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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, For Use of the
Commission Only
[X] Definitive proxy statement (as permitted by Rule
14a-6(e)(2))
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
LIN TELEVISION CORPORATION
- --------------------------------------------------------------------------------
(Name of registrant as specified in its charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
- --------------------------------------------------------------------------------
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
LIN TELEVISION CORPORATION
FOUR RICHMOND SQUARE
[LIN LOGO] PROVIDENCE, RHODE ISLAND 02906
TO OUR SHAREHOLDERS:
You are cordially invited to attend the Special Meeting of Shareholders of
LIN Television Corporation (the "Company"), to be held at The Waldorf-Astoria
Hotel, 301 Park Avenue, New York, New York on Wednesday, January 7, 1998 at
10:00 a.m., local time.
At the Special Meeting of Shareholders you will be asked to consider and
vote upon a proposal to approve and adopt the Agreement and Plan of Merger,
dated as of August 12, 1997, as amended by the Amendment to Merger Agreement
(the "Amendment"), dated as of October 21, 1997 (as amended, the "Merger
Agreement"), by and among the Company, Ranger Holdings Corp., a Delaware
corporation ("Holdings"), and Ranger Acquisition Company, a Delaware corporation
and a wholly owned subsidiary of Holdings ("Acquisition Sub"), pursuant to
which, upon the terms and subject to the conditions of the Merger Agreement,
Acquisition Sub will be merged with and into the Company (the "Merger"), with
the Company being the surviving corporation and a wholly owned subsidiary of
Holdings. Holdings and Acquisition Sub are newly formed corporations which are
owned by Hicks, Muse, Tate & Furst Equity Fund III, L.P., a Delaware limited
partnership organized at the direction of Hicks, Muse, Tate & Furst
Incorporated, and its affiliates.
If the proposed Merger is consummated, each share of the Company's common
stock, par value $0.01 per share (the "Common Stock") outstanding immediately
prior to the effective time of the Merger (other than shares of Common Stock
held by the Company, Holdings, Acquisition Sub, any of their respective
subsidiaries or by shareholders who exercise their statutory appraisal rights
under Delaware law) will be converted into the right to receive in cash $55.00
plus an additional amount per share equal to 8% per annum on $55.00
(approximately $0.36 per share per month) accruing from February 15, 1998
through the date immediately prior to the date on which the Merger becomes
effective.
Morgan Stanley & Co. Incorporated and Wasserstein Perella & Co., Inc.,
financial advisors to the Company, has each rendered its opinion that, as of
October 21, 1997, the consideration to be received by the holders of the Common
Stock pursuant to the Merger Agreement is fair from a financial point of view to
such holders. Copies of their opinions are attached to the accompanying Proxy
Statement as Annexes B-1 and B-2.
We urge you to read carefully the accompanying Notice of Special Meeting of
Shareholders and Proxy Statement (and its Annexes) for details of the Merger and
additional related information.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF THE COMPANY
AND ITS SHAREHOLDERS, AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
Your vote is important to the Company. Whether or not you plan to attend
the Special Meeting in person and regardless of the number of shares of Common
Stock you own, please complete, sign, date and return the enclosed proxy card
promptly in the enclosed pre-addressed, postage-paid envelope. You may, of
course, attend the Special Meeting, revoke your proxy and vote in person even if
you have already returned your proxy card.
<TABLE>
<S> <C> <C>
Sincerely,
/s/ Dennis J. Carey /s/ Gary R. Chapman
November 19, 1997 DENNIS J. CAREY GARY R. CHAPMAN
Chairman Chief Executive
Officer
</TABLE>
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LIN TELEVISION CORPORATION
FOUR RICHMOND SQUARE
[LIN LOGO] PROVIDENCE, RHODE ISLAND 02906
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 7, 1998
------------------------
Notice is hereby given that a Special Meeting of Shareholders (the "Special
Meeting") of LIN Television Corporation, a Delaware corporation (the "Company"),
will be held at The Waldorf-Astoria Hotel, 301 Park Avenue, New York, New York
on Wednesday, January 7, 1998 at 10:00 a.m., local time, for the following
purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of August 12, 1997, as amended by
the Amendment to Merger Agreement (the "Amendment"), dated as of October
21, 1997 (as amended, the "Merger Agreement"), by and among the Company,
Ranger Holdings Corp., a Delaware corporation ("Holdings"), and Ranger
Acquisition Company, a Delaware corporation and a wholly owned subsidiary
of Holdings ("Acquisition Sub"), pursuant to which, upon the terms and
subject to the conditions of the Merger Agreement, Acquisition Sub will be
merged with and into the Company (the "Merger"), with the Company being the
surviving corporation and a wholly owned subsidiary of Holdings. Holdings
and Acquisition Sub are newly formed corporations which are owned by Hicks,
Muse, Tate & Furst Equity Fund III, L.P., a Delaware limited partnership
organized at the direction of Hicks, Muse, Tate & Furst Incorporated, and
its affiliates. If the proposed Merger is consummated, each share of the
Company's common stock, par value $0.01 per share (the "Common Stock"),
outstanding immediately prior to the effective time of the Merger (other
than shares of Common Stock held by the Company, Holdings, Acquisition Sub,
any of their respective subsidiaries or by shareholders who exercise their
statutory appraisal rights under Delaware law) will be converted into the
right to receive in cash $55.00 plus an additional amount per share equal
to 8% per annum on $55.00 (approximately $0.36 per share per month)
accruing from February 15, 1998 through the date immediately prior to the
date on which the Merger becomes effective.
2. To transact such other business as may properly come before the
Special Meeting and any adjournment or postponement thereof.
The Merger and other matters related thereto are more fully described in
the attached Proxy Statement and the Annexes thereto.
The stock transfer books of the Company will not be closed but only
shareholders of record at the close of business on November 17, 1997 will be
entitled to notice of and to vote at the Special Meeting or any adjournment or
postponement thereof. A complete list of the shareholders entitled to vote will
be available for inspection by any shareholder during the Special Meeting; in
addition, the list will be open for examination by any shareholder, for any
purpose germane to the Special Meeting, during ordinary business hours, for a
period of at least 10 days prior to the Special Meeting, at the principal
executive offices of the Company.
All shares of Common Stock represented by properly executed proxies will be
voted in accordance with the specifications on the enclosed proxy. If no such
specifications are made, proxies will be voted FOR approval and adoption of the
Merger Agreement. Shareholders of the Company who do not vote in favor of
approval and adoption of the Merger Agreement and who otherwise comply with the
provisions of Section 262 of the General Corporation Law of the State of
Delaware will, under certain circumstances, have the right, if the Merger is
consummated, to dissent and to demand appraisal of the fair market value of
their shares of Common Stock. A copy of Section 262 is included in the attached
Proxy Statement as Annex G. See "The Merger -- Appraisal Rights" in the attached
Proxy Statement for a description of the procedures required to exercise
appraisal rights properly.
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Approval and adoption of the Merger Agreement requires the affirmative vote
of (i) the holders of a majority of the outstanding shares of Common Stock of
the Company, and (ii) the holders of a majority of the shares of Common Stock
held by persons other than AT&T Corp. or any of its affiliates (the "Public
Shares") present and entitled to vote at a meeting at which the holders of a
majority of Public Shares are present. As indicated in the Proxy Statement, AT&T
Corp., which beneficially owns approximately 45% of the outstanding shares of
Common Stock, has agreed to vote such shares in favor of approval and adoption
of the Merger Agreement if the vote of the holders of the Public Shares
described in subclause (ii) of the preceding sentence is obtained.
YOUR VOTE IS IMPORTANT TO THE COMPANY. WHETHER OR NOT YOU PLAN TO ATTEND
THE SPECIAL MEETING IN PERSON AND REGARDLESS OF THE NUMBER OF SHARES OF COMMON
STOCK YOU OWN, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
PROMPTLY IN THE ENCLOSED PRE-ADDRESSED, POSTAGE-PAID ENVELOPE. YOU MAY, OF
COURSE, ATTEND THE SPECIAL MEETING, REVOKE YOUR PROXY AND VOTE IN PERSON EVEN IF
YOU HAVE ALREADY RETURNED YOUR PROXY CARD.
Please do not send any stock certificates with your proxy card. If the
Merger is approved and adopted by the shareholders and the Merger is
consummated, you will receive a transmittal form and instructions for the
surrender of the certificates previously representing your shares of Common
Stock.
By Order of the Board of Directors
/s/ Gregory M. Schmidt
GREGORY M. SCHMIDT
Vice President, General Counsel and
Secretary
Providence, Rhode Island
November 19, 1997
<PAGE> 5
LIN TELEVISION CORPORATION
------------------------
PROXY STATEMENT
------------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 7, 1998
This proxy statement (the "Proxy Statement") is being furnished to
shareholders of LIN Television Corporation, a Delaware corporation (the
"Company"), in connection with the solicitation of proxies by the Board of
Directors of the Company (the "Board of Directors" or the "Board") for use at
the Special Meeting of Shareholders (the "Special Meeting") to be held at The
Waldorf-Astoria Hotel, 301 Park Avenue, New York, New York on Wednesday, January
7, 1998 at 10:00 a.m., local time, or at any adjournment or postponement
thereof, for the purposes set forth in the accompanying Notice of Special
Meeting of Shareholders.
At the Special Meeting, the holders of the shares of common stock, par
value $0.01 per share, of the Company (the "Common Stock") will be asked to
consider and vote upon a proposal to approve and adopt the Agreement and Plan of
Merger, dated as of August 12, 1997 (the "Original Merger Agreement"), as
amended by the Amendment to Merger Agreement (the "Merger Agreement Amendment"),
dated as of October 21, 1997 (the Original Merger Agreement, as amended by the
Merger Agreement Amendment, is referred to herein as the "Merger Agreement"), by
and among the Company, Ranger Holdings Corp., a Delaware corporation
("Holdings"), and Ranger Acquisition Company, a Delaware corporation and a
wholly-owned subsidiary of Holdings ("Acquisition Sub"), pursuant to which, upon
the terms and subject to the conditions of the Merger Agreement, Acquisition Sub
will be merged with and into the Company (the "Merger"), with the Company being
the surviving corporation (after consummation of the Merger, the "Surviving
Corporation") and a wholly-owned subsidiary of Holdings. Holdings and
Acquisition Sub are newly formed corporations which are owned by Hicks, Muse,
Tate & Furst Equity Fund III, L.P. ("Fund III"), a Delaware limited partnership
organized at the direction of Hicks, Muse, Tate & Furst Incorporated ("Hicks
Muse"), and its affiliates.
If the proposed Merger is consummated, each share of Common Stock
outstanding immediately prior to the effective time of the Merger (other than
shares of Common Stock held by the Company, Holdings, Acquisition Sub, any of
their respective subsidiaries or by shareholders who exercise their statutory
appraisal rights under Delaware law ("Dissenting Shares")) will be converted
into the right to receive in cash $55.00 plus an additional amount per share (an
"Additional Amount") equal to $55.00 multiplied by a fraction (A) the numerator
of which shall be equal to 8% multiplied by the number of days from and
including February 15, 1998 (the "Accretion Start Date"), to but excluding the
date on which the Merger becomes effective and (B) the denominator of which
shall be 365 (collectively, the "Merger Consideration"). Additional Amounts will
accrue at approximately $0.36 per share per month.
The enclosed proxy is solicited on behalf of the Board of Directors. The
giving of a proxy does not preclude the right to vote in person should you so
desire. You may revoke or change your proxy at any time prior to its use at the
Special Meeting by giving the Company a written direction to revoke your proxy,
giving the Company a new proxy or attending the Special Meeting and voting in
person.
A conformed copy of the Merger Agreement is included as Annex A hereto. The
summaries of portions of the Merger Agreement set forth in this Proxy Statement
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, the text of the Merger Agreement.
Approval and adoption of the Merger Agreement requires the affirmative vote
of (i) the holders of a majority of the outstanding shares of Common Stock of
the Company, and (ii) the holders of a majority of the shares of Common Stock
held by persons other than AT&T Corp. or any of its affiliates (the "Public
Shares") present and entitled to vote at a meeting at which the holders of a
majority of Public Shares are present (collectively, the "Required Vote"). AT&T
Corp., which beneficially owns approximately 45% of the outstanding shares of
Common Stock, has agreed to vote such shares in favor of approval and adoption
of the
<PAGE> 6
Merger Agreement if the vote of the holders of the Public Shares described in
subclause (ii) of the preceding sentence is obtained.
The Board of Directors of the Company has unanimously approved the Merger
Agreement, determined that the Merger is in the best interests of the Company
and its shareholders and recommends that shareholders vote for the approval and
adoption of the Merger Agreement. The unanimous approval of the Board of
Directors included the unanimous approval of each director who was not nominated
by AT&T Corp. or its affiliates (the "AT&T Board Nominees"). See "The
Merger -- Reasons for the Merger and Recommendation of the Board of Directors"
and "The Merger -- Interests of Certain Persons in the Merger and Related
Transactions".
Shareholders of the Company who do not vote in favor of approval and
adoption of the Merger Agreement and who otherwise comply with the provisions of
Section 262 of the General Corporation Law of the State of Delaware (the "DGCL")
will, under certain circumstances, have the right if the Merger is consummated
to dissent and to demand appraisal of the fair market value of their shares of
Common Stock. A copy of Section 262 of the DGCL is attached to this Proxy
Statement as Annex G. See "The Merger -- Appraisal Rights" for a description of
the procedures required to exercise appraisal rights properly.
This Proxy Statement is first being mailed to the Company's shareholders on
or about November 21, 1997.
------------------------
The date of this Proxy Statement is November 19, 1997
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
SUMMARY............................................................................... 1
The Parties......................................................................... 1
The Special Meeting................................................................. 1
The Merger; The Merger Agreement.................................................... 3
Other Agreements.................................................................... 9
Selected Consolidated Financial and Operating Data.................................. 11
THE SPECIAL MEETING................................................................... 13
Date, Place and Time................................................................ 13
Matters to be Considered at the Special Meeting..................................... 13
Record Date; Quorum................................................................. 13
Required Vote....................................................................... 13
Voting of Proxies................................................................... 14
Revocability of Proxies............................................................. 14
Solicitation of Proxies............................................................. 14
Appraisal Rights.................................................................... 15
THE PARTIES........................................................................... 16
The Company......................................................................... 16
Holdings, Acquisition Sub, Fund III and Hicks Muse.................................. 17
THE MERGER............................................................................ 17
Background of the Merger............................................................ 17
Reasons for the Merger and Recommendation of the Board of Directors................. 23
Opinions of Financial Advisors...................................................... 24
The Venture......................................................................... 35
Accounting Treatment................................................................ 36
Certain United States Federal Income Tax Consequences............................... 36
Interests of Certain Persons in the Merger and Related Transactions................. 36
Regulatory Filings and Approvals.................................................... 39
Appraisal Rights.................................................................... 41
THE MERGER AGREEMENT.................................................................. 44
Effect of the Merger................................................................ 44
Payment for Shares and Surrender of Share Certificates.............................. 44
Representations and Warranties...................................................... 45
Conduct of Business Pending the Merger.............................................. 45
Conditions to the Merger............................................................ 48
No Solicitation..................................................................... 50
Reasonable Best Efforts............................................................. 51
Solvency Letter..................................................................... 52
Financing........................................................................... 52
Termination......................................................................... 53
Fees and Expenses................................................................... 54
Amendment and Waiver................................................................ 55
Employee Benefits; Stock Plans and Stock Options.................................... 55
</TABLE>
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<TABLE>
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PAGE
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<S> <C>
OTHER AGREEMENTS...................................................................... 56
Shareholders Agreements............................................................. 56
Amendment to the Television Private Market Value Guarantee.......................... 57
WOOD-TV Asset Purchase Agreement.................................................... 59
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA.................................... 61
PRICE RANGE OF COMMON STOCK AND DIVIDEND HISTORY...................................... 63
OWNERSHIP OF VOTING SECURITIES........................................................ 63
CERTAIN PENDING LITIGATION............................................................ 65
AVAILABLE INFORMATION................................................................. 65
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 65
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS....................................... 66
INDEPENDENT PUBLIC ACCOUNTANTS........................................................ 66
OTHER MATTERS......................................................................... 66
SHAREHOLDER PROPOSALS................................................................. 67
</TABLE>
<TABLE>
<CAPTION>
ANNEXES
- ----------
<S> <C> <C>
Annex A -- Composite conformed copy of the Agreement and Plan of Merger, dated as of
August 12, 1997, among Ranger Holdings Corp., Ranger Acquisition Company
and LIN Television Corporation, as amended by the Amendment to Merger
Agreement dated as of October 21, 1997
Annex B-1 -- Opinion of Morgan Stanley & Co. Incorporated, dated as of October 21,
1997, relating to the Merger
Annex B-2 -- Opinion of Wasserstein Perella & Co. Inc., dated as of October 21, 1997,
relating to the Merger
Annex C -- Opinion of Wasserstein Perella & Co. Inc., dated as of August 12, 1997,
relating to the amendment to the PMVG Agreement
Annex D -- Opinion of Wasserstein Perella & Co. Inc., dated as of August 12, 1997,
relating to the WOOD-TV Asset Purchase Agreement
Annex E -- Stockholders Agreement, dated as of August 12, 1997, among Ranger
Holdings Corp., Ranger Acquisition Company, AT&T Corp., AT&T Wireless
Services, Inc., MMM Holdings, Inc. and LIN Television Corporation
Annex F -- Stockholders Agreement, dated as of August 12, 1997, among Ranger
Holdings Corp., Ranger Acquisition Company, Cook Inlet Communications
Corp. and LIN Television Corporation
Annex G -- Delaware General Corporation Law Section 262
</TABLE>
ii
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SUMMARY
The following summary is intended to highlight certain information included
elsewhere in this Proxy Statement. The summary does not purport to be complete
and is qualified in its entirety by the more detailed information contained
elsewhere in this Proxy Statement, the Annexes hereto and other documents
referred to and incorporated by reference herein. Shareholders are urged to read
this Proxy Statement, the Annexes hereto and the documents referred to herein in
their entirety.
THE PARTIES
LIN Television
Corporation................ The Company is a Delaware corporation that owns and
operates eight network-affiliated television
stations, including five in the 40 largest domestic
television markets. In addition to network
programming, each of the Company's stations devotes
segments of its broadcasting day to news, local
live programming, talk shows, and syndicated and
off-network programs. News and community-oriented
programs are emphasized and play an important role
in the stations' service to their viewers.
Additional programming outlets are served through
programming and marketing services provided to four
other stations pursuant to local marketing
agreements ("LMAs") and through the operation of
low-power television stations ("LPTVs") and
satellite broadcasting facilities. The Company's
principal executive office is located at Four
Richmond Square, Suite 200, Providence, Rhode
Island 02906, and the telephone number at that
address is (401) 454-2880. See "The Merger -- The
Parties".
Ranger Holdings Corp. and
Ranger Acquisition
Company.................. Each of Holdings and Acquisition Sub is a Delaware
corporation wholly owned by Hicks, Muse, Tate &
Furst Equity Fund III, L.P. ("Fund III"), a
Delaware limited partnership organized at the
direction of Hicks, Muse, Tate & Furst Incorporated
("Hicks Muse"), and its affiliates. Holdings and
Acquisition Sub were organized solely for the
purpose of entering into the Merger Agreement and
consummating the transactions contemplated thereby
and have not carried on any activities to date
other than activities incident to their formation
and in connection with the transactions
contemplated by the Merger Agreement. The principal
offices of Holdings, Acquisition Sub, Fund III and
Hicks Muse are located at 200 Crescent Court, Suite
1600, Dallas, Texas 75201, and the telephone number
at that address is (214) 740-7300. See "The
Merger -- The Parties".
THE SPECIAL MEETING
Date, Place and Time....... The Special Meeting will be held on Wednesday,
January 7, 1998, at The Waldorf-Astoria Hotel, 301
Park Avenue, New York, New York at 10:00 a.m.,
local time.
Matters to be Considered at
the Special Meeting........ At the Special Meeting, holders of the Common Stock
will be asked to consider and vote upon a proposal
to approve and adopt the Merger Agreement and such
other matters as may properly come before the
Special Meeting. See "The Special
Meeting -- Matters to be Considered at the Special
Meeting".
1
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Record Date................ The Board of Directors has fixed the close of
business on November 17, 1997 as the record date
(the "Record Date") for the determination of the
shareholders entitled to notice of, and to vote at,
the Special Meeting. Only holders of record of
Common Stock at the close of business on the Record
Date will be entitled to notice of and to vote at
the Special Meeting and any adjournment or
postponement thereof. See "The Special
Meeting -- Record Date; Quorum".
Required Vote.............. Pursuant to the Merger Agreement, the approval and
adoption of the Merger Agreement will require the
affirmative vote (collectively, the "Required
Vote") of (i) the holders as of the Record Date of
a majority of the outstanding shares of Common
Stock, and (ii) the holders as of the Record Date
of a majority of the shares of Common Stock held by
persons other than AT&T Corp. or any of its
affiliates (the "Public Shares") present and
entitled to vote at a meeting at which the holders
of a majority of Public Shares are present. See
"The Special Meeting -- Required Vote".
AT&T Corp. (together with its subsidiaries and
affiliates, including without limitation, AT&T
Wireless Services, Inc. ("AT&T Wireless") and MMM
Holdings, Inc. ("MMM Holdings") which are the
principal subsidiaries through which it owns or
manages its investment in the Company, being
collectively referred to herein as "AT&T"), which
as of the Record Date beneficially owned in the
aggregate 13,494,750 shares (the "AT&T Shares") of
Common Stock (representing approximately 45% of the
shares of Common Stock outstanding as of the Record
Date), has agreed pursuant to the AT&T Voting
Agreement (as defined below under "-- Shareholders
Agreements") to vote all of the AT&T Shares in
favor of the approval and adoption of the Merger
Agreement if the holders of a majority of the
Public Shares represented in person or by proxy at
a meeting at which holders of a majority of the
Public Shares are present vote in favor of the
approval and adoption of the Merger Agreement. Cook
Inlet Communications Corp. ("Cook Inlet"), which,
as of the Record Date beneficially owned 1,608,975
shares of Common Stock (representing approximately
5% of the shares of Common Stock outstanding as of
the Record Date), has agreed pursuant to the Cook
Inlet Voting Agreement (as defined below under
"-- Other Agreements -- Shareholders Agreements")
to vote all Common Stock it holds of record or
beneficially owns at the Special Meeting in favor
of the approval and adoption of the Merger
Agreement. However, the Cook Inlet Voting Agreement
does not restrict Cook Inlet's ability to dispose
of shares of Common Stock prior to the Special
Meeting. See "Other Agreements -- Shareholders
Agreements".
Security Ownership of
Directors and Executive
Officers................. As of the Record Date, directors and executive
officers of the Company and their affiliates
beneficially owned and were entitled to vote 38,367
shares of Common Stock, which represented less than
1% of the shares of Common Stock outstanding on the
Record Date. Each director and executive officer
has indicated his or her present intention to vote,
or cause to be voted, the Common Stock so owned by
him or her for approval and adoption of the Merger
Agreement. See "The Special Meeting -- Required
Vote".
2
<PAGE> 11
THE MERGER; THE MERGER
AGREEMENT
Effect of the Merger....... The Merger will be effective upon the filing of a
Certificate of Merger with the Secretary of State
of Delaware, or at such later time as is specified
therein, in accordance with the DGCL (the
"Effective Time"). At the Effective Time,
Acquisition Sub will merge with and into the
Company, with the Company surviving the Merger as a
wholly-owned subsidiary of Holdings (after the
Effective Time, the "Surviving Corporation"). As a
result of the Merger, all current holders of Common
Stock will cease to have an equity interest in, or
possess any rights as shareholders of, the Company.
See "The Merger Agreement -- Effect of the Merger".
Consideration to be
Received in the Merger..... At the Effective Time, each outstanding share of
Common Stock (other than shares of Common Stock
held by the Company, Holdings, Acquisition Sub, any
of their respective subsidiaries and Dissenting
Shares) will be converted into the right to receive
in cash $55.00 plus an additional amount per share
(an "Additional Amount") equal to 8% per annum on
$55.00 from February 15, 1998 (the "Accretion Start
Date") through the date immediately prior to the
date on which the Merger becomes effective
(collectively, the "Merger Consideration").
Additional Amounts will accrue at approximately
$0.36 per share per month.
Reasons for the Merger and
Recommendation of the
Board of Directors....... The Board of Directors considered a number of
factors when making its determination to approve
the Merger Agreement and the transactions
contemplated thereby. See "The Merger -- Reasons
for the Merger and Recommendation of the Board of
Directors". The Board of Directors has unanimously
approved the Merger Agreement, determined that the
Merger is in the best interests of the Company and
its shareholders and recommends that shareholders
vote for the approval and adoption of the Merger
Agreement. The unanimous approval of the Board of
Directors included the unanimous approval of each
director who is not an AT&T Board Nominee. See "The
Merger -- Reasons for the Merger and Recommendation
of the Board of Directors" and "The Merger --
Interests of Certain Persons in the Merger and
Related Transactions".
Opinions of Financial
Advisors................... Each of Wasserstein Perella & Co, Inc.
("Wasserstein Perella") and Morgan Stanley & Co.
Incorporated ("Morgan Stanley") has rendered a
written opinion to the Board that, as of October
21, 1997 (the date the Board approved the Merger
Agreement Amendment), the consideration to be
received by holders of the Common Stock in the
Merger is fair from a financial point of view to
such holders. Copies of the opinions are attached
hereto as Annexes B-1 and B-2. The Company has
agreed to pay fees to each of Wasserstein Perella
and Morgan Stanley for their services in connection
with the Merger, a portion of which is contingent
upon shareholder approval and a portion of which is
contingent upon consummation of the Merger.
For information on the assumptions made, matters
considered and limits of the review by each of
Wasserstein Perella and Morgan Stanley, see "The
Merger -- Opinions of Financial Advisors".
3
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Interests of Certain
Persons in the Merger and
Related Transactions..... If the Merger is consummated, AT&T, in its capacity
as a shareholder, will receive approximately
$754,356,525 for the AT&T Shares (assuming the
Merger becomes effective as of May 1, 1998). In
addition, whether or not the Merger is consummated,
AT&T, in its capacity as the owner of certain
separate television assets, will also receive a net
purchase price of approximately $122.5 million,
plus certain additional amounts, upon the
consummation of the related sale of such assets
pursuant to the WOOD-TV Asset Purchase Agreement
(as defined below under "-- Other
Agreements -- WOOD-TV Asset Purchase Agreement").
Six of the ten directors of the Company were
nominated for election by and serve at the request
of AT&T.
Consummation of the Merger will result in certain
employees of the Company (including one executive
officer who is also a director of the Company)
becoming eligible for certain benefits in the event
their employment is terminated and in the
accelerated vesting of certain employee stock
options.
In addition, the Surviving Corporation has agreed
to indemnify, and maintain directors' and officers'
insurance covering, directors and officers of the
Company following the Merger.
See "The Merger Agreement -- Employee Benefits;
Stock Plans and Stock Options", and "The
Merger -- Interests of Certain Persons in the
Merger and Related Transactions."
Conditions to the Merger... The respective obligations of Holdings and
Acquisition Sub, on the one hand, and the Company,
on the other hand, to consummate the Merger are
subject to the satisfaction or waiver of certain
conditions, including the receipt of the Required
Vote, the absence of any temporary restraining
order, preliminary or permanent injunction, or
other order, or other legal restraint preventing
the consummation of the Merger, the expiration or
termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act") and the approval by the
Federal Communications Commission (the "FCC") of
the FCC Application (as defined under "The
Merger -- Regulatory Filings and Approvals"). The
obligations of Holdings and Acquisition Sub to
consummate the Merger are subject to the
satisfaction or waiver of certain additional
conditions, including (i) receipt by Holdings and
Acquisition Sub of debt and equity financing on
terms substantially as set forth in certain
commitment letters (collectively, the "Commitment
Letters") from Fund III, The Chase Manhattan Bank
and Chase Securities Inc. obtained by Holdings and
Acquisition Sub on the date of the execution of the
Merger Agreement Amendment or the Alternative
Commitments to be delivered at the time, if any,
the Venture Notice is delivered (as described under
"The Merger Agreement -- Conduct of Business
Pending the Merger"), (ii) receipt by the Company
of consents under certain material contracts, (iii)
there being no material modification or termination
of any of the Company's LMAs which individually or
in the aggregate would reasonably be expected to
have a materially adverse economic effect on the
business, financial condition or results of
operations of the Company and its subsidiaries
taken as a whole or a denial by the FCC of the
waiver requests relating to the Merger
4
<PAGE> 13
contained in the FCC Application, in each case
other than as directed by the FCC under Current FCC
Policy (as defined under "The Merger
Agreement -- Conditions to the Merger") and (iv) no
more than 5% of the outstanding shares of Common
Stock being Dissenting Shares. See "The Merger
Agreement -- Conditions to the Merger",
"-- Financing" and "-- Regulatory Filings and
Approvals".
No Solicitation............ During the period from the date of the Merger
Agreement to the Effective Time, the Company and
its subsidiaries have agreed (i) to cease any
discussions with any parties with respect to
alternative Transaction Proposals (as defined under
"The Merger Agreement -- No Solicitation") and (ii)
not to (a) solicit, initiate or encourage the
initiation of any inquiries or proposals regarding
any Transaction Proposal or (b) enter into any
discussions or negotiations regarding any
Transaction Proposal; provided that at any time
prior to the receipt of the Required Vote, the
Company may, in response to an unsolicited
Transaction Proposal (x) furnish information and
(y) enter into discussions, investigations and/or
negotiations regarding such Transaction Proposal.
The Company has agreed to give prompt notice to
Holdings of the names of any persons with respect
to which it takes such action and a general
description of the actions taken. If the Board of
Directors determines in good faith that it has
received a Superior Proposal (as defined under "The
Merger Agreement -- No Solicitation"), the Board
may, prior to the receipt of the Required Vote,
withdraw or modify its approval or recommendation
of the Merger and the Merger Agreement, approve or
recommend such superior proposal or terminate the
Merger Agreement, subject to providing five
business days written notice thereof to Holdings
and, if applicable, paying a termination fee to
Holdings. See "The Merger Agreement -- No
Solicitation".
Conduct of Business Pending
the Merger................. The Company is subject to customary restrictions on
the operation of its business from the date of the
Merger Agreement through the consummation of the
Merger. In addition, pursuant to the Merger
Agreement Amendment, the Company has agreed to take
certain actions to facilitate the transactions
contemplated by a binding letter agreement between
Holdings and National Broadcasting Company, Inc.
("NBC") which was entered into concurrently with
the execution of the Merger Agreement Amendment
(the "HM/NBC Letter Agreement"). The HM/NBC Letter
Agreement contemplates the formation of a
partnership to hold KXAS-TV in Dallas, TX (which is
currently owned by the Company) and KNSD-TV, in San
Diego, CA (which is currently owned by NBC). If
Holdings so requests in writing (the "Venture
Notice") prior to the fifteenth (15th) business day
following the date on which FCC approval of the FCC
application with respect to the transfer of the FCC
Licenses of television station KXAS-TV to an entity
controlled by NBC shall have become final, then the
Company, without the payment of any additional
Merger Consideration, has agreed to take all
actions necessary or reasonably advisable,
including, without limitation, executing and
performing its obligations under the definitive
documentation which shall be in form and substance
reasonably satisfactory to the Company, to
implement immediately prior to the Effective Time a
television station joint venture (the "Venture")
and the financing thereof, in each case in the
manner described in the HM/NBC Letter
5
<PAGE> 14
Agreement. The obligation of the Company to execute
the definitive documentation relating to the
Venture is expressly conditioned upon there being
included in such documentation: (a) an indemnity
substantially in the form previously agreed to by
the Company and (b) an agreement setting forth the
mechanism for the unwinding of the Venture in the
event the Merger does not become effective within
24 hours after the assets are transferred to the
Venture.
THE MERGER CONSIDERATION WILL BE THE SAME WHETHER
OR NOT THE TRANSACTIONS CONTEMPLATED BY THE HM/NBC
LETTER AGREEMENT ARE CONSUMMATED. BECAUSE THE
BUSINESS OF THE VENTURE WILL NOT COMMENCE UNTIL
AFTER THE EFFECTIVE TIME, THE CURRENT SHAREHOLDERS
OF THE COMPANY WILL NOT DERIVE ANY BENEFITS FROM
THE VENTURE.
Under the Merger Agreement, any actions taken by
the Company to implement the Venture pursuant to,
and consistent with, its obligations described
above (and the results thereof) shall not (i)
constitute a breach of any representation, warranty
or covenant under the Merger Agreement, (ii) be
taken into account in determining whether there has
been or may be a Material Adverse Effect (as
defined in "The Merger Agreement -- Representations
and Warranties") on the Company and (iii) in any
respect be the basis for Holdings or Acquisition
Sub having the right to terminate the Merger
Agreement.
See "The Merger Agreement -- Conduct of Business
Pending the Merger".
Financing.................. Concurrently with the execution of the Merger
Agreement Amendment, Holdings delivered to the
Company copies of: (i) a binding commitment letter
from Fund III to provide equity financing in an
amount not less than $835 million to provide
Holdings and Acquisition Sub a portion of the funds
necessary to consummate the transactions
contemplated by the Merger Agreement and (ii)
binding commitment letters from The Chase Manhattan
Bank and Chase Securities Inc. to provide debt
financing in an amount not less than $1.255 billion
in the aggregate to provide Holdings and
Acquisition Sub all remaining funds necessary to
consummate the transactions contemplated by the
Merger Agreement.
Funding under the Commitment Letters is subject to
the satisfaction or waiver of a number of material
conditions, including: (i) there being no material
adverse change in the consolidated financial
condition of the Company (other than changes in
general economic conditions or in economic
conditions generally affecting the television
broadcasting industry), (ii) confirmation of the
status of certain network affiliation agreements
and local marketing agreements and (iii) there not
having occurred a material disruption of or
material adverse change in financial, banking or
capital market conditions that could materially
impair the syndication of the debt financing. The
funding is also subject to other customary
conditions.
Notwithstanding the foregoing, if Holdings delivers
the Venture Notice, Holdings and Acquisition Sub
shall deliver concurrently therewith alternative
binding commitment letters (the "Alternative
Commitments") to the Company (i) to provide equity
financing from Fund III in an amount not less than
$750 million, (ii) to provide debt financing from
Chase Manhattan Bank and/or Chase Securities Inc.,
in an amount not less
6
<PAGE> 15
than $520 million in the aggregate and (iii) to
provide debt financing from General Electric
Capital Corporation or one of its affiliates in an
amount not less than $815.5 million.
Holdings has agreed to promptly notify the Company
if at any time prior to the Closing Date it no
longer believes in good faith that it will be able
to obtain any of the financing substantially on the
terms described in the Commitment Letters and the
Alternative Commitments. In addition, Holdings has
agreed to confirm in writing to the Company from
time to time upon request that Holdings believes in
good faith that it will be able to obtain financing
substantially on the terms described in the
Commitment Letters and the Alternative Commitments.
See "The Merger Agreement -- Financing".
Termination................ The Merger Agreement may be terminated and the
Merger abandoned at any time prior to the Effective
Time (i) by mutual written consent of Holdings,
Acquisition Sub and the Company; (ii) by Holdings
or the Company (A) so long as the terminating party
is not in material breach, for breach of a material
representation, warranty or covenant by the non-
terminating party if such breach cannot be cured by
the date on which the parties hold a closing in
respect of the Merger (the "Closing Date") or has
not been cured within 30 days of notice thereof,
(B) if any injunction preventing the Merger has
become final, (C) if the Merger is not consummated
by June 30, 1998 (the "Termination Date") or (D) if
the Merger is not approved by the Required Vote at
the Special Meeting or any adjournment thereof;
(iii) by Holdings, if (A) the Board of Directors of
the Company shall have (I) withdrawn, modified or
changed its approval of the Merger Agreement or the
Merger in a manner adverse to Holdings, (II)
approved an alternative Transaction Proposal or
(III) resolved to do the foregoing or (B) the
Company shall have wilfully failed to hold the
Special Meeting on or prior to January 31, 1998
(subject to extension in certain cases); and (iv)
by the Company (A) prior to the receipt of the
Required Vote in connection with the receipt of a
Superior Proposal; provided that the Company has
provided Holdings with the required written notice
and pays a termination fee, if any, required to be
paid to Holdings as described under "The Merger
Agreement -- Fees and Expenses", (B) if there is no
reasonable possibility that (I) the FCC Application
will receive final approval on or prior to the
Termination Date or (II) the funding of the
financing commitments will be available to Holdings
or Acquisition Sub substantially on the terms set
forth in the Commitment Letters and the Alternative
Commitments, (C) if (I) the Solvency Letter (as
defined under "The Merger Agreement -- Solvency
Letter") is not delivered by Holdings to the Board
of Directors when required, or (II) Holdings does
not confirm in writing that it believes it will be
able to obtain financing substantially on the terms
set forth in the Commitment Letters and the
Alternative Commitments within five business days
of a request to do so.
Termination Fees and
Expenses................... In certain circumstances (including if (i) the
Board of Directors (A) withdraws, modifies or
changes its approval of the Merger in a manner
which is adverse to Holdings, (B) approves an
alternative Transaction Proposal or (C) resolves to
do the foregoing or (ii) the Company wilfully fails
to hold the Special Meeting on or prior to
7
<PAGE> 16
January 31, 1998), upon the termination of the
Merger Agreement, the Company is obligated to pay
to Holdings $64 million as an alternative
transaction fee plus $10 million as reimbursement
of the expenses of Holdings and Acquisition Sub;
provided that Holdings must present statements
documenting such expenses to the Company within
five business days following such termination,
together with a refund of any amounts which are not
supported by such documentation. If the Required
Vote is not obtained at the Special Meeting or any
adjournment thereof and the Merger Agreement is
therefore terminated, the Company is obligated to
pay to Holdings an amount equal to documented
out-of-pocket expenses incurred by Holdings up to
$10 million. If Holdings or the Company terminates
the Merger Agreement because the approval of the
shareholders of the Company of the Merger Agreement
and the Merger has not been obtained by reason of
the failure to obtain the Required Vote or if
Holdings terminates the Merger Agreement as a
result of a willful breach of a material
representation, warranty or covenant by the
Company, and within 320 days of the date of
termination enters into a merger agreement,
acquisition agreement or similar agreement
(including a letter of intent) with respect to a
Transaction Proposal or a Superior Proposal, or a
Transaction Proposal or a Superior Proposal is
consummated, which in any such case will result in
shareholders of the Company becoming entitled to
receive upon consummation of such Transaction
Proposal or Superior Proposal consideration with a
value (determined in good faith by the Board of
Directors) per share of Common Stock greater than
the Merger Consideration (with Additional Amounts
accruing from the Accretion Start Date through the
date of the consummation of such Transaction
Proposal or Superior Proposal) then the Company is
obligated to pay Holdings upon the consummation of
such Transaction Proposal or Superior Proposal the
difference between the amounts previously paid to
Holdings and $64 million. See "The Merger
Agreement -- Termination" and "-- Fees and
Expenses".
Stock Options.............. Each stock option, stock appreciation right,
limited stock appreciation right and performance
unit (the "Options") theretofore granted under any
stock option, performance unit or similar plan of
the Company (the "Stock Option Plans"), whether or
not otherwise exercisable, shall no longer be
exercisable but shall entitle each holder thereof
(subject to applicable withholding taxes), in
cancellation and settlement therefor, to a cash
payment at the Effective Time equal to (x) the
excess, if any, of the Merger Consideration over
the exercise price of each Option held by the
holder, whether or not then vested or exercisable,
multiplied by (y) the number of shares of Common
Stock subject to such Option.
Certain United States
Federal Income Tax
Consequences............. The receipt of cash for shares of Company Common
Stock in the Merger or pursuant to the exercise of
dissenters' appraisal rights will be a taxable
transaction for Federal income tax purposes and may
also be a taxable transaction under applicable
state, local, foreign or other tax laws. Each
Shareholder is urged to consult his or her own tax
advisor to determine the tax consequences to him or
her in light of his or her own particular
circumstances. See "The Merger -- Certain United
States Federal Income Tax Consequences".
8
<PAGE> 17
Appraisal Rights........... Under the DGCL, shareholders who do not vote in
favor of the Merger and who file demands for
appraisal prior to the shareholder vote on the
Merger Agreement have the right to obtain, upon the
consummation of the Merger, a cash payment for the
"fair value" of their Common Stock (excluding any
element of value arising from the accomplishment or
expectation of the Merger). In order to exercise
such rights, a shareholder must comply with all of
the procedural requirements of Section 262
("Section 262") of the DGCL, a description of which
is provided in "The Merger -- Appraisal Rights"
herein and the full text of which is attached to
this Proxy Statement as Annex G. Such "fair value"
would be determined in judicial proceedings, the
result of which cannot be predicted. Failure to
take any of the steps required under Section 262
may result in a loss of such appraisal rights. See
"The Merger -- Appraisal Rights".
Recent Market Prices of
Common Stock............. The Common Stock is listed on the NASDAQ National
Market System (the "NMS"). On August 11, 1997, the
last trading day prior to the public announcement
that the Company, Holdings and Acquisition Sub had
executed the Original Merger Agreement, the last
reported sale price of the Common Stock as reported
on the NMS was 47 7/8 per share. On October 21,
1997, the last trading day prior to the public
announcement that the parties had executed the
Merger Agreement Amendment, the last reported sale
price of the Common Stock as reported on the NMS
was $52 1/8 per share. On November 17, 1997, the
last reported sale price of the Common Stock as
reported on the NMS was $53 1/16 per share. See
"Price Range of Common Stock and Dividend History".
OTHER AGREEMENTS
Shareholders Agreements.... AT&T Voting Agreement. Concurrently with the
execution of the Original Merger Agreement,
Holdings, Acquisition Sub, AT&T, AT&T Wireless, MMM
Holdings and the Company entered into a
Stockholders Agreement (the "AT&T Voting
Agreement") pursuant to which AT&T has agreed to
vote the AT&T Shares in favor of the approval and
adoption of the Merger Agreement if the holders of
a majority of the Public Shares represented in
person or by proxy at a meeting at which holders of
a majority of the Public Shares are present vote in
favor of the approval and adoption of the Merger
Agreement. See "Other Agreements -- Shareholders
Agreements -- AT&T Voting Agreement".
Cook Inlet Voting Agreement. Concurrently with the
execution of the Original Merger Agreement,
Holdings, Acquisition Sub, Cook Inlet and the
Company entered into a Stockholders Agreement (the
"Cook Inlet Voting Agreement") pursuant to which
Cook Inlet has agreed to vote all Common Stock it
holds of record or beneficially owns at the Special
Meeting in favor of the approval and adoption of
the Merger Agreement. However, the Cook Inlet
Voting Agreement does not restrict Cook Inlet's
ability to dispose of shares of Common Stock prior
to the Special Meeting. See "Other
Agreements -- Shareholders Agreements -- Cook Inlet
Voting Agreement".
Termination Agreement. Concurrently with the
execution of the Original Merger Agreement, a
Stockholders Agreement, dated as of December 28,
1994, among the predecessor of AT&T Wireless, Cook
Inlet and
9
<PAGE> 18
the Company (the "AT&T/Cook Inlet Shareholders
Agreement"), pursuant to which, among other things,
AT&T agreed to vote its shares of Common Stock in
favor of a Cook Inlet nominee and Cook Inlet agreed
to vote its shares of Common Stock in favor of six
AT&T nominees for election to the Company's Board
of Directors, was terminated pursuant to a
Termination Agreement (the "Termination Agreement")
entered into by the parties. See "Other
Agreements -- Shareholders
Agreements -- Termination Agreement".
Amendment to the Television
Private Market Value
Guarantee................ On December 28, 1994, the Company became a
public-traded entity when its Common Stock was
distributed (the "Spin-Off") to the shareholders of
its parent company LIN Broadcasting Corporation
("LIN Broadcasting"), a company primarily engaged
in the cellular communications business which was
controlled by a predecessor company of AT&T
Wireless. At the time of the Spin-Off, the Company
and AT&T Wireless entered into a Television Private
Market Value Guarantee (the "PMVG Agreement") for
the purpose of continuing the protections to the
holders of the Public Shares that previously had
been provided to them under a similar arrangement
relating to LIN Broadcasting. The PMVG Agreement,
among other things, contemplated a sale of the
Company to AT&T or a third party in 1998. In order
to allow the shareholders to consider and receive
the benefits of the Merger, concurrently with the
execution of the Original Merger Agreement, AT&T
Wireless and the Company entered into an amendment
to the PMVG Agreement (the "PMVG Amendment")
pursuant to which AT&T has relinquished its option
to purchase the Common Stock of the Company it
currently does not own, the requirement that
appraisers be appointed thereunder has been
eliminated and the commencement date of any sale
process under the PMVG Agreement has been deferred
and will occur only if the Merger does not occur.
See "Other Agreements -- Amendment to the
Television Private Market Value Guarantee".
WOOD-TV Asset Purchase
Agreement................ Concurrently with the execution of the Original
Merger Agreement, Holdings, LIN Broadcasting, LIN
Michigan Broadcasting Corporation ("LIN Michigan"),
LCH Communications, Inc. ("LCH Communications" and
together with LIN Broadcasting and LIN Michigan,
the "WOOD-TV Sellers") and the Company entered into
an Asset Purchase Agreement (the "WOOD-TV Asset
Purchase Agreement") pursuant to which television
station WOOD-TV (Grand Rapids, MI) and certain
related assets will be sold by the WOOD-TV Sellers
to Holdings if the Merger is consummated (and the
Company has waived its right of first refusal
related thereto) or such assets will be sold to the
Company if the Merger Agreement is terminated. See
"Other Agreements -- WOOD-TV Asset Purchase
Agreement".
10
<PAGE> 19
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
Set forth below is selected consolidated financial and operating data of
the Company as of and for each of the five years in the period ended December
31, 1996 and as of and for the nine month periods ended September 30, 1997 and
September 30, 1996. The data should be read in conjunction with the historical
consolidated financial statements of the Company, and the notes thereto. Also
set forth below are certain pro forma operating data for the years ended
December 31, 1995 and 1994. The pro forma financial information is presented as
if the Spin-Off (as defined under "The Merger -- Background of the Merger")
(which occurred on December 28, 1994) and the acquisitions of WTNH-TV (New
Haven/Hartford, CT) and WIVB-TV (Buffalo, NY) (which occurred on December 28,
1994 and October 2, 1995, respectively) had taken place at January 1, 1994. The
pro forma financial presentation gives effect to a full year of operations at
stations WTNH-TV and WIVB-TV and includes pro forma adjustments for additional
depreciation and amortization of intangibles related to the purchase price
allocations, and additional provisions for income taxes related to the
adjustments described above, as well as the addition of station WTNH-TV's and
WIVB-TV's results of operations. The pro forma information is not necessarily
indicative of the results of operations that would have been reported if the
Spin-Off and acquisitions had taken place on the dates specified, nor is it
indicative of the Company's future operating results. The Company's audited
consolidated financial statements are incorporated by reference in this Proxy
Statement from the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, and the Company's unaudited consolidated financial statements
are incorporated by reference in this Proxy Statement from the Company's
Quarterly Report on Form 10-Q for the nine months ended September 30, 1997. See
"Incorporation of Certain Documents by Reference".
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- --------- --------- -------- ---------
(UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues......................... $216,878 $201,895 $273,367 $ 217,247 $ 150,523 $127,541 $ 124,496
Operating income..................... 72,714 66,642 99,160 85,028 64,069 52,251 51,717
Income before extraordinary
loss(1)............................ 32,622 29,538 46,461 38,030 31,185 22,287 19,150
Net income........................... 32,622 29,538 46,461 38,030 28,260 22,287 19,150
Earnings per share:
Income before extraordinary loss..... 1.07 0.98 1.54 1.28 1.19 0.86 0.74
Net income........................... 1.07 0.98 1.54 1.28 1.08 0.86 0.74
Weighted average shares
outstanding(2)..................... 30,470 30,059 30,120 29,757 26,136 25,816 25,816
BALANCE SHEET DATA:
Cash and cash equivalents............ $ 25,642 $ 25,930 $ 27,952 $ 18,025 $ 17,907 $ 19,461 $ 17,353
Total assets......................... 585,517 597,007 595,944 587,256 423,964 183,697 179,371
Long-term debt....................... 295,000 365,000 350,000 387,000 295,000 176,447 222,088
Total shareholders' equity
(deficit).......................... 172,941 120,466 138,448 86,434 40,160 (99,115) (138,736)
Book value per share................. 5.80 4.06 4.66 2.93 1.38 (3.84) (5.51)
CASH FLOW DATA:
Net cash provided by operating
activities......................... $ 61,656 $ 49,139 $ 66,066 $ 55,208 $ 49,654 $ 46,705 $ 43,743
Net cash used in investing
activities......................... (10,837) (22,496) (23,131) (126,891) (142,168) (6,864) (3,111)
Net cash (used in) provided by
financing activities............... (53,129) (18,738) (33,008) 71,801 90,960 (37,733) (31,565)
Net (decrease) increase in cash and
cash equivalents................... (2,310) 7,905 9,927 118 (1,554) 2,108 9,067
OTHER DATA:
Broadcast cash flow(3)............... $102,513 $ 90,686 $130,399 $ 106,749 $ 77,203 $ 65,466 $ 63,095
PRO FORMA DATA:
Net revenues......................... $ 233,507 $ 208,346
Operating income..................... 87,736 78,894
Net income........................... 36,780 33,712
Net income per share................. 1.24 1.14
Weighted average shares
outstanding(2)..................... 29,757 29,466
OTHER PRO FORMA DATA:
Broadcast cash flow(3)............... $ 113,014 $ 103,284
</TABLE>
11
<PAGE> 20
- ---------------
Notes to Selected Consolidated Financial and Operating Data:
(1) In 1994, the Company recorded a $4.5 million write-off of unamortized bank
fees and expenses related to its previous credit facility. This write-off
has been reflected as an extraordinary loss on extinguishment of debt, net
of an income tax benefit of $1.6 million, in the Company's financial
statements.
(2) Net income per share for all periods is calculated based on the number of
shares of common stock outstanding, assuming the shares issued in the
Spin-Off were issued on January 1, 1992, and the dilutive effect of common
stock equivalents. Pro forma net income per share is calculated based on the
number of shares of common stock outstanding, assuming the shares issued in
the WTNH-TV acquisition were issued on January 1, 1994, and the dilutive
effect of common stock equivalents.
(3) "Broadcast cash flow", which is commonly used as a measure of performance of
broadcast companies, is defined as operating income plus corporate expenses,
depreciation and amortization, including both tangible and intangible assets
and program rights and other non-cash items, less cash payments for program
rights. Cash program payments represent cash payments for current program
payables, and do not necessarily correspond to program usage. Broadcast cash
flow does not purport to represent cash provided by operating activities, as
reflected in the Company's consolidated statement of cash flow, is not a
measure of financial performance under generally accepted accounting
principles and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles.
12
<PAGE> 21
THE SPECIAL MEETING
DATE, PLACE AND TIME
The Special Meeting will be held on January 7, 1998, at The Waldorf-Astoria
Hotel, 301 Park Avenue, New York, New York at 10:00 a.m., local time.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
The purpose of the Special Meeting is to consider and vote upon a proposal
to approve and adopt the Merger Agreement and to consider and vote upon such
other matters as may properly be brought before the Special Meeting.
The Board of Directors has unanimously approved the Merger Agreement and
the transactions contemplated thereby and recommends a vote FOR approval and
adoption of the Merger Agreement. The unanimous approval of the Board of
Directors included the unanimous approval of each director who is not an AT&T
Board Nominee.
RECORD DATE; QUORUM
Only holders of record of Common Stock as of the Record Date will be
entitled to notice of and to vote at the Special Meeting and any adjournments or
postponements thereof. As of the Record Date, there were issued and outstanding
29,815,659 shares of Common Stock held by approximately 998 holders of record.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Special Meeting is
necessary to constitute a quorum.
REQUIRED VOTE
Pursuant to the Merger Agreement, the approval and adoption of the Merger
Agreement will require the affirmative vote of (i) the holders as of the Record
Date of a majority of the outstanding shares of Common Stock, and (ii) the
holders as of the Record Date of a majority of the Public Shares present and
entitled to vote at a meeting at which the holders of a majority of Public
Shares are present.
Holders of the Common Stock as of the Record Date are entitled to one vote
per share of Common Stock on each matter to be considered at the Special
Meeting.
AT&T, which as of the Record Date beneficially owned in the aggregate
13,494,750 shares (the "AT&T Shares") of Common Stock (representing
approximately 45% of the shares of Common Stock outstanding as of the Record
Date), has agreed pursuant to the AT&T Voting Agreement to vote all of the AT&T
Shares in favor of the approval and adoption of the Merger Agreement if the
holders of a majority of the Public Shares represented in person or by proxy at
a meeting at which holders of a majority of the Public Shares are present vote
in favor of the approval and adoption of the Merger Agreement. Cook Inlet, which
as of the Record Date beneficially owned 1,608,975 shares of Common Stock
(representing approximately 5% of the shares of Common Stock outstanding as of
the Record Date), has agreed pursuant to the Cook Inlet Voting Agreement to vote
all Common Stock it holds of record or beneficially owns at the Special Meeting
in favor of the approval and adoption of the Merger Agreement. However, the Cook
Inlet Voting Agreement does not restrict Cook Inlet's ability to dispose of
shares of Common Stock prior to the Special Meeting. See "Other
Agreements -- Shareholders Agreements".
As of the Record Date, directors and executive officers of the Company and
their affiliates beneficially owned and were entitled to vote 38,367 shares of
Common Stock, which represented less than 1% of the shares of Common Stock
outstanding on the Record Date. Each director and executive officer has
indicated his or her present intention to vote, or cause to be voted, the Common
Stock so owned by him or her for approval and adoption of the Merger Agreement.
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<PAGE> 22
VOTING OF PROXIES
All shares of Common Stock represented at the Special Meeting by properly
executed proxies received prior to or at the Special Meeting, unless such
proxies previously have been revoked, will be voted at the Special Meeting in
the manner specified by the holder thereof. Proxies which do not contain voting
instructions will be voted FOR approval and adoption of the Merger Agreement.
Management does not know of any matters to be presented at the Special
Meeting other than those set forth in this Proxy Statement and the Notice
accompanying this Proxy Statement. If other matters should properly come before
the Special Meeting, the proxy holders will vote on such matters in accordance
with their judgment.
Shares of Common Stock represented at the Special Meeting by a properly
executed, dated and returned proxy will be treated as present at the Special
Meeting for purposes of determining a quorum, without regard to whether the
proxy is marked as casting a vote or abstaining. For voting purposes at the
Special Meeting, only shares affirmatively voted (or deemed voted) in favor of
approval and adoption of the Merger Agreement will be counted as favorable votes
for such approval and adoption. Since only the approval and adoption of the
Merger Agreement is expected to be voted upon at the Special Meeting, the
Company does not expect to receive any "broker nonvotes". A "broker nonvote"
occurs when a broker or other nominee holding shares of a beneficial owner votes
on one proposal but does not vote on another proposal because the broker does
not have discretionary voting power and has not received instructions from the
beneficial owner. Should any broker nonvotes be received, however, they will
have the same effect as votes against approval and adoption of the Merger
Agreement since they are not affirmative votes in favor thereof. Accordingly,
broker nonvotes will have the same effect as votes against approval and adoption
of the Merger Agreement.
The persons named as proxies by a shareholder may propose and vote for one
or more adjournments of the Special Meeting to permit further solicitations of
proxies in favor of approval and adoption of the Merger Agreement; provided,
however, that no proxy which is voted against the approval and adoption of the
Merger Agreement will be voted in favor of any such adjournment.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed form does not preclude a shareholder
from voting in person. A shareholder may revoke a proxy at any time prior to its
exercise by submission of a signed written revocation to the Secretary of the
Company, by submitting a signed proxy bearing a later date or by appearing at
the Special Meeting and voting in person at the Special Meeting. No special form
of revocation is required. Attendance at the Special Meeting will not, in and of
itself, constitute revocation of a proxy.
SOLICITATION OF PROXIES
The Company will bear the cost of the solicitation of proxies from its
shareholders, including the costs of preparing, filing, printing and
distributing this Proxy Statement and any other solicitation materials that are
used. In addition to solicitation by mail, the directors, officers and employees
of the Company may solicit proxies from shareholders of the Company by telephone
or telegram or by other means of communication. Such directors, officers and
employees will not be additionally compensated but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation.
Arrangements will also be made with brokerage houses and other custodians,
nominees and fiduciaries for the forwarding of solicitation material to the
beneficial owners of stock held of record by such persons, and the Company will
reimburse such custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses in connection therewith.
Corporate Investor Communications, Inc. will assist in the solicitation of
proxies by the Company for a fee of $6,500, plus reasonable out-of-pocket costs
and expenses. Any questions or requests regarding proxies or related materials
may be directed in writing to Corporate Investor Communications, Inc., 111
Commerce Road, Carlstadt, NJ 07072-2586 or by telephone at 1-800-346-7885.
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<PAGE> 23
APPRAISAL RIGHTS
Holders of Common Stock who elect to dissent from the approval and adoption
of the Merger Agreement and who shall have not voted their shares in favor of
the Merger, shall have delivered to the Company a written demand for appraisal
of such shares and shall have met certain other statutory requirements as
specifically set forth in the DGCL, will be entitled to have the value of their
shares appraised in accordance with Section 262 of the DGCL. See "The
Merger -- Appraisal Rights".
SHAREHOLDERS SHOULD NOT SEND COMMON STOCK CERTIFICATES WITH THEIR PROXY
CARDS. IF THE MERGER AGREEMENT IS APPROVED AND ADOPTED BY THE SHAREHOLDERS AND
THE MERGER IS CONSUMMATED, TRANSMITTAL FORMS AND INSTRUCTIONS WILL BE SENT FOR
THE EXCHANGE OF SHARES OF COMMON STOCK.
15
<PAGE> 24
THE PARTIES
THE COMPANY
The Company owns and operates eight network-affiliated television stations,
including five in the 40 largest domestic television markets. In addition to
network programming, each of the Company's stations devotes segments of its
broadcasting day to news, local live programming, talk shows, and syndicated and
off-network programs. News and community-oriented programs are emphasized and
play an important role in the stations' service to their viewers. Additional
programming outlets are served through programming and marketing services
provided to four other stations pursuant to LMAs and through the operation of
LPTVs and satellite broadcasting facilities.
The following table summarizes certain information regarding the Company's
stations and its operations.
<TABLE>
<CAPTION>
NO. OF
ESTIMATED COMMERCIAL
NETWORK MARKET MARKET STATIONS
MARKET, STATIONS AND OTHER OUTLETS STATUS CHANNEL AFFILIATION RANK POPULATION IN MARKET
- ------------------------------------- ------ -------- ----------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Dallas-Fort Worth, TX
KXAS-TV............................ O&O 5(VHF) NBC 8 4,787,000 4 VHF/9 UHF
KXTX-TV............................ LMA 39(UHF) Ind.
Local Weather Station............ O&O Cable n/a
Indianapolis, IN
WISH-TV............................ O&O 8(VHF) CBS 25 2,346,000 4 VHF/7 UHF
WIIH-LP (SATELLITE)................ O&O 11(VHF) CBS
Local Weather Station............ O&O Cable n/a
New Haven-Hartford, CT
WTNH-TV............................ O&O 8(VHF) ABC 27 2,297,000 2 VHF/5 UHF
WBNE-TV............................ LMA 59(UHF) WB
Buffalo, NY
WIVB-TV............................ O&O 4(VHF) CBS 39 1,577,000 3 VHF/2 UHF
Norfolk-Portsmouth, VA
WAVY-TV............................ O&O 10(VHF) NBC 40 1,644,000 3 VHF/4 UHF
WVBT-TV............................ LMA 43(UHF) WB
Low Power Network................ O&O Various Ind.
Local Weather Station............ O&O Cable n/a
Austin, TX
KXAN-TV............................ O&O 36(UHF) NBC 63 1,071,000 1 VHF/4 UHF
KXAM-TV(SATELLITE)................. O&O 14(UHF) NBC
KNVA-TV............................ LMA 54(UHF) WB
Low Power Network.................. O&O Various UPN
Local Weather Station.............. O&O Cable n/a
Champaign, Springfield, Decatur, IL
WAND-TV............................ O&O 17(UHF) ABC 82 788,000 1 VHF/5 UHF
Local Weather Station............ O&O Cable n/a
Fort Wayne, IN
WANE-TV............................ O&O 15(UHF) CBS 103 625,000 4 UHF
Local Weather Station............ O&O Cable n/a
</TABLE>
- ---------------
(1) "O&O" refers to stations owned and operated by the Company. "LMA" refers to
a station to which the Company provides services under a local marketing
agreement. "Ind" refers to stations without any network affiliation.
16
<PAGE> 25
(2) LPTVs and satellite broadcasting facilities provide simultaneous
broadcasting of the network programming of the station serving the same
market, unless a different network affiliation for the LPTV is indicated.
(3) Rankings are based on the relative size of a station's "market" among the
211 generally recognized television markets in the United States. Source:
Nielsen Station Index DMA Market Ratings -- May 1997, A.C. Nielsen Company.
(4) Estimates Market Population based on estimates of "total persons 2+" in each
station's DMA. Source: Nielsen Station Index DMA Market Ratings -- May 1997
A.C. Nielsen Company.
(5) The number of stations in a market excludes LPTVs and satellite broadcasting
facilities.
(6) Station KXAM-TV, Channel 14 (UHF), Llano, Texas, is operated as a satellite
station of KXAN-TV to increase KXAN-TV's coverage.
(7) Station WVBT-TV, Channel 43 (UHF), Norfolk-Portsmouth, Virginia, will begin
an affiliation with Fox in September of 1998.
HOLDINGS, ACQUISITION SUB, FUND III AND HICKS MUSE
Holdings and Acquisition Sub were organized solely for the purpose of
entering into the Merger Agreement and consummating the transactions
contemplated thereby and have not carried on any activities to date other than
activities incident to their formation and in connection with the transactions
contemplated by the Merger Agreement. Each of Holdings and Acquisition Sub is
owned by Fund III, a private investment partnership organized at the direction,
and managed by an affiliate, of Hicks Muse, and its affiliates. Hicks Muse is a
private investment firm with offices in Dallas, New York, St. Louis and Mexico
City that specializes in leveraged acquisitions, recapitalizations and other
principal investing activities.
THE MERGER
BACKGROUND OF THE MERGER
Prior to December 28, 1994, the Company was a subsidiary of LIN
Broadcasting Corporation ("LIN Broadcasting") which was primarily engaged in the
cellular communications business. In 1989, McCaw Cellular Communications, Inc.
("McCaw") acquired approximately 52% of the common stock of LIN Broadcasting and
entered into a Private Market Value Guarantee, dated December 11, 1989 (the "LIN
Broadcasting PMVG"). The LIN Broadcasting PMVG provided that in 1995, McCaw
would have the option to purchase the shares of LIN Broadcasting it did not then
own at an appraised price or the entire company would be put up for sale in a
process supervised by independent directors.
In September 1994, AT&T Corp. acquired McCaw. On December 28, 1994, the
Company became a publicly-traded entity when its Common Stock was distributed to
the shareholders of LIN Broadcasting (the "Spin-Off"). In connection with the
Spin-Off, the Company acquired WTNH-TV (New Haven/Hartford, CT) (the
"Acquisition") from Cook Inlet. As a result of the Spin-Off and the Acquisition,
the Company's Common Stock was held 46.2% by AT&T, 11.5% by Cook Inlet and the
balance by the public. The AT&T/Cook Inlet Shareholders Agreement was entered
into at that time and provided that, for so long as they maintained ownership of
specified levels of Common Stock, AT&T would vote its shares of Common Stock in
favor of a Cook Inlet nominee and Cook Inlet would vote its shares of Common
Stock in favor of six AT&T nominees for election to the Board of Directors of
the Company.
At the time of the Spin-Off, the Company and a predecessor of AT&T Wireless
entered into the PMVG Agreement for the purpose of continuing the protections to
public shareholders of the Company that previously had been provided to them
under the LIN Broadcasting PMVG. The PMVG Agreement, among other things,
contemplates a sale of the Company to AT&T or a third party in 1998 as more
fully described under "Other Agreements -- Amendment to the Television Private
Market Value Guarantee". Under the PMVG Agreement, there was no assurance that
AT&T Wireless would have agreed to purchase the PMVG
17
<PAGE> 26
Public Shares (as defined under "Other Agreements -- Amendment to the Television
Private Market Value Guarantee") at the private market value described therein.
The PMVG Agreement did not prohibit AT&T from selling its shares of Common Stock
in the open market nor from selling equity interests in the Company in
connection with a sale of the entire Company to an unaffiliated party. The PMVG
Agreement permitted a sale of the entire Company to an acquiror (other than
AT&T) prior to the initiation of the appraisal and sale process set forth in the
PMVG Agreement, and such a sale did not require either the separate approval of
the Independent Directors (as defined under "-- Other Agreements -- Amendment to
the Television Private Market Value Guarantee") or the holders of a majority of
the PMVG Public Shares.
During the second quarter of 1996, management of the Company recommended
the adoption of a strategy of growth through acquisition. The Board approved
management's recommendation, subject to Board review of transaction proposals
and to the requirements of the PMVG Agreement which, among other things,
permitted the Independent Directors to veto any transaction which they
determined in their good faith judgment was not in the best interests of the
Company. The Independent Directors, with the approval of the entire Board of
Directors, retained Wasserstein Perella to assist them in evaluating potential
transaction proposals. Morgan Stanley provided similar advice to AT&T.
For the following nine months, management, the Board of Directors and AT&T,
together with Morgan Stanley, Wasserstein Perella and legal counsel, reviewed
and held discussions with several broadcasting or media companies regarding
potential acquisitions by the Company of a number of television stations as well
as potential business combinations involving the Company. Such discussions
included consideration of potential "merger of equals" transactions, in which
shareholders of the Company would have received securities of the combined
company in a tax-free exchange, and the potential disposition of part of the
Company through a "Morris Trust" structure. These discussions did not lead to
any proposal which the Board of Directors and AT&T decided to pursue because the
suggested economics and structures were not deemed attractive. During the course
of these discussions, no firm offers to acquire the Company were made.
On December 9, 1996, AT&T issued a press release and filed an amendment to
its Schedule 13D stating that it intended to review its investment in the
Company and to evaluate alternatives which could result in the disposition,
either through private or public sales, of some or all of the shares of Common
Stock held by it.
In early 1997, the Company began discussions with AT&T concerning the
purchase of WOOD-TV by the Company from the WOOD-TV Sellers (who are all direct
or indirect subsidiaries of AT&T). Thereafter the management of the Company and
AT&T reached a tentative oral agreement whereby the Company would purchase
WOOD-TV for $122.5 million, subject to further negotiation of other terms and
conditions and to Board approval.
In March 1997, Wasserstein Perella and Morgan Stanley were directed by the
Board of Directors and AT&T, respectively, to formulate a list of companies that
the firms believed would be interested in acquiring, and have the financial
resources to acquire, the Company. Following review and discussion with the
Board of Directors and AT&T, a list of companies to be contacted was developed.
Wasserstein Perella and Morgan Stanley were asked to contact these companies to
determine the extent of their interest. The decision by the Board of Directors
to seek a buyer for the Company was prompted by three principal considerations:
(i) the fact that from 1995 through the first quarter of 1997 the broadcast
industry had been consolidating at an accelerated pace and the multiples of
broadcast cash flow paid for television broadcast properties were reaching
historic highs; (ii) under the PMVG Agreement, the Company was required to be
put up for sale in 1998 and uncertainty existed as to whether prices obtainable
for television broadcast properties at that time would be as favorable as
currently appeared obtainable; and (iii) the strong interest of AT&T to be a
seller of its Common Stock if an acceptable transaction was available.
Over the next several months, Morgan Stanley and Wasserstein Perella
contacted potential buyers, including certain parties with whom discussions
regarding an acquisition or business combination had previously been held. As
part of this process, Hicks Muse was contacted. On June 13, Hicks Muse and the
Company executed a confidentiality agreement pursuant to which the Company
agreed to share certain confidential information with Hicks Muse (the
"Confidentiality Agreement"). For the next two weeks, confidential information
was provided and preliminary discussions were held among representatives of the
18
<PAGE> 27
Company, AT&T and Hicks Muse. The confidential information included estimates by
the Company's management dated June 22, 1997 that the Company's net revenues,
net income and broadcast cash flow (as described in Note 3 under "Selected
Consolidated Financial and Operating Data") were expected to be $288,655,000,
$50,269,000 and $140,312,000, respectively, for the fiscal year ended December
31, 1997, $318,052,000, $65,091,000 and $159,847,000, respectively, for the
fiscal year ended December 31, 1998, $332,895,000, $70,561,000 and $167,453,000,
respectively, for the fiscal year ended December 31, 1999, $365,496,000,
$88,395,000 and $191,609,000, respectively, for the fiscal year ended December
31, 2000, $377,002,000, $92,683,000 and $195,481,000, respectively, for the
fiscal year ended December 31, 2001, and $408,027,000, $109,908,000 and
$218,940,000, respectively, for the fiscal year ended December 31, 2002, (the
"Projections"). Subsequently, Hicks Muse was orally advised by the Company's
management that its estimate of broadcast cash flow for 1997 and 1998 had been
revised and was now expected to be in the range of $143,000,000 to $144,000,000
for 1997 and $162,000,000 to $163,000,000 for 1998.* At the time of the initial
contact with Hicks Muse, no other potential acquiror contacted on the Company's
behalf had indicated an intention to engage in serious discussions regarding a
transaction on terms that were acceptable to the Board of Directors or AT&T.
In early July, The Retirement Systems of Alabama (the "RSA") and Raycom
Media, Inc. ("Raycom") contacted AT&T and its investment advisor, Morgan
Stanley, about purchasing AT&T's interest in the Company for $42 per share. AT&T
has indicated that it informed the RSA that AT&T viewed its offer price as
insufficient, but that if the RSA or Raycom wanted to make an offer for the
entire Company it should do so directly to the Company. The Company was not
contacted by Raycom until October 1997 as described below.
In July 1997, Hicks Muse indicated that it would be willing to acquire the
Company for a cash price of $45 per share, subject to the satisfactory
completion of its due diligence review, the negotiation of a definitive merger
agreement and obtaining satisfactory financing commitments. In response, Hicks
Muse was informed that it would have to increase its offer price before the
Company would be willing to engage in serious discussions regarding a
transaction. Hicks Muse indicated that, subject to the conditions referred to
above, it would be willing to increase its offer price to $47.50 per share in
cash.
Following additional discussions with Hicks Muse, a special meeting of the
Board of Directors was held on July 15. At the meeting, the Board of Directors
determined that the Company would retain Morgan Stanley and Wasserstein Perella
as financial advisors to the Company and ratified the engagement of Simpson
Thacher & Bartlett ("Simpson Thacher") as legal counsel to the Company in
connection with a potential sale. During the meeting, representatives of Simpson
Thacher reviewed the status of the discussions with Hicks Muse, the requirements
of the PMVG Agreement and the duties of the directors in connection with a
- ---------------
* The Company does not, as a matter of course, publicly disclose projections as
to future revenues, income or other financial information. The Projections are
disclosed herein because they were disclosed to Hicks Muse, together with
certain other projected financial data. The Company believes that the
Projections, together with the information in this footnote and as set forth
under "Disclosure Regarding Forward Looking Statements", constitute the
material items of the projected financial data provided to Hicks Muse.
Shareholders should note, however, that the Projections are not included in
this Proxy Statement to induce any shareholder to vote for the Merger and do
not reflect the significantly altered capital structure expected to result
from the Merger. The Projections were based upon a variety of assumptions,
including those related to the achievement of strategic goals, objectives and
targets over the applicable periods. Such assumptions involve judgments with
respect to, among other things, future economic, competitive and regulatory
conditions, financial market conditions and future business decisions, all of
which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. In addition, the Projections do not reflect
the costs incurred or to be incurred in connection with the Merger and the
transactions related thereto. The Projections were not prepared with a view to
public disclosure, use in this Proxy Statement or compliance with published
guidelines of the SEC, nor were they prepared in accordance with the
guidelines established by the American Institute of Certified Public
Accountants for preparation and presentation of financial projections. In
light of the uncertainties inherent in any projected data, shareholders are
cautioned not to place undue reliance on the Projections. See "Disclosure
Regarding Forward Looking Statements".
19
<PAGE> 28
potential sale of the Company. The Board also was informed of AT&T's
determination that it would vote its shares of Common Stock in favor of a
proposed acquisition of the Company only if the acquisition was separately
approved by the holders of a majority of the Public Shares present and entitled
to vote at a meeting at which the holders of a majority of the Public Shares
were present. AT&T also indicated that it expected that an agreement for the
sale of WOOD-TV and related assets (and the termination of the Company's right
of first refusal with respect thereto), with economic terms substantially
equivalent to those already negotiated between AT&T and the management of the
Company (see "-- Other Agreements -- WOOD-TV Asset Purchase Agreement"), would
be executed simultaneously with the execution of a definitive merger agreement.
In addition, the General Counsel of the Company reviewed with the Board certain
significant regulatory issues that would need to be addressed in a definitive
merger agreement.
On July 21, members of management and the financial advisors and legal
counsel to the Company met with legal counsel to Hicks Muse to review certain
unresolved business issues and to review a proposed draft merger agreement. At
the meeting it became apparent that the parties had not reached agreement on
several significant matters, including (i) an adjustment factor to be applied to
the proposed cash purchase price to provide additional consideration to the
Company's shareholders in the event of any delay in closing, including a delay
in the regulatory approval process, (ii) the certainty of closing and
availability of financing, (iii) risks associated with required regulatory
approvals, (iv) termination provisions, (v) agreements committing certain
shareholders to support a proposed transaction and (vi) the sale of WOOD-TV by
AT&T.
In light of the unresolved issues with Hicks Muse, various discussions took
place over the next ten days among representatives of the management and Board
of Directors of the Company and AT&T, as well as their respective advisors,
regarding possible alternative courses of action, including a possible leveraged
recapitalization in which the Company would purchase the shares of Common Stock
held by AT&T. However, a leveraged recapitalization was not pursued by the Board
because, after discussions with Wasserstein Perella and Morgan Stanley, the
Board concluded that (x) the shareholders of the Company could receive greater
value for their Common Stock in the Merger than could be received in a
recapitalization and (y) the Merger, unlike a leveraged recapitalization, would
allow all of the Company's shareholders to sell all of their Common Stock.
During the same period, discussions continued with Hicks Muse. This process
culminated in a special meeting of the Board of Directors held on July 31 and
August 1, at which all of the foregoing was discussed. At the conclusion of
these discussions, the Board of Directors unanimously determined that the most
advantageous course of action would be the resumption of negotiations with Hicks
Muse in an effort to resolve all open issues.
From August 1 to August 11, extensive negotiations took place concerning
the terms of the definitive merger agreement and related agreements.
At a special meeting of the Board of Directors held on August 11, the
financial advisors to the Company reviewed in detail with the Board the status
of the Hicks Muse merger proposal and their financial and valuation analyses of
the proposal. Legal counsel to the Company reviewed the terms of the proposed
definitive merger agreement (including issues not then resolved with Hicks Muse)
and related agreements, including the WOOD-TV Asset Purchase Agreement, the PMVG
Amendment, the Termination Agreement, the AT&T Voting Agreement and the Cook
Inlet Voting Agreement (see "-- Other Agreements"). It was pointed out that the
PMVG Amendment would be entered into contemporaneously with the Merger Agreement
to postpone the initiation of any sale process pursuant to the PMVG Agreement
until such time, if any, as the Merger Agreement was terminated. Counsel also
reviewed the duties of the directors in connection with the proposed
transactions. Following discussion, the Board of Directors recessed the meeting
until the next day without any vote on the proposed transactions.
On August 12, the Board of Directors continued the meeting. Counsel to the
Company informed the Board of the resolution of the outstanding points on the
proposed definitive merger agreement and related agreements. Each of the
financial advisors to the Company delivered its oral opinion (subsequently
confirmed in writing) that, subject to the assumptions made, matters considered
and limits on their review stated in their opinions, the consideration to be
received by the holders of the shares of Common Stock pursuant to the Original
Merger Agreement (i.e. $47.50 per share plus an additional amount per share
equal to 8% per annum
20
<PAGE> 29
on $47.50 from the earlier of the date of receipt of the Required Vote and
January 1, 1998 through the date immediately prior to the date the Merger became
effective) was fair from a financial point of view to such holders. The
directors then continued their discussion and consideration of the proposed
transactions. In the course of this discussion, Messrs. Bodman, Carey, Chapman,
Daniell, Harris and Swenson, who are the AT&T Board Nominees (and, in certain
instances, current or retired officers or employees of AT&T Corp. or its
affiliates), advised those present of AT&T's position as a substantial
shareholder of the Company that supported the transactions contemplated by the
Original Merger Agreement and noted that it was simultaneously entering into the
transactions contemplated by the WOOD-TV Asset Purchase Agreement. Mr. Chapman,
the chief executive officer of the Company, advised those present that he
expected to continue to be employed by the Company following the consummation of
the Merger.
Following discussion, the Board of Directors unanimously approved the
Original Merger Agreement and the transactions contemplated thereby and
authorized the execution of the Original Merger Agreement on behalf of the
Company. The unanimous approval of the Board of Directors included the unanimous
approval of each director who is not an AT&T Board Nominee. At the same time,
the Board of Directors also unanimously approved the AT&T Voting Agreement, the
Cook Inlet Voting Agreement, the Termination Agreement, the PMVG Amendment and
the WOOD-TV Asset Purchase Agreement and the transactions contemplated thereby
and authorized the execution of such agreements on behalf of the Company. The
PMVG Amendment and the WOOD-TV Asset Purchase Agreement also received the
separate unanimous approval of the Independent Directors. See "Other
Agreements -- Shareholders Agreements", "-- Amendment to the Television Private
Market Value Guarantee" and "-- WOOD-TV Asset Purchase Agreement."
The Original Merger Agreement was executed and a press release was issued
on August 12, 1997.
On October 14, 1997, the Company received an unsolicited merger proposal
from Raycom. Raycom advised the Company that it was the owner of 25
network-affiliated television stations, reaching approximately 6.6% of U.S.
television households, that the RSA were its sole lenders and the holders of its
preferred stock and that its common stock was privately owned.
Raycom proposed to acquire the Company in a merger in which the Company's
shareholders would receive $52.50 per share in cash plus an additional amount
per share equal to 8% per annum on $52.50 accruing from the earlier of the date
of shareholder approval of the merger and January 1, 1998 through the date
immediately prior to the effective date of the merger. Raycom also requested a
$50 million termination fee in the event the Company terminated a Raycom merger
agreement to accept a superior proposal from a third party. Raycom indicated
that its obligation to close the transaction would not be contingent upon
receipt of financing and provided a letter from the RSA indicating that subject
to the conditions and assumptions set forth in the Raycom merger proposal, the
RSA were prepared to fund the merger proposal. The Raycom proposal, by its
terms, expired at 5:00 p.m., Friday, October 24, 1997, unless Raycom and the
Company had theretofore entered into a merger agreement.
As permitted by the Merger Agreement, on October 15, 1997, the Company and
Raycom entered into a confidentiality agreement and the Company notified
Holdings pursuant to the terms of the Merger Agreement. The Company also issued
a press release indicating it had received a merger proposal from, and would
engage in discussions with, a third party whose name was not publicly disclosed.
On October 15, the Company's Board of Directors met and received a report
from its financial advisors, Wasserstein Perella and Morgan Stanley, and its
legal counsel, Simpson Thacher, with respect to the Raycom proposal and the
process required to be followed under the Merger Agreement.
On October 16, Hicks Muse and NBC issued a press release announcing that
they had entered into a letter of intent relating to the formation of a
partnership to own and operate the Company's television station KXAS-TV, Dallas,
Texas and NBC's television station KNSD-TV, San Diego, California. In the press
release, NBC stated that it had agreed to keep its affiliation agreements in
effect following the transfer of control of the Company to Holdings, subject to
the negotiation of definitive documentation. NBC further stated that any
transfers of control to other parties would similarly require NBC's consent in
order for the affiliation agreements to remain in effect.
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<PAGE> 30
At the direction of the Board of Directors, Raycom was provided with
confidential information substantially similar to that provided to Hicks Muse
and the Company's financial advisors and legal counsel engaged in negotiations
with financial and legal advisors to Raycom. As a result of these discussions,
Raycom indicated a willingness to revise its proposal to eliminate as a
condition to the closing of a transaction that the Company have obtained network
consents to the assignment of the Company's affiliation agreements and to reduce
its break-up fee request to $42.5 million. However, Raycom also reduced its
offer by providing that the 8% per annum increase in consideration would accrue
from February 1, 1998. Raycom rejected the Company's request that it pay the $32
million termination fee the Company would be obligated to pay Holdings if it
terminated the Original Merger Agreement. In addition, on Friday, October 17,
Raycom modified its proposal to request the Company pay a $5 million fee (later
raised to $10 million) to Raycom if it did not enter into a merger agreement
with Raycom within a specified period of time and that the Company commit to
give Raycom 24 hours notice before accepting a higher offer from Holdings.
Raycom also requested that the Company give notice to Holdings no later than
Sunday, October 19 that it had received a transaction proposal that may
constitute a Superior Proposal (as defined in the Merger Agreement). Under the
Merger Agreement, the Company had agreed not to terminate the Merger Agreement
to accept a merger proposal from a third party without first giving Holdings at
least five business days notice specifying the material terms and conditions of
such proposal and the identity of the party making the proposal.
On Sunday, October 19, Raycom informed the Company that its merger proposal
would terminate at midnight that day unless the Company either agreed to pay a
$10 million fee to Raycom in the event the Company accepted an improved merger
proposal from Holdings or gave the five business day notice (described above) to
Holdings. The Company called a special meeting of its Board of Directors to be
held the next day, October 20, to consider the revised Raycom proposal. The
Company also gave the five business day notice to Holdings and issued a press
release identifying Raycom and setting forth certain terms of its proposal.
The Board of Directors met on Monday, October 20 and reviewed the status of
the negotiations with Raycom with its financial advisors and legal counsel. The
financial advisors and legal counsel were instructed to continue negotiations
with Raycom.
On October 21, representatives of the Company and Raycom continued
negotiations without reaching satisfactory resolution of a number of material
issues. Raycom refused the Company's request that it (i) place in escrow (a) a
merger agreement (with terms acceptable to both parties) executed by Raycom and
(b) financing commitment letters and (ii) allow the Company until 24 hours
following the five business day notice given to Holdings to execute the escrowed
merger agreement. In addition, as of that date, Raycom had not provided
commitment letters in acceptable form, nor supporting due diligence information
and legal opinions relating to the proposed commitments and the authority of the
RSA to enter into the contemplated transactions.
Also on October 21, after the close of the market, the Company received a
revised merger proposal from Holdings. Holdings offered to increase the merger
consideration to $55 per share with no additional amounts. In addition, Holdings
requested an increase in the break-up fee to $85 million and that it (not the
Company) have the right to purchase WOOD-TV from AT&T if the Company terminated
the Merger Agreement to accept a Superior Proposal from a third party. The
revised merger proposal, by its terms, would be withdrawn at 9:00 a.m.,
Wednesday, October 22, or prior thereto if disclosed by the Company to Raycom or
the public.
After negotiations among the legal counsel and financial advisors for the
Company and Holdings, Holdings further revised its offer by dropping the request
with respect to WOOD-TV and proposing that (i) the 8% per annum additional
consideration would accrue from February 15, 1998, (ii) the pendency of
shareholder litigation would not be a condition to Holdings' obligation to
close, (iii) a termination fee of $64 million plus up to $10 million for
expenses would be paid to Holdings in the event the Company terminated the
Merger Agreement to accept a Superior Proposal (as defined therein) from a third
party and a $10 million fee would be paid to Holdings if the Merger Agreement
was terminated because the Company's shareholders did not vote to approve it. In
addition, Holdings requested the cooperation of the Company in forming a
partnership with NBC and the related transfer to the partnership of the
Company's NBC affiliated station,
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<PAGE> 31
KXAS-TV, Dallas, Texas. Holdings informed the Company that in conjunction with
acceptance by the Company of the revised merger proposal, NBC would consent to
the transfer by the Company to Holdings and its affiliates of all NBC network
affiliation agreements between NBC and the Company and its affiliates, subject
to the Company complying with its obligations under the Merger Agreement
relating to the establishment of the Venture. Finally, Holdings requested that
the Company hold its shareholders meeting relating to the revised merger
proposal by January 15, 1998, that if the Company wilfully failed to hold the
shareholders meeting by January 31, 1998, Holdings would have the right to
terminate the Merger Agreement and that the Termination Date (as defined in the
Merger Agreement) be moved to June 30, 1998. All of these proposals were
reflected in a draft amendment to the Original Merger Agreement presented by
Holdings to the Company.
In considering the revised Holdings' merger proposal, the Board of
Directors considered, among other things, that an amended merger agreement with
Holdings could be entered into immediately while the Raycom proposal could only
be accepted following the five business day notice period, that acceptable
financing commitments and supporting information and opinions had not been
provided by Raycom, that Raycom had declined to escrow a signed merger
agreement, that agreeing to pay Raycom a $10 million fee if the Company did not
execute a merger agreement with Raycom could constitute a breach of the Original
Merger Agreement, that the parties had not been able to agree on material
provisions of the Raycom proposal and that Raycom was effectively assuming the
risk of obtaining NBC's consent to the transfer of network affiliation
agreements in the face of NBC's October 16, 1997 press release regarding its
agreement with Hicks Muse and the need for NBC's consent to any transfer to a
party other than Hicks Muse or its affiliates.
At a special meeting held October 21, 1997, the Board of Directors
discussed the revised proposal from Holdings. Legal counsel to the Company
reviewed the terms of the proposed amendment to the Original Merger Agreement
and the duties of the directors in connection with the Raycom offer and the
revised proposal. The financial advisors to the Company reviewed the financial
terms of the proposed amendment to the Original Merger Agreement and updated for
the Board certain financial and valuation analyses. Each of the financial
advisors to the Company delivered its oral opinion (subsequently confirmed in
writing) that, subject to the assumptions made, matters considered and limits on
their review stated in their opinions, the Merger Consideration to be received
by the holders of the shares of Common Stock pursuant to the Original Merger
Agreement, as amended by the Merger Agreement Amendment, was fair from a
financial point of view to such holders. The directors then continued their
discussion and consideration of the proposed transactions. In the course of this
discussion, the AT&T Board Nominees informed those present of AT&T's position as
a substantial shareholder of the Company that supported the transactions
contemplated by the Merger Agreement and noted that it had previously entered
into the WOOD-TV Asset Purchase Agreement. Mr. Chapman, the chief executive
officer of the Company, informed those present that he expected to continue to
be employed by the Company following the consummation of the Merger.
Following further discussion, the Board of Directors unanimously approved
the Merger Agreement Amendment and the transactions contemplated thereby and
authorized the execution of the Merger Agreement Amendment on behalf of the
Company. The unanimous approval of the Board of Directors included the unanimous
approval of each director who is not an AT&T Board Nominee.
The Merger Agreement Amendment was executed as of October 21, 1997 and a
press release was issued prior to the opening of the market on October 22, 1997.
On October 22, 1997, Raycom issued a press release withdrawing its
proposal.
REASONS FOR THE MERGER AND RECOMMENDATION OF THE BOARD OF DIRECTORS
The following is a summary of the factors considered material by the Board
of Directors in making its determination to approve the Merger Agreement and the
consummation of the transactions contemplated thereby: (i) the rapid
consolidation taking place in the broadcast industry and the high multiples of
broadcast cash flow which broadcast properties were able to obtain currently;
(ii) the uncertainty of future market conditions, including the possibility of
adverse regulatory actions, and their effect on the ability to successfully sell
the Company in 1998 through the process set forth in the PMVG Agreement; (iii)
the results of the exploratory sale process discussed above under "-- Background
of the Merger"; (iv) the fact that the terms of
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<PAGE> 32
the Merger Agreement permit the Board of Directors to respond to unsolicited
inquiries and proposals from third parties interested in the possible
acquisition of the Company and to provide information to, and enter into
discussions and negotiations with, such parties; and the belief of the Board of
Directors that the provisions of the Merger Agreement providing for a
termination fee to be paid to Holdings in the event of, among other things, a
termination of the Merger Agreement due to a change in the Board's
recommendation of the Merger would not unreasonably discourage offers from third
parties; (v) the fact that AT&T would be a seller of its Common Stock for cash
in the Merger if the Required Vote is obtained; (vi) the fact that the approval
and adoption of the Merger Agreement will require the approval of the holders of
a majority of the Public Shares present and entitled to vote at a meeting at
which the holders of a majority of the Public Shares are present; (vii) the
Board's knowledge of the business, operations, assets, financial condition and
results of operations of the Company, including its size compared to other group
broadcasting companies; (viii) the opinions of Wasserstein Perella and Morgan
Stanley regarding the fairness of the Merger Consideration to be received by
holders of Common Stock in the Merger under the Original Merger Agreement as
amended by the Merger Agreement Amendment; (ix) the fact that the terms of the
Merger Agreement relating to the Additional Amounts to be added to the cash
purchase price provide meaningful consideration to shareholders for the time
period between the execution of the Merger Agreement and the consummation of the
Merger; (x) the experience and high rate of success of Hicks Muse in structuring
and closing transactions similar to the Merger, the Commitment Letters arranged
by Hicks Muse with Fund III, The Chase Manhattan Bank and Chase Securities Inc.
to finance the transactions contemplated by the Merger Agreement and the
Alternative Commitments to be delivered by such entities and General Electric
Capital Corporation in the event the Venture Notice is delivered; (xi) the fact
that Holdings' offer of $55.00 per share exceeded Raycom's offer by $2.50 per
share; (xii) the fact that acceptable financing commitments and supporting
information and opinions had not been provided by Raycom; (xiii) the fact that
Raycom had declined to escrow a signed merger agreement; (xiv) the fact that
agreeing to pay Raycom a $10 million fee if the Company did not execute a merger
agreement with Raycom could constitute a breach of the Original Merger
Agreement; (xv) the fact that Raycom was effectively assuming the risk of
obtaining NBC's consent to the transfer of network affiliation agreements in the
face of NBC's October 16, 1997 press release regarding its agreement with Hicks
Muse and the need for NBC's consent to any transfer to a party other than Hicks
Muse or its affiliates; (xvi) the fact that NBC had agreed to consent to the
transfer by the Company to Holdings and its affiliates of all NBC network
affiliation agreements between NBC and the Company and its affiliates; and
(xvii) the other terms of the Merger Agreement, which were also the result of
arms-length negotiations. The Board of Directors also considered whether the
Company should enter into the transaction or continue to operate independently
and, while the Board noted that the Company had a qualified management team and
had experienced growth, it also noted that, due to the PMVG Agreement, the
Company was likely to be sold in the near future. Each of such factors supported
the Board's decision, and the Board viewed all of the foregoing factors as
important in reaching its conclusion and did not assign any particular weight to
any individual factor.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT,
DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF THE COMPANY AND ITS
SHAREHOLDERS, AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT. The unanimous approval of the Board of
Directors included the unanimous approval of each director who is not an AT&T
Board Nominee. See "-- Interests of Certain Persons in the Merger and Related
Transactions."
OPINIONS OF FINANCIAL ADVISORS
Opinions of Wasserstein Perella.
Fairness Opinion. Wasserstein Perella has acted as financial advisor to
the Company in connection with the Merger. At the meeting of the Board of
Directors held on October 21, 1997, Wasserstein Perella delivered its oral
opinion to the Board, subsequently confirmed in writing (the "Wasserstein
Perella Fairness Opinion"), to the effect that, based upon and subject to
various considerations set forth in such opinion, as of October 21, 1997, the
Merger Consideration to be received by the Company's shareholders in the Merger
was fair from a financial point of view to such shareholders. No limitations
were imposed by the Board upon Wasserstein
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<PAGE> 33
Perella with respect to investigations made or procedures followed by
Wasserstein Perella in rendering the Wasserstein Perella Fairness Opinion.
THE FULL TEXT OF THE WASSERSTEIN PERELLA FAIRNESS OPINION, WHICH SETS FORTH
THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF THE
REVIEW TAKEN, IS ATTACHED HERETO AS ANNEX B-2 TO THIS PROXY STATEMENT.
SHAREHOLDERS ARE URGED TO READ THE WASSERSTEIN PERELLA FAIRNESS OPINION
CAREFULLY AND IN ITS ENTIRETY. THE WASSERSTEIN PERELLA FAIRNESS OPINION IS
DIRECTED ONLY TO THE FAIRNESS OF THE MERGER CONSIDERATION TO THE COMPANY'S
SHAREHOLDERS FROM A FINANCIAL POINT OF VIEW, HAS BEEN PROVIDED TO THE BOARD OF
DIRECTORS IN CONNECTION WITH ITS EVALUATION OF THE MERGER, DOES NOT ADDRESS ANY
OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE. THE SUMMARY OF THE
WASSERSTEIN PERELLA FAIRNESS OPINION SET FORTH IN THIS PROXY STATEMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE WASSERSTEIN
PERELLA FAIRNESS OPINION.
In arriving at the Wasserstein Perella Fairness Opinion, Wasserstein
Perella reviewed, among other things (i) the PMVG Agreement and the PMVG
Amendment; (ii) the Original Merger Agreement and the Merger Agreement
Amendment; (iii) the WOOD-TV Asset Purchase Agreement; (iv) certain publicly
available information with respect to the Company, including publicly available
consolidated financial statements of the Company for recent years and interim
periods; (v) certain financial and operating information, including certain
projections of financial performance, relating to the Company prepared by the
management of the Company ("Management"); (vi) certain publicly available
information concerning the public trading prices of the Common Stock, certain
market indices and the stock of certain other companies in businesses similar to
that of the Company; and (vii) certain recent acquisitions and business
combination transactions in the industry in which the Company is a participant.
Wasserstein Perella had discussions with Management concerning the businesses,
operations, assets, financial condition and future prospects of the Company and
its subsidiaries. Wasserstein Perella also performed such studies and analyses
as it considered appropriate for purposes of arriving at and preparing the
Wasserstein Perella Fairness Opinion.
In rendering the Wasserstein Perella Fairness Opinion, Wasserstein Perella
assumed and relied upon, without independent verification, the accuracy and
completeness of all financial and other information provided or that was
publicly available. With respect to financial forecasts and projections,
Wasserstein Perella assumed, with the Company's consent, that they were
reasonably prepared by Management in good faith and on bases reflecting
Management's best currently available judgments and estimates. Wasserstein
Perella expresses no view as to, and assumes no responsibility for, such
forecasts or projections or the assumptions on which they are based.
The forecasts, projections and estimates furnished to Wasserstein Perella
for the Company were based on numerous variables and assumptions which are
inherently uncertain and which may not be within the control of Management,
including, without limitation, general economic, regulatory and competitive
conditions. Accordingly, actual results could vary materially from those set
forth in such forecasts, projections and estimates. See "Disclosure Regarding
Forward-Looking Statements."
The Wasserstein Perella Fairness Opinion was prepared and delivered based
upon economic, market and other conditions as they existed and could be
evaluated by Wasserstein Perella as of the date thereof and based upon the
Merger Agreement, the draft Merger Agreement Amendment, the PMVG Amendment and
the WOOD-TV Asset Purchase Agreement in the forms provided to Wasserstein
Perella prior to rendering the Wasserstein Perella Fairness Opinion.
In delivering the Wasserstein Perella Fairness Opinion, representatives of
Wasserstein Perella considered and discussed various financial and other matters
that it deemed relevant. General valuation considerations deemed to be relevant
by Wasserstein Perella include, without limitation: (i) television broadcasting
and demographic and advertising trends as a whole and in the Company's markets;
(ii) the Company's historical financial and operating performance and future
prospects in the context of its business strategy, market position and current
and prospective competition; (iii) the Company's technological, marketing and
programming strategy; (iv) the Company's size and asset mix; and (v) publicly
available commentary, research and valuation estimates by industry analysts.
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<PAGE> 34
The following is a summary of the analyses presented by Wasserstein Perella
to the Board at its meeting held on August 11 and 12, 1997, as updated by
Wasserstein Perella for the Board at it meeting held on October 21, 1997, in
connection with the delivery of the Wasserstein Perella Fairness Opinion. The
summary below includes reference ranges of implied prices per share of Common
Stock based on Wasserstein Perella's judgment of the data analyzed. These
reference ranges include reference points, implicit in the Merger Consideration
under the Original Merger Agreement of $47.50 in cash to be paid per share of
Common Stock in the Merger, including the enterprise value as a multiple of
broadcast cash flow (defined as operating income plus corporate expenses plus
depreciation and amortization plus amortization of program rights plus non-cash
compensation expenses less cash payment for program rights ("BCF")) for the
latest twelve months ("LTM") of 12.4x, an estimated 1997 BCF multiple of 12.2x
and an estimated 1998 BCF multiple of 10.7x. These reference points were all
considered in the context of the analyses described below. Each of these
analyses supports the Wasserstein Perella Fairness Opinion because the original
Merger Consideration of $47.50 and the LTM BCF, estimated 1997 BCF and estimated
1998 BCF multiples implied by the original Merger Consideration of $47.50 are
within the reference ranges for such prices and multiples calculated using a
precedent merger and acquisition transactions analysis and a discounted cash
flow analysis and are higher than the relevant reference ranges for such prices
and multiples using a public company trading analysis. At the meeting of the
Board held on October 21, 1997, Wasserstein Perella updated certain multiples
based on updated estimates provided by Management and by the Merger
Consideration of $55.00, including an LTM BCF multiple of 13.7x, an estimated
1997 BCF multiple of 13.5x and an estimated 1998 BCF multiple of 11.9x. The
Wasserstein Perella Fairness Opinion is supported by these updated multiples
because the Merger Consideration of $55.00 and the updated LTM BCF, estimated
1997 BCF and estimated 1998 BCF Multiples implied by the Merger Consideration of
$55.00 are within the relevant reference range for such prices and multiples
calculated using the precedent merger and acquisition transactions analysis, and
are higher than the relevant reference ranges for such prices and multiples
using the discounted cash flow analysis and the public company trading analysis,
discussed with the Board at the meeting held on August 11 and 12, 1997.
Public Company Trading Analysis. Wasserstein Perella reviewed, analyzed
and compared certain operating, financial, and trading information of the
Company and four other publicly traded television broadcasting companies
(Hearst-Argyle Television, Inc. ("H-A TV"), Granite Broadcasting Corporation
("Granite"), Sinclair Broadcast Group, Inc. ("Sinclair") and Young Broadcasting
Inc. ("Young")), including market values, enterprise values and estimated
enterprise values. These values and multiples are set forth below.
<TABLE>
<CAPTION>
ESTIMATED ENTERPRISE
VALUE AS A MULTIPLE
MARKET OF:
EQUITY ENTERPRISE LTM ----------------------
VALUE VALUE NET LTM 1997E 1997E
($MM) ($MM) REVENUES BCF BCF BCF
------ ---------- -------- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
H-A TV................................... $1,215 $1,876 5.1x 11.7x 11.0 x 9.8 x
Granite.................................. 195 715 4.6 10.0 9.9 9.4
Sinclair................................. 1,457 3,174 5.5 12.6 11.2 10.7
Young.................................... 465 1,131 4.3 9.2 9.4 8.7
</TABLE>
Wasserstein Perella noted, among other things, that the Company lacks a
precise analogue among publicly traded television broadcasting companies because
of its geographic distribution of stations and mix of network affiliations.
Wasserstein Perella also noted that the public market trading price of the
Common Stock has been affected because holders of the Common Stock already had
anticipated consummation of a merger with AT&T or an alternative transaction
such as the Merger pursuant to the PMVG Agreement.
Based on the foregoing values and multiples and in Wasserstein Perella's
judgment, the appropriate reference ranges for the Company derived from its
public company trading analysis were 9.5x-11.5x as a multiple of estimated 1997
BCF and 8.5x-10.5x as a multiple of estimated 1998 BCF, implying public trading
reference range prices of $36-$44 per share of Common Stock based on estimated
1997 BCF and $36-$46 per share based on 1998 BCF. The reference ranges of
implied public company trading prices are not based on a purely mathematical
analysis, but also take into consideration a qualitative analysis of each
publicly traded
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<PAGE> 35
company and Wasserstein Perella's judgments concerning the likely trading
position of the Company in the market of publicly traded television companies.
Precedent Merger and Acquisition Transactions. Wasserstein Perella
reviewed and analyzed selected merger and acquisition transactions involving
other companies in the television broadcast industry that it deemed relevant.
Among other factors, Wasserstein Perella indicated that while there have been a
number of recent television broadcasting transactions, acquisition values paid
in specific transactions have historically been affected by several factors
including the transaction structure, the target's operating performance and
geographic mix of assets, the existence of a controlling/major shareholder, the
strategic rationale for the transaction and the existence and implied valuation
of non-television broadcasting assets in the target.
Wasserstein Perella reviewed and analyzed selected transactions involving
other companies in the television broadcast industry since June 1995 that it
deemed relevant. The transactions reviewed included the following, which are
listed by acquiror/seller: Sinclair/Heritage Media Corporation; Paxson
Communications Corporation/ITT-Dow Jones Television; The Hearst Corp./Argyle
Television, Inc.; Meredith Corporation/First Media Television, L.P.; A.H. Belo
Corporation/The Providence Journal Company; Raycom Media, Inc./AFLAC
Incorporated; Media General, Inc./Park Communications, Inc.; The News
Corporation Limited/New World Communications Group Incorporated; Tribune
Company/Renaissance Communications Corp.; The National Broadcasting Company,
Inc./New World Communications Group Incorporated; Ellis Acquisition Inc.
(Employees Retirement Systems of Alabama)/Ellis Communications, Inc.; The New
York Times Company/Palmer Communications, Inc.; Young Broadcasting Inc./The Walt
Disney Company; Sinclair/River City Broadcasting, L.P.; Benedek Broadcasting
Corporation/Brissette Broadcasting Corporation; Gannett Co., Inc./Multimedia,
Inc.; ITT-Dow Jones Television/New York City; Westinghouse Electric
Corporation/CBS Inc.; The Walt Disney Company/Capital Cities/ABC,Inc.; National
Broadcasting Corporation/Outlet Communications, Inc.; and ABRY Broadcast
Partners II, L.P./Act III Broadcasting, Inc. Wasserstein Perella's analysis of
the selected acquisition transactions yielded an estimated multiple of BCF for
the calendar year as of the announcement date of such acquisition or, for
transactions announced in 1997, an estimated multiple for estimated 1997 BCF
multiple in the range of 10.3x-19.1x. The analysis also yielded an implied price
range of $39.11-$77.40 per share based on estimated 1997 BCF. Because the market
conditions and circumstances surrounding each of the transactions analyzed were
specific to each transaction, and because of the inherent differences between
the businesses, operations and market conditions of the Company and the acquired
businesses analyzed, Wasserstein Perella believed it was inappropriate to, and
therefore did not, rely solely on the quantitative results of the analysis and,
accordingly, also made qualitative judgments concerning differences between the
characteristics of these transactions and the Merger that would affect the
acquisition values of the Company and such acquired companies.
Based on the foregoing values and multiples and in Wasserstein Perella's
judgment, the appropriate reference range derived from its precedent merger and
acquisition transactions analysis was 11.0x-14.0x as a multiple of estimated
1997 BCF, implying a reference price range of $42-$55 per share of Common Stock.
Discounted Cash Flow Analysis. Wasserstein Perella performed discounted
cash flow analyses based on Management's projections, and calculated present
values per share of Common Stock as of December 31, 1997. In performing its
discounted cash flow analysis, Wasserstein Perella considered various different
assumptions that it deemed appropriate. Based on a review with Management of the
Company's prospects and risks associated with the business of the Company,
Wasserstein Perella applied valuation parameters that it deemed appropriate to
Management's projections. Wasserstein Perella believed it appropriate to utilize
discount rates of 10%-11% and terminal valuations based on (i) perpetuity growth
rates of 3.5%-4.5% and (ii) multiples of estimated year 2002 BCF of 9x-11x.
These were deemed appropriate with respect to the television broadcast industry.
Based on the foregoing, in Wasserstein Perella's judgment, a discounted cash
flow analysis yielded a summary reference range of implied prices of $42-$53 per
share of Common Stock.
In arriving at the Wasserstein Perella Fairness Opinion, Wasserstein
Perella performed a variety of financial analyses, the material portions of
which are summarized above. The preparation of a fairness opinion is a complex
analytical process involving various determinations as to the most appropriate
and relevant methods of financial analyses and the application of those methods
to the particular circumstances and,
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<PAGE> 36
therefore, such an opinion is not necessarily susceptible to partial analysis or
summary description. In arriving at its opinion, Wasserstein Perella did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to significance and relevance of each
analysis and factor. Accordingly, Wasserstein Perella believes that its analyses
must be considered as a whole and that selecting portions of such analyses and
the factors considered by it, without considering all such analyses and factors,
could create an incomplete view of the process underlying its analyses set forth
in its opinion. In performing its analysis Wasserstein Perella relied on
numerous assumptions made by Management, and made numerous judgments of its own
with regard to the performance of the Company, industry performance, general
business and economic conditions and other matters, many of which are beyond the
Company's ability to control. Actual values will depend upon several factors,
including changes in interest rates, dividend rates, market conditions, general
economic conditions and other factors that generally influence the price of
securities. Any estimates contained in such analysis are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable. In addition, analyses relating to values of companies do
not purport to be appraisals or to reflect the prices at which companies may
actually be sold. Since such estimates are inherently subject to uncertainty,
none of the Company, Wasserstein Perella or any other person assumes
responsibility for their accuracy. With regard to the comparable public company
analysis and the comparable transactions analysis summarized above, Wasserstein
Perella selected comparable public companies on the basis of various factors;
however, no public company or transactions utilized as a comparison is identical
to the Company or the Merger. Accordingly, an analysis of the foregoing is not
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
comparable companies and other factors that could affect the acquisition or
public trading value of the comparable companies and transactions to which the
Company and the Merger are being compared.
Wasserstein Perella concluded, based on the full range of its analyses,
that the Merger Consideration to be paid in the Merger was fair from a financial
point of view to the shareholders of the Company.
Supplemental Opinions Provided by Wasserstein Perella. At the request of
the Independent Directors (defined herein), at the meeting of the Board of
Directors held on August 11 and 12, 1997, Wasserstein Perella delivered oral
opinions to the Independent Directors, each subsequently confirmed in writing,
to the effect that, based upon and subject to various considerations set forth
in such opinions, as of August 12, 1997, in the context of the Merger, the PMVG
Amendment and the WOOD-TV Asset Purchase Agreement, (i) the PMVG Amendment would
not be materially adverse to the holders of PMVG Public Shares (as defined under
"Other Agreements -- Amendment to Television Private Market Value Guarantee")
from a financial point of view (the "PMVG Opinion"), and (ii) the transactions
contemplated by the WOOD-TV Asset Purchase Agreement would not likely depress
the value of the Company on the Initiation Date from a financial point of view
(the "WOOD-TV Opinion" and together with the PMVG Opinion, the "Supplemental
Opinions"). No limitations were imposed by the Independent Directors upon
Wasserstein Perella with respect to investigations made or procedures followed
by Wasserstein Perella in rendering any of the Supplemental Opinions. The
Independent Directors requested the PMVG Opinion and the WOOD-TV Opinion because
they believed Wasserstein Perella's advice would be helpful to them in making
the determinations required by the PMVG. The PMVG Agreement can be amended only
if such amendment is found by the Independent Directors not to be materially
adverse to the holders of PMVG Public Shares. In addition, pursuant to the terms
of the PMVG Agreement, no transaction can be undertaken by the Company if the
Independent Directors determine in their good faith judgment that such
transaction or action would likely depress the value of the Company on January
1, 1998.
THE FULL TEXT OF EACH OF THE SUPPLEMENTAL OPINIONS, WHICH SETS FORTH THE
PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF THE
REVIEW TAKEN, IS ATTACHED HERETO AS ANNEX C AND D TO THIS PROXY STATEMENT.
SHAREHOLDERS ARE URGED TO READ EACH OF THE SUPPLEMENTAL OPINIONS CAREFULLY AND
IN ITS ENTIRETY. EACH OF THE SUPPLEMENTAL OPINIONS IS ADDRESSED TO THE
INDEPENDENT DIRECTORS, IS SOLELY FOR THE BENEFIT AND USE OF THE INDEPENDENT
DIRECTORS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER WITH
RESPECT TO HOW SUCH HOLDER SHOULD VOTE WITH RESPECT TO THE MERGER. ANY SUMMARY
OF A SUPPLEMENTAL OPINION SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
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<PAGE> 37
In arriving at the Supplemental Opinions, Wasserstein Perella considered
and reviewed, among other things (i) the factors described above that were
reviewed in rendering the Wasserstein Perella Fairness Opinion; (ii) with
respect to the PMVG Opinion, (a) the ability of the Independent Directors,
pursuant to the PMVG Amendment, to direct the sale of the Company, in a manner
intended to maximize value for all of the Common Stock in the event the Merger
Agreement was terminated, within eighteen months after such termination, and (b)
the other ongoing protections afforded to the holders of PMVG Public Shares
under the PMVG Agreement and the PMVG Amendment in the event the Merger was not
consummated by reason of it not being approved by the requisite Required Vote;
and (iii) with respect to the WOOD-TV Opinion, (a) certain financial information
relating to WOOD-TV provided by Management, (b) certain publicly available
information concerning the public trading prices of certain other companies in
businesses similar to that of WOOD-TV, and (c) certain publicly available
information relating to selected transactions similar to the transactions
contemplated by the WOOD-TV Asset Purchase Agreement; and (iv) such other
factors or analyses as Wasserstein Perella deemed relevant.
In rendering the Supplemental Opinions, Wasserstein Perella assumed and
relied upon, without independent verification, the accuracy and completeness of
all financial and other information provided or that was publicly available.
With respect to financial forecasts and projections, Wasserstein Perella
assumed, with the Independent Director's consent, that they were reasonably
prepared and on bases reflecting the best currently available judgments and
estimates. Wasserstein Perella expresses no view as to, and assumes no
responsibility for, such forecasts or projections or the assumptions on which
they are based. In connection with the WOOD-TV Opinion, Wasserstein Perella
assumed, with the Independent Directors' consent, that the Company's potential
purchase of WOOD-TV would be consummated no sooner than March 1, 1998.
The forecasts, projections and estimates furnished to Wasserstein Perella
for the Company and WOOD-TV were based on numerous variables and assumptions
which are inherently uncertain and which may not be within the control of
Management, including, without limitation, general economic, regulatory and
competitive conditions. Accordingly, actual results could vary materially from
those set forth in such forecasts, projections and estimates. See "Disclosure
Regarding Forward-Looking Statements".
The Supplemental Opinions were prepared and delivered based upon economic,
market and other conditions as they existed and could be evaluated by
Wasserstein Perella as of the date thereof and based upon the draft Merger
Agreement, the draft PMVG Amendment and the draft WOOD-TV Asset Purchase
Agreement in the forms provided to Wasserstein Perella prior to rendering the
Supplemental Opinions.
In arriving at the Supplemental Opinions, Wasserstein Perella performed a
variety of financial analyses. The preparation of an opinion such as each of the
Supplemental Opinions is a complex analytical process involving various
determinations as to the most appropriate and relevant methods of financial
analyses and the application of those methods to the particular circumstances
and, therefore, such an opinion is not necessarily susceptible to partial
analysis or summary description. In arriving at each of its Supplemental
Opinions, Wasserstein Perella did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
significance and relevance of each analysis and factor. Accordingly, Wasserstein
Perella believes that its analyses must be considered as a whole and that
selecting portions of such analyses and the factors considered by it, without
considering all such analyses and factors, could create an incomplete view of
the process underlying its analyses set forth in its opinion. In performing its
analysis Wasserstein Perella relied on numerous assumptions, and made numerous
judgments of its own with regard to the performance of the Company, industry
performance, general business and economic conditions and other matters, many of
which are beyond the Company's ability to control. Actual values will depend
upon several factors, including changes in interest rates, dividend rates,
market conditions, general economic conditions and other factors that generally
influence the price of securities. Any estimates contained in such analysis are
not necessarily indicative of actual values or actual future results, which may
be significantly more or less favorable. In addition, analyses relating to
values of companies do not purport to be appraisals or to reflect the prices at
which companies may actually be sold. Since such estimates are inherently
subject to uncertainty, none of the Company, Wasserstein Perella or any other
person assumes responsibility for their accuracy.
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Terms of Wasserstein Perella's Engagement. Pursuant to the terms of
engagement letters dated June 4, 1996, as amended, and August 12, 1997,
Wasserstein Perella agreed to act as financial advisor to the Independent
Directors and the Board, respectively. The Company has agreed to pay Wasserstein
Perella a transaction fee equal to the sum of $7.25 million and 0.375% of the
amount by which the aggregate consideration under the Merger Agreement (as
amended by the Merger Agreement Amendment) exceeds the aggregate consideration
under the Original Merger Agreement, calculated as if the transaction
contemplated under the Original Merger Agreement closed on the date the Merger
closes, of which (i) 31.0% was payable upon, among other things Wasserstein
Perella being prepared to render the Wasserstein Perella Fairness Opinion and
the Supplemental Opinions, (ii) 34.5% will be payable upon the Merger Agreement
being approved by the holders of the Common Stock, and (iii) the remainder will
be payable upon consummation of the Merger. The Company also agreed to reimburse
Wasserstein Perella for its reasonable out-of-pocket expenses, including fees,
disbursements and other charges of its counsel. The Company agreed to indemnify
Wasserstein Perella and its affiliates, their respective directors, officers,
partners, agents and employees and each person, if any, controlling Wasserstein
Perella or any of its affiliates against certain liabilities and expenses,
including certain liabilities under the federal securities laws, relating to or
arising out of such engagement. The fees, expense reimbursement and
indemnification described above include compensation to Wasserstein Perella for
its service to the Independent Directors in connection with this transaction.
Wasserstein Perella has advised the Board of Directors and the Independent
Directors, respectively, that, based on the terms of Wasserstein Perella's
engagement by the Company, in the case of the Wasserstein Perella Fairness
Opinion, and by the Independent Directors, in the case of the Supplemental
Opinions, Wasserstein Perella does not believe that any person (including any
shareholder of the Company), other than the Company and the Board of Directors
in the case of the Wasserstein Perella Fairness Opinion, and the Independent
Directors in the case of the Supplemental Opinions, has the legal right to rely
upon the Wasserstein Perella Fairness Opinion or the Supplemental Opinions,
respectively, to support any claim against Wasserstein Perella arising under
applicable state law and that, should any such claim be brought against
Wasserstein Perella by any such person, this assertion would be raised as a
defense. Wasserstein Perella has further advised the Board of Directors and the
Independent Directors that (i) in the absence of applicable state law, the
availability of such a defense would be resolved by a court of competent
jurisdiction, (ii) resolution of the question of the availability of such a
defense, however, would have no effect on the rights an responsibilities of the
Board of Directors under applicable state law and (iii) the availability of such
defense to Wasserstein Perella would have no effect on the rights and
responsibilities of either Wasserstein Perella or the Board of Directors under
the federal securities laws.
Wasserstein Perella is an investment banking firm engaged, among other
things, in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings, and
secondary distributions of listed and unlisted securities and private
placements. Wasserstein Perella was selected to render the Wasserstein Perella
Fairness Opinion and the Supplemental Opinions because it is a nationally
recognized investment banking firm and because of its experience in the
valuation of companies, including companies in the television broadcast
industry. Wasserstein Perella has acted as financial advisor to the Independent
Directors regarding general financial matters under its June 4, 1996 letter
agreement and has been paid a fee of $390,000 for providing such services
through August 1997.
Opinion of Morgan Stanley.
Morgan Stanley was retained by the Company to act as financial advisor in
connection with the Merger and related matters based upon Morgan Stanley's
experience and expertise in the valuation of companies, including companies in
the television broadcast industry, as well as the knowledge of the Company's
business and affairs that it had developed as financial advisor to AT&T in
connection with AT&T's investment in the Company. At the meeting of the Board of
Directors of the Company on October 21, 1997, Morgan Stanley rendered to the
Board an oral opinion, subsequently confirmed in writing as of October 21, 1997,
to the effect that, as of such date and based on certain matters stated therein,
the Merger Consideration to be received by the holders of shares of Common Stock
pursuant to the Merger Agreement is fair from a financial point of view to such
holders (the "Morgan Stanley Opinion"). The Morgan Stanley Opinion, by
reference,
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<PAGE> 39
incorporated certain analyses performed by Morgan Stanley and reviewed with the
Company's Board of Directors in connection with Morgan Stanley's presentation to
the Board on August 11 and 12, 1997. No limitations were imposed by the Board
upon Morgan Stanley with respect to investigations made or procedures followed
by Morgan Stanley in rendering the Morgan Stanley Opinion.
THE FULL TEXT OF THE MORGAN STANLEY OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN,
IS ATTACHED AS ANNEX B-1 TO THIS PROXY STATEMENT AND IS INCORPORATED HEREIN BY
REFERENCE. HOLDERS OF COMMON STOCK ARE URGED TO, AND SHOULD, READ THE MORGAN
STANLEY OPINION CAREFULLY AND IN ITS ENTIRETY. THE MORGAN STANLEY OPINION IS
DIRECTED TO THE BOARD OF DIRECTORS OF THE COMPANY. THE MORGAN STANLEY OPINION
ADDRESSES THE FAIRNESS OF THE MERGER CONSIDERATION TO BE RECEIVED BY THE HOLDERS
OF SHARES OF COMMON STOCK PURSUANT TO THE MERGER AGREEMENT FROM A FINANCIAL
POINT OF VIEW, AND IT DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER, NOR DOES
IT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF SHARES OF COMMON STOCK AS TO HOW
TO VOTE AT THE SPECIAL MEETING. THE SUMMARY OF THE MORGAN STANLEY OPINION SET
FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF SUCH OPINION.
In arriving at its opinion, Morgan Stanley (i) reviewed certain publicly
available financial statements and other information of the Company; (ii)
reviewed certain internal financial statements and other financial and operating
data concerning the Company prepared by the management of the Company; (iii)
reviewed certain financial projections prepared by the management of the
Company; (iv) discussed the past and current operations and financial condition
and the prospects of the Company with senior executives of the Company; (v)
reviewed the reported prices and trading activity for the Common Stock; (vi)
compared the financial performance of the Company and the prices and trading
activity of the Common Stock with that of certain other comparable
publicly-traded companies and their securities; (vii) reviewed the financial
terms, to the extent publicly available, of certain comparable acquisition
transactions; (viii) participated in discussions and negotiations among
representatives of the Company and Holdings and their legal advisors; (ix)
reviewed the PMVG Agreement and the amendment thereto; (x) reviewed the Original
Merger Agreement, the Merger Agreement Amendment and certain related documents;
and (xi) performed such other analyses as it deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by Morgan Stanley for purposes of its opinion. With respect to
financial projections, Morgan Stanley assumed that they had been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the future financial performance of the Company. Morgan Stanley did
not make an independent valuation or appraisal of the Company's assets or
liabilities, nor was Morgan Stanley furnished with any such appraisals. The
Morgan Stanley Opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to Morgan Stanley
as of, the date thereof.
As described above, on October 21, 1997, Morgan Stanley rendered the Morgan
Stanley Opinion to the Board of Directors of the Company, which, by reference,
incorporated certain analyses performed by Morgan Stanley and reviewed with the
Company's Board of Directors during Morgan Stanley's presentation to the Board
on August 11 and 12, 1997. The following is a brief summary of such analyses, as
updated as noted. This summary does not purport to be a complete description of
the Morgan Stanley Opinion or Morgan Stanley's presentations to the Board of
Directors on August 11 and 12, 1997 and October 21, 1997 respectively.
Historical Public Market Trading Value. Morgan Stanley reviewed the
historical performance of the Common Stock based on an historical analysis of
closing prices and trading volumes from January 1, 1996 through August 8, 1997
(the last full trading day prior to Morgan Stanley's presentation to the
Company's Board of Directors) on August 11 and 12, 1997. Based on the latest
twelve months of trading activity through August 8, 1997 ("LTM"), the price of
the Common Stock had ranged from a low of $35.00 to a high of $48.75. The Common
Stock closed at a price of $47.75 per share on August 8, 1997. Morgan Stanley
also reviewed the historical trading performance of the Standard & Poor's Index
of 400 Industrial Companies (the "S&P 400") and an index of reported trading
prices of the stock of certain other publicly traded television
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broadcasting companies from January 1, 1996 through August 8, 1997, consisting
of Argyle Television, Inc. ("Argyle"), Granite Broadcasting Corporation
("Granite"), Sinclair Broadcast Group, Inc. ("Sinclair") and Young Broadcasting
Inc. ("Young") (collectively, the "Television Index"). Morgan Stanley noted that
during the time period reviewed, the price of the Common Stock had outperformed
both the S&P 400 and the Television Index.
Comparable Company Trading Analysis. Morgan Stanley reviewed and analyzed
certain publicly available financial and market information for the Company and
a group of the four publicly traded companies in the television broadcasting
industry which comprise the Television Index (the "Comparable Companies").
Morgan Stanley's analysis included, among other things, a review of each
company's respective aggregate values (market value of equity plus net debt and
preferred stock) expressed as a multiple of estimated 1997 and 1998 BCF, pro
forma for announced acquisitions. For each company, such BCF estimates were
based on publicly available reports published by equity research analysts.
The BCF multiples derived from Morgan Stanley's analysis of the Comparable
Companies ranged from 9.2x to 11.5x 1997 estimated BCF and 8.6x to 10.9x 1998
estimated BCF. The median of such multiples for the Comparable Companies was
10.5x 1997 estimated BCF and 9.3x 1998 estimated BCF. Based on this analysis,
Morgan Stanley derived a range of implied public market trading prices per share
of the Common Stock of $31.46 to $44.20.
Morgan Stanley also noted that the aggregate original consideration under
the Original Merger Agreement (including net debt as of June 30, 1997, less
proceeds from the exercise of stock options), based on a price of $47.50 per
share of Common Stock, implied a multiple of approximately 12.5x 1997 estimated
BCF. Assuming a closing of the Merger as of December 31, 1997, Morgan Stanley
noted that such aggregate original consideration (including projected net debt
as of such date and less proceeds from the exercise of stock options) implied a
multiple of approximately 12.2x 1997 estimated BCF and 10.7x 1998 estimated BCF.
At the meeting of the Board of Directors on October 21, 1997, Morgan Stanley
updated certain multiples based on updated estimates provided by Management and
on the Merger Consideration of $55.00, and noted that, assuming a closing of the
Merger as of December 31, 1997, the Merger Consideration (including projected
net debt as of such date and less proceeds from the exercise of stock options),
implied a multiple of approximately 13.5x 1997 estimated BCF and 11.9x estimated
1998 BCF.
Morgan Stanley noted its view that the public market trading price for the
Company's Common Stock was affected by the existence and terms of the PMVG and
that the stock could possibly trade at lower prices if the PMVG Agreement did
not exist.
No company utilized in the comparable company analysis as a comparison is
identical to the Company. In evaluating the Comparable Companies, Morgan Stanley
made judgments and assumptions with regard to industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of the Company, such as the impact of competition
on the business of the Company and the industry generally, industry growth and
the absence of any adverse material change in the financial condition and
prospects of the Company or the industry or in the financial markets in general.
Mathematical analysis (such as determining the average or median) is not in
itself a meaningful method of using comparable company data.
Precedent Transaction Multiples Analysis. Morgan Stanley reviewed and
analyzed public information relating to the financial terms of certain precedent
transactions in the television broadcasting industry (the "Comparable
Transactions"), which, in Morgan Stanley's judgment, were deemed to be the most
comparable to the Merger for purposes of this analysis. These Comparable
Transactions included the acquisition of certain television and radio stations
from Heritage Media Corporation by Sinclair, the acquisition of Argyle by The
Hearst Corporation ("Hearst"), the acquisition of WXON-TV by Granite, the
acquisition of four television stations from First Media Television L.P. by
Meredith Corp., the acquisition of the Providence Journal Company ("Providence
Journal") by A.H. Belo Corporation ("A.H. Belo"), the acquisition of four
stations from AFLAC Inc. by Raycom Media, Inc., the acquisition of Park
Acquisitions, Inc. ("Park Acquisitions") by Media General, Inc., the acquisition
of New World Communications Group, Inc. ("New World") by News Corp., the
acquisition of Renaissance Communications Group ("Renaissance") by Tribune Co.
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("Tribune"), the acquisition of two stations by National Broadcasting Co., Inc.
("NBC") from New World, the acquisition of two stations by the New York Times
Company from Palmer Communications, Inc., the acquisition of Ellis
Communications, Inc. by the Employees Retirement System of Alabama and the
Teachers' Retirement System of Alabama, the acquisition of KCAL-TV by Young from
The Walt Disney Company ("Disney"), the acquisition of the assets of River City
Broadcasting by Sinclair and the acquisition of Citicasters Inc. ("Citicasters")
by Jacor Communications, Inc. ("Jacor"). Morgan Stanley reviewed the prices paid
in these transactions, including analysis of the aggregate value of such
transactions expressed as multiples of publicly available estimates of cash flow
(BCF where available, or otherwise earnings before interest, taxes, depreciation
and amortization ("EBITDA")). The aggregate values for these transactions,
expressed as a multiple of projected cash flow, ranged from 11.9x to 17.8x
projected cash flow for transactions announced in 1996 and from 11.0x to 14.5x
projected cash flow for transactions announced in 1997. The median cash flow
multiple for these transactions was 12.9x in 1996 and 13.0x in 1997. Morgan
Stanley noted that certain of these transactions involved companies that had
lower current operating margins than the Company, and certain of these
transactions were structured as sales of assets (rather than a sale of stock)
and thus conferred additional tax benefits to the buyer in each such
transaction. Based on this analysis, Morgan Stanley derived a range of implied
prices per share of Common Stock, based on a range of 11.5x to 13.5x 1997
estimated BCF for the Company, of $44.43 to $53.14.
No transaction utilized in the precedent transaction analysis is identical
to the Merger. In evaluating the Comparable Transactions, Morgan Stanley made
judgments and assumptions with regard to industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the Company's control, such as the impact of competition on the business
of the Company and the industry generally, industry growth and the absence of
any adverse material change in the financial condition and prospects of the
Company or the industry or in the financial markets in general. Mathematical
analysis (such as determining the average or median) is not in itself a
meaningful method of using comparable transaction data.
Equity Research Analysts' Private Market Value Estimates. Morgan Stanley
reviewed and analyzed the estimated private market values per share of the
Common Stock prepared and published by certain equity research analysts at
Furman Selz L.L.C., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bear
Stearns & Co., Inc., Salomon Brothers Inc., Alex. Brown & Sons, Inc., Smith
Barney, Inc. and CS First Boston Corp. (collectively, the "Analysts") in the
period from January 30, 1997 through July 24, 1997. Such estimates of private
market value, where a numerical value was published, adjusted to reflect an
estimated January 1, 1998 valuation, ranged from a low of $45.00 per share of
Common Stock to a high of $58.16 per share of Common Stock. Morgan Stanley
noted, however, that such Analysts' estimates are not necessarily indicative of
prices at which the Company could actually be sold, and that certain Analysts'
estimates of private market value reflected their view of what price the Company
might potentially be sold to an unrelated third party at an unspecified future
time.
Precedent Public Market Transaction Premiums. Morgan Stanley reviewed and
analyzed the financial terms of, and prices paid by purchasers in, certain
recent transactions involving publicly traded companies in the media industry,
which, in Morgan Stanley's judgment, were deemed to be the most comparable to
the Merger for purposes of this analysis. Morgan Stanley analyzed the premiums
to public market prices paid in these transactions as measured by the price paid
relative to Morgan Stanley's estimate of the "unaffected stock price," adjusted
in certain cases to reflect increases in the broadcasting sector as a whole. The
transactions reviewed for purposes of this analysis included the acquisition of
Park Communications, Inc. ("Park Communications") by Park Acquisitions, the
acquisition of Providence Journal by A. H. Belo, the acquisition of Multimedia,
Inc. by Gannett Co., Inc., the acquisition of Outlet Broadcasting, Inc. by NBC,
the acquisition of CBS, Inc. by Westinghouse Broadcasting Company
("Westinghouse"), the acquisition of New World by News Corp., the acquisition of
Capital Cities/ABC, Inc. by Disney, the acquisition of Citicasters by Jacor, the
acquisition of Renaissance by Tribune, the acquisition of Infinity Broadcasting
Corporation by Westinghouse and the acquisition of Argyle by Hearst. The
premiums in these transactions ranged from a discount of 9% in the case of
Hearst's acquisition of Argyle to a premium of 58% in the case of Park
Acquisitions' acquisition of Park Communications. Based on this analysis, Morgan
Stanley derived a range of
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implied prices for the Common Stock based on a premium of 15% to 35% to an
implied unaffected public market trading price of $36.80 per share of the Common
Stock (based on an average of the prices implied by the comparable company
trading multiples) of $42.32 to $49.68 per share of the Common Stock. Morgan
Stanley noted that the Merger Consideration would represent a premium of 29% to
such implied unaffected public market trading price and that it represented a
discount of approximately 1% to the closing price of $47.75 on August 8, 1997.
Morgan Stanley further indicated, however, that the price per share of Common
Stock had recently risen and that equity research analysts' commentary indicated
their view that the Common Stock price reflected some degree of speculation
regarding any possible outcome subject to the PMVG Agreement.
No transaction utilized in the precedent public market transaction premium
analysis is identical to the Merger. In evaluating the precedent transactions,
Morgan Stanley made judgments and assumptions with regard to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the Company's control, such as the
impact of competition on the business of the Company and the industry generally,
industry growth and the absence of any adverse material change in the financial
condition and prospects of the Company or the industry or in the financial
markets in general. Mathematical analysis (such as determining the average or
median) is not in itself a meaningful method of using precedent transaction
data.
Discounted Cash Flow Analysis. Morgan Stanley conducted a discounted cash
flow analysis for the Company's existing television stations (assuming no
additional station acquisitions) in order to estimate the present value of the
unlevered free cash flows that could be generated by such stations. Morgan
Stanley derived a range of discounted cash flow values by calculating the
estimated present value as of December 31, 1997 of projected unlevered free cash
flow for the Company for the calendar years 1998 through 2002 and a terminal
value based on a multiple of EBITDA projected for the year 2002. Such analysis
was based on certain assumptions, including (i) management's projected
performance for the stations; (ii) exit multiples of 9.0x to 11.0x EBITDA
projected for the year 2002; (iii) a discount rate of 10% to 12% and (iv)
certain other assumptions. Based on this analysis, Morgan Stanley derived a
range of discounted cash flow values of $40.11 to $51.93 per share of Common
Stock.
Financial Advisor's Engagement. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to a partial analysis or
summary description. In arriving at its opinion, Morgan Stanley considered the
results of all of its analyses as a whole and did not attribute any particular
weight to any particular analysis or factor considered by it. Furthermore,
selecting any portion of Morgan Stanley's analyses, without considering all
analyses, would create an incomplete view of the process underlying the Morgan
Stanley Opinion. In addition, Morgan Stanley may have deemed various assumptions
more or less probable than other assumptions, so that the ranges of valuations
resulting from any particular analysis as described above should not be taken to
be Morgan Stanley's view of the actual value of the Company.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and other matters, many of
which are beyond the control of the Company. The analyses performed by Morgan
Stanley are not necessarily indicative of actual values, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as a part of Morgan Stanley's analysis of the
fairness of the Merger Consideration from a financial point of view to the
holders of shares of the Common Stock and were provided to the Board of
Directors of the Company in connection with the delivery of the Morgan Stanley
Opinion. The analyses do not purport to be appraisals or to reflect the prices
at which the Company might actually be sold. Because such estimates are
inherently subject to uncertainty, neither the Company, Morgan Stanley nor any
other person assumes responsibility for their accuracy. In addition, as
described above, each of the Morgan Stanley Opinion and Morgan Stanley's
presentations to the Company's Board of Directors on August 11 and 12, 1997 and
October 21, 1997, respectively, was one of many factors taken into consideration
by the Board of Directors in making its determination to approve the Merger.
Morgan Stanley is an internationally recognized investment banking and
financial advisory firm. Morgan Stanley, as part of its investment banking
business, is continuously engaged in the valuation of businesses and
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securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. Morgan Stanley is a full-service securities firm engaged in securities
trading and brokerage activities, as well as providing investment banking,
financing and financial advisory services. In the ordinary course of its trading
and brokerage activities, Morgan Stanley or its affiliates may at any time hold
long or short positions, and may trade or otherwise effect transactions, for its
own account or the accounts of customers, in debt or equity securities or senior
loans of the Company or Holdings, or AT&T or their respective affiliates. In the
past, Morgan Stanley and its affiliates have provided financial advisory or
financing services to certain affiliates of Hicks Muse, an affiliate of Holdings
and Acquisition Sub, and AT&T, and have received customary fees for the
rendering of these services.
Financial Advisor Fees. Pursuant to a letter agreement dated August 12,
1997, the Company has agreed to pay Morgan Stanley a transaction fee equal to
the sum of (i) $6.25 million and (ii) .375% of the aggregate consideration under
the Merger Agreement which exceeds the aggregate consideration under the
Original Merger Agreement, calculated as if the transaction contemplated under
the Original Merger Agreement closed on the date the Merger closes. The Company
agreed to pay 20% of this fee when Morgan Stanley was prepared to render the
Morgan Stanley Opinion to the Board of Directors of the Company, and 40% of this
fee upon approval and adoption of the Merger Agreement by a vote of the
shareholders of the Company. The balance of the fee is payable when the Merger
is consummated. In addition to the foregoing compensation, the Company has
agreed to reimburse Morgan Stanley for its expenses, including reasonable
out-of-pocket fees and expenses of its counsel, and to indemnify Morgan Stanley
for liabilities and expenses arising out of the engagement and the transactions
in connection therewith, including liabilities under federal securities laws.
THE VENTURE
Concurrently with the execution of the Merger Agreement Amendment, Holdings
and NBC entered into a binding letter agreement (the "HM/NBC Letter Agreement")
which contemplates the formation of a Venture (as defined under "The Merger
Agreement -- Conduct of Business Pending the Merger") to hold KXAS-TV, in
Dallas, TX (which is currently owned by the Company) and KNSD-TV, in San Diego,
CA (which is currently owned by NBC). NBC will hold a majority interest in the
Venture and manage both stations. In a consent letter delivered to the Company
at the time of the execution of the Merger Agreement Amendment, NBC has agreed
to keep its affiliation agreements with the Company in effect following the
completion of the Merger, subject to the Company complying with its obligations
under the Merger Agreement relating to the establishment of the Venture.
The Company is not a party to the HM/NBC Letter Agreement, but pursuant to
the terms of the Merger Agreement Amendment has agreed to take certain actions
to facilitate the transactions described therein if requested to do so by
Holdings. Whether or not the transactions contemplated by the HM/NBC Letter
Agreement are consummated, the material terms of the Merger and the Merger
Agreement (including the Merger Consideration) will not change; provided that if
the transactions contemplated thereby are entered into, the financing of the
commitments under the Commitment Letters will be reduced and an additional
financing commitment from General Electric Capital Corporation or one of its
affiliates will be delivered by Holdings to the Company. In the event that the
Merger does not become effective within 24 hours after the assets are
transferred to the Venture, the HM/NBC Letter Agreement contains provisions
allowing the Company to require that the Venture be unwound and that NBC
indemnify the Company for any damages or losses the Company incurs. See "The
Merger Agreement -- Conduct of Business Pending the Merger" and "-- Financing"
for additional discussion regarding the Venture and its effects on the Company.
THE MERGER CONSIDERATION WILL BE THE SAME WHETHER OR NOT THE TRANSACTIONS
CONTEMPLATED BY THE HM/NBC LETTER AGREEMENT ARE CONSUMMATED. BECAUSE THE
BUSINESS OF THE VENTURE WILL NOT COMMENCE UNTIL AFTER THE EFFECTIVE TIME, THE
CURRENT SHAREHOLDERS OF THE COMPANY WILL NOT DERIVE ANY BENEFITS FROM THE
VENTURE.
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ACCOUNTING TREATMENT
The Merger will be accounted for as a "purchase", as such term is used
under generally accepted accounting principles, for accounting and financial
reporting purposes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING DISCUSSION SETS FORTH THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER APPLICABLE TO SHAREHOLDERS THAT HOLD THEIR SHARES AS
CAPITAL ASSETS WITHIN THE MEANING OF SECTION 1221 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED. HOWEVER, SUCH DISCUSSION DOES NOT ADDRESS ALL FEDERAL
INCOME TAX CONSIDERATIONS THAT MAY BE RELEVANT TO PARTICULAR SHAREHOLDERS WHO
ARE DEALERS IN SECURITIES, FOREIGN PERSONS OR SHAREHOLDERS WHO ACQUIRED THEIR
SHARES IN CONNECTION WITH STOCK OPTIONS OR STOCK PURCHASE WARRANTS. EACH
SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR TO DETERMINE THE TAX
CONSEQUENCES TO HIM OR HER OF THE MERGER IN LIGHT OF HIS OR HER OWN PARTICULAR
CIRCUMSTANCES, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND
FOREIGN INCOME TAX AND OTHER TAX LAWS AND POSSIBLE CHANGES IN SUCH TAX LAWS
(WHICH MAY HAVE RETROACTIVE EFFECT).
The receipt of cash for shares of Common Stock in the Merger or pursuant to
the exercise of dissenters' appraisal rights will be a taxable transaction for
Federal income tax purposes and may also be a taxable transaction under
applicable state, local, foreign or other tax laws. Generally, a shareholder
will recognize gain or loss for such purposes equal to the difference between
the cash received in connection with the Merger and such shareholder's tax basis
for the shares of Common Stock such shareholder owned immediately prior to the
Effective Time. For Federal income tax purposes, such gain or loss will be a
capital gain or loss if the shares of Common Stock are a capital asset in the
hands of the shareholder. Any Additional Amounts should be taken into account in
determining such capital gain or loss, although the Internal Revenue Service
could take the position that such Additional Amounts are ordinary interest
income. Under recently enacted legislation, capital gains of individuals derived
in respect of capital assets held for more than one year are eligible for
reduced rates of taxation depending upon the holding period of such capital
assets. Shareholders should consult their own tax advisors with respect to the
tax consequences of the new legislation. There are limitations on the
deductibility of capital losses.
INTERESTS OF CERTAIN PERSONS IN THE MERGER AND RELATED TRANSACTIONS
In considering the recommendations of the Board of Directors, shareholders
should be aware that certain members of the Company's Board of Directors and
certain executive officers of the Company have certain interests in the Merger
that are in addition to the interests of the Company's shareholders generally.
AT&T. One of the reasons for the decision by the Board of Directors to
seek a buyer for the Company was the strong interest of AT&T to be a seller of
its Common Stock if an acceptable transaction was available. AT&T had indicated
that it did not view television broadcasting as a core business. While the
Company was exploring a strategy of growth through acquisition, AT&T, in light
of the high valuations which were being placed on television broadcasting
properties, was evaluating alternatives which could result in the disposition,
either through private or public sales, of some or all of the shares of Common
Stock held by it. If the Merger is consummated, AT&T, in its capacity as a
shareholder of the Company, will receive approximately $754,356,525 for the AT&T
Shares (assuming the Merger becomes effective as of May 1, 1998). In addition,
whether or not the Merger is consummated, AT&T, as the owner of WOOD-TV, will
also receive a net purchase price of approximately $122.5 million, plus certain
additional amounts, upon the consummation of the sale of certain assets pursuant
to the WOOD-TV Asset Purchase Agreement. Messrs. Carey, Chapman, Bodman,
Daniell, Harris and Swenson, the AT&T Board Nominees, were nominated for
election by and serve at the request of AT&T. See "Other Agreements -- WOOD-TV
Asset Purchase Agreement".
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<PAGE> 45
Stock Options. As of the Record Date, the directors and executive officers
of the Company owned an aggregate of 38,367 shares (less than 1% of the
outstanding shares) of Common Stock and had Options to acquire an aggregate of
1,408,941 shares (58% of the outstanding Options) of Common Stock.
The directors and executive officers of the Company who own Common Stock
will receive the Merger Consideration in exchange for each share of Common Stock
owned, and those who hold Options to purchase Common Stock will receive a cash
payment equal to the difference between the Merger Consideration and the
applicable Option exercise price. The table below identifies such directors and
executive officers, the number of shares owned, the number of Options owned and
the cash payments to be received by each in respect of such ownership. For
purposes of calculating the cash payments to be received by directors and
officers, it has been assumed that the Merger will be consummated as of May 1,
1998, so that the aggregate Merger Consideration per share of Common Stock will
be $55.90.
<TABLE>
<CAPTION>
NO. CASH FOR CASH FOR
NAME NO. SHARES(1) OPTIONS(2) SHARES OPTIONS TOTAL CASH
- ------------------------------------ ------------- ---------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Dennis J. Carey, Director, Chairman
of the Board(3)................... -- -- -- -- --
Gary R. Chapman, Director, President
& CEO(3)(4)(5).................... 12,976 571,110 $725,359 $15,582,397 $16,307,756
Richard S. Bodman, Director(3)...... -- 12,500 -- 278,750 278,750
James D. Daniell, Director(3)....... -- -- -- -- --
Errol A. Harris, Director(3)........ -- -- -- -- --
William G. Herbster, Director(6).... 1,740 17,500 97,266 437,000 534,266
Roy M. Huhndorf, Director(7)........ -- 17,500 -- 437,000 437,000
Wilma H. Jordan, Director........... 289 17,500 16,156 437,000 453,156
Richard W. Kislik, Director......... 4,205 17,500 235,060 437,000 672,060
Gary A. Swenson, Director(3)........ -- -- -- -- --
Paul Karpowicz, Vice President --
Television(8)..................... 3,696 182,957 206,607 4,593,679 4,800,285
Deborah R. Jacobson, Vice
President -- Corporate Development
& Treasurer....................... 3,547 131,000 198,278 2,968,500 3,166,778
C. Robert Ogren, Vice President --
Engineering and Operations........ 800 122,985 44,727 3,024,923 3,069,643
Denise M. Parent, Vice President --
Deputy General Counsel............ -- 12,000 -- 171,300 171,300
Peter E. Maloney, Vice President --
Finance........................... 9,030 129,889 504,778 3,307,946 3,812,723
Gregory M. Schmidt, Vice
President -- New Development,
General Counsel & Secretary....... 2,084 176,500 116,496 4,080,045 4,196,541
</TABLE>
- ---------------
(1) The number of shares of Common Stock is as of November 17, 1997. The number
of shares of Common Stock for Ms. Jacobson and Messrs. Chapman, Karpowicz,
Maloney, Ogren & Schmidt will increase with monthly purchases made pursuant
to the Company's Employee Stock Purchase Plan.
(2) The number of options set forth above represents all unexercised options
held by each officer and director of the Company as of the date of this
Proxy Statement. Pursuant to the Merger Agreement, all such options
outstanding immediately prior to the Effective Time shall no longer be
exercisable but shall entitle each holder thereof (subject to applicable
withholding taxes), in cancellation and settlement therefor, to a cash
payment at the Effective Time equal to (x) the excess, if any, of the Merger
Consideration over the exercise price of each such option held by the
holder, whether or not then vested or exercisable, multiplied by (y) the
number of shares of Common Stock subject to such option.
(3) Messrs. Carey, Chapman, Bodman, Daniell, Harris and Swenson were nominated
by and serve as directors at the request of AT&T. Messrs. Carey, Bodman,
Daniell, Harris and Swenson are current or retired officers or employees of
AT&T.
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<PAGE> 46
(4) Mr. Chapman shares with his wife voting and investment power with respect to
26 shares of Common Stock.
(5) Includes 200 shares held by Mr. Chapman's children.
(6) Includes 1,740 shares held by Mr. Herbster's wife.
(7) Mr. Huhndorf was nominated by and serves at the request of Cook Inlet.
(8) Includes 200 shares held by Mr. Karpowicz's children.
(9) Certain officers and directors own shares of AT&T, but none owns shares
representing more than 1% of AT&T.
Severance Arrangements. The Company is a party to an employment agreement
with Gary R. Chapman and severance compensation agreements with Gary R. Chapman,
Gregory M. Schmidt, Paul Karpowicz, Deborah R. Jacobson, Peter E. Maloney, C.
Robert Ogren and Denise M. Parent. Each of these agreements provides that upon
the termination under certain circumstances of the executive officer's
employment following a "Change in Control" transaction such as the Merger, the
executive officer party thereto shall be entitled to among other things a
lump-sum payment (the "Severance Payment"). The Severance Payments for each of
Messrs. Chapman, Schmidt, Karpowicz, Maloney and Ogren and Ms. Jacobson are (i)
2 times the executive's annual base salary in effect on the day the executive is
given notice of termination, (ii) 2 times the bonus paid to the executive with
respect to the last fiscal year, (iii) 2 times the contribution, if any, paid by
the Company for the benefit of the executive to any 401(k) plan in the last
complete fiscal year, and (iv) the present value of the sum of certain benefits
that have accrued but not vested under various Company benefit plans. Until
January 1, 1998, Ms. Parent's Severance Payment is equal to the sum of (i) Ms.
Parent's annual base salary on the day she is given notice of termination, (ii)
the target bonus compensation set forth in a certain letter of December 1996,
(iii) the contribution, if any, paid by the Company for the benefit of Ms.
Parent to any 401(k) plan in the last complete fiscal year, and (iv) the present
value of the sum of certain benefits that have vested but not accrued under
various Company benefit plans. After January 1, 1998, Ms. Parent's Severance
Payment will be calculated in the same manner as those for the other officers
listed above. The total estimated payment for each of Messrs. Chapman, Schmidt,
Karpowicz, Maloney and Ogren and Mses. Jacobson and Parent under their severance
compensation agreements with the Company are $1,273,228, $878,520, $806,795,
$460,000, $468,069, $526,063 and $312,728, respectively, which amounts may
increase to reflect changes in salary or bonus made in the ordinary course of
business, and the total estimated amount payable to each of such persons in
connection with the cancellation of their options are set forth in the preceding
table.
Initial Officers of the Surviving Corporation. It is expected that the
current officers of the Company will be the initial officers of the Surviving
Corporation.
Directors and Officers Indemnification. In the Merger Agreement, the
Surviving Corporation has agreed that it will exculpate, indemnify and hold
harmless the present and former employees, officers, agents and directors of the
Company and its Subsidiaries in respect of acts or omissions occurring prior to
the Effective Time to the same extent such persons are exculpated and
indemnified by the Company pursuant to the Company's certificate of
incorporation and bylaws for any act or omission occurring at or prior to the
Effective Time. The Surviving Corporation has agreed that it will provide, for
an aggregate period of not less than six years from the Effective Time, the
directors and officers of the Company or any of its subsidiaries who are
currently covered by the Company's existing insurance and indemnification policy
an insurance and indemnification policy that provides coverage for events
occurring prior to the Effective Time (the "D&O Insurance") that is no less
favorable than the Company's existing policy or, if substantially equivalent
insurance coverage is unavailable, the best available coverage; provided that
the Surviving Corporation shall not be required to pay an annual premium for the
D&O Insurance in excess of 200 percent of the last annual premium paid prior to
the date hereof, but in such case shall purchase as much coverage as possible
for such amount; provided further, that the Surviving Corporation shall not be
obligated to provide such insurance if the Company or the Surviving Corporation
shall have obtained for the benefit of the directors and officers of the Company
and its subsidiaries who are covered by the Company's existing insurance and
indemnification
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<PAGE> 47
policy a prepaid policy that provides coverage for the six year period for
events occurring prior to the Effective Time that is no less favorable than the
Company's existing policy.
REGULATORY FILINGS AND APPROVALS
FCC Regulation of Broadcast Stations; FCC Approval Process. Television
broadcast stations are subject to the jurisdiction of the FCC under the
Communications Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Communications Act"). The Communications Act
prohibits the operation of television broadcast stations except under licenses
issued by the FCC. The Communications Act further prohibits the assignment of a
television broadcast station license or the transfer of control of a television
broadcast station licensee without the prior approval of the FCC. The Company,
through subsidiaries, holds licenses for eight television broadcast stations and
programs substantially all of the broadcast time of four other television
broadcast stations pursuant to LMAs. Because the Merger will result in the
transfer of control for purposes of the Communications Act of the licenses held
by the Company's subsidiaries, the prior approval of the FCC is necessary before
the Merger may be consummated.
Upon the filing of an application for consent to the transfer of control of
a broadcast station licensee, the FCC will release an official public notice of
the filing of the application. Interested parties have a period of 30 days
following release of the public notice in which to petition to deny such
application. Applications for approval of the transfer of control of the Company
to Holdings and its controlling persons on FCC Form 315 were filed with the FCC
on September 10, 1997 (the "FCC Application"). Public notice of the filing was
released by the FCC on September 24, 1997. Any petitions to deny the
applications were required to be filed with the FCC on or before October 24,
1997. To the Company's knowledge, no petitions to deny the FCC Application have
been filed with the FCC as of the date of this Proxy Statement. Applications
relating to the transfer of control of certain non broadcast licenses held by
the Company (through its subsidiaries) also have been filed with the FCC.
In reviewing an application for its approval to a transfer of control, the
FCC considers whether such transfer will serve the public interest, convenience
and necessity, as well as whether the proposed transferee has the requisite
legal, financial, technical and other qualifications to operate the licensed
entities. Following the grant of FCC approval with respect to such a transfer,
the transaction may be consummated by the parties. Any "person who is aggrieved
or whose interests are adversely affected" (as such terms are defined in Section
402(b) of the Communications Act) may appeal the FCC's approval of the transfer
to the United States Court of Appeals for the District of Columbia Circuit. In
addition, under certain circumstances the FCC may reconsider such approval at
the request of a third party or on its own motion. In the event the parties to
the proposed transfer determine to consummate the transaction prior to the
deadline for the filing of an appeal or for reconsideration by the FCC on its
own motion or prior to the completion of any FCC or judicial review proceedings,
they assume the risk that the FCC's approval could be reversed or modified by
the FCC or a reviewing court.
The FCC Application requests two waivers of the FCC's television duopoly
rule, which prohibits common ownership or control of two or more television
broadcast stations serving overlapping geographic areas. The first results from
the overlap of television broadcast signal contours of the Company's Buffalo,
New York station, WIVB-TV, and that of WROC-TV, a Rochester, New York station
licensed to a subsidiary of Sunrise Television Partners, an entity whose
ownership is attributed to Holdings by the FCC's rules. The second is required
because of signal contour overlaps of the Company's television broadcast station
licensed to Austin, Texas, and its satellite station licensed to Llano, Texas.
The FCC Application requests waivers of the FCC's one-to-a-market rule,
which prohibits common ownership of television and radio broadcast stations
serving overlapping geographic areas. These requests result from the fact that
the communities of license of various radio broadcast stations licensed to
entities whose ownership is attributed to Holdings are located within the
relevant signal contours of the Company's television broadcast stations.
In each of these cases, a waiver is required to permit Holdings to retain
ownership of all the overlapping properties, either permanently, though in
certain instances subject to the outcome of pending rulemakings
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<PAGE> 48
(described below), or, in the alternative, for a temporary period post-Merger to
permit orderly divestitures necessary for compliance.
Proposed Regulations. The FCC has pending rulemakings looking towards
amendment of various of its media ownership rules, including the television
duopoly rule and the one-to-a-market rule. Among the issues under consideration
in these rulemakings are whether LMAs such as those operated by the Company
should for the first time be deemed attributable ownership interests for
purposes of these rules, if so, whether otherwise prohibited LMAs should
nonetheless be permitted because, e.g., they were entered into prior to the
proposed rule change ("grandfathered"), and the extent to which grandfathered
LMAs can be transferred without losing their exempt status. The FCC could
resolve these issues prior to consummation of the Merger in a manner which
requires material modification or termination of the Company's LMAs.
License Grant and Renewal. License renewals filed after 1996 will be
customarily granted for terms of eight years. At the time an application is made
for renewal of a television station license, parties in interest may file
petitions to deny the application, and such parties, including members of the
public, may comment upon the service the station has provided during the
preceding license term. Under the Communications Act, broadcast licenses are
required to be renewed by the FCC if it finds that: (i) the station has served
the public interest, convenience and necessity; (ii) there have been no serious
violations of either the Communications Act or the FCC's rules and regulations
by the licensee; and (iii) there have been no violations which, taken together,
constitute a pattern of abuse. Pursuant to Section 307(c)(3) of the
Communications Act, a station's license continues in effect pending final action
on the renewal application by the FCC. If a station's application for license
renewal is denied, other parties may thereafter file applications for FCC
authorization to operate a station on the same frequency.
In the vast majority of cases, broadcast licenses are renewed by the FCC
even when petitions to deny are filed against license renewal applications.
Currently, the Company has pending an application for renewal of the license of
WAND-TV in Decatur, Illinois, which was filed on or about August 1, 1997. The
Company is not required to file any other license renewal applications prior to
the Termination Date except for renewal applications for KXAS-TV in Fort Worth
Texas, KXAN-TV in Austin, Texas and KXAM-TV in Llano, Texas, all which must be
filed on or before April 1, 1998.
Under normal procedures, the FCC will not grant its consent to the transfer
of control of a licensee that is the subject of a pending application for
renewal of one or more of its licenses. Accordingly, the Company anticipates
that the FCC will act upon the WAND-TV renewal application before or
contemporaneously with the FCC Application. Under certain circumstances, the FCC
will permit a multi-station transaction, such as the proposed Merger, to proceed
while a renewal application remains pending, provided the parties agree, as they
have so represented in the FCC Applications, to accept the consequences of any
action the FCC may take on the renewal application.
Following the earlier of the consummation of the Merger or the termination
of the Merger Agreement, the Company will join in an application requesting FCC
consent to the assignment of license of WOOD-TV to the Company. See "Other
Agreements -- WOOD-TV Asset Purchase Agreement". The Company has also joined in
FCC applications filed on October 27, 1997 requesting FCC consent to the
assignment of the FCC Licenses of KXAS-TV to the Venture.
There can be no assurance that approval of the FCC Application will be
forthcoming. It is possible that the FCC could deny the FCC Application, grant
it subject to selective pre-Merger or post-Merger divestiture requirements, or
otherwise attach conditions to its approval. Such divestiture requirements or
other conditions may be more extensive than those which Holdings and Acquisition
Sub have agreed to in the Merger Agreement and may result in the termination of
the Merger Agreement. The Company cannot predict the timing or outcome of the
FCC approval process.
Antitrust. Under the HSR Act and the rules promulgated thereunder by the
Federal Trade Commission (the "FTC"), the Merger may not be consummated until
notifications have been given and certain information has been furnished to the
Antitrust Division of the U.S. Department of Justice (the "Antitrust Division")
and the FTC and specified waiting period requirements have been satisfied. The
Company and
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<PAGE> 49
Holdings each filed with the Antitrust Division and the FTC a Notification and
Report Form for certain Mergers and Acquisitions (the "Notification and Report
Form") with respect to the Merger on September 10, 1997. On September 19, 1997,
the FTC orally confirmed that a request for early termination of the applicable
waiting period had been granted effective as of such date.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Merger. At any time before or
after the Special Meetings, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the Merger or seeking the divestiture of
substantial assets of the Company or its subsidiaries or Holdings or its
affiliates.
In addition, state antitrust authorities may also bring legal action under
state antitrust laws. Such action could include seeking to enjoin the
consummation of the Merger or seeking divestiture of certain assets of the
Company or Holdings and its affiliates. Private parties may also seek to take
legal action under the antitrust laws under certain circumstances. There can be
no assurance that a challenge to the Merger on antitrust grounds will not be
made or, if such a challenge is made, of the result thereof.
APPRAISAL RIGHTS
Record holders of shares of Common Stock are entitled to appraisal rights
under Section 262 of the DGCL in connection with the Merger. The following
discussion is not a complete statement of the law pertaining to appraisal rights
under the DGCL and is qualified in its entirety by reference to the full text of
Section 262 which is reprinted in its entirety as Annex G to this Proxy
Statement. Except as set forth herein and in Annex G, holders of shares of
Common Stock will not be entitled to appraisal rights in connection with the
Merger.
Under the DGCL, record holders of Common Stock who follow the procedures
set forth in Section 262 and who have not voted in favor of the Merger will be
entitled to have their shares of Common Stock appraised by the Delaware Court of
Chancery and to receive payment of the "fair value" of such shares, exclusive of
any element of value arising from the accomplishment or expectation of the
Merger, together with a fair rate of interest, as determined by such court.
Under Section 262, where a merger agreement is to be submitted for adoption
at a meeting of shareholders, as in the case of the Special Meeting, not less
than 20 days prior to such meeting, the Company must notify each of the holders
of Common Stock at the close of business on the record date for such meeting
that such appraisal rights are available and include in each such notice a copy
of Section 262. This Proxy Statement constitutes such notice for purposes of the
Special Meeting. Any shareholder of record who wishes to exercise appraisal
rights should review the following discussion and Annex C carefully because
failure timely and properly to comply with the procedures specified in Section
262 will result in the loss of appraisal rights under the DGCL.
A holder of Common Stock wishing to exercise appraisal rights must deliver
to the Company, before the vote on the approval and adoption of the Merger
Agreement at the Special Meeting, a written demand for appraisal of such
holder's shares of Common Stock. In addition, a holder of Common Stock wishing
to exercise appraisal rights must hold of record such Common Stock on the date
the written demand for appraisal is made and must continue to hold such Common
Stock through the Effective Time.
Only a holder of record of Common Stock is entitled to assert appraisal
rights for the shares of Common Stock registered in that holder's name. A demand
for appraisal should be executed by or on behalf of the holder of record fully
and correctly, as the holder's name appears on the stock certificates.
If shares of Common Stock are owned of record in a fiduciary capacity, such
as by a trustee, guardian or custodian, execution of the demand for appraisal
should be made in that capacity, and if the shares of Common Stock are owned of
record by more than one person, as in a joint tenancy or tenancy in common, the
demand should be executed by or on behalf of all joint owners. An authorized
agent, including one for two or more joint owners, may execute the demand for
appraisal on behalf of a holder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in executing the
demand, he or
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<PAGE> 50
she is acting as agent for such owner or owners. A record holder such as a
broker who holds shares of Common Stock as nominee for several beneficial owners
may exercise appraisal rights with respect to the shares of Common Stock held
for one or more beneficial owners while not exercising such rights with respect
to the shares of Common Stock held for other beneficial owners; in such case,
the written demand should set forth the number of shares of Common Stock as to
which appraisal is sought and where no number of shares of Common Stock is
expressly mentioned the demand will be presumed to cover all shares of Common
Stock held in the name of the record owner. Holders of shares of Common Stock
who hold their shares in brokerage accounts or other nominee forms and who wish
to exercise appraisal rights are urged to consult with their brokers to
determine the appropriate procedures for the making of a demand for appraisal by
such nominee. All written demands for appraisal of shares of Common Stock should
be delivered to LIN Television Corporation, Four Richmond Square, Suite 200,
Providence, Rhode Island, 02906, Attention: Corporate Secretary, so as to be
received before the vote on the approval and adoption of the Merger Agreement
and the Merger at the Special Meeting.
Within 10 days after the Effective Time, the Company, as the Surviving
Corporation, must send a notice as to the effectiveness of the Merger to each
person who has satisfied the appropriate provisions of Section 262. Within 120
days after the Effective Time, but not thereafter, the Surviving Corporation or
any such shareholder who has satisfied the foregoing conditions and is otherwise
entitled to appraisal rights under Section 262, may file a petition in the
Delaware Court of Chancery demanding a determination of the fair value of the
shares of Common Stock held by such shareholder. If no such petition is filed,
appraisal rights will be lost for all shareholders who had previously demanded
appraisal of their shares of Common Stock. Shareholders of the Company seeking
to exercise appraisal rights should assume that the Surviving Corporation will
not file a petition with respect to the appraisal of the value of shares of
Common Stock and that the Surviving Corporation will not initiate any
negotiations with respect to the "fair value" of shares of Common Stock.
Accordingly, shareholders of the Company who wish to exercise their appraisal
rights should regard it as their obligation to take all steps necessary to
perfect their appraisal rights in the manner prescribed in Section 262.
Within 120 days after the Effective Time, any record holder of shares of
Common Stock who has complied with the provisions of Section 262 will be
entitled, upon written request, to receive from the Surviving Corporation a
statement setting forth the aggregate number of shares of Common Stock not voted
in favor of approval of the Merger Agreement and with respect to which demands
for appraisal were received by the Company, and the number of holders of such
shares of Common Stock. Such statement must be mailed within ten days after the
written request therefore has been received by the Surviving Corporation or
within ten days after expiration of the time for delivery of demands for
appraisal under Section 262, whichever is later.
If a petition for appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the holders of shares of
Common Stock entitled to appraisal rights and will appraise the "fair value" of
the shares of Common Stock, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
Holders considering seeking appraisal should be aware that the fair value of
their shares of Common Stock as determined under Section 262 could be more than,
the same as or less than the value of the Merger Consideration that they would
otherwise receive if they did not seek appraisal of their shares of Common
Stock. The Delaware Supreme Court has stated that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community are otherwise admissible in court" should be considered in the
appraisal proceedings. In addition, Delaware courts have decided that the
statutory appraisal remedy, depending on factual circumstances, may or may not
be a dissenter's exclusive remedy. The Court will also determine the amount of
interest, if any, to be paid upon the amounts to be received by persons whose
shares of Common Stock have been appraised. The costs of the action may be
determined by the Court and taxed upon the parties as the Court deems equitable.
The Court may also order that all or a portion of the expenses incurred by any
holder of shares of Common Stock in connection with an appraisal, including
without limitation, reasonable attorneys' fees and the fees and expenses of
experts utilized
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<PAGE> 51
in the appraisal proceeding, be charged pro rata against the value of all of the
shares of Common Stock entitled to appraisal.
Any shareholder of the Company who has duly demanded an appraisal in
compliance with Section 262 will not, after the Effective Time, be entitled to
vote his or her shares of Common Stock for any purpose nor, after the Effective
Time, be entitled to the payment of dividends or other distributions thereon.
If no petition for an appraisal is filed within the time provided, or if a
shareholder of the Company delivers to the Surviving Corporation a written
withdrawal of his or her demand for an appraisal and an acceptance of the
Merger, within 60 days after the Effective Time or with the written approval of
the Surviving Corporation thereafter, then the right of such shareholder to an
appraisal will cease and such shareholder shall be entitled to receive the
Merger Consideration, without interest, as if he or she had not demanded
appraisal of his or her shares of Common Stock. No pending appraisal proceeding
in the Court of Chancery will be dismissed as to any shareholder without the
approval of the Court, which approval may be conditioned on such terms as the
Court deems just.
SHAREHOLDERS DESIRING TO EXERCISE THEIR APPRAISAL RIGHTS MUST NOT VOTE IN
FAVOR OF THE MERGER AND SHOULD STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
SECTION 262 OF THE DGCL. FAILURE TO FOLLOW ANY OF SUCH PROCEDURES MAY RESULT IN
A TERMINATION OR WAIVER OF APPRAISAL RIGHTS UNDER SECTION 262 OF THE DGCL.
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<PAGE> 52
THE MERGER AGREEMENT
The following describes material terms of the Merger Agreement. A composite
conformed copy of the Merger Agreement is attached to this Proxy Statement as
Annex A and is incorporated herein by reference. The description of the Merger
Agreement set forth below is qualified in its entirety by reference thereto.
Shareholders are urged to read the Merger Agreement in its entirety.
EFFECT OF THE MERGER
The Merger will be effective as of the date and time of filing of a
Certificate of Merger with the Secretary of State of the State of Delaware, or
such later time as is specified therein, in accordance with the DGCL (the
"Effective Time"). The Merger Agreement provides that such filing will be made
as soon as practicable following the satisfaction or waiver of the conditions
stated in the Merger Agreement. At the Effective Time, each outstanding share of
Common Stock (other than shares of Common Stock held by the Company, Holdings,
Acquisition Sub, any of their respective subsidiaries and Dissenting Shares)
will be converted into the right to receive the Merger Consideration.
If the Merger is consummated, the Company's shareholders will not have an
opportunity to continue their equity interest in the Company as an ongoing
corporation and, therefore, will not share in future earnings and growth, if
any, of the Company. If the Merger is consummated, public trading of the Common
Stock will cease, the Common Stock will cease to be quoted on the NMS, and the
registration of the Common Stock under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") will be terminated. As a result, the Surviving
Corporation will be relieved of the duty to file informational reports under the
Exchange Act in respect of the Common Stock.
PAYMENT FOR SHARES AND SURRENDER OF SHARE CERTIFICATES
As a result of the Merger, holders of certificates formerly evidencing
shares of Common Stock will cease to have any equity interest in the Company. As
soon as reasonably practicable after the Effective Time, a letter of transmittal
containing instructions with respect to the surrender of certificates previously
representing shares of Common Stock will be furnished to each record holder of
Common Stock. The letter of transmittal will set forth the procedure for
surrendering such certificates for exchange to the Paying Agent. After the
Effective Time and until surrendered, each stock certificate which represented
shares of Common Stock (other than shares of Common Stock held by the Company,
Holdings, Acquisition Sub, any of their respective subsidiaries and Dissenting
Shares) will evidence only the right to receive the Merger Consideration for
each Share represented. In order to receive the Merger Consideration to which a
holder of shares of Common Stock will be entitled as a result of the Merger,
such holder will be required, following the Effective Time, to surrender his
stock certificate(s), together with a duly executed and properly completed
letter of transmittal (and any other required documents), to the Paying Agent.
SHAREHOLDERS SHOULD SURRENDER CERTIFICATES REPRESENTING SHARES OF COMMON STOCK
ONLY WITH A LETTER OF TRANSMITTAL. SHAREHOLDERS SHOULD NOT SEND ANY STOCK
CERTIFICATES WITH THE ENCLOSED PROXY CARD. Thereafter, the shareholder will
receive as promptly as practicable in exchange therefor the Merger
Consideration. No interest will be paid on the cash payable upon the surrender
of such certificate(s).
After the Effective Time there will be no transfers of Common Stock on the
stock transfer books of the Company. If, after the Effective Time, certificates
theretofore representing shares of Common Stock are presented for transfer, they
will be cancelled and exchanged for the Merger Consideration pursuant to the
terms of the Merger Agreement.
No transfer taxes will be payable in connection with any such payment for
shares of Common Stock, except that if the check for such payment is to be
delivered to a person other than the person in whose name the certificates
surrendered are registered, the person requesting delivery of the check must,
prior to the delivery thereof, either (a) pay to the Paying Agent any resulting
transfer taxes or other taxes or (b) establish to the satisfaction of the Paying
Agent that such tax has been paid or is not applicable.
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At any time following six months after the Effective Time, Holdings will be
entitled to require the Paying Agent to deliver to it or to the Surviving
Corporation any funds which have not been disbursed to holders of stock
certificates (subject to abandoned property, escheat or other similar laws). If
outstanding certificates previously representing shares of Common Stock are not
surrendered prior to six months following the Effective Time and the payment of
the Merger Consideration has not been claimed by such time, the holders of such
certificates will have to look only to the Surviving Corporation for payment of
their claim. Notwithstanding the foregoing, neither the Paying Agent nor any
party to the Merger Agreement will be liable to any holder of stock certificates
for any amount paid to a public official pursuant to any applicable abandoned
property, escheat or similar law. Except as otherwise indicated in the
immediately preceding paragraph, Holdings will pay all charges and expenses,
including those of the Payment Agent, in connection with the exchange of the
stock certificates for the Merger Consideration.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of the
Company, Holdings and Acquisition Sub. The representations and warranties of the
Company relate to (i) corporate organization and qualification, (ii)
capitalization, (iii) the authorization, execution, delivery and enforceability
of the Merger Agreement, (iv) consents and approvals under certain agreements
and no violations, (v) licenses necessary for business, (vi) SEC documents and
other reports, (vii) information supplied, (viii) absence of certain changes or
events, (ix) liabilities, (x) absence of litigation, (xi) labor matters, (xii)
employee arrangements and benefit plans, (xiii) payment of taxes and certain
other tax matters, (xiv) ownership and rights to use intellectual property, (xv)
compliance with environmental laws, (xvi) transactions with affiliates, (xvii)
opinions of financial advisors, (xviii) brokers, (xix) material agreements, (xx)
compliance with applicable law, and (xxi) tangible property. The representations
and warranties of Holdings and Acquisition Sub relate to: (i) corporate
organization and qualification, (ii) authority relative to agreements, (iii)
consents and approvals and no violations, (iv) information supplied, (v)
financing, (vi) brokers, (vii) FCC Licenses, (viii) the FCC Application, (ix)
ownership and operations of Holdings and Acquisition Sub, and (x) "attributable
interests" and "meaningful relationships" under FCC rules of affiliates of
Holdings and Acquisition Sub.
Certain representations and warranties require that certain conditions or
events not have a "Material Adverse Effect" on the Company. As defined in the
Merger Agreement, a "Material Adverse Effect" means any event, change or effect
that, individually or together with all other events, changes or effects, is
materially adverse to the properties, business, financial condition or results
of operations of the Company and its subsidiaries taken as a whole (other than
changes in general economic conditions or in economic conditions generally
affecting the television broadcasting industry); provided that Holdings,
Acquisition Sub and the Company have agreed that for purposes of the Merger
Agreement, (i) (provided that the Company has complied with its obligations to
use reasonable best efforts to obtain necessary regulatory approvals and
consents) any modification of, or any payments made or other arrangements
entered into, in connection with obtaining any consent to the transactions
contemplated by the Merger Agreement under any Material Contract (as defined
therein), (ii) (subject to the closing condition relating to LMAs) any
modification or termination of any LMA Agreement to comply with any FCC rule
making proceeding or other action and (iii) any suit, action, claim or
proceeding of any kind brought by or on behalf of any shareholder of the Company
relating to any of the transactions contemplated by the Merger Agreement, the
PMVG Agreement, the Shareholder Agreements or the WOOD-TV Asset Purchase
Agreement, in each case shall not be taken into account in determining whether
there has been or may be a Material Adverse Effect.
CONDUCT OF BUSINESS PENDING THE MERGER
The Company has agreed to conduct its business in the ordinary course prior
to the Effective Time, to use its reasonable best efforts to preserve intact the
business organization of the Company and its subsidiaries, to keep available the
services of the present officers, employees and consultants of the Company and
its subsidiaries and to preserve the present relationships of the Company and
its subsidiaries with customers, suppliers and other persons with which the
Company or any of its subsidiaries has significant business
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relationships. The Company has also agreed neither it nor any of its
subsidiaries shall, between the date of the Merger Agreement and the Effective
Time, directly or indirectly do, or propose or commit to do, any of the
following without the prior written consent of Holdings (which may not be
unreasonably delayed or withheld):
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock (except dividends and
distributions by a wholly owned subsidiary of the Company to its parent),
(ii) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock or (iii) purchase, redeem
or otherwise acquire any shares of capital stock of the Company or any of
its subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities (other than in
connection with its employee stock purchase plan consistent with past
practice);
(b) except as permitted under existing benefit plans or employment
arrangements in effect on the date of the Merger Agreement and consistent
with past practice, authorize for issuance, issue, deliver, sell or agree
or commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise), pledge or otherwise encumber any shares of its
capital stock or the capital stock of any of its subsidiaries, any other
voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities or any other securities or equity equivalents
(including without limitation stock appreciation rights) (other than sales
of capital stock of any wholly owned subsidiary of the Company to the
Company or another wholly owned subsidiary of the Company);
(c) except to the extent required under existing benefit plans or
employment arrangements as in effect on the date of the Merger Agreement,
(i) increase the compensation or fringe benefits of any of its directors,
officers or employees, except for periodic increases in salary or wages of
officers or employees of the Company or its subsidiaries in the ordinary
course of business consistent with past practice, or (ii) grant any
severance or termination pay not currently required to be paid under
existing benefit plans other than in the ordinary course of business
consistent with past practice, or (iii) enter into any employment
arrangement or similar agreement or arrangement with any present or former
director level or other equivalent or more senior officer or employee, or,
other than in the ordinary course of business, any other employee of the
Company or any of its subsidiaries, or (iv) establish, adopt, enter into or
amend in any material respect or terminate any benefit plan or employment
arrangement or other plan, agreement, trust, fund, policy or arrangement
for the benefit of any directors, officers or employees; this subsection
(c) shall not apply to (A) any employment or consulting arrangement
providing for annual compensation (excluding benefits) of $200,000 or less
which is entered into in the ordinary course of business or (B) any renewal
of any existing employment or consulting arrangement that provides for an
increase in annual compensation (excluding benefits) of 10% or less than
the immediately preceding year or (C) any amendment or termination of the
stock incentive plans necessary or desirable to effectuate the provisions
of the Merger Agreement relating to the treatment of employee options;
(d) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents or alter through merger,
liquidation, reorganization, restructuring or in any other fashion the
corporate structure or ownership of any significant subsidiary of the
Company;
(e) acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the stock or assets of, or by any
other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or (ii) any
assets that are material, individually or in the aggregate, to the Company
and its subsidiaries taken as a whole;
(f) sell, lease, dispose of, license, mortgage or otherwise encumber
or subject to any lien or otherwise dispose of any of its properties or
assets, except (i) in the ordinary course of business, and (ii) in
connection with capital expenditures permitted to be expended by the
Company pursuant to clause (h) below;
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(g) (i) incur or assume any indebtedness for borrowed money or
guarantee any such indebtedness of another person (other than guarantees by
the Company in favor of any of its wholly owned subsidiaries or by any of
its subsidiaries in favor of the Company), issue or sell any debt
securities or warrants or other rights to acquire any debt securities of
the Company or any of its subsidiaries, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
borrowings incurred in the ordinary course of business under existing lines
of credit, or (ii) make any loans, advances or capital contributions to, or
investments in, any other person, other than to the Company or any direct
or indirect wholly owned subsidiary of the Company;
(h) authorize or expend funds for capital expenditures other than in
accordance with the Company's current capital expenditure plans and budgets
(which plans and budgets were disclosed in writing to Holdings on or prior
to the date of the Merger Agreement);
(i) enter into, amend in any material respect, terminate, rescind,
waive in any material respect or release any of the terms or provisions of
any (i) material contract or (ii) any other agreement which is material to
the business of the Company and its subsidiaries taken as a whole other
than in the ordinary course of business, in each case other than (A) any
modification in compliance with the terms of the Merger Agreement, (B) any
modification or termination of an LMA agreement to comply with any FCC rule
making proceeding or other action, (C) any programming agreement entered
into after the date of the Merger Agreement in the ordinary course of
business and which provides for annual payments by a broadcast television
station owned by the Company or a subsidiary of the Company of $400,000 or
less and has a term of 2 years or less and (D) any modification of the PMVG
Agreement approved by the Independent Directors;
(j) knowingly violate or fail to perform any material obligation or
duty imposed upon it by any applicable material federal, state or local
law, rule, regulation, guideline or ordinance;
(k) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;
(l) recognize any labor union (unless legally required to do so) or
enter into or materially amend any collective bargaining agreement;
(m) except as may be required as a result of a change in law or in
generally accepted accounting principles, make any material change in its
method of accounting;
(n) revalue in any material respect any of its material assets,
including, without limitation, writing down the value of inventory or
writing-off notes or accounts receivable other than in the ordinary course
of business or as required by generally accepted accounting principles;
(o) except to the extent required by law, make or revoke any tax
election or settle or compromise any tax liability that is, in the case of
any of the foregoing, material to the business, financial condition or
results of operations of the Company and its subsidiaries taken as a whole
or change (or make a request to any taxing authority to change) any
material aspect of its method of accounting for tax purposes;
(p) except for claims covered by insurance, settle or compromise any
litigation in which the Company or any subsidiary is a defendant (whether
or not commenced prior to the date of the Merger Agreement) or settle, pay
or compromise any claims not required to be paid, which payments are
individually in an amount in excess of $500,000 and in the aggregate in an
amount in excess of $1,000,000, or settle or compromise any pending or
threatened suit, action or claim which would prevent or materially delay
the ability of the Company to consummate the transactions contemplated by
the Merger Agreement;
(q) pay any liabilities or obligations (absolute, accrued, asserted,
contingent or otherwise), other than any payment, discharge or satisfaction
in the ordinary course of business consistent with past practice, any
payment for the prepaid insurance and indemnification policy referred to in
the Merger
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Agreement and any payment of expenses arising in connection with the
transactions contemplated hereby;
(r) knowingly violate or fail to perform any material obligation under
the consulting agreement with WOOD-TV, Grand Rapids, Michigan; and
(s) take, propose to take, or agree in writing or otherwise to take,
any of the foregoing actions.
In addition to the foregoing, pursuant to the terms of the Merger
Agreement, if Holdings so requests in writing (the "Venture Notice") prior to
the fifteenth (15th) business day following the date on which FCC approval of
the FCC application with respect to the transfer of the FCC Licenses of
television station KXAS-TV to an entity controlled by NBC shall have become
final, then the Company, without the payment of any additional Merger
Consideration, has agreed to take all actions necessary or reasonably advisable,
including, without limitation, executing and performing its obligations under
the definitive documentation which shall be in form and substance reasonably
satisfactory to the Company, to implement prior to the Effective Time (i) a
television station joint venture (the "Venture") involving the Company's
television station KXAS-TV, Dallas, Texas and NBC's television station KNSD-TV,
San Diego, California and (ii) the financing thereof, in each case in the manner
described in the HM/NBC Letter Agreement. The Company has agreed to cooperate
with Holdings in filing all materials necessary to obtain FCC approval in
connection with the Venture, whether or not the Venture Notice has been
delivered to the Company. The obligation of the Company to execute the
definitive documentation relating to the Venture is expressly conditioned upon
there being included in such documentation: (a) an indemnity substantially in
the form previously agreed to by the Company and (b) an agreement setting forth
the mechanism for the unwinding of the Venture in the event the Merger does not
become effective within 24 hours after the assets are transferred to the
Venture. The Company has also agreed to waive certain conditions to the closing
of the Merger relating to FCC approval of the transfer of the FCC licenses for
KXAS-TV if requested to do so by Holdings. If certain transactions described in
the HM/NBC Letter Agreement have not occurred on or prior to May 1, 1998, then
the Company's obligations to take actions with respect to the Venture thereafter
terminate.
Under the Merger Agreement, any actions taken by the Company to implement
the Venture pursuant to, and consistent with, its obligations described above
(and the results thereof) shall not (i) constitute a breach of any
representation, warranty or covenant under the Merger Agreement, (ii) be taken
into account in determining whether there has been or may be a Material Adverse
Effect on the Company and (iii) in any respect be the basis for Holdings or
Acquisition Sub having the right to terminate the Merger Agreement.
CONDITIONS TO THE MERGER
The respective obligations of Holdings, Acquisition Sub and the Company to
effect the Merger are subject to the following conditions:
(i) the approval of the Merger and the Merger Agreement by the
Required Vote;
(ii) the waiting period (and any extension thereof) applicable to the
Merger under the HSR Act shall have been terminated or shall have expired,
and no restrictive order or other requirements pursuant to the HSR Act
shall have been placed on the Company, Holdings, Acquisition Sub or the
Surviving Corporation in connection therewith;
(iii) the FCC shall have approved the FCC Application and such
approval shall have become final (which for purposes of the Merger
Agreement shall be deemed to have occurred if the FCC has taken action (i)
approving the transfer of the FCC Licenses for the ownership and operation
of the Company Stations pursuant to the Merger and (ii) if Holdings has
delivered the Venture Notice, approving the transfer of the FCC Licenses
for the ownership and operation of television station KXAS-TV as
contemplated by the HM/NBC Letter Agreement, which in the case of each such
approval has not been reversed, stayed, enjoined, set aside, annulled or
suspended, with respect to which no timely request for stay, petition for
reconsideration or appeal or sua sponte action of the FCC with comparable
effect is pending and as to which the time for filing any such request,
petition or appeal or for the taking of any such sua sponte action by the
FCC has expired, provided, that the requirement that such FCC approval
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must be final may be (A) waived in writing by Holdings or (B) waived in
writing by the Company with respect to the transfer of the FCC Licenses
pertaining to television station KXAS-TV (which waiver may only be effected
if requested by Holdings pursuant to the Merger Agreement); and, provided
further, that the requirement that final FCC approval with respect to the
transfer of the FCC Licenses for the ownership and operation of television
station KXAS-TV by an entity controlled by NBC shall not be a closing
condition if such final approval shall not have been obtained by May 1,
1998); provided, that such approval may be subject to Holdings (or its
affiliates) or the Surviving Corporation making certain Divestitures (as
defined under "The Merger Agreement -- Reasonable Best Efforts") or to
changes being made in the terms and conditions of any contracts to which
the Company is a party; and
(iv) no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the
Merger shall be in effect nor shall any proceeding by any court or
governmental authority be pending, and no statute, rule, regulation or
order shall have been enacted, entered, enforced or deemed applicable to
the Merger, which makes the consummation of the Merger illegal.
The obligations of Holdings and Acquisition Sub to effect the Merger are
subject to the satisfaction of the following conditions, unless waived by
Holdings:
(i) the representations and warranties of the Company set forth in the
Merger Agreement shall be true and correct in all respects as of the date
of the Merger Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date, except for such breaches that would
not, individually or in the aggregate with any other breaches on the part
of the Company, reasonably be expected to have a Material Adverse Effect on
the Company, and Holdings shall have received a certificate signed on
behalf of the Company by the Chief Executive Officer of the Company to such
effect;
(ii) the Company shall have performed in all material respects all
obligations required to be performed by it under the Merger Agreement at or
prior to the Closing Date, and Holdings shall have received a certificate
signed on behalf of the Company by the Chief Executive Officer of the
Company to such effect;
(iii) Holdings shall have received the debt and equity financing for
the transactions contemplated by the Merger Agreement on terms
substantially as outlined in the Commitment Letters or the Alternative
Commitments as described under "-- Financing";
(iv) the Company shall have obtained the consent or approval of each
person (other than any Governmental Entity) whose consent or approval shall
be required in connection with the transactions contemplated hereby under
any Material Contract (as defined in the Merger Agreement);
(v) there shall not have been any material modification or termination
of any LMA Agreement which individually or in the aggregate would
reasonably be expected to have a materially adverse economic effect on the
business, financial condition or results of operations of the Company and
its subsidiaries taken as a whole or a denial by the FCC of any of the
waiver requests set forth in the FCC Application (provided that Holdings
has made and/or agreed to make any necessary Divestitures required by the
Merger Agreement), in each case other than as directed by the FCC under
Current FCC Policy. The FCC shall be deemed to have acted under Current FCC
Policy except to the extent that its action is the result of (i)
legislative change enacted after the date of the Merger Agreement, (ii) FCC
action taken after the date of the Merger Agreement in a rule making
proceeding or (iii) application by the FCC Staff of interim decisions,
policies or processing guidelines adopted by the FCC Staff with respect to
requests for waivers of the duopoly rule, 47 C.F.R. Section 73.3555(b) or
the one-to-a-market rule, 47 C.F.R. Section 73.3555(c), or to local
marketing agreements, not heretofore applied to transfer applications for
stations similarly situated to the stations whose licenses are to be
transferred pursuant to the FCC Application;
(vi) no more than five percent (5%) of the Common Stock outstanding
immediately prior to the Effective Time shall be Dissenting Shares; and
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(vii) all Stock Plans shall have been or will be as of the Effective
Time duly cancelled by the Company and each Option and all securities
convertible into or exchangeable or exercisable for shares of capital stock
or voting securities of the Company shall be or will be as of the Effective
Time cancelled, exercised or expired, with the effect that, upon
consummation of the Merger, Holdings will own 100% of the capital stock and
voting securities of the Surviving Corporation on a fully diluted basis.
The obligation of the Company to consummate the Merger is subject to the
satisfaction of the following conditions, unless waived by the Company:
(i) the representations and warranties of each of Holdings and
Acquisition Sub set forth in the Merger Agreement shall be true and correct
in all respects as of the date of the Merger Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date, except
for such breaches that would not, individually or in the aggregate with
other breaches on the part of Holdings and/or Acquisition Sub, materially
adversely affect the ability of Holdings or Acquisition Sub to consummate
the transactions contemplated by the Merger Agreement, and the Company
shall have received a certificate signed on behalf of each of Holdings and
Acquisition Sub by the Chief Executive Officer of each of Holdings and
Acquisition Sub to such effect;
(ii) each of Holdings and Acquisition Sub shall have performed in all
material respects all obligations required to be performed by it under the
Merger Agreement at or prior to the Closing Date, and the Company shall
have received a certificate signed on behalf of each of Holdings and
Acquisition Sub by the Chief Executive Officer of each of Holdings and
Acquisition Sub to such effect; and
(iii) the Board of Directors of the Company shall have received the
Solvency Letter (as defined under "The Merger Agreement -- Solvency
Letter") from Holdings.
NO SOLICITATION
The Company has agreed to direct and use its best efforts to cause the
officers, directors, employees, representatives, agents and affiliates of the
Company and its subsidiaries to, immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to any
Transaction Proposal and not to, directly or indirectly, (i) solicit, initiate
or knowingly encourage (including by way of furnishing information or
assistance) any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Transaction Proposal or (ii) enter
into or participate in any discussions or negotiations regarding any Transaction
Proposal; provided, however, that at any time prior to the receipt of the
Required Vote the Company may, in response to a Transaction Proposal which was
not solicited subsequent to the date of the Merger Agreement, (x) furnish
information with respect to the Company to any person pursuant to a
confidentiality agreement on terms no less favorable to the Company than the
Confidentiality Agreement (unless the Company also agrees to amend the
Confidentiality Agreement in the same manner); provided that standstill
provisions need not be included and (y) enter into or participate in
discussions, investigations and/or negotiations regarding such Transaction
Proposal. The Company has also agreed that it shall promptly give notice to
Holdings of the names of the person or persons with respect to which it takes
any action pursuant to subclauses (x) or (y) of the preceding sentence and a
general description of the actions taken.
In addition, the Board of Directors of the Company may not (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to
Holdings, the approval or recommendation by such Board of Directors of the
Merger or the Merger Agreement, (ii) approve or recommend, or propose publicly
to approve or recommend, any Transaction Proposal or (iii) cause the Company to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement related to any Transaction Proposal. Notwithstanding
the foregoing, if the Board of Directors of the Company determines in good faith
that it has received a Superior Proposal, the Board of Directors of the Company
may, prior to the receipt of the Required Vote, withdraw or modify its approval
or recommendation of the Merger and the Merger Agreement, approve or recommend a
Superior Proposal (as defined below) or terminate the Merger Agreement, but in
each case, only at a time that is at least five business days after Holdings's
receipt of written notice advising Holdings that the Board of Directors of the
Company has received a Transaction Proposal that may constitute a Superior
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Proposal, specifying the material terms and conditions of such Superior Proposal
and the names of the person or persons making such Superior Proposal.
The term "Transaction Proposal" is defined in the Merger Agreement to mean
any bona fide inquiry, proposal or offer from any person relating to any direct
or indirect acquisition or purchase of more than 50% of the aggregate assets of
the Company and its subsidiaries, taken as a whole, or more than 50% of the
voting power of the shares of Common Stock then outstanding or any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company, other than the transactions
contemplated by the Merger Agreement.
The term "Superior Proposal" is defined in the Merger Agreement to mean any
proposal determined by the Board of Directors of the Company in good faith,
after consultation with outside counsel, to be a bona fide proposal and made by
a third party on or after October 22, 1997 (other than AT&T) to acquire,
directly or indirectly, for consideration consisting of cash, property and/or
securities, more than 50% of the voting power of the shares of Common Stock then
outstanding or all or substantially all the assets of the Company and otherwise
on terms which the Board of Directors of the Company determines in its good
faith judgment, after consultation with outside counsel and with a financial
advisor of nationally recognized reputation (such as Wasserstein Perella and
Morgan Stanley), to be more favorable to the Company's shareholders (taking into
account all factors relating to such proposal deemed relevant by the Board of
Directors of the Company, including, without limitation, the financing of such
proposal, any regulatory issues related thereto and all other conditions to
closing) than the Merger after giving effect to the Merger Agreement Amendment.
REASONABLE BEST EFFORTS
Upon the terms and subject to the conditions set forth in the Merger
Agreement, each of the parties thereto has agreed to use its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
reasonably necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by the Merger Agreement, including (i) the obtaining of all
necessary actions, waivers, consents, licenses and approvals from governmental
entities and the making of all necessary registrations and filings (including
filings with governmental entities) and the taking of all reasonable steps as
may be necessary to obtain an approval, waiver or license from, or to avoid an
action or proceeding by, any governmental entity, (ii) the obtaining of all
necessary consents, approvals or waivers from third parties (and in furtherance
thereof the Company, with the consent of Holdings (which consent may not be
unreasonably withheld), may make and commit to make payments to third parties
and enter into or modify agreements), (iii) the defending of any lawsuits or
other legal proceedings, whether judicial or administrative, challenging the
Merger Agreement, or the consummation of the transactions contemplated by the
Merger Agreement, including seeking to have any stay or temporary restraining
order entered by any court or other governmental entity vacated or reversed and
(iv) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to carry out fully the purposes
of, the Merger Agreement. Each of the parties to the Merger Agreement, to the
extent applicable, has further agreed (i) to file (and, in the case of Holdings
to cause its affiliates to file) contemporaneously with the filing of the FCC
Application any requests for temporary or permanent waivers of applicable FCC
rules and regulations or rules and regulations of other governmental entities
and in furtherance of those waiver requests to pledge to hold separate, to place
in trust and/or to divest any of the businesses, product lines or assets of (A)
the Company or any of its subsidiaries at any time after the Effective Time or
(B) Holdings or any of its affiliates at any time prior to, on or after the
Effective Time, in each case as may be required under Current FCC Policy to
obtain approval of the FCC Application (collectively, "Divestitures") in order
to permit consummation of the Merger and the other transactions contemplated by
the Merger Agreement prior to the Termination Date and (ii) to expeditiously
prosecute such waiver requests and to diligently submit any additional
information or amendments for which the FCC or any other relevant governmental
entity may ask with respect to such waiver requests. Holdings has further
covenanted that, prior to the Effective Time, neither it nor any of its
affiliates shall acquire any new or increased "attributable interest" or
"meaningful relationship", each as defined in the FCC rules, in any media
property ("Further Media Interest"), which Further Media Interest
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could not be held in common control with any Company station by the Surviving
Corporation following the Effective Time (including by virtue of the FCC's
multiple ownership limits), without the prior written consent of the Company.
SOLVENCY LETTER
Holdings has agreed to use all reasonable efforts to deliver to the Board
of Directors of the Company a letter (the "Solvency Letter") from an independent
third party selected by the Board of Directors and reasonably satisfactory to
Holdings (the "Appraiser") attesting that, immediately after the Effective Time,
the Surviving Corporation: (i) will be solvent (in that both the fair value of
its assets will not be less than the sum of its debts and that the present fair
saleable value of its assets will not be less than the amount required to pay
its probable liability on its debts as they become absolute and matured), (ii)
will have adequate capital with which to engage in its business and (iii) will
not have incurred and does not plan to incur debts beyond its ability to pay as
they become absolute and matured, based upon the proposed financing structure
for the Merger and certain other financial information to be provided to the
Appraiser by Holdings and the Company and after giving effect to any changes in
the Surviving Corporation's assets and liabilities as a result of the Merger and
the financing relating thereto. Subject to the foregoing, the Solvency Letter
shall be in form and substance reasonably satisfactory to the Board of Directors
of the Company. Except with the prior written consent of the Company's Board of
Directors, Holdings will not consummate the Merger unless and until such Board
of Directors shall have received the Solvency Letter.
FINANCING
Concurrently with the execution of the Merger Agreement Amendment, Holdings
delivered to the Company copies of: (i) a binding commitment letter from Fund
III to provide equity financing in an amount not less than $835 million to
provide Holdings and Acquisition Sub a portion of the funds necessary to
consummate the transactions contemplated by the Merger Agreement and (ii)
binding commitment letters from The Chase Manhattan Bank and Chase Securities
Inc. to provide debt financing in an amount not less than $1.255 billion in the
aggregate to provide Holdings and Acquisition Sub all remaining funds necessary
to consummate the transactions contemplated by the Merger Agreement
(collectively, the "Commitment Letters").
Funding under the Commitment Letters is subject to the satisfaction or
waiver of a number of material conditions, including: (i) there being no
material adverse change in the consolidated financial condition of the Company
(other than changes in general economic conditions or in economic conditions
generally affecting the television broadcasting industry), (ii) confirmation of
the status of certain network affiliation agreements and local marketing
agreements and (iii) there not having occurred a material disruption of or
material adverse change in financial, banking or capital market conditions that
could materially impair the syndication of the debt financing. The funding is
also subject to other customary conditions.
Notwithstanding the foregoing, if Holdings delivers the Venture Notice,
Holdings and Acquisition Sub shall deliver concurrently therewith alternative
binding commitment letters (the "Alternative Commitments") to the Company (i) to
provide equity financing from Fund III in an amount not less than $750 million,
(ii) to provide debt financing from Chase Manhattan Bank and/or Chase Securities
Inc., in an amount not less than $520 million in the aggregate and (iii) to
provide debt financing from General Electric Capital Corporation or one of its
affiliates in an amount not less than $815.5 million.
Holdings has agreed to promptly notify the Company if at any time prior to
the Closing Date it no longer believes in good faith that it will be able to
obtain any of the financing substantially on the terms described in the
Commitment Letters and the Alternative Commitments. In addition, Holdings has
agreed to confirm in writing to the Company from time to time upon request that
Holdings believes in good faith that it will be able to obtain financing
substantially on the terms described in the Commitment Letters and the
Alternative Commitments.
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TERMINATION
Termination by Mutual Consent
The Merger Agreement may be terminated at any time prior to the Effective
Time by the mutual written consent of Holdings, Acquisition Sub and the Company
or by either Holdings or the Company if:
(i) if any permanent injunction or other order, decree, ruling or
action by any governmental entity preventing the consummation of the Merger
shall have become final and nonappealable; provided that such right of
termination shall not be available to any party if such party shall have
failed to make reasonable efforts to prevent or contest the imposition of
such injunction or other order, decree, ruling or action and such failure
materially contributed to such imposition,
(ii) if (other than due to the willful failure of the party seeking to
terminate the Merger Agreement to perform its obligations under the Merger
Agreement required to be performed at or prior to the Effective Time) the
Merger shall not have been consummated on or prior to the Termination Date;
provided that such right of termination shall not be available to Holdings
if Holdings (or its affiliates) have not taken necessary action required to
be taken under the Merger Agreement in order for the FCC Application to be
approved, or
(iii) if the approval of the shareholders of the Company of the Merger
Agreement and the Merger required for the consummation of the Merger shall
not have been obtained by reason of the failure to obtain the Required Vote
at a duly held meeting of shareholders or at any adjournment thereof (the
"No-Vote Trigger Event").
Termination by Holdings
The Merger Agreement may be terminated at any time prior to the Effective
Time by Holdings upon the occurrence of any one of the events described below:
(i) so long as neither Holdings nor Sub is then in material breach of
its obligations under the Merger Agreement, upon a breach of any material
representation, warranty, covenant or agreement on the part of the Company
set forth in the Merger Agreement, or if any such representation or
warranty of the Company shall have been or become untrue and certain other
conditions are satisfied, and such breach or untruth (a) cannot be cured by
the Closing Date or (b) has not been cured within 30 days of the date on
which the Company receives written notice thereof from Holdings (the
"Company Breach Trigger Event"), or
(ii) if (i) the Board of Directors of the Company (A) shall have
withdrawn, modified or changed its approval or recommendation of the Merger
Agreement or the Merger in any manner which is adverse to Holdings, (B)
shall have approved or have recommended to the shareholders of the Company
a Transaction Proposal or (C) shall have resolved to do the foregoing; or
(ii) the Company shall have wilfully failed to hold the Special Meeting on
or prior to January 31, 1998 (the "Delayed Date"); provided that the
Delayed Date shall be automatically extended for each day with respect to
which the failure to hold the Special Meeting (x) is attributable to a lack
of cooperation and assistance by Holdings, Acquisition Sub or their
affiliates or (y) is the result of any injunction or similar action or any
action of the SEC, in each case preventing or delaying the holding of such
meeting.
Termination by the Company
The Merger Agreement may be terminated at any time prior to the Effective
Time (except as otherwise set forth in (ii) below) by the Company upon the
occurrence of any of the events described below:
(i) so long as the Company is not then in material breach of its
obligations under the Merger Agreement, upon a breach of any material
representation, warranty, covenant or agreement on the part of Holdings or
Sub set forth in the Merger Agreement, or if any such representation or
warranty of Holdings or Sub shall have been or become untrue and certain
other conditions are satisfied, and such breach or
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untruth (i) cannot be cured by the Closing Date or (ii) has not been cured
within 30 days of the date on which Holdings or Sub receives written notice
thereof from the Company,
(ii) prior to the receipt of the Required Vote if the Board of
Directors of the Company determines in good faith to withdraw or modify its
approval or recommendation of the Merger or the Merger Agreement or
approves or recommends a Superior Proposal; provided, that Holdings
receives at least five business days' prior written notice and, during such
five business day period, the Company shall, and shall cause its financial
and legal advisors to, consider any adjustment in the terms and conditions
of the Merger Agreement that Holdings may propose; provided, further, that
the Company may not effect such termination pursuant to this provision
unless the Company has contemporaneously with such termination tendered
payment to Holdings or Holdings's designee of the amounts, if any, that are
due to Holdings under the termination provisions of the Merger Agreement;
(iii) if there is no reasonable possibility that (A) the FCC
Application will receive final approval on or prior to the Termination Date
or (B) the funding of any of the financing commitments described in the
Financing Documents will be available to Holdings or Sub substantially on
the terms set forth therein; or
(iv) (i) if a Solvency Letter reasonably satisfactory to the Company
has not been delivered to the Company prior to the Special Meeting or (ii)
if Holdings does not confirm in writing to the Company that Holdings
believes in good faith that it will be able to obtain financing
substantially on the terms set forth in the Financing Documents within five
business days of being requested to do so by the Company.
FEES AND EXPENSES
Except as provided below all fees and expenses incurred in connection with
the Merger, the Merger Agreement and the transactions contemplated thereby shall
be paid by the party incurring such fees or expenses, whether or not the Merger
is consummated.
The Merger Agreement provides that if the Merger Agreement is terminated
pursuant to:
(i) subsection (ii) under "Termination -- Termination by Holdings",
the Company shall pay Holdings $64 million as an alternative transaction
fee (the "Termination Fee") plus $10 million dollars as reimbursement of
the expenses of Holdings and Acquisition Sub, provided that Holdings will
present statements documenting such expenses within five business days of
such termination, together with a refund of any amounts which are not
supported by such documentation;
(ii) subsection (ii) under the "Termination -- Termination by the
Company", the Company shall pay the Termination Fee upon such termination;
(iii) the No-Vote Trigger Event, the Company shall reimburse Holdings for
its documented out-of-pocket expenses incurred in connection with the
transactions contemplated hereby, up to a maximum reimbursement of $10 million,
promptly upon presentment of statements documenting such expenses;
(iv) (1) the No-Vote Trigger Event or (2) the Company Breach Trigger
Event as a result of a willful breach of a material representation,
warranty or covenant by the Company, and within 320 days thereafter, (A)
the Company enters into a merger agreement, acquisition agreement or
similar agreement (including, without limitation, a letter of intent) with
respect to a Transaction Proposal, or a Transaction Proposal is
consummated, or (B) the Company enters into a merger agreement, acquisition
agreement or similar agreement (including, without limitation, a letter of
intent) with respect to a Superior Proposal, or a Superior Proposal is
consummated, which in the case of either (A) or (B) above will result in
shareholders of the Company becoming entitled to receive upon consummation
of such Transaction Proposal or Superior Proposal consideration with a
value (determined in good faith by the Board of Directors of the Company)
per share of Common Stock greater than the Merger Consideration (with
Additional Amounts accruing from the Accretion Start Date through the date
of the consummation of such Transaction Proposal or Superior Proposal),
then, in the case of either (A) or (B) above, the Company shall pay to
Holdings upon the consummation of such Transaction Proposal or Superior
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Proposal the difference between the Termination Fee and the amounts
previously paid to Holdings pursuant to the immediately preceding paragraph
(iii) above.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by the parties thereto in writing at
any time prior to the Effective Time; provided, however, that, after approval of
the Merger by the shareholders of the Company, no amendment may be made which
would reduce the amount or change the type of consideration into which each
share of Company Stock shall be converted upon consummation of the Merger. At
any time prior to the Effective Time, any party to the Merger Agreement, to the
extent lawful, may (a) extend the time for the performance of any of the
obligations or other acts of the other parties thereto, (b) waive any
inaccuracies in the representations and warranties contained therein or in any
document delivered pursuant thereto and (c) waive compliance with any of the
agreements or conditions contained therein.
EMPLOYEE BENEFITS; STOCK PLANS AND STOCK OPTIONS
Benefit Plans. The Merger Agreement provides that (i) during the period
from the Effective Time until January 1, 2000, the Surviving Corporation will
maintain wages, compensation levels, employee pension and welfare plans for the
benefit of employees and former employees of the Company and its subsidiaries,
which in the aggregate are equal or greater than those wages, compensation
levels and other benefits provided under the plans and employment arrangements
that were in effect on the date the Merger Agreement was entered into, (ii) with
respect to any officer or employee who is covered by a severance compensation
agreement, employment agreement or other severance policy or plan separate from
the standard severance policy for the employees of the Company or any of its
subsidiaries, the Surviving Corporation will maintain or cause to be maintained
such severance compensation agreement, employment agreement or other separate
policy or plan as in effect as of the date the Merger Agreement was entered into
(except as may be otherwise agreed by such officer or employee), and as to all
other officers and employees, the Surviving Corporation will maintain or cause
to be maintained the standard severance policy of the Company and its
subsidiaries as in effect as of the date the Merger Agreement was entered into
until January 1, 2000, (iii) the Surviving Corporation will honor or cause to be
honored all severance agreements and employment agreements with the directors,
officers and employees of the Company and its subsidiaries, (iv) the Surviving
Corporation will maintain the bonus practices of the Company and its
subsidiaries, as in effect on the date the Merger Agreement was entered into,
through the end of the 1998 fiscal year, with bonuses to be paid to the employee
participating thereunder at levels consistent with past practice and (v) the
Surviving Corporation will (A) waive all limitations as to preexisting
conditions, exclusions and waiting periods with respect to participation and
coverage requirements applicable to the employees of the Company or any of its
subsidiaries under any welfare plan that such employees may be eligible to
participate in after the Effective Time, and (B) provide each employee of the
Company and its subsidiaries with credit for any co-payments and deductibles
paid prior to the Effective Time in satisfying any applicable deductible or
out-of-pocket requirements under any welfare plans that such employees are
eligible to participate in after the Effective Time.
Stock Options. The Merger Agreement provides that prior to the Effective
Time, the Board of Directors of the Company (or, if appropriate, any committee
thereof) will adopt appropriate resolutions and take all other actions
reasonably necessary to (i) provide for the cancellation, effective at the
Effective Time, of all the outstanding stock options, stock appreciation rights,
limited stock appreciation rights and performance units (the "Options")
theretofore granted under any stock option, performance unit or similar plan of
the Company (the "Stock Plans"). Each Option outstanding under any of the
Company's Stock Option Plans, whether or not then vested or exercisable, shall
no longer be exercisable but shall entitle each holder thereof (subject to
applicable withholding taxes), in cancellation and settlement therefor, to a
cash payment at the Effective Time equal to (x) the excess, if any, of the
Merger Consideration over the exercise price of each Option held by the holder,
whether or not then vested or exercisable, multiplied by (y) the number of
shares of Common Stock subject to such Option.
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OTHER AGREEMENTS
The descriptions of the following agreements, while providing a summary of
the material terms thereof, do not purport to be complete and are qualified in
their entirety by reference to such agreements. The AT&T Voting Agreement and
the Cook Inlet Voting Agreement are attached to this Proxy Statement as Annexes
E and F, respectively. The Termination Agreement, the PMVG Amendment and the
WOOD-TV Asset Purchase Agreement were filed as exhibits to the Company's Current
Report on Form 8-K/A, dated August 13, 1997.
SHAREHOLDERS AGREEMENTS
AT&T Voting Agreement. Concurrently with the execution of the Original
Merger Agreement, Holdings, Acquisition Sub, AT&T and the Company entered into
the AT&T Voting Agreement pursuant to which AT&T agreed to vote the AT&T Shares
in favor of the approval and adoption of the Merger Agreement if the holders of
a majority of the Public Shares represented in person or by proxy at a meeting
at which holders of a majority of the Public Shares are present vote in favor of
the approval and adoption of the Merger Agreement. Further, AT&T has agreed not
to sell or otherwise transfer the AT&T Shares until the earlier of the Effective
Time or the termination of the Merger Agreement. AT&T owned 13,494,750 shares of
Common Stock as of the Record Date (or approximately 45% of the outstanding
shares as of such date).
Other than the Merger and the transactions contemplated by the Merger
Agreement, AT&T has agreed to vote the AT&T Shares against (i) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or its subsidiaries, (ii) a sale, lease or
transfer of a material amount of assets of the Company or its subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its subsidiaries, (iii) any change in a majority of the persons who constitute
the board of directors of the Company, (iv) any change in the capitalization of
the Company, (v) any other action involving the Company which could delay or
materially adversely affect the Merger and the transactions contemplated by the
Merger Agreement.
The AT&T Voting Agreement terminates upon the earlier of the consummation
of the Merger and the termination of the Merger Agreement in accordance with its
terms by Holdings or the Company. Therefore, if the Company terminates the
Merger Agreement to accept a Superior Proposal, AT&T would then be able to vote
in favor of such Superior Proposal.
Notwithstanding anything in the AT&T Voting Agreement to the contrary, the
covenants and agreements set forth therein shall not prevent any of the AT&T
Board Nominees from taking any action, subject to applicable provisions of the
Merger Agreement, while acting in such Board member's capacity as a director of
the Company.
AT&T reaffirmed the AT&T Voting Agreement as of the date of the Merger
Agreement Amendment.
Cook Inlet Voting Agreement. Concurrently with the execution of the
Original Merger Agreement, Holdings, Acquisition Sub, Cook Inlet and the Company
entered into the Cook Inlet Voting Agreement pursuant to which Cook Inlet has
agreed to vote all of the shares of Common Stock its holds of record or
beneficially owns at the Special Meeting in favor of the approval and adoption
of the Merger Agreement. Cook Inlet owned 1,608,975 shares of Common Stock as of
the Record Date (or approximately 5% of the outstanding shares as of such date).
The Cook Inlet Voting Agreement does not restrict Cook Inlet's ability to
dispose of shares of Common Stock prior to the Special Meeting.
Other than the Merger and the transactions contemplated by the Merger
Agreement, Cook Inlet has agreed to vote all of its shares of Common Stock
against (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or its
subsidiaries, (ii) a sale, lease or transfer of a material amount of assets of
the Company or its subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation of the Company or its subsidiaries, (iii) any change
in a majority of the persons who constitute the board of directors of the
Company, (iv) any change in the capitalization of the Company, (v) any other
action involving the Company which could delay or materially adversely affect
the Merger and the transactions contemplated by the Merger Agreement.
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The Cook Inlet Voting Agreement terminates upon the earlier of the
consummation of the Merger and the termination of the Merger Agreement in
accordance with its terms by Holdings or the Company. Therefore, if the Company
terminates the Merger Agreement to accept a Superior Proposal, Cook Inlet would
then be able to vote in favor of such Superior Proposal.
Notwithstanding anything in the Cook Inlet Voting Agreement to the
contrary, the covenants and agreements set forth therein shall not prevent the
designee of Cook Inlet who serves on the Company's Board of Directors from
taking any action, subject to applicable provisions of the Merger Agreement,
while acting in such designee's capacity as a director of the Company.
Termination Agreement. In connection with the Spin-Off, the Company, the
predecessor of AT&T Wireless and Cook Inlet entered into the AT&T/Cook Inlet
Shareholders Agreement, which, among other things, governed the nominations of,
voting for and removal of members of the Company's Board of Directors. Pursuant
to the AT&T/Cook Inlet Shareholders Agreement, AT&T agreed to vote its shares of
Common Stock in favor of a Cook Inlet nominee and Cook Inlet agreed to vote its
shares of Common Stock in favor or six AT&T nominees for election to the
Company's Board of Directors. Concurrently with the execution of the Original
Merger Agreement, the AT&T/Cook Inlet Shareholders Agreement was terminated by
the parties thereto pursuant to the Termination Agreement.
AMENDMENT TO THE TELEVISION PRIVATE MARKET VALUE GUARANTEE
In connection with the Spin-Off, the Company entered into the PMVG
Agreement with the predecessor to AT&T Wireless for the purpose of continuing
the protections to the holders of shares of Common Stock other than AT&T Corp.,
its affiliates and any member of any group (as used in Schedule 13D under the
Exchange Act) of which AT&T Corp. or its affiliates are members with respect to
securities of the Company (the "PMVG Public Shares") that previously had been
provided to such persons under a similar arrangement relating to LIN
Broadcasting. Contemporaneously with the execution of the Original Merger
Agreement, AT&T Wireless and the Company entered into an amendment to the PMVG
Agreement (the "PMVG Amendment"). The PMVG Agreement and the PMVG Amendment are
described below.
At the time the PMVG Agreement was entered into, three members of the Board
of Directors of the Company were designated to serve as independent directors
(the "Independent Directors"). Thereafter, under the PMVG Agreement, the
Independent Directors to be elected at each annual meeting of the Company's
shareholders are to be nominated under the PMVG Agreement by the then-current
Independent Directors and elected by the affirmative vote of the holders of at
least a majority of the PMVG Public Shares present and entitled to vote at any
meeting at which the holders of a majority of the PMVG Public Shares are
present. Independent Directors are subject to removal only for cause, and only
if a majority of the Independent Directors approve such removal or if such
removal is approved by the affirmative vote of the holders of a majority of the
PMVG Public Shares without any solicitation of votes by AT&T Wireless. At all
times since the Spin-Off, William G. Herbster, Wilma H. Jordan and Richard W.
Kislik have served as the Independent Directors under the PMVG Agreement.
Pursuant to the PMVG Agreement, on or about January 1, 1998 (the
"Initiation Date"), the Independent Directors were to designate an investment
banking firm of recognized national standing and AT&T Wireless was to designate
an investment banking firm of recognized national standing, in each case to
determine the private market value per share of the Common Stock. Private market
value per share is the private price per share of Common Stock ("Private Market
Price") (including control premium) that an unrelated third party would pay if
it were to acquire all the outstanding Common Stock of the Company (including
the Common Stock held by AT&T Wireless and its affiliates) in an arm's-length
transaction, assuming that the Company was being sold in a manner designated to
attract all possible participants and to maximize shareholder value, including,
if necessary, through the sale or other disposition (including tax-free
spin-offs, if possible) of businesses prohibited by legal restrictions to be
owned by a particular buyer or class of buyers.
Once the Private Market Price was determined pursuant to the procedures
provided for in the PMVG Agreement, AT&T Wireless would have had 45 days to
decide whether it intended to proceed with an acquisition of all the PMVG Public
Shares (a "Transaction") at that price. If AT&T Wireless had decided to
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proceed with a Transaction, it could have paid the Private Market Price in cash
or any combination of cash, common equity securities and/or nonconvertible
senior or subordinated "current cash pay" debt securities that the Independent
Directors, after consultation with their investment banking firm, believed in
good faith would have an aggregate market value of not less than the Private
Market Price. If AT&T Wireless had determined to proceed with a Transaction as
set forth above, it would have entered into an agreement with the Company
(containing customary terms and conditions) and would have caused a meeting of
the Company's shareholders to be held as soon as practicable to consider and
vote thereon. A Transaction would only be completed if it was approved by the
holders of a majority of the PMVG Public Shares.
If AT&T Wireless had determined not to proceed with a Transaction, or if
despite its good-faith efforts a Transaction had not been completed within 12
months following the Initiation Date (or, if a Transaction had been approved by
holders of a majority of the PMVG Public Shares and was being pursued in good
faith by AT&T Wireless but had not been completed due to regulatory delays or
litigation, within 20 months following the Initiation Date), AT&T Wireless would
put the Company in its entirety up for sale under the direction of the
Independent Directors in a manner intended by the Independent Directors to
maximize value for all Common Stock of the Company. The sale procedures would
have been set by the Independent Directors and would have included, if necessary
to maximize shareholder value, provisions for the sale or other disposition of
businesses prohibited by legal restrictions to be owned by any particular buyer
or class of buyers. The Independent Directors would have selected from among the
proposed transactions the one or more transactions determined by them (including
tax-free spin-offs, if possible) as being most likely to maximize value for all
Common Stock of the Company and would have caused a meeting of the Company's
shareholders to be held as soon as practicable to consider and vote thereon.
AT&T Wireless would have been required to fully cooperate in the sale process
set forth in the PMVG Agreement and, if one or more of the transactions so
selected by the Independent Directors were approved by holders of a majority of
the PMVG Public Shares, would cause all Common Stock of the Company owned by its
affiliates to be voted in favor thereof. Any sale of the Company would have been
subject to receipt of FCC and other necessary regulatory approvals.
If a Transaction presented for approval at a meeting of the Company's
shareholders as contemplated above failed to receive the requisite approval by
holders of a majority of the PMVG Public Shares, AT&T Wireless would have had no
further rights or obligations to participate in the sale process described in
the PMVG Agreement, but the remainder of the PMVG Agreement would have continued
to apply to the extent described therein.
Pursuant to the PMVG Agreement, except as described above, neither AT&T
Wireless nor any of its non-Company affiliates is permitted to engage in any
material transaction (including, without limitation, agreements that are
standard in the industry) with the Company or any of its subsidiaries (other
than proportionately as a shareholder of the Company) unless such transaction
has been approved by a majority of the Independent Directors. See "-- WOOD-TV
Asset Purchase Agreement". Except as permitted above, neither AT&T Wireless nor
any of its non-Company affiliates may purchase additional shares of Common Stock
if, after such purchase, AT&T Wireless and such affiliates would beneficially
own in the aggregate more than 75% of the outstanding Common Stock. In addition,
except as described above, neither AT&T Wireless nor any of its non-Company
affiliates may engage in a merger or consolidation with the Company, or purchase
all or substantially all of the Company's assets, unless the transaction is
approved not only by a majority of the Independent Directors but also by the
holders of a majority of the PMVG Public Shares.
Pursuant to the PMVG Agreement, no transaction can be undertaken, and the
Company will not take any action, whether or not approved by a majority of the
Board, if the Independent Directors determine in their good-faith judgment by
unanimous vote that such transaction or action would likely depress the value of
the Company on the Initiation Date. In addition, the Company cannot acquire or
dispose of any business, whether or not approved by a majority of the Board, if
the Independent Directors determine in their good-faith judgment by unanimous
vote that such acquisition or disposition is not in the Company's best interest.
Except pursuant to a sale of the Company as described above, neither AT&T
Wireless nor any of its non-Company affiliates may sell more than 25% of the
outstanding Common Stock to a third party or group unless that third party or
group agrees in writing to be bound by the provisions set forth in the PMVG
Agreement to the same extent as AT&T Wireless is bound.
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Under the PMVG Agreement, there was no assurance that AT&T Wireless would
have agreed to purchase the PMVG Public Shares at private market value.
Furthermore, if AT&T Wireless had not offered or agreed to purchase the PMVG
Public Shares, there was no assurance that the Company would successfully have
been sold in its entirety or, if it was sold, that the price obtained would be
favorable. The PMVG Agreement did not prohibit AT&T Wireless from selling its
shares of Common Stock in the open market nor from selling equity interests in
the Company in connection with a sale of the entire Company to an unaffiliated
party. The PMVG Agreement permitted a sale of the Company to an acquiror (other
than AT&T Wireless or its affiliates) prior to the initiation of the sale
process set forth in the PMVG Agreement, and such a sale did not require either
the separate approval of the Independent Directors or the holders of a majority
of the PMVG Public Shares. The PMVG Agreement remains in effect as long as AT&T
Wireless and its non-Company affiliates beneficially own in the aggregate at
least 25% of the outstanding shares of Common Stock or AT&T Wireless's designees
constitute a majority of the Board.
On December 9, 1996 AT&T issued a press release and filed an amended
Schedule 13D stating that it intended to review its investment in the Company
and to evaluate alternatives which could result in the disposition, either
through private or public sales, of some or all of the shares of Common Stock
held it. In connection with the discussions with the Board of Directors
regarding the proposed Merger, AT&T indicated that if the discussions produced
an acceptable sale alternative, it would not be a buyer of the Common Stock held
by the public.
In light of the foregoing and the transactions contemplated by the Merger
Agreement, the Independent Directors determined that it would be advisable to
amend the provisions of the PMVG Agreement as provided in the PMVG Amendment to
allow the shareholders of the Company the opportunity to consider and receive
the benefits of the Merger.
Under the terms of the PMVG Amendment, AT&T has relinquished its rights
relating to the purchase of the approximately 55% of the Company it currently
does not own, the requirement that appraisers be appointed has been eliminated
and the commencement date of any sale process under the PMVG Agreement has been
deferred and will only occur if the Merger does not occur.
At the special meeting of the Board of Directors held on August 11 and 12,
1997, Wasserstein Perella delivered its oral opinion to the Independent
Directors (subsequently confirmed in writing) that the PMVG Amendment was not
materially adverse to the holders of the PMVG Public Shares from a financial
point of view. At such meeting, the PMVG Amendment was unanimously approved by
the Independent Directors. See "The Merger -- Background of the Merger" and
"-- Opinions of Financial Advisors -- Opinions of Wasserstein
Perella -- Supplemental Opinions".
The PMVG Amendment is not subject to the approval of the shareholders of
the Company.
WOOD-TV ASSET PURCHASE AGREEMENT
While the Company was a subsidiary of LIN Broadcasting, the Company's
commercial television broadcast assets included, among other things, the assets
comprising broadcast television station WOOD-TV (Grand Rapids, MI) and certain
local marketing agreement rights and other auxiliary facilities related thereto
as well as an option to acquire broadcast television station WOTV(TV)
(collectively, "WOOD-TV").
On December 28, 1994, the Company became an independent publicly-traded
entity through the Spin-Off. WOOD-TV was not included as part of the Company in
the Spin-Off and ownership of WOOD-TV was retained by LIN Broadcasting, a
subsidiary of AT&T Corp.
In connection with the Spin-Off, the Company entered into a consulting
agreement dated as of December 28, 1994 (the "Consulting Agreement"), pursuant
to which the Company agreed to provide management and operations consulting for
WOOD-TV. In addition, the Company and LIN Broadcasting entered into a Right of
First Refusal Agreement dated as of December 28, 1994, pursuant to which the
Company would have the right to review any offers to purchase assets associated
with WOOD-TV and have the right to purchase such assets for cash at the offered
price.
In early 1997, the Company began discussions with AT&T concerning the
purchase of WOOD-TV by the Company from the WOOD-TV Sellers (who are all direct
or indirect subsidiaries of AT&T). Thereafter,
59
<PAGE> 68
the management of the Company and AT&T reached a tentative oral agreement
whereby the Company would purchase WOOD-TV for $122.5 million, subject to
further negotiation of other terms and conditions and to Board approval. Over
the next several weeks the management of the Company and AT&T engaged in a
series of informal negotiations regarding these terms and conditions and a draft
asset purchase agreement was prepared.
Before a final agreement between the Company and AT&T could be reached,
Hicks Muse began the preliminary negotiations with the Company and AT&T which
culminated in the execution of the Merger Agreement. During these negotiations,
due to AT&T's intention to enter into an agreement to sell WOOD-TV at the same
time a definitive merger agreement was executed, Hicks Muse proposed that
simultaneously with the execution of the Merger Agreement, the Company waive its
right of first refusal in order to allow Hicks Muse to purchase WOOD-TV from
AT&T for the price at which AT&T and management of the Company had previously
reached preliminary agreement.
The Company was unwilling to waive its right of first refusal prior to the
consummation of the Merger and therefore proposed an arrangement whereby Hicks
Muse would purchase WOOD-TV if the Merger occurs and the Company would purchase
WOOD-TV if the Merger does not occur. AT&T and Hicks Muse agreed to this
proposal and its terms were incorporated into the WOOD-TV Asset Purchase
Agreement which was negotiated on an arm's-length basis among the parties.
Pursuant to the WOOD-TV Asset Purchase Agreement, if the Merger Agreement
is not terminated prior to the Effective Time, Holdings will purchase WOOD-TV
from AT&T for a net purchase price of $122.5 million plus (i) an additional
amount equal to $125.5 million multiplied by a fraction (A) the numerator of
which will be equal to 8% multiplied by the number of days from and including
January 1, 1998, to but excluding the date on which the closing of the purchase
of WOOD-TV occurs, and (B) the denominator of which shall be 365, (ii) a
reimbursement for any cash contributed to WOOD-TV subsequent to January 1, 1998
(which cash shall be in excess of the $3 million to be transferred with WOOD-TV
under the WOOD-TV Asset Purchase Agreement), and (iii) a further additional
amount equal to 8% per annum on such excess cash from the date of contribution
of such excess cash to but excluding the date on which the closing of the
purchase of WOOD-TV occurs. Pursuant to the WOOD-TV Asset Purchase Agreement, if
the Merger Agreement is terminated prior to the Effective Time, the Company will
purchase WOOD-TV from AT&T for a net purchase price of $122.5 million plus (i)
an additional amount equal to $125.5 million multiplied by a fraction (A) the
numerator of which shall be equal to 8% multiplied by the number of days from
and including March 1, 1998, to but excluding the date on which the closing of
the purchase of WOOD-TV occurs, and (B) the denominator of which shall be 365,
(ii) a reimbursement for cash contributed to WOOD-TV subsequent to March 1, 1998
(which cash shall be in excess of the $3 million to be transferred with WOOD-TV
under the WOOD-TV Asset Purchase Agreement) and (iii) a further additional
amount equal to 8% per annum on such excess cash from the date of contribution
of such excess cash to but excluding the date on which the closing of the
purchase of WOOD-TV occurs.
Because the purchase of WOOD-TV cannot occur until after the consummation
of the Merger or the termination of the Merger Agreement, contemporaneously with
the execution of the WOOD-TV Asset Purchase Agreement, the Company extended the
Consulting Agreement (at an increased consulting fee) through June 28, 1998.
Under the PMVG Agreement, the transactions between the Company and AT&T
with respect to WOOD-TV required the approval of the Independent Directors in
addition to the approval of the Board of Directors. At the special meeting of
the Board of Directors held on August 11 and 12, 1997, Wasserstein Perella
delivered its oral opinion to the Independent Directors (subsequently confirmed
in writing) that the WOOD-TV Asset Purchase Agreement and the transactions
contemplated thereby are not likely to depress the value of the Company on the
Initiation Date. At such meeting, the WOOD-TV Asset Purchase Agreement was
unanimously approved by the Independent Directors. See "The Merger -- Background
of the Merger" and "-- Opinions of Financial Advisors -- Opinions of Wasserstein
Perella -- Supplemental Opinions".
The WOOD-TV Asset Purchase Agreement is not subject to the approval of the
shareholders of the Company.
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<PAGE> 69
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
Set forth below is selected consolidated financial and operating data of
the Company as of and for each of the five years in the period ended December
31, 1996 and as of and for the nine month periods ended September 30, 1997 and
September 30, 1996. The data should be read in conjunction with the historical
consolidated financial statements of the Company, and the notes thereto. Also
set forth below are certain pro forma operating data for the years ended
December 31, 1995 and 1994. The pro forma financial information is presented as
if the Spin-Off (as defined under "The Merger -- Background of the Merger")
(which occurred on December 28, 1994) and the acquisitions of WTNH-TV (New
Haven/Hartford, CT) and WIVB-TV (Buffalo, NY) (which occurred on December 28,
1994 and October 2, 1995, respectively) had taken place at January 1, 1994. The
pro forma financial presentation gives effect to a full year of operations at
stations WTNH-TV and WIVB-TV and includes pro forma adjustments for additional
depreciation and amortization of intangibles related to the purchase price
allocations, and additional provisions for income taxes related to the
adjustments described above, as well as the addition of station WTNH-TV's and
WIVB-TV's results of operations. The pro forma information is not necessarily
indicative of the results of operations that would have been reported if the
Spin-Off and acquisitions had taken place on the dates specified, nor is it
indicative of the Company's future operating results. The Company's audited
consolidated financial statements are incorporated by reference in this Proxy
Statement from the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, and the Company's unaudited consolidated financial statements
are incorporated by reference in this Proxy Statement from the Company's
Quarterly Report on Form 10-Q for the nine months ended September 30, 1997. See
"Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------- YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- --------- --------- -------- ---------
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.................................. $216,878 $201,895 $273,367 $ 217,247 $ 150,523 $127,541 $ 124,496
Operating income.............................. 72,714 66,642 99,160 85,028 64,069 52,251 51,717
Income before extraordinary loss(1)........... 32,622 29,538 46,461 38,030 31,185 22,287 19,150
Net income.................................... 32,622 29,538 46,461 38,030 28,260 22,287 19,150
Earnings per share:
Income before extraordinary loss.............. 1.07 0.98 1.54 1.28 1.19 0.86 0.74
Net income.................................... 1.07 0.98 1.54 1.28 1.08 0.86 0.74
Weighted average shares outstanding(2)........ 30,470 30,059 30,120 29,757 26,136 25,816 25,816
BALANCE SHEET DATA:
Cash and cash equivalents..................... $ 25,642 $ 25,930 $ 27,952 $ 18,025 $ 17,907 $ 19,461 $ 17,353
Total assets.................................. 585,517 597,007 595,944 587,256 423,964 183,697 179,371
Long-term debt................................ 295,000 365,000 350,000 387,000 295,000 176,447 222,088
Total shareholders' equity (deficit).......... 172,941 120,466 138,448 86,434 40,160 (99,115) (138,736)
Book value per share.......................... 5.80 4.06 4.66 2.93 1.38 (3.84) (5.51)
CASH FLOW DATA:
Net cash provided by operating activities..... $ 61,656 $ 49,139 $ 66,066 $ 55,208 $ 49,654 $ 46,705 $ 43,743
Net cash used in investing activities......... (10,837) (22,496) (23,131) (126,891) (142,168) (6,864) (3,111)
Net cash (used in) provided by financing
activities.................................. (53,129) (18,738) (33,008) 71,801 90,960 (37,733) (31,565)
Net (decrease) increase in cash and cash
equivalents................................. (2,310) 7,905 9,927 118 (1,554) 2,108 9,067
OTHER DATA:
Broadcast cash flow(3)........................ $102,513 $ 90,686 $130,399 $ 106,749 $ 77,203 $ 65,466 $ 63,095
PRO FORMA DATA:
Net revenues.................................. $ 233,507 $ 208,346
Operating income.............................. 87,736 78,894
Net income.................................... 36,780 33,712
Net income per share.......................... 1.24 1.14
Weighted average shares outstanding(2)........ 29,757 29,466
OTHER PRO FORMA DATA:
Broadcast cash flow(3)........................ $ 113,014 $ 103,284
</TABLE>
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<PAGE> 70
- ---------------
Notes to Selected Consolidated Financial and Operating Data:
(1) In 1994, the Company recorded a $4.5 million write-off of unamortized bank
fees and expenses related to its previous credit facility. This write-off
has been reflected as an extraordinary loss on extinguishment of debt, net
of an income tax benefit of $1.6 million, in the Company's financial
statements.
(2) Net income per share for all periods is calculated based on the number of
shares of common stock outstanding, assuming the shares issued in the
Spin-Off were issued on January 1, 1992, and the dilutive effect of common
stock equivalents. Pro forma net income per share is calculated based on the
number of shares of common stock outstanding, assuming the shares issued in
the WTNH-TV acquisition were issued on January 1, 1994, and the dilutive
effect of common stock equivalents.
(3) "Broadcast cash flow", which is commonly used as a measure of performance of
broadcast companies, is defined as operating income plus corporate expenses,
depreciation and amortization, including both tangible and intangible assets
and program rights and other non-cash items, less cash payments for program
rights. Cash program payments represent cash payments for current program
payables, and do not necessarily correspond to program usage. Broadcast cash
flow does not purport to represent cash provided by operating activities, as
reflected in the Company's consolidated statement of cash flow, is not a
measure of financial performance under generally accepted accounting
principles and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles.
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<PAGE> 71
PRICE RANGE OF COMMON STOCK AND DIVIDEND HISTORY
The Company's Common Stock is quoted on the NMS under the symbol "LNTV".
The following table sets forth, for the quarters indicated, on the high and low
sale prices of the Common Stock on the NMS as reported in publishing financial
sources. These prices reflect inter-dealer prices, without retail mark-up, mark-
down or commission and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
SALES PRICE
--------------
YEAR HIGH LOW
- ----------------------------------------------------------------------------- ---- ---
<S> <C> <C>
1995
First Quarter.............................................................. $33 3/4 $22 1/4
Second Quarter............................................................. 39 3/4 30 3/4
Third Quarter.............................................................. 39 1/2 29 1/4
Fourth Quarter............................................................. 33 3/4 27 1/4
1996
First Quarter.............................................................. $39 3/4 $27 1/4
Second Quarter............................................................. 37 1/2 30 3/8
Third Quarter.............................................................. 42 1/8 35
Fourth Quarter............................................................. 44 1/2 37 1/2
1997
First Quarter.............................................................. $43 7/8 $35 7/8
Second Quarter............................................................. 44 5/8 36
Third Quarter.............................................................. 49 1/8 43 1/4
Fourth Quarter (through November 17)....................................... 54 1/4 46 /16
</TABLE>
As of November 17, 1997, there were approximately 998 holders of record of
the Common Stock (the number of holders does not include the number of
shareholders whose shares are held of record by a broker or clearing agency, but
does include such a brokerage house or clearing agency as one record holder).
The Company has never paid cash dividends on the Common Stock. The
Company's bank credit facility restricts the Company from paying cash dividends
to its shareholders. There are also restrictions on the ability of the Company's
operating subsidiaries to pay dividends to the Company. The Company does not
anticipate that any cash dividends will be paid on the Common Stock in the
foreseeable future if, for any reason, the Merger is not consummated.
OWNERSHIP OF VOTING SECURITIES
The following table sets forth, as of November 17, 1997, information with
respect to the beneficial ownership of shares of Common Stock by (i) each person
known by the Company to beneficially own more than 5% of the outstanding Common
Stock, (ii) each director of the Company, (iii) each of the Chief Executive
Officer and the four other most highly compensated executive officers of the
Company and (iv) all directors and executive officers of the Company as a group.
Addresses are only given for holders of 5% or more of the outstanding shares of
Common Stock. Unless otherwise indicated, each person or group has sole voting
and investment power with respect to such Shares. For purposes of this table, a
person or group of persons is deemed to have "beneficial ownership" of any
Shares which such person or group has the right to acquire (including pursuant
to exercisable options or options which become exercisable) within 60 days of
November 17, 1997. For purposes of computing the percent of outstanding Shares
held by each person or group named below as of a given date, any Shares which
such person or group has the right to so acquire are
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<PAGE> 72
deemed to be outstanding, but are not deemed to be outstanding for the purpose
of computing the percentage owned by any other person or group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING SHARES
- --------------------------------------------------------- ---------------------- ------------------
<S> <C> <C>
AT&T Corp................................................ 13,494,750(1) 45.3%
c/o AT&T Wireless Services, Inc.
5400 Carillon Point
Kirkland, Washington 98033
Massachusetts Financial Services Company................. 3,119,170(2) 10.5%
500 Boylston Street
Boston, Massachusetts 02116
Putnam Investments, Inc.................................. 1,655,848(2) 5.6%
One Post Office Square
Boston, Massachusetts 02109
Cook Inlet Communications Corp........................... 1,608,975(3) 5.4%
2525 C Street, Suite 500
Anchorage, Alaska 99509
Dennis J. Carey, Director, Chairman of the Board......... 0 *
Gary R. Chapman, Director, President & CEO(4)(5)......... 12,976 *
Richard S. Bodman, Director.............................. 0 *
James D. Daniell, Director............................... 0 *
Errol A. Harris, Director................................ 0 *
William G. Herbster, Director(6)......................... 1,740 *
Roy M. Huhndorf, Director................................ 0 *
Wilma H. Jordan, Director................................ 289 *
Richard W. Kislik, Director.............................. 4,205 *
Gary A. Swenson, Director................................ 0 *
Paul Karpowicz, Vice President -- Television(7).......... 3,696 *
Deborah R. Jacobson, Vice President -- Corporate
Development & Treasurer................................ 3,547 *
Peter E. Maloney, Vice President -- Finance.............. 9,030 *
Gregory M. Schmidt, Vice President -- New Development,
General Counsel & Secretary............................ 2,084 *
All directors and officers as a group (16 individuals)... 38,351 *
</TABLE>
- ---------------
* Less than 1%
(1) AT&T Corp. holds its shares of Common Stock through its indirect
wholly-owned subsidiary, MMM Holdings.
(2) Based upon information contained in Schedule 13Fs filed with the SEC as of
June 30, 1997.
(3) Cook Inlet is an indirect wholly-owned subsidiary of Cook Inlet Region Inc.
(4) Mr. Chapman shares with his wife voting and investment power with respect to
26 shares of Common Stock.
(5) Includes 200 shares held by Mr. Chapman's children.
(6) Includes 1,740 shares held by Mr. Herbster's wife.
(7) Includes 200 shares held by Mr. Karpowicz's children.
(8) Certain officers and directors own shares of AT&T, but none owns shares that
represent more than 1% of AT&T.
64
<PAGE> 73
CERTAIN PENDING LITIGATION
As of the date of this Proxy Statement, the Company is aware of four
lawsuits that have been filed by shareholders relating to the Merger. The
Company and its directors are defendants in all of the lawsuits. AT&T is a
defendant in three of the lawsuits, and Hicks Muse is a defendant in one of the
lawsuits. All of the lawsuits were filed by a shareholder seeking to represent a
putative class of all public shareholders. Three of the lawsuits were filed in
Delaware Chancery Court, New Castle County, and one lawsuit was filed in New
York Supreme Court, New York County.
While the allegations of each complaint are not identical, all of the
lawsuits assert that the Merger is not in the interests of the Company's public
shareholders. All of the complaints allege breach of fiduciary duty in approving
the Merger. Two of the complaints also allege breach of fiduciary duty in
connection with the approval of the sale of WOOD-TV and the PMVG Amendment.
All of the complaints seek preliminary and permanent injunctive relief
prohibiting the Company from, among other things, consummating the Merger. The
complaints also seek unspecified damages, attorneys' fees and other relief.
The Company believes that the allegations contained in the complaints are
without merit and intends to contest the actions vigorously.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the SEC. Such reports, proxy statements and other information
filed by the Company with the SEC, can be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and the SEC's Regional Offices in New York (Suite 1300,
Seven World Trade Center, New York, New York 10048) and in Chicago (Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661). Copies of
such material also can be obtained from the Public Reference Section of the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Recent
materials filed by the Company also may be accessed electronically by means of
the SEC's home page on the Internet at http://www.sec.gov.
Statements contained in this Proxy Statement, or in any document
incorporated in this Proxy Statement by reference, as to the contents of any
contract or other document referred to herein or therein, are qualified in all
respects by reference to such contract or other document.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the SEC are incorporated
into this Proxy Statement by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (and Proxy Statement, dated April 14, 1997 to the extent
it was incorporated by reference therein), as amended by Amendment No. 1
thereto on Form 10-K/A dated November 18, 1997;
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997; and
3. The Company's Current Report on Form 8-K/A, dated August 13, 1997
and its Current Report on Form 8-K dated October 22, 1997.
All documents and reports filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy Statement
and prior to the date of the Special Meeting shall be deemed to be incorporated
by reference in this Proxy Statement and to be a part hereof from the dates of
filing of such documents or reports. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Proxy Statement to the extent
that a statement contained herein or in any other subsequently filed document
which
65
<PAGE> 74
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement.
The foregoing incorporation by reference shall not be deemed to incorporate
by reference the information referred to in Item 402(a)(8) of Regulation S-K.
This Proxy Statement incorporates documents by reference which are not
presented herein or delivered herewith. These documents (other than exhibits to
such documents, unless such exhibits are specifically incorporated therein by
reference) are available, without charge, to any person, including any
beneficial owner of Common Stock to whom this Proxy Statement is delivered, on
written or oral request to LIN Television Corporation, Four Richmond Square,
Suite 200, Providence, Rhode Island 02906, Attention: Investor Relations
(telephone number: (401) 457-9404). In order to ensure delivery of the documents
prior to the Special Meeting, requests should be received by December 24, 1997.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Proxy Statement (and the documents incorporated
herein by reference) and its attachments, including, without limitation,
statements regarding Projections under "The Merger -- Background of the Merger",
are forward-looking. These may be identified by the use of forward-looking words
or phrases such as "believe," "expect," "anticipate," "should," "planned,"
"estimated," and "potential," among others. These forward-looking statements are
based on the current expectations of the Company. The Private Securities
Litigation Reform Act of 1995 provides a "safe harbor" for such forward-looking
statements. In order to comply with the terms of the safe harbor, the Company
notes that a variety of factors could cause the Company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in such forward-looking statements. The risks and
uncertainties that may affect the operations, performance, development, and
results of the Company include (i) the Company's outstanding indebtedness and
substantial leverage, (ii) restrictions imposed by the terms of the Company's
indebtedness, (iii) the loss of key employees, (iv) future capital requirements,
(v) changes in advertising revenues which are caused by changes in national and
local economic conditions, the relative popularity of the Company's programming,
the demographic characteristics of the Company's markets, the activities of
competitors and other factors outside the Company's control, (vi) increases in
the costs of syndicated programming, (vii) modification or termination of
network affiliation agreements, (viii) competition for market share and
advertising revenues in each of the Company's markets, (ix) the introduction and
implementation of new or different technologies, (x) governmental regulation,
including FCC rulemaking proceedings relating to LMAs and to multiple ownership
of media properties in the same market, (xi) control by AT&T and the PMVG
Agreement, (xii) dividend restrictions in the Company's bank credit facility and
(xiii) other factors that might be described from time to time in filings of the
Company with the SEC.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of the Company incorporated herein by
reference to its Annual Report on Form 10-K for the fiscal year ended December
31, 1996, have been audited by Ernst & Young LLP, independent accountants for
the Company.
Representatives of Ernst & Young LLP are expected to be present at the
Special Meeting, will have the opportunity to make a statement at the Special
Meeting if they desire to do so and are expected to be available to respond to
appropriate questions.
OTHER MATTERS
The Board of Directors knows of no other matter to be acted upon at the
Special Meeting. However, if any other matters are properly brought before the
Special Meeting, the persons named in the accompanying form of proxy will vote
thereon in accordance with their judgment.
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<PAGE> 75
SHAREHOLDER PROPOSALS
The date by which shareholder proposals must be received by the Company for
inclusion in the Proxy Statement and Form of Proxy for its 1998 Annual Meeting
of Shareholders, in the event the Merger has not been consummated prior thereto,
is December 29, 1997. Such shareholder proposals should be submitted to LIN
Television Corporation, Four Richmond Square, Suite 200, Providence, Rhode
Island 02906, Attention: Secretary.
By Order of the Board of Directors
/s/ Gregory M. Schmidt
GREGORY M. SCHMIDT
Vice President, General Counsel and
Secretary
November 19, 1997
67
<PAGE> 76
ANNEX A
<PAGE> 77
COMPOSITE CONFORMED COPY*
------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
RANGER HOLDINGS CORP.,
RANGER ACQUISITION COMPANY
AND
LIN TELEVISION CORPORATION
DATED AS OF AUGUST 12, 1997,
AS AMENDED AS OF OCTOBER 21, 1997
------------------------
- ---------------
* For the convenience of readers, this Composite Conformed Copy (the "Composite
Conformed Copy") combines the Agreement and Plan of Merger, dated as of August
12, 1997 (the "Original Merger Agreement"), among Ranger Holdings Corp.,
Ranger Acquisition Company and LIN Television Corporation and the Amendment to
Merger Agreement, dated as of October 21, 1997 (the "Amendment"), among the
parties. Any statement which speaks "as of the date hereof" speaks as of
August 12, 1997.
<PAGE> 78
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
THE MERGER............................................................................ A-1
SECTION 1.1 The Merger................................................................ A-1
SECTION 1.2 Closing................................................................... A-1
SECTION 1.3 Effective Time of the Merger.............................................. A-1
SECTION 1.4 Effects of the Merger..................................................... A-2
SECTION 1.5 Certificate of Incorporation; By-Laws..................................... A-2
SECTION 1.6 Directors and Officers.................................................... A-2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES........................................................................ A-2
SECTION 2.1 Effect on Capital Stock................................................... A-2
(a) Common Stock of Sub............................................................. A-2
(b) Cancellation of Treasury Stock and Parent Owned Company Common Stock............ A-2
(c) Conversion of Company Common Stock.............................................. A-2
(d) Shares of Dissenting Holders.................................................... A-2
(e) Additional Amounts.............................................................. A-3
SECTION 2.2 Payment; Exchange of Certificates......................................... A-3
(a) Paying Agent; Payment Fund...................................................... A-3
(b) Exchange Procedures............................................................. A-3
(c) No Further Ownership Rights in Company Common Stock............................. A-4
(d) Termination of Payment Fund..................................................... A-4
(e) No Liability.................................................................... A-4
(f) Withholding Rights.............................................................. A-4
SECTION 2.3 Treatment of Employee Options............................................. A-4
SECTION 2.4 Termination of Private Market Value Guarantee............................. A-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES........................................................ A-5
SECTION 3.1 Representations and Warranties of the Company............................. A-5
(a) Organization and Qualification; Subsidiaries.................................... A-5
(b) Certificates of Incorporation and By-Laws....................................... A-6
(c) Capitalization.................................................................. A-6
(d) Authority Relative to Agreements................................................ A-7
(e) Consents and Approvals; No Violations........................................... A-7
(f) Licenses........................................................................ A-8
(g) SEC Documents and Other Reports................................................. A-8
(h) Information Supplied............................................................ A-9
(i) Absence of Certain Changes or Events............................................ A-9
</TABLE>
i
<PAGE> 79
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(j) Liabilities..................................................................... A-9
(k) Absence of Litigation........................................................... A-10
(l) Labor Matters................................................................... A-10
(m) Employee Arrangements and Benefit Plans......................................... A-10
(n) Tax Matters..................................................................... A-11
(o) Intellectual Property........................................................... A-12
(p) Environmental Matters........................................................... A-12
(q) Transactions with Affiliates.................................................... A-13
(r) Opinion of Financial Advisor.................................................... A-13
(s) Brokers......................................................................... A-13
(t) Material Agreements............................................................. A-14
(u) Compliance with Applicable Law.................................................. A-14
(v) Tangible Property............................................................... A-15
SECTION 3.2 Representations and Warranties of Parent and Sub.......................... A-15
(a) Corporate Organization.......................................................... A-15
(b) Authority Relative to Agreements................................................ A-15
(c) Consents and Approvals; No Violations........................................... A-15
(d) Information Supplied............................................................ A-16
(e) Financing....................................................................... A-16
(f) Brokers......................................................................... A-16
(g) FCC Licenses of Parent and Affiliates........................................... A-16
(h) FCC Application................................................................. A-17
(i) Ownership and Operations of Parent and Sub...................................... A-17
(j) Attributable Interests and Meaningful Relationships............................. A-17
ARTICLE IV
CONDUCT OF BUSINESSES PENDING THE MERGER.............................................. A-17
SECTION 4.1 Conduct of Business of the Company........................................ A-17
SECTION 4.2 Control of Company Operations............................................. A-19
SECTION 4.3 Conduct of Business of Parent and Sub..................................... A-19
SECTION 4.4 Notification of Certain Matters........................................... A-19
SECTION 4.5 Assistance................................................................ A-20
SECTION 4.6 Joint Venture Option...................................................... A-20
ARTICLE V
ADDITIONAL AGREEMENTS................................................................. A-21
SECTION 5.1 Shareholder Approval; Preparation of Proxy Statement...................... A-21
SECTION 5.2 Access to Information; Confidentiality.................................... A-21
SECTION 5.3 No Solicitation........................................................... A-21
SECTION 5.4 Employee Benefits Matters................................................. A-23
SECTION 5.5 Directors' and Officers' Indemnification and Insurance.................... A-23
SECTION 5.6 Reasonable Best Efforts................................................... A-24
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 5.7 Public Announcements...................................................... A-25
SECTION 5.8 Taxes..................................................................... A-25
SECTION 5.9 Conveyance Taxes.......................................................... A-25
SECTION 5.10 Solvency Letter.......................................................... A-25
SECTION 5.11 Definitive Commitment Letters and Alternative Commitments................ A-26
ARTICLE VI
CONDITIONS OF MERGER.................................................................. A-26
SECTION 6.1 Conditions to Obligation of Each Party to Effect the Merger............... A-26
SECTION 6.2 Conditions to Obligations of Parent and Sub............................... A-27
SECTION 6.3 Conditions to Obligations of the Company.................................. A-28
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER..................................................... A-28
SECTION 7.1 Termination............................................................... A-28
SECTION 7.2 Effect of Termination..................................................... A-29
SECTION 7.3 Fees and Expenses......................................................... A-29
SECTION 7.4 Brokers................................................................... A-30
SECTION 7.5 Amendment................................................................. A-30
SECTION 7.6 Waiver.................................................................... A-30
ARTICLE VIII
GENERAL PROVISIONS.................................................................... A-30
SECTION 8.1 Non-Survival of Representations, Warranties and Agreements................ A-30
SECTION 8.2 Notices................................................................... A-31
SECTION 8.3 Certain Definitions....................................................... A-31
SECTION 8.4 Severability.............................................................. A-33
SECTION 8.5 Entire Agreement; Assignment.............................................. A-33
SECTION 8.6 Parties in Interest....................................................... A-33
SECTION 8.7 Director and Officer Liability............................................ A-33
SECTION 8.8 Enforcement of Agreement.................................................. A-33
SECTION 8.9 Governing Law............................................................. A-33
SECTION 8.10 Headings................................................................. A-33
SECTION 8.11 Counterparts............................................................. A-33
SECTION 8.12 Effect of the Venture.................................................... A-33
</TABLE>
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<PAGE> 81
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 12, 1997 (this
"Agreement"), among RANGER HOLDINGS CORP., a Delaware corporation ("Parent"),
RANGER ACQUISITION COMPANY, a Delaware corporation and a wholly owned subsidiary
of Parent ("Sub"), and LIN TELEVISION CORPORATION, a Delaware corporation (the
"Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved, and deem it advisable and in the best interests of Parent, Sub
and the Company and of their respective shareholders to consummate, the business
combination transaction provided for herein in which Sub will merge with and
into the Company (the "Merger");
WHEREAS, pursuant to the Merger, each outstanding share of the Company's
common stock, par value $.01 per share (the "Company Common Stock"), shall be
converted into the right to receive the Merger Consideration (as defined in
Section 2.1(c)), upon the terms and subject to the conditions set forth herein;
WHEREAS, Parent and Sub are unwilling to enter into this Agreement (and
effect the transactions contemplated hereby) unless, contemporaneously with the
execution and delivery hereof, the Principal Company Shareholder (as defined in
Section 2.4) and Cook Inlet Communications Corp. ("CI") each enters into an
agreement (collectively, the "Shareholders Agreements") providing for certain
matters with respect to its shares of Company Common Stock and the Principal
Company Shareholder and CI have each agreed to execute and deliver such
agreements;
WHEREAS, Parent, by its execution of this Agreement, has authorized,
approved, adopted and consented to this Agreement and the transactions
contemplated hereby; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, mutual covenants and agreements herein contained,
and intending to be legally bound hereby, Parent, Sub and the Company hereby
agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the General Corporation Law of
the State of Delaware (the "DGCL"), at the Effective Time (as defined in Section
1.3), Sub shall be merged with and into the Company. As a result of the Merger,
the separate corporate existence of Sub shall cease, and the Company shall
continue as the surviving corporation of the Merger (the "Surviving
Corporation") and shall continue under the name LIN Television Corporation.
SECTION 1.2 Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 7.1 and subject to the satisfaction or waiver of the conditions set
forth in Article VI, the closing of the Merger (the "Closing") will take place
as promptly as practicable (and in any event within two business days) following
satisfaction or waiver of the conditions set forth in Article VI (the "Closing
Date"), at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New
York, New York 10153-0119, unless another date, time or place is agreed to in
writing by the parties hereto.
SECTION 1.3 Effective Time of the Merger. As soon as practicable on or
after the Closing Date, the parties hereto shall cause the Merger to be
consummated by filing this Agreement or a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware,
in such form as required by, and executed in accordance with the relevant
provisions of, the DGCL (the date and time of the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware (or such later time
as is specified in the Certificate of Merger) being the "Effective Time").
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SECTION 1.4 Effects of the Merger. The Merger shall have the effects set
forth in the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the properties, rights, privileges,
immunities, powers and franchises of the Company and Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company and
Sub shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION 1.5 Certificate of Incorporation; By-Laws. (a) At the Effective
Time, the certificate of incorporation of the Company, as in effect immediately
prior to the Effective Time, shall be the certificate of incorporation of the
Surviving Corporation following the Merger.
(b) The by-laws of Sub, as in effect immediately prior to the Effective
Time, shall be the by-laws of the Surviving Corporation and thereafter may be
amended or repealed in accordance with their terms or the certificate of
incorporation of the Surviving Corporation or as provided by applicable law.
SECTION 1.6 Directors and Officers. The directors of Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the certificate of
incorporation and by-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed, as the case may be, and qualified.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holders of any shares of
Company Common Stock, or any shares of capital stock of Sub:
(a) Common Stock of Sub. Each share of common stock, par value $0.01 per
share, of Sub issued and outstanding immediately prior to the Effective Time
shall be converted into one validly issued, fully paid and nonassessable share
of common stock, par value $0.01 per share, of the Surviving Corporation, which
shall be all of the issued and outstanding capital stock of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Company Common
Stock. Each share of Company Common Stock and all other shares of capital stock
of the Company that are owned by the Company or by any subsidiary of the
Company, and each share of Company Common Stock and all other shares of capital
stock of the Company that are owned by Parent, Sub or any other subsidiary of
Parent, shall automatically be cancelled and retired and shall cease to exist
and no consideration shall be delivered or deliverable in exchange therefor.
(c) Conversion of Company Common Stock. Except as otherwise provided
herein and subject to Section 2.1(d), each issued and outstanding share of
Company Common Stock (other than shares to be cancelled in accordance with
Section 2.1(b)) shall be converted into the right to receive $55.00 plus the
additional amounts, if any, payable with respect thereto pursuant to Section
2.1(e) (collectively, the "Merger Consideration"), payable to the holder thereof
upon surrender of the certificate formerly representing such share of Company
Common Stock in the manner provided in Section 2.2. All such shares of Company
Common Stock, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
certificate previously representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration therefor upon the surrender of such certificates in accordance
with Section 2.2.
(d) Shares of Dissenting Holders. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time held by holders who have not voted in
favor of the Merger or consented thereto in writing and who have demanded
appraisal rights with respect thereto in accordance with Section 262 of the DGCL
(the "Dissenting Shares") shall not be converted into the right to receive the
Merger Consideration as described in Section 2.1(c), but holders of
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such shares shall be entitled to receive payment of the appraised value of such
shares in accordance with the provisions of such Section 262; provided, however,
that any Dissenting Shares held by a holder who shall thereafter have failed to
perfect or shall have effectively withdrawn such demand for appraisal of such
shares or shall have lost the right to appraisal as provided in Section 262 of
the DGCL shall thereupon be deemed to have been converted, at the Effective
Time, into the right to receive the Merger Consideration as described in Section
2.1(c) upon surrender (in the manner provided in Section 2.2) of the Certificate
or Certificates that, immediately prior to the Effective Time, evidenced such
shares of Company Common Stock. The Company shall give Parent (i) prompt notice
of any written demands for appraisal of any shares, attempted withdrawals of
such demands, and any other instruments served pursuant to the DGCL that are
received by the Company relating to shareholders' rights of appraisal and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of Parent, voluntarily make any payment with respect to
any demands for appraisals of capital stock of the Company, offer to settle or
settle any such demands or approve any withdrawal of any such demands.
(e) Additional Amounts. (i) The amount of cash to which holders of issued
and outstanding shares of Company Common Stock shall be entitled pursuant to
Section 2.1(c) shall be increased by an additional amount per share equal to
$55.00 multiplied by a fraction (A) the numerator of which shall be equal to the
Applicable Rate (as defined below) multiplied by the number of days from and
including February 15, 1998 (the "Accretion Start Date"), to but excluding the
date on which the Effective Time occurs and (B) the denominator of which shall
be 365.
(ii) For purposes of this Section 2.1(e), the term "Applicable Rate" shall
mean 8% per annum.
SECTION 2.2 Payment; Exchange of Certificates.
(a) Paying Agent; Payment Fund. Prior to the Effective Time, Parent shall
designate a bank or trust company who shall be reasonably satisfactory to the
Company to act as paying agent in the Merger (the "Paying Agent"), and on or
prior to the Closing Date, Parent shall deposit or cause to be deposited with
the Paying Agent for the benefit of the holders of the Company Common Stock
(other than the Company and holders of Dissenting Shares) cash in an amount
necessary for the payment of the Merger Consideration as provided in Section 2.1
upon surrender of certificates representing shares of Company Common Stock as
part of the Merger. Funds deposited with the Paying Agent shall be invested by
the Paying Agent as directed by Parent or, after the Effective Time, the
Surviving Corporation, provided that such investments shall only be in
obligations of or guaranteed by the United States of America, in commercial
paper obligations rated A-1 or P-1 or better by Moody's Investors Service, Inc.
or Standard & Poor's Corporation, respectively, or in certificates of deposit,
bank repurchase agreements or banker's acceptances of commercial banks with
capital exceeding $1 billion. Any interest earned on such funds shall be for the
Surviving Corporation. The Paying Agent shall, pursuant to irrevocable
instructions from Parent and the Surviving Corporation, use the funds deposited
with the Paying Agent to pay the holders of the Company Common Stock in
accordance with this Article II, and such funds shall not be used for any other
purpose. If for any reason (including losses) the funds on deposit with the
Paying Agent are inadequate to pay the amounts to which the holders of shares of
Company Common Stock shall be entitled under Article II, Parent shall cause the
Surviving Corporation to promptly deposit in trust additional cash with the
Paying Agent sufficient to make all payments required under this Agreement, and
the Surviving Corporation shall in any event be liable for payment thereof.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates"),
whose shares were converted pursuant to Section 2.1 into the right to receive
the Merger Consideration, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Paying Agent and
shall be in such form and have such other provisions as Parent and the Company
may reasonably specify) and (ii) instructions to effect the surrender of the
Certificates in exchange for payment of the Merger Consideration. Upon surrender
of one or more Certificates for cancellation to the Paying Agent or to such
other agent or agents as may be appointed by Parent, which agents shall be
reasonably satisfactory to the Company, together with such letter of
transmittal,
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duly executed, the holder of such Certificates shall be entitled to receive in
exchange therefor the Merger Consideration for each share of Company Common
Stock formerly represented by such Certificate, and the Certificates so
surrendered shall forthwith be cancelled. Except as required by law, no interest
shall be paid on the Merger Consideration payable upon surrender of any
Certificate. If payment of the Merger Consideration is to be made to a person
other than the person in whose name the surrendered Certificate is registered,
it shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or shall be otherwise in proper form for transfer and that the
person requesting such payment shall have paid any transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such tax
either has been paid or is not applicable. Until surrendered as contemplated by
this Section 2.2, each Certificate (other than Certificates representing
Dissenting Shares) shall be deemed at any time after the Effective Time to
represent only the right to receive the Merger Consideration in cash as
contemplated by this Section 2.2.
(c) No Further Ownership Rights in Company Common Stock. All cash paid
upon the surrender of Certificates in accordance with the terms of this Article
II shall be deemed to have been paid in full satisfaction of the rights
pertaining to the shares of Company Common Stock theretofore represented by such
Certificates. At the Effective Time, the stock transfer books of the Company
shall be closed, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Company
Common Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Paying Agent or the
Surviving Corporation, they shall be cancelled and exchanged for the Merger
Consideration as provided in this Article II.
(d) Termination of Payment Fund. Any portion of the funds held by the
Paying Agent pursuant to this Section 2.2 which remain undistributed to the
holders of Company Common Stock for six months after the Effective Time shall be
delivered to the Surviving Corporation, upon demand, and any holders of Company
Common Stock who have not theretofore complied with this Article II shall
thereafter look only to the Surviving Corporation (subject to abandoned
property, escheat or other similar laws) for payment of the Merger Consideration
to which they are entitled.
(e) No Liability. None of Parent, the Company, the Surviving Corporation
or the Paying Agent shall be liable to any holder of shares of Company Common
Stock for any cash delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to five years after the Effective Time (or immediately
prior to such earlier date on which any payment in respect thereof would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 3.1(e)), the payment in respect of such Certificates shall,
to the extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
(f) Withholding Rights. The Paying Agent or the Surviving Corporation
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as the Paying Agent or the Surviving Corporation is required
to deduct and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
state, local or foreign tax law, or any court order, provided, however, there
shall be no withholding pursuant to section 1445 of the Code if the Company or
its shareholders deliver appropriate certification pursuant to section 1445 of
the Code. To the extent that amounts are so withheld by the Paying Agent or the
Surviving Corporation, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the shares of Company
Common Stock in respect of which such deduction and withholding was made by the
Paying Agent or the Surviving Corporation.
SECTION 2.3 Treatment of Employee Options. (a) Prior to the Effective
Time, the Board of Directors of the Company (or, if appropriate, any committee
thereof) shall adopt appropriate resolutions and take all other actions
reasonably necessary to (i) provide for the cancellation, effective at the
Effective Time, of all the outstanding stock options, stock appreciation rights,
limited stock appreciation rights and performance units (the "Options")
heretofore granted under any stock option, performance unit or similar
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<PAGE> 85
plan of the Company (the "Stock Plans"), (ii) provide that immediately prior to
the Effective Time, each Option, whether or not then vested or exercisable,
shall no longer be exercisable but shall entitle each holder thereof (subject to
applicable withholding taxes), in cancellation and settlement therefor, to a
cash payment at the Effective Time equal to (x) the excess, if any, of the
Merger Consideration over the exercise price of each Option held by the holder,
whether or not then vested or exercisable, multiplied by (y) the number of
shares of Company Common Stock subject to such Option and (iii) provide that all
Stock Plans will terminate as of or prior to the Effective Time.
(b) As provided herein, the Stock Plans and any other plan, program or
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of the Company or any subsidiary (collectively with the
Stock Plans, referred to as the "Stock Incentive Plans") shall terminate as of
the Effective Time. The Company will take all action reasonably necessary to
ensure that, as of the Effective Time, none of Parent, the Company, the
Surviving Corporation or any of their respective subsidiaries is or will be
bound by any Options, other options, warrants, rights or agreements which would
entitle any person, other than Parent or its affiliates, to own any capital
stock of the Company or the Surviving Corporation or any of their respective
subsidiaries or to receive any payment in respect thereof after the Effective
Time.
SECTION 2.4 Termination of Private Market Value Guarantee. At the
Effective Time, without further action on the part of any of the parties hereto
or any shareholders of the Company (including the Public Stockholders (as
defined in Section 8.3)), the Television Private Market Value Guarantee dated
December 28, 1994 between the Company and AT&T Wireless Services, Inc. (as
successor) (the "Principal Company Shareholder"), as the same may be further
amended or supplemented (the "PMVG"), shall terminate and be of no further force
or effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company. The Company
hereby represents and warrants to Parent and Sub as follows:
(a) Organization and Qualification; Subsidiaries. Each of the Company and
each of its Significant Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect (as defined
below) or to prevent or materially delay the ability of the Company to
consummate the transactions contemplated hereby. Each of the Company and each of
its Significant Subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing which would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
When used in connection with the Company or any of its subsidiaries, the
term "Material Adverse Effect" means any event, change or effect that,
individually or together with all other events, changes or effects, is
materially adverse to the properties, business, financial condition or results
of operations of the Company and its subsidiaries taken as a whole (other than
changes in general economic conditions or in economic conditions generally
affecting the television broadcasting industry). Notwithstanding the preceding
sentence, the parties hereto agree that for purposes of this Agreement (i)
(provided that the Company has complied with its obligations under Section
5.6(a)(ii)) any modification of, or any payments made or other arrangements
entered into, in connection with obtaining any consent to the transactions
contemplated hereby under any Material Contract (as defined in Section 3.1(t)),
(ii) (subject to Section 6.2(e)) any modification or termination of any LMA
Agreement (as defined in Section 3.1(t)) to comply with any FCC rule making
proceeding or other action, and (iii) any suit, action, claim or proceeding of
any kind brought by or on behalf
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<PAGE> 86
of any shareholder of the Company relating to any of the transactions
contemplated by this Agreement, the PMVG Agreement, the Shareholder Agreements
or the WOOD Agreement, in each case shall not be taken into account in
determining whether there has been or may be a Material Adverse Effect.
(b) Certificates of Incorporation and By-Laws. The Company has heretofore
furnished to Parent a complete and correct copy of the certificate of
incorporation and the by-laws of the Company and each Significant Subsidiary of
the Company as currently in effect. The certificate of incorporation and by-laws
of the Company and each Significant Subsidiary are in full force and effect and
no other organizational documents are applicable to or binding upon the Company
or any Significant Subsidiary. Neither the Company nor any Significant
Subsidiary is in violation of any of the provisions of its certificate of
incorporation or by-laws.
(c) Capitalization. The authorized capital stock of the Company consists
of 90,000,000 shares of Company Common Stock and 15,000,000 shares of Preferred
Stock, $.01 par value per share ("Company Preferred Stock"). As of August 1,
1997, (i) 29,782,664 shares of Company Common Stock were issued and outstanding,
all of which were validly issued, fully paid and nonassessable and were issued
free of preemptive (or similar) rights, (ii) 3,956 shares of Company Common
Stock were owned by the Company or by subsidiaries of the Company and (iii) an
aggregate of 2,455,231 shares of Company Common Stock were reserved for issuance
and issuable upon or otherwise deliverable in connection with the exercise of
outstanding employee Options issued pursuant to the Plans (as defined in Section
3.1(m)). Since June 30, 1997, no options to purchase shares of Company Common
Stock have been granted and no shares of Company Common Stock have been issued
except for shares issued pursuant to the exercise of employee Options
outstanding as of June 30, 1997. Section 3.1(c) of the Disclosure Schedule sets
forth a true and complete list of the subsidiaries and associated entities of
the Company which evidences, among other things, the capitalization of, and the
amount of capital stock or other equity interests owned by the Company, directly
or indirectly, in, such subsidiaries or associated entities. As of the date
hereof, no shares of Company Preferred Stock are issued and outstanding. Except
as set forth above and except as a result of the exercise of employee Options
outstanding as of June 30, 1997, there are outstanding (i) no shares of capital
stock or other voting securities of the Company or any subsidiary, (ii) no
securities of the Company or any subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or voting securities of the Company or
any subsidiary, (iii) no options or other rights to acquire from the Company or
any subsidiary, and no obligation of the Company or any subsidiary to issue, any
capital stock, voting securities or securities convertible into or exchangeable
or exercisable for capital stock or voting securities of the Company or any
subsidiary and (iv) no equity equivalents, interests in the ownership or
earnings of the Company or any subsidiary, stock appreciation rights or other
similar rights (collectively, "Company Securities"). Except as set forth in
Section 3.1(c) of the Disclosure Schedule of the Company dated the date hereof
and delivered to Parent (the "Disclosure Schedule"), there are no outstanding
obligations of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any Company Securities, and there are no other options, calls,
warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company or any
of its subsidiaries to which the Company or any of its subsidiaries is a party.
Except as set forth in Section 3.1(c) of the Disclosure Schedule, there are no
stockholder agreements (other than the Shareholders Agreements), voting trusts
or other agreements or understandings to which the Company or any of its
subsidiaries is a party or by which any of them is bound relating to the voting
of any shares of capital stock of the Company or any such subsidiary. All shares
of Company Common Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable
and free of preemptive (or similar) rights. There are no outstanding contractual
obligations of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of Company Common Stock or the capital stock of any
subsidiary or, except as described in Section 3.1(c) of the Disclosure Schedule,
to provide funds to or make any investment (in the form of a loan, capital
contribution, guarantee or otherwise) in any such subsidiary or any other
entity. Except as set forth in Section 3.1(c) of the Disclosure Schedule, each
of the outstanding shares of capital stock of each of the Company's subsidiaries
is duly authorized, validly issued, fully paid and nonassessable and is owned
directly or indirectly by the Company free and clear of any Liens (as defined in
Section 8.3).
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(d) Authority Relative to Agreements. The Company has all necessary
corporate power and authority to execute and deliver this Agreement and, subject
to approval of the Merger and this Agreement by (i) the holders of a majority of
the issued and outstanding Company Common Stock and (ii) a Majority Vote of the
Public Stockholders (as defined in Section 8.3), in each case as set forth
herein (collectively, the "Required Vote"), to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company (subject to the approval and
adoption of the Merger and this Agreement by the Required Vote, and, with
respect to the Merger, the filing of appropriate merger documents as required by
the DGCL). The Board of Directors of the Company has unanimously resolved to
recommend that the shareholders of the Company approve and adopt this Agreement,
provided, that such approval and recommendation may be withdrawn or modified if
permitted pursuant to Section 5.3. This Agreement has been duly executed and
delivered by the Company and, assuming the valid authorization, execution and
delivery hereof by each of Parent and Sub, constitutes the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting or
relating to the enforcement of creditors' rights generally and by general
principles of equity. The action of the Board of Directors of the Company in
approving the Merger and this Agreement and the transactions contemplated by
this Agreement is sufficient to render inapplicable to the Merger and this
Agreement the provisions of Section 203 of the DGCL and to the knowledge of the
Company no other state takeover statute or similar statute or regulation applies
to the Merger, this Agreement or any of the transactions contemplated hereby.
(e) Consents and Approvals; No Violations. Except as set forth in Section
3.1(e) of the Disclosure Schedule, the execution and delivery by the Company of
this Agreement do not, and the consummation by the Company of the transactions
contemplated hereby and compliance by the Company with the provisions hereof
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or the loss of a
benefit under, or result in the creation of any Lien upon or right of first
refusal with respect to any of the properties or assets of the Company or any of
its subsidiaries under, (i) any provision of the certificate of incorporation,
by-laws or comparable organization documents of the Company or any of its
Significant Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement (other than, with respect to
termination, agreements terminable without material penalty either at will or
upon 90 days' or less notice by the terminating party), obligation, instrument,
permit, concession, franchise or license applicable to the Company or any of its
Significant Subsidiaries or (iii) assuming all the consents, filings and
registrations referred to in the next sentence are obtained and made, any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any of its Significant Subsidiaries or any of their respective
properties or assets, other than, in the case of clause (ii) or (iii), any such
violations, defaults, rights, losses or liens, that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
No filing or registration with, or authorization, consent or approval of, any
domestic (federal and state) or foreign court, commission, governmental body,
regulatory agency, authority or tribunal (a "Governmental Entity") is required
by or with respect to the Company or any of its subsidiaries in connection with
the execution and delivery of this Agreement by the Company or is necessary for
the consummation of the Merger and the other transactions contemplated by this
Agreement, except (i) the filing with the Securities and Exchange Commission
(the "SEC") of (1) a proxy statement in definitive form relating to the
Shareholders' Meeting (such proxy statement, as amended or supplemented from
time to time, the "Proxy Statement") and (2) such other filings under the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"), as may be required in connection
with this Agreement and the transactions contemplated hereby and the obtaining
from the SEC of such orders as may be required in connection therewith, (ii)
applicable filings, if any, pursuant to the provisions of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (iii) such
filings with, and orders of, the Federal Communications Commission (the "FCC")
as may be required under the Communications Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the "Communications Act") (iv) the
filing of the Certificate of Merger with the Secretary of
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State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company or any of its subsidiaries is
qualified to do business, (v) such filings and consents as may be required under
any environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
other transactions contemplated by this Agreement, (vi) such filings as may be
required in connection with statutory provisions and regulations relating to
real property transfer gains taxes and real property transfer taxes, and (vii)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect or prevent or materially delay the ability of the Company to
consummate the transactions contemplated by this Agreement.
(f) Licenses. (i) Each of the Company and its Significant Subsidiaries has
all permits, licenses, waivers and authorizations (other than FCC Licenses (as
defined in Section 8.3), but including licenses, authorizations and certificates
of public convenience and necessity from applicable state and local
authorities), which are necessary for it to conduct its business, including its
television broadcast operations, in the manner in which they are presently being
conducted (collectively, "Licenses"), other than any Licenses the failure of
which to have would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each of the Company and its
Significant Subsidiaries is in compliance with the terms of all Licenses (other
than FCC Licenses), except for such failures so to comply which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company and its Significant Subsidiaries have duly performed
their respective obligations under and are in compliance with the terms of such
Licenses, except for such non-performance or non-compliance as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. There is no pending or, to the knowledge of the Company,
threatened application, petition, objection or other pleading with any
Governmental Entity other than the FCC which challenges or questions the
validity of, or any rights of the holder under, any License (other than an FCC
License), except for such applications, petitions, objections or other
pleadings, that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or that are applicable to the
broadcast industry generally. No representation or warranty is made in this
Section 3.1(f) with respect to Licenses required by Environmental Laws (as
defined in Section 3.1(p)).
(ii) Section 3.1(f)(ii) of the Disclosure Schedule sets forth all material
FCC Licenses held by or in respect of each Company Station and to the knowledge
of the Company (without investigation) all material FCC Licenses held by or in
respect of each LMA Station. Except as set forth in Section 3.1(f)(ii) of the
Disclosure Schedule and except as does not materially adversely affect the
operation by the Company or any subsidiary of the Company of any of the Company
Stations or the operation of the LMA Stations (as defined in Section 8.3) to
which the FCC Licenses listed in Section 3.1(f)(ii) of the Disclosure Schedule
apply: (A) the Company and those of its subsidiaries that are required to hold
FCC Licenses with respect to Company Stations, or that control FCC Licenses with
respect to Company Stations, are financially qualified and, to the knowledge of
the Company, are otherwise qualified to hold such FCC Licenses or to control
such FCC Licenses, as the case may be; (B) the Company and those of its
subsidiaries that are required to hold FCC Licenses with respect to Company
Stations hold such FCC Licenses; (C) the Company is not aware of any facts or
circumstances relating to the FCC qualifications of the Company or any of its
subsidiaries that would prevent the FCC's granting the FCC Form 315 Transfer of
Control Application to be filed with respect to the Merger (the "FCC
Application"); (D) each Company Station and to the knowledge of the Company
(without investigation) each LMA Station is in material compliance with all FCC
Licenses held by it and with the Communications Act; and (E) there is not
pending or, to the knowledge of the Company (without investigation in respect of
LMA Stations), threatened any application, petition, objection or other pleading
with the FCC or other Governmental Entity which challenges the validity of, or
any rights of the holder under, any FCC License held by the Company Stations,
the LMA Stations, the Company or any of its subsidiaries, except for rule making
or similar proceedings of general applicability to persons engaged in
substantially the same business conducted by the Company Stations.
(g) SEC Documents and Other Reports. The Company has filed all required
documents with the SEC since January 1, 1995 (the "SEC Reports"). Except as set
forth in Section 3.1(g) of the Disclosure Schedule,
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as of their respective filing dates, the SEC Reports complied in all material
respects with the requirements of the Securities Act of 1933, as amended, and
the rules and regulations thereunder (the "Securities Act"), or the Exchange
Act, as the case may be, each as in effect on the date so filed, and at the time
filed with SEC none of the SEC Reports contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Except as set forth in Section 3.1(g) of
the Disclosure Schedule, the financial statements of the Company included in the
SEC Reports comply as of their respective dates as to form in all material
respects with the then applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the case of
the unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto) and fairly present the consolidated financial position
of the Company and its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
(h) Information Supplied. The Proxy Statement (or any amendment thereof or
supplement thereto) will, at the date of mailing to shareholders of the Company
and at the time of the Shareholders' Meeting to be held in connection with the
Merger, not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that no representation is made by the Company with
respect to statements made based on information supplied by Parent or Sub in
writing specifically for inclusion in the Proxy Statement. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
(i) Absence of Certain Changes or Events. Since June 30, 1997, except as
contemplated by this Agreement, as set forth in Section 3.1(i) of the Disclosure
Schedule or disclosed in the SEC Reports filed since that date and up to the
date of this Agreement, the Company and its subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (i) any condition, event or
occurrence which, individually or in the aggregate, has had, or would reasonably
be expected to have, a Material Adverse Effect, (ii) any termination or
cancellation of, or any modification to, any agreement, arrangement or
understanding which has had or would reasonably be expected to have a Material
Adverse Effect, (iii) any material change by the Company in its accounting
methods, principles or practices, (iv) any revaluation by the Company of any of
its material assets other than in the ordinary course of business, consistent
with past practice, (v) any entry by the Company or any of its subsidiaries into
any commitment or transactions material to the Company, (vi) any declaration,
setting aside or payment of any dividends or distributions in respect of the
shares of Company Common Stock or any redemption, purchase or other acquisition
of any of its securities, (vii) any increase in or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards, or restricted stock
awards), stock purchase or other employee benefit plan or agreement or
arrangement, or any other increase in the compensation payable or to become
payable to any officers or key employees of the Company or any of its
subsidiaries other than in the ordinary course of business consistent with past
practice or as was required under employment, severance or termination
agreements in effect as of June 30, 1997, (viii) any bonus paid to the employees
of the Company or its subsidiaries other than in the ordinary course of business
and consistent with past practice, (ix) any sale or transfer of any material
assets of the Company or its subsidiaries other than in the ordinary course of
business and consistent with past practice or (x) any loan, advance or capital
contribution to or investment in any person in an aggregate amount in excess of
$100,000 by the Company or any subsidiary (excluding any loan, advance or
capital contribution to, or investment in, the Company or any wholly owned
subsidiary and except for drawdowns by the Company under its credit facility).
(j) Liabilities. Except (a) for liabilities incurred in the ordinary
course of business consistent with past practice, (b) for transaction expenses
incurred in connection with this Agreement, (c) for liabilities which
individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect, (d) for
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liabilities set forth on any balance sheet (including the notes thereto)
included in the Company's financial statements included in the SEC Reports filed
prior to the date hereof, or (e) as set forth in Section 3.1(j) of the
Disclosure Schedule, since December 31, 1996 neither the Company nor any of its
subsidiaries has incurred any liabilities or obligations of any nature, whether
or not accrued, contingent or otherwise, and whether due or to become due, that
would be required to be reflected or reserved against in a consolidated balance
sheet of the Company and its subsidiaries (including the notes thereto) prepared
in accordance with generally accepted accounting principles as applied in
preparing the consolidated balance sheet of the Company and its subsidiaries as
of December 31, 1996 contained in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996.
(k) Absence of Litigation. Except as disclosed in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996 or in Section
3.1(k) of the Disclosure Schedule, there are no suits, claims, actions,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries, or any properties or
rights of the Company or any of its subsidiaries, before any court, arbitrator
or administrative, governmental or regulatory authority or body, domestic or
foreign, that (i) individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect, (ii) as of the date of this Agreement
question the validity of this Agreement or any action to be taken by the Company
in connection with the consummation of the transactions contemplated hereby or
(iii) as of the date of this Agreement would prevent or result in a material
delay of the consummation of the transactions contemplated hereby. As of the
date hereof, neither the Company nor any of its subsidiaries nor any of their
respective properties is or are subject to any order, writ, judgment,
injunction, decree, determination or award having, or which would reasonably be
expected to have, a Material Adverse Effect or which would prevent or result in
a material delay of the consummation of the transactions contemplated hereby.
(l) Labor Matters. Except as set forth in Section 3.1(l) of the Disclosure
Schedule or in the SEC Reports filed prior to the date hereof, (i) neither the
Company nor any of its subsidiaries is a party to any labor or collective
bargaining agreement, and no employees of the Company or any of its subsidiaries
are represented by any labor organization, (ii) to the knowledge of the Company
there are no material representation or certification proceedings, or petitions
seeking a representation proceeding pending or threatened to be brought or filed
with the National Labor Relations Board or any other labor relations tribunal or
authority and (iii) to the knowledge of the Company there are no material
organizing activities involving the Company or any of its subsidiaries with
respect to any group of employees of the Company or its subsidiaries.
(m) Employee Arrangements and Benefit Plans. (i) Section 3.1(m) of the
Disclosure Schedule sets forth a complete and correct list of (i) all employee
benefit plans within the meaning of Section 3(3) of ERISA and all bonus or other
incentive compensation, deferred compensation, salary continuation, severance,
disability, stock award, stock option, stock purchase, tuition assistance, or
vacation pay plans or programs (collectively the "Plans") and (ii) all written
employment, severance, termination, change-in-control, or indemnification
agreements (collectively, the "Employment Arrangements"), in each case (i) or
(ii) under which the Company or any of its subsidiaries has any obligation or
liability (contingent or otherwise), except for any Employment Arrangement which
provides for annual compensation (excluding benefits) of $150,000 or less or has
an unexpired term of and can be terminated (before, on or after a change in
control) in less than one year from the date hereof without additional cost or
penalty. Except as set forth in the SEC Reports filed prior to the date of this
Agreement or in Section 3.1(m) of the Disclosure Schedule and except as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect: (A) each Plan has been administered and is in compliance with
the terms of such Plan and all applicable laws, rules and regulations, (B) no
"reportable event" (as such term is used in section 4043 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (other than those
events for which the 30 day notice has been waived pursuant to the regulations),
"prohibited transaction" (as such term is used in section 406 of ERISA or
section 4975 of the Code) or "accumulated funding deficiency" (as such term is
used in section 412 or 4971 of the Code) has heretofore occurred with respect to
any Plan and (C) each Plan intended to qualify under Section 401(a) of the Code
has received a favorable determination from the IRS regarding its
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qualified status and no notice has been received from the IRS with respect to
the revocation of such qualification.
(ii) There is no litigation or administrative or other proceeding involving
any Plan or Employment Arrangement nor has the Company received written notice
that any such proceeding is threatened, in each case where an adverse
determination would reasonably be expected to have a Material Adverse Effect.
Except as set forth in Section 3.1(m) of the Disclosure Schedule, the Company
has not contributed to any "multiemployer plan" (within the meaning of section
3(37) of ERISA) and neither the Company nor any of its subsidiaries has
incurred, nor, to the best of the Company's knowledge, is reasonably likely to
incur any withdrawal liability which remains unsatisfied in an amount which
would reasonably be expected to have a Material Adverse Effect. The termination
of, or withdrawal from, any Plan or multiemployer plan to which the Company
contributes, on or prior to the Closing Date, will not subject the Company to
any liability under Title IV of ERISA that would reasonably be expected to have
a Material Adverse Effect.
(iii) With respect to each Plan and Employment Arrangement (other than any
Employment Arrangement which provides for annual compensation (excluding
benefits) of $150,000 or less or has an unexpired term of and can be terminated
(before, on or after a change in control) in less than one year from the date
hereof without additional cost or penalty), a complete and correct copy of each
of the following documents (if applicable) have been provided by the Company:
(i) the most recent Plan or Employment Arrangement, and all amendments thereto
and related trust documents; (ii) the most recent summary plan description, and
all related summaries of material modifications; (iii) the most recent Form 5500
(including schedules); (iv) the most recent IRS determination letter; (v) the
most recent actuarial reports (including for purposes of Financial Accounting
Standards Board report no. 87, 106 and 112) and (vi) the most recent estimate of
withdrawal liability from any Plan constituting a multiemployer plan if any.
(iv) Except as disclosed in Section 3.1(m) of the Disclosure Schedule, in
the SEC Reports or in connection with equity compensation, neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (i) result in any payment becoming due to any employee
(current, former or retired) or consultant of Company or any or its
subsidiaries, (ii) increase any benefits under any Plan or Employment
Arrangement or (iii) result in the acceleration of the time of payment or
vesting of any rights under any Plan or Employment Arrangement.
(n) Tax Matters. (i) Except as set forth in Section 3.1(n) of the
Disclosure Schedule, (A) the Company and each of its subsidiaries have timely
filed with the appropriate taxing authorities all material Tax Returns (as
defined below) required to be filed through the date hereof and will timely file
any such material Tax Returns required to be filed on or prior to the Closing
Date (except those under valid extension) and all such Tax Returns are and will
be true and correct in all material respects, (B) all Taxes (as defined below)
of the Company and each of its subsidiaries shown to be due on the Tax Returns
described in (A) above have been timely paid or adequately reserved for in
accordance with GAAP (except to the extent that such Taxes are being contested
in good faith, which contested Taxes are set forth in Section 3.1(n) of the
Disclosure Schedule, (C) no material deficiencies for any Taxes have been
proposed, asserted or assessed against the Company or any of its subsidiaries
that have not been fully paid or adequately provided for in the appropriate
financial statements of the Company and its subsidiaries, and no power of
attorney with respect to any Taxes has been executed or filed with any taxing
authority and no material issues relating to Taxes have been raised in writing
by any governmental authority during any presently pending audit or examination,
(D) the Company and its subsidiaries are not now subject to audit by any taxing
authority and no waivers of statutes of limitation with respect to the Tax
Returns have been given by or requested in writing from the Company, (E) there
are no material liens for Taxes (other than for Taxes not yet due and payable)
on any assets of the Company or any of its subsidiaries, (F) neither the Company
nor any of its subsidiaries is a party to or bound by (nor will any of them
become a party to or bound by) any tax indemnity, tax sharing, tax allocation
agreement, or similar agreement, arrangement or practice with respect to taxes,
(G) neither the Company nor any of its Subsidiaries has ever been a member of an
affiliated group of corporations within the meaning of Section 1504 of the Code,
other than the affiliated group of which the Company is the common parent, (H)
neither the Company nor any of its subsidiaries has filed a consent pursuant to
the collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state or local law) or agreed to
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have Section 341(f)(2) of the Code (or any corresponding provisions of state or
local law) apply to any disposition of any asset owned by the Company or any of
its subsidiaries, as the case may be, (I) neither the Company nor any of its
subsidiaries has agreed to make, nor is any required to make any adjustment
under Section 481(a) of Code by reason of a change in accounting method or
otherwise, (J) the Company and its subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to withholding
of Taxes and (K) no property owned by the Company or any of its subsidiaries (i)
is property required to be treated as being owned by another person pursuant to
the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately prior to the enactment of the Tax Reform Act
of 1986; (ii) constitutes "tax exempt use property" within the meaning of
Section 168(h)(1) of the Code; or (iii) is tax exempt bond financed property
within the meaning of Section 168(g) of the Code.
(ii) As used in this Agreement, "Tax Return" shall mean any return, report
or statement required to be filed with any governmental authority with respect
to Taxes. As used in this Agreement, "Taxes" shall mean taxes of any kind,
including but not limited to those measured by or referred to as income, gross
receipts, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, value added,
property or windfall profits taxes, customs, duties or similar fees, assessments
or charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental authority,
domestic or foreign.
(o) Intellectual Property. Except as set forth in Section 3.1(o) of the
Disclosure Schedule and except to the extent that the inaccuracy of any of the
following (or the circumstances giving rise to such inaccuracy), individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect: (a) the Company and each of its subsidiaries owns, or is licensed to use
(in each case, clear of any Liens), all Intellectual Property (as defined below)
used in or necessary for the conduct of its business as currently conducted; (b)
the use of any Intellectual Property by the Company and its subsidiaries does
not infringe on or otherwise violate the rights of any person and is in
accordance with any applicable license pursuant to which the Company or any
subsidiary acquired the right to use any Intellectual Property; and (c) to the
knowledge of the Company, no person is challenging, infringing on or otherwise
violating any right of the Company or any of its subsidiaries with respect to
any Intellectual Property owned by and/or licensed to the Company or its
subsidiaries and (d) neither the Company nor any of its subsidiaries has
received any written notice of any pending claim with respect to any
Intellectual Property used by the Company and its subsidiaries and to its
knowledge no Intellectual Property owned and/or licensed by the Company or its
subsidiaries is being used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of such Intellectual Property. For
purposes of this Agreement, "Intellectual Property" shall mean trademarks,
service marks, brand names and other indications of origin, the goodwill
associated with the foregoing and registrations in any jurisdiction of, and
applications in any jurisdiction to register, the foregoing, including any
extension, modification or renewal of any such registration or application;
inventions, discoveries and ideas, whether patentable or not, in any
jurisdiction; patents, applications for patents (including, without limitation,
divisions, continuations, continuations in part and renewal applications), and
any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any person; writings and
other works, whether copyrightable or not, in any jurisdiction; registrations or
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof; any similar intellectual property or proprietary
rights; and any claims or causes of action arising out of or relating to any
infringement or misappropriation of any of the foregoing.
(p) Environmental Matters. Except as disclosed in the SEC Reports filed
prior to the date of this Agreement or in Section 3.1(p) of the Disclosure
Schedule and except as would not reasonably be expected to have a Material
Adverse Effect (i) the operations of the Company and its subsidiaries have been
and are in compliance with all Environmental Laws and with all Licenses required
by Environmental Laws, (ii) there are no pending or, to the knowledge of the
Company, threatened, actions, suits, claims, investigations or other proceedings
(collectively, "Actions") under or pursuant to Environmental Laws against the
Company or its subsidiaries or involving any real property currently or, to the
knowledge of the Company, formerly owned, operated or leased by the Company or
its subsidiaries, (iii) the Company and its subsidiaries are not subject to
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any Environmental Liabilities, and, to the knowledge of the Company, no facts,
circumstances or conditions relating to, arising from, associated with or
attributable to any real property currently or, to the knowledge of the Company,
formerly owned, operated or leased by the Company or its subsidiaries or
operations thereon that could reasonably be expected to result in Environmental
Liabilities, (iv) all real property owned and to the knowledge of the Company
all real property operated or leased by the Company or its subsidiaries is free
of contamination from Hazardous Material and (v) there is not now, nor, to the
knowledge of the Company, has there been in the past, on, in or under any real
property owned, leased or operated by the Company or any of its predecessors (a)
any underground storage tanks, above-ground storage tanks, dikes or impoundments
containing Hazardous Materials, (b) any asbestos-containing materials, (c) any
polychlorinated biphenyls, or (d) any radioactive substances.
As used in this Agreement, "Environmental Laws" means any and all federal,
state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decisions, injunctions, orders, decrees, requirements of any
Governmental Entity, any and all common law requirements, rules and bases of
liability regulating, relating to or imposing liability or standards of conduct
concerning pollution, Hazardous Materials or protection of human health or the
environment, as currently in effect and includes, but is not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. sec. 9601 et seq., the Hazardous Materials Transportation Act 49
U.S.C. sec. 1801 et seq., the Resource Conservation and Recovery Act ("RCRA"),
42 U.S.C. sec. 6901 et seq., the Clean Water Act, 33 U.S.C. sec. 1251 et seq.,
the Clean Air Act, 33 U.S.C. sec. 2601 et seq., the Toxic Substances Control
Act, 15 U.S.C. sec. 2601 et seq., the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C., sec. 136 et seq., and the Oil Pollution Act of 1990,
33 U.S.C. sec. 2701 et seq., as such laws have been amended or supplemented, and
the regulations promulgated pursuant thereto, and all analogous state or local
statutes. As used in this Agreement, "Environmental Liabilities" with respect to
any person means any and all liabilities of or relating to such person or any of
its subsidiaries (including any entity which is, in whole or in part, a
predecessor of such person or any of such subsidiaries), whether vested or
unvested, contingent or fixed, actual or potential, known or unknown, which (i)
arise under or relate to matters covered by Environmental Laws and (ii) relate
to actions occurring or conditions existing on or prior to the Closing Date. As
used in this Agreement, "Hazardous Materials" means any hazardous or toxic
substances, materials or wastes, defined, listed, classified or regulated as
such in or under any Environmental Laws which includes, but is not limited to,
petroleum, petroleum products, friable asbestos, urea formaldehyde and
polychlorinated biphenyls.
(q) Transactions with Affiliates. Except as set forth in the SEC Reports
filed prior to the date of this Agreement or in Section 3.1(q) of the Disclosure
Schedule, there are no contracts, agreements, arrangements or understandings of
any kind between any affiliate of the Company, on the one hand, and the Company
or any subsidiary of the Company, on the other hand.
(r) Opinion of Financial Advisor. On the date hereof, the Company has
received the opinions of Wasserstein Perella & Co., Inc. ("Wasserstein") and
Morgan Stanley, Dean Witter, Discover & Co. ("Morgan Stanley") to the effect
that the Merger Consideration is fair to the holders of the Company Common Stock
from a financial point of view and the Independent Directors (as defined in
Section 8.3) have received the opinions of Wasserstein to the effect that (i)
the amendment to the PMVG dated as of the date hereof is not materially adverse
to the holders of the Public Shares (as defined in Section 8.3) from a financial
point of view (ii) the provisions of this Agreement relating to the Termination
Fee (as defined in Section 7.3) and the fees and expenses of the transactions
contemplated hereby are not likely to depress the value of the Company on the
Initiation Date (as defined in the amendment to the PMVG described in the
preceding clause (i)) and (iii) the Asset Purchase Agreement dated as of the
date hereof among Parent, the Company, LIN Broadcasting Corporation and LCH
Communications, Inc. (the "WOOD Agreement") and the transactions contemplated
thereby are not likely to depress the value of the Company on the Initiation
Date. Copies of each such opinion have been made available to Parent.
(s) Brokers. No broker, finder, financial advisor or investment banker
(other than each of Wasserstein and Morgan Stanley) is entitled to any
brokerage, finder's or other fee, commission or expense reimbursement in
connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of the Company. The Company has heretofore
furnished to Parent a complete and correct copy of
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all agreements between the Company and each of Wasserstein and Morgan Stanley
pursuant to which each such firm would be entitled to any payment or
reimbursement relating to the transactions contemplated by this Agreement. The
Company shall be responsible for the payment of all such payments or
reimbursements.
(t) Material Agreements. (i) From and after December 31, 1996, neither the
Company nor any of its subsidiaries has entered into any contract, agreement or
other document or instrument (other than this Agreement and the WOOD Agreement)
that is required to be filed with the SEC that has not been so filed on or
before the date of this Agreement or any material amendment, modification or
waiver under any contract, agreement or other document or instrument (other than
any amendment to this Agreement, any agreements relating to the Venture (as
defined in Section 4.6), the WOOD Agreement and any amendments to agreements
related thereto, any amendment relating to the PMVG entered into in connection
with this Agreement, any amendment to the LIN Television Stockholders Agreement
dated as of December 28, 1994 among the Company, the Principal Company
Shareholder and CI or any amendments to any Stock Incentive Plan) that was
previously so filed.
(ii) Except as filed as an exhibit to the SEC Reports filed prior to the
date hereof or as set forth in Section 3.1(t) of the Disclosure Schedule,
neither the Company nor any of its subsidiaries is a party to or has entered
into or as of the date hereof made any material amendment or modification to or
granted any material waiver under the following (collectively, "Material
Contracts"): (A) any network affiliation agreement for any Company Station (a
"Network Agreement"), (B) any material sports broadcasting agreement (a "Sports
Agreement"), (C) any main transmitter site or main studio lease for any Company
Station or LMA Station (a "Necessary Lease"), (D) any agreement pursuant to
which the Company agrees to provide programming to an LMA Station, or pursuant
to which the Company has either a contingent obligation or the right to purchase
the assets of an LMA Station or any shares of capital stock of any corporation
holding any assets relating to an LMA Station (an "LMA Agreement"), or (E) any
partnership or joint venture agreement obligating the Company to contribute cash
in excess of $200,000 per year.
(iii) Each of the Material Contracts is valid and enforceable against the
Company in accordance with its terms, and there is no default under any Material
Contract either by the Company or any of its subsidiaries which is a party to
such Material Contract or, to the knowledge of the Company, by any other party
thereto, and no event has occurred that with the lapse of time or the giving of
notice or both would constitute a default thereunder by the Company or, to the
knowledge of the Company, any other party thereto, in any such case in which
such default or event would reasonably be expected to have a Material Adverse
Effect. In addition, neither the Company nor any subsidiary is in material
breach of any Network Agreement, Sports Agreement or LMA Agreement (including
any breach which would give rise to a right to terminate any such agreement).
Neither the Company nor any subsidiary has received any written notice (or to
the knowledge of the Company any other notice) of default or termination under
any Material Contract, and to the knowledge of the Company, there exists no
basis for any assertion of a right of default or termination under such
agreements, except as set forth in Section 3.1(t) of the Disclosure Schedule.
Neither the Company nor any subsidiary has received any written notice (or to
the knowledge of the Company any other notice) of the exercise of a put option
or other right pursuant to which the Company would be obligated to purchase
capital stock or assets relating to any LMA Station.
(iv) Neither the Company nor any of its subsidiaries is in breach of any
material agreement other than any Material Contract, except for breaches which
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(u) Compliance with Applicable Law. Except as set forth in Section 3.1(u)
of the Disclosure Schedule or as disclosed by the Company in the SEC Reports
filed prior to the date hereof, the Company and its subsidiaries are not in
violation of any law, ordinance or regulation of any Governmental Entity, except
that no representation or warranty is made in this Section 3.1(u) with respect
to Environmental Laws, the Communications Act and FCC rules, regulations and
policies and except for violations or possible violations which would not
reasonably be expected to have a Material Adverse Effect. Except as set forth in
Section 3.1(u) of the Disclosure Schedule or as disclosed by the Company in the
SEC Reports filed prior to the date hereof, to the knowledge of the Company no
investigation or review by any Governmental Entity with
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respect to the Company or its subsidiaries is pending or threatened, nor, to the
knowledge of the Company, has any Governmental Entity indicated an intention to
conduct the same, other than, in each case, any such action or intention of the
FCC and those which would not reasonably be expected to have a Material Adverse
Effect.
(v) Tangible Property. All of the assets of the Company and its
subsidiaries are in good operating condition, reasonable wear and tear excepted,
and usable in the ordinary course of business, except where the failure to be in
such condition or so usable would not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect.
SECTION 3.2 Representations and Warranties of Parent and Sub. Each of
Parent and Sub hereby represents and warrants to the Company as follows:
(a) Corporate Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority and any necessary
governmental authority to own, operate or lease its properties and to carry on
its business as it is now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority and
governmental approvals would not, individually or in the aggregate, reasonably
be expected to prevent or materially delay the ability of Parent or Sub to
consummate the transactions contemplated hereby. All of the issued and
outstanding capital stock of Sub is owned directly by Parent free and clear of
any Lien. Parent has provided the Company with complete and correct copies of
the certificate of incorporation and by-laws of Parent and Sub as currently in
effect.
(b) Authority Relative to Agreements. Each of Parent and Sub has all
necessary corporate power and authority to enter into this Agreement to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by each of
Parent and Sub and the consummation by Parent and Sub of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Parent and Sub and no other corporate
proceedings on the part of Parent or Sub are necessary to authorize this
Agreement or to consummate such transactions, other than filing and recordation
of appropriate merger documents as required by the DGCL. This Agreement has been
duly executed and delivered by each of Parent and Sub and, assuming due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of each of Parent and Sub enforceable against Parent and
Sub in accordance with its terms, except as may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws affecting or relating to the enforcement of creditors' rights generally and
by general principles of equity.
(c) Consents and Approvals; No Violations. The execution and delivery by
each of Parent and Sub of this Agreement do not, and the consummation by Parent
and Sub of the transactions contemplated hereby and compliance by Parent and Sub
with the provisions hereof will not, conflict with, or result in any violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or the loss of a benefit under, or result in the creation of any Lien upon or
right of first refusal with respect to any of the properties or assets of either
Parent or Sub under, (i) any provision of the certificate of incorporation or
by-laws of Parent or Sub, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, obligation, instrument, permit,
concession, franchise or license applicable to Parent or Sub or (iii) assuming
all the consents, filings and registrations referred to in the next sentence are
obtained and made, any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or Sub (or any of their affiliates) or any of
its properties or assets, other than, in the case of clause (ii) or (iii), any
such violations, defaults, rights, losses or liens, that, individually or in the
aggregate, would not reasonably be expected to prevent or result in a material
delay of the consummation of the transactions contemplated hereby. No filing or
registration with, or authorization, consent or approval of, any Governmental
Entity is required by or with respect to Parent or Sub (or any of their
affiliates) in connection with the execution and delivery of this Agreement by
Parent or Sub or is necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement, except (i) applicable filings, if
any, pursuant to the HSR Act, (ii) such filings with, and orders of, the FCC as
may be required under the Communications Act, (iii) the filing of the
Certificate of Merger with the
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Secretary of State of the State of Delaware, (iv) such filings as may be
required with Governmental Entities to satisfy the applicable requirements of
state securities or "blue sky" laws, (v) such filings as may be required in
connection with statutory provisions and regulations relating to real property
transfer gains taxes and real property transfer taxes, and (vi) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings the failure of which to be obtained or made would not, individually or
in the aggregate, reasonably be expected to prevent or result in a material
delay of the consummation of the transactions contemplated hereby.
(d) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub for inclusion or incorporation by reference in the
Proxy Statement will, at the date of mailing to shareholders and at the time of
the Shareholders' Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(e) Financing. Parent and Sub have delivered to the Company true and
complete copies of: (i) a binding commitment letter from Hicks, Muse, Tate &
Furst Equity Fund III, L.P., a Delaware limited partnership ("Fund III") to
provide equity financing in an amount not less than $835 million to provide
Parent and Sub a portion of the funds necessary to consummate the transactions
contemplated hereby and (ii) a binding commitment letter or letters from The
Chase Manhattan Bank, N.A. and/or Chase Securities, Inc. to provide debt
financing in an amount not less than $1.255 billion in the aggregate to provide
Parent and Sub all remaining funds necessary to consummate the transactions
contemplated hereby (collectively, the "Commitment Letters"). Fund III shall on
the date hereof and immediately prior to the Effective Time have subscription
commitments for unallocated capital equal to at least the amount set forth in
clause (i) above and, immediately prior to the Effective Time, there shall be no
restrictions on Fund III's ability to call such capital. Parent is not aware of
any facts or circumstances that would cause Parent to be unable to obtain
financing in accordance with the terms of the Commitment Letters. Parent agrees
to promptly notify the Company if at any time prior to the Closing Date it no
longer believes in good faith that it will be able to obtain any of the
financing substantially on the terms described in the Commitment Letters.
Notwithstanding the foregoing, if Parent delivers the Venture Notice (as defined
in Section 4.6), Parent and Sub shall deliver concurrently therewith alternative
binding commitment letters (the "Alternative Commitments") to the Company (i) to
provide equity financing from Fund III in an amount not less than $750 million,
(ii) to provide debt financing from Chase Manhattan Bank, N.A. and/or Chase
Securities, Inc., in an amount not less than $520 million in the aggregate and
(iii) to provide debt financing from General Electric Capital Corporation or one
of its affiliates in an amount not less than $815.5 million.
(f) Brokers. No broker, finder, financial advisor or investment banker is
entitled to any brokerage, finder's or other fee, commission or expense
reimbursement in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of Parent or Sub except for The
Chase Manhattan Bank, Chase Securities, Inc. and Greenhill & Co. LLC, whose fees
and expenses will be paid by Parent in accordance with Parent's agreements with
such firms.
(g) FCC Licenses of Parent and Affiliates. To the knowledge of Parent
(without investigation) as of the date of this Agreement but subject to the
disclosure provisions of Section 4.4 hereof: (i) Parent and its affiliates hold
or control all FCC Licenses necessary to the lawful operation of their business
and have the requisite FCC qualifications to hold or control such FCC Licenses,
(ii) each broadcast station owned, controlled or operated by Parent or any of
its affiliates is in material compliance with its FCC Licenses and with the
Communications Act, (iii) there are no facts or circumstances relating to the
FCC qualifications of Parent or any of its affiliates that would prevent the
FCC's granting the FCC Application under Current FCC Policy (as defined in
Section 8.3) and (iv) there is not pending or threatened any application,
petition, objection or other pleading with the FCC or other Governmental Entity
challenging the FCC qualifications of Parent or any of its affiliates to hold
any of their FCC Licenses, except for rule making or similar proceedings of
general applicability to persons engaged in substantially the same business
conducted by the broadcast stations owned, controlled or operated by Parent or
any of its affiliates.
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(h) FCC Application. To Parent's knowledge and except as set forth in the
Disclosure Schedule of Parent dated the date hereof and delivered to the Company
(the "Parent Disclosure Schedule"), Parent and its affiliates are qualified
under Current FCC Policy to hold, or control the entities which hold or will
hold, the FCC Licenses currently held or controlled by the Company and to be
held by Parent or any person under common control with Parent after the
Effective Time. Except as set forth in the Parent Disclosure Schedule, Parent is
not aware of any facts or circumstances relating to Parent or any of its
affiliates that would, under Current FCC Policy, prevent or materially delay the
FCC's granting of the FCC Application.
(i) Ownership and Operations of Parent and Sub. Each of Parent and Sub was
formed solely for the purpose of engaging in the transactions contemplated by
this Agreement. As of the date hereof and as of the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated by this Agreement and except for
this Agreement and any other agreements or arrangements contemplated by this
Agreement, each of Parent and Sub has no and will not have incurred, directly or
indirectly, through any subsidiary or affiliate, any obligations or liabilities
or engaged in any business activities of any type or kind whatsoever or entered
into any agreements or arrangements with any person or own or lease any real
property.
(j) Attributable Interests and Meaningful Relationships. Parent has
provided to the Company in writing a list of all media properties in which
Parent or any of its affiliates have any "attributable interest" or any
"meaningful relationship" under Current FCC Policy.
ARTICLE IV
CONDUCT OF BUSINESSES PENDING THE MERGER
SECTION 4.1 Conduct of Business of the Company. The Company covenants and
agrees that, during the period from the date hereof to the Effective Time,
except as set forth in Section 4.1 of the Disclosure Schedule or unless Parent
shall otherwise agree in writing, the businesses of the Company and its
subsidiaries shall be conducted only in, and the Company shall not take any
action and its subsidiaries shall not take any action except in, the ordinary
course of business; and the Company and each of its subsidiaries shall use its
reasonable best efforts to preserve intact the business organization of the
Company and its subsidiaries, to keep available the services of the present
officers, employees and consultants of the Company and its subsidiaries and to
preserve the present relationships of the Company and its subsidiaries with
customers, suppliers and other persons with which the Company or any of its
subsidiaries has significant business relationships. Without limiting the
generality of the foregoing, except as expressly provided in this Agreement
(including Section 4.2), neither the Company nor any of its subsidiaries shall,
between the date of this Agreement and the Effective Time, directly or
indirectly do, or propose or commit to do, any of the following without the
prior written consent of Parent (which may not be unreasonably delayed or
withheld):
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock (except dividends and
distributions by a wholly owned subsidiary of the Company to its parent),
(ii) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock or (iii) purchase, redeem
or otherwise acquire any shares of capital stock of the Company or any of
its subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities (other than in
connection with its employee stock purchase plan consistent with past
practice);
(b) except as set forth in Schedule 3.1(m) of the Disclosure Schedule
and except as permitted under existing Plans or Employment Arrangements in
effect on the date of this Agreement (including, without limitation, any
Stock Incentive Plans) and consistent with past practice, authorize for
issuance, issue, deliver, sell or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise), pledge or
otherwise encumber any shares of its capital stock or the capital stock of
any of its subsidiaries, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares,
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voting securities or convertible securities or any other securities or
equity equivalents (including without limitation stock appreciation rights)
(other than sales of capital stock of any wholly owned subsidiary of the
Company to the Company or another wholly owned subsidiary of the Company);
(c) except as set forth in Section 3.1(m) of the Disclosure Schedule
and except to the extent required under existing Plans or Employment
Arrangements as in effect on the date of this Agreement, (i) increase the
compensation or fringe benefits of any of its directors, officers or
employees, except for periodic increases in salary or wages of officers or
employees of the Company or its subsidiaries in the ordinary course of
business consistent with past practice, or (ii) grant any severance or
termination pay not currently required to be paid under existing Plans
other than in the ordinary course of business consistent with past
practice, or (iii) enter into any Employment Arrangement or similar
agreement or arrangement with any present or former director level or other
equivalent or more senior officer or employee, or, other than in the
ordinary course of business, any other employee of the Company or any of
its subsidiaries, or (iv) establish, adopt, enter into or amend in any
material respect or terminate any Plan or Employment Arrangement or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
directors, officers or employees; provided that this Section 4.1(c) shall
not apply to (A) any employment or consulting arrangement providing for
annual compensation (excluding benefits) of $200,000 or less which is
entered into in the ordinary course of business or (B) any renewal of any
existing employment or consulting arrangement that provides for an increase
in annual compensation (excluding benefits) of 10% or less than the
immediately preceding year or (C) any amendment or termination of the Stock
Incentive Plans necessary or desirable to effectuate the purposes of
Section 2.3;
(d) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents or alter through merger,
liquidation, reorganization, restructuring or in any other fashion the
corporate structure or ownership of any Significant Subsidiary of the
Company;
(e) acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the stock or assets of, or by any
other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or (ii) any
assets that are material, individually or in the aggregate, to the Company
and its subsidiaries taken as a whole;
(f) sell, lease, dispose of, license, mortgage or otherwise encumber
or subject to any lien or otherwise dispose of any of its properties or
assets, except (i) in the ordinary course of business, and (ii) in
connection with capital expenditures permitted to be expended by the
Company pursuant to Section 4.1(h);
(g) (i) incur or assume any indebtedness for borrowed money or
guarantee any such indebtedness of another person (other than guarantees by
the Company in favor of any of its wholly owned subsidiaries or by any of
its subsidiaries in favor of the Company), issue or sell any debt
securities or warrants or other rights to acquire any debt securities of
the Company or any of its subsidiaries, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
borrowings incurred in the ordinary course of business under existing lines
of credit, or (ii) make any loans, advances or capital contributions to, or
investments in, any other person, other than to the Company or any direct
or indirect wholly owned subsidiary of the Company;
(h) authorize or expend funds for capital expenditures other than in
accordance with the Company's current capital expenditure plans and budgets
(which plans and budgets shall have been disclosed in writing to Parent on
or prior to the date hereof);
(i) enter into, amend in any material respect, terminate, rescind,
waive in any material respect or release any of the terms or provisions of
any (i) Material Contract or (ii) any other agreement which is material to
the business of the Company and its subsidiaries taken as a whole other
than in the ordinary course of business, in each case other than (A) any
modification in compliance with the terms of Section 5.6(a)(ii), (B) any
modification or termination of an LMA Agreement to comply with any FCC rule
making proceeding or other action, (C) any programming agreement entered
into after the date
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hereof in the ordinary course of business and which provides for annual
payments by a Company Station of $400,000 or less and has a term of 2 years
or less and (D) any modification of the PMVG approved by the Independent
Directors;
(j) knowingly violate or fail to perform any material obligation or
duty imposed upon it by any applicable material federal, state or local
law, rule, regulation, guideline or ordinance;
(k) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;
(l) recognize any labor union (unless legally required to do so) or
enter into or materially amend any collective bargaining agreement;
(m) except as may be required as a result of a change in law or in
generally accepted accounting principles, make any material change in its
method of accounting;
(n) revalue in any material respect any of its material assets,
including, without limitation, writing down the value of inventory or
writing-off notes or accounts receivable other than in the ordinary course
of business or as required by generally accepted accounting principles;
(o) except to the extent required by law, make or revoke any Tax
election or settle or compromise any Tax liability that is, in the case of
any of the foregoing, material to the business, financial condition or
results of operations of the Company and its subsidiaries taken as a whole
or change (or make a request to any taxing authority to change) any
material aspect of its method of accounting for tax purposes;
(p) except for claims covered by insurance, settle or compromise any
litigation in which the Company or any subsidiary is a defendant (whether
or not commenced prior to the date of this Agreement) or settle, pay or
compromise any claims not required to be paid, which payments are
individually in an amount in excess of $500,000 and in the aggregate in an
amount in excess of $1,000,000, or settle or compromise any pending or
threatened suit, action or claim which would prevent or materially delay
the ability of the Company to consummate the transactions contemplated
hereby;
(q) pay any liabilities or obligations (absolute, accrued, asserted,
contingent or otherwise), other than any payment, discharge or satisfaction
in the ordinary course of business consistent with past practice, any
payment for the prepaid insurance and indemnification policy referred to in
the second proviso of Section 5.5 and any payment of expenses arising in
connection with the transactions contemplated hereby;
(r) knowingly violate or fail to perform any material obligation under
the consulting agreement with WOOD-TV, Grand Rapids, Michigan; and
(s) take, propose to take, or agree in writing or otherwise to take,
any of the foregoing actions.
SECTION 4.2 Control of Company Operations. Notwithstanding Section 4.1,
prior to the Effective Time, control of the Company's television broadcast
operations, along with all of the Company's other operations, shall remain with
the Company. The Company, Parent and Sub acknowledge and agree that neither
Parent nor Sub nor any of their employees, affiliates, agents or
representatives, directly or indirectly, shall, or have any right to, control,
direct or otherwise supervise, or attempt to control, direct or otherwise
supervise, such broadcast and other operations, it being understood that
supervision of all programs, equipment, operations and other activities of such
broadcast and other operations shall be the sole responsibility, and at all
times prior to the Effective Time remain within the complete control and
discretion, of the Company, subject to the terms of Section 4.1.
SECTION 4.3 Conduct of Business of Parent and Sub. During the period from
the date of this Agreement to the Effective Time, neither Parent nor Sub shall
engage in any activities of any nature except as provided in, or in connection
with the transactions contemplated by, this Agreement.
SECTION 4.4 Notification of Certain Matters. If Parent (or its affiliates)
or the Company receives an administrative or other order or notification
relating to any violation or claimed violation of the rules and
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regulations of the FCC, or of any Governmental Entity, that could affect
Parent's, Sub's or the Company's ability to consummate the transactions
contemplated hereby, or should Parent (or its affiliates) or the Company become
aware of any fact (including any change in law or regulations (or any
interpretation thereof by the FCC)) relating to the qualifications of Parent
(and its controlling persons) that reasonably could be expected to cause the FCC
to withhold its consent to the transfer of control of the FCC Licenses, Parent
or the Company, as the case may be, shall promptly notify the other party
thereof and shall use all reasonable efforts to take such steps as may be
necessary to remove any such impediment to the transactions contemplated by this
Agreement. In addition, Parent or the Company, as the case may be, shall give to
the other party prompt written notice of (a) the occurrence, or failure to
occur, of any event of which it becomes aware that has caused or that would be
likely to cause any representation or warranty of Parent and Sub or the Company,
as the case may be, contained in this Agreement to be untrue or inaccurate at
any time from the date hereof to the Closing Date, and (b) the failure of Parent
and Sub or the Company, as the case may be, or any officer, director, employee
or agent thereof, to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it
hereunder. No such notification shall affect the representations or warranties
of the parties or the conditions to their respective obligations hereunder.
SECTION 4.5 Assistance. If Parent requests, the Company will cooperate,
and will cause Ernst & Young LLP to cooperate, in all reasonable respects with
the efforts of Parent to finance the transactions contemplated by this
Agreement, including without limitation, providing assistance in the preparation
of one or more offering documents relating to debt financing to be obtained by
Parent, all at the sole expense of Parent. The Company (a) shall furnish to
Ernst & Young LLP, as independent accountants to the Company, such customary
management representation letters as Ernst & Young LLP may require of the
Company in connection with the delivery of any customary "comfort" letters
requested by Parent's financing sources and (b) shall furnish to Parent all
financial statements (audited and unaudited) and other information in the
possession of the Company or its representatives or agents as Parent shall
reasonably determine is necessary or appropriate for the preparation of such
offering documents. Notwithstanding the foregoing, prior to the Closing, the
Company shall not be required to file or assist Parent in filing any
registration statement with the SEC in connection with Parent's efforts to
finance the transactions contemplated hereby. Parent and Sub will indemnify and
hold harmless the Company and its officers, directors and controlling persons
against any and all claims, losses, liabilities, damages, costs or expenses
(including reasonable attorneys' fees and expenses) that may arise out of or
with respect to the efforts by Parent to finance the transactions contemplated
hereby, including, without limitation, any offering documents and other
documents related thereto.
SECTION 4.6 Joint Venture Option. If Parent so requests in writing (the
"Venture Notice") prior to the fifteenth (15th) business day following the date
on which FCC approval of the FCC Application with respect to the transfer of the
FCC Licenses of television station KXAS-TV to an entity controlled by NBC shall
have become final, then the Company, without the payment of any additional
Merger Consideration, will take all actions necessary or reasonably advisable,
including, without limitation, executing and performing its obligations under
the definitive documentation which shall be in form and substance reasonably
satisfactory to the Company, to implement prior to the Effective Time (i) a
television station joint venture (the "Venture") involving certain assets owned
by LIN Television of Texas, L.P. and certain assets owned by a subsidiary of
National Broadcasting Company, Inc. ("NBC") and (ii) the financing thereof, in
each case in the manner described in that certain Letter Agreement Regarding
Proposed Television Station Joint Venture and Asset Sale, dated October 21, 1997
(the "Letter Agreement") among Parent and NBC, a true and complete copy of which
has been provided to the Company. Promptly upon execution of this Amendment, the
Company will cooperate with Parent in filing all materials necessary to obtain
FCC approval in connection with the Venture, whether or not the Venture Notice
has been delivered to the Company. The obligation of the Company to execute the
definitive documentation relating to the Venture is expressly conditioned upon
there being included in such documentation: (a) an indemnity substantially in
the form set forth in Section 13 of the Letter Agreement and (b) an agreement
setting forth the mechanism for the unwind of the Venture, substantially in the
form set forth in Section 13 of the Letter Agreement. Upon written request of
Parent, the Company agrees to waive the condition to closing set forth in
Section 6.1(c) with respect to the transfer of the FCC Licenses pertaining to
the ownership and operation of the television station KXAS-TV by an entity
controlled by NBC. In connection with the Letter Agreement, the Company has been
provided with a true and complete copy of
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NBC's consent, pursuant to the Network Agreements between the Company and/or its
affiliates and NBC and/or its affiliates (the "NBC Network Agreements"), to the
transfer of control of the FCC Licenses of the Company Stations covered by such
Network Agreements to Parent or its affiliate upon consummation of the Merger.
If the transactions set forth in Sections 4(a) and 4(b) of the Letter Agreement
shall not have occurred on or prior to May 1, 1998, then the Company's
obligations set forth in this Section 4.6 shall thereafter terminate and this
Section 4.6 shall be of no further force and effect.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Shareholder Approval; Preparation of Proxy Statement. (a) On
or prior to January 15, 1998, the Company shall duly call, give notice of,
convene and hold a meeting of holders of the Company Common Stock (the
"Shareholders Meeting") for the purpose of obtaining the Required Vote. Without
limiting the generality of the foregoing but subject to Section 5.3(b), the
Company agrees that its obligations pursuant to the first sentence of this
Section 5.1(a) shall not be affected by (i) the commencement, public proposal,
public disclosure or communication to the Company of any Transaction Proposal or
(ii) the withdrawal or modification by the Board of Directors of the Company of
its approval or recommendation of this Agreement or the Merger. The Company
shall, through its Board of Directors (but subject to the right of the Board of
Directors to withdraw or modify its approval or recommendation of the Merger and
this Agreement as set forth in Section 5.3(b)), recommend to its shareholders
that the Required Vote be given.
(b) The Company shall prepare and file a preliminary Proxy Statement with
the SEC and shall use its reasonable best efforts to respond to any comments of
the SEC or its staff, and, to the extent permitted by law, to cause the Proxy
Statement to be mailed to the Company's shareholders as promptly as practicable
after responding to all such comments to the satisfaction of the staff and in
any event at least 20 days prior to the Shareholders Meeting. The Company shall
notify Parent promptly of the receipt of any comments from the SEC or its staff
and of any request by the SEC or its staff for amendments or supplements to the
Proxy Statement or for additional information and will supply Parent with copies
of all correspondence between the Company or any of its representatives, on the
one hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. If at any time prior to the Shareholders Meeting there
shall occur any event that should be set forth in an amendment or supplement to
the Proxy Statement, the Company shall promptly prepare and mail to its
shareholders such an amendment or supplement. The Company shall not mail any
Proxy Statement, or any amendment or supplement thereto, to which Parent
reasonably objects. Parent shall cooperate with and provide such information as
is reasonably requested by the Company in the preparation of the Proxy Statement
or any amendment or supplement thereto.
(c) Parent, in its capacity as the sole shareholder of Sub, by its
execution hereof, approves and adopts this Agreement and the transactions
contemplated hereby.
Section 5.2 Access to Information; Confidentiality. The Company shall, and
shall cause each of its subsidiaries to, upon reasonable notice, afford to
Parent and to the officers, employees, accountants, counsel, actuaries,
financial advisors and other representatives of Parent and Parent's financing
sources with respect to the transactions contemplated by this Agreement,
reasonable access to, and permit them to make such inspections as they may
reasonably require of, during normal business hours during the period from the
date of this Agreement through the Effective Time, all their respective
properties, books, contracts, commitments, documents and records and, during
such period, the Company shall, and shall cause each of its subsidiaries to,
furnish promptly to Parent (i) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws and (ii) all other information
concerning its business, properties and personnel as Parent may reasonably
request. The Company acknowledges and agrees that, for the purpose of this
Section 5.2 and in relation to the operations, business and assets of television
stations KXAS-TV and KXTX-TV, NBC shall be deemed to be one of Parent's
financing sources with respect to the transactions contemplated by this
Agreement. All information obtained by or on behalf of Parent pursuant to this
Section 5.2 shall be kept confidential in accordance with the Confidentiality
Agreement (as defined in Section 8.3), provided, that the Company hereby
consents to the
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disclosure by Parent to NBC of the Evaluation Material (as defined in the
Confidentiality Agreement) relating to the operations, business and assets of
television stations KXAS-TV and KXTX-TV. The Company shall use reasonable best
efforts to cause its senior management to cooperate with any reasonable request
by Parent relating to Parent obtaining the financing described in the Financing
Documents (as defined in Section 5.11), including the attendance and
participation by such senior management in meetings with prospective members of
and participants in any syndicate of financial institutions being assembled to
provide such financing.
Section 5.3 No Solicitation. (a) The Company and its subsidiaries shall,
and the Company shall direct and use its best efforts to cause the officers,
directors, employees, representatives, agents and affiliates of the Company and
its subsidiaries to, immediately cease any discussions or negotiations with any
parties that may be ongoing with respect to any Transaction Proposal (as
hereinafter defined). The Company shall not, nor shall it permit any of its
subsidiaries to, nor shall it authorize or permit any of its officers, directors
or employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of its subsidiaries to, directly
or indirectly, (i) solicit, initiate or knowingly encourage (including by way of
furnishing information or assistance) any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any
Transaction Proposal or (ii) enter into or participate in any discussions or
negotiations regarding any Transaction Proposal; provided, however, that at any
time prior to the receipt of the Required Vote the Company may, in response to a
Transaction Proposal which was not solicited subsequent to the date hereof, (x)
furnish information with respect to the Company to any person pursuant to a
confidentiality agreement on terms no less favorable to the Company than the
Confidentiality Agreement (unless the Company also agrees to amend the
Confidentiality Agreement in the same manner); provided that provisions similar
to Section 4 thereof need not be included and (y) enter into or participate in
discussions, investigations and/or negotiations regarding such Transaction
Proposal. The Company shall promptly give notice to Parent of the names of the
person or persons with respect to which it takes any action pursuant to
subclauses (x) or (y) of the preceding sentence and a general description of the
actions taken.
(b) Except as set forth in this Section 5.3, the Board of Directors of the
Company shall not (i) withdraw or modify, or propose publicly to withdraw or
modify, in a manner adverse to Parent, the approval or recommendation by such
Board of Directors of the Merger or this Agreement, (ii) approve or recommend,
or propose publicly to approve or recommend, any Transaction Proposal or (iii)
cause the Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any Transaction
Proposal. Notwithstanding the foregoing, if the Board of Directors of the
Company determines in good faith that it has received a Superior Proposal, the
Board of Directors of the Company may, prior to the receipt of the Required
Vote, withdraw or modify its approval or recommendation of the Merger and this
Agreement, approve or recommend a Superior Proposal (as defined below) or
terminate this Agreement, but in each case, only at a time that is at least five
business days after Parent's receipt of written notice advising Parent that the
Board of Directors of the Company has received a Transaction Proposal that may
constitute a Superior Proposal, specifying the material terms and conditions of
such Superior Proposal and the names of the person or persons making such
Superior Proposal.
(c) Nothing contained in this Section 5.3 shall prohibit the Company from
taking and disclosing to its shareholders a position contemplated by Rules 14d-9
and 14e-2 promulgated under the Exchange Act or from making any disclosure to
the Company's shareholders if, in the good faith judgment of the Board of
Directors of the Company, after consultation with outside counsel, such
disclosure is necessary in order to comply with its fiduciary duties to the
Company's shareholders under applicable law or is otherwise required under
applicable law.
(d) (i) For purposes of this Agreement, "Transaction Proposal" means any
bona fide inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of more than 50% of the aggregate assets of the
Company and its subsidiaries, taken as a whole, or more than 50% of the voting
power of the shares of Company Common Stock then outstanding or any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company, other than the transactions
contemplated by this Agreement.
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(ii) For purposes of this Agreement, a "Superior Proposal" means any
proposal determined by the Board of Directors of the Company in good faith,
after consultation with outside counsel, to be a bona fide proposal and made by
a third party on or after October 22 (other than the Principal Company
Shareholder) to acquire, directly or indirectly, for consideration consisting of
cash, property and/or securities, more than 50% of the voting power of the
shares of Company Common Stock then outstanding or all or substantially all the
assets of the Company and otherwise on terms which the Board of Directors of the
Company determines in its good faith judgment, after consultation with outside
counsel and with a financial advisor of nationally recognized reputation (such
as the financial advisor(s) identified in Section 3.1(r)), to be more favorable
to the Company's shareholders (taking into account all factors relating to such
proposal deemed relevant by the Board of Directors of the Company, including,
without limitation, the financing of such proposal, any regulatory issues
related thereto and all other conditions to closing) than the Merger after
giving effect to the Amendment.
SECTION 5.4 Employee Benefits Matters. (a) During the period from the
Effective Time until January 1, 2000, the Surviving Corporation shall maintain
wages, compensation levels, employee pension and welfare plans for the benefit
of employees and former employees of the Company and its subsidiaries, which in
the aggregate are equal or greater than those wages, compensation levels and
other benefits provided under the Plans and Employment Arrangements that are in
effect on the date hereof.
(b) (i) With respect to any officer or employee who is covered by a
severance compensation agreement, employment agreement or other severance policy
or plan separate from the standard severance policy for the employees of the
Company or any of its subsidiaries, the Surviving Corporation shall maintain or
cause to be maintained such severance compensation agreement, employment
agreement or other separate policy or plan as in effect as of the date hereof
(except as may be otherwise agreed by such officer or employee), and as to all
other officers and employees, the Surviving Corporation shall maintain or cause
to be maintained the standard severance policy of the Company and its
subsidiaries as in effect as of the date hereof until January 1, 2000.
(ii) The Surviving Corporation shall honor or cause to be honored all
severance agreements and employment agreements with the directors, officers and
employees of the Company and its subsidiaries.
(c) The Surviving Corporation will maintain the bonus practices of the
Company and its subsidiaries, as in effect on the date hereof, through the end
of the 1998 fiscal year, with bonuses to be paid to the employee participating
thereunder at levels consistent with past practice.
(d) The Surviving Corporation will (i) waive all limitations as to
preexisting conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the employees of the
Company or any of its subsidiaries under any welfare plan that such employees
may be eligible to participate in after the Effective Time, and (ii) provide
each employee of the Company and its subsidiaries with credit for any
co-payments and deductibles paid prior to the Effective Time in satisfying any
applicable deductible or out-of-pocket requirements under any welfare plans that
such employees are eligible to participate in after the Effective Time.
SECTION 5.5 Directors' and Officers' Indemnification and Insurance. From
and after the Effective Time, the Surviving Corporation will exculpate,
indemnify and hold harmless all past and present employees, officers, agents and
directors of the Company and its subsidiaries (the "Indemnified Parties") to the
same extent such persons are currently exculpated and indemnified by the Company
pursuant to the Company's certificate of incorporation and by-laws for any acts
or omissions occurring at or prior to the Effective Time and the Surviving
Corporation's certificate of incorporation and by-laws will continue to include
provisions to such effect. The Surviving Corporation will provide, for an
aggregate period of not less than six years from the Effective Time, the
directors and officers of the Company or any of its subsidiaries who are
currently covered by the Company's existing insurance and indemnification policy
an insurance and indemnification policy that provides coverage for events
occurring prior to the Effective Time (the "D&O Insurance") that is no less
favorable than the Company's existing policy or, if substantially equivalent
insurance coverage is unavailable, the best available coverage; provided that
the Surviving Corporation shall not be required to pay an annual premium for the
D&O Insurance in excess of 200 percent of the last annual premium paid prior to
the date hereof (which the Company represents and warrants to be approximately
$218,000), but in such case shall
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purchase as much coverage as possible for such amount; provided further, that
the Surviving Corporation shall not be obligated to provide such insurance if
the Company or the Surviving Corporation shall have obtained for the benefit of
the directors and officers of the Company and its subsidiaries who are covered
by the Company's existing insurance and indemnification policy a prepaid policy
that provides coverage for the six year period for events occurring prior to the
Effective Time that is no less favorable than the Company's existing policy.
SECTION 5.6 Reasonable Best Efforts. (a) Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things reasonably necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the Merger and the
other transactions contemplated by this Agreement, including (i) the obtaining
of all necessary actions, waivers, consents, licenses and approvals from
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities) and the taking of all reasonable
steps as may be necessary to obtain an approval, waiver or license from, or to
avoid an action or proceeding by, any Governmental Entity, (ii) the obtaining of
all necessary consents, approvals or waivers from third parties (and in
furtherance thereof the Company, with the consent of Parent (which consent may
not be unreasonably withheld), may make and commit to make payments to third
parties and enter into or modify agreements), (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement, or the consummation of the transactions contemplated
by this Agreement, including seeking to have any stay or temporary restraining
order entered by any court or other Governmental Entity vacated or reversed and
(iv) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to carry out fully the purposes
of, this Agreement. Without limiting the foregoing, each of the parties hereto
shall use its reasonable best efforts and cooperate in promptly preparing and
filing as soon as practicable, and in any event within 20 business days after
executing this Agreement, (i) notifications under the HSR Act and (ii) the FCC
Application and related filings in connection with the Merger and the other
transactions contemplated hereby, and to respond as promptly as practicable to
any inquiries or requests received from the Federal Trade Commission (the
"FTC"), the Antitrust Division of the United States Department of Justice (the
"Antitrust Division"), the FCC and any other Governmental Entities for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other Governmental Entity in connection with antitrust matters or
matters relating to the FCC Application. Each of the parties hereto, to the
extent applicable, further agrees (i) to file (and, in the case of Parent to
cause its affiliates to file) contemporaneously with the filing of the FCC
Application any requests for temporary or permanent waivers of applicable FCC
rules and regulations or rules and regulations of other Governmental Entities
and in furtherance of those waiver requests to pledge to hold separate, to place
in trust and/or to divest any of the businesses, product lines or assets of (A)
the Company or any of its subsidiaries at any time after the Effective Time or
(B) Parent or any of its affiliates at any time prior to, on or after the
Effective Time, in each case as may be required under Current FCC Policy to
obtain approval of the FCC Application (collectively, "Divestitures") in order
to permit consummation of the Merger and the other transactions contemplated by
this Agreement prior to the Termination Date (as defined in Section 7.1(e)) and
(ii) to expeditiously prosecute such waiver requests and to diligently submit
any additional information or amendments for which the FCC or any other relevant
Governmental Entity may ask with respect to such waiver requests. Parent further
covenants that, prior to the Effective Time, neither it nor any of its
affiliates shall acquire any new or increased "attributable interest" or
"meaningful relationship", each as defined in the FCC rules, in any media
property ("Further Media Interest"), which Further Media Interest could not be
held in common control with any Company Station by the Surviving Corporation
following the Effective Time (including by virtue of the FCC's multiple
ownership limits), without the prior written consent of the Company.
(b) In connection with, but without limiting, the foregoing, the Company
and its Board of Directors shall (i) use reasonable best efforts to ensure that
no state takeover statute or similar statute or regulation is or becomes
applicable to this Agreement, the Merger or any of the other transactions
contemplated by this Agreement and (ii) if any state takeover statute or similar
statute or regulation becomes applicable to this
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Agreement, the Merger or any of the transactions contemplated by this Agreement,
use reasonable best efforts to ensure that the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise to minimize the effect of
such statute or regulation on the Merger and the other transactions contemplated
by this Agreement.
(c) In connection with, but without limiting, the foregoing, Parent shall
use its reasonable best efforts to resolve such objections, if any, as may be
asserted with respect to the transactions contemplated by this Agreement under
any antitrust, competition or trade regulatory laws, rules or regulations of any
Governmental Entity ("Antitrust Laws") or any laws, rules or regulations of the
FCC or other Governmental Entities relating to the broadcast, newspaper, mass
media or communications industries (collectively, "Communications Laws") and
will take all necessary and proper steps (including, without limitation, any
Divestitures) as may be required (i) for securing the termination of any
applicable waiting period or for the approval of the FCC Application under the
Antitrust Laws or Communications Laws, in each case in order to permit the
consummation of the Merger and the other transactions contemplated hereby prior
to the Termination Date or (ii) by any domestic or foreign court or similar
tribunal, in any suit brought by a private party or Governmental Entity
challenging the transactions contemplated by this Agreement as violative of any
Antitrust Law or Communications Law, in order to avoid the entry of, or to
effect the dissolution of, any injunction, temporary restraining order or other
order that has the effect of preventing the consummation of any of such
transactions.
(d) Each of the parties hereto shall promptly provide the others with a
copy of any inquiry or request for information (including any oral request for
information), pleading, order or other document either party receives from any
Governmental Entities with respect to the matters referred to in Section 5.6.
(e) The Company shall give prompt notice to Parent and Sub, and Parent and
Sub shall give prompt notice to the Company, of (i) any notice of, or other
communication relating to, a default or event which, with notice or lapse of
time or both, would become a default, if received by it or any of its
subsidiaries subsequent to the date of this Agreement and prior to the Effective
Time, under any Material Contract or (ii) any written notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement; provided, however, that the delivery of any notice pursuant to this
Section 5.6 shall not cure such breach or non-compliance or limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
(f) Parent agrees to assume and become bound by the terms of any of the
Network Agreements if and to the extent required thereby in connection with the
transactions contemplated by this Agreement.
SECTION 5.7 Public Announcements. Each of the parties hereto shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Merger and shall not issue any such press release
or make any such public statement prior to such consultation, except as may be
required by law, fiduciary duties or any listing agreement with any national
securities exchange or quotation system.
SECTION 5.8 Taxes. Any liability with respect to taxes specified in
Section 5.9 hereof that are incurred in connection with the Merger shall be
borne by the Surviving Corporation and expressly shall not be a liability of the
shareholders of the Company.
SECTION 5.9 Conveyance Taxes. Each of the parties hereto shall cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes that become
payable in connection with the transactions contemplated hereby that are
required or permitted to be filed on or before the Effective Time.
SECTION 5.10 Solvency Letter. (a) Parent shall use all reasonable efforts
to deliver to the Board of Directors of the Company a letter (the "Solvency
Letter") from an independent third party selected by the Board of Directors and
reasonably satisfactory to Parent (the "Appraiser") attesting that, immediately
after the Effective Time, the Surviving Corporation: (i) will be solvent (in
that both the fair value of its assets will not be less than the sum of its
debts and that the present fair saleable value of its assets will not be less
than
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the amount required to pay its probable liability on its debts as they become
absolute and matured), (ii) will have adequate capital with which to engage in
its business; and (iii) will not have incurred and does not plan to incur debts
beyond its ability to pay as they become absolute and matured, based upon the
proposed financing structure for the Merger and certain other financial
information to be provided to the Appraiser by Parent and the Company and after
giving effect to any changes in the Surviving Corporation's assets and
liabilities as a result of the Merger and the financing relating thereto.
Subject to the foregoing, the Solvency Letter shall be in form and substance
reasonably satisfactory to the Board of Directors of the Company. Except with
the prior written consent of the Company's Board of Directors, Parent will not
consummate the Merger unless and until such Board of Directors shall have
received the Solvency Letter.
(b) Parent will request the Appraiser to promptly deliver the Solvency
Letter and in any event, Parent will cause the Solvency Letter to be delivered
prior to the Shareholders Meeting. The parties agree to cooperate with the
Appraiser in connection with the preparation of the Solvency Letter, including,
without limitation, providing the Appraiser with any information reasonably
available to them necessary for the Appraiser's preparation of such letter.
SECTION 5.11 Definitive Commitment Letters and Alternative
Commitments. Parent agrees to confirm in writing to the Company from time to
time upon request that Parent believes in good faith that it will be able to
obtain financing substantially on the terms described in the Commitment Letters
and Alternative Commitments.
ARTICLE VI
CONDITIONS OF MERGER
SECTION 6.1 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Shareholder Approval. The Merger and this Agreement shall have been
approved by the Required Vote.
(b) HSR Approval. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired, and no restrictive order or other requirements pursuant to the HSR
Act shall have been placed on the Company, Parent, Sub or the Surviving
Corporation in connection therewith.
(c) FCC Approval. The FCC shall have approved the FCC Application and such
approval shall have become final; provided, that such approval may be subject to
Parent (or its affiliates) or the Surviving Corporation making Divestitures as
set forth in Section 5.6 or to changes being made in the terms and conditions of
any contracts to which the Company is a party. For purposes of this Agreement,
FCC Approval of the FCC Application shall be deemed to be final if the FCC has
taken action (i) approving the transfer of the FCC Licenses for the ownership
and operation of the Company Stations pursuant to the Merger and (ii) if Parent
has delivered the Venture Notice, approving the transfer of the FCC Licenses for
the ownership and operation of television station KXAS-TV as contemplated by the
Letter Agreement, which in the case of each such approval has not been reversed,
stayed, enjoined, set aside, annulled or suspended, with respect to which no
timely request for stay, petition for reconsideration or appeal or sua sponte
action of the FCC with comparable effect is pending and as to which the time for
filing any such request, petition or appeal or for the taking of any such sua
sponte action by the FCC has expired, provided, that the requirement that such
FCC Approval must be final may be (A) waived in writing by Parent or (B) waived
in writing by the Company with respect to the transfer of the FCC Licenses
pertaining to television station KXAS-TV (which waiver may only be effected if
requested by Parent pursuant to Section 4.6); and, provided further, that the
requirement that final FCC Approval with respect to the transfer of the FCC
Licenses for the ownership and operation of television station KXAS-TV by an
entity controlled by NBC shall not be a closing condition if such final approval
shall not have been obtained by May 1, 1998.
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(d) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, nor shall any proceeding by any
Governmental Entity seeking any of the foregoing be pending. There shall not be
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger, which makes the consummation of the
Merger illegal.
SECTION 6.2 Conditions to Obligations of Parent and Sub. The obligations
of Parent and Sub to effect the Merger are subject to the satisfaction of the
following additional conditions unless waived by Parent:
(a) Representations and Warranties of the Company. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
in all respects (provided that any representation or warranty of the Company
contained herein that is subject to a materiality, Material Adverse Effect or
similar qualification shall not be so qualified for purposes of determining the
existence of any breach thereof on the part of the Company) as of the date of
this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date, except for such breaches that would not, individually or in
the aggregate with any other breaches on the part of the Company, reasonably be
expected to have a Material Adverse Effect on the Company, and Parent shall have
received a certificate signed on behalf of the Company by the Chief Executive
Officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of the Company by the Chief Executive
Officer of the Company to such effect.
(c) Financing. Parent shall have received the debt and equity financing
for the transactions contemplated hereby on terms substantially as outlined in
the Commitment Letters and Alternative Commitments.
(d) Consents. The Company shall have obtained the consent or approval of
each person (other than any Governmental Entity) whose consent or approval shall
be required in connection with the transactions contemplated hereby under any
Material Contract. The Company and Parent acknowledge in connection with the
foregoing that a true, correct and complete copy of NBC's consent, under the NBC
Network Agreements, to the transfer of control of the FCC Licenses of the
Company Stations covered by the NBC Network Agreements to Parent or its
affiliate in connection with the Merger has been delivered to the Company.
(e) LMA Agreements; Waiver Requests. There shall not have been any
material modification or termination of any LMA Agreement which individually or
in the aggregate would reasonably be expected to have a materially adverse
economic effect on the business, financial condition or results of operations of
the Company and its subsidiaries taken as a whole or a denial by the FCC of any
of the waiver requests referred to in the Parent Disclosure Schedule (provided
that Parent has made and/or agreed to make any necessary Divestitures pursuant
to Section 5.6), in each case other than as directed by the FCC under Current
FCC Policy. For purposes of this Agreement, the FCC shall be deemed to have
acted under Current FCC Policy except to the extent that its action is the
result of (i) legislative change enacted after the date of this Agreement, (ii)
FCC action taken after the date of this Agreement in a rule making proceeding or
(iii) application by the FCC Staff of interim decisions, policies or processing
guidelines adopted by the FCC Staff with respect to requests for waivers of the
duopoly rule, 47 C.F.R. Section 73.3555(b) or the one-to-a-market rule, 47
C.F.R. Section 73.3555(c), or to local marketing agreements, not heretofore
applied to transfer applications for stations similarly situated to the stations
whose licenses are to be transferred pursuant to the FCC Application.
(f) Dissenting Shares. No more than five percent (5%) of the shares of
Company Common Stock outstanding immediately prior to the Effective Time shall
be Dissenting Shares.
(g) Options and Convertible Securities. All Stock Incentive Plans shall
have been or will be as of the Effective Time duly cancelled by the Company and
each Option and all securities convertible into or exchangeable or exercisable
for shares of capital stock or voting securities of the Company shall be or will
be
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as of the Effective Time cancelled, exercised or expired, with the effect that,
upon consummation of the Merger, Parent will own 100% of the capital stock and
voting securities of the Surviving Corporation on a fully diluted basis.
SECTION 6.3 Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is subject to the satisfaction of the following
additional conditions unless waived by the Company:
(a) Representations and Warranties of Parent and Sub. The representations
and warranties of each of Parent and Sub set forth in this Agreement shall be
true and correct in all respects (provided that any representation or warranty
of Parent and Sub contained herein that is subject to a materiality, Material
Adverse Effect or similar qualification shall not be so qualified for purposes
of determining the existence of any breach thereof on the part of Parent and/or
Sub) as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, except for such breaches that
would not, individually or in the aggregate with other breaches on the part of
Parent and/or Sub, materially adversely affect the ability of Parent or Sub to
consummate the transactions contemplated hereby, and the Company shall have
received a certificate signed on behalf of each of Parent and Sub by the Chief
Executive Officer of each of Parent and Sub to such effect.
(b) Performance of Obligations of Parent and Sub. Each of Parent and Sub
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and the
Company shall have received a certificate signed on behalf of each of Parent and
Sub by the Chief Executive Officer of each of Parent and Sub to such effect.
(c) Solvency Letter. The Board of Directors of the Company shall have
received the Solvency Letter referred to in Section 5.10.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the shareholders of the Company:
(a) by mutual written consent of Parent, Sub and the Company; or
(b) by Parent, so long as neither Parent nor Sub is then in material breach
of its obligations hereunder, upon a breach of any material representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, or if any such representation or warranty of the Company shall have
been or become untrue, in each case such that the conditions set forth in
Section 6.2(a) or Section 6.2(b), as the case may be, would not be satisfied and
such breach or untruth (i) cannot be cured by the Closing Date or (ii) has not
been cured within 30 days of the date on which the Company receives written
notice thereof from Parent;
(c) by the Company, so long as the Company is not then in material breach
of its obligations hereunder, upon a breach of any material representation,
warranty, covenant or agreement on the part of Parent or Sub set forth in this
Agreement, or if any such representation or warranty of Parent or Sub shall have
been or become untrue, in each case such that the conditions set forth in
Section 6.3(a) or Section 6.3(b), as the case may be, would not be satisfied and
such breach or untruth (i) cannot be cured by the Closing Date or (ii) has not
been cured within 30 days of the date on which Parent or Sub receives written
notice thereof from the Company;
(d) by either Parent or the Company if any permanent injunction or other
order, decree, ruling or action by any Governmental Entity preventing the
consummation of the Merger shall have become final and nonappealable; provided
that such right of termination shall not be available to any party if such party
shall have failed to make reasonable efforts to prevent or contest the
imposition of such injunction or other order, decree, ruling or action and such
failure materially contributed to such imposition;
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(e) by either Parent or the Company if (other than due to the willful
failure of the party seeking to terminate this Agreement to perform its
obligations hereunder required to be performed at or prior to the Effective
Time) the Merger shall not have been consummated on or prior to June 30, 1998
(the "Termination Date"); provided that such right of termination shall not be
available to Parent if Parent (or its affiliates) have not taken necessary
action pursuant to Section 5.6 in order for the FCC Application to be approved;
(f) by either Parent or the Company, if the approval of the shareholders of
the Company of this Agreement and the Merger required for the consummation of
the Merger shall not have been obtained by reason of the failure to obtain the
Required Vote at a duly held meeting of shareholders or at any adjournment
thereof;
(g) by Parent, if (i) the Board of Directors of the Company (A) shall have
withdrawn, modified or changed its approval or recommendation of this Agreement
or the Merger in any manner which is adverse to Parent, (B) shall have approved
or have recommended to the shareholders of the Company a Transaction Proposal or
(C) shall have resolved to do the foregoing; or (ii) the Company shall have
wilfully failed to hold the Shareholders Meeting on or prior to January 31, 1998
(the "Delayed Date"); provided that the Delayed Date shall be automatically
extended for each day with respect to which the failure to hold the Shareholders
Meeting (x) is attributable to a lack of cooperation and assistance by Parent,
Sub or their affiliates or (y) is the result of any injunction or similar action
or any action of the SEC, in each case preventing or delaying the holding of
such meeting;
(h) by the Company prior to the receipt of the Required Vote in accordance
with Section 5.3; provided, that Parent receives at least the five business
days' prior written notice specified in Section 5.3(b) and, during such five
business day period, the Company shall, and shall cause its financial and legal
advisors to, consider any adjustment in the terms and conditions of this
Agreement that Parent may propose; provided, further, that the Company may not
effect such termination pursuant to this Section 7.1(h) unless the Company has
contemporaneously with such termination tendered payment to Parent or Parent's
designee of the amounts, if any, that are due to Parent under Section
7.3(b)(ii);
(i) by the Company if there is no reasonable possibility that (A) the FCC
Application will receive final approval on or prior to the Termination Date or
(B) the funding of any of the financing commitments described in the Commitment
Letters and Alternative Commitments will be available to Parent or Sub
substantially on the terms set forth therein; or
(j) by the Company (i) if a Solvency Letter reasonably satisfactory to the
Company has not been delivered to the Company within the period described in
Section 5.10(b) or (ii) if Parent does not confirm in writing to the Company
that Parent believes in good faith that it will be able to obtain financing
substantially on the terms set forth in the Commitment Letters and Alternative
Commitments within five business days of being requested to do so by the Company
pursuant to Section 5.11.
SECTION 7.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto except as set
forth in Section 7.3, Section 5.2 and Section 8.1; provided, however, that
nothing herein shall relieve any party from liability for any breach hereof.
SECTION 7.3 Fees and Expenses. (a) Except as provided below in this
Section 7.3, all fees and expenses incurred in connection with the Merger, this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated.
(b) The Company shall pay, or cause to be paid, in same day funds to Parent
the amounts set forth below (which amounts shall constitute full satisfaction of
all of the Company's obligations and liabilities to Parent and Sub under this
Agreement) under the circumstances and at the times specified:
(i) if Parent terminates this Agreement under Section 7.1(g), the
Company shall pay Parent upon such termination (A) $64 million as an
alternative transaction fee (the "Termination Fee") plus (B) $10 million as
reimbursement of the expenses of Parent and Sub, provided that Parent will
present statements documenting the expenses referenced in clause (B) to the
Company within five (5) business
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days following such termination, together with a refund of any amounts
which are not supported by such documentation.
(ii) if the Company terminates this Agreement under Section 7.1(h),
the Company shall pay the Termination Fee upon such termination;
(iii) if Parent or the Company terminates this Agreement under Section
7.1(f), the Company shall reimburse Parent for its documented out-of-pocket
expenses incurred in connection with the transactions contemplated hereby,
up to a maximum reimbursement of $10 million, promptly upon presentment of
statements documenting such expenses;
(iv) if (1) Parent or the Company terminates this Agreement under
Section 7.1(f) or (2) Parent terminates this Agreement under Section 7.1(b)
as a result of a willful breach of a material representation, warranty or
covenant by the Company, and within 320 days thereafter, (A) the Company
enters into a merger agreement, acquisition agreement or similar agreement
(including, without limitation, a letter of intent) with respect to a
Transaction Proposal, or a Transaction Proposal is consummated, or (B) the
Company enters into a merger agreement, acquisition agreement or similar
agreement (including, without limitation, a letter of intent) with respect
to a Superior Proposal, or a Superior Proposal is consummated, which in the
case of either (A) or (B) above will result in shareholders of the Company
becoming entitled to receive upon consummation of such Transaction Proposal
or Superior Proposal consideration with a value (determined in good faith
by the Board of Directors of the Company) per share of Company Common Stock
greater than (i) the cash price specified in Section 2.1(c) plus (ii) the
Additional Amounts described in Section 2.1(e) accruing from the Accretion
Start Date through the date of the consummation of such Transaction
Proposal or Superior Proposal, then, in the case of either (A) or (B)
above, the Company shall pay to Parent upon the consummation of such
Transaction Proposal or Superior Proposal the difference between the
Termination Fee and the amounts previously paid to Parent pursuant to
Section 7.3(b)(iii).
SECTION 7.4 Brokers. Except as otherwise provided in Section 7.3, the
Company agrees to indemnify and hold harmless Parent and Sub, and Parent and Sub
agree to indemnify and hold harmless the Company, from and against any and all
liability to which Parent and Sub, on the one hand, or the Company, on the other
hand, may be subjected by reason of any brokers, finders or similar fees or
expenses with respect to the transactions contemplated by this Agreement to the
extent such similar fees and expenses are attributable to any action undertaken
by or on behalf of the Company, Parent or Sub, as the case may be.
SECTION 7.5 Amendment. This Agreement may be amended by the parties hereto
by action taken by the respective Boards of Directors of Parent, Sub and the
Company at any time prior to the Effective Time; provided, however, that, after
approval of the Merger by the shareholders of the Company, no amendment may be
made which would reduce the amount or change the type of consideration into
which each share of Company Stock shall be converted upon consummation of the
Merger. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
SECTION 7.6 Waiver. At any time prior to the Effective Time, any party
hereto, to the extent lawful, may (a) extend the time for the performance of any
of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or parties to
be bound thereby.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.1, except that (i) those agreements set forth in Section
2.1, Section 2.2,
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Section 5.2, Section 5.4, Section 5.5, Section 7.2, Section 7.3, Section 7.4 and
Article VIII shall survive the Effective Time and those agreements set forth in
Section 5.2, Section 7.2, Section 7.3, Section 7.4 and Article VIII shall
survive termination (in each of (i) and (ii) in accordance with the terms of
such provisions).
SECTION 8.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
if to Parent or Sub:
Ranger Holdings Corp.
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention: Lawrence Stuart
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen E. Jacobs, Esq.
Howard Chatzinoff, Esq.
if to the Company:
LIN Television Corporation
#1 Richmond Square, Suite 230E
Providence, Rhode Island 02906
Attention: Peter E. Maloney
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: David B. Chapnick, Esq.
SECTION 8.3 Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first mentioned person;
(b) "beneficial owner" with respect to any shares of Company Common
Stock means a person who shall be deemed to be the beneficial owner of such
shares of Company Common Stock (i) which such person or any of its
affiliates or associates beneficially owns, directly or indirectly, (ii)
which such person or any of its affiliates or associates (as such term is
defined in Rule 12b-2 of the Exchange Act) has, directly or indirectly, (A)
the right to acquire (whether such right is exercisable immediately or
subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration rights,
exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding or (iii) which
are beneficially owned, directly or indirectly, by any other persons with
whom such person or any of its affiliates or person with whom such person
or any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
any shares;
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(c) "Company Station" means each broadcast television station owned by
the Company or a subsidiary of the Company and shall not include any
broadcast television station operated by the Company or a subsidiary of the
Company pursuant to a local marketing agreement;
(d) "Confidentiality Agreement" means the confidentiality agreement
dated June 13, 1997 between the Company and Hicks, Muse, Tate & Furst
Incorporated, as amended, modified or supplemented from time to time;
(e) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or otherwise;
(f) "Current FCC Policy" means the Communications Act and FCC rules,
regulations and policies in effect on the date of this Agreement;
(g) "FCC License" means any permit, license, waiver or authorization
that a person is required by the FCC to hold in connection with the
operation of its business;
(h) "generally accepted accounting principles" shall mean the
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession in the United States, in each case applied on a basis consistent
with the manner in which the audited financial statements for the fiscal
year of the Company ended December 31, 1996 were prepared;
(i) "Independent Directors" means the three members of the Company's
Board of Directors designated as such pursuant to the PMVG;
(j) "knowledge" means, with respect to any entity, knowledge of any
officer of an entity after reasonable inquiry (except as otherwise set
forth herein);
(k) "Lien" means, with respect to any asset (including, without
limitation, any security) any mortgage, lien, pledge, collateral
assignment, hypothecation, charge, security interest or encumbrance of any
kind in respect of such asset;
(l) "LMA Station" means each broadcast television station for which
the Company or a subsidiary of the Company provides programming and
advertising services pursuant to a local marketing agreement;
(m) "Majority Vote of the Public Stockholders" means (i) the
affirmative vote of the holders of at least a majority of the Public Shares
present and entitled to vote at any meeting at which the holders of a
majority of the Public Shares are present or (ii) the action by written
consent (in accordance with applicable provisions of Delaware law and the
Company's certificate of incorporation and by-laws) of the holders of a
majority of the Public Shares;
(n) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act);
(o) "Public Shares" means shares of Company Common Stock not owned by
the Principal Company Shareholder or any of its affiliates;
(p) "Significant Subsidiary" means, with respect to the Company, each
of the Company's subsidiaries through which the Company operates, or holds
an FCC License with respect to the operation of, a Company Station and any
other subsidiary which is a party to a Material Contract; and
(q) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent, Sub or any other person means any corporation,
partnership, joint venture or other legal entity of which the Company, the
Surviving Corporation, Parent, Sub or such other person, as the case may be
(either alone or through or together with any other subsidiary), owns,
directly or indirectly, 50% or more of the stock or
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other equity interests the holder of which is generally entitled to vote
for the election of the board of directors or other governing body of such
corporation or other legal entity.
SECTION 8.4 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the fullest extent possible.
SECTION 8.5 Entire Agreement; Assignment. Except for the Letter Agreement,
the Shareholders Agreements, Confidentiality Agreement and the WOOD Agreement,
this Agreement constitutes the entire agreement among the parties with respect
to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof; provided however that it is expressly
agreed that the transactions contemplated by this Agreement do not violate
Section 4 of the Confidentiality Agreement. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interest and obligations hereunder to any
newly-formed direct wholly owned Subsidiary of Parent or Sub. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
SECTION 8.6 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and (other than Sections
2.2(a), 5.4 and 5.5) nothing in this Agreement, express or implied, is intended
to or shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
SECTION 8.7 Director and Officer Liability. The directors, officers,
stockholders and other controlling persons of each of the parties and their
affiliates acting in such capacity shall not in such capacity have any personal
liability or obligation arising under this Agreement (including any claims that
the other parties may assert) other than as an assignee of this Agreement.
SECTION 8.8 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, such remedy being in addition to any
other remedy to which any party is entitled at law or in equity.
SECTION 8.9 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 8.10 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 8.11 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
Section 8.12 Effect of the Venture. Any actions taken by the Company to
implement the Venture pursuant to, and consistent with, its obligations under
Section 4.6 of the Agreement (and the results thereof) shall not (i) constitute
a breach of any representation, warranty or covenant under the Agreement, (ii)
be taken into account in determining whether there has been or may be a Material
Adverse Effect on the Company and (iii) in any respect be the basis for Parent
or Sub having the right to terminate the Agreement.
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<PAGE> 114
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
RANGER HOLDINGS CORP.
By: /s/ MICHAEL J. LEVITT
--------------------------------------
Name: Michael J. Levitt
Title: Vice President
RANGER ACQUISITION COMPANY
By: /s/ MICHAEL J. LEVITT
--------------------------------------
Name: Michael J. Levitt
Title: Vice President
LIN TELEVISION CORPORATION
By: /s/ GREGORY M. SCHMIDT
--------------------------------------
Name: Gregory M. Schmidt
Title: Vice President and General
Counsel
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ANNEX B-1
[MORGAN STANLEY LOGO]
[MORGAN STANLEY LETTERHEAD]
October 21, 1997
Board of Directors
LIN Television Corporation
Four Richmond Square
Suite 200
Providence, Rhode Island 02906
Members of the Board:
We understand that LIN Television Corporation ("LIN" or the "Company"),
Ranger Holdings Corp. ("Buyer") and Ranger Acquisition Company, a wholly owned
subsidiary of Buyer, ("Acquisition Sub") propose to enter into the Amendment to
Merger Agreement dated as of October 21, 1997 (the "Merger Agreement
Amendment"), which amends the Agreement and Plan of Merger, dated as of August
12, 1997 (the "Original Merger Agreement," and as so amended, the "Merger
Agreement") and which provides, among other things, for the merger (the
"Merger") of Acquisition Sub with and into LIN. Pursuant to the Merger, LIN will
become a wholly owned subsidiary of Buyer and each outstanding share of common
stock, par value $.01 per share (the "Common Stock") of LIN, other than shares
held in treasury or held by Buyer or any affiliate of Buyer or as to which
dissentliers' rights have been perfected, will be converted into the right to
receive $55.00 per share in cash as adjusted pursuant to the Merger Agreement
(the "Consideration"). The terms and conditions of the Merger are more fully set
forth in the Merger Agreement.
You have asked for our opinion as to whether the Consideration to be
received by the holders of shares of Common Stock pursuant to the Merger
Agreement is fair from a financial point of view to such holders.
For purposes of the option set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the Company prepared by the
management of the Company;
(iii) reviewed certain financial projections prepared by the
management of the Company;
(iv) discussed the past and current operations and financial condition
and the prospects of the Company with senior executives of the Company;
(v) reviewed the reported prices and trading activity for the Common
Stock;
(vi) compared the financial performance of the Company and the prices
and trading activity of the Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
(viii) participated in discussions and negotiations among
representatives at the Company and Buyer and their financial and legal
advisors;
(ix) reviewed the Television Private Market Value Guarantee and the
proposed amendment thereto;
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<PAGE> 116
(x) reviewed the Original Merger Agreement, the Merger Agreement
Amendment and certain relaxed documents, and
(xi) performed such other analyses as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of the
Company. We have not made any independent valuation or appraisal of the assets
or liabilities of the Company, nor have we been furnished with any such
appraisals. Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory or financing services for the Company, Hicks, Muse, Tate &
Furst Incorporated, an affiliate of the Buyer and the Acquisition Sub, and AT&T
Corp. and have received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing made by the Company with the Securities and Exchange Commission
with respect to the Merger. In addition, we express no opinion or
recommendations as to how the holders of Common Stock should vote at the
shareholders' meeting held in connection with the Merger.
Based on the foregoing, we are of the opinion on the date hereof that the
Consideration to be received by the holders of shares of Common Stock pursuant
to the Merger Agreement is fair from a financial point of view to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By:
[Paul J. Taubman Signature]
Paul J. Taubman
Managing Director
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<PAGE> 117
ANNEX B-2
[WASSERSTEIN LOGO] [WASSERSTEIN LETTERHEAD]
October 21, 1997
The Board of Directors
LIN Television Corporation
4 Richmond Square, Floor 2
Providence, Rhode Island 02906
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the common stock, par value $0.01 per
share (the "Shares"), of LIN Television Corporation, a Delaware corporation (the
"Company"), of the consideration proposed to be received by such holders
pursuant to the terms of the Agreement and Plan of Merger, dated as of August
12, 1997 (the "Merger Agreement"), among the Company, Ranger Holdings Corp., a
Delaware corporation ("Parent"), and Ranger Acquisition Company, a Delaware
corporation and wholly owned subsidiary of Parent ("Sub"), as amended pursuant
to an Amendment to Merger Agreement (the "Merger Amendment"). We understand that
the Merger Agreement and the Merger Amendment provide for, among other things, a
merger of Sub with and into the Company (the "Transaction") pursuant to which
each outstanding Share will be converted into the right to receive $55.00 in
cash, subject to adjustment (the "Consideration"). The terms and conditions of
the Transaction are set forth in more detail in the Merger Agreement and the
Merger Amendment.
In connection with rendering our opinion, we have reviewed the Television
Private Market Value Guarantee, dated December 28, 1994, between AT&T Wireless
Services, Inc., the legal successor to McCaw Cellular Communications, Inc., and
the Company (the "Original Guarantee"), the Merger Agreement, the amendment to
the Original Guarantee dated as of August 12, 1997 (the Amendment and, together
with the Original Guarantee, the "Guarantee"), the Asset Purchase Agreement,
dated as of August 12, 1997, among the Company, Parent and LCH Communications,
Inc., a Delaware corporation (the "Asset Purchase Agreement"), a draft Merger
Amendment and certain other related documents, and for purposes hereof we have
assumed that the final form of the Merger Amendment will not differ in any
material respect from the draft provided to us. We have also reviewed and
analyzed certain publicly available business and financial information relating
to the Company for recent years and interim periods to date, as well as certain
internal financial and operating information, including financial forecasts,
analyses and projections prepared by or on behalf of management of the Company
and provided to us for purposes of our analysis, and we have met with management
of the Company to review and discuss such information and, among other matters,
the Company's business, past and current operations, assets, financial condition
and future prospects.
We have reviewed and considered certain financial and stock market data
relating to the Company, and we have compared that data with similar data for
certain other companies, the securities of which are publicly traded, that we
believe may be relevant or comparable in certain respects to the Company or one
or more of its businesses or assets, and we have reviewed and considered the
financial terms of certain recent acquisitions and business combination
transactions in the television broadcasting industry specifically and in other
industries generally, that we believe to be reasonably comparable, in whole or
in part, to the Transaction or otherwise relevant to our inquiry. We have also
performed such other studies, analyses, and investigations and reviewed such
other information as we considered appropriate for purposes of this opinion.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all the financial and other
information reviewed by us, and we have not assumed any
B-2-1
[WASSERSTEIN LETTERHEAD ADDRESS]
<PAGE> 118
responsibility for independent verification of any of such information. We have
also relied upon the reasonableness and accuracy of the financial projections,
forecasts and analyses provided to us and we have assumed, with your consent,
that such projections, forecasts and analyses were reasonably prepared in good
faith and on bases reflecting the best currently available judgments and
estimates of the Company's management, and we express no opinion with respect to
such projections, forecasts and analyses or the assumptions upon which they are
based. In addition, we have not reviewed any of the books and records of the
Company, nor assumed any responsibility for conducting a physical inspection of
the properties or facilities of the Company, nor for making or obtaining an
independent valuation or appraisal of the assets or liabilities of the Company,
and no such independent valuation or appraisal was provided to us. We have
assumed that the transactions described in the Merger Agreement, the Merger
Amendment, the Guarantee and the Asset Purchase Agreement will be consummated on
the terms set forth therein, without material waiver or modification. Our
opinion is necessarily based on economic and market conditions and other
circumstances, and the information made available to us, as such exist and can
be evaluated by us as of October 21, 1997.
We are acting as financial advisor to the Company in connection with the
proposed Transaction and will receive a fee for our services, a portion of which
is contingent upon the consummation of the Transaction, as well as a fee for
rendering this opinion. In addition, we have performed various investment
banking services for the Independent Directors (as defined as the Guarantee)
from time to time in the past and have received customary fees for rendering
such services. We are continuing to provide financial advisory services to the
Independent Directors with respect to the Guarantee and may receive additional
fees for such services.
This opinion addresses only the fairness from a financial point of view to
the stockholders of the Company of the Consideration to be received by such
stockholders pursuant to the Transaction, and does not express any views on any
other terms of the Transaction. Specifically, our opinion does not address the
Company's underlying business decision to effect the transactions contemplated
by the Merger Agreement, the Merger Amendment, the Guarantee and the Asset
Purchase Agreement. We have advised the Board of Directors that, based on the
terms of our engagement by the Company, we do not believe that any person
(including any stockholder of the Company), other than the Company and the Board
of Directors, has the legal right to rely upon this letter to support any claim
against us arising under applicable state law and that, should any such claim be
brought against us by any such person, this assertion would be raised as a
defense. In the absence of applicable state law, the availability of such a
defense would be resolved by a court of competent jurisdiction. Resolution of
the question of the availability of such a defense, however, would have no
effect on the rights and responsibilities of the Board of Directors under
applicable state law. Furthermore, the availability of such defense to us would
have no effect on the rights and responsibilities of either us or the Board of
Directors under the federal securities laws.
It is understood that this letter is solely for the benefit and use of the
Board of Directors in its consideration of the Transaction and except for
inclusion in its entirety in a registration statement or proxy statement or both
relating to the Transaction, may not be relied upon by any other person, quoted,
used or reproduced for any other purpose without our prior written consent. This
opinion does not constitute a recommendation to any stockholder with respect to
how such holder should vote with respect to the Transaction, and should not be
relied upon by any stockholder as such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that as of the date hereof,
the Consideration to be received by the stockholders of the Company pursuant to
the Transaction is fair to such stockholders from a financial point of view.
Very truly yours,
/s/ WASSERSTEIN PERELLA & CO., INC.
------------------------------------
Wasserstein Perella & Co., Inc.
B-2-2
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ANNEX C
[WASSERSTEIN LOGO] [WASSERSTEIN LETTERHEAD]
August 12, 1997
Independent Directors of the Board of Directors
LIN Television Corporation
4 Richmond Square, Floor 2
Providence, Rhode Island 02906
Lady/Gentlemen:
You have asked us to advise you with respect to whether, in the context of
the Transaction (as defined below), the proposed amendment (the "PMVG
Amendment") to the Television Private Market Value Guarantee (the "PMVG"), dated
December 28, 1994, between LIN Television Corporation, a Delaware corporation
(the "Company"), and McCaw Cellular Communications, Inc. (now known as AT&T
Wireless Services, Inc.) would be materially adverse to the holders of Public
Shares (as defined in the PMVG) from a financial point of view. We understand
that the PMVG Amendment will be executed in connection with (i) the Agreement
and Plan of Merger, dated as of August 12, 1997 (the "Merger Agreement"), among
the Company, Ranger Holdings Corp., a Delaware corporation ("Parent"), and
Ranger Acquisition Company, a Delaware corporation and a wholly owned subsidiary
of Parent ("Sub"), and (ii) the Asset Purchase Agreement, dated as of August 12,
1997 among the Company, Parent and LCH Communications, Inc., a Delaware
corporation (the "Asset Purchase Agreement") (the execution of and the
transactions contemplated by the PMVG Amendment, the Merger Agreement and the
Asset Purchase Agreement, collectively, the "Transaction"). The Merger Agreement
provides for, among other things, a merger of Sub with and into the Company
pursuant to which each outstanding share of common stock, par value $0.01 per
share, of the Company will be converted into the right to receive $47.50 in
cash, subject to adjustment. The terms and conditions of the Transaction are set
forth in more detail in the Merger Agreement, the PMVG Amendment and the Asset
Purchase Agreement.
In connection with rendering our opinion, we have reviewed the PMVG and
drafts of the PMVG Amendment, the Merger Agreement and the Asset Purchase
Agreement, and for purposes hereof we have assumed that the final forms of these
documents will not differ in any material respect from the drafts provided to
us. We have also reviewed and analyzed certain publicly available business and
financial information relating to the Company for recent years and interim
periods to date, as well as certain internal financial and operating
information, including financial forecasts, analyses and projections prepared by
or on behalf of the Company and provided to us for purposes of our analysis, and
we have met with management of the Company to review and discuss such
information and, among other matters, the Company's business, operations,
assets, financial condition and future prospects.
We have reviewed and considered certain financial and stock market data
relating to the Company, and we have compared that data with similar data for
certain other companies, the securities of which are publicly traded, that we
believe may be relevant or comparable in certain respects to the Company or one
or more of its businesses or assets, and we have reviewed and considered the
financial terms of certain recent acquisitions and business combination
transactions in the television broadcasting industry specifically, and in other
industries generally, that we believe to be reasonably comparable, in whole or
in part, to the Transaction or otherwise relevant to our inquiry. We have also
performed such other studies, analyses, and investigations and reviewed such
other information as we considered appropriate for purposes of this opinion.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all the financial and other
information reviewed by us, and we have not assumed any
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<PAGE> 120
responsibility for independent verification of any of such information. We have
also relied upon the reasonableness and accuracy of the financial projections,
forecasts and analyses provided to us and we have assumed, with your consent,
that such projections, forecasts and analyses were reasonably prepared in good
faith and on bases reflecting the best currently available judgments and
estimates of the Company's management, and we express no opinion with respect to
such projections, forecasts and analyses or the assumptions upon which they are
based. In addition, we have not reviewed any of the books and records of the
Company, nor assumed any responsibility for conducting a physical inspection of
the properties or facilities of the Company, nor for making or obtaining an
independent valuation or appraisal of the assets or liabilities of the Company,
and no such independent valuation or appraisal was provided to us. We have
assumed that the transactions described in the Merger Agreement, the PMVG and
the Asset Purchase Agreement will be consummated on the terms set forth therein,
without material waiver or modification. Our opinion is necessarily based on
economic and market conditions and other circumstances, and the information made
available to us, as such exist and can be evaluated by us as of August 12, 1997.
We are acting as financial advisor to the Independent Directors (as defined
in the PMVG) in connection with certain aspects of the proposed Transaction and
will receive a fee for our services, a portion of which is contingent upon the
consummation of the Transaction, as well as a fee for rendering this opinion. In
addition, we have performed various investment banking services for the Board of
Directors of the Company in connection with the Transaction, and for the
Independent Directors from time to time in the past and have received customary
fees for rendering such services. We are continuing to provide financial
advisory services to the Independent Directors with respect to the PMVG, as
amended.
This opinion addresses only whether, in the context of the Transaction, the
PMVG Amendment is materially adverse to the holders of the Public Shares from a
financial point of view, and does not express any views on any other terms of
the Transaction. Specifically, our opinion does not address the Company's
underlying business decision to effect the Transaction, including the
transactions contemplated by the PMVG Agreement. We have advised the Independent
Directors that, based on the terms of our engagement by the Independent
Directors, we do not believe that any person other than the Independent
Directors has the legal right to rely upon this letter to support any claim
against us arising under applicable state law and that, should any such claim be
brought against us by any such person, this assertion would be raised as a
defense. In the absence of applicable state law, the availability of such a
defense would be resolved by a court of competent jurisdiction. Resolution of
the questions of the availability of such a defense, however, would have no
effect on the rights and responsibilities of the Independent Directors under
applicable state law. Furthermore, the availability of such a defense to us
would have no effect on the rights and responsibilities of either us or the
Independent Directors under the federal securities laws.
It is understood that this letter is solely for the benefit and use of the
Independent Directors in their consideration of the Transaction. This opinion
does not constitute a recommendation to any stockholder with respect to how such
holder should vote with respect to the Transaction, and should not be relied
upon by any stockholder as such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that as of the date hereof
and in the context of the Transaction, the proposed PMVG Amendment would not be
materially adverse to the holders of Public Shares from a financial point of
view.
Very truly yours,
/s/ WASSERSTEIN PERELLA & CO., INC.
------------------------------------
Wasserstein Perella & Co., Inc.
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ANNEX D
[WASSERSTEIN LOGO] [WASSERSTEIN LETTERHEAD]
August 12, 1997
Independent Directors of the Board of Directors
LIN Television Corporation
4 Richmond Square, Floor 2
Providence, Rhode Island 02906
Lady/Gentlemen:
You have asked us to advise you with respect to whether, in the context of
the Transaction (as defined below), the transactions contemplated by the Asset
Purchase Agreement, dated as of August 12, 1997 (the "Asset Purchase
Agreement"), among LIN Television Corporation, a Delaware corporation (the
"Company"), Ranger Holdings Corp., a Delaware corporation ("Parent"), and LCH
Communications, Inc. ("LCH"), a Delaware corporation, would likely depress the
value of the Company on the Initiation Date (as defined in the PMVG, as defined
below) from a financial point of view. We understand that the Asset Purchase
Agreement will be executed in connection with (i) the Agreement and Plan of
Merger, dated as of August 12, 1997 (the "Merger Agreement"), among the Company,
Parent and Ranger Acquisition Company, a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and (ii) the Television Private Market Value
Guarantee, dated December 28, 1994, between AT&T Wireless Services Inc., the
legal successor to McCaw Cellular Communications, Inc., and the Company, as
amended on August 12, 1997 (the "PMVG") (the execution of and the transactions
contemplated by the PMVG, the Merger Agreement and the Asset Purchase Agreement,
collectively, the "Transaction"). The Merger Agreement provides for, among other
things, a merger of Sub with and into the Company pursuant to which each
outstanding share of common stock, par value $0.01 per share, of the Company
will be converted into the right to receive $47.50 in cash, subject to
adjustment (the "Consideration"). The Asset Purchase Agreement provides for,
among other things, the obligation of the Company to purchase (i) the assets
comprising broadcast television station WOOD-TV and certain local marketing
agreement rights and other auxiliary facilities and (ii) an option to acquire
broadcast television station WOTV (collectively, the "WOOD-TV Properties") if
the Merger Agreement is terminated for an aggregate consideration of $125.5
million, subject to adjustment. The terms and conditions of the Transaction are
set forth in more detail in the Merger Agreement, the PMVG and the Asset
Purchase Agreement.
In connection with rendering our opinion, we have reviewed the PMVG, as
originally executed, and drafts of the Merger Agreement, the proposed amendment
to the PMVG referred to above and the Asset Purchase Agreement and for purposes
hereof, we have assumed that the final forms of these documents will not differ
in any material respect from the drafts provided to us.
We have also reviewed and analyzed certain publicly available business and
financial information relating to the Company and the WOOD-TV Properties for
recent years and interim periods to date, as well as certain internal financial
and operating information, including financial forecasts, analyses and
projections prepared by or on behalf of management of the Company and provided
to us for purposes of our analysis. We have also met with management of the
Company to review and discuss such information and, among other matters, the
WOOD-TV Properties and the Company's business, operations, assets, financial
condition and future prospects.
We have reviewed and considered certain financial and stock market data
relating to the Company and the WOOD-TV Properties and we have compared that
data with similar data for certain other companies, the securities of which are
publicly traded, that we believe may be relevant or comparable in certain
respects to the Company and the WOOD-TV Properties or one or more of their
respective businesses or assets, and we
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<PAGE> 122
have reviewed and considered the financial terms of certain recent acquisitions
and business combination transactions in the television broadcasting industry
specifically, and in other industries generally, that we believe to be
reasonably comparable, in whole or in part, to the Transaction or otherwise
relevant to our inquiry. We have also analyzed the effect of the execution of
agreements similar to the Asset Purchase Agreement and the consummation of
acquisitions similar to that contemplated by an Asset Purchase Agreement on the
valuation of certain of such companies. We have also performed such other
studies, analyses, and investigations and reviewed such other information as we
considered appropriate for purposes of this opinion.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all the financial and other
information reviewed by us, and we have not assumed any responsibility for
independent verification of any of such information. We have also relied upon
the reasonableness and accuracy of the financial projections, forecasts and
analyses provided to us and we have assumed, with your consent, that such
projections, forecasts and analyses were reasonably prepared in good faith and
on bases reflecting the best currently available judgments and estimates of the
Company's management, and we express no opinion with respect to such
projections, forecasts and analyses or the assumptions upon which they are
based. In addition, we have not reviewed any of the books and records of the
Company or the WOOD-TV Properties, nor assumed any responsibility for conducting
a physical inspection of the properties or facilities of the Company or the
WOOD-TV Properties nor for making or obtaining an independent valuation or
appraisal of the assets or liabilities of the Company or the WOOD-TV Properties
and no such independent valuation or appraisal was provided to us. We have
assumed that the transactions described in the Merger Agreement, the PMVG, and
the Asset Purchase Agreement will be consummated on the terms set forth therein,
without material waiver or modification. Our opinion is necessarily based on
economic and market conditions and other circumstances, and the information made
available to us, as such exist and can be evaluated by us as of August 12, 1997.
We are acting as financial advisor to the Independent Directors (as defined
in the PMVG) in connection with certain aspects of the proposed Transaction and
will receive a fee for our services, a portion of which is contingent upon the
consummation of the Transaction, as well as a fee for rendering this opinion. In
addition, we have performed various investment banking services for the Board of
Directors of the Company in connection with the Transaction and for the
Independent Directors from time to time in the past and have received customary
fees for rendering such services. We are continuing to provide financial
advisory services to the Independent Directors with respect to the PMVG and may
receive additional fees for such services.
This opinion addresses only whether, in the context of the Transaction, the
transactions contemplated by the Asset Purchase Agreement would likely depress
the value of the Company on the Initiation Date from a financial point of view,
and does not express any views on any other terms of the Transaction.
Specifically, our opinion does not address the Company's underlying business
decision to effect the Transaction, including the transactions contemplated by
the Asset Purchase Agreement. We have assumed with your permission for purposes
of this opinion that the Company's potential purchase of the WOOD-TV Properties
and related transactions would be consummated no sooner than March 1, 1998. We
have advised the Independent Directors that, based on the terms of our
engagement by the Independent Directors, we do not believe that any person other
than the Independent Directors has the legal right to rely upon this letter to
support any claim against us arising under applicable state law and that, should
any such claim be brought against us by any such person, this assertion would be
raised as a defense. In the absence of applicable state law, the availability of
such a defense would be resolved by a court of competent jurisdiction.
Resolution of the questions of the availability of such a defense, however,
would have no effect on the rights and responsibilities of the Independent
Directors under applicable state law. Furthermore, the availability of such a
defense to us would have no effect on the rights and responsibilities of either
us or the Independent Directors under the federal securities laws.
It is understood that this letter is solely for the benefit and use of the
Independent Directors in their consideration of the Transaction. This opinion
does not constitute a recommendation to any stockholder with respect to how such
holder should vote with respect to the Transaction, and should not be relied
upon by any stockholder as such.
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<PAGE> 123
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that as of the date hereof
and in the context of the Transaction, the transactions contemplated by the
Asset Purchase Agreement would not likely depress the value of the Company on
the Initiation Date from a financial point of view.
Very truly yours,
/s/ WASSERSTEIN PERELLA & CO., INC.
-------------------------------------
Wasserstein Perella & Co., Inc.
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ANNEX E
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT, dated as of August 12, 1997 (this
"Agreement"), is made and entered into by Ranger Holdings Corp., a Delaware
corporation ("Parent"), Ranger Acquisition Corp., a Delaware corporation and a
direct wholly owned subsidiary of Parent ("Sub"), and AT&T Corp., a New York
corporation, and AT&T Wireless Services, Inc., a Delaware corporation and a
direct wholly owned subsidiary of AT&T Corp. (collectively, the "Other AT&T
Parties"), and MMM Holdings, Inc., a Delaware corporation and a direct wholly
owned subsidiary of AT&T Wireless Services, Inc. ("Holding" and, together with
the Other AT&T Parties, the "AT&T Parties"). In addition to the above parties,
LIN Television Corporation, a Delaware corporation (the "Company"), hereby joins
in the execution and delivery of this Agreement for purposes of Sections 2(b)
and 7.
W I T N E S S E T H
WHEREAS, concurrently herewith, Parent, Sub and the Company are entering
into an Agreement and Plan of Merger (as such agreement may hereafter be amended
from time to time, the "Merger Agreement"; capitalized terms used and not
defined herein have the respective meanings ascribed to them in the Merger
Agreement), pursuant to which Sub will be merged with and into the Company (the
"Merger");
WHEREAS, Holding is the record and Beneficial Owner of 13,494,750 Shares;
and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the AT&T Parties agree, and the AT&T Parties
have agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing.
(b) "Company Common Stock" shall mean at any time the Common Stock, par
value $.01 per share, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2. Provisions Concerning Company Common Stock.
(a) Each AT&T Party hereby jointly and severally agrees that during the
period commencing on the date hereof and continuing until the first to occur of
the Effective Time or termination of the Merger Agreement in accordance with its
terms, at any meeting of the holders of Company Common Stock, however called, or
in connection with any written consent of the holders of Company Common Stock,
Holding shall, in its capacity as a holder of Company Common Stock and subject
to Section 8, vote (and the Other AT&T Parties shall cause to be voted) all of
the issued and outstanding Shares held of record or Beneficially Owned by
Holding, whether heretofore owned and held as of the date hereof or hereafter
acquired, other than in connection with the termination of the Merger Agreement
in accordance with its terms (i) in favor of the Merger, the execution and
delivery by the Company of the Merger Agreement and the approval of the terms
thereof and each of the other actions contemplated by the Merger Agreement and
this Agreement and any actions required in furtherance thereof and hereof if,
but only if, a majority of the issued and outstanding Company Common Stock not
owned by Holding that is represented in person or by proxy at any meeting of the
holders of the Company Common Stock at which the holders of a majority of the
shares of Company
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Common Stock not owned by Holding are present shall have voted to approve the
Merger, it being understood that in the event of any other vote at such meeting
Holding may abstain with respect to the approval and adoption of the Merger and
the Merger Agreement; (ii) against any action or agreement that would result in
a breach in any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or this
Agreement; and (iii) except as otherwise agreed to in writing in advance by
Parent, against the following actions (other than the Merger and the
transactions contemplated by the Merger Agreement): (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or its Subsidiaries; (B) a sale, lease or
transfer of a material amount of assets of the Company or its Subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its Subsidiaries; (C)(1) any change in a majority of the persons who constitute
the board of directors of the Company, provided that Holding and the Other AT&T
Parties may, at any time, change its designees to the board of directors of the
Company; (2) any change in the present capitalization of the Company or any
amendment of the Company's Certificate of Incorporation or Bylaws; (3) any other
material change in the Company's corporate structure or business; or (4) any
other action involving the Company or its Subsidiaries which is intended, or
could reasonably be expected, to materially delay or materially adversely affect
the Merger and the transactions contemplated by this Agreement and the Merger
Agreement, and during such period no AT&T Party shall enter into any agreement
or understanding with any person or entity the effect of which would be
inconsistent with or violative of the provisions and agreements contained in
this Section 2.
(b) Section 2(a) is for the benefit of, and may not be amended or waived
without the prior written consent of, the Company.
3. Irrevocable Commitment. Each AT&T Party hereby irrevocable commits and
agrees that for a period of at least two years from the Closing Date (a) neither
it nor its affiliates will acquire, in the aggregate, beneficial ownership of
25% or more of the Company Common Stock on a fully diluted basis and (b) it
shall not cause or permit the designees of any AT&T Party or its affiliates to
constitute a majority of the Board of Directors of the Company.
4. Information Supplied by the AT&T Parties. The AT&T Parties will,
jointly and severally, indemnify and hold harmless Parent and Sub and their
respective officers, directors, controlling persons and agents against any and
all claims, losses, liabilities, damages, costs or expenses (including
reasonable attorneys' fees and expenses) that may arise out of or with respect
to the information specifically supplied by any AT&T Party for inclusion in the
Proxy Statement containing or being alleged to contain an untrue statement of
material fact or omitting or being alleged to omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
5. Covenants, Representations and Warranties of Each AT&T Party.
(a) Each AT&T Party hereby jointly and severally represents and warrants to
Parent as follows:
(i) Ownership of Shares. Holding is the record and Beneficial Owner
of 13,494,750 Shares and the Other AT&T Parties are each the Beneficial
Owner but not the record holder of 13,494,750 Shares. On the date hereof,
such 13,494,750 Shares constitute all of the Shares owned of record or
Beneficially Owned by the AT&T Parties. The AT&T Parties have sole voting
power and sole power to issue instructions with respect to the matters set
forth in Sections 2 and 3 hereof, sole power of disposition, sole power of
conversion, sole power to demand appraisal rights and sole power to agree
to all of the matters set forth in this Agreement, in each case with
respect to 13,494,750 Shares, with no material limitations, qualifications
or restrictions on such rights, subject to applicable securities laws and
the terms of this Agreement.
(ii) Organization, Standing and Power. Each of the AT&T Parties is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Each AT&T Party has adequate
corporate power and authority to own its properties and carry on its
business as presently conducted. Each AT&T Party has the corporate power
and authority to enter into and perform
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all of such AT&T Party's obligations under this Agreement and to consummate
the transactions contemplated hereby. There is no beneficiary or holder of
a voting trust certificate or other interest of any trust of which any AT&T
Party is trustee whose consent is required for the execution and delivery
of this Agreement or the consummation by such AT&T Party of the
transactions contemplated hereby.
(iii) Execution, Delivery and Performance. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
each AT&T Party, and each AT&T Party has taken all other actions required
by law, its Certificate of Incorporation and its Bylaws in order to
consummate the transactions contemplated by this Agreement. This Agreement
has been duly and validly executed and delivered by each AT&T Party and
constitutes the valid and binding obligation of each AT&T Party and is
enforceable in accordance with its terms, except as enforceability may be
subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally.
(iv) No Conflicts. No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by any AT&T Party or, except
for filings under the Exchange Act, the HSR Act and the Communications Act,
and the filings required under the Merger Agreement, the consummation by
each AT&T Party of the transactions contemplated hereby, except where the
failure to obtain such consent, permit, authorization, approval or filing
would not prevent such AT&T Party from performing its obligations
hereunder. None of the execution and delivery of this Agreement by each
AT&T Party, the consummation by such AT&T Party of the transactions
contemplated hereby or compliance by such AT&T Party with any of the
provisions hereof (1) conflicts with or results in any breach of any
applicable organizational documents applicable to such AT&T Party, (2)
results in a violation or breach of, conflicts with, or constitutes (with
or without notice or lapse of time or both) a default (or gives rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which such AT&T Party is a party or by which such AT&T Party or any of such
AT&T Party's properties or assets may be bound, or (3) violates, subject,
with respect to consummation of the transactions contemplated hereby or
compliance with the provisions hereof, to filings under the Exchange Act,
the HSR Act and the Communications Act, and the filings required under the
Merger Agreement, any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to such AT&T Party or any of such
AT&T Party's properties or assets, in each such case except to the extent
that any conflict, breach, default or violation would not prevent such AT&T
Party from performing its obligations hereunder.
(v) No Encumbrances. The Shares subject to this Agreement and the
certificates representing such Shares are held by Holding, or by a nominee
or custodian for the benefit of Holding, free and clear of all proxies,
voting trusts or agreements, understandings or arrangements or any other
encumbrances whatsoever.
(vi) No Solicitation. Until the earlier of the Effective Time or
termination of the Merger Agreement in accordance with its terms, no AT&T
Party shall, in its capacity as such a stockholder and subject to Section
8, directly or indirectly, solicit (including by way of furnishing
information) or respond to any inquiries or the making of any proposal by
any person or entity (other than Parent or any affiliate of Parent) with
respect to the Company that constitutes a Transaction Proposal.
(vii) Restriction on Transfer, Proxies and Non-Interference. Until
the first to occur of the Effective Time or termination of the Merger
Agreement in accordance with its terms, Holding shall not (and the Other
AT&T Parties shall not cause Holding to) directly or indirectly: (i) offer
for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to or consent to the offer for sale, sale,
transfer, tender, pledge, encumbrance, assignment or other disposition of,
any or all of the Shares subject to this Agreement, or any interest
therein; (ii) grant any proxies or powers of attorney, deposit any Shares
into a
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voting trust or enter into a voting agreement with respect to any Shares;
or (iii) take any action that would make any representation or warranty of
the AT&T Parties contained herein untrue or incorrect or have the effect of
preventing or disabling any AT&T Party from performing such AT&T Party's
obligations under this Agreement.
(viii) Waiver of Appraisal Rights. Holding hereby waives any rights
of appraisal or rights to dissent from the Merger that Holding may have
pursuant to Section 262 of the Delaware General Corporation Law.
(ix) Reliance by Parent. Each AT&T Party understands and acknowledges
that Parent is entering into, and causing Sub to enter into, the Merger
Agreement in reliance upon each AT&T Party's execution and delivery of this
Agreement.
(b) Parent hereby represents and warrants to each AT&T Party as follows:
(i) Organization, Standing and Power. Parent is a corporation duly
formed and validly existing under the laws of the State of Delaware, with
adequate corporate power and authority to own its properties and carry on
its business as presently conducted. Parent has the corporate power and
authority to enter into and perform all of Parent's obligations under this
Agreement and to consummate the transactions contemplated hereby.
(ii) Execution, Delivery and Performance. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Parent, and Parent has taken all other actions required by law, its
Certificate of Incorporation and its Bylaws in order to consummate the
transactions contemplated by this Agreement. This Agreement has been duly
and validly executed and delivered by Parent and constitutes the valid and
binding obligation of Parent and is enforceable in accordance with its
terms, except as enforceability may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally.
(iii) No Conflicts. No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by Parent or, except for
filings under the HSR Act, filings under the Communications Act, and the
filings required under the Merger Agreement, the consummation by Parent of
the transactions contemplated hereby, except where the failure to obtain
such consent, permit, authorization, approval or filing would not interfere
with Parent's ability to perform its obligations hereunder. None of the
execution and delivery of this Agreement by Parent, the consummation by
Parent of the transactions contemplated hereby or compliance by Parent with
any of the provisions hereof (1) conflicts with or results in any breach of
any applicable organizational documents applicable to Parent, (2) results
in a violation or breach of, conflicts with, or constitutes (with or
without notice or lapse of time or both) a default (or gives rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which Parent is a party or by which Parent or any of Parent's properties or
assets may be bound, or (3) violates, subject, with respect to the
consummation of the transactions contemplated hereby or compliance with the
provisions hereof, to filings under the Exchange Act, the HSR Act and the
Communications Act, and the filings required under the Merger Agreement,
any order, writ, injunction, decree, judgment, order, statute, rule or
regulation applicable to Parent or any of Parent's properties or assets, in
each such case except to the extent that any conflict, breach, default or
violation would not interfere with the ability of Parent to perform its
obligations hereunder.
6. Stop Transfer. Each AT&T Party agrees with, and covenants to, Parent
that Holding shall not (and the Other AT&T Parties shall not cause Holding to)
request that the Company register the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of Holding's Shares, if
such transfer is in violation of this Agreement (including the provisions of
Section 2 hereof). In the event of a stock dividend or distribution, or any
change in the Company Common Stock by reason of any stock dividend,
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split-up, recapitalization, combination, exchange of shares or the like, the
term "Shares" shall be deemed to refer to and include the Shares as well as all
such stock dividends and distributions and any shares into which or for which
any or all of the Shares may be changed or exchanged.
7. Termination. Except as otherwise provided herein, the covenants and
agreements contained herein with respect to the Shares shall terminate upon the
termination of the Merger Agreement in accordance with its terms by Parent or
the Company.
8. Directors Actions. Notwithstanding anything in this Agreement to the
contrary, the covenants and agreements set forth herein shall not prevent any
designees of the AT&T Parties serving on the Company's Board of Directors from
taking any action, subject to the applicable provisions of the Merger Agreement,
while acting in such designee's capacity as a director of the Company.
9. Miscellaneous.
(a) Assignment. Each AT&T Party agrees that this Agreement and the
obligations hereunder shall attach to Holding's Shares and shall be binding upon
any person or entity to which legal or beneficial ownership of such Shares shall
pass, whether by operation of law or otherwise. Notwithstanding any transfer of
Shares, the transferor shall remain liable for the performance of all
obligations under this Agreement of the transferor.
(b) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
<TABLE>
<S> <C>
If to the AT&T Parties: AT&T Corp.
131 Morristown Road
Basking Ridge, New Jersey 07920
Attn: Corporate Secretary
Telecopy: (908) 204-8574
If to Parent or Sub: Ranger Holdings Corp.
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attn: Lawrence D. Stuart, Jr.
Telecopy: (214) 740-7313
copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attn: Stephen E. Jacobs, Esq.
Telecopy: (212) 310-8007
</TABLE>
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<PAGE> 129
<TABLE>
<S> <C>
If to the Company: LIN Television Corporation
Four Richmond Square, Suite 200
Providence, Rhode Island 02906
Attn: President
Telecopy: (401) 454-2817
copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: David B. Chapnick, Esq.
Telecopy: (212) 455-2502
</TABLE>
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth
above.
(d) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(e) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
(f) Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
(g) No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(h) No Third Party Beneficiaries. Except as provided in Section 2(b), this
Agreement is not intended to be for the benefit of, and shall not be enforceable
by, any person or entity who or which is not a party hereto.
(i) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
(j) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
(k) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together, shall
constitute one and the same Agreement.
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IN WITNESS WHEREOF, Parent, Sub and each AT&T Party have caused this
Agreement to be duly executed as of the day and year first above written.
RANGER HOLDINGS CORP.
By: /s/ Michael Levitt
Name: Michael Levitt
Title: Vice President
RANGER ACQUISITION CORP.
By: /s/ Michael Levitt
Name: Michael Levitt
Title: Vice President
AT&T CORP.
By: /s/ D.J. Carey
Name: D.J. Carey
Title: Vice President
AT&T WIRELESS SERVICES, INC.
By: /s/ Daniel R. Hesse
Name: Daniel R. Hesse
Title:
MMM HOLDINGS, INC.
By: /s/ Daniel R. Hesse
Name: Daniel R. Hesse
Title:
AGREED TO AND ACKNOWLEDGED
(with respect to Sections 2(b) and 7 hereof and for purposes of acknowledging
its consent hereto):
LIN TELEVISION CORPORATION
By: /s/ Peter Maloney
Name: Peter Maloney
Title: Vice President
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<PAGE> 131
ANNEX F
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT, dated as of August 12, 1997 (this
"Agreement"), is made and entered into by Ranger Holdings Corp., a Delaware
corporation ("Parent"), Ranger Acquisition Corp., a Delaware corporation and a
direct wholly owned subsidiary of Parent ("Sub"), and Cook Inlet Communications
Corp. ("CI"), a Delaware corporation. In addition to the above parties, LIN
Television Corporation, a Delaware corporation (the "Company") hereby joins in
the execution and delivery of this Agreement for purposes of Sections 2(b).
W I T N E S S E T H
WHEREAS, concurrently herewith, Parent, Sub and the Company are entering
into an Agreement and Plan of Merger (as such agreement may hereafter be amended
from time to time, the "Merger Agreement"; capitalized terms used and not
defined herein have the respective meanings ascribed to them in the Merger
Agreement), pursuant to which Sub will be merged with and into the Company (the
"Merger");
WHEREAS, CI is the record and Beneficial Owner of 1,608,975 Shares; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that CI agree, and CI has agreed, to enter into
this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing.
(b) "Company Common Stock" shall mean at any time the Common Stock, par
value $.01 per share, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2. Provisions Concerning Company Common Stock.
(a) CI hereby agrees that during the period commencing on the date hereof
and continuing until the first to occur of the Effective Time or termination of
the Merger Agreement in accordance with its terms, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, CI shall in its capacity as a
holder of Company Common Stock and subject to Section 5, vote all of the issued
and outstanding Shares held of record or Beneficially Owned by CI, whether
heretofore owned or hereafter acquired, other than in connection with the
termination of the Merger Agreement (i) in favor of the Merger, the execution
and delivery by the Company of the Merger Agreement and the approval of the
terms thereof and each of the other actions contemplated by the Merger Agreement
and this Agreement and any actions required in furtherance thereof and hereof,
it being understood that the agreement to vote in favor of the Merger is
dependent on no reduction having been made to the Merger Consideration and the
affirmative recommendation of the Company's Board of Directors; (ii) against any
action or agreement that would result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement or this Agreement; and (iii) except as
otherwise agreed to in writing in advance by Parent, against the following
actions (other than the Merger, the transactions contemplated by the Merger
Agreement or as otherwise permitted or contemplated by the Merger Agreement):
(A) any extraordinary corporate transac-
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tion, such as a merger, consolidation or other business combination involving
the Company or its Subsidiaries; (B) a sale, lease or transfer of a material
amount of assets of the Company or its Subsidiaries, or a reorganization,
recapitalization, dissolution or liquidation of the Company or its Subsidiaries;
(C)(1) any change in a majority of the persons who constitute the board of
directors of the Company; (2) any change in the present capitalization of the
Company or any amendment of the Company's Certificate of Incorporation or
Bylaws; (3) any other material change in the Company's corporate structure or
business; or (4) any other action involving the Company or its Subsidiaries
which is intended, or could reasonably be expected, to impede, interfere with,
delay, postpone, or materially adversely affect the Merger and the transactions
contemplated by this Agreement and the Merger Agreement, and during such period,
CI shall not enter into any agreement or understanding with any person or entity
the effect of which would be inconsistent with or violative of the provisions
and agreements contained in this Section 2.
(b) Section 2(a) is for the benefit of, and may not be amended or waived
without the prior written consent of, the Company.
3. Covenants, Representations and Warranties of CI.
(a) CI hereby represents and warrants to Parent as follows:
(i) Ownership of Shares. CI is the record and Beneficial Owner of
1,608,975 Shares. On the date hereof, such 1,608,975 Shares constitute all
of the Shares owned of record or Beneficially Owned by CI and its
affiliates (other than any options to purchase shares held by Roy M.
Huhndorf). CI has voting power and power to issue instructions with respect
to the matters set forth in Section 2 hereof, power of disposition, power
of conversion, power to demand appraisal rights and power to agree to all
of the matters set forth in this Agreement, in each case with respect to
1,608,975 Shares, with no material limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the
terms of this Agreement.
(ii) Organization, Standing and Power. CI is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. CI has adequate corporate power and
authority to own its properties and carry on its business as presently
conducted. CI has the corporate power and authority to enter into and
perform all of CI's obligations under this Agreement and to consummate the
transactions contemplated hereby. There is no beneficiary or holder of a
voting trust certificate or other interest of any trust of which CI is
trustee whose consent is required for the execution and delivery of this
Agreement or the consummation by CI of the transactions contemplated
hereby.
(iii) Execution, Delivery and Performance. This Agreement has been
duly and validly executed and delivered by CI and constitutes the valid and
binding obligation of CI, enforceable in accordance with its terms, except
as enforceability may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally.
(iv) Reliance by Parent. CI understands and acknowledges that Parent
is entering into, and causing Sub to enter into, the Merger Agreement in
reliance, among other things, upon CI's execution and delivery of this
Agreement.
(b) Parent hereby represents and warrants to CI as follows:
(i) Organization, Standing and Power. Parent is a corporation duly
formed and validly existing under the laws of the State of Delaware, with
adequate corporate power and authority to own its properties and carry on
its business as presently conducted. Parent has the corporate power and
authority to enter into and perform all of Parent's obligations under this
Agreement and to consummate the transactions contemplated hereby.
(ii) Execution, Delivery and Performance. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Parent, and Parent has taken all other actions required by law, its
Certificate of Incorporation and its Bylaws in order to consummate the
transactions contemplated by this Agreement. This Agreement has been duly
and validly executed and delivered by Parent and constitutes the valid and
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<PAGE> 133
binding obligation of Parent and is enforceable in accordance with its
terms, except as enforceability may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally.
(iii) No Conflicts. No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by Parent or, except for
filings under the HSR Act, filings under the Communications Act, and the
filings required under the Merger Agreement, the consummation by Parent of
the transactions contemplated hereby, except where the failure to obtain
such consent, permit, authorization, approval or filing would not interfere
with Parent's ability to perform its obligations hereunder. None of the
execution and delivery of this Agreement by Parent, the consummation by
Parent of the transactions contemplated hereby or compliance by Parent with
any of the provisions hereof shall (1) conflict with or result in any
breach of any applicable organizational documents applicable to Parent, (2)
result in a violation or breach of, conflict with, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which Parent is a party or by, which Parent or any of Parent's properties
or assets may be bound, or (3) violate, subject, with respect to the
consummation of the transactions contemplated hereby or compliance with the
provisions hereof, to filings under the Exchange Act, the HSR Act and the
Communications Act, and the filings required under the Merger Agreement,
any order, writ, injunction, decree, judgment, order, statute, rule or
regulation applicable to Parent or any of Parent's properties or assets, in
each such case except to the extent that any conflict, breach, default or
violation would not interfere with the ability of Parent to perform its
obligations hereunder.
4. Termination. Except as otherwise provided herein, the covenants and
agreements contained herein with respect to the Shares shall terminate upon the
termination of the Merger Agreement in accordance with its terms by Parent or
the Company.
5. Directors Actions. Notwithstanding anything in this Agreement to the
contrary, the covenants and agreements set forth herein shall not (i) prevent
any designees of CI serving on the Company's Board of Directors from taking any
action, subject to the applicable provisions of the Merger Agreement, while
acting in such designee's capacity as a director of the Company, or (ii) in any
way prevent or restrain CI at any time from offering for sale, selling,
transferring, tendering, pledging, encumbering, assigning or otherwise disposing
of any or all of the Shares currently or hereafter held by CI, and none of the
covenants and agreements set forth herein shall apply to any transferee of the
Shares.
6. Miscellaneous.
(a) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
(b) Notices. All notices, requests claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested)
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<PAGE> 134
or by any courier service, such as Federal Express, providing proof of delivery.
All communications hereunder shall be delivered to the respective parties at the
following addresses:
<TABLE>
<S> <C>
If to CI: Cook Inlet Communications Corp.
2525 C Street
Anchorage, Alaska 99503
Attn: Mark Kroloff, Esq.
Telecopy: (907) 263-5182
copy to: Munger, Tolles & Olson
355 South Grand Avenue
Los Angeles, California 90071
Attn: John B. Frank, Esq.
Telecopy: (213) 687-3702
If to Parent Ranger Holdings Corp.
of Sub: c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attn: Lawrence D. Stuart, Jr.
Telecopy: (214) 740-7313
copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attn: Stephen E. Jacobs, Esq.
Telecopy: (212) 310-8007
If to the Company: LIN Television Corporation
Four Richmond Square, Suite 200
Providence, Rhode Island 02906
Attn: President
Telecopy: (401) 454-2817
copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: David B. Chapnick, Esq.
Telecopy: (212) 455-2502
</TABLE>
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(c) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(d) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
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<PAGE> 135
(e) Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
(f) No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(g) No Third Party Beneficiaries. Except as provided in Section 2(b), this
Agreement is not intended to be for the benefit of, and shall not be enforceable
by, any person or entity who or which is not a party hereto.
(h) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
(i) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
(j) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together, shall
constitute one and the same Agreement.
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<PAGE> 136
IN WITNESS WHEREOF, Parent, Sub and CI have caused this Agreement to be
duly executed as of the day and year first above written.
RANGER HOLDINGS CORP.
By: /s/ MICHAEL LEVITT
------------------------------------
Name: Michael Levitt
Title: Vice President
RANGER ACQUISITION CORP.
By: /s/ MICHAEL LEVITT
------------------------------------
Name: Michael Levitt
Title: Vice President
COOK INLET COMMUNICATIONS CORP.
By: /s/ MARK KROLOFF
------------------------------------
Name: Mark Kroloff
Title: V.P. and Secretary
AGREED TO AND ACKNOWLEDGED
(with respect to Sections 2(b) hereof and for purposes of acknowledging its
consent hereto):
LIN TELEVISION CORPORATION
By: /s/ PETER MALONEY
------------------------------------
Name: Peter Maloney
Title: Vice President
F-6
<PAGE> 137
ANNEX G
DELAWARE CODE ANNOTATED
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
8 DEL. C. SEC. 262
SECTION 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec.228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.sec.251 (other than a merger effected pursuant to
subsection (g) of sec.251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
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<PAGE> 138
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or
sec.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit
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of the secretary or assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such notice has
been given shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix, in advance,
a record date that shall not be more than 10 days prior to the date the
notice is given; provided that, if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or
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resulting corporation pursuant to subsection (f) of this section and who has
submitted his certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that he is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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PROXY
LIN TELEVISION CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
LIN TELEVISION CORPORATION (THE "COMPANY"), FOR THE SPECIAL MEETING
OF SHAREHOLDERS TO BE HELD ON JANUARY 7,1998.
The undersigned hereby appoints DEBORAH R. JACOBSON, PETER E. MALONEY and
GREGORY M. SCHMIDT, and each of them, each with the power to appoint his or her
substitute, attorneys, successors and assigns, with all powers the undersigned
would possess if personally present, to vote all of the shares of common stock,
par value $.01 per share, of the Company (the "Common Stock") which the
undersigned would be entitled to vote on the proposal to approve and adopt the
Agreement and Plan of Merger, dated as of August 12, 1997 (the "Original Merger
Agreement"), as amended by the Amendment to Merger Agreement (the "Merger
Agreement Amendment"), dated as of October 21, 1997 (the Original Merger
Agreement, as amended by the Merger Agreement Amendment, is referred to herein
as the "Merger Agreement"), by and among the Company, Ranger Holdings Corp., and
Ranger Acquisition Company ("Acquisition Sub"), pursuant to which Acquisition
Sub will be merged with and into the Company (as more fully described in the
Proxy Statement accompanying this proxy card), at the Special Meeting of
Shareholders to be held on January 7, 1998 at The Waldorf-Astoria Hotel, 301
Park Avenue, New York, New York at 10:00 a.m. local time, and any adjournment or
postponement thereof (the "Special Meeting"), in the manner specified, and to
vote, in their discretion, upon all other matters which may come before the
Special Meeting.
LIN TELEVISION CORPORATION
P.O. BOX 11209
NEW YORK, N.Y. 10203-0209
PLEASE SIGN AND DATE THIS PROXY IN THE SPACE PROVIDED ON THE REVERSE HEREOF.
<PAGE> 142
[TARGET BOX]
[NO TEXT PRINTING IN THIS AREA]
The BOARD OF DIRECTORS OF THE COMPANY recommend a vote FOR the approval and
adoption of the Merger Agreement.
Please indicate below how your shares of Common Stock are to be voted on the
following proposal:
Approval and adoption of the Merger Agreement.
For [X} Against [X] Abstain [X]
THE SHARES OF COMMON STOCK REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED,
OR IF NO CHOICE IS SPECIFIED, FOR THE PROPOSAL DESCRIBED ABOVE AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
SPECIAL MEETING.
[NO VOTING BOXES BELOW THIS LINE]
NOTE: Your signature should appear as your name appears hereon. When shares of
Common Stock are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by the President
or other authorized officer. If a partnership, please sign in partnership name
by authorized person. Please sign, date and return this Proxy promptly using the
enclosed envelope.
Dated:___________________, 199____________
- ------------------------------------------
(Signature)
- ------------------------------------------
(Signature if held jointly)
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. [X]
[ADDRESS AREA]
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
