UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the period ended June 30, 1995.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from _____________ to ________________
Commission File Number: 0-2481
LIN Broadcasting Corporation
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(Exact name of registrant as specified in its charter)
Delaware 62-0673800
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5295 Carillon Point, Kirkland, WA 98033
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(Address of principal executive offices) (Zip Code)
(206) 828-1902
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(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at July 31, 1995
--------------------- -----------------------------
Common Stock, $0.01 par value 51,775,609<PAGE>
<PAGE> 1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
June 30, December 31,
1995 1994
------------ -----------
ASSETS
--------------------------
Current Assets:
Cash and cash equivalents $31,434 $47,467
Accounts receivable, less allowance
for doubtful accounts 157,961 136,279
Inventories 15,553 16,848
Prepaid expenses and other
current assets 8,290 9,907
--------- ---------
Total current assets 213,238 210,501
Property and equipment, at cost, less
accumulated depreciation 501,992 450,698
Other noncurrent assets 44,036 47,150
Investments in and advances to
unconsolidated affiliates 301,435 274,830
Intangible assets, less accumulated
amortization 1,906,563 1,940,694
--------- ---------
Total assets $2,967,264 $2,923,873
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term
bank debt $183,250 $151,875
Accounts payable, accrued expenses
and other current liabilities 210,19 230,574
--------- ---------
Total current liabilities 393,447 382,449
Long-term bank debt 1,434,250 1,443,125
Deferred income taxes 737,225 735,313
Other noncurrent liabilities 1,776 6,741
--------- ---------
Total Liabilities 2,566,698 2,567,628
--------- ---------
Minority interests in equity of
consolidated subsidiaries 58,185 58,507
--------- ---------
(continued)<PAGE>
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(Dollars in thousands)
(Unaudited)
June 30, December 31,
1995 1994
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
(Continued)
Stockholders' Equity
Common stock (55,329,000
shares issued) 553 553
Paid-in capital 1,057,804 1,055,169
Deficit (548,998) (586,055)
--------- ---------
509,359 469,667
Less common stock in treasury,
at cost (3,559,000 and
3,678,000 shares, respectively) 166,978 171,929
--------- ---------
Total stockholders' equity 342,381 297,738
--------- ---------
Total liabilities and
stockholders' equity $2,967,264 $2,923,873
========== ==========
See notes to condensed consolidated financial statements.<PAGE>
<PAGE> 3
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Service $218,041 $219,583 $417,076 $411,836
Equipment sales 27,405 22,972 59,645 46,690
-------- -------- -------- --------
Total revenue 245,446 242,555 476,721 458,526
Cost of equipment sales 27,552 22,967 59,600 47,311
-------- -------- -------- --------
217,894 219,588 417,121 411,215
-------- -------- -------- --------
Operating Costs and Expenses:
Direct costs and expenses 137,059 125,058 273,368 253,574
Corporate expenses 2,378 2,159 5,344 4,772
Depreciation 16,014 14,075 30,701 27,156
Amortization of intangible assets 17,233 20,932 34,465 40,633
-------- -------- -------- --------
172,684 162,224 343,878 326,135
-------- -------- -------- --------
Operating Income 45,210 57,364 73,243 85,080
-------- -------- -------- --------
(continued)<PAGE>
<PAGE> 4
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Other Income (Expense):
Equity in income of unconsolidated
affiliates 37,355 32,353 67,546 64,201
Investment and other 287 926 1,318 2,163
Gain on redemption of preferred
stock of a subsidiary -- 468,689 -- 468,689
Interest expense (33,381) (24,762) (65,645) (47,282)
-------- -------- -------- --------
4,261 477,206 3,219 487,771
-------- -------- -------- --------
Income Before Income Tax Expense
and Minority Interests 49,471 534,570 76,462 572,851
Income Tax Expense 16,840 20,397 23,734 33,311
-------- -------- -------- --------
Income Before Minority Interests 32,631 514,173 52,728 539,540
(continued)<PAGE>
<PAGE> 5
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
------ ------ ------ ------
Minority Interests:
In net income of consolidated
subsidiaries 8,275 7,412 15,671 14,299
Provision for preferrered
dividends of a subsidiay -- -- -- 33,575
-------- -------- -------- --------
Net Income $24,356 $506,761 $37,057 $491,666
======== ======== ======== ========
Net Income Per Share $0.47 $9.75 $0.71 $9.46
======== ======== ======== ========
Average Common and Common Equivalent
Shares Outstanding 52,187 51,988 52,180 51,967
======== ======== ======== ========
See notes to condensed consolidated financial statements.<PAGE>
</TABLE>
<PAGE> 6
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended
June 30,
----------------------
1995 1994
------ ------
Net cash provided by operating
activities $27,475 $96,053
-------- --------
Investing Activities:
Proceeds from sale of marketable
securities -- 4,120
Proceeds from sale of capital equipment -- 5,622
Capital expenditures (82,136) (76,675)
Cellular and television acquisitions -- (176,952)
Net advances from unconsolidated
affiliates 4,761 9,027
-------- --------
Net cash used in investing
activities (77,375) (234,858)
-------- --------
Financing Activities:
Proceeds from borrowings 90,000 340,000
Repayment of bank debt (67,500) (186,571)
Redemption of preferred stock -- (13,167)
Proceeds from common stock issued
for stock purchase plan
and stock options 11,367 3,241
Purchase of common stock for treasury -- (752)
-------- --------
Net cash from financing activities 33,867 142,751
-------- --------
Increase (decrease) in Cash and
Cash Equivalents (16,033) 3,946
Cash and Cash Equivalents at
Beginning of Period 47,467 86,366
-------- --------
Cash and Cash Equivalents at
End of Period $31,434 $90,312
======== ========<PAGE>
<PAGE> 7
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Supplemental Disclosures Of Cash Flow Information
Interest payments were $61,293 and $37,507 for the six months
ended June 30, 1995 and 1994, respectively. Net income tax
payments were $34,607 and $38,084 for the six months ended June
30, 1995 and 1994, respectively.
See notes to condensed consolidated financial statements.<PAGE>
<PAGE> 8
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
1. Basis Of Presentation:
The condensed consolidated financial statements include the
accounts of LIN Broadcasting Corporation (LIN), its wholly-owned
subsidiaries and cellular partnerships (principally
New York and Dallas) in which LIN has voting control (the
Company). The Company's investments in cellular
partnerships in which it has voting interests of 50% or less
but more than 20% (principally Los Angeles and Houston) are
accounted for on the equity method.
These financial statements have been prepared without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote
disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such
rules and regulations. These condensed consolidated
financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto
included in the Company's Form 10-K, as amended, for the
year ended December 31, 1994.
The financial information included herein reflects all
adjustments (consisting of normal recurring adjustments)
which are, in the opinion of management, necessary to a fair
presentation of the results for interim periods. Certain
reclassifications have been made to the financial statements
for previous periods to conform with the current period's
presentation. The results of operations for the three and
six month periods ended June 30, 1995 are not necessarily
indicative of the results to be expected for the full year.
2. Summarized Financial Data
The table provides summarized income statement information
for the cellular ventures accounted for on the equity method
for the three and six months ended June 30, 1995 and 1994.
The information for the periods is not directly comparable
due to the disposition of the Company's equity investment in
the Philadelphia cellular operation in June 1994.<PAGE>
<PAGE> 9
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
2. Summarized Financial Data (continued)
Three Months Six Months
Ended Ended
June 30, June 30,
--------------- ---------------
At 100% 1995 1994 1995 1994
-------- ---- ---- ---- ----
Total revenue $243,033 $251,658 $469,289 $497,562
Net income 90,573 76,140 161,373 151,764
LIN's equity in
net income 37,355 32,353 67,546 64,201
3. Income Per Share
The computation of primary earnings per share is based on the
weighted average number of outstanding common shares and
additional share equivalents assuming the exercise of stock
options. For 1994 a separate earnings per share calculation
for the excess of carrying amount of preferred stock over the
fair value of consideration transferred to the holder of the
preferred stock added to primary net income is also included.
Net income per share was calculated as follows:
Three Months Six Months
Ended Ended
June 30, June 30,
--------------- ---------------
1995 1994 1995 1994
---- ---- ---- ----
Shares outstanding:
Weighted
average shares
outstanding 51,723 51,533 51,787 51,522
Share equivalents 464 455 393 445
------- ------ ------ ------
Adjusted shares
outstanding 52,187 51,988 52,180 51,967
====== ====== ====== ======
Net Income $24,356 $506,761 $37,057 $491,666
(continued)
<PAGE>
<PAGE> 10
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
3. Income Per Share (continued)
Three Months Six Months
Ended Ended
June 30, June 30,
--------------- ---------------
1995 1994 1995 1994
---- ---- ---- ----
Excess carrying value
of preferred stock
over fair value of
consideration
transferred -- 783,823 -- 783,823
------ ------- ------ -------
Total $24,356 $1,290,584 $37,057 $1,275,489
======= ========= ======= =========
Net income per share:
Primary income
per share $0.47 $9.75 $0.71 $9.46
Amount per share -
excess carrying
value of preferred
stock over fair
value of consideration
transferred -- 15.08 -- 15.08
----- ------- ------ -------
Net income per share
including excess of
carrying value of
preferred stock over
fair value of
consideration
transferred $0.47 $24.83 $0.71 $24.54
===== ====== ===== ======
<PAGE>
<PAGE> 11
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
1995 v. 1994
The results for the periods are not directly comparable due to
the previously reported spin-off of the LIN Television
Corporation ("LIN Television") operations and the divestiture of
the Philadelphia cellular equity investment and the
GuestInformant publishing operations. See Note 3 to the
Consolidated Financial Statements in the Company's 1994 Form 10-K
Report, as amended.
The Company's total revenues for the second quarter and the first
six months of 1995 increased versus the same periods in 1994.
Total revenues for the Company's consolidated cellular operations
for the three and six month periods ended June 30, 1995 increased
24% and 26%, respectively, over the 1994 comparable periods. The
increases in cellular (service) revenues were principally due to
a 40% increase in the subscriber base of the consolidated
cellular operations since the second quarter of 1994, offset in
part by a 13% decrease in average monthly revenue per subscriber.
Average monthly revenue per subscriber continues to trend
downward as market penetration increases, reflecting the
continuation of a change in the mix of customers toward more
casual users as a percentage of the total customer base. Average
monthly minutes of usage per subscriber declined approximately 9%
and 7% for the three and six months ended June 30, 1995,
respectively, from the comparable periods in 1994. In addition,
pricing changes and promotional activities have resulted in a
lower average revenue per minute of usage.
Direct costs and expenses increased 10% and 8% during the second
quarter and first half of 1995, respectively, over the same
periods last year. The increases were primarily the result of
higher marketing costs associated with growth in the cellular
subscriber bases, as well as higher customer support and
administrative costs of the consolidated cellular operations.
The cost per new subscriber increased 16% for the second quarter
of 1995 compared to the second quarter of 1994, but increased 2%
for the six months of 1995 compared to 1994. Such increases were
offset in part by the absence of the divested television
operations.
Depreciation expense increased 14% and 13% during the second
quarter and the first six months of 1995 over the comparable
periods in 1994 due primarily to higher levels of cellular
property and equipment at the consolidated cellular ventures.
Amortization expense decreased 18% and 15% for the three and six
months ended June 30, 1995, respectively, as certain intangible
assets became fully amortized in December, 1994.<PAGE>
<PAGE> 12
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
RESULTS OF OPERATIONS (Continued)
Equity in income of unconsolidated cellular affiliates increased
15% and 5% during the second quarter and first six months of
1995, respectively, compared to the same periods in 1994 due
primarily to increased income of those cellular ventures. The
revenues of the unconsolidated cellular affiliates (Los Angeles,
Houston and Galveston) increased 24% and 20% for the three and
six month periods ended June 30, 1995, respectively, compared to
the same periods in the prior year, due to increases in the
subscriber bases since June 1994, partially offset by a decline
in average revenue per subscriber. Operating costs and expenses
for these affiliates were up 29% and 32% for the second quarter
and first half of 1995, respectively, over the comparable periods
in 1994, due to higher customer support and administrative costs
related to growth in the subscriber bases.
Interest expense (which includes the amortization of financing
and commitment fees) increased 35% and 39% during the second
quarter and first six months of 1995, respectively. The
increases were primarily due to higher interest rates during the
periods, offset in part, by the absence of the divested LIN
Television Corporation debt.
The gain on redemption of Preferred Stock resulted from the
redemption of all the Redeemable Preferred Stock of LCH
Communications, Inc., a subsidiary of the Company in the second
quarter of 1994. As a result of this transaction, the provision
for Preferred Stock dividends is no longer required. See note 7
to the Consolidated Financial Statements in the Company's 1994
Form 10-K Report, as amended.
In October 1994, the Company adopted the Statement of Financial
Accounting Standards No. 119, Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments,
which requires additional disclosure regarding the nature and
purpose of derivative financial instruments. The Company
utilizes interest rate caps to comply with certain debt covenants
and to provide protection against rising interest rates. The
adoption of Statement No. 119 did not have a material impact on
the financial position or results of operations of the Company.
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, effective for
fiscal years beginning after December 15, 1995. This statement
requires the separation of long-lived assets and certain
identifiable intangible assets into two categories for purposes
of accounting for an impairment of assets: those to be held and
used and those to be disposed of. An impairment loss is<PAGE>
<PAGE> 13
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
RESULTS OF OPERATIONS (Continued)
indicated if the sum of the expected cash flows, undiscounted and
without interest charges, is less than the carrying amount of the
assets. The carrying value of intangible assets will be reviewed
if the facts and circumstances indicate they may be impaired. If
this review indicates that the intangible assets will not be
recoverable based on the sum of expected cash flows, undiscounted
and without interest charges, the Company's carrying value of the
intangible assets will be reduced by an impairment loss equal to
the excess of the carrying amount over the fair value of the
assets. Management believes the adoption of Statement No. 119
will not have a material impact on the financial position or
results of operations of the Company.
LEGISLATION, REGULATION AND COMPETITION
Governmental regulation of the Company's cellular interests is
described in the Company's Annual Report on Form 10-K, as
amended, for the year ended December 31, 1994 and its Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995. Since
the dates of those reports, both the United States Senate and
House of Representatives have passed legislative proposals that
would comprehensively overhaul federal telecommunications law.
Each bill contains provisions specifying that cellular and other
wireless carriers will not be required to offer equal access to
long distance carriers, although they may be required to offer
customers the opportunity to reach their preferred long distance
carriers directly by dialing access codes. The Senate and House
bills must be reconciled in a single measure, which will be
subject to approval by both bodies and Presidential action. It
is uncertain at this time whether the pending legislation will
become law and, if so, the final form it will take. <PAGE>
<PAGE> 14
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
LEGISLATION, REGULATION AND COMPETITION (Continued)
Personal communications services ("PCS") licenses awarded in the
first round of the PCS spectrum auction conducted by the Federal
Communications Commission ("FCC") were formally granted by the
FCC on June 23, 1995. The Company did not participate in the
bidding for these licenses. The auction for PCS licenses
reserved for small businesses, which was scheduled to begin on
August 29, 1995, has been suspended indefinitely pending the
outcome of a challenge brought by OmniPoint Corp. to the FCC's
rules for those proceedings. Additional messaging licenses are
scheduled to be auctioned in the next year. Several of the
recipients of the messaging licenses have announced plans to
provide two-way short message services, which may compete with
cellular offerings.
The Omnibus Budget Reconciliation Act of 1993 and implementing
rules adopted by the FCC specify that cellular and other
commercial mobile providers should be subject to similar
regulatory treatment, including federal preemption of state rate
and entry regulation and exemption from tariffing requirements.
Several states petitioned the FCC for waivers of the federal
preemption of their rate regulatory authority, but the FCC denied
all petitions in May. The FCC has received two requests for
reconsideration. In addition, the Connecticut Department of
Public Utility Control has filed an appeal in federal court of
the FCC's decision and has asked the FCC to stay the federal
preemption of Connecticut's power to regulate cellular rates. On
August 8, 1995, the FCC denied the reconsideration petitions.
The Connecticut appeal (and request for stay) are pending.
The California Public Utilities Commission ("CPUC") has taken the
position that, regardless of the status of the law affecting
state regulation of cellular rates, it intends to require
cellular carriers to interconnect with switch-based resellers at
the reseller's request and has ordered the Company's Los Angeles
cellular affiliate (LACTC) to test the feasibility of such
interconnection. A test was performed by LACTC with a reseller
in July, and a report on the test results has been filed with the
CPUC.
In addition to competition which the Company continues to face
from B Block cellular licensees and from enhanced specialized
mobile services (ESMR) operators, the Company and its
unconsolidated affiliates also face competition from resellers
such as MCI, which is negotiating resale agreements with several
carriers across the country and has agreed to purchase Nationwide
Cellular, a publicly-traded entity that resells service of the
Company's Los Angeles and New York systems.
<PAGE>
<PAGE> 15
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company utilizes capital primarily to expand and improve its
cellular systems, to make acquisitions of cellular interests and
to make interest and principal payments on its indebtedness. The
Company's cellular operations continue to require substantial
capital to increase system capacity and coverage areas, to
enable provision of new services, and to expand and improve
administrative support systems.
The Company's principal sources of funds are its operations and
two bank credit facilities, a senior secured facility and a
senior unsecured facility (together the "Bank Credit
Facilities"). Under its Bank Credit Facilities, the Company had
$1.6 billion outstanding on June 30, 1995. The Company had an
additional $130 million available on its Bank Credit Facilities
as of June 30, 1995.
Under its Bank Credit Facilities, the Company must remain in
compliance with a series of financial covenants which compare the
levels of the Company's cellular indebtedness to its cellular
cash flows as of the end of each quarter. As of June 30, 1995,
the Company was in compliance with or had obtained appropriate
waivers from all covenants under the Bank Credit Facilities.
Further discussion of the Company's Bank Credit Facilities,
including restrictions on certain activities by the Company, is
set forth in the Company's Form 10-K, as amended, for the year
ended December 31, 1994.
Net cash provided by operating activities totaled $27.5 million
for the six months ended June 30, 1995, compared to cash provided
by operating activities of $96.1 million for the same period in
1994. The decrease was primarily due to a decrease in operating
income due to the divestiture of LIN Television, an increase in
the reduction of accrued expenses, an increase in interest
payments due to higher interest rates and an increase in accounts
receivable due to a switch from advance billing to arrears
billing for cellular access charges in the New York market. This
was offset, in part, by an increase in cash received from equity
affiliates during the period compared to the prior year.
Unlike the first six months of 1994, when LIN acquired several
cellular and television properties, no acquisitions occurred in
the first six months of 1995, resulting in a substantial decrease
in cash used in investing activities. Despite a 40% increase in
consolidated cellular subscribers, capital expenditures increased
by only 7%, reflecting the economies of scale that are available
as the customer base grows. Cash generated from financing
activities, which included $90 million of additional borrowings,
decreased during the first six months of 1995 due primarily to
the fact that additional borrowings of $340 million during 1994
included funds needed for cellular and television acquisitions.<PAGE>
<PAGE> 16
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
The Company's indebtedness is due and payable over several years,
with the amortization increasing significantly during the next
few years. While the Company expects to have sufficient funds
from operations and available under the Bank Credit Facilities to
fund its operations and repay its indebtedness when due, there
can be no assurance that this will occur as the Company continues
to have substantial debt service and other operating and capital
requirements. If cash generated from operations is not
sufficient to fund those requirements, the Company will have to
modify its operations or borrow additional amounts under its Bank
Credit Facilities. There are conditions which must be satisfied
before the banks will be required to lend those additional
amounts. If these conditions are not satisfied, the banks may
conclude it is not in their best interest to lend additional
amounts to the Company. If the Company were unable to borrow
the required amounts from the banks, it may seek to refinance the
Bank Credit Facilities, issue additional debt through a private
or public offering, sell equity or sell certain cellular
interests or other assets. There can be no assurance that the
Company will be able to obtain such refinancings, additional
financing or asset sales when needed, or if carried out, that the
terms will be favorable to the Company or its stockholders.
It is the Company's policy to carefully monitor the state of its
business, cash requirements and capital structure. From time to
time, the Company may enter into transactions pursuant to which
debt is extinguished, including sales of assets or equity, joint
ventures, reorganizations or recapitalizations. There can be no
assurance that any further such transactions will be undertaken
or, if undertaken, will be favorable to stockholders.
AGREEMENT AND PLAN OF MERGER
On June 30, 1995, LIN, McCaw Cellular Communications, Inc.
("McCaw"), a wholly owned subsidiary of AT&T Corp. ("AT&T"), MMM
Holdings, Inc. ("Holdings"), a wholly owned subsidiary of McCaw,
and MMM Acquisition Corp. ("Acquisition"), a wholly owned
subsidiary of Holdings, entered into the Agreement and Plan of
Merger Dated April 28, 1995, as Amended and Restated June 30,
1995 (the "Merger Agreement"). A more complete description of
the Merger Agreement and the transactions contemplated therein is
contained in the Report on Form 8-K dated June 30, 1995, filed by
LIN with the Securities and Exchange Commission.
<PAGE>
<PAGE> 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is from time to time a defendant in and is threatened
with various legal proceedings arising from its regular business
activities. The Company is also party to routine filings with
the FCC and state regulatory authorities and customary regulatory
proceedings pending in connection with interconnection, rates,
and practices and proceedings concerning the telecommunications
industry in general and other proceedings which management does
not expect to have a material adverse effect on the financial
position or results of operations of the Company.
In August 1993 and in December 1993, two dealers for the Los
Angeles cellular partnership (LACTC) filed lawsuits against the
partnership and certain other parties in California state court,
seeking injunctive relief, damages, treble damages, punitive
damages and restitution. Goldenwest Cellular Corp. v. Los
Angeles SMSA Ltd. Partnership; PacTel Cellular; The Good Guys
Inc., Case No. 715479 (Superior Court of California, Orange
County), and Autophone, Inc. v. Los Angeles Cellular Telephone
Co.; Los Angeles SMSA Ltd. Partnership; PacTel Cellular, et al.,
Case No. 722299 (Superior Court of California, Orange County)).
These cases are now set for trial in October 1995 and have been
consolidated. The lawsuits allege various torts and statutory
violations, including price-fixing regarding cellular equipment
and service, below-cost sales of equipment, fraud, interference
with economic relationship, unfair competition, discrimination
among agents and conspiracy. Plaintiffs in these cases have
alleged damages in excess of $1,800,000 and seek actual, treble
and punitive damages. A third lawsuit addressing similar facts
and raising many of the same claims (Cellular Activators, et al.
v. Los Angeles Cellular Telephone Company, et al., Case No.
729278 (Superior Court of California, Orange County)) was filed
in May 1994. Plaintiffs in this case seek damages in excess of
$5,400,000, punitive damages, treble damages, restitution, and
injunctive relief. This case is set for trial in December 1995.
A fourth suit was filed in February 1994 (Cel-Tech
Communications, Inc., et al. v. Los Angeles Cellular Telephone
Company, et al., Case No. VC015535 (Superior Court of California,
Los Angeles County)) containing claims relating to equipment
sales and seeking injunctive relief, restitution and monetary
damages. This case was tried in February and March 1995; after
presentation of the plaintiff's case, the judge granted LACTC's
motion to dismiss the case in its entirety. Plaintiff's appeal
from this decision is pending.
In August 1994 a class action was filed against LACTC in
California state court on behalf of the partnership's cellular
telephone service customers and former customers in the greater
Los Angeles area (Thomas and Nicola v. Los Angeles Cellular
Telephone Company, et al., Case No. 734316, Superior Court of
California, Orange County). The complaint alleges that LACTC has <PAGE>
<PAGE> 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (continued)
engaged in price fixing for cellular service rates with other
cellular carriers in violation of California law. The complaint
seeks actual damages on behalf of the class in excess of
$100,000,000. The complaint further seeks treble damages and
injunctive relief. A similar class action complaint was also
filed in California state court in November 1994 on behalf of the
customers of Los Angeles SMSA (Euros Cady v. Los Angeles Cellular
Corp., Case No. 739101, Superior Court of California, Orange
County). The Thomas and Cady cases have been consolidated for
discovery purposes only with the Garabedian case referenced
below.
Another similar class action complaint was filed against LACTC in
federal court in October of 1994, on behalf of former and current
cellular customers of both LACTC and its competitor Los Angeles
SMSA. This case also specifically named Los Angeles SMSA and its
affiliate AirTouch Cellular (PacTel Cellular) as defendants.
(Kagan and Sifuentes v. Los Angeles Cellular Telephone Company,
et al., Case No. 94-6923, U.S. District Court, Central District
of California). The complaint alleged that defendants engaged in
price fixing for cellular service rates in violation of Sections
1 and 2 of the Sherman Act and sought damages, treble damages and
injunctive relief. In March 1995, the judge entered an order
granting LACTC's motion for a summary judgment in this case.
Plaintiffs have appealed this decision.
A class action complaint similar to the Thomas case was filed in
November 1993 against PacTel Cellular (AirTouch), Los Angeles
SMSA and others in California state court (Garabedian v.
California, Case No. 721144, Superior Court of California, Orange
County). The complaint, brought on behalf of current and former
customers of Los Angeles SMSA and LACTC, alleges that PacTel
Cellular and LACTC conspired to fix cellular service prices.
Like the Thomas case, the complaint seeks damages in excess of
$100,000,000, treble damages and injunctive relief. In March
1995, the court granted the motion of AirTouch and Los Angeles
SMSA to add LACTC as a defendant in this case, and granted the
plaintiffs' motion to certify the class. Trial has been set for
June 1996.
LACTC intends to continue to defend the above-referenced lawsuits
vigorously, and believes that it has meritorious defenses to the
allegations contained in the complaints. The Company does not
expect that the decisions in these legal proceedings will have a
material adverse effect on its financial position or results of
operations.
<PAGE>
<PAGE> 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (continued)
The Company is aware of an antitrust investigation that was
conducted by the California State Attorney General involving the
pricing of cellular telephone service in the Los Angeles area
market from about 1986 to the early 1990's. No formal charge or
complaint was filed. LACTC has been informed that the Attorney
General does not intend to file antitrust claims against LACTC or
the Company at this time. A representative of the Attorney
General's office has stated that the investigation is open but
inactive.
In August 1993, a class action lawsuit was filed on behalf of
Texas cellular subscribers in state court in Texas (Crowley, et
al. v. Houston Cellular Telephone Company, et al., Case No. 93-0879,
Harrison County, Texas, 71st Judicial District). The
defendants in this action are Houston Cellular Telephone Company
("HCTC"), LIN, Metroplex Telephone Co., McCaw Cellular
Communications, Inc., and the affiliates of these entities
providing cellular service in the State of Texas. The most
recent petition, filed in August 1995, generally challenges the
liquidated damages and automatic renewal provisions in annual
cellular subscriber contracts. Plaintiffs allege that the
liquidated damages clause is void, that payments made pursuant to
the clause are recoverable as damages and that the defendants
engaged in a civil conspiracy by which the challenged provisions
were included in the subscriber contracts. Plaintiffs allege two
separate sub-classes; the "damages" class, consisting of persons
who terminated their contracts and were thereby charged or paid
liquidated damages; and the "contracts" class, consisting of
persons who are currently subject to the challenged provisions in
their subscriber contracts. Neither of these sub-classes has
been certified by the court at this time. Plaintiffs seek
declaratory relief, damages, fees, costs and interest. Written
and deposition discovery has commenced. No trial or class
certification hearing dates have been set. The defendants intend
to defend the lawsuit vigorously, and believe they have
meritorious defenses to the allegations contained in the
complaint. The Company does not expect that the decision in this
legal proceeding will have a material adverse effect on its
financial position or results of operations. The Company has
been informed that the Office of the Attorney General of the
State of Texas notified HCTC in March 1995 of that office's
intention to file claims against that partnership that are
largely similar to the claims presented in the Crowley case.
Discussions have been held with representatives of the Attorney
General's Office and are scheduled to continue.
<PAGE>
<PAGE> 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (continued)
In April of 1995 a class action lawsuit was filed in the United
States District Court, Southeastern District of Texas at Houston,
against many advertisers and advertising agencies alleging
defendants had sent unsolicited fax advertisements in violation
of federal and state law. One of the alleged advertising
defendants is HCTC (The Chair King, Inc., et al. v. Houston
Cellular Corporation [sic], et al., No. 95-1066). The complaint
alleges that class members are entitled to statutorily prescribed
damages of $500 for each unsolicited fax or actual losses, treble
damages and punitive damages. The potential amount of damages to
which HCTC might be subject, assuming the claims are upheld, has
not been determined given the early stage of the proceedings nor
have the plaintiffs pleaded such amount with specificity. If HCTC
is determined to be liable for damages, such an outcome could
have a material adverse effect on the Company's financial
position or results of operations. HCTC and the other defendants
believe they have meritorious defenses to the claims and intend
to vigorously defend against them. The alleged class has not
been certified. Motions challenging the complaint are scheduled
to be fully submitted on August 14, 1995.
Certain litigation related to the Merger Agreement and the
transactions contemplated therein have previously been described
in LIN's Annual Report on Form 10-K, as amended, for the year
ended December 31, 1994 and Amendment No. 1 thereto. One of
those cases, Newman v. McCaw Cellular Communications, et al.,
United States District Court for the Southern District of New
York, C.A. No. 95 Civ. 1583, was voluntarily dismissed without
prejudice on June 22, 1995. On June 22, 1995, counsel for the
plaintiffs in all of the pending actions related to the Merger
Agreement and the transactions contemplated therein and counsel
for AT&T, McCaw and Holdings executed a Memorandum of
Understanding (the "Memorandum of Understanding") setting forth
the terms of their agreement in principle to the settlement of
these actions. The terms of the Memorandum of Understanding are
described in a Report on Form 8-K dated June 30, 1995 filed by
LIN. As contemplated in the Memorandum of Understanding, a
Stipulation and Agreement of Compromise, Settlement and Release
(the "Stipulation") was executed on behalf of all parties in In
re LIN Broadcasting Corporation Shareholders Litigation, Delaware
Court of Chancery, New Castle County, Consolidated C.A. No.
14039, and entered in that action on July 27, 1995. Pursuant to
the Stipulation, a Consolidated Amended Class Action Complaint
was filed on July 31, 1995, adding certain parties and causes of
action that previously were included in actions that had not been
consolidated with this action. A Notice of Pendency of Class
Action, Class Action Determination, Proposed Settlement of Class
Action, Settlement Hearing and Right to Appear, describing, among
other things, the terms of the proposed settlement and the rights <PAGE>
<PAGE> 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (continued)
of stockholders in connection with the settlement, is filed
herewith as Exhibit 99.1 and is being distributed to all persons
who have been holders, of record or beneficially, of LIN's common
stock at any time on or after January 1, 1995. A hearing has
been scheduled for September 15, 1995, or such adjourned date as
the Court may, without further notice, direct, at which the Court
will consider and determine the fairness, reasonableness and
adequacy of the Stipulation and whether an order and final
judgment should be entered approving the settlement and will hear
applications for the award of attorneys' fees and expenses.
Item 5. Other Information
(a) Attachment of Supplemental Financial Data
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Agreement and Plan of Merger By and Among
McCaw Cellular Communications, Inc., MMM
Holdings, Inc., MMM Acquisition Corp. and LIN
Broadcasting Corporation, dated April 28,
1995, as Amended and Restated June 30, 1995
(incorporated by reference to Exhibit 2.1 to
the Company's Report on 8-K dated June 30,
1995)
27.1 Financial Data Schedule
99.1 Notice of Pendency of Class Action, Class
Action Determination, Proposed Settlement of
Class Action, Settlement Hearing, and Right
to Appear dated July 28, 1995
(b) Reports on Form 8-K
A Report on Form 8-K dated April 28, 1995 was
filed pursuant to Item 2 describing the execution,
delivery and terms of the Agreement and Plan of
Merger By and Among McCaw, Holdings, Acquisition
and LIN dated April 28, 1995. The Report did not
contain any financial statements.
A Report on Form 8-K dated June 30, 1995 was filed
pursuant to Item 2 describing the execution,
delivery and terms of the Merger Agreement. The
Report did not contain any financial statements.<PAGE>
<PAGE> 22
<TABLE>
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA
(Dollars in thousands)
(Unaudited)
The following table sets forth unaudited supplemental data for the Company's cellular
operations reflecting proportionate consolidation of the entities in which the Company has
an interest. This presentation differs from the consolidation methodology used to prepare
the Company's principal financial statements in accordance with generally accepted
accounting principles (see Note 1 to the condensed consolidated financial statements).
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ --------------------
1995 1994(1) 1995 1994(1)
------ ------- ------ -------
<S> <C> <C> <C> <C>
Cellular:
Revenues
Service $287,344 $249,868 $550,346 $473,427
Equipment sales 32,426 33,318 69,981 67,913
-------- -------- -------- --------
Total revenue 319,770 283,186 620,327 541,340
Cost of equipment sales 33,569 33,379 72,295 69,138
-------- -------- -------- --------
286,201 249,807 548,032 472,202
-------- -------- -------- --------
Direct costs and expenses 95,808 75,867 180,490 145,670
Marketing 75,402 62,562 161,628 130,337
Depreciation 22,329 19,000 42,770 36,424
Amortization 17,265 20,228 34,530 39,205
-------- -------- -------- --------
210,804 177,657 419,418 351,636
-------- -------- -------- --------
Operating income $75,397 $72,150 $128,614 $120,566
======== ======== ======== ========
Proportionate subscribers (2) 1,271,000 918,000 1,271,000 918,000
(continued)<PAGE>
<PAGE> 23
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (continued)
(Dollars in thousands)
(Unaudited)
(1) Includes the proportionate results of LIN's interest in the Philadelphia system which
was divested in June 1994.
(2) Calculated by multiplying (i) the total subscribers of a licensee in which, as of the
date specified, the Company owned an interest, by (ii) the percentage ownership
interest in that licensee which the Company owned on such date.<PAGE>
</TABLE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
LIN Broadcasting Corporation
(Registrant)
DONALD GUTHRIE
-------------------------------
Date: August 14, 1995 Donald Guthrie
Senior Vice President - Finance
<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit
No.
-------
2.1 Agreement and Plan of Merger By and Among McCaw
Cellular Communications, Inc., MMM Holdings, Inc., MMM
Acquisition Corp. and LIN Broadcasting Corporation,
dated April 28, 1995, as Amended and Restated June 30,
1995 (incorporated by reference to Exhibit 2.1 to the
Company's Report on 8-K dated June 30, 1995)
27.1 Financial Data Schedule
99.1 Notice of Pendency of Class Action, Class Action
Determination, Proposed Settlement of Class Action,
Settlement Hearing, and Right to Appear dated July 28,
1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 31434
<SECURITIES> 0
<RECEIVABLES> 182648
<ALLOWANCES> (24687)
<INVENTORY> 15553
<CURRENT-ASSETS> 213238
<PP&E> 674231
<DEPRECIATION> (172239)
<TOTAL-ASSETS> 2967264
<CURRENT-LIABILITIES> 393447
<BONDS> 1434250
<COMMON> 553
0
0
<OTHER-SE> 341828
<TOTAL-LIABILITY-AND-EQUITY> 2967264
<SALES> 0
<TOTAL-REVENUES> 476721
<CGS> 59600
<TOTAL-COSTS> 66781
<OTHER-EXPENSES> 196565
<LOSS-PROVISION> 10022
<INTEREST-EXPENSE> 65645
<INCOME-PRETAX> 76462
<INCOME-TAX> 23734
<INCOME-CONTINUING> 37057
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37057
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.71
</TABLE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
IN RE LIN BROADCASTING CORPORATION ) Consolidated
SHAREHOLDERS LITIGATION ) C.A. No. 14039
NOTICE OF PENDENCY OF CLASS ACTIONS, CLASS
ACTION DETERMINATION, PROPOSED SETTLEMENT
OF CLASS ACTIONS, SETTLEMENT HEARING, AND
RIGHT TO APPEAR
To: All Record Holders And Beneficial Owners Of Common
Stock Of LIN Broadcasting Corporation ("LIN"), at any
time on or after January 1, 1995 And Their Successors
In Interest, Immediate Or Remote.
All Record Holders Are Requested By The Court To
Forward This Notice To Their Beneficial Owners.
This Notice is given pursuant to Rule 23 of the Court
of Chancery of the State of Delaware in and for New Castle County
(the "Court") and an Order of the Court (the "Hearing Order")
entered in the above-captioned action to inform you of the
pendency of the above-captioned lawsuit (the "Delaware Action"),
to advise you of a proposed Settlement of the Delaware Action and
of your rights, among other things, to participate in the hearing
on, or to object to, the proposed Settlement and to give you
notice of a hearing to be held by the Court of Chancery of the
State of Delaware in and for New Castle County, Daniel L. Herrman
Courthouse, 11th and King Streets, Wilmington, Delaware on
September 15, 1995, at 2:30 p.m., to determine whether the
proposed Settlement should be approved as fair, reasonable, and
adequate and to consider the application by plaintiffs' counsel
for attorneys' fees and costs.
PLEASE BE ADVISED that a number of related actions (the
"New York State Court Actions") have been filed in the New York
Supreme Court (the "New York Court") by counsel who are also
participating in the Delaware Action. The parties to the
Settlement are in the process of asking the New York Court to
dismiss the New York State Court Actions without prejudice and
without costs. It is anticipated that no notice to any class of
LIN shareholders will be required or given in connection with
procuring the dismissal of the New York State Court Actions.
ACCORDINGLY, ANY PARTY OBJECTING TO THE DISMISSAL OR COMPROMISE
OF THE CLAIMS ASSERTED IN THE NEW YORK STATE COURT ACTIONS SHOULD
APPEAR AND OBJECT TO THE APPROVAL OF THIS SETTLEMENT IN
ACCORDANCE WITH THE PROCEDURES DESCRIBED MORE FULLY BELOW UNDER
THE CAPTION "RIGHT TO APPEAR."
<PAGE>
NOTICE TO PERSONS HOLDING
RECORD OWNERSHIP ON BEHALF OF OTHERS
If you are or were a record (but not a beneficial)
owner of common stock of LIN Broadcasting Corporation ("LIN"),
you should within five days of the receipt of this Notice, either
(a) forward this Notice to each such beneficial owner who is a
member of the Settlement Class defined below or (b) mail a list
of the names and addresses of each such beneficial owner to LIN
Broadcasting Corporation, 5295 Carillon Point, Kirkland,
Washington 98033, Attention: Investor Relations, with a request
that copies of the Notice be mailed to such beneficial owners.
If you are a nominee holder and wish additional copies of this
Notice, additional copies of this Notice will be made available
to you for this purpose upon request directed to the foregoing
address or by telephoning 206-828-1350. Nominee holders will be
reimbursed their reasonable costs and expenses incurred in
complying with the foregoing directives of this paragraph.
NO OPINION EXPRESSED BY
THE COURT AS TO THE MERITS
This Notice is not an expression by the Court as to the
merits of any claims or defenses asserted by the parties in the
Delaware Action.
BACKGROUND AND DESCRIPTION OF THE ACTIONS
The following is a summary of certain of the facts and
procedural history underlying the instant litigation and the
Settlement.
In April 1988, McCaw Cellular Communications, Inc.
("McCaw"), which is principally engaged in the business of
providing cellular communication services, and certain of its
affiliates filed a Statement on Schedule 13D with the Securities
and Exchange Commission reporting their aggregate beneficial
ownership of 2,820,400 Common Shares of LIN. LIN is engaged
primarily in the business of providing cellular voice telephone
and data services. Over the course of the next 14 months, McCaw
and its affiliates increased their ownership to 5,089,500 Common
Shares.
On June 8, 1989, McCaw commenced a tender offer (the
"McCaw Offer") pursuant to which it offered to purchase for cash
all of the LIN Common Shares it did not then own for $120 per LIN
Common Share. On July 28, 1989, McCaw revised the price at which
it was offering to purchase LIN Common Shares to $110 per LIN
Common Share.
On September 11, 1989, LIN entered into a merger
agreement with BellSouth Corporation, pursuant to which the
cellular operations of LIN and BellSouth would be combined into
LIN, with BellSouth holding a 50% equity interest in LIN, the
stockholders of LIN would receive a cash payment of $20 per LIN
Common Share and LIN's television operations would be spun off to
LIN's stockholders.
On October 10, 1989, McCaw revised the McCaw Offer to
offer to purchase 22 million LIN Common Shares for cash for $125
per LIN Common Share, which would have provided McCaw with a
majority of LIN's voting stock. In addition, McCaw indicated its
intention to enter into a mutually satisfactory private market
value guarantee agreement as promptly as practicable following
consummation of its offer.
On November 20, 1989, in response to further
negotiations between LIN and BellSouth, McCaw again revised the
McCaw Offer by offering to purchase 22.5 million LIN Common
Shares for cash for $150 per LIN Common Share; to enter into a
private market value guarantee agreement; and to cause LIN,
following successful completion of the McCaw Offer, to purchase
and distribute to LIN's stockholders, other than McCaw and its
affiliates, shares of Class A Common Stock of McCaw with an
aggregate market value of $425 million.
After further discussions, the final version of the
McCaw Offer ensued. McCaw agreed to a restructured transaction
that reduced the number of LIN Common Shares that it would offer
to purchase to 21.9 million, increased the purchase price to
$154.11 per LIN Common Share, dropped certain conditions to its
tender offer, and made certain changes to the proposed private
market value guarantee that resulted in its final form (in final
form, the "PMVG"), subject to the LIN Board of Directors publicly
announcing its recommendation that LIN's stockholders accept the
revised McCaw Offer. The LIN Board, following discussion and
based on advice from LIN's investment advisors and legal counsel,
by unanimous vote withdrew its earlier recommendation of the
transactions contemplated by the BellSouth merger agreement and
recommended that LIN's stockholders accept the McCaw Offer once
the conditions to that offer were satisfied.
Thereafter, LIN requested that BellSouth terminate the
BellSouth merger agreement. McCaw subsequently entered into a
settlement agreement with BellSouth pursuant to which the
BellSouth merger agreement was terminated, and McCaw paid $66.5
million to BellSouth in respect of certain termination fees and
expenses contemplated by the BellSouth merger agreement.
On December 11, 1989, LIN and McCaw entered into an
agreement pursuant to which McCaw undertook to proceed with the
McCaw Offer on the terms described above and established other
terms, including the execution by McCaw and LIN, on the same day,
of the PMVG. The PMVG had been negotiated at arm's length by
McCaw and LIN prior to McCaw's acquisition of control of LIN and
was approved by the LIN Board prior to the time that any of the
members of the LIN Board were designated by or otherwise
affiliated with McCaw. On March 5, 1990, McCaw acquired 21.9
million LIN Common Shares pursuant to the McCaw Offer, bringing
McCaw's aggregate ownership to 26,989,500 LIN Common Shares, or
approximately 52% of the outstanding LIN Common Shares. McCaw
has not increased its beneficial ownership of LIN Common Shares
since completion of the McCaw Offer.
McCaw and LIN thus entered into the PMVG on December
11, 1989 as part of the agreement under which McCaw and LIN
agreed to McCaw's acquisition of control of LIN. The PMVG
provided, inter alia, that for as long as McCaw and its
affiliates or any member of a "group," as such term is used for
purpose of Schedule 13D under the Exchange Act (collectively
"Group Members") beneficially own in the aggregate at least 25%
of the outstanding LIN Common Shares on a fully diluted basis, or
McCaw's designees constitute a majority of the LIN Board, and any
LIN Common Shares are held by other persons, the following
provisions, among others, will apply:
i. Three members of the LIN Board will be independent
directors as determined under the New York Stock Exchange Rules
(the "LIN Independent Directors"). The current LIN Independent
Directors are persons who served on LIN's Board prior to the
completion by McCaw of the McCaw Offer.
ii. On or about January 1, 1995, the LIN Independent
Directors would designate an investment banking firm of
recognized national standing, and McCaw would designate an
investment banking firm of recognized national standing, in each
case to determine the private market value per LIN Common Share
pursuant to the terms of the PMVG.
On December 4, 1990, a number of LIN shareholders
brought an action in the United States District Court for the
Southern District of New York (the "Federal Court") against LIN,
McCaw and the directors of LIN, individually and derivatively on
behalf of LIN, alleging, inter alia, that certain of the actions
of the LIN board that related to the acquisition of LIN by McCaw
were unlawful (the "LIN Action"). On June 6, 1992, the LIN
Action was settled upon notice to a class of LIN shareholders
(the "LIN Class") consisting of holders of LIN Common Stock at
any time from and including June 7, 1989 through and including
March 5, 1990 (the "LIN Settlement"). As part of the LIN
Settlement, the LIN Class released all claims relating to or
arising out of the acquisition of LIN by McCaw, including all
claims relating to or arising out of the PMVG.
On November 4, 1992, McCaw and AT&T Corp. ("AT&T"),
which is principally engaged in global information movement and
management, financial services and leasing, announced publicly
that they were discussing a proposed strategic alliance,
including a significant investment by AT&T in McCaw, the purchase
by AT&T from McCaw's controlling stockholders of an option to
obtain voting control of McCaw and the grant by AT&T to McCaw of
a 99-year license to use the AT&T service mark on McCaw's
wireless services. Discussions with respect to the proposed
alliance continued through 1992 and the first half of 1993.
Officers of McCaw periodically reported to the LIN Board on the
status of the negotiations with respect to the proposed AT&T/
McCaw alliance.
In July 1993, AT&T representatives informed McCaw
representatives that AT&T wished to explore the desirability and
feasibility of a merger as a possible alternative to the proposed
strategic alliance. On August 14, 1993, AT&T made a merger
proposal to McCaw, and the terms thereof were negotiated on
August 14 and 15, 1993. On August 15, 1993, the proposed merger
was approved by the Boards of Directors of AT&T and McCaw. On
August 16, 1993, AT&T and McCaw executed a merger agreement
providing for the merger of McCaw and a subsidiary of AT&T (the
"AT&T/McCaw Merger"). On September 19, 1994, the AT&T/McCaw
Merger was consummated, and AT&T acquired all of the outstanding
shares of McCaw in exchange for shares of common stock, par value
$1.00 per share, of AT&T. Neither AT&T nor any of its
subsidiaries has acquired any LIN Common Shares except indirectly
through its acquisition of McCaw in such merger. At the time of
AT&T's acquisition of McCaw, there were five McCaw designees, in
addition to the three LIN Independent Directors, on the LIN
Board. Subsequent to that acquisition, two of the five McCaw
designees resigned from the LIN Board, the size of the LIN Board
was increased by three and five persons employed by AT&T were
elected to the LIN Board.
As required by the PMVG, a process commenced on January
1, 1995 to determine the private market value per LIN Common
Share. Pursuant to a provision in the PMVG, McCaw and the LIN
Independent Directors each designated nationally recognized
investment banking firms to determine such firms' views of the
private market value per LIN Common Share as defined in the PMVG.
The LIN Independent Directors designated Bear, Stearns & Co. Inc.
("Bear Stearns") and Lehman Brothers Inc. ("Lehman Brothers"),
acting jointly, for this purpose; McCaw designated Morgan Stanley
& Co. Incorporated ("Morgan Stanley"). The PMVG defines private
market value per LIN Common Share as "the private market price
per [LIN Common] Share (including control premium) that an
unrelated third party would pay if it were to acquire all
outstanding [LIN Common] Shares (including the [LIN Common]
Shares held by [McCaw] and its affiliates) in an arm's-length
transaction, assuming that [LIN] was being sold in a manner
designed to attract all possible participants (including the
Regional Bell Operating Companies) and to maximize stockholder
value, including if necessary through the sale or other
disposition (including tax-free spinoffs, if possible) of
businesses prohibited by legal restrictions to be owned by any
particular buyer or class of buyers (e.g., the Regional Bell
Operating Companies)."
Bear Stearns and Lehman Brothers and Morgan Stanley
conducted due diligence with respect to LIN, including reviewing
various sets of projections for LIN from LIN management and from
McCaw management. Each of the investment banking firms also
conducted various analyses to determine their views of the
private market value of LIN, including a discounted cash flow
analysis; an analysis of selected precedent transactions; an
analysis of potential purchasers; and an analysis of the public
trading prices of the shares of comparable companies. In
accordance with the instructions of both McCaw and the LIN
Independent Directors, Morgan Stanley and Bear Stearns and Lehman
Brothers did not solicit third-party interest with respect to an
acquisition of all or any part of LIN.
Pursuant to the PMVG, on January 31, 1995, Morgan
Stanley and Bear Stearns and Lehman Brothers exchanged their
initial views as to the private market value per LIN Common
Share. The initial view of Morgan Stanley was that the private
market value per LIN Common Share was $100. The initial view of
Bear Stearns and Lehman Brothers was that the private market
value per LIN common Share was $162, assuming a closing date for
an acquisition of LIN of June 30, 1995. As contemplated by the
PMVG, at their January 31, 1995 meeting and during the period
from January 31, 1995 to February 15, 1995, Morgan Stanley and
Bear Stearns and Lehman Brothers consulted with one another with
respect to these views, which included discussion of the
methodologies employed by each of the firms in reaching their
initial views.
On February 15, 1995, Morgan Stanley and Bear Stearns
and Lehman Brothers delivered their final views as to the private
market value per LIN Common Share. The final view of Morgan
Stanley was that the private market value per LIN Common Share
was $105, assuming a closing date for an acquisition of LIN of no
earlier than June 30, 1995. The final view of Bear Stearns and
Lehman Brothers was that the private market value per LIN Common
Share was $155, assuming a closing date for an acquisition of LIN
of June 30, 1995. On February 15, 1995, the last trading day
prior to the public announcement of the final views of Morgan
Stanley and Bear Stearns and Lehman Brothers, the high and low
sales price per LIN Common Share on the Nasdaq National Market
were $141 and $138 , respectively. On February 16, 1995, the
day that the final views were disclosed, the high and low sales
prices were $132 and $129 per LIN Common Share, respectively.
Under the PMVG, because the final view of Bear Stearns
and Lehman Brothers was more than 110% of the final view of
Morgan Stanley, the investment banking firms were required to
agree upon and jointly designate another investment banking firm
of recognized national standing to determine the private market
value per LIN Common Share. Pursuant to these provisions, on
February 17, 1995, Wasserstein Perella, an independent nationally
recognized investment banking firm unaffiliated with AT&T, McCaw
and LIN, was engaged for this purpose.
Wasserstein Perella was provided with written
presentations from Morgan Stanley and Bear Stearns and Lehman
Brothers; conducted due diligence with respect to LIN, including
reviewing varying projections from LIN management and McCaw
management and other written materials and conducting interviews
with LIN management and McCaw management; conducted two lengthy
meetings with representatives of Morgan Stanley, Bear Stearns and
Lehman Brothers and counsel for McCaw and the LIN Independent
Directors, at which extensive presentations were made; received
legal advice with respect to the proper interpretation of the
PMVG and other related issues; and conducted its own analyses of
the private market value per LIN Common Share. The legal advice
provided to Wasserstein Perella by its counsel included advice as
to whether, in determining the private market value in accordance
with the definition of private market value contained in the
PMVG, AT&T and McCaw should be considered as potential buyers, an
issue as to which McCaw and the LIN Independent Directors had a
difference of views. Wasserstein Perella's counsel concluded
that, under this definition, AT&T and McCaw should not be
considered potential buyers.
On March 7, 1995, Wasserstein Perella determined that
the private market value per LIN Common Share, as defined under
the PMVG, is $127.50. Under the formula set forth in the PMVG,
$127.50 per LIN Common Share is the Private Market Price as
defined under the PMVG, because this amount is more than onethird
and less than two-thirds of the way between the $105 per LIN
Common Share and the $155 per LIN Common Share determined by
Morgan Stanley, and by Bear Stearns and Lehman Brothers,
respectively, as the private market value per LIN Common Share.
If Wasserstein Perella's determination were not in this middle
range, the Private Market Price would have been the average of
Wasserstein Perella's determination and the closer of the other
two appraisals, but not more than the higher view ($155) nor less
than the lower view ($105). On March 7, 1995, the last trading
day prior to the public announcement of Wasserstein Perella's
determination as to the private market value per LIN Common
Share, the high and low sales prices per LIN Common Share on the
Nasdaq National Market were $130.25 and $128.25, respectively.
Pursuant to the PMVG, McCaw was given 45 days to
determine whether it desired to proceed with an acquisition of
all the publicly held LIN common shares (the "LIN Public Shares")
at the Private Market Price. Under the PMVG, if McCaw decided to
proceed, it was required to enter into an agreement with LIN for
such acquisition. If McCaw decided not to proceed, the PMVG
would require McCaw to put LIN up for sale in its entirety under
the direction of the LIN Independent Directors in a manner
intended to maximize value for all LIN Common Shares.
On April 7, 1995, McCaw determined that it desired to
proceed with an acquisition of the LIN Public Shares at the
Private Market Price of $127.50 per LIN Common Share (the
"Original Merger"). On April 6, 1995, the last trading day prior
to the public announcement of McCaw's determination, the high and
low sales prices per LIN Common Share on the Nasdaq National
Market were $122.25 and $121.50, respectively. Subsequent to
McCaw's determination, representatives of the LIN Independent
Directors had discussions with representatives of McCaw with
respect to the terms on which the LIN Independent Directors would
be willing to vote in favor of, or abstain with respect to, the
acquisition of the LIN Public Shares by McCaw pursuant to the
PMVG. These discussions focused on: (i) the possibility of
McCaw increasing the price at which it would acquire the LIN
Public Shares and/or adding an accretion to the purchase price in
the event the Original Merger closed after June 30, 1995; (ii)
certain requested changes in the text of a draft of a proposed
merger agreement, including adding a guarantee from AT&T and a
representation that the funds for the purchase of the LIN Public
Shares would be provided by AT&T in the form of a capital
contribution and narrowing or eliminating the condition to
McCaw's obligation to consummate the Original Merger that there
be no pending litigation challenging the Original Merger or the
PMVG; and (iii) the possibility of seeking a fairness opinion
from Wasserstein Perella or another investment banking firm.
Following discussions between the representatives of
the LIN Independent Directors and of McCaw, on April 28, 1995,
the LIN Board met to consider a proposed form of merger agreement
(the "Original Merger Agreement"). At this meeting, the LIN
Board heard presentations from and asked questions of
representatives of Morgan Stanley, Bear Stearns, Lehman Brothers,
and Wasserstein Perella; heard presentations on the background of
the PMVG, the terms of the proposed Original Merger Agreement and
the status of pending litigation; and were advised by counsel
with respect to their duties under Delaware law. The LIN Board
then approved the Original Merger Agreement and the Original
Merger by a vote of six to three, with two directors abstaining.
The three LIN Independent Directors each voted no on the proposal
to approve the Original Merger Agreement presented to the LIN
Board. Following the meeting of the LIN Board, McCaw, MMM
Holdings, Inc. ("MMM"), a wholly-owned subsidiary of McCaw, MMM
Acquisition Corp. ("Merger Sub"), a wholly-owned subsidiary of
MMM, and LIN entered into the Original Merger Agreement. The
purpose of the Original Merger was to effect the acquisition of
all the LIN Public Shares by McCaw, as contemplated by the PMVG.
A number of putative class action lawsuits challenging
the Original Merger and the PMVG process were filed in several
jurisdictions. There is now pending the Delaware action, which
is entitled In re LIN Broadcasting Corporation Shareholders
Litigation, Consolidated C.A. No. 14039, in the Court of Chancery
of the State of Delaware, New Castle County, and the actions
entitled Katz v. Robert F. Allen, et al., Index No. 95-104259,
Luke v. Wasserstein Perella & Co., et al., Index No. 95-105973,
and Frank v. Alberg, et al., Index No. 95-108949, in the Supreme
Court of the State of New York, County of New York (the "New York
State Court Actions") (collectively, the "Actions"). The Actions
were filed as putative class actions on behalf of holders of LIN
Common Shares, naming as defendants AT&T, McCaw, MMM, certain
individual officers and directors of AT&T, McCaw and LIN
(collectively, the "Individual Defendants"), Wasserstein Perella,
and Morgan Stanley. The Actions variously seek injunctive
relief, monetary damages and/or rescission on the grounds that
the conduct of the various defendants in connection with the LIN
Board's facilitation of AT&T's acquisition of McCaw, the proposed
plan of merger among LIN, McCaw and two subsidiaries of McCaw and
the determination of the private market value of the LIN Common
Shares pursuant to the PMVG, constitutes, inter alia, a breach of
the PMVG, unjust enrichment, and a breach of fiduciary duties.
Another action, Newman v. McCaw Cellular Communications
and AT&T Corp., C.A. No. 95 Civ. 1583, in the United States
District Court for the Southern District of New York (the
"Federal Action"), that asserted certain federal claims, was
voluntarily dismissed without prejudice on June 22, 1995 pursuant
to the filing of plaintiff's Notice of Voluntary Dismissal dated
June 21, 1995, in which plaintiff stated that based on facts
learned from defendants' counsel subsequent to the commencement
of the action, plaintiff no longer believed it could prevail on
its claims.
Under the Original Merger Agreement, one of the
conditions to McCaw's obligation to consummate the Merger was
that no litigation be pending that questioned the validity or
legality of the PMVG or the proceedings thereunder or of the
Original Merger Agreement or the transactions contemplated
thereby, or which imposes or could impose any remedy, condition
or restriction in connection therewith unacceptable to McCaw.
The litigation described above, if left pending, would have
caused that condition not to be satisfied. That condition could,
however, be waived by McCaw.
Following plaintiffs' counsel's extensive factual
investigation, document discovery and consultation with experts,
arm's-length negotiations commenced between plaintiffs' counsel
and counsel for AT&T. On June 22, 1995, the parties executed a
Memorandum of Understanding (the "Memorandum of Understanding"),
which contemplated the settlement of the Actions and all claims
that have been or could have been the subject of the Actions (the
"Settlement"), on the terms and subject to the conditions set
forth below. The Memorandum of Understanding was subject to:
(a) the drafting and execution of an appropriate Stipulation and
such other documentation as may be required to obtain final Court
approval of the Settlement; (b) the completion by plaintiffs of
appropriate discovery in the Actions reasonably satisfactory to
plaintiffs' counsel; (c) final Court approval of the Settlement
and dismissal of the Actions with prejudice and without awarding
costs to any party (except as provided on page 12 below); (d) the
approval of the LIN Independent Directors; and (e) the receipt of
a fairness opinion from a mutually acceptable investment banking
firm. The Memorandum of Understanding was to be null and void and
of no force and effect were any of these conditions not met or
should plaintiffs' counsel have determined after completion of
discovery that the Settlement was not fair and reasonable.
At a meeting on June 30, 1995, the LIN Board of
Directors considered a proposed amended and restated merger
agreement (the "Merger Agreement") that reflected the terms of
the Memorandum of Understanding. The LIN Board also received the
opinion and financial presentation of Wasserstein Perella, the
agreed-to mutually-acceptable investment banking firm, to the
effect that the increased consideration as provided in the Merger
Agreement is fair from a financial point of view to the LIN
Public Stockholders. As contemplated by the Memorandum of
Understanding as a condition to the Settlement, the LIN
Independent Directors joined in the unanimous approval by the LIN
Board of Directors of the Merger Agreement and the Merger
contemplated thereby (the "Merger") and indicated their
acceptance of the Memorandum of Understanding setting forth the
terms of the proposed litigation Settlement. The LIN Independent
Directors have also assented to the scheduled conversion of
certain cellular systems of LIN and its subsidiaries to provide
equal access for long distance carriers and the use by LIN and
its subsidiaries of the AT&T service mark in the marketing of
certain services pending the Merger.
Plaintiffs in the Actions, through their counsel, have
completed appropriate discovery and have deemed the terms and
conditions of the Settlement are fair, reasonable, and in the
best interests of the LIN Public Stockholders. In reaching this
conclusion, plaintiffs and their attorneys have represented to
the Court that they have taken into account, among other things,
the risks of litigation and the substantial benefits the
Settlement will confer on LIN Public Stockholders and the members
of the Settlement Class (as defined below). Defendants have
represented to the Court that they believe that it is in the best
interests of all parties that the Actions be settled and
dismissed, because such settlement would avoid the time, expense
and risks associated with further litigation and would allow
repose of the Settled Claims, as defined below.
CLASS ACTION DETERMINATION
The Hearing Order provides that the Delaware Action
shall be maintained as a class action, for purposes of settlement
only, by the plaintiffs as class representatives and by their
counsel as class counsel, pursuant to Chancery Court Rules 23(a)
and 23(b)(1) and 23(b)(2), on behalf of a class consisting of all
record holders and beneficial owners of LIN common stock, and
their successors in interest, immediate or remote, at any time on
or after January 1, 1995 up through and including the Effective
Time of the Merger (as defined below), including those who have
sold their LIN shares and thus no longer are current LIN
shareholders (the "Settlement Class"). Excluded from the
Settlement Class are the defendants herein, members of the
immediate family of each of the individual defendants, any
person, firm, trust, corporation, officer, director or other
individual or entity in which any defendant has a controlling
interest or which is related to or affiliated with any of the
defendants and the legal representatives, heirs, successors in
interest or assigns of any such excluded party.
THE SETTLEMENT
Pursuant to the proposed Settlement, defendants have
agreed that, in consideration for the dismissal of the Actions
and the release and settlement of the Settled Claims (as defined
below), instead of the Original Merger, McCaw will pay in the
Merger $129.50 in cash per LIN Common Share, plus the Additional
Amount (as defined below), if any, plus the Accretion Amount (as
defined below), if any (collectively, the "Merger
Consideration"). The term "Additional Amount" means $0.25 less
an amount equal to (x) the excess over $4 million of the total
fee awarded by a final and nonappealable order of the Delaware
Chancery Court to the plaintiffs' attorneys in connection with
the litigation Settlement (as described on page 12 below),
divided by (y) the number of LIN Common Shares issued and
outstanding immediately prior to the Effective Time (as described
below), other than LIN Common Shares owned by McCaw or any of its
wholly-owned subsidiaries and LIN Common Shares held in the
treasury of LIN or by any wholly-owned subsidiary of LIN. The
term "Accretion Amount" means an amount, if any, equal to the
amount of simple interest that would accrue on $129.50 plus the
Additional Amount (if any) at a rate of five and one-half percent
(5.5%) per annum from, but not including, September 15, 1995
through, and including the date upon which the closing of the
Merger (the "Closing") occurs. The term "Effective Time" is the
date upon which the Merger will be consummated and become
effective, which will be on the date and at the time at which the
certificate of merger to be filed pursuant to the General
Corporation Law of the State of Delaware is accepted for filing
by the Secretary of State of the State of Delaware or such later
date and time as may be specified, with the approval of LIN and
McCaw, in such certificate of merger. The LIN public
stockholders will continue to be stockholders of LIN until the
Effective Time. The Merger Consideration (before the Accretion
Amount) constitutes from $2.00 to $2.25 per LIN Common Share
above the private market value determined pursuant to the PMVG,
representing an aggregate increase of from $50 to $55 million
over the Private Market Price.
In consideration of the foregoing, pursuant to the
proposed Settlement plaintiffs in the Actions filed a
consolidated amended complaint in the Delaware Action which,
among other things, incorporates the allegations made in the New
York State Court Actions. The parties to the respective Actions
will use their best efforts to obtain final Court approval of the
Settlement and the dismissal of the Delaware Action with
prejudice as to all claims asserted in the Actions as against the
named plaintiffs and the Settlement Class with no right to
opt-out of the Settlement and without costs to any party (except
as provided on page __ below) and are in the process of obtaining
Orders and Judgments in each of the New York State Court Actions
dismissing those actions without prejudice and without costs. As
used herein, "final Court approval" of the Settlement means that
the Delaware Court of Chancery has entered an order dismissing
the Delaware Action with prejudice in accordance with the terms
provided in the Settlement and the order is finally affirmed on
appeal or is no longer subject to appeal.
The Stipulation provides that, if the Settlement is
approved by the Court, all claims, rights and causes of action
(state or federal), including but not limited to claims arising
under the federal securities laws, the rules or regulations
promulgated thereunder, or otherwise, whether known or unknown
that are, could have been or might in the future be asserted by
any of the plaintiffs or any member of the Settlement Class,
whether directly, derivatively, representatively or in any other
capacity against defendants and their predecessors, successors,
parents, subsidiaries, affiliates and agents (including, without
limitation, any investment bankers or attorneys and any past,
present or future officers, directors or employees of defendants
and their predecessors, successors, parents, subsidiaries,
affiliates and agents) which have been, or could have been,
asserted relating to the Original Merger Agreement, the Merger
Agreement, the Original Merger, the Merger, the actions of the
LIN Board of Directors and the Individual Director Defendants
relating to the AT&T/McCaw Merger, the PMVG, the proxy statement,
the actions of the Board of Directors of AT&T, McCaw or LIN and
the Individual Director Defendants relating to the Original
Merger, the Merger, the Original Merger Agreement, the Merger
Agreement, or any of the transactions, disclosures, facts and
allegations that are the subject of the Actions (except for
appraisal rights pursuant to Delaware General Corporation Law
262) (the "Settled Claims"), shall be compromised, settled,
released, and discharged with prejudice.
REASONS FOR SETTLEMENT
As a result of extensive investigation of the facts and
examination of applicable law, plaintiffs and their attorneys in
the Actions have concluded that it is desirable and in the best
interests of the Settlement Class to settle the litigation upon
the terms and conditions set forth in the Stipulation of
Settlement. In reaching their conclusion to settle the Actions
on the terms negotiated, plaintiffs and their attorneys have
concluded that the terms and conditions of the proposed
Settlement are fair, reasonable and adequate, and have agreed to
settle the Actions, pursuant to the terms and provisions of the
Stipulation, after considering: (i) the substantial monetary
benefits that LIN shareholders will receive pursuant to the
Settlement; (ii) the attendant risks and delays of continued
litigation; and (iii) uncertainties relating to proof of the
allegations asserted in the Actions.
DEFENDANTS' DENIAL OF LIABILITY
Defendants have denied and continue to deny vigorously
that they have committed or attempted to commit any violations of
law or breaches of duty to LIN or its stockholders. Defendants
are entering into the Stipulation solely because the proposed
Settlement as described above would: (i) eliminate the burden,
expense, inconvenience, risks and distraction of further
litigation; and (ii) put the Settled Claims to rest.
NOTICE OF HEARING
Notice is hereby given that a hearing will be held
before the Court in the Daniel L. Herrman Courthouse, 11th and
King Streets, Wilmington, Delaware, on September 15, 1995, at
2:30 p.m. (the "Hearing") (or at such adjourned time as the
Delaware Court may, without further notice, direct) to determine:
(a) the fairness, reasonableness, and adequacy of the terms of
the Stipulation of Settlement; and (b) whether an order and final
judgment should be entered approving the proposed settlement and
compromise and dismissing on the merits and with prejudice the
Delaware Action against the defendants and to hear plaintiffs'
application for an order allowing payment to plaintiffs in the
Delaware Action for reasonable attorneys' fees and expenses in
connection with the Delaware Action, as more fully described
below under the heading "Attorneys' Fees And Expenses."
The Delaware Court has reserved the right to adjourn
the Hearing from time to time at such hearing or any adjournment
thereof, by announcement at the Hearing or any adjournment
thereof. The Delaware Court has also reserved the right to
approve the Stipulation of Settlement, with or without
modifications, and to enter its final judgment dismissing the
Delaware Action as to defendants on the merits and with prejudice
and to approve the payments of plaintiffs' attorneys' fees and
expenses without any further notice of any kind.
RIGHT TO APPEAR
Any member of the Settlement Class who objects to the
Class determination, the Stipulation, the Settlement, the
judgment to be entered herein, or the award of attorneys' fees
and expenses to plaintiffs' counsel, or who otherwise wishes to
be heard, may appear in person or by his attorney at the Hearing
and present any evidence or argument that may be proper and
relevant. However, no such person shall be heard and no papers,
briefs, pleadings, or other documents submitted by any person
shall be received and considered by the Delaware Court (unless
the Delaware Court in its discretion shall thereafter otherwise
direct, upon application of such person and for good cause
shown), unless no later than ten (10) days prior to the Hearing
directed herein to be held on September 15, 1995, such persons
shall file with the Register in Chancery, Daniel L. Herrman
Courthouse, 11th and King Streets, Wilmington, Delaware 19801
and, before such filing, shall serve upon:
Joseph A. Rosenthal
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
First Federal Plaza
Post Office Box 1070
Wilmington, DE 19899-1070
David McBride
YOUNG, CONAWAY, STARGATT & TAYLOR
1100 North Market Street
Wilmington Trust Center
Wilmington, DE 19801
A. Gilchrist Sparks III
MORRIS, NICHOLS ARSHT & TUNNEL
1201 North Market Street
Post Office Box 11347
Wilmington, DE 19899-1347
(a) notice of intention to appear; (b) a detailed
statement of such person's specific objections to any matter
before the Court; (c) proof of membership in the Settlement
Class; and (d) the grounds for such objections and any reasons
why such person desires to appear and to be heard, as well as all
documents or writings which such person desires the Delaware
Court to consider.
Unless the Delaware Court otherwise directs, no person
shall be entitled to object to the Class Action determination,
the approval of the Stipulation of Settlement, the Settlement,
the judgment to be entered herein, or the award of attorneys'
fees and expenses to plaintiffs' counsel, or otherwise to be
heard, except by serving and filing written objections as
described above. Any person who fails to object in the manner
prescribed above shall be deemed to have waived such objections
and shall be forever barred from raising such objection in this
or any other action or proceeding.
As noted above, the parties to the Actions are in the
process of obtaining the dismissal of each of New York State
Court Actions without prejudice and without costs. It is
anticipated that no further notice to any class of LIN
shareholders will be required or given in connection with
procuring the dismissal of the New York State Court Actions.
Accordingly, any party objecting to the dismissal of the claims
asserted in the New York State Court Actions should appear and
object to the approval of this Settlement in accordance with the
procedures described above.
ATTORNEYS' FEES AND EXPENSES
Plaintiffs' counsel intend to apply to the Delaware
Court for an award of attorneys' fees and reasonable
out-of-pocket disbursements (together, the "Fees") on the basis
of the benefits provided by the Settlement, which, as noted
above, represent an aggregate increase in the Merger
Consideration (before the Accretion Amount) of from $50 to $55
million. Subject to the terms and conditions of the Stipulation,
plaintiffs' counsel will apply for Fees of up to $4 million plus
$.25 per LIN Merger Share (together with any interest as provided
below), which will not be opposed by the parties or the Released
Persons. "LIN Merger Shares" means the LIN Common Shares issued
and outstanding immediately prior to the Effective Time, other
than LIN Common Shares owned by McCaw or any of its wholly owned
subsidiaries and LIN Common Shares held in the treasury of LIN or
by any wholly owned subsidiary of LIN.
If final Court approval of the Settlement is obtained
and the Delaware Court awards total Fees of $4 million or less by
a final and nonappealable order, McCaw will pay that amount to
the plaintiffs' attorneys and an additional $.25 per LIN Merger
Share (plus any portion of the Accretion Amount allocable to the
$.25 per LIN Merger Share) will be paid to the LIN public
stockholders as additional Merger Consideration. If final Court
approval of the Settlement is obtained and the Delaware Court
finally awards total Fees of more than $4 million, McCaw will pay
that amount to the plaintiffs' attorneys, the amount in excess of
$4 million will be deducted from the $.25 per LIN Merger Share
(together with any portion of the Accretion Amount allocable to
the $.25 per LIN Merger Share) and, if any amount remains after
such deduction, the remaining amount will be paid to the LIN
public stockholders as additional Merger Consideration.
Regardless of the amount of the Fees that are finally awarded,
LIN public stockholders will receive at least $2 per LIN Common
Share more in the Merger than was provided in the Original Merger
Agreement approved by the LIN Board. The obligation of McCaw to
pay the Fees in either such event is conditioned upon the
dismissal of each of the New York State Court Actions.
If final Court approval of the Settlement is obtained
and all other conditions to the Merger are satisfied or waived
but the amount of the Fees has not been approved by a final Court
order, McCaw will close the Merger and pay $129.50 per LIN Merger
Share plus the Accretion Amount allocable to the $129.50 per LIN
Merger Share, if any, in the Merger. In such case, McCaw will
deposit $.25 per LIN Merger Share on the date of the Closing
(together with any portion of the Accretion Amount allocable to
said amount) into an interest bearing account. Following final
Court determination of the Fees, the amount in such account
(including pro rata interest) will be paid in accordance with the
order of the Court to the plaintiffs' attorneys and the balance,
if any, will be paid to the LIN public stockholders who receive
the Merger Consideration. The obligation of McCaw to pay the Fees
in such event is conditioned upon the dismissal of each of the
New York State Court Actions.
In the event that the Merger is consummated and, for
whatever reason, plaintiffs' counsel is not yet entitled to the
payment of the Fees, McCaw will, within five days after the
consummation of the Merger, deposit the lesser of $4 million or,
in the event an award has been made, the amount of Fees awarded
by the Delaware Court into a separate interest bearing escrow
account. Within five days after plaintiffs' counsel is entitled
to the Fees, McCaw will cause the amount finally awarded by the
Court, together with the interest allocable to the amount
awarded, to be paid to plaintiffs' counsel.
CONDITIONS OF THE SETTLEMENT
The Stipulation provides that the parties have the
option to withdraw from the Settlement in the event that: (a) the
Order and Final Judgment called for in the Stipulation is not
entered substantially in the form specified therein (including
such modifications thereto as may be ordered by the Delaware
Court with the consent of the parties); (b) the Settlement is not
approved by the Delaware Court; or (c) such Order is reversed or
substantially modified upon appeal. The Settlement is further
conditioned upon consummation of the Merger, and will not be
binding upon any party if the Merger Agreement is terminated in
accordance with its terms. AT&T and McCaw have the option to
withdraw from the Settlement in the event that the Merger is
terminated or in the event that final Court approval of the
Settlement is not obtained by November 30, 1995. Plaintiffs have
the option to withdraw from the Settlement in the event that the
final proxy statement issued by LIN in connection with the Merger
is not substantially in the form in which it was filed by LIN
with the Securities and Exchange Commission ("SEC") on July 10,
1995, excluding any changes made by LIN in response to comments
from the SEC and any other changes reasonably satisfactory to the
Co-Chairs of the Plaintiffs' Executive Committee.
In the event any option to withdraw from the Settlement
is exercised by any party (as provided for in the Stipulation),
or if the Stipulation of Settlement and the Settlement are not
approved by the Delaware Court or shall not become effective for
any reason whatsoever, the Stipulation of Settlement, the
Settlement provided therein (including any modification thereto
made with the consent of the parties), and any actions taken in
connection therewith will be terminated and will become void and
have no further force and effect, except for the obligation of
McCaw to pay for any expenses incurred in connection with this
Notice.
SCOPE OF THIS NOTICE AND FURTHER INFORMATION
The foregoing description of the Delaware Court's
Hearing Order, the Delaware and New York State Court Actions, the
terms of the Stipulation of Settlement, and other matters
described herein are only summaries. For the full details of the
Delaware Action, and the terms and conditions of the Settlement,
you are referred to the Stipulation of Settlement, and the other
documents on file with the Delaware Court, Daniel L. Herrman
Courthouse, 11th and King Streets, Wilmington, Delaware. For the
full details of the New York State Court Actions, you are
referred to the Complaints and the other documents on file in
those Actions with the New York Court, 60 Centre Street, New
York, New York.
Questions or communications concerning the Settlement
may be directed in writing to counsel for the plaintiffs, by
contacting: Lester L. Levy Sr., Wolf Popper Ross Wolf & Jones,
L.L.P., 845 Third Avenue, New York, NY 10022, or Stanley D.
Bernstein, Bernstein Liebhard & Lifshitz, 274 Madison Avenue, New
York, NY 10016, Co-Chairs of the Plaintiffs' Executive
Committee.
Dated: Wilmington, Delaware
July 28, 1995.
/s/ John D. Kelly, III
-------------------------------
John D. Kelly, III, Register In
Chancery, Court of Chancery of
The State Of Delaware In And
For New Castle County
