UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period _________ to __________
Commission File No. 1-6383
MEDIA GENERAL, INC.
(Exact name of registrant as specified in its charter)
Commonwealth of Virginia 54-0850433
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 East Grace Street, Richmond, Virginia 23219
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (804) 649-6000
Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock American Stock Exchange
(Title of class) (Name of exchange on
which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
registrant was $683,207,910 as of March 2, 1997.
The number of shares of Class A Common Stock outstanding on March 2,
1997, was 26,055,573. The number of shares of Class B Common Stock outstanding
on March 2, 1997, was 556,574.
Part I, Part II and Part IV incorporate information by reference from
the Annual Report to Stockholders for the year ended December 29, 1996. Part III
incorporates information by reference from the proxy statement for the Annual
Meeting of Stockholders to be held on May 16, 1997.
<PAGE>
Part I
Item 1. Business
General
Media General, Inc., is an independent, publicly owned communications
company situated primarily in the Southeast with interests in newspapers,
broadcast and cable television, recycled newsprint production and diversified
information services. The Company employs approximately 8,900 people on a full
or part-time basis as of March 1997. The Company's businesses are somewhat
seasonal; the second and fourth quarters are typically stronger than the first
and third quarters.
As part of expanding the Company's focus in the Southeast region, it
has completed several transactions since 1995. In August 1996, the Company
acquired, for approximately $38 million, the Danville Register & Bee, a daily
newspaper in Virginia (circulation - 23,000 daily, 27,000 Sunday), which
complements the Company's existing Virginia daily newspapers. In May 1996, the
Company acquired, for approximately $2 million, Professional Communications
Systems (PCS), a provider of equipment and studio design services for television
stations. PCS allows the Company to move into new income-generating areas that
are still closely related to its core business, while also bringing cost savings
in the purchase of broadcast television equipment.
In late October 1995, the Company acquired for approximately $232
million the assets of several Virginia newspapers (Virginia Newspapers) from
Worrell Enterprises, Inc., and its affiliates. Newspaper properties acquired
include four daily and Sunday newspapers (combined circulation -79,500 daily,
87,900 Sunday). In addition, the acquisition included a number of weekly and
other publications, located in Culpeper, Greene, Madison, Orange and Tazewell
Counties, Virginia.
On January 7, 1997, the Company acquired Park Acquisitions, Inc.,
parent of Park Communications, Inc. (Park). The total consideration approximated
$715 million, representing the purchase of all the issued and outstanding common
stock of Park, the assumption of $476 million of high coupon long-term debt, and
estimated transaction costs of $5 million. The acquisition of Park included ten
network affiliated television stations, 28 daily community newspapers and 82
weekly newspapers. Since that date, the Company has sold certain of the daily
newspapers and associated weekly newspapers acquired from Park, most all of
which were located outside of the Southeast. A portion of the sale proceeds was
used to purchase The Potomac News (Woodbridge, Virginia; daily circulation -
28,000), while another portion is expected to be used to purchase The Reidsville
Review, a daily newspaper in Reidsville, North Carolina, and The Messenger, a
weekly newspaper in Madison, North Carolina. The Company anticipates purchasing
the Times-Standard, a daily newspaper in Eureka, California, in April 1997. The
Company is also evaluating other newspapers for potential purchase.
In addition, due to the Federal Communication Commission's (FCC)
requirement that the WTVR-TV (Richmond, Virginia) station , also acquired from
Park, be sold within one year from its January 1997 purchase date, the Company
has entered into an exchange agreement to trade WTVR-TV for three other
stations: WSAV-TV (Savannah, Georgia), WJTV-TV (Jackson, Mississippi), and
WHLT-TV (Hattiesburg, Mississippi). The Company also has entered into an
agreement to sell another television station acquired from Park, WUTR-TV in
Utica, New York. All of these television station transactions are expected to
close by the end of the third quarter of 1997.
1
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Industry Segments
The Company is engaged in four significant industry segments. For
financial information related to these segments see pages 33 and 34 of the 1996
Annual Report to Stockholders, which are incorporated herein by reference.
Additional information related to each of the Company's significant industry
segments is included below.
Publishing Business
At December 29, 1996, publishing operations included daily and Sunday
newspapers in Tampa, Florida; Winston-Salem, North Carolina; and Richmond,
Lynchburg, Charlottesville, Culpeper, Suffolk, and Danville, Virginia. Daily and
Sunday newspapers included the Richmond Times-Dispatch, The Tampa Tribune, the
Winston-Salem Journal, The News & Advance (Lynchburg), The Daily Progress
(Charlottesville), the Culpeper Star-Exponent, the Suffolk News Herald, and the
Danville Register & Bee. In addition, Hernando Today in Brooksville, Florida,
and Highlands Today in Sebring, Florida, are published every day except Sunday,
when subscribers are offered the Sunday edition of The Tampa Tribune.
Since the beginning of 1997, the Company has acquired and retained nine
additional daily newspapers in North Carolina, Virginia and Kentucky. The North
Carolina newspapers are The Concord Tribune, The (Eden) Daily News, The (Marion)
McDowell News, The (Morganton) News Herald, and the Statesville Record &
Landmark, for a combined statewide daily circulation of 61,300. The Virginia
newspapers are The Potomac (Woodbridge) News, The (Manassas) Journal Messenger,
and the (Waynesboro) News-Virginian for a combined statewide daily circulation
of 44,700. The Kentucky newspaper is The (Somerset) Commonwealth Journal, with a
daily circulation of 8,600.
The Company also owns weekly newspapers, shoppers and other
publications in Virginia, Florida, North Carolina and Kentucky.
All of the Company's newspapers compete for circulation and advertising
with other newspapers published nationally and in nearby cities and towns and
for advertising with magazines, radio, television and other promotional media.
All of the newspapers compete for circulation principally on the basis of
performance, service and price.
The primary raw material used by the Company in its publishing
operations is newsprint, which is purchased from various Canadian and United
States sources, including Garden State Paper Company, Inc., a wholly owned
subsidiary of the Company, and Southeast Paper Manufacturing Co., in which the
Company owns a one-third equity interest. The publishing operations of the
Company consumed approximately 123,000 tons of newsprint in 1996. Management of
the Company believes that newsprint inventory and sources of supply under
existing arrangements will be adequate in 1997.
On September 28, 1994, the Company acquired 40% of the common stock of
Denver Newspapers, Inc. (DNI), the parent company of The Denver Post, a Denver,
Colorado, daily newspaper company, through the exercise for $40,000 of a warrant
held since 1987. Beginning with the fourth quarter of 1994, the Company began
recognizing in its earnings 40% of DNI's net income applicable to common
stockholders.
2
<PAGE>
On May 20, 1994, the Company sold its 40% common equity interest (held
since 1985) in Garden State Newspapers, Inc. (GSN), a domestic daily and weekly
newspaper company, along with its GSN Series A and Series C Preferred Stock, for
$63 million in cash. Additionally, in exchange for the GSN Series B Preferred
Stock previously owned by the Company, the Company received 1,200 shares of
$25,000 par, 9% Cumulative Preferred Stock of DNI (previously owned by GSN),
which included accumulated, unpaid dividends of approximately $17.4 million.
This preferred stock was valued at $34 million, net of an unamortized discount
of $27.3 million, based on an imputed discount rate of 12% and a redemption date
of June 30, 1999. Incorporating all of the foregoing, the sale of GSN resulted
in a gain of $91.5 million ($83.3 million after-tax; $3.17 per share).
The following table presents certain circulation and advertising data
for the Company's three largest, wholly owned daily newspaper companies:
<TABLE>
<CAPTION>
<S> <C>
(Dollar amounts in thousands)
Richmond Times-Dispatch 1996 1995 1994
- ----------------------- ---- ---- ----
Average Circulation
Daily 209,343 211,725 212,189
Sunday 245,104 256,147 254,971
Inches
ROP full run 1,505,594 1,506,981 1,550,668
Revenue
Retail Advertising $ 41,664 $ 42,976 $ 41,832
Classified Advertising 38,220 35,471 32,221
Circulation 30,261 29,140 27,230
The Tampa Tribune
- -----------------
Average Circulation
Daily 251,445 261,706 265,616
Sunday 350,311 359,780 361,147
Inches
ROP full run 1,800,492 1,669,168 1,755,501
Revenue
Retail Advertising $ 60,201 $ 61,923 $ 61,281
Classified Advertising 61,655 58,718 52,401
Circulation 25,595 25,513 24,184
Winston-Salem Journal
- ---------------------
Average Circulation
Daily 91,972 91,002 90,275
Sunday 104,094 103,301 102,975
Inches
ROP full run 1,487,229 1,531,333 1,538,568
Revenue
Retail Advertising $ 18,416 $ 18,172 $ 17,775
Classified Advertising 14,004 13,522 12,266
Circulation 7,847 7,787 7,495
</TABLE>
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Broadcast Television Business
The ownership, operation and sale of broadcast television stations,
including those licensed to the Company, are subject to the jurisdiction of the
FCC, which engages in extensive and changing regulation of the broadcasting
industry under authority granted by the Communications Act of 1934
(Communications Act). The Communications Act requires broadcasters to serve the
public interest. Among other things, the FCC assigns frequency bands for
broadcasting; determines the particular frequencies, locations and operating
power of stations; issues, renews, revokes and modifies station licenses;
determines whether to approve changes in ownership or control of station
licenses; regulates equipment used by stations; adopts and implements
regulations and policies that directly or indirectly affect the ownership,
operation and employment practices of station; regulates program content and has
the authority to impose penalties for violations of its rules or the
Communications Act.
Pursuant to the Children's Television Act of 1990 (Children's
Television Act), the FCC has adopted rules limiting advertising in children's
television programming and requiring that broadcast television stations serve
the educational and informational needs of children. The Children's Television
Act specifically requires the FCC to consider compliance with these obligations
in deciding whether to renew a television broadcast license.
Reference should be made to the Communications Act, the
Telecommunications Act of 1996 (1996 Telecom Act), the Children's Television
Act, FCC rules and the public notices and the rulings of the FCC for further
information concerning the nature and extent of federal regulation of broadcast
television stations.
The following table sets forth certain information on each of the
Company's television stations, including those as to which exchange or sale
agreements presently are pending (as noted):
<TABLE>
<CAPTION>
<S> <C>
Expiration Expiration
National Date of Date of
Station Market Station Audience FCC Network
Location Rank (a) Rank (a) * % Share (a) * License Agreement
-------- -------- ---------- ------------- ------- ---------
WFLA-TV NBC (b) 15 1 17% 2/1/97 12/31/04
Tampa, FL
WBMG(TV) CBS (b) 51 4 8% 4/1/97 12/31/04
Birmingham, AL
WJWB(TV) WB (c) 54 --- --- 2/1/02 1/12/99
Jacksonville, FL
WTVR-TV CBS (d) 59 2 19% 10/1/04 12/31/04
Richmond, VA
4
<PAGE>
<CAPTION>
Expiration Expiration
National Date of Date of
Station Market Station Audience FCC Network
Location Rank (a) Rank (a) * % Share (a) * License Agreement
-------- -------- ---------- ------------- ------- ---------
WSLS-TV NBC 67 2 14% 10/1/97 10/1/05
Roanoke, VA
WTVQ-TV ABC 71 3 11% 8/1/97 1/1/06
Lexington, KY
WDEF-TV CBS 87 3 14% 8/1/97 12/31/04
Chattanooga, TN
WJTV(TV) CBS (b)(d) 90 2 20% 6/1/97 12/22/97
Jackson, MS
WJHL(TV) CBS 93 2 17% 8/1/97 12/31/04
Johnson City, TN
WSAV-TV NBC (b) (d) 100 2 13% 11/1/01 9/30/04
Savannah, GA
WNCT-TV CBS 105 1 20% 12/1/01 12/31/04
Greenville, NC
WCBD-TV NBC (e) 109 2 17% 12/1/01 1/1/05
Charleston, SC
WHOA-TV ABC (b) 113 3 8% 4/1/97 6/11/06
Montgomery, AL
WUTR(TV) ABC (f) 166 2 11% 6/1/99 1/1/06
Utica, NY
WHLT(TV) CBS (b) (d) 169 2 11% 6/1/97 8/31/05
Hattiesburg, MS
KALB-TV NBC (b) 177 1 31% 6/1/97 10/1/05
Alexandria, LA
(a) Source: November 1996 Nielson Rating Books.
(b) The station presently has pending before the FCC an application to renew its license.
(c) Formerly WJKS-TV; transferred network affiliation from ABC to Warner Brothers in February 1997.
Current station rank and audience % share as a Warner Brothers affiliate is not available.
(d) An application to exchange the Company's Richmond, Virginia, station for stations in Savannah,
Georgia, and Jackson and Hattiesburg, Mississippi, presently is pending before the FCC.
(e) Transferred network affiliation from ABC to NBC in August 1996.
(f) An application to sell the Company's Utica, New York, station presently is pending before the FCC.
* Sign-On to Sign-Off.
</TABLE>
5
<PAGE>
Prior to the Park acquisition, the Broadcast Television Division
operated three network affiliated television stations: Tampa and Jacksonville,
Florida, and Charleston, South Carolina. As a result of the Park acquisition,
the Company acquired ten additional television stations located in seven states.
Due to FCC rules which generally prohibit common ownership of a daily
newspaper and a television station in the same market, the Company, upon FCC
consent, will exchange its Richmond, Virginia, station for stations located in
Savannah, Georgia, and Hattiesburg and Jackson, Mississippi. The Company has
requested a waiver of the FCC's multiple ownership rules to commonly control the
Savannah station and its Charleston station. The Company also has requested
permission from the FCC to continue to operate the Hattiesburg station as a
"satellite" of the Jackson station. The sale of the Company's Utica, New York,
station additionally is pending FCC consent. Upon completion of these
transactions, the Company will own 13 network affiliated broadcast television
stations, all located in the Southeast.
The primary source of revenues for the Company's television stations is
the sale of time to national and local advertisers. Since each of the stations
is network affiliated, additional revenue is derived from the network
programming carried by each.
The Company's television stations are in competition for audience and
advertising revenues with other television and radio stations and cable
television systems as well as magazines, newspapers and other promotional media.
A number of cable television systems which operate generally on a subscriber
payment basis are in business in the Company's broadcasting markets and compete
for audience by importing out-of-market television signals and by presenting
cable network and other program services. The television stations compete for
audience on the basis of program content and quality of reception, and for
advertising revenues on the basis of price, share of market and performance.
Under the 1996 Telecom Act, television broadcasting licenses are
granted for maximum terms of eight years and are subject to renewal upon
application to the FCC.
The Communications Act prohibits the assignment of a broadcast
television license or the transfer of control of such a license without the
prior approval of the FCC. In determining whether to grant or renew a broadcast
license, the FCC considers a number of factors pertaining to the licensee,
including compliance with various rules limiting common (cross) ownership of
broadcast, newspaper and cable properties and the "character" of the licensee.
The FCC's cross-ownership rules prohibit the common ownership of
interests in certain media outlets serving the same geographic area. Under these
rules, absent approval or a FCC waiver, a single entity generally may not have
interests in: (i) both a radio station and a television station that serve
specified overlapping areas; (ii) a daily newspaper and either a radio station
or a television station that serve specified overlapping areas; or (iii) a
television station and a cable television system that serve specified
overlapping areas. The Company's common control of WFLA-TV and a daily newspaper
in Tampa, Florida, was approved by the FCC in 1975.
6
<PAGE>
Broadcast of obscene or indecent material is regulated by the FCC as
well as by state and federal law. Stations also must follow various rules
promulgated under the Communications Act that regulate, among other things,
political advertising, sponsorship identifications, the advertising of contests
and lotteries, and technical operations, including limits on human exposure to
radio frequency energy. In addition, licensees must develop and implement
affirmative action programs designed to promote equal employment opportunities
and must submit reports to the FCC with respect to these matters on an annual
basis and in connection with a renewal application.
Congress and the FCC have under consideration, and in the future may
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that could affect, directly or indirectly, the operation, ownership
and profitability of the Company's broadcast television stations and affect the
ability of the Company to acquire additional stations. In addition to the
matters noted above, these include, for example, spectrum use fees, political
advertising rates, potential restrictions on the advertising of certain products
(such as alcoholic beverages) and the rules and policies to be applied in
enforcing the FCC's equal employment opportunity regulations. Other matters that
could potentially affect the Company's broadcast properties include
technological innovations and developments generally affecting competition in
the mass communications industry, such as direct radio and television broadcast
satellite service, wireless cable systems and low power television stations,
digital television and radio technologies and the advent of telephone company
participation in the provision of video programming services.
Cable Television Business
The Cable Television Division includes two cable systems in Northern
Virginia, Media General Cable of Fairfax County, Inc., and Media General Cable
of Fredericksburg, Inc., and a cable advertising agency, Mega Advertising, Inc.
The Fairfax County system has a 120-channel capacity, with two-way dual coaxial
cable passing approximately 328,000 homes. The Fredericksburg system has a
60-channel capacity and passes approximately 20,000 homes.
The Company has cable television franchises to operate its existing
systems in portions of Fairfax County, Virginia, and adjoining cities and towns
and in Fredericksburg, Virginia, and portions of Spotsylvania and Stafford
Counties, Virginia. These jurisdictions have enacted extensive regulations
governing cable television systems within their borders. In anticipation of a
series of expiration dates commencing in September 1997, renewal proceedings are
underway for the Company's Fairfax County system. Renewal proceedings are also
underway for the Company's Spotsylvania and Stafford County franchises. At
December 29, 1996, the Company's cable television systems served approximately
243,000 subscribers.
The Company's cable television systems have substantially the same
competition as its television stations. The cable television systems compete for
audience on the basis of program content and quality of reception and for
advertising revenues on the basis of price, share of market and performance.
7
<PAGE>
The FCC has jurisdiction over and has adopted a regulatory program
concerning the cable television industry. The FCC's regulations govern cable
television engineering standards, registration and reporting obligations and
other matters. In 1992, Congress passed, effective December 4, 1992, the Cable
Television Consumer Protection and Competition Act of 1992 (1992 Cable Act). It
contains a number of provisions affecting and potentially affecting the Company,
including service, programming and equipment mandates and other limitations
which impact the Company's costs and business. Additionally, the 1992 Cable Act
established rate regulation for the cable services (other than premium and
pay-per-view services) which the Company offers to subscribers. Ratemaking
authority is divided between local franchisors and the FCC, and some of the
Company's rates are under review by franchisors and under review by or on appeal
to the FCC. While the Company believes that its rates have been established in
compliance with the applicable FCC regulations and the 1992 Cable Act, it is
possible that rate refunds and/or rate adjustments may be ordered. The 1996
Telecom Act eliminates rate regulation after March 31, 1999, for all cable
services except the "basic" tier, which is the service including the local
broadcast signals carried by a cable system.
The 1996 Telecom Act removes previously applicable restrictions that
prevented most local telephone companies from providing cable services within
the areas in which they provided telephone services. This will almost certainly
lead to increased competition by competitive providers of video services within
the areas served by the Company's cable systems. Increases in competition from
wireless cable and direct broadcast satellite providers of video programming to
the home is also highly likely. Reference is made to pages 44 and 45 of the 1996
Annual Report to Stockholders, which is incorporated herein by reference, for
information regarding cable competition and strategic planning alternatives
being considered by the Company.
Reference should be made to the Communications Act, the 1992 Cable Act,
the 1996 Telecom Act, FCC rules and the public notices and rulings of the FCC
for further information concerning the nature and extent of federal regulation
of cable television systems.
The following table sets forth certain information with respect to the
Company's largest cable operation:
<TABLE>
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<S> <C>
Media General Cable of Fairfax
- ------------------------------
1996 1995 1994
---- ---- ----
Subscribers 227,717 221,784 214,259
Penetration 69.4% 69.2% 68.8%
Monthly revenue per home passed $32.87 $31.82 $28.65
Monthly average revenue per subscriber $47.54 $46.25 $42.50
</TABLE>
Newsprint Paper Manufacturing Business
Media General's newsprint operations consist of the Garden State Paper
Company (Garden State), a wholly owned newsprint mill in Garfield, New Jersey,
with an annual capacity of 235,000 short tons, and a one-third interest in
Southeast Paper Manufacturing Co. (SEPCO) in Dublin, Georgia, with an annual
capacity of 485,000 short tons. Both facilities use Media General's proprietary
de-inking technology to produce 100 percent recycled, high quality newsprint
from recovered old newspapers (ONP). Media General's share of their combined
total capacity is approximately 400,000 short tons, making Media General the
nation's leading producer of 100 percent recycled newsprint. The Company also
earns licensing fees pursuant to a contract with SEPCO, in addition to its share
of operating results.
8
<PAGE>
Garden State owns certain United States patent rights and also has
obtained patents in various foreign countries. Although these have been of
value, their loss would not materially affect the conduct of its business as the
Company has developed substantial proprietary knowledge related to its
manufacturing process which enhances its competitive position.
Garden State competes with approximately twenty Canadian and American
companies in selling newsprint, its sole product, to newspaper publishers.
Distribution from the Garden State mill is primarily by truck transportation.
Competition is based principally on price, quality of product and service,
although the percentage of recovered fiber contained in manufactured newsprint
is becoming increasingly important to newspaper publishers to meet various
existing and proposed state and federal standards.
In recent years, environmentally driven legislation has encouraged the
use of recycled paper. With demand pushing against the practical limits of
recovery, ONP costs accelerated during much of 1995, but began to decline to
more favorable levels by year-end. ONP prices continued to decline gradually
throughout all of 1996. Media General's strategically located and cost-effective
newsprint recycling facilities have helped assure the Company of adequate
supplies of ONP.
Historically a cyclical industry, the newsprint business peaked in
1988, declining over the next four years as U.S. newsprint consumption slipped
and demand fell. In late 1992, a threatened Canadian newsprint strike resulted
in a short period of somewhat improved newsprint prices which lasted until
mid-1993, when supply again exceeded demand. Demand picked up again in 1994
producing higher selling prices as most mills reached 96-97 percent of operating
capacity. The trend upward continued through 1995, enabling Media General's
newsprint operations to implement four price increases during the year. However,
prices peaked in early 1996 and then fell throughout the remainder of the year,
reflecting an industry cycle of declining selling prices and weak demand.
Item 2. Properties
The headquarters of Media General, Inc., and its Richmond Newspapers,
Inc., subsidiary are located in downtown Richmond, Virginia, in five adjacent
buildings. The Richmond newspaper is printed at a production and distribution
facility located on an 86 acre site in Hanover County, Virginia, near Richmond.
The Tampa, Florida, newspaper is located in a single unit production plant and
office building located on a six acre tract in that city. The Winston-Salem
newspaper is headquartered in one building in downtown Winston-Salem. Its
newspapers are printed at a production and distribution facility located on a
nearby 12 acre site. The Lynchburg newspaper is printed at a production and
distribution facility, which also contains VNI's headquarters, on a six acre
tract in that city. The Charlottesville newspaper is printed at a production and
distribution facility, located on a four acre site in that city. The Danville
newspaper is printed at a production and distribution facility located on a one
acre parcel adjacent to the newspaper's headquarters. All of the newspapers
acquired as a result of the Park acquisition are located in North Carolina,
Virginia and Kentucky. Substantially all of the newspaper production equipment,
land and buildings, including those acquired and retained from the Park
acquisition, are owned by the Company.
9
<PAGE>
Television facilities for WFLA-TV Tampa, Florida, WJWB-TV Jacksonville,
Florida, and WCBD-TV Charleston, South Carolina, are located on land owned by
the Company in and around these respective cities. Substantially all of the
television facilities, including those acquired and to be retained in or as a
result of the Park acquisition, are owned by the Company. They are located in
Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina,
South Carolina, Tennessee and Virginia.
Media General Cable of Fairfax County, Inc., a subsidiary of the
Company, has its headquarters located in one building owned by the Company in
Chantilly, Virginia, and two signal retransmission centers are located in
Fairfax County, Virginia, one on property owned by the Company and adjacent to
its production studio and one on leased property. In addition, Fairfax Cable
leases an operations center for its service maintenance fleet in Springfield,
Virginia. The cable system includes a home subscriber network and a separate
institutional network.
Newsprint production facilities of Garden State consist of a
Company-owned mill in Garfield, New Jersey, housing two paper-making machines
adjacent to a Company-owned power plant which supplies it with steam and
electric power. Garden State leases adequate storage facilities for waste paper
in the general vicinity of the newsprint mill.
The Company considers all of its properties, together with the related
machinery and equipment contained therein, to be well-maintained, in good
operating condition, and adequate for its present and foreseeable future needs.
Item 3. Legal Proceedings
One Company subsidiary has been identified as a potentially responsible
party (PRP), along with many other businesses unrelated to the Company, in
connection with alleged soil and/or groundwater contamination at a former
solvent reclamation location. Another Company subsidiary has been identified as
a PRP in connection with a drum reconditioning facility. With respect to these
matters, the involved subsidiaries have contributed, or may in the future be
asked to contribute, to the costs of site assessment and cleanup. In addition, a
third Company subsidiary is involved in an environmental remediation project at
a facility currently owned. While the ultimate costs of the foregoing matters
are not presently determinable, based on information currently available,
management believes such costs will not be material to the Company's financial
position or results of operations.
10
<PAGE>
Items 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of 1996.
<TABLE>
<CAPTION>
<S> <C>
Executive Officers of the Registrant
Name Age Position and Office Year First Took Office*
D. Tennant Bryan 90 Chairman of the Executive Committee 1930
J. Stewart Bryan III 58 Chairman, President, Chief Executive Officer 1990
Marshall N. Morton 51 Senior Vice President, Chief Financial Officer 1989
H. Graham Woodlief, Jr. 52 Vice President 1989
Stephen Y. Dickinson 51 Controller 1989
George L. Mahoney 44 General Counsel, Secretary 1993
Stephen R. Zacharias 47 Treasurer 1989
</TABLE>
* The year indicated is the year in which the officer first assumed an
office with the Company or with Richmond Newspapers, Inc., the predecessor of
the Company, involving essentially the same duties and responsibilities as the
office presently held, regardless of its formal titles at that time. Mr.
Dickinson assumed executive officer responsibilities as of May 1994. Mr. Mahoney
previously served as Assistant General Counsel of Dow Jones & Company, Inc., for
more than five years. Mr. Zacharias assumed executive officer responsibilities
as of December 1993.
Officers of the Company are elected at the Annual Meeting of the Board
of Directors to serve, unless sooner removed, until the next Annual Meeting of
the Board of Directors and/or until their successors are duly elected and
qualified.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Reference is made to page 49 of the 1996 Annual Report to Stockholders,
which is incorporated herein by reference, for information required by this
item.
Item 6. Selected Financial Data
Reference is made to Note 5 on pages 33 and 34, and to pages 50 and 51
of the 1996 Annual Report to Stockholders, which are incorporated by reference,
for information required by this item.
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<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Reference is made to pages 42 through 48 of the 1996 Annual Report to
Stockholders, which are incorporated herein by reference, for information
required by this item.
Item 8. Financial Statements and Supplementary Data
Consolidated financial statements of the Company as of December 29,
1996, and December 31, 1995, and for the fiscal years ended December 29, 1996,
December 31, 1995, and December 25, 1994, and the report of independent auditors
thereon, as well as the Company's unaudited quarterly financial data for the
fiscal years ended December 29, 1996, and December 31, 1995, are incorporated
herein by reference from the 1996 Annual Report to Stockholders pages 25 through
41 and page 49.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders on May 16, 1997, except as to
certain information regarding executive officers included in Part I.
Item 11. Executive Compensation
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders on May 16, 1997.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders on May 16, 1997.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders on May 16, 1997.
12
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. and 2. The financial statements and schedule listed in the
accompanying index to financial statements and financial statement
schedules are filed as part of this annual report.
3. Exhibits
The exhibits listed in the accompanying index to exhibits are filed as
part of this annual report.
(b) Reports on Form 8-K
On January 21, 1997, the Company filed a Form 8-K to report the January
7, 1997, acquisition of Park Acquisitions, Inc., parent of Park
Communications, Inc. (Park).
On January 29, 1997, the Company filed a Form 8-K to amend and restate
the title of its Thrift Plan Plus for Employees of Media General, Inc.
and Register Publishing Company, Inc.
Index to Financial Statements and Financial Statement Schedules - Item 14(a)
<TABLE>
<CAPTION>
<S> <C>
Annual Report to
Form 10-K Stockholders
--------- ------------
Media General, Inc.
(Registrant)
Report of independent auditors 14 41
Consolidated statements of operations for the fiscal years ended
December 29, 1996, December 31, 1995, and December 25, 1994 25
Consolidated balance sheets at December 29, 1996, and
December 31, 1995 26-27
Consolidated statements of stockholders' equity for the fiscal
years ended December 29, 1996, December 31, 1995,
and December 25, 1994 28
Consolidated statements of cash flows for the fiscal years ended
December 29, 1996, December 31, 1995, and December 25, 1994 29
Notes to consolidated financial statements 30-40
Schedule:
II - Valuation and qualifying accounts and reserves 15
</TABLE>
Schedules other than Schedule II, listed above, are omitted since they are not
required or are not applicable, or the required information is shown in the
financial statements or notes thereto.
The consolidated financial statements of Media General, Inc., listed in the
above index which are included in the Annual Report to Stockholders of Media
General, Inc., for the fiscal year ended December 29, 1996, are incorporated
herein by reference. With the exception of the pages listed in the above index
and the information incorporated by reference included in Parts I, II and IV,
the 1996 Annual Report to Stockholders is not deemed filed as part of this
report.
13
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Media General, Inc.
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Media General, Inc., of our report dated February 10, 1997, included in the
1996 Annual Report to Stockholders of Media General, Inc.
Our audits also included the financial statement schedule of Media General,
Inc., listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
We also 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-3 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 Effective
January 30, 1996 and (g) the Registration Statement (Form S-8 No. 333-16737)
pertaining to the Thrift Plan Plus For Employees of Media General, Inc. and
Register Publishing Company, Inc. Incentive Saving Plan, of our report dated
February 10, 1997, with respect to the consolidated financial statements of
Media General, Inc., incorporated herein by reference, and our report included
in the preceding paragraph with respect to the financial statement schedule of
Media General, Inc., included in this Annual Report (Form 10-K) of Media
General, Inc., for the fiscal year ended December 29, 1996.
ERNST & YOUNG LLP
Richmond, Virginia
March 27, 1997
14
<PAGE>
Media General, Inc., and Subsidiaries
Schedule II - Valuation and Qualifying Accounts and Reserves
Fiscal Years Ended December 29, 1996, December 31, 1995, and December 25, 1994
<TABLE>
<CAPTION>
<S> <C>
Additions
(reductions)
Balance at charged
beginning (credited) to Deductions
of period expense-net net
--------- ----------- ---
1996
Allowance for doubtful accounts $ 4,529,960 $ 5,195,767 $ 4,546,572
Reserve for warranties 3,040,833 1,700,000 594,828
------------------ ------------------ ------------------
Totals $ 7,570,793 $ 6,895,767 $ 5,141,400
================== ================== ==================
1995
Allowance for doubtful accounts $ 3,360,172 $ 4,224,695 $ 3,343,663
Reserve for warranties 3,441,835 --- 401,002
------------------ ------------------ ------------------
Totals $ 6,802,007 $ 4,224,695 $ 3,744,665
================== ================== ==================
1994
Allowance for doubtful accounts $ 3,697,761 $ 3,109,329 $ 3,446,918
Reserve for warranties 3,968,006 --- 526,171
Reserve for discontinuance
of Broadcast Services 784,783 --- 259,347
------------------ ------------------ ------------------
Totals $ 8,450,550 $ 3,109,329 $ 4,232,436
================== ================== ==================
<CAPTION>
Balance
at end
Transfers of period
--------- ---------
1996
Allowance for doubtful accounts $ 91,610 (a) $ 5,270,765
Reserve for warranties --- 4,146,005
------------------ ------------------
Totals $ 91,610 $ 9,416,770
================== ==================
1995
Allowance for doubtful accounts $ 288,756 (a) $ 4,529,960
Reserve for warranties --- 3,040,833
------------------ ------------------
Totals $ 288,756 $ 7,570,793
================== ==================
1994
Allowance for doubtful accounts $ --- $ 3,360,172
Reserve for warranties --- 3,441,835
Reserve for discontinuance
of Broadcast Services (525,436) (b) ---
------------------ ------------------
Totals $ (525,436) $ 6,802,007
================== ==================
</TABLE>
(a) Amount associated with the acquisition of properties.
(b) Amount transferred to other liabilities and deferred credits.
15
<PAGE>
Index to Exhibits
Exhibit
Number Description
2.1 Agreement and Plan of Merger dated July 19, 1996, by and among
Media General, Inc., MG Acquisitions, Inc., and Park
Acquisitions, Inc., incorporated by reference to Exhibit 2.1
of Form 8-K dated January 7, 1997.
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., incorporated
by reference to Exhibit 2.2 of Form 8-K dated January 7, 1997.
3 (i) The Amended and Restated Articles of Incorporation of Media
General, Inc., incorporated by reference to Exhibit 3.1 of
Form 10-K for the fiscal year ended December 31, 1989.
3 (ii) Bylaws of Media General, Inc., amended as of May 31, 1993,
incorporated by reference to Exhibit 3 (ii) of Form 10-K for
the fiscal year ended December 26, 1993.
10.1 Form of Option granted under the 1976 Non-Qualified Stock
Option Plan, incorporated by reference to Exhibit 2.2 of
Registration Statement 2-56905.
10.2 Additional Form of Option to be granted under the 1976
Non-Qualified Stock Option Plan, incorporated by reference to
Exhibit 2 to Post-Effective Amendment No. 3 Registration
Statement 2-56905.
10.3 Addendum dated January 1984, to Form of Option granted under
the 1976 Non-Qualified Stock Option Plan, incorporated by
reference to Exhibit 10.13 of Form 10-K for the fiscal year
ended December 31, 1983.
10.4 Addendum dated June 19, 1992, to Form of Option granted under
the 1976 Non-Qualified Stock Option Plan, incorporated by
reference to Exhibit 10.15 of Form 10-K for the fiscal year
ended December 27, 1992.
10.5 The Media General, Inc., Amended and Restated Restricted Stock
Plan, dated January 31, 1996, incorporated by reference to
Exhibit 10.10 of Form 10-K for the fiscal year ended December
31, 1995.
10.6 Addendum dated June 19, 1992, to Form of Option granted under
the 1987 Non-Qualified Stock Option Plan, incorporated by
reference to Exhibit 10.20 of Form 10-K for the fiscal year
ended December 27, 1992.
10.7 Media General, Inc., Executive Death Benefit Plan effective
January 1, 1991, incorporated by reference to Exhibit 10.17 of
Form 10-K for the fiscal year ended December 29, 1991.
16
<PAGE>
10.8 Amendment to the Media General, Inc., Executive Death Benefit
Plan dated July 24, 1991, incorporated by reference to Exhibit
10.18 of Form 10-K for the fiscal year ended December 29,
1991.
10.9 1984 Outside Directors Retirement Agreement, incorporated by
reference to Exhibit 10.16 of Form 10-K for the fiscal year
ended December 31, 1984.
10.10 Shareholders Agreement, dated May 28, 1987, between Mary
Tennant Bryan, Florence Bryan Wisner, J. Stewart Bryan III,
and D. Tennant Bryan and J. Stewart Bryan III as trustees
under D. Tennant Bryan Media Trust, and Media General, Inc.,
incorporated by reference to Exhibit 10.50 of form 10-K for
the fiscal year ended December 31, 1987.
10.11 Amended and Restated Redemption Agreement between Media
General, Inc., and D. Tennant Bryan, dated April 7, 1994,
incorporated by reference to Exhibit 10.21 of Form 10-Q for
the period ending March 27, 1994.
10.12 Media General, Inc., Supplemental Thrift Plan, amended and
restated as of November 17, 1994, incorporated by reference to
Exhibit 10.27 of Form 10-K for the fiscal year ended December
25, 1994.
10.13 Media General, Inc., Executive Supplemental Retirement Plan,
amended, and restated as of November 17, 1994, incorporated by
reference to Exhibit 10.28 of Form 10-K for the fiscal year
ended December 25, 1994.
10.14 Deferred Income Plan for Selected Key Executives of Media
General, Inc., and form of Deferred Compensation Agreement
thereunder dated as of December 1, 1984, incorporated by
reference to Exhibit 10.29 of Form 10-K for the fiscal year
ended December 31, 1989.
10.15 Media General, Inc., Management Performance Award Program,
adopted November 16, 1990, and effective January 1, 1991,
incorporated by reference to Exhibit 10.35 of Form 10-K for
the fiscal year ended December 29, 1991.
10.16 Media General, Inc., Deferred Compensation Plan, amended and
restated as of November 17, 1994, incorporated by reference to
Exhibit 10.32 of Form 10-K for the fiscal year ended December
25, 1994.
10.17 Media General, Inc., ERISA Excess Benefits Plan, amended and
restated as of November 17, 1994, incorporated by reference to
Exhibit 10.33 of Form 10-K for the fiscal year ended December
25, 1994.
10.18 Media General, Inc., Restricted Stock Plan for Non-Employee
Directors, adopted as of May 19, 1995, incorporated by
reference to Exhibit 10.32 of Form 10-K for the fiscal year
ended December 31, 1995.
10.19 Media General, Inc., 1995 Long-Term Incentive Plan, adopted as
of May 19, 1995, incorporated by reference to Exhibit 10.33 of
Form 10-K for the fiscal year ended December 31, 1995.
17
<PAGE>
10.20 Media General, Inc., 1996 Employee Non-Qualified Stock Option
Plan, adopted as of January 30, 1996.
10.21 Media General, Inc., 1997 Employee Restricted Stock Plan.
10.22 Media General, Inc., Directors' Deferred Compensation Plan.
10.23 Amended and Restated Partnership Agreement, dated November 1,
1987, by and among Virginia Paper Manufacturing Corp., KR
Newsprint Company, Inc., and CEI Newsprint, Inc., incorporated
by reference to Exhibit 10.31 of Form 10-K for the fiscal year
ended December 31, 1987.
10.24 Amended and Restated License Agreement, dated November 1,
1987, by and among Media General, Inc., Garden State Paper
Company, Inc., and Southeast Paper Manufacturing Co.,
incorporated by reference to Exhibit 10.34 of Form 10-K for
the fiscal year ended December 31, 1987.
10.25 Amended and Restated Umbrella Agreement, dated November 1,
1987, by and among Media General, Inc., Knight - Ridder, Inc.,
and Cox Enterprises, Inc., incorporated by reference to
Exhibit 10.32 of Form 10-K for the fiscal year ended December
31, 1987.
10.26 Amended Newsprint Purchase Contract, dated November 1, 1987,
by and among Southeast Paper Manufacturing Co., Media General,
Inc., Knight-Ridder, Inc., and Cox Enterprises, Inc.,
incorporated by reference to Exhibit 10.35 of Form 10-K for
the fiscal year ended December 31, 1987.
10.27 Television affiliation agreement, dated February 10, 1995,
between WFLA-TV and the NBC Television Network incorporated by
reference to Exhibit 10.38 of Form 10-K for the fiscal year
ended December 25, 1994.
10.28 Amendments, dated May 17, 1993, to television affiliations
agreement, between WFLA-TV and National Broadcasting Company,
Inc., dated March 22, 1989, incorporated by reference to
Exhibit 10.47 of Form 10-K for the fiscal year ended December
26, 1993.
10.29 Franchise Agreements, dated September 30, 1982, between Media
General, Inc., Media General Cable of Fairfax County, Inc.,
and Fairfax County, Virginia, as amended January 30, 1984,
incorporated by reference to Exhibit 10.32 of Form 10-K for
the fiscal year ended December 31, 1983.
10.30 Agreement dated March 14, 1988, between Media General Cable of
Fairfax County, Inc., and Warner Cable Communications of
Reston, Inc., partially assigning Franchise Agreements dated
September 30, 1982, incorporated by reference to Exhibit 10.34
of Form 10-K for the fiscal year ended December 31, 1988.
10.31 Cable Television Franchise Ordinance of the Town of Herndon,
Virginia, accepted January 24, 1984, by Media General, Inc.,
and Media General Cable of Fairfax County, Inc., incorporated
by reference to Exhibit 10.33 of Form 10-K for the fiscal year
ended December 31, 1983.
18
<PAGE>
10.32 Franchise Agreement, dated June 14, 1983, between Media
General, Inc., Media General Cable of Fairfax County, Inc.,
and the City of Fairfax, Virginia, incorporated by reference
to Exhibit 10.34 of Form 10-K for the fiscal year ended
December 31, 1983.
10.33 Franchise Agreement, dated April 9, 1983, between Media
General Cable of Fairfax County, Inc., and the Town of Vienna,
Virginia, incorporated by reference to Exhibit 10.35 of Form
10-K for the fiscal year ended December 31, 1983.
10.34 Franchise Agreement, dated July 12, 1983, between Media
General Cable of Fairfax County, Inc., Media General, Inc.,
and the City of Falls Church, Virginia, incorporated by
reference to Exhibit 10.36 of Form 10-K for the fiscal year
ended December 31, 1983.
10.35 Second Amended and Restated Stock and Warrant Purchase and
Shareholders' Agreement dated May 20, 1994, by and among Media
General, Inc., Affiliated Newspapers Investments, Inc., and
Denver Newspapers, Inc., incorporated by reference to Exhibit
2 of Form 8-K dated September 28, 1994.
10.36 Asset Purchase Agreement dated February 13, 1997, by and among
Media General Newspapers, Inc., and Newspaper Holdings, Inc.
13 Media General, Inc., Annual Report to Stockholders for the
fiscal year ended December 29, 1996.
21 List of subsidiaries of the registrant.
23 Consent of Ernst & Young LLP, independent auditors.
27 Financial Data Schedule
Note: Exhibits 10.1 - 10.22 are management contracts or
compensatory plans, contracts or arrangements.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MEDIA GENERAL, INC.
Date: March 27, 1997
/s/ J. Stewart Bryan III
----------------------------------------------
J. Stewart Bryan III, Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
Signature Title Date
--------- ----- ----
Chairman of the Executive March 27, 1997
- ------------------------------------ Committee and Director
D. Tennant Bryan
/s/ James S. Evans Vice Chairman and Director March 27, 1997
- ------------------------------------
James S. Evans
/s/ Marshall N. Morton Senior Vice President and March 27, 1997
- ------------------------------------ Chief Financial Officer
Marshall N. Morton
/s/ Stephen Y. Dickinson Controller March 27, 1997
- ------------------------------------
Stephen Y. Dickinson
/s/ Robert P. Black Director March 27, 1997
- ------------------------------------
Robert P. Black
Director March 27, 1997
- ------------------------------------
Charles A. Davis
/s/ Wyndham Robertson Director March 27, 1997
- ------------------------------------
Wyndham Robertson
/s/ Robert V. Hatcher, Jr. Director March 27, 1997
- ------------------------------------
Robert V. Hatcher, Jr.
/s/ John G. Medlin, Jr. Director March 27, 1997
- ------------------------------------
John G. Medlin, Jr.
/s/ Henry L. Valentine, II Director March 27, 1997
- ------------------------------------
Henry L. Valentine, II
</TABLE>
20
MEDIA GENERAL, INC.
1996 EMPLOYEE NON-QUALIFIED STOCK OPTION PLAN
Effective as of January 30, 1996
Media General, Inc., a corporation organized and existing under the
laws of the Commonwealth of Virginia, which, along with its wholly owned
subsidiaries, is hereinafter referred to as the "Company", has previously
adopted the Media General, Inc. Long Term Incentive Plan, effective May 19, 1995
for officers and other salaried employees of the Company (the "LTIP").
Under the terms of the LTIP, the Compensation and Stock Option
Committee of the Board of Directors of the Company (the "Committee") has the
authority to determine and establish the type and number of Awards to be
granted, the terms and conditions, including forfeiture provisions of such
Awards, and to select the Participants to receive any such Awards, in each case
subject to and consistent with the provisions of the LTIP. All capitalized terms
not otherwise defined herein shall have the meanings ascribed to them in the
LTIP.
1. Purpose. This Employee Non-Qualified Stock Option Plan (the "Plan")
is intended to advance the interests of the Company by providing its officers
and other key executive employees having substantial responsibility for the
direction and management of the Company an additional incentive to promote its
success and to encourage them to remain in its employ.
2. Administration of Plan. The Plan shall be administered by the
Committee, which shall consist of two or more directors, all of whom shall be
"disinterested persons" under Rule 16b-3 prior to August 15, 1996 and
"Non-Employee Directors" under Rule 16b-3 on and after August 15, 1996, as
promulgated under the Securities Exchange Act of 1934, and "outside directors"
under Section 162(m) of the Code. The Committee shall adopt such rules and
regulations as it deems necessary to carry out the Plan. The Board may from time
to time make such changes in and additions to the Plan as it may deem proper in
order to accomplish the intentions of the Plan. The interpretation and
construction of any provision of the Plan by the Committee shall, unless
otherwise determined by the Board, be final and conclusive.
3. Eligibility. The Committee shall grant Non-Qualified Stock Options
("Options") only to officers and other key executive employees of the Company
who perform services of major importance in the management, operation and
development of the business of the Company ("Optionee"). The Committee shall
determine the term of such Options and the number of shares to be allocated to
each Optionee.
4. Stock. The Board hereby authorizes the Committee to appropriate and
to grant Options for, and to issue and sell for the purposes of the Plan, an
aggregate of 1,000,000 shares of the Class A Common Stock of the Company
(subject to adjustment as provided hereinafter). Any Options that expire or are
forfeited pursuant to paragraph 6 hereof may be granted in whole or in part to
another Optionee by the Committee. The Company shall not be required to issue or
deliver any certificate for shares of its stock purchased upon the exercise of
any part of any such Option prior to (1) the admission of such shares to listing
on any stock exchange on which the stock of the Company may then be listed, (2)
the completion of any registration or other qualification of such shares under
any state or federal law or ruling or regulation of any governmental regulatory
body which the Company shall, in its sole discretion, determine is necessary or
advisable, and (3) the receipt by the Board of an opinion of counsel that all
applicable legal requirements have been complied with.
5. Price. The purchase price of the shares of stock covered by an
Option granted hereunder shall be as determined by the Committee, but such price
shall not be less than the fair market value of such shares covered by an Option
on the date such Option is granted. For purposes of the Plan, fair market value
shall mean the average of the highest and lowest trading prices at which shares
of the Company's Class A Common Stock are traded on the date that an Option is
granted.
6. Duration and Exercise of Options. Except as otherwise provided
herein, any Option granted under this Plan shall be exercisable during the
employment of the Optionee and twelve (12) months thereafter and during such
extended period as may be determined by the Committee. In the event an Option is
not held for three (3) full years from the date the Option is granted such
Option may be exercised only in accordance with the following schedule of time
and proportions of the total stock subject thereto:
Option held less than one (l) year ........................up to 0% of total
Option held one (l) year or more .....................up to 33 l/3% of total
Option held two (2) years or more ....................up to 66 2/3% of total
provided, however, that such vesting shall cease (except pursuant to the
following two paragraphs) upon termination of employment and further provided
that no fractional shares shall be issued.
In the event of the death of the Optionee while employed by the
Company, any Option held by such Optionee may be exercised in full without
regard to the length of time the Option has been held by said Optionee by the
legatees, personal representatives or distributees of the Optionee within one
year of the date of the Optionee's death.
In the event of the termination of the Optionee's employment by reason
of his retirement after at least ten years of service with the Company and after
attaining age fifty-five (55), or by reason of his disability at any age, then
such Optionee may, within twelve (12) months after such termination of
employment, or such extended period as may be determined by the Committee,
exercise any Option granted under the Plan in full without regard to the length
of time the Option shall have been held by said Optionee.
Notwithstanding any provision to the contrary contained herein, unless
the Board specifically extends the period during which any Option granted under
this Section 6 may be exercised, such option shall expire and be forfeited on
the date that is ten (10) years from the date such Option is granted.
The exercise of any Option and delivery of the Option shares shall be
contingent upon receipt by the Company of the full purchase price of such Option
shares in cash and upon payment of all federal and state withholding taxes
required by law.
7. Non-transferability of Options. An Option shall not be transferable
otherwise than by will or the laws of descent and distribution.
8.Effect of Stock Dividends, Stock Splits, etc. The Committee shall
make appropriate adjustments in the price of the shares and the number allotted
or subject to allotment if there are any changes in the outstanding shares of
Class A Common Stock of the Company by reason of stock dividends, stock splits,
recapitalizations, mergers, or consolidation. In addition, in the case of
merger, consolidation, dissolution or liquidation, the expiration date and the
time at which any Option granted under this Plan may or must be exercised may be
accelerated by the Board.
9.Expiration and Termination of the Plan. Options may be granted under
the Plan at any time until the Plan shall be terminated by the Board or the
Stockholders of Media General, Inc.
10.Waiver of Vesting and Benefit Accrual Limitations. The Committee
may, in its sole discretion, waive, modify or amend all or any portion of the
provisions of the Plan that have the effect of limiting the right of a
Participant to exercise any option granted under the Plan. Such action by the
Committee may be made on a case by case basis or may be made with respect to all
Optionees.
IN WITNESS WHEREOF, the Plan has been duly adopted and executed as of
the 30th of January, 1996.
5
MEDIA GENERAL, INC.
1997 EMPLOYEE RESTRICTED STOCK PLAN
Media General, Inc., a corporation organized and existing under the
laws of the Commonwealth of Virginia, which, along with its wholly owned
subsidiaries, is hereinafter referred to as the "Company", has previously
adopted the Media General, Inc. Long Term Incentive Plan, effective May 19, 1995
for officers and other salaried employees of the Company (the "LTIP").
Under the terms of the LTIP, the Compensation Committee of the Board of
Directors of the Company (the "Committee") has the authority to determine and
establish the type and number of Awards to be granted, the terms and conditions,
including forfeiture provisions of such Awards, and to select the Participants
to receive any such Awards, in each case subject to and consistent with the
provisions of the LTIP. All capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the LTIP.
1. Purpose. The purpose of this plan is to keep personnel of experience
and ability in the employ of the Company and its subsidiaries and to compensate
them for their contributions to the growth and profits of the Company and its
subsidiaries and thereby induce them to continue to make such contributions in
the future.
2. Definitions.
(a) "Company" shall mean Media General, Inc.
(b) "Subsidiary" or "Subsidiaries" shall mean a corporation or
corporations of which the Company owns, directly or indirectly, shares having a
majority of the voting power for the election of directors.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Committee" shall mean the Compensation Committee as
appointed from time to time by the Board, which shall consist solely of two or
more persons who qualify as "Non-Employee Directors" under Rule 16b-3 of the
Securities and Exchange Commission and as "Outside Directors" under Section
162(m) of the Internal Revenue Code of 1986.
(e) "Plan" shall mean this Media General, Inc., Restricted
Stock Plan.
(f) "Restricted Share" shall mean the shares of Class A Common
Stock of the Company reserved pursuant to Section 3 hereof and any such shares
issued to a Recipient pursuant to this Plan.
(g) "Recipient" shall mean an employee of the Company or a
Subsidiary to whom shares are allocated pursuant to this Plan, or his designated
beneficiary, surviving spouse, estate, or legal representative, but for the
purposes hereof, any beneficiary, spouse, estate or legal representative shall
be considered as one person with the employee.
(h) "Disability" shall mean the Recipient's inability to
perform the services required by his position with the Company by reason of any
medically determinable, physical or mental impairment which can be expected to
result in death or to be of long-continued and indefinite duration.
3. Restricted Share Reserve. There shall be established a Restricted
Share Reserve to which shall be credited 300,000 shares of the Class A Common
Stock of the Company. In the event that the shares of Class A Common Stock of
the Company should, as a result of a stock split or stock dividend or
combination of shares or any other change, or exchange for other securities, by
reclassification, reorganization, merger, consolidation, recapitalization or
otherwise, be increased or decreased or changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or of another corporation, the number of shares then remaining in the Restricted
Share Reserve shall be appropriately adjusted to reflect such action. If any
such adjustment shall result in a fractional share, such fraction shall be
disregarded. Upon the allocation of shares hereunder, the Restricted Share
Reserve shall be reduced by the number of Restricted Shares so allocated.
Subject to limitations that may be imposed by Rule 16b-3 or other provisions of
the federal securities laws at such time, upon the forfeiture of Restricted
Shares pursuant to Section 7 hereof, the Restricted Share Reserve shall be
increased by such number of Restricted Shares, and such Restricted Shares may
again be the subject of allocations hereunder. All authorized and unissued
shares issued as Restricted Shares in accordance with the Plan shall be fully
paid and non-assessable shares and free from pre-emptive rights.
4. Eligibility and Making of Allocations. Any salaried executive
employee of the Company or any Subsidiary, having substantial responsibility for
the direction and management of the Company or any Subsidiary, shall be eligible
to receive an allocation of Restricted Shares pursuant to the Plan, except that
no employee shall be entitled to receive an allocation of greater than fifty
thousand (50,000) Restricted Shares within any two year period.
From the employees eligible to receive allocations pursuant to the
Plan, the Committee may from time to time select those employees to whom
Restricted Shares shall be allocated. In selecting those employees to whom an
allocation shall be made and in determining the number of Restricted Shares
subject thereto, the Committee shall consider the position and responsibilities
of the eligible employees, the value of their services to the Company and its
Subsidiaries, and such other factors as the Committee deems pertinent. If the
Committee elects to award Restricted Shares to any employee, the date of such
action shall be the "date of allocation" for purposes of this Plan.
The aggregate number of Restricted Shares which may be allocated
pursuant to this Plan shall not exceed the amount available therefor in the
Restricted Share Reserve.
5. Form of Allocations. Each allocation shall specify the number of
Restricted Shares subject thereto, subject to the provisions of Section 4
hereof.
At the time of making any allocation, the Board shall advise the
Recipient and the Company thereof by delivery of written notice.
The Company shall take such action as shall be necessary to cause any
Restricted Shares issued pursuant to this Plan and not previously listed to be
listed on the American Stock Exchange and/or such other exchanges on which
shares of the same class as the Restricted Shares are then listed.
The Recipient, by accepting an allocation of Restricted Shares
hereunder, agrees that he will not elect to treat the receipt of such Restricted
Shares as a taxable event pursuant to Section 83(b) of the Internal Revenue Code
of 1986, as amended. In addition, the Recipient agrees that at such time that
the value of the Restricted Shares is included in his income, the Company shall
withhold from issuance that number of Restricted Shares necessary to satisfy the
Recipient's applicable federal and state income tax withholding. Thereafter, the
Company shall release to the Recipient a certificate evidencing ownership of the
balance of Restricted Shares to which the Recipient is entitled, without any
restrictions on transfer whatsoever.
6. Restrictions.
(a) Restricted Shares shall forthwith after the allocation,
pursuant to Section 5 hereof, be duly issued or transferred and a certificate or
certificates for such shares shall be issued in the Recipient's name. The
Recipient shall thereupon be a shareholder with respect to all the Restricted
Shares represented by such certificate or certificates and shall have all the
rights of a shareholder with respect to all such shares, including the right to
vote such shares and to receive all dividends and other distributions (subject
to the provisions of Section 6(b) hereof) paid with respect to such shares,
provided, however, that such shares shall be subject to the restrictions
hereinafter described in Section 6(d). Certificates of stock representing
Restricted Shares shall be imprinted with a legend to the effect that the shares
represented thereby may not be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of except in accordance with the terms of
this Plan, and the transfer agent for the Common Stock shall be instructed to
like effect in respect of such shares. In aid of such restrictions, the Company
shall retain the certificate(s) therefor, and the Recipient shall deposit a
stock power or other instrument of transfer, appropriately endorsed in blank,
with an officer designated by the Committee, which officer shall retain
possession of such certificates until the Restricted Period (described in (c)
below) expires.
(b) In the event that as the result of a stock split or stock
dividend or combination of shares or any other change, or exchange for other
securities, by reclassification, reorganization, merger, consolidation,
recapitalization or otherwise, the Recipient shall, as the owner of Restricted
Shares subject to restrictions hereunder, be entitled to new or additional or
different shares of stock or securities, the certificate or certificates for, or
other evidences of, such new or additional or different shares or securities,
together with an instrument of transfer appropriately endorsed, shall also be
imprinted with a legend as provided in Section 6(a) and all provisions of the
Plan relating to restrictions and lapse of restrictions herein set forth shall
thereupon be applicable to such new or additional or different shares or
securities to the extent applicable to the shares with respect to which they
were distributed; provided, however, that if the Recipient shall receive rights,
warrants or fractional interests in respect of any of such Restricted Shares,
such rights or warrants may be held, exercised, sold or otherwise disposed of,
and such fractional interests may be settled, by the Recipient free and clear of
the restrictions hereafter set forth.
(c) The term "Restricted Period" with respect to Restricted
Shares (after which restrictions shall lapse) shall mean a period of ten (10)
years from the date of allocation of such Restricted Shares to the Recipient
(subject to earlier termination pursuant to Section 7(a) below). Notwithstanding
the foregoing, at the time Restricted Shares are allocated, the Committee may
establish performance targets which, if met, will accelerate the termination of
the Restricted Period for such Restricted Shares; provided, however, that the
Restricted Period shall not lapse or be terminated as to any Restricted Shares
(any such shares being hereafter designated as "Deferred Shares") of a
Recipient, if his or her resulting taxable income (should such lapse or
termination occur), if added to other income that is not "performance-based" (as
that term is defined in regulations promulgated under Section 162(m) of the
Internal Revenue Code) received by such Recipient in any year, would exceed
$1,000,000. In such event, the Restricted Period for Deferred Shares shall
terminate if, and to the extent that, such Recipient's taxable income allocable
to Deferred Shares, when added to such Recipient's other income that is not
"performance-based," for any year, shall equal $1,000,000. The performance
targets, if any, and the number of Restricted Shares affected will be set forth
in the notice that will be given to the Recipient advising him of the allocation
of Restricted Shares.
(d) The restrictions to which Restricted Shares shall be
subject shall be as follows:
During the Restricted Period applicable to such shares and
except as otherwise specifically provided in the Plan, none of
such shares shall be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of.
7. Forfeiture of Restricted Shares.
(a) If the employment of a Recipient should be terminated
during the Restricted Period on account of his death, or on account of his
retirement after attaining age sixty-three (63), he shall forfeit and return to
the Company the unvested portion of the Restricted Shares that have been issued
to him. For this purpose, it will be assumed that Restricted Shares are vested
ratably over the one hundred and twenty (120) month period after the Restricted
Shares are allocated. The Restricted Period shall automatically terminate for
such vested Restricted Shares, and the Company shall release to the Recipient,
or the duly qualified personal representative of a deceased Recipient, a
certificate for such vested Restricted Shares, without restrictions.
(b) If the employment of a Recipient should be terminated
during the Restricted Period other than on account of his death or retirement
after attaining age sixty-three (63), he shall forfeit and return to the Company
all of the Restricted Shares that have been allocated to him.
(c) Nothing contained in this Section 7 or elsewhere in this
Plan shall preclude the transfer of vested Restricted Shares, on the death of
the Recipient, to his legal representatives or his estate or preclude such
representatives from transferring such shares, or any of them, to the person or
persons entitled thereto by will or by the laws of descent and distribution.
(d) All notices in writing required pursuant to this Section 7
shall be sufficient only if actually delivered or if sent via registered or
certified mail, postage prepaid, to the Company at its principal office within
the City of Richmond, Virginia, and shall be conclusively deemed given on the
date of delivery, if delivered or on the first business day following the date
of such mailing, if mailed.
8. Finality of Determinations. The Committee shall administer this Plan
and construe its provisions; any determination by the Committee in carrying out,
administering or construing this Plan shall be final and binding for all
purposes and upon all interested persons and their heirs, successors, assigns
and personal representatives.
9. Limitations. No person shall at any time have any right to receive
an allocation of Restricted Shares hereunder, and no person shall have authority
to enter into an agreement for the making of an allocation or to make any
representation or warranty with respect thereto.
Recipients of allocations shall have no rights in respect thereof
except as set forth in the Plan. Such rights may not be assigned or transferred
except by will or by the laws of descent and distribution, and in the event that
any attempt shall be made to sell, exchange, transfer, pledge, hypothecate or
otherwise dispose of any Restricted Shares held by the Recipient during the
Restricted Period then the shares which are the subject of such attempted
disposition shall be deemed to be forfeited. Before the actual issuance of
Restricted Shares, no such shares shall be earmarked for the Recipients'
accounts, nor shall the Recipients have any rights as stockholders with respect
to such shares.
Neither the action of the Company in establishing the Plan, nor any
action taken by it or by the Board or the Committee under the Plan, nor any
provision of the Plan, shall be construed as giving to any person the right to
be retained in the employ of the Company of any Subsidiary.
10. Amendment, Suspension or Termination of the Plan in Whole or in
Part. The Board may amend, suspend or terminate the Plan in whole or in part at
any time, provided that any amendment shall not adversely affect rights or
obligations with respect to allocations theretofore made; and provided further,
that no modification of the Plan by the Board without approval of the
stockholders shall (a) increase the maximum number of Restricted Shares reserved
pursuant to Section 3; (b) change the provisions of Section 3 with respect to
the aggregate number of Restricted Shares which may be allocated under the Plan;
or (c) render any member of the Committee eligible to receive an allocation at
any time while he is serving on the Committee.
11. Waiver of Vesting and Benefit Accrual Limitations. The Board may,
in its sole discretion, waive, modify or amend all or any portion of the
provisions of the Plan that have the effect of limiting the amount or the timing
of payments that are to be made under the plan, provided that such waiver,
modification or amendment shall not adversely affect rights or obligations with
respect to allocations theretofore made. Such action by the Board may be made on
a case by case basis or may be made with respect to all Recipients.
12. Governing Law. The Plan shall be governed by the laws of the
Commonwealth of Virginia.
13. Expenses of Administration. All costs and expenses incurred in the
operation and administration of this Plan shall be borne by the Company.
14. Registration of Restricted Shares. The Company shall proceed
promptly to register under the Securities Act of 1933 (or similar statute then
in effect) all Restricted Shares to the extent that such registration is
required under the regulations of the Securities and Exchange Commission.
The Company at its expense will furnish to each Recipient such number
of prospectuses incident to any such registration and indemnify each such
Recipient against all claims, losses, damages and liabilities caused by any
untrue statement of a material fact contained therein (or in any related
registration statement or by any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same may have been caused by an untrue
statement or omission based upon information furnished in writing to the Company
by such Recipient expressly for use therein; and, as a condition precedent to
the obligations of the Company pursuant to this Section 14, each Recipient will
agree in writing to indemnify the Company against all claims, losses, damages
and liabilities caused by an untrue statement or omission based upon information
furnished to the Company by such Recipient expressly for use therein.
The Recipient shall furnish the Company such information that may be
required and shall fully cooperate with the Company in connection with any
registration or filing that may be required at any time with respect to the
Restricted Shares.
MEDIA GENERAL, INC.
DIRECTORS' DEFERRED COMPENSATION PLAN
1. Purpose. The purpose of the Media General, Inc. Directors' Deferred
Compensation Plan (the "Plan") is to encourage and enable each member of the
Board of Directors (the "Board") of Media General, Inc. (the "Company") who is
not and has never been an employee of the Company (a "Director") to increase his
or her proprietary interest in the Company and to align his or her interests
more closely with the shareholders of the Company through the receipt of
Deferred Stock Units representing fifty percent or more of the annual
compensation payable to each Director for his or her services to the Board.
2. Definitions.
a) "Act" shall mean The Securities Exchange Act of 1934, as
amended.
b) "Annual Director's Fee" shall mean the annual retainer fee
paid quarterly by the Company to each Director, which fee may be modified from
time to time, and which shall include all Director compensation, including
attendance at Board and committee meetings. For any Director who shall have
failed to attend at least 75 percent of the Board meetings in the prior fiscal
year, the Annual Director's Fee shall exclude the amount otherwise payable on
the first Quarterly Payment Date.
c) "Award Value" shall mean the average of the closing trading
prices of a share of Common Stock on the exchange on which the Common Stock then
is traded for the last ten trading days of the prior calendar year, as reported
in The Wall Street Journal.
d) "Beneficiary" shall mean that person, including a trust,
designated by a Director in writing to the Committee to receive any benefits
that may become due under this Plan following the death of such Director.
e) "Code" shall mean the Internal Revenue code of 1986, as
amended.
f) "Committee" shall mean the Compensation Committee as
appointed from time to time by the Board, and which shall consist of two or more
"non-employee directors" as that term is defined in Rule 16b-3 of the Act.
g) "Common Stock" shall mean the Class A Common Stock of the
Company.
h) "Deferred Cash Account" shall mean the book entry account
established and maintained solely to record and measure future benefits to be
distributed to each Director who may have elected to have half of his or her
Annual Director's Fee deferred in cash. The balance in a Deferred Cash Account
shall be increased on the last business day of each quarter by an amount equal
to three months of simple interest earned as computed under the same method as
that of the deferred compensation plan offered to certain Company employees.
i) "Deferred Stock Unit" shall mean a hypothetical share of
Common Stock, and each Deferred Stock Unit credited to a DSU Account shall be
deemed to have the same value, calculated from time to time, as a share of
Common Stock.
j) "Dividend Account" shall mean the book entry account
established and maintained for each Director to record the conversion of
Dividend Equivalents into Deferred Stock Units in accordance with Section 5 of
the Plan.
k) "Dividend Equivalents" shall mean an amount of hypothetical
cash dividends on Common Stock upon which Deferred Stock Units are credited to a
Dividend Account, and which are determined by (i) multiplying the Company's
quarterly dividend per share by the number of Deferred Stock Units in a DSU
Account as of the Record Date, and (ii) by dividing that amount by the Fair
Market Value of a share of Common Stock as of the Dividend Payment Date.
l) "Dividend Payment Date" shall mean that date upon which the
Company's quarterly dividends are payable.
m) "DSU Account" shall mean the book entry account established
and maintained solely to record and measure the future benefits to be
distributed based upon the collective record of a Director's Stock Unit Account
and Dividend Account.
n) "Effective Date" shall mean January 1, 1997.
o) "Fair Market Value" shall mean the average of the closing
trading prices, as reported in The Wall Street Journal, of a share of Common
Stock on the exchange on which the Common Stock then is traded for the ten
trading days immediately preceding the date on which the determination of value
is made.
p) "Outside Directors Retirement Agreement" shall mean the
agreement between the Company and each Director serving on the Board on the
Effective Date, the benefits of which shall be converted into Deferred Stock
Units under Section 9 of the Plan.
q) "Quarterly Payment Date" shall mean each of the four dates
established by the Company for payment of the Annual Director's Fee, and which
shall be the dates on which Deferred Stock Units will be credited to the Stock
Unit Account and the Dividend Account.
r) "Record Date" shall mean the date upon which ownership of
Common Stock entitles such owner to receive quarterly dividends.
s) "Retirement" shall mean the effective date of the
termination of the services of a Director for any reason.
t) "Stock Unit Account" shall mean the book entry account
established and maintained for each Director to record the Deferred Stock Units
to be credited to a Director pursuant to Section 4 of the Plan.
3. Administration. The Plan is an unfunded deferred compensation
arrangement and shall be administered, interpreted and construed by the
Committee, provided that the Secretary or the Treasurer of the Company shall be
authorized to take such ministerial actions as may be necessary to effectuate
the instructions of the Committee and the Plan. All elections permitted or
required under the Plan will be made by filing written notice thereof with the
Secretary or Treasurer of the Company.
4. Deferrals; Further Elections. A minimum of fifty percent (50%) of
each Director's Annual Director's Fee shall be paid by the Company in Deferred
Stock Units. Each Director annually may elect to defer the balance of his or her
Annual Director's Fee in either Deferred Stock Units or cash for the following
year by filing a written notice of such election with the Treasurer of the
Company no later than December 31 of the prior calendar year. Current Directors
shall file any such elections prior to April 1, 1997 with respect to the
remaining portion of the 1997 Annual Director's Fee; Directors elected after the
Effective Date shall file any such election promptly upon the commencement of
services to the Board. The amount of Deferred Stock Units to be credited to a
Director's Stock Unit Account shall be determined annually for each Quarterly
Payment Date during the calendar year by dividing (a) the portion of the Annual
Director's Fee to be deferred in Deferred Stock Units by (b) the Award Value.
The amount of cash to be credited to a Director's Deferred Cash Account, if any,
shall be the portion of the Annual Director's Fee payable on the Quarterly
Payment Date. Any portion of an Annual Director's Fee to be paid in cash without
deferral also shall be paid on the Quarterly Payment Date.
5. Dividend Equivalent Award.Directors shall not be entitled to any
rights of a holder of Common Stock by reason of DSU Accounts credited with
Deferred Stock Units, except that Deferred Stock Units credited to Dividend
Accounts shall be increased by Dividend Equivalents determined and credit as of
each Dividend Payment Date.
6. Settlement of Account Balance. The aggregate number of Deferred
Stock Units credited to a Director's DSU Account and the balance, if any,
credited to a Director's Deferred Cash Account will be distributed according to
such Director's election, which, to be effective, must be submitted in writing
to the Secretary or Treasurer of the Company no more than thirty days after such
Director's Retirement. A Director may elect to have his or her DSU Account
balance settled in a cash lump sum payment as of his or her Retirement date, in
a single distribution of Common Stock as of such date or in annual installments
of either cash or Common Stock over a period up to ten years. A Director may
elect to have his or her Deferred Cash Account balance settled in a cash lump
sum payment as of his or her Retirement date or in annual installments of cash
over a period up to ten years. In the absence of a timely election, a Director's
DSU Account balance will be settled in a single Common Stock distribution as of
his or her Retirement date and his or her Deferred Cash Account balance will be
settled in a single cash lump sum payment as of his or her Retirement date.
For single distributions of Common Stock from a DSU Account, the number
of shares of Common Stock to be distributed shall equal the number of Deferred
Stock Units available for distribution on the Director's Retirement date. In the
event annual installments of Common Stock are elected, the number of shares of
Common Stock distributable over the installment period shall be determined
annually as follows: (a) the number of Deferred Stock Units then credited to a
DSU Account (such calculation to include increases in the Dividend Account by
reason of Dividend Equivalents, and decreases in the DSU Account by reason of
prior distributions) shall be divided by (b) the number of installment payments
remaining in the designated installment term (including the current installment
payment date). Any fractional shares shall be retained in the Director's DSU
Account until the date of the last installment payment, at which time any
fractional share shall be paid in cash based upon the Fair Market Value a of the
trading day immediately preceding any such annual installment payment date.
The amount of cash subject to distribution from a DSU Account shall be
determined as follows: (a) the number of Deferred Stock Units in a Director's
DSU Account on the Director's Retirement date shall be multiplied by (b) the
Fair Market Value of the Common Stock as of such date. For a single distribution
from a Director's Deferred Cash Account, the amount to be distributed shall be
the balance in his or her Deferred Cash Account as of the Director's Retirement
Date. In the event annual distributions of cash are elected, the payment amounts
distributable over the installment period shall be determined annually as
follows: (a) the balance in the Director's Deferred Cash Account shall be
divided by (b) the number of installment payments remaining in the designated
installment term (including the current installment payment date).
In the event annual installments of cash are selected, the DSU Account
balance, and the Deferred Cash Account balance, if any, shall be increased on
the last business day of each quarter by an amount equal to three months of
simple interest earned as computed under the same method as that of the deferred
compensation plan offered to certain Company employees.
If a Director dies before all amounts credited to such Director's DSU
Account and Deferred Cash Account have been distributed, the balance will be
distributed to such Director's Beneficiary in the manner previously designated
by the Director or, in the absence of such designation, in the manner specified
timely by the Beneficiary. If a Director dies without designating a Beneficiary,
or if the designated Beneficiary predeceases the Director, the balance in the
Director's DSU Account and Deferred Cash Account will be distributed to the
executor or administrator of such Director's estate, in the manner previously
designated by the Director or, in the absence of such designation, in the manner
specified timely by the executor or administrator.
7. Nonassignability and General Rights. Neither participation in, nor
the right to receive any payments under, the Plan will give any Director or
Beneficiary a proprietary interest in the Company or any of its assets. A
Director or Beneficiary will for all purposes be deemed to be a general creditor
of the Company and shall not have any security interest in, or lien against, any
assets deemed to be associated with any Deferred Cash Account, Dividend Account,
DSU Account or Stock Unit Account. The rights of a Director or Beneficiary under
the Plan cannot be assigned or pledged and will not be subject to the claims of
creditors of the Director or Beneficiary.
8. Amendment. The Board of Directors will have the right to modify this
Plan from time to time, with shareholder approval to the extent required by Rule
16b-3, or to terminate the Plan entirely; provided, however, that no
modification or termination of the Plan will operate to annul an election
already in effect for the fiscal year in which such modification or termination
is effective, or to adversely affect the rights of a Director or Beneficiary to
receive distributions as provided herein.
9. Conversion of Retirement Benefit. As a condition to participation in
the Plan, each Director participating in the Outside Director Retirement Plan
agrees that his or her annual vested accrued benefit in the Outside Director
Retirement Plan, as of the Effective Date, shall be converted into Deferred
Stock Units, as of the Effective Date, in accordance with Exhibit A hereof.
10. General Restrictions. The issuance of Common Stock or the delivery
of certificates therefor to or for the benefit of Directors hereunder shall be
subject to the requirement that, if the listing, registration or qualification
of such shares upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental body, shall be necessary or
desirable as a condition of, or in connection which, such issuance and delivery
thereunder, such issuance or delivery shall not take place unless such listing,
registration, qualification, consent or approval shall have been effected
promptly and in a manner acceptable to the Company.
11. Change in Capital Structure. In the event of any change in the
Common Stock by reason of any stock dividend, spin-off, split, combination of
shares, exchange of shares, warrants or rights offering to purchase Common Stock
at a price below its fair market value, reclassification, recapitalization,
merger, consolidation or other change in capitalization, appropriate adjustment
shall be made by the Committee in the number and kind of Deferred Stock Units
subject to the Plan and any other relevant provisions of the Plan, whose
determination shall be binding and conclusive on all persons.
12. Governing Law. The Plan shall be construed and enforced pursuant to
the laws of the Commonwealth of Virginia.
13. Term. The Plan shall remain in effect until amended or terminated
by action of the Board as provided herein.
<PAGE>
Exhibit A
<TABLE>
<CAPTION>
Converted
Annual Vested Number of
Year of Accrued Effective Date Deferred
Director Election Benefit Present Value Stock Units
- -------- -------- ------- ------------- -----------
<S> <C>
Davis 1989 $10,500 $80,239 2,650
Hatcher 1991 9,000 68,776 2,250
Valentine 1991 7,500 57,314 1,900
Black 1993 6,000 45,851 1,500
Medlin 1994 4,500 34,388 1,150
Robertson 1996 1,500 11,463 400
</TABLE>
ASSET PURCHASE AGREEMENT
BETWEEN
MEDIA GENERAL NEWSPAPERS, INC., AS SELLER
AND
NEWSPAPER HOLDINGS, INC., AS BUYER
Dated as of February 13, 1997
<PAGE>
<TABLE>
<S> <C>
TABLE OF CONTENTS
Page
ARTICLE 1
SALE AND TRANSFER
1.1 The Sale.............................................................................................1
1.2 Excluded Assets......................................................................................4
1.3 Assumption of Obligations and Liabilities............................................................4
ARTICLE 2
PURCHASE PRICE CLOSING ADJUSTMENTS
2.1 Purchase Price.......................................................................................5
2.2 Working Capital Settlement...........................................................................6
ARTICLE 3
THE CLOSING
3.1 Time and Place of Closing............................................................................9
3.2 Deliveries by Seller................................................................................10
3.3 Deliveries by Buyer.................................................................................10
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
4.1 Organization........................................................................................11
4.2 Authority Relative to this Agreement................................................................11
4.3 Noncontravention; Consents and Approvals............................................................11
4.4 Brokers and Finders.................................................................................12
4.5 Title...............................................................................................12
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Organization........................................................................................13
5.2 Authority Relative to this Agreement................................................................13
5.3 Noncontravention; Consents and Approvals............................................................13
5.4 Brokers and Finders.................................................................................14
5.5 Hart-Scott-Rodino...................................................................................14
ARTICLE 6
COVENANTS OF THE PARTIES
6.1 Conduct of Business.................................................................................14
6.2 Access to Information...............................................................................15
6.3 Employees and Employee Benefits.....................................................................15
6.4 Consummation of Agreement...........................................................................18
6.5 Public Announcements................................................................................18
6.6 Solicitation of Employees...........................................................................18
6.7 Insurance...........................................................................................19
6.8 Woodbridge Assets...................................................................................19
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF BUYER
7.1 Representations and Warranties......................................................................20
7.2 Covenants...........................................................................................20
7.3 Certificates........................................................................................20
- i -
<PAGE>
Page
7.4 Certain Proceedings.................................................................................20
7.5 Opinion of Counsel..................................................................................21
7.6 Document Delivery; Other Action.....................................................................21
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF SELLER
8.1 Representations and Warranties......................................................................21
8.2 Covenants...........................................................................................21
8.3 Certificates........................................................................................22
8.4 Certain Proceedings.................................................................................22
8.5 Opinion of Counsel..................................................................................22
8.6 Document Delivery; Other Action.....................................................................22
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 Non-Survival of Representations, Warranties and
Covenants...........................................................................................22
9.2 Termination.........................................................................................23
9.3 Expenses............................................................................................25
9.4 Amendment and Modification..........................................................................25
9.5 Waiver of Compliance; Consents......................................................................25
9.6 Notices.............................................................................................26
9.7 Assignment..........................................................................................27
9.8 Governing Law.......................................................................................27
9.9 Consent to Jurisdiction, etc........................................................................27
9.10 Counterparts........................................................................................27
9.11 Interpretation......................................................................................27
9.12 Entire Agreement....................................................................................28
9.13 Severability........................................................................................28
9.14 Cooperation With Respect to Like-Kind Exchange......................................................28
9.15 Cooperation With Respect to Tax and Accounting
Records.............................................................................................28
9.16 Glossary of Defined Terms...........................................................................29
</TABLE>
- ii -
<PAGE>
EXHIBITS
Exhibit A - Publications and Related Assets
Exhibit B - Pre-Closing Statement of Assets and Liabilities
Exhibit C - Closing Date Statement of Assets and Liabilities
Exhibit D - Assignment and Assumption Agreement
Exhibit E - Seller's Officer's Certificate
Exhibit F - Opinion of Counsel to Seller
Exhibit G - Buyer's Officer's Certificate
Exhibit H - Opinion of Counsel to Buyer
SCHEDULES
1.1(a) - Real Property
1.1(f) - Trade Names, Trademarks, Service Marks
1.1(g) - Copyrights
4.3(a) - Transaction Conflicts
- iii -
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is entered
into as of this 13th day of February, 1997, between Media General Newspapers,
Inc. (formerly known as "Park Newspapers, Inc.), a Delaware corporation
("Seller") and Newspaper Holdings, Inc. a Delaware corporation ("Buyer").
PRELIMINARY STATEMENTS
A. Seller owns and operates the publications and
related assets listed on Exhibit A attached hereto (the
"Newspapers").
B. Buyer desires to acquire the ongoing businesses and all of
such assets owned by Seller as of the Closing and used directly and exclusively
in connection with the operation of the Newspapers consistent with past
operations at each of their respective locations (except assets specifically
excluded herein), and to assume all of the liabilities related to the Newspapers
(except liabilities specifically excluded herein) and Seller desires to sell
such businesses and assets, and to assign such liabilities, to Buyer, upon the
terms and conditions stated herein.
In consideration of the mutual covenants and agreements set
forth herein, and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
SALE AND TRANSFER
1.1 The Sale. Upon the terms and subject to the conditions set
forth in this Agreement, on the Closing Date (as defined in Section 3.1 hereof),
Seller agrees to sell, assign, transfer and deliver to Buyer, and Buyer agrees
to purchase and accept from Seller free and clear of all liens, mortgages or
security interests ("Liens"), except as expressly permitted in Section 3.2(a)
hereof, all of the assets and properties of Seller, whether real, personal,
tangible or intangible, which are owned by Seller and used directly and
exclusively in connection with the Newspapers at each of their respective
locations consistent with past operations (specifically excepting the Excluded
Assets described in Section 1.2 hereof), including all additions thereto through
and including the Closing Date, but less all dispositions thereof as permitted
pursuant to Section 6.1 hereof through and including the Closing Date, such
assets and properties being referred to herein as the "Assets," and including
without limitation the following:
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(a) Seller's parcels of real property owned in
fee and used directly and exclusively in the ownership or operation of the
Newspapers consistent with past operations, and all buildings, structures and
other improvements located thereon, and all easements, rights of way and similar
authorizations used directly and exclusively in the conduct of the business and
operations of the Newspapers consistent with past operations, including the
parcels of real property owned in fee and easements, rights of way and similar
authorizations which are described in Schedule 1.1(a);
(b) All of the tangible personal property which
is owned and used directly and exclusively in the conduct of the business and
operations of the Newspapers consistent with past operations at each of their
respective locations, including furniture, fixtures, machinery, equipment and
vehicles (but expressly excluding headquarters assets or property wherever
located including, but not limited to, laptop computers and audio/visual
presentation equipment);
(c) All contracts, agreements, options, leases
and commitments of Seller which are related to the conduct of the business and
operations of the Newspapers, whether oral or written, express or implied,
including leases of property used directly and exclusively in the operations of
the Newspapers consistent with past operations, rights and interests in and
under purchase contracts for new equipment, including purchase price deposits,
newsprint agreements (limited, however, to those agreements for the period
ending on or before December 31, 1996 and those agreements solely attributable
to the Newspapers), advertising sales and newspaper distribution contracts,
supplier contracts, advertising service contracts, all service and feature or
other information provider contracts and all noncompetition agreements and
consulting agreements (all of such contracts, agreements, options, leases or
commitments are sometimes referred to herein collectively as the "Contracts");
(d) All orders for the sale of advertising and
subscriptions which relate to the Newspapers;
(e) All permits, licenses and authorizations
issued by local, state and federal authorities, and applications therefor, which
are held by Seller or any Newspaper, that are used directly and exclusively in
the conduct of the business of any Newspaper consistent with past operations;
(f) All mastheads, trade names, trademarks,
service marks, service names and other similar intangible rights
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and interests, including, without limitation, the trade names, trademarks and
service marks described in Schedule 1.1(f) to the extent Seller has rights
thereto, and the goodwill associated therewith, which are used directly and
exclusively in connection with the business and operations of the Newspapers
consistent with past operations;
(g) All artwork, copyrights and other ownership
rights directly and exclusively related to the contents of the Newspapers
consistent with past operations, including, without limitation, the copyrights
described in Schedule 1.1(g) to the extent Seller has rights thereto, all copies
of previously published editions of the Newspapers, the Newspapers' morgue or
library and copies of all material files, financial information and all
accounting records relating to the assets or operations of the Newspapers and
located at any offices or facilities of the Newspapers;
(h) All prepaid taxes (excluding income taxes)
and expenses with respect to the business and operations of the
Newspapers;
(i) All inventories of newsprint, ink, film,
photographic paper and plates, spare parts, supplies, fuel and other consumable
items used directly and exclusively in connection with the business and
operations of the Newspapers consistent with past operations and located at the
locations of the Newspapers;
(j) All surety bonds, surety deposits and
security deposits posted by or on behalf of Seller as security for its or the
Newspapers' performance of any Contract or obligation to be assumed by Buyer
pursuant to this Agreement;
(k) All cash bonds and trust accounts related to
carriers for the Newspapers;
(l) All subscriber, advertiser and trade accounts
receivable due to Seller as a result of the business and
operations of the Newspapers prior to the Closing Date; and
(m) Seller's records, files and data used
directly and exclusively in the business and operations of the Newspapers
consistent with past operations, including maps, plans, diagrams, engineering
data, blueprints and schematics, if any.
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1.2 Excluded Assets. Notwithstanding anything
contained herein to the contrary, the following properties and
assets (the "Excluded Assets") shall be retained by Seller and
shall not be sold, assigned or transferred to Buyer:
(a) all of Seller's cash in its bank accounts;
(b) except as specifically provided for herein,
any Employee Plan (as defined below);
(c) all tangible personal property disposed of
(not to exceed an amount equal to $10,000) or consumed in the ordinary course of
the business of Seller between the date of this Agreement and the Closing Date;
(d) all contracts of insurance and all insurance
plans and the assets thereof and all bonds, letters of credit or
similar items and any cash surrender value in regard thereto;
(e) Seller's minute books, stock ledgers and
other books and records that pertain to internal matters of Seller and Seller's
account books of original entry with respect to any Newspaper or any Assets, and
all original accounts, checks, payment records, tax records (including payroll,
unemployment, real estate and other tax records) and other similar books,
records and information of Seller relating to Seller's operation of the business
of any Newspaper or any Assets, prior to Closing; and
(f) any assets owned by Seller not constituting
Assets, including without limitation, any assets not used directly and
exclusively in the business of the Newspapers consistent with past operations
and any of Seller's federal or state income taxes receivable (including deferred
taxes) or any of Seller's intercompany receivables from affiliates.
1.3 Assumption of Obligations and Liabilities. As of,
and from and after, the Closing Date, Buyer shall assume, pay,
discharge and perform the following:
(a) all the obligations and liabilities of Seller
under, arising out of, or relating to the Contracts, whether arising before or
after the Closing, including, without limitation, all obligations and
liabilities of Seller to the extent that any adjustment is made or is to be made
in connection therewith in Buyer's favor pursuant to Section 2.2 hereof;
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(b) all obligations and liabilities of Seller
attributable to the Newspapers arising out of noncompetition agreements,
covenants not to compete, consulting agreements and similar agreements and
arrangements, whether oral or written and whether arising before or after the
Closing;
(c) all state and local sales or transfer taxes
payable as a consequence of the sale of the assets of the Newspapers
contemplated hereby; provided, however that Seller shall be liable for its share
of such taxes as provided for in Section 9.3 hereof; and
(d) all other obligations, liabilities, duties,
claims, demands, actions, commitments, costs or expenses, known or unknown,
matured or contingent, arising out of, relating to or attributable to the
ownership or operation of the Newspapers or the Assets, whether arising before
or after the Closing.
It is understood and agreed that notwithstanding the
foregoing, Buyer is not assuming any of Seller's obligations for federal or
state income taxes payable (including deferred taxes) or any of Seller's
intercompany obligations with affiliates, including but not limited to
intercompany management and accounting fees payable.
ARTICLE 2
PURCHASE PRICE CLOSING ADJUSTMENTS
2.1 Purchase Price.
(a) In consideration of One Hundred Seven Million
Dollars ($107,000,000) (the "Purchase Price"), at the Closing (as hereinafter
defined), Seller agrees to sell, transfer and assign the Assets to Buyer, and
Buyer agrees to purchase and accept the Assets and assume the liabilities and
obligations referred to in Section 1.3 from Seller. Such Purchase Price shall be
paid with the following amounts of cash and/or assets:
(i) If Buyer does not consummate the
purchase of substantially all of the assets of The Potomac News in Woodbridge,
Virginia and certain related newspapers (the "Woodbridge Assets") prior to the
Closing, such Purchase Price shall be paid entirely in cash.
(ii) If Buyer consummates the purchase of
the Woodbridge Assets prior to the Closing, such Purchase Price shall be paid by
delivery of the Woodbridge Assets pursuant to Section 6.8 hereof, plus cash in
the amount of $59,000,000, decreased to
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the extent Buyer is obligated to pay more than $48,000,000 for the Woodbridge
Assets at the closing thereof pursuant to working capital or other price
adjustments required under the Woodbridge Purchase Agreement (as hereinafter
defined), or increased to the extent Buyer is obligated to pay less than
$48,000,000 for the Woodbridge Assets at the closing thereof pursuant to working
capital or other price adjustments required under the Woodbridge Purchase
Agreement.
(b) At the Closing Buyer shall cause the cash
portion of the Purchase Price to be paid to Seller by wire transfer of
immediately available funds to a bank account to be designated by Seller.
2.2 Working Capital Settlement.
(a) For purposes of this Agreement, the following
terms shall have the following meanings:
(i) "Current Liabilities" shall be all the
current liabilities attributable to the operations of the Newspapers, determined
in accordance with generally accepted accounting principles ("GAAP") as of 11:59
p.m. on February 13 (the "Adjustment Time") (but expressly excluding any sales
or transfer taxes arising as a consequence of the transactions contemplated by
this Agreement, except as and to the extent of Seller's obligations in respect
thereof as provided for in Section 9.3 hereof), such current liabilities to be
determined using the same accounting methods, practices and policies used by
Seller prior to the execution of the Agreement and Plan of Merger dated as of
July 19, 1996 (as such Agreement may be amended or modified), (the "Merger
Agreement") among Media General, Inc., MG Acquisitions, Inc. and Park
Acquisitions, Inc., irrespective of the amounts reflected in the financial
statements relating to the Newspapers or any changes to such methods practices
and policies instituted since the execution of the Merger Agreement (such
accounting methods, practices and procedures being referred to as the
"Pre-Merger Accounting Practices)"; for purposes of clarification, it is
understood and agreed that "Current Liabilities" shall (i) include the amount
regularly scheduled and due and payable during calendar year 1997 under the
noncompetition agreements, covenants not to compete, consulting agreements and
similar agreements or arrangements attributable to the Newspapers being assigned
by Buyer under this Agreement and the Assumption Agreement; and (ii) exclude
federal and state income taxes payable (including the current portion of
deferred income taxes) and intercompany payables with affiliates,
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including but not limited to intercompany management and
accounting fees payable.
(ii) "Current Assets" shall be the
following, to the extent such items are transferred to Buyer, determined in
accordance with GAAP as of the Adjustment Time and using the Pre-Merger
Accounting Practices:
(A) Accounts receivable attributable
to the Newspapers; provided that an adequate allowance for doubtful accounts
determined in accordance with GAAP shall be made;
(B) All prepaid expenses
attributable to the Newspapers;
(C) Inventory attributable to the
Newspapers;
(D) Deposits attributable to the
Newspapers classified as current assets; and
(E) All other current assets
attributable to the Newspapers, excluding cash retained by Seller, federal and
state income taxes receivable (including the current portion of deferred income
taxes) and intercompany receivables with affiliates;
(iii) "Working Capital Deficit" shall mean the amount by
which the Current Liabilities exceed the Current Assets.
(iv) "Working Capital Surplus" shall mean the amount by which
the Current Assets exceed Current Liabilities.
(b) At the Closing, Seller shall prepare and
deliver to the Buyer an estimated Statement of Assets and Liabilities,
substantially in the form of Exhibit B attached hereto, as of the Adjustment
Time (the "Pre-Closing Statement of Assets and Liabilities") for the Newspapers
setting forth the Current Assets and Current Liabilities, as of the Adjustment
Time in accordance with the terms of this Agreement; provided that it is
understood and agreed that in preparing the foregoing estimate, Seller has used
computations as of January 31, 1997, but final adjustments pursuant to
subparagraphs (d) and (e) below shall be made as of the Adjustment Time.
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(c) At the Closing, in the event that the Pre-
Closing Statement of Assets and Liabilities has a Working Capital Deficit,
Seller shall remit to Buyer's lenders, in accordance with written instructions
provided by Buyer to Seller at the Closing, by wire transfer at the Closing an
amount equal to such deficit. Conversely, in the event that the Pre-Closing
Statement of Assets and Liabilities has a Working Capital Surplus, Buyer shall
remit to Seller by wire transfer at the Closing an amount equal to such surplus,
subject to the following sentence. At the Closing, if there is a Working Capital
Surplus, Buyer shall be required to make payment in respect of such Working
Capital Surplus to the extent that the total amount to be paid at Closing by
Buyer in respect of (i) the Purchase Price; (ii) Buyer's estimated share of
state and local sales and transfer taxes payable by it (taking into account the
reimbursement by Seller provided for herein) as a consequence of the sale of the
assets of the Newspapers contemplated hereby, as determined pursuant to Section
9.3 hereof; and (iii) the Working Capital Surplus, does not exceed $107,500,000.
If the sum of the foregoing amounts in the preceding sentence exceeds
$107,500,000 at Closing, Buyer and Seller shall indicate on the Pre-Closing
Statement of Assets and Liabilities the amount of the Working Capital Surplus
not paid by Buyer at Closing. Any amount not paid at Closing shall be paid in
full by Buyer within 30 days after the Closing by wire transfer of immediately
available funds to a bank account to be designated by Seller. Buyer acknowledges
and agrees that to the extent it fails to make any such payment in respect of
the remaining Working Capital Surplus within such 30 day period, in addition to
making payment of such amount, Buyer shall be required to reimburse Seller,
immediately upon submission of request therefor by Seller, for all reasonable
out-of-pocket legal fees or other expenses incurred by Seller in enforcing
Buyer's promise to pay such amount.
(d) Within sixty (60) days after the Closing,
Buyer shall prepare a Statement of Assets and Liabilities, substantially in the
form of Exhibit C attached hereto, as of the Adjustment Time (the "Closing Date
Statement of Assets and Liabilities") setting forth the Current Assets and
Current Liabilities, as of the Adjustment Time, in accordance with the terms of
this Agreement, and submit such statement to Seller for review and approval.
(e) Within thirty (30) days after receipt of the
Closing Date Statement of Assets and Liabilities, Seller shall notify Buyer of
any objections Seller may have to the Closing Date Statement of Assets and
Liabilities. Without limiting any other provision of this Agreement, Buyer shall
grant Seller and
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its authorized representatives with access during normal business hours, to the
books and records of the Newspapers (including the right to make copies thereof)
for purposes of permitting Seller to verify the Closing Date Statement of Assets
and Liabilities and to determine any objections thereto that Seller may have. In
the absence of any such objections, Seller shall be deemed to have approved the
Closing Date Statement of Assets and Liabilities for purposes of the adjustment
to be made pursuant to this subsection 2.2(e). If Seller notifies Buyer of any
such objections, Buyer and Seller shall attempt to resolve such objections in
good faith for a period of thirty (30) days from the date of such notice of
objections. If any objections of Seller cannot be resolved by Seller and Buyer
within such thirty (30) day period, such dispute shall immediately be referred
to a mutually satisfactory independent certified public accounting firm of
national reputation which has not been employed by any of Seller, Media General,
Inc. or Buyer during the one year period preceding the date of such referral,
and which has agreed to meet the time deadlines imposed herein. The
determination of such firm with respect to such dispute, which shall occur on or
prior to ninety (90) days after Seller's receipt of the Closing Date Statement
of Assets and Liabilities, shall be conclusive and binding on Seller and Buyer.
In the event Buyer and Seller are unable to agree on the selection of such
independent certified public accounting firm, the parties shall refer the
selection of such firm to the American Arbitration Association, whose selection
shall be conclusive and binding on Seller and Buyer. Seller and Buyer shall each
pay one-half of the fees of such firm (and the fees, if any, of the American
Arbitration Association).
(f) If, based on the Closing Date Statement of
Assets and Liabilities as finally approved, it is determined that the amount, if
any, paid by Buyer at the Closing in accordance with subsection 2.2(d) should
have been more or less than what was paid on the Closing Date, then within three
(3) days of the final approval of Closing Statement of Assets and Liabilities in
accordance with subsection 2.2(e), Buyer or Seller, respectively, shall pay to
the other the amount of such underpayment or overpayment.
ARTICLE 3
THE CLOSING
3.1 Time and Place of Closing. Subject to
(a) satisfaction or, to the extent permissible by law, waiver (by
the party for whose benefit the closing condition is imposed), on
the Closing Date of the closing conditions described in
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Articles 7 and 8, and (b) the provisions of Section 9.2 hereof, the closing of
the transactions contemplated by this Agreement (the "Closing") shall take place
at the offices of Dow, Lohnes & Albertson, PLLC, 1200 New Hampshire Avenue,
N.W., Washington, D.C. or at such other place as the parties shall mutually
agree, at 10:00 a.m., local time, on February 13, 1997 (the "Closing Date");
provided that Seller shall have the right to require that the Closing take place
on the same date as the transfer of the Woodbridge Assets to Buyer; and provided
further that in no event shall the Closing take place later than August 13,
1997(the "Termination Date").
3.2 Deliveries by Seller. At the Closing, Seller
shall deliver to Buyer (or Buyer's lender under subsection 3.2(d)
below) the following:
(a) Deeds to the parcels of real property owned
by Seller in fee to be transferred to Buyer hereunder, together with bills of
sale of personal property, assignments and other instruments of transfer and
conveyance, transferring and assigning to Buyer the Assets, free and clear of
all Liens, other than (i) liens for taxes not yet due and payable; (ii)
landlord's liens and statutory liens created in the ordinary course of business;
(iii) easements, rights of way, mineral rights or other restrictions
(governmental or otherwise) and encumbrances relating to property, which are
either of record or which individually or in the aggregate do not materially and
adversely affect or interfere with the use of such property in the business and
operations of the Newspapers as presently conducted; and (iv) those liens that
exist with respect to the Assets as of the Closing under the Merger Agreement;
(b) An Assignment and Assumption Agreement
substantially in the form annexed hereto as Exhibit D attached
hereto (the "Assumption Agreement");
(c) The opinions, certificates, consents and
other documents contemplated by Article 7 hereof; and
(d) The Indemnity Agreement dated of even date
herewith, executed by Media General, Inc. and Seller (the
"Indemnity Agreement"); and
(e) Any payments required to be made by Seller to
Buyer's lender under subsection 2.2(c) hereof.
3.3 Deliveries by Buyer. At the Closing, Buyer shall
deliver to Seller the following:
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(a) Funds equal to the Purchase Price and any
payments required to be made by Buyer at Closing under subsection
2.2(c) hereof;
(b) The Assumption Agreement; and
(c) The opinions, certificates and other
documents contemplated by Article 8 hereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
4.1 Organization. Seller is a corporation duly incorporated
and validly existing under the laws of the State of Delaware. Seller has all
requisite corporate power and authority to own, lease and operate its properties
(including, without limitation, the Assets) and to carry on its business as now
being conducted. Seller is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification necessary, other than in such jurisdictions where the failure to
be so qualified would not have a material adverse effect on the business,
assets, financial condition or results of operations of the Newspapers taken as
a whole (a "Material Adverse Effect").
4.2 Authority Relative to this Agreement. Seller has the full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby,
have been duly and validly authorized and approved by all necessary corporate
action by Seller. This Agreement, has been duly and validly executed and
delivered by Seller and, assuming this Agreement constitutes a legal, valid and
binding agreement of Buyer constitutes a legal, valid and binding agreement of
Seller, enforceable against Seller in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and to general principles of equity.
4.3 Noncontravention; Consents and Approvals.
(a) Except as set forth in Schedule 4.3(a),
assuming that all filings, permits, authorizations, consents and
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approvals or waivers thereof have been duly made or obtained pursuant to Section
4.3(b), the execution and delivery of this Agreement by Seller and the
consummation by Seller of the transactions contemplated hereby will not (i)
conflict with or result in any breach of any provisions of the certificate or
articles of incorporation or bylaws of Seller, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture or other evidence or instrument of, or agreement relating to,
indebtedness to which Seller is a party or by which it or any of its properties
or assets are bound, (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation, or acceleration) under, any of the
terms, conditions or provisions of any license, agreement or other instrument or
obligation to which Seller is a party or by which it or any of its properties of
assets is bound, or (iv) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Seller or any of its properties or assets,
excluding from the foregoing clauses (ii), (iii) and (iv) violations, breaches
or defaults that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(b) Assuming the accuracy of the representations
and warranties of Buyer set forth in Article V hereof, no filing or registration
with, or notification to, and no permit, authorization, consent or approval of,
any governmental entity is necessary for the execution and delivery of this
Agreement by Seller or the consummation by Seller of the transactions
contemplated by this Agreement, except (i) such filings, registrations,
notifications, permits, authorizations, consents or approvals that result solely
from the specific legal or regulatory status of Buyer or as a result of any
other facts that specifically relate to the business or activities in which
Buyer is engaged and (ii) such licenses, permits and other governmental
approvals as may be required to permit Buyer to operate the Newspapers.
4.4 Brokers and Finders. Neither Seller nor any of its
officers, directors, partners or employees has employed any broker or finder in
connection with the transactions contemplated by this Agreement, other than
Dirks, Van Essen & Associates, or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated by
<PAGE>
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this Agreement, other than to Dirks, Van Essen & Associates which shall be paid
by Seller.
4.5 Title. Seller will have good title to all of the Assets
owned by it, free and clear of any Liens except for such Liens as may have
existed with respect to the Assets as of the closing under the Merger Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1 Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Buyer has all requisite corporate power and authority to carry on its business
as it is now being conducted and is in good standing in each jurisdiction in
which the nature of its business or the ownership or leasing of its properties
makes such qualification necessary, other than in such jurisdictions where the
failure to be so qualified would not have a material adverse effect on the
business, financial condition or results of operations of Buyer taken as a
whole. Buyer has delivered to Seller true and correct copies of its articles of
incorporation and bylaws as amended to date.
5.2 Authority Relative to this Agreement. Buyer has the full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized and approved by the Board of Directors of
Buyer, and no other corporate proceedings on the part of Buyer are necessary to
authorize this Agreement or the consummation of the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by Buyer
and, assuming this Agreement constitutes a legal, valid and binding agreement of
Seller constitutes a legal, valid and binding agreement of Buyer, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and to general principles of
equity.
5.3 Noncontravention; Consents and Approvals.
(a) Assuming that all filings, permits,
authorizations, consents and approvals or waivers thereof have
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been duly made or obtained as contemplated by Section 5.3(b), the execution and
delivery of this Agreement by Buyer and the consummation by Buyer of the
transactions contemplated hereby will not (i) conflict with or result in any
breach of any provision of the articles of incorporation or bylaws of Buyer,
(ii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default under the terms, conditions or
provisions of any note, bond, mortgage, indenture, license agreement or other
instrument or obligation to which Buyer is a party, or by which Buyer or any of
its properties or assets are bound, or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Buyer or any of
its properties or assets, excluding from the foregoing clauses (ii) and (iii)
violations, breaches or defaults which, either individually or in the aggregate,
would not impair the ability of Buyer to consummate the transactions
contemplated hereby.
(b) No filing or registration with, or
notification to, and no permit, authorization, consent or approval of, any
governmental entity is required by Buyer in connection with the execution and
delivery of this Agreement by Buyer or the consummation by Buyer of the
transactions contemplated hereby.
5.4 Brokers and Finders. Neither Buyer nor any of its
officers, directors, partners or employees has employed any broker or finder in
connection with the transactions contemplated by this Agreement or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement except for Tomlin &
Company, Inc., whose fees and expenses shall be paid by Buyer.
5.5 Hart-Scott-Rodino. Buyer has prepared and delivered to the
United States Federal Trade Commission (the "FTC") a balance sheet in the
ordinary course of business which does not include the Woodbridge Assets and has
received, based upon such balance sheet, a staff interpretation from the FTC
that the Buyer and Seller are not required to file a notification and report
form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
ARTICLE 6
COVENANTS OF THE PARTIES
6.1 Conduct of Business. Except as specifically
provided in this Agreement, during the period from the date of
this Agreement to the Closing Date, Seller will conduct the
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business and operations of the Newspapers in the ordinary course of business.
Without limiting the generality of the foregoing, except as otherwise expressly
provided in this Agreement, prior to the Closing Date, without the prior written
consent of Buyer, Seller will not:
(a) sell, transfer, lease, license, pledge,
encumber, mortgage, remove from the premises of any Newspaper or otherwise
dispose of, or agree to sell, transfer, lease, license, pledge, encumber,
mortgage, remove from the premises of any Newspaper or otherwise dispose of
("Transfer"), any assets or properties, real or personal, used directly and
exclusively in the operations of the Newspapers consistent with past operations,
except (i) in the ordinary course of business and (ii) for the return to
Seller's headquarters of certain headquarters assets, office equipment,
furniture and property including, but not limited to, laptop computers and
audio/visual presentation equipment;
(b) enter into or renew any agreements,
commitments or contracts relating to the Newspapers, except in
the ordinary course of business; or
(c) (i) increase the compensation of any
employees of the Newspapers, except in the ordinary course of business; or (ii)
increase the number of employment positions of the Newspapers except in the
ordinary course of business.
6.2 Access to Information. From the date of this Agreement to
the Closing Date, Seller will (a) give Buyer and its authorized 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 Seller,
which shall not be unreasonably withheld, to the facilities, personnel and
operations of the Newspapers and to all of its books and records relating to the
Newspapers and furnish Buyer with such financial and operating data and other
information with respect to the business operations of the Newspapers as Buyer
may from time to time reasonably request; provided, that any inspection of
properties or discussion with personnel shall occur only if a representative of
Seller is present. Buyer shall hold, and shall cause its employees, agents and
representatives to hold, in strict confidence all such information, including,
without limitation, in the event of termination of this Agreement. Buyer and its
accountants, counsel and other representatives shall, in the exercise of the
rights described in this Section 6.2, not unduly interfere with the operations
of the business of Seller or the Newspapers.
<PAGE>
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6.3 Employees and Employee Benefits. The following
provisions shall act exclusively for the benefit of the parties
to this Agreement and not for the benefit of any other person or
entity:
(a) Effective as of the Closing Date, Buyer shall
offer employment to each employee of Seller who is employed at any Newspaper
immediately prior to the Closing Date (collectively, the "Assumed Employees").
Except as otherwise provided in this Section 6.3 or as any employment agreement
between Buyer and any Assumed Employee may otherwise require, Buyer shall offer
employment to the Assumed Employees on terms and conditions that are
substantially similar in the aggregate to the terms and conditions of employment
of such employees with Seller or its Affiliates as of the Closing Date,
including the provision of retirement and health care benefits, if any. Buyer
shall assume all contracts of employment of the Assumed Employees and
notwithstanding anything in the foregoing to the contrary, to the extent such
employment contract assumed hereunder provides for terms and conditions in
addition to those referenced in the preceding sentence, Buyer shall assume the
terms thereof. Each Assumed Employee shall receive credit for past service with
Seller and its predecessors for all purposes under Buyer's benefits plans and
compensation arrangements; provided, however, that Buyer shall not be required
to provide any Assumed Employee with credit for service with the Seller for
purposes of benefit accrual under any defined benefit pension plan sponsored or
maintained by Buyer.
(b) Buyer shall offer health plan coverage to all
Assumed Employees and their dependents under the terms and conditions generally
applicable to such employees and their dependents with Seller or its affiliates
as of the Closing Date. For purposes of providing such coverage, Buyer shall
waive all preexisting condition limitations for all Assumed Employees and their
dependents covered by Seller's group health plan as of the Closing Date and
shall provide such health care coverage effective as of the Closing Date without
the application of any eligibility period for coverage. In addition, Buyer shall
credit all employee and dependent payments toward deductible and co-payment
obligations limits under Seller's health care plans for the plan year which
includes the Closing Date as if such payments had been made for similar purposes
under Buyer's health care plans during the plan year which includes the Closing
Date, with respect to the Assumed Employees and their dependents.
(c) Buyer shall assume full responsibility and
liability for offering and providing "Continuation Coverage" to
<PAGE>
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any "Qualified Beneficiary" who is covered by a "Group Health Plan" sponsored or
contributed to by Seller or any entity required to be combined with Seller
(within the meaning of Sections 414(b) or (c) of the Internal Revenue Code of
1986, as amended (the "Code")) and who has experienced a "Qualifying Event" or
is receiving "Continuation Coverage" on or prior to the Closing Date.
"Continuation Coverage," "Qualified Beneficiary," "Qualifying Event" and "Group
Health Plan" all shall have the meanings given such terms under Section 4980B of
the Code and Section 601 et seq. of ERISA.
(d) Buyer shall grant Assumed Employees credit
for and shall assume and be responsible for any liabilities with respect to
accrued sick and personal leave and earned vacation time by any Assumed
Employees as of the Closing Date.
(e) Buyer agrees that Seller may inform its
employees that Buyer has agreed that the Assumed Employees will be offered
employment as provided in this Section 6.3; provided, however, that Buyer shall
have the right to approve any written statement to be made by Seller in
connection therewith, which approval shall not be unreasonably withheld.
(f) Buyer and Seller hereby agree that, pursuant
to Section 5.01 of Revenue Procedure 96-60, Seller shall be relieved from
furnishing Forms W-2 to any Assumed Employee for the calendar year in which the
Closing occurs and Buyer shall timely furnish such forms for such year
reflecting wages paid and taxes withheld by both Buyer and Seller.
(g) Buyer shall assume any liability of Seller to
provide post-retirement health or death benefits to former employees of the
Newspapers.
(h) Buyer covenants that it will not, on or
within ninety (90) days of the Closing Date, take any action or fail to take any
action which would cause a Plant Closing or Mass Layoff resulting in Employment
Loss at any of the employment sites to be acquired from Seller, as those terms
are defined by the Worker Adjustment and Retraining Notification Act, Public Law
100-379 (August 4, 1988)("WARN Act"). Buyer hereby indemnifies and holds
harmless Seller from any loss, cost, expense or liability which may be incurred
by Seller as a result of any claim made by an employee of any Newspaper pursuant
to the WARN Act and which claim results from the failure of Buyer to hire any
employees of the Newspapers or from any action by Buyer to dismiss or terminate
any employees of Newspapers following the Closing.
<PAGE>
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The following definitions shall be used in this Agreement:
(i) "Compensation Arrangement" shall mean
any plan or compensation arrangement other than an Employee Plan, whether
written or unwritten, which provides to employees or former employees of the
Newspapers any compensation or other benefits, whether deferred or not, in
excess of base salary or wages and excluding overtime pay, including, but not
limited to, any bonus or incentive plan, stock rights plan, deferred
compensation arrangement, life insurance, stock purchase plan, severance pay
plan and any other perquisites and employee fringe benefit plan.
(ii) "Employee Plan" shall mean any pension,
retirement, profit-sharing, deferred compensation, vacation, severance, bonus,
incentive, medical, vision, dental, disability, life insurance or any other
employee benefit plan as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), which provides benefits to
employees or former employees of the Newspapers and to which Seller or any
entity related to Seller (under the terms of Sections 414(b) or (c) of the Code)
contributes or which Seller or any entity related to Seller (under the terms of
Sections 414(b) or (c) of the Code), sponsors, maintains or otherwise is bound.
6.4 Consummation of Agreement. Each of Seller and Buyer will
use commercially reasonable efforts to perform or fulfill all other conditions
and obligations to be performed or fulfilled by it under this Agreement so that
the transactions contemplated hereby shall be consummated as expeditiously as
possible. If any event should occur, either within or outside the control of
Seller or Buyer that would materially delay or prevent fulfillment of the
conditions upon the obligations of any party hereto to consummate the
transactions contemplated by this Agreement, Seller and Buyer will use their
respective commercially reasonable efforts to cure or minimize the same as
expeditiously as possible.
6.5 Public Announcements. Seller and Buyer will consult with
each other before issuing any other press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement and
shall not issue any such press release or make any such public statement that is
not approved by the other party, except as may be required by law (including
without limitation federal securities laws) or court order.
<PAGE>
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6.6 Solicitation of Employees. For a period of five (5) years
from the date of this Agreement, neither party hereto nor any of their
respective affiliates, agents or representatives shall directly or indirectly
solicit or cause or assist in the solicitation of the employment of, or employ,
any officer of, or executive, management or other employee of the other party
hereto or its subsidiaries or affiliates. For purposes of this Agreement, an
affiliate shall mean, with respect to either party, a person, corporation,
partnership or other entity that is controlled by, controls, or is under common
control with such party.
6.7 Insurance. From the date hereof to the Closing Date,
Seller will maintain property and casualty insurance on the Assets at levels of
coverage at least equal to those in effect with respect to the Newspapers on the
date of the consummation of the Merger, and on such other terms and conditions
as Seller determines in its sole discretion, including without limitation, that
Seller may change its existing insurance policies to adjust the applicable
deductibles.
6.8 Woodbridge Assets.
(a) Buyer agrees that with respect to the
Woodbridge Assets, except for negotiation and agreement with Garden State
Newspapers, Inc. for acquisition of the Woodbridge Assets, which shall be
subject to the approval of Seller, it will not (nor will it permit any of its
officers, directors, stockholders, affiliates or agents to) directly or
indirectly solicit or participate or engage in or initiate any negotiations or
discussions, or enter into (or authorize) any agreement or agreement in
principle, or announce any intention to do any of the foregoing, with respect to
any offer or proposal to acquire (or to dispose of) all or a substantial part of
the Woodbridge Assets (or otherwise to acquire, or dispose of, directly or
indirectly, the Woodbridge Assets, by means of a stock purchase, merger,
consolidation or otherwise).
(b) Buyer agrees that it will take all reasonable and
appropriate steps to acquire the Woodbridge Assets from the current owner
thereof and to deliver such Woodbridge Assets to Seller, including without
limitation, executing an appropriate purchase agreement (the "Woodbridge
Purchase Agreement") with the current owner of the Woodbridge Assets and taking
such other actions as may be reasonably requested by Seller in connection
therewith; provided that Buyer understands and agrees that the terms of the
Woodbridge Purchase Agreement shall be subject to the approval of Seller. Buyer
further agrees that if it acquires
<PAGE>
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the Woodbridge Assets, it shall be required to convey such assets to Seller on
the terms and conditions provided for herein. Buyer acknowledges and agrees that
because of the unique nature of the Woodbridge Assets, without limiting any
other legal or equitable remedies that may be available to Seller, if Buyer
breaches its obligations hereunder, including, without limitation, its
obligation to convey the Woodbridge Assets to Seller as contemplated hereunder,
Seller shall have the right to specific performance to enforce such obligations
and Buyer hereby waives any defense that Seller has an adequate remedy at law.
(c) Upon the Closing, if Buyer shall have
acquired the Woodbridge Assets, Buyer and Seller shall execute such conveyancing
documents as Seller shall reasonably request to evidence the transfer of the
Woodbridge Assets by Buyer to Seller including, without limitation, a bill of
sale, assignments of contracts, deeds and assignment of rights under the
Woodbridge Purchase Agreement.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligations of Buyer to purchase the Assets from Seller
and to perform its other obligations hereunder to be performed at or subsequent
to the Closing shall be subject to the fulfillment at or prior to the Closing of
each of the following additional conditions, any one or more of which may be
waived by Buyer:
7.1 Representations and Warranties. All representations and
warranties of Seller contained herein shall be true and correct on the Closing
Date as though such representations and warranties were made as of such date
(other than representations and warranties made as of an earlier date, which
shall be true and correct as of such earlier date) except for changes expressly
permitted by this Agreement and except for inaccuracies that in the aggregate do
not constitute a Material Adverse Effect.
7.2 Covenants. Seller shall have performed and complied in all
material respects with all covenants and agreements contained in this Agreement
required to be performed or complied with by it on or prior to the Closing Date.
7.3 Certificates. Seller shall have furnished a certificate of
an authorized officer to evidence compliance with the conditions set forth in
Sections 7.1 and 7.2 substantially in the form of Exhibit E attached hereto.
<PAGE>
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7.4 Certain Proceedings. No writ, order, decree or injunction
of a court of competent jurisdiction or governmental entity shall have been
entered against Buyer or Seller that prohibits or restricts the sale of Assets
contemplated hereby.
7.5 Opinion of Counsel. Buyer shall have received the
favorable opinion of George L. Mahoney, Esq., General Counsel of
Media General, Inc., substantially in the form of Exhibit F
attached hereto.
7.6 Document Delivery; Other Action. Seller shall
have taken the following actions and delivered the following
documents, appropriately executed, to Buyer:
(a) Payment by Seller to Buyer's lenders of any
amounts required to be paid by Seller under subsection 2.2(c)
hereof;
(b) All documents required to be delivered to
Buyer pursuant to Section 3.2;
(c) Certified copies of the resolutions of the
Board of Directors of Seller authorizing the execution and delivery of this
Agreement and consummation of the transactions contemplated hereby; and
(d) Certificates of good standing for Seller from its
state of incorporation.
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement to effect the
sale of the Assets to Buyer and to perform its other obligations hereunder to be
performed at the Closing shall be subject to the fulfillment at or prior to the
Closing of each of the following additional conditions, any one or more of which
may be waived by Seller:
8.1 Representations and Warranties. All representations and
warranties of Buyer contained herein shall be true and correct on the Closing
Date as though such representations and warranties were made as of such date
(other than representations and warranties made as of an earlier date, which
shall be true and correct as of such earlier date) except for changes expressly
permitted by this Agreement and except for inaccuracies that in the aggregate
would not have a material
<PAGE>
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adverse effect on Buyer's ability to consummate the transactions
contemplated hereunder.
8.2 Covenants. Buyer shall have performed and complied in all
material respects with all covenants and agreements contained in this Agreement
required to be performed or complied with by it on or prior to the Closing Date.
8.3 Certificates. Buyer shall have furnished a certificate of
an authorized officer to evidence compliance with the conditions set forth in
Sections 8.1 and 8.2 substantially in the form of Exhibit G attached hereto.
8.4 Certain Proceedings. No writ, order, decree or injunction
of a court of competent jurisdiction or governmental entity shall have been
entered against Buyer or Seller which prohibits or restricts the sale of Assets
contemplated hereby.
8.5 Opinion of Counsel. Seller shall have received the
favorable opinion of Robinson, Bradshaw & Hinson, P.A., counsel to Buyer,
substantially in the form of Exhibit H attached hereto.
8.6 Document Delivery; Other Action. Buyer shall have
taken the following actions and delivered the following to
Seller, and where documents are involved, the documents shall be
appropriately executed:
(a) Payment of the Purchase Price to Seller as
contemplated by Section 2.1 and payment of any other amounts to Seller required
to be made by Buyer at Closing as contemplated under subsection 2.2(c) hereof;
(b) All documents required to be delivered to
Seller pursuant to Section 3.3;
(c) Certified copy of the resolutions of the
Board of Directors of Buyer authorizing the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby; and
(d) Certificate of good standing from the State
of Delaware issued with respect to Buyer.
<PAGE>
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ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 Non-Survival of Representations, Warranties and Covenants.
No representations, warranties, covenants or agreements made by any party in
this agreement or in documents and instruments delivered pursuant hereto shall
survive the Closing, except for the Indemnity Agreement and the agreements
specified in Sections 1.3 (and including Buyer's obligations under the
Assumption Agreement), 2.2, 6.3, 6.6, 6.8, 9.3, 9.9 and 9.15 which agreements
shall survive until fully discharged or performed. Except in respect of the
agreements that survive Closing as provided for in the preceding sentence (and
with respect to the breach thereof, the non-breaching party shall have all
rights available at law or equity for such breach), after the Closing neither
Buyer nor Seller shall have any recourse against the other as a result of the
breach of any representation, warranty, covenant or agreement contained herein,
any certificate, document or instrument delivered in connection herewith or
otherwise arising out of or in connection with the transactions contemplated
hereby. Without limiting the foregoing, Buyer acknowledges that it is intimately
familiar with the assets of Seller being sold hereunder, and agrees that the
Assets are being purchased hereunder on an "as is and where is" basis. In
addition, Buyer hereby unconditionally and irrevocably waives and releases any
and all actual or potential claims that it may have against Seller (and/or its
officers, directors, shareholders or affiliates) regarding any form of
representations, warranty, express or implied, of any kind or type, including
warranties of fitness, or any other claim of liability against Seller (and/or
its affiliates, directors, shareholders or affiliates) of any kind or nature
whatsoever, except in respect of agreements stated herein expressly to survive
Closing, relating to or in connection with the purchase of the Assets or the
transactions contemplated hereby or the operations of the Newspapers.
9.2 Termination.
(a) This Agreement may be terminated prior to
Closing:
(i) at any time by mutual consent of Seller
and Buyer;
(ii) by either party, if the Closing
hereunder has not taken place on or before the Termination Date,
<PAGE>
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provided that the party seeking such termination shall not then
be in breach of its obligations under this Agreement;
(iii) by Seller if all conditions set forth
in Article 8 have not been satisfied or waived on or prior to the Closing Date,
and Seller is not in breach of its obligations under this Agreement; and
(iv) by Buyer if all conditions set forth
in Article 7 have not been satisfied or waived on or prior to the Closing Date;
and Buyer is not in breach of its obligations under this Agreement.
(b) In the event of termination of this
Agreement and abandonment of the transactions contemplated hereby
by any or all of the parties pursuant to Section 9.2(a),
(i) prompt written notice thereof shall
forthwith be given to the other party and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned without further action by
any of the parties hereto. If this Agreement is terminated as provided herein:
(A) None of the parties hereto nor
any of their directors, officers, shareholders, employees, agents or affiliates
shall have any liability or further obligation to the other party or any of its
directors, officers, shareholders, employers, agents or affiliates pursuant to
this Agreement with respect to which termination has occurred, except as stated
in Section 9.2(b)(ii) hereof;
(B) All filings, applications and
other submissions relating to the transactions contemplated hereby shall, to the
extent practicable, be withdrawn from the agency or other person to which made;
and
(C) Buyer shall return any
information received by Buyer from Seller and will cause all confidential
information obtained by Buyer from Seller concerning the Newspapers to be
treated as such.
(ii) Notwithstanding anything to the
contrary contained in this Agreement, if Seller or Buyer is in breach its
respective obligations under this Agreement prior to the date of termination of
this Agreement, then and in that event, as appropriate, the following provisions
shall apply:
<PAGE>
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(A) In the event the parties
hereto shall fail to close this transaction due to Seller's breach of this
Agreement, then Buyer shall have the right to seek all remedies available to it
as provided hereunder or at law or equity.
(B) In the event the parties
hereto shall fail to close this transaction due to Buyer's breach of this
Agreement, then Seller shall have the right to seek all remedies available to it
as provided hereunder or at law or equity.
9.3 Expenses. Whether or not the transactions contemplated
hereby are consummated, except as otherwise specifically provided herein, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby will be paid by the party incurring such costs
and expenses; provided that any sales, use, transfer or other similar taxes
arising as a consequence of the transactions contemplated by this Agreement
shall be paid by Buyer in a timely fashion and Buyer shall, whether on or after
the Closing, prepare all necessary returns to be filed in connection with such
taxes and Seller shall cooperate with Buyer in preparing such filings; provided
further, however, that in respect of the first $200,000 of such sales, use,
transfer or other similar taxes, Seller shall be responsible for payment of
one-half of such taxes, up to a maximum amount of $100,000. To the extent
reasonably practicable, the amount of such taxes shall be determined at Closing
and indicated on the Pre-Closing Statement of Assets and Liabilities and payment
of such taxes shall be made at Closing to the relevant governmental authorities.
If not paid at Closing, Seller shall make payment of its share of such taxes
(subject to the limitation of $100,000 provided for herein) to Buyer immediately
upon receipt of written evidence from Buyer of its payment of all such taxes.
Seller and Buyer shall cooperate in determining the amount of such taxes both at
and after Closing.
9.4 Amendment and Modification. This Agreement may
be amended, modified or supplemented only by written agreement of
Seller and Buyer.
9.5 Waiver of Compliance; Consents. Except as otherwise
provided in this Agreement, any failure of any of the parties to comply with any
obligation, representation, warranty, covenant, agreement or condition herein
may be waived by the party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver or failure
to insist upon strict compliance with such
<PAGE>
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obligation, representation, warranty, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
9.5.
9.6 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given (i) when delivered personally or
by facsimile transmission or telexed, (ii) three days after being deposited in
the mail by registered or certified mail (return receipt requested), postage
prepaid, or (iii) one business day after being sent by nationally recognized
courier service (receipt requested), in each case to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice; provided that notices of a change of address shall be effective
only upon receipt thereof):
(a) if to Seller:
Media General Newspapers, Inc.
c/o Media General, Inc.
333 East Grace Street
Richmond, Virginia 23293
Attention: Mr. J. Stewart Bryan III
Chairman
Telecopy : (804) 649-6898
Copies (which shall not constitute notice) to:
Media General, Inc.
333 East Grace Street
Richmond, Virginia 23293
Attention: Mr. Marshall N. Morton
Senior Vice President
and
George L. Mahoney, Esq.
General Counsel
Telecopy : (804) 649-6898
<PAGE>
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(b) if to Buyer:
Newspaper Holdings, Inc.
3309 Brighton Place
Lexington, Kentucky 40509
Attention: Mr. Ralph I. Martin
Telecopy : (606) 252-2234
With a copy (which shall not constitute notice) to:
Robinson, Bradshaw & Hinson, P.A.
One Independence Center
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246-1900
Attention: Thomas B. Henson, Esq.
Telecopy : (704) 373-3918
9.7 Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but, except as provided in
Section 9.14 with respect to Seller which shall not require any consent, neither
this Agreement nor any of the rights, interest or obligations hereunder shall be
assigned by any party hereto without the prior written consent of the other
parties, nor is this Agreement intended to confer upon any other person except
the parties hereto any rights or remedies hereunder.
9.8 Governing Law. This Agreement shall be governed by the
laws of the Commonwealth of Virginia (but not the laws pertaining to choice of
law) as to all matters, including but not limited to matters of validity,
construction, effect, performance and remedies.
9.9 Consent to Jurisdiction, etc. The parties hereto hereby
irrevocably consent to the nonexclusive jurisdiction and venue of any Federal
court located in the City of Richmond, Commonwealth of Virginia or to the extent
such courts are not available due to lack of jurisdiction, any court in the City
of Richmond, Commonwealth of Virginia, in connection with any action or
proceeding arising out of or relating to this Agreement. The parties hereto
hereby waive personal service of any process in connection with any such action
or proceeding and agree that the service thereof may be made by certified or
registered mail addressed to or by personal delivery to the other party at such
other party's address set forth pursuant to Section 10.6 hereof. In the
alternative, in its discretion, any of the parties hereto
<PAGE>
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may effect service upon any other party in any other form or manner permitted by
law.
9.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.11 Interpretation. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.
9.12 Entire Agreement. This Agreement, including the
Exhibits and Schedules hereto, and the documents delivered
pursuant to this Agreement embody the entire agreement and
understanding of the parties hereto in respect of the transactions contemplated
by this Agreement. The Exhibits and Schedules hereto are an integral part of
this Agreement and are incorporated by reference herein. There are no
representations, warranties, covenants or agreements made with respect to the
Newspapers except as expressly set forth in this Agreement and the Exhibits and
Schedules hereto.
9.13 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
9.14 Cooperation With Respect to Like-Kind Exchange. Buyer
agrees that Seller's transfer of the Assets to Buyer shall, at Seller's
election, be accomplished in a manner enabling the transfer to qualify as part
of a like-kind exchange of property within the meaning of Section 1031 of the
Code. If Seller so elects, Buyer shall cooperate with Seller to effect such
like-kind exchange, which cooperation shall include, without limitation, taking
such actions as Seller requests in order to effect the transfer of the Assets in
a manner which enables such transfer to qualify as part of a like-kind exchange
of property within the meaning of Section 1031 of the Code and Buyer agrees that
Seller may assign its rights (but not its obligations) under this Agreement to
an escrow agent acting as a qualified intermediary under United States Treasury
Regulations, to qualify the transfer of the Assets as part of a like-kind
exchange of property within the meaning of Section 1031 of the Code. Seller
<PAGE>
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shall reimburse Buyer for all reasonable out-of-pocket expenses incurred by
Buyer in connection with such like-kind exchange.
9.15 Cooperation With Respect to Tax and Accounting Records.
From and after Closing, Seller and Buyer will cooperate fully, including
allowing each other full access to and right to copy documents, examination by
any governmental taxing authority or otherwise with respect to the business of
the Newspapers or any of the Assets including, but not limited to, furnishing or
making available records, files, financial information, accounting records,
books of account or other materials (the "Tax Accounting and Records") necessary
or helpful (i) for purposes of conducting any internal audit of the operations
of the Newspapers for the period during which the party requesting such Tax and
Accounting Records owned or controlled the Newspapers, and including, without
limitation, in the case of Seller, permitting Seller to establish opening
balances at the Newspapers for the period from January 1, 1997 related to its
consummation of the Merger Agreement and (ii) for the defense against the
assertions of any taxing authority as to any tax returns, tax declarations or
tax reports of Buyer, Seller or any of their respective affiliates. Neither
Buyer nor Seller will destroy any Tax and Accounting Records for a period of six
(6) years after the Closing Date without having given thirty (30) days prior
notice to Seller or Buyer, respectively, and, in the event Seller or Buyer
wishes to copy any such records, cooperate in making such records available for
such copying, provided arrangements are made for reimbursement of all expenses
reasonably incurred as a result of such cooperation.
9.16 Glossary of Defined Terms. The following is a
list of terms used in this Agreement and a reference to the
section hereof in which such term is defined:
Term Section
---- -------
Adjustment Time 2.2(a)(i)
Agreement Preamble
Assets 1.1
Assumed Employees 6.3(a)
Assumption Agreement 3.2(b)
Buyer Preamble
Closing 3.1
<PAGE>
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Term Section
---- -------
Closing Date 3.1
Closing Date Statement of 2.2(d)
Assets and Liabilities
Code 6.3(c)
Compensation Arrangement 6.3
Contracts 1.1(c)
Current Assets 2.2(a)(ii)
Current Liabilities 2.2(a)(i)
DOJ 6.4
Employee Plan 6.3
ERISA 6.3
Excluded Assets 1.2
FTC 5.5
HSR Act 4.3(b)
Indemnity Agreement 3.2(d)
GAAP 2.2(a)(i)
Liens 1.1
Material Adverse Effect 4.1
Merger Agreement 2.2(a)(i)
Newspapers Preliminary
Statements
Pre-Closing Statement of 2.2(b)
Assets and Liabilities
Pre-merger Accounting 2.2(a)(i)
Practices
Purchase Price 2.1(a)
Seller Preamble
<PAGE>
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Term Section
---- -------
Tax and Accounting Records 9.15
Termination Date 3.1
Transfer 6.1(a)
WARN Act 6.3(h)
Woodbridge Assets 2.1(a)
Woodbridge Purchase Agreement 6.9(b)
Working Capital Deficit 2.2(a)(iii)
Working Capital Surplus 2.2(a)(iv)
<PAGE>
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IN WITNESS WHEREOF, Seller and Buyer have caused this Asset
Purchase Agreement to be signed by their respective duly authorized officers as
of the date first above written.
BUYER:
NEWSPAPER HOLDINGS, INC.
By: ______________________________
Name :
Title:
SELLER:
MEDIA GENERAL NEWSPAPERS, INC.
By: ______________________________
Name:
Title:
<PAGE>
EXHIBITS
to the Asset Purchase Agreement
between
Newspaper Holdings, Inc.
and
Media General Newspapers, Inc.
<PAGE>
EXHIBIT A
Publications and Related Assets
Burley, Idaho
South Idaho Press
The News Review
The Sunrise Shopper
The Wood River Journal
Sun Valley Dining Guide
Minidoka County News
Clinton, North Carolina
The Sampson Independent
Sampson County Shopping Guide and TV Schedule
Devils Lake, North Dakota
Devil's Lake Daily Journal
The Country Peddler
Effingham, Illinois
Effingham Daily News
The Weekly Advertiser
Jeffersonville, Indiana
The Evening News
Clark County Journal
Golden Opportunities
Lockport, New York
Union-Sun & Journal
Tri-County News
Lumberton, North Carolina
The Robesonian
The Robesonian Sunday
The Robesonian Mid-Weekly
Bladen Daily Journal
The Southeastern Times
Macomb, Illinois
Macomb Daily Journal
Business News
Exhibit A - Page 1
<PAGE>
McAlester, Oklahoma
News Capital & Democrat
Southeast Oklahoma Shopping News
Hartshorne Sun
Medina, New York
The Journal Register
Eastern Niagra Edition
Pennysaver
TV Signals
Albion Advertiser
Plymouth, Indiana
The Pilot-News
Bremen Enquirer
Bourbon News-Mirror
Nappanee Advance News
Farm and Home News
Sapulpa, Oklahoma
Sapulpa Daily Herald
Herald Extra
Warner Robins, Georgia
The Daily Sun
Sunday Sun
Daily Sun Extra
Robins Rev-up
Exhibit A - Page 2
<PAGE>
EXHIBIT B*
Pre-closing Statement of Assets and Liabilities
as of Adjustment Time
(To be prepared as of Closing Date)
<TABLE>
<S> <C>
ESTIMATED CURRENT ASSETS:
Accounts receivable (net of allowance) $ XXXXX
Prepaid expenses XXXXX
Inventories XXXXX
Deposits XXXXX
Other Current Assets (if any) XXXXX
TOTAL ESTIMATED CURRENT ASSETS XXXXX
ESTIMATED CURRENT LIABILITIES:
Accounts payable $ YYYYY
Accrued expenses YYYYY
Subscriptions collected in advance YYYYY
Other current liabilities (if any) YYYYY
TOTAL ESTIMATED CURRENT LIABILITIES YYYYY
ZZZZZ
ESTIMATED WORKING CAPITAL SURPLUS
(amount Buyer owes Seller) $
OR
ESTIMATED WORKING CAPITAL DEFICIT
(amount Seller owes Buyer) $
</TABLE>
Amount of Working Capital Surplus not paid by
Buyer at Clsoing (to be paid within 30 days after
Closing by wire transfer)
- --------
* Prepared in accordance with GAAP and subject to the applicable provisions of
the Asset Purchase Agreement.
Exhibit B - Page 1
<PAGE>
EXHIBIT C*
Closing Date Statement of Assets and Liabilities
as of Adjustment Time
(To be prepared within 60 days after Closing Date)
<TABLE>
<S> <C>
ACTUAL CURRENT ASSETS:
Accounts receivable (net of allowance) $ XXXXX
Prepaid expenses XXXXX
Inventories XXXXX
Deposits XXXXX
Other Current Assets (if any) XXXXX
TOTAL ACTUAL CURRENT ASSETS XXXXX
ACTUAL CURRENT LIABILITIES:
Accounts payable $ YYYYY
Accrued expenses YYYYY
Subscriptions collected in advance YYYYY
Other current liabilities (if any) YYYYY
TOTAL ACTUAL CURRENT LIABILITIES YYYYY
ZZZZZ
ACTUAL WORKING CAPITAL SURPLUS $
[OR]
ACTUAL WORKING CAPITAL DEFICIT $
ADJUSTMENT PAID AT CLOSING $
BALANCE DUE TO BUYER OR SELLER $
</TABLE>
- --------
* Prepared in accordance with GAAP and subject to the applicable provisions of
the Asset Purchase Agreement.
Exhibit C - Page 1
<PAGE>
EXHIBIT D
Assignment and Assumption Agreement
This Assignment and Assumption Agreement (this "Agreement")
is made and entered into as of this ____ day of February, 1997,
between Media General Newspapers, Inc. ("Seller") and Newspaper
Holdings, Inc. ("Buyer").
PRELIMINARY STATEMENTS:
A. Buyer and Seller are party to that certain Asset Purchase Agreement
dated as of February __, 1997 (the "Purchase Agreement") pursuant to which Buyer
will acquire the ongoing businesses and all of such assets owned by Seller as of
the date hereof and used directly and exclusively in connection with the
operation of the Newspapers consistent with past operations at each of their
respective locations (except assets specifically excluded in the Purchase
Agreement), and will assume all of the liabilities related to the Newspapers
(except liabilities specifically excluded in the Purchase Agreement) and Seller
will sell such businesses and assets, and assign such liabilities, to Buyer,
upon the terms and conditions stated in the Purchase Agreement. Capitalized
terms and references used herein and not otherwise defined herein have the
meanings ascribed to them in the Purchase Agreement.
B. In partial consideration for the assignment of the
Assets, the Purchase Agreement requires Buyer to assume, pay,
discharge and perform the liabilities and obligations specified
below.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein and in the Purchase Agreement, and pursuant to the
Purchase Agreement, Seller and Buyer hereby agree as follows:
1. Assignment. Upon the terms and subject to the conditions set forth
in the Purchase Agreement, on the date hereof, Seller hereby sells, assigns,
transfers and delivers to Buyer, and Buyer hereby purchases and accepts from
Seller free and clear of all liens, mortgages or security interests ("Liens"),
except as expressly permitted in Section 3.2(a) of the Purchase Agreement, all
of the assets and properties of Seller, whether real, personal, tangible or
intangible, which are owned by Seller and used directly and exclusively in
connection with the Newspapers at each of their respective locations consistent
with past operations (specifically excepting the Excluded Assets described in
Section 1.2 of the Purchase Agreement), including all additions thereto through
and including the date hereof but less all dispositions thereof as permitted
pursuant to
Exhibit D - Page 1
<PAGE>
Section 6.1 of the Purchase Agreement through and including the date hereof,
such assets and properties being referred to herein as the "Assets," and
including without limitation the following:
(a) Seller's parcels of real property owned in fee and used
directly and exclusively in the ownership or operation of the Newspapers
consistent with past operations, and all buildings, structures and other
improvements located thereon, and all easements, rights of way and similar
authorizations used directly and exclusively in the conduct of the business and
operations of the Newspapers consistent with past operations, including the
parcels of real property owned in fee and easements, rights of way and similar
authorizations which are described in Schedule 1.1(a) attached to the Purchase
Agreement;
(b) All of the tangible personal property which is owned and
used directly and exclusively in the conduct of the business and operations of
the Newspapers consistent with past operations at each of their respective
locations, including furniture, fixtures, machinery, equipment and vehicles (but
expressly excluding headquarters assets or property wherever located including,
but not limited to, laptop computers and audio/visual presentation equipment);
(c) All contracts, agreements, options, leases and commitments
of Seller which are related to the conduct of the business and operations of the
Newspapers, whether oral or written, express or implied, including leases of
property used directly and exclusively in the operations of the Newspapers
consistent with past operations, rights and interests in and under purchase
contracts for new equipment, including purchase price deposits, newsprint
agreements (limited, however, to those agreements for the period ending on or
before December 31, 1996 and those agreements attributable solely to the
Newspapers), advertising sales and newspaper distribution contracts, supplier
contracts, advertising service contracts and all service and feature or other
information provider contracts and all noncompetition agreements and consulting
agreements (all of such contracts, agreements, options, leases or commitments
are sometimes referred to herein collectively as the "Contracts");
(d) All orders for the sale of advertising and
subscriptions which relate to the Newspapers;
(e) All permits, licenses and authorizations issued by local,
state and federal authorities, and applications therefor, which are held by
Seller or any Newspaper, that are used directly and exclusively in the conduct
of the business of any Newspaper consistent with past operations;
(f) All mastheads, trade names, trademarks, service
marks, service names and other similar intangible rights and
Exhibit D - Page 2
<PAGE>
interests, including, without limitation, the trade names, trademarks and
service marks described in Schedule 1.1(f) of the Purchase Agreement to the
extent Seller has rights thereto, and the goodwill associated therewith, which
are used directly and exclusively in connection with the business and operations
of the Newspapers consistent with past operations;
(g) All artwork, copyrights and other ownership rights
directly and exclusively related to the contents of the Newspapers consistent
with past operations, including, without limitation, the copyrights described in
Schedule 1.1(g) of the Purchase Agreement to the extent Seller has rights
thereto, all copies of previously published editions of the Newspapers, the
Newspapers' morgue or library and copies of all material files, financial
information and all accounting records relating to the assets or operations of
the Newspapers and located at any offices or facilities of the Newspapers;
(h) All prepaid taxes (excluding income taxes) and
expenses with respect to the business and operations of the
Newspapers;
(i) All inventories of newsprint, ink, film, photographic
paper and plates, spare parts, supplies, fuel and other consumable items used
directly and exclusively in connection with the business and operations of the
Newspapers consistent with past operations and located at the locations of the
Newspapers;
(j) All surety bonds, surety deposits and security deposits
posted by or on behalf of Seller as security for its or the Newspapers'
performance of any Contract or obligation to be assumed by Buyer pursuant to the
Purchase Agreement;
(k) All cash bonds and trust accounts related to
carriers for the Newspapers;
(l) All subscriber, advertiser and trade accounts
receivable due to Seller as a result of the business and
operations of the Newspapers prior to the date hereof; and
(m) Seller's records, files and data used directly and
exclusively in the business and operations of the Newspapers consistent with
past operations, including maps, plans, diagrams, engineering data, blueprints
and schematics, if any.
2. Exclusions and Limitations. Notwithstanding anything
contained herein to the contrary, the Seller retains and does not
sell, assign or transfer the following properties and assets (the
"Excluded Assets") to the Buyer:
(a) all of Seller's cash in its bank accounts;
Exhibit D - Page 3
<PAGE>
(b) except as specifically provided for in the
Purchase Agreement, any Employee Plan (as defined in the Purchase
Agreement);
(c) all tangible personal property disposed of (not to exceed
an amount equal to $10,000) or consumed in the ordinary course of the business
of Seller between the date of the Purchase Agreement and the date hereof;
(d) all contracts of insurance and all insurance plans
and the assets thereof and all bonds, letters of credit or
similar items and any cash surrender value in regard thereto;
(e) Seller's minute books, stock ledgers and other books and
records that pertain to internal matters of Seller and Seller's account books of
original entry with respect to any Newspaper or any Assets, and all original
accounts, checks, payment records, tax records (including payroll, unemployment,
real estate and other tax records) and other similar books, records and
information of Seller relating to Seller's operation of the business of any
Newspaper or any Assets, prior to Closing; and
(f) any assets owned by Seller not constituting Assets,
including, without limitation, any assets not used directly and exclusively in
the Newspaper business consistent with past operations and any of Seller's
federal or state income taxes receivable (including deferred taxes) or any of
Seller's intercompany receivables from affiliates.
3. Assumption. As of, and from and after, the date
hereof, Buyer shall assume, pay, discharge and perform, and
indemnify and hold Seller harmless from any liabilities, losses,
costs and expenses arising out of or in connection with, the
following:
(a) all the obligations and liabilities of Seller under,
arising out of, or relating to the Contracts, whether arising before or after
the Closing including, without limitation, all obligations and liabilities of
Seller to the extent that any adjustment is made or is to be made in connection
therewith in Buyer's favor pursuant to Section 2.2 of the Purchase Agreement;
(b) all obligations and liabilities of Seller attributable to
the Newspapers arising out of noncompetition agreements, covenants not to
compete, consulting agreements and similar agreements and arrangements, whether
oral or written and whether arising before or after the date hereof;
(c) all state and local sales or transfer taxes
payable as a consequence of the sale of the assets of the
Exhibit D - Page 4
<PAGE>
Newspapers contemplated in the Purchase Agreement; provided, however that Seller
shall be liable for its share of such taxes as provided for in Section 9.3 of
the Purchase Agreement; and
(d) all other obligations, liabilities, duties, claims,
demands, actions, commitments, costs or expenses, known or unknown, matured or
contingent, arising out of, relating to or attributable to the ownership or
operation of the Newspapers or the Assets, whether arising before or after the
Closing.
It is understood and agreed that notwithstanding the foregoing, Buyer
is not assuming any of Seller's obligations for federal or state income taxes
payable (including deferred taxes) or any of Seller's intercompany obligations
with affiliates, including but not limited to intercompany management and
accounting fees payable.
4. Cooperation. In implementation of the foregoing provisions, Buyer
shall indemnify Seller and hold Seller harmless from and against any and all
obligations and liabilities, including, without limitation, all costs, expenses
and attorneys' fees, which Seller may sustain or suffer or to which it may
become subject as a result of any threatened, pending or future actions, suits,
claims, proceedings, investigations, administrative proceedings, audits, or
arbitrations, both known and unknown, without limitation and of any nature,
relating to the Assets or the operation of the Newspapers (the "Litigation"),
and Buyer shall be obligated to undertake the defense and the cost of defense of
the Litigation, subject to the following:
(i) Buyer shall assume and control the defense of
Seller in the Litigation, including the employment of counsel selected by Buyer;
Seller shall have the right to employ separate counsel in any such Litigation
and to participate in (but not control) the defense of the Litigation, but the
fees and expenses of such counsel shall be borne by Seller; provided, however,
that if (A) the named parties to any such Litigation (including any impleaded
parties) include both Seller and Buyer, (B) Buyer requires that the same counsel
represent both Seller and Buyer, and (C) representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them, then Seller shall have the right to retain its own
counsel at the cost and expense of Buyer;
(ii) Buyer shall pay all costs and expenses of,
and Seller shall cooperate with Buyer in connection with, the conduct of such
defense, and Buyer shall be responsible for any liability assessed against
Seller or any settlement reached in the Litigation;
(iii) Seller shall promptly upon its discovery of
facts or circumstances giving rise to a claim for
Exhibit D - Page 5
<PAGE>
indemnification, including receipt by it of notice of any demand, assertion,
claim, action or proceeding (judicial, governmental or otherwise) by any third
party, give notice thereof to Buyer, such notice in any event to be given within
sixty (60) days from the date Seller obtains actual knowledge of the basis or
alleged basis for the right of indemnity or such shorter period as may be
necessary to avoid material prejudice to Buyer;
(iv) Seller shall use commercially reasonable
efforts to cooperate with Buyer in Buyer's defense of the Litigation including,
without limitation, providing Buyer with access to such personnel, documents and
records, and executing such documents, as Buyer may reasonably request in
connection with the defense of any Litigation;
(v) Buyer shall not be liable for any settlement
effected by Seller without Buyer's consent except where Seller has assumed the
defense because Buyer has failed or refused to do so; and
(vi) if Buyer shall have failed to assume the
defense of any Litigation in accordance with the provisions of this Section 4,
then Seller shall have the right to control its defense in the Litigation, and,
shall be entitled to indemnification from Buyer hereunder, including the costs,
fees and expenses of such defense (including, without limitation, attorneys'
costs and expenses).
5. Purchase Agreement. This Agreement is subject to and
controlled by the terms of the Purchase Agreement.
6. Counterparts. This Agreement may be signed upon any
number of counterparts with the same effect as if the signatures
as all counterparts are upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have signed this Assignment and
Assumption Agreement as of the date first above written.
NEWSPAPER HOLDINGS, INC.
By: ______________________________
Its: ______________________________
MEDIA GENERAL NEWSPAPERS, INC.
By: ______________________________
Exhibit D - Page 6
<PAGE>
Its: ______________________________
Exhibit D - Page 7
<PAGE>
EXHIBIT E
Seller's Officer's Certificate
This Officer's Certificate is delivered pursuant to Section 7.3 of the
Asset Purchase Agreement dated as of February ___, 1997 (the "Purchase
Agreement"), by and among Media General Newspapers, Inc. ("Seller"), and
Newspaper Holdings, Inc. Capitalized terms and references used herein and not
otherwise defined herein have the meanings ascribed to them in the Purchase
Agreement. The undersigned hereby certifies as follows:
1. As of the date hereof, I am duly appointed or elected and acting
____________ of Seller, and I am providing this Officer's Certificate in such
capacity.
2. All representations and warranties of Seller contained herein are
true and correct on the date hereof as though such representations and
warranties were made on the date hereof (other than representations and
warranties made as of an earlier date, which were true and correct as of such
earlier date) except for changes expressly permitted by the Purchase Agreement
and except for inaccuracies that in the aggregate do not constitute a Material
Adverse Effect.
3. Seller has performed and complied in all material respects with all
covenants and agreements contained in the Purchase Agreement required to be
performed or complied with by it on or prior to the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this Officer's
Certificate as of the _____ day of February, 1997.
MEDIA GENERAL NEWSPAPERS, INC.
By: ______________________________
Its: ______________________________
Exhibit E - Page 1
<PAGE>
Newspaper Holdings, Inc.
[Closing Date]
Page 1
EXHIBIT F
[Closing Date]
Newspaper Holdings, Inc.
3309 Brighton Place
Lexington, KY 40509
Re: Asset Purchase Agreement, dated as of February __,
1997, by and between Media General Newspapers, Inc. and
Newspaper Holdings, Inc. and Related Documents
Ladies and Gentlemen:
I am General Counsel for Media General Newspapers Inc., a Delaware
corporation ("Seller") and Media General, Inc., a Virginia corporation ("Media
General") and have acted as such in connection with the transactions
contemplated by that certain Asset Purchase Agreement, dated as of February ___,
1997 (the "Asset Purchase Agreement"), by and between Seller and Newspaper
Holdings, Inc., a Delaware corporation ("Buyer"). This opinion is being
delivered to you pursuant to Section 7.5 of the Asset Purchase Agreement. All
capitalized terms used herein but not otherwise defined in this opinion shall
have the meanings ascribed thereto in the Asset Purchase Agreement.
In rendering this opinion, I have reviewed:
1. the Asset Purchase Agreement,
2. the documents to be delivered by Seller pursuant to
Article 7 of the Asset Purchase Agreement (collectively, the
"Related Documents" and, together with the Asset Purchase
Agreement, the "Transaction Documents"),
3. the Certificate of Incorporation and Bylaws of Seller
(collectively, the "Seller Organizational Documents"),
4. the records of certain proceedings and actions of
Seller, in the forms certified to me by an officer of Seller as
being true, correct and complete and to be in effect (without
rescission, modification or amendment) on the date of this
opinion,
5. the records of certain proceedings and actions of Media
General, and
Exhibit F - Page 1
<PAGE>
Newspaper Holdings, Inc.
[Closing Date]
Page 2
6. the Indemnification Agreement dated as of February __,
1997, by and among Seller, Buyer, Media General and Community
Newspaper Holdings, Inc.
I have not reviewed the records of any court.
In my examination of documents and records, I have assumed, without
investigation, (i) the genuineness of all signatures, (ii) the legal capacity of
natural persons, (iii) the authenticity of all documents submitted to me as
originals, and (iv) the conformity with originals of all documents submitted to
me as telecopied, certified, photostatic or reproduced copies and the
authenticity of all such documents. I have also assumed, but not independently
verified, that the Transaction Documents, the Indemnification Agreement and all
other documents executed by a party other than Seller or Media General were duly
and validly authorized, executed and delivered by such party, that such party
has the requisite power and authority to execute, deliver and perform such
agreements and other documents, and that such agreements and other documents are
legal, valid and binding obligations of such party and are enforceable against
such party in accordance with their respective terms.
With respect to questions of fact, I have relied, without independent
inquiry or verification by me, solely upon (a) the representations and
warranties set forth in the Asset Purchase Agreement, (b) written and oral
representations of officers of Seller and Media General and (c) certificates of
public officials, and I do not opine in any respect as to the accuracy of any
such facts. I have conducted no independent investigation whatsoever of any
factual matter.
This opinion is limited to the laws of the Commonwealth of Virginia and
the federal law of the United States of America insofar as such laws apply
(collectively, "Applicable Law"), except that Applicable Law includes only laws
and regulations that a lawyer exercising customary professional diligence would
reasonably recognize as being directly applicable to the transactions
contemplated by the Transaction Documents and the Indemnification Agreement and
excludes those set forth in Section 19 of the Legal Opinion Accord of the
American Bar Association Section of Business Law (1991). I express no opinion as
to choice of law or conflicts of law rules, or the laws of any states or
jurisdictions other than as specified above.
Statements in this opinion as to the legality, validity,
binding effect and enforceability of the Transaction Documents
Exhibit F - Page 2
<PAGE>
Newspaper Holdings, Inc.
[Closing Date]
Page 3
and the Indemnification Agreement are subject to limitations imposed by
bankruptcy, insolvency, reorganization, moratorium or similar laws and related
court decisions of general applicability relating to or affecting creditors'
rights generally, and to the application of general equitable principles.
In addition, without limitation of any of the foregoing, I express no
opinion herein as to (i) the enforceability of any of the provisions of Section
9.9(Consent to Jurisdiction, etc.) of the Asset Purchase Agreement, (ii) any
consents of third parties that may be required in connection with the transfer
and assignment of any of the Assets, or the effects of the failure to have
obtained any such consents that may be required, (iii) antitrust laws, or (iv)
the right, title or interest of Seller in or to any of the Assets.
Based upon the foregoing, subject to the assumptions, limitations and
exceptions contained herein, I am of the opinion that:
1. Seller is a corporation, duly organized, validly existing and in
good standing under the laws of the State of Delaware. Seller is duly qualified
as a foreign corporation to transact business, and is in good standing, in each
jurisdiction in which the ownership of its assets or the conduct of its business
requires such qualification, other than any jurisdiction in which the failure to
so qualify would not have a material adverse effect on Seller or its assets,
taken as a whole. Seller has the requisite corporate power and authority to
execute, deliver and perform the Transaction Documents to which it is a party.
2. The execution, delivery and performance by Seller of the Transaction
Documents to which it is a party, and the consummation by Seller, to the extent
applicable, of the transactions contemplated thereby, have been duly and validly
authorized by all necessary corporate action on the part of Seller.
3. The Transaction Documents to which Seller is a party have been duly
and validly executed and delivered by Seller, and the Transaction Documents to
which Seller is a party constitute the legal, valid and binding agreements of
Seller (to the extent it is a party thereto), enforceable against Seller (to the
extent it is a party thereto) in accordance with their respective terms.
Exhibit F - Page 3
<PAGE>
Newspaper Holdings, Inc.
[Closing Date]
Page 4
4. Media General is a corporation, duly organized, validly existing and
in good standing under the laws of the Commonwealth of Virginia. Media General
has the requisite corporate power and authority to execute, deliver and perform
the Indemnification Agreement.
5. The execution, delivery and performance by Media General of the
Indemnification Agreement, and the taking by Media General, to the extent
applicable, of the actions contemplated thereby, have been duly and validly
authorized by all necessary corporate action on the part of Media General.
6. The Indemnification Agreement to which Media General is a party has
been duly and validly executed and delivered by Media General, and constitutes
the legal, valid and binding agreement of Media General, enforceable against
Media General in accordance with its terms.
I express no opinion as to the effect of the violation of any law or
regulation that may be applicable to Seller or Media General as a result of the
involvement of parties other than Seller or Media General in the transactions
contemplated by the Asset Purchase Agreement or Indemnification Agreement, as
applicable, because of the legal or regulatory status of such other parties or
because of any other facts specifically pertaining to any of them.
The information set forth herein is as of the date hereof. I assume no
obligation to advise you of changes that may thereafter be brought to my
attention. My opinions are based on statutory provisions and judicial decisions
in effect at the date hereof, and I do not opine with respect to any law,
regulation, rule or governmental policy that may be enacted or adopted after the
date hereof nor assume any responsibility to advise you of future changes in my
opinions.
This letter is solely for your information in connection with the
consummation of the transactions contemplated by the Asset Purchase Agreement
and the Indemnification Agreement and is not to be reproduced, quoted in whole
or in part or otherwise referred to in any of your financial statements or
public releases, nor is it to be filed with any governmental agency or relied
upon by any other person or for any purposes whatsoever without my prior written
consent; provided however, that the Lenders (as defined in the Indemnification
Agreement) may rely on the foregoing opinions solely in connection with the
financing
Exhibit F - Page 4
<PAGE>
Newspaper Holdings, Inc.
[Closing Date]
Page 5
they are providing to Buyer in connection with the transactions contemplated by
the Asset Purchase Agreement.
Very truly yours,
Exhibit F - Page 5
<PAGE>
EXHIBIT G
Buyer's Officer's Certificate
This Officer's Certificate is delivered pursuant to Section
8.3 of the Asset Purchase Agreement dated as of February __, 1997
(the "Purchase Agreement"), between Media General Newspapers,
Inc., and Newspaper Holdings, Inc. ("Buyer"). Capitalized terms
and references used herein and not otherwise defined herein have
the meanings ascribed to them in the Purchase Agreement. The
undersigned hereby certifies as follows:
1. As of the date hereof, I am duly appointed or elected and acting
____________ of Buyer, and I am providing this Officer's Certificate in such
capacity.
2. All representations and warranties of Buyer contained herein are
true and correct on the date hereof as though such representations and
warranties were made on the date hereof (other than representations and
warranties made as of an earlier date, which were true and correct as of such
earlier date) except for changes expressly permitted by the Purchase Agreement
and except for inaccuracies that in the aggregate would not have a material
adverse effect on Buyer's ability to consummate the transactions contemplated
under the Purchase Agreement.
3. Buyer has performed and complied in all material respects with all
covenants and agreements contained in the Purchase Agreement required to be
performed or complied with by it on or prior to the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this Officer's
Certificate as of the _____ day of February, 1997.
NEWSPAPER HOLDINGS, INC.
By: ______________________________
Its: ______________________________
Exhibit G - Page 1
<PAGE>
Media General Newspapers, Inc.
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Page 1
EXHIBIT H
[Closing Date]
Media General Newspapers, Inc.
c/o Media General, Inc.
333 East Grace Street
Richmond, Virginia 23293
Re: Asset Purchase Agreement, dated as of February __,
1997, by and between Media General Newspapers, Inc. and
Newspaper Holdings, Inc.
Ladies and Gentlemen:
We have acted as counsel to Newspaper Holdings, In ., a Delaware
corporation (the "Buyer"), in connection with the transactions contemplated by
that certain Asset Purchase Agreement, dated as of February __, 1997 (the "Asset
Purchase Agreement"), by and between Media General Newspapers, Inc., a Delaware
corporation (the "Seller"), and Buyer. This opinion is being delivered to you
pursuant to Section 8.5 of the Asset Purchase Agreement. All capitalized terms
used herein but not otherwise defined in this opinion shall have the meanings
ascribed thereto in the Asset Purchase Agreement.
In rendering this opinion, we have reviewed:
1. the Asset Purchase Agreement,
2. the documents to be delivered by Buyer pursuant to
Article 8 of the Asset Purchase Agreement
(collectively, the "Related Documents" and, together
with the Asset Purchase Agreement, the "Transaction
Documents"),
3. the Certificate of Incorporation and By-laws of Buyer
(collectively, the "Buyer Organizational Documents"),
and
4. the records of certain proceedings and actions of Buyer and
its shareholders, in the forms certified to us by an officer
of the Buyer as being true, correct and complete and to be in
effect (without rescission, modification or amendment) on the
date of this opinion.
Exhibit H - Page 1
<PAGE>
Media General Newspapers, Inc.
- ---------------
Page 2
We have not reviewed the records of any court.
In our examination of documents and records, we have assumed, without
investigation, (i) the genuineness of all signatures, (ii) the legal capacity of
natural persons, (iii) the authenticity of all documents submitted to us as
originals, and (iv) the conformity with originals of all documents submitted to
us as telecopied, certified, photostatic or reproduced copies and the
authenticity of all such documents. We have also assumed, but not independently
verified, that the Asset Purchase Agreement, the Related Documents and all other
documents executed by a party other than Buyer or any of its subsidiaries, were
duly and validly authorized, executed and delivered by such party, that such
party has the requisite power and authority to execute, deliver and perform such
agreements and other documents, and that such agreements and other documents are
legal, valid and binding obligations of such party and are enforceable against
such party in accordance with their respective terms.
With respect to questions of fact, we have relied, without independent
inquiry or verification by us, solely upon (a) the representations and
warranties set forth in the Asset Purchase Agreement, (b) written and oral
representations of officers of Buyer and (c) certificates of public officials,
and we do not opine in any respect as to the accuracy of any such facts. We have
conducted no independent investigation whatsoever of any factual matter.
This opinion is limited to the laws of the states of North Carolina and
Delaware and the federal law of the United States of America (collectively,
"Applicable Law"), except that Applicable Law includes only laws and regulations
that a lawyer exercising customary professional diligence would reasonably
recognize as being directly applicable to the transactions contemplated by the
Transaction Documents and excludes those set forth in Section 19 of the Legal
Opinion Accord of the American Bar Association Section of Business Law (1991).
You expressly understand that we are not admitted to the practice of law in the
State of Delaware. We express no opinion as to choice of law or conflicts of law
rules, or the laws of any states or jurisdictions other than as specified above.
We have not considered and express no opinion on the laws of other
jurisdictions; we have assumed compliance with all such laws.
Statements in this opinion as to the legality, validity,
binding effect and enforceability of the Transaction Documents
Exhibit H - Page 2
<PAGE>
Media General Newspapers, Inc.
- ---------------
Page 3
are subject to limitations imposed by bankruptcy, insolvency, reorganization,
moratorium or similar laws and related court decisions of general applicability
relating to or affecting creditors' rights generally, and to the application of
general equitable principles.
In addition, without limitation of any of the foregoing, we express no
opinion herein as to (i) the enforceability of any of the provisions of Section
9.9 (Consent to Jurisdiction, etc.) of the Asset Purchase Agreement, (ii) any
consents of third parties that may be required in connection with the transfer
and assignment of any of the Assets, or the effects of the failure to have
obtained any such consents that may be required or (iii) antitrust laws.
Based upon the foregoing, subject to the assumptions, limitations and
exceptions contained herein, we are of the opinion that:
1. Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Buyer is duly qualified as a
foreign corporation to transact business, and is in good standing, under the
laws of the Commonwealth of Virginia. Buyer has the requisite corporate power
and authority to execute, deliver and perform the Asset Purchase Agreement.
2. The execution, delivery and performance by Buyer of the Transaction
Documents to which Buyer is a party, and the consummation by Buyer of the
transactions contemplated thereby, have been duly and validly authorized by all
necessary corporate action on the part of the Buyer.
3. The Transaction Documents to which Buyer is a party have been duly
and validly executed and delivered by Buyer and the Transaction to which Buyer
is a party constitute the legal, valid and binding agreements of Buyer
enforceable against Buyer in accordance with their respective terms.
4. Neither Buyer nor Seller nor any other Person (as defined in the
Hart-Scott-Rodino Antitrust Improvements Act of 1976) is required to file a
Notification and Report Form for Certain Mergers and Acquisitions or any other
document with the United States Department of Justice or the United States
Federal Trade Commission in connection with the execution, delivery or
performance of the Asset Purchase Agreement.
Exhibit H - Page 3
<PAGE>
Media General Newspapers, Inc.
- ---------------
Page 4
We express no opinion as to the effect of the violation of any law or
regulation that may be applicable to the Buyer as a result of the involvement of
parties other than the Buyer in the transactions contemplated by the Asset
Purchase Agreement because of the legal or regulatory status of such other
parties or because of any other facts specifically pertaining to any of them.
The information set forth herein is as of the date hereof. We assume no
obligation to advise you of changes that may thereafter be brought to our
attention. Our opinions are based on statutory provisions and judicial decisions
in effect at the date hereof, and we do not opine with respect to any law,
regulation, rule or governmental policy that may be enacted or adopted after the
date hereof nor assume any responsibility to advise you of future changes in our
opinions.
This letter is solely for your information in connection with the
consummation of the transactions contemplated by the Asset Purchase Agreement
and is not to be reproduced, quoted in whole or in part or otherwise referred to
in any of your financial statements or public releases, nor is it to be filed
with any governmental agency or relied upon by any other person or for any
purposes whatsoever without the prior written consent of a partner of this firm.
Very truly yours,
Exhibit H - Page 4
<PAGE>
Media General, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Years Ended
----------------------------------------------------
December 29, December 31, December 25,
1996 1995 1994
(53 weeks)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Revenues $ 765,105 $ 707,766 $ 626,247
Operating costs:
Production costs 410,659 391,940 332,557
Selling, distribution and administrative 187,059 182,243 171,989
Depreciation and amortization 64,951 60,590 55,450
- -------------------------------------------------------------------------------------------------------------------------
Total operating costs 662,669 634,773 559,996
- -------------------------------------------------------------------------------------------------------------------------
Operating income 102,436 72,993 66,251
- -------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Gain on sale of Garden State Newspapers investment --- --- 91,520
Interest expense (21,267) (15,522) (16,948)
Investment income (loss) - unconsolidated affiliates:
Southeast Paper Manufacturing Co. 19,508 12,780 (1,647)
Denver Newspapers, Inc.:
Equity in net income 2,704 1,817 2,037
Preferred stock income 4,976 4,437 2,545
Other, net 1,381 5,204 (789)
- --------------------------------------------------------------------------------------------------------------------------
Total other income 7,302 8,716 76,718
- -------------------------------------------------------------------------------------------------------------------------
Income before income taxes 109,738 81,709 142,969
- -------------------------------------------------------------------------------------------------------------------------
Income taxes 39,240 28,477 25,960
- -------------------------------------------------------------------------------------------------------------------------
Net income $ 70,498 $ 53,232 $ 117,009
=========================================================================================================================
Earnings per common share and equivalent $ 2.65 $ 2.01 $ 4.45
=========================================================================================================================
</TABLE>
Notes to Consolidated Financial Statements begin on page 30. Weighted average
common shares and equivalents were 26,576, 26,482 and 26,283 for 1996, 1995 and
1994, respectively.
25
<PAGE>
Media General, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except shares)
<TABLE>
<CAPTION>
ASSETS
December 29, December 31,
1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Current assets:
Cash $ 4,471 $ 3,367
Accounts receivable (less allowance for doubtful
accounts 1996 - $5,271; 1995 - $4,530) 81,513 76,532
Inventories 16,329 20,380
Other 25,905 25,812
----------------- -----------------
Total current assets 128,218 126,091
- -------------------------------------------------------------------------------------------------------------------------
Investments in unconsolidated affiliates 113,872 102,284
- -------------------------------------------------------------------------------------------------------------------------
Other assets 38,493 42,718
- -------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost:
Land 22,711 22,789
Buildings 151,834 153,182
Machinery and equipment 811,388 796,451
Construction in progress 11,642 10,121
Accumulated depreciation (527,597) (484,411)
----------------- -----------------
Net property, plant and equipment 469,978 498,132
- -------------------------------------------------------------------------------------------------------------------------
Excess of cost of businesses acquired over equity in net assets
(less accumulated amortization 1996 - $16,091; 1995 - $9,429) 274,923 247,518
- -------------------------------------------------------------------------------------------------------------------------
Total assets $ 1,025,484 $ 1,016,743
=========================================================================================================================
</TABLE>
Notes to Consolidated Financial Statements begin on page 30.
26
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
December 29, December 31,
1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Current liabilities:
Accounts payable $ 30,154 $ 25,324
Accrued expenses and other liabilities 72,310 72,764
Income taxes payable 1,381 5,065
Short-term borrowings 11,000 ---
----------------- -----------------
Total current liabilities 114,845 103,153
- -------------------------------------------------------------------------------------------------------------------------
Long-term debt 265,000 326,750
- -------------------------------------------------------------------------------------------------------------------------
Deferred income taxes 102,055 102,884
- -------------------------------------------------------------------------------------------------------------------------
Other liabilities and deferred credits 106,344 106,845
- -------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Notes 10 and 11)
Stockholders' equity:
Preferred stock ($5 cumulative convertible), par value $5 per share:
Authorized 5,000,000 shares; none outstanding
Common stock, par value $5 per share:
Class A, authorized 75,000,000 shares; issued
25,950,287 and 25,905,237 shares 129,751 129,526
Class B, authorized 600,000 shares; issued
556,574 shares 2,783 2,783
Additional paid-in capital 11,393 10,068
Unearned compensation (1,254) (2,573)
Retained earnings 294,567 237,307
----------------- -----------------
Total stockholders' equity 437,240 377,111
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 1,025,484 $ 1,016,743
=========================================================================================================================
</TABLE>
Notes to Consolidated Financial Statements begin on page 30.
27
<PAGE>
Media General, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except shares and per share amounts)
<TABLE>
<CAPTION>
Common Stock Additional
----------------------- Paid-in Unearned Retained
Class A Class B Capital Compensation Earnings
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Balance at December 26, 1993 $ 128,475 $ 2,786 $ 5,967 $ (3,108) $ 91,314
Net income ($4.45 per share) --- --- --- --- 117,009
Cash dividends ($0.44 per share) --- --- --- --- (11,553)
Exercise of options on 55,554
Class A shares 278 --- 684 --- ---
Income tax benefits relating to
restricted share dividends and
exercised options --- --- 270 --- ---
Issuance of 4,629 Class A shares
under dividend reinvestment plan 23 --- 100 --- ---
Exchange of 580 Class B shares
for Class A shares 3 (3) --- --- ---
Amortization and forfeitures
of unearned compensation (80) --- (234) 1,432 ---
------------- ------------- ------------- ------------- -------------
Balance at December 25, 1994 128,699 2,783 6,787 (1,676) 196,770
- ---------------------------------------------------------------------------------------------------------------------------
Net income ($2.01 per share) --- --- --- --- 53,232
Cash dividends ($0.48 per share) --- --- --- --- (12,695)
Exercise of options on 81,436
Class A shares 407 --- 699 --- ---
Issuance of 88,305 Class A shares
under restricted stock plan 442 --- 2,050 (2,492) ---
Income tax benefits relating to
restricted share dividends and
exercised options --- --- 557 --- ---
Issuance of 5,646 Class A shares under
dividend reinvestment plan 28 --- 149 --- ---
Amortization and forfeitures of
unearned compensation (50) --- (174) 1,595 ---
------------- ------------- ------------- ------------- -------------
Balance at December 31, 1995 129,526 2,783 10,068 (2,573) 237,307
- ---------------------------------------------------------------------------------------------------------------------------
Net income ($2.65 per share) --- --- --- --- 70,498
Cash dividends ($0.50 per share) --- --- --- --- (13,238)
Purchase and retirement of 44,212
Class A shares (221) --- (1,238) --- ---
Exercise of options on 88,621
Class A shares 443 --- 1,470 --- ---
Income tax benefits relating to
restricted shares and exercised
options --- --- 1,016 --- ---
Issuance of 5,408 Class A shares
under dividend reinvestment plan 27 --- 149 --- ---
Amortization and forfeitures of
unearned compensation (24) --- (72) 1,319 ---
------------- ------------- ------------- ------------- -------------
Balance at December 29, 1996 $ 129,751 $ 2,783 $ 11,393 $ (1,254) $ 294,567
===========================================================================================================================
</TABLE>
Notes to Consolidated Financial Statements begin on page 30.
28
<PAGE>
Media General, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended
----------------------------------------------------
December 29, December 31, December 25,
1996 1995 1994
(53 weeks)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net income $ 70,498 $ 53,232 $ 117,009
Adjustments to reconcile net income:
Depreciation and amortization 64,951 60,590 55,450
Deferred income taxes (1,733) 4,271 4,704
Provision for doubtful accounts 5,084 4,188 2,690
Investment income - unconsolidated affiliates (27,188) (19,034) (2,935)
Distribution from unconsolidated newsprint
affiliate 15,600 --- ---
Gain on sale of Garden State Newspapers
investment --- --- (91,520)
Change in assets and liabilities:
Accounts receivable and inventories (1,979) (16,730) (10,539)
Other current assets 1,780 (3,814) 8,010
Accounts payable, accrued expenses
and other liabilities (1,745) 11,959 10,042
Other, net 1,235 8,641 9,923
---------------- --------------- ---------------
Net cash provided by operating activities 126,503 103,303 102,834
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of businesses (40,024) (231,900) ---
Capital expenditures (28,510) (29,076) (56,919)
Change in restricted bond proceeds held in trust 550 2,668 3,365
Other, net 5,944 3,871 1,645
Net proceeds from sale of Garden State
Newspapers investment --- --- 57,520
---------------- --------------- ---------------
Net cash provided (used) by investing activities (62,040) (254,437) 5,611
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase in long-term debt 38,000 207,000 ---
Payment of long-term debt (88,750) (52,750) (89,256)
Cash dividends paid (13,238) (12,695) (11,553)
Other, net 629 1,283 1,085
---------------- --------------- ---------------
Net cash provided (used) by financing activities (63,359) 142,838 (99,724)
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 1,104 (8,296) 8,721
Cash and cash equivalents at beginning of year 3,367 11,663 2,942
---------------- --------------- ---------------
Cash and cash equivalents at end of year $ 4,471 $ 3,367 $ 11,663
=========================================================================================================================
</TABLE>
Notes to Consolidated Financial Statements begin on page 30.
29
<PAGE>
Media General, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Principles of Consolidation
The accompanying financial statements include the accounts of Media
General, Inc., and subsidiaries more than 50% owned (the Company). All
significant intercompany balances and transactions have been eliminated. See
Note 10 for a summary of the Company's accounting policies.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The Company's fiscal year ends on the last Sunday in December. Results for
1996 and 1994 are for the 52 week periods ended December 29, 1996, and December
25, 1994, respectively, while results for 1995 are for the 53 week period ended
December 31, 1995.
Note 2: Acquisitions
On August 1, 1996, the Company acquired, for approximately $38 million, the
Danville Register & Bee, a daily newspaper in Virginia. Also, on May 15, 1996,
the Company acquired, for approximately $2 million, Professional Communications
Systems, a provider of equipment and studio design services for television
stations. The results of operations of these businesses, since their respective
dates of acquisition, have been included in the Company's consolidated results
of operations and are not material.
On October 26, 1995, the Company acquired for approximately $232 million
the assets of several Virginia newspapers (Virginia Newspapers) from Worrell
Enterprises, Inc., and its affiliates. Daily and Sunday newspaper properties
acquired included The News & Advance in Lynchburg, The Daily Progress in
Charlottesville, the Culpeper Star-Exponent in Culpeper and the Suffolk
News-Herald in Suffolk. In addition, the acquisition included a number of weekly
and other publications. Virginia Newspapers' results of operations have been
included in the Company's consolidated results of operations since the date of
acquisition. The acquisition was accounted for as a purchase and, accordingly,
the purchase price was allocated to assets acquired based on their estimated
fair values. The amount allocated to cost in excess of net assets acquired was
$205 million, to other intangibles (principally subscription lists) was $14
million, and to other assets, net (principally property, plant and equipment)
was $13 million. Cost in excess of net assets acquired and other intangibles are
being amortized on a straight-line basis over lives ranging from 10-35 years.
The unaudited consolidated results of operations on a pro forma basis, as though
the Virginia Newspapers had been acquired as of the beginning of fiscal year
1995, would not have been materially different from the reported results of
operations.
Note 3: Investments in Unconsolidated Affiliates
The Company has a one-third partnership interest in Southeast Paper
Manufacturing Company (SEPCO), a domestic newsprint manufacturer which pays
licensing fees to the Company. The Company acquired on September 28, 1994, a 40%
interest in Denver Newspapers, Inc. (DNI), the parent company of The Denver
Post, a Denver, Colorado, daily newspaper company, by exercising a warrant, held
since 1987, for $40,000.
On May 20, 1994, the Company sold its 40% common equity interest in Garden
State Newspapers, Inc. (GSN), a domestic daily and weekly newspaper company,
along with its GSN Series A and Series C Preferred Stock, for $63 million in
cash. Additionally, in exchange for the GSN Series B Preferred Stock previously
owned by the Company, the Company received 1,200 shares of $25,000 par, 9%
Cumulative Preferred Stock of DNI (previously owned by GSN), which included
accumulated and unpaid dividends of approximately $17.4 million. The preferred
stock was valued at $34 million, net of an unamortized discount of $27.3
million, based on an imputed discount rate of approximately 12% and a redemption
date of June 30, 1999. The sale of GSN resulted in a gain of $91.5 million
($83.3 million after-tax; $3.17 per share).
<PAGE>
Summarized financial information for these investments accounted for by the
equity method follows:
<TABLE>
Southeast Paper Manufacturing Company:
<CAPTION>
(In thousands) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Current assets $ 74,269 $ 87,498
Noncurrent assets 309,550 325,135
Current liabilities 60,706 63,564
Noncurrent liabilities 139,256 176,938
- -------------------------------------------------------------------------------------------------------------------
30
(In thousands) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
Net sales $ 277,543 $ 290,980 $ 195,599
Gross profit 93,150 75,274 29,497
Net income (loss) 58,525 38,341 (5,331)
Company's equity in net income (loss) 19,508 12,780 (1,647)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
Denver Newspapers, Inc.:
<CAPTION>
(In thousands) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Current assets $ 38,855 $ 38,631
Noncurrent assets 99,770 86,370
Current liabilities 40,961 35,209
Noncurrent liabilities 26,867 28,459
Mandatorily redeemable preferred stock 54,300 51,600
- -------------------------------------------------------------------------------------------------------------------
(In thousands) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
Net sales $ 190,140 $ 168,836 $ 140,625
Gross profit 74,987 67,800 70,377
Income before cumulative effect of a change
in accounting principle 9,461 7,242 12,560
Net income applicable to common stock 6,761 4,542 7,117
Company's equity in net income 2,704 1,817 2,037
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The above summarized information for DNI includes its operating results for
the 12 month periods ended November 30, 1996, and November 30, 1995, and the 11
month period ended November 30, 1994. Effective with the fourth quarter of 1994,
the Company began recognizing, on a one month lag, 40% of DNI's net income
applicable to common stockholders. The carrying value of the Company's
investment in the DNI mandatorily redeemable preferred stock, which is included
in investments in unconsolidated affiliates, was $46 million and $41 million,
net of unamortized discounts of $15.3 million and $20.3 million, at December 29,
1996, and December 31, 1995, respectively. The fair value of the preferred
stock, which the Company intends to hold until maturity, approximates its
carrying value.
Other:
Retained earnings of the Company at December 29, 1996, includes $20.2
million related to undistributed earnings of unconsolidated affiliates.
<PAGE>
Note 4: Long-Term Debt
Long-term debt at December 29, 1996, and December 31, 1995, was as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Revolving credit facility $ 180,000 $ 190,000
8.62% senior notes due annually from 1998 to 2002 65,000 65,000
7.125% revenue bonds due 2022 20,000 20,000
Bank lines --- 8,000
9.27% notes due annually through 1996 --- 43,750
------------- -------------
Long-term debt $ 265,000 $ 326,750
==================================================================================================================
</TABLE>
31
In December 1996, the Company entered into a seven-year revolving credit
facility committing a syndicate of banks to lend the Company up to $1.2 billion.
This new facility has mandatory commitment reductions of 25% at the end of 2001
and 2002. Interest rates under the facility are typically based on London
Interbank Offered Rate (LIBOR) plus a margin ranging from .225% to .75% (.225%
at December 29, 1996), based on the Company's debt to cash flow ratio (leverage
ratio), as defined. Under this facility, the Company pays commitment fees (.1%
at December 29, 1996) on the unused portion of the facility at a rate based on
its leverage ratio. The new facility replaces a $320 million revolving credit
facility with interest rates based on LIBOR.
The Company has an agreement, which expires in February 1998, with an
insurance company which permits the Company to borrow up to an additional $150
million under senior notes on an uncommitted basis. The notes can have a maximum
maturity of 15 years with interest rates determined by market conditions at the
time of issuance. No borrowings were outstanding under this agreement at
December 29, 1996.
In 1992, the Company issued $20 million of New Jersey Economic Development
Authority tax-exempt revenue bonds. The bonds are secured by a letter of credit,
under which the Company pays an annual fee equal to .125% plus a margin (.225%
at December 29, 1996) based on the Company's leverage ratio per annum on
outstanding bond principal and interest payable. The bonds contain certain
optional and mandatory redemption provisions, and the bond proceeds were
restricted for capital expenditures related to the Company's Garden State Paper
newsprint operations in New Jersey.
The Company's debt covenants contain a minimum net worth requirement ($385
million at December 29, 1996), and require the maintenance of an interest
coverage ratio, as defined. Also, the facility requires the Company's leverage
ratio not to exceed 5.25 initially, with decreases each year until 2000 when it
must not exceed 3.5 thereafter. Long-term debt maturities during the five years
subsequent to December 29, 1996, aggregating $52,000,000, are as follows: 1997
- -- none; 1998 -- $13,000,000; 1999 -- $13,000,000 ; 2000 -- $13,000,000; 2001 --
$13,000,000.
At December 31, 1995, the Company had borrowings of $8 million from
available uncommitted bank demand lines and amounts outstanding under the 9.27%
notes due in 1996, which were classified as long-term debt in accordance with
the Company's intention and ability to refinance the obligations on a long-term
basis.
In October 1995, the Company entered into three interest rate swap
agreements totaling $200 million with maturities of three to five years which
effectively convert the Company's variable rate debt to fixed rate debt with a
weighted average interest rate of 6.1% at December 29, 1996. The Company enters
into interest rate swap agreements to manage interest cost and risk associated
with increasing variable interest rates. Amounts which are due to or from
interest rate swap counterparties are recorded in interest expense in the period
in which they accrue. The Company's exposure to credit loss on its interest rate
swap agreements in the event of nonperformance by the counterparties is believed
to be remote due to the Company's requirement that counterparties have a strong
credit rating.
<PAGE>
Estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- ----------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amounts Value Amounts Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investment in DNI Preferred Stock (Note 3) $ 45,958 $ 45,958 $ 40,982 $ 40,982
Interest rate swap agreements --- 1,005 --- ---
Liabilities:
Long-term debt:
Revolving credit facility 180,000 180,000 190,000 190,000
8.62% senior notes 65,000 68,512 65,000 71,401
7.125% revenue bonds 20,000 22,502 20,000 22,677
Bank lines --- --- 8,000 8,000
9.27% notes --- --- 43,750 45,269
Interest rate swap agreements --- --- --- 3,315
Short-term bank lines 11,000 11,000 --- ---
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
32
The fair value of the Company's investment in DNI Preferred Stock,
which is not publicly traded, was estimated by discounting expected future cash
flows using a current market rate applicable to the yield, credit quality and
maturity of the investment. The fair values of the interest rate swaps are based
on the estimated amounts the Company would receive or pay to terminate the
swaps. Fair values of the Company's long-term debt are estimated using
discounted cash flow analyses based on the Company's incremental borrowing rates
for similar types of borrowings. The borrowings under the Company's revolving
credit facility and bank demand lines approximate their fair value.
Note 5: Business Segments
The Company is a diversified communications company with four principal
business segments located primarily in the Southeast United States. At December
29, 1996, the Publishing segment, the Company's largest segment based on assets,
included ten daily (four of which were purchased in 1995 and one in 1996) and a
number of weekly newspapers and other publications; similarly, the Broadcast
Television segment consisted of three television stations. The Cable Television
segment includes two cable television operations and a cable advertising unit.
The Newsprint segment includes the Company's recycled newsprint operations.
Intersegment sales (principally newsprint) comprise less than 1% of consolidated
totals and are not shown separately. Corporate assets are principally property,
plant and equipment and investments in unconsolidated affiliates.
Other income, net, for 1995 includes a $3.6 million gain from the sale
of the Company's interest in a Mexican newsprint operation.
Operations for 1994 include recognition of a gain of $91.5 million
($83.3 million after-tax; $3.17 per share) related to the sale of the Company's
investment in Garden State Newspapers, Inc. (GSN), for $63 million in cash and
Denver Newspapers, Inc., Preferred Stock valued at $34 million. See Note 3 for a
further discussion of the GSN sale.
Other income, net, for 1992 includes $2.9 million of insurance proceeds
related to a 1991 fire at the Company's Garden State Paper newsprint mill in
Garfield, New Jersey, and $2.1 million resulting from the termination of
obligations previously established upon the disposition of certain operations.
In 1996, the Company's newspaper and auxiliary operations, which were
previously reported as separate segments, have been combined and are now
reported as the Publishing segment. Certain prior year financial information has
been reclassified to conform with the current year's presentation.
<PAGE>
Information as to revenues, profitability and assets is as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Revenues
Publishing $ 407,791 $ 364,204 $ 338,088 $ 320,976 $ 311,173
Broadcast Television 83,445 69,274 62,443 54,121 52,579
Cable Television 146,159 134,183 123,305 125,356 117,367
Newsprint 127,710 140,105 102,411 100,371 96,540
- ------------------------------------------------------------------------------------------------------------------------
Total $ 765,105 $ 707,766 $ 626,247 $ 600,824 $ 577,659
========================================================================================================================
Operating profit
Publishing $ 49,454 $ 25,303 $ 31,443 $ 19,400 $ 15,424
Broadcast Television 25,872 25,195 20,647 14,281 11,259
Cable Television 24,646 10,654 13,691 20,897 14,653
Newsprint 2,464 11,841 470 5,725 1,277
- ------------------------------------------------------------------------------------------------------------------------
102,436 72,993 66,251 60,303 42,613
Gain on sale of Garden State
Newspapers investment --- --- 91,520 --- ---
Interest expense (21,267) (15,522) (16,948) (21,274) (17,559)
Equity in net income (loss) of
unconsolidated affiliates 22,212 14,597 390 (990) (4,926)
Preferred stock income 4,976 4,437 2,545 --- ---
Other, net 1,381 5,204 (789) 835 6,131
- ------------------------------------------------------------------------------------------------------------------------
Income before income taxes $ 109,738 $ 81,709 $ 142,969 $ 38,874 $ 26,259
========================================================================================================================
33
Identifiable assets
Publishing $ 602,276 $ 589,026 $ 367,042 $ 354,905 $ 368,561
Broadcast Television 51,090 52,483 40,697 42,208 47,347
Cable Television 149,265 165,933 181,221 186,744 196,035
Newsprint 82,530 86,173 84,042 84,295 85,895
Corporate 140,323 123,128 114,163 77,090 89,587
- ------------------------------------------------------------------------------------------------------------------------
Total $ 1,025,484 $ 1,016,743 $ 787,165 $ 745,242 $ 787,425
========================================================================================================================
Capital expenditures
Publishing $ 4,877 $ 5,653 $ 34,710 $ 12,485 $ 63,690
Broadcast Television 2,269 1,805 1,852 2,227 1,291
Cable Television 11,733 17,895 16,371 13,110 12,023
Newsprint 6,504 3,392 3,797 4,413 14,899
Corporate 3,127 331 189 602 416
- ------------------------------------------------------------------------------------------------------------------------
Total $ 28,510 $ 29,076 $ 56,919 $ 32,837 $ 92,319
========================================================================================================================
Depreciation and amortization
Publishing $ 29,300 $ 24,328 $ 22,869 $ 23,245 $ 20,916
Broadcast Television 2,760 2,794 3,066 3,397 3,656
Cable Television 26,530 26,914 22,812 23,126 23,586
Newsprint 6,361 6,554 6,703 7,079 6,392
- ------------------------------------------------------------------------------------------------------------------------
Total $ 64,951 $ 60,590 $ 55,450 $ 56,847 $ 54,550
========================================================================================================================
</TABLE>
<PAGE>
Note 6: Taxes on Income
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109), which requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this "liability" method, deferred tax
liabilities and assets are determined based on the temporary differences between
the financial statement and tax bases of assets and liabilities by applying
enacted statutory tax rates applicable to future years in which the differences
are expected to reverse.
The Company's federal income tax returns through fiscal year 1993 have been
examined and closed by the Internal Revenue Service. The Company has various
state tax returns under examination, the results of which are not expected to be
material to the Company's results of operations, financial position or cash
flows.
Significant components of income taxes are as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Current:
Federal $ 35,143 $ 20,300 $ 18,996
State 5,830 3,906 2,260
-------------- ------------- --------------
40,973 24,206 21,256
-------------- ------------- --------------
Deferred:
Federal (1,885) 4,073 3,645
State 152 198 1,059
-------------- ------------- --------------
(1,733) 4,271 4,704
-------------- ------------- --------------
$ 39,240 $ 28,477 $ 25,960
===================================================================================================================
</TABLE>
34
Temporary differences which give rise to significant components of the
Company's deferred tax liabilities and assets at December 29, 1996, and December
31, 1995, are as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Deferred tax liabilities:
Tax over book depreciation $ 123,649 $ 126,231
Other 17,504 13,895
------------- --------------
Total deferred tax liabilities 141,153 140,126
------------- --------------
Deferred tax assets:
Employee benefits (35,209) (34,019)
Other (14,096) (13,579)
-------------- --------------
Total deferred tax assets (49,305) (47,598)
-------------- --------------
Deferred tax liabilities, net 91,848 92,528
Deferred tax assets included in other current assets 10,207 10,356
------------- --------------
Deferred tax liabilities $ 102,055 $ 102,884
===================================================================================================================
</TABLE>
Reconciliation of income taxes computed at the federal statutory tax rate
to actual income tax expense is as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Income taxes computed at federal statutory tax rate $ 38,408 $ 28,598 $ 50,039
Increase (reduction) in income taxes resulting from:
State income taxes, net of federal income tax benefit 3,888 2,664 2,261
Investment income -- unconsolidated affiliates (2,150) (1,751) (1,283)
Life insurance plans (1,772) (1,674) (1,525)
Gain on sale of investment in Garden State Newspapers --- --- (24,422)
Other 866 640 890
-------------- ------------- --------------
$ 39,240 $ 28,477 $ 25,960
===================================================================================================================
</TABLE>
Net of refunds, in 1996, 1995 and 1994, the Company paid income taxes of
$42.9 million, $18.4 million and $9.2 million, respectively. Taxes paid in 1994
are net of $10.8 million of refunds resulting from settlements with the Internal
Revenue Service concerning examinations of fiscal years prior to 1992.
Note 7: Common Stock and Stock Options
Holders of the Class A common stock are entitled to elect 30% of the Board
of Directors and, with the holders of Class B common stock, also are entitled to
vote on the reservation of shares for stock awards and on certain specified
types of major corporate reorganizations or acquisitions. Class B common stock
can be converted into Class A common stock on a share-for-share basis at the
option of the holder. Both classes of common stock receive the same dividends
per share.
In May 1995, shareholders approved the 1995 Long-Term Incentive Plan (LTIP)
which reserved and made available 1,300,000 shares of Class A common stock for
stock-based awards to key employees, of which 1,000,000 are reserved for
nonqualified stock options and 300,000 are reserved for restricted stock. The
plan is administered by the Compensation Committee of the Board of Directors.
Grant prices of stock options are determined by the Committee and shall not be
less than the fair market value on the date of grant. Options are exercisable
during the continued employment of the optionee but not for a period greater
than ten years and not for a period greater than one year after termination of
employment, and they become exercisable at the rate of one-third each year from
the date of grant. Restricted stock is awarded in the name of each of the
participants; these shares have all the rights of other Class A shares, subject
to certain restriction and forfeiture provisions. Restrictions on the shares
expire no more than ten years after the date of award, or earlier if certain
performance targets are met. The plan will continue until terminated by the
Company.
Options to purchase Class A common stock were granted to key employees
under the 1976 and 1987 nonqualified stock option plans prior to the 1995 LTIP.
The Company will not make any future awards under these plans and past awards
are not affected. Options outstanding under the plans are exercisable during the
continued employment of the optionee, but not for a period greater than ten
years after the date of grant for options granted subsequent to the 1991
amendment to the 1987 plan and for a period of not greater than three years
after termination of employment.
35
Restricted shares of the Company's Class A common stock were granted to
certain key employees under the 1991 restricted stock plan. The Company will not
make any future awards under the plan and past awards are not affected. In 1995,
1993 and 1991, 86,400, 107,600 and 158,400 shares, respectively, were granted
under the terms of the plan. Shares were awarded in the name of each of the
participants; these shares have all the rights of other Class A shares, subject
to certain restrictions and forfeiture provisions. Restrictions on the shares
expire no more than ten years after the date of the award, or earlier if certain
performance targets are met.
Unearned compensation was recorded at the date of the restricted stock
awards based on the market value of shares. Unearned compensation, which is
shown as a separate component of stockholder's equity, is being amortized to
expense over a vesting period not exceeding ten years, based upon meeting
certain performance targets. The amount amortized to expense in 1996, 1995 and
1994 was $1,198,000, $1,361,000 and $1,118,000, respectively.
In 1996, the Company adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation". As permitted by the provisions of SFAS 123, the Company continues
to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", and related interpretations in accounting for its
stock-based awards. Accordingly, since stock options are issued at fair market
value on the date of grant, the Company does not recognize compensation cost
related to its stock option plans.
The following information is provided solely in connection with the
disclosure requirements of SFAS 123. If the Company had elected to recognize
compensation cost related to its stock options granted in 1996 and 1995 in
accordance with the provisions of SFAS 123, earnings per share would have
declined $0.02 and $0.01 in 1996 and 1995, and pro forma net income and earnings
per share would have been $69,896,000 and $52,936,000; and $2.63 and $2.00,
respectively. These pro forma amounts are not indicative of future effects of
applying the provisions of SFAS 123 since a three year vesting period is used to
measure pro forma compensation expense and 1996 and 1995 amounts reflect expense
for two years and one year of vesting, respectively. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for 1996 and 1995,
respectively: risk-free interest rates of 5.57% and 7.78%; dividend yields of
1.75% and 2.03%; volatility factors of .282 and .324; and an expected life of 8
years.
A summary of the Company's stock option activity, and related information
for the years ended December 29, 1996, December 31, 1995 and December 25, 1994
follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------------- -------------- --------------
Weighted-Average
Options Shares Exercise Price Shares Shares
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Outstanding-beginning of year 1,038,511 $ 24.68 1,022,649 948,583
Granted 130,400 31.81 130,400 149,400
Exercised (88,621) 21.59 (81,436) (55,554)
Forfeited (13,568) 41.62 (33,102) (19,780)
------------- -------------- -------------
Outstanding-end of year 1,066,722 25.59 1,038,511 1,022,649
------------- -------------- -------------
Price Range at end of year $2 to $46 $2 to $46 $2 to $46
Price Range for exercised shares $2 to $32 $2 to $32 $2 to $20
Available for grant at end of year 869,600 310,187 434,985
Exercisable at end of year 814,622 776,711 711,411
Weighted-average fair value of options
granted during the year $ 11.44
36
The following table summarizes information about stock options outstanding
at December 29, 1996:
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------------------- -------------------------------
Range of Number Weighted-Average Number
Exercise Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Prices at 12/29/96 Contractual Life Exercise Price at 12/29/96 Exercise Price
- --------------------------------------------------------------------------------------------------------------------
$ 2.50 24,100 * $ 2.50 24,100 $ 2.50
15.75 63,830 ** 15.75 63,830 15.75
18.81-20.19 414,167 5 years 19.50 414,167 19.50
27.63-31.81 382,825 8 years 29.21 130,725 27.78
32.5-46.5 181,800 ** 38.35 181,800 38.35
------------- -----------
2.50-46.5 1,066,722 25.59 814,622 24.24
============= ===========
(*) exercisable during lifetime of optionee
(**) exercisable during the continued employment of the optionee and for a three-year period thereafter
</TABLE>
Note 8: Retirement Plans
The Company has a non-contributory defined benefit retirement plan which
covers substantially all employees. Benefits are based on salary and years of
service. The Company's funding policy is to contribute annually the
tax-deductible amounts required by statute. Plan assets include marketable
securities, U.S. government obligations and cash equivalents. The Company also
has a non-contributory unfunded executive supplemental retirement plan which
supplements the coverage available to certain executives under the defined
benefit retirement plan.
Certain employees of the Company's newsprint operations participate in
multi-employer defined benefit and contribution pension plans. The plans provide
benefits to substantially all union employees.
<PAGE>
Net pension cost for 1996, 1995 and 1994 is summarized below.
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Benefits earned during the year $ 4,568 $ 4,067 $ 4,632
Interest cost on projected benefit obligation 11,362 10,973 10,462
Actual return on plan assets (24,566) (38,363) (1,179)
Net amortization and deferral 8,074 22,490 (13,647)
-------------- ------------- --------------
Defined benefit plan expense (credit) (562) (833) 268
Supplemental retirement plan expense 2,705 2,371 2,040
Multi-employer plans expense 627 576 593
-------------- ------------- --------------
Total expense $ 2,770 $ 2,114 $ 2,901
===================================================================================================================
</TABLE>
The non-contributory defined benefit retirement plan's status was as
follows:
<TABLE>
<CAPTION>
December 29, December 31,
(In thousands) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Actuarial present value of benefit obligation:
Vested $ 123,813 $ 123,250
Non-vested 3,887 4,431
------------- --------------
Total accumulated benefit obligation $ 127,700 $ 127,681
- -------------------------------------------------------------------------------------------------------------------
Plan assets at fair value $ 187,611 $ 172,710
Projected benefit obligation 155,196 153,711
------------- --------------
Plan assets in excess of projected benefit obligation 32,415 18,999
Unrecognized net gain (43,372) (30,157)
Unrecognized prior service costs 5,053 5,704
Unrecognized net asset from transition (4,049) (5,061)
-------------- --------------
Net pension liability $ (9,953) $ (10,515)
===================================================================================================================
37
Assumptions used in determining the funded status of the non-contributory
defined benefit retirement plan are as follows:
<CAPTION>
1996 1995 1994
---- ---- ----
Discount rate 7.75% 7.50% 8.00%
Average rate of increase in compensation levels 4.75% 4.50% 5.00%
Expected long-term rate of return on plan assets 10.00% 10.00% 10.00%
</TABLE>
At December 29, 1996, and December 31, 1995, the accrued pension cost of
the supplemental retirement plan totaled $14.4 million and $12.8 million,
respectively, and was included as a liability in the accompanying balance sheet.
The Company also sponsors a thrift plan covering substantially all
employees. Company contributions represent a partial matching of employee
contributions up to a maximum of 3.3% of the employee's salary. Contributions
charged to expense under the plan were $4.2 million, $4 million and $3.7 million
in 1996, 1995 and 1994, respectively.
Note 9: Postretirement Benefits
The Company provides certain health and life insurance benefits for retired
employees. Substantially all full-time employees hired before 1992 may become
eligible for all or a portion of those benefits if they retire after age 55 with
at least ten years of service. Employees hired after 1991 are not eligible for
Company paid health care and life insurance benefits at retirement. The
postretirement health care plan for participants hired before 1992 and retiring
after December 31, 1991, is contributory and contains cost-sharing features. The
annual health care benefit paid by the Company is fixed and determined by years
of service and retirement age and is limited to $4,500 per employee. Company
paid life insurance benefits are based on age and compensation, with a maximum
insurance coverage limitation of $50,000 for post-1991 retirees. The Company's
policy is to fund postretirement benefits as claims and premiums are paid.
The following table sets forth components of the accumulated postretirement
benefit obligation included in the accompanying balance sheet at December 29,
1996, and December 31, 1995:
<TABLE>
<CAPTION>
(In thousands) Medical Plans Life Insurance Plans
- ----------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C>
Retirees $ 12,354 $ 11,978 $ 5,582 $ 5,561
Fully eligible plan participants 907 163 422 163
Other active plan participants 8,710 6,213 2,465 2,006
---------- ---------- ---------- ---------
Accumulated postretirement benefit obligation 21,971 18,354 8,469 7,730
Unrecognized accumulated net gain (loss) (4,368) (1,407) 647 677
---------- ---------- ---------- ---------
Accrued postretirement benefit cost $ 17,603 $ 16,947 $ 9,116 $ 8,407
================================================================================================================
Net periodic postretirement benefit cost for 1996, 1995 and 1994 includes
the following components:
<CAPTION>
(In thousands) Medical Plans Life Insurance Plans
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
Service cost $ 410 $ 324 $ 388 $ 116 $ 114 $ 133
Interest cost 1,620 1,383 1,410 624 570 573
Amortization of net loss 99 --- --- 38 --- ---
----------- ----------- ----------- ----------- ----------- -----------
Net periodic postretirement
benefit cost $ 2,129 $ 1,707 $ 1,798 $ 778 $ 684 $ 706
===========================================================================================================================
</TABLE>
The annual assumed rate of increase in the health care cost trend rate is
9.75% for 1997 (10.25% for 1996), and is assumed to decrease gradually to 6.25%
in 2004 and thereafter for pre-age 65 benefits, and to 5.25% in 2006 and
thereafter for age 65 and later benefits. Increasing the health care cost trend
rate assumption by one percentage point in each year would increase the
accumulated postretirement benefit obligation at December 29, 1996, and December
31, 1995, by approximately $1 million, and the aggregate of the service and
interest cost components of net periodic postretirement benefit cost for 1996
and 1995 by approximately $.1 million.
The discount rate used to determine the accumulated postretirement benefit
obligation was 7.75% and 7.5% for 1996 and 1995, respectively. The average rate
of increase in compensation levels used to determine life insurance benefits was
4.75% and 4.5% for 1996 and 1995, respectively.
38
Note 10: Other
Revenue recognition
Advertising revenue is recognized when ads are published or aired, or when
related advertising services are rendered. Subscription revenue is recognized on
a pro-rata basis over the term of the subscription. Newsprint revenue is
recognized upon shipment of newsprint.
Depreciation and amortization
Plant and equipment are depreciated, primarily on a straight-line basis,
over their estimated useful lives which are generally 40 years for buildings and
range from 3 to 20 years for machinery and equipment. Depreciation deductions
are computed by accelerated methods for income tax purposes.
Cost in excess of net assets acquired through 1970 (approximately $33
million) is not amortized unless there is evidence of diminution in value; such
excess cost incurred after 1970 is being amortized by the straight-line method
over periods not exceeding 40 years. Management periodically evaluates the
recoverability of cost in excess of net assets acquired by reviewing the current
and projected profitability of each of the Company's operations. Amortization of
the excess of cost of businesses acquired over equity in net assets and other
intangibles was $7,933,000, $3,071,000 and $1,764,000 in 1996, 1995 and 1994,
respectively.
<PAGE>
Interest
In 1996, 1995 and 1994, the Company's interest expense was $21.3 million,
$15.5 million and $16.9 million, respectively, which is net of $.3 million, $.4
million and $.8 million of interest costs capitalized for those years. Interest
payments, net of amounts capitalized, made during 1996, 1995 and 1994 were $23.3
million, $14.4 million and $19.5 million, respectively.
Inventories
Inventories, principally raw materials, are valued at the lower of cost or
market. The cost of raw material used in the production of newsprint is
determined on the basis of average cost. The cost of newsprint inventories is
determined on the first-in, first-out method.
Other current assets
Other current assets include program rights of $5,809,000 and
$8,246,000 at December 29, 1996 and December 31, 1995, respectively.
Accrued expenses and other liabilities
Accrued expenses and other liabilities consist of the following:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Payroll $ 17,828 $ 16,477
Program rights 5,724 8,067
Advances from unconsolidated newsprint affiliate 6,667 6,667
Unearned revenue 7,204 6,636
Other 34,887 34,917
------------- --------------
Total $ 72,310 $ 72,764
===================================================================================================================
</TABLE>
Lease obligations
The Company and its subsidiaries rent certain facilities and equipment
under operating leases. These leases extend for varying periods of time up to
ten years and in most cases contain renewal options. Total rental expenses
amounted to $8.3 million in 1996, $7 million in 1995 and $7.2 million in 1994.
Minimum rental commitments under operating leases with noncancelable terms in
excess of one year are as follows: 1997 -- $7,369,000; 1998 -- $5,685,000; 1999
- -- $4,575,000; 2000 -- $2,834,000; 2001 -- $2,147,000; subsequent years --
$6,953,000.
Concentrations of credit risk
Media General is a diversified communications company which sells products
and services to a wide variety of customers located principally in the eastern
United States. The Company's trade receivables result primarily from its
publishing, broadcast television, cable television and newsprint operations. The
Company routinely assesses the financial strength of significant customers, and
this assessment, combined with the large number and geographic diversity of its
customer base, limits its concentration of risk with respect to trade
receivables.
Commitments and contingencies
Over the next four years the Company is committed to purchase approximately
$22 million of program rights which currently are not available for broadcast,
including programs not yet produced. If such programs are not produced the
Company's commitment would expire without obligation.
The Company entered into a stock redemption agreement in 1985, which was
amended in 1988, and 1994, with Mr. D. Tennant Bryan, Chairman of the Executive
Committee of the Board of Directors. The amended agreement provides that upon
Mr. Bryan's death, his estate has the option to sell and the Company has a
separate option to buy the lesser of (a) 15% of the Company's Class A stock
owned by Mr. Bryan at his death and (b) a sufficient number of shares of Class A
stock to fund estate taxes and certain other expenses. The purchase price for
each share redeemed under the amended agreement will equal 90% of the average
daily closing
39
price for a share of Class A stock during the 91 days preceding
the date that is 30 days after the date of death. If the Company or the estate
had exercised an option, respectively, to buy or sell, the maximum cost to the
Company of the redemption would have approximated $9 million at December 29,
1996.
Pursuant to the provisions of the Cable Television Consumer and Competition
Act of 1992 (the "1992 Cable Act"), the rates charged to subscribers by the
Company's Fairfax Cable subsidiary are subject to regulation and review by local
franchising authorities and the Federal Communications Commission (FCC). The FCC
is currently reviewing certain of the rates charged to subscribers. The Company
believes that it has complied with all provisions of the 1992 Cable Act,
including its rate setting provisions. However, since the Company's rates for
regulated services are subject to review, the Company may be subject to a refund
liability if its rates are successfully challenged.
Note 11: Subsequent Events
On January, 7, 1997, the Company acquired Park Acquisitions, Inc., parent
of Park Communications, Inc. (Park). The acquisition of Park includes ten
network affiliated television stations, nine of which are located in the
Southeast; and 28 daily community newspapers and 82 weekly newspapers located in
12 states primarily in the eastern United States. The total consideration
approximated $715 million, representing the purchase of all the issued and
outstanding common stock of Park, the assumption of $476 million of Park's high
coupon long-term debt, and estimated transaction costs of $5 million. In early
February 1997, the Company redeemed Park's high coupon debt and as a result,
recorded an extraordinary loss of approximately $63 million (net of tax benefit
of approximately $39 million), or $2.37 per share, representing the debt
prepayment premium and the write-off of associated debt issuance costs. The
acquisition and prepayment of the Park debt were financed with borrowings under
the $1.2 billion revolving credit facility (see note 4). In connection with the
additional borrowings, the Company has entered into interest rate swap
agreements which effectively convert variable rate debt to fixed rate debt, at
interet rates approximating 7% over four to seven year periods.
The acquisition will be accounted for as a purchase in 1997 and the
purchase price will be allocated to the assets acquired and liabilities assumed
based upon their estimated fair values. The preliminary purchase price
allocation, which includes approximately $200 million allocated to identifiable
intangibles, principally network affiliations, and approximately $500 million
allocated to excess cost over the net assets acquired, is based on preliminary
appraisals and may change as the appraisals are completed and more facts become
known. These amounts are expected to be amortized over a period of 10-35 years.
The following unaudited pro forma summary presents the consolidated results
of operations, based on preliminary appraisals and estimates, as if the
acquisition had been completed at the beginning of the periods presented and
does not purport to be indicative of what would have occurred had the
acquisition actually been made as of such date, nor is it indicative of results
which may occur in the future.
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 1996 1995
- --------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C>
Revenues $ 914,846 $ 852,078
Net income $ 44,443 $ 33,659
Earnings per common share and equivalent $ 1.67 $ 1.27
- --------------------------------------------------------------------------------------------------------
</TABLE>
The Company intends to exchange certain of the acquired Park properties for
similar properties in the Southeast. Also the Company intends to sell certain
acquired properties and purchase with the sale proceeds similar properties
located in the Southeast. The Company's management does not believe these
transactions would materially affect these unaudited pro forma results of
operations as presented.
40
Media General, Inc.
Management Statement
Primary responsibility for the integrity and objectivity of the Company's
financial statements rests with Management. The financial statements report on
Management's stewardship of Company assets. They are prepared in conformity with
generally accepted accounting principles and accordingly include amounts that
are based on Management's informed estimates and judgments. Nonfinancial
information included in the annual report has also been prepared by Management
and is consistent with the financial statements.
Media General, Inc., maintains an accounting system and related controls
designed to provide reasonable assurance that there is proper authorization and
accounting for all transactions, that financial records are reliable for
preparing financial statements, and that assets are safeguarded against loss or
unauthorized use. The system is supported by written policies and guidelines, a
program of internal audit and the selection and training of qualified personnel.
The Audit Committee of the Board of Directors, which is composed solely of
outside directors, meets periodically with Management, internal auditors and the
independent auditors to review their respective activities and the discharge of
their responsibilities.
Media General operates under a strict Code of Ethics that all employees are
required to follow without exception. The Code requires ethical standards in all
of the Company's relationships, including those with customers, suppliers and
government agencies.
February 10, 1997
J. Stewart Bryan III Marshall N. Morton
Chairman, President and Senior Vice President and
Chief Executive Officer Chief Financial Officer
Report of Independent Auditors
The Board of Directors and Stockholders,
Media General, Inc.
We have audited the accompanying consolidated balance sheets of Media
General, Inc., as of December 29, 1996, and December 31, 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three fiscal years in the period ended December 29, 1996. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Media General, Inc., at December 29, 1996, and December 31, 1995, and the
consolidated results of its operations and its cash flows for each of the three
fiscal years in the period ended December 29, 1996, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
February 10, 1997
Richmond, Virginia
41
<PAGE>
Media General, Inc.
Financial Review and Management Analysis
This discussion addresses the principal factors affecting the Company's
operations during the past three years and should be read in conjunction with
the Company's financial statements and the Ten-Year Financial Summary which
appear elsewhere in this report. Operating results for fiscal years 1996 and
1994 included 52 weeks, while fiscal year 1995 included 53 weeks.
ACQUISITIONS
In August 1996, the Company acquired, for approximately $38 million, the
Danville Register & Bee (Danville), a daily newspaper in Virginia. In May 1996,
the Company acquired, for approximately $2 million, Professional Communications
Systems (PCS), a provider of equipment and studio design services for television
stations.
In late October 1995, for approximately $232 million, the Company acquired
newspaper properties in Lynchburg, Charlottesville, Culpeper and Suffolk,
Virginia (Virginia Newspapers) which included four daily and Sunday newspapers
and a number of weekly and other publications.
The aforementioned transactions were accounted for as purchases and accordingly,
the operations of the acquired properties have been included in the Company's
consolidated results of operations since the date of purchase. The following
discussions of segment operating results are primarily focused on the
comparative performance of the Company, excluding these acquisitions.
Subsequent to the end of the fiscal year, on January 7, 1997, the Company
acquired Park Acquisitions, Inc., parent of Park Communications, Inc. (Park).
The acquisition of Park included ten network affiliated television stations,
nine of which are located in the Southeast, 28 daily community newspapers and 82
weekly newspapers located primarily in the eastern United States. The total
consideration approximated $715 million (including estimated transaction costs
of $5 million), representing the purchase of all the issued and outstanding
common stock of Park and the assumption of $476 million of Park's high coupon
long-term debt. This acquisition will be included in operations beginning in
1997. See Note 11 to the accompanying consolidated financial statements for
further information.
<TABLE>
CONSOLIDATED OPERATING RESULTS
(In millions, except per share data)
<CAPTION>
1996 Change 1995 Change 1994
---- ------ ---- ------ ----
<S> <C>
Revenues $ 765.1 8% $ 707.8 13% $ 626.2
Net Income $ 70.5 32% $ 53.2 (55%) $ 117.0 *
Earnings Per Share $ 2.65 32% $ 2.01 (55%) $ 4.45 *
*Includes Garden State Newspapers gain ($83.3 million; $3.17 per share)
</TABLE>
SEGMENT OPERATING RESULTS
In 1996, the Company's newspaper and auxiliary operations, which were previously
reported as separate segments, were combined and are now reported as the
Publishing Segment. As a result of this change, certain prior year segment
information and discussions contained in this review and analysis have been
reclassified and modified to conform with the current year's presentation.
Operating cash flow amounts presented with business segment information
represent operating income plus depreciation and amortization of intangible
assets. Such cash flow amounts vary from net cash provided by operating
activities, as presented in the Consolidated Statements of Cash Flows, because
cash payments for interest and taxes are not reflected therein, nor are the cash
flow effects of non-operating items or changes in certain operations-related
balance sheet accounts.
<TABLE>
PUBLISHING
(In millions)
<CAPTION>
1996 Change 1995 Change 1994
---- ------ ---- ------ ----
<S> <C>
Revenues $ 407.8 12% $ 364.2 8% $ 338.1
Operating Expenses $ 358.3 6% $ 338.9 11% $ 306.7
Operating Income $ 49.5 95% $ 25.3 (20%) $ 31.4
Depreciation & Amortization $ 29.3 20% $ 24.3 6% $ 22.9
Operating Cash Flow $ 78.8 59% $ 49.6 (9%) $ 54.3
</TABLE>
1996 Compared to 1995
Publishing Segment revenues, excluding acquisitions, increased $7 million (2%)
in 1996. At the Company's metropolitan newspaper group, which includes its three
largest daily newspapers, advertising revenues increased $5.5 million,
reflecting the effect of a 1.8% average rate increase together with a slight
rise in advertising inches. Classified advertising, led by the employment and
automotive categories, was the primary contributor to the overall revenue
improvement. A small increase in general advertising
42
revenue was more than offset by a decline in retail advertising revenue.
Circulation revenues rose 2% in 1996, the result of a 6.3% average rate increase
partially offset by a 4% drop in circulation volume.
Publishing Segment operating expenses, excluding acquisitions, decreased $8
million in 1996. Employee compensation and benefit costs dropped $4 million,
primarily the result of a re-engineering program implemented at the Company's
Winston-Salem, North Carolina, daily newspaper during the last half of 1995, as
well as a re-engineering program which began in late 1996 at the Company's
Tampa, Florida, daily newspaper. Other expense reductions were due to the
absence of $2.9 million of costs related to the aforementioned re-engineering
program at Winston-Salem, and a $2.1 million reduction in depreciation and
amortization, primarily the result of certain intangibles becoming fully
amortized in 1995. In addition, advertising, promotion and incentive costs
dropped $1 million. These reductions more than offset a $2.2 million rise in
newsprint expense, up due to increased cost per ton.
Operating income for the Publishing Segment rose $24.2 million in 1996 from
1995. Over half of this increase was from the Company's metropolitan newspapers,
reflecting growth in classified advertising revenue and reduced employee
compensation and benefit costs. The balance of the increase was primarily
attributable to contributions made by recent newspaper acquisitions.
1995 Compared to 1994
Publishing Segment revenues, excluding acquisitions, increased $17.9 million
(5.3%) in 1995. At the Company's metropolitan newspaper group, advertising
revenues increased $11.7 million, reflecting the effect of a 6.4% average rate
increase offset by a 1.6% decline in advertising inches. Classified advertising
led the way in the overall revenue improvement, with growth in the employment,
automotive and real estate categories. A small revenue increase in retail
advertising was offset by a commensurate decline in general advertising revenue.
Circulation revenues rose 6% in 1995, the result of a 4.5% average rate increase
together with a 1.4% rise in circulation volume. Other revenues rose 23% due
principally to increased waste newsprint sales (up due to prices) and commercial
printing revenue gains.
Publishing Segment operating expenses, excluding acquisitions, increased $27
million in 1995. Of this increase, approximately $16 million was attributable to
a rise in newsprint expense at the metropolitan newspapers, the result of a 39%
increase in price per ton which was partially offset by a 5% decline in tons
consumed (due largely to aggressive newsprint conservation measures undertaken
by the newspaper properties). Operating costs in 1995 included $2.9 million
related to a re-engineering program implemented at the Company's Winston-Salem,
North Carolina, daily newspaper during the year. Approximately one-third of the
program's cost was recouped in that same year from lower payroll and benefits
expense. Other expense increases included a $3.5 million (2.6%) rise in employee
compensation and benefit costs (moderated somewhat by the reduction in costs
which resulted from the above-mentioned re-engineering program), a $1.7 million
increase in newspaper circulation-related expenses and a $1.2 million rise in
bad debt expense as a result of both increased revenues and slower collection
experience over the preceding year.
Total operating income for the Publishing Segment, excluding acquisitions,
declined $9 million in 1995 over 1994. Revenue growth, up 5.3% on the strength
of classified advertising, was more than offset by a 9% increase in operating
costs, largely due to a 33% rise in total newsprint cost (due to price),
together with other operating cost increases.
<TABLE>
BROADCAST TELEVISION
(In millions)
<CAPTION>
1996 Change 1995 Change 1994
---- ------ ---- ------ ----
<S> <C>
Revenues $ 83.4 20% $ 69.3 11% $ 62.4
Operating Expenses $ 57.5 31% $ 44.1 5% $ 41.8
Operating Income $ 25.9 3% $ 25.2 22% $ 20.6
Depreciation & Amortization $ 2.8 (1%) $ 2.8 (9%) $ 3.1
Operating Cash Flow $ 28.6 2% $ 28.0 18% $ 23.7
</TABLE>
1996 Compared to 1995
Broadcast Television Segment revenues, excluding acquisitions, increased $4.9
million in 1996, up 7.1% from 1995. The revenue growth was principally the
result of increases in political, national and local spot sales at the Company's
flagship station, WFLA-TV in Tampa. National and local revenues were aided by
the broadcast of the Summer Olympics, as well as increases in the automotive and
department store categories, while political revenues increased due to state
issues and strong Presidential and state election advertising. These increases
were partially offset by a decrease in revenues at the Company's station in
Jacksonville, largely attributable to advertiser reluctance in the face of that
station's loss of its ABC network affiliation.
43
The Company completed the transfer of the network affiliation at its
Jacksonville station from ABC to Warner Brothers in February 1997. In addition,
the Company's WCBD-TV station in Charleston switched networks from ABC to NBC in
August 1996.
Broadcast Television Segment operating expenses, excluding acquisitions, rose
$4.4 million in 1996 over 1995. The majority of this increase was attributable
to increased programming costs of $3.2 million (51%) due to the addition of new
programs in the fall of 1995 at WFLA-TV , as well as a rise in employee
compensation and benefit costs of $.8 million (4.4%) over 1995 levels.
Broadcast Television Segment operating income increased $.7 million in 1996. The
improvement was attributable to strong revenue growth at the Company's WFLA-TV
station in Tampa, which more than offset increased programming costs and
lackluster performances at the Company's Jacksonville and Charleston television
stations. While results are expected to improve at the Company's WCBD-TV due to
its network affiliation switch from ABC to NBC, Jacksonville's network
affiliation change to Warner Brothers from ABC is expected to somewhat impede
1997 results, related to the differences in programming between the two
networks.
1995 Compared to 1994
Broadcast Television Segment revenues increased $6.8 million in 1995, up
11% from 1994. The increase came from strength in local and national advertising
primarily at WFLA-TV in Tampa; the Jacksonville station also contributed to the
overall growth. Increases in national and local advertising categories (due to
robust automotive spending along with increases in the food and entertainment
categories), more than offset declines in political revenues (resulting from the
absence of the prior year's political races) and the slight decline in revenues
at WCBD-TV in Charleston. In December 1994, three of the Tampa market's four
major broadcast television stations changed their network affiliations. In that
market only the Company's WFLA-TV station retained its historical network
affiliation. This undisrupted network affiliation coupled with WFLA's
traditionally strong local programming contributed to its ability to achieve the
number one ranking in that market (sign-on to sign-off), resulting in strong
demand for advertising time and increased advertising rates.
Broadcast Television Segment operating expenses increased $2.3 million in 1995
over 1994. The majority of the increase was attributable to the September 1995
acquisition of new afternoon programs at WFLA-TV that resulted in a rise of $1.5
million in programming costs, as well as to an increase in employee compensation
and benefit costs which rose $.9 million (4.9%) over 1994.
Broadcast Television Segment operating income rose $4.5 million (22%) in 1995
over 1994. Solid improvement in advertising revenues at WFLA-TV in Tampa, and at
the Jacksonville station, led by automotive spending, more than offset a 5%
increase in operating costs, up mainly due to increased programming expenses.
<TABLE>
CABLE TELEVISION
(In millions)
<CAPTION>
1996 Change 1995 Change 1994
---- ------ ---- ------ ----
<S> <C>
Revenues $ 146.1 9% $ 134.2 9% $ 123.3
Operating Expenses $ 121.5 (2%) $ 123.5 13% $ 109.6
Operating Income $ 24.6 131% $ 10.7 (22%) $ 13.7
Depreciation & Amortization $ 26.5 (1%) $ 26.9 18% $ 22.8
Operating Cash Flow $ 51.2 36% $ 37.6 3% $ 36.5
</TABLE>
1996 Compared to 1995
Revenues at the Company's Cable Television Segment rose $12 million in 1996, up
9% from 1995. The increase was attributable to the Company's Fairfax County,
Virginia, cable system (Fairfax Cable), as a result of a 2.7% increase in the
number of subscribers (to 227,700 at December 29, 1996), together with average
6.5% and 9.2% increases in basic and expanded subscriber rates, respectively.
These rate increases combined with subscriber growth produced a 7% improvement
in average revenue per subscriber (excluding pay-per-view).
While the Telecommunications Act of 1996 (1996 Act) eliminated rate regulation
of cable services other than the basic service tier after March 31, 1999,
certain of the rates charged for regulated services after September 1, 1993,
remain subject to regulation and review by local franchising authorities and the
Federal Communications Commission (FCC) under the Cable Television Consumer
Protection Act of 1992 (1992 Cable Act). The FCC is currently reviewing certain
of the Company's rates charged to subscribers. The Company believes it has
complied with all applicable provisions of the 1992 Act, including its rate
setting provisions. However, since the Company's rates for regulated services
are subject to review, the Company may be subject to a refund liability and/or
rate adjustments if its rates are successfully challenged. The 1996 Act also
removes previously applicable restrictions that had
44
prevented most local telephone companies from offering cable services in the
areas where they provide telephone services. This development and the advent of
wireless and direct broadcast satellite services likely will increase
competition in the areas served by the Company's cable systems. The Company is
also developing several strategic planning initiatives, including entry into the
data transmission and commercial and residential telephone markets, for its
Fairfax Cable system. The Company estimates that the capital investment required
for it to compete effectively in those markets could exceed $200 million over a
ten-year period.
Cable Television Segment operating expenses decreased $2 million in 1996 from
1995. A $3.1 million (11%) decline in employee compensation and benefit costs,
reflecting the results of a restructuring process implemented at Fairfax Cable,
and a $1.3 million decrease in maintenance and repair expense, more than offset
a $3.3 million (12%) increase in programming costs.
Cable Television Segment operating income increased $14 million in 1996 from
1995. The increase reflects revenue growth at Fairfax Cable, up 10.4% in 1996 as
a result of both rate and subscriber count increases, combined with reduced
compensation and employee benefit costs, which together, more than offset an
increase in programming costs.
1995 Compared to 1994
Revenues at the Company's Cable Television Segment rose $10.9 million in 1995,
up 9% from 1994. The improvement came from the Company's Fairfax Cable system as
a result of a January 1, 1995, 2.1% subscriber rate increase on basic service
and an average increase of 6.5% on expanded service. These rate increases,
together with the 3.5% growth in subscribers (to 221,800 at December 31, 1995),
produced a 3.6% improvement in average revenue per subscriber (excluding
pay-per-view).
Cable Television Segment operating expenses rose $13.9 million in 1995 over
1994. The rise was attributable to increases in programming costs, up $3.8
million as a result of higher programming rates and an increased subscriber
base, employee compensation and benefit costs, up $1.7 million (6.5%), and
depreciation expense, up $3.9 million.
Cable Television Segment operating income decreased $3 million in 1995 from
1994. A 9% rise in revenues, the result of both rate and subscriber count
increases, was more than offset by a 13% increase in operating costs, largely
the result of increases in depreciation expense and programming costs.
<TABLE>
NEWSPRINT
(In millions)
<CAPTION>
1996 Change 1995 Change 1994
---- ------ ---- ------ ----
<S> <C>
Revenues $ 127.7 (9%) $ 140.1 37% $ 102.4
Operating Expenses $ 125.2 (2%) $ 128.3 26% $ 101.9
Operating Income $ 2.5 (79%) $ 11.8 --- $ .5
Depreciation & Amortization $ 6.4 (3%) $ 6.6 (2%) $ 6.7
Operating Cash Flow $ 8.8 (52%) $ 18.4 156% $ 7.2
</TABLE>
1996 Compared to 1995
Newsprint Segment revenues declined $12.4 million (9%) in 1996, largely
reflecting the results of the Company's Garden State Paper (Garden State)
newsprint mill, located in Garfield, New Jersey. The decline resulted from a 9%
decrease in tons sold, as the average realized selling price remained
essentially even with last year. Average newsprint selling prices began the year
at $652 per ton, and dropped to $444 per ton by year-end, reflecting the results
of an industry cycle of declining selling prices and weak demand.
Newsprint Segment operating expenses dropped $3 million in 1996 from the
comparable 1995 amount. The cost of Garden State's principal raw material,
recovered newspapers (ONP), dropped $12 million (32%). The average cost of ONP
in 1996 was $87 per ton, down 28% from last year's $121 per ton, due to lower
market demand for ONP throughout the year. This decline in ONP expense more than
offset the rise in other expenses, including a $4.4 million (18%) increase in
energy costs due to a severe winter which limited the available supply of low
cost fuel, a $2.8 million (32%) rise in maintenance and repair expense related
to production problems, a $1.3 million increase in consultant fees related to a
process re-engineering project at Garden State, a $1 million increase in
additive and bleaching chemical costs in order to increase quality, and a $1
million rise in employee compensation and benefit costs.
Newsprint Segment operating income fell $9.4 million in 1996 from 1995. The
decrease resulted from the reduction in tons sold in the current year (down 9%
from prior year levels), which more than offset the decrease in operating costs.
1995 Compared to 1994
Newsprint Segment revenues increased $37.7 million (37%) in 1995 over 1994,
attributable to the Company's Garden State Paper newsprint mill, where the
average realized selling price per
45
ton rose 39%. The rise in the average realized selling price was a result of the
cumulative effects of four selling price increases implemented during 1995.
Average newsprint selling prices began the year at $455 per ton, and reached
$652 per ton by year-end.
Newsprint Segment operating expenses rose $26.3 million in 1995 from the
comparable 1994 amount. A $20.7 million (131%) increase in the cost of ONP
accounted for approximately 80% of the operating cost increase. The average cost
of ONP in 1995 was $121 per ton, up 133% from $52 per ton in 1994, reflecting
increased domestic and foreign market demand. Although the 1995 average cost per
ton consumed was up significantly from 1994, ONP costs were decreasing at the
end of 1995. Other expense increases over 1994 expense levels included a $1.6
million increase in additives and bleaching chemicals, a $1.2 million (5.3%)
increase in energy costs due both to higher volume and to price increases, a $.7
million (2.8%) increase in employee compensation and benefit costs and a $.5
million (6.1%) rise in maintenance and repair expense.
Newsprint Segment operating income rose $11.3 million in 1995 from 1994. The
rise was due to improved newsprint selling prices which produced a 1995 revenue
increase of 37%. The solid revenue growth more than offset a 26% increase in
operating costs, due chiefly to the 131% rise in the cost of ONP.
UNCONSOLIDATED AFFILIATES
1996 Compared to 1995
The Company's investment income from unconsolidated affiliates rose $8.2 million
in 1996 over 1995. The most significant portion of the increase came from the
Company's share of the operating results of its Southeast Paper Manufacturing
Company (SEPCO) newsprint affiliate, which increased $6.7 million over the
previous year. SEPCO established new annual records for income and production in
1996. SEPCO's improvement was primarily attributable to significantly lower
production costs (mainly due to reduced ONP expense), as well as a slight
increase in revenues. For the year, SEPCO's average realized selling price
approximated $583 per ton compared to $578 per ton in 1995.
Income earned from the Company's Denver Newspapers, Inc. (DNI), affiliate
increased $1.4 million in 1996 over 1995 due to a $.9 million increase in the
Company's share of net income applicable to common stockholders and $.5 million
increase in income from the Company's DNI preferred stock investment. DNI's
improved operating results were attributable to strong advertising revenue
growth which more than offset the effect of increased operating expenses
(principally newsprint).
1995 Compared to 1994
The Company's investment income from unconsolidated affiliates rose $16.1
million in 1995 over 1994. The most significant portion of the increase resulted
from the Company's share of the operating results of its SEPCO newsprint
affiliate, which increased $14.4 million over 1994. In 1995, SEPCO surpassed all
previous annual records for income, production and shipments. The record income
in 1995 was a reversal from three prior years of losses. SEPCO, like the
Company's wholly owned newsprint operations, benefited from the significant
improvement in newsprint selling prices in 1995. For the year, SEPCO's average
realized selling price approximated $578 per ton compared to $406 per ton in
1994. Sales volume remained steady, increasing .8%. The growth in revenues more
than offset a significant increase in production costs, principally the result
of rising ONP costs. As noted at the Company's wholly owned newsprint
operations, some moderation in ONP prices began in late 1995.
Income earned from the Company's Denver Newspapers, Inc. affiliate increased
$1.7 million in 1995 over 1994, reflecting a $1.9 million increase in income
from the Company's DNI preferred stock investment and a $.2 million decrease in
the Company's share of DNI's net income applicable to common stockholders. As
discussed more fully in Note 3 to the accompanying consolidated financial
statements, the Company held no ownership position in DNI until its acquisition
(through the exercise, for $40,000, of a warrant held since 1987) of 40% of
DNI's common stock in the fourth quarter of 1994, at which time the Company
began recognizing 40% of DNI's net income applicable to common stockholders.
Prior to that time, the Company had only recognized income from its preferred
stock investment, acquired in May 1994. Consequently, the Company's 1994 pretax
income includes its share of DNI's earnings for only one quarter and the
recognition of seven months' income from its DNI preferred stock investment. The
share of DNI's net income applicable to common stockholders recognized by the
Company in 1995 reflects a decline in DNI's operating margins, principally the
result of the significant and continuing increases in the price of newsprint,
which more than exceeded DNI's strong revenue growth (led by retail and
classified advertising).
On May 20, 1994, the Company sold its investment in Garden State Newspapers,
Inc. (GSN), for cash of $63 million and preferred
46
stock of Denver Newspapers, Inc., which at that date had a fair value of $34
million. This disposition ended the Company's nine-year ownership position in
GSN and resulted in a gain of $91.5 million ($83.3 million after-tax; $3.17 per
share). See Note 3 to the accompanying consolidated financial statements for a
further discussion of the GSN sale.
INTEREST EXPENSE
Interest expense of $21.3 million represented a $5.7 million increase over 1995.
The increase was due primarily to the $108 million rise in average debt
outstanding, the result of the recent acquisitions, partially offset by a
reduction in the Company's average effective borrowing rate to 6.8%. In 1997,
interest costs are expected to increase by approximately $40 million over 1996
due to a higher level of debt outstanding as a result of the Park acquisition.
Interest expense decreased $1.4 million in 1995 from 1994. The decrease was
primarily attributable to the significant decline in debt during the first nine
months of 1995, from $172.5 million at the beginning of the year to $128.75
million by the end of September. In late October 1995, additional debt of
approximately $207 million was incurred in connection with the acquisition of
the Virginia Newspaper properties. Despite this late-year increase in debt,
average debt outstanding for the full year declined approximately $16 million
(from a 1994 average of $204 million). The Company's average effective borrowing
rate throughout the year remained relatively stable. The net decrease in average
debt outstanding was directly attributable to increased cash flow, partially
offset by the increase in funds borrowed late in the year for the Virginia
Newspapers acquisition.
NON-OPERATING ITEMS
Other income, net, decreased $3.8 million in 1996 from 1995. The decline was
primarily the result of the absence of 1995's $3.6 million pretax gain on the
sale of the Company's interest in a Mexican newsprint affiliate, combined with a
decline of interest earned on short-term investments held by the Company prior
to the 1995 Virginia Newspapers acquisition. Together, these offset an increase
in gains from various fixed asset sales.
Other income, net, increased $6 million in 1995 over 1994. The improvement was
primarily due to the previously mentioned $3.6 million gain on the sale of the
Company's interest in a Mexican newsprint affiliate and to a $1 million rise in
interest income earned on short-term cash equivalent securities due to higher
investable balances.
PROVISION FOR INCOME TAXES
Excluding the gain and related income taxes on the Company's first quarter 1995
sale of its interest in a Mexican newsprint operation, the Company's effective
tax rate was 35.8% in 1996, up slightly from 35% in the previous year. Income
tax expense rose $11.9 million (43%) over 1995 on a pretax earnings increase of
$31.6 million (40%). See Note 6 to the accompanying consolidated financial
statements for additional information regarding income taxes. The Company
expects its effective tax rate to increase in 1997 because of nondeductible
intangible asset amortization related to the Park acquisition.
Excluding gains and related income taxes applicable to the Company's 1995 sale
of its interest in a Mexican newsprint affiliate and the 1994 sale of its
investment in GSN, income tax expense for 1995 rose $9.7 million (55%) on a
pretax earnings increase of $26.7 million (52%). The Company's effective tax
rate, excluding the previously mentioned gain items, rose slightly to 35% in
1995 from 34.4% in 1994.
NET INCOME
Net Income for 1996 was $70.5 million ($2.65 per share) compared to $53.2
million ($2.01 per share) in 1995. Net income for 1995 included the after-tax
gain of $2.5 million ($.09 per share) from the sale of the Company's interest in
a Mexican newsprint affiliate. Excluding the impact of the 1995 gain, 1996 net
income was up 39% from the prior year reflecting strong growth in operating
income in the Publishing Segment due to improvements at the metropolitan daily
newspapers, the addition of the Virginia Newspaper properties, and increased
operating income in Cable Television due mainly to revenue growth.
Excluding the previously mentioned 1995 gain on the sale of the Company's
interest in a Mexican newsprint affiliate and the 1994 second quarter gain
($83.3 million or $3.17 per share) on the sale of the Company's investment in
GSN, net income was $50.7 million ($1.92 per share) in 1995 compared to $33.7
million ($1.28 per share) in 1994, an increase of 50%. The increase was
primarily due to strong operating increases in the Newsprint Segment and higher
earnings from SEPCO, the Company's newsprint affiliate. The earnings impact of
the Virginia Newspapers acquisition was not significant to the Company's 1995
net income.
LIQUIDITY AND CAPITAL RESOURCES
Funds generated by operating activities during 1996 totaled $126.5 million, up
$23.2 million from 1995 reflecting increased net
47
income and a $15.6 million distribution from SEPCO, the Company's newsprint
affiliate. Of the funds generated from operating and other investing activities,
$40 million was used for acquisitions, $28.5 million for capital expenditures
and $13.2 million for the payment of dividends to stockholders. Remaining funds
of $50.8 million were used to reduce long-term debt.
Total debt outstanding at December 29, 1996, was $276 million. Using borrowings
under its revolving credit facility, the Company made its final $43.75 million
payment on its 9.27% notes during July, 1996. In December 1996, the Company
replaced its $320 million revolving credit facility with a seven-year $1.2
billion revolving credit facility, a part of which was used to finance the Park
acquisition and to prepay the related Park debt assumed in the transaction.
Augmenting this new credit facility's borrowing capacity, the Company continues
to have an arrangement with an insurance company which makes available an
uncommitted credit facility allowing the Company to borrow up to an additional
$150 million under senior notes at prevailing interest rates.
On January 7, 1997, the Company acquired Park for total consideration of $715
million which included the assumption of $476 million of long-term debt. In
early February 1997, the Company prepaid the outstanding Park high coupon debt
with borrowings under its new $1.2 billion bank revolver. The Company will
record an extraordinary charge in the first quarter of 1997 of approximately $63
million ($2.37 per share) reflecting the after-tax cost related to the debt
prepayment premium and redemption costs, along with the unamortized debt
issuance cost. See Note 11 to the accompanying consolidated financial statements
for additional information regarding the Park acquisition. In early 1997, in
connection with the additional borrowings, the Company entered into $600 million
of interest rate swap agreements which effectively converted variable rate debt
to fixed rate debt at interest rates approximating 7% over four to seven year
periods.
The Company anticipates that internally generated funds, together with existing
credit facilities, will be more than adequate to finance other possible
acquisitions, projected capital expenditures, dividends to stockholders, and
working capital needs in the future.
OUTLOOK FOR 1997
With the exception of Newsprint, all of the Company's segments are expected to
produce year-over-year operating income improvement, with Publishing showing
particularly strong results. Results for the Newsprint Segment are directly
affected by the newsprint market's price levels, which have undergone
significant swings over the past several years. Overall net income will decrease
significantly as a result of the high intangible asset amortization and interest
costs related to the Park acquisition. Net income will also be affected by a
first quarter 1997 extraordinary charge of approximately $63 million related to
the prepayment of Park high coupon debt, resulting in a net loss for the first
quarter and 1997 as a whole. With the Park acquisition and the related debt
redemption fully completed in early 1997, we are optimistic and excited about
the positive changes in store for Media General immediately and in the future.
48
Media General, Inc.
Quarterly Review
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------
1996
<S> <C>
Revenues $ 184,800 $ 192,632 $ 188,003 $ 199,670
Operating income 20,015 29,553 23,199 29,669
Net income 15,056 20,880 15,623 18,939
Net income per share 0.57 0.78 0.59 0.71
- ---------------------------------------------------------------------------------------------------------------------
Shares traded 2,661 1,756 2,597 2,095
Stock price range $ 29.88-39.38 $ 34.75-39.50 $ 27.63-37.50 $ 29.38-32.63
Quarterly dividend paid $ 0.12 $ 0.12 $ 0.13 $ 0.13
- ---------------------------------------------------------------------------------------------------------------------
1995
Revenues $ 165,154 $ 173,479 $ 168,458 $ 200,675
Operating income 15,902 20,310 11,475 25,306
Net income 12,675 13,189 8,848 18,520
Net income per share 0.48 0.50 0.33 0.70
- ---------------------------------------------------------------------------------------------------------------------
Shares traded 1,732 945 1,482 1,848
Stock price range $ 27.50-32.63 $ 30.50-33.50 $ 31.25-37.38 $ 27.75-35.75
Quarterly dividend paid $ 0.12 $ 0.12 $ 0.12 $ 0.12
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Media General, Inc., Class A common stock is listed on the American Stock
Exchange under the symbol MEG.A. The approximate number of equity security
holders of record at February 28, 1997 was: Class A common -- 2,570, Class
B common -- 18.
Fourth quarter 1995 was a 14 week period and includes the results of
operations of Virginia Newspapers, Inc., acquired October 26, 1995.
First quarter 1995 results include $3.6 million ($2.5 million after-tax;
$0.09 per share) from the sale of the Company's interest in a Mexican
newsprint operation.
49
Media General, Inc.
Ten-Year Financial Summary
(In thousands, except per share amounts)
Certain of the following data were compiled from the consolidated financial
statements of Media General, Inc., and should be read in conjunction with those
statements and the financial review and management analysis which appear
elsewhere in this report.
<TABLE>
<CAPTION>
1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Summary of Operations
Operating revenues (d) $ 765,105 $ 707,766 $ 626,247 $ 600,824
- -------------------------------------------------------------------------------------------------------------------------
Operating income (a) (d) $ 102,436 $ 72,993 $ 66,251 $ 60,303
Gain on sale of Garden State Newspapers investment --- --- 91,520 ---
Interest expense (21,267) (15,522) (16,948) (21,274)
Investment income (loss) - unconsolidated affiliates 27,188 19,034 2,935 (990)
Other, net 1,381 5,204 (789) 835
----------- ---------- ----------- -----------
Income (loss) before income taxes and cumulative
effect of changes in accounting principles 109,738 81,709 142,969 38,874
Income taxes (39,240) (28,477) (25,960) (13,166)
Cumulative effect of changes in accounting
principles (b) --- --- --- ---
----------- ---------- ----------- -----------
Net income (loss) $ 70,498 $ 53,232 $ 117,009 $ 25,708
=========================================================================================================================
Per Share Data: (b) (c)
Income (loss) before cumulative effect of changes
in accounting principles $ 2.65 $ 2.01 $ 4.45 $ 0.98
Cumulative effect of changes in accounting
principles --- --- --- ---
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 2.65 $ 2.01 $ 4.45 $ 0.98
Cash dividends 0.50 0.48 0.44 0.44
Common stock price
High 39.50 37.38 29.88 30.63
Low 27.63 27.50 21.75 16.88
Stockholders' equity 16.50 14.25 12.68 8.59
=========================================================================================================================
Other Financial Data:
Total assets $ 1,025,484 $1,016,743 $ 787,165 $ 745,242
Working capital 13,373 22,938 14,833 9,551
Capital expenditures 28,510 29,076 56,919 32,837
Total debt 276,000 326,750 172,500 261,756
Stockholders' equity 437,240 377,111 333,363 225,434
Total debt/total capital ratio 38.7% 46.4% 34.1% 53.7%
Shares outstanding at fiscal year-end 26,507 26,462 26,296 26,252
=========================================================================================================================
</TABLE>
(a) Operating income includes the following pretax special charges: 1991 - $11.3
million for an early retirement program and newspaper merger costs: 1989 -
$10.3 million for the write-off of unrecovered costs related to a lawsuit
against William B. Tanner and others; 1988 - $66.3 million primarily related
to the Company's discontinuance of Broadcast Services operations.
(b) Includes the recognition, at the beginning of fiscal 1992, of the
accumulated postretirement benefit obligation related to prior service costs
of $22.8 million ($14.4 million after-tax; $0.55 per share) as the
cumulative effect of a change in accounting principle for the adoption of
Statement of Financial Accounting Standards No. 106 "Employers' Accounting
for Postretirement Benefits Other Than Pensions" and the adoption of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" which
increased 1992 net income by $15.1 million ($0.58 per share), which
represented the net decrease in the Company's deferred tax liability at that
date.
50
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988 1987
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
$ 577,659 $ 585,900 $ 613,667 $ 595,132 $ 738,871 $ 703,148
- -------------------------------------------------------------------------------------------------------------------
$ 42,613 $ 36,341 $ 63,825 $ 44,139 $ 15,412 $ 77,638
--- --- --- --- --- ---
(17,559) (16,056) (19,831) (25,385) (18,089) (15,780)
(4,926) (75,640) (1,303) 10,562 16,507 11,898
6,131 2,659 814 684 369 265
- -------------- ------------- ------------- ------------- --------------- --------------
26,259 (52,696) 43,505 30,000 14,199 74,021
(7,946) (9,395) (18,025) (9,280) (5,380) (31,100)
687 --- --- --- --- ---
- -------------- ------------- ------------- ------------- --------------- --------------
$ 19,000 $ (62,091) $ 25,480 $ 20,720 $ 8,819 $ 42,921
===================================================================================================================
$ 0.70 $ (2.39) $ 0.98 $ 0.80 $ 0.31 $ 1.50
0.03 --- --- --- --- ---
- -------------------------------------------------------------------------------------------------------------------
$ 0.73 $ (2.39) $ 0.98 $ 0.80 $ 0.31 $ 1.50
0.44 0.44 0.44 0.42 0.39 0.34
22.63 22.88 31.63 40.00 49.00 48.25
14.50 16.63 15.38 30.38 33.75 21.31
8.04 7.74 10.58 10.02 9.80 12.34
===================================================================================================================
$ 787,425 $ 762,311 $ 775,944 $ 782,657 $ 852,764 $ 823,094
9,657 3,668 21,333 62,210 55,488 60,439
92,319 115,383 73,686 69,117 77,717 80,593
320,506 277,202 234,565 275,928 274,985 234,348
209,941 201,868 273,818 258,637 252,419 348,431
60.4% 57.9% 46.1% 51.6% 52.1% 40.2%
26,099 26,071 25,874 25,806 25,751 28,233
===================================================================================================================
</TABLE>
(c) Per share data is restated for the 1987 stock split.
(d) In December 1988, the Company discontinued its Broadcast Services operations
and sold its media placement division, and agreed to dispose of its West
Coast newsprint mill and related operations. Revenues for 1988 include
disposed broadcast operation revenues of $62.4 million and disposed
newsprint operation revenues of $74.3 million. Operating income for 1988
includes disposed broadcast operation operating losses of $59.3 million and
disposed newsprint operation operating profits of $14.8 million.
51
Exhibit 21
Subsidiaries of the Registrant
Listed below are the major subsidiaries of the Company, including
equity investees, each of which is in the consolidated financial statements of
the Company and its Subsidiaries, and the percentage of ownership by the Company
(or if indented, by the subsidiary under which it is listed). Subsidiaries
omitted from the list would not, if aggregated, constitute a significant
subsidiary:
<TABLE>
<CAPTION>
<S> <C>
Jurisdiction of Securities
Name of Subsidiary Incorporation Ownership
- ------------------ ------------- ---------
Charleston Television, Inc. South Carolina 100%
Denver Newspapers, Inc. Delaware 40%
Garden State Paper Company, Inc. Virginia 100%
Jacksonville Television, Inc. Florida 100%
Media General Cable of Fairfax County, Inc. Virginia 100%
Piedmont Publishing Company, Inc. North Carolina 100%
Register Publishing Company, Inc. Virginia 100%
Richmond Newspapers, Inc. Virginia 100%
Tampa Television, Inc. Florida 100%
The Tribune Company Florida 100%
Virginia Newspapers, Inc. Virginia 100%
Virginia Paper Manufacturing Corp. Virginia 100%
Southeast Paper Manufacturing Co.
(Partnership) Georgia 33.33%
</TABLE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Media General, Inc.
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Media General, Inc., of our report dated February 10, 1997, included in the
1996 Annual Report to Stockholders of Media General, Inc.
Our audits also included the financial statement schedule of Media General,
Inc., listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
We also 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-3 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 Effective
January 30, 1996 and (g) the Registration Statement (Form S-8 No. 333-16737)
pertaining to the Thrift Plan Plus For Employees of Media General, Inc. and
Register Publishing Company, Inc. Incentive Saving Plan, of our report dated
February 10, 1997, with respect to the consolidated financial statements of
Media General, Inc., incorporated herein by reference, and our report included
in the preceding paragraph with respect to the financial statement schedule of
Media General, Inc., included in this Annual Report (Form 10-K) of Media
General, Inc., for the fiscal year ended December 29, 1996.
ERNST & YOUNG LLP
Richmond, Virginia
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANICAL INFORMATION EXTRACTED FROM MEDIA
GENERAL, INC.'S CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF
OPERATIONS AND IS QUALIFIFED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> DEC-29-1996
<CASH> 4,471
<SECURITIES> 0
<RECEIVABLES> 86,784
<ALLOWANCES> 5,271
<INVENTORY> 16,329
<CURRENT-ASSETS> 128,218
<PP&E> 997,575
<DEPRECIATION> 527,597
<TOTAL-ASSETS> 1,025,484
<CURRENT-LIABILITIES> 114,845
<BONDS> 265,000
0
0
<COMMON> 132,534
<OTHER-SE> 304,706
<TOTAL-LIABILITY-AND-EQUITY> 1,025,484
<SALES> 765,105
<TOTAL-REVENUES> 765,105
<CGS> 410,659
<TOTAL-COSTS> 410,659
<OTHER-EXPENSES> 64,951
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,267
<INCOME-PRETAX> 109,738
<INCOME-TAX> 39,240
<INCOME-CONTINUING> 70,498
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,498
<EPS-PRIMARY> 2.65
<EPS-DILUTED> 0
</TABLE>
