contract in accordance with the terms
of such plan, arrangement or contract or pursuant to the terms of any subsequent
amendment to or agreement between Parent and any person covered under the terms
of such plan, arrangement or contract.
(b) Parent will cause the Surviving Corporation, within a
reasonable period of time after the Closing Date, to provide employees of the
Company and its Subsidiaries with compensation and benefits comparable to those
of similarly situated employees of Parent and its subsidiaries; provided that
neither Parent nor the Surviving Corporation nor any Subsidiary or Affiliate
thereof shall be required to employ, continue to employ or offer to employ any
employee of the Company or any of its Subsidiaries. It is understood that after
the Effective Time no party hereto will have any obligation to issue shares of
capital stock of any entity pursuant to any compensation or benefit plan or
program and that any substitute plan or program may be based on reasonable merit
based performance criteria in determination of individual bonus compensation and
commissions pursuant to such plans after the Effective Time. In addition, from
and after the Effective Time, Parent and Sub shall, and shall cause the
Surviving Corporation and each of its Subsidiaries to, (i) provide all employees
of the Company and its Subsidiaries who become employees of the Surviving
Corporation or its Subsidiaries or Affiliates
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as of the Closing Date ("Company Employees") with service credit for all periods
of employment with the Company and its Subsidiaries (including, without
limitation, as provided in the Company's current Company Benefit Plans) prior to
the Effective Time for purposes of eligibility and vesting under any
compensation or benefit plan applicable to Company Employees, but only to the
extent such service was credited under such plans by the Company or any
Subsidiary prior to the Closing Date, and provided that no prior service credit
shall be awarded for purposes of any defined benefit retirement plan (except to
the extent required by ERISA), (ii) use all reasonable efforts to waive any
pre-existing condition of any Company Employee for purposes of determining
eligibility for, and the terms upon which they participate in, any welfare plan
adopted by Parent, Sub, the Surviving Corporation or any of their Affiliates
with respect to Company Employees (other than conditions that are already in
effect with respect to such employees under the Company's welfare plans that
have not been satisfied as of the Effective Time), (iii) recognize the 1996
deductible and copayments of each Company Employee under the Company Benefit
Plans for purposes of determining the 1996 deductible and copayments recognized
under any welfare plan adopted by Parent, Sub, the Surviving Corporation or any
of their Affiliates for the benefit of any such Company Employee, (iv) provide
each Company Employee (other than Company Employees who are subject to a
severance plan or individual severance arrangement described in clause (v) below
upon involuntary termination of such employee's employment with the Surviving
Corporation and any of its Subsidiaries and Affiliates, with a minimum of two
weeks of severance pay for each year prior to such termination such Company
Employee was employed by the Company or its Subsidiaries or the Surviving
Corporation or its Subsidiaries or Affiliates up to a maximum of 39 weeks of
severance pay; provided that such termination occurs within six months of the
Closing Date, is not for cause, and is not in connection with a corporate
transaction in which such employee is immediately offered employment by a third
party and (v) provide each Company Employee who is subject to a severance plan
or individual severance arrangement the benefits provided in such plan or
arrangement.
(c) This Section 7.3 shall operate exclusively for the benefit
of the parties to this Merger Agreement and not for the benefit of any other
person, including without limitation any current, future, former or retired
employee of the Company or any of its Subsidiaries.
7.4 Public Announcements. So long as this Merger Agreement is in
effect, each of Parent, Sub and the Company agree to use all reasonable efforts
to consult with each other before issuing any press release or otherwise making
any public statement with respect to the transactions contemplated by this
Merger Agreement.
7.5 Indemnification.
(a) Parent agrees that (i) all rights to indemnification
existing in favor of any director, officer, employee or agent of the Company and
its Subsidiaries (the "Indemnified Parties") as provided in their respective
Certificates of Incorporation, By-laws or comparable organizational documents or
in indemnification agreements with the Company or any of its Subsidiaries, or
otherwise in effect as of the date hereof, shall survive the Merger and shall
continue in full force and effect for a period of not less than six years from
the Effective Time
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and (ii) Parent shall guarantee the performance by the Surviving Corporation of
its obligations referred to in clause (i), provided that, in the event any claim
or claims are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims, and Parent's guarantee
with respect thereto, shall continue until final disposition of any and all such
claims. Parent also agrees to indemnify all Indemnified Parties to the fullest
extent permitted by applicable law with respect to all acts and omissions
arising out of such individuals' services as officers, directors, employees or
agents of the Company or any of its Subsidiaries or as trustees or fiduciaries
of any plan for the benefit of employees or directors of, or otherwise on behalf
of, the Company or any of its Subsidiaries, occurring prior to the Effective
Time including, without limitation, the transactions contemplated by this Merger
Agreement. Without limiting the generality of the foregoing, if any such
Indemnified Party is or becomes involved in any capacity in any action,
proceeding or investigation in connection with any matter, including, without
limitation, the transactions contemplated by this Merger Agreement, occurring
prior to or at the Effective Time, Parent shall pay as incurred such Indemnified
Party's legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith. From and after the Effective
Time, Parent shall pay all expenses, including attorneys' fees, that may be
incurred by any Indemnified Party in enforcing the indemnity and other
obligations provided for in this Section 7.5.
(b) Parent agrees that, from and after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect for not less than
six years from the Effective Time the current policies of the directors' and
officers' liability insurance maintained by the Company; provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage, and with insurance companies of substantially the same claims paying
ability, containing terms and conditions which are no less advantageous and
provided that such substitution shall not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time;
provided, further, that the Surviving Corporation shall not be required to pay
an annual premium in excess of 300% of the last annual premium paid by the
Company prior to the date hereof and if the Surviving Corporation is unable to
obtain the insurance required by this Section 7.5(b) it shall obtain as much
comparable insurance as possible for an annual premium equal to such maximum
amount.
7.6 Efforts; Consents.
(a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use all reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Merger Agreement and the Merger and to
cooperate with each other in connection with the foregoing. Without limiting the
generality of the foregoing, each of the Company, Sub and Parent shall make or
cause to be made all required filings with or applications to Governmental
Entities (including under the HSR Act and applicable requirements of the FCC,
and the Communications Act), and use all reasonable efforts to (i) obtain all
necessary waivers of any Violations and other Consents of all Governmental
Entities and other third parties, necessary for the parties to consummate the
transactions contemplated hereby except for those Consents the failure of which
to obtain would
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not have a Company Material Adverse Effect and except as otherwise provided
herein, (ii) oppose, lift or rescind any injunction or restraining order or
other order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, and (iii) fulfill all conditions to this
Merger Agreement; provided, however, in the event Parent and the Company are
informed by the FCC that the FCC will not grant the Richmond waiver as more
fully described in Section 7.6(c), Parent and the Company shall promptly
resubmit to the FCC revised applications for consent to the transactions
contemplated by this Merger Agreement, which applications shall exclude WTVR-TV,
Richmond, Virginia, from any transfer to Parent and Sub, and Parent and Sub will
thereafter direct the Company as to the entity to which WTVR-TV shall be
transferred.
(b) Without limiting the foregoing, the Company and Parent
shall use all reasonable efforts and cooperate in promptly preparing and filing
(i) within 20 business days of executing this Merger Agreement, notifications
under the HSR Act, and (ii) within seven business days of executing this Merger
Agreement, the FCC Applications in connection with the Merger and the other
transactions contemplated hereby, and to respond as promptly as practicable to
any inquiries or requests received from the Federal Trade Commission (the
"FTC"), the Antitrust Division of the United States Department of Justice (the
"Antitrust Division"), and the FCC for additional information or documentation
and to respond as promptly as practicable to all inquiries and requests received
from any State Attorney General or other Governmental Entity in connection with
antitrust matters or matters relating to the FCC Applications. Each of Parent,
Sub and the Company, to the extent applicable, further agrees to file
contemporaneously with the filing of the FCC Applications any requests for
waivers of applicable FCC rules as may be required to expeditiously prosecute
such waiver requests and to diligently submit any additional information or
amendments for which the FCC may ask with respect to such waiver requests.
Parent and Sub further covenant to prosecute each such waiver request in good
faith and to supply any information requested by the FCC in connection with such
waiver in a timely and complete manner.
(c) In furtherance and not in limitation of the foregoing,
Parent and Sub shall use all reasonable efforts to resolve such objections, if
any, as may be asserted with respect to the transactions contemplated by this
Merger Agreement under any antitrust, competition or trade regulatory laws,
rules or regulations of any Governmental Entity ("Antitrust Laws") or any laws,
rules or regulations of the FCC or other Governmental Entities relating to the
broadcast, cable, newspaper, mass media or communications industries
(collectively, "Communications Laws") and will take all necessary and proper
steps (excluding, however, agreeing to hold separate, to place in trust and/or
to divest any of the businesses, product lines or assets of Parent or any of its
Subsidiaries or Affiliates or of any of the Company or any of, its Subsidiaries
or Affiliates) as may be reasonably required (i) for securing the grant of the
FCC Applications and for resolving any objections to the transactions
contemplated hereby of any Governmental Entities under the Antitrust Laws or
Communications Laws or (ii) by any domestic or foreign court or similar
tribunal, in any suit brought by a private party or Governmental Entity
challenging the transactions contemplated by this Merger Agreement as violative
of any Antitrust Law or Communications Law, in order to avoid the entry of, or
to effect the dissolution of, any injunction, temporary restraining order or
other order that has the effect of preventing the
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consummation of any of such transactions; provided, however, that Parent and Sub
shall be permitted to request that the FCC grant a temporary waiver, extending
for a period of six months after the Closing Date, of the FCC's rules and
regulations to the extent they would otherwise prohibit Parent's simultaneous
ownership of WTVR-TV in Richmond, Virginia and Parent's interests in The
Richmond Times Dispatch newspaper.
(d) Each of Parent and the Company shall promptly provide the
other with a copy of any inquiry or request for information (including notice of
any oral request for information), pleading, order or other document either
party receives from any Governmental Entities with respect to the matters
referred to in this Section 7.6.
(e) The Company shall use all reasonable efforts to assist
Parent and Sub in any efforts they may undertake to prepay any outstanding
indebtedness of the Company, including without limitation the giving of any
required notices to the holders of outstanding notes of the Company and, if
requested by Parent and Sub, permitting Parent and Sub to engage in a "Strategic
Equity Investment", as defined under the notes originally issued by Park
Communications, Inc., Park Broadcasting, Inc. and Park Newspapers, Inc. on May
13, 1996, in the Company or its Subsidiaries; provided, however, that the
Company shall not be required to give any such notice unless such notice
provides that the Company is not obligated to prepay any such indebtedness
unless the Merger is consummated; and provided further that Parent shall
indemnify and hold harmless the Stockholders for all costs, liabilities and
damages (including without limitation reasonable counsel fees and expenses) that
they may suffer solely as a result of the actions that the Company may take at
the request of Parent and/or Sub in connection with the Company's permitting
Parent and/or Sub to engage in such a Strategic Equity Investment.
(f) The Company shall consult with Parent and Sub prior to
entering into any new agreements for programming or extensions or existing
agreements for programming.
(g) The Company shall use all reasonable efforts to assist
Parent in producing a schedule setting forth (i) the tax basis of the assets of
the Company and its Subsidiaries; (ii) the net operating loss carryover, general
business credit carryover, alternative minimum tax carryover and capital loss
carryover of the Company Consolidated Group available for federal, state and
local income tax purposes; and (iii) all federal, state and local tax elections
in effect for the Company Consolidated Group for any tax year that has not been
closed by applicable statute.
(h) The Company shall, within 30 days after the date of this
Merger Agreement, use all reasonable efforts to provide the Parent with a list
of all items of Personal Property for which the Company or its Subsidiaries
maintains a depreciation schedule.
(i) The Company shall cause its Subsidiaries to comply with
the terms of those certain Registration Rights Agreements dated as of May 13,
1996 relating to the registration of the PCI Notes, the PBI Notes and the PNI
Notes (as such terms are defined in the Company Disclosure Schedule).
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7.7 Notice of Breaches. The Company shall give prompt notice to Parent,
and Parent or Sub shall give prompt notice to the Company, of (i) any
representation or warranty made by it contained in this Merger Agreement which
has become untrue or inaccurate in any material respect, or (ii) the failure by
it to comply with or satisfy in any material respect any covenant, condition, or
agreement to be complied with or satisfied by it under this Merger Agreement;
provided, however, that such notification shall not excuse or otherwise affect
the representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Merger Agreement.
7.8 Transfer and Gains Taxes and Certain Other Taxes and Expenses.
Parent and Sub agree that the Surviving Corporation will pay all real property
transfer, gains and other similar taxes and all documentary stamps, filing fees,
recording fees and sales and use taxes, if any, and any penalties or interest
with respect thereto, payable in connection with consummation of the Merger
without any offset, deduction, counterclaim or deferment of the payment of the
Merger Consideration.
7.9 Solvency Opinion. If Parent or Sub is required to deliver a
solvency opinion to their financing sources in connection with the Merger,
Parent and Sub shall cause such opinion to be addressed to the Company's current
Board of Directors and stockholders and delivered to the current Board of
Directors.
7.10 Financial and FCC Reports. Within 30 days after the end of each
month ending after June 30, 1996 through the Closing Date, the Company will
furnish Parent and Sub with copies of the Company's monthly operating statement
prepared after the date hereof for each such month and the fiscal year to the
end of such month. Within 30 days after the end of each quarter beginning with
the quarter ending on June 30, 1996 through the Closing Date, the Company will
furnish Parent and Sub with copies of the Company's quarterly balance sheet
prepared after the date hereof for each such quarter. All of such financial
reports shall comply with the requirements concerning financial statements set
forth in the last sentence of Section 4.5(b). In addition, the Company will
furnish to Parent and Sub, within five days after filing, all material reports
filed after the date hereof with the FCC with respect to the Company, its
Subsidiaries, the television stations indirectly owned by the Company and the
Radio Stations.
7.11 June Financial Statements. The Company shall deliver to Parent and
Sub within seven days of the date hereof an unaudited consolidated balance sheet
and related statement of income and retained earnings of the Company for the
period ended June 30, 1996 (the "June Financial Statements"), which have been
prepared in accordance with GAAP on a basis consistent with the Audited
Financial Statements, subject to the lack of footnotes which otherwise would be
required under GAAP. The June Financial Statements will present fairly, in all
material respects, the consolidated financial position (including without
limitation all liabilities, if any, with respect to employees of the Radio
Stations), results of operations and cash flows of the Company and its
consolidated Subsidiaries for the period presented therein (except as provided
in the prior sentence).
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7.12 Deliveries. The Company shall deliver to Parent and Sub at the
Closing the opinion and certificates referred to in Sections 8.3(iv) and 8.3(v)
below.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated and any other
Consents from Governmental Entities (including specifically the FCC Consents)
and other third parties required prior to the Effective Time with respect to the
transactions contemplated hereby shall have been either filed or received other
than those Consents, the absence of which would not have a Company Material
Adverse Effect immediately prior to the Effective Time; and
(b) The consummation of the Merger shall not be restrained,
enjoined or prohibited by any order, judgment, decree, injunction or ruling of a
court of competent jurisdiction; provided, however, that the parties shall
comply with the provisions of Section 7.6 and shall further use all reasonable
efforts to cause any such order, judgment, decree, injunction or ruling to be
vacated or lifted.
8.2 Conditions to Obligation of the Company to Effect the Merger. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the additional conditions,
unless waived by the Company, that Parent and Sub shall have performed in all
material respects their respective agreements contained in this Merger Agreement
required to be performed at or prior to the Effective Time, the representations
and warranties of Parent and Sub contained in this Merger Agreement shall be
true when made and (except for representations and warranties made as of a
specified date, which need only be true as of such date) at and as of the
Effective Time as if made at and as of such time, except as contemplated by this
Merger Agreement and except for inaccuracies that in the aggregate do not
constitute a Parent Material Adverse Effect, and the Stockholder Notes shall
have been cancelled by the Company; and the Company shall have received a
certificate of the Chief Executive Officer or a Vice President of Parent and Sub
to that effect.
8.3 Conditions to Obligations of Parent and Sub to Effect the Merger.
The obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the additional following
conditions, unless waived by Parent: (i) the Company shall have performed in all
material respects its agreements contained in this Merger Agreement required to
be performed at or prior to the Effective Time and the representations and
warranties of the Company contained in this Merger Agreement shall be true when
made and (except for representations and warranties made as of a specified date,
which need only be
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true as of such date) at and as of the Effective Time as if made at and as of
such time, except as contemplated by this Merger Agreement and except for
inaccuracies that in the aggregate do not constitute a Company Material Adverse
Effect; and Parent and Sub shall have received a certificate of the Chief
Executive Officer or a Vice President of the Company to that effect, (ii) the
FCC Consents (except as to WTVR-TV in Richmond, Virginia if the FCC does not
grant a temporary waiver) shall have become Final Orders (as defined in Section
10.8), (iii) the Company and its Subsidiaries shall not have incurred any
indebtedness for borrowed money after May 31, 1996 (other than in respect of
additional notes issued to pay interest on the notes issued by Park
Communications, Inc. on May 13, 1996), (iv) an opinion of counsel for Tomlin
Family Trust II (the "Trust"), in form and substance reasonably satisfactory to
Parent, shall be delivered to Parent and Sub as to the authorization, execution
and delivery by the Trust of the stockholder consent approving the transactions
contemplated hereby and the certificate referred to in clause (v) below and (v)
a certificate of each of the Stockholders, in the forms attached hereto as
Exhibit B-1 and Exhibit B-2, as applicable, shall be delivered to Parent and
Sub.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Merger Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of Parent and the Company;
(b) by the Company, upon a material breach of this Merger
Agreement on the part of Parent or Sub which has not been cured and which would
cause the condition set forth in Section 8.2 to be incapable of being satisfied
by the Termination Date;
(c) by Parent, (i) upon a material breach of this Merger
Agreement on the part of the Company set forth in this Merger Agreement which
has not been cured and which would cause any condition set forth in Section 8.3
to be incapable of being satisfied by the Termination Date or (ii) if Parent
reasonably concludes, within 30 days of the date hereof, that the FCC will not
grant a temporary waiver (the "FCC Waiver"), extending for a period of six
months after the Closing Date, of the FCC's rules and regulations to the extent
they would otherwise prohibit Parent's simultaneous ownership of WTVR-TV in
Richmond, Virginia and Parent's interests in The Richmond Times Dispatch
newspaper.
(d) by Parent or the Company if any court of competent
jurisdiction shall have issued, enacted, entered, promulgated or enforced any
order, judgment, decree, injunction or ruling which restrains, enjoins or
otherwise prohibits the Merger and such order, judgment, decree, injunction or
ruling shall have become final and nonappealable; or
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(e) by either Parent or the Company if the Merger shall not
have been consummated on or before the following date (the "Termination Date"):
(i) if the FCC Consents shall have become Final Orders and the FCC Waiver shall
have been obtained, April 1, 1997, or (ii) if the FCC Consents shall have become
Final Orders and the FCC Waiver shall not have been obtained, the earlier of (A)
120 days after the date of such Final Orders or (B) June 1, 1997 (provided the
terminating party is not otherwise in material breach of its representations,
warranties or obligations under this Merger Agreement).
9.2 Effect of Termination. In the event of termination of this Merger
Agreement by either Parent or the Company as provided in Section 9.1, this
Merger Agreement shall forthwith become void and there shall be no liability
hereunder on the part of any of the Company, Parent or Sub or their respective
officers or directors; provided that Sections 9.2, 9.3 and 10.6 and the second
sentence of Section 7.1 shall survive the termination.
9.3 Fees and Expenses.
(a) If the Merger is not consummated for a reason other than
the willful and material breach of this Agreement by a party, all fees and
expenses incurred in connection with this Merger Agreement and the transactions
contemplated by this Merger Agreement shall be paid by the party incurring such
fees or expenses.
(b) If the Merger is not consummated because of a willful and
material breach of this Merger Agreement by any party, the nonbreaching party
shall be entitled to pursue all legal and equitable remedies against the
breaching party for such breach including specific performance and in the case
of such a breach by Parent or Sub those remedies set forth in the Escrow
Agreement and all fees and expenses incurred by the nonbreaching party or
parties in connection with enforcing its rights under this Agreement with
respect to such breach shall be paid by the party breaching this Merger
Agreement.
9.4 Amendment. This Merger Agreement has been approved by all of the
Stockholders and may be amended by the parties hereto at any time; provided,
however, that no amendment shall be made which (i) changes the form or decreases
the amount of the Merger Consideration, (ii) in any way materially adversely
affects the rights of the Stockholders or (iii) under applicable law would
require approval of the Stockholders, in any such case referred to in clauses
(i), (ii) and (iii), without the further approval of the Stockholders. This
Merger Agreement may not be amended except by an instrument in writing signed on
behalf of the parties hereto.
9.5 Waiver. At any time prior to the Effective Time, the parties hereto
may, to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
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ARTICLE X
GENERAL PROVISIONS
10.1 Non-Survival of Representations, Warranties and Agreements; No
Recourse. No representations, warranties or agreements in this Merger Agreement
shall survive the Merger, except that the agreements contained in Article III
and the agreements of Parent and Sub referred to in Sections 7.3, 7.5, 7.8, 10.1
and 10.6 and the certificates referred to in Section 8.3(v) shall survive the
Merger indefinitely (except to the extent a shorter period of time is explicitly
specified therein). In no event shall Parent or Sub have any recourse against
the present or former directors, officers or stockholders of the Company or any
of its Affiliates with respect to any representation, warranty or agreement made
by the Company in this Merger Agreement.
10.2 Notices. All notices or other communications under this Merger
Agreement shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in Person, by telecopy (with
confirmation of receipt), or by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
If to the Company: Park Acquisitions, Inc.
1700 Vine Center Office Tower
333 West Vine Street
Lexington, Kentucky 40507
Attention: Gary B. Knapp,
Chairman of the Board
Telecopy No.: 606-233-4007
With a copy (which Donald R. Tomlin, Jr., President
shall not constitute c/o Tomlin & Company, Inc.
notice) to: 1401 Main Street
Columbia, South Carolina 29201
Telecopy No.: 803-771-6828
With a copy (which Stephen I. Burr, Esq.
shall not constitute Eckert Seamans Cherin & Mellott
notice) to: One International Place
Boston, Massachusetts 02110
Telecopy No.: 617-439-3950
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If to Parent or Media General, Inc.
Sub: 333 East Grace Street
Richmond, Virginia 23293
Attention: J. Stewart Bryan III,
Chairman
Telecopy No.: 804-649-6898
With a copy (which Media General, Inc.
shall not constitute 333 East Grace Street
notice) to: Richmond, Virginia 23293
Attention: Marshall N. Morton,
Senior Vice President and
George L. Mahoney, Esq.,
General Counsel
Telecopy No.: 804-649-6898
With a copy (which Leonard J. Baxt, Esq.
shall not constitute Dow, Lohnes & Albertson
notice) to: 1200 New Hampshire Ave., N.W.
Washington, D.C. 20036
Telecopy No.: 202-776-2222
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Merger
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Merger Agreement and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which they are entitled at law or in equity.
10.4 Entire Agreement. This Merger Agreement (including the documents
and instruments referred to herein) constitutes the entire agreement and
supersede all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof
(other than as provided in the second sentence of Section 7.1). There are no
other representations or warranties, whether written or oral, between the
parties in connection the subject matter hereof, except as expressly set forth
herein.
10.5 Assignments; Parties in Interest. Neither this Merger Agreement
nor any of the rights, interests or obligations hereunder may be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Merger Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Merger Agreement, express or implied, is
intended to or shall confer upon any Person not a party hereto any right,
benefit or remedy of any nature whatsoever under or by reason of this Merger
Agreement, including to confer third party beneficiary rights, except for the
provisions of Article III and Sections 7.4, 7.6 and 7.9.
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10.6 Governing Law. This Merger Agreement shall be governed in all
respects by the laws of the State of Delaware (without giving effect to the
provisions thereof relating to conflicts of law). The exclusive venue for the
adjudication of any dispute or proceeding arising out of this Merger Agreement
or the performance thereof shall be the courts located in the State of Delaware,
and the parties hereto and their Affiliates hereby consent to and submit to the
jurisdiction of any court located in the State of Delaware.
10.7 Headings; Disclosure. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Merger Agreement. Any disclosure by
the Company or Parent in any portion of its respective disclosure schedule shall
be deemed disclosure in each other portion of such disclosure schedule.
10.8 Certain Definitions. As used in this Merger Agreement:
(a) the term "Affiliate," as applied to any Person, shall mean
any other Person directly or indirectly controlling, controlled by, or under
common control with, that Person; for purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract or otherwise;
(b) the term "Final Order" means an order which is no longer
subject to reconsideration or review by any court or administrative body;
(c) the terms "knowledge," or any similar formulation of
knowledge shall mean, with respect to a corporation other than the Company, the
actual knowledge of its senior executive officers, and with respect to the
Company, the actual knowledge of the Chief Executive Officer, the Chief
Operating Officer and the Chief Financial Officer of the Company;
(d) the term "Person" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is defined in Section 13(d)(3) of the Exchange Act);
(e) the term "Radio Station" means each of WPAT-FM (Patterson,
NJ), WPAT(AM) (Patterson, NJ), WNCT-FM (Greenville, NC), WNCT(AM) (Greenville,
NC), KEZX(AM) (Seattle, WA), KWJZ-FM (Seattle, WA), WTVR-FM (Richmond, VA),
WTVR(AM) (Richmond, VA), WTNT-FM (Tallahassee, FL), WNLS(AM) (Tallahassee, FL),
WHEN-FM (Syracuse, NY), WHEN(AM) (Syracuse, NY), WNAX-FM (Yankton, SD), WNAX(AM)
(Yankton, SD), KWJJ-FM (Portland, OR), KWFF(AM) (Portland, OR), KMJZ-FM (St.
Louis Park, MN), KSGS(AM) (St. Louis Park, MN), KFMW-FM (Waterloo, IA), KWLO(AM)
(Waterloo, IA), WDEF-FM (Chattanooga, TN) and WDEF(AM) (Chattanooga, TN); and
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(f) the term "Subsidiary" or "Subsidiaries" means, with
respect to Parent, the Company or any other Person, any corporation,
partnership, joint venture or other legal entity of which Parent, the Company or
such other Person, as the case may be (either alone or through or together with
any other Subsidiary) owns, directly or indirectly, stock or other equity
interests the holders of which are generally entitled to more than 50% of the
vote for the election of the board of directors or other governing body of such
corporation or other legal entity.
10.9 No Solicitation. Neither the Company nor any of its Subsidiaries,
officers, directors, representatives or agents shall, directly or indirectly,
knowingly encourage, solicit, initiate or participate in any way in discussions
or negotiations with, or knowingly provide any confidential information to, any
corporation, partnership, person or other entity or group (other than Parent or
any Affiliate or associate of Parent and their respective directors, officers,
employees, representatives and agents) concerning any merger of the Company or
any of its Subsidiaries, the sale of any substantial part of the assets of the
Company, the sale of shares of capital stock of the Company or any of its
Subsidiaries, or similar transactions involving the Company or its Subsidiaries.
10.10 Counterparts. This Merger Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
taken together shall constitute a single agreement.
10.11 Severability. If any term or other provision of this Merger
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Merger Agreement
shall nevertheless remain in full force and effect so long as the economics or
legal substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon determination that any term or
other provision hereof is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Merger Agreement so
as to effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
[This space intentionally left blank.]
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Merger
Agreement to be signed by their respective officers thereunder duly authorized
all as of the date first written above.
MEDIA GENERAL, INC.
By: ________________________________
Name: J. Stewart Bryan
Title: Chairman and President
MG ACQUISITIONS, INC.
By: ________________________________
Name: J. Stewart Bryan
Title: President
PARK ACQUISITIONS, INC.
By: ________________________________
Name: Gary B. Knapp
Title: Chairman of the Board
By: ________________________________
Name: Donald R. Tomlin, Jr.
Title: President
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EXHIBITS
Exhibit A-1 - Form of Estimated Closing Statement
Exhibit A-2 - Form of Final Closing Statement
Exhibit B-1 - Stockholder's Certificate
Exhibit B-2 - Stockholder's Certificate
DISCLOSURE SCHEDULE
4.1 - Organization and Qualification
4.2 - Capitalization
4.3 - Authority Relative to This Merger Agreement
4.4 - No Conflicts, Required Fillings and Consents
4.5 - Reports and Financial Statements
4.6 - Litigation
4.7 - Absence of Certain Changes or Events
4.8 - Employee Benefit Plans
4.9 - ERISA
4.10 - Taxes
4.11 - Compliance with Applicable Laws
4.12 - Voting Requirements
4.13 - State Takeover Statutes
4.14 - Brokers
4.15 - Environmental Matters
4.16 - Contracts
4.17 - Title to Properties
4.18 - Intellectual Property
4.19 - Totality of the Assets
4.20 - Disclosure
6.1 - Conduct of Business by the Company Pending the Merger
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This First Amendment to Agreement and Plan of Merger (this
"Amendment") is entered into as of January 7, 1997 by and among (i) Media
General, Inc., a Virginia corporation ("Parent"); (ii) MG Acquisitions, Inc., a
Delaware corporation and wholly owned subsidiary of Parent ("Sub"); and (iii)
Park Acquisitions, Inc., a Delaware corporation (the "Company").
W I T N E S E T H :
WHEREAS, Parent, Sub and Company are parties to that certain
Agreement and Plan of Merger dated as of July 19, 1996 (the "Merger Agreement");
WHEREAS, the Closing Date (as defined under the Merger
Agreement) will occur after January 1, 1997; and
WHEREAS, notwithstanding the actual Closing Date, the parties
desire to provide that, for purposes of determining the Total Consideration and
all adjustments thereto, the Closing will be effective as of December 31, 1996
and to make certain other amendments to the Merger Agreement;
NOW THEREFORE, in consideration of the premises herein
contained, and for other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to such terms in the Merger
Agreement.
2. Amendments of the Merger Agreement. As of the Amendment Date (as defined in
Section 3), the Merger Agreement shall be amended as follows:
(a) Section 3.1(j)(i) shall be amended to change "60 days" to "90
days".
(b) Section 3.5 shall be added, to read in its entirety as follows:
3.5 Effective Closing Date. (a) Notwithstanding anything
else in this Agreement, if the Closing shall occur on or before
January 7, 1997 (the "Cutoff Date"), then for purposes of
determining the Total Consideration and all adjustments thereto
in accordance with Section 3.1 hereof (but for no other purposes)
the Closing Date shall be deemed to occur as of December 31, 1996
(the "Effective Closing Date"), and the Estimated Closing
Statement and the Final Closing Statement shall each be prepared
as of 11:59 p.m. on the Effective Closing Date; provided that:
<PAGE>
(1) notwithstanding the use of the Effective Closing Date for
purposes of determining the Total Consideration and adjustments thereto as
provided for herein (i) any costs or expenses of the Company or the Stockholders
for which the Company is liable incurred in connection with the transactions
contemplated by this Merger Agreement that have not been paid by the actual
Closing Date shall be taken into account for purposes of computing the Total
Consideration and all adjustments thereto irrespective of the Effective Closing
Date or the actual Closing Date; and (ii) those certain proposed payments to
employees described on Exhibit A hereto shall be taken into account for purposes
of computing the Total Consideration and all adjustments thereto irrespective of
the Effective Closing Date or the actual Closing Date;
(2) for purposes of computing the Working Capital and/or for
purposes of computing Total Consideration, the parties agree as follows,
notwithstanding any other provision of the Merger Agreement:
(i) no amount resulting from any potential tax
deduction in respect of the proposed payments to employees
described on Exhibit A shall be taken into account;
(ii) the sum of $2,638,000 shall be used in respect
of computing capital expenditures under Section 6.3 of the
Merger Agreement to be added to Total Consideration;
(iii) no adjustment to Working Capital will be made
in respect of any potential tax benefit of interest paid in
1996 on certain paid-in-kind notes of the Company or its
subsidiaries;
(iv) no adjustment will be made in respect of two
adjustments recorded by the Company (or its subsidiaries) on
their books and records in respect of a writedown of broadcast
film rights ($882,000) or liabilities to Rick Prusator
($147,000);
(v) cash resulting from the sale of certain real
estate described on Exhibit B in the amount of $316,175 shall
not be taken into account;
(vi) certain automobiles described on Exhibit C have
been sold to the Shareholders for the net book value thereof,
pursuant to the adjustment made on the Estimated Closing
Statement and no further adjustment (other than as shown on
the Estimated Closing Statement) will be made in respect
thereof;
(vii) no amount resulting from the assumption of a
liability ($168,000) in connection with a commercial insert
machine at WHOA-TV shall be taken into account; and
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(viii) for purposes of the calculation of the Total
Consideration, because the closing of the WHOA Acquisition
took place on January 3, 1997, after the December 31
calculation of Working Capital provided for herein, Total
Consideration has been decreased by the amount of $1,200,000
paid to the Sellers (as defined in the WHOA Agreement) on
January 3, 1997.
(ix) a tax benefit of $55,000, in respect of the
items listed on Exhibit D hereto shall be taken into account
in computing Working Capital.
Assuming the accuracy of the financial information provided by the Company, both
parties agree not to seek to renegotiate items (2)(i)-(ix) above in connection
with the preparation of the Final Closing Statement.
In respect of the $139,000 item shown on the Estimated Closing Statement
relating to Rick Prusator, the parties agree that if Parent, in settlement of
any claims with Rick Prusator, pays (or permits its subsidiaries to pay) in
excess of $139,000, the Shareholders reserve the right to contest any excess
payment as not a current liability of the Company.
If the Closing shall not occur on or before the Cutoff Date, the Closing Date
shall be the date of the Closing, determined in accordance with Section 1.2
hereof.
(b) From and after the Effective Closing Date through
and including the Cutoff Date, except with respect to
authorization of the proposed payments to employees described
on Exhibit A hereto, the Company shall take no actions outside
the ordinary course of business, nor any actions in the
ordinary course of business not consistent with its past
practices, in either case that would cause the calculation of
the adjustments specified in Section 3.1 hereof as of the
Effective Closing Date to be different than if the calculation
of such adjustments had been made on the Closing Date. Without
limiting the generality of the foregoing sentence, from and
after the Effective Closing Date through and including the
Cutoff Date, the Company shall continue to pay all bills that
are due and payable in a timely manner.
(c) Section 8.3 shall be amended by deleting the word "and" after the
word "below" in the penultimate line thereof, and replacing it with ";", and by
adding the following provision at the end of such Section:
; and (vi) the Company shall have performed in all material
respects its agreements contained in Section 3.5 hereof and
Parent and Sub shall have received a certificate of the Chief
Executive Officer or a Vice President of the Company to that
effect.
<PAGE>
3. Amendment Date. This Amendment shall become effective as of the date first
above written (the "Amendment Date") upon execution by each of Parent, Sub
and Company of this Amendment.
4. Ratification. The Merger Agreement, as amended hereby, is hereby ratified,
approved and confirmed in all respects.
5. Reference to Merger Agreement. From and after the Amendment Date, each
reference in the Merger Agreement to "this Agreement", "hereof", or
"hereunder" or words of like import, and all references to the Merger
Agreement in any and all agreements, instruments, documents, notes,
certificates and other writings of every kind and nature shall be deemed to
mean the Merger Agreement, as amended by this Amendment.
6. Governing Law. This Amendment shall be governed in all respects by the laws
of the State of Delaware (without giving effect to the provisions thereof
relating to conflicts of law).
7. Execution in Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
taken together shall constitute a single agreement.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this First Amendment to Agreement and Plan of Merger to be signed by their
respective officers thereunder duly authorized all as of the date first written
above.
MEDIA GENERAL, INC.
By: ______________________________
Name: J. Stewart Bryan III
Title: Chairman and President
MG ACQUISITIONS, INC.
By: _______________________________
Name: J. Stewart Bryan III
Title: President
<PAGE>
PARK ACQUISITIONS, INC.
By: _________________________________
Name: Gary B. Knapp
Title: Chairman of the Board
By: _________________________________
Name: Donald R. Tomlin, Jr.
Title: President
<PAGE>
Exhibit List
Exhibit A Employee List
Exhibit B Real Estate Sales
Exhibit C Automobile List
Exhibit D Miscellaneous List
Consent of Independent Accountants
We consent to the inclusion in this Form 8-K of our report, which includes an
explanatory paragraph explaining certain financial reporting implications
related to the acquisition of Park Communications, Inc. and Subsidiaries (the
"Company") by Park Acquisitions, Inc., dated February 2, 1996, except for Note
13 as to which the date is May 6, 1996, on our audit of the consolidated
financial statements of the Company as of December 31, 1995 and for the period
from May 11, 1995 to December 31, 1995 and for the period from January 1, 1995
to May 10, 1995.
Coopers & Lybrand L.L.P.
Lexington, Kentucky
January 21, 1997
Consent of Independent Auditors
We hereby consent to the incorporation by reference in (a) the Registration
Statement (Form S-8 No. 2-56905) pertaining to the 1971 Unqualified Stock Option
Plan and the 1976 Qualified and Non-Qualified Stock Option Plans of Media
General, Inc.; (b) the Registration Statement (Form S-8 No. 33-29478) pertaining
to the Media General, Inc., Employees Thrift Plan; (c) the Registration
Statement (Form S-8 No. 33-23698) pertaining to the 1987 Non-Qualified Stock
Option Plan of Media General, Inc.; (d) the Registration Statement (Form S-8 No.
33-26853) pertaining to the Media General, Inc., Automatic Dividend Reinvestment
and Stock Purchase Plan; (e) the Registration Statement (Form S-8 No. 33-52472)
pertaining to the 1987 Non-Qualified Stock Option Plan of Media General, Inc.,
amended and restated May 17, 1991; (f) the Registration Statement (Form S-8 No.
333-16731) pertaining to the 1996 Non-Qualified Stock Option Plan and (g) the
Registration Statement (Form S-8 No. 333-16737) pertaining to the Media General,
Inc., Employees Thrift Plan Plus, of our report dated January 27, 1995, with
respect to the consolidated financial statements of Park Communications, Inc.,
as of and for each of the two years in the period ended December 31, 1994
included in the Current Report on Form 8-K of Media General, Inc., dated January
7, 1997, filed with the Securities and Exchange Commission.
Ernst & Young LLP
Syracuse, New York
January 20, 1997
