sv4
As filed with the Securities and Exchange Commission on June 23, 2010
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Gray Television, Inc.
(Exact name of registrant as specified in its charter)
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Georgia
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4833
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58-0285030 |
(State or other jurisdiction of
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(Primary Standard Industrial
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(I.R.S. Employer |
incorporation or organization)
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Classification Code Number)
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Identification No.) |
4370 Peachtree Road, N.E.
Atlanta, Georgia 30319
(404) 504-9828
(Address, including zip code, and telephone number, including area code, of the registrants principal executive offices)
James C. Ryan
Gray Television, Inc.
4370 Peachtree Road, N.E.
Atlanta, Georgia 30319
(404) 504-9828
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copy to:
Mark L. Hanson, Esq.
Jones Day
1420 Peachtree Street, N.E., Suite 800
Atlanta, Georgia 30309
(404) 581-8573
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED OFFER TO THE PUBLIC:
As soon as practicable after the effective date of this registration statement.
If the securities being registered on this form are being offered in connection with the
formation of a holding company and there is compliance with General Instruction G, check the
following box. o
If this form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. o
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer o |
Accelerated filer o |
Non-accelerated filer þ (Do not check if a smaller reporting company) |
Smaller reporting company o |
If applicable, place an X in the box to designate the appropriate rule provision relied
upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) o
Exchange Act Rule 14d-1(d) (Cross-Border Third Party Tender Offer) o
CALCULATION OF REGISTRATION FEE
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Proposed maximum |
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Proposed maximum |
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Title of each class of securities |
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Amount to be |
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offering price |
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aggregate |
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Amount of |
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to be registered |
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registered |
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per unit(1) |
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offering price(1) |
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registration fee |
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101/2% Senior Secured Second Lien
Notes due 2015 |
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$ |
365,000,000 |
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100 |
% |
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$ |
365,000,000 |
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$ |
26,024.50 |
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Guarantees of 101/2% Senior Secured
Second Lien Notes due 2015 (2) |
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(3) |
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Total |
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$ |
365,000,000 |
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100 |
% |
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$ |
365,000,000 |
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$ |
26,024.50 |
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(1) |
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Estimated in accordance with Rule 457(f) under the Securities Act of 1933 solely for purposes of calculating the registration fee. |
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(2) |
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See inside facing page for registrant guarantors. |
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(3) |
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In accordance with Rule 457(n), no separate registration fee for the guarantees is payable. |
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE
NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO
SAID SECTION 8(a), MAY DETERMINE.
TABLE OF ADDITIONAL REGISTRANTS
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State or Other |
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Jurisdiction of |
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Primary Standard |
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IRS Employer |
Exact Name of Registrant as Specified |
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Incorporation or |
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Industrial Classification |
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Identification |
in its Charter(1) |
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Organization |
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Code Number |
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Number |
WVLT-TV, Inc. |
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Georgia |
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4833 |
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58-2256206 |
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Gray Television Group, Inc. |
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Delaware |
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4833 |
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13-2982954 |
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Gray Television Licensee, LLC |
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Nevada |
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4833 |
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51-0376603 |
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(1) |
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The address and telephone number of each of the additional registrants
is: 4370 Peachtree Road, NE, Atlanta, Georgia 30319; telephone (404)
504-9828. |
Information contained herein is subject to completion or amendment. A registration statement
relating to these securities has been filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities in any state in
which such offer, solicitation or sale would be unlawful prior to the registration or qualification
under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED JUNE 23, 2010
PRELIMINARY PROSPECTUS
(GRAY TELEVISION, INC. LOGO)
Gray Television, Inc.
Offer to Exchange up to $365,000,000
Aggregate Principal Amount of Newly
Issued 101/2% Senior Secured Second Lien Notes due 2015
For
a Like Principal Amount of Outstanding
Restricted 101/2% Senior Secured Second Lien Notes due 2015
Issued in April 2010
On April 29, 2010, we issued $365.0 million aggregate principal amount of restricted 101/2%
Senior Secured Second Lien Notes due 2015 in a private placement exempt from the registration
requirements under the Securities Act of 1933 (the Securities Act). We refer to these as the
original notes.
We are offering to exchange a new issue of 101/2% Senior Secured Second Lien Notes due 2015 (the
exchange notes) for our outstanding restricted 101/2% Senior Secured Second Lien Notes due 2015. We
sometimes refer to the original notes and the exchange notes in this prospectus together as the
notes. The terms of the exchange notes are substantially identical to the terms of the original
notes, except that the exchange notes will be issued in a transaction registered under the
Securities Act, and the transfer restrictions and registration rights and related special interest
provisions applicable to the original notes will not apply to the exchange notes. The exchange
notes will be exchanged for original notes in denominations of $2,000 and integral multiples of
$1,000 in excess thereof. We will not receive any proceeds from the issuance of exchange notes in
the exchange offer.
You may withdraw tenders of original notes at any time prior to the expiration of the exchange
offer.
The exchange offer expires at 9:00 a.m., New York City time, on , 2010,
unless extended, which we refer to as the expiration date.
We do not intend to list the exchange notes on any national securities exchange or to seek
approval through any automated quotation system, and no active public market for the exchange notes
is anticipated.
Each broker-dealer that receives exchange notes for its own account pursuant to the registered
exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of
exchange notes. The letter of transmittal accompanying this prospectus states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an underwriter within the meaning of the Securities Act. This prospectus, as it may be amended
or supplemented from time to time, may be used by a broker-dealer in connection with resales of
exchange notes received in exchange for original notes where the original notes were acquired by
such broker-dealer as a result of market-making activities or other trading activities. We have
agreed that, for a period ending on the earlier of (i) 90 days from the date on which the
registration statement of which this prospectus forms a
part is declared effective and (ii) the date on which a broker-dealer is no longer required to
deliver a prospectus in connection with market-making or other trading activities, we will make
this prospectus available to any broker-dealer for use in connection with these resales. See Plan
of Distribution.
You should consider
carefully the risk factors beginning on page 11 of this prospectus before
deciding whether to participate in the exchange offer.
Neither the Securities and Exchange Commission (SEC) nor any state securities commission or
other similar authority has approved these exchange notes or determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2010
TABLE OF CONTENTS
This prospectus may only be used where it is legal to make the exchange offer and by a
broker-dealer for resales of exchange notes acquired in the exchange offer where it is legal to do
so.
i
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
From time to time, including in this prospectus and in the documents incorporated by reference
in this prospectus, we make forward-looking statements within the meaning of federal and state
securities laws. Disclosures that use words such as believes, expects, anticipates,
estimates, will, may or should and similar expressions are intended to identify
forward-looking statements, as defined under the Private Securities Litigation Reform Act of 1995.
These forward-looking statements reflect our then-current expectations and are based upon data
available to us at the time the statements are made. Such statements are subject to certain risks
and uncertainties that could cause actual results to differ materially from expectations. The most
material, known risks are detailed in the section titled Risk Factors in this prospectus. All
forward-looking statements in, and incorporated by reference into, this prospectus are qualified by
these cautionary statements and are made only as of the date of this prospectus. Any such
forward-looking statements, whether made in this prospectus or elsewhere, should be considered in
context with the various disclosures made by us about our business. These forward-looking
statements fall under the safe harbors of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934 (the Exchange Act). The following risks, among others, could
cause actual results to differ materially from those described in any forward-looking statements:
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we have a significant amount of debt, and have the ability to incur additional debt,
any of which could restrict our future operating and strategic flexibility and expose us to
the risks of financial leverage; |
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the agreements governing our various debt and other obligations restrict our business
and limit our ability to act; |
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our ability to meet our debt service obligations on the exchange notes and our other
debt will depend on our future performance, which is, and will be, subject to many factors
that are beyond our control; |
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we are dependent on advertising revenues, which are seasonal and may fluctuate as a
result of a number of factors, including a continuation of the economic downturn; |
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we are highly dependent upon a limited number of advertising categories; |
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we are highly dependent on network affiliations and may lose a significant amount of
television programming if a network terminates or significantly changes its affiliation
with us; |
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we purchase television programming in advance of earning any related revenue, and may
not earn sufficient revenue to offset the costs thereof; |
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we are subject to risks of competition from other local stations as well as from cable
systems, the Internet and other providers; |
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we may incur significant capital and operating costs; |
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we may incur impairment charges related to our assets; and |
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we are subject to risks and limitations due to government regulation of the
broadcasting industry, including Federal Communications Commission (FCC or the
Commission) control over the renewal and transfer of broadcasting licenses, which could
materially adversely affect our operations and growth strategy. |
We urge you to review carefully the information under the heading Risk Factors included
elsewhere in this prospectus and in the documents incorporated by reference in this prospectus for
a more complete discussion of the risks of participating in the exchange offer.
WHERE YOU CAN FIND MORE INFORMATION
Gray furnishes and files annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy materials that we have furnished to or filed with
the SEC at the SECs public reference room located at 100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC
filings are also available to the public on the SECs Internet website at http://www.sec.gov. Those
filings are also available to the public on our corporate website at http://www.gray.tv. The
information contained in our website is not part of or incorporated by reference into this
prospectus.
ii
INCORPORATION BY REFERENCE
This prospectus incorporates important business and financial information about Gray
Television, Inc. from documents that are not included in or delivered with this prospectus. You
should rely only on the information contained or incorporated by reference into this prospectus. We
have not authorized anyone to provide you with information that is different. You should not assume
that the information contained in this prospectus is accurate as of any date other than the date on
the front cover of this prospectus and that any information we have incorporated by reference is
accurate as of any date other than the date of the document incorporated by reference.
We incorporate by reference the documents listed below that we have filed with the SEC (File
No. 1-13796) under the Securities Exchange Act of 1934, as well as any filing that we make with the
SEC on or after the date of this prospectus (unless such filing expressly states that it is not
incorporated by reference herein) until the expiration date:
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our Annual Report on Form 10-K (the 2009 Form 10-K) filed on April 7, 2010; |
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the portions of our proxy statement for our 2010 annual meeting of shareholders
incorporated by reference into the 2009 Form 10-K, which proxy statement was filed on April
26, 2010; |
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our Quarterly Report on Form 10-Q, filed on May 10, 2010; and |
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our Current Reports on Form 8-K, filed on April 1, 2010; April 12, 2010; April 20, 2010;
April 22, 2010; and April 30, 2010. |
Any statement contained in a document all or a portion of which is incorporated or deemed to
be incorporated by reference herein will be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any statement so modified will not be deemed to constitute a part of this
prospectus, except as so modified, and any statement so superseded will not be deemed to constitute
a part of this prospectus.
The information related to us contained in this prospectus should be read together with the
information contained in the documents incorporated by reference. We will provide without charge to
each person to whom a copy of this prospectus is delivered, upon the written or oral request of any
such person, a copy of any or all of the documents incorporated into this prospectus by reference,
other than exhibits to those documents unless the exhibits are specifically incorporated by
reference into those documents, or referred to in this prospectus. Requests should be directed to:
Gray Television, Inc.
4370 Peachtree Road, N.E.
Atlanta, Georgia 30319
(404) 504-9828
In order to receive timely delivery of any requested documents in advance of the expiration
date of the exchange offer, you should make your request no later than , 2010, which is
five full business days before you must make a decision regarding the exchange offer.
INDUSTRY AND MARKET DATA
This prospectus includes industry data regarding station rank, in-market share and television
household data that we obtained from periodic reports published by A.C. Nielsen Company. Industry
publications generally state that the information contained therein has been obtained from sources
believed to be reliable. We have not independently verified any of the data from third-party
sources nor have we ascertained the underlying economic assumptions relied upon therein.
iii
SUMMARY
This summary contains basic information about our Company and the exchange offer. This summary
highlights selected information contained elsewhere in this prospectus. This summary is not
complete and does not contain all of the information that you should consider before deciding
whether or not to invest in the exchange notes. For a more complete understanding of our Company
and the exchange offer, you should read this entire prospectus and the documents incorporated by
reference in this prospectus, including the information under the heading Risk Factors. The
summary contains forward looking statements that involve risk and uncertainties. Our actual results
may differ based upon certain factors, including those set forth under the caption Risk Factors
herein and the documents incorporated by reference in this prospectus. Unless otherwise indicated
or required by the context, the terms Gray, we, our, us and the Company refer to Gray
Television, Inc. and its subsidiaries. Our discussion of the television (or TV) stations that we
own and operate does not include our minority equity interest in the television and radio stations
owned by Sarkes Tarzian, Inc.
Our Company
General
We are a television broadcast company operating 36 television stations serving 30 markets.
Seventeen of our stations are affiliated with CBS Inc. (CBS), ten are affiliated with the
National Broadcasting Company, Inc. (NBC), eight are affiliated with the American Broadcasting
Company (ABC), and one is affiliated with FOX Entertainment Group, Inc. (FOX). Our 17
CBS-affiliated stations make us the largest independent owner of CBS affiliates in the United
States. In addition, we currently operate 39 digital second channels including one affiliated with
ABC, four affiliated with FOX, seven affiliated with The CW Network, LLC (CW), 18 affiliated with
Twentieth Television, Inc. (MyNetworkTV or MyNet.), two affiliated with the Universal Sports
Network (Universal Sports) and seven local news/weather channels, in certain of our existing
markets. We created our digital second channels to better utilize our excess broadcast spectrum.
The digital second channels are similar to our primary broadcast channels; however, our digital
second channels are affiliated with networks different from those affiliated with our primary
broadcast channels. Our combined TV station group reaches approximately 6.3% of total United States
households.
We were incorporated in 1897, initially to publish the Albany Herald in Albany, Georgia, and
entered the broadcasting industry in 1953. We have a dedicated and experienced senior management
team.
For the fiscal year ended December 31, 2009 and the first quarter ended March 31, 2010, we
generated revenue of $270.4 million and $70.5 million, respectively.
Markets
Gray operates in designated market areas (DMAs) ranked between 51-200 and primarily focuses
its operations on university towns and state capitals. Our markets include 17 university towns,
representing enrollment of approximately 469,000 students, and eight state capitals. We believe
university towns and state capitals provide significant advantages as they generally offer more
favorable advertising demographics, more stable economics and a stronger affinity between local
stations and university sports teams.
We have a strong, market leading position in our markets. Our combined station group has 23
markets with stations ranked #1 in local news audience and 21 markets with stations ranked #1 in
overall audience within their respective markets, based on the results of the average of the
Nielsen March, May, July and November 2009 ratings reports. Of the 30 markets that we serve, we
operate the #1 or #2 ranked station in 29 of those markets. We believe a key driver for our strong
market position is the strength of our local news and information programs. Our news audience share
outperforms the national average of the networks audience share with nearly twice the Nielsen
Station Index (NSI) national average market share in November 2009 for both 6 p.m. and late night
news. We believe that our market position and our strong local revenue stream have enabled us to
better preserve our revenues in softer economic conditions compared to many of our peers.
We are diversified across our markets and network affiliations. Our largest market by revenue
is Charleston/Huntington, WV, which contributed approximately 7% of our revenues in 2009. Our top
10 markets by revenue contributed 53% of our revenues in 2009. Our 17 CBS-affiliated stations
accounted for 49% of our revenues, our 10 NBC-affiliated stations accounted for 36% of our
revenues, our 8 ABC-affiliated stations accounted for 15% of our revenues and our 1 FOX-affiliated
station accounted for less than 1% of our revenues, for 2009, respectively.
1
Business Strategy
Our success has been based on the following strategies for growing our revenues and our
operating cash flow:
Maintain and Grow our Market Leadership Position. We have the #1 ranking in overall audience
in 21 of the 30 markets in which we operate. We are ranked #2 in audience in all of our other
markets, except Albany, GA. We have the #1 ranking in local news audience in 23 of our markets and
our news audience share outperforms the national average of the networks audience share with
nearly twice the NSI national average market share in November 2009 for both 6 p.m. and late night
news.
We believe there are significant advantages in operating the #1 or #2 television broadcasting
stations. Strong audience and market share allows us enhance our advertising revenues through price
discipline and leadership. We believe a top-rated news platform is critical to capturing
incremental sponsorship and political advertising revenue. Our high-quality station group improves
our cash flow and allows us additional opportunities to reinvest in our business to further
strengthen our network and news ratings. Furthermore, we believe operating the top ranking stations
in our various markets allows us to attract and retain top talent.
We also believe that our leadership position in the markets we serve gives us additional
leverage to negotiate retransmission contracts with multiple system operators (MSOs), and we
believe it will help us in our potential negotiations with networks upon expiration of our current
contracts with them. Our primary network affiliation agreements expire at various dates through
January 1, 2016.
We intend to maintain our market leadership position through prudent continued investment in
our news and syndicated programs, as well as continued technological advances and program
improvements. We are in the process of converting our local studios to be able to provide high
definition digital broadcasting (HD) in select markets to further enhance the visual quality of
our local programs, which we believe can drive incremental viewership, and expect to continue to
invest in local HD conversion over the next few years.
Pursue New Media Opportunities. We currently operate web, mobile and desktop applications in
all of our markets. We have focused on expanding the applicable local content, such as news,
weather and sports, on our websites to drive increased traffic. We have experienced strong growth
in internet page views in the past, with page views growing at a 57% compound annual growth rate
from 2003 and 2009, and anticipate continued growth in the future.
Our aggregate internet revenues are derived from two sources. The first source is advertising
or sponsorship opportunities directly on our websites. We call this direct internet revenue. The
other revenue source is television advertising time purchased by our clients to directly promote
their involvement in our websites. We refer to this internet revenue source as internet-related
commercial time sales. In the future, we anticipate our direct internet revenue will grow at a
faster pace relative to our internet-related commercial time sales.
We are a member of the open mobile video coalition (OMVC), which aims to accelerate the
development and rollout of mobile DTV products and services, maximizing the full potential of the
digital television spectrum. We are currently testing mobile television in the Omaha and Lincoln,
Nebraska markets.
Monetize Digital Spectrum. We currently operate 39 digital second channels, including one
affiliated with ABC, four affiliated with FOX, seven affiliated with CW, 18 affiliated with
MyNetworkTV, two affiliated with the Universal Sports Network and seven local news/weather
channels, in certain of our existing markets. We created our digital second channels to better
utilize our excess broadcast spectrum. The digital second channels are similar to our primary
broadcast channels, except that our digital second channels are affiliated with networks different
from those affiliated with our primary broadcast channels. In the year ended December 31, 2009, we
generated $7.1 million in revenues from our digital second channels.
Our strategy is to expand upon our digital offerings, evaluating potential opportunities from
time to time either on our own and/or in partnership with other companies, as such opportunities
present themselves. We intend to aggressively pursue the use of our spectrum for additional
opportunities such as local video on demand, music on demand and other digital downloads. We also
intend to evaluate opportunities to use spectrum for future delivery of television broadcasts to
handheld and other mobile devices.
Prudent Cost Management. Historically, we have closely managed our costs to maintain our
margins. We believe that our market leadership position gives us additional negotiating leverage to
enable us to lower our syndicated programming costs. We have increased the efficiency of our
stations by automating processes as a part of the conversion of local studios to digital. As of
December 31, 2009, we had reduced our total number of employees by 241, or 9.9%, since December 31,
2007. We also lowered our syndicated programming costs by $1.1 million during the year ended
December 31, 2009. We intend to continue to seek and implement additional cost saving opportunities
in the future.
2
Selected 2010 Developments
Amendment to Senior Credit Facility
Effective as of March 31, 2010, we amended our senior credit facility (the 2010 amendment)
to provide for, among other things: (i) an increase in the maximum total net leverage ratio
covenant under the senior credit facility through March 30, 2011 and (ii) a potential issuance of
certain capital stock and/or senior or subordinated debt securities, with the proceeds to be used
to repay amounts outstanding under our senior credit facility. The amendment to our senior credit
facility also provided for a reduction in the revolving loan commitment under the senior credit
facility from $50.0 million to $40.0 million.
Pursuant to the 2010 amendment, from March 31, 2010 until we completed the offering of the
original notes on April 29, 2010 and repaid not less than $200.0 million of the term loan
outstanding under our senior credit facility using the proceeds from that offering: (i) we were
required to pay an annual incentive fee equal to 2.0%, which fee was eliminated upon the
consummation of the offering of original notes and related repayment of amounts under our senior
credit facility; (ii) the then-existing annual facility fee remained at 3.0%, but, following such
repayment, was reduced to 1.25% per year, with a potential for further reductions in future
periods; and (iii) we remained subject to the then-existing maximum total net leverage ratio, but,
following such repayment, that ratio was replaced by a first lien leverage test. In addition, from
and after such repayment, we became subject to a minimum fixed charge coverage ratio of 0.90x to
1.0x.
Immediately after giving effect to the completion of the offering of the original notes and
the repayment of $300.0 million of the term loan outstanding under our senior credit facility, the
related reduction in the annual facility fee and the elimination of the incentive fee thereunder,
our effective interest rate under our senior credit facility was LIBOR plus 4.25% per year.
For additional information regarding the amendment to our senior credit facility, see
Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity
and Capital Resources and Description of Other Indebtedness and Certain Other Obligations
included elsewhere in this prospectus.
Repurchase of a Portion of the Outstanding Shares of Our Series D Perpetual Preferred Stock
On April 19, 2010, we entered into an agreement (the Exchange Agreement) with holders of
shares of our Series D perpetual preferred stock. Pursuant to the Exchange Agreement, concurrently
with the completion of the offering of the original notes, we repurchased $75.59 million of Series
D perpetual preferred stock, including accrued dividends, in exchange for $50.0 million in cash and
8.5 million shares of our common stock.
Corporate Information
Gray Television, Inc. is a Georgia corporation. Our executive offices are located at 4370
Peachtree Road, NE, Atlanta, GA 30319, and our telephone number at that location is (404) 504-9828.
Our website address is http://www.gray.tv. The information on our website is not a part of or
incorporated by reference into this prospectus.
3
THE EXCHANGE OFFER
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The Exchange Offer
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We are offering to exchange up to
(i) $365,000,000 aggregate
principal amount of our registered
101/2% Senior Secured Second Lien
Notes due 2015 (the exchange
notes) for an equal principal
amount of our outstanding
restricted 101/2% Senior Secured
Second Lien Notes due 2015 (the
original notes) that were issued
in April 2010. The terms of the
exchange notes are identical in all
material respects to those of the
original notes, except that the
exchange notes will be issued in a
transaction registered under the
Securities Act, and the transfer
restrictions, registration rights
and related special interest
provisions relating to the original
notes do not apply to the exchange
notes. The exchange notes will be
of the same class as the
outstanding original notes. Holders
of original notes do not have any
appraisal or dissenters rights in
connection with the exchange offer. |
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Purpose of the Exchange Offer
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The exchange notes are being
offered to satisfy our obligations
under the registration rights
agreement entered into at the time
we issued and sold the original
notes. |
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Expiration Date; Withdrawal of
Tenders; Return of Original Notes
Not Accepted for Exchange
|
|
The exchange offer will expire at
9:00 a.m., New York City time, on
, 2010, or on a later
date and time to which we extend it
(the expiration date). Tenders of
original notes in the exchange
offer may be withdrawn at any time
prior to the expiration date. As
soon as practicable following the
expiration date, we will exchange
the exchange notes for validly
tendered original notes. Any
original notes that are not
accepted for exchange for any
reason will be returned without
expense to the tendering holder
promptly after the expiration or
termination of the exchange offer. |
|
|
|
Procedures for Tendering Original
Notes
|
|
Each holder of original notes
wishing to participate in the
exchange offer must complete, sign
and date the accompanying letter of
transmittal, or its facsimile, in
accordance with its instructions,
and mail or otherwise deliver it,
or its facsimile, together with the
original notes and any other
required documentation to the
exchange agent at the address in
the letter of transmittal. Original
notes may be physically delivered,
but physical delivery is not
required if a confirmation of a
book-entry transfer of the original
notes to the exchange agents
account at DTC is delivered in a
timely fashion. A holder may also
tender its original notes by means
of DTCs Automated Tender Offer
Program (ATOP), subject to the
terms and procedures of that
program. See The Exchange Offer
Procedures for Tendering Original
Notes. |
|
|
|
Conditions to the Exchange Offer
|
|
The exchange offer is not
conditioned upon any minimum
aggregate principal amount of
original notes being tendered for
exchange. The exchange offer is
subject to customary conditions,
which may be waived by us in our
discretion. We currently expect
that all of the conditions will be
satisfied and that no waivers will
be necessary. |
|
|
|
Exchange Agent
|
|
U.S. Bank National Association. |
|
|
|
U.S. Federal Income Tax
Considerations
|
|
Your exchange of an original note
for an exchange note will not
constitute a taxable exchange. The
exchange will not result in taxable
income, gain or loss being
recognized by you or by us.
Immediately after the exchange, you
will have the same adjusted basis
and holding period in each exchange
note received as you had
immediately prior to the exchange
in the corresponding original note
surrendered. See Certain U.S.
Federal Income Tax Considerations. |
|
|
|
Risk Factors
|
|
You should consider carefully the
risk factors beginning on page 11
of this prospectus before deciding
whether to participate in the
exchange offer. |
4
THE EXCHANGE NOTES
The terms of the exchange notes are identical in all material aspects to those of the original
notes, except for the transfer restrictions and registration rights and related special interest
provisions relating to the original notes that do not apply to the exchange notes.
|
|
|
Issuer
|
|
Gray Television, Inc. |
|
|
|
Notes Offered
|
|
$365,000,000 aggregate principal amount of 101/2% senior secured
second lien notes due 2015. The new notes offered hereby will be
of the same class as the original notes. |
|
|
|
Maturity Date
|
|
June 29, 2015. |
|
|
|
Interest
|
|
Interest on the exchange notes will accrue at a rate of 10.5% per
annum, payable semi-annually, in cash in arrears, on May 1 and
November 1 of each year, commencing November 1, 2010. |
|
|
|
Guarantees
|
|
The exchange notes will be fully and unconditionally guaranteed on
a senior secured basis by all of our existing and future domestic
restricted subsidiaries. |
|
|
|
Ranking
|
|
The exchange notes and the guarantees will be our and the
guarantors senior secured obligations and will: |
|
|
|
|
|
rank senior in right of payment to our and the guarantors
existing and future debt and other obligations that expressly
provide for their subordination to the exchange notes and the
guarantees; |
|
|
|
|
|
be effectively senior to our and the guarantors existing
and future unsecured debt to the extent of the value of the
collateral securing the exchange notes, after giving effect to
first-priority liens on the collateral and permitted liens; |
|
|
|
|
|
be effectively junior to our and the guarantors obligations
that are either (i) secured by first priority liens on the
collateral, including indebtedness under our senior credit
facility or (ii) secured by assets that are not part of the
collateral that is securing the exchange notes, in each case to
the extent of the value of the collateral securing such debt; and |
|
|
|
|
|
be structurally subordinated to all of the existing and
future liabilities of our subsidiaries, if any, that do not
guarantee the exchange notes. |
|
|
|
|
|
After giving effect to the issuance of the original notes and the
use of proceeds from the original notes, at March 31, 2010, the
Company and the guarantors would have had approximately $879.4
million aggregate principal amount of total indebtedness
(excluding intercompany indebtedness), of which $879.0 million
would have been senior debt (including the original notes), and of
which approximately $514.0 million would have ranked effectively
senior to the exchange notes to the extent of the assets securing
such debt. |
5
|
|
|
|
|
|
Security
|
|
The exchange notes and the guarantees will be secured by a second
priority lien on substantially all of the assets owned by us and
the guarantors, which assets also secure obligations under our
senior credit facility, subject to certain exceptions and
permitted liens. Under the security documents we and the
guarantors have, subject to certain exceptions, granted security
interests in substantially all of our and their real, personal and
fixture property, including (i) all present and future shares of
capital stock of (or other ownership or profit interests in) each
of our present and future direct and indirect subsidiaries, held
by us or any subsidiary guarantor (but, (a) as to the voting stock
of any foreign subsidiary, not to exceed 66% of the outstanding
voting stock and (b) excluding any capital stock of a subsidiary
to the extent necessary for such subsidiary not to be subject to
any requirement to file separate financial statements with the SEC
pursuant to Rule 3-16 or Rule 3-10 of Regulation S-X under the
Exchange Act, due to the fact that such subsidiarys capital stock
secured the exchange notes or guarantees); (ii) all present and
future intercompany debt owed to us or any subsidiary guarantor;
(iii) substantially all of our and each subsidiary guarantors
present and future property and assets, real and personal,
including, but not limited to, machinery and equipment, inventory
and other goods, accounts receivable, owned real estate,
leaseholds, fixtures, bank accounts, general intangibles,
financial assets, investment property, license rights, patents,
trademarks, trade names, copyrights, other intellectual property,
chattel paper, insurance proceeds, contract rights, hedge
agreements, documents, instruments, indemnification rights, tax
refunds and cash; (iv) all FCC licenses except to the extent (but
only to the extent) and for so long as that at such time the
collateral agent may not validly possess a security interest
directly in the FCC license pursuant to applicable Federal law,
including the Communications Act of 1934, as amended (the
Communications Act), and the rules, regulations and policies
promulgated thereunder, as in effect at such time, but including
at all times all proceeds incident or appurtenant to the FCC
licenses and all proceeds of the FCC licenses, and the right to
receive all monies, consideration and proceeds derived from or in
connection with the sale, assignment, transfer, or other
disposition of the FCC licenses; and (v) all proceeds and products
of the property and assets described in clauses (i), (ii), and
(iv) above. For more details, see Description of
NotesSecurity. |
|
|
|
|
|
The value of collateral at any time will depend on market and
other economic conditions, including the availability of suitable
buyers for the collateral. The liens on the collateral may be
released without the consent of the holders of the exchange notes
if collateral is disposed of in a transaction that complies with
the indenture and the related security documents or in accordance
with the provisions of an intercreditor agreement to be entered
into relating to the collateral securing the exchange notes and
our senior credit facility. See Risk FactorsRisks Related to
the Exchange Notes It may be difficult to realize upon the value
of the collateral securing the exchange notes and Description of
NotesSecurity and Description of Notes Intercreditor
Agreement. |
|
|
|
|
|
Certain security interests, including those granted or to be
granted pursuant to mortgages on certain of our owned and leased
real properties intended to constitute collateral that secures the
original notes and the exchange notes, were not in place on the
date of issuance of the original notes, and may not be in place on
the date of issuance of the exchange notes. We are required to
file or cause to be filed UCC financing statements to perfect the
security interests in the collateral that can be perfected by such
filings on the date of the issuance of the original notes. With
respect to the portion of the collateral securing the exchange
notes for which a valid and perfected security interest in favor
of the collateral agent was not created or perfected on or prior
to the date of issuance of the original notes and which cannot be
perfected by the filing of UCC financing statements, we have
agreed to use our commercially reasonable efforts to complete
those actions required to create and perfect such security
interest within 150 days following the date of issuance of the
original notes. |
6
|
|
|
|
|
|
Intercreditor Agreement
|
|
Pursuant to an intercreditor agreement, the liens securing the
exchange notes will be second priority liens that will be
expressly junior in priority to the liens that secure obligations
under our senior credit facility and obligations under certain
hedging and cash management arrangements. The rights of holders of
the exchange notes to the collateral and their ability to enforce
rights will be materially limited by the intercreditor agreement.
The holders of the first priority lien obligations will receive
all proceeds from any realization of the collateral or from the
collateral or proceeds thereof in any insolvency or liquidation
proceeding, in each case until the first priority lien obligations
are paid in full. See Description of NotesIntercreditor
Agreement. |
|
|
|
Optional Redemption
|
|
On or after November 1, 2012, we may redeem the exchange notes, in
whole or in part, at any time, at the redemption prices described
under Description of NotesRedemptionOptional Redemption. In
addition, we may redeem up to 35% of the aggregate principal
amount of the exchange notes before November 1, 2012 with the net
cash proceeds from certain equity offerings at a redemption price
of 110.500% of the principal amount plus accrued and unpaid
interest, if any, to the redemption date. We may also redeem some
or all of the exchange notes before November 1, 2012 at a
redemption price of 100% of the principal amount, plus accrued and
unpaid interest, if any, to the redemption date, plus a make
whole premium. |
|
|
|
Change of Control
|
|
If we experience certain kinds of changes of control, we will be
required to offer to purchase the exchange notes at 101% of their
principal amount, plus accrued and unpaid interest. For more
details, see Description of NotesChange of Control. |
|
|
|
Mandatory Offer to
Purchase Following
Certain Asset Sales
and Certain Events of
Loss
|
|
If we sell certain assets, or upon certain events of loss, under
certain circumstances we will be required to use the net proceeds
resulting from such events to offer to purchase the exchange notes
at 100% of their principal amount, plus accrued and unpaid
interest, as described under Description of NotesCertain
Covenants Limitation on Asset Sales and Description of Notes
Certain Covenants Events of Loss. |
|
|
|
Certain Covenants
|
|
The indenture contains covenants that limit, among other things,
our ability and the ability of our restricted subsidiaries to: |
|
|
|
|
|
incur additional debt; |
|
|
|
|
|
declare or pay dividends, redeem stock or make other
distributions to stockholders; |
|
|
|
|
|
make investments; |
|
|
|
|
|
create liens or use assets as security in other transactions; |
|
|
|
|
|
enter into agreements restricting our or our subsidiaries
ability to pay dividends or make certain other payments; |
|
|
|
|
|
merge or consolidate, or sell, transfer, lease or dispose of
substantially all of our assets; |
|
|
|
|
|
engage in transactions with affiliates; and |
|
|
|
|
|
sell or transfer assets. |
7
|
|
|
|
|
|
|
|
These covenants are subject to a number of important
qualifications and limitations. See Description of NotesCertain
Covenants. |
|
|
|
Use of Proceeds
|
|
We will not receive any cash proceeds from the issuance of the
exchange notes. See Use of Proceeds. |
You should refer to the section entitled Risk Factors beginning on page 11 for an
explanation of certain risks of participating in the exchange offer.
8
Summary Historical Consolidated Financial and Other Data
We have derived the following summary historical consolidated financial and other data for
each of the three years ended December 31, 2009, 2008 and 2007 from our audited consolidated
financial statements included elsewhere in this prospectus. We have derived the following summary
historical consolidated financial and other data for the three months ended March 31, 2010 and 2009
from our unaudited condensed consolidated financial statements included elsewhere in this
prospectus. The summary historical consolidated financial and other data presented below does not
contain all of the information you should consider before deciding whether or not to participate in
the exchange offer, and should be read in conjunction with Managements Discussion and Analysis of
Financial Condition and Results of Operations and the consolidated financial statements, and notes
thereto, included elsewhere in this prospectus. You should not consider our results for the three
months ended March 31, 2010 or 2009 to be indicative of results to be achieved for any future
interim or full-year period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues (less agency commissions)(1) |
|
$ |
70,482 |
|
|
$ |
61,354 |
|
|
$ |
270,374 |
|
|
$ |
327,176 |
|
|
$ |
307,288 |
|
Operating expenses before depreciation, amortization,
impairment, and gains on disposal of assets, net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast |
|
|
47,567 |
|
|
|
45,654 |
|
|
|
187,583 |
|
|
|
199,572 |
|
|
|
199,687 |
|
Corporate and administrative |
|
|
2,922 |
|
|
|
4,046 |
|
|
|
14,168 |
|
|
|
14,097 |
|
|
|
15,090 |
|
Depreciation |
|
|
7,975 |
|
|
|
8,261 |
|
|
|
32,595 |
|
|
|
34,561 |
|
|
|
38,558 |
|
Amortization of intangible assets |
|
|
122 |
|
|
|
149 |
|
|
|
577 |
|
|
|
792 |
|
|
|
825 |
|
Impairment of goodwill and broadcast licenses(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
338,681 |
|
|
|
|
|
Gain on disposals of assets, net |
|
|
(44 |
) |
|
|
(1,522 |
) |
|
|
(7,628 |
) |
|
|
(1,632 |
) |
|
|
(248 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
58,542 |
|
|
|
56,588 |
|
|
|
227,295 |
|
|
|
586,071 |
|
|
|
253,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
11,940 |
|
|
|
4,766 |
|
|
|
43,079 |
|
|
|
(258,895 |
) |
|
|
53,376 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous income (expense), net |
|
|
39 |
|
|
|
12 |
|
|
|
54 |
|
|
|
(53 |
) |
|
|
972 |
|
Interest expense |
|
|
(19,611 |
) |
|
|
(10,113 |
) |
|
|
(69,088 |
) |
|
|
(54,079 |
) |
|
|
(67,189 |
) |
Loss from early extinguishment of debt(3) |
|
|
(349 |
) |
|
|
(8,352 |
) |
|
|
(8,352 |
) |
|
|
|
|
|
|
(22,853 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(7,981 |
) |
|
|
(13,687 |
) |
|
|
(34,307 |
) |
|
|
(313,027 |
) |
|
|
(35,694 |
) |
Income tax benefit |
|
|
(3,238 |
) |
|
|
(4,767 |
) |
|
|
(11,260 |
) |
|
|
(111,011 |
) |
|
|
(12,543 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(4,743 |
) |
|
|
(8,920 |
) |
|
|
(23,047 |
) |
|
|
(202,016 |
) |
|
|
(23,151 |
) |
Preferred stock dividends (includes accretion of
issuance cost of $301, $301, $1,202, $576 and $439,
respectively) |
|
|
4,551 |
|
|
|
4,051 |
|
|
|
17,119 |
|
|
|
6,593 |
|
|
|
1,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to common stockholders |
|
|
(9,294 |
) |
|
|
(12,971 |
) |
|
|
(40,166 |
) |
|
|
(208,609 |
) |
|
|
(24,777 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at end of period): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
13,664 |
|
|
$ |
14,857 |
|
|
$ |
16,000 |
|
|
$ |
30,649 |
|
|
$ |
15,338 |
|
Working capital |
|
|
14,163 |
|
|
|
13,388 |
|
|
|
11,712 |
|
|
|
19,645 |
|
|
|
21,872 |
|
Net intangible assets, broadcast licenses and goodwill |
|
|
990,697 |
|
|
|
991,247 |
|
|
|
990,819 |
|
|
|
991,396 |
|
|
|
1,330,869 |
|
Total assets |
|
|
1,235,815 |
|
|
|
1,248,442 |
|
|
|
1,245,739 |
|
|
|
1,278,265 |
|
|
|
1,625,969 |
|
Total debt and long-term accrued facility fees |
|
|
814,034 |
|
|
|
798,359 |
|
|
|
810,116 |
|
|
|
800,380 |
|
|
|
925,000 |
|
Redeemable preferred stock(4) |
|
|
93,687 |
|
|
|
92,484 |
|
|
|
93,386 |
|
|
|
92,183 |
|
|
|
|
|
Total stockholders equity |
|
|
88,140 |
|
|
|
107,154 |
|
|
|
93,620 |
|
|
|
117,107 |
|
|
|
337,845 |
|
Cash Flow Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
6,986 |
|
|
$ |
(1,296 |
) |
|
$ |
18,903 |
|
|
$ |
73,675 |
|
|
$ |
28,360 |
|
Investing activities |
|
|
(3,185 |
) |
|
|
(5,469 |
) |
|
|
(17,531 |
) |
|
|
(16,340 |
) |
|
|
(25,662 |
) |
Financing activities |
|
|
(6,137 |
) |
|
|
(9,027 |
) |
|
|
(16,021 |
) |
|
|
(42,024 |
) |
|
|
7,899 |
|
Other Financial and Operating Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
2,888 |
|
|
|
5,183 |
|
|
|
17,756 |
|
|
|
15,019 |
|
|
|
24,605 |
|
Ratio of earnings to fixed charges(5) |
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
(1) |
|
Our revenues fluctuate significantly between years, in accordance with, among other
things, increased political advertising expenditures in even-numbered years. |
|
(2) |
|
As of December 31, 2008, we recorded a non-cash impairment expense of $338.7 million
resulting from a write down of $98.6 million in the carrying value of our goodwill
and a write down of $240.1 million in the carrying value of our broadcast licenses.
The write-down of our goodwill and broadcast licenses related to seven stations and
23 stations, respectively. As of this testing date, we believed events had occurred
and circumstances changed that more likely than not reduce the fair value of our
broadcast licenses and goodwill below their carrying amounts. These events, which
accelerated in the fourth quarter of 2008, included: (i) the continued decline of
the price of our common stock and Class A common stock; (ii) the decline in the
current selling prices of television stations; (iii) the decline in local and
national advertising revenues excluding political advertising revenue; and (iv) the
decline in the operating profit margins of some of our stations. |
|
(3) |
|
In 2010 and 2009, we recorded a loss on early extinguishment of debt related to an
amendment of our senior credit facility. In 2007, we recorded a loss on early
extinguishment of debt related to a refinancing of our senior credit facility and
the redemption of our 9.25% Senior Subordinated Notes (9.25% Notes). |
|
(4) |
|
On June 26, 2008, we issued 750 shares of Series D perpetual preferred stock and on
July 15, 2008, we issued an additional 250 shares of our Series D perpetual
preferred stock. We generated net cash proceeds from such issuances of approximately
$91.6 million after a 5.0% original issue discount, transaction fees and expenses.
The Series D perpetual preferred stock has a liquidation value of $100,000 per
share, for a total liquidation value of $75.0 million. The $8.4 million of original
issue discount, transaction fees and expenses is being accreted over a seven-year
period ending June 30, 2015. |
|
|
|
Amounts exclude unamortized original issuance costs and accrued and unpaid
dividends. Such costs and dividends aggregated $29.5 million, $14.3 million, $25.5
million and $10.8 million as of March 31, 2010, March 31, 2009, December 31, 2009
and 2008, respectively. |
|
(5) |
|
For purposes of this ratio: |
|
|
|
The term fixed charges means the sum of: (i) interest expensed and capitalized,
(ii) amortized premiums, discounts and capitalized expenses related to indebtedness,
(iii) an estimate of the interest within rental expense, and (iv) preference
security dividend requirements of consolidated subsidiaries. |
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The term preference security dividend is the amount of pre-tax earnings required
to pay the dividends on outstanding preference securities. The dividend requirement
is computed as the amount of the dividend divided by (1 minus the effective income
tax rate applicable to continuing operations). |
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The term earnings is the amount resulting from adding and subtracting the
following items. We add the following: (i) pre-tax income from continuing operations
before adjustment for income or loss from equity investees; (ii) fixed charges;
(iii) amortization of capitalized interest; (iv) distributed income of equity
investees; and (v) our share of pre-tax losses of equity investees for which charges
arising from guarantees are included in fixed charges. From the total of the added
items, we subtract the following: (i) interest capitalized; (ii) preference security
dividend requirements of consolidated subsidiaries; and (iii) the noncontrolling
interest in pre-tax income of subsidiaries that have not incurred fixed charges.
Equity investees are investments that we account for using the equity method of
accounting. |
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Our ratio of earnings to fixed charges for the year ended December 31, 2006 was 1.21:1.00. |
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For the three months ended March 31, 2010 and the years ended December 31, 2009,
2008, 2007 and 2005, earnings were inadequate to cover fixed charges by
approximately $15.7 million, $59.9 million, $323.2 million, $38.2 million and $1.9
million, respectively. |
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RISK FACTORS
The terms of the exchange notes are identical in all material aspects to those of the original
notes, except for the transfer restrictions and registration rights and related special interest
provisions relating to the original notes that do not apply to the exchange notes. However, you
should carefully consider the following risks before deciding whether or not to participate in the
exchange offer. These risks are not the only ones we face. Additional risks not presently known to
us or that we currently deem immaterial may also impair our business operations, financial
condition and results of operations. Our business, financial condition or results of operations
could be materially adversely affected by any of these risks. The value of the exchange notes
could decline due to any of these risks, and you may lose all or part of your investment. This
prospectus also contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those anticipated in forward-looking statements as a
result of certain factors, including the occurrence of one or more of the factors described in the
following risk factors.
Risks Related to the Exchange Notes and the Exchange Offer
The lien on the collateral securing the exchange notes and the guarantees will be junior and
subordinate to the lien on the collateral securing our senior credit facility.
The exchange notes and the guarantees will be secured by second priority liens granted by us
and the existing guarantors and any future guarantor on our assets and the assets of the guarantors
that secure obligations under our senior credit facility, subject to certain permitted liens,
exceptions and encumbrances described in the indenture governing the exchange notes and the
security documents relating to the exchange notes. As set out in more detail under Description of
Notes, the lenders under our senior credit facility will be entitled to receive all proceeds from
the realization of the collateral under certain circumstances, including upon default in payment
on, or the acceleration of, any obligations under our senior credit facility, or in the event of
our, or any of our subsidiary guarantors, bankruptcy, insolvency, liquidation, dissolution,
reorganization or similar proceeding, to repay such obligations in full before the holders of the
exchange notes will be entitled to any recovery from such collateral. We cannot assure you that, in
the event of a foreclosure, the proceeds from the sale of all of such collateral would be
sufficient to satisfy the amounts outstanding under the exchange notes and other obligations
secured by the second priority liens, if any, after payment in full of the obligations secured by
the first priority liens on the collateral. If such proceeds were not sufficient to repay amounts
outstanding under the exchange notes, then holders of the exchange notes (to the extent not repaid
from the proceeds of sale of the collateral) would only have an unsecured claim against our
remaining assets, which claim would rank equal in priority to the unsecured claims with respect to
any unsatisfied portions of the obligations secured by the first priority liens and other unsecured
senior indebtedness. In addition, the indenture governing the exchange notes will permit us and the
guarantors to create additional liens under specified circumstances, including liens senior in
priority to, or ranking on a pari passu basis with, the liens securing the exchange notes. Any
obligations secured by such liens may further limit the recovery from the realization of the
collateral available to satisfy holders of the exchange notes.
The collateral securing the exchange notes may be diluted under certain circumstances.
The collateral that will secure the exchange notes also secures obligations under our senior
credit facility. This collateral may secure on a first priority basis additional indebtedness that
we incur in the future, subject to restrictions on our ability to incur debt and liens governing
the exchange notes and the senior credit facility. Your rights to the collateral would be diluted
by any increase in the indebtedness secured on a parity basis by this collateral.
The rights of holders of the exchange notes to the collateral and their ability to enforce rights
will be materially limited by the terms of the intercreditor agreement.
The lenders under our senior credit facility, as holders of first priority lien obligations,
will control substantially all matters related to the collateral pursuant to the terms of the
intercreditor agreement. The holders of the first priority lien obligations may cause the
collateral agent thereunder (the first lien agent) to dispose of, release, foreclose on, or take
other actions with respect to, the collateral (including amendments of and waivers under the
security documents) with which holders of the exchange notes may disagree or that may be contrary
to the interests of holders of the exchange notes, even after a default under the exchange notes.
To the extent collateral is released from securing the first priority lien obligations, the
intercreditor agreement will provide that in certain circumstances, the second priority liens
securing the exchange notes will also be released. In addition, the security documents related to
the second priority lien generally provide that, so long as the first priority lien obligations are
in effect, the holders of the first priority lien obligations may change, waive, modify or vary the
security documents governing such first priority liens without the consent of the holders of the
exchange notes (except under certain limited circumstances) and that the security documents
governing the second priority liens will be automatically changed, waived and modified in the same
manner. Further, the security documents
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governing the second priority liens may not be amended in any manner adverse to the holders of
the first-priority obligations without the consent of the first lien agent until the first priority
lien obligations are paid in full. The security agreement governing the second priority liens will
prohibit second priority lienholders from foreclosing on the collateral until payment in full of
the first priority lien obligations. We cannot assure you that in the event of a foreclosure by the
holders of the first priority lien obligations, the proceeds from the sale of collateral would be
sufficient to satisfy all or any of the amounts outstanding under the exchange notes after payment
in full of the obligations secured by first priority liens on the collateral. In addition, there
can be no assurance that the first lien agent has taken all actions necessary to create properly
perfected security interests in the collateral securing the exchange notes, which, as a result of
the intercreditor agreement, may result in the loss of the priority of the security interest in
favor of the holders of exchange notes to which they would have been entitled as a result of such
non-perfection.
Notwithstanding the foregoing, the collateral agent may exercise rights and remedies with
respect to the security interests after the passage of a period of 180 days from the date on which
the collateral agent has notified the administrative agent under our senior credit facility that an
event of default has occurred, the obligations under the exchange notes have been accelerated and a
demand for payment has been made, but only to the extent that the first lien administrative agent
is not diligently pursuing the exercise of its rights and remedies with respect to a material
portion of its security interests.
The right of the collateral agent to foreclose upon and sell the collateral after an event of
default has occurred may also be subject to limitations under the Communications Act and the
regulations under the FCC.
Under the Communications Act and implementing rules and regulations of the FCC, the consent of
the FCC must be obtained prior to any change in direct or indirect control of an entity holding
licenses issued by the FCC. We and certain of our subsidiaries hold licenses issued by the FCC. The
foreclosure of our capital stock or of the capital stock of our subsidiaries which directly or
indirectly hold such licenses could result in a transfer of control of an entity holding FCC
licenses. In the event of default, the collateral agent may be required to obtain the consent of
the FCC prior to exercising foreclosure rights or selling the collateral securing the exchange
notes and the guarantees. Furthermore, security interests in FCC licenses are limited to the extent
such security interests are prohibited by law or regulation. This limitation could complicate the
ability of the second lien collateral agent to foreclose upon and sell the collateral. We can give
no assurance that such consent can be obtained by the second lien collateral agent.
Security over all of the collateral was not in place on the date of issuance of the original notes
or was not perfected on such date and may not yet be in place or perfected, as the case may be,
and any unresolved issues may impact the value of the collateral.
Certain security interests were not in place on the date of issuance of the original notes or
were not perfected on such date and may not yet be in place or perfected, as the case may be. We
are required to file or cause to be filed financing statements under the Uniform Commercial Code to
perfect the security interests that can be perfected by such filings. We are required to use
commercially reasonable efforts to have all security interests that are required to be perfected by
the security documents to be in place no later than 150 days after the date of issuance of the
original notes, except to the extent any such security interest cannot be perfected with
commercially reasonable efforts. Any issues that we are not able to resolve in connection with the
delivery and recordation of such security interests may negatively impact the value of the
collateral.
Certain mortgages or title insurance securing the original notes and the exchange notes were not
in place on the date of issuance of the original notes and may not yet be in place, and any
unresolved issues in connection with the issuance of such mortgages and title policies may impact
the value of the collateral.
Certain mortgages on the properties intended to secure the original notes and the exchange
notes were not in place at the time of the issuance of the original notes and may not yet be in
place. Title insurance may not be obtained for leasehold properties and title insurance policies
may not yet be in place to insure, among other things, (i) that valid title or leasehold interest
to such properties is held in the name of the entity represented by us to be the owner or tenant
thereof and that such title or interest is not encumbered by unpermitted liens and (ii) the
validity and second lien priority of the mortgage granted to the collateral agent for the benefit
of the holders of the exchange notes.
We have agreed to grant mortgage liens in favor of the collateral agent for the benefit of the
trustee and the holders of the exchange notes on all our interests, as tenants, in certain real
property leases (a) upon which a broadcast tower is located, (b) upon which a studio or other
facility related to the operation of a station is located or (c) that has an estimated fair market
value (determined by us in good faith) in excess of $500,000, in each case, to the extent that the
landlords consent is obtained with respect to any such lease where such consent is required to
grant such mortgage lien or otherwise to the extent any landlords consent is not necessary
pursuant to the provisions of the applicable lease. To the extent the landlord of any lease shall
fail or refuse to grant such consent after
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we have used commercially reasonable efforts to obtain such consent, the leasehold interest
pursuant thereto shall not constitute collateral securing the exchange notes.
With respect to our real properties mortgaged or to be mortgaged as security for the exchange
notes, no surveys or legal opinions have been or will be delivered. There will, therefore, be no
independent assurance that the mortgages securing the exchange notes are enforceable under
applicable state law to encumber the correct real properties.
In connection with the issuance of the original notes and this exchange offer, we were not,
and are not, required to provide surveys or legal opinions with respect to our real properties
intended to constitute collateral. Therefore, we can provide no independent assurance that: (i) the
real property encumbered by the mortgages includes all of the property intended to be included in
the collateral; and (ii) such property is not subject to any encroachments, claims or other matters
that would only be revealed by a survey. In addition, as legal opinions are not being delivered
with respect to such properties in connection with this exchange offer, there can be no independent
assurance that the mortgages create and constitute valid and enforceable liens on the property
intended to be encumbered thereby under the laws of each jurisdiction in which such property is
located.
It may be difficult to realize upon the value of the collateral securing the exchange notes.
The collateral securing the exchange notes will be subject to any and all exceptions, defects,
encumbrances, liens and other imperfections as may be accepted by the trustee for the exchange
notes and the second lien collateral agent and any other creditors that have the benefit of first
liens on the collateral securing the exchange notes from time to time. The existence of any such
exceptions, defects, encumbrances, liens and other imperfections could adversely affect the value
of the collateral securing the exchange notes as well as the ability of the second lien collateral
agent to realize upon or foreclose on such collateral.
No appraisals of any of the collateral have been prepared by us or on behalf of us in
connection with this exchange offer. The value of the collateral at any time will depend on market
and other economic conditions, including the availability of suitable buyers. By their nature, some
or all of the pledged assets may be illiquid and may have no readily ascertainable market value. We
cannot assure you that the fair market value of the collateral as of the date of this prospectus
exceeds the principal amount of the debt secured thereby. There also can be no assurance that the
collateral will be saleable and, even if saleable, the timing of the liquidation thereof would be
uncertain. To the extent that liens, rights or easements granted to third parties encumber assets
located on property owned by us, such third parties have or may exercise rights and remedies with
respect to the property subject to such liens that could adversely affect the value of the
collateral and the ability of the collateral agent to realize or foreclose on the collateral. The
value of the assets pledged as collateral for the exchange notes could be impaired in the future as
a result of changing economic conditions, our failure to implement our business strategy,
competition, unforeseen liabilities and other future events. Accordingly, there may not be
sufficient collateral to pay all or any of the amounts due on the exchange notes. Any claim for the
difference between the amount, if any, realized by holders of the exchange notes from the sale of
the collateral securing the exchange notes and the obligations under the exchange notes will rank
equally in right of payment with all of our other unsecured unsubordinated indebtedness and other
obligations. Additionally, in the event that a bankruptcy case is commenced by or against us, if
the value of the collateral is less than the amount of principal and accrued and unpaid interest on
the exchange notes and all other senior secured obligations, interest may cease to accrue on the
exchange notes from and after the date the bankruptcy petition is filed.
In the future, the obligation to grant additional security over assets, or a particular type
or class of assets, whether as a result of the acquisition or creation of future assets or
subsidiaries, the designation of a previously unrestricted subsidiary or otherwise, is subject to
the provisions of the intercreditor agreement. The intercreditor agreement sets out a number of
limitations on the rights of the holders of the exchange notes to require security in certain
circumstances, which may result in, among other things, the amount recoverable under any security
provided by any subsidiary being limited and/or security not being granted over a particular type
or class of assets. Accordingly, this may affect the value of the security provided by us and our
subsidiaries. Furthermore, upon enforcement against any collateral or in insolvency, under the
terms of the intercreditor agreement the claims of the holders of the exchange notes to the
proceeds of such enforcement will rank behind the claims of the holders of obligations under our
senior credit facility, which are first priority obligations, and holders of additional secured
indebtedness (to the extent permitted to have priority by the indenture).
The security interest of the second lien collateral agent will be subject to practical
problems generally associated with the realization of security interests in collateral. For
example, the second lien collateral agent may need to obtain consents of third parties to obtain or
enforce security interests in contracts and other collateral, and make additional filings. We
cannot assure you that the collateral agent will be able to obtain any such consents or make any
such filings. We also cannot assure you that the consents of any third parties will be given when
required, or at all, to facilitate a foreclosure on such assets. Accordingly, the second lien
collateral
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agent may not have the ability to foreclose upon those assets and, in such event, the holders
will not be entitled to the collateral or any recovery with respect thereto.
These requirements may also limit the number of potential bidders for certain collateral in
any foreclosure and may delay any sale, either of which events may have an adverse effect on the
sale price of the collateral. Therefore, the practical value of realizing on the collateral,
without the appropriate consents and filings, may be limited.
Bankruptcy laws may limit your ability to realize value from the collateral.
The right of the second lien collateral agent to repossess and dispose of the collateral upon
the occurrence of an event of default under the indenture governing the exchange notes is likely to
be significantly impaired (or at a minimum delayed) by applicable bankruptcy law if a bankruptcy
case were to be commenced by or against us before the second lien collateral agent repossessed and
disposed of the collateral. Upon the commencement of a case under the bankruptcy code, a secured
creditor such as the second lien collateral agent is prohibited from repossessing its security from
a debtor in a bankruptcy case, or from disposing of security repossessed from such debtor, without
bankruptcy court approval, which may not be given. Moreover, the bankruptcy code permits the debtor
to continue to retain and use collateral even though the debtor is in default under the applicable
debt instruments, provided that the secured creditor is given adequate protection. The meaning of
the term adequate protection may vary according to circumstances, but it is intended in general
to protect the value of the secured creditors interest in the collateral as of the commencement of
the bankruptcy case and may include cash payments or the granting of additional or replacement
security if and at such times as the bankruptcy court in its discretion determines that the value
of the secured creditors interest in the collateral is declining during the pendency of the
bankruptcy case. A bankruptcy court may determine that a secured creditor may not require
compensation for a diminution in the value of its collateral if the value of the collateral exceeds
the debt it secures.
In view of the lack of a precise definition of the term adequate protection and the broad
discretionary power of a bankruptcy court, it is impossible to predict:
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how long payments under the exchange notes could be delayed following commencement of a
bankruptcy case; |
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whether or when the collateral agent could repossess or dispose of the collateral; |
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the value of the collateral at the time of the bankruptcy petition; or |
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whether or to what extent holders of the exchange notes would be compensated for any
delay in payment or loss of value of the collateral through the requirement of adequate
protection. |
In addition, the intercreditor agreement provides that, in the event of a bankruptcy, the
trustee and the second lien collateral agent may not object to a number of important matters
following the filing of a bankruptcy petition so long as any first priority lien obligations are
outstanding. After such a filing, the value of the collateral securing the exchange notes could
materially deteriorate and the holders of the exchange notes would be unable to raise an objection.
The right of the holders of obligations secured by first priority liens on the collateral to
foreclose upon and sell the collateral upon the occurrence of an event of default also would be
subject to limitations under applicable bankruptcy laws if we or any of our subsidiaries become
subject to a bankruptcy proceeding.
Any disposition of the collateral during a bankruptcy case would also require permission from
the bankruptcy court. Furthermore, in the event a bankruptcy court determines the value of the
collateral is not sufficient to repay all amounts due on first priority lien debt and, thereafter,
the exchange notes, the holders of the exchange notes would hold a secured claim only to the extent
of the value of the collateral to which the holders of the exchange notes are entitled and
unsecured claims with respect to such shortfall. The bankruptcy code only permits the payment and
accrual of post-petition interest, costs and attorneys fees to a secured creditor during a
debtors bankruptcy case to the extent the value of its collateral is determined by the bankruptcy
court to exceed the aggregate outstanding principal amount of the obligations secured by the
collateral.
In certain instances, the trustee may determine not to foreclose on certain collateral.
The trustee and the collateral agent may need to evaluate the impact of the potential
liabilities before determining to foreclose on collateral consisting of real property, if any,
because secured creditors that hold or enforce a security interest in real property may be held
liable under environmental laws for the costs of remediating or preventing the release or
threatened releases of hazardous
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substances at such real property. Consequently, the collateral agent may decline to foreclose
on such collateral or exercise remedies available in respect thereof if it does not receive
indemnification to its satisfaction from the holders of the exchange notes.
A court could void our subsidiaries guarantees of the exchange notes and the liens securing such
guarantees under fraudulent transfer laws.
Although the guarantees provide holders of the exchange notes with a direct claim against the
assets of the subsidiary guarantors and the guarantees will be secured by the collateral owned by
the guarantors, under the federal bankruptcy laws and comparable provisions of state fraudulent
transfer laws, a guarantee or lien could under certain circumstances be voided, or claims with
respect to a guarantee or lien could be subordinated to all other debts of that guarantor. In
addition, a bankruptcy court could potentially void (i.e., cancel) any payments by that guarantor
pursuant to its guarantee and require those payments and enforcement proceeds from the collateral
to be returned to the guarantor or to a fund for the benefit of the other creditors of the
guarantor. Each guarantee will contain a provision intended to limit the guarantors liability to
the maximum amount that it could incur without causing the incurrence of obligations under its
guarantee to be a fraudulent transfer. This provision may not be effective to protect the
guarantees from being voided under fraudulent transfer law, or may eliminate a guarantors
obligations or reduce a guarantors obligations to an amount that effectively makes the guarantee
worthless. In a recent Florida bankruptcy case, this kind of provision was found to be ineffective
to protect the guarantees.
The bankruptcy court might take these actions if it found, among other things, that when a
subsidiary guarantor executed its guarantee or granted its lien (or, in some jurisdictions, when it
became obligated to make payments under its guarantee):
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such subsidiary guarantor received less than reasonably equivalent value or fair
consideration for the incurrence of its guarantee or granting of the lien; and |
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such subsidiary guarantor: |
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was (or was rendered) insolvent by the incurrence of the guarantee; |
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was engaged or about to engage in a business or transaction for which its assets
constituted unreasonably small capital to carry on its business; |
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intended to incur, or believed that it would incur, obligations beyond its ability
to pay as those obligations matured; or |
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was a defendant in an action for money damages, or had a judgment for money damages
docketed against it and, in either case, after final judgment, the judgment was
unsatisfied. |
A bankruptcy court would likely find that a subsidiary guarantor received less than fair
consideration or reasonably equivalent value for its guarantee or lien to the extent that it did
not receive a direct or indirect benefit from the issuance of the exchange notes. A bankruptcy
court could also void a guarantee or lien if it found that the subsidiary issued its guarantee or
granted its lien with actual intent to hinder, delay or defraud creditors.
Although courts in different jurisdictions measure solvency differently, in general, an entity
would be deemed insolvent if the sum of its debts, including contingent and unliquidated debts,
exceeds the fair value of its assets, or if the present fair salable value of its assets is less
than the amount that would be required to pay the expected liability on its debts, including
contingent and unliquidated debts, as they become due.
If a court voided a guarantee or lien, it could require that holders of exchange notes return
any amounts previously paid under such guarantee or enforcement proceeds from the collateral. If
any guarantee or lien were voided, holders of exchange notes would cease to have a direct claim
against the applicable subsidiary guarantor, but would retain their rights against us and any other
subsidiary guarantors, although there is no assurance that those entities assets would be
sufficient to pay the exchange notes in full.
In the event of a future bankruptcy of us or any of the guarantors, holders of the exchange notes
may be deemed to have an unsecured claim to the extent that our obligations in respect of the
exchange notes exceed the fair market value of the collateral securing the exchange notes.
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In any future bankruptcy proceeding with respect to us or any of the guarantors, it is
possible that the bankruptcy trustee, the debtor in possession or competing creditors will assert
that the fair market value of the collateral with respect to the exchange notes on the date of the
bankruptcy filing was less than the then-current principal amount of the exchange notes. Upon a
finding by the bankruptcy court that the exchange notes are under-collateralized, the claims in the
bankruptcy proceeding with respect to the exchange notes would be bifurcated between a secured
claim in an amount equal to the value of the collateral and an unsecured claim with respect to the
remainder of its claim which would not be entitled to the benefits of security in the collateral.
Other consequences of a finding of under-collateralization would be, among other things, a lack of
entitlement on the part of the exchange notes to receive post-petition interest or applicable fees,
costs or charges and a lack of entitlement on the part of the unsecured portion of the exchange
notes to receive adequate protection under federal bankruptcy laws. In addition, if any payments
of post-petition interest had been made at any time prior to such a finding of
under-collateralization, those payments would be recharacterized by the bankruptcy court as a
reduction of the principal amount of the secured claim.
The Company has a significant amount of indebtedness and other obligations, including the exchange
notes, that become due over a relatively short period of time.
We have a significant amount of indebtedness, including the exchange notes, and other
obligations that will, or may, become due between December 31, 2014 and June 30, 2015. These
obligations include any potential exercise of optional redemption rights held by the holders of our
Series D perpetual preferred stock, which those holders may exercise at any time from and after
June 30, 2015. Our ability to make required payments on our indebtedness, or other obligations,
depends on our ability to generate cash in the future. If we cannot generate sufficient cash to
repay our indebtedness, including the exchange notes, at maturity or if we are not able to satisfy
our other financial obligations as they come due, or if we are unable to refinance all or a portion
of such indebtedness, or obtain financing sufficient to enable us to meet such other obligations,
at times, and on terms, which are acceptable to us, then we may have to take such actions as
reducing or delaying capital investments, selling assets, restructuring or refinancing our debt or
seeking additional capital through alternative sources. We may not be able to complete any of these
actions on commercially reasonable terms, or at all. Our inability to repay or refinance our
indebtedness and other obligations as they become due, or the violation of any covenants which may
impair, restrict or limit our ability to do so, could have a material adverse effect on our
financial condition and results of operations. Furthermore, in the event that we were unable to
repay or refinance our indebtedness or other obligations, and a bankruptcy case were to be
commenced under the bankruptcy code, we could be subject to claims, with respect to any payments
made within 90 days prior to commencement of such a case, that we were insolvent at the time any
such payments were made and that all or a portion of such payments, which could include repayments
of amounts due under the exchange notes, might be deemed to constitute a preference, under the
bankruptcy code, and that such payments should be voided by the bankruptcy court and recovered from
the recipients for the benefit of the entire bankruptcy estate.
The collateral is subject to casualty risks.
We maintain insurance or otherwise insure against certain hazards. There are, however, losses
that may not be insured. If there is a total or partial loss of any of the pledged collateral, we
cannot assure you that any insurance proceeds received by us will be sufficient to satisfy all the
secured obligations, including the exchange notes and the guarantees.
The exchange notes will be effectively subordinated to the claims of the creditors of our
non-guarantor subsidiaries.
We conduct a substantial portion of our business through our subsidiaries, all of which
initially will be guarantors of the exchange notes. However, the indenture governing the exchange
notes in certain circumstances permits non-guarantor subsidiaries. Claims of creditors of any
non-guarantor subsidiaries, including trade creditors, will generally have priority with respect to
the assets and earnings of such subsidiaries over the claims of creditors of the Company, including
holders of the exchange notes. The indenture governing the exchange notes permits the incurrence of
certain additional indebtedness by our non-guarantor subsidiaries in the future. See Description
of NotesSubsidiary Guarantees and Description of NotesCertain CovenantsLimitation on
Incurrence of Indebtedness.
We may be unable to purchase the exchange notes upon a change of control.
Upon the occurrence of a change of control, as defined in the indenture governing the exchange
notes, we are required to offer to purchase the exchange notes in cash at a price equal to 101% of
the principal amount of the exchange notes, plus accrued and unpaid interest, if any. A change of
control constitutes an event of default under our senior credit facility that permits the lenders
to accelerate the maturity of the borrowings thereunder and may trigger similar rights under our
other indebtedness then outstanding. Our senior credit facility may prohibit us from repurchasing
any exchange notes. The failure to repurchase the exchange notes would result in an
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event of default under the exchange notes. In the event of a change of control, we may not
have sufficient funds to purchase all of the exchange notes and to repay the amounts outstanding
under our new senior credit facility or other indebtedness.
We cannot be sure that a market for the exchange notes, if any, will develop or continue.
We cannot assure you as to:
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the liquidity of any trading market for the exchange notes; |
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your ability to sell your exchange notes; or |
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the price at which you may be able to sell your exchange notes. |
The exchange notes may trade at a discount from their initial price, depending upon prevailing
interest rates, the market for similar securities and other factors, including general economic
conditions, our financial condition, performance and prospects and prospects for companies in our
industry generally. In addition, the liquidity of the trading market in the exchange notes and the
market prices quoted for the exchange notes may be adversely affected by changes in the overall
market for high-yield securities.
Certain of the initial purchasers of the original notes have advised us that they intend to
make a market in the exchange notes as permitted by applicable law. They are not obligated,
however, to make a market in the exchange notes and any such market-making may be discontinued at
any time at the sole discretion of the initial purchasers of the original notes. As a result, you
cannot be sure that an active trading market will develop for the exchange notes.
The capital stock securing the exchange notes will automatically be released from the collateral
to the extent the pledge of such collateral would require the filing of separate financial
statements for any of our subsidiaries with the SEC.
The indenture governing the exchange notes and the security documents provides that, to the
extent that any rule would be, or is, adopted, amended or interpreted which would require the
filing with the SEC (or any other governmental agency) of separate financial statements of any of
our subsidiaries due to the fact that such subsidiarys capital stock or other securities secure
the exchange notes, then such capital stock or other securities will automatically be deemed, for
so long as such requirement would be in effect, not to be part of the collateral securing the
exchange notes to the extent necessary not to be subject to such requirement. In such event, the
security documents may be amended, without the consent of the holders of the exchange notes, to the
extent necessary to evidence the absence of any liens on such capital stock or other securities. As
a result, holders of the exchange notes could lose their security interest in such portion of the
collateral if and for so long as any such rule is in effect. In addition, the absence of a lien on
a portion of the capital stock of a subsidiary pursuant to this provision in certain circumstances
could result in less than a majority of the capital stock of a subsidiary being pledged to secure
the exchange notes, which could impair the ability of the collateral agent, acting on behalf of the
holders of the exchange notes, to sell a controlling interest in such subsidiary or to otherwise
realize value on its security interest in such subsidiarys stock or assets.
If you fail to exchange your original notes, they will continue to be restricted securities and
may become less liquid.
Original notes that you do not tender or we do not accept will, following the exchange offer,
continue to be restricted securities, and you may not offer to sell them except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and applicable state
securities laws. We will issue exchange notes in exchange for the original notes pursuant to the
exchange offer only following the satisfaction of the procedures and conditions set forth in The
Exchange Offer Procedures for Tendering Original Notes and The Exchange Offer Conditions to
the Exchange Offer. These procedures and conditions include timely receipt by the exchange agent
of such original notes (or a confirmation of book-entry transfer) and of a properly completed and
duly executed letter of transmittal (or an agents message from The Depository Trust Company).
Because we anticipate that all or substantially all holders of original notes will elect to
exchange their original notes in this exchange offer, we expect that the liquidity of the market
for any original notes remaining after the completion of the exchange offer will be substantially
limited. Any original notes tendered and exchanged in the exchange offer will reduce the aggregate
principal amount of the original notes outstanding. Following the exchange offer, if you do not
tender your original notes, you generally will not have any further registration rights, and your
original notes will continue to be subject to certain transfer restrictions. Accordingly, the
liquidity of the market for the original notes could be adversely affected.
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Risks Related to Our Indebtedness
We have substantial debt and have the ability to incur additional debt. The principal and interest
payment obligations of such debt may restrict our future operations and impair our ability to meet
our obligations under the exchange notes.
After giving effect to the issuance of the original notes and the use of proceeds thereof, at
March 31, 2010, we and the guarantors would have had approximately $879.4 million aggregate
principal amount of outstanding indebtedness (excluding intercompany indebtedness), substantially
all of which would have constituted senior debt (including the original notes and the exchange
notes), and of which approximately $514.0 million would have effectively ranked senior to the
original notes and the exchange notes, to the extent of the assets securing such debt. In addition,
the terms of our senior credit facility and the indenture governing the exchange notes permit us to
incur additional indebtedness, subject to our ability to meet certain borrowing conditions.
Our substantial debt may have important consequences to you. For instance, it could:
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make it more difficult for us to satisfy our financial obligations, including those
relating to the exchange notes; |
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require us to dedicate a substantial portion of any cash flow from operations to the
payment of interest and principal due under our debt, which will reduce funds available for
other business purposes, including capital expenditures and acquisitions; |
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place us at a competitive disadvantage compared with some of our competitors that may
have less debt and better access to capital resources; and |
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limit our ability to obtain additional financing required to fund working capital and
capital expenditures and for other general corporate purposes. |
We have significant financial obligations outstanding. Our ability to service our debt and
these other obligations depends on our ability to generate significant cash flow. This is partially
subject to general economic, financial, competitive, legislative and regulatory, and other factors
that are beyond our control. We cannot assure you that our business will generate cash flow from
operations, that future borrowings will be available to us under our senior credit facility, or
that we will be able to complete any necessary financings, in amounts sufficient to enable us to
fund our operations or pay our debts and other obligations, or to fund other liquidity needs. If we
are not able to generate sufficient cash flow to service our debt obligations, we may need to
refinance or restructure our debt, sell assets, reduce or delay capital investments, or seek to
raise additional capital. Additional debt or equity financing may not be available in sufficient
amounts, at times or on terms acceptable to us, or at all. If we are unable to implement one or
more of these alternatives, we may not be able to service our debt or other obligations, which
could result in us being in default thereon, in which circumstances our lenders could cease making
loans to us and accelerate and declare due all outstanding obligations under our senior credit
facility, which could have a material adverse effect on the value of our common stock. In addition,
the current volatility in the capital markets may also impact our ability to obtain additional
financing, or to refinance our existing debt, on terms or at times favorable to us.
The agreements governing our various debt obligations impose restrictions on our business and
limit our ability to undertake certain corporate actions.
The agreements governing our various debt obligations, including the indenture governing the
exchange notes and the agreements governing our senior credit facility, include covenants imposing
significant restrictions on our business. These restrictions may affect our ability to operate our
business and may limit our ability to take advantage of potential business opportunities as they
arise. These covenants place restrictions on our ability to, among other things:
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incur additional debt; |
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declare or pay dividends, redeem stock or make other distributions to stockholders; |
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make investments or acquisitions; |
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create liens or use assets as security in other transactions; |
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issue guarantees; |
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merge or consolidate, or sell, transfer, lease or dispose of substantially all of our
assets; |
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amend our articles of incorporation or bylaws; |
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engage in transactions with affiliates; and |
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purchase, sell or transfer certain assets. |
Our senior credit facility also requires us to comply with a number of financial ratios and
covenants.
Our ability to comply with these agreements may be affected by events beyond our control,
including prevailing economic, financial and industry conditions. These covenants could have an
adverse effect on our business by limiting our ability to take advantage of financing, merger and
acquisition or other corporate opportunities. The breach of any of these covenants or restrictions
could result in a default under the indenture governing the exchange notes or our senior credit
facility. An event of default under any of our debt agreements could permit some of our lenders,
including the lenders under our senior credit facility, to declare all amounts borrowed from them
to be immediately due and payable, together with accrued and unpaid interest, which could, in turn,
trigger defaults under other debt obligations and the commitments of the lenders to make further
extensions of credit under our senior credit facility could be terminated. If we were unable to
repay debt to our lenders, or are otherwise in default under any provision governing our
outstanding secured debt obligations, our secured lenders could proceed against us and the
subsidiary guarantors and against the collateral securing that debt. In addition, acceleration of
our other indebtedness may cause us to be unable to make interest payments on the exchange notes
and repay the principal amount of or repurchase the exchange notes or may cause the subsidiary
guarantors to be unable to make payments under the guarantees.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our annual
debt service obligations to increase significantly.
Borrowings under our senior credit facility are at variable rates of interest and expose us to
interest rate risk. If interest rates increase, our debt service obligations on our variable rate
indebtedness would increase even though the amount borrowed remained the same, and our net income
would decrease.
Risks Related to Our Business
We depend on advertising revenues, which are seasonal, and also may fluctuate as a result of a
number of factors.
Our main source of revenue is sales of advertising time and space. Our ability to sell
advertising time and space depends on:
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economic conditions in the areas where our stations are located and in the nation as a
whole; |
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the popularity of our programming; |
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changes in the population demographics in the areas where our stations are located; |
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local and national advertising price fluctuations, which can be affected by the
availability of programming, the popularity of programming, and the relative supply of and
demand for commercial advertising; |
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our competitors activities, including increased competition from other forms of
advertising-based mediums, particularly network, cable television, direct satellite
television and internet; |
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the duration and extent of any network preemption of regularly scheduled programming
for any reason, including as a result of the outbreak or continuance of military
hostilities or terrorist attacks, and decisions by advertisers to withdraw or delay planned
advertising expenditures for any reason, including as a result of military action or
terrorist attacks; and |
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other factors that may be beyond our control. For example, a labor dispute or other
disruption at a major national advertiser, programming provider or network, or a recession
nationally and/or in a particular market, might make it more difficult to sell advertising
time and space and could reduce our revenue. |
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Our results are also subject to seasonal fluctuations. Seasonal fluctuations typically result
in higher broadcast operating income in the second and fourth quarters than first and third
quarters of each year. This seasonality is primarily attributable to (i) advertisers increased
expenditures in the spring and in anticipation of holiday season spending and (ii) an increase in
viewership during this period. Furthermore, revenues from political advertising are significantly
higher in even-numbered years, particularly during presidential election years.
Our dependence upon a limited number of advertising categories could adversely affect our
business.
We derive a material portion of our advertising revenue from the automotive and restaurant
industries. In 2009, we earned approximately 17% and 12% of our total revenue from the automotive
and restaurant categories, respectively. In 2008, we earned approximately 19% and 10% of our total
revenue from the automotive and restaurant categories, respectively. Our business and operating
results could be materially adversely affected if automotive- or restaurant-related advertising
revenues decrease. Our business and operating results could also be materially adversely affected
if revenue decreased from one or more other significant advertising categories, such as the
communications, entertainment, financial services, professional services or retail industries.
We are highly dependent upon our network affiliations, and may lose a large amount of television
programming if a network (i) terminates its affiliation with us, (ii) significantly changes the
economic terms and conditions of any future affiliation agreements with us or (iii) significantly
changes the type, quality or quantity of programming provided to us under an affiliation
agreement.
Our business depends in large part on the success of our network affiliations. Each of our
stations is affiliated with a major network pursuant to an affiliation agreement. Each affiliation
agreement provides the affiliated station with the right to broadcast all programs transmitted by
the affiliated network. Our primary network affiliation agreements expire at various dates through
January 1, 2016. See BusinessOur Stations and Their Markets included elsewhere in this
prospectus.
If we can not enter into affiliation agreements to replace our expiring agreements, we may no
longer be able to carry the affiliated networks programming. This loss of programming would
require us to obtain replacement programming. Such replacement programming may involve higher costs
and may not be as attractive to our target audiences, thereby reducing our ability to generate
advertising revenue. Furthermore, our concentration of CBS and/or NBC affiliates makes us
particularly sensitive to adverse changes in our business relationship with, and the general
success of, CBS and/or NBC.
In addition, if we are unable to renew or replace our existing affiliation agreements, we may
be unable to satisfy certain obligations under our existing or any future retransmission consent
agreements with cable, satellite and telecommunications providers (MVPDs). Furthermore, if in the
future a network limited or removed our ability to retransmit network programming to MVPDs, we may
be unable to satisfy certain obligations under our existing or any future retransmission consent
agreements. In either case, such an event could have a material adverse effect on our business and
results of operations.
We must purchase television programming in advance but cannot predict whether a particular show
will be popular enough to cover its cost.
One of our most significant costs is television programming. If a particular program is not
sufficiently popular among audiences in relation to its costs, we may not be able to sell enough
advertising time to cover the costs of the program. Since we purchase programming content from
others, we have little control over programming costs. We usually must purchase programming several
years in advance, and may have to commit to purchase more than one years worth of programming. We
may also replace programs that are performing poorly before we have recaptured any significant
portion of the costs we incurred or fully expensed the costs for financial reporting purposes. Any
of these factors could reduce our revenues, result in the incurrence of impairment charges or
otherwise cause our costs to escalate relative to revenues. For instance, during the year ended
December 31, 2009, we recorded a television program impairment expense of $0.2 million.
We operate in a highly competitive environment. Competition occurs on multiple levels (for
audiences, programming and advertisers) and is based on a variety of factors. If we are not able
to successfully compete in all relevant aspects, our revenues will be materially adversely
affected.
As described elsewhere herein, television stations compete for audiences, certain programming
(including news) and advertisers. Signal coverage and assigned frequency also materially affect a
television stations competitive position. With respect to audiences,
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stations compete primarily based on broadcast program popularity. Because we purchase or
otherwise acquire, rather than produce, programs, we cannot provide any assurances as to the
acceptability by audiences of any of the programs we broadcast. Further, because we compete with
other broadcast stations for certain programming, we cannot provide any assurances that we will be
able to obtain any desired programming at costs that we believe are reasonable. Cable-originated
programming and increased access to cable and satellite TV has become a significant competitor for
broadcast television programming viewers. Cable networks advertising share has increased due to
the growth in cable/satellite penetration (the percentage of television households that are
connected to a cable or satellite system), which reduces viewers. Further increases in the
advertising share of cable or satellite networks could materially adversely affect the advertising
revenue of our television stations.
In addition, technological innovation and the resulting proliferation of programming
alternatives, such as home entertainment systems, wireless cable services, satellite master
antenna television systems, LPTV stations, television translator stations, DBS, video distribution
services, pay-per-view and the internet, have further fractionalized television viewing audiences
and resulted in additional challenges to revenue generation.
Our inability or failure to broadcast popular programs, or otherwise maintain viewership for
any reason, including as a result of significant increases in programming alternatives, could
result in a lack of advertisers, or a reduction in the amount advertisers are willing to pay us to
advertise, which could have a material adverse effect on our business, financial condition and
results of operations.
The required phased-in introduction of digital television will continue to require us to incur
significant capital and operating costs and may expose us to increased competition.
The 2009 requirement to convert from analog to digital television services in the United
States may require us to incur significant capital expenditures in replacing our stations
equipment to produce local programming, including news, in digital format. We cannot be certain
that increased revenues will offset these additional capital expenditures.
In addition, we also may incur additional costs to obtain programming for the additional
channels made available by digital technology. Increased revenues from the additional channels may
not offset the conversion costs and additional programming expenses. Multiple channels programmed
by other stations may further increase competition in our markets.
Any potential hostilities or terrorist attacks, or similar events leading to broadcast
interruptions, may affect our revenues and results of operations.
If the United States engages in additional foreign hostilities, experiences a terrorist attack
or experiences any similar event resulting in interruptions to regularly scheduled broadcasting, we
may lose advertising revenue and incur increased broadcasting expenses. Lost revenue and increased
expenses may be due to pre-emption, delay or cancellation of advertising campaigns, and increased
costs of covering such events. We cannot predict the (i) extent or duration of any future
disruption to our programming schedule, (ii) amount of advertising revenue that would be lost or
delayed or (iii) amount by which our broadcasting expenses would increase as a result. Any such
loss of revenue and increased expenses could negatively affect our future results of operations.
We have, in the past, incurred impairment charges on our goodwill and/or broadcast licenses, and
any such future charges may have a material effect on the value of our total assets.
For the year ended December 31, 2008, we recorded a non-cash impairment charge to our
broadcast licenses of $240.1 million and a non-cash impairment charge to our goodwill of $98.6
million. As of March 31, 2010, the book value of our broadcast licenses was $819.0 million and the
book value of our goodwill was $170.5 million, in comparison to total assets of $1.2 billion. Not
less than annually, and more frequently if necessary, we are required to evaluate our goodwill and
broadcast licenses to determine if the estimated fair value of these intangible assets is less than
book value. If the estimated fair value of these intangible assets is less than book value, we will
be required to record a non-cash expense to write-down the book value of the intangible asset to
the estimated fair value. We cannot make any assurances that any required impairment charges will
not have a material effect on our total assets.
Our operating and financial flexibility is limited by the terms of our Series D perpetual
preferred stock.
In addition to the limitations imposed by our various debt obligations as described under
The agreements governing our various debt obligations impose restrictions on our business and
limit our ability to undertake certain corporate actions above, our Series D perpetual preferred
stock prevents us from taking certain actions
and requires us to comply with certain requirements. Among other things, this includes
limitations on:
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additional indebtedness; |
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liens; |
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amendments to our by-laws and articles of incorporation; |
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our ability to issue equity securities having liquidation preferences senior or
equivalent to the liquidation preferences of the Series D perpetual preferred stock; |
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mergers and the sale of assets; |
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guarantees; |
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investments and acquisitions; |
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payment of dividends and the redemption of our capital stock; and |
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related-party transactions. |
These restrictions may prevent us from taking action that could increase the value of our
business, or may require actions that decrease the value of our business.
Risks Related to Regulatory Matters
Federal broadcasting industry regulation limits our operating flexibility.
The FCC regulates all television broadcasters, including us. We must obtain FCC approval
whenever we (i) apply for a new license, (ii) seek to renew or assign a license, (iii) purchase a
new station or (iv) transfer the control of one of our subsidiaries that holds a license. Our FCC
licenses are critical to our operations, and we cannot operate without them. We cannot be certain
that the FCC will renew these licenses in the future or approve new acquisitions. Our failure to
renew any licenses upon the expiration of any license term could have a material adverse effect on
our business.
Federal legislation and FCC rules have changed significantly in recent years and may continue
to change. These changes may limit our ability to conduct our business in ways that we believe
would be advantageous and may affect our operating results.
The FCCs duopoly restrictions limit our ability to own and operate multiple television stations
in the same market and our ability to own and operate a television station and newspaper in the
same market.
The FCCs ownership rules generally prohibit us from owning or having attributable interests
in television stations located in the same markets in which our stations are licensed. Accordingly,
those rules constrain our ability to expand in our present markets through additional station
acquisitions. Current FCC cross-ownership rules prevent us from owning and operating a television
station and newspaper in the same market.
The FCCs National Television Station Ownership Rule limits the maximum number of households we
can reach.
A single television station owner can reach no more than 39 percent of U.S. households through
commonly owned television stations. Accordingly, these rules constrain our ability to expand
through additional station acquisitions.
Federal legislation and FCC rules have changed significantly in recent years and may continue
to change. These changes may limit our ability to conduct our business in ways that we believe
would be advantageous and may affect our operating results.
The FCCs National Broadband Plan could result in the reallocation of broadcast spectrum for
wireless broadband use, which could materially impair our ability to provide competitive services.
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On March 16, 2010, the FCC delivered to Congress a National Broadband Plan. The National
Broadband Plan, inter alia, makes recommendations regarding the use of spectrum currently allocated
to television broadcasters, including seeking the voluntary surrender of certain portions of the television broadcast spectrum and repacking the currently
allocated spectrum to make portions of that spectrum available for other wireless communications
services. If some or all of our television stations are required to change frequencies or reduce
the amount of spectrum they use, our stations could incur substantial conversion costs, reduction
or loss of over-the-air signal coverage or an inability to provide high definition programming and
additional program streams, including mobile video services. Prior to implementation of the
proposals contained in the National Broadband Plan, further action by the FCC or Congress or both
is necessary. We cannot predict the likelihood, timing or outcome of any Congressional or FCC
regulatory action in this regard nor the impact of any such changes upon our business.
Our ability to successfully negotiate future retransmission consent agreements may be hindered by
the interests of networks with whom we are affiliated and by potential legislative or regulatory
changes to the framework under which these agreements are negotiated.
Our affiliation agreements with some broadcast networks include certain terms that may affect
our future ability to permit MVPDs to retransmit network programming, and in some cases, we may be
unable to satisfy certain obligations under our existing or any future retransmission consent
agreements with MVPDs. In addition, we may not be able to successfully negotiate future
retransmission consent agreements with the MVPDs in our local markets if the broadcast networks
withhold their consent to the retransmission of those positions of our stations signals containing
network programming, or the networks may require us to pay compensation in exchange for permitting
redistribution of network programming by MVPDs. If we are required to make payments to networks in
connection with signal retransmission, those payments may adversely affect our operating results.
If we are unable to satisfy certain obligations under our existing or future retransmission consent
agreements with MVPDs, there could be a material adverse effect on our results of operations.
The FCC is currently examining proposals that, if adopted as currently proposed, would change
the current rules for conducting negotiations with cable and satellite companies, including
requiring mandatory arbitration in some instances. If Congress or the FCC were to require
mandatory arbitration and maintenance of signal carriage during any such negotiation and until any
arbitration is completed, our ability to generate revenue for these services could be materially
adversely affected.
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THE EXCHANGE OFFER
Purpose of the Exchange Offer
In connection with the offer and sale of the original notes, we and the guarantors entered
into a registration rights agreement with the initial purchasers of the original notes. We are
making the exchange offer to satisfy our obligations under the registration rights agreement.
Terms of the Exchange
We are offering to exchange, upon the terms and subject to the conditions set forth in this
prospectus and in the accompanying letter of transmittal, exchange notes for an equal principal
amount of original notes. The terms of the exchange notes are identical in all material respects to
those of the original notes, except for transfer restrictions, registration rights and special
interest provisions relating to the original notes that will not apply to the exchange notes. The
exchange notes will be entitled to the benefits of the indenture under which the original notes
were issued. See Description of Notes.
The exchange offer is not conditioned upon any minimum aggregate principal amount of original
notes being tendered or accepted for exchange. As of the date of this prospectus, $365.0 million
aggregate principal amount of the original notes was outstanding. Original notes tendered in the
exchange offer must be in denominations of $1,000 and integral multiples thereof.
Based on certain interpretive letters issued by the staff of the SEC to third parties in
unrelated transactions, holders of original notes, except any holder who is an affiliate of ours
within the meaning of Rule 405 under the Securities Act, who exchange their original notes for
exchange notes pursuant to the exchange offer generally may offer the exchange notes for resale,
resell the exchange notes and otherwise transfer the exchange notes without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided that the exchange
notes are acquired in the ordinary course of the holders business and such holders are not
participating in, and have no arrangement or understanding with any person to participate in, a
distribution of the exchange notes.
Each broker-dealer that receives exchange notes for its own account in exchange for original
notes, where the original notes were acquired by the broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of the exchange notes as described in Plan of Distribution. In
addition, to comply with the securities laws of individual jurisdictions, if applicable, the
exchange notes may not be offered or sold unless they have been registered or qualified for sale in
the jurisdiction or an exemption from registration or qualification is available and complied with.
We have agreed, pursuant to the registration rights agreement, to file with the SEC a registration
statement (of which this prospectus forms a part) with respect to the exchange notes. If you do not
exchange such original notes for exchange notes pursuant to the exchange offer, your original notes
will continue to be subject to restrictions on transfer.
If any holder of the original notes is an affiliate of ours, is engaged in or intends to
engage in or has any arrangement or understanding with any person to participate in the
distribution of the exchange notes to be acquired in the exchange offer, the holder would not be
able to rely on the applicable interpretations of the SEC and would be required to comply with the
registration requirements of the Securities Act, except for resales made pursuant to an exemption
from, or in a transaction not subject to, the registration requirement of the Securities Act and
applicable state securities laws.
Expiration Date; Extensions; Termination; Amendments
The exchange offer expires on the expiration date, which is 9:00 a.m., New York City time, on
, 2010 unless we, in our sole discretion, extend the period during which the exchange
offer is open.
We reserve the right to extend the exchange offer at any time and from time to time prior to
the expiration date by giving written notice to U.S. Bank National Association, the exchange agent,
and by public announcement communicated by no later than 9:00 a.m. on the next business day
following the previously scheduled expiration date, unless otherwise required by applicable law or
regulation, by making a release to PR Newswire or other wire service. During any extension of the
exchange offer, all original notes previously tendered will remain subject to the exchange offer
and may be accepted for exchange by us.
The exchange date will be as soon as practicable following the expiration date. We expressly
reserve the right to:
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terminate the exchange offer and not accept for exchange any original notes for any
reason, including if any of the events set forth below under Conditions to the Exchange
Offer shall have occurred and shall not have been waived by us; and |
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amend the terms of the exchange offer in any manner, whether before or after any tender
of the original notes. |
If any termination or material amendment occurs, we will notify the exchange agent in writing
and will either issue a press release or give written notice to the holders of the original notes
as promptly as practicable.
Unless we terminate the exchange offer prior to the expiration date, we will exchange the
exchange notes for the tendered original notes promptly after the expiration date, and will issue
to the exchange agent exchange notes for original notes validly tendered, not withdrawn and
accepted for exchange. Any original notes not accepted for exchange for any reason will be returned
without expense to the tendering holder promptly after expiration or termination of the exchange
offer. See Acceptance of Original Notes for Exchange; Delivery of Exchange Notes.
This prospectus and the accompanying letter of transmittal and other relevant materials will
be mailed by us to record holders of original notes and will be furnished to brokers, banks and
similar persons whose names, or the names of whose nominees, appear on the lists of holders for
subsequent transmittal to beneficial owners of original notes.
Procedures for Tendering Original Notes
The tender of original notes by you pursuant to any one of the procedures set forth below will
constitute an agreement between you and us in accordance with the terms and subject to the
conditions set forth in this prospectus and in the accompanying letter of transmittal.
General Procedures. You may tender the original notes by:
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properly completing and signing the accompanying letter of transmittal or a facsimile and
delivering the letter of transmittal together with a timely confirmation of a book-entry
transfer of the original notes being tendered, if the procedure is available, into the
exchange agents account at The Depository Trust Company, or DTC, for that purpose pursuant
to the procedure for book-entry transfer described below, or |
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complying with the guaranteed delivery procedures described below. |
A holder may also tender its original notes by means of DTCs Automated Tender Offer Program
(ATOP), subject to the terms and procedures of that system. If delivery is made through ATOP, the
holder must transmit an agents message to the exchange agents account at DTC. The term agents
message means a message, transmitted to DTC and received by the exchange agent and forming a part
of a book-entry transfer, that states that DTC has received an express acknowledgement that the
holder agrees to be bound by the letter of transmittal and that we may enforce the letter of
transmittal against the holder.
If tendered original notes are registered in the name of the signer of the accompanying letter
of transmittal and the exchange notes to be issued in exchange for those original notes are to be
issued, or if a new note representing any untendered original notes is to be issued, in the name of
the registered holder, the signature of the signer need not be guaranteed. In any other case, the
tendered original notes must be endorsed or accompanied by written instruments of transfer in form
satisfactory to us and duly executed by the registered holder and the signature on the endorsement
or instrument of transfer must be guaranteed by a commercial bank or trust company located or
having an office or correspondent in the United States or by a member firm of a national securities
exchange or of the National Association of Securities Dealers, Inc. or by a member of a signature
medallion program such as STAMP. If the exchange notes and/or original notes not exchanged are to
be delivered to an address other than that of the registered holder appearing on the note register
for the original notes, the signature on the letter of transmittal must be guaranteed by an
eligible institution.
Any beneficial owner whose original notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and who wishes to tender original notes should
contact the registered holder promptly and instruct the registered holder to tender original notes
on the beneficial owners behalf. If the beneficial owner wishes to tender the original notes
itself, the beneficial owner must, prior to completing and executing the accompanying letter of
transmittal and delivering the original notes, either make appropriate arrangements to register
ownership of the original notes in the beneficial owners name or follow the procedures described
in the immediately preceding paragraph. The transfer of record ownership may take considerable
time.
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A tender will be deemed to have been received as of the date when:
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the tendering holders properly completed and duly signed letter of transmittal
accompanied by a book-entry confirmation is received by the exchange agent; or |
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notice of guaranteed delivery or letter or facsimile transmission to similar effect from
an eligible institution is received by the exchange agent. |
Issuances of exchange notes in exchange for original notes tendered pursuant to a notice of
guaranteed delivery or letter or facsimile transmission to similar effect by an eligible
institution will be made only against deposit of the letter of transmittal and book-entry
confirmation and any other required documents.
All questions as to the validity, form, eligibility, including time of receipt, and acceptance
for exchange of any tender of original notes will be determined by us and will be final and
binding. We reserve the absolute right to reject any or all tenders not in proper form or the
acceptances for exchange of which may, upon advice of our counsel, be unlawful. We also reserve the
absolute right to waive any of the conditions to the exchange offer or any defects or
irregularities in tenders of any particular holder, whether or not similar defects or
irregularities are waived in the case of other holders. Neither we, the exchange agent nor any
other person will be under any duty to give notification of any defects or irregularities in
tenders or will incur any liability for failure to give any such notification. Our interpretation
of the terms and conditions of the exchange offer, including the letter of transmittal and its
instructions, will be final and binding.
The method of delivery of all documents is at the election and risk of the tendering holders,
and delivery will be deemed made only when actually received and confirmed by the exchange agent.
If the delivery is by mail, it is recommended that registered mail properly insured with return
receipt requested be used and that the mailing be made sufficiently in advance of the expiration
date to permit delivery to the exchange agent prior to 9:00 a.m., New York City time, on the
expiration date. As an alternative to delivery by mail, holders may wish to consider overnight or
hand delivery service. In all cases, sufficient time should be allowed to ensure delivery to the
exchange agent prior to 9:00 a.m., New York City time, on the expiration date. No letter of
transmittal or other document should be sent to us. Beneficial owners may request their respective
brokers, dealers, commercial banks, trust companies or nominees to effect the above transactions
for them.
Book-Entry Transfer. The exchange agent will make a request to establish an account with
respect to the original notes at DTC for purposes of the exchange offer within two business days
after this prospectus is mailed to holders, and any financial institution that is a participant in
DTC may make book-entry delivery of original notes by causing DTC to transfer the original notes
into the exchange agents account at DTC in accordance with DTCs procedures for transfer.
Guaranteed Delivery Procedures. If the procedure for book-entry transfer cannot be completed
on a timely basis, a tender may be effected if the exchange agent has received at its office a
letter or facsimile transmission from an eligible institution setting forth the name and address of
the tendering holder, the names in which the original notes are registered, the principal amount of
the original notes being tendered and stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange trading days after the expiration date a
book-entry confirmation together with a properly completed and duly executed letter of transmittal
and any other required documents, will be delivered by the eligible institution to the exchange
agent in accordance with the procedures outlined above. Unless original notes being tendered by the
above-described method are deposited with the exchange agent, including through a book-entry
confirmation, within the time period set forth above and accompanied or preceded by a properly
completed letter of transmittal and any other required documents, we may, at our option, reject the
tender. Additional copies of a notice of guaranteed delivery which may be used by eligible
institutions for the purposes described in this paragraph are available from the exchange agent.
Terms and Conditions Contained in the Letter of Transmittal
The accompanying letter of transmittal contains, among other things, the following terms and
conditions, which are part of the exchange offer.
The transferring party tendering original notes for exchange will be deemed to have exchanged,
assigned and transferred the original notes to us and irrevocably constituted and appointed the
exchange agent as the transferors agent and attorney-in-fact to cause the original notes to be
assigned, transferred and exchanged. The transferor will be required to represent and warrant that
it has full power and authority to tender, exchange, assign and transfer the original notes and to
acquire exchange notes issuable upon the exchange of the tendered original notes and that, when the
same are accepted for exchange, we will acquire good and unencumbered title to the tendered
original notes, free and clear of all liens, restrictions, other than restrictions on transfer,
charges and encumbrances
26
and that the tendered original notes are not and will not be subject to any adverse claim. The
transferor will be required to also agree that it will, upon request, execute and deliver any
additional documents deemed by the exchange agent or us to be necessary or desirable to complete
the exchange, assignment and transfer of tendered original notes. The transferor will be required
to agree that acceptance of any tendered original notes by us and the issuance of exchange notes in
exchange for tendered original notes will constitute performance in full by us of our obligations
under the registration rights agreement and that we will have no further obligations or liabilities
under the registration rights agreement, except in certain limited circumstances. All authority
conferred by the transferor will survive the death, bankruptcy or incapacity of the transferor and
every obligation of the transferor will be binding upon the heirs, legal representatives,
successors, assigns, executors, administrators and trustees in bankruptcy of the transferor.
By tendering original notes and executing the accompanying letter of transmittal, the
transferor certifies that:
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|
|
it is not an affiliate of ours or our subsidiaries or, if the transferor is an affiliate
of ours or our subsidiaries, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable; |
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|
the exchange notes are being acquired in the ordinary course of business of the person
receiving the exchange notes, whether or not the person is the registered holder; |
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|
the transferor has not entered into an arrangement or understanding with any other person
to participate in the distribution, within the meaning of the Securities Act, of the
exchange notes; |
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|
the transferor is not a broker-dealer who purchased the original notes for resale
pursuant to an exemption under the Securities Act; and |
|
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|
|
the transferor will be able to trade the exchange notes acquired in the exchange offer
without restriction under the Securities Act. |
Each broker-dealer that receives exchange notes for its own account in exchange for original
notes where such original notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities must acknowledge that it will deliver a prospectus in
connection with any resale of such exchange notes. See Plan of Distribution.
Withdrawal Rights
Original notes tendered pursuant to the exchange offer may be withdrawn at any time prior to
the expiration date.
For a withdrawal to be effective, a written letter or facsimile transmission notice of
withdrawal must be received by the exchange agent at its address set forth in the accompanying
letter of transmittal not later than the expiration date. Any notice of withdrawal must specify the
person named in the letter of transmittal as having tendered original notes to be withdrawn, the
principal amount of original notes to be withdrawn, that the holder is withdrawing its election to
have such original notes exchanged and the name of the registered holder of the original notes, and
must be signed by the holder in the same manner as the original signature on the letter of
transmittal, including any required signature guarantees, or be accompanied by evidence
satisfactory to us that the person withdrawing the tender has succeeded to the ownership of the
original notes being withdrawn. Properly withdrawn original notes may be retendered by following
one of the procedures described under Procedures for Tendering Original Notes above at any
time on or prior to the expiration date. Any notice of withdrawal must specify the name and number
of the account at DTC to be credited with the withdrawn original notes and otherwise comply with
the procedures of DTC. All questions as to the validity of notices of withdrawals, including time
of receipt, will be determined by us, and will be final and binding on all parties.
Acceptance of Original Notes for Exchange; Delivery of Exchange Notes
Upon the terms and subject to the conditions of the exchange offer, the acceptance for
exchange of original notes validly tendered and not withdrawn and the issuance of the exchange
notes will be made on the exchange date. For purposes of the exchange offer, we will be deemed to
have accepted for exchange validly tendered original notes when and if we have given written notice
to the exchange agent.
The exchange agent will act as agent for the tendering holders of original notes for the
purposes of receiving exchange notes from us and causing the original notes to be assigned,
transferred and exchanged. Original notes tendered by book-entry transfer into the exchange agents
account at DTC pursuant to the procedures described above will be credited to an account maintained
by the holder with DTC for the original notes, promptly after withdrawal, rejection of tender or
termination of the exchange offer.
27
Conditions to the Exchange Offer
Notwithstanding any other provision of the exchange offer, or any extension of the exchange
offer, we will not be required to issue exchange notes in exchange for any properly tendered
original notes not previously accepted and may terminate the exchange offer, by oral or written
notice to the exchange agent and by timely public announcement communicated, unless otherwise
required by applicable law or regulation, to PR Newswire or other wire service, or, at our option,
modify or otherwise amend the exchange offer, if, in our reasonable determination:
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there is threatened, instituted or pending any action or proceeding before, or any
injunction, order or decree shall have been issued by, any court or governmental agency or
other governmental regulatory or administrative agency or of the SEC: |
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seeking to restrain or prohibit the making or consummation of the exchange offer, |
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|
assessing or seeking any damages as a result thereof, or |
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|
resulting in a material delay in our ability to accept for exchange or exchange some or
all of the original notes pursuant to the exchange offer; or |
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|
the exchange offer violates any applicable law or any applicable interpretation of the
staff of the SEC. |
These conditions are for our sole benefit and may be asserted by us with respect to all or any
portion of the exchange offer regardless of the circumstances, including any action or inaction by
us, giving rise to the condition or may be waived by us in whole or in part at any time or from
time to time in our sole discretion. The failure by us at any time to exercise any of the foregoing
rights will not be deemed a waiver of any right, and each right will be deemed an ongoing right
that may be asserted at any time or from time to time. We reserve the right, notwithstanding the
satisfaction of these conditions, to terminate or amend the exchange offer.
Any determination by us concerning the fulfillment or non-fulfillment of any conditions will
be final and binding upon all parties.
In addition, we will not accept for exchange any original notes tendered, and no exchange
notes will be issued in exchange for any original notes, if at such time, any stop order has been
issued or is threatened with respect to the registration statement of which this prospectus is a
part, or with respect to the qualification of the indenture under which the original notes were
issued under the Trust Indenture Act, as amended.
28
Exchange Agent
U.S. Bank National Association has been appointed as the exchange agent for the exchange
offer. Questions relating to the procedure for tendering, as well as requests for additional copies
of this prospectus, the accompanying letter of transmittal or a notice of guaranteed delivery,
should be directed to the exchange agent addressed as follows:
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By Registered or Certified Mail, Overnight |
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Courier or Hand Delivery:
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Facsimile Transmission Number:
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Confirm by Telephone or for Information: |
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U.S. Bank National Association
|
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(651) 495-8158
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|
(800) 934-6802 |
West Side Flats Operations Center
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Attention: Specialized Finance |
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Attn: Specialized Finance
60 Livingston Avenue
Mail StationEP-MN-WS2N
St. Paul MN 55107-2292 |
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Delivery of the accompanying letter of transmittal to an address other than as set forth
above, or transmission of instructions via facsimile other than as set forth above, will not
constitute a valid delivery.
The exchange agent also acts as trustee under the indenture under which the original notes
were issued and the exchange notes will be issued.
Solicitation of Tenders; Expenses
We have not retained any dealer-manager or similar agent in connection with the exchange offer
and we will not make any payments to brokers, dealers or others for soliciting acceptances of the
exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its
services and will reimburse it for actual and reasonable out-of-pocket expenses. The expenses to be
incurred in connection with the exchange offer, including the fees and expenses of the exchange
agent and printing, accounting and legal fees, will be paid by us.
No person has been authorized to give any information or to make any representations in
connection with the exchange offer other than those contained in this prospectus. If given or made,
the information or representations should not be relied upon as having been authorized by us.
Neither the delivery of this prospectus nor any exchange made in the exchange offer will, under any
circumstances, create any implication that there has been no change in our affairs since the date
of this prospectus or any earlier date as of which information is given in this prospectus.
The exchange offer is not being made to, nor will tenders be accepted from or on behalf of,
holders of original notes in any jurisdiction in which the making of the exchange offer or the
acceptance would not be in compliance with the laws of the jurisdiction. However, we may, at our
discretion, take any action as we may deem necessary to make the exchange offer in any
jurisdiction. In any jurisdiction where its securities laws or blue sky laws require the exchange
offer to be made by a licensed broker or dealer, the exchange offer is being made on our behalf by
one or more registered brokers or dealers licensed under the laws of the jurisdiction.
Appraisal Rights
You will not have dissenters rights or appraisal rights in connection with the exchange
offer.
Accounting Treatment
The exchange notes will be recorded at the carrying value of the original notes as reflected
on our accounting records on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized by us upon the exchange of exchange notes for original notes. Expenses
incurred in connection with the issuance of the exchange notes will be amortized over the term of
the exchange notes.
29
Transfer Taxes
If you tender your original notes, you will not be obligated to pay any transfer taxes in
connection with the exchange offer unless you instruct us to register exchange notes in the name
of, or request original notes not tendered or not accepted in the exchange offer be returned to, a
person other than the registered holder, in which case you will be responsible for the payment of
any applicable transfer tax.
Income Tax Considerations
We advise you to consult your own tax advisers as to your particular circumstances and the
effects of any state, local or foreign tax laws to which you may be subject.
The discussion herein is based upon the provisions of the Internal Revenue Code of 1986, as
amended, and regulations, rulings and judicial decisions thereunder, in each case as in effect on
the date of this prospectus, all of which are subject to change.
The exchange of an original note for an exchange note will not constitute a taxable exchange.
The exchange will not result in taxable income, gain or loss being recognized by you or by us.
Immediately after the exchange, you will have the same adjusted basis and holding period in each
exchange note received as you had immediately prior to the exchange in the corresponding original
note surrendered. See Certain U.S. Federal Income Tax Considerations for more information.
Consequences of Failure to Exchange
As a consequence of the offer or sale of the original notes pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the Securities Act and applicable
state securities laws, holders of original notes who do not exchange original notes for exchange
notes in the exchange offer will continue to be subject to the restrictions on transfer of the
original notes. In general, the original notes may not be offered or sold unless such offers and
sales are registered under the Securities Act, or exempt from, or not subject to, the registration
requirements of the Securities Act and applicable state securities laws.
Upon completion of the exchange offer, due to the restrictions on transfer of the original
notes and the absence of similar restrictions applicable to the exchange notes, it is highly likely
that the market, if any, for original notes will be relatively less liquid than the market for
exchange notes. Consequently, holders of original notes who do not participate in the exchange
offer could experience significant diminution in the value of their original notes compared to the
value of the exchange notes.
30
RATIO OF EARNINGS TO FIXED CHARGES
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Three Months Ended March 31, |
|
Year Ended December 31, |
|
|
2010 |
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
2005 |
Consolidated ratio of earnings to fixed charges(1)(2) |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.21 |
|
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|
|
|
|
|
|
(1) |
|
For purposes of this ratio: |
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|
The term fixed charges means the sum of: (i) interest expensed and
capitalized, (ii) amortized premiums, discounts and capitalized
expenses related to indebtedness, (iii) an estimate of the interest
within rental expense, and (iv) preference security dividend
requirements. |
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|
The term preference security dividend is the amount of pre-tax
earnings required to pay the dividends on outstanding preference
securities. The dividend requirement is computed as the amount of the
dividend divided by (1 minus the effective income tax rate applicable
to continuing operations). |
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The term earnings is the amount resulting from adding and
subtracting the following items. We add the following: (i) pre-tax
income from continuing operations before adjustment for income or loss
from equity investees; (ii) fixed charges; (iii) amortization of
capitalized interest; (iv) distributed income of equity investees; and
(v) our share of pre-tax losses of equity investees for which charges
arising from guarantees are included in fixed charges. From the total
of the added items, we subtract the following: (i) interest
capitalized; (ii) preference security dividend requirements of
consolidated subsidiaries; and (iii) the noncontrolling interest in
pre-tax income of subsidiaries that have not incurred fixed charges.
Equity investees are investments that we account for using the equity
method of accounting. |
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(2) |
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For the three months ended March 31, 2010 and the years ended December
31, 2009, 2008, 2007 and 2005, earnings were inadequate to cover fixed
charges by approximately $15.7 million, $59.9 million, $323.2 million,
$38.2 million and $1.9 million, respectively. |
31
USE OF PROCEEDS
The exchange offer is intended to satisfy our obligations under the registration rights
agreement relating to the original notes. We will not receive any cash proceeds from the issuance
of the exchange notes. In consideration for issuing the exchange notes as contemplated in this
prospectus, we will receive, in exchange, an equal principal amount of outstanding original notes.
The form and terms of the exchange notes are identical in all material respects to the form and
terms of the original notes, except with respect to the transfer restrictions and registration
rights and related special interest provisions relating to the original notes. The original notes
surrendered in exchange for the exchange notes will be retired and cannot be reissued.
32
CAPITALIZATION
The following table sets forth our actual cash and cash equivalents and capitalization as of
March 31, 2010, and as adjusted to give effect to the completion of the offering of original notes
and the use of net proceeds therefrom. This table should be read in conjunction with Selected
Consolidated Financial and Other Data as well as the consolidated financial statements, and notes
thereto, included elsewhere in this prospectus.
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As of March 31, 2010 |
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|
Actual |
|
|
As Adjusted |
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|
(Dollars in millions) |
|
Cash and cash equivalents |
|
$ |
13.7 |
|
|
$ |
12.6 |
|
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|
|
|
|
|
|
Long-term debt (including current maturities): |
|
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|
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|
|
|
|
Senior credit facility: |
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|
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|
|
|
|
Revolving credit facility(1) |
|
$ |
|
|
|
$ |
|
|
Term loans |
|
|
789.8 |
|
|
|
489.8 |
|
Long-term accrued facility fee(2) |
|
|
24.2 |
|
|
|
24.2 |
|
Original notes(3) |
|
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|
|
365.0 |
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|
|
|
|
|
|
Long-term debt (including current portion) and accrued facility fee |
|
$ |
814.0 |
|
|
$ |
879.0 |
|
Less current portion of long-term debt |
|
|
(8.1 |
) |
|
|
(5.0 |
) |
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|
|
|
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|
Total long-term debt and accrued facility fee |
|
|
805.9 |
|
|
|
874.0 |
|
Series D perpetual preferred stock (at liquidation value, including accrued dividends)(4) |
|
|
123.2 |
|
|
|
47.6 |
|
Total stockholders equity(4) |
|
|
88.1 |
|
|
|
113.7 |
|
|
|
|
|
|
|
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Total capitalization |
|
$ |
1,017.2 |
|
|
$ |
1,035.3 |
|
|
|
|
|
|
|
|
|
|
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(1) |
|
The maximum available borrowing capacity under the revolving credit facility was $40.0 million as of March 31, 2010. |
|
(2) |
|
Includes $24.2 million of accrued facility fee. Affiliates of certain of the initial purchasers of the original
notes are lenders under our senior credit facility and, accordingly, received a portion of the net proceeds from
the offering of the original notes. |
|
(3) |
|
Reflects $365.0 million aggregate principal amount of original notes, before deducting $7.0 million of unamortized
original issue discount. |
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(4) |
|
Pursuant to the Exchange Agreement, concurrently with the completion of the offering of original notes, we issued
holders of our Series D perpetual preferred stock 8.5 million shares of our common stock, together with $50.0
million in cash, in exchange for $75.59 million of Series D perpetual preferred stock, including accrued dividends. |
33
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
We have derived the following selected consolidated financial and other data for each of the
five years ended December 31, 2009, 2008, 2007, 2006 and 2005 from our audited consolidated
financial statements. We have derived the following selected consolidated financial and other data
for the three months ended March 31, 2010 and 2009 from our unaudited condensed consolidated
financial statements. The selected consolidated financial and other data below for each of the
three years ended December 31, 2009, 2008 and 2007 and for the three month periods ended March 31,
2010 and 2009 should be read in conjunction with Managements Discussion and Analysis of Financial
Condition and Results of Operations and the consolidated financial statements, and notes thereto,
included elsewhere in this prospectus.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
Year Ended December 31, |
|
|
2010 |
|
2009 |
|
2009 |
|
2008 |
|
2007 |
|
2006(1) |
|
2005(2) |
|
|
(Dollars in thousands, except per share data) |
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Statement of
Operations Data: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Revenues (less agency
commissions)(3) |
|
$ |
70,482 |
|
|
$ |
61,354 |
|
|
$ |
270,374 |
|
|
$ |
327,176 |
|
|
$ |
307,288 |
|
|
$ |
332,137 |
|
|
$ |
261,553 |
|
Impairment of goodwill
and broadcast licenses(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
338,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
11,940 |
|
|
|
4,766 |
|
|
|
43,079 |
|
|
|
(258,895 |
) |
|
|
53,376 |
|
|
|
87,991 |
|
|
|
60,861 |
|
Loss on early
extinguishment of debt(5) |
|
|
(349 |
) |
|
|
(8,352 |
) |
|
|
(8,352 |
) |
|
|
|
|
|
|
(22,853 |
) |
|
|
(347 |
) |
|
|
(6,543 |
) |
(Loss) income from
continuing operations |
|
|
(7,981 |
) |
|
|
(13,687 |
) |
|
|
(23,047 |
) |
|
|
(202,016 |
) |
|
|
(23,151 |
) |
|
|
11,711 |
|
|
|
4,604 |
|
Loss from discontinued
publishing and wireless
operations, net of income
tax of $0, $0, $0, $0,
$0, $0 and $3,253
respectively(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,242 |
) |
Net (loss) income |
|
|
(4,743 |
) |
|
|
(8,920 |
) |
|
|
(23,047 |
) |
|
|
(202,016 |
) |
|
|
(23,151 |
) |
|
|
11,711 |
|
|
|
3,362 |
|
Net (loss) income
available to common
stockholders |
|
|
(9,294 |
) |
|
|
(12,971 |
) |
|
|
(40,166 |
) |
|
|
(208,609 |
) |
|
|
(24,777 |
) |
|
|
8,464 |
|
|
|
(2,286 |
) |
Net (loss) income from
continuing operations
available to common
stockholders per common
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
(0.19 |
) |
|
|
(0.27 |
) |
|
|
(0.83 |
) |
|
|
(4.32 |
) |
|
|
(0.52 |
) |
|
|
0.17 |
|
|
|
(0.02 |
) |
Diluted |
|
|
(0.19 |
) |
|
|
(0.27 |
) |
|
|
(0.83 |
) |
|
|
(4.32 |
) |
|
|
(0.52 |
) |
|
|
0.17 |
|
|
|
(0.02 |
) |
Net (loss) income
available to common
stockholders per common
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
(0.19 |
) |
|
|
(0.27 |
) |
|
|
(0.83 |
) |
|
|
(4.32 |
) |
|
|
(0.52 |
) |
|
|
0.17 |
|
|
|
(0.05 |
) |
Diluted |
|
|
(0.19 |
) |
|
|
(0.27 |
) |
|
|
(0.83 |
) |
|
|
(4.32 |
) |
|
|
(0.52 |
) |
|
|
0.17 |
|
|
|
(0.05 |
) |
Cash dividends declared
per common share(7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.09 |
|
|
|
0.12 |
|
|
|
0.12 |
|
|
|
0.12 |
|
Balance Sheet Data (at
end of period): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,235,815 |
|
|
$ |
1,248,442 |
|
|
$ |
1,245,739 |
|
|
$ |
1,278,265 |
|
|
$ |
1,625,969 |
|
|
$ |
1,628,287 |
|
|
$ |
1,525,054 |
|
Long-term debt (including
current portion) |
|
|
789,789 |
|
|
|
798,359 |
|
|
|
791,809 |
|
|
|
800,380 |
|
|
|
925,000 |
|
|
|
851,654 |
|
|
|
792,509 |
|
Long-term accrued
facility fee(8) |
|
|
24,245 |
|
|
|
|
|
|
|
18,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable preferred
stock(9) |
|
|
93,687 |
|
|
|
92,484 |
|
|
|
93,386 |
|
|
|
92,183 |
|
|
|
|
|
|
|
37,451 |
|
|
|
39,090 |
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
Year Ended December 31, |
|
|
2010 |
|
2009 |
|
2009 |
|
2008 |
|
2007 |
|
2006(1) |
|
2005(2) |
|
|
(Dollars in thousands, except per share data) |
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
88,140 |
|
|
|
107,154 |
|
|
|
93,620 |
|
|
|
117,107 |
|
|
|
337,845 |
|
|
|
379,754 |
|
|
|
380,996 |
|
Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to
fixed charges(10) |
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.21 |
|
|
|
|
|
|
|
|
(1) |
|
Reflects the acquisition of WNDU-TV on March 3, 2006 as of the acquisition date.
For further information concerning this acquisition, see Business included
elsewhere in this prospectus. |
|
(2) |
|
Reflects the acquisitions of KKCO-TV on January 31, 2005, WSWG-TV on November 10,
2005 and WSAZ-TV on November 30, 2005, as of their respective acquisition dates. |
|
(3) |
|
Our revenues fluctuate significantly between years, consistent with, among other
things, increased political advertising expenditures in even-numbered years. |
|
(4) |
|
As of December 31, 2008, we recorded a non-cash impairment expense of $338.7
million resulting from a write down of $98.6 million in the carrying value of our
goodwill and a write down of $240.1 million in the carrying value of our broadcast
licenses. The write-down of our goodwill and broadcast licenses related to seven
stations and 23 stations, respectively. As of this testing date, we believe events
had occurred and circumstances changed that more likely than not reduce the fair
value of our broadcast licenses and goodwill below their carrying amounts. These
events which accelerated in the fourth quarter of 2008 included: (i) the continued
decline of the price of our common stock and Class A common stock; (ii) the decline
in the current selling prices of television stations; (iii) the decline in local
and national advertising revenues excluding political advertising revenue; and (iv)
the decline in the operating profit margins of some of our stations. |
35
|
|
|
(5) |
|
In 2010 and 2009, we recorded a loss on early extinguishment of debt related to an
amendment of our senior credit facility. In 2007, we recorded a loss on early
extinguishment of debt related to a refinancing of our senior credit facility and
the redemption of our 9.25% Notes. In 2006, we recorded a loss on early
extinguishment of debt related to the repurchase of a portion of our 9.25% Notes.
In 2005, we recorded a loss on early extinguishment of debt related to two
amendments to our then existing senior credit facility and the repurchase of a
portion of our 9.25% Notes. |
|
(6) |
|
On December 30, 2005, we completed (i) the contribution of all of our membership
interests in Gray Publishing, LLC, which included our Gray Publishing and Graylink
Wireless businesses and certain other assets, to Triple Crown Media, Inc. (TCM)
and (ii) the spinoff of all the common stock of TCM to our shareholders. The
selected financial information for 2005 reflects the reclassification of the
results of operations of those businesses as discontinued operations, net of income
tax. |
|
(7) |
|
Cash dividends for 2007 and 2006 include a cash dividend of $0.03 per share
approved in the fourth quarters of 2007 and 2006, respectively, and paid in the
first quarters of 2008 and 2007, respectively. |
|
(8) |
|
On March 31, 2009, we amended our senior credit facility. Effective on that date,
we began to incur an annual facility fee equal to 3% multiplied by the outstanding
balance under our senior credit facility. See Note 3. Long-term Debt and Accrued
Facility Fee of our notes to our audited consolidated financial statements
included elsewhere in this prospectus for further information regarding our accrued
facility fee. |
|
(9) |
|
On June 26, 2008, we issued 750 shares of Series D perpetual preferred stock and on
July 15, 2008, we issued an additional 250 shares of our Series D perpetual
preferred stock. We generated net cash proceeds from such issuances of
approximately $91.6 million, after a 5.0% original issue discount, transaction fees
and expenses. The Series D perpetual preferred stock has a liquidation value of
$100,000 per share, for a total liquidation value of $100.0 million. The $8.4
million of original issue discount, transaction fees and expenses is being accreted
over a seven-year period ending June 30, 2015. |
|
|
|
On May 22, 2007, we redeemed all outstanding shares of our Series C preferred stock. |
|
|
|
Amounts exclude unamortized original issuance costs and accrued and unpaid
dividends. Such costs and dividends aggregated $29.5 million, $14.3 million, $25.5
million and $10.8 million as of March 31, 2010, March 31, 2009, December 31, 2009
and December 31, 2008, respectively. |
|
(10) |
|
For purposes of this ratio: |
|
|
|
The term fixed charges means the sum of: (i) interest expensed and
capitalized, (ii) amortized premiums, discounts and capitalized
expenses related to indebtedness, (iii) an estimate of the interest
within rental expense, and (iv) preference security dividend
requirements. |
|
|
|
The term preference security dividend is the amount of pre-tax
earnings required to pay the dividends on outstanding preference
securities. The dividend requirement is computed as the amount of the
dividend divided by (1 minus the effective income tax rate applicable
to continuing operations). |
|
|
|
The term earnings is the amount resulting from adding and
subtracting the following items. We add the following: (i) pre-tax
income from continuing operations before adjustment for income or
loss from equity investees; (ii) fixed charges; (iii) amortization of
capitalized interest; (iv) distributed income of equity investees;
and (v) our share of pre-tax losses of equity investees for which
charges arising from guarantees are included in fixed charges. From
the total of the added items, we subtract the following: (i) interest
capitalized; (ii) preference security dividend requirements of
consolidated subsidiaries; and (iii) the noncontrolling interest in
pre-tax income of subsidiaries that have not incurred fixed charges.
Equity investees are investments that we account for using the equity
method of accounting. |
|
|
|
For the three months ended March 31, 2010 and the years ended
December 31, 2009, 2008, 2007 and 2005, earnings were inadequate to
cover fixed charges by approximately $15.7 million, $59.9 million,
$323.2 million, $38.2 million and $1.9 million, respectively. |
36
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Executive Overview
Introduction
The following analysis of the financial condition and results of operations of Gray
Television, Inc. (we, us, or our) should be read in conjunction with our audited consolidated
financial statements and unaudited condensed consolidated financial statements, and notes thereto,
included elsewhere herein.
Overview
We are a television broadcast company operating 36 television stations serving 30 markets.
Seventeen of our stations are affiliated with CBS Inc. (CBS), ten are affiliated with the
National Broadcasting Corporation, Inc. (NBC), eight are affiliated with the American
Broadcasting Corporation (ABC), and one is affiliated with FOX Entertainment Group, Inc. (FOX).
Our 17 CBS-affiliated stations make us the largest independent owner of CBS affiliates in the
United States. In addition, we currently operate 39 digital second channels including one
affiliated with ABC, four affiliated with FOX, seven affiliated with CW, 18 affiliated with
Twentieth Television, Inc. (MyNetworkTV), two affiliated with Universal Sports Network and seven
local news/weather channels in certain of our existing markets. We created our digital second
channels to better utilize our excess broadcast spectrum. The digital second channels are similar
to our primary broadcast channels; however, our digital second channels are affiliated with
networks different from those affiliated with our primary broadcast channels. Our combined TV
station group reaches approximately 6.3% of total United States households.
Our operating revenues are derived primarily from broadcast and internet advertising and from
other sources such as production of commercials, tower rentals, retransmission consent fees and
management fees.
Broadcast advertising is sold for placement either preceding or following a television
stations network programming and within local and syndicated programming. Broadcast advertising is
sold in time increments and is priced primarily on the basis of a programs popularity among the
specific audience an advertiser desires to reach, as measured by Nielsen. In addition, broadcast
advertising rates are affected by the number of advertisers competing for the available time, the
size and demographic makeup of the market served by the station and the availability of alternative
advertising media in the market area. Broadcast advertising rates are the highest during the most
desirable viewing hours, with corresponding reductions during other hours. The ratings of a local
station affiliated with a major network can be affected by ratings of network programming.
We sell internet advertising on our stations websites. These advertisements are sold as
banner advertisements on the websites, pre-roll advertisements or video and other types of
advertisements.
Most advertising contracts are short-term and generally run only for a few weeks.
Approximately 66% of the net revenues of our television stations for the three months ended March
31, 2010 were generated from local advertising (including political advertising revenues), which is
sold primarily by a stations sales staff directly to local accounts, and the remainder was
represented primarily by national advertising, which is sold by a stations national advertising
sales representatives. The stations generally pay commissions to advertising agencies on local,
regional and national advertising and the stations also pay commissions to the national sales
representatives on national advertising.
Broadcast advertising revenues are generally highest in the second and fourth quarters each
year, due in part to increases in advertising in the spring and in the period leading up to and
including the holiday season. In addition, broadcast advertising revenues are generally higher
during even numbered years due to increased spending by political candidates and special interest
groups in advance of upcoming elections, which spending typically is heaviest during the fourth
quarter of such years.
Our primary broadcast operating expenses are employee compensation, related benefits and
programming costs. In addition, broadcasting operations incur overhead expenses, such as
maintenance, supplies, insurance, rent and utilities. A large portion of our operating expenses for
broadcasting operations is fixed.
During the recent economic recession, many of our advertising customers have reduced their
advertising spending, which has in turn reduced our revenue. Specifically, automotive dealers and
manufacturers, which have traditionally accounted for a significant
37
portion of our revenues have suffered disproportionately during the recent recession and have
therefore, significantly reduced their advertising expenditures, which has further negatively
impacted our revenues. Our revenues have also come under pressure from the internet as a competitor
for advertising spending. We continue to enhance and market our internet websites in order to
generate additional revenue.
Revenue
Set forth below are the principal types of revenue, less agency commissions, earned by us for
the periods indicated and the percentage contribution of each to our total revenues (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
Amount |
|
|
Percent of Total |
|
|
Amount |
|
|
Percent of Total |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local |
|
$ |
43,511 |
|
|
|
61.7 |
% |
|
$ |
39,286 |
|
|
|
64.0 |
% |
National |
|
|
13,951 |
|
|
|
19.8 |
% |
|
|
12,875 |
|
|
|
21.0 |
% |
Internet |
|
|
3,072 |
|
|
|
4.4 |
% |
|
|
2,564 |
|
|
|
4.2 |
% |
Political |
|
|
2,783 |
|
|
|
3.9 |
% |
|
|
1,009 |
|
|
|
1.6 |
% |
Retransmission consent |
|
|
4,639 |
|
|
|
6.6 |
% |
|
|
3,640 |
|
|
|
5.9 |
% |
Production and other |
|
|
1,932 |
|
|
|
2.7 |
% |
|
|
1,842 |
|
|
|
3.0 |
% |
Network compensation |
|
|
44 |
|
|
|
0.1 |
% |
|
|
138 |
|
|
|
0.3 |
% |
Consulting revenue |
|
|
550 |
|
|
|
0.8 |
% |
|
|
|
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
70,482 |
|
|
|
100.0 |
% |
|
$ |
61,354 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year End December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Revenues: |
|
Amount |
|
|
Percent of Total |
|
|
Amount |
|
|
Percent of Total |
|
|
Amount |
|
|
Percent of Total |
|
Local |
|
$ |
170,813 |
|
|
|
63.2 |
% |
|
$ |
186,492 |
|
|
|
57.0 |
% |
|
$ |
200,686 |
|
|
|
65.3 |
% |
National |
|
|
53,892 |
|
|
|
19.9 |
% |
|
|
68,417 |
|
|
|
20.9 |
% |
|
|
77,365 |
|
|
|
25.2 |
% |
Internet |
|
|
11,413 |
|
|
|
4.2 |
% |
|
|
11,859 |
|
|
|
3.6 |
% |
|
|
9,506 |
|
|
|
3.1 |
% |
Political |
|
|
9,976 |
|
|
|
3.7 |
% |
|
|
48,455 |
|
|
|
14.8 |
% |
|
|
7,808 |
|
|
|
2.5 |
% |
Retransmission consent |
|
|
15,645 |
|
|
|
5.8 |
% |
|
|
3,046 |
|
|
|
0.9 |
% |
|
|
2,436 |
|
|
|
0.8 |
% |
Production and other |
|
|
7,119 |
|
|
|
2.6 |
% |
|
|
8,155 |
|
|
|
2.5 |
% |
|
|
8,719 |
|
|
|
2.8 |
% |
Network compensation |
|
|
653 |
|
|
|
0.2 |
% |
|
|
752 |
|
|
|
0.3 |
% |
|
|
768 |
|
|
|
0.3 |
% |
Consulting revenue |
|
|
863 |
|
|
|
0.4 |
% |
|
|
|
|
|
|
0.0 |
% |
|
|
|
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
270,374 |
|
|
|
100.0 |
% |
|
$ |
327,176 |
|
|
|
100.0 |
% |
|
$ |
307,288 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Factors
The broadcast television industry relies primarily on advertising revenues and faces increased
competition. For a discussion of certain other presently known, significant factors that may affect
our business, see Risk Factors.
Results of Operations
Three Months Ended March 31, 2010 (2010 three month period) Compared To Three Months Ended March
31, 2009 (2009 three month period)
Revenue
Total revenues increased $9.1 million, or 15%, to $70.5 million in the 2010 three month period
reflecting increased local, national, internet and political advertising revenue, retransmission
revenue and other revenue, partially offset by decreased network compensation revenues. Local
advertising revenue increased $4.2 million, or 11%, to $43.5 million and national advertising
revenue increased $1.1 million, or 8%, to $14.0 million. Internet advertising revenues increased
$0.5 million, or 20%, to $3.1 million. Local, national and internet advertising revenue increased
due to increased spending by advertisers in an improving economic environment.
38
Political advertising revenues increased $1.8 million, or 176%, to $2.8 million reflecting
increased advertising from political candidates and special interest groups. Net advertising
revenue associated with the broadcast of the 2010 Super Bowl on our seventeen CBS-affiliated
stations approximated $860,000 which was an increase from our approximately $750,000 of Super Bowl
revenues earned in 2009 on our ten NBC-affiliated stations. In addition, the 2010 three month
period benefited from approximately $2.8 million of net revenues earned from the broadcast of the
2010 Winter Olympic Games on our NBC-affiliated stations. There was no corresponding broadcast of
Olympic Games during the 2009 three month period.
Advertising from the automotive sector improved significantly, increasing by 43% in the 2010
three month period when compared to the 2009 three month period. Other categories demonstrating
significant improvement in advertising revenues during the 2010 three month period compared to the
2009 three month period were: supermarkets, increasing 27%; financial and insurance services,
increasing 23%; medical services, increasing 16%; and legal services, increasing 15%.
Retransmission revenue increased $1.0 million, or 27%, to $4.6 million due to the improved terms of
our retransmission contracts compared to those of the 2009 three month period. We earned consulting
revenue of $0.6 million due to our agreement with Young Broadcasting, Inc.
Broadcast Expenses
Broadcast expenses (before depreciation, amortization and gain on disposal of assets, net)
increased $1.9 million, or 4%, to $47.6 million in the 2010 three month period, due primarily to
increases in compensation expense of $1.4 million and non-compensation expense of $0.5 million.
Compensation expense increased primarily due to increases in sales incentive compensation of $0.7
million due to the increase in net advertising revenue discussed above and an increase in pension
expense of $0.3 million. As of March 31, 2010 and 2009, we employed 2,172 and 2,218 full and
part-time employees, respectively, in our broadcast operations. Since December 31, 2007, we have
decreased the total number of employees in our broadcast operations by 253 persons, a decrease of
10.4%. Non-compensation related expenses increased primarily due to an increase in sales related
costs of $0.5 million, which were attributable to the increased net advertising revenue discussed
above. The increase in sales related costs were partially offset by a decrease in electricity
expenses due to the discontinuance of our analog broadcasts.
Corporate and Administrative Expenses
Corporate and administrative expenses (before depreciation, amortization and gain on disposal
of assets, net) decreased $1.1 million, or 28%, to $2.9 million. The decrease in corporate and
administrative expenses was due primarily to decreased compensation and legal expenses.
Compensation expense decreased due to a decrease in relocation expenses of $0.4 million and
non-cash stock-based compensation of $0.2 million. We incurred expenses related to the relocation
of several general managers during the 2009 three month period due to routine personnel changes. We
did not have similar expenses in the 2010 three month period. During the 2010 three month period
and the 2009 three month period, we recorded non-cash stock-based compensation expense of $155,000
and $353,000, respectively. We incurred higher legal fees during the 2009 three month period due to
our renegotiation of many of our retransmission consent contracts. These negotiations were largely
completed in 2009 and, as a result, our legal fees decreased $0.3 million in the 2010 three month
period compared to the 2009 three month period.
Depreciation
Depreciation of property and equipment totaled $8.0 million and $8.3 million for the 2010
three month period and the 2009 three month period, respectively. The decrease in depreciation was
the result of reduced capital expenditures in recent years compared to that of prior years.
Gain on Disposal of Assets, net
Gain on disposal of assets, net decreased $1.5 million during the 2010 three month period as
compared to 2009 three month period. The Federal Communications Commission (the FCC) has mandated
that all broadcasters operating microwave facilities on certain frequencies in the 2 GHz band
relocate to other frequencies and upgrade their equipment. The spectrum being vacated by
broadcasters has been reallocated to third parties who, as part of the overall FCC-mandated
spectrum reallocation project, must provide affected broadcasters with new digital microwave
replacement equipment at no cost to the broadcaster and also reimburse them for certain associated
out-of-pocket expenses. During the three month periods ended March 31, 2010 and 2009, we recognized
gains of $0.1 million and $1.6 million, respectively, on the disposal of assets associated with
this spectrum reallocation project.
Interest Expense
Interest expense increased $9.5 million, or 94%, to $19.6 million for the 2010 three month
period compared to the 2009 three month period. This increase was attributable to an increase in
average interest rates, partially offset by a decrease in average principal outstanding. Average
interest rates have increased due to our amendment of our senior credit facility on March 31, 2009.
This
39
amendment included an increase in annual interest rates from the London Interbank Offered Rate
(LIBOR) plus 1.5% to LIBOR plus 6.5%. Our debt balance decreased as a result of scheduled
quarterly principal repayments. Our average outstanding debt balance was $791.1 million and $799.7
million during the 2010 three month period and the 2009 three month period, respectively. The
average interest rates on our total outstanding debt balances was 9.8% and 4.9% during the 2010
three month period and the 2009 three month period, respectively. These interest rates include the
effects of our interest rate swap agreements.
Loss from Early Extinguishment of Debt
On March 31, 2010, we amended our senior credit facility. In order to obtain this amendment,
we incurred loan issuance costs of approximately $4.4 million, including legal and professional
fees. These fees were funded from our cash balances. In connection with this transaction, we
reported a loss from early extinguishment of debt of $0.3 million in the 2010 three month period.
Also, on March 31, 2009, we amended our senior credit facility. In order to obtain this amendment,
we incurred loan issuance costs of approximately $7.5 million, including legal and professional
fees. These fees were also funded from our cash balances. In connection with this transaction, we
reported a loss on early extinguishment of debt of $8.4 million in the 2009 three month period.
Income Tax Benefit
For the three month periods ended March 31, 2010 and 2009, our effective tax rates were 40.6%
and 34.8%, respectively. Our effective tax rates differ from the statutory tax rate due to the
impact of the following items:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Statutory federal income tax rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
State income taxes |
|
|
6.0 |
% |
|
|
0.9 |
% |
Reserve for uncertain tax positions |
|
|
(4.2 |
)% |
|
|
1.0 |
% |
Adjustments to valuation allowance of deferred tax assets |
|
|
2.2 |
% |
|
|
(1.6 |
)% |
Other |
|
|
1.6 |
% |
|
|
(0.5 |
)% |
|
|
|
|
|
|
|
Effective income tax rate |
|
|
40.6 |
% |
|
|
34.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit |
|
$ |
(3,238 |
) |
|
$ |
(4,767 |
) |
Year ended December 31, 2009 Compared to Year Ended December 31, 2008
Revenue
Total revenues decreased $56.8 million, or 17%, to $270.4 million due primarily to decreased
local, national, political and internet advertising revenue, decreased network compensation revenue
and decreased production and other revenue. These decreases were partially offset by increased
retransmission consent revenue and consulting revenue in the year ended December 31, 2009.
Retransmission consent revenue increased $12.6 million, or 414%, to $15.6 million reflecting the
more profitable terms of our current contracts that we finalized earlier in 2009. Consulting
revenue increased to $0.9 million for the year ended December 31, 2009 due to revenue from an
agreement with Young Broadcasting, Inc. that was effective August 10, 2009. Local advertising
revenues, excluding political advertising revenues, decreased $15.7 million, or 8%, to $170.8
million. National advertising revenues, excluding political advertising revenues, decreased $14.5
million, or 21%, to $53.9 million. The decrease in local and national advertising revenue was due
to reduced spending by advertisers in the continued recessionary economic environment. Our
automotive advertising revenue decreased approximately 31% compared to the prior year. In addition,
during the year ended December 31, 2008, we earned a total of $3.4 million of net revenue from
local and national advertisers during the broadcast of the 2008 Summer Olympics on our ten NBC
stations. There were no Olympic Game broadcasts during 2009. The negative effects of the recession
were partially offset by increased advertising during the 2009 Super Bowl. Net advertising revenue
associated with the broadcast of the 2009 Super Bowl on our ten NBC affiliated stations
approximated $750,000, which was an increase from the approximate $130,000 of Super Bowl revenue
earned in 2008 on our then six Fox affiliated channels. Political advertising revenues decreased
$38.5 million, or 79%, to $10.0 million reflecting reduced advertising from political candidates
during the off year of the two-year political advertising cycle. However, we did recognize
political advertising revenue in the three months ended December 31, 2009 related to increased
spending on the national healthcare debate.
40
Broadcast expenses
Broadcast expenses (before depreciation, amortization, impairment expense and gain on disposal
of assets) decreased $12.0 million, or 6%, to $187.6 million due primarily to a reduction in
compensation expense of $3.4 million, professional service expense of $2.2 million, facility fees
of $1.1 million, bad debt expense of $0.9 million and syndicated programming expense of $1.1
million. Compensation expenses included payroll and benefit expenses. Payroll expense decreased
primarily due to a reduction in the number of employees and reduced commissions. As of December 31,
2009 and 2008, we employed 2,184 and 2,253 total employees in our broadcast operations which
included full-time and part-time employees. This reduction in total employees is a decrease of 3.1%
or 69 total employees. Since December 31, 2007, we have reduced our total number of employees by
241, or 9.9%. Our reduction in payroll expense resulting from the reduced number of employees was
partially offset by an increase in pension expense of $1.9 million. Pension expense increased due
to the use of a lower discount rate in 2009 compared to the discount rate used to calculate the
2008 pension expense and due to the performance of our pension plans assets in 2009 and 2008.
Professional service expense decreased primarily due to lower national representation fees, which
are paid based upon a percentage of our national and political revenue, both of which decreased as
discussed above. Facility fees decreased primarily due to lower electricity expense resulting from
the discontinuance of our analog broadcasts. Bad debt expense improved due to an improvement in the
average age of our accounts receivable balances. Syndicated programming expense decreased primarily
due to a lower impairment expense in the current year compared to the prior year. We recorded
impairment expenses related to our syndicated television programming during the years ended
December 31, 2009 and 2008 of $0.2 million and $0.6 million, respectively.
Corporate and administrative expenses
Corporate and administrative expenses (before depreciation, amortization, impairment and
(gain) loss on disposal of assets) increased $0.1 million, or 1%, to $14.2 million during the year
ended December 31, 2009. The increase was due primarily to an increase in pension expense of $0.2
million, an increase in relocation expense of $0.2 million and an increase in legal expense of $0.5
million. These increases were partially offset by a decrease in market research expense of $0.6
million and severance expense of $0.1 million. We currently believe the relocation cost incurred in
2009 will not recur in future years to the same extent as 2009. Also, approximately $0.4 million of
the increased legal costs were attributable to the negotiation and documentation of our new
retransmission consent agreements, and such costs are currently not anticipated to recur in future
periods to the same extent. Corporate and administrative expenses included non-cash stock-based
compensation expense during the years ended 2009 and 2008 of $1.4 million and $1.5 million,
respectively.
Depreciation
Depreciation of property and equipment totaled $32.6 million and $34.6 million for 2009 and
2008, respectively. The decrease in depreciation was the result of reduced capital expenditures in
recent years compared to that of prior years. As a result, more assets acquired in prior years have
become fully depreciated than were purchased in recent years.
Amortization of intangible assets
Amortization of intangible assets was $0.6 million for 2009 as compared to $0.8 million for
2008. Amortization expense decreased in the current year compared to that of the prior year as a
result of certain assets becoming fully amortized in the current year.
Impairment of goodwill and broadcast licenses
As of December 31, 2009, we evaluated the recorded value of our goodwill and broadcast
licenses for potential impairment and concluded that they were reasonably stated. As a result, we
did not record an impairment expense for 2009. As of December 31, 2008, we recorded a non-cash
impairment expense of $338.7 million resulting from a write-down of $98.6 million in the carrying
value of our goodwill and a write down of $240.1 million in the carrying value of our broadcast
licenses. The write-down of our goodwill and broadcast licenses related to seven stations and 23
stations, respectively. As of this testing date, we believed events had occurred and circumstances
changed that more likely than not reduce the fair value of our broadcast licenses and goodwill
below their carrying amounts. These events, which accelerated in the fourth quarter of 2008,
included: (i) the continued decline of the price of our common stock and Class A common stock; (ii)
the decline in the current selling prices of television stations; (iii) the decline in local and
national advertising revenues excluding political advertising revenue; and (iv) the decline in the
operating profit margins of some of our stations.
41
Gain or loss on disposal of assets
Gain on disposal of assets increased $6.0 million, or 367%, to $7.6 million during 2009 as
compared to 2008. The FCC has mandated that all broadcasters operating microwave facilities on
certain frequencies in the 2 GHz band relocate to other frequencies and upgrade their equipment.
The spectrum being vacated by these broadcasters has been reallocated to third parties who, as part
of the overall FCC-mandated spectrum reallocation project, must provide affected broadcasters with
new digital microwave replacement equipment at no cost to the broadcaster and also reimburse those
broadcasters for certain associated out-of-pocket expenses. During 2009 and 2008, we recognized
gains of $9.2 million and $2.2 million, respectively, on the disposal of equipment associated with
the spectrum reallocation project. The gains from the spectrum reallocation project were partially
offset by losses on disposals of equipment in the ordinary course of business.
Interest expense
Interest expense increased $15.0 million, or 28%, to $69.1 million for 2009 compared to 2008.
This increase is due to the net effect of higher average interest rates and lower principal
balances in 2009 compared to 2008. The average interest rates were 8.4% and 5.9% for 2009 and 2008,
respectively. The total average principal balance was $796.4 million and $868.3 million for 2009
and 2008, respectively. These average interest rates and average principal balances are for the
respective period and not the respective ending balance sheet dates. The average interest rates
include the effects of our interest rate swap agreements.
Loss from early extinguishment of debt
On March 31, 2009, we amended our senior credit facility. To obtain this amendment, we
incurred loan issuance costs of approximately $7.4 million, including legal and professional fees.
These fees were funded from our existing cash balances. In connection with this transaction, we
reported a loss on early extinguishment of debt of $8.4 million for 2009. There was no comparable
loss in 2008.
Income tax expense or benefit
The effective tax rate decreased to 32.8% for 2009 from 35.5% for 2008. The effective tax
rates differ from the statutory rate due to the following items:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2009 |
|
2008 |
Statutory federal income tax rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
State income taxes |
|
|
2.6 |
% |
|
|
3.7 |
% |
Change in valuation allowance |
|
|
(4.5 |
)% |
|
|
0.1 |
% |
Reserve for uncertain tax positions |
|
|
1.1 |
% |
|
|
(0.2 |
)% |
Goodwill impairment |
|
|
0.0 |
% |
|
|
(3.0 |
)% |
Other |
|
|
(1.4 |
)% |
|
|
(0.1 |
)% |
|
|
|
|
|
|
|
|
|
Effective income tax rate |
|
|
32.8 |
% |
|
|
35.5 |
% |
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
Revenue
Total revenues increased $19.9 million, or 6%, to $327.2 million reflecting increased cyclical
political advertising revenues. Political advertising revenues increased $40.7 million, or 521%, to
$48.5 million reflecting the cyclical influence of the 2008 elections. Local advertising revenues,
excluding political advertising revenues, decreased $14.2 million, or 7%, to $186.5 million.
National advertising revenues, excluding political advertising revenues, decreased $9.0 million, or
12%, to $68.4 million. Internet advertising revenues, excluding political advertising revenues,
increased $2.4 million, or 25%, to $11.9 million reflecting increased website traffic and internet
sales initiatives in each of our markets. The increase in political advertising revenue reflects
increased advertising from political candidates in the 2008 primary and general elections. Spending
on political advertising was the strongest at our stations in Colorado, West Virginia, Wisconsin,
Michigan and North Carolina, accounting for a significant portion of the total political net
revenue for 2008. The decrease in local and national revenue was largely due to the general
weakness in the economy and due to the change in networks broadcasting the Super Bowl. During 2008,
we earned approximately $130,000 of net revenue relating to the 2008 Super Bowl broadcast on our
six FOX channels compared to approximately $750,000 of net revenue relating to the 2007 Super Bowl
broadcast on our 17 CBS channels during 2007. The decrease in local and national revenue was offset
in part by $3.4 million of net revenue earned during 2008 attributable to the broadcast of the 2008
Summer Olympics on our ten NBC stations.
42
Broadcast expenses
Broadcast expenses (before depreciation, amortization, impairment expense and (gain) loss on
disposal of assets) decreased $0.1 million, or approximately 0%, to $199.6 million. This modest
decrease primarily reflected the impact of increased national sales representative commissions on
the incremental political advertising revenues and increased syndicated programming expenses offset
partially by decreases in payroll and other operating expenses. We recorded an impairment expense
related to our syndicated television programming of $0.6 million in 2008. Employee payroll and
related expenses decreased due to a reduction in our number of employees in 2008 compared to 2007.
As of December 31, 2008 and 2007, we employed 2,253 and 2,425 total employees in our broadcast
operations, which included full-time and part-time employees. This reduction in total employees was
a decrease of 7.1% or 172 total employees.
Corporate and administrative expenses
Corporate and administrative expenses (before depreciation, amortization, impairment and
(gain) loss on disposal of assets) decreased $1.0 million, or 7%, to $14.1 million. During 2008,
corporate payroll expenses decreased by $950,000 compared to 2007, due primarily to a decrease in
incentive-based compensation. Corporate and administrative expenses included non-cash stock-based
compensation expense during the years ended 2008 and 2007 of $1.5 million and $1.2 million,
respectively.
Depreciation
Depreciation of property and equipment totaled $34.6 million and $38.6 million for 2008 and
2007, respectively. The decrease in depreciation was the result of a large proportion of our
stations equipment, which was acquired in 2002, becoming fully depreciated.
Amortization of intangible assets
Amortization of intangible assets was $0.8 million for each of 2008 and 2007. Amortization
expense remained consistent to that of the prior year as a result of no acquisitions or disposals
of definite-lived intangible assets in 2008.
Impairment of goodwill and broadcast licenses
During 2008, we recorded a non-cash impairment expense of $338.7 million resulting from a
write-down of $98.6 million in the carrying value of our goodwill and a write down of $240.1
million in the carrying value of our broadcast licenses. The write-down of our goodwill and
broadcast licenses related to seven stations and 23 stations, respectively. We tested our
unamortized intangible assets for impairment at December 31, 2008. As of the testing date, we
believe events had occurred and circumstances changed that more likely than not reduce the fair
value of our broadcast licenses and goodwill below their carrying amounts. These events, which
accelerated in the fourth quarter of 2008, included: (i) the continued decline of the price of our
common stock and Class A common stock; (ii) the decline in the current selling prices of television
stations; (iii) the decline in local and national advertising revenues excluding political
advertising revenue; and (iv) the decline in the operating profit margins of some of our stations.
Interest expense
Interest expense decreased $13.1 million, or 20%, to $54.1 million for 2008 compared to 2007.
This decrease was primarily attributable to lower average principal balances in 2008 compared to
2007 and lower average interest rates. The total average principal balance was $868.3 million and
$913.0 million for 2008 and 2007, respectively. The average interest rates were 5.9% and 7.1% for
2008 and 2007, respectively. These average principal balances and interest rates were for the
respective period and not the respective ending balance sheet dates. The average interest rates
include the effects of our interest rate swap agreements.
Loss on Early Extinguishment of Debt
In 2007, we replaced our former senior credit facility with a new senior credit facility and
redeemed our 9.25% Notes. As a result of these transactions, we recorded a loss on early
extinguishment of debt of $6.5 million related to the senior credit facility and $16.4 million
related to the redemption of the 9.25% Notes. The loss related to the redemption of the 9.25% Notes
included $11.8 million in premiums, the write-off of $4.0 million in deferred financing costs and
$614,000 in unamortized bond discount.
43
Income tax expense or benefit
The effective tax rate increased to 35.5% for 2008 from 35.1% for 2007. The effective tax
rates differ from the statutory rate due to the following items:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2008 |
|
2007 |
Statutory federal income tax rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
State income taxes |
|
|
3.7 |
% |
|
|
4.1 |
% |
Change in valuation allowance |
|
|
0.1 |
% |
|
|
(1.2 |
)% |
Reserve for uncertain tax positions |
|
|
(0.2 |
)% |
|
|
(2.8 |
)% |
Goodwill impairment |
|
|
(3.0 |
)% |
|
|
0.0 |
% |
Other |
|
|
(0.1 |
)% |
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
Effective income tax rate |
|
|
35.5 |
% |
|
|
35.1 |
% |
|
|
|
|
|
|
|
|
|
Liquidity and Capital Resources
General
The following table presents data that we believe is helpful in evaluating our liquidity and
capital resources (in thousands).
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Net cash provided by (used in) operating activities |
|
$ |
6,986 |
|
|
$ |
(1,296 |
) |
Net cash used in investing activities |
|
|
(3,185 |
) |
|
|
(5,469 |
) |
Net cash used in financing activities |
|
|
(6,137 |
) |
|
|
(9,027 |
) |
|
|
|
|
|
|
|
Decrease in cash |
|
$ |
(2,336 |
) |
|
$ |
(15,792 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
March 31, |
|
December 31, |
|
|
2010 |
|
2009 |
Cash |
|
$ |
13,664 |
|
|
$ |
16,000 |
|
Long-term debt including current portion |
|
$ |
789,789 |
|
|
$ |
791,809 |
|
Long-term accrued facility fee |
|
$ |
24,245 |
|
|
$ |
18,307 |
|
Preferred stock, excluding unamortized original issue discount |
|
$ |
93,687 |
|
|
$ |
93,386 |
|
Borrowing availability under our senior credit facility |
|
$ |
40,000 |
|
|
$ |
31,681 |
|
|
|
|
|
|
|
|
|
|
Leverage ratio as defined under our senior credit facility: |
|
|
|
|
|
|
|
|
Actual |
|
|
8.43 |
|
|
|
8.42 |
|
Maximum allowed |
|
|
9.00 |
|
|
|
8.75 |
|
Senior Credit Facility
The amount outstanding under our senior credit facility as of March 31, 2010 and December 31,
2009 was $789.8 million and $791.8 million, respectively, consisting solely of the term loan. In
addition, we had a liability resulting from the long-term accrued facility fee under our term loan
of $24.2 million and $18.3 million as of March 31, 2010 and December 31, 2009, respectively. This
long term accrued facility fee is not due and payable until December 31, 2014 coincident with the
maturity date of our term loan. Under the revolving loan portion of our senior credit facility, the
maximum borrowing availability, subject to covenant restrictions, was $40.0 million and $50.0
million as of March 31, 2010 and December 31, 2009, respectively. The amount that we can draw under
our revolving loan is further limited by the restrictive covenants in our senior credit facility.
As of March 31, 2010 and December 31, 2009, we could have drawn $40.0 million and $31.7 million,
respectively, of the maximum availability under the revolving loan.
Amendment of Senior Credit Facility
Effective as of March 31, 2010, we amended our existing senior credit facility (the 2010
amendment) to provide for, among other things: (i) an increase in the maximum total net leverage
ratio covenant under the senior credit facility through March 30, 2011
and (ii) a potential issuance of capital stock and/or senior or subordinated debt securities,
which could include securities with a second
44
lien security interest (the Replacement Debt). The
2010 amendment to the senior credit facility also reduced the revolving loan commitment under the
senior credit facility from $50.0 million to $40.0 million.
Pursuant to the 2010 amendment, from March 31, 2010 until we completed an offering of
Replacement Debt and repaid not less than $200.0 million of our term loan outstanding under the
senior credit facility using the proceeds from that offering: (i) we were required to pay an annual
incentive fee equal to 2.0%, which fee would be eliminated upon the consummation of such offering
and repayment, (ii) the then-existing annual facility fee remained at 3.0%, but would, following
such repayment, be reduced to 1.25% per year, with a potential for further reductions in future
periods, and (iii) we remained subject to the then-existing maximum total net leverage ratio, but,
following such repayment, that ratio was replaced by a first lien leverage test, as described in
the following paragraph. In addition, from and after such repayment, we would be required to comply
with a minimum fixed charge coverage ratio of 0.90x to 1.0x.
The 2010 amendment also provided that upon the completion of an offering of Replacement Debt
that resulted in the repayment of not less than $200.0 million of our term loan outstanding under
the senior credit facility, we would, from the date of such repayment, be subject to a maximum
first lien leverage ratio covenant, which would replace our maximum total leverage ratio covenant.
The leverage ratio covenant would range from 7.5x to 6.5x, depending upon the amount of any such
repayment.
As of March 31, 2010, we were in compliance with all applicable covenants under our senior
credit facility.
The original notes, issued on April 29, 2010 and guaranteed by all of our subsidiaries,
constituted Replacement Debt under the senior credit facility. We used a portion of the net
proceeds from the sale of the Notes to repay $300.0 million in principal amount of term loans
outstanding under our senior credit facility, to repay interest thereon and to repay certain fees
due thereunder. As a result of the completion of the offering of Notes and the related repayment of
term loans, Gray is, from and after April 29, 2010, subject to and required to comply with the
terms and conditions of its senior credit facility as set out under the heading As Amended and
After Issuance of Original Notes and Related Repayment of the Term Loan in the table below.
The original notes were priced at 98.085% of par, resulting in gross proceeds to the Company
of $358.0 million. The original notes mature on June 29, 2015. Interest accrues on the original
notes from April 29, 2010, and interest is payable semi-annually, on May 1 and November 1 of each
year commencing November 1, 2010. We may redeem some or all of the original notes at any time after
November 1, 2012 at specified redemption prices. We may also redeem up to 35% of the aggregate
principal amount of the original notes using the proceeds from certain equity offerings completed
before November 1, 2012. In addition, we may redeem some or all of the original notes at any time
prior to November 1, 2012 at a price equal to 100% of the principal amount thereof plus a make
whole premium, and accrued and unpaid interest. If we sell certain of our assets or experience
specific kinds of changes of control, we must offer to repurchase the original notes.
The original notes and the guarantees thereof are secured by a second priority lien on
substantially all of the assets owned by Gray and its subsidiary guarantors, including, among other
things, all present and future shares of capital stock, equipment, owned real property, leaseholds
and fixtures, in each case subject to certain exceptions and customary permitted liens (the
Original Notes Collateral). The Original Notes Collateral also secures obligations under the
Companys senior credit facility on a first priority basis, subject to certain exceptions and
permitted liens.
A summary of certain significant terms contained in our senior credit facility (i) before the
March 31, 2010 amendment, (ii) as so amended, and (iii) as amended and after giving effect to the
issuance of original notes and related repayment of $300.0 million in principal amount of term
loans outstanding under the senior credit facility is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Amended and |
|
|
|
|
|
|
|
|
Prior to Issuance |
|
As Amended and |
|
|
|
|
|
|
of Original Notes and |
|
After Issuance of |
|
|
|
|
|
|
Related |
|
Original Notes and Related |
|
|
Prior to Amendment |
|
Repayment of the |
|
Repayment of the |
Description |
|
on March 31, 2010 |
|
Term Loan |
|
Term Loan |
Annual interest rate on outstanding
term loan balance
|
|
LIBOR plus
3.50%
or BASE plus 2.50%
|
|
Same
|
|
Same |
|
|
|
|
|
|
|
|
|
|
|
Annual interest rate on outstanding
revolving loan balance
|
|
LIBOR plus 3.50%
or BASE plus 2.50%
|
|
Same
|
|
Same |
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Amended and |
|
|
|
|
|
|
|
|
Prior to Issuance |
|
As Amended and |
|
|
|
|
|
|
of Original Notes and |
|
After Issuance of |
|
|
|
|
|
|
Related |
|
Original Notes and Related |
|
|
Prior to Amendment |
|
Repayment of the |
|
Repayment of the |
Description |
|
on March 31, 2010 |
|
Term Loan |
|
Term Loan |
Annual facility fee rate
|
|
3.00% with
a potential for
reduction in
future periods.
|
|
3.00% with
a potential for
reduction in
future periods.
|
|
0.75% with
a potential for
reduction in
future periods. |
|
|
|
|
|
|
|
|
|
|
|
Annual incentive fee rate
|
|
None
|
|
|
2.00 |
% |
|
None |
|
|
|
|
|
|
|
|
|
|
|
Annual commitment fee on undrawn
revolving loan balance
|
|
|
0.50 |
% |
|
Same
|
|
Same |
|
|
|
|
|
|
|
|
|
|
|
Revolving loan commitment
|
|
$50 million
|
|
$40 million
|
|
$40 million |
|
|
|
|
|
|
|
|
|
|
|
Maximum total net leverage ratio at: |
|
|
|
|
|
|
|
|
|
|
March 31, 2010 through
June 29, 2010
|
|
|
7.00x |
|
|
|
9.00x |
|
|
Replaced with a first lien
leverage test as described above. |
June 30, 2010 through
September 29, 2010
|
|
|
6.50x |
|
|
|
9.50x |
|
|
|
|
September 30, 2010 through
March 30, 2011
|
|
|
6.50x |
|
|
|
9.75x |
|
|
|
|
March 31, 2011 and thereafter
|
|
|
6.50x |
|
|
|
6.50x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum fixed charge coverage ratio
|
|
None
|
|
Same
|
|
0.90x to 1.00x |
|
|
|
|
|
|
|
|
|
|
|
Maximum cash balance that can be
deducted from total debt to calculate
net debt in the total net leverage
ratio (or first lien leverage test, as
applicable)
|
|
$10.0 million
|
|
Same
|
|
$15.0 million |
Beginning April 30, 2010 and thereafter, all interest and fees accrued under the senior credit
facility are payable in cash upon their respective due dates, with no portion of such accrued
interest and fees being subject to deferral.
In order to obtain the foregoing amendment, we incurred loan issuance costs of approximately
$4.4 million, including legal and professional fees. We recorded a loss from early extinguishment
of debt of $0.3 million for the three month period ended March 31, 2010. As of March 31, 2010, we
had a deferred loan cost balance of $5.6 million.
As a result of the completion of the 2010 amendment and the issuance of the original notes and
application of the proceeds thereof, we reduced the total interest cost of borrowings under our
senior credit facility from an effective interest rate of LIBOR plus 8.50% to an effective interest
rate of LIBOR plus 4.25% as of April 29, 2010.
Series D Perpetual Preferred Stock
As of March 31, 2010 and December 31, 2009, we had 1,000 shares of Series D Perpetual
Preferred Stock outstanding. The Series D Perpetual Preferred Stock has a liquidation value of
$100,000 per share for a total liquidation value of $100.0 million as of March 31, 2010 and
December 31, 2009. Our accrued Series D Perpetual Preferred Stock dividend balances as of March 31,
2010 and December 31, 2009 were $23.2 million and $18.9 million, respectively.
We have deferred the cash payment of our preferred stock dividends earned thereon since
October 1, 2008. When three consecutive cash dividend payments with respect to the Series D
Perpetual Preferred Stock remain unfunded, the dividend rate increases from 15.0% per annum to
17.0% per annum. Thus, our Series D Perpetual Preferred Stock dividend began accruing at 17.0% per
annum on July 16, 2009 and will accrue at that rate as long as at least three consecutive cash
dividend payments remain unfunded.
In connection with the offering of the original notes, on April 29, 2010, we repurchased
approximately $60.7 million in face amount of our Series D Perpetual Preferred Stock, and $14.9
million in accrued dividends thereon, in exchange for $50.0 million in cash, using a portion of the
net proceeds from the sale of original notes, and the issuance of 8.5 million shares of common
stock. As a result of the completion of this exchange, the liquidation value of outstanding Series
D Perpetual Preferred Stock was reduced to $39.3 million, and the accrued dividends thereon were
reduced to $9.6 million, each as of April 29, 2010.
46
While any Series D Perpetual Preferred Stock dividend payments are in arrears, we are
prohibited from repurchasing, declaring and/or paying any cash dividend with respect to any equity
securities having liquidation preferences equivalent to or junior in ranking to the liquidation
preferences of the Series D Perpetual Preferred Stock, including our common stock and Class A
common stock. We can provide no assurances as to when any future cash payments will be made on any
accumulated and unpaid Series D Perpetual Preferred Stock cash dividends presently in arrears or
that become in arrears in the future. The Series D Perpetual Preferred Stock has no mandatory
redemption date but may be redeemed at the stockholders option on or after June 30, 2015.
Income Taxes
We file a consolidated federal income tax return and such state or local tax returns as are
required. Although we may earn taxable operating income in future years, as of December 31, 2009,
we anticipate that through the use of our available loss carryforwards we will not pay significant
amounts of federal income taxes in the next several years. However, we estimate that we will pay
state income taxes in certain states over the next several years.
Net Cash Provided By (Used In) Operating, Investing and Financing Activities
Net cash provided by operating activities was $7.0 million in the 2010 three month period
compared to net cash used in operating activities of $1.3 million in the 2009 three month period.
The increase in cash provided by operations is due primarily to increased revenue.
Net cash provided by operating activities decreased $54.8 million to $18.9 million for 2009
compared to net cash provided of $73.7 million for 2008. The decrease in cash provided by
operations was due primarily to several factors, including: (i) a decrease in revenues of $56.8
million and (ii) a decrease from a net change in current operating assets and liabilities of $10.9
million partially offset by a decrease in broadcast expenses of $12.0 million.
Net cash used in investing activities was $3.2 million in the 2010 three month period compared
to net cash used in investing activities of $5.5 million for the 2009 three month period. The
decrease in cash used in investing activities was largely due to decreased spending for equipment.
Net cash used in investing activities increased $1.2 million to $17.5 million for 2009
compared to $16.3 million for 2008. The increase in cash used in investing activities was largely
due to increases in capital expenditures for 2009 of $2.8 million.
Net cash used in financing activities was $6.1 million in the 2010 three month period compared
to net cash used in financing activities of $9.0 million in the 2009 three month period. This
decrease in cash used was due primarily to decreased payments for the amendment of our senior
credit facility in the 2010 three month period compared to the 2009 three month period.
Net cash used in financing activities decreased $26.0 million to $16.0 million for 2009
compared to $42.0 million for 2008. In 2008, we issued our Series D perpetual preferred stock and
used the proceeds of that issuance along with cash generated from operations to repay a portion of
our long-term debt balance. Also, we paid $8.8 million of dividends in 2008. During 2009, we repaid
$8.6 million of our long-term debt balance, paid $7.5 million in fees associated with our long-term
debt refinancing and suspended the payment of all dividends.
Capital Expenditures
Capital expenditures in the 2010 and 2009 three month periods were $2.9 million and $5.2
million, respectively. The 2009 three month period included, in part, capital expenditures relating
to the conversion of analog broadcasts to digital broadcasts upon the final cessation of analog
transmissions, while the 2010 three month period did not contain as many comparable projects. We
anticipate that our capital expenditures for the remainder of 2010 will be $12.1 million.
Capital expenditures for the years ended December 31, 2009 and 2008 were $17.8 million and
$15.0 million, respectively. The year ended December 31, 2009 included, in part, capital
expenditures relating to the conversion of analog broadcasts to digital broadcasts upon the final
cessation of analog transmissions, while the year ended December 31, 2008 did not contain
comparable projects. Our senior credit facility limits our capital expenditures to not more than
$15.0 million for the year ending December 31 2010. We expect to fund future capital expenditures
with cash from operations and borrowings under our senior credit facility.
Other
47
We file a consolidated federal income tax return and such state or local tax returns as are
required. Although we may earn taxable operating income in future years, as of March 31, 2010, we
anticipate that through the use of our available loss carryforwards we will not pay significant
amounts of federal or state income taxes for the next several years.
We do not believe that inflation has had a significant impact on our results of operations nor
do we expect it to have a significant effect upon our business in the near future.
We are a holding company with no material independent assets or operations, other than our
investment in our subsidiaries. The aggregate assets, liabilities, earnings and equity of the
subsidiary guarantors (as defined in and for purposes of our senior credit facility) are
substantially equivalent to our assets, liabilities, earnings and equity on a consolidated basis.
The subsidiary guarantors are, directly or indirectly, our wholly owned subsidiaries and the
guarantees of the subsidiary guarantors are full, unconditional and joint and several. All of our
current and future direct and indirect subsidiaries are subsidiary guarantors. Accordingly,
separate financial statements and other disclosures of each of the subsidiary guarantors are not
presented because we have no independent assets or operations, the guarantees are full and
unconditional and joint and several.
Retirement Plan
We have three defined benefit pension plans. Two of these plans were assumed by us as a result
of our acquisitions and are frozen plans. Our active defined benefit pension plan, which we
consider to be our primary pension plan, covers substantially all our full-time employees.
Retirement benefits under such plan are based on years of service and the employees highest
average compensation for five consecutive years during the last ten years of employment. Our
funding policy is consistent with the funding requirements of existing federal laws and regulations
under the Employee Retirement Income Security Act of 1974.
A discount rate is selected annually to measure the present value of the benefit obligations.
In determining the selection of a discount rate, we estimated the timing and amounts of expected
future benefit payments and applied a yield curve developed to reflect yields available on
high-quality bonds. The yield curve is based on an externally published index specifically designed
to meet the criteria of GAAP. The discount rate selected for determining benefit obligations as of
December 31, 2009 was 6.27% which reflects the results of this yield curve analysis. The discount
rate used for determining benefit obligations as of December 31, 2008 was 5.79%. Our assumption
regarding expected return on plan assets reflects asset allocations, investment strategy and the
views of investment managers, as well as historical experience. We use an assumed return of 7.00%
for our assets invested in our active pension plan. Actual asset returns for this plan increased in
value 14.85% in 2009 and decreased in value 25.28% in 2008. Other significant assumptions include
inflation, salary growth, retirement rates and mortality rates. Our inflation assumption is based
on an evaluation of external market indicators. The salary growth assumptions reflect our long-term
actual experience, the near-term outlook and assumed inflation. Compensation increases over the
latest five-year period have been in line with assumptions. Retirement and mortality rates are
based on actual plan experience.
During the 2010 three month period, we contributed $1.5 million to our pension plans. During
the remainder of fiscal 2010, we expect to contribute an additional $2.5 million to our pension
plans.
During 2009 and 2008, we contributed $3.5 million and $2.9 million, respectively, to all three
of our pension plans.
Off-Balance Sheet Arrangements
Operating Commitments
We have various operating lease commitments for equipment, land and office space. We also have
commitments for various syndicated television programs.
We have two types of syndicated television program contracts: first run programs and off
network reruns. The first run programs are programs such as Oprah and the off network programs are
programs such as Friends. A difference between the two types of syndicated television programming
is that the first run programs have not been produced at the time the contract is signed and the
off network programs have been produced. For all syndicated television contracts we record an asset
and corresponding liability for payments to be made for the entire off network contract period
and for only the current year of the first run contract period. Only the payments in the current
year of the first run contracts are recorded on the current balance sheet, because the programs
for the later years of the contract period have not been produced and delivered.
Obligation to UK
48
On October 12, 2004, the University of Kentucky (UK) awarded a sports marketing agreement
jointly to a subsidiary of IMG Worldwide, Inc. (IMG) and us (the UK Agreement). The UK
Agreement commenced on April 16, 2005 and has an initial term of seven years, with the option to
extend for three additional years.
On July 1, 2006, the terms of the agreement between IMG and us were amended and restated. The
amended and restated agreement provides that we will share in profits in excess of certain amounts
specified by the agreement, if any, but not losses. The agreement also provides that we will
separately retain all local broadcast advertising revenue and pay all local broadcast expenses for
activities under the agreement. Under the amended and restated agreement, IMG agreed to make all
license fee payments to UK. However, if IMG is unable to pay the license fee to UK, we will then
pay the unpaid portion of the license fee to UK. As of March 31, 2010, the aggregate license fees
to be paid by IMG to UK over the remaining portion of the full ten-year term (including the
optional three year extension) of the agreement is approximately $45.4 million. If we make advances
on behalf of IMG, IMG will then reimburse us for the amount paid within 60 days after the close of
each contract year which ends on June 30th. IMG has also agreed to pay interest on any advance at a
rate equal to the prime rate. During the three months ended March 31, 2010, and the years ended
December 31, 2009 and 2008, we did not advance any amounts to UK on behalf of IMG under this
agreement. As of March 31, 2010, we do not consider the risk of non-performance by IMG to be high.
Tabular Disclosure of Contractual Obligations as of December 31, 2009
The following table aggregates our material expected contractual obligations and commitments
as of December 31, 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Due by Period |
|
|
|
|
|
|
|
Less Than |
|
|
|
|
|
|
|
|
|
|
More Than |
|
|
|
|
|
|
|
1 Year |
|
|
1-3 Years |
|
|
3-5 Years |
|
|
5 Years |
|
Contractual Obligations |
|
Total |
|
|
2010 |
|
|
2011-2012 |
|
|
2013-2014 |
|
|
after 2014 |
|
Contractual obligations recorded in our balance
sheet as of December 3l, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt obligations(1) |
|
$ |
791,809 |
|
|
$ |
8,080 |
|
|
$ |
16,160 |
|
|
$ |
767,569 |
|
|
$ |
|
|
Long-term accrued facility fee(2) |
|
|
18,307 |
|
|
|
|
|
|
|
|
|
|
|
18,307 |
|
|
|
|
|
Dividends currently accrued(3) |
|
|
18,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,917 |
|
Programming obligations currently accrued(4) |
|
|
16,802 |
|
|
|
15,271 |
|
|
|
1,241 |
|
|
|
290 |
|
|
|
|
|
Interest rate swap agreements(5) |
|
|
6,344 |
|
|
|
6,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related liabilities(6) |
|
|
1,790 |
|
|
|
863 |
|
|
|
834 |
|
|
|
93 |
|
|
|
|
|
Off-balance sheet arrangements as of December 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash interest on long-term debt obligations(7) |
|
|
261,169 |
|
|
|
53,568 |
|
|
|
104,939 |
|
|
|
102,662 |
|
|
|
|
|
Cash interest on long-term accrued facility fee(8) |
|
|
8,189 |
|
|
|
1,136 |
|
|
|
3,487 |
|
|
|
3,566 |
|
|
|
|
|
Operating lease obligations(9) |
|
|
8,119 |
|
|
|
1,321 |
|
|
|
1,780 |
|
|
|
1,231 |
|
|
|
3,787 |
|
Dividends not currently accrued(10) |
|
|
85,000 |
|
|
|
17,000 |
|
|
|
34,000 |
|
|
|
34,000 |
|
|
unknown |
Purchase obligations not currently accrued(11) |
|
|
832 |
|
|
|
832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming obligations not currently accrued(12) |
|
|
22,304 |
|
|
|
4,502 |
|
|
|
16,526 |
|
|
|
1,257 |
|
|
|
19 |
|
Obligation to UK(13) |
|
|
45,426 |
|
|
|
7,763 |
|
|
|
15,963 |
|
|
|
17,200 |
|
|
|
4,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,285,008 |
|
|
$ |
116,680 |
|
|
$ |
194,930 |
|
|
$ |
946,175 |
|
|
$ |
27,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Long-term debt obligations represent current and all future payment
principal obligations under our senior credit facility. These amounts
are recorded as liabilities as of the current balance sheet date. As
of December 31, 2009, the interest rate on the balance outstanding
under the senior credit facility, excluding effects of interest rate
swap agreements, was 6.8%. |
|
(2) |
|
Long-term accrued facility fee represents a facility fee accrued as
of December 31, 2009 under our senior credit facility at a rate of
3.0% per annum, which is payable in subsequent periods. |
|
(3) |
|
Dividends currently accrued represent Series D perpetual preferred
stock dividends accrued as of December 31, 2009 and payable in
subsequent periods. |
|
(4) |
|
Programming obligations currently accrued represent obligations for
syndicated television programming whose license period has begun and
the product is available. These amounts are recorded as liabilities
as of the current balance sheet date. |
|
(5) |
|
Interest rate swap agreements represent certain contracts that
allow us to fix the interest rate on a portion of our long-term debt
balance. We have estimated obligations associated with these
contracts. Although the fair value of these contracts can fluctuate
significantly based on market interest rates, the amounts in the
table are estimated settlement amounts. These amounts |
49
|
|
|
|
|
are recorded as
liabilities as of the current balance sheet date. |
|
(6) |
|
Acquisition related liabilities represent certain obligations
associated with acquisitions of television stations that were
completed in prior years. These amounts are recorded as liabilities
as of the current balance sheet date. |
|
(7) |
|
Cash interest on long-term debt obligations includes estimated
interest expense on long-term debt obligations based upon the average
debt balances expected in the future and computed using an interest
rate of 6.8%. This was the interest rate on the balance outstanding
under the senior credit facility, excluding the effects of our
interest rate swap agreements, as of December 31, 2009. Our senior
credit facility will mature on December 31, 2014. |
50
|
|
|
(8) |
|
Cash interest on long-term accrued facility fee represents
estimated interest expense on the accrued facility fee obligation
under our senior credit facility. Effective as of March 31, 2009, we
incur a facility fee equal to 3.0% per annum on the outstanding
revolving and term loans thereunder. From March 31, 2009 through
April 30, 2010, this fee accrues and becomes payable on the
respective maturity dates of those loans (March 19, 2014 and December
31, 2014, respectively). From April 30, 2010 until the maturity dates
under the senior credit facility, such accrued amounts bear interest
at 6.5% per year. These interest payments are included in this item
as cash interest on long-term accrued facility fee. From April 30,
2010 until the maturity dates under our senior credit facility, the
fee will be payable in cash on a quarterly basis. This portion of the
fee is included in the estimate of Cash interest on long-term debt
obligations above. |
|
(9) |
|
Operating lease obligations represent payment obligations under
non-cancelable lease agreements classified as operating leases. These
amounts are not recorded as liabilities as of the current balance
sheet date. |
|
(10) |
|
Dividends not currently accrued represent Series D perpetual
preferred stock dividends for future periods and assumes that the
$100 million of Series D perpetual preferred stock remains
outstanding in future periods with a dividend rate of 17%. For the
column headed More than 5 years, after 2014, we cannot estimate a
dividend amount; due to the perpetual nature of our Series D
perpetual preferred stock and its holders having the right to
request that we repurchase such Stock on or after June 30, 2015. |
|
(11) |
|
Purchase obligations not currently accrued generally represent
payment obligations for equipment. It is our policy to accrue for
these obligations when the equipment is received and the vendor has
completed the work required by the purchase agreement. These amounts
are not recorded as liabilities as of the current balance sheet date
because we had not yet received the equipment. |
|
(12) |
|
Programming obligations not currently accrued represent obligations
for syndicated television programming whose license period has not
yet begun or the product is not yet available. These amounts are not
recorded as liabilities as of the current balance sheet date. |
|
(13) |
|
Obligation to UK represents total obligations, excluding any
potential revenues, under the UK Agreement. These amounts are not
recorded as liabilities as of the current balance sheet date. See
Off-Balance Sheet Arrangements immediately preceding this table for
additional information concerning this obligation. |
Estimates of the amount, timing and future funding obligations under our pension plans include
assumptions concerning, among other things, actual and projected market performance of plan assets,
investment yields, statutory requirements and demographic data for pension plan participants.
Pension plan funding estimates are therefore not included in the table above because the timing and
amounts of funding obligations for all future periods cannot be reasonably determined.
51
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires us to make judgments
and estimations that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ materially from those reported amounts. We consider our
accounting policies relating to intangible assets and income taxes to be critical policies that
require judgments or estimations in their application where variances in those judgments or
estimations could make a significant difference to future reported results. Our policies concerning
intangible assets are disclosed below.
Annual Impairment Testing of Broadcast Licenses and Goodwill
Our annual impairment testing of broadcast licenses and goodwill for each individual
television station requires an estimation of the fair value of each broadcast license and the fair
value of the entire television station which we consider a reporting unit. Such estimations
generally rely on analyses of public and private comparative sales data as well as discounted cash
flow analyses that inherently require multiple assumptions relating to the future prospects of each
individual television station including, but not limited to: (i) expected long-term market growth
characteristics, (ii) estimations regarding a stations future expected viewing audience, (iii)
station revenue shares within a market, (iv) future expected operating expenses, (v) costs of
capital and (vi) appropriate discount rates. We believe that the assumptions we utilize in
analyzing potential impairment of broadcast licenses and/or goodwill for each of our television
stations are reasonable individually and in the aggregate. However, these assumptions are highly
subjective and changes in any one assumption, or a combination of assumptions, could produce
significant differences in the calculated outcomes.
To estimate the fair value of our reporting units, we utilize a discounted cash flow model
supported by a market multiple approach. We believe that a discounted cash flow analysis is the
most appropriate methodology to test the recorded value of long-term assets with a demonstrated
long-lived/enduring franchise value. We believe the results of the discounted cash flow and market
multiple approaches provide reasonable estimates of the fair value of our reporting units because
these approaches are based on our actual results and reasonable estimates of future performance,
and also take into consideration a number of other factors deemed relevant by us, including but not
limited to, expected future market revenue growth, market revenue shares and operating profit
margins. We have consistently used these approaches in determining the fair value of our goodwill.
We also consider a market multiple valuation method to corroborate our discounted cash flow
analysis. We believe that this methodology is consistent with the approach that any strategic
market participant would utilize if they were to value one of our television stations.
As of December 31, 2009, the recorded value of our broadcast licenses and goodwill was
approximately $819.0 million and $170.5 million, respectively. As of December 31, 2008, the
recorded value of our broadcast licenses and goodwill was approximately $819.0 million and $170.5
million, respectively.
As of December 31, 2008, we recorded a non-cash impairment expense of $338.7 million resulting
from a write-down of $98.6 million in the recorded value of our goodwill at seven of our stations
and a write-down of $240.1 million in the recorded value of our broadcast licenses at 23 of our
stations. We did not record an impairment expense related to our broadcast licenses or goodwill
during 2009 or 2007. Neither of these asset types are amortized; however, they are both subject to
impairment testing.
Prior to January 1, 2002, acquired broadcast licenses were valued at the date of acquisition
using a residual method. The recorded value of these broadcast licenses as of December 31, 2009 and
2008 was approximately $341.0 million. The impairment charge recorded as of December 31, 2008 for
these broadcast licenses approximated $129.6 million. After December 31, 2001, acquired broadcast
licenses were valued at the date of acquisition using an income method that assumes an initial
hypothetical start-up operation. This change in methodology was due to a change in accounting
requirements. The book value of these broadcast licenses as of December 31, 2009 and 2008 was
approximately $478.0 million. The impairment expense recorded as of December 31, 2008 for these
broadcast licenses approximated $110.5 million. Regardless of whether we initially recorded the
value of our broadcast licenses using the residual or the income method, for purposes of testing
for potential impairment we use the income method to estimate the fair value of our broadcast
licenses.
We test for impairment of broadcast licenses and goodwill on an annual basis on the last day
of each fiscal year. However, we will test for impairment during any reporting period if certain
triggering events occur. The two most recent impairment testing dates were as of December 31, 2009
and 2008. A summary of the significant assumptions used in our impairment analyses of broadcast
licenses and goodwill as of December 31, 2009 and 2008 is presented below. Following the summary of
assumptions is a sensitivity analysis of those assumptions as of December 31, 2009. Our reporting
units, allocations of our broadcast licenses and goodwill and our methodologies were consistent as
of both testing dates.
52
|
|
|
|
|
|
|
|
|
|
|
As of December 31 |
|
|
2009 |
|
2008 |
|
|
(Dollars in millions) |
Pre-tax impairment charge: |
|
|
|
|
|
|
|
|
Broadcast licenses |
|
$ |
|
|
|
$ |
240.1 |
|
Goodwill |
|
$ |
|
|
|
$ |
98.6 |
|
Significant assumptions: |
|
|
|
|
|
|
|
|
Forecast period |
|
10 years |
|
10 years |
Increase or (decrease) in market advertising revenue for projection year compared
to latest historical period(1) |
|
(4.4)% to 8.9% |
|
(15.8)% to (2.3)% |
Positive or (negative) advertising revenue compound growth rate for forecast period |
|
(0.3)% to 3.7% |
|
1.1% to 3.4% |
Operating cash flow margin: |
|
|
|
|
|
|
|
|
Broadcast licenses |
|
8.3% to 50.0% |
|
11.0% to 50.0% |
Goodwill |
|
11.1% to 50.0% |
|
11.5% to 50.0% |
Discount rate: |
|
|
|
|
|
|
|
|
Broadcast licenses |
|
|
9.50 |
% |
|
|
10.50 |
% |
Goodwill |
|
|
10.50 |
% |
|
|
11.50 |
% |
|
|
|
(1) |
|
Depending on whether the first year of the respective projection
period is an even- or odd-numbered year, assumptions relating to
market advertising growth rates can vary significantly from year to
year reflecting the significant cyclical impact of political
advertising in even-numbered years. The fiscal 2009 analysis generally
anticipated an increase in revenues for fiscal 2010. As a result,
overall future projected revenue growth rates thereafter were low
given the high starting point of these projections. Conversely, since
the fiscal 2008 analysis assumed cyclically low revenues for fiscal
2009, the subsequent projected growth rates were higher. |
When estimating the fair value of our broadcast licenses and goodwill, we make assumptions
regarding revenue growth rates, operating cash flow margins and discount rates. These assumptions
require substantial judgment. Although we did not record an impairment charge for the year ended
December 31, 2009, we may have recorded such an adjustment if we had changed certain assumptions.
The following table contains a sensitivity analysis of these assumptions and a hypothetical
impairment charge that would have resulted if our advertising revenue growth rate and our operating
cash flow margin had been revised lower or if our discount rate had been revised higher. We also
provide a hypothetical impairment charge assuming a 5.0% and 10.0% decrease in the fair value of
our broadcast licenses and enterprise values.
|
|
|
|
|
|
|
|
|
|
|
Hypothetical Impairment |
|
|
Charge As of |
|
|
December 31, 2009 |
|
|
Broadcast |
|
|
|
|
License |
|
Goodwill |
|
|
(In millions) |
Hypothetical change: |
|
|
|
|
|
|
|
|
A 100 basis point decrease in advertising revenue growth rate throughout the forecast period |
|
$ |
29.4 |
|
|
$ |
3.9 |
|
A 100 basis point decrease in operating cash flow margin throughout the forecast period |
|
$ |
0.5 |
|
|
$ |
|
|
A 100 basis point increase in the applicable discount rate |
|
$ |
29.9 |
|
|
$ |
4.2 |
|
A 5% reduction in the fair value of broadcast licenses and enterprise values |
|
$ |
1.1 |
|
|
$ |
|
|
A 10% reduction in the fair value of broadcast licenses and enterprise values |
|
$ |
6.8 |
|
|
$ |
2.8 |
|
These hypothetical non-cash impairment charges would not have any direct impact on our
liquidity, senior credit facility covenant compliance or future results of operations. Our
historical operating results may not be indicative of our future operating results. Our future
ten-year discounted cash flow analysis, which fundamentally supports our estimated fair values as
of December 31, 2009, reflected certain assumptions relating to the expected impact of the current
general economic recession and dislocation of the credit markets.
In addition, the change in macroeconomic factors impacting the credit markets caused us to
decrease our assumed discount rate to 9.5% for valuing broadcast licenses and to 10.5% for valuing
goodwill in 2009 as compared to the 10.5% discount rate used to value broadcast licenses and the
11.5% rate used to value goodwill in 2008. The discount rates used in our impairment analysis were
based upon the after-tax rate determined using a weighted-average cost of capital calculation for
media companies. In calculating the discount rates, we considered estimates of the long-term mean
market return, industry beta, corporate borrowing rate, average industry debt to capital ratio,
average industry equity capital ratio, risk free rate and the tax rate. We believe using a discount
rate based on a weighted-average cost of capital calculation for media companies is appropriate
because it would be reflective of rates active participants in the media industry would utilize in
valuing broadcast licenses and/or broadcast enterprises
53
Valuation of Network Affiliation Agreements
We believe that the value of a television station is derived primarily from the attributes of
its broadcast license. These attributes have a significant impact on the audience for network
programming in a local television market compared to the national viewing patterns of the same
network programming.
Certain other broadcasting companies have valued network affiliations on the basis that it is
the affiliation and not the other attributes of the station, including its broadcast license, that
contributes to the operational performance of that station. As a result, we believe that these
broadcasting companies allocate a significant portion of the purchase price for any station that
they may acquire to the network affiliation relationship and include in their network affiliation
valuation amounts related to attributes which we believe are more appropriately reflected in the
value of the broadcast license or goodwill.
The methodology we used to value these stations was based on our evaluation of the broadcast
licenses acquired and the characteristics of the markets in which they operated. Given our
assumptions and the specific attributes of the stations we acquired from 2002 through December 31,
2009, we ascribed no incremental value to the incumbent network affiliation relationship in each
market beyond the cost of negotiating a new agreement with another network and the value of any
terms of the affiliation agreement that were more favorable or unfavorable than those generally
prevailing in the market.
Some broadcast companies may use methods to value acquired network affiliations different than
those that we use. These different methods may result in significant variances in the amount of
purchase price allocated to these assets among broadcast companies.
If we were to assign higher values to all of our network affiliations and less value to our
broadcast licenses or goodwill and if it is further assumed that such higher values of the network
affiliations are definite-lived intangible assets, this reallocation of value might have a
significant impact on our operating results. It should be noted that there is diversity of practice
within the industry, and some broadcast companies have considered such network affiliation
intangible assets to have a life ranging from 15 to 40 years depending on the specific assumptions
utilized by those broadcast companies.
The following table reflects the hypothetical impact of the reassignment of value from
broadcast licenses to network affiliations for all our prior acquisitions (the first acquisition
being in 1994) and the resulting increase in amortization expense assuming a hypothetical 15-year
amortization period as of our most recent impairment testing date of December 31, 2009 (in
thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Total |
|
|
|
|
|
|
Value Reassigned to Network |
|
|
As |
|
Affiliation Agreements |
|
|
Reported |
|
50% |
|
25% |
Balance Sheet (As of December 3l, 2009): |
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast licenses |
|
$ |
818,981 |
|
|
$ |
262,598 |
|
|
$ |
540,789 |
|
Other intangible assets, net (including network affiliation agreements) |
|
|
1,316 |
|
|
|
185,347 |
|
|
|
93,332 |
|
Statement of Operations (For the year ended December 31, 2009): |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
577 |
|
|
|
36,626 |
|
|
|
18,602 |
|
Operating income |
|
|
43,079 |
|
|
|
7,030 |
|
|
|
25,054 |
|
Net loss |
|
|
(23,047 |
) |
|
|
(45,037 |
) |
|
|
(34,042 |
) |
Net loss available to common stockholders |
|
|
(40,166 |
) |
|
|
(62,156 |
) |
|
|
(51,161 |
) |
Net loss available to common stockholders, per share basic and diluted |
|
$ |
(0.83 |
) |
|
$ |
(1.28 |
) |
|
$ |
(1.05 |
) |
In future acquisitions, the valuation of the network affiliations may differ from the values
of previous acquisitions due to the different characteristics of each station and the market in
which it operates.
Market Capitalization
When we test our broadcast licenses and goodwill for impairment, we also consider our market
capitalization. During 2009, our market capitalization increased from its 2008 lows. As of December
31, 2009, our market capitalization was less than our book value and it remains less than book
value as of the date of this filing. We believe the decline in our stock price has been influenced,
in part, by the current state of the national credit market and the national economic recession. We
believe that it is appropriate to view the current state of credit markets and recession as
relatively temporary in relation to reporting units that have demonstrated long-lived/enduring
franchise value. Accordingly, we believe that a variance between market capitalization and fair
value can exist and that difference could be significant at points in time due to intervening
macroeconomic influences.
54
Income Taxes
We have approximately $285.3 million in federal operating loss carryforwards, which expire
during the years 2020 through 2029. Additionally, we have an aggregate of approximately $328.6
million of various state operating loss carryforwards. We project to have taxable income in the
carryforward periods. Therefore, we believe that it is more likely than not that the federal net
operating loss carryforwards will be fully utilized.
A valuation allowance has been provided for a portion of the state net operating loss
carryforwards. We believe that it will not meet the more likely than not threshold in certain
states due to the uncertainty of generating sufficient income. Therefore, the state valuation
allowance at December 31, 2009 and 2008 was $6.2 million and $4.6 million, respectively. As of
December 31, 2009 and 2008, a full valuation allowance of $264,000 and $261,000, respectively, has
been provided for the capital loss carryforwards, as we believe that we will not meet the more
likely than not threshold due to the uncertainty of generating sufficient capital gains in the
carryforward period.
Recent Accounting Pronouncements
Various authoritative accounting organizations have issued accounting pronouncements that we
will be required to adopt at a future date. Either (i) we have reviewed these pronouncements and
concluded that their adoption will not have a material affect upon our liquidity or results of
operations or (ii) we are continuing to evaluate the pronouncements. See Note 1. Description of
Business and Summary of Significant Accounting Policies of our audited consolidated financial
statements included elsewhere in this prospectus for further discussion of recent accounting
principles.
55
BUSINESS
General
We are a television broadcast company operating 36 television stations serving 30 markets.
Seventeen of our stations are affiliated with CBS, ten are affiliated with NBC, eight are
affiliated with ABC, and one is affiliated with FOX. Our 17 CBS-affiliated stations make us the
largest independent owner of CBS affiliates in the United States. In addition, we currently operate
39 digital second channels including one affiliated with ABC, four affiliated with FOX, seven
affiliated with CW, 18 affiliated with MyNetworkTV, two affiliated with Universal Sports and seven
local news/weather channels, in certain of our existing markets. We created our digital second
channels to better utilize our excess broadcast spectrum. The digital second channels are similar
to our primary broadcast channels; however, our digital second channels are affiliated with
networks different from those affiliated with our primary broadcast channels. Our combined TV
station group reaches approximately 6.3% of total United States households.
We were incorporated in 1897, initially to publish the Albany Herald in Albany, Georgia, and
entered the broadcasting industry in 1953. We have a dedicated and experienced senior management
team.
For the fiscal year ended December 31, 2009 and the first quarter ended March 31, 2010, we
generated revenue of $270.4 million and $70.5 million, respectively.
Markets
Gray operates in DMAs ranked between 51-200 and primarily focuses its operations on university
towns and state capitals. Our markets include 17 university towns, representing enrollment of
approximately 469,000 students, and eight state capitals. We believe university towns and state
capitals provide significant advantages as they generally offer more favorable advertising
demographics, more stable economics and a stronger affinity between local stations and university
sports teams.
We have a strong, market leading position in our markets. Our combined station group has 23
markets with stations ranked #1 in local news audience and 21 markets with stations ranked #1 in
overall audience within their respective markets, based on the results of the average of the
Nielsen March, May, July and November 2009 ratings reports. Of the 30 markets that we serve, we
operate the #1 or #2 ranked station in 29 of those markets. We believe a key driver for our strong
market position is the strength of our local news and information programs. Our news audience share
outperforms the national average of the networks audience share with at least twice the NSI
national average market share in November 2009 for both 6 p.m. and late night news. We believe that
our market position and our strong local revenue stream have enabled us to better preserve our
revenues in softer economic conditions compared to many of our peers.
We are diversified across our markets and network affiliations. Our largest market by revenue
is Charleston/Huntington, WV, which contributed approximately 7% of our revenues in 2009. Our top
10 markets by revenue contributed 53% of our revenue in 2009. Our 17 CBS-affiliated stations
accounted for 49% of our revenues, our 10 NBC-affiliated stations accounted for 36% of our
revenues, our 8 ABC-affiliated stations accounted for 15% of our revenues and our 1 FOX-affiliated
station accounted for less than 1% of our revenues, for 2009, respectively.
Business Strategy
Our success has been based on the following strategies for growing our revenues and our
operating cash flow:
Maintain and Grow our Market Leadership Position. We have the #1 ranking in overall audience
in 21 of the 30 markets in which we operate. We are ranked #2 in audience in all of our other
markets, except Albany, GA. We have the #1 ranking in local news audience in 23 of our markets and
our news audience share outperforms the national average of the networks audience share with
nearly twice the NSI national average market share in November 2009 for both 6 p.m. and late night
news.
We believe there are significant advantages in operating the #1 or #2 television broadcasting
stations. Strong audience and market share allows us enhance our advertising revenues through price
discipline and leadership. We believe a top-rated news platform is critical to capturing
incremental sponsorship and political advertising revenue. Our high-quality station group improves
our cash flow and allows us additional opportunities to reinvest in our business to further
strengthen our network and news ratings. Furthermore, we believe operating the top ranking stations
in our various markets allows us to attract and retain top talent.
56
We also believe that our leadership position in the markets we serve gives us additional
leverage to negotiate retransmission contracts with multiple system operators MSOs, and we believe
it will help us in our potential negotiations with networks upon expiration of our current
contracts with them. Our primary network affiliation agreements expire at various dates through
January 1, 2016.
We intend to maintain our market leadership position through prudent continued investment in
our news and syndicated programs, as well as continued technological advances and program
improvements. We are in the process of converting our local studios to be able to provide HD in
select markets to further enhance the visual quality of our local programs, which we believe can
drive incremental viewership, and expect to continue to invest in local HD conversion over the next
few years.
Pursue New Media Opportunities. We currently operate web, mobile and desktop applications in
all of our markets. We have focused on expanding the applicable local content, such as news,
weather and sports, on our websites to drive increased traffic. We have experienced strong growth
in internet page views in the past, with page views growing at a 57% compound annual growth rate
from 2003 and 2009, and anticipate continued growth in the future.
Our aggregate internet revenues are derived from two sources. The first source is advertising
or sponsorship opportunities directly on our websites. We call this direct internet revenue. The
other revenue source is television advertising time purchased by our clients to directly promote
their involvement in our websites. We refer to this internet revenue source as internet-related
commercial time sales. In the future, we anticipate our direct internet revenue will grow at a
faster pace relative to our internet-related commercial time sales.
We are a member of the OMVC, which aims to accelerate the development and rollout of mobile
DTV products and services, maximizing the full potential of the digital television spectrum. We are
currently testing mobile television in the Omaha and Lincoln, Nebraska markets.
Monetize Digital Spectrum. We currently operate 39 digital second channels, including one
affiliated with ABC, four affiliated with FOX, seven affiliated with CW, 18 affiliated with
MyNetworkTV, two affiliated with the Universal Sports Network and seven local news/weather
channels, in certain of our existing markets. We created our digital second channels to better
utilize our excess broadcast spectrum. The digital second channels are similar to our primary
broadcast channels, except that our digital second channels are affiliated with networks different
from those affiliated with our primary broadcast channels. In the year ended December 31, 2009, we
generated $7.1 million in revenue from our digital second channels.
Our strategy is to expand upon our digital offerings, evaluating potential opportunities from
time to time either on our own and/or in partnership with other companies, as such opportunities
present themselves. We intend to aggressively pursue the use of our spectrum for additional
opportunities such as local video on demand, music on demand and other digital downloads. We also
intend to evaluate opportunities to use spectrum for future delivery of television broadcasts to
handheld and other mobile devices.
Prudent Cost Management. Historically, we have closely managed our costs to maintain our
margins. We believe that our market leadership position gives us additional negotiating leverage to
enable us to lower our syndicated programming costs. We have increased the efficiency of our
stations by automating processes as a part of the conversion of local studios to digital. As of
December 31, 2009, we had reduced our total number of employees by 241, or 9.9% since December 31,
2007. We also lowered our syndicated programming costs by $1.1 million during the year ended
December 31, 2009. We intend to continue to seek and implement additional cost saving opportunities
in the future.
Acquisitions, Investments and Divestitures
In 1993, we implemented a strategy to foster a significant portion of our growth through
strategic acquisitions and select divestitures. Since January 1, 1994, our significant acquisitions
have included 33 television stations. We completed our most recent acquisition on March 3, 2006.
Our acquisition, investment and divestiture activities during the most recent five years are
described below.
2006 Acquisition
On March 3, 2006, we completed the acquisition of the stock of Michiana Telecasting Corp.,
owner of WNDU-TV, the NBC affiliate in South Bend, Indiana, from the University of Notre Dame for
$88.9 million, which included certain working capital adjustments and transaction fees. We financed
this acquisition with borrowings under our senior credit facility.
57
2005 Spinoff
On December 30, 2005, we completed the spinoff of all of the outstanding stock of TCM.
Immediately prior to the spinoff, we contributed all of the membership interests in Gray
Publishing, LLC which owned and operated our Gray Publishing and GrayLink Wireless businesses and
certain other assets, to TCM. In the spinoff, each of the holders of our common stock received one
share of TCM common stock for every ten shares of our common stock and each holder of our Class A
common stock received one share of TCM common stock for every ten shares of our Class A common
stock. As part of the spinoff, we received a cash dividend of approximately $44.0 million from TCM.
We used the dividend proceeds to reduce our outstanding indebtedness.
2005 Acquisitions
On November 30, 2005, we completed the acquisition of the assets of WSAZ-TV, the NBC affiliate
in Charleston/Huntington, West Virginia. We purchased these assets from Emmis Communications Corp.
for approximately $185.8 million in cash plus certain transaction fees. We financed this
acquisition with borrowings under the senior credit facility we then had in place.
On November 10, 2005, we completed the acquisition of the assets of WSWG-TV, the UPN affiliate
serving the Albany, Georgia television market. We purchased these assets from P.D. Communications,
LLC for $3.75 million in cash. We used a portion of our cash on hand to fund this acquisition.
After the acquisition, we obtained a CBS affiliation for this station.
On January 31, 2005, we completed the acquisition of KKCO-TV from Eagle III Broadcasting, LLC.
We acquired this station for approximately $13.5 million plus certain transaction fees. KKCO-TV
serves the Grand Junction, Colorado television market and is an NBC affiliate. We used a portion of
our cash on hand to fully fund this acquisition.
During 2005, we acquired an FCC license to operate a low power television station, WAHU-TV, in
the Charlottesville, Virginia television market. We currently operate WAHU-TV as a FOX affiliate.
Revenues
Our revenues are derived primarily from local, regional and national advertising. Our revenues
are derived to a much lesser extent from retransmission consent fees; network compensation; studio
and tower space rental; and commercial production activities. Advertising refers primarily to
advertisements broadcast by television stations, but it also includes advertisements placed on a
television stations website. Advertising rates are based upon a variety of factors, including: (i)
a programs popularity among the viewers an advertiser wishes to attract, (ii) the number of
advertisers competing for the available time, (iii) the size and demographic makeup of the market
served by the station and (iv) the availability of alternative advertising media in the market
area. Rates are also determined by a stations overall ratings and in-market share, as well as the
stations ratings and market share among particular demographic groups that an advertiser may be
targeting. Because broadcast stations rely on advertising revenues, they are consequently sensitive
to cyclical changes in the economy. The sizes of advertisers budgets, which can be affected by
broad economic trends, can affect the broadcast industry in general and the revenues of individual
broadcast television stations.
Our revenues fluctuate significantly between years, consistent with, among other things,
increased political advertising expenditures in even-numbered years.
We derive a material portion of our advertising revenue from the automotive and restaurant
industries. In 2009, we earned approximately 17% and 12% of our total revenue from the automotive
and restaurant categories, respectively. In 2008, we earned approximately 19% and 10% of our total
revenue from the automotive and restaurant categories, respectively. Our business and operating
results could be materially adversely affected if automotive or restaurant-related advertising
revenues decrease. Our business and operating results could also be materially adversely affected
if revenue decreased from one or more other significant advertising categories, such as the
communications, entertainment, financial services, professional services or retail industries.
Our Stations and Their Markets
Each of our stations is affiliated with a major network pursuant to an affiliation agreement.
Each affiliation agreement provides the affiliated station with the right to broadcast all programs
transmitted by the affiliated network. Our primary network affiliation agreements expire at various
dates through January 1, 2016. The following table is a list of all our owned and operated
television stations.
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary Network |
DMA |
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast |
|
Station |
|
News |
Rank |
|
|
|
|
|
Primary Network |
|
Secondary Network |
|
License |
|
Rank in |
|
Rank in |
(a) |
|
Market |
|
Station |
|
Affil.(b) |
|
Exp.(c) |
|
Affil.(b) |
|
Exp.(c) |
|
Expiration |
|
DMA(d) |
|
DMA(e) |
59
|
|
Knoxville, TN
|
|
WVLT
|
|
CBS
|
|
12/31/14
|
|
My Net.
|
|
10/04/11
|
|
08/01/05(i)
|
|
|
2 |
|
|
|
2 |
|
62
|
|
Lexington, KY
|
|
WKYT
|
|
CBS
|
|
12/31/14
|
|
CW
|
|
09/17/14
|
|
08/01/05(i)
|
|
|
1 |
|
|
|
1 |
|
63
|
|
Charleston/Huntington, WV
|
|
WSAZ
|
|
NBC
|
|
01/01/12
|
|
My Net.
|
|
10/04/11
|
|
10/01/12
|
|
|
1 |
|
|
|
1 |
|
69
|
|
Wichita/Hutchinson, KS
|
|
KAKE
|
|
ABC
|
|
12/31/13
|
|
NA
|
|
NA
|
|
06/01/06(i)
|
|
|
2 |
|
|
|
2 |
|
|
|
(Colby, KS)
|
|
KLBY(f)
|
|
ABC
|
|
12/31/13
|
|
NA
|
|
NA
|
|
06/01/06(i)
|
|
|
2 |
|
|
|
2 |
|
|
|
(Garden City, KS)
|
|
KUPK(f)
|
|
ABC
|
|
12/31/13
|
|
NA
|
|
NA
|
|
06/01/06(i)
|
|
|
2 |
|
|
|
2 |
|
76
|
|
Omaha, NE
|
|
WOWT
|
|
NBC
|
|
01/01/12
|
|
Universal Sports
|
|
12/31/11
|
|
06/01/06(i)
|
|
|
2 |
|
|
|
1 |
|
85
|
|
Madison, WI
|
|
WMTV
|
|
NBC
|
|
01/01/12
|
|
News
|
|
NA
|
|
12/01/05(i)
|
|
|
2 |
|
|
|
2 |
|
89
|
|
Waco-Temple-Bryan, TX
|
|
KWTX
|
|
CBS
|
|
12/31/14
|
|
CW
|
|
12/31/14
|
|
08/01/06(i)
|
|
|
1 |
|
|
|
1 |
|
|
|
(Bryan, TX)
|
|
KBTX(g)
|
|
CBS
|
|
12/31/14
|
|
CW
|
|
12/31/14
|
|
08/01/06(i)
|
|
|
1 |
|
|
|
1 |
|
91
|
|
South Bend, IN
|
|
WNDU
|
|
NBC
|
|
01/01/12
|
|
NA
|
|
NA
|
|
08/01/13
|
|
|
2 |
|
|
|
2 |
|
92
|
|
Colorado Springs, CO
|
|
KKTV
|
|
CBS
|
|
12/31/14
|
|
My Net.
|
|
10/04/11
|
|
04/01/06(i)
|
|
|
1 |
|
|
|
2 |
|
103
|
|
Greenville/New
Bern/Washington, NC
|
|
WITN
|
|
NBC
|
|
01/01/12
|
|
My Net.
|
|
10/04/11
|
|
12/01/04(i)
|
|
|
2 |
|
|
|
1 |
|
105
|
|
Lincoln/Hastings/Kearney, NE
|
|
KOLN
|
|
CBS
|
|
12/31/14
|
|
My Net.
|
|
10/04/11
|
|
06/01/06(i)
|
|
|
1 |
|
|
|
1 |
|
|
|
Grand Island, NE
|
|
KGIN(h)
|
|
CBS
|
|
12/31/14
|
|
My Net.
|
|
10/04/11
|
|
06/01/06(i)
|
|
|
1 |
|
|
|
1 |
|
106
|
|
Tallahassee, FL/Thomasville, GA
|
|
WCTV
|
|
CBS
|
|
12/31/14
|
|
My Net.
|
|
10/04/11
|
|
04/01/13
|
|
|
1 |
|
|
|
1 |
|
108
|
|
Reno, NV
|
|
KOLO
|
|
ABC
|
|
12/31/13
|
|
Universal Sports
|
|
01/09/11
|
|
10/01/06(i)
|
|
|
1 |
|
|
|
1 |
|
114
|
|
Augusta, GA
|
|
WRDW
|
|
CBS
|
|
12/31/14
|
|
My Net.
|
|
10/04/11
|
|
04/01/13
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
News
|
|
NA |
|
|
|
|
|
|
|
|
|
|
115
|
|
Lansing, MI
|
|
WILX
|
|
NBC
|
|
01/01/12
|
|
News
|
|
NA
|
|
10/01/05(i)
|
|
|
2 |
|
|
|
1 |
|
127
|
|
La Crosse/Eau Claire, WI
|
|
WEAU
|
|
NBC
|
|
01/01/12
|
|
News
|
|
NA
|
|
12/01/05(i)
|
|
|
1 |
|
|
|
1 |
|
134
|
|
Rockford, IL
|
|
WIFR
|
|
CBS
|
|
12/31/14
|
|
News
|
|
NA
|
|
12/01/05(i)
|
|
|
1 |
|
|
|
1 |
|
135
|
|
Wausau/Rhinelander, WI
|
|
WSAW
|
|
CBS
|
|
12/31/14
|
|
My Net.
|
|
10/04/11
|
|
12/01/05(i)
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
News
|
|
NA |
|
|
|
|
|
|
|
|
|
|
136
|
|
Topeka, KS
|
|
WIBW
|
|
CBS
|
|
12/31/14
|
|
My Net.
|
|
10/04/11
|
|
06/01/06(i)
|
|
|
1 |
|
|
|
1 |
|
145
|
|
Albany, GA
|
|
WSWG
|
|
CBS
|
|
12/31/14
|
|
My Net.
|
|
10/04/11
|
|
04/01/13
|
|
|
3 |
|
|
NA(j)
|
151
|
|
Panama City, FL
|
|
WJHG
|
|
NBC
|
|
01/01/12
|
|
CW
|
|
09/17/12
|
|
02/01/05(i)
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
My Net.
|
|
10/04/11 |
|
|
|
|
|
|
|
|
|
|
161
|
|
Sherman, TX/Ada, OK
|
|
KXII
|
|
CBS
|
|
12/31/14
|
|
FOX
|
|
06/30/11
|
|
08/01/06(i)
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
My Net.
|
|
10/04/11 |
|
|
|
|
|
|
|
|
|
|
172
|
|
Dothan, AL
|
|
WTVY
|
|
CBS
|
|
12/31/14
|
|
CW
|
|
09/01/12
|
|
04/01/13
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
My Net.
|
|
10/04/11 |
|
|
|
|
|
|
|
|
|
|
178
|
|
Harrisonburg, VA
|
|
WHSV
|
|
ABC
|
|
12/31/13
|
|
ABC
|
|
12/31/13
|
|
10/01/12
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
FOX
|
|
06/30/11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
My Net.
|
|
10/04/11 |
|
|
|
|
|
|
|
|
|
|
182
|
|
Bowling Green, KY
|
|
WBKO
|
|
ABC
|
|
12/31/13
|
|
FOX
|
|
06/30/11
|
|
08/01/05(i)
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
CW
|
|
09/01/13 |
|
|
|
|
|
|
|
|
|
|
183
|
|
Charlottesville, VA
|
|
WCAV
|
|
CBS
|
|
12/31/14
|
|
News
|
|
NA
|
|
10/01/12
|
|
|
2 |
|
|
|
2 |
|
|
|
|
|
WVAW
|
|
ABC
|
|
12/31/13
|
|
NA
|
|
NA
|
|
10/01/12
|
|
|
3 |
|
|
|
4 |
|
|
|
|
|
WAHU
|
|
FOX
|
|
06/30/11
|
|
My Net.
|
|
10/04/11
|
|
01/01/12
|
|
|
4 |
|
|
|
3 |
|
184
|
|
Grand Junction, CO
|
|
KKCO
|
|
NBC
|
|
01/01/16
|
|
NA
|
|
NA
|
|
04/01/06(i)
|
|
|
1 |
|
|
|
1 |
|
185
|
|
Meridian, MS
|
|
WTOK
|
|
ABC
|
|
12/31/13
|
|
CW
|
|
09/15/10
|
|
06/01/05(i)
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
My Net.
|
|
10/04/11 |
|
|
|
|
|
|
|
|
|
|
194
|
|
Parkersburg, WV
|
|
WTAP
|
|
NBC
|
|
01/01/12
|
|
FOX
|
|
06/30/11
|
|
10/01/04(i)
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
My Net.
|
|
10/04/11 |
|
|
|
|
|
|
|
|
|
|
(k)
|
|
Hazard, KY
|
|
WYMT
|
|
CBS
|
|
12/31/14
|
|
NA
|
|
NA
|
|
08/01/05(i)
|
|
|
1 |
|
|
|
1 |
|
|
|
|
(a) |
|
DMA rank based on data published by Nielsen or other public sources for the 2009-2010 television season. |
|
(b) |
|
Indicates network affiliations. The majority of our stations are affiliated with a network. We also
have independent stations and stations broadcasting local news and weather. Such stations are
identified as News. |
59
|
|
|
(c) |
|
Indicates date of expiration of network license. |
|
(d) |
|
Based on the average of Nielsen data for the March, May, July and November 2009 rating periods (except
for Hazard, KY, as described in note (k)), measured from Sunday to Saturday, 6 a.m. to 2 a.m. |
|
(e) |
|
Based on our review of Nielsen data for the March, May, July and November 2009 rating periods (except
for Hazard, KY, as described in note (k)) for various news programs. |
|
(f) |
|
KLBY-TV and KUPK-TV are satellite stations of KAKE-TV under FCC rules. KLBY-TV and KUPK-TV retransmit
the signal of the primary station and may offer some locally originated programming, such as local
news. |
|
(g) |
|
KBTX-TV is a satellite station of KWTX-TV under FCC rules. KBTX-TV retransmits the signal of the
primary station and may offer some locally originated programming, such as local news. |
|
(h) |
|
KGIN-TV is a satellite station of KOLN-TV under FCC rules. KGIN-TV retransmits the signal of the
primary station and may offer some locally originated programming, such as local news. |
|
(i) |
|
We have filed a license renewal application with the FCC, and renewal is pending. We anticipate that
all pending applications will be renewed in due course. |
|
(j) |
|
This station does not currently broadcast local news that is specific to the Albany, Georgia market. |
|
(k) |
|
The rankings shown for WYMT-TV are based on Nielsen data for the trading area for the four most recent
reporting periods, which are November 2008 and February, May and November 2009. |
Television Industry Background
The FCC grants broadcast licenses to television stations. Historically, there have been a
limited number of channels available for broadcasting in any one geographic area.
Television station revenues are derived primarily from local, regional and national
advertising. Television station revenues are derived to a much lesser extent from retransmission
consent fees; network compensation; studio and tower space rental; and commercial production
activities. Advertising rates are based upon a variety of factors, including: (i) a programs
popularity among the viewers an advertiser wishes to attract, (ii) the number of advertisers
competing for the available time, (iii) the size and demographic makeup of the market served by the
station and (iv) the availability of alternative advertising media in the market area. Rates are
also determined by a stations overall ratings and in-market share, as well as the stations
ratings and market share among particular demographic groups that an advertiser may be targeting.
Because broadcast stations rely on advertising revenues, they are sensitive to cyclical changes in
the economy. The sizes of advertisers budgets, which can be affected by broad economic trends, can
affect the broadcast industry in general and the revenues of individual broadcast television
stations.
Television stations in the country are grouped by Nielsen, a national audience measuring
service, into approximately 210 generally recognized television markets or DMAs. These markets are
ranked in size according to various formulae based upon actual or potential audience. Each DMA is
an exclusive geographic area consisting of all counties in which the home-market commercial
stations receive the greatest percentage of total viewing hours. Nielsen periodically publishes
data on estimated audiences for the television stations in the various television markets
throughout the country.
Station Network Affiliations
Four major broadcast networks, ABC, NBC, CBS and FOX, dominate broadcast television in terms
of the amount of original programming provided to network affiliates. CW and MyNetworkTV provide
their affiliates with a smaller portion of each days programming compared to ABC, NBC, CBS and
FOX.
Most successful commercial television stations obtain their brand identity from locally
produced news programs. Notwithstanding this, however, the affiliation of a station with one of the
four major networks can have a significant impact on the stations programming, revenues, expenses
and operations. A typical affiliate of these networks receives the majority of each days
programming from the network. The network provides an affiliate this programming, along with cash
payments (network compensation) in certain instances, in exchange for a substantial majority of
the advertising time available for sale during the airing
60
of network programs. The network then sells this advertising time and retains the revenues.
The affiliate retains revenues from advertising time sold for time periods between network programs
and for programs the affiliate produces or purchases from non-network sources. In seeking to
acquire programming to supplement network-supplied programming, the affiliates compete primarily
with other affiliates and independent stations in their markets. Cable systems generally do not
compete with local stations for programming, although various national cable networks from time to
time have acquired programs that would have otherwise been offered to local television stations.
A television station may also acquire programming through barter arrangements. Under a barter
arrangement, a national program distributor retains a fixed amount of advertising time within the
program in exchange for the programming it supplies. The television station may pay a fixed fee for
such programming.
We account for trade or barter transactions involving the exchange of tangible goods or
services with our customers. The revenue is recorded at the time the advertisement is broadcast and
the expense is recorded at the time the goods or services are used. The revenue and expense
associated with these transactions are based on the fair value of the assets or services received.
We do not account for barter revenue and related barter expense generated from network or
syndicated programming.
In contrast to a network-affiliated station, independent stations purchase or produce all of
the programming they broadcast, generally resulting in higher programming costs. Independent
stations, however, retain their entire inventory of advertising time and all related revenues. When
compared to major networks such as ABC, CBS, NBC and FOX, certain networks such as CW and
MyNetworkTV produce a smaller amount of network-provided programming. Affiliates of CW or
MyNetworkTV must purchase or produce a greater amount of their non-network programming, generally
resulting in higher programming costs. Affiliates of CW or MyNetworkTV retain a larger portion of
their advertising time inventory and the related revenues compared to stations affiliated with the
major networks.
Cable-originated programming is a significant competitor of broadcast television programming.
However, no single cable programming network regularly attains audience levels exceeding a small
fraction of those of any major broadcast network. Cable networks advertising share has increased
due to the growth in cable penetration (the percentage of television households that are connected
to a cable system). Despite increases in cable viewership, and increases in advertising, growth in
direct broadcast satellite (DBS) and other multi-channel video program distribution services,
over-the-air broadcasting remains the dominant distribution system for mass-market television
advertising.
Seasonality
Broadcast advertising revenues are generally highest in the second and fourth quarters each
year. This seasonality results partly from increases in consumer advertising in the spring and
retail advertising in the period leading up to and including the holiday season. Broadcast
advertising revenues are also generally higher in even-numbered years, due to spending by political
candidates, political parties and special interest groups. This political spending typically is
heaviest during the fourth quarter.
Competition
Television stations compete for audiences, certain programming (including news) and
advertisers. Signal coverage and assigned frequency also materially affect a television stations
competitive position.
Audience
Stations compete for audience based on broadcast program popularity, which has a direct effect
on advertising rates. Affiliated networks supply a substantial portion of our stations daily
programming. Stations depend on the performance of the network programs to attract viewers. There
can be no assurance that any such current or future programming created by our affiliated networks
will achieve or maintain satisfactory viewership levels in the future. Stations program non-network
time periods with a combination of locally produced news, public affairs and other entertainment
programming, including national news or syndicated programs purchased for cash, cash and barter, or
barter only.
Cable and satellite television have significantly altered competition for audience in the
television industry. Cable and satellite television can increase a broadcasting stations
competition for viewers by bringing into the market distant broadcasting signals not otherwise
available to the stations audience and by serving as a distribution system for non-broadcast
programming.
61
Other sources of competition include home entertainment systems, wireless cable services,
satellite master antenna television systems, low-power television stations, television translator
stations, DBS video distribution services and the internet.
Recent developments by many companies, including internet service providers, are expanding the
variety and quality of broadcast content on the internet. Internet companies have developed
business relationships with companies that have traditionally provided syndicated programming,
network television and other content. As a result, additional programming is becoming available
through non-traditional methods, which can directly impact the number of TV viewers, and thus
indirectly impact station rankings, popularity and revenue possibilities from our stations.
Programming
Competition for non-network programming involves negotiating with national program
distributors, or syndicators, that sell first-run and rerun programming packages. Each station
competes against the other broadcast stations in its market for exclusive access to off-network
reruns (such as Friends) and first-run programming (such as Oprah). Broadcast stations compete also
for exclusive news stories and features. Cable systems generally do not compete with local stations
for programming, although various national cable networks from time to time have acquired programs
that would have otherwise been offered to local television stations.
Advertising
Advertising rates are based upon: (i) the size of a stations market, (ii) a stations overall
ratings, (iii) a programs popularity among targeted viewers, (iv) the number of advertisers
competing for available time, (v) the demographic makeup of the stations market, (vi) the
availability of alternative advertising media in the market, (vii) the presence of effective sales
forces and (viii) the development of projects, features and programs that tie advertiser messages
to programming. Advertising revenues comprise the primary source of revenues for our stations. Our
stations compete with other television stations for advertising revenues in their respective
markets. Our stations also compete for advertising revenue with other media, such as newspapers,
radio stations, magazines, outdoor advertising, transit advertising, yellow page directories,
direct mail, internet and local cable systems. In the broadcasting industry, advertising revenue
competition occurs primarily within individual markets.
Federal Regulation of Our Business
General
Under the Communications Act, television broadcast operations such as ours are subject to the
jurisdiction of the FCC. Among other things, the Communications Act empowers the FCC to: (i) issue,
revoke and modify broadcasting licenses; (ii) regulate stations operations and equipment; and
(iii) impose penalties for violations of the Communications Act or FCC regulations. The
Communications Act prohibits the assignment of a license or the transfer of control of a licensee
without prior FCC approval.
License Grant and Renewal
The FCC grants broadcast licenses to television stations for terms of up to eight years.
Broadcast licenses are of paramount importance to the operations of our television stations. The
Communications Act requires the FCC to renew a licensees broadcast license if the FCC 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 FCCs rules and regulations; and (iii)
there have been no other violations which, taken together, would constitute a pattern of abuse.
Historically the FCC has renewed broadcast licenses in substantially all cases. While we are not
currently aware of any facts or circumstances that might prevent the renewal of our stations
licenses at the end of their respective license terms, we cannot provide any assurances that any
license could be renewed. Our failure to renew any licenses upon the expiration of any license term
could have a material adverse effect on our business. Under FCC rules, a license expiration date is
automatically extended pending the review and approval of the renewal application. For further
information regarding the expiration dates of our stations current licenses and renewal
application status, see the table under the heading Our Stations and Their Markets.
Ownership Rules
The FCCs broadcast ownership rules affect the number, type and location of broadcast and
newspaper properties that we may hold or acquire. The rules now in effect limit the common
ownership, operation or control of, and attributable interests or voting
62
power in: (i) television stations serving the same area; (ii) television stations and daily
newspapers serving the same area; and (iii) television stations and radio stations serving the same
area. The rules also limit the aggregate national audience reach of television stations that may be
under common ownership, operation and control, or in which a single person or entity may hold an
official position or have more than a specified interest or percentage of voting power. The FCCs
rules also define the types of positions and interests that are considered attributable for
purposes of the ownership limits, and thus also apply to our principals and certain investors.
The FCC is required by statute to review all of its broadcast ownership rules every four years
to determine if such rules remain necessary in the public interest. The FCC completed a
comprehensive review of its ownership rules in 2003, significantly relaxing restrictions on the
common ownership of television stations, radio stations and daily newspapers within the same local
market. However, in 2004, the United States Court of Appeals for the Third Circuit vacated many of
the FCCs 2003 rule changes. The court remanded the rules to the FCC for further proceedings and
extended a stay on the implementation of the new rules. In 2007, the FCC adopted a Report and Order
addressing the issues remanded by the Third Circuit and fulfilling the FCCs obligation to review
its media ownership rules every four years. That Order left most of the FCCs pre-2003 ownership
restrictions in place, but made modifications to the newspaper/broadcast cross-ownership
restriction. A number of parties appealed the FCCs order; those appeals were consolidated in the
Third Circuit in 2008 and remain pending. The Third Circuit initially stayed implementation of the
2007 changes to the newspaper/broadcast cross-ownership restriction, but recently lifted the stay
and set a briefing schedule for the pending appeals. We cannot provide any assurances regarding the
outcome of the appeals, or the potential impact thereof on our business. In 2010, the FCC again
will be required to undertake a comprehensive review of its broadcast ownership rules to determine
whether the rules remain necessary in the public interest.
Local TV Ownership Rule
The FCCs 2007 actions generally reinstated the FCCs pre-2003 local television ownership
rules. Under those rules, one entity may own two commercial television stations in a DMA as long as
no more than one of those stations is ranked among the top four stations in the DMA and eight
independently owned, full-power stations will remain in the DMA. Waivers of this rule may be
available if at least one of the stations in a proposed combination qualifies, pursuant to specific
criteria set forth in the FCCs rules, as failed, failing, or unbuilt. The FCC has recently
initiated a proceeding to reexamine these rules. No assurances can be provided as to the timing or
outcome of any such proceedings, or their impact on our business, financial condition or results of
operations.
Cross-Media Limits
The newspaper/broadcast cross-ownership rule generally prohibits one entity from owning both a
commercial broadcast station and a daily newspaper in the same community. The radio/television
cross-ownership rule allows a party to own one or two TV stations and a varying number of radio
stations within a single market. The FCCs 2007 decision left the pre-2003 newspaper/broadcast and
radio/television cross-ownership restrictions in place, but provided that the FCC would evaluate
newly-proposed newspaper/broadcast combinations under a non-exhaustive list of four public interest
factors and apply positive or negative presumptions in specific circumstances. As noted above, a
stay implemented by the Third Circuit that precluded these rule changes from taking effect recently
was lifted, and the FCC has subsequently initiated a proceeding to reexamine these rules. No
assurances can be provided as to the timing or outcome of any such proceedings, or their impact on
our business, financial condition or results of operations.
National Television Station Ownership Rule
The maximum percentage of U.S. households that a single owner can reach through commonly owned
television stations is 39 percent. This limit was specified by Congress in 2004 and is not affected
by the December 2007 FCC decision. The FCC applies a 50 percent discount for ultra-high frequency
(UHF) stations, but the FCC indicated in the 2007 decision that it will conduct a separate
proceeding to determine how or whether the UHF discount will operate in the future.
As indicated above, the FCCs latest actions concerning media ownership are subject to further
judicial and FCC review. We cannot predict the outcome of potential appellate litigation or FCC
action.
Attribution Rules
Under the FCCs ownership rules, a direct or indirect purchaser of certain types of our
securities could violate FCC regulations if that purchaser owned or acquired an attributable
interest in other media properties in the same areas as our stations. Pursuant to FCC rules, the
following relationships and interests are generally considered attributable for purposes of
broadcast ownership restrictions:
63
(i) all officers and directors of a corporate licensee and its direct or indirect parent(s);
(ii) voting stock interests of at least five percent; (iii) voting stock interests of at least 20
percent, if the holder is a passive institutional investor (such as an investment company, bank, or
insurance company); (iv) any equity interest in a limited partnership or limited liability company,
unless properly insulated from management activities; (v) equity and/or debt interests that in
the aggregate exceed 33 percent of a licensees total assets, if the interest holder supplies more
than 15 percent of the stations total weekly programming or is a same-market broadcast company or
daily newspaper publisher; (vi) time brokerage of a broadcast station by a same-market broadcast
company; and (vii) same-market radio joint sales agreements. The FCC is also considering deeming
same-market television joint sales agreements attributable. Management services agreements and
other types of shared services arrangements between same-market stations that do not include
attributable time brokerage or joint sales components generally are not deemed attributable under
the FCCs rules.
To our knowledge, no officer, director or five percent stockholder currently holds an
attributable interest in another television station, radio station or daily newspaper that is
inconsistent with the FCCs ownership rules and policies or with our ownership of our stations.
Alien Ownership Restrictions
The Communications Act restricts the ability of foreign entities or individuals to own or hold
interests in broadcast licenses. The Communications Act bars the following from holding broadcast
licenses: foreign governments, representatives of foreign governments, non-citizens,
representatives of non-citizens, and corporations or partnerships organized under the laws of a
foreign nation. Foreign individuals or entities, collectively, may directly or indirectly own or
vote no more than 20 percent of the capital stock of a licensee or 25 percent of the capital stock
of a corporation that directly or indirectly controls a licensee. The 20 percent limit on foreign
ownership of a licensee may not be waived. While the FCC has the discretion to permit foreign
ownership in excess of 25 percent in a corporation controlling a licensee, it has rarely done so in
the broadcast context.
We serve as a holding company of wholly owned subsidiaries, one of which is a licensee for our
stations. Therefore we may be restricted from having more than one-fourth of our stock owned or
voted directly or indirectly by non-citizens, foreign governments, representatives of non-citizens
or foreign governments, or foreign corporations.
Programming and Operations
Rules and policies of the FCC and other federal agencies regulate certain programming
practices and other areas affecting the business or operations of broadcast stations.
The Childrens Television Act of 1990 limits commercial matter in childrens television
programs and requires stations to present educational and informational childrens programming.
Broadcasters are required to provide at least three hours of childrens educational programming per
week on their primary digital channels. This requirement increases proportionately with each free
video programming stream a station broadcasts simultaneously (multicasts). In October 2009, the
FCC issued a Notice of Inquiry (NOI) seeking comment on a broad range of issues related to
childrens usage of electronic media and the current regulatory landscape that governs the
availability of electronic media to children. The NOI remains pending, and we cannot predict what
recommendations or further action, if any, will result from it.
In 2007 the FCC adopted an order imposing on broadcasters new public filing and public
interest reporting requirements. These new requirements must be approved by the Office of
Management and Budget before they become effective, and the OMB has not yet approved them. It is
unclear when, if ever, these rules will be implemented. Pursuant to these new requirements,
stations that have websites will be required to make certain portions of their public inspection
files accessible online. Stations also will be required to file electronically every quarter a new,
standardized form that will track various types and quantities of local programming. The form will
require information about programming related to: (i) local news and community issues, (ii) local
civic affairs, (iii) local electoral affairs, (iv) underserved communities, (v) public service
announcements (vi) independently produced programming, and (vii) religious programming. Stations
will also have to describe: (i) any efforts made to assess the programming needs of their stations
community, (ii) whether the station is providing required close captioning, (iii) efforts to make
emergency information accessible to persons with disabilities and (iv), if applicable, any local
marketing or joint sales agreements involving the station. If
implemented as proposed by the FCC, the new standardized form will significantly increase
recordkeeping requirements for television broadcasters. Several station owners and other interested
parties have asked the FCC to reconsider the new reporting requirements and have sought to postpone
their implementation. In addition, the order imposing the new rules is currently on appeal in the
U.S. Court of Appeals for the District of Columbia Circuit.
64
In 2007, the FCC issued a Report on Broadcast Localism and Notice of Proposed Rulemaking
(the Report). The Report tentatively concluded that broadcast licensees should be required to
have regular meetings with permanent local advisory boards to ascertain the needs and interests of
their communities. The Report also tentatively adopted specific renewal application processing
guidelines that would require broadcasters to air a minimum amount of local programming. The Report
sought public comment on two additional rule changes that would impact television broadcasters.
These rule changes would restrict a broadcasters ability to locate a stations main studio outside
the community of license and the right to operate a station remotely. To date, the FCC has not
issued a final order on the matter. We cannot predict whether or when the FCC will codify some or
all of the specific localism initiatives discussed in the Report.
Over the past few years, the FCC has increased its enforcement efforts regarding broadcast
indecency and profanity. In 2006, the statutory maximum fine for broadcast indecency material
increased from $32,500 to $325,000 per incident. Several judicial appeals of FCC indecency
enforcement actions are currently pending, and their outcomes could affect future FCC policies in
this area.
EEO Rules
The FCCs Equal Employment Opportunity (EEO) rules impose job information dissemination,
recruitment, documentation and reporting requirements on broadcast station licensees. Broadcasters
are subject to random audits to ensure compliance with the EEO rules and could be sanctioned for
noncompliance.
Cable and Satellite Transmission of Local Television Signals
Under FCC regulations, cable systems must devote a specified portion of their channel capacity
to the carriage of local television station signals. Television stations may elect between must
carry rights or a right to restrict or prevent cable systems from carrying the stations signal
without the stations permission (retransmission consent). Stations must make this election at
the same time once every three years, and did so most recently on October 1, 2008. All broadcast
stations that made carriage decisions on October 1, 2008 will be bound by their decisions until the
end of the current three year cycle on December 31, 2011. Our stations have generally elected
retransmission consent and have entered into carriage agreements with cable systems serving their
markets.
For those markets in which a DBS carrier provides any local signal, the FCC also has
established a market-specific requirement for mandatory carriage of local television stations by
DBS operators similar to that for cable systems. The FCC has also adopted rules relating to station
eligibility for DBS carriage and subscriber eligibility for receiving signals. There are specific
statutory requirements relating to satellite distribution of distant network signals to unserved
households, households that do not receive a Grade B signal from a local network affiliate. A law
governing DBS distribution, the Satellite Home Viewer Extension and Reauthorization Act of 2004
(SHVERA), was scheduled to expire at the end of 2009. Congress has extended SHVERA three times.
The most recent extension maintains the current law until April 30, 2010. A long-term extension and
revision of SHVERA is still expected to be finalized in the near future. We cannot predict the
impact of DBS service on our business. We have, however, entered into retransmission consent
agreements with DISH Network and DirectTV for the retransmission of our television stations
signals into the local markets that each of these DBS providers respectively serves.
Digital Television Service
In 1997, the FCC adopted rules for implementing digital television (DTV) service. On June
12, 2009, the U.S. finalized its transition from analog to digital service, and full-power
television stations were required to cease analog operations and commence digital-only operations.
The DTV transition has improved the technical quality of viewers television signals and given
broadcasters the ability to provide new services, such as high definition television.
Broadcasters may use their digital spectrum to provide either a single DTV signal or multicast
several program streams. Broadcasters also may use some of their digital spectrum to offer
non-broadcast ancillary services such as subscription video, data transfer or audio signals.
However, broadcasters must pay the government a fee of five percent of gross revenues received from
such ancillary services. Under the FCCs rules relating to digital broadcasters must carry
rights (which apply to cable and certain DBS systems) digital stations asserting must carry
rights are entitled to carriage of only a single programming stream and other program-related
content on that stream, even if they multicast. Now that the DTV transition is complete, cable
operators have two options to ensure that all analog cable subscribers continue to be able to
receive the signals of stations electing must-carry status. They may choose either to (i) broadcast
the signal in digital format for digital customers and down-convert the signal to analog format
for analog customers or (ii) deliver the signal in digital format to all subscribers and ensure
that all subscribers with analog service have set-top boxes that convert the digital signal to
analog format.
65
Currently, all of our full-power stations are broadcasting digitally. In 2009, we also began
testing mobile DTV broadcasts in one of our markets. Consumers are able to view these broadcasts on
handheld devices equipped with a DTV receiver. To date, the FCC has not adopted any regulations
that are specific to mobile DTV services, and we cannot predict whether it will do so in the
future.
The FCC has adopted rules and procedures regarding the digital conversion of Low Power
Television (LPTV) stations, TV translator stations and TV booster stations. Under these rules,
existing LPTV and TV translator stations may convert to digital operations on their current
channels. Alternatively, LPTV and translator licenses may seek a digital companion channel for
their analog station operations. At a later date, the FCC will determine the date by which those
stations obtaining a digital companion channel must surrender one of their channels.
Beginning December 31, 2006, DTV broadcasters were required to comply with Emergency Alert
System (EAS) rules and ensure that viewers of all programming streams can receive EAS messages.
Broadcast Spectrum
On March 16, 2010, the FCC delivered to Congress a National Broadband Plan. The National
Broadband Plan, inter alia, makes recommendations regarding the use of spectrum currently allocated
to television broadcasters, including seeking the voluntary surrender of certain portions of the
television broadcast spectrum and repacking the currently allocated spectrum to make portions of
that spectrum available for other wireless communications services. If some or all of our
television stations are required to change frequencies or reduce the amount of spectrum they use,
our stations could incur substantial conversion costs, reduction or loss of over-the-air signal
coverage or an inability to provide high definition programming and additional program streams,
including mobile video services. Prior to implementation of the proposals contained in the National
Broadband Plan, further action by the FCC or Congress or both is necessary. We cannot predict the
likelihood, timing or outcome of any Congressional or FCC regulatory action in this regard nor the
impact of any such changes upon our business.
The foregoing does not purport to be a complete summary of the Communications Act, other
applicable statutes, or the FCCs rules, regulations or policies. Proposals for additional or
revised regulations and requirements are pending before, are being considered by, and may in the
future be considered by, Congress and federal regulatory agencies from time to time. We cannot
predict the effect of any existing or proposed federal legislation, regulations or policies on our
business. Also, several of the foregoing matters are now, or may become, the subject of litigation,
and we cannot predict the outcome of any such litigation or the effect on our business.
Employees
As of December 31, 2009, we had 1,954 full-time employees and 254 part-time employees. As of
December 31, 2009, we had 100 full-time employees and 19 part-time employees that were represented
by unions. We consider relations with our employees to be good.
Legal Proceedings
From time to time, the Company and its operations are parties to, or targets of, lawsuits,
claims, investigations and proceedings. Any such claims are handled and defended in the ordinary
course of business. While the Company is unable to predict the outcome of these matters, we do not
believe, based upon currently available facts, that the ultimate resolution of any such pending
matters will have a material adverse effect on our overall financial condition, results of
operations, or cash flows. However, adverse developments could negatively impact earnings or cash
flows in a particular future period.
66
COMPANY MANAGEMENT AND DIRECTORS
The following table sets forth information about our executive officers and directors.
|
|
|
|
|
|
|
Name |
|
Age |
|
Position Held With Gray |
Hilton H. Howell, Jr.
|
|
|
48 |
|
|
Chief Executive Officer, Vice Chairman and Director |
William E. Mayher, III
|
|
|
70 |
|
|
Chairman of the Board of Directors |
Robert S. Prather, Jr.
|
|
|
65 |
|
|
President, Chief Operating Officer and Director |
James C. Ryan
|
|
|
49 |
|
|
Chief Financial Officer and Senior Vice President |
Robert A. Beizer
|
|
|
70 |
|
|
Vice President for Law and Development and
Secretary |
J. Mack Robinson
|
|
|
85 |
|
|
Director and Chairman Emeritus |
Richard L. Boger
|
|
|
62 |
|
|
Director |
Ray M. Deaver
|
|
|
68 |
|
|
Director |
T.L. Elder
|
|
|
70 |
|
|
Director |
Zell B. Miller
|
|
|
77 |
|
|
Director |
Howell W. Newton
|
|
|
62 |
|
|
Director |
Hugh E. Norton
|
|
|
76 |
|
|
Director |
Harriett J. Robinson
|
|
|
78 |
|
|
Director |
Set forth below is certain information concerning the business experience during the past five
years of each of the individuals named above.
Hilton H. Howell, Jr. has been our Chief Executive Officer since August 20, 2008 and has also
served as Vice-Chairman since September 2002. Before that, he had been our Executive Vice President
since September 2000. He has served as one of our directors since 1993. He has served as President
and Chief Executive Officer of Atlantic American Corporation, an insurance holding company, since
1995, and as Chairman of that Company since February 24, 2009. He has been Executive Vice President
and General Counsel of Delta Life Insurance Company and Delta Fire and Casualty Insurance Company
since 1991. He has served as Vice Chairman of Bankers Fidelity Life Insurance Company since 1992
and Vice Chairman of Georgia Casualty & Surety Company from 1992 through 2008. He served as
Chairman of the Board of TCM, from December 2005 until December 2009. Mr. Howell also serves as a
director of Atlantic American Corporation and its subsidiaries American Southern Insurance Company,
American Safety Insurance Company and Bankers Fidelity Life Insurance Company, as well as Delta
Life Insurance Company and Delta Fire and Casualty Insurance Company. He is the son-in-law of Mr.
J. Mack Robinson and Mrs. Harriett J. Robinson, both members of our board of directors.
William E. Mayher, III is a member of the Executive Committee, the Audit Committee, the
Management Personnel Committee and the 2007 Long Term Incentive Plan Committee of our Board of
Directors and has served as Chairman of our Board of Directors since August 1993. Dr. Mayher was a
neurosurgeon in Albany, Georgia from 1970 to 1998. Dr. Mayher is the Chairman of the Medical
College of Georgia Foundation and a past member of the Board of Directors of the American
Association of Neurological Surgeons. He also serves as a director of Palmyra Medical Centers and
Chairman of the Albany Dougherty County Airport Commission.
Robert S. Prather, Jr. has served as our President and Chief Operating Officer since September
2002. He has served as one of our directors since 1993. He has been a director of TCM since 1994,
and served as Chairman of TCM from December 2005 until November 2007. He served as President and
Chief Executive Officer of TCM from May 2005 to December 30, 2005, and has served in that position
since November 2007. TCM filed for protection under Chapter 11 of the U.S. bankruptcy code on
September 14, 2009. The order confirming the Plan of Reorganization under Chapter 11 of the
bankruptcy code became effective December 8, 2009. He serves as an advisory director of Swiss Army
Brands, Inc., and serves on the Board of Trustees of the Georgia World Congress Center Authority.
He also serves as a member of the Board of Directors for GAMCO Investors, Inc., Gaylord
Entertainment Company and Victory Ventures, Inc.
James C. Ryan has served as our Chief Financial Officer since October 1998 and Senior Vice
President since September 2002. Before that, he had been our Vice President since October 1998.
Robert A. Beizer has served as our Vice President for Law and Development and Secretary since
1996. From June 1994 to February 1996, he was of counsel to Venable, LLC, a law firm, in its
regulatory and legislative practice group. From 1990 to 1994, Mr. Beizer was a partner in the law
firm of Sidley & Austin and was head of their communications practice group in Washington, D.C. He
is a past president of the Federal Communications Bar Association and has served as a member of the
American Bar Association House of Delegates. He is a member of the ABA Forum Committee on
Communications Law.
67
J. Mack Robinson was our Chairman and Chief Executive Officer from September 2002 until August
2008. Prior to that, he was our President and Chief Executive Officer from 1996 through September
2002. He is Chairman Emeritus of our Board of Directors. Mr. Robinson has served as Chairman of the
Board and President of Delta Life Insurance Company and Delta Fire and Casualty Insurance Company
since 1958. Mr. Robinson served as Chairman of the Board of Atlantic American Corporation, an
insurance holding company, from 1974 to February 2009 and has served as Chairman Emeritus of
Atlantic American Corporation since February 2009. Mr. Robinson also serves as a director of the
following companies: Bankers Fidelity Life Insurance Company, American Southern Insurance Company
and American Safety Insurance Company. Mr. Robinson is the husband of Mrs. Harriett J. Robinson and
the father-in-law of Mr. Hilton H. Howell, Jr., both members of our Board of Directors.
Richard L. Boger is a member of the Audit Committee of our Board of Directors. Mr. Boger has
been President and Chief Executive Officer of Lex-Tek International, Inc., an insurance software
company, since February 2002. Since July 2003, he has also served as business manager for Owen
Holdings, LLLP, a Georgia Limited Liability Limited Partnership; since July 2004, has served as
General Partner of Shawnee Meadow Holdings, LLLP, a Georgia Limited Liability Limited Partnership;
and since March 2006 has served as business manager for Heathland Holdings, LLLP, a Georgia Limited
Liability Limited Partnership. He also serves as a member of the Board of Trustees of Corner Cap
Group of Funds, a series mutual fund.
Ray M. Deaver is Chairman of the Management Personnel Committee and a member of the 2007 Long
Term Incentive Plan Committee of our Board of Directors. Prior to his appointment to our Board of
Directors, Mr. Deaver served as our Regional Vice President-Texas from October 1999 until his
retirement in 2001. He was the President and General Manager of KWTX Broadcasting Company and
President of Brazos Broadcasting Company from November 1997 until their acquisition by us in
October 1999.
T.L. (Gene) Elder is a member the Audit Committee of our Board of Directors. Until May 2003,
Mr. Elder was a partner of Tatum, LLC, a national firm of career chief financial officers, and
since 2004 has been a Senior Partner of that firm.
Zell B. Miller is a member of the Management Personnel Committee and the 2007 Long Term
Incentive Plan Committee of our Board of Directors. He was U.S. Senator from Georgia from July 2000
until his retirement in January 2005. Prior to that time he was Governor of the State of Georgia
from 1991 until 1999 and Lieutenant Governor from 1975 until 1991. He is a Director Emeritus of the
Board of Directors of United Community Banks, Inc. in Blairsville, Georgia.
Howell W. Newton is Chairman of the Audit Committee of our Board of Directors. Since 1978, Mr.
Newton has been President and Treasurer of Trio Manufacturing Co., a real estate and investment
company.
Hugh E. Norton is Chairman of the 2007 Long Term Incentive Plan Committee and is a member of
the Management Personnel Committee of our Board of Directors. Mr. Norton has been President of
Norco, Inc., an insurance agency, since 1973 and also is a real estate developer in Destin,
Florida.
Harriett J. Robinson has been a director of Atlantic American Corporation since 1989. Mrs.
Robinson has also been a director of Delta Life Insurance Company and Delta Fire and Casualty
Insurance Company since 1967. Mrs. Robinson is the wife of Mr. J. Mack Robinson and the
mother-in-law of Mr. Hilton H. Howell, Jr., both members of our Board of Directors.
68
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We obtain certain liability, umbrella and workers compensation insurance coverages through
Insurance Associates of Georgia, an insurance agency that is owned by a son-in-law of Hugh E.
Norton, one of our directors. During 2009, in connection with these coverages, Insurance Associates
of Georgia retained commissions of $130,577 paid to it by the various insurance companies providing
insurance to us and paid $96,640 of such commissions to Norco Holdings, Inc., an insurance agency,
of which Mr. Norton is President and which is owned by Mr. Nortons wife and daughter. The Board of
Directors has reviewed these arrangements and has determined that, notwithstanding these payments,
Mr. Norton is independent in accordance with Section 303A.02(b) of the New York Stock Exchange
listing standards and the standards set forth in the Internal Revenue Code of 1986, as amended (the
Code) and the Exchange Act.
In December 2008, we entered into a consulting contract with Mr. Robinson in which he agreed
to consult and advise us with respect to its television stations and all related matters in
connection with various proposed or existing television stations. In return for these services, Mr.
Robinson received compensation of $400,000 for the year ended December 31, 2009. Mr. Robinson
serves as a member of our Board of Directors and as Chairman Emeritus.
69
DESCRIPTION OF OTHER INDEBTEDNESS AND CERTAIN OTHER OBLIGATIONS
This description contains a summary of our outstanding indebtedness and certain other
obligations. This description is only a summary of the applicable obligations. The following
summaries do not purport to be complete and are subject to, and qualified in their entirety by
reference to, all of the provisions of the corresponding agreements, including the definitions of
certain terms therein that are not otherwise defined in this prospectus.
Senior Credit Facility
Our senior credit facility consists of a revolving loan and a term loan. The amount
outstanding under our senior credit facility as of March 31, 2010 was $789.8 million, consisting
solely of the term loan and excluding the facility fee as described below. On that date and after
giving effect to the offering of original notes and the use of proceeds therefrom, we had $489.8
million outstanding under the senior credit facility. The maximum borrowing capacity available
under the revolving loan was $40.0 million. Of the maximum borrowing capacity available under our
revolving loan, the amount that we can draw is limited by certain restrictive covenants, including
our total net leverage ratio covenant. Based on such covenant, as of March 31, 2010, we could have
drawn $40.0 million under the revolving loan.
Under our revolving and term loans, we can choose to pay interest at an annual rate equal to
LIBOR plus 3.5%, or the lenders base rate, generally equal to the lenders prime rate, plus 2.5%.
This interest is payable in cash throughout the year.
In addition, on March 31, 2009, we began to incur a facility fee at an annual rate of 3.0% on
all principal balances outstanding under the revolving and term loans. For the period from March
31, 2009 until April 30, 2010, the annual facility fee for the revolving and term loans accrued,
and is payable on the respective revolving and term loan maturity dates. The revolving loan and
term loan maturity dates are March 19, 2014 and December 31, 2014, respectively. For the period
from April 30, 2010 until maturity of the senior credit facility, the annual facility fee is
payable in cash on a quarterly basis and the amount accrued through April 30, 2010 bears interest
at an annual rate of 6.5%, payable quarterly in arrears. As of March 31, 2010, our accrued facility
fee of $24.2 million was classified as a long-term liability on our balance sheet. The accrued
facility fee is included in determining the amount of total debt in calculating our total net
leverage ratio covenant as defined in our senior credit facility.
The average interest rate on our total debt outstanding under the senior credit facility as of
March 31, 2010 was 8.8%. This rate is as of the period end and does not include the effects of our
interest rate swap agreements. Including the effects of our interest rate swap agreements, the
average interest rate on our total debt outstanding under the senior credit facility at March 31,
2010 was 11.8%.
Also under our revolving loan, we pay a commitment fee on the average daily unused portion of
the revolving loan availability. As of March 31, 2010, the annual commitment fee was 0.5%.
Collateral and Restrictions
The collateral for our senior credit facility consists of substantially all of our and our
subsidiaries assets. In addition, our subsidiaries are joint and several guarantors of the
obligations and our ownership interests in our subsidiaries are pledged to collateralize the
obligations. The senior credit facility contains affirmative and restrictive covenants. These
covenants include but are not limited to (i) limitations on additional indebtedness, (ii)
limitations on liens, (iii) limitations on amendments to our by-laws and articles of incorporation,
(iv) limitations on mergers and the sale of assets, (v) limitations on guarantees, (vi) limitations
on investments and acquisitions, (vii) limitations on the payment of dividends and the redemption
of our capital stock, (vii) maintenance of a specified total net leverage ratio not to exceed
certain maximum limits, (viii) limitations on related party transactions, (ix) limitations on the
purchase of real estate, and (x) limitations on entering into multiemployer retirement plans, as
well as other customary covenants for credit facilities of this type. As of March 31, 2010, we were
in compliance with all restrictive covenants as required by our senior credit facility.
We are a holding company with no material independent assets or operations, other than our
investments in our subsidiaries. The aggregate assets, liabilities, earnings and equity of the
subsidiary guarantors (as defined in and for purposes of our senior credit facility) are
substantially equivalent to our assets, liabilities, earnings and equity on a consolidated basis.
The subsidiary guarantors are, directly or indirectly, our wholly owned subsidiaries and the
guarantees of the subsidiary guarantors are full, unconditional and joint and several. All of our
current and future direct and indirect subsidiaries are and will be guarantors under the senior
credit facility.
70
The 2010 amendment, among other things, increased the maximum amount of the total net leverage
ratio covenant thereunder through March 31, 2011, and reduced the maximum availability under the
revolving loan to $40.0 million.
The 2010 amendment also imposed an additional fee, equal to 2.0% per annum, payable quarterly,
in arrears, until such time as we completed an offering of capital stock or certain debt securities
that resulted in the repayment of not less than $200.0 million of the term loan outstanding under
our senior credit facility. That fee was eliminated upon the repayment of amounts under the term
loan which occurred upon the completion of the offering of original notes and use of proceeds
thereof. In addition, upon completion of a financing that results in the repayment of at least
$200.0 million of our term loan, we achieved additional flexibility under various covenants in our
senior credit facility. After completing the offering of original notes and using the net proceeds
to repay at least $200.0 million of our term loan, the 2.0% per annum fee was eliminated, the
facility fee was reduced, and the terms of certain restrictive covenants were improved. The use of
proceeds from any issuance of additional securities is generally limited to the repayment of
amounts outstanding under our term loan and, in certain circumstances, to the repurchase of
outstanding shares of our Series D perpetual preferred stock. For additional details regarding the
March 2010 amendment to our senior credit facility, see Note 14. Subsequent EventLong-term Debt
Amendment to our audited financial statements included elsewhere herein.
A summary of certain significant terms contained in our senior credit facility (i) giving
effect to the 2010 amendment and (ii) as so amended and after giving affect to the completion of
the offering of original notes and the repayment of not less than $200.0 million of the term loan
outstanding under our senior credit facility, is as follows:
|
|
|
|
|
|
|
|
|
|
|
As Amended and |
|
|
|
|
Prior to |
|
As Amended and |
|
|
the Offering of |
|
After Giving Effect to |
|
|
Original |
|
the Offering of |
|
|
Notes and Related |
|
Original Notes and |
|
|
Repayment of |
|
Related Repayment of |
Description |
|
Term Loan |
|
Term Loan |
Annual interest rate on outstanding term loan balance
|
|
LIBOR plus 3.5%
or BASE plus 2.5%
|
|
Same
|
Annual interest rate on outstanding revolving loan balance
|
|
LIBOR plus 3.5%
or BASE plus 2.5%
|
|
Same
|
Annual facility fee rate
|
|
3.0% with
a potential
reduction in
future periods
|
|
1.25% with
a potential
reduction in
future periods.
|
Annual incentive fee rate
|
|
|
2.0 |
% |
|
|
0.0 |
% |
Annual commitment fee on undrawn revolving loan balance
|
|
|
0.50 |
% |
|
Same
|
Revolving loan commitment
|
|
$40 million
|
|
$40 million
|
Maximum total net leverage ratio at: |
|
|
|
|
|
|
|
|
March 31, 2010 through June 29, 2010
|
|
|
9.00x |
|
|
Replaced with first
|
June 30, 2010 through September 29, 2010
|
|
|
9.50x |
|
|
lien leverage test
|
September 30, 2010 through March 30, 2011
|
|
|
9.75x |
|
|
|
|
|
March 31, 2011 and thereafter
|
|
|
6.50x |
|
|
|
|
|
Minimum fixed charge coverage ratio
|
|
None
|
|
0.90x to 1.0x
|
Maximum cash balance that can be deducted from total debt
to calculate total net debt in the total net leverage
ratio (or first lien leverage test, as applicable)
|
|
$10.0 million
|
|
$15.0 million
|
As a result of the repayment of in excess of $250.0 million of the term loan outstanding under
the senior credit facility, certain fees thereunder were further reduced, and we were able to
achieve certain additional covenant relief.
For further information concerning our senior credit facility, see Note 3. Long-term Debt and
Accrued Facility Fee to our consolidated financial statements included elsewhere herein. For
estimates of future principal and interest payments under our senior credit facility, see Tabular
Disclosure of Contractual Obligations as of December 31, 2009 in Managements Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere in this prospectus.
71
Series D Perpetual Preferred Stock
The Company is authorized to issue up to 20.0 million shares of preferred stock. As of March
31, 2010, we had 1,000 shares of Series D perpetual preferred stock outstanding. The certificate of
designation relating to the Series D perpetual preferred stock (the Certificate of Designation)
provides the following:
Voting Rights
Shares of Series D perpetual preferred stock do not have any voting rights, except with
respect to amendments to the Certificate of Designation, or as otherwise required by law.
Ranking and Liquidation
The Series D perpetual preferred stock ranks, as to dividend rights and rights on liquidation
events, senior to all classes of common stock, on parity with other series or classes of preferred
stock which do not expressly provide that such class or series will rank senior to the Series D
perpetual preferred stock, and junior to each series or class of preferred stock which expressly
provides that such class or series ranks senior to the Series D perpetual preferred stock. Upon any
liquidation, dissolution or winding up of the Company, the holders of the Series D perpetual
preferred stock have a liquidation preference. The Series D perpetual preferred stock had a
liquidation value of $100,000 per share for a total liquidation value of $100.0 million as of March
31, 2010.
Dividends
The holders of the Series D perpetual preferred stock are entitled to quarterly dividends. We
have deferred the cash payment of dividends thereon since October 1, 2008. As a result and in
accordance with the terms of the Certificate of Designation, the dividend rate on the Series D
perpetual preferred stock has increased from 15.0% per annum to 17.0% per annum, and will continue
to accrue at that rate as long as at least three consecutive cash dividend payments remain
unfunded.
While any Series D perpetual preferred stock dividend payments are in arrears, we are
prohibited from repurchasing, declaring and/or paying any cash dividend with respect to any equity
securities having liquidation preferences equivalent to or junior in ranking to the liquidation
preferences of the Series D perpetual preferred stock, including our common stock and Class A
common stock.
Redemption
The Series D perpetual preferred stock has no mandatory redemption date, but is redeemable, at
our option, at any time. If redeemed prior to January 1, 2012, we would be required to pay a
premium thereon as set out in the Certificate of Designation. In addition, in the event of certain
changes of control, we would be required to repurchase the Series D perpetual preferred stock.
Shares of Series D perpetual preferred stock may also be redeemed, at a holders option, on or
after June 30, 2015. If the Series D perpetual preferred stock is redeemed, we are required to pay
the liquidation price per share in cash plus the pro-rata accrued dividends to the date fixed for
redemption.
Covenants
The Certificate of Designation requires that we comply with certain covenants contained
therein, including: (i) a limitation on restricted payments; (ii) a limitation on indebtedness;
(iii) a limitation on certain liens; (iv) a limitation on asset sales; (v) a limitation on certain
mergers; (vi) requirements as to the use of proceeds from asset sales; (vii) a limitation on
transactions with affiliates.
Repurchase of a Portion of the Outstanding Shares of our Series D Perpetual Preferred Stock
On April 19, 2010, we entered into an agreement (the Exchange Agreement) with holders of
shares of our Series D perpetual preferred stock. Pursuant to the Exchange Agreement, concurrently
with the completion of the offering of the original notes, we repurchased $75.59 million of Series
D perpetual preferred stock, including accrued dividends, in exchange for $50.0 million in cash and
8.5 million shares of our common stock.
72
DESCRIPTION OF NOTES
General
We issued the original notes and will issue the exchange notes under an Indenture (the
Indenture), dated as of April 29, 2010, by and among us, the Subsidiary Guarantors and U.S. Bank,
National Association, as trustee (the Trustee). The exchange notes will be identical in all
material respects to the original notes, except that the exchange notes will be issued in a
transaction registered under the Securities Act and are free of any obligation regarding
registration, including the payment of special interest upon failure to file or have declared
effective an exchange offer registration statement or to consummate an exchange offer by certain
dates. The terms of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the Trust Indenture Act).
The Notes are subject to all such terms, and holders of Notes are referred to the Indenture and the
Trust Indenture Act for a statement of those terms.
We summarize below certain material provisions of the Indenture, the Notes, the Security
Documents and the Intercreditor Agreement. We do not restate those provisions in their entirety. We
urge you to read the Indenture, the Collateral Agreement and the Intercreditor Agreement because
they define your rights. You can obtain a copies of the Indenture, a form of the Notes, the
Collateral Agreement and the Intercreditor Agreement from us . Except as otherwise indicated, the
following summary of the notes applies to both the original notes and the exchange notes.
Key terms used in this section are defined under Certain Definitions. When we refer in
this section to:
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the Company, we mean Gray Television, Inc. and not its subsidiaries; and |
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the Notes, we mean the original notes, the exchange notes and Additional Notes we may
issue from time to time under the Indenture (and exchange notes issued in exchange
therefor). |
Overview of the Notes
The Notes are senior secured obligations of the Company and rank:
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equally in right of payment with all existing and future senior Indebtedness (including
any Permitted Additional Pari Passu Secured Obligations permitted to be incurred in
accordance with the Indenture) of the Company; |
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senior in right of payment to all existing and future subordinated Indebtedness of the
Company; |
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effectively junior to any obligations of the Company that are secured by a Lien on the
Collateral that is senior or prior to the Second Priority Liens, including the First
Priority Liens securing obligations under the Senior Credit Facility referred to below, and
potentially any Permitted Liens; |
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effectively senior to any obligations of the Company that are unsecured to the extent
of the value of the Collateral after giving effect to the First Priority Liens, and
potentially any Permitted Liens; and |
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structurally junior to any Indebtedness or Obligations of any non-guarantor
Subsidiaries. |
The Notes and the obligations under the Indenture are secured by second-priority security
interests in the Collateral (subject to priority and otherwise to certain exceptions and Permitted
Liens). As a result, the Notes and the obligations under the Indenture are effectively (a) junior
to any Indebtedness of the Company and the Subsidiary Guarantors which either is (i) secured by the
First Priority Liens or (ii) secured by assets which are not part of the Collateral securing the
Notes, in each case, to the extent of the value of such assets and (b) equal in rank with any
Permitted Additional Pari Passu Secured Obligations. The Indebtedness Incurred under the Senior
Credit Facility is and will be secured by a first-priority security interest in the Collateral.
Accordingly, while the Notes rank equally in right of payment with the Indebtedness under the
Senior Credit Facility and all other liabilities not expressly subordinated by their terms to the
Notes, the Notes are effectively subordinated to the Indebtedness outstanding under the Senior
Credit Facility to the extent of the value of the Collateral.
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As described in the unaudited condensed consolidated financial information included elsewhere
in this prospectus, after giving effect to the offering of the original notes and the use of
proceeds thereof, at March 31, 2010:
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our total indebtedness (excluding intercompany indebtedness) would have been
approximately $879.4 million; |
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the Company would have had approximately $879.4 million of secured indebtedness, $514.0
million of which would have been under the Senior Credit Facility ranking effectively
senior to the extent of the value of the collateral securing the Senior Credit Facility and
$365.0 million of which would be the Notes offered hereby; and |
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the Subsidiary Guarantors would have had approximately $879.4 million of indebtedness,
including guarantees of indebtedness of $514.0 million under our Senior Credit Facility and
$365.0 million of indebtedness as Subsidiary Guarantors of the Notes. |
Additional Notes
Subject to the limitations set forth under Certain CovenantsLimitation on Incurrence of
Indebtedness and Certain CovenantsLimitation on Liens (including the Permitted Additional
Pari Passu Secured Obligations definition), the Company may issue additional notes (Additional
Notes) in one or more transactions, which have substantially identical terms as the original notes
and the exchange notes, except that such Additional Notes may have different CUSIP numbers,
issuance dates and dates from which interest initially accrues. Holders of Additional Notes would
have the right to vote together with holders of the original notes and the exchange notes as one
class.
Principal, Maturity And Interest
We issued $365.0 million of aggregate principal amount of original notes on April 29, 2010 in
denominations of $2,000 and integral multiples of $1,000 in excess thereof. The Notes will mature
on June 29, 2015.
Interest on the Notes accrues at the rate of 10.5% per annum and is payable semi-annually in
arrears on May 1 and November 1, commencing on November 1, 2010, to holders of record on the
immediately preceding April 15 and October 15. Interest on the Notes accrues from the most recent
date on which interest has been paid or, if no interest has been paid, from April 29, 2010, the
date of the original issuance of the Notes (the Issue Date). Interest is computed on the basis of
a 360-day year comprised of twelve 30-day months.
Principal of, premium, if any, and interest on the Notes is payable at the office or agency of
the Company maintained for such purpose within the City of New York or, at the option of the
Company, payment of interest may be made by check mailed to the holders of the Notes at their
respective addresses as set forth in the register of holders of Notes. Until otherwise designated
by the Company, the Companys office or agency in the City of New York is the office of the Trustee
maintained for such purpose. The Notes are issuable in fully registered form, without coupons and
in denominations of $2,000 and integral multiples of $1,000 in excess thereof.
Subsidiary Guarantees
Our obligations under the Notes are guaranteed, jointly and severally and fully and
unconditionally, on a senior secured basis (the Subsidiary Guarantees) by the Subsidiary
Guarantors. The obligations of a Subsidiary Guarantor under its Subsidiary Guarantee are limited to
the maximum amount as will result in the obligations of such Subsidiary Guarantor under the
Subsidiary Guarantee not to be deemed to constitute a fraudulent conveyance or fraudulent transfer
under federal or state law. This provision may not be effective to protect the Subsidiary
Guarantees from being voided under fraudulent transfer law, or may eliminate the Subsidiary
Guarantors obligations or reduce such obligations to an amount that effectively limits the value
of the Subsidiary Guarantee or effectively makes the Subsidiary Guarantee worthless. In a recent
Florida bankruptcy case, a similar provision was found to be ineffective to protect the guarantees.
The Subsidiary Guarantees will be secured by Second Priority Liens on the Collateral, subject to
certain exceptions and Permitted Collateral Liens, described below under Security. The
obligations of each Subsidiary Guarantor under its Subsidiary Guarantee are unconditional and
absolute, irrespective of any invalidity, illegality, unenforceability of any Note or the Indenture
or any extension, compromise, waiver or release in respect of any obligation of the Company or any
other Subsidiary Guarantor under any Note or the Indenture, or any modification or amendment of or
supplement to the Indenture.
As of the date of this prospectus, all of our Subsidiaries are Restricted Subsidiaries.
However, under the circumstances described below under the subheading Certain
CovenantsLimitation on Creation of Unrestricted Subsidiaries, any of our Subsidiaries may be
designated as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to the
restrictive covenants in the Indenture and will not guarantee the Notes. Claims of creditors of
non-guarantor Subsidiaries, including trade
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creditors, and claims of minority stockholders (other than the Company and the Subsidiary
Guarantors) of those subsidiaries will have priority with respect to the assets and earnings of
those subsidiaries over the claims of creditors of the Company and the Subsidiary Guarantors,
including holders of the Notes.
The Indenture provides that the Subsidiary Guarantee of a Subsidiary Guarantor will be
automatically and unconditionally released:
(a) in the event of a sale or other transfer (including by way of consolidation or merger)
of Capital Stock in such Subsidiary Guarantor in compliance with the terms of the Indenture
following which such Subsidiary Guarantor ceases to be a Subsidiary;
(b) upon the designation of such Guarantor as an Unrestricted Subsidiary in compliance with
the provisions described under the subheading Certain CovenantsLimitation on Creation of
Unrestricted Subsidiaries; or
(c) in connection with a legal defeasance or covenant defeasance of the Indenture or upon
satisfaction and discharge of the Indenture.
Upon any release of a Subsidiary Guarantor from its Subsidiary Guarantee, such Subsidiary
Guarantor will also be automatically and unconditionally released from its obligations under the
Security Documents.
The Subsidiary Guarantees are senior secured obligations of each Subsidiary Guarantor and
rank:
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equally in right of payment with all existing and future senior Indebtedness (including
Permitted Additional Pari Passu Secured Obligations) of each Subsidiary Guarantor; |
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senior in right of payment to all existing and future subordinated Indebtedness of each
Subsidiary Guarantor; |
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effectively junior to any obligations of each Subsidiary Guarantor that are secured by
a Lien on the Collateral that is senior or prior to the Second Priority Liens, including
the First Priority Liens securing obligations under the Senior Credit Facility referred to
below, and potentially any Permitted Liens; |
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effectively senior to any obligations of each Subsidiary Guarantor that are unsecured
to the extent of the value of the Collateral after giving effect to the First Priority
Liens, and potentially any Permitted Liens; and |
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structurally junior to any Indebtedness or Obligations of any non-Subsidiary Guarantor
Subsidiaries. |
Security
General
The Notes and the Companys Obligations under the Indenture are secured by Second Priority
Liens granted by the Company, the existing Subsidiary Guarantors and any future Subsidiary
Guarantor on substantially all of the assets of Company and the Subsidiary Guarantors (whether now
owned or hereafter arising or acquired), subject to certain exceptions, Excluded Property,
Permitted Collateral Liens and encumbrances described in the Indenture and the Security Documents.
In the security and pledge agreements, the Company and the Subsidiary Guarantors, subject to
certain exceptions, have granted security interests in (collectively, excluding the Excluded
Property and subject to certain limitations, the Collateral):
(a) all present and future shares of Capital Stock of (or other ownership or profit
interests in) each of Companys present and future direct and indirect subsidiaries, held by the
Company or a Subsidiary Guarantor;
(b) all present and future intercompany debt owed to the Company or any Subsidiary
Guarantor;
(c) substantially all of the present and future property and assets, real and personal, of
the Company and each Subsidiary Guarantor, including, but not limited to, machinery and
equipment, inventory and other goods, accounts receivable, owned real estate, leaseholds,
fixtures, bank accounts, general intangibles, financial assets, investment property, license
rights, patents,
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trademarks, trade names, copyrights, other intellectual property, chattel paper, insurance
proceeds, contract rights, hedge agreements, documents, instruments, indemnification rights, tax
refunds and cash;
(d) all FCC Licenses except to the extent (but only to the extent) and for so long as that
at such time the Collateral Agent may not validly possess a security interest directly in the
FCC License pursuant to applicable Federal law, including the Communications Act of 1934, as
amended, and the rules, regulations and policies promulgated thereunder, as in effect at such
time, but the Collateral will include at all times all proceeds incident or appurtenant to the
FCC Licenses and all proceeds of the FCC Licenses, and the right to receive all monies,
consideration and proceeds derived from or in connection with the sale, assignment, transfer, or
other disposition of the FCC Licenses; and
(e) all proceeds and products of the property and assets described in clauses (a), (b), and
(d) above.
The Indenture and the Security Documents exclude certain property from the Collateral (the
Excluded Property), including (without limitation):
(a) any rights under any lease, contract or agreement (including, without limitation, any
license for intellectual property) to the extent that the granting of a security interest
therein to Collateral Agent is specifically prohibited in writing by, or would constitute an
event of default under or would grant a party a termination right under, any agreement governing
such right, unless such prohibition is not enforceable or is otherwise ineffective under
applicable law; provided that this exclusion shall in no way limit, impair or otherwise affect
Collateral Agents unconditional continuing security interests in and liens upon any rights or
interests of the Company or Subsidiary Guarantors in or to monies due or to become due to the
Company or Subsidiary Guarantor under any such lease, contract or agreement (including any
receivables);
(b) shares of margin stock;
(c) any shares entitled to vote (within the meaning of Treasury Regulation Section 1.956-2)
of any direct or indirect Subsidiary of the Company that is a controlled foreign corporation
in excess of sixty-six (66%) percent of all of the issued and outstanding Capital Stock in such
Subsidiary;
(d) any Capital Stock of any Subsidiary of the Company to the extent necessary for such
Subsidiary not to be subject to any requirement pursuant to Rule 3-16 or Rule 3-10 of Regulation
S-X under the Exchange Act to file separate financial statements with the Securities and
Exchange Commission (or any other governmental agency), due to the fact that such Subsidiarys
Capital Stock secures the Notes or Subsidiary Guarantees; and
(e) any FCC License to the extent excluded pursuant to clause (d) of the preceding
paragraph.
The Company is required to perfect on the Issue Date the security interests in the Collateral
to the extent they can be perfected by the filing of UCC-1 financing statements or the delivery of
certificates representing Capital Stock or notes representing intercompany debt. To the extent any
such security interest cannot be perfected by such filing or delivery, the Company is required to
use commercially reasonable efforts to have all security interests that are required by the
Security Documents to be in place perfected as soon as practicable following the Issue Date, but in
any event no later than 150 days after the Issue Date, except to the extent any such security
interest cannot be perfected with commercially reasonable efforts or to the extent the Security
Documents do not require perfection of the security interest. If the Company, or any Guarantor,
were to become subject to a bankruptcy proceeding, any Liens recorded or perfected after the Issue
Date would face a greater risk of being invalidated than if they had been recorded or perfected on
the Issue Date. See Risk FactorsRisks Related to the Exchange Notes.
Subject to the foregoing, if property that is intended to be Collateral is acquired by the
Company or a Subsidiary Guarantor (including property of a Person that becomes a new Subsidiary
Guarantor) that is not automatically subject to a perfected security interest under the Security
Documents, then the Company or such Subsidiary Guarantor will provide a Second Priority Lien over
such property (or, in the case of a new Subsidiary Guarantor, such of its property) in favor of the
Collateral Agent and deliver certain certificates and opinions in respect thereof, all as and to
the extent required by the Indenture or the Security Documents.
As set out in more detail below, upon an enforcement event or Insolvency or Liquidation
Proceeding, proceeds from the Collateral will be applied first to satisfy First Priority
Obligations and then ratably to satisfy obligations under the Notes and any Permitted Additional
Pari Passu Secured Obligations. In addition, the Indenture permits the Company and the Subsidiary
Guarantors to create additional Liens under specified circumstances. See the definition of
Permitted Liens.
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The Collateral is pledged to (1) the administrative agent under the Senior Credit Facility
(together with any successor, the First Priority Representative), on a first-priority basis, for
the benefit of the First Priority Secured Parties to secure the First Priority Obligations and (2)
the Collateral Agent, on a second-priority basis, for the benefit of the Trustee and the Holders of
the Notes and the holders of any Permitted Additional Pari Passu Secured Obligations to secure the
Second Lien Obligations. The Second Lien Obligations will constitute claims separate and apart from
(and of a different class from) the First Priority Obligations. The Second Priority Liens will be
junior and subordinate to the First Priority Liens.
Control over Collateral and Enforcement of Liens
For a standstill period of 180 days (subject to extension for any period during which the
applicable First Priority Representative has commenced and is diligently pursuing its rights and
remedies in good faith against a material portion of the Collateral or an insolvency proceeding has
been commenced) commencing on the date that the First Priority Representative receives notice of an
Event of Default under the Indenture, the First Priority Representative will have the sole power to
exercise remedies against the Collateral (subject to the right of the Collateral Agent and the
Holders of Notes and holders of Permitted Additional Pari Passu Secured Obligations to take limited
protective measures with respect to the Second Priority Liens and to take certain actions that
would be permitted to be taken by unsecured creditors) and to foreclose upon and dispose of the
Collateral. Upon any sale of any Collateral in connection with any enforcement action consented to
by First Priority Representative which results in the release of the Lien securing the Senior
Priority Obligations on such item of Collateral, the Second Priority Lien on such item of
Collateral will be automatically released.
Proceeds realized by the First Priority Representative or the Collateral Agent from the
Collateral (including proceeds of Collateral in an Insolvency or Liquidation Proceeding) will be
applied:
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first, to the First Priority Representative for application to the First Priority
Obligations in accordance with the terms of the First Priority Documents, until the First
Priority Obligations Payment Date; |
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second, to amounts owing to the Collateral Agent in its capacity as such in accordance
with the terms of the Security Documents, to amounts owing to the Trustee in its capacity
as such in accordance with the terms of the Indenture; |
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third, to amounts owing to any representative for Permitted Additional Pari Passu
Secured Obligations in its capacity as such in accordance with the terms of such Permitted
Additional Pari Passu Secured Obligations; |
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fourth, ratably to amounts owing to the holders of Second Lien Obligations in
accordance with the terms of the Security Documents and the Indenture; and |
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fifth, to the Company and/or other persons entitled thereto. |
None of the Collateral has been appraised in connection with the offering of the Notes. The
fair market value of the Collateral is subject to fluctuations based on factors that include, among
others, the condition of our industry, our ability to implement our business strategy, the ability
to sell the Collateral in an orderly sale, general economic conditions, the availability of buyers
and similar factors. The amount to be received upon a sale of the Collateral would be dependent on
numerous factors, including but not limited to the actual fair market value of the Collateral at
such time and the timing and the manner of the sale. By its nature, portions of the Collateral may
be illiquid and may have no readily ascertainable market value. Likewise, there can be no assurance
that the Collateral will be saleable, or, if saleable, that there will not be substantial delays in
its liquidation. In the event of a foreclosure, liquidation, bankruptcy or similar proceeding, we
cannot assure you that the proceeds from any sale or liquidation of the Collateral will be
sufficient to pay our obligations under the Notes. In addition, the fact that the First Priority
Creditors will receive proceeds from enforcement of the Collateral before Holders of the Notes,
that other Persons may have First Priority Liens in respect of Collateral subject to Permitted
Liens and that the Second Priority Lien held by the Collateral Agent will secure any Permitted
Additional Pari Passu Secured Obligations in addition to the Obligations under the Notes and the
Indenture could have a material adverse effect on the amount that Holders of the Notes would
receive upon a sale or other disposition of the Collateral. Accordingly, there can be no assurance
that proceeds of any sale of the Collateral pursuant to the Indenture and the related Security
Documents following an Event of Default would be sufficient to satisfy, or would not be
substantially less than, amounts due under the Notes. In addition, in the event of a bankruptcy,
the ability of the Holders to realize upon any of the Collateral may be subject to certain
bankruptcy law limitations as described below.
If the proceeds from a sale or other disposition of the Collateral were not sufficient to
repay all amounts due on the Notes, the Holders of the Notes (to the extent not repaid from the
proceeds of the sale of the Collateral) would have only an unsecured claim against the remaining
assets of the Company and the Subsidiary Guarantors.
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To the extent that Liens (including Permitted Liens), rights or easements granted to third
parties encumber assets located on property owned by the Company or the Subsidiary Guarantors,
including the Collateral, such third parties may exercise rights and remedies with respect to the
property subject to such Liens that could adversely affect the value of the Collateral and the
ability of the Collateral Agent, the Trustee or the Holders of the Notes to realize or foreclose on
Collateral.
Certain Bankruptcy Limitations
The right of the Collateral Agent to repossess and dispose of the Collateral upon the
occurrence of an Event of Default would be significantly impaired (or at a minimum delayed) by
bankruptcy law in the event that a bankruptcy case were to be commenced by or against the Company
or any Subsidiary Guarantor prior to the Collateral Agents having repossessed and disposed of the
Collateral. Upon the commencement of a case for relief under Title 11 of the United States Code, as
amended (the Bankruptcy Code), a secured creditor such as the Collateral Agent is prohibited from
repossessing its security from a debtor in a bankruptcy case, or from disposing of security without
bankruptcy court approval.
In view of the broad equitable powers of a U.S. bankruptcy court, it is impossible to predict
how long payments under the Notes could be delayed following commencement of a bankruptcy case,
whether or when the Collateral Agent could repossess or dispose of the Collateral, the value of the
Collateral at any time during a bankruptcy case or whether or to what extent Holders of the Notes
would be compensated (in the form of adequate protection or otherwise) for any delay in payment
or post-petition loss of value of the Collateral.
The Bankruptcy Code permits only the payment and/or accrual of post-petition interest, costs
and attorneys fees to a secured creditor during a debtors bankruptcy case to the extent the value
of such creditors interest in the Collateral, after taking into account the value of the first
lien interest, is determined by the bankruptcy court to exceed the aggregate outstanding principal
amount of such creditors obligations secured by the Collateral. Furthermore, in the event a
bankruptcy court determines that the value of the Collateral is not sufficient to repay all amounts
due on the Notes, the Holders of the Notes would hold secured claims only to the extent of the
value of the Collateral to which the Holders of the Notes are entitled, after taking into account
the value of the first lien interest, and unsecured claims with respect to such shortfall. Thus,
under federal bankruptcy laws, Holders of the Notes would not be entitled to receive either (a)
post-petition interest or applicable fees, costs or charges, or (b) adequate protection
on the unsecured portion of the notes. In addition, if any payments of post-petition interest had
been made at any time prior to such a finding of undercollateralization, those payments would be
recharacterized by the bankruptcy court as a reduction of the principal amount of the secured
claim.
Release of Liens
The Security Documents and the Indenture provide that the Second Priority Liens securing the
Subsidiary Guarantee of any Subsidiary Guarantor will be automatically released when such
Subsidiary Guarantors Subsidiary Guarantee is released in accordance with the terms of the
Indenture. In addition, the Second Priority Liens securing the Obligations under the Notes and the
Indenture will be released (a) in whole, upon a legal defeasance or a covenant defeasance of the
Notes as set forth below under Defeasance, (b) in whole, upon satisfaction and discharge of the
Indenture, (c) in whole, upon payment in full of principal, interest and all other Obligations on
the Notes issued under the Indenture, (d) in whole or in part, with the consent of the requisite
Holders of the Notes in accordance with the provisions under Modifications and Amendments,
including, without limitation, consents obtained in connection with a tender offer or exchange
offer for, or purchase of, Notes and (e) in part, as to any asset constituting Collateral (A) that
is sold or otherwise disposed of by the Company or any of the Subsidiary Guarantors in a
transaction permitted by Certain CovenantsLimitation on Asset Sales and by the Security
Documents (to the extent of the interest sold or disposed of) or otherwise permitted by the
Indenture and the Security Documents, if all other Liens on that asset securing the First Priority
Obligations and any Permitted Additional Pari Passu Secured Obligations then secured by that asset
(including all commitments thereunder) are released; (B) that is cash withdrawn from deposit
accounts for any purpose not prohibited under the Indenture or the Security Documents; (C) that is
Capital Stock of a Subsidiary of the Company to the extent necessary for such Subsidiary not to be
subject to any requirement pursuant to Rule 3-16 or Rule 3-10 of Regulation S-X under the
Securities Act, due to the fact that such Subsidiarys Capital Stock secures the Notes or
Subsidiary Guarantees, to file separate financial statements with the Securities and Exchange
Commission (or any other governmental agency); (D) that is used to make a Restricted Payment or
Permitted Investment permitted by the Indenture; (E) that becomes Excluded Property; (F) upon any
release, sale or disposition of Collateral permitted pursuant to the terms of the First Priority
Documents that results in the release of the First Priority Lien on any Collateral (including
without limitation any sale or other disposition pursuant to any enforcement action); provided,
however, that (i) if the First Priority Lien on any Collateral is released in connection with the
First Priority Obligations Payment Date (without a contemporaneous incurrence of
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new or replacement First Priority Obligations pursuant to a replacement First Priority Agreement permitted under the
Intercreditor Agreement), the Second Priority Lien on the Common Collateral will not be required to
be released (except to the extent the Collateral or any portion thereof was disposed of or
otherwise transferred or used in order to repay the First Priority Obligations secured by such
Collateral); or (G) that is otherwise released in accordance with, and as expressly provided for in
accordance with, the Indenture, the Security Documents and the Intercreditor Agreement.
To the extent applicable, the Company will comply with Section 313(b) of the TIA, relating to
reports, and, following qualification of the Indenture under the TIA (if required), Section 314(d)
of the TIA, relating to the release of property and to the substitution therefor of any property to
be pledged as Collateral for the Notes. Any certificate or opinion required by Section 314(d) of
the TIA may be made by an officer of the Company except in cases where Section 314(d) requires that
such certificate or opinion be made by an independent engineer, appraiser or other expert, who
shall be reasonably satisfactory to the Trustee. Until such time as we qualify the Indenture under
the TIA, Section 314(d) of the TIA will not apply to the Indenture. In every instance that the
Trustee or the Collateral Agent is asked to acknowledge a release, the Company shall deliver an
opinion and Officers Certificate stating that all conditions to the release in the Indenture, the
Security Documents and the Intercreditor Agreement have been satisfied. Notwithstanding anything to
the contrary herein, the Company and the Subsidiary Guarantors will not be required to comply with
all or any portion of Section 314(d) of the TIA if they determine, in good faith based on advice of
outside counsel, that under the terms of that section and/or any interpretation or guidance as to
the meaning thereof of the SEC and its staff, including no action letters or exemptive orders,
all or any portion of Section 314(d) of the TIA is inapplicable to the released Collateral. Without
limiting the generality of the foregoing, certain no-action letters issued by the SEC have
permitted an indenture qualified under the TIA to contain provisions permitting the release of
collateral from liens under such indenture in the ordinary course of business without requiring the
issuer to provide certificates and other documents under Section 314(d) of the TIA. In addition,
under interpretations provided by the SEC, to the extent that a release of a lien is made without
the need for consent by the noteholders or the trustee, the provisions of Section 314(d) may be
inapplicable to the release.
Intercreditor Agreement
The Company, the Subsidiary Guarantors, the Collateral Agent and the First Priority
Representative have entered into the Intercreditor Agreement, which establishes the second-priority
status of the Second Priority Liens relative to the First Priority Liens. In addition to the
provisions described above with respect to control of remedies and release of Collateral, the
Intercreditor Agreement also imposes certain other restrictions and agreements, including the
restrictions and agreements described below.
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Pursuant to the Intercreditor Agreement, the Collateral Agent, the Trustee, the Holders
of the Notes and the holders of any Permitted Additional Pari Passu Secured Obligations
agree that the First Priority Representative and the other First Priority Secured Parties
have no duties to them in respect of the maintenance or preservation of the Collateral. The
First Priority Representative has agreed in the Intercreditor Agreement to hold, until the
First Priority Obligations Payment Date, certain possessory collateral also for the benefit
of the Trustee, the Collateral Agent and the holders of the Second Lien Obligations. |
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In addition, the Collateral Agent, the Trustee and the Holders of the Notes and the
holders of any Permitted Additional Pari Passu Secured Obligations have agreed to not
institute any suit or other proceeding or assert in any suit, insolvency proceeding or
other proceeding any claim against any First Priority Secured Party seeking damages from or
other relief by way of specific performance, injunction or otherwise, with respect to, and
no First Priority Secured Party shall be liable for, any action taken or omitted to be
taken by any First Priority Secured Party with respect to, the Collateral or pursuant to
the First Priority Documents. They further agree not to seek, and waive, any right to have
the Collateral marshalled upon disposition or other foreclosure. |
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The Intercreditor Agreement provides for the right of the Collateral Agent and the
holders of Second Lien Obligations to exercise rights and remedies as unsecured creditors
against the Company or any Subsidiary Guarantor, subject to certain terms, conditions,
waivers and limitations as more fully set forth in the Intercreditor Agreement. |
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Pursuant to the Intercreditor Agreement, the Collateral Agent, for itself and on behalf
of the Holders of the Notes and the holders of any Permitted Additional Pari Passu Secured
Obligations, irrevocably appoints the First Priority Representative and any officer or
agent of the First Priority Representative, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the place of the
Collateral Agent or in the First Priority Representatives own name, from time to time in
the First Priority Representatives sole discretion, for the purpose of carrying out the
terms of the releases of the Second Priority Liens as permitted thereby, including releases
upon sales due to enforcement of remedies or otherwise provided for in the Intercreditor
Agreement, to take any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of such section
of the Intercreditor Agreement, including, without limitation, any financing statements,
endorsements, assignments, releases or other documents or instruments of transfer. |
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Notwithstanding anything to the contrary contained in any agreement or filing to which
any Second Priority Secured Party may now or hereafter be a party, and regardless of the
time, order or method of grant, attachment, recording or perfection of any financing
statements or other security interests, assignments, pledges, deeds, mortgages and other
liens, charges or encumbrances or any defect or deficiency or alleged defect or deficiency
in any of the foregoing, notwithstanding any provision of the Uniform Commercial Code or
any applicable law or any First Priority Document or Second Priority Document or any other
circumstance whatsoever, the First Priority Liens will rank senior to any Second Priority
Liens on the Collateral. The Collateral for the First Priority Liens, the Second Priority
Liens and the Permitted Additional Pari Passu Secured Obligations is intended at all times
to be the same; provided that the Excluded Property identified in clause (d) of the
definition of Excluded Property may secure the First Lien Obligations. |
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Any amendment, waiver or consent in respect of any First Priority Security Documents
shall automatically apply to any comparable provision of the Security Documents (subject to
certain exceptions). |
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The Trustee, the Collateral Agent, the Holders and the holders of any Permitted
Additional Pari Passu Secured Obligations agree that (i) in certain circumstances the
holders under the Senior Credit Facility are required by the terms thereof to be repaid
with proceeds of dispositions of Collateral prior to repayment of the Second Lien
Obligations and (ii) they will not accept payments from such dispositions of Collateral
until applied to repayment of the Senior Credit Facility as so required. The First Priority
Representative acknowledges that, except as otherwise set forth in the Intercreditor
Agreement, nothing in the Intercreditor Agreement shall prohibit the receipt by the Second
Priority Representative or any Holders of Notes of required payments under the Indenture so
long as (x) such receipt is not the direct or indirect result of the exercise by the Second
Priority Representative or any second priority creditors of rights or remedies as a secured
creditor (including set-off or recoupment) or enforcement of any Lien held by any of them
or (y) such payment or receipt of such payment is not otherwise in contravention of the
Intercreditor Agreement or any First Priority Document. The Trustee, the Collateral Agent,
the Holders and the holders of any Permitted Additional Pari Passu Secured Obligations
agree that if they receive payments at any time from the Collateral in violation of the
Intercreditor Agreement, they will promptly turn such payments over to the First Priority
Representative. |
In addition, if the Company or any Subsidiary Guarantor is subject to any Insolvency or
Liquidation Proceeding, the Collateral Agent, on behalf of the Holders and the holders of any
Permitted Additional Pari Passu Secured Obligations, agrees, among other things, that:
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it will not object to or otherwise contest (and, as necessary, will consent to) the
Companys or such Subsidiary Guarantors use of cash collateral if the First Lien
Obligation holders consent (or do not object) to such usage; |
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if the First Lien Obligation holders consent to a DIP financing, the Collateral Agent,
on behalf of the holders of the Second Lien Obligations, will be deemed to have consented
to, and will not object to, such DIP financing and to the priming of their Liens in
connection therewith in the event that the Liens in favor of the First Lien Obligation
holders are primed in connection with such DIP financing, so long as the maximum principal
amount of indebtedness that may be outstanding from time to time under such DIP financing
plus the aggregate principal amount of First Priority Obligations shall not exceed an
aggregate amount equal to $40.0 million in excess of the Maximum First Priority
Indebtedness amount; |
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none of them shall object, contest, or support any other person objecting to or
contesting, (a) any request by the First Priority Representative or the other First
Priority Secured Parties for adequate protection or any adequate protection provided to the
First Priority Representative or the other First Priority Secured Parties or (b) any
objection by the First Priority Representative or any other First Priority Secured Parties
to any motion, relief, action or proceeding based on a claim of a lack of adequate
protection or (c) the payment of interest, fees, expenses or other amounts to the First
Priority Representative or any other First Priority Secured Party; provided that under
certain circumstances (i) if the First Priority Secured Parties (or any subset thereof) are
granted adequate protection consisting of additional collateral (with replacement liens on
such additional collateral) and/or superpriority claims in connection with any DIP
financing or use of cash collateral, and the First Priority Representative does not file an
objection to the adequate protection being provided to them, then in connection with any
such DIP financing or use of cash collateral the Second Priority Representative, on behalf
of itself and any of the Second Priority Secured Parties, may seek or accept adequate
protection consisting (as applicable) of (x) a replacement Lien on the same additional
collateral, subordinated to the Liens securing the First Priority Obligations and such DIP
financing on the same basis as the other Liens securing the Second Priority Obligations are
so subordinated to the First Priority Obligations under this Agreement and/or (y)
superpriority claims junior in all respects to the superpriority claims granted to the
First Priority Secured Parties, subject to certain limitations set forth in the
Intercreditor Agreement; |
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none of them will seek relief from the automatic stay or from any other stay in any
Insolvency Proceeding or take any action in derogation thereof, in each case in respect of
any Collateral, without the prior written consent of the First Priority Representative; |
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they will not oppose any sale or other disposition of the Collateral consented to by
the First Lien Obligation holders and shall be deemed to have consented to under Section
373 of the Bankruptcy Code and released the Liens securing the Second Lien Obligations;
provided that the Liens of the Second Priority Secured Parties attach to the proceeds of
such sale to the same extent and junior priority as such Liens have with respect to the
Collateral; and |
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no Second Priority Secured Party shall support or vote in favor of any plan of
reorganization (and each shall be deemed to have voted to reject any plan of
reorganization) unless such plan (a) pays off, in cash in full, all First Priority
Obligations or (b) is accepted by the class of holders of First Priority Obligations voting
thereon in accordance with Bankruptcy Code § 1126 and is supported by the First Priority
Representative. |
No Impairment of the Security Interests
Neither the Company nor any of the Subsidiary Guarantors are permitted to take any action, or
knowingly or negligently omit to take any action, which action or omission might or would have the
result of materially impairing the security interest with respect to the Collateral for the benefit
of the Trustee, the Collateral Agent and the Holders of the Notes.
Further Assurances
Subject to the limitations described above under SecurityGeneral, the Security Documents
and the Indenture provide that the Company and the Subsidiary Guarantors shall, at their expense,
duly execute and deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such farther acts as may be necessary or
proper to evidence, perfect, maintain and enforce the Second Priority Lien in the Collateral
granted to the Collateral Agent and the priority thereof, and to otherwise effectuate the
provisions or purposes of the Indenture and the Security Documents.
Redemption
Optional Redemption. Except as described below, the Notes are not redeemable at our option
prior to November 1, 2012. On and after such date, the Notes will be subject to redemption at our
option, in whole or in part, at the redemption prices (expressed as percentages of the principal
amount of the Notes) set forth below, plus accrued and unpaid interest to the date fixed for
redemption, if redeemed during the period beginning on the dates indicated below:
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Year |
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Percentage |
November 1, 2012 |
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107.875 |
% |
May 1, 2013 |
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105.250 |
% |
May 1, 2014 and thereafter |
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100.000 |
% |
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Notwithstanding the foregoing, at any time prior to November 1, 2012, we may, at our option,
use the net proceeds of one or more Public Equity Offerings to redeem up to 35% of the aggregate
principal amount of the Notes (including Additional Notes, if any) originally issued, at a
redemption price equal to 110.500% of the principal amount thereof, together with accrued and
unpaid interest to the date fixed for redemption; provided, however, that at least 65% of the
aggregate principal amount of the Notes (including Additional Notes, if any) originally issued
remains outstanding immediately after any such redemption.
At any time prior to November 1, 2012, the Notes may be redeemed as a whole but not in part at
the option of the Company, upon not less than 30 or more than 60 days prior notice mailed by
first-class mail to each holders registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Make Whole Premium as of, and accrued but unpaid interest, if
any, to, the redemption date, subject to the right of holders on the relevant record date to
receive interest due on the relevant interest payment date.
Make Whole Premium means with respect to a Note at any redemption date, the greater of (i)
1.0% of the principal amount of such Note or (ii) the excess of (A) the present value of (1) the
redemption price of such Note at November 1, 2012 (such redemption price being set forth in the
table above) plus (2) all required interest payments due on such Note through November 1, 2012,
computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (B) the
principal amount of such Note.
Treasury Rate means the yield to maturity at the time of computation of United States
Treasury securities with a constant maturity (as compiled and published in the most recent Federal
Reserve Statistical Release H. 15(519) which has become publicly available at least two Business
Days prior to the redemption date or, if such Statistical Release is no longer published, any
publicly available source or similar market data) most nearly equal to the period from the
redemption date to November 1, 2012; provided, however, that if the period from the redemption date
to November 1, 2012 is not equal to the constant maturity of a United States Treasury security for
which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if the period from the redemption
date to November 1, 2012 is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be used.
Selection and Notice. If less than all of the Notes are to be redeemed at any time, selection
of the Notes to be redeemed will be made by the Trustee, on behalf of the Company, in compliance
with the requirements of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not listed on a securities exchange by the Trustee, on behalf of the
Company, on a pro rata basis, by lot or by any other method as the Trustee shall deem fair and
appropriate; provided that a redemption pursuant to the provisions relating to Public Equity
Offerings will be on a pro rata basis. Notes redeemed in part shall only be redeemed in integral
multiples of $1,000. Notices of any redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each holder of Notes to be redeemed at such
holders registered address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount thereof to be redeemed,
and the Trustee shall authenticate and deliver to the holder of the original Note a new Note in
principal amount equal to the unredeemed portion of the original Note promptly after the original
Note has been cancelled. On and after the redemption date, interest will cease to accrue on Notes
or portions thereof called for redemption.
Change of Control
In the event of a Change of Control (as defined herein), the Company will make an offer to
purchase all of the then outstanding Notes at a purchase price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest to the date of purchase, in
accordance with the terms set forth below (a Change of Control Offer).
Within 30 days after any Change of Control, we will mail to each holder of Notes at such
holders registered address a notice stating: (i) that a Change of Control has occurred and that
such holder has the right to require the Company to purchase all or a portion (equal to $1,000 or
an integral multiple thereof) of such holders Notes at a purchase price in cash equal to 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest to the date of purchase
(the Change of Control Purchase Date), which shall be a Business Day, specified in such notice,
that is not earlier than 30 days or later than 60 days from the date such notice is mailed, (ii)
the amount of accrued and unpaid interest as of the Change of Control Purchase Date, (iii) that any
Note not tendered will continue to accrue interest, (iv) that, unless the Company defaults in the
payment of the purchase price for the Notes payable pursuant to the Change of Control Offer, any
Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest
on and after the Change of Control Purchase Date, (v) the procedures, consistent with the
Indenture, to be followed by a holder of Notes in order to accept a Change of Control Offer or to
withdraw such acceptance, and (vi) such other information as may be required by the Indenture and
applicable laws and regulations.
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On the Change of Control Purchase Date, we will (i) accept for payment all Notes or portions
thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent the
aggregate purchase price of all Notes or portions thereof accepted for payment and any accrued and
unpaid interest on such Notes as of the Change of Control Purchase Date, and (iii) deliver or cause
to be delivered to the Trustee for cancellation all Notes tendered pursuant to the Change of
Control Offer. The Paying Agent shall promptly deliver to each holder of Notes or portions thereof
accepted for payment an amount equal to the purchase price for such Notes plus any accrued and
unpaid interest thereon to the Change of Control Purchase Date, and the Trustee shall promptly
authenticate and deliver to such holder of Notes accepted for payment in part a new Note equal in
principal amount to any unpurchased portion of the Notes, and any Note not accepted for payment in
whole or in part for any reason consistent with the Indenture shall be promptly returned to the
holder of such Note. On and after a Change of Control Purchase Date, interest will cease to accrue
on the Notes or portions thereof accepted for payment, unless the Company defaults in the payment
of the purchase price therefor. We will announce the results of the Change of Control Offer to
holders of the Notes on or as soon as practicable after the Change of Control Purchase Date.
We will comply with the applicable tender offer rules, including the requirements of Rule
14e-1 under the Exchange Act, and all other applicable securities laws and regulations in
connection with any Change of Control Offer.
The Change of Control provision will not require us to make a Change of Control Offer upon the
consummation of any transaction contemplated by clause (b) of the definition of Change of Control
if the party that will own, directly or indirectly, more than 50% of the Voting Stock of the
Company as a result of such transaction is J. Mack Robinson, Robert S. Prather, Jr. or certain
other persons, entities or groups affiliated with or controlled by either of them. See Certain
DefinitionsPermitted Holders. J. Mack Robinson and Robert S. Prather are directors of the
Company. As a result of the definition of Permitted Holders, a concentration of control in the
hands of Permitted Holders would not give rise to a situation where holders could have their Notes
repurchased pursuant to a Change of Control Offer. As of April 16, 2010, Mr. Robinson was the
beneficial owner of approximately 39% of the outstanding Voting Stock.
The Change of Control provision and the other covenants that limit the ability of the Company
to incur debt may not necessarily afford holders protection in the event of a highly leveraged
transaction, such as a reorganization, merger or similar transaction involving the Company that may
adversely affect holders, because such transactions may not involve a concentration in voting power
or beneficial ownership, or, if there were such a concentration, may not involve a concentration of
the magnitude required under the definition of Change of Control.
With respect to the sale of substantially all the assets of the Company, which would
constitute a Change of Control for purposes of the Indenture, the meaning of the phrase
substantially all varies according to the facts and circumstances of the subject transaction, has
no clearly established meaning under relevant law and is subject to judicial interpretation.
Accordingly, in certain circumstances there may be a degree of uncertainty in ascertaining whether
a particular transaction would involve a disposition of substantially all of the assets of the
Company and, therefore, it may be unclear whether a Change of Control has occurred and whether the
Notes should be subject to a Change of Control Offer. Further, Change of Control will be defined in
the Indenture to include any transaction as a result of which individuals who constitute a majority
of the board of directors of the Company together with directors approved by such directors or by
the Permitted Holders cease for any reasons to constitute a majority of directors. See Certain
Definitions. In a recent decision, the Chancery Court of Delaware raised the possibility that a
change of control as a result of a failure to have continuing directors comprising a majority of
the board of directors may be unenforceable on public policy grounds. Accordingly, in certain
circumstances there may be a degree of uncertainty in ascertaining whether a Change of Control has
occurred and whether the Company is required to make a Change of Control Offer following a
transaction that results in such a change in the board of directors of the Company.
Certain Covenants
Limitation on Incurrence of Indebtedness. The Indenture provides that the Company will not,
and will not permit any of its Restricted Subsidiaries to, create, incur, assume or directly or
indirectly guarantee or in any other manner become directly or indirectly liable for (incur) any
Indebtedness (including Acquired Debt) if, immediately after giving pro forma effect to such
incurrence and the application of the proceeds thereof, the Debt to Operating Cash Flow Ratio of
the Company and its Restricted Subsidiaries is more than 7.0 to 1.0.
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The foregoing limitations will not apply to the incurrence of any of the following
(collectively, Permitted Indebtedness):
(i) Indebtedness of the Company incurred under Senior Credit Facilities in an aggregate
principal amount at any time outstanding not to exceed the sum of (x) $516.0 million and (y)
$75.0 million of extensions of credit under revolving facilities under Senior Credit Facilities,
less the aggregate amount of all Net Proceeds of Asset Sales applied by the Company or any of
its Restricted Subsidiaries since the Issue Date to repay any term loans thereunder or to repay
revolving loans thereunder and effect a corresponding commitment reduction thereunder pursuant
to and in accordance with the covenant described under Certain CovenantsLimitation on Asset
Sales;
(ii) Indebtedness of any Subsidiary Guarantor consisting of a guarantee of Indebtedness of
the Company under the Senior Credit Facility;
(iii) Indebtedness of the Company represented by (a) the Notes issued on the Issue Date and
exchange notes issued therefor and (b) Indebtedness of any Subsidiary Guarantor represented by a
Subsidiary Guarantee in respect therefor or in respect of Additional Notes incurred in
accordance with the Indenture;
(iv) Indebtedness owed by any Subsidiary Guarantor to the Company or to another Subsidiary
Guarantor, or owed by the Company to any Subsidiary Guarantor; provided that any such
Indebtedness shall be held by a Person which is either the Company or a Subsidiary Guarantor;
and provided, further, that an incurrence of additional Indebtedness which is not permitted
under this clause (iv) shall be deemed to have occurred upon either (a) the transfer or other
disposition of any such Indebtedness to a Person other than the Company or another Subsidiary
Guarantor or (b) the sale, lease, transfer or other disposition of shares of Capital Stock
(including by consolidation or merger) of any such Subsidiary Guarantor to a Person other than
the Company or another Subsidiary Guarantor such that such Subsidiary Guarantor ceases to be a
Subsidiary Guarantor;
(v) Indebtedness of any Subsidiary Guarantor consisting of guarantees of any Indebtedness
of the Company or another Subsidiary Guarantor which Indebtedness of the Company or another
Subsidiary Guarantor has been incurred in accordance with the provisions of the Indenture;
(vi) Indebtedness arising with respect to Interest Rate Agreement Obligations incurred for
the purpose of hedging interest rate risk with respect to any Indebtedness (and not for
speculative purposes) that is permitted by the terms of the Indenture to be outstanding;
provided, however, that the notional principal amount of such Interest Rate Agreement Obligation
does not exceed the principal amount of the Indebtedness to which such Interest Rate Agreement
Obligation relates;
(vii) Permitted Purchase Money Indebtedness, Capital Lease Obligations and mortgage
financings so long as the aggregate amount of all such Permitted Purchase Money Indebtedness,
Capital Lease Obligations and mortgage financings does not exceed $15.0 million at any one time
outstanding;
(viii) Acquisition Debt of an Issuer or a Restricted Subsidiary if (w) such Acquisition
Debt is incurred within 270 days after the date on which the related definitive acquisition
agreement or LMA, as the case may be, was entered into by the Company or such Restricted
Subsidiary, (x) the aggregate principal amount of such Acquisition Debt is no greater than the
aggregate principal amount of Acquisition Debt set forth in a notice from the Company to the
Trustee (an Incurrence Notice) within ten days after the date on which the related definitive
acquisition agreement or LMA, as the case may be, was entered into by the Company or such
Restricted Subsidiary, which notice shall be executed on the Companys behalf by the chief
financial officer of the Company in such capacity and shall describe in reasonable detail the
acquisition or LMA, as the case may be, which such Acquisition Debt will be incurred to finance,
(y) after giving pro forma effect to the acquisition or LMA, as the case may be, described in
such Incurrence Notice, the Company or such Restricted Subsidiary could have incurred such
Acquisition Debt under the Indenture as of the date upon which the Company delivers such
Incurrence Notice to the Trustee and (z) such Acquisition Debt is utilized solely to finance the
acquisition or LMA, as the case may be, described in such Incurrence Notice (including to repay
or refinance Indebtedness or other obligations incurred in connection with such acquisition or
LMA, as the case may be, and to pay related fees and expenses);
(ix) Refinancing Indebtedness in respect of Indebtedness permitted by the first paragraph
of this covenant, clause (iii) above, clause (viii) above, this clause (ix) or clause (x) below;
(x) Indebtedness of the Company or any Subsidiary Guarantor existing on the Issue Date;
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(xi) Indebtedness consisting of customary indemnification, adjustments of purchase price or
similar obligations, in each case, incurred or assumed in connection with the acquisition of any
business or assets;
(xii) Indebtedness incurred by the Company or any Restricted Subsidiary constituting
reimbursement obligations with respect to letters of credit issued in the ordinary course of
business, including without limitation to letters of credit in respect to workers compensation
claims or self-insurance, or other Indebtedness with respect to reimbursement type obligations
regarding workers compensation claims; provided, however, that upon the drawing of such letters
of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days
following such drawing or incurrence;
(xiii) Obligations in respect of performance and surety bonds and completion guarantees
provided by the Company or any Restricted Subsidiary in the ordinary course of business;
(xiv) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness
arising from customary cash management services or the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn against insufficient
funds, so long as such Indebtedness is covered within five Business Days;
(xv) unsecured Indebtedness of the Company owing to any then existing or former director,
officer or employee of the Company or any of its Restricted Subsidiaries or their respective
assigns, estates, heirs or their current or former spouses for the repurchase, redemption or
other acquisition or retirement for value of any Capital Stock held by them that would have
otherwise been permitted pursuant to clause (vii) of the second paragraph of the covenant
described above under the caption Limitation on Restricted Payments;
(xvi) Indebtedness of the Company or any Subsidiary Guarantor incurred to finance the
redemption, repurchase or other repayment of the Companys Series D perpetual preferred stock
outstanding after giving effect to the transactions contemplated by the Offering Memorandum,
dated April 21, 2010, relating to the offering of the original notes (the Offering Memorandum)
(including the use of proceeds of the Notes), in an aggregate principal amount not to exceed an
amount equal to 100% of the fair market value (measured on the basis of its then-current market
price) of Capital Stock of the Company (other than Disqualified Stock) issued prior to or
concurrently with the incurrence of such Indebtedness which was issued or the proceeds of which
was used in connection with the redemption, repurchase or other repayment of Series D perpetual
preferred stock outstanding on the Issue Date after giving effect to the transactions
contemplated by the Offering Memorandum; provided that immediately after giving pro forma effect
to such incurrence and the application of the proceeds thereof, the Debt to Operating Cash Flow
Ratio of the Company and its Restricted Subsidiaries is not more than 7.5 to 1.0; provided
further that the proceeds of any such Capital Stock issuance shall not increase the amount
available under clause (iii) under Limitation on Restricted Payments; and
(xvii) Indebtedness of the Company and its Restricted Subsidiaries in addition to that
described in clauses (i) through (xvi) above, and any renewals, extensions, substitutions,
refundings, refinancings or replacements of such Indebtedness, so long as the aggregate
principal amount of all such Indebtedness incurred pursuant to this clause (xvi) does not exceed
$15.0 million at any one time outstanding.
For purposes of determining compliance with this covenant:
(1) In the event that an item of Indebtedness meets the criteria of more than one of the
categories of Indebtedness permitted pursuant to clauses (i) through (xvii) above, the Company
shall, in its sole discretion, be permitted to classify such item of Indebtedness in any manner
that complies with this covenant and may from time to time reclassify such items of Indebtedness
in any manner that would comply with this covenant at the time of such reclassification;
(2) Indebtedness permitted by this covenant need not be permitted solely by reference to
one provision permitting such Indebtedness but may be permitted in part by one such provision
and in part by one or more other provisions of this covenant permitting such Indebtedness;
(3) In the event that Indebtedness meets the criteria of more than one of the types of
Indebtedness described in this covenant, the Company, in its sole discretion, shall classify
such Indebtedness and only be required to include the amount of such Indebtedness in one of such
clauses; and
(4) Accrual of interest (including interest paid-in-kind) and the accretion of accreted
value will not be deemed to be an incurrence of Indebtedness for purposes of this covenant.
85
Notwithstanding any other provision of this covenant:
(1) The maximum amount of Indebtedness that the Company or any Restricted Subsidiary of the
Company may incur pursuant to this covenant shall not be deemed to be exceeded solely as a
result of fluctuations in the exchange rate of currencies; and
(2) Indebtedness incurred pursuant to the Senior Credit Facility prior to or on the date of
the Indenture shall be treated as incurred pursuant to clause (i) of the first paragraph of this
covenant.
Limitation on Restricted Payments. The Indenture provides that the Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, make any Restricted
Payment, unless at the time of and immediately after giving effect to the proposed Restricted
Payment (with the value of any such Restricted Payment, if other than cash, to be determined by the
Board of Directors of the Company in good faith and which determination shall be conclusive and
evidenced by a board resolution),
(i) no Default or Event of Default shall have occurred and be continuing or would occur as a
consequence thereof,
(ii) the Company could incur at least $1.00 of additional Indebtedness pursuant to the first
paragraph under Limitation on Incurrence of Indebtedness, and
(iii) the aggregate amount of all Restricted Payments made after the Issue Date shall not
exceed the sum of (without duplication):
(a) an amount equal to the Companys Cumulative Operating Cash Flow less 1.4 times the
Companys Cumulative Consolidated Interest Expense, plus
(b) the aggregate amount of all net cash proceeds received after the Issue Date by the
Company from (x) the issuance and sale (other than to a Subsidiary of the Company) of Capital
Stock of the Company (other than Disqualified Stock) to the extent that such proceeds are not
used to redeem, repurchase, retire or otherwise acquire Capital Stock or any Indebtedness of the
Company or any Subsidiary of the Company pursuant to clause (ii) of the next paragraph or (y)
Indebtedness of the Company issued since the Issue Date (other than to Subsidiaries) that have
been converted into Capital Stock of the Company (other than Disqualified Stock), plus
(c) to the extent that any Unrestricted Subsidiary is redesignated as a Restricted
Subsidiary after the Issue Date, 100% of the fair market value of such Subsidiary as of the date
of such redesignation, plus
(d) the aggregate amount returned in cash with respect of Investments (other than Permitted
Investments) made after the Issue Date whether through interest payments, principal payments,
dividends or other distributions, plus
(e) in the case of the disposition or repayment of any Investment for cash, which
Investment constituted a Restricted Payment made after the Issue Date, an amount equal to the
return of capital with respect to such Investment, reduced (but not below zero) by the excess,
if any, of the cost of the disposition of such Investment over the gain, if any, realized by the
Company or such Restricted Subsidiary in respect of such disposition.
The foregoing provisions will not prohibit, so long as there is no Default or Event of Default
continuing, the following actions (collectively, Permitted Payments):
(i) the payment of any dividend within 60 days after the date of declaration thereof, if at
such declaration date such payment would have been permitted under the Indenture;
(ii) the redemption, repurchase, retirement, defeasance or other acquisition of any Capital
Stock or any Indebtedness of the Company in exchange for, or out of the proceeds of the sale
(other than to a Subsidiary of the Company), within six months prior to the consummation of such
redemption, repurchase, retirement, defeasance or other such acquisition of any Capital Stock or
Indebtedness of the Company, of Capital Stock of the Company (other than any Disqualified
Stock);
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(iii) the repurchase, redemption or other repayment of any Subordinated Debt of the Company
or a Subsidiary Guarantor in exchange for, by conversion into or solely out of the proceeds of
the substantially concurrent sale (other than to a Subsidiary of the Company) of Subordinated
Debt of the Company or such Subsidiary Guarantor with a Weighted Average Life to Maturity equal
to or greater than the then remaining Weighted Average Life to Maturity of the Subordinated Debt
repurchased, redeemed or repaid;
(iv) Restricted Investments received as consideration in connection with an Asset Sale made
in compliance with the Indenture;
(v) the making of a Restricted Investment out of the proceeds of the sale (other than to a
Subsidiary of the Company) within one year prior to the making of such Restricted Investment of
Capital Stock of the Company (other than any Disqualified Stock);
(vi) the payment of any dividend or distribution by a Subsidiary that is a Qualified Joint
Venture to the holders of its Capital Stock on a pro rata basis;
(vii) the repurchase, redemption or other acquisition or retirement for value of any
Capital Stock of the Company to effect the repurchase, redemption, acquisition or retirement of
Capital Stock that is held by any member or former member of the Companys (or any Subsidiarys)
management, or by any of its respective directors, employees or consultants; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or retired Capital Stock may
not exceed the sum of $1.0 million in any calendar year (with unused amounts in any calendar
year being available to be so utilized in succeeding calendar years);
(viii) repurchases of Capital Stock of the Company deemed to occur upon the exercise of
stock options;
(ix) payments or distributions to dissenting stockholders pursuant to applicable law in
connection with a consolidation, merger, or transfer of assets that complies with the provision
of the Indenture applicable to mergers, consolidations and transfers of all or substantially all
of the property and assets of the Company;
(x) Restricted Payments consisting of the redemption, repurchase or other repayment of a
portion of the Companys Series D perpetual preferred stock as set forth under Use of Proceeds
in connection with the transactions contemplated by the Offering Memorandum;
(xi) Restricted Payments using the proceeds of Indebtedness incurred under clause (xvi) of
the second paragraph under Limitation on Incurrence of Indebtedness used to fund the
redemption, repurchase or other repayment of the Companys Series D perpetual preferred stock
outstanding on the Issue Date after giving effect to the transactions contemplated by the
Offering Memorandum; provided that immediately after giving pro forma effect to such Restricted
Payment, the Debt to Operating Cash Flow Ratio of the Company and its Restricted Subsidiaries is
not more than 7.5 to 1.0; and
(xii) other Restricted Payments not to exceed $10.0 million in the aggregate.
In computing the amount of Restricted Payments for purposes of clause (iii) of the second
preceding paragraph, Restricted Payments made under clauses (i), (v), (vii), (ix) and (xi) of the
preceding paragraph shall be included and Restricted Payments made under clauses (ii), (iii), (iv),
(vi), (viii), (x) and (xii) of the preceding paragraph shall not be included.
Limitation on Asset Sales. The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, make any Asset Sale unless (i) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at
least equal to the fair market value (determined by the Board of Directors of the Company in good
faith, which determination shall be evidenced by a board resolution) of the assets or other
property sold or disposed of in the Asset Sale, (ii) at least 75% of such consideration is in the
form of cash or Cash Equivalents or assets used or useful in the business of the Company and (iii)
if such Asset Sale involves the disposition of Collateral, the Company or such Restricted
Subsidiary has complied with the provisions of the Indenture and the Security Documents; provided
that for purposes of this covenant cash shall include the amount of any liabilities (other than
liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) of the
Company or such Subsidiary (as shown on the Companys or such Restricted Subsidiarys most recent
balance sheet or in the notes thereto) that are assumed by the transferee of any such assets or
other property in such Asset Sale (and excluding any liabilities that are incurred in connection
with or in anticipation of such Asset Sale), but only to the extent that such assumption is
effected on a basis under which there is no further recourse to the Company or any of its
Subsidiaries with respect to such liabilities.
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Notwithstanding clause (ii) above, (a) all or a portion of the consideration for any such
Asset Sale may consist of all or substantially all of the assets or a majority of the Voting Stock
of an existing television business, franchise or station (whether existing as a separate entity,
subsidiary, division, unit or otherwise) or any business directly related thereto and (b) the
Company may, and may permit its Subsidiaries to, issue shares of Capital Stock in a Qualified Joint
Venture to a Qualified Joint Venture Partner without regard to clause (ii) above; provided that, in
the case of any of (a) or (b) of this sentence after giving effect to any such Asset Sale and
related acquisition of assets or Voting Stock, (x) no Default or Event of Default shall have
occurred or be continuing; and (y) the Net Proceeds of any such Asset Sale, if any, are applied in
accordance with this covenant.
Within 360 days after any Asset Sale (or such shorter period as the Company in its sole
election may determine), the Company may elect to apply or cause to be applied the Net Proceeds
from such Asset Sale to (a) repay First Lien Obligations, (b) make an investment in, or acquire
assets directly related to, the business of the Company and its Subsidiaries existing on the Issue
Date; provided that if such Net Cash Proceeds are received in respect of Collateral, such assets
are pledged as Collateral under the Security Documents and/or (c) to make capital expenditures in
or that is used or useful in the business or to make capital expenditures for maintenance, repair
or improvement of existing assets in accordance with the terms of the Indenture. Any Net Proceeds
from an Asset Sale not applied or invested as provided in the first sentence of this paragraph
within 360 days (or such shorter period as the Company in its sole election may determine) of such
Asset Sale will be deemed to constitute Excess Proceeds on the 361st day after such Asset Sale.
As soon as practical, but in no event later than 20 Business Days after any date (an Asset
Sale Offer Trigger Date) that the aggregate amount of Excess Proceeds exceeds $10.0 million, the
Company shall commence an offer to purchase to all Holders of Notes (an Asset Sale Offer) at a
price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest to
the date of purchase and (x) in the case of Net Proceeds from Collateral, to the holders of any
other Permitted Additional Pari Passu Secured Obligations containing provisions similar to those
set forth in the Indenture with respect to asset sales or (y) in the case of any other Net
Proceeds, to all holders of other Indebtedness ranking pari passu with the Notes containing
provisions similar to those set forth in the Indenture with respect to asset sales, in each case,
equal to the Excess Proceeds. If the aggregate principal amount of Notes and other Permitted
Additional Pari Passu Secured Obligations (in the case of Net Proceeds from Collateral) or Notes
and other pari passu debt (in the case of any other Net Proceeds) tendered into such Offer to
Purchase exceeds the amount of Excess Proceeds, the Trustee will select the Notes and the Company
or its agent shall select the other Permitted Additional Pari Passu Secured Obligations or other
pari passu debt, as the case may be, to be purchased on a pro rata basis. Upon completion of each
Offer to Purchase, the amount of Excess Proceeds will be reset at zero. To the extent that any
Excess Proceeds remain after completion of an Asset Sale Offer, the Company may use the remaining
amount for general corporate purposes and such amount shall no longer constitute Excess Proceeds.
In connection with an Asset Sale Offer, the Company shall mail to each holder of Notes at such
holders registered address a notice stating: (i) that an Asset Sale Offer Trigger Date has
occurred and that the Company is offering to purchase the maximum principal amount of Notes that
may be purchased out of the Excess Proceeds (and identifying other Indebtedness, if any, that is
entitled to participate pro rata in the Offer), at an offer price in cash equal to 100% of the
principal amount thereof, plus accrued and unpaid interest to the date of purchase (the Asset Sale
Offer Purchase Date), which shall be a Business Day, specified in such notice, that is not earlier
than 30 days or later than 60 days from the date such notice is mailed, (ii) the amount of accrued
and unpaid interest as of the Asset Sale Offer Purchase Date, (iii) that any Note not tendered will
continue to accrue interest, (iv) that, unless the Company defaults in the payment of the purchase
price for the Notes payable pursuant to the Asset Sale Offer, any Notes accepted for payment
pursuant to the Asset Sale Offer shall cease to accrue interest after the Asset Sale Offer Purchase
Date, (v) the procedures, consistent with the Indenture, to be followed by a holder of Notes in
order to accept an Asset Sale Offer or to withdraw such acceptance, and (vi) such other information
as may be required by the Indenture and applicable laws and regulations.
On the Asset Sale Offer Purchase Date, the Company will (i) accept for payment the maximum
principal amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer that can be
purchased out of Excess Proceeds from such Asset Sale, (ii) deposit with the Paying Agent the
aggregate purchase price of all Notes or portions thereof accepted for payment and any accrued and
unpaid interest on such Notes as of the Asset Sale Offer Purchase Date, and (iii) deliver or cause
to be delivered to the Trustee all Notes tendered pursuant to the Asset Sale Offer. If less than
all Notes tendered pursuant to the Asset Sale Offer are accepted for payment by the Company for any
reason consistent with the Indenture, selection of the Notes to be purchased by the Company shall
be in compliance with the requirements of the principal national securities exchange, if any, on
which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or by
such method as the Trustee shall deem fair and appropriate; provided that Notes accepted for
payment in part shall only be purchased in integral multiples of $1,000. The Paying Agent shall
promptly mail to each holder of Notes or portions thereof accepted for payment an amount equal to
the purchase price for such Notes plus any accrued and unpaid interest thereon, and the Trustee
shall promptly authenticate and mail to such holder of Notes accepted for payment in part
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a new Note equal in principal amount to any unpurchased portion of the Notes, and any Note not
accepted for payment in whole or in part shall be promptly returned to the holder of such Note. On
and after an Asset Sale Offer Purchase Date, interest will cease to accrue on the Notes or portions
thereof accepted for payment, unless the Company defaults in the payment of the purchase price
therefor. The Company will announce the results of the Asset Sale Offer to holders of the Notes on
or as soon as practicable after the Asset Sale Offer Purchase Date.
The Company will comply with the applicable tender offer rules, including the requirements of
Rule 14e-1 under the Exchange Act, and all other applicable securities laws and regulations in
connection with any Asset Sale Offer. To the extent that the provisions of any applicable
securities laws or regulations conflict with the Asset Sale Offer provisions of the Indenture, the
Company will comply with the applicable securities laws and regulations and shall not be deemed to
have breached their obligations under the Asset Sale Offer provisions of the Indenture by virtue of
such compliance.
The Senior Credit Facility limits the Company from purchasing any Notes, and also provides
that certain asset sale events with respect to the Company would constitute a default under the
Senior Credit Facility. Any future credit agreements or other agreements to which the Company
becomes a party may contain similar restrictions and provisions. In the event an Asset Sale
generating Excess Proceeds occurs at a time when the Company is prohibited from purchasing Notes,
the Company could seek the consent of its senior lenders to the purchase of Notes or could attempt
to refinance the borrowings that contain such prohibition. If the Company does not obtain such a
consent or repay such borrowings, the Company will remain prohibited from purchasing Notes. In such
case, the Companys failure to purchase tendered Notes would constitute an Event of Default under
the Indenture which would, in turn, constitute a default under such other agreements.
Events of Loss. In the event of an Event of Loss resulting in Net Loss Proceeds in excess of
$5.0 million, the Company or the affected Restricted Subsidiary of the Company, as the case may be,
may (and to the extent required pursuant to the terms of any lease encumbered by a mortgage shall)
apply the Net Loss Proceeds from such Event of Loss to (i) repay First Lien Obligations and/or (ii)
the rebuilding, repair, replacement or construction of improvements to the property affected by
such Event of Loss (the Subject Property), with no concurrent obligation to offer to purchase any
of the Notes; provided, however, that the Company delivers to the Trustee within 90 days of such
Event of Loss an Officers Certificate certifying that the Company has applied (or will apply after
receipt of any anticipated insurance or similar proceeds) the Net Loss Proceeds or other sources in
accordance with this sentence.
Any Net Loss Proceeds that are not reinvested or not permitted to be reinvested as provided in
the first sentence of this covenant will be deemed Excess Loss Proceeds. When the aggregate
amount of Excess Loss Proceeds exceeds $10.0 million, the Company will make an offer (an Event of
Loss Offer) to all Holders and to the holders of any other Permitted Additional Pari Passu Secured
Obligations containing provisions similar to those set forth in the Indenture with respect to
events of loss to purchase or repurchase the Notes and such other Permitted Additional Pari Passu
Secured Obligations with the proceeds from the Event of Loss in an amount equal to the maximum
principal amount of Notes and such other Permitted Additional Pari Passu Secured Obligations that
may be purchased out of the Excess Loss Proceeds. The offer price in any Event of Loss Offer will
be equal to 100% of the principal amount plus accrued and unpaid interest if any, to the date of
purchase, and will be payable in cash. If any Excess Loss Proceeds remain after consummation of an
Event of Loss Offer, the Company may use such Excess Loss Proceeds for any purpose not otherwise
prohibited by the Indenture and the Security Documents and such remaining amount shall not be added
to any subsequent Excess Loss Proceeds for any purpose under the Indenture; provided that any
remaining Excess Loss Proceeds shall remain subject to the Lien of the Security Documents. If the
aggregate principal amount of Notes and other Permitted Additional Pari Passu Secured Obligations
tendered pursuant to an Event of Loss Offer exceeds the Excess Loss Proceeds, the Trustee will
select the Notes and the Company or its agent shall select such other Permitted Additional Pari
Passu Secured Obligations to be purchased on a pro rata basis based on the principal amount
tendered.
The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws or regulations are
applicable in connection with the offer to repurchase the Notes pursuant to an Event of Loss Offer.
To the extent that the provisions of any applicable securities laws or regulations conflict with
the Event of Loss provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and shall not be deemed to have breached their obligations under
the Event of Loss provisions of the Indenture by virtue of such compliance.
Limitation on Liens. The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, enter into, create, incur, assume or suffer to
exist any Liens of any kind, on or with respect to the Collateral except Permitted Collateral
Liens. Subject to the immediately preceding sentence, the Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, enter into, create, incur, assume or suffer to
exist any Liens of any kind, other than Permitted Liens, on or with respect to any of its property
or assets now owned or hereafter acquired or any interest therein or any income or profits
therefrom other than the Collateral without securing the Notes and all other amounts due under the
Indenture and the Security Documents (for so long as such Lien exists) equally and ratably with (or
prior to) the obligation or liability secured by such Lien.
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Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries. The Indenture
provides that the Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any Restricted Subsidiary of the Company to (i) pay
dividends or make any other distributions to the Company or any other Restricted Subsidiary of the
Company on its Capital Stock or with respect to any other interest or participation in, or measured
by, its profits, or pay any Indebtedness owed to the Company or any other Restricted Subsidiary of
the Company, (ii) make loans or advances to the Company or any other Restricted Subsidiary of the
Company, or (iii) transfer any of its properties or assets to the Company or any other Restricted
Subsidiary of the Company (collectively, Payment Restrictions), except for such encumbrances or
restrictions existing on the Issue Date or otherwise existing under or by reason of (a) the Senior
Credit Facility as in effect on the Issue Date, and any amendments, restatements, renewals,
replacements or refinancings thereof; provided that such amendments, restatements, renewals,
replacements or refinancings are no more restrictive in the aggregate with respect to such dividend
and other payment restrictions than those contained in the Senior Credit Facility immediately prior
to any such amendment, restatement, renewal, replacement or refinancing, (b) applicable law, (c)
any instrument governing Indebtedness or Capital Stock of an Acquired Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except
to the extent such Indebtedness was incurred in connection with such acquisition); provided that
such restriction is not applicable to any Person, or the properties or assets of any Person, other
than the Acquired Person, (d) customary non-assignment provisions in leases entered into in the
ordinary course of business, (e) purchase money Indebtedness for property acquired in the ordinary
course of business that only impose restrictions on the property so acquired (and proceeds
generated therefrom), (f) an agreement for the sale or disposition of the Capital Stock or assets
of such Restricted Subsidiary; provided that such restriction is only applicable to such Restricted
Subsidiary or assets, as applicable, and such sale or disposition otherwise is permitted under the
covenant described under Limitation on Asset Sales; and provided further that such restriction
or encumbrance shall be effective only for a period from the execution and delivery of such
agreement through a termination date not later than 365 days after such execution and delivery, and
(g) Refinancing Indebtedness permitted under the Indenture; provided that the restrictions
contained in the agreements governing such Refinancing Indebtedness are not more restrictive in the
aggregate than those contained in the agreements governing the Indebtedness being refinanced
immediately prior to such refinancing.
Limitation on Transactions with Affiliates. The Indenture provides that the Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or
suffer to exist any transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with any Affiliate of the
Company or any beneficial owner of ten percent or more of any class of Capital Stock of the Company
or any Restricted Subsidiary unless:
(i) such transaction or series of transactions is on terms that are no less favorable to
the Company or such Restricted Subsidiary, as the case may be, than would reasonably be expected
to be available in a comparable transaction in arms-length dealings with an unrelated third
party, and
(ii) (a) with respect to any transaction or series of transactions involving aggregate
payments in excess of $5.0 million, the Company delivers an officers certificate to the Trustee
certifying that such transaction or series of related transactions complies with clause (i)
above and such transaction or series of related transactions has been approved by a majority of
the members of the Board of Directors of the Company (and approved by a majority of the
Independent Directors or, in the event there is only one Independent Director, by such
Independent Director), and (b) with respect to any transaction or series of transactions
involving aggregate payments in excess of $10.0 million, the Company delivers to the Trustee an
opinion to the effect that such transaction or series of transactions is fair to the Company or
such Restricted Subsidiary from a financial point of view issued by an investment banking firm
of national standing or nationally recognized accounting firm or appraisal firm.
Notwithstanding the foregoing, this provision will not apply to (i) employment agreements or
compensation or employee benefit arrangements or indemnification agreements or similar arrangements
with any officer, director or employee of the Company entered into in the ordinary course of
business (including customary benefits thereunder), (ii) any transaction entered into by or among
the Company or any Restricted Subsidiary and one or more Restricted Subsidiaries, (iii)
transactions pursuant to agreements existing on the Issue Date and (iv) Restricted Payments and
Permitted Investments.
Limitation on Creation of Unrestricted Subsidiaries. The Company may designate any Subsidiary
of the Company to be an Unrestricted Subsidiary as provided below, in which event such Subsidiary
and each other person that is a Subsidiary of such Subsidiary will be deemed to be an Unrestricted
Subsidiary.
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Unrestricted Subsidiary means:
(1) any Subsidiary designated as such by the Board of Directors of the Company as set forth
below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Company may designate any Subsidiary to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, any other
Restricted Subsidiary of the Company; provided that either:
(x) the Subsidiary to be so designated has total assets of $1,000 or less; or
(y) immediately after giving effect to such designation, the Company could incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the first
paragraph under the Limitation on Incurrence of Indebtedness covenant,
and provided further that the Company could make a Restricted Payment or Permitted Investment in an
amount equal to the fair market value as determined in good faith by the Board of Directors of such
Subsidiary pursuant to the Limitation on Restricted Payments covenant and such amount is
thereafter treated as a Restricted Payment or Permitted Investment for the purpose of calculating
the amount available in connection with such covenant.
An Unrestricted Subsidiary may be designated as a Restricted Subsidiary if (i) all the
Indebtedness of such Unrestricted Subsidiary could be Incurred under the Limitation on
Incurrence of Indebtedness covenant and (ii) all the Liens on the property and assets of such
Unrestricted Subsidiary could be incurred pursuant to the Limitation on Liens covenant.
Future Subsidiary Guarantors. The Indenture provides that the Company shall cause each
Restricted Subsidiary of the Company (other than any Foreign Subsidiary) formed or acquired after
the Issue Date that (i) has assets in excess of $1.0 million or (ii) directly or indirectly
assumes, becomes a borrower under, guarantees or in any other manner become liable with respect to
any Indebtedness of the Company under the Senior Credit Facility to issue a Subsidiary Guarantee
and execute and deliver an indenture supplemental to the Indenture as a Subsidiary Guarantor. The
Obligations under the Notes, the Note Guarantees and the Indenture and any Permitted Additional
Pari Passu Secured Obligations of any Person that is or becomes a Subsidiary Guarantor after the
Issue Date will be secured equally and ratably by a Second Priority Lien in the Collateral granted
to the Collateral Agent for the benefit of the Holders of the Notes and the holders of Permitted
Additional Pari Passu Secured Obligations. Such Subsidiary Guarantor will enter into a joinder
agreement to the applicable Security Documents defining the terms of the security interests that
secure payment and performance when due of the Notes and take all actions advisable in the opinion
of the Company, as set forth in an Officers Certificate accompanied by an opinion of counsel to
the Company to cause the Second Priority Liens created by the Collateral Agreement to be duly
perfected to the extent required by such agreement in accordance with all applicable law, including
the filing of financing statements in the jurisdictions of incorporation or formation of the
Company and the Subsidiary Guarantors.
Provision of Financial Statements. The Indenture provides that, whether or not the Company is
then subject to Section 13(a) or 15(d) of the Exchange Act, the Company will file with the SEC, so
long as the Notes are outstanding, the annual reports, quarterly reports and other periodic reports
which the Company would have been required to file with the SEC pursuant to such Section 13(a) or
15(d) if the Company were so subject, and such documents shall be filed with the SEC on or prior to
the respective dates (the Required Filing Dates) by which the Company would have been required so
to file such documents if the Company were so subject. The Company will also in the event the
filing such documents by the Company with the SEC is prohibited under the Exchange Act, (i) within
15 days of each Required Filing Date, (a) transmit by mail to all holders of Notes, as their names
and addresses appear in the Note register, without cost to such holders and (b) file with the
Trustee copies of the annual reports, quarterly reports and other periodic reports which the
Company would have been required to file with the SEC pursuant to Section 13(a) or 15(d) of the
Exchange Act if the Company were subject to such Sections and (ii) promptly upon written request
and payment of the reasonable cost of duplication and delivery, supply copies of such documents to
any prospective holder at the Companys cost.
Notwithstanding anything herein to the contrary, the Company will not be deemed to have failed
to comply with any of its agreements under this covenant for purposes of clause (iii) under
Events of Default until 90 days after the date any report hereunder is required to be filed
with the SEC (or posted in the Companys website) pursuant to this covenant.
Additional Covenants. The Indenture also contains covenants with respect to the following
matters: (i) payment of principal, premium and interest; (ii) maintenance of an office or agency in
the City of New York; (iii) maintenance of corporate existence; (iv) payment of taxes and other
claims; (v) maintenance of properties; and (vi) maintenance of insurance.
Merger, Consolidation and Sale of Assets
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The Indenture provides that the Company shall not consolidate or merge with or into (whether
or not the Company is the Surviving Person), or, directly or indirectly through one or more
Restricted Subsidiaries, sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related transactions, to another
Person or Persons unless (i) the Surviving Person is a corporation or limited liability company or
limited partnership organized or existing under the laws of the United States, any state thereof or
the District of Columbia; provided that at any time the Company or its successor is not a
corporation, there shall be a co-issuer of the Notes that is a corporation; (ii) the Surviving
Person (if other than the Company) assumes all the obligations of the Company under the Notes and
the Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction, no Default or Event of Default shall have
occurred and be continuing; (iv) the Surviving Person causes such amendments, supplements or other
instruments to be executed, delivered, filed and recorded, as applicable, in such jurisdictions as
may be required by applicable law to preserve and protect the Lien of the Security Documents on the
Collateral owned by or transferred to the Surviving Person; (v) the Collateral owned by or
transferred to the Surviving Person shall (a) continue to constitute Collateral under the Indenture
and the Security Documents, (b) be subject to the Lien in favor of the Collateral Agent for the
benefit of the Trustee and the Holders of the Notes, and (c) not be subject to any Lien other than
Permitted Collateral Liens; (vi) the property and assets of the Person which is merged or
consolidated with or into the Surviving Person, to the extent that they are property or assets of
the types which would constitute Collateral under the Security Documents, shall be treated as
after-acquired property and the Surviving Person shall take such action as may be reasonably
necessary to cause such property and assets to be made subject to the Lien of the Security
Documents in the manner and to the extent required in the Indenture; and (vii) at the time of such
transaction and after giving pro forma effect thereto (other than a merger with a wholly-owned
Subsidiary or for purposes of reincorporating into another state), the Surviving Person would (a)
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of
the covenant described under Certain CovenantsLimitation on Incurrence of Indebtedness or (b)
have a lower Debt to Operating Cash Flow Ratio immediately after the transaction than the Companys
Debt to Operating Cash Flow Ratio immediately prior to the transaction.
In the event of any transaction (other than a lease of all or substantially all assets)
described in the immediately preceding paragraph in which the Company is not the Surviving Person
and the Surviving Person is to assume all the obligations of the Company under the Notes and the
Indenture pursuant to a supplemental indenture, such Surviving Person shall succeed to, and be
substituted for, and may exercise every right and power of, the Company, and the Company would be
discharged from its obligations under the Indenture and the Notes; provided that solely for the
purpose of calculating amounts described in clause (iii) under Certain CovenantsLimitation on
Restricted Payments, any such Surviving Person shall only be deemed to have succeeded to and be
substituted for the Company with respect to the period subsequent to the effective time of such
transaction (and the Company (before giving effect to such transaction) shall be deemed to be the
Company for such purposes for all prior periods).
Events of Default
The Indenture provides that each of the following constitutes an Event of Default:
(i) a default for 30 days in the payment when due of interest on any Note;
(ii) a default in the payment when due of principal on any Note, whether upon maturity,
acceleration, optional or mandatory redemption, required repurchase or otherwise;
(iii) failure to perform or comply with any covenant, agreement or warranty in the
Indenture (other than the defaults specified in clauses (i) and (ii) above) which failure
continues for 60 days after written notice thereof has been given to the Company by the Trustee
or to the Company and the Trustee by the holders of at least 25% in aggregate principal amount
of the then outstanding Notes;
(iv) the occurrence of one or more defaults under any agreements, indentures or instruments
under which the Company or any Restricted Subsidiary of the Company then has outstanding
Indebtedness in excess of $10.0 million in the aggregate and, if not already matured at its
final maturity in accordance with its terms, such Indebtedness shall have been accelerated;
(v) except as permitted by the Indenture, any Subsidiary Guarantee shall for any reason
cease to be, or be asserted in writing by any Subsidiary Guarantor or the Company not to be, in
full force and effect and enforceable in accordance with its terms;
(vi) one or more judgments, orders or decrees for the payment of money in excess of $10.0
million, either individually or in the aggregate shall be entered against the Company or any
Restricted Subsidiary of the Company or any of their respective
92
properties and which judgments, orders or decrees are not paid, discharged, bonded or
stayed for a period of 60 days after their entry;
(vii) any holder or holders of at least $10.0 million in aggregate principal amount of
Indebtedness of the Company or any Restricted Subsidiary of the Company after a default under
such Indebtedness (a) shall notify the Company or the Trustee of the intended sale or
disposition of any assets of the Company or any Restricted Subsidiary of the Company with an
aggregate fair market value (as determined in good faith by the Companys Board of Directors,
which determination shall be evidenced by a board resolution), individually or in the aggregate,
of at least $10.0 million that have been pledged to or for the benefit of such holder or holders
to secure such Indebtedness or (b) shall commence proceedings, or take any action (including by
way of set-off), to retain in satisfaction of such Indebtedness, or to collect on, seize,
dispose of or apply in satisfaction of such Indebtedness, such assets of the Company or any
Restricted Subsidiary of the Company (including funds on deposit or held pursuant to lock-box
and other similar arrangements);
(viii) there shall have been the entry by a court of competent jurisdiction of (a) a decree
or order for relief in respect of the Company or any Restricted Subsidiary of the Company in an
involuntary case or proceeding under any applicable Bankruptcy Law or (b) a decree or order
adjudging the Company or any Restricted Subsidiary of the Company bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment or composition of or in respect of the Company
or any Restricted Subsidiary of the Company under any applicable federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or any Restricted Subsidiary of the Company or of any substantial part
of their respective properties, or ordering the winding up or liquidation of their affairs, and
any such decree or order for relief shall continue to be in effect, or any such other decree or
order shall be unstayed and in effect, for a period of 60 days;
(ix) (a) the Company or any Restricted Subsidiary of the Company commences a voluntary case
or proceeding under any applicable Bankruptcy Law or any other case or proceeding to be
adjudicated bankrupt or insolvent, (b) the Company or any Restricted Subsidiary of the Company
consents to the entry of a decree or order for relief in respect of the Company or such
Restricted Subsidiary of the Company in an involuntary case or proceeding under any applicable
Bankruptcy Law or to the commencement of any bankruptcy or insolvency case or proceeding against
it, (c) the Company or any Restricted Subsidiary of the Company files a petition or answer or
consent seeking reorganization or relief under any applicable federal or state law, (d) the
Company or any Restricted Subsidiary of the Company (x) consents to the filing of such petition
or the appointment of or taking possession by, a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or such Restricted Subsidiary of
the Company or of any substantial part of their respective property, (y) makes an assignment for
the benefit of creditors or (z) admits in writing its inability to pay its debts generally as
they become due or (e) the Company or any Restricted Subsidiary of the Company takes any
corporate action in furtherance of any such actions in this paragraph (ix); or
(x) with respect to any Collateral having a fair market value in excess of $10.0 million,
individually or in the aggregate, (a) any default or breach by the Company or any Subsidiary
Guarantor in the performance of its obligations under the Security Documents or the Indenture
which adversely affects the condition or value of the collateral or the enforceability,
validity, perfection or priority of the Second Priority Liens, taken as a whole in any material
respect, and continuance of such default or breach for a period of 60 days after written notice
thereof by the Trustee or the Holders of 25% in principal amount of the outstanding Notes, or
(b) any security interest created under the Security Documents or under the Indenture is
declared invalid or unenforceable by a court of competent jurisdiction or (y) the Company or any
Subsidiary Guarantor asserts, in any pleading in any court of competent jurisdiction, that any
security interest in any Collateral is invalid or unenforceable.
If any Event of Default (other than as specified in clause (viii) or (ix) of the preceding
paragraph with respect to the Company or any Restricted Subsidiary) occurs and is continuing, the
Trustee or the holders of at least 25% in aggregate principal amount of the then outstanding Notes
may, and the Trustee at the request of such holders shall, declare all the Notes to be due and
payable immediately. In the case of an Event of Default arising from the events specified in clause
(viii) or (ix) of the preceding paragraph with respect to the Company or any Restricted Subsidiary,
the principal of, premium, if any, and any accrued and unpaid interest on all outstanding Notes
shall ipso facto become immediately due and payable without further action or notice.
Holders of the Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. The holders of a majority in aggregate principal amount of the Notes then outstanding by
notice to the Trustee may on behalf of the holders of all the Notes waive any existing Default or
Event of Default and its consequences under the Indenture except (i) a continuing Default or Event
of Default in the payment of the principal of, or premium, if any, or interest on, the Notes (which
may only be waived with the consent of each holder of Notes affected), or (ii) in respect of a
covenant or provision which under the Indenture cannot be modified or amended without the consent
of each holder of Notes affected. Subject to certain limitations, holders of a majority in
principal amount of the
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then outstanding Notes may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal, premium or interest) if
it determines that withholding notice is in their interest.
The Company is required to deliver to the Trustee annually a statement regarding compliance
with the Indenture, and the Company is required, upon becoming aware of any Default (which has not
been timely cured) or Event of Default, to deliver to the Trustee a statement specifying such
Default or Event of Default.
Defeasance
The Company may, at its option and at any time, elect to have the obligations of the Company
discharged with respect to the outstanding Notes and the Subsidiary Guarantees (legal
defeasance). Such legal defeasance means that the Company and the Subsidiary Guarantors shall be
deemed to have paid and discharged the entire indebtedness represented by the outstanding Notes and
the Subsidiary Guarantees and to have satisfied all other obligations under the Notes, the
Subsidiary Guarantees and the Indenture, except for (i) the rights of holders of the outstanding
Notes to receive, solely from the trust fund described below, payments in respect of the principal
of, premium, if any, and interest on such Notes when such payments are due, (ii) the Companys
obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes, and the maintenance of an office or agency for payment
and money for security payments held in trust, (iii) the rights, powers, trusts, duties and
immunities of the Trustee under the Indenture and (iv) the defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the obligations of the
Company and the Subsidiary Guarantors released with respect to certain covenants that are described
in the Indenture (covenant defeasance) and any omission to comply with such obligations shall not
constitute a Default or an Event of Default with respect to the Notes.
In order to exercise either legal defeasance or covenant defeasance, (i) the Company shall
irrevocably deposit with the Trustee, as trust funds in trust for the benefit of the holders of the
Notes, cash in United States dollars, U.S. Government Obligations, or a combination thereof,
maturing as to principal and interest in such amounts as will be sufficient, without consideration
of any reinvestment of such interest, in the opinion of a nationally recognized firm of independent
public accountants or a nationally recognized investment banking firm, to pay and discharge the
principal of, premium, if any, and interest on the outstanding Notes on the stated maturity of such
principal or installment of principal or interest; (ii) in the case of legal defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable federal income tax law, in either case to the effect that, and
based thereon such opinion of counsel shall confirm that, the holders of the Notes will not
recognize income, gain or loss for federal income tax purposes as a result of such legal defeasance
and will be subject to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such legal defeasance had not occurred; (iii) in the case of
covenant defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee confirming that the holders of the Notes will
not recognize income, gain or loss for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such covenant defeasance had not occurred; (iv) no
Default or Event of Default shall have occurred and be continuing on the date of such deposit; (v)
such legal defeasance or covenant defeasance shall not result in a breach or violation of, or
constitute a Default under, the Indenture or any other material agreement or instrument to which
the Company is a party or by which it is bound; (vi) the Company shall have delivered to the
Trustee an opinion of counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of other Indebtedness of the Company or of any Subsidiary Guarantor, including,
without limitation, those arising under the Indenture, after the 91st day following the deposit and
(B) after the 91st day following the deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors rights
generally; (vii) the Company shall have delivered to the Trustee an officers certificate stating
that the deposit was not made by the Company with the intent of preferring the holders of the Notes
over the other creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; (viii) no event or condition shall exist that would
prevent the Company from making payments of the principal of, premium, if any, and interest on the
Notes on the date of such deposit; and (ix) the Company shall have delivered to the Trustee an
officers certificate and an opinion of counsel, each stating that all conditions precedent
provided for relating to either the legal defeasance or the covenant defeasance, as the case may
be, have been complied with.
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Satisfaction and Discharge
The Indenture will cease to be of further effect (except as to surviving rights of
registration, transfer or exchange of the Notes, as expressly provided for in the Indenture) as to
all outstanding Notes when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid) have been delivered to
the Trustee for cancellation or (b) all Notes not theretofore delivered for cancellation (x) have
become due and payable or (y) will become due and payable at their Stated Maturity within one year
or (z) are to be called for redemption within one year under arrangements reasonably satisfactory
to the Trustee, for the giving of notice of redemption by the Trustee in the name, and at the
expense of, the Company; and the Company or any Subsidiary Guarantor has irrevocably deposited or
caused to be deposited with the Trustee as trust funds in trust an amount in United States dollars
or direct obligations of, or obligations the principal of and interest on which are unconditionally
guaranteed by, the United States of America (or by any agency thereof to the extent such
obligations are backed by the full faith and credit of the United States of America), in each case,
maturing prior to the date the Notes will have become due and payable, the Stated Maturity of the
Notes or the relevant redemption date of the Notes, as the case may be, sufficient to pay and
discharge the entire indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, including principal of, premium, if any, and accrued interest at maturity, Stated
Maturity or redemption date; and (ii) the Company or any Subsidiary Guarantor has paid or caused to
be paid all other sums payable under the Indenture by the Company and any Subsidiary Guarantor; and
(iii) the Company has delivered to the Trustee an officers certificate and an opinion of counsel
each stating that all conditions precedent under the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with and that such satisfaction and discharge will
not result in a breach or violation of, or constitute a default under, the Indenture or any other
material agreement or instrument to which the Company or any Restricted Subsidiary is a party or by
which the Company or any Restricted Subsidiary is bound.
Modifications and Amendments
Modifications and amendments of the Indenture or the Notes may be made by the Company, the
Subsidiary Guarantors and the Trustee with the written consent of the holders of not less than a
majority in aggregate principal amount of the then outstanding Notes; provided, however, without
the consent of the holder of each outstanding Note affected thereby, no such modification or
amendment may (with respect to any Notes held by a nonconsenting holder): (i) change the stated
maturity of the principal of, or any installment of interest on, any Note, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof,
or change the coin or currency or the manner in which the principal of any Note or any premium or
the interest thereon is payable, or impair the right to institute suit for the enforcement of any
such payment after the stated maturity thereof (or, in the case of redemption, on or after the
redemption date); (ii) extend the time for payment of interest on the Notes; (iii) alter the
redemption provisions in the Notes or the Indenture in a manner adverse to any holder of the Notes;
(iv) reduce the percentage in principal amount of outstanding Notes, the consent of whose holders
is required for any amended or supplemental indenture or the consent of whose holders is required
for any waiver of compliance with any provision of the Indenture or any Default thereunder and
their consequences provided for in the Indenture; (v) modify any of the provisions of the Indenture
relating to any amended or supplemental indentures requiring the consent of holders or relating to
the waiver of past defaults or relating to the waiver of any covenant, except to increase the
percentage of outstanding Notes required for such actions or to provide that any other provision of
the Indenture cannot be modified or waived without the consent of the holder of each Note affected
thereby; and (vi) modify the ranking or priority of the Notes or any Subsidiary Guarantee; or (vii)
release any Subsidiary Guarantor from any of its obligations under its Subsidiary Guarantee other
than in accordance with the terms of the Indenture.
In addition, any amendment to, or waiver of, the provisions of the Indenture or any Security
Document that has the effect of releasing all or substantially all of the Collateral from the Liens
securing the Notes other than in accordance with the Indenture and the Security Documents or modify
the Intercreditor Agreement in any manner adverse in any material respect to the Holders of the
Notes will require the consent of the holders of at least 66 2/3% in aggregate principal amount of
the Notes and Permitted Additional Pari Passu Secured Obligations then outstanding, voting as one
class.
Notwithstanding the foregoing, without the consent of any holder of Notes, the Company, the
Subsidiary Guarantors and the Trustee may amend or supplement the Indenture or the Notes to (i)
cure any ambiguity, defect or inconsistency, (ii) provide for uncertificated Notes in addition to
or in place of certificated Notes, (iii) provide for the assumption of the Companys obligations to
the holders of the Notes in the event of any transaction involving the Company that is permitted
under the provisions of Merger, Consolidation and Sale of Assets in which the Company is not
the Surviving Person, (iv) make any change that would provide any additional rights or benefits to
the holders of the Notes or does not adversely affect the legal rights of any holder, (v) comply
with the requirements of the SEC in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act, (vi) add additional Subsidiary Guarantors (which does not require
existing Subsidiary Guarantors to execute such supplemental indenture), (vii) to secure additional
Permitted Additional Pari Passu Secured Obligations pursuant to the Indenture by Liens ranking pari
passu
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with the Liens securing the Notes and the Note Guarantees, (viii) to amend any Security
Document to eliminate any assets purported to be secured thereby which are not actually owned by
the Company or the Subsidiary Guarantors and were not owned by the Company or the Guarantors at the
time such Security Document was entered into, (ix) to release a Guarantor from its Guarantee when
permitted by the Indenture or Intercreditor Agreement or (x) to conform the Indenture, the Security
Documents or the Notes to provisions of this Description of Notes to the extent such provision was
intended to be a verbatim recitation thereof.
The Trustee
In the event that the Trustee becomes a creditor of the Company, the Indenture contains
certain limitations on the rights of the Trustee to obtain payment of claims in certain cases or to
realize on certain property received in respect of any such claim as security or otherwise. The
Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for permission to
continue as Trustee, or resign.
The holders of a majority in aggregate principal amount of the then outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, subject to certain exceptions. The Indenture provides that, in case an
Event of Default has occurred and has not been cured, the Trustee will be required, in the exercise
of its power, to use the degree of care of a prudent man in the conduct of his own affairs. The
Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at
the request of any holder of Notes, unless such holder shall have offered to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense.
The Indenture provides that neither the Trustee nor the Collateral Agent shall be responsible
for the existence, genuineness, value or protection of any Collateral (except for the safe custody
of Collateral in its possession and the accounting for Trust Monies actually received), for the
legality, effectiveness or sufficiency of any Security Document, or for the creation, perfection,
priority, sufficiency or protection of any Second Priority Lien.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Company or any Subsidiary
Guarantor, as such, will have any liability for any obligations of the Company or the Subsidiary
Guarantors under the Notes, the Indenture, the Note Guarantees and the Security Documents, or for
any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder
of Notes by accepting a Note waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Notes. The waiver may not be effective to waive
liabilities under the federal securities laws.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference is made to the
Indenture for the definition of all other terms used in the Indenture.
Acquisition Debt means Indebtedness the proceeds of which are utilized solely to (x) acquire
all or substantially all of the assets or a majority of the Voting Stock of an existing television
broadcasting business franchise or station or (y) finance an LMA (including to repay or refinance
Indebtedness or other obligations incurred in connection with such acquisition or LMA, as the case
may be, and to pay related fees and expenses).
Acquired Debt means, with respect to any specified Person, Indebtedness of any other Person
(the Acquired Person) existing at the time the Acquired Person merges with or into, or becomes a
Restricted Subsidiary of, such specified Person, including Indebtedness incurred in connection
with, or in contemplation of, the Acquired Person merging with or into, or becoming a Restricted
Subsidiary of, such specified Person.
Affiliate means, with respect to any specified Person, any other Person directly or
indirectly controlling or controlled by or under direct or indirect common control with such
specified Person. For purposes of this definition, control (including, with correlative meanings,
the terms controlling, controlled by and under common control with) of any Person means the
possession, directly or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting securities, by agreement or
otherwise.
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Asset Sale means (i) any sale, lease, conveyance or other disposition by the Company or any
Restricted Subsidiary of the Company of any assets (including by way of a sale-and-leaseback) other
than in the ordinary course of business (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company shall not be an Asset Sale
but instead shall be governed by the provisions of the Indenture described under Merger,
Consolidation and Sale of Assets) or (ii) the issuance or sale of Capital Stock of any Subsidiary
of the Company, in each case, whether in a single transaction or a series of related transactions,
to any Person (other than to the Company or a Subsidiary Guarantor); provided that the term Asset
Sale shall not include any disposition or dispositions (i) during any twelve-month period of
assets or property having a fair market value of less than $5.0 million in the aggregate; (ii)
between or among the Company and Subsidiary Guarantors (including equity issuances); (iii) in a
transaction constituting a Change of Control; (iv) of products, services or accounts receivable in
the ordinary course of business; (v) damaged, worn-out or obsolete assets; (vi) cash or Cash
Equivalents; and (vii) Restricted Payments.
Bankruptcy Law means Title 11, United States Bankruptcy Code of 1978, as amended, or any
similar United States federal or state law relating to bankruptcy, insolvency, receivership,
winding up, liquidation, reorganization or relief of debtors, or any amendment to, succession to or
change in any such law.
Business Day means any date which in not a Legal Holiday.
Capital Lease Obligations of any Person means the obligations to pay rent or other amounts
under a lease of (or other Indebtedness arrangements conveying the right to use) real or personal
property of such Person which are required to be classified and accounted for as a capital lease or
liability on the face of a balance sheet of such Person in accordance with GAAP. The amount of such
obligations shall be the capitalized amount thereof in accordance with GAAP and the stated maturity
thereof shall be the date of the last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be terminated by the lessee without payment of a
penalty.
Capital Stock of any Person means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in (however designated)
corporate stock or other equity participations, including partnership interests, whether general or
limited, of such Person, including any Preferred Stock.
Cash Equivalents means (i) marketable direct obligations issued or guaranteed by the United
States of America, or any governmental entity or agency or political subdivision thereof (provided
that the full faith and credit of the United States of America is pledged in support thereof)
maturing within one year of the date of purchase; (ii) commercial paper issued by corporations,
each of which shall have a consolidated net worth of at least $500 million, maturing within 180
days from the date of the original issue thereof, and rated P-1 or better by Moodys Investors
Service or A-1 or better by Standard & Poors Corporation or an equivalent rating or better by
any other nationally recognized securities rating agency; and (iii) certificates of deposit issued
or acceptances accepted by or guaranteed by any bank or trust company organized under the laws of
the United States of America or any state thereof or the District of Columbia, in each case having
capital, surplus and undivided profits totaling more than $500 million, maturing within one year of
the date of purchase; and (iv) any money market fund sponsored by a registered broker dealer or
mutual fund distributor (including the Trustee) that invests solely in the securities specified in
the foregoing clause (i), (ii) or (iii).
Change of Control means the occurrence of any of the following events:
(a) any person or group (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), disregarding the Permitted Holders, becomes the beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or group shall be deemed to
have beneficial ownership of all shares of Capital Stock that such person or group has the right
to acquire regardless of when such right is first exercisable), directly or indirectly, of more
than 50% of the total voting power represented by the outstanding Voting Stock of the Company;
(b) the Company merges with or into another Person or sells, assigns, conveys, transfers,
leases or otherwise disposes of all or substantially all of its assets to any Person, or any
Person merges with or into the Company, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is converted into or exchanged for cash, securities or
other property, other than any such transaction where (x) the outstanding Voting Stock of the
Company is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the
surviving or transferee corporation and (y) immediately after such transaction no person or
group (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), disregarding
the Permitted Holders, is the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person or group shall be deemed to have beneficial ownership of all
shares of Capital Stock that such person or group has the right to acquire regardless of when
such right is first exercisable), directly or indirectly, of more than 50% of the total voting
power represented by the outstanding Voting Stock of the surviving or transferee corporation;
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(c) during any consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new directors whose
election by the Board of Directors of the Company or whose nomination for election by the
stockholders of the Company was approved by (x) a vote of at least a majority of the directors
then still in office who were either directors at the beginning of such period or whose election
or nomination for election was previously so approved (as described in this clause (x) or in the
following clause (y)) or (y) Permitted Holders that are beneficial owners (as defined in Rules
13d-3 and 13d-5 under the Exchange Act) of a majority of the total voting power represented by
the outstanding Voting Stock of the Company) cease for any reason to constitute a majority of
the Board then in office; or
(d) the Company is liquidated or dissolved or adopts a plan of liquidation.
Collateral means all of the assets of the Company and the Subsidiary Guarantors, whether
real, personal or mixed, with respect to which a Lien is granted (or purported to be granted) as
security for any Second Lien Obligations (including proceeds and products thereof).
Collateral Agent means the Trustee, in its capacity as Collateral Agent under the Security
Documents together with its successors.
Collateral Agreement means the security agreement to be dated as of the Issue Date among the
Collateral Agent, the Company and the Subsidiary Guarantors granting, among other things, a Second
Priority Lien on the Collateral subject to Permitted Collateral Liens and Permitted Liens, in each
case in favor of the Collateral Agent for its benefit and for the benefit of the Trustee and the
Holders of the Notes and the holders of any Permitted Additional Pari Passu Secured Obligations, as
amended, modified, restated, supplemented or replaced from time to time in accordance with its
terms.
Consolidated Interest Expense means, with respect to any period, the sum of (i) the interest
expense of the Company and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP consistently applied, including, without limitation or
duplication, (a) amortization of debt discount, (b) the net payments, if any, under interest rate
contracts (including amortization of discounts) and (c) accrued interest, plus (ii) the interest
component of the Capital Lease Obligations paid, accrued and/or scheduled to be paid or accrued by
the Company during such period, and all capitalized interest of the Company and its Restricted
Subsidiaries, in each case as determined on a consolidated basis in accordance with GAAP
consistently applied.
Consolidated Net Income means, with respect to any period, the net income (or loss) of the
Company and its Restricted Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP consistently applied, adjusted, to the extent included in calculating such net
income (or loss), by excluding, without duplication, (i) the portion of net income (or loss) of the
Company and its Restricted Subsidiaries allocable to interests in unconsolidated Persons, except to
the extent of the amount of dividends or distributions actually paid to the Company or its
Restricted Subsidiaries by such other Person during such period, (ii) net income (or loss) of any
Person combined with the Company or any of its Restricted Subsidiaries on a pooling of interests
basis attributable to any period prior to the date of combination, (iii) the net income of any
Restricted Subsidiary to the extent that the declaration of dividends or similar distributions by
that Restricted Subsidiary of that income to the Company is not at the time permitted, directly or
indirectly, by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or
its stockholders, (iv) the net income of any Qualified Joint Venture in excess of the dividends and
distributions paid by such Qualified Joint Venture to the Company or a Subsidiary Guarantor, (v)
the Companys proportionate share of net loss of any Qualified Joint Venture and (vi) the
cumulative effect of a change in accounting principles.
Cumulative Consolidated Interest Expense means, as of any date of determination,
Consolidated Interest Expense less non-cash amortization of deferred financing costs from the last
day of the month immediately preceding the Issue Date to the last day of the most recently ended
month prior to such date for which financial statements are available, taken as a single accounting
period.
Cumulative Operating Cash Flow means, as of any date of determination, Operating Cash Flow
from the last day of the month immediately preceding the Issue Date to the last day of the most
recently ended month prior to such date for which financial statements are available, taken as a
single accounting period.
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Debt To Operating Cash Flow Ratio means, with respect to any date of determination, the
ratio of (i) the aggregate principal amount of all outstanding Indebtedness of the Company and its
Restricted Subsidiaries as of such date on a consolidated basis to (ii) Operating Cash Flow of the
Company and its Restricted Subsidiaries on a consolidated basis for the four most recent full
fiscal quarters ending on or immediately prior to such date for which financial statements are
available, determined on a pro forma basis after giving pro forma effect to (a) the incurrence of
all Indebtedness to be incurred on such date and (if applicable) the application of the net
proceeds therefrom, including to refinance other Indebtedness, as if such Indebtedness was
incurred, and the application of such proceeds occurred, at the beginning of such four-quarter
period; (b) the incurrence, repayment or retirement of any other Indebtedness by the Company and
its Restricted Subsidiaries since the first day of such four-quarter period as if such Indebtedness
was incurred, repaid or retired at the beginning of such four-quarter period (including any such
incurrence or issuance which is the subject of an Incurrence Notice delivered to the Trustee during
such period pursuant to clause (vii) of the definition of Permitted Indebtedness) (except that,
in making such computation, the amount of Indebtedness under any revolving credit facility shall be
computed based upon the average balance of such Indebtedness at the end of each month during such
four-quarter period); (c) in the case of Acquired Debt, the related acquisition as if such
acquisition had occurred at the beginning of such four-quarter period; and (d) any acquisition or
disposition by the Company and its Restricted Subsidiaries of any company or any business or any
assets out of the ordinary course of business (including any pro forma expense and cost reductions
calculated on a basis in accordance with Regulation S-X under the Exchange Act associated with any
such acquisition or disposition), or any related repayment of Indebtedness, in each case since the
first day of such four-quarter period (including any such acquisition which is the subject of an
Incurrence Notice delivered to the Trustee during such period pursuant to clause (viii) of the
definition of Permitted Indebtedness), assuming such acquisition or disposition had been
consummated on the first day of such four-quarter period. In addition, the consolidated net income
of a Person with outstanding Indebtedness or Capital Stock providing for a payment restriction
which is permitted to exist by reason of clause (c) of the covenant described under Certain
CovenantsLimitation on Dividends and Other Payment Restrictions Affecting Subsidiaries shall not
be taken into account in determining whether any Indebtedness is permitted to be incurred under the
Indenture.
Default means any event that is, or after the giving of notice or passage of time or both
would be, an Event of Default.
Disposition means, with respect to any Person, any merger, consolidation or other business
combination involving such Person (whether or not such Person is the Surviving Person) or the sale,
assignment, transfer, lease, conveyance or other disposition of all or substantially all of such
Persons assets.
Disqualified Stock means any Capital Stock that, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the option of the holder thereof, in whole or in part on or prior to
the stated maturity of the Notes (which for avoidance of doubt shall exclude the Companys Series D
perpetual preferred stock as in effect on the Issue Date).
Event of Loss means, with respect to any property or asset (tangible or intangible, real or
personal) constituting Collateral, any of the following:
(i) any loss, destruction or damage of such property or asset;
(ii) any institution of any proceeding for the condemnation or seizure of such property or
asset or for the exercise of any right of eminent domain;
(iii) any actual condemnation, seizure or taking by exercise of the power of eminent domain
or otherwise of such property or asset, or confiscation of such property or asset or the
requisition of the use of such property or asset; or
(iv) any settlement in lieu of clauses (ii) or (iii) above.
Exchange Act means the Securities Exchange Act of 1934.
FCC mean the Federal Communications Commission.
FCC License means any license, authorization, approval, or permit granted by the FCC
pursuant to the Communications Act of 1934, as amended, to the Company or any Guarantor, or
assigned or transferred to the Company or any Guarantor pursuant to FCC consent.
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Film Contracts means contracts with suppliers that convey the right to broadcast specified
films, videotape motion pictures, syndicated television programs or sports or other programming.
First Priority Agreement means the collective reference to (a) the Senior Credit Facility in
effect on the Issue Date, (b) any additional First Priority Agreement permitted to be designated as
such by the First Priority Agreement then extant and the Indenture and (c) any other credit
agreement, loan agreement, note agreement, promissory note, indenture or other agreement or
instrument evidencing or governing the terms of any indebtedness or other financial accommodation
that has been incurred to extend, replace, refinance or refund in whole or in part the indebtedness
and other obligations outstanding under the Senior Credit Facility in effect on the Issue Date, any
such additional First Priority Agreement or any other agreement or instrument referred to in this
clause (c) unless such agreement or instrument expressly provides that it is not intended to be and
is not a First Priority Agreement hereunder (a Replacement First Priority Agreement). Any
reference to the First Priority Agreement hereunder shall be deemed a reference to any First
Priority Agreement then extant.
First Priority Creditors means the Lenders as defined in the First Priority Agreement, or
any Persons that are designated under the First Priority Agreement as the First Priority
Creditors for purposes of this Agreement.
First Priority Documents means the First Priority Agreement, each First Priority Security
Document and each First Priority Guarantee.
First Priority Guarantee means any guarantee by any loan party of any or all of the First
Priority Obligations.
First Priority Liens means all Liens that secure the First Priority Obligations.
First Priority Obligations means (a) all principal of and interest (including without
limitation any Post-Petition Interest) and premium (if any) on all loans made pursuant to the First
Priority Agreement, (b) all reimbursement obligations (if any) and interest thereon (including
without limitation any Post-Petition Interest) with respect to any letter of credit or similar
instruments issued pursuant to the First Priority Agreement, (c) all Hedging Obligations, (d) all
Cash Management Obligations and (e) all guarantee obligations, fees, expenses and other amounts
payable from time to time pursuant to the First Priority Documents, in each case whether or not
allowed or allowable in an Insolvency Proceeding provided that the aggregate principal amount of,
without duplication, revolving credit loans, letters of credit, term loans, other loans, notes or
similar instruments (excluding, in any event, Cash Management Obligations and Hedging Obligations)
provided for under the First Lien Credit Documents in excess of the Maximum First Priority
Indebtedness shall not constitute First Lien Obligations for purposes of this Agreement. To the
extent any payment with respect to any First Priority Obligation (whether by or on behalf of any
loan party, as proceeds of security, enforcement of any right of setoff or otherwise) is declared
to be a fraudulent conveyance or a preference in any respect, set aside or required to be paid to a
debtor in possession, any Second Priority Secured Party, receiver or similar Person, then the
obligation or part thereof originally intended to be satisfied shall, for the purposes of this
Agreement and the rights and obligations of the First Priority Secured Parties and the Second
Priority Secured Parties, be deemed to be reinstated and outstanding as if such payment had not
occurred.
First Priority Obligations Payment Date means the first date on which (a) the First Priority
Obligations (other than those that constitute Unasserted Contingent Obligations) have been paid in
cash in full (or cash collateralized or defeased in accordance with the terms of the First Priority
Documents), (b) all commitments to extend credit under the First Priority Documents have been
terminated, (c) there are no outstanding letters of credit or similar instruments issued under the
First Priority Documents (other than such as have been cash collateralized or defeased in
accordance with the terms of the First Priority Security Documents), and (d) the First Priority
Representative has delivered a written notice to the Second Priority Representative stating that
the events described in clauses (a), (b) and (c) have occurred, which notice shall be delivered by
the First Priority Representative promptly after the occurrence of such events described in clauses
(a), (b) and (c).
First Priority Secured Parties means the First Priority Representative, the First Priority
Creditors and any other holders of the First Priority Obligations.
First Priority Security Documents means the Security Documents as defined in the First
Priority Agreement, and any other documents that are designated under the First Priority Agreement
as First Priority Security Documents for purposes of this Agreement.
Foreign Subsidiary means any Subsidiary of the Company organized under the laws of any
jurisdiction other than the United States of America or any State thereof or the District of
Columbia.
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GAAP means 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 have been approved by a significant segment of the
accounting profession, which are in effect on the Issue Date.
Guarantee by any Person means any obligation, contingent or otherwise, of such Person
guaranteeing any Indebtedness of any other Person (the primary obligor) in any manner, whether
directly or indirectly, and including, without limitation, any obligation of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for the payment of such
Indebtedness, (ii) to purchase property, securities or services for the purpose of assuring the
holder of such Indebtedness of the payment of such Indebtedness, or (iii) to maintain working
capital, equity capital or other financial statement condition or liquidity of the primary obligor
so as to enable the primary obligor to pay such Indebtedness (and guaranteed, guaranteeing and
guarantor shall have meanings correlative to the foregoing); provided, however, that the
guarantee by any Person shall not include endorsements by such Person for collection or deposit, in
either case, in the ordinary course of business.
Indebtedness means, with respect to any Person, without duplication, and whether or not
contingent, (i) all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services or which is evidenced by a note, bond, debenture or similar
instrument, (ii) all Capital Lease Obligations of such Person, (iii) all reimbursement obligations
of such Person in respect of letters of credit or bankers acceptances issued or created for the
account of such Person, (iv) all Interest Rate Agreement Obligations of such Person, (v) all
liabilities secured by any Lien on any property owned by such Person even if such Person has not
assumed or otherwise become liable for the payment thereof to the extent of the lesser of (x) the
amount of the Obligation so secured and (y) the fair market value of the property subject to such
Lien, (vi) all obligations to purchase, redeem, retire, or otherwise acquire for value any Capital
Stock of such Person, or any warrants, rights or options to acquire such Capital Stock, now or
hereafter outstanding on or prior to the stated maturity of the Notes (which for avoidance of doubt
shall exclude the Companys Series D perpetual preferred stock as in effect on the Issue Date),
(vii) to the extent not included in (vi), all Disqualified Stock issued by such Person, valued at
the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid
dividends thereon, and (viii) to the extent not otherwise included, any guarantee by such Person of
any other Persons indebtedness or other obligations described in clauses (i) through (vii) above.
For purposes hereof, the maximum fixed repurchase price of any Disqualified Stock which does not
have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified
Stock as if such Disqualified Stock were purchased on any date on which Indebtedness shall be
required to be determined pursuant to the Indenture, and if such price is based upon, or measured
by the fair market value of, such Disqualified Stock, such fair market value is to be determined in
good faith by the board of directors of the issuer of such Disqualified Stock.
Independent Director means a director of the Company other than a director (i) who (apart
from being a director of the Company or any Subsidiary) is an employee, associate or Affiliate of
the Company or a Subsidiary or has held any such position during the previous five years, or (ii)
who is a director, employee, associate or Affiliate of another party to the transaction in
question.
Insolvency or Liquidation Proceeding means, with respect to any Person, any liquidation,
dissolution or winding up of such Person, or any bankruptcy, reorganization, insolvency,
receivership or similar proceeding with respect to such Person, whether voluntary or involuntary.
Interest Rate Agreement Obligations means, with respect to any Person, the Obligations of
such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate
collar agreements, and (ii) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
Investments means, with respect to any Person, all investments by such Person in other
Persons (including Affiliates of such Person) in the form of loans, guarantees, advances or capital
contributions (excluding commission, travel, relocation and similar advances to officers and
employees made in the ordinary course of business) purchases or other acquisitions for
consideration of Indebtedness, Capital Stock or other securities and all other items that are or
would be classified as investments on a balance sheet prepared in accordance with GAAP.
Investments shall exclude extensions of trade credit (including extensions of credit in respect
of equipment leases) by the Company and its Restricted Subsidiaries in the ordinary course of
business in accordance with normal trade practices of the Company or such Subsidiary, as the case
may be.
Issue Date means April 29, 2010.
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Legal Holiday means a Saturday, Sunday or other day on which banking institutions in the
State of New York are authorized or required by law to close.
LMA means a local marketing arrangement, joint sales agreement, time brokerage agreement,
shared services agreement, management agreement or similar arrangement pursuant to which a Person,
subject to customary preemption rights and other limitations (i) obtains the right to sell a
portion of the advertising inventory of a television station of which a third party is the
licensee, (ii) obtains the right to exhibit programming and sell advertising time during a portion
of the air time of a television station or (iii) manages a portion of the operations of a
television station.
Lien means, with respect to any asset, any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title retention agreement,
any lease in the nature thereof, any option or other agreement to sell or give a security interest
in any asset and any filing of, or agreement to give, any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
Maximum First Priority Indebtedness means all Indebtedness under, and as defined in the
First Priority Agreement, including letters of credit, under the First Priority Agreement (with
letters of credit being deemed to have a principal amount equal to the maximum potential liability
of the Grantors thereunder) in an aggregate principal amount not to exceed the sum of (x) $516.0
million and (y) $75.0 million of extensions of credit under revolving facilities under Senior
Credit Facilities, less the aggregate amount of all Net Proceeds of Asset Sales applied by the
Company or any of its Restricted Subsidiaries since the Issue Date to repay any term loans
thereunder or to repay revolving loans thereunder and effect a corresponding commitment reduction
thereunder pursuant to and in accordance with the covenant described under Certain
CovenantsLimitation on Asset Sales. For the avoidance of doubt, Hedging Obligations and Cash
Management Obligations are not and shall not be considered Indebtedness under the First Priority
Agreement.
Net Loss Proceeds means the aggregate cash proceeds received by the Company or any
Subsidiary Guarantor in respect of any Event of Loss, including, without limitation, insurance
proceeds, condemnation awards or damages awarded by any judgment, net of the direct cost in
recovery of such Net Loss Proceeds (including, without limitation, legal, accounting, appraisal and
insurance adjuster fees and any relocation expenses incurred as a result thereof), amounts required
to be applied to the repayment of Indebtedness secured by any Permitted Collateral Lien on the
asset or assets that were the subject of such Event of Loss (other than any Lien which does not
rank prior to the Second Priority Liens), and any taxes paid or payable as a result thereof.
Net Proceeds means, with respect to any Asset Sale by any Person, the aggregate cash
proceeds received by such Person and/or its Affiliates in respect of such Asset Sale, which amount
is equal to the excess, if any, of (i) the cash received by such Person and/or its Affiliates
(including any cash payments received by way of deferred payment pursuant to, or monetization of, a
note or installment receivable or otherwise, but only as and when received) in connection with such
Asset Sale, over (ii) the sum of (a) the amount of any Indebtedness that is secured by such asset
and which is required to be repaid by such Person in connection with such Asset Sale, plus (b) all
fees, commissions and other expenses incurred by such Person in connection with such Asset Sale,
plus (c) provision for taxes, including income taxes, attributable to the Asset Sale or
attributable to required prepayments or repayments of Indebtedness with the proceeds of such Asset
Sale, plus (d) a reasonable reserve for the after-tax cost of any indemnification payments (fixed
or contingent) attributable to sellers indemnities to purchaser in respect of such Asset Sale
undertaken by the Company or any of its Subsidiaries in connection with such Asset Sale, plus (e)
if such Person is a Subsidiary of the Company, any dividends or distributions payable to holders of
minority interests in such Subsidiary from the proceeds of such Asset Sale.
Obligations means any principal, interest (including, without limitation, interest accruing
on or after the filing of any petition in bankruptcy or for reorganization of the Company or a
Subsidiary Guarantor, as the case may be, regardless of whether or not a claim for post-filing
interest is allowed in such proceedings), penalties, fees, indemnifications, reimbursement
obligations, damages and other liabilities payable under the documentation governing any
Indebtedness.
Operating Cash Flow means, with respect to any period and without duplication, the
Consolidated Net Income of the Company and its Restricted Subsidiaries for such period, plus (i)
any extraordinary net losses, net losses from the disposition of any securities, net losses from
the extinguishment of any Indebtedness and net losses realized on any sale of assets during such
period, to the extent such losses were deducted in computing Consolidated Net Income, plus (ii)
provision for taxes based on income or profits, to the extent such provision for taxes was included
in computing such Consolidated Net Income, plus (iii) Consolidated Interest Expense of the Company
and its Restricted Subsidiaries for such period, to the extent deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization, impairment and all other non-cash
charges, to the extent such depreciation, amortization, impairment
102
and other non-cash charges were deducted in computing such Consolidated Net Income (including
pension expense, impairment of Film Contracts, goodwill, broadcast licenses and other intangible
assets including amortization of other intangible assets and Film Contracts), but excluding any
such charges which represent any accrual of, or a reserve for, cash charges for a future period,
plus (v) any fees recognized as expenses, including deferred finance costs, incurred in connection
with the issuance of the Notes and the entering into of the Second Amendment to the Senior Credit
Facility (including, without limitation, ratings agency fees) to the extent that such costs were
deducted in computing Consolidated Net Income, plus (vi) non-capitalized transaction costs incurred
in connection with actual or proposed financings, acquisitions or transactions to the extent that
such costs were deducted in computing Consolidated Net Income, plus (vii) non-cash compensation
expense incurred with any issuance of equity interests to an employee of such Person or any
Restricted Subsidiary and plus (viii) non-cash items decreasing Consolidated Net Income (to the
extent included in computing such Consolidated Net Income), minus (ix) any cash payments made with
respect to Film Contracts and pension obligations (to the extent not previously included in
computing such Consolidated Net Income), minus (x) extraordinary net gains, net gains from the
disposition of any securities, net gains from the extinguishment of any Indebtedness and any net
gains realized on any sale of assets during such period, minus (xi) non-cash items increasing
Consolidated Net Income other than the accrual of revenue or other items in the ordinary course of
business (to the extent included in computing such Consolidated Net Income) and minus (xii)
provision for taxes based on losses, to the extent such benefit for taxes was included in computing
such Consolidated Net Income.
Pari Passu Indebtedness means any Indebtedness of the Company or a Subsidiary Guarantor
which ranks pari passu in right of payment with the Notes or the Subsidiary Guarantee of such
Subsidiary Guarantor, as the case may be (whether or not such Indebtedness is secured by any Lien).
Permitted Additional Pari Passu Secured Obligations means obligations under any Additional
Notes or other Indebtedness secured by the Second Priority Liens; provided that the amount of such
obligations does not exceed an amount (x) such that immediately after giving effect to the
Incurrence of such Additional Notes or other Indebtedness, as applicable, and the receipt and
application of the proceeds therefrom, the Debt to Operating Cash Flow Ratio of the Company and its
Restricted Subsidiaries would be less than or equal to 7.0 to 1.0, or (y) that may be incurred
pursuant to clause (xvi) under the second paragraph of Limitation on Incurrence of
Indebtedness; provided that (i) the representative of such Permitted Additional Pari Passu
Obligation executes a joinder agreement to the Collateral Agreement and the Intercreditor
Agreement, in each case in the form attached thereto agreeing to be bound thereby and (ii) the
Company has designated such Indebtedness as Permitted Additional Pari Passu Secured Obligations
under the Collateral Agreement and the Intercreditor Agreement.
Permitted Collateral Liens means:
(i) Liens securing the Notes outstanding on the Issue Date, Refinancing Indebtedness with
respect to such Notes, the Guarantees relating thereto and any Obligations with respect to such
Notes, Refinancing Indebtedness and Guarantees;
(ii) Liens securing Permitted Additional Pari Passu Secured Obligations permitted to be
incurred pursuant to the Indenture (including Additional Notes), the Guarantees relating thereto
and any Obligations with respect to such Notes and Refinancing Indebtedness with respect to such
Permitted Additional Pari Passu Secured Obligations, the Guarantees relating thereto and any
Obligations with respect to such Notes; provided that such Liens are granted pursuant to the
provisions of the Security Documents;
(iii) Liens existing on the Issue Date (other than Liens specified in clause (i) or (ii)
above) and any extension, renewal, refinancing or replacement thereof so long as such extension,
renewal, refinancing or replacement does not extend to any other property or asset and does not
increase the outstanding principal amount thereof (except by the amount of any premium or fee
paid or payable or original issue discount in connection with such extension, renewal,
replacement or refinancing);
(iv) Liens described in clauses (ii) (which Liens shall be subject to the Intercreditor
Agreement), (iii), (iv), (v), (vi), (vii), (viii), (ix), (xi) (where the Liens securing the
Indebtedness being refinanced were Permitted Collateral Liens), (xii), (xiii), (xiv), (xv),
(xvi), (xvii), (xviii), (xix), (xx), (xxi) or (xxii) of the definition of Permitted Liens;
(v) survey exceptions, encumbrances, easements or reservations of, or rights of others for,
licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar
purposes, or zoning or other similar restrictions as to the use of real properties or Liens
incidental to the conduct of the business of such Person or to the ownership of its properties
which were not incurred in connection with Indebtedness and which do not individually or in the
aggregate materially adversely affect the value of the property affected thereby or materially
impair the use of such property in the operation of the business of such Person;
103
(vi) other Liens (not securing Indebtedness) incidental to the conduct of the business of
the Company or any of its Restricted Subsidiaries, as the case may be, or the ownership of their
assets which do not individually or in the aggregate materially adversely affect the value of
the property affected thereby or materially impair the use of such property in the operation of
the business of the Company or its Restricted Subsidiaries; and
(vii) Liens on the Collateral in favor of the Collateral Agent relating to Collateral
Agents administrative expenses with respect to the Collateral.
Permitted Holders means (i) each of J. Mack Robinson and Robert S. Prather, Jr.; (ii) their
spouses and lineal descendants; (iii) in the event of the incompetence or death of any of the
Persons described in clauses (i) and (ii), such Persons estate, executor, administrator, committee
or other personal representative; (iv) any trusts created for the benefit of the Persons described
in clause (i) or (ii); or (v) any Person controlled by any of the Persons described in clause (i),
(ii), or (iv) and (v) any group of Persons (as defined in the Exchange Act) in which the Persons
described in clause (i), (ii), or (iv), individually or collectively, control such group. For
purposes of this definition, control, as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through ownership of voting securities or by agreement or
otherwise.
Permitted Investments means:
(i) Investments existing on the Issue Date (and any extension, modification or renewal or
any such Investments, but only to the extent not involving additional advances, contributions or
increases thereof, other than as a result of accrual or accretion of original issue discount or
the issuance of pay-in-kind securities, in each case, pursuant to the terms of the Investment in
effect on the Issue Date), and any Investment in the Company, any Restricted Subsidiary or any
Qualified Joint Venture;
(ii) any Investments in Cash Equivalents;
(iii) any Investment in a Person (an Acquired Person) if, as a result of such Investment,
(a) the Acquired Person becomes a Restricted Subsidiary, or (b) the Acquired Person either (1)
is merged, consolidated or amalgamated with or into the Company or a Restricted Subsidiary and
the Company or such Restricted Subsidiary is the Surviving Person, or (2) transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a Restricted
Subsidiary;
(iv) accounts and notes receivable generated or acquired in the ordinary course of
business;
(v) Interest Rate Agreement Obligations permitted pursuant to the second paragraph of the
covenant described under Certain CovenantsLimitation on Incurrence of Indebtedness;
(vi) any Investments received in compromise of obligations of such persons incurred in the
ordinary course of trade creditors or customers that were incurred in the ordinary course of
business, including pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of any trade creditor or customer;
(vii) Investments consisting of endorsements of negotiable instruments and similar
documents, accounts receivables, deposits, prepayments, credits or purchases of inventory,
supplies, materials and equipment, deposits to secure lease or utility payments, in each case in
the ordinary course of business; and
(viii) any other Investments in an aggregate amount up to $5.0 million in any calendar year
(provided that any unused amounts in any calendar year may be carried forward to one or more
future periods) plus, to the extent not increasing the amount available under clause (iii) of
the first paragraph under Limitation on Restricted Payments, in the case of the disposition
or repayment of any such Investment made pursuant to this clause (viii) for cash, an amount
equal to the lesser of the return of capital with respect to such Investment and the cost of
such Investment, in either case, reduced (but not below zero) by the excess, if any, of the cost
of the disposition of such Investment over the gain, if any, realized by the Company or
Restricted Subsidiary, as the case may be, in respect of such disposition.
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Permitted Liens means:
(i) Liens existing on the Issue Date;
(ii) Liens that secure the Senior Credit Facility (incurred pursuant to clause (i) of the
definition of Permitted Indebtedness); provided that such Liens are subject to the provisions
of the Intercreditor Agreement;
(iii) Liens securing Indebtedness of a Person existing at the time that such Person is
merged into or consolidated with the Company or a Restricted Subsidiary of the Company, provided
that such Liens were in existence prior to the contemplation of such merger or consolidation and
do not extend to any assets other than those of such Person;
(iv) Liens on property acquired by the Company or a Restricted Subsidiary, provided that
such Liens were in existence prior to the contemplation of such acquisition and do not extend to
any other property;
(v) Liens in favor of the Company or any Restricted Subsidiary of the Company;
(vi) Liens incurred, or pledges and deposits in connection with, workers compensation,
unemployment insurance and other social security benefits, and leases, appeal bonds and other
obligations of like nature incurred by the Company or any Restricted Subsidiary of the Company
in the ordinary course of business;
(vii) Liens imposed by law, including, without limitation, mechanics, carriers,
warehousemens, materialmens, suppliers and vendors Liens, incurred by the Company or any
Restricted Subsidiary of the Company in the ordinary course of business;
(viii) Liens securing Permitted Purchase Money Indebtedness and Capital Lease Obligations
incurred pursuant to clause (vii) of the second paragraph under Limitation on Incurrence of
Indebtedness; provided that such Liens do not extend to or cover any assets other than such
assets acquired or constructed after the Issue Date with the proceeds of such Permitted Purchase
Money Indebtedness;
(ix) Liens for ad valorem, income or property taxes or assessments and similar charges
which either are not delinquent or are being contested in good faith by appropriate proceedings
for which the Company has set aside on its books reserves to the extent required by GAAP;
(x) Liens on assets or Capital Stock of Unrestricted Subsidiaries that secure Non-Recourse
Debt of Unrestricted Subsidiaries;
(xi) Liens securing Refinancing Indebtedness where the Liens securing Indebtedness being
refinanced were permitted under the Indenture;
(xii) easements, rights-of-way, zoning and similar restrictions, encroachments, protrusions
and other similar encumbrances or title defects incurred or imposed as applicable, in the
ordinary course of business and consistent with industry practices and zoning or other
restrictions as to the use of real properties or Liens incidental which are imposed by any
governmental authority having jurisdiction over such property;
(xiii) Liens securing reimbursement obligations with respect to commercial letters of
credit which encumber documents and other property relating to letters of credit and products
and proceeds thereof;
(xiv) Liens securing Interest Rate Agreement Obligations which Interest Rate Agreement
Obligations relate to Indebtedness that is otherwise permitted under the Indenture;
(xv) leases, licenses, sub-licenses or subleases granted to others and Liens arising from
filing UCC financing statements regarding leases;
(xvi) Liens securing judgments, attachments or awards not giving rise to an Event of
Default and notices of lis pendens and associated rights related to litigation being contested
in good faith by appropriate proceedings and for which adequate reserves as is required in
conformity with GAAP has been made therefor;
105
(xvii) Liens (i) that are contractual rights of set-off (A) relating to treasury,
depository and cash management services with banks or any automated clearing house transfers of
funds, in each case, in the ordinary course of business and not given in connection with the
issuance of Indebtedness, (B) relating to pooled deposit or sweep accounts of the Company or any
Restricted Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the
ordinary course of business of the Company or any Restricted Subsidiary or (C) relating to
purchase orders and other agreements entered into with customers of the Company or any
Restricted Subsidiary in the ordinary course of business and (ii) of a collection bank arising
under Section 4-210 of the UCC on items in the course of collection, in favor of a banking
institution arising as a matter of law encumbering deposits (including the right of set-off)
arising in the ordinary course of business in connection with the maintenance of such accounts
and which are within the general parameters customary in the banking industry;
(xviii) Liens arising by operation of law or contract on insurance policies and the
proceeds thereof to secure premiums thereunder, and Liens, pledges and deposits in the ordinary
course of business securing liability for premiums or reimbursement or indemnification
obligations of (including obligations in respect of letters of credit or bank guarantees for the
benefit of) insurance carriers;
(xix) utility and other similar deposits made in the ordinary course of business;
(xx) Liens on cash or Cash Equivalents, arising in connection with the defeasance,
discharge or redemption of Indebtedness or escrowed to repurchase or redeem Indebtedness or
Capital Stock, in each case where such defeasence, discharge, redemption or repurchase is
otherwise permitted hereunder;
(xxi) leases, subleases, licenses or sublicenses granted to others in the ordinary course
of business so long as such leases, subleases, licenses or sublicenses are subordinate in all
respects to the Liens granted and evidenced by the Security Documents and which do not
materially interfere with the ordinary conduct of the business of the Company or any Restricted
Subsidiaries and do not secure any Indebtedness; and
(xxii) Liens on assets or Capital Stock in connection with merger agreements, stock or
asset purchase agreements and similar agreements in respect of the disposition of such assets or
Capital Stock otherwise permitted under the Indenture for so long as such agreements are in
effect.
Permitted Purchase Money Indebtedness means any Indebtedness incurred for the acquisition of
intellectual property rights, property, plant or equipment used or useful in the business of the
Company.
Person means any individual, corporation, partnership, joint venture, association,
joint-stock company, limited liability company, trust, unincorporated organization or government or
any agency or political subdivision thereof.
Preferred Stock as applied to the Capital Stock of any Person, means Capital Stock of any
class or classes (however designated) which is preferred as to the payment of dividends or
distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over Capital Stock of any other class of such Person.
Public Equity Offering means an underwritten public offering of Capital Stock (other than
Disqualified Stock) of the Company subsequent to the Issue Date pursuant to an effective
registration statement filed under the Securities Act, the net proceeds of which to the Company
(after deducting any underwriting discounts and commissions) exceed $25.0 million.
Qualified Joint Venture means a newly-formed, majority-owned Subsidiary where Capital Stock
of the Subsidiary is issued to a Qualified Joint Venture Partner in consideration of the
contribution primarily consisting of assets used or useful in the business of owning and operating
television stations, all businesses directly related thereto, and any electronic news and
information delivery business and any other television broadcasting-related, television
distribution-related or television content-related business.
Qualified Joint Venture Partner means a person who is not affiliated with the Company.
Refinancing Indebtedness means Indebtedness that refunds, refinances, defeases, renews,
replaces or extends any Indebtedness permitted to be Incurred by the Company or any Restricted
Subsidiary pursuant to the terms of the Indenture, whether involving the same or any other lender
or creditor or group of lenders or creditors, but only to the extent that:
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(i) the Refinancing Indebtedness is subordinated to the Notes to at least the same extent
as the Indebtedness being refunded, refinanced, defeased, renewed, replaced or extended, if such
Indebtedness was subordinated to the Notes,
(ii) the Refinancing Indebtedness is scheduled to mature either (a) no earlier than the
Indebtedness being refunded, refinanced or extended or (b) at least 91 days after the maturity
date of the Notes,
(iii) the Refinancing Indebtedness has a weighted average life to maturity at the time such
Refinancing Indebtedness is Incurred that is equal to or greater than the weighted average life
to maturity of the Indebtedness being refunded, refinanced, defeased, renewed, replaced or
extended,
(iv) such Refinancing Indebtedness (or accreted amount in the case of any Indebtedness
issued with original issue discount, as such) is in an aggregate principal amount that is less
than or equal to the sum of (a) the aggregate principal or accreted amount (in the case of any
Indebtedness issued with original issue discount, as such) then outstanding under the
Indebtedness being refunded, refinanced, defeased, renewed, replaced or extended, (b) the amount
of accrued and unpaid interest, if any, and premiums owed, if any, not in excess of pre-existing
optional prepayment provisions on such Indebtedness being refunded, refinanced, defeased,
renewed, replaced or extended and (c) the amount of reasonable and customary fees, expenses and
costs related to the Incurrence of such Refinancing Indebtedness, and
(v) such Refinancing Indebtedness shall not include (x) Indebtedness of a Restricted
Subsidiary of the Company that is not a Guarantor that refinances Indebtedness of the Company or
a Guarantor or (y) Indebtedness of the Company or a Restricted Subsidiary that refinances
Indebtedness of an Unrestricted Subsidiary.
Restricted Investment means an Investment other than a Permitted Investment.
Restricted Payment means (i) any dividend or other distribution declared or paid on any
Capital Stock of the Company or any of its Restricted Subsidiaries (other than dividends or
distributions payable solely in Capital Stock (other than Disqualified Stock) of the Company or
such Restricted Subsidiary or dividends or distributions payable to the Company or any Restricted
Subsidiary); (ii) any payment to purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any Restricted Subsidiary of the Company or other Affiliate of the
Company (other than any Capital Stock owned by the Company or any Restricted Subsidiary); (iii) any
payment to purchase, redeem, defease or otherwise acquire or retire for value any Subordinated
Indebtedness prior to the scheduled maturity thereof except for any purchase, redemption,
defeasance or other acquisition or retirement within one year of the scheduled maturity thereof; or
(iv) any Restricted Investment.
Restricted Subsidiary means any Subsidiary that has not been designated as an Unrestricted
Subsidiary in accordance with the Indenture.
Second Lien Obligations means the Indebtedness Incurred and Obligations under the Indenture
and any Permitted Additional Pari Passu Secured Obligations.
Second Priority Liens means all Liens in favor of the Collateral Agent on Collateral
securing the Second Lien Obligations, including, without limitation, any Permitted Additional Pari
Passu Secured Obligations.
Security Documents means the Collateral Agreement, the Intercreditor Agreement and all of
the security agreements, pledges, collateral assignments, mortgages, deeds of trust, trust deeds or
other instruments or agreements evidencing or creating or purporting to create any security
interests in favor of the Collateral Agent for its benefit and for the benefit of the Trustee and
the Holders of the Notes and the holders of any Permitted Additional Pari Passu Secured
Obligations, in all or any portion of the Collateral, in each case, as amended, modified, restated,
supplemented or replaced from time to time.
Senior Credit Facility means the Credit Agreement, dated as of March 19, 2007, as amended,
by and among the Company and the guarantors named therein, Wachovia Bank, National Association, as
the administrative agent and the other agents and lenders named therein as the same may be amended,
modified, renewed, refunded, replaced or refinanced in whole or in part from time to time,
including (i) any related notes, letters of credit, guarantees, collateral documents, indentures,
instruments and agreements executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time, and (ii) any notes, guarantees,
collateral documents, instruments and agreements executed in connection with any such amendment,
modification, renewal, refunding, replacement or refinancing.
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Stated Maturity means, with respect to any security, the date specified in such security as
the fixed date on which the final payment of principal of such security is due and payable,
including pursuant to any mandatory redemption provision (but excluding any provision providing for
the repurchase of such security at the option of the holder thereof upon the happening of any
contingency.
Subordinated Indebtedness means any Indebtedness of the Company or a Subsidiary Guarantor if
the instrument creating or evidencing such Indebtedness or pursuant to which such Indebtedness is
outstanding expressly provides that such Indebtedness is subordinated in right of payment to the
Notes or the Subsidiary Guarantee of such Subsidiary Guarantor, as the case may be.
Subsidiary of any Person means (i) any corporation more than 50% of the outstanding Voting
Stock of which is owned or controlled, directly or indirectly, by such Person or by one or more
other Subsidiaries of such Person, or by such Person and one or more other Subsidiaries thereof, or
(ii) any limited partnership of which such Person or any Subsidiary of such Person is a general
partner, or (iii) any other Person (other than a corporation or limited partnership) in which such
Person, or one or more other Subsidiaries of such Person, or such Person and one or more other
Subsidiaries thereof, directly or indirectly, has more than 50% of the outstanding partnership or
similar interests or has the power, by contract or otherwise, to direct or cause the direction of
the policies, management and affairs thereof.
Subsidiary Guarantor means (i) each Restricted Subsidiary of the Company existing on the
Issue Date, (ii) each of the Companys Subsidiaries which becomes a guarantor of the Notes in
compliance with the provisions set forth under Certain CovenantsFuture Subsidiary Guarantors,
and (iii) each of the Companys Subsidiaries executing a supplemental indenture in which such
Subsidiary agrees to be bound by the terms of the Indenture.
Trust Monies means all cash and Cash Equivalents received by the Trustee:
(1) upon the release of Collateral from the Lien of the Indenture or the Security
Documents, including all Net Cash Proceeds and Net Loss Proceeds and all moneys received in
respect of the principal of all purchase money, governmental and other obligations;
(2) pursuant to the Security Documents;
(3) as proceeds of any sale or other disposition of all or any part of the Collateral by or
on behalf of the Trustee or any collection, recovery, receipt, appropriation or other
realization of or from all or any part of the Collateral pursuant to the Indenture or any of the
Security Documents or otherwise; or
(4) for application as provided in the relevant provisions of the Indenture or any Security
Document or which disposition is not otherwise specifically provided for in the Indenture or in
any Security Document;
provided, however, that Trust Monies shall in no event include any property deposited with the
Trustee for any redemption, legal defeasance or covenant defeasance of Notes, for the satisfaction
and discharge of the Indenture or to pay the purchase price of Notes pursuant to an Offer to
Purchase in accordance with the terms of the Indenture and shall not include any cash received or
applicable by the Trustee in payment of its fees and expenses.
UCC means the Uniform Commercial Code as in effect from time to time in the State of New
York; provided, however, that, at any time, if by reason of mandatory provisions of law, any or all
of the perfection or priority of the Collateral Agents security interest in any item or portion of
the Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other that
the State of New York, the term UCC shall mean the Uniform Commercial Code as in effect, at such
time, in such other jurisdiction for purposes of the provisions hereof relating to such perfection
or priority and for purposes of definitions relating to such provisions.
Voting Stock means, with respect to any Person, Capital Stock of such Person of the class or
classes pursuant to which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers or trustees of such
Person (irrespective of whether or not at the time stock of any other class or classes shall have
or might have voting power by reason of the happening of any contingency).
Weighted Average Life to Maturity means, with respect to any Indebtedness at any date, the
number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the
amount of each then remaining installment, sinking fund, serial maturity or other required
scheduled payment of principal, including payment as final maturity, in respect thereof, with (b)
the number of years (calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (ii) the then outstanding aggregate principal amount of such
Indebtedness.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax considerations relating to the
exchange offer and the ownership and disposition of the exchange notes issued pursuant to the
exchange offer. It is not a complete analysis of all the potential tax considerations relating to
the exchange offer or the notes. This summary is based upon the provisions of the Code, Treasury
Regulations promulgated under the Code, administrative rulings and pronouncements and judicial
decisions, all relating to the United States federal income tax treatment of debt instruments.
These authorities may be changed, perhaps with retroactive effect, so as to result in U.S. federal
income tax consequences materially and adversely different from those set forth below.
This summary is limited to beneficial owners of original notes that purchased the original
notes at their issue price (the first price at which a substantial amount of the original notes
were sold to persons other than to bond houses, brokers or similar persons or organizations acting
in the capacity of underwriters, placement agents or wholesalers) and have held the original notes,
participate in the exchange offer and will hold the exchange notes as capital assets within the
meaning of Section 1221 of the Code. This summary does not address the tax considerations arising
under other federal tax laws (such as estate and gift tax laws) or the laws of any foreign, state
or local jurisdiction. In addition, this discussion does not address all tax considerations that
may be applicable to holders particular circumstances or to holders that may be subject to special
tax rules under the U.S. federal income tax laws, such as, for example:
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holders subject to the alternative minimum tax; |
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banks, insurance companies, or other financial institutions; |
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real estate investment trusts and regulated investment companies; |
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tax-exempt organizations; |
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brokers and dealers in securities or currencies; |
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persons who have ceased to be citizens or residents of the United States; |
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traders in securities that elect to use a mark-to-market method of tax accounting for
their securities holdings; |
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U.S. Holders (as defined below) whose functional currency is not the U.S. dollar or
who hold notes through a foreign entity or foreign account; |
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persons that will hold the notes as a position in a hedging transaction, straddle,
conversion transaction or other risk reduction transaction; |
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persons deemed to sell the notes under the constructive sale provisions of the Code; or |
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partnerships (or other entities or arrangements classified as partnerships for U.S.
federal income tax purposes) or other pass-through entities, or investors in such entities. |
This summary of certain U.S. federal income tax considerations is for general information only
and is not tax advice. This summary is not binding on the Internal Revenue Service, which we refer
to as the IRS. We have not sought, and will not seek, any ruling from the IRS with respect to the
statements made in this summary, and there can be no assurance that the IRS will not take a
position contrary to these statements or that a contrary position taken by the IRS would not be
sustained by a court. You are urged to consult your own tax advisor with respect to the application
of the U.S. federal income tax laws to your particular situation, as well as any tax considerations
arising under other U.S. federal tax laws, the laws of any state, local or foreign taxing
jurisdiction or any applicable income tax treaty.
Tax Consequences of the Exchange of Original Notes for Exchange Notes
The exchange of an original note for an exchange note pursuant to the exchange offer will not
constitute a taxable exchange for U.S. federal income tax purposes. Consequently, a holder will not
recognize any gain or loss upon the receipt of an exchange note pursuant to the exchange offer. The
holding period for an exchange note will include the holding period of the original note exchanged
pursuant to the exchange offer, and the tax basis in an exchange note will be the same as the
adjusted tax basis in the original note as of the time of the exchange. Moreover, the exchange
notes will have the same issue price and the same adjusted issue price as the original notes as of
the time of the exchange, and the exchange notes will be subject to the rules governing original
issue discount, or
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OID, under the Code to the same extent that the original notes were so subject. The U.S.
federal income tax consequences of holding and disposing of an exchange note received pursuant to
the exchange offer generally will be the same as the U.S. federal income tax consequences of
holding and disposing of an original note if you do not participate in the exchange offer.
Certain Additional Payments
It is possible that the IRS could assert that the additional interest which we would have been
obligated to pay if the exchange offer registration statement were not filed or declared effective
within the applicable time periods was a contingent payment for purposes of the OID rules. It is
also possible that the IRS could assert that the payment by us of 101% of the face amount of any
note purchased by us at the holders election after a change of control, as described above under
the heading Description of NotesChange of Control is a contingent payment for purposes of the
OID rules. If any such payment is treated as a contingent payment, the exchange notes may be
treated as contingent payment debt instruments, in which case the timing and amount of income
inclusions and the character of income recognized may be different from the consequences described
herein. The Treasury regulations regarding debt instruments that provide for one or more contingent
payments state that, for purposes of determining whether a debt instrument is a contingent payment
debt instrument, remote or incidental contingencies are ignored. We intend to treat the possibility
of our making any of the above payments as remote or to treat such payments as incidental.
Accordingly, we do not intend to treat the exchange notes as contingent payment debt instruments.
Our treatment will be binding on all holders, except a holder that discloses its differing
treatment in a statement attached to its timely filed U.S. federal income tax return for the
taxable year during which the exchange note was acquired. However, our treatment is not binding on
the IRS. If the IRS were to challenge our treatment, a holder might be required to accrue income on
the exchange notes in excess of stated interest and to treat as ordinary income, rather than
capital gain, any gain recognized on the disposition of the exchange notes before the resolution of
the contingencies. In any event, if we actually make any such payment, the timing, amount and
character of a holders income, gain or loss with respect to the exchange notes may be affected.
The remainder of this discussion assumes that the exchange notes will not be contingent payment
debt instruments. Holders are urged to consult their own tax advisors regarding the potential
application to the exchange notes of the rules regarding contingent payment debt instruments and
the consequences thereof.
Consequences to U.S. Holders
A U.S. Holder means a beneficial owner of a note that is, for U.S. federal income tax
purposes:
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an individual who is a citizen or resident of the United States; |
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a corporation created or organized in or under the laws of the United States, a state
thereof or the District of Columbia; |
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an estate the income of which is subject to U.S. federal income taxation regardless of
its source; or |
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a trust that (1) is subject to the supervision of a court within the United States, if
one or more U.S. persons have the authority to control all substantial decisions of the
trust, or (2) has a valid election in effect under applicable U.S. Treasury Regulations to
be treated as a U.S. person. |
If an entity or arrangement classified as a partnership for U.S. federal income tax purposes
holds notes, the tax treatment of a partner in the partnership will generally depend upon the
status of the partner and the activities of the partnership. If you are an entity or arrangement
treated as a partnership for U.S. federal income tax purposes (or if you are a partner in such a
partnership), you are urged to consult your tax advisor regarding the tax consequences of holding
the notes to you.
Payments of Stated Interest
Stated interest on the exchange notes will generally be taxable to you as ordinary income at
the time it is paid or accrued in accordance with your method of accounting for U.S. federal income
tax purposes.
Original Issue Discount
The original notes were issued with OID for U.S. federal income tax purposes. Accordingly, the
exchange notes will be treated as having been issued with OID for U.S. federal income tax purposes
in the same amount as the OID on the original notes exchanged therefor. OID with respect to an
original note is generally equal to the excess of the stated redemption price at maturity of the
original note over its issue price. The stated redemption price at maturity is equal to the sum of
all payments on the original note other
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than the stated interest, and the issue price of the original note is the first price at which
a substantial amount of the original notes were sold to persons other than those acting as
placement agents, underwriters, brokers or wholesalers. Regardless of a U.S. Holders regular
method of tax accounting, a U.S. holder must include OID in income (as ordinary income) as it
accrues throughout the term of the note, whether or not the U.S. Holder receives a corresponding
cash payment on the exchange note during the taxable year. In general, the amount of OID included
in income is calculated using a constant-yield method, adding the daily portions of OID with
respect to the note for each day during the taxable year or portion of the taxable year that the
U.S. holder owns the note. The daily portion is determined by allocating to each day in any accrual
period a pro rata portion of the OID allocable to that accrual period. The accrual period is
generally selected by the holder, provided that no accrual period may be longer than one year and
each scheduled payment of interest or principal on the note must occur on either the first or final
day of an accrual period.
The amount of OID allocable to an accrual period is generally equal to the excess, if any, of
(i) the product of the notes adjusted issue price at the beginning of the accrual period and the
notes yield to maturity (determined on the basis of compounding at the close of each accrual
period and properly adjusted for the length of the accrual period) over (ii) the sum of the amounts
payable as stated interest on the note during the accrual period. The adjusted issue price of a
note at the beginning of any accrual period is the issue price of the note, increased by the amount
of accrued OID for each prior accrual period and decreased by the amount of any payments previously
made on the note that were not stated interest payments. The yield to maturity on a note is the
discount rate that, when used in computing the present value of all payments to be made on the
note, produces an amount equal to the issue price of the note. The amount of OID allocable to the
final accrual period is equal to the difference between the stated principal amount of the note and
the notes adjusted issue price at the beginning of the final accrual period.
Sale or Other Taxable Disposition of the Exchange Notes
Upon the sale or other taxable disposition of an exchange note (including a retirement or
redemption), you generally will recognize capital gain or loss equal to the difference between the
amount realized on such disposition (except to the extent any amount realized is attributable to
accrued but unpaid stated interest, which, if not previously taxed, will be taxable as ordinary
income) and your adjusted tax basis in the exchange note. Your adjusted tax basis in an exchange
note generally will be your cost for the note, increased by the previously accrued OID.
The capital gain or loss recognized on the disposition of an exchange note generally will be
long-term capital gain or loss if, at the time of such disposition, your holding period for the
exchange note is more than one year. Long-term capital gains of individuals and other non-corporate
taxpayers are generally eligible for reduced rates of taxation. The deductibility of capital losses
is subject to certain limitations.
Medicare Tax
For taxable years beginning after December 31, 2012, recently enacted legislation will
generally impose a 3.8% tax on the net investment income of certain individuals with a modified
adjusted gross income of over $200,000 ($250,000 in the case of joint filers) and on the
undistributed net investment income of certain estates and trusts. For these purposes, net
investment income will generally include interest paid and OID accrued with respect to an exchange
note and net gain from the sale, exchange, redemption, retirement or other taxable disposition of
an exchange note, unless such interest, OID or net gain is derived in the ordinary course of the
conduct of a trade or business (other than a trade or business that consists of certain passive or
trading activities). If you are a U.S. Holder that is an individual, estate or trust, you are urged
to consult your tax advisor regarding the applicability of the Medicare tax to your income and
gains in respect of the exchange notes.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to certain payments of interest and
accruals of OID and to the proceeds of a sale or other disposition (including a retirement or
redemption) of exchange notes unless you are an exempt recipient such as a corporation. Backup
withholding of tax (at a current rate of 28%, which is scheduled to increase to 31% in 2011) will
apply to such amounts if you fail to provide your taxpayer identification number or certification
of exempt status or have been notified by the IRS that you are subject to backup withholding.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding
rules will generally be allowed as a refund or a credit against your U.S. federal income tax
liability provided that you furnish the required information to the IRS on a timely basis.
Consequences to Non-U.S. Holders
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As used in this prospectus, the term Non-U.S. Holder means a beneficial owner of a note that
is, for federal income tax purposes, an individual, corporation, estate, or trust, and is not a
U.S. Holder.
If an entity or arrangement treated as a partnership for United States federal income tax
purposes, is a holder of a note, the U.S. federal income tax treatment of a partner in such a
partnership will generally depend on the status of the partner and the activities of the
partnership. Partners in such a partnership are urged to consult their tax advisors as to the
particular U.S. federal income tax consequences applicable to them of acquiring, holding or
disposing of exchange notes.
Payments of Interest
Subject to the discussion of backup withholding below, if you are a Non-U.S. Holder, you will
generally not be subject to U.S. federal income tax or the 30% U.S. federal withholding tax on
interest paid on the exchange notes (which, for purposes of this discussion of Non-U.S. Holders,
includes OID) so long as that interest is not effectively connected with your conduct of a trade or
business within the United States, provided that:
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you do not actually or constructively own 10% or more of the total combined voting
power of all classes of our stock that are entitled to vote; |
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you are not a controlled foreign corporation that is actually or constructively related
to us through stock ownership; |
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you are not a bank whose receipt of interest on a note is described in Section
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you provide the applicable withholding agent with, among other things, your name and
address, and certify, under penalties of perjury, that you are not a U.S. person (which
certification may be made on an IRS Form W-8BEN (or successor form)). |
If you cannot satisfy the requirements described above, payments of interest will generally be
subject to the 30% U.S. federal withholding tax, unless you provide the applicable withholding
agent with a properly executed (1) IRS Form W-8BEN (or successor form) claiming an exemption from
or reduction in withholding under the benefit of an applicable income tax treaty or (2) IRS Form
W-8ECI (or successor form) stating that interest paid on the notes is not subject to U.S. federal
withholding tax because it is effectively connected with your conduct of a trade or business in the
United States (as discussed below under Interest or Gain Effectively Connected with a United
States Trade or Business).
Sale or Other Taxable Disposition of the Notes
Subject to the discussion of backup withholding below, you will generally not be subject to
U.S. federal income or withholding tax on any gain recognized on the sale or other taxable
disposition of an exchange note (including a retirement or redemption), unless:
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if you are an individual non-U.S. holder, you are present in the United States for at
least 183 days in the taxable year of such disposition and certain other conditions are
met; or |
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that gain is effectively connected with the conduct by you of a trade or business
within the United States. |
If you are described in the first bullet point above, you will generally be subject to U.S.
federal income tax at a rate of 30% on the amount by which your capital gains allocable to U.S.
sources, including gain from such disposition, exceed any capital losses allocable to U.S. sources,
except as otherwise required by an applicable income tax treaty. If you are described in the second
bullet point, see Interest or Gain Effectively Connected with a United States Trade or
Business, below.
To the extent that the amount realized on any disposition of exchange notes is attributable to
accrued but unpaid interest on the exchange note, such amount generally will be treated in the same
manner as payments of interest as described under the heading Payments of Interest above.
Interest or Gain Effectively Connected with a United States Trade or Business
If you are engaged in a trade or business in the United States and interest on an exchange
note or gain recognized from the sale or other taxable disposition (including a retirement or
redemption) of an exchange note is effectively connected with the conduct of that trade or
business, you will generally be subject to U.S. federal income tax (but not the 30% U.S. federal
withholding tax on interest if you provide an applicable IRS Form W-8ECI, as described above) on
that interest or gain on a net income basis in the same manner as if you were a U.S. person as
defined under the Code (unless an applicable income tax treaty provides otherwise). In addition, if
you are a foreign corporation, you may be subject to a branch profits tax equal to 30% (or lower
applicable income tax treaty rate) of your earnings and profits for the taxable year, subject to
adjustments, that are effectively connected with your conduct of a trade or
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business in the United States. For this purpose, interest or gain effectively connected with a
trade or business in the United States will be included in the earnings and profits of a foreign
corporation.
Information Reporting and Backup Withholding
Generally, information returns will be filed with the IRS in connection with payments of
interest on the exchange notes and proceeds from the sale or other taxable disposition (including a
retirement or redemption) of the exchange notes. Copies of the information returns reporting such
payments and any withholding may also be made available to the tax authorities in the country in
which you reside under the provisions of an applicable income tax treaty.
You may be subject to backup withholding of tax (at a current rate of 28%, which is scheduled
to increase to 31% in 2011) on payments of interest on the exchange notes and, depending on the
circumstances, the proceeds of a sale or other taxable disposition (including a retirement or
redemption) of the exchange notes unless you comply with certain certification procedures to
establish that you are not a U.S. person. The certification procedures required to claim an
exemption from withholding of tax on interest described above generally will satisfy the
certification requirements necessary to avoid backup withholding as well. Backup withholding is not
an additional tax. The amount of any backup withholding from a payment to you will be allowed as a
credit against your U.S. federal income tax liability and may entitle you to a refund, provided
that the required information is timely furnished to the IRS.
Recent Legislation
Recently enacted legislation regarding foreign account tax compliance, effective for payments
made after December 31, 2012, imposes a withholding tax of 30% on interest and gross proceeds from
the disposition of certain debt instruments paid to certain foreign entities unless various
information reporting and certain other requirements are satisfied. However, the withholding tax
will not be imposed on payments pursuant to obligations outstanding as of March 18, 2012. In
addition, the legislation also imposes new U.S. return disclosure obligations (and related
penalties for failure to disclose) on persons required to file U.S. federal income tax returns that
hold certain specified foreign financial assets (which include financial accounts in foreign
financial institutions). Holders should consult their own tax advisors regarding the possible
implications of this recently enacted legislation on their investment in exchange notes.
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BOOK-ENTRY, DELIVERY AND FORM
We issued the original notes in the form of global securities registered in the name of a
nominee of DTC. The exchange notes will be initially issued in the form of global securities
registered in the name of DTC or its nominee.
Upon the issuance of a global security, DTC or its nominee will credit the accounts of persons
holding through it with the respective principal amounts of the applicable exchange notes
represented by such global security exchanged by such persons in the exchange offer. The term
global security means the outstanding global securities or the exchange global securities, as the
context may require. Ownership of beneficial interests in a global security will be limited to
persons that have accounts with DTC, which we refer to as participants, or persons that may hold
interests through participants. Ownership of beneficial interests in a global security will be
shown on, and the transfer of that ownership interest will be effected only through, records
maintained by DTC (with respect to participants interests) and such participants (with respect to
the owners of beneficial interests in such global security other than participants). The laws of
some jurisdictions require that certain purchasers of securities take physical delivery of such
securities in definitive form. These limits and laws may impair the ability to transfer beneficial
interests in a global security. Because DTC can act only on behalf of participants, which in turn
act on behalf of indirect participants, the ability of a person having beneficial interests in a
global security to pledge its interests to persons that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the lack of a physical
certificate evidencing those interests.
Payment of principal of and interest on any exchange notes represented by a global security
will be made in immediately available funds to DTC or its nominee, as the case may be, as the sole
registered owner and the sole holder of the exchange notes represented thereby for all purposes
under the indentures. The Company has been advised by DTC that upon receipt of any payment of
principal of or interest on any global security, DTC will immediately credit, on its book-entry
registration and transfer system, the accounts of participants with payments in amounts
proportionate to their respective beneficial interests in the principal or face amount of such
global security as shown on the records of DTC. Payments by participants to owners of beneficial
interests in a global security held through such participants will be governed by standing
instructions and customary practices as is now the case with securities held for customer accounts
registered in street name and will be the sole responsibility of such participants.
A global security may not be transferred except as a whole by DTC or a nominee of DTC to a
nominee of DTC or to DTC. A global security is exchangeable for certificated exchange notes only
if:
(a) DTC notifies the Company that it is unwilling or unable to continue as a depositary for
such global security or if at any time DTC ceases to be a clearing agency registered under the
Exchange Act and, in either case, the Company fails to appoint a successor depository;
(b) the Company, in its discretion, at any time determines not to have all the exchange notes
represented by such global security; or
(c) there shall have occurred and be continuing a Default or an Event of Default with respect
to the exchange notes of the series represented by such global security.
Any global security that is exchangeable for certificated exchange notes pursuant to the
preceding sentence will be exchanged for certificated exchange notes in authorized denominations
and registered in such names as DTC or any successor depositary holding such global security may
direct. Subject to the foregoing, a global security is not exchangeable, except for a global
security of like denomination to be registered in the name of DTC or any successor depositary or
its nominee. In the event that a global security becomes exchangeable for certificated exchange
notes,
(a) certificated exchange notes will be issued only in fully registered form in denominations
of $2,000 or integral multiples of $1,000 in excess thereof;
(b) payment of principal of, and premium, if any, and interest on, the certificated exchange
notes will be payable, and the transfer of the certificated exchange notes will be registrable, at
the office or agency of the Company maintained for such purposes; and
(c) no service charge will be made for any registration of transfer or exchange of the
certificated exchange notes, although the Company may require payment of a sum sufficient to cover
any tax or governmental charge imposed in connection therewith.
Certificated exchange notes may not be exchanged for beneficial interests in any global
security unless the transferor first delivers to the trustee a written certificate, in the form
provided in the applicable indenture.
114
The Company will make payments in respect of the exchange notes represented by the global
securities, including principal and interest, by wire transfer of immediately available funds to
the accounts specified by the DTC or its nominee. The Company will make all payments of principal
and interest with respect to certificated exchange notes by wire transfer of immediately available
funds to the accounts specified by the holders of the certificated exchange notes or, if no such
account is specified, by mailing a check to each such holders registered address.
So long as DTC or any successor depositary for a global security, or any nominee, is the
registered owner of such global security, DTC or such successor depositary or nominee, as the case
may be, will be considered the sole owner or holder of the exchange notes represented by such
global security for all purposes under the indenture and the exchange notes. Except as set forth
above, owners of beneficial interests in a global security will not be entitled to have the
exchange notes represented by such global security registered in their names, will not receive or
be entitled to receive physical delivery of certificated exchange notes in definitive form and will
not be considered to be the owners or holders of any exchange notes under such global security.
Accordingly, each person owning a beneficial interest in a global security must rely on the
procedures of DTC or any successor depositary, and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to exercise any rights
of a holder under the indenture under which such exchange notes were issued. The Company
understands that under existing industry practices, in the event that the Company requests any
action of holders or that an owner of a beneficial interest in a global security desires to give or
take any action which a holder is entitled to give or take under the indenture, DTC or any
successor depositary would authorize the participants holding the relevant beneficial interest to
give or take such action and such participants would authorize beneficial owners owning through
such participants to give or take such action or would otherwise act upon the instructions of
beneficial owners owning through them.
Consequently, neither the Company, the trustee nor any agent of the Company or the trustee has
or will have any responsibility or liability for:
(a) any aspect of DTCs records or any participants or indirect participants records
relating to or payments made on account of beneficial ownership interest in the global securities
or for maintaining, supervising or reviewing any of DTCs records or any participants or indirect
participants records relating to the beneficial ownership interests in the global securities; or
(b) any other matter relating to the actions and practices of DTC or any of its participants
or indirect participants.
DTC has advised the Company that DTC is a limited-purpose trust company organized under the
Banking Law of the State of New York, a member of the Federal Reserve System, a clearing
corporation within the meaning of the New York Uniform Commercial Code and a clearing agency
registered under the Exchange Act. DTC was created to hold the securities of its participants and
to facilitate the clearance and settlement of securities transactions among its participants in
such securities through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. DTCs participants include
securities brokers and dealers (which may include the initial purchasers of the original notes),
banks, trust companies, clearing corporations and certain other organizations some of whom (or
their representatives) own DTC. Access to DTCs book-entry system is also available to others, such
as banks, brokers, dealers and trust companies, that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate transfers of
interests in global securities among participants of DTC, it is under no obligation to perform or
continue to perform such procedures, and such procedures may be discontinued at any time. Neither
the Company nor the trustee under the indenture or the exchange agent will have any responsibility
for the performance by DTC, or its participants or indirect participants of their respective
obligations under the rules and procedures governing its operations.
115
PLAN OF DISTRIBUTION
Any broker-dealer that holds original notes that were acquired for its own account as a result
of market-making activities or other trading activities (other than original notes acquired
directly from us) may exchange such original notes pursuant to the exchange offer. Any such
broker-dealer, however, may be deemed to be an underwriter within the meaning of the Securities
Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of exchange notes received by such broker-dealer in the exchange offer.
Such prospectus delivery requirement may be satisfied by the delivery by such broker-dealer of this
prospectus.
We have agreed to make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with such resales for up to 90 days from the effective date of
the registration statement of which this prospectus forms a part. We will provide sufficient copies
of this prospectus, as amended or supplemented, to any broker-dealer promptly upon request at any
time during such 90-day period in order to facilitate such resales.
We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange
notes received by broker-dealers for their own account in the exchange offer may be sold from time
to time in one or more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the exchange notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such prevailing market prices
or negotiated prices. Any of these resales may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or concessions from
these broker-dealers and/or the purchasers of exchange notes. Any broker-dealer that resells
exchange notes that were received by it for its own account in the exchange offer and any
broker-dealer that participates in a distribution of the exchange notes may be deemed to be an
underwriter within the meaning of the Securities Act and any profit on any such resale of
exchange notes and any commission or concessions received by any such person may be deemed to be
underwriting compensation under the Securities Act. The accompanying letter of transmittal states
that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an underwriter within the meaning of the Securities Act.
We have agreed to pay all expenses incident to the exchange offer, including the expenses of
one counsel for the holders of the original notes, other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the original notes, including any
broker-dealers, against certain liabilities, including liabilities under the Securities Act.
116
LEGAL MATTERS
Jones Day, Atlanta, Georgia, will pass upon certain legal matters for us regarding the
exchange notes and the related guarantees. Woodburn and Wedge, Las Vegas, Nevada, will pass upon
certain legal matters under Nevada law regarding the guarantees of the exchange notes.
117
EXPERTS
The consolidated financial statements of Gray Television, Inc. and subsidiaries as of and for
the years ended December 31, 2009, 2008 and 2007, included in this prospectus and registration
statement, have been audited by McGladrey & Pullen, LLP, independent auditors, as stated in their
report appearing herein, and given on the authority of said firm as
experts in auditing and accounting.
118
INDEX TO FINANCIAL STATEMENTS
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Page |
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|
F-2 |
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F-3 |
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F-4 |
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F-5 |
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F-8 |
|
|
F-9 |
|
|
F-35 |
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F-37 |
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F-38 |
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F-39 |
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|
F-40 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Gray Television, Inc.
We have audited the accompanying consolidated balance sheets of Gray Television, Inc. as
of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders
equity and comprehensive income, and cash flows for each of the three years in the period ended
December 31, 2009. Our audits also included the financial statement schedule listed in Item 15(a).
We also have audited Gray Television, Inc.s internal control over financial reporting as of
December 31, 2009, based on criteria established in Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission. Gray Television, Inc.s
management is responsible for these financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting. Our responsibility is to express an opinion on these financial
statements, the financial statement schedule and an opinion on the companys internal control over
financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of material
misstatement and whether effective internal control over financial reporting was maintained in all
material respects. Our audits of the financial statements included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
A companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes those policies and
procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (b) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (c) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the companys assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Gray Television, Inc. as of December 31, 2009 and
2008, and the results of its operations and its cash flows for each of the years in the three-year
period ended December 31, 2009, in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a whole, presents
fairly in all material respects the information set forth herein. Further in our opinion Gray
Television, Inc. maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2009, based on criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission .
As discussed in Note 9 to the consolidated financial statements, in 2007 the company changed
its method of accounting for uncertainty in income taxes.
/s/ McGladrey & Pullen, LLP
Ft. Lauderdale, Florida
April 6, 2010
F-2
GRAY TELEVISION, INC.
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(In thousands) |
|
Assets: |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
16,000 |
|
|
$ |
30,649 |
|
Accounts receivable, less allowance for doubtful accounts of $1,092 and $1,543, respectively |
|
|
57,179 |
|
|
|
54,685 |
|
Current portion of program broadcast rights, net |
|
|
10,220 |
|
|
|
10,092 |
|
Deferred tax asset |
|
|
1,597 |
|
|
|
1,830 |
|
Marketable securities |
|
|
|
|
|
|
1,384 |
|
Prepaid and other current assets |
|
|
1,788 |
|
|
|
3,167 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
86,784 |
|
|
|
101,807 |
|
Property and equipment, net |
|
|
148,092 |
|
|
|
162,903 |
|
Deferred loan costs, net |
|
|
1,619 |
|
|
|
2,850 |
|
Broadcast licenses |
|
|
818,981 |
|
|
|
818,981 |
|
Goodwill |
|
|
170,522 |
|
|
|
170,522 |
|
Other intangible assets, net |
|
|
1,316 |
|
|
|
1,893 |
|
Investment in broadcasting company |
|
|
13,599 |
|
|
|
13,599 |
|
Other |
|
|
4,826 |
|
|
|
5,710 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,245,739 |
|
|
$ |
1,278,265 |
|
|
|
|
|
|
|
|
Liabilities and stockholders equity: |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
6,047 |
|
|
$ |
11,515 |
|
Employee compensation and benefits |
|
|
9,675 |
|
|
|
9,603 |
|
Accrued interest |
|
|
13,531 |
|
|
|
9,877 |
|
Other accrued expenses |
|
|
4,814 |
|
|
|
9,128 |
|
Interest rate hedge derivatives |
|
|
6,344 |
|
|
|
|
|
Dividends payable |
|
|
|
|
|
|
3,000 |
|
Federal and state income taxes |
|
|
4,206 |
|
|
|
4,374 |
|
Current portion of program broadcast obligations |
|
|
15,271 |
|
|
|
15,236 |
|
Acquisition related liabilities |
|
|
863 |
|
|
|
980 |
|
Deferred revenue |
|
|
6,241 |
|
|
|
10,364 |
|
Current portion of long-term debt |
|
|
8,080 |
|
|
|
8,085 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
75,072 |
|
|
|
82,162 |
|
Long-term debt, less current portion |
|
|
783,729 |
|
|
|
792,295 |
|
Long-term accrued facility fee |
|
|
18,307 |
|
|
|
|
|
Program broadcast obligations, less current portion |
|
|
1,531 |
|
|
|
1,534 |
|
Deferred income taxes |
|
|
142,204 |
|
|
|
143,975 |
|
Long-term deferred revenue |
|
|
2,638 |
|
|
|
3,310 |
|
Long-term accrued dividends |
|
|
18,917 |
|
|
|
|
|
Accrued pension costs |
|
|
13,969 |
|
|
|
18,782 |
|
Interest rate hedge derivatives |
|
|
|
|
|
|
24,611 |
|
Other |
|
|
2,366 |
|
|
|
2,306 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,058,733 |
|
|
|
1,068,975 |
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 11) |
|
|
|
|
|
|
|
|
Preferred stock, no par value; cumulative; redeemable; designated 1.00 shares, issued and outstanding 1.00
shares, ($100,000 aggregate liquidation value) |
|
|
93,386 |
|
|
|
92,183 |
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
Common stock, no par value; authorized 100,000 shares, issued 47,530 shares and 47,179 shares, respectively |
|
|
453,824 |
|
|
|
452,289 |
|
Class A common stock, no par value; authorized 15,000 shares, issued 7,332 shares |
|
|
15,321 |
|
|
|
15,321 |
|
Accumulated deficit |
|
|
(303,698 |
) |
|
|
(263,532 |
) |
Accumulated other comprehensive loss, net of income tax benefit |
|
|
(9,314 |
) |
|
|
(24,458 |
) |
|
|
|
|
|
|
|
|
|
|
156,133 |
|
|
|
179,620 |
|
Treasury stock at cost, common stock, 4,655 shares |
|
|
(40,115 |
) |
|
|
(40,115 |
) |
Treasury stock at cost, Class A common stock, 1,579 shares |
|
|
(22,398 |
) |
|
|
(22,398 |
) |
|
|
|
|
|
|
|
Total stockholders equity |
|
|
93,620 |
|
|
|
117,107 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
1,245,739 |
|
|
$ |
1,278,265 |
|
|
|
|
|
|
|
|
See accompanying notes.
F-3
GRAY TELEVISION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
(In thousands, except for per share data) |
|
Revenues (less agency commissions) |
|
$ |
270,374 |
|
|
$ |
327,176 |
|
|
$ |
307,288 |
|
Operating expenses before depreciation,
amortization, impairment, and gain on
disposal of assets, net |
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast |
|
|
187,583 |
|
|
|
199,572 |
|
|
|
199,687 |
|
Corporate and administrative |
|
|
14,168 |
|
|
|
14,097 |
|
|
|
15,090 |
|
Depreciation |
|
|
32,595 |
|
|
|
34,561 |
|
|
|
38,558 |
|
Amortization of intangible assets |
|
|
577 |
|
|
|
792 |
|
|
|
825 |
|
Impairment of goodwill and broadcast licenses |
|
|
|
|
|
|
338,681 |
|
|
|
|
|
Gain on disposals of assets, net |
|
|
(7,628 |
) |
|
|
(1,632 |
) |
|
|
(248 |
) |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
227,295 |
|
|
|
586,071 |
|
|
|
253,912 |
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
43,079 |
|
|
|
(258,895 |
) |
|
|
53,376 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous income (expense), net |
|
|
54 |
|
|
|
(53 |
) |
|
|
972 |
|
Interest expense |
|
|
(69,088 |
) |
|
|
(54,079 |
) |
|
|
(67,189 |
) |
Loss from early extinguishment of debt |
|
|
(8,352 |
) |
|
|
|
|
|
|
(22,853 |
) |
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(34,307 |
) |
|
|
(313,027 |
) |
|
|
(35,694 |
) |
Income tax benefit |
|
|
(11,260 |
) |
|
|
(111,011 |
) |
|
|
(12,543 |
) |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(23,047 |
) |
|
|
(202,016 |
) |
|
|
(23,151 |
) |
Preferred dividends (includes accretion of
issuance cost of $1,202, $576 and $439,
respectively) |
|
|
17,119 |
|
|
|
6,593 |
|
|
|
1,626 |
|
|
|
|
|
|
|
|
|
|
|
Net loss available to common stockholders |
|
$ |
(40,166 |
) |
|
$ |
(208,609 |
) |
|
$ |
(24,777 |
) |
|
|
|
|
|
|
|
|
|
|
Basic and diluted per share information: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to common stockholders |
|
$ |
(0.83 |
) |
|
$ |
(4.32 |
) |
|
$ |
(0.52 |
) |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
48,510 |
|
|
|
48,302 |
|
|
|
47,788 |
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share |
|
$ |
|
|
|
$ |
0.09 |
|
|
$ |
0.12 |
|
See accompanying notes.
F-4
GRAY TELEVISION, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Class A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
Common |
|
|
Other |
|
|
|
|
|
|
Common Stock |
|
|
Common Stock |
|
|
Accumulated |
|
|
Treasury Stock |
|
|
Treasury Stock |
|
|
Comprehensive |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Deficit |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Income (Loss) |
|
|
Total |
|
|
|
(In thousands, except for number of shares) |
|
Balance at December 31, 2006 |
|
|
7,331,574 |
|
|
$ |
15,321 |
|
|
|
45,690,633 |
|
|
$ |
443,698 |
|
|
$ |
(20,026 |
) |
|
|
(1,578,554 |
) |
|
$ |
(22,398 |
) |
|
|
(3,123,750 |
) |
|
$ |
(34,412 |
) |
|
$ |
(2,429 |
) |
|
$ |
379,754 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,151 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on derivatives, net of
income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,754 |
) |
|
|
|
|
Adjustment to pension
liability, net of income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136 |
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33,769 |
) |
Common stock cash dividends
($0.12) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,757 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,757 |
) |
Preferred stock dividends
(including accretion of
original issuance costs) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,626 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,626 |
) |
Issuance of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) plan |
|
|
|
|
|
|
|
|
|
|
264,419 |
|
|
|
2,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,242 |
|
Non-qualified stock plan |
|
|
|
|
|
|
|
|
|
|
163,295 |
|
|
|
1,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,271 |
|
Directors restricted stock plan |
|
|
|
|
|
|
|
|
|
|
55,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(647,800 |
) |
|
|
(5,518 |
) |
|
|
|
|
|
|
(5,518 |
) |
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007 |
|
|
7,331,574 |
|
|
$ |
15,321 |
|
|
|
46,173,347 |
|
|
$ |
448,459 |
|
|
$ |
(50,560 |
) |
|
|
(1,578,554 |
) |
|
$ |
(22,398 |
) |
|
|
(3,771,550 |
) |
|
$ |
(39,930 |
) |
|
$ |
(13,047 |
) |
|
$ |
337,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-5
GRAY TELEVISION, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Class A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
Common |
|
|
Other |
|
|
|
|
|
|
Common Stock |
|
|
Common Stock |
|
|
Accumulated |
|
|
Treasury Stock |
|
|
Treasury Stock |
|
|
Comprehensive |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Deficit |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Income (Loss) |
|
|
Total |
|
|
|
(In thousands, except for number of shares) |
|
Balance at December 31, 2007 |
|
|
7,331,574 |
|
|
$ |
15,321 |
|
|
|
46,173,347 |
|
|
$ |
448,459 |
|
|
$ |
(50,560 |
) |
|
|
(1,578,554 |
) |
|
$ |
(22,398 |
) |
|
|
(3,771,550 |
) |
|
$ |
(39,930 |
) |
|
$ |
(13,047 |
) |
|
$ |
337,845 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(202,016 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on derivatives, net of
income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,262 |
) |
|
|
|
|
Adjustment to pension
liability, net of income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,149 |
) |
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(213,427 |
) |
Common stock cash dividends
($0.09) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,363 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,363 |
) |
Preferred stock dividends
(including accretion of
original issuance costs) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,593 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,593 |
) |
Issuance of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) plan |
|
|
|
|
|
|
|
|
|
|
950,601 |
|
|
|
2,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,380 |
|
Directors restricted stock plan |
|
|
|
|
|
|
|
|
|
|
55,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(883,200 |
) |
|
|
(185 |
) |
|
|
|
|
|
|
(185 |
) |
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008 |
|
|
7,331,574 |
|
|
$ |
15,321 |
|
|
|
47,178,948 |
|
|
$ |
452,289 |
|
|
$ |
(263,532 |
) |
|
|
(1,578,554 |
) |
|
$ |
(22,398 |
) |
|
|
(4,654,750 |
) |
|
$ |
(40,115 |
) |
|
$ |
(24,458 |
) |
|
$ |
117,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-6
GRAY TELEVISION, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY AND COMPREHENSIVE LOSS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Class A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
Common |
|
|
Other |
|
|
|
|
|
|
Common Stock |
|
|
Common Stock |
|
|
Accumulated |
|
|
Treasury Stock |
|
|
Treasury Stock |
|
|
Comprehensive |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Deficit |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Income (Loss) |
|
|
Total |
|
|
|
(In thousands, except for number of shares) |
|
Balance at December 31, 2008 |
|
|
7,331,574 |
|
|
$ |
15,321 |
|
|
|
47,178,948 |
|
|
$ |
452,289 |
|
|
$ |
(263,532 |
) |
|
|
(1,578,554 |
) |
|
$ |
(22,398 |
) |
|
|
(4,654,750 |
) |
|
$ |
(40,115 |
) |
|
$ |
(24,458 |
) |
|
$ |
117,107 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,047 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on derivatives, net of
income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,143 |
|
|
|
|
|
Adjustment to pension
liability, net of income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,001 |
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,903 |
) |
Preferred stock dividends
(including accretion of
original issuance costs) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,119 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,119 |
) |
Issuance of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) plan |
|
|
|
|
|
|
|
|
|
|
350,554 |
|
|
|
147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147 |
|
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
|
7,331,574 |
|
|
$ |
15,321 |
|
|
|
47,529,502 |
|
|
$ |
453,824 |
|
|
$ |
(303,698 |
) |
|
|
(1,578,554 |
) |
|
$ |
(22,398 |
) |
|
|
(4,654,750 |
) |
|
$ |
(40,115 |
) |
|
$ |
(9,314 |
) |
|
$ |
93,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-7
GRAY TELEVISION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
(In thousands) |
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(23,047 |
) |
|
$ |
(202,016 |
) |
|
$ |
(23,151 |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
32,595 |
|
|
|
34,561 |
|
|
|
38,558 |
|
Amortization of intangible assets |
|
|
577 |
|
|
|
792 |
|
|
|
825 |
|
Amortization of deferred loan costs |
|
|
329 |
|
|
|
475 |
|
|
|
967 |
|
Amortization of restricted stock awards |
|
|
1,388 |
|
|
|
1,450 |
|
|
|
1,248 |
|
Loss from early extinguishment of debt |
|
|
8,352 |
|
|
|
|
|
|
|
22,853 |
|
Accrual of long-term accrued facility fee |
|
|
18,307 |
|
|
|
|
|
|
|
|
|
Impairment of goodwill and broadcast licenses |
|
|
|
|
|
|
338,681 |
|
|
|
|
|
Amortization of program broadcast rights |
|
|
15,130 |
|
|
|
16,070 |
|
|
|
15,194 |
|
Payments on program broadcast obligations |
|
|
(15,287 |
) |
|
|
(13,968 |
) |
|
|
(14,101 |
) |
Common stock contributed to 401(K) Plan |
|
|
147 |
|
|
|
2,380 |
|
|
|
2,242 |
|
Deferred revenue, network compensation |
|
|
(617 |
) |
|
|
(604 |
) |
|
|
(300 |
) |
Deferred income taxes |
|
|
(11,219 |
) |
|
|
(110,990 |
) |
|
|
(13,823 |
) |
Gain on disposals of assets, net |
|
|
(7,628 |
) |
|
|
(1,632 |
) |
|
|
(248 |
) |
Payment for sports marketing agreement |
|
|
|
|
|
|
|
|
|
|
(4,950 |
) |
Other |
|
|
2,574 |
|
|
|
257 |
|
|
|
173 |
|
Changes in operating assets and liabilities, net of business acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(2,483 |
) |
|
|
8,385 |
|
|
|
(2,089 |
) |
Other current assets |
|
|
3,208 |
|
|
|
3,387 |
|
|
|
(3,169 |
) |
Accounts payable |
|
|
(4,238 |
) |
|
|
2,162 |
|
|
|
2,082 |
|
Employee compensation, benefits and pension costs |
|
|
72 |
|
|
|
(2,017 |
) |
|
|
288 |
|
Accrued expenses |
|
|
(2,288 |
) |
|
|
870 |
|
|
|
(374 |
) |
Accrued interest |
|
|
3,654 |
|
|
|
(6,001 |
) |
|
|
5,047 |
|
Income taxes payable |
|
|
(168 |
) |
|
|
(282 |
) |
|
|
1,141 |
|
Deferred revenue other, including current portion |
|
|
(455 |
) |
|
|
1,715 |
|
|
|
(53 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
18,903 |
|
|
|
73,675 |
|
|
|
28,360 |
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of television businesses and licenses, net of cash acquired |
|
|
|
|
|
|
|
|
|
|
(92 |
) |
Purchases of property and equipment |
|
|
(17,756 |
) |
|
|
(15,019 |
) |
|
|
(24,605 |
) |
Proceeds from asset sales |
|
|
104 |
|
|
|
199 |
|
|
|
272 |
|
Equipment transactions related to spectrum reallocation, net |
|
|
697 |
|
|
|
(766 |
) |
|
|
(211 |
) |
Payments on acquisition related liabilities |
|
|
(805 |
) |
|
|
(779 |
) |
|
|
(1,012 |
) |
Other |
|
|
229 |
|
|
|
25 |
|
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(17,531 |
) |
|
|
(16,340 |
) |
|
|
(25,662 |
) |
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings on long-term debt |
|
|
|
|
|
|
16,000 |
|
|
|
392,500 |
|
Repayments of borrowings on long-term debt |
|
|
(8,571 |
) |
|
|
(140,621 |
) |
|
|
(318,500 |
) |
Deferred and other loan costs |
|
|
(7,450 |
) |
|
|
|
|
|
|
(16,255 |
) |
Dividends paid, net of accreted preferred stock dividend |
|
|
|
|
|
|
(8,825 |
) |
|
|
(7,709 |
) |
Proceeds from issuance of common stock |
|
|
|
|
|
|
|
|
|
|
1,271 |
|
Proceeds from issuance of preferred stock |
|
|
|
|
|
|
91,607 |
|
|
|
|
|
Purchase of common stock |
|
|
|
|
|
|
(185 |
) |
|
|
(5,518 |
) |
Redemption of preferred stock |
|
|
|
|
|
|
|
|
|
|
(31,400 |
) |
Redemption and purchase of preferred stock from related party |
|
|
|
|
|
|
|
|
|
|
(6,490 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(16,021 |
) |
|
|
(42,024 |
) |
|
|
7,899 |
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
(14,649 |
) |
|
|
15,311 |
|
|
|
10,597 |
|
Cash and cash equivalents at beginning of period |
|
|
30,649 |
|
|
|
15,338 |
|
|
|
4,741 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
16,000 |
|
|
$ |
30,649 |
|
|
$ |
15,338 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-8
GRAY TELEVISION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business and Summary of Significant Accounting Policies
Description of Business
Gray Television, Inc. is a television broadcast company headquartered in Atlanta, Georgia. We
own 36 television stations serving 30 television markets. Seventeen of the stations are affiliated
with CBS Inc. (CBS), ten are affiliated with the National Broadcasting Company, Inc. (NBC),
eight are affiliated with the American Broadcasting Company (ABC), and one is affiliated with FOX
Entertainment Group, Inc. (FOX). In addition to our primary channels that we broadcast from our
television stations, we currently broadcast 39 digital second channels including one affiliated
with ABC, four affiliated with FOX, seven affiliated with The CW Network, LLC (CW), 18 affiliated
with Twentieth Television, Inc. (MyNetworkTV or MyNet.), two affiliated with Universal Sports
Network or (Universal Sports) and seven local news/weather channels in certain of our existing
markets. We created our digital second channels to better utilize our excess broadcast spectrum.
The digital second channels are similar to our primary broadcast channels; however, our digital
second channels are affiliated with networks different from those affiliated with our primary
broadcast channels. Our operations consist of one reportable segment.
Principles of Consolidation
The consolidated financial statements include our accounts and the accounts of our
subsidiaries. All significant intercompany accounts and transactions have been eliminated.
Revenue Recognition
Broadcasting advertising revenue is generated primarily from the sale of television
advertising time to local, national and political customers. Internet advertising revenue is
generated from the sale of advertisements on our stations websites. Broadcast network compensation
is generated by contractual payments to us from the broadcast networks. Retransmission consent
revenue is generated by payments to us from cable and satellite distribution systems for their
retransmission of our broadcasts. Advertising revenue is billed to the customer and recognized when
the advertisement is broadcast or appears on our stations websites. Broadcast network compensation
is recognized on a straight-line basis over the life of the contract. Retransmission consent
revenue is recognized as earned over the life of the contract. Cash received which has not yet been
recognized as revenue is presented as deferred revenue.
Barter Transactions
We account for trade barter transactions involving the exchange of tangible goods or services
with our customers as revenue. The revenue is recorded at the time the advertisement is broadcast
and the expense is recorded at the time the goods or services are used. The revenue and expense
associated with these transactions are based on the fair value of the assets or services involved
in the transaction. Trade barter revenue and expense recognized by us for each of the years ended
December 31, 2009, 2008 and 2007 are as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Trade barter revenue |
|
$ |
1,289 |
|
|
$ |
1,850 |
|
|
$ |
2,256 |
|
Trade barter expense |
|
|
(1,324 |
) |
|
|
(1,892 |
) |
|
|
(2,116 |
) |
|
|
|
|
|
|
|
|
|
|
Net trade barter (expense) income |
|
$ |
(35 |
) |
|
$ |
(42 |
) |
|
$ |
140 |
|
|
|
|
|
|
|
|
|
|
|
We do not account for barter revenue and related barter expense generated from network or
syndicated programming as such amounts are not material. Furthermore, any such barter revenue
recognized would then require the recognition of an equal amount of barter expense. The recognition
of these amounts would have no effect upon net income (loss).
Advertising Expense
We recorded advertising expense of $0.8 million, $1.3 million and $1.8 million for the years
ended December 31, 2009, 2008 and 2007, respectively. In 2009 and 2008, advertising expense
decreased as a result of general cost reduction initiatives. In 2007, advertising expense increased
as a result of the acquisition of stations and the expansion of operations at existing stations
through digital second channels. We expense all advertising expenditures.
F-9
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America (GAAP) requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes.
Our actual results could materially differ from these estimated amounts. Our most significant
estimates are used for our allowance for doubtful accounts in receivables, valuation of goodwill
and intangible assets, amortization of program rights and intangible assets, stock-based
compensation, pension costs, income taxes, employee medical insurance claims, useful lives of
property and equipment, contingencies and litigation.
Allowance for Doubtful Accounts
We record a provision for doubtful accounts based on a percentage of receivables. We recorded
expenses for this allowance of $0.9 million, $1.8 million and $1.0 million for the years ended
December 31, 2009, 2008 and 2007, respectively. We write-off accounts receivable balances when we
determine that they have become uncollectible.
Program Broadcast Rights
Rights to programs available for broadcast under program license agreements are initially
recorded at the beginning of the license period for the amounts of total license fees payable under
the license agreements and are charged to operating expense over the period that the episodes are
broadcast. The portion of the unamortized balance expected to be charged to operating expense in
the succeeding year is classified as a current asset, with the remainder classified as a
non-current asset. The liability for the license fees payable under program license agreements is
classified as current or long-term, in accordance with the payment terms of the various license
agreements.
Property and Equipment
Property and equipment are carried at cost. Depreciation is computed principally by the
straight-line method. Buildings, towers, improvements and equipment are generally depreciated over
estimated useful lives of approximately 35 years, 20 years, 10 years and 5 years, respectively.
Maintenance, repairs and minor replacements are charged to operations as incurred; major
replacements and betterments are capitalized. The cost of any assets sold or retired and related
accumulated depreciation are removed from the accounts at the time of disposition, and any
resulting profit or loss is reflected in income or expense for the period. The following table
lists components of property and equipment by major category (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Property and equipment: |
|
|
|
|
|
|
|
|
Land |
|
$ |
23,046 |
|
|
$ |
22,452 |
|
Buildings and improvements |
|
|
51,606 |
|
|
|
49,766 |
|
Equipment |
|
|
291,682 |
|
|
|
296,013 |
|
|
|
|
|
|
|
|
|
|
|
366,334 |
|
|
|
368,231 |
|
Accumulated depreciation |
|
|
(218,242 |
) |
|
|
(205,328 |
) |
|
|
|
|
|
|
|
Total property and equipment, net |
|
$ |
148,092 |
|
|
$ |
162,903 |
|
|
|
|
|
|
|
|
Deferred Loan Costs
Loan acquisition costs are amortized over the life of the applicable indebtedness using a
straight-line method that approximates the effective interest method.
Asset Retirement Obligations
We own office equipment, broadcasting equipment, leasehold improvements and transmission
towers, some of which are located on, or are housed in, leased property or facilities. At the
conclusion of several of these leases we are legally obligated to dismantle, remove and otherwise
properly dispose of and remediate the facility or property. We estimate our asset retirement
obligation based upon the cash flows of the costs to be incurred and the net present value of those
estimated amounts. The asset retirement obligation is recognized as a non-current liability and as
a component of the cost of the related asset. Changes to our asset retirement obligation resulting
from revisions to the timing or the amount of the original undiscounted cash flow estimates are
recognized as an increase or decrease to the carrying amount of the asset retirement obligation and
the related asset retirement cost capitalized as part of the related
F-10
property, plant, or equipment. Changes in the asset retirement obligation resulting from
accretion of the net present value of the estimated cash flows are recognized as operating
expenses. We recognize depreciation expense of the capitalized cost over the estimated life of the
lease. Our estimated obligations become due at varying times during the years 2010 through 2059.
The liability recognized for our asset retirement obligations was approximately $465,000 and
$507,000 as of December 31, 2009 and 2008, respectively. Related to our asset retirement
obligations, we recorded a gain of $3,000 for the year ended December 31, 2009 and expenses of
$28,000 and $0 for the years ended December 31, 2008 and 2007, respectively.
Concentration of Credit Risk
We provide advertising air-time to national and local advertisers within the geographic areas
in which we operate. Credit is extended based on an evaluation of the customers financial
condition, and generally advance payment is not required except for political advertising. Credit
losses are provided for in the financial statements and consistently have been within our
expectations that are based upon our prior experience.
For the year ended December 31, 2009, approximately 17% and 12% of our broadcast revenue was
obtained from advertising sales to automotive and restaurant customers, respectively. We
experienced similar industry-based concentrations of revenue in the years ended December 31, 2008
and 2007. Although our revenues can be affected by changes within these industries, we believe this
risk is in part mitigated due to the fact that no one customer accounted for in excess of 5% of our
revenue in any of these periods. Furthermore, our large geographic operating area partially
mitigates the potential effect of regional economic changes. However, during the years ended
December 31, 2009 and 2008, our overall revenues have been negatively impacted by the economic
recession, including the recessions effect upon the automotive industry.
The majority of our cash is held by a major financial institution and we believe risk of loss
is mitigated by the size and the financial health of the institution. Risk of loss has been further
mitigated by the U.S. Governments intervention in the banking system during the years ended
December 31, 2009 and 2008.
Earnings Per Share
We compute basic earnings per share by dividing net income by the weighted-average number of
common shares outstanding during the relevant period. The weighted-average number of common shares
outstanding does not include unvested restricted shares. These shares, although classified as
issued and outstanding, are considered contingently returnable until the restrictions lapse and are
not to be included in the basic earnings per share calculation until the shares are vested. Diluted
earnings per share is computed by giving effect to all dilutive potential common shares issuable,
including restricted stock and stock options. The following table reconciles basic weighted-average
shares outstanding to diluted weighted-average shares outstanding for the years ended December 31,
2009, 2008 and 2007 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2009 |
|
2008 |
|
2007 |
Weighted-average shares outstanding basic |
|
|
48,510 |
|
|
|
48,302 |
|
|
|
47,788 |
|
Stock options and restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding diluted |
|
|
48,510 |
|
|
|
48,302 |
|
|
|
47,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For periods in which we reported losses, all common stock equivalents are excluded from the
computation of diluted earnings per share, since their inclusion would be antidilutive. Securities
that could potentially dilute earnings per share in the future, but which were not included in the
calculation of diluted earnings per share because their inclusion would have been antidilutive for
the periods presented are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2009 |
|
2008 |
|
2007 |
Potentially dilutive securities outstanding at end of period: |
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options |
|
|
1,476 |
|
|
|
1,949 |
|
|
|
864 |
|
Unvested restricted stock |
|
|
66 |
|
|
|
100 |
|
|
|
128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,542 |
|
|
|
2,049 |
|
|
|
992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-11
Investment in Broadcasting Company
We have an investment in Sarkes Tarzian, Inc. (Tarzian) whose principal business is the
ownership and operation of two television stations. The investment represents 33.5% of the total
outstanding common stock of Tarzian (both in terms of the number of shares of common stock
outstanding and in terms of voting rights), but such investment represents 73% of the equity of
Tarzian for purposes of dividends, if paid, as well as distributions in the event of any
liquidation, dissolution or other sale of Tarzian. This investment is accounted for under the cost
method of accounting and reflected as a non-current asset. We have no commitment to fund operations
of Tarzian and we have neither representation on Tarzians board of directors or any other
influence over Tarzians management. We believe the cost method is appropriate to account for this
investment given the existence of a single voting majority shareholder and our lack of management
influence.
Valuation of Broadcast Licenses, Goodwill and Other Intangible Assets
From January 1, 1994 through December 31, 2009, we acquired 33 television stations. We
completed our most recent acquisition on March 3, 2006. Among the assets acquired in these
transactions were broadcast licenses issued by the Federal Communications Commission, goodwill and
other intangible assets.
For broadcast licenses acquired prior to January 1, 2002, we recorded their respective values
using a residual method (analogous to goodwill) where the excess of the purchase price over the
fair value of all identified tangible and intangible assets is attributed to the broadcast license.
This residual basis approach will generally produce higher valuations of broadcast licenses when
compared to applying an income method as discussed below.
For broadcast licenses acquired after December 31, 2001, we recorded their respective values
using an income approach. Under this approach, a broadcast license is valued based on analyzing the
estimated after-tax discounted future cash flows of the station, assuming an initial hypothetical
start-up operation maturing into an average performing station in a specific television market and
giving consideration to other relevant factors such as the technical qualities of the broadcast
license and the number of competing broadcast licenses within that market. This income approach
will generally produce lower valuations of broadcast licenses when compared to applying a residual
method as discussed above. For television stations acquired after December 31, 2001, we allocated
the residual value of the station to goodwill.
When renewing broadcast licenses, we incur regulatory filing fees and legal fees. We expense
these fees as they are incurred.
Other intangible assets that we have acquired include network affiliation agreements,
advertising contracts, client lists, talent contracts and leases. Each of our stations is
affiliated with a broadcast network. We believe that the value of a television station is derived
primarily from the attributes of its broadcast license rather than its network affiliation
agreement. As a result, we have allocated minimal values to our network affiliation agreements. We
have classified our other intangible assets as definite-lived intangible assets. The amortization
period of our other intangible assets is equal to the shorter of their estimated useful life or
contract period. When renewing other intangible asset contracts, we incur legal fees which expensed
as incurred.
Annual Impairment Testing of Intangible Assets
We test for impairment of our intangible assets on an annual basis on the last day of each
fiscal year. However, if certain triggering events occur, we will test for impairment during the
relevant reporting period.
For purposes of testing goodwill for impairment, each of our individual television stations is
considered a separate reporting unit. We review each television station for possible goodwill
impairment by comparing the estimated fair value of each respective reporting unit to the recorded
value of that reporting units net assets. If the estimated fair value exceeds the net asset value,
no goodwill impairment is deemed to exist. If the fair value of the reporting unit does not exceed
the recorded value of that reporting units net assets, we then perform, on a notional basis, a
purchase price allocation by allocating the reporting units fair value to the fair value of all
tangible and identifiable intangible assets with residual fair value representing the implied fair
value of goodwill of that reporting unit. The recorded value of goodwill for the reporting unit is
written down to this implied value.
To estimate the fair value of our reporting units, we utilize a discounted cash flow model
supported by a market multiple approach. We believe that a discounted cash flow analysis is the
most appropriate methodology to test the recorded value of long-term assets with a demonstrated
long-lived / enduring franchise value. We believe the results of the discounted cash flow and
market multiple approaches provide reasonable estimates of the fair value of our reporting units
because these approaches are based on our
F-12
actual results and reasonable estimates of future performance, and also take into
consideration a number of other factors deemed relevant by us, including but not limited to,
expected future market revenue growth, market revenue shares and operating profit margins. We have
historically used these approaches in determining the value of our goodwill. We also consider a
market multiple approach utilizing market multiples to corroborate our discounted cash flow
analysis. We believe that this methodology is consistent with the approach that a strategic market
participant would utilize if they were to value one of our television stations.
For testing of our broadcast licenses and other intangible assets for potential impairment of
their recorded asset values, we compare their estimated fair value to the respective assets
recorded value. If the fair value is greater than the assets recorded value, no impairment expense
is recorded. If the fair value does not exceed the assets recorded value, we record an impairment
expense equal to the amount that the assets recorded value exceeded the assets fair value. We use
the income method to estimate the fair value of all broadcast licenses irrespective of whether they
were initially recorded using the residual or income methods.
For further discussion of our goodwill, broadcast licenses and other intangible assets, see
Note 12. Goodwill and Intangible Assets.
Market Capitalization
When we test our broadcast licenses and goodwill for impairment, we also give consideration to
our market capitalization. During 2008, we experienced a significant decline in our market
capitalization. As of December 31, 2008, our market capitalization was less than our book value and
it remains less than book value as of the date of this filing. We believe the decline in our stock
price was influenced, in part, by the then current state of the national credit market and the
national economic recession. We believe that it is appropriate to view the current status of the
credit markets and recession as relatively temporary in relation to reporting units that have
demonstrated long-lived/enduring franchise value. Accordingly, we believe that a variance between
market capitalization and fair value can exist and that difference could be significant at points
in time due to intervening macroeconomic influences.
Related Party Transactions
On December 23, 2008, Gray entered into a one-year consulting contract with Mr. J. Mack
Robinson whereby he agreed to consult and advise Gray with respect to its television stations and
all related matters in connection with various proposed or existing television stations. In return
for his services, Mr. Robinson received compensation under this agreement of $400,000 for the year
ended December 31, 2009. Prior to Mr. Robinsons retirement on December 14, 2008, he had served as
Grays Chief Executive Officer. At all times during which the consulting agreement has been in
effect, he has continued to serve as a member of Grays Board of Directors and as Chairman
emeritus.
For the years ended December 31, 2008 and 2007, we made related party payments to Georgia
Casualty & Surety Co. (Georgia Casualty) in the amounts of $183,000 and $317,000, respectively,
for certain insurance services provided. Through March 2008, Georgia Casualty was a wholly-owned
subsidiary of Atlanta American Corporation, a publicly-traded company (Atlantic American). For
all periods through 2008, Mr. Robinson served as chairman of the board of Atlantic American. Mr.
Robinson and certain entities controlled by him own a majority of the outstanding capital stock of
Atlantic American. In addition, Mr. Hilton H. Howell, our Chairman and Chief Executive Officer is
Chairman, President and Chief Executive Officer of, and maintains an ownership interest in,
Atlantic American and Harriett J. Robinson, one of our directors and the wife of J. Mack Robinson,
is a director of, and maintains an ownership interest in, Atlantic American. During 2008, Atlantic
American sold Georgia Casualty to an unrelated party. The payments for 2008 are the total payments
made for all of 2008. After 2008, we no longer consider Georgia Casualty a related party due to
their sale in 2008.
Accumulated Other Comprehensive (Loss) Income
Our accumulated other comprehensive (loss) income balances as of December 31, 2009 and 2008
consist of adjustments to our derivative and pension liabilities as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Accumulated balances of items included in accumulated other comprehensive loss: |
|
|
|
|
|
|
|
|
Loss on derivatives, net of income tax |
|
$ |
(3,870 |
) |
|
$ |
(15,013 |
) |
Pension liability adjustments, net of income tax |
|
|
(5,444 |
) |
|
|
(9,445 |
) |
|
|
|
|
|
|
|
Accumulated other comprehensive loss |
|
$ |
(9,314 |
) |
|
$ |
(24,458 |
) |
|
|
|
|
|
|
|
F-13
Recent Accounting Pronouncements
In June 2009 the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 168 The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles a replacement of FASB Standard No. 162 (SFAS 168).
SFAS 168 replaces GAAP with two levels of GAAP: authoritative and non-authoritative. On July 1,
2009, the FASB Accounting Standards Codification (FASB ASC) became the single source of
authoritative nongovernmental GAAP, except for rules and interpretive releases of the Securities
and Exchange Commission. All other non-grandfathered accounting literature became
non-authoritative. The adoption of SFAS 168 did not have a material impact on our consolidated
financial statements. As a result of the adoption of SFAS 168, all references to GAAP now refer to
the codified FASB ASC topic.
In September 2006, FASB ASC Topic 820 was issued. FASB ASC Topic 820 defines fair value,
establishes a framework for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. FASB ASC Topic 820 does not require any new fair
value measurements, but provides guidance on how to measure fair value by providing a fair value
hierarchy used to classify the source of the information. We adopted the provisions of FASB ASC
Topic 820 on January 1, 2009. The adoption of FASB ASC Topic 820 did not have a significant impact
on our consolidated financial statements.
In April 2009, FASB ASC Topic 855 was issued. FASB ASC Topic 855 establishes general standards
of accounting for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or available to be issued. We adopted FASB ASC Topic 855 for the
quarter ending June 30, 2009. The adoption did not have a material impact on our consolidated
financial statements.
Subsequent Events
We evaluate subsequent events through the date we issue our financial statements.
Reclassifications
Certain reclassifications have been made within the liability section of our prior years
balance sheet and the investing section of our prior years statement of cash flows to be
consistent with the current years presentation. The reclassifications did not change total assets,
total liabilities or net loss as previously recorded.
2. Marketable Securities
We have historically invested excess cash balances in an enhanced cash fund managed by
Columbia Management Advisers, LLC, a subsidiary of Bank of America, N.A. (Columbia Management).
We refer to this investment fund as the Columbia Fund.
On December 6, 2007, Columbia Management initiated a series of steps which included the
temporary suspension of all immediate cash distributions from the Columbia Fund and changed its
method of valuation from a fixed asset valuation to a fluctuating asset valuation. Since that date,
Columbia Management has commenced the liquidation of the Columbia Fund. During the quarter ended
March 31, 2009, Columbia Management completed the liquidation and distribution of our investment.
For the years ended December 31, 2009, 2008 and 2007, we recorded a mark-to-market expense of
$2,100, $383,000 and $88,000, respectively, reflecting a decrease in market value of our original
investment in the Columbia Fund. As of December 31, 2009, we no longer had funds invested in the
Columbia Fund. Our balance in the Columbia Fund net of the mark-to-market adjustment as of December
31, 2008 was $1.4 million and was recorded as a current marketable security.
For the years ended December 31, 2009, 2008 and 2007, we received cash distributions of $1.4
million, $4.5 million and $623,000, respectively, and we earned interest income of $5,000, $116,000
and $78,000, respectively, from the Columbia Fund.
Fair value is based on quoted prices of similar assets in active markets. Valuation of these
items entails a significant amount of judgment and the inputs that are significant to the fair
value measurement are Level 2 in the fair value hierarchy. See Note 5. Fair Value Measurement for
further discussion of fair value.
As of December 31, 2009, all excess cash is held in a bank account and we do not have any cash
equivalents.
F-14
3. Long-term Debt and Accrued Facility Fee
Long-term debt consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Long-term debt: |
|
|
|
|
|
|
|
|
Senior credit facility current portion |
|
$ |
8,080 |
|
|
$ |
8,085 |
|
Senior credit facility long-term portion |
|
|
783,729 |
|
|
|
792,295 |
|
|
|
|
|
|
|
|
Total long-term debt including current portion |
|
|
791,809 |
|
|
|
800,380 |
|
Long-term accrued facility fee |
|
|
18,307 |
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt and accrued facility fee |
|
$ |
810,116 |
|
|
$ |
800,380 |
|
|
|
|
|
|
|
|
Borrowing availability under our senior credit facility |
|
$ |
31,681 |
|
|
$ |
12,262 |
|
Leverage ratio as defined in our senior credit facility: |
|
|
|
|
|
|
|
|
Actual |
|
|
8.42 |
|
|
|
7.14 |
|
Maximum allowed |
|
|
8.75 |
|
|
|
7.25 |
|
Our senior credit facility consists of a revolving loan and a term loan. The amount
outstanding under our senior credit facility as of December 31, 2009 and December 31, 2008 was
$791.8 million and $800.4 million, respectively, comprised solely of the term loan. Under the
revolving loan portion of our senior credit facility, the maximum available borrowing capacity was
$50.0 million as of December 31, 2009. Of the maximum borrowing capacity available under our
revolving loan, the amount that we can draw is limited by certain restrictive covenants, including
our total net leverage ratio covenant. Based on such covenant, as of December 31, 2009 and December
31, 2008, we could have drawn $31.7 million and $12.3 million, respectively, of the $50.0 million
maximum borrowing capacity under the revolving loan. Effective as of March 31, 2010, the maximum
borrowing capacity available under the revolving loan was reduced to $40.0 million.
Under our revolving and term loans, we can choose to pay interest at an annual rate equal to
the London Interbank Offered Rate (LIBOR) plus 3.5% or at the lenders base rate, generally equal
to the lenders prime rate, plus 2.5%. This interest is payable in cash throughout the year.
In addition, effective as of April 1, 2009, we incur a facility fee at an annual rate of 3.0%
on all principal balances outstanding under the revolving and term loans. For the period from April
4, 2009 until April 30, 2010, the annual facility fee for the revolving and term loans accrues and
is payable on the respective revolving and term loan maturity dates. The revolving loan and term
loan maturity dates are March 19, 2014 and December 31, 2014, respectively. For the period from
April 30, 2010 until maturity of the senior credit facility, the annual facility fee will be
payable in cash on a quarterly basis and the amount accrued through April 30, 2010 will bear
interest at an annual rate of 6.5%, payable quarterly. As of December 31, 2009, our accrued
facility fee of $18.3 million was classified as a long-term liability on our balance sheet. The
accrued facility fee is included in determining the amount of total debt in calculating our total
net leverage ratio covenant as defined in our senior credit facility.
The average interest rates on our total debt balance outstanding under the senior credit
facility as of December 31, 2009 and 2008 were 6.8% and 4.8%, respectively. These rates are as of
the period end and do not include the effects of our interest rate swap agreements. See Note 4.
Derivatives. Including the effects of our interest rate swap agreements, the average interest
rates on our total debt balance outstanding under our senior credit facility at December 31, 2009
and 2008 were 9.8% and 5.6%, respectively.
Also under our revolving loan, we pay a commitment fee on the average daily unused portion of
the $50.0 million revolving loan. As of December 31, 2009 and 2008, the annual commitment fees were
0.5% and 0.4%, respectively.
Collateral and Restrictions
The collateral for our senior credit facility consists of substantially all of our and our
subsidiaries assets. In addition, our subsidiaries are joint and several guarantors of the
obligations and our ownership interests in our subsidiaries are pledged to collateralize the
obligations. The senior credit facility contains affirmative and restrictive covenants. These
covenants include but are not limited to (i) limitations on additional indebtedness, (ii)
limitations on liens, (iii) limitations on amendments to our by-laws and articles of incorporation,
(iv) limitations on mergers and the sale of assets, (v) limitations on guarantees, (vi) limitations
on investments and acquisitions, (vii) limitations on the payment of dividends and the redemption
of our capital stock, (vii) maintenance of a specified total net leverage ratio not to exceed
certain maximum limits, (viii) limitations on related party transactions, (ix) limitations on the
purchase of real estate, and (x) limitations on entering into multiemployer retirement plans, as
well as other customary covenants for credit facilities of this type. As of December 31, 2009 and
2008, we were in compliance with all restrictive covenants as required by our senior credit
facility.
F-15
We are a holding company with no material independent assets or operations, other than our
investments in our subsidiaries. The aggregate assets, liabilities, earnings and equity of the
subsidiary guarantors as defined in our senior credit facility are substantially equivalent to our
assets, liabilities, earnings and equity on a consolidated basis. The subsidiary guarantors are,
directly or indirectly, our wholly owned subsidiaries and the guarantees of the subsidiary
guarantors are full, unconditional and joint and several. All of our current and future direct and
indirect subsidiaries are and will be guarantors under the senior credit facility. Accordingly,
separate financial statements and other disclosures of each of the subsidiary guarantors are not
presented because we have no independent assets or operations, the guarantees are full and
unconditional and joint and several and any of our subsidiaries other than the subsidiary
guarantors are immaterial.
Amendments to Our Senior Credit Facility
Effective as of March 31, 2009, we amended our senior credit facility (the 2009 amendment).
The 2009 amendment included (i) an increase in the maximum total net leverage ratio covenant for
the year ended December 31, 2009, (ii) a general increase in the restrictiveness of our remaining
covenants and (iii) increased interest rates, as described below. In connection therewith, we
incurred loan issuance costs of approximately $7.4 million, including legal and professional fees.
These fees were funded from our existing cash balances. The 2009 amendment of our senior credit
facility was determined to be significant and, as a result, we recorded a loss from early
extinguishment of debt of $8.4 million.
Without the 2009 amendment, we would not have been in compliance with the total net leverage
ratio covenant under the senior credit facility and such noncompliance would have caused a default
under the agreement as of March 31, 2009. Such a default would have given the lenders thereunder
certain rights, including the right to declare all amounts outstanding under our senior credit
facility immediately due and payable or to foreclose on the assets securing such indebtedness. The
2009 amendment increased our annual cash interest rate by 2.0% and, beginning March 31, 2009,
required the payment of a 3.0% annual facility fee.
As stated above, our senior credit facility requires us to maintain our total net leverage
ratio below certain maximum amounts. Our actual total net leverage ratio and our maximum total net
leverage ratio allowed under our senior credit facility for recent reporting periods was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leverage Ratio |
|
|
|
|
|
|
Maximum Allowed |
|
|
|
|
|
|
Agreement |
|
|
|
|
|
|
|
|
Giving Effect |
|
Agreement |
|
|
|
|
|
|
to 2009 |
|
Pre-2009 |
|
|
Actual |
|
Amendment |
|
Amendment |
Leverage ratios under our senior credit facility as of: |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
7.14 |
|
|
NA |
|
|
7.25 |
|
March 31, 2009 |
|
|
7.48 |
|
|
|
8.00 |
|
|
|
7.25 |
|
June 30, 2009 |
|
|
7.98 |
|
|
|
8.25 |
|
|
|
7.25 |
|
September 30, 2009 |
|
|
8.22 |
|
|
|
8.50 |
|
|
|
7.25 |
|
December 31, 2009 |
|
|
8.42 |
|
|
|
8.75 |
|
|
|
7.00 |
|
Assuming we maintain compliance with the financial and other covenants in our senior credit
facility, including the total net leverage ratio covenant, we believe that our current cash
balance, cash flows from operations and any available funds under the revolving credit line of our
senior credit facility will be adequate to provide for our capital expenditures, debt service and
working capital requirements through December 31, 2010.
Compliance with our total net leverage ratio covenant depends on a number of factors,
including the interrelationship of our ability to reduce our outstanding debt and/or the results of
our operations. The continuing general economic recession, including the significant decline in
advertising by the automotive industry, adversely impacted our ability to generate cash from
operations during 2009. Based upon certain internal financial projections, we did not believe that
we would be in compliance with our total net leverage ratio as of March 31, 2010 unless we further
amended the terms of our senior credit facility. As a result, we requested and obtained such an
amendment of our senior credit facility on March 31, 2010.
Effective March 31, 2010, we amended our senior credit facility which, among other things,
increased the maximum amount of the total net leverage ratio covenant through March 31, 2011, and
reduced the maximum availability under the revolving loan to $40.0 million.
F-16
Based upon our internal financial projections as of the date of filing this Annual Report and
the amended terms of our senior credit facility, we believe that we will be in compliance with all
covenants required by our amended senior credit facility as of March 31, 2010. The March 2010
amendment also imposed an additional fee, equal to 2.0% per annum, payable quarterly, in arrears,
until such time as we complete an offering of capital stock or certain debt securities that results
in the repayment of not less than $200.0 million of the term loan outstanding under our senior
credit facility. That fee would be eliminated upon such a repayment of amounts under the term loan.
In addition, upon completion of a financing that results in the repayment of at least $200.0
million of our term loan, we would achieve additional flexibility under various covenants in our
senior credit facility. The use of proceeds from any issuance of additional securities will
generally be limited to the repayment of amounts outstanding under our term loan and, in certain
circumstances, to the repurchase of outstanding shares of our Series D Perpetual Preferred Stock.
There can be no assurance that we will be able to complete such a capital raising transaction, or
to repurchase any of our preferred stock, at times and on terms acceptable to us, or at all. If we
are unable to complete such a financing and repayment of amounts under our term loan, we would
continue to incur increased fees under our senior credit facility and to be subject to the stricter
limits contained in our existing financial covenants. For additional details regarding the March
2010 amendment to our senior credit facility, see Note 14. Subsequent Event Long-term Debt
Amendment to our audited financial statements included elsewhere herein.
Loss on Early Extinguishment of Debt in 2007
On March 19, 2007, we entered into the senior credit facility and repaid all then-outstanding
obligations under our previous credit facility. As a result of these transactions, in the first
quarter of 2007 we incurred lender and legal fees of approximately $3.2 million and recognized a
loss on early extinguishment of debt of $6.5 million, including the write-off of a portion of our
previously capitalized loan fees.
On April 18, 2007, we redeemed all of our then-outstanding 9.25% Notes and, accordingly,
recorded a loss on early extinguishment of debt of $16.4 million during the second quarter of 2007.
Maturities
Aggregate minimum principal maturities on long-term debt and long-term accrued facility fee as
of December 31, 2009, were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum Principal Maturities |
|
|
|
Long-Term Accrued |
|
|
Long-Term |
|
|
|
|
Year |
|
Facility Fee |
|
|
Debt |
|
|
Total |
|
2010 |
|
$ |
|
|
|
$ |
8,080 |
|
|
$ |
8,080 |
|
2011 |
|
|
|
|
|
|
8,080 |
|
|
|
8,080 |
|
2012 |
|
|
|
|
|
|
8,080 |
|
|
|
8,080 |
|
2013 |
|
|
|
|
|
|
8,080 |
|
|
|
8,080 |
|
2014 |
|
|
18,307 |
|
|
|
759,489 |
|
|
|
777,796 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
18,307 |
|
|
$ |
791,809 |
|
|
$ |
810,116 |
|
|
|
|
|
|
|
|
|
|
|
Interest Payments
For all of our interest bearing obligations, including derivative contracts, we made interest
payments of approximately $46.8 million, $59.6 million and $61.2 million during 2009, 2008 and
2007, respectively. We did not capitalize any interest payments during the years ended December 31,
2009, 2008 and 2007.
4. Derivatives
Risk Management Objective of Using Derivatives
We are exposed to certain risks arising from business operations and economic conditions. We
attempt to manage our exposure to a wide variety of business and operational risks principally
through management of our core business activities. We attempt to manage economic risk, including
interest rate, liquidity, and credit risk, primarily by managing the amount, sources and duration
of our debt funding and the use of interest rate swap agreements. Specifically, we enter into
interest rate swap agreements to manage interest rate exposure with the following objectives:
F-17
|
|
|
managing current and forecasted interest rate risk while maintaining financial
flexibility and solvency; |
|
|
|
|
proactively managing our cost of capital to ensure that we can effectively manage
operations and execute our business strategy, thereby maintaining a competitive advantage
and enhancing shareholder value; and |
|
|
|
|
complying with covenant requirements in our senior credit facility. |
Cash Flow Hedges of Interest Rate Risk
In using interest rate derivatives, our objectives are to add stability to interest expense
and to manage our exposure to interest rate movements. To accomplish these objectives, we primarily
use interest rate swap agreements as part of our interest rate risk management strategy. Interest
rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a
counterparty in exchange for our making fixed-rate payments over the life of the agreements,
without exchange of the underlying notional amount. Under the terms of our senior credit facility,
we are required to fix the interest rate on at least 50.0% of the outstanding balance thereunder
through March 19, 2010.
During 2007, we entered into three swap agreements to convert $465.0 million of our variable
rate debt under our senior credit facility to fixed rate debt. These interest rate swap agreements
expire on April 3, 2010, and they were our only derivatives as of December 31, 2009 and 2008. Upon
entering into the swap agreements, we designated them as hedges of variability of our variable rate
interest payments attributable to changes in three-month LIBOR, the designated interest rate.
Therefore, these interest rate swap agreements are considered cash flow hedges.
Upon entering into a swap agreement, we document our hedging relationships and our risk
management objectives. Our swap agreements do not include written options. Our swap agreements are
intended solely to modify the payments for a recognized liability from a variable rate to a fixed
rate. Our swap agreements do not qualify for the short-cut method of accounting because the
variable rate debt being hedged is pre-payable.
Hedge effectiveness is evaluated at the end of each quarter. We compare the notional amount,
the variable interest rate and the settlement dates of the interest rate swap agreements to the
hedged portion of the debt. Historically, our swap agreements have been highly effective at hedging
our interest rate exposure, although no assurances can be provided that they will continue to be
effective for future periods.
During the period of each interest rate swap agreement, we recognize the swap agreements at
their fair value as an asset or liability on our balance sheet. The effective portion of the change
in the fair value of our interest rate swap agreements is recorded in accumulated other
comprehensive income (loss). The ineffective portion of the change in fair value of the derivatives
is recognized directly in earnings. Amounts reported in accumulated other comprehensive income
(loss) related to derivatives will be reclassified to interest expense as the related interest
payments are made on our variable rate debt. We estimate that an additional $6.3 million will be
reclassified as an increase in interest expense and a decrease in other comprehensive income (loss)
between January 1, 2010 and April 3, 2010.
Under these swap agreements, we receive variable rate interest at the LIBOR and pay fixed
interest at an annual rate of 5.48%. The variable LIBOR is reset in three-month periods for the
swap agreements. At our option, the variable LIBOR is reset in one-month or three-month periods for
the hedged portion of our variable rate debt.
Beginning in April 2009 and ending in early October 2009, we chose to hedge our long-term debt
against a one-month LIBOR contract that is renewed monthly rather than a three-month LIBOR
contract. By doing so, we took advantage of the lower one-month LIBOR during this period. As a
result, our hedge was not 100% effective during this period and the ineffective portion was
recognized in earnings.
The table below presents the fair value of our interest rate swap agreements as well as their
classification on our balance sheet as of December 31, 2009 and 2008. These interest rate swap
agreements are our only derivative financial instruments. We did not have any derivatives
classified as assets as of December 31, 2009 or 2008. The fair values of the derivative instruments
are estimated by obtaining quotations from the financial institutions that are counterparties to
the instruments. The fair values are estimates of the net amount that we would have been required
to pay on December 31, 2009 and 2008 if the agreements were transferred to other parties or
cancelled on such dates. Amounts in the following table are in thousands.
F-18
Fair Values of Derivative Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 |
|
As of December 31, 2008 |
|
|
Balance Sheet |
|
Fair |
|
Balance Sheet |
|
Fair |
|
|
Location |
|
Value |
|
Location |
|
Value |
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements |
|
Current liabilities |
|
$ |
6,344 |
|
|
Noncurrent liabilities |
|
$ |
24,611 |
|
The following table presents the effect of our derivative financial instruments on our
consolidated statement of operations for the years ended December 31, 2009 and 2008 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Hedging Relationships |
|
|
|
for the Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Interest rate swap agreements: |
|
|
|
|
|
|
|
|
|
|
|
|
Asset (liability) at beginning of period |
|
$ |
(24,611 |
) |
|
$ |
(17,625 |
) |
|
$ |
4 |
|
Effective portion of gains (losses) recognized in other comprehensive income (loss) |
|
|
35,497 |
|
|
|
719 |
|
|
|
(17,693 |
) |
Effective portion of gains (losses) recorded in accumulated other comprehensive
income (loss) and reclassified into interest expense |
|
|
(17,230 |
) |
|
|
(7,705 |
) |
|
|
64 |
|
Portion of gains (losses) representing the amount of hedge ineffectiveness and the
amount excluded from the assessment of hedge effectiveness and recorded as an
increase (decrease) in interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset (liability) at end of period |
|
$ |
(6,344 |
) |
|
$ |
(24,611 |
) |
|
$ |
(17,625 |
) |
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2009, we recorded a loss on derivatives as other comprehensive
income of $11.2 million, net of a $7.1 million income tax expense. For the year ended December 31,
2008, we recorded a loss on derivatives as other comprehensive expense of $4.3 million, net of a
$2.7 million income tax benefit. For the year ended December 31, 2007, we recorded a loss on
derivatives as other comprehensive expense of $10.8 million, net of a $6.9 million income tax
benefit.
Credit-risk Related Contingent Features
We manage our counterparty risk by entering into derivative instruments with global financial
institutions that we believe present a low risk of credit loss resulting from nonperformance. As of
December 31, 2009 and 2008, we had not recorded a credit value adjustment related to our interest
rate swap agreements.
Our interest rate swap agreements incorporate the covenant provisions of our senior credit
facility. Failure to comply with the covenant provisions of the senior credit facility could result
in our being in default of our obligations under our interest rate swap agreements.
5. Fair Value Measurement
Fair value is the price that market participants would pay or receive to sell an asset or paid
to transfer a liability in an orderly transaction. Fair value is also considered the exit price. We
utilize market data or assumptions that market participants would use in pricing an asset or
liability, including assumptions about risk and the risks inherent in the inputs to the valuation
technique. These inputs can be readily observable, market corroborated or generally unobservable.
We utilize valuation techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs. These inputs are prioritized into a hierarchy that gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and
the lowest priority to unobservable inputs that require assumptions to measure fair value (Level
3).
Recurring Fair Value Measurements
Financial assets and liabilities are classified in their entirety based on the lowest level of
input that is significant to the fair value measurement. Our assessment of the significance of a
particular input to the fair value measurement requires judgment and may affect the fair value of
assets and liabilities and their placement within the fair value hierarchy levels. The following
table sets forth our financial assets and liabilities, which were accounted for at fair value, by
level within the fair value hierarchy as of December 31, 2009 and 2008 (in thousands):
F-19
Recurring Fair Value Measurements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements |
|
$ |
|
|
|
$ |
6,344 |
|
|
$ |
|
|
|
$ |
6,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008 |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities |
|
$ |
|
|
|
$ |
1,384 |
|
|
$ |
|
|
|
$ |
1,384 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements |
|
$ |
|
|
|
$ |
24,611 |
|
|
$ |
|
|
|
$ |
24,611 |
|
Fair value of our interest rate swap agreements is based on estimates provided by the
counterparties. Fair value of our marketable securities was based on estimates provided by Columbia
Management. Valuation of these items does entail a significant amount of judgment.
Non-Recurring Fair Value Measurements
We have certain assets that are measured at fair value on a non-recurring basis and are
adjusted to fair value only when the carrying values exceed their fair values. Included in the
following table are the significant categories of assets measured at fair value on a non-recurring
basis as of December 31, 2009 (amounts in thousands).
Non-Recurring Fair Value Measurements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment Loss |
|
|
|
As of December 31, 2009 |
|
|
For The Year Ended |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
December 31, 2009 |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
|
|
|
$ |
|
|
|
$ |
148,092 |
|
|
$ |
148,092 |
|
|
$ |
|
|
Program broadcast rights |
|
|
|
|
|
|
|
|
|
|
11,265 |
|
|
|
11,265 |
|
|
|
177 |
|
Investment in broadcasting company |
|
|
|
|
|
|
|
|
|
|
13,599 |
|
|
|
13,599 |
|
|
|
|
|
Broadcast licenses |
|
|
|
|
|
|
|
|
|
|
818,981 |
|
|
|
818,981 |
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
170,522 |
|
|
|
170,522 |
|
|
|
|
|
Other intangible assets, net |
|
|
|
|
|
|
|
|
|
|
1,316 |
|
|
|
1,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
1,163,775 |
|
|
$ |
1,163,775 |
|
|
$ |
177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment Loss |
|
|
|
As of December 31, 2008 |
|
|
For The Year Ended |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
December 31, 2008 |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
|
|
|
$ |
|
|
|
$ |
162,903 |
|
|
$ |
162,903 |
|
|
$ |
|
|
Program broadcast rights |
|
|
|
|
|
|
|
|
|
|
11,068 |
|
|
|
11,068 |
|
|
|
627 |
|
Investment in broadcasting company |
|
|
|
|
|
|
|
|
|
|
13,599 |
|
|
|
13,599 |
|
|
|
|
|
Broadcast licenses |
|
|
|
|
|
|
|
|
|
|
818,981 |
|
|
|
818,981 |
|
|
|
240,085 |
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
170,522 |
|
|
|
170,522 |
|
|
|
98,596 |
|
Other intangible assets, net |
|
|
|
|
|
|
|
|
|
|
1,893 |
|
|
|
1,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
1,178,966 |
|
|
$ |
1,178,966 |
|
|
$ |
339,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of our property and equipment is estimated by our engineers. Fair value of our
program broadcast rights is based upon estimated future advertising revenue generated by the
programming. Fair value of our investment in broadcasting company is based upon estimated future
cash flows. Fair value of broadcast licenses, goodwill and other intangible assets is described in
Note 1. Description of Business and Summary of Significant Accounting Policies. Our program
broadcast rights impairment charge was recorded as a broadcast operating expense in the respective
periods.
F-20
Fair Value of Other Financial Instruments
The estimated fair value of other financial instruments is determined using the best available
market information and appropriate valuation methodologies. Interpreting market data to develop
fair value estimates involves considerable judgment. Accordingly, the estimates presented are not
necessarily indicative of the amounts that we could realize in a current market exchange, or the
value that ultimately will be realized upon maturity or disposition. The use of different market
assumptions may have a material effect on the estimated fair value amounts.
The carrying amounts of the following instruments approximate fair value, due to their short
term to maturity: (i) accounts receivable, (ii) prepaid and other current assets, (iii) accounts
payable, (iv) accrued employee compensation and benefits, (v) accrued interest, (vi) other accrued
expenses, (vii) dividends payable, (viii) acquisition-related liabilities and (ix) deferred
revenue.
The carrying amount of our long-term debt, including the current portion and long-term accrued
facility fee, was $810.1 million and $800.4 million, respectively, and the fair value was $704.8
million and $312.1 million, respectively as of December 31, 2009 and 2008. Fair value of our
long-term debt, including the current portion and long-term accrued facility fee, is based on
estimates provided by third party financial professionals as of December 31, 2009 and 2008.
Management believes that these estimated fair values as of December 31, 2009 and 2008 were not an
accurate indicator of fair value, given that (i) our debt has a relatively limited number of market
participants, relatively infrequent market trading and generally small dollar volume of actual
trades and (ii) management believes there continues to exist a general disruption of the financial
markets. Based upon consideration of alternate valuation methodologies, including our historic and
projected future cash flows, as well as historic private trading valuations of television stations
and/or television companies, we believe that the estimated fair value of our long-term debt would
more closely approximate the recorded book value of the debt as of December 31, 2009 and 2008,
respectively.
6. Stockholders Equity
We are authorized to issue 135 million shares of all classes of stock, of which 15 million
shares are designated Class A common stock, 100 million shares are designated common stock, and 20
million shares are designated blank check preferred stock for which our Board of Directors has
the authority to determine the rights, powers, limitations and restrictions. The rights of our
common stock and Class A common stock are identical, except that our Class A common stock has 10
votes per share and our common stock has one vote per share. If declared, our common stock and
Class A common stock receive cash dividends on an equal per-share basis.
As of December 31, 2009, we are authorized by our Board of Directors to repurchase an
aggregate total of up to 5,000,000 shares of our common stock and Class A common stock in the open
market. When we have determined that market and liquidity conditions are favorable, we have
repurchased shares. As of December 31, 2009, 279,200 shares of our common stock and Class A common
stock are available for repurchase under these authorizations. There is no expiration date for
these authorizations. Shares repurchased are held as treasury shares and used for general corporate
purposes including, but not limited to, satisfying obligations under our employee benefit plans and
long term incentive plan. Treasury stock is recorded at cost.
During the year ended December 31, 2009, we did not make any repurchases under these
authorizations. During the year ended December 31, 2008, we repurchased 883,200 shares of our
common stock at an average price of $0.20 per share for a total cost of $177,000. During the year
ended December 31, 2007, we repurchased 647,800 shares of our common stock at an average price of
$8.49 per share for a total cost of $5.5 million.
For the year ended December 31, 2009, we did not declare or pay any common stock or Class A
common stock dividends. For the year ended December 31, 2008, we declared common stock and Class A
common stock dividends in the first, second and third quarters and did not declare a common stock
or Class A common stock dividend in the fourth quarter.
We deferred cash dividends on our Series D Perpetual Preferred Stock and correspondingly
suspended cash dividends on our common and Class A common stock to reallocate cash resources to
support our ability to pay increased interest costs and fees associated with our senior credit
facility.
As of December 31, 2009, we had not funded our Series D Perpetual Preferred Stock dividend for
at least three consecutive quarters. See Note 7 Preferred Stock for further discussion of our
Series D Perpetual Preferred Stock dividend payments. As long as these Series D Perpetual Preferred
Stock dividends remain in arrears, we are prohibited from paying additional common stock or Class A
common stock dividends.
F-21
In connection with our various employee benefit plans, we may, at our discretion, issue
authorized and unissued shares of our Class A common stock and common stock or previously issued
shares of our Class A common stock or common stock reacquired by Gray, including stock purchased in
the open market, held in the treasury. As of December 31, 2009, we had reserved 8,868,940 shares
and 1,000,000 shares of our common stock and Class A common stock, respectively, for future
issuance under various employee benefit plans. As of December 31, 2008, we had reserved 9,523,365
shares and 1,000,000 shares of our common stock and Class A common stock, respectively, for future
issuance under various employee benefit plans.
7. Preferred Stock
During 2008, we issued 1,000 shares of perpetual preferred stock to a group of private
investors. This preferred stock was designated Series D Perpetual Preferred Stock, no par value.
The issuance of the Series D Perpetual Preferred Stock generated net cash proceeds of approximately
$91.6 million, after a 5.0% original issue discount, transaction fees and expenses. The $8.4
million of original issue discount, transaction fees and expenses are being accreted over a
seven-year period ending June 30, 2015.
As of December 31, 2009 and 2008, we had 1,000 shares of Series D Perpetual Preferred Stock
outstanding. The Series D Perpetual Preferred Stock has a liquidation value of $100,000 per share
for a total liquidation value of $100.0 million as of December 31, 2009 and 2008 and a recorded
value of $93.4 million and $92.2 million as of December 31, 2009 and 2008, respectively. The
difference between the liquidation values and the recorded values was the un-accreted portion of
the original issuance discount and issuance cost. Our accrued Series D Perpetual Preferred Stock
dividend balances as of December 31, 2009 and 2008 were $18.9 million and $3.0 million,
respectively.
The Series D Perpetual Preferred Stock has no mandatory redemption date, but is redeemable, at
our option, at any time. The Series D Perpetual Preferred Stock may also be redeemed, at the
stockholders option, on or after June 30, 2015. If the Series D Perpetual Preferred Stock is
redeemed, we are required to pay the liquidation price per share in cash plus the pro-rata accrued
dividends to the date fixed for redemption. If the Series D Perpetual Preferred Stock is redeemed
before January 1, 2012, the redemption price per share will include a premium as described in the
following table:
|
|
|
|
|
|
|
Redemption |
|
|
Price |
Date of Redemption |
|
per Share |
January 1, 2009 through June 30, 2009 |
|
$ |
105,000 |
|
July 1, 2009 through December 31, 2009 |
|
$ |
106,500 |
|
January 1, 2010 through June 30, 2010 |
|
$ |
108,000 |
|
July 1, 2010 through December 31, 2010 |
|
$ |
106,000 |
|
January 1, 2011 through June 30, 2011 |
|
$ |
104,000 |
|
July 1, 2011 through December 31, 2011 |
|
$ |
102,000 |
|
January 1, 2012 and thereafter |
|
$ |
100,000 |
|
We made our most recent Series D Perpetual Preferred Stock cash dividend payment on October
15, 2008 for dividends earned through September 30, 2008. We have deferred the cash payment of our
Series D Perpetual Preferred Stock dividends earned thereon since October 1, 2008. When three
consecutive cash dividend payments with respect to the Series D Perpetual Preferred Stock remain
unfunded, the dividend rate increases from 15.0% per annum to 17.0% per annum. Thus, our Series D
Perpetual Preferred Stock dividend began accruing at 17.0% per annum on July 16, 2009 and will
accrue at that rate as long as at least three consecutive cash dividend payments remain unfunded.
Our Series D Perpetual Preferred Stock dividend rate was 15.0% per annum from December 31, 2008
through July 16, 2009. Prior to December 31, 2008, our Series D Perpetual Preferred Stock dividend
rate was 12% per annum.
While any Series D Perpetual Preferred Stock dividend payments are in arrears, we are
prohibited from repurchasing, declaring and/or paying any cash dividend with respect to any equity
securities having liquidation preferences equivalent to or junior in ranking to the liquidation
preferences of the Series D Perpetual Preferred Stock, including our common stock and Class A
common stock. We can provide no assurances as to when any future cash payments will be made on any
accumulated and unpaid Series D Perpetual Preferred Stock dividends presently in arrears or that
become in arrears in the future.
F-22
8. Stock-Based Compensation
Long Term Incentive Plan
The 2007 Long Term Incentive Plan (the 2007 Incentive Plan) provides for the grant of
incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation
rights, and performance awards to our officers and employees to acquire shares of our Class A
common stock, common stock or to receive other awards based on our performance. We recognize the
fair value of the stock options on the date of grant as compensation expense, and such expense is
amortized over the vesting period of the stock option. The 2007 Incentive Plan allows us to grant
share-based awards for a total of 6.0 million shares of stock, with not more than 1.0 million out
of that 6.0 million to be Class A common stock and the remaining shares to be common stock. As of
December 31, 2009, 5.0 million shares were available for issuance under the 2007 Incentive Plan.
Shares of common stock underlying outstanding options or performance awards are counted against the
2007 Incentive Plans maximum shares. Under the 2007 Incentive Plan, the options granted typically
vest after a two-year period and expire three years after fully vesting. However, options will vest
immediately upon a change in control as such term is defined in the 2007 Incentive Plan. All
options have been granted with purchase prices that equal the market value of the underlying stock
at the close of business on the date of the grant.
Directors Restricted Stock plan
On May 14, 2003, our shareholders approved a restricted stock plan for our Board of Directors
(the Directors Restricted Stock Plan). We have reserved 1.0 million shares of our common stock
for issuance under this plan and as of December 31, 2009 there were 770,000 shares available for
award. Under the Directors Restricted Stock Plan, each director can be awarded up to 10,000 shares
of restricted stock each calendar year. Under this plan, we granted a total of 55,000 shares of
restricted common stock to our directors during each of the years ended December 31, 2008 and 2007,
respectively. We did not grant any shares of restricted common stock to our directors during the
year ended December 31, 2009. Of the total shares granted to the directors since the inception of
the Directors Restricted Stock Plan, 66,000 shares were not fully vested as of December 31, 2009.
8. Stock-Based Compensation
Stock-Based Compensation Valuation Assumptions for Stock Options
Included in corporate and administrative expenses in the years ended December 31, 2009, 2008
and 2007 were $1.4 million, $1.5 million and $1.2 million, respectively, of non-cash expense for
stock-based compensation which included amortization of restricted stock and stock option expense.
We did not grant any stock options during 2009. The assumptions used to value stock options
granted during 2008 and 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2008 |
|
2007 |
Expected term (in years) |
|
|
2.63 |
|
|
|
2.76 |
|
Volatility |
|
|
36.71 |
% |
|
|
32.20 |
% |
Risk-free interest rate |
|
|
2.77 |
% |
|
|
4.41 |
% |
Dividend yield |
|
|
1.65 |
% |
|
|
1.41 |
% |
Expected forfeitures |
|
|
2.57 |
% |
|
|
3.65 |
% |
Expected volatilities are based on historical volatilities of our common stock and Class A
common stock. The expected life represents the weighted average period of time that options granted
are expected to be outstanding giving consideration to the vesting schedules and our historical
exercise patterns. The risk free rate is based on the U.S. Treasury yield curve in effect at the
time of grant for periods corresponding to the expected life of the option. Expected forfeitures
were estimated based on historical forfeiture rates.
F-23
Stock Option and Restricted Share Activity
A summary of our stock option activity for Class A common stock, for the years ended December
31, 2009, 2008 and 2007 is as follows (in thousands, except weighted average data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2009 |
|
2008 |
|
2007 |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Average |
|
|
|
|
|
Average |
|
|
|
|
|
Average |
|
|
|
|
|
|
Exercise |
|
|
|
|
|
Exercise |
|
|
|
|
|
Exercise |
|
|
Options |
|
Price |
|
Options |
|
Price |
|
Options |
|
Price |
Stock options outstanding beginning of period |
|
|
|
|
|
$ |
|
|
|
|
21 |
|
|
$ |
15.39 |
|
|
|
21 |
|
|
$ |
15.39 |
|
Options expired |
|
|
|
|
|
|
|
|
|
|
(21 |
) |
|
|
15.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options outstanding end of period |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
21 |
|
|
$ |
15.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of period |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
21 |
|
|
$ |
15.39 |
|
A summary of our stock option activity for common stock for the years ended December 31, 2009,
2008 and 2007 is as follows (in thousands, except weighted average data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2009 |
|
2008 |
|
2007 |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Average |
|
|
|
|
|
Average |
|
|
|
|
|
Average |
|
|
|
|
|
|
Exercise |
|
|
|
|
|
Exercise |
|
|
|
|
|
Exercise |
|
|
Options |
|
Price |
|
Options |
|
Price |
|
Options |
|
Price |
Stock options outstanding beginning of period |
|
|
1,949 |
|
|
$ |
8.31 |
|
|
|
842 |
|
|
$ |
9.96 |
|
|
|
1,797 |
|
|
$ |
9.82 |
|
Options granted |
|
|
|
|
|
|
|
|
|
|
1,333 |
|
|
|
7.49 |
|
|
|
55 |
|
|
|
8.69 |
|
Options exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(163 |
) |
|
|
7.78 |
|
Options forfeited |
|
|
(460 |
) |
|
|
8.31 |
|
|
|
(66 |
) |
|
|
8.17 |
|
|
|
(42 |
) |
|
|
9.55 |
|
Options expired |
|
|
(13 |
) |
|
|
12.37 |
|
|
|
(160 |
) |
|
|
10.25 |
|
|
|
(805 |
) |
|
|
10.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options outstanding end of period |
|
|
1,476 |
|
|
$ |
8.28 |
|
|
|
1,949 |
|
|
$ |
8.31 |
|
|
|
842 |
|
|
$ |
9.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of period |
|
|
498 |
|
|
$ |
9.93 |
|
|
|
614 |
|
|
$ |
10.01 |
|
|
|
789 |
|
|
$ |
10.05 |
|
The weighted average fair value of options granted during the years ended December 31, 2008
and 2007 was $1.76 and $2.05 per share, respectively.
Information concerning common stock options outstanding has been segregated into five groups
with similar exercise prices and is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
Number of |
|
Weighted Average |
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
Average |
|
Options |
|
Exercise Price |
Exercise Price |
|
Number of |
|
Exercise |
|
Remaining |
|
Outstanding |
|
per Share of |
per Share |
|
Options |
|
Price |
|
Contractual |
|
That Are |
|
Options That are |
Low |
|
High |
|
Outstanding |
|
per Share |
|
Life |
|
Exercisable |
|
Exercisable |
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
(In years) |
|
(In thousands) |
|
|
|
|
$ |
1.78 |
|
|
$ |
3.56 |
|
|
|
10 |
|
|
$ |
2.10 |
|
|
|
3.6 |
|
|
|
|
|
|
$ |
|
|
|
3.56 |
|
|
|
5.34 |
|
|
|
35 |
|
|
|
3.61 |
|
|
|
3.4 |
|
|
|
|
|
|
|
|
|
|
7.13 |
|
|
|
8.91 |
|
|
|
1,017 |
|
|
|
7.68 |
|
|
|
3.0 |
|
|
|
84 |
|
|
|
8.23 |
|
|
8.91 |
|
|
|
10.69 |
|
|
|
338 |
|
|
|
9.71 |
|
|
|
0.6 |
|
|
|
338 |
|
|
|
9.71 |
|
$ |
12.47 |
|
|
$ |
14.25 |
|
|
|
76 |
|
|
$ |
12.77 |
|
|
|
0.2 |
|
|
|
76 |
|
|
$ |
12.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,476 |
|
|
|
|
|
|
|
|
|
|
|
498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of our stock options was $0 based on the closing market price of
our common stock at December 31, 2009.
F-24
The following table summarizes the activity for our non-vested restricted shares during the
year ended December 31, 2009 under our Directors Restricted Stock Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Number of |
|
Average |
|
|
Shares |
|
Fair Value |
|
|
(In thousands) |
Restricted Stock: |
|
|
|
|
|
|
|
|
Non-vested common restricted shares, December 31, 2008 |
|
|
100 |
|
|
$ |
6.64 |
|
Vested |
|
|
(34 |
) |
|
|
7.19 |
|
|
|
|
|
|
|
|
|
|
Non-vested common restricted shares, December 31, 2009 |
|
|
66 |
|
|
$ |
6.36 |
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, there was $525,000 of total unrecognized compensation cost related to
all non-vested share based compensation arrangements. The cost is expected to be recognized over a
weighted average period of 0.9 years.
9. Income Taxes
We recognize deferred tax assets and liabilities for future tax consequences attributable to
differences between our financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected
to reverse. We recognize the effect on deferred tax assets and liabilities resulting from a change
in tax rates in income in the period that includes the enactment date.
Under certain circumstances, we recognize liabilities in our financial statements for
positions taken on uncertain tax issues. When tax returns are filed, it is highly certain that some
positions taken would be sustained upon examination by the taxing authorities, while others are
subject to uncertainty about the merits of the position taken or the amount of the position that
would be ultimately sustained. The benefit of a tax position is recognized in the financial
statements in the period during which, based on all available evidence, we believe it is more
likely than not that the position will be sustained upon examination, including the resolution of
appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with
other positions. Tax positions that meet the more-likely-than-not recognition threshold are
measured as the largest amount of tax benefit that is more than 50 percent likely of being realized
upon settlement with the applicable taxing authority. The portion of the benefits associated with
tax positions taken that exceeds the amount measured as described above is reflected as a liability
for unrecognized tax benefits in the balance sheet along with any associated interest and penalties
that would be payable to the taxing authorities upon examination. Interest and penalties associated
with unrecognized tax benefits are classified as income tax expense in the statement of operations.
Federal and state income tax expense (benefit) is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
State and local |
|
|
344 |
|
|
|
354 |
|
|
|
274 |
|
State and local reserve for uncertain tax positions |
|
|
(385 |
) |
|
|
525 |
|
|
|
1,006 |
|
|
|
|
|
|
|
|
|
|
|
Current income tax expense |
|
|
(41 |
) |
|
|
879 |
|
|
|
1,280 |
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
(11,640 |
) |
|
|
(99,510 |
) |
|
|
(12,504 |
) |
State and local |
|
|
421 |
|
|
|
(12,380 |
) |
|
|
(1,319 |
) |
|
|
|
|
|
|
|
|
|
|
Deferred income tax benefit |
|
|
(11,219 |
) |
|
|
(111,890 |
) |
|
|
(13,823 |
) |
|
|
|
|
|
|
|
|
|
|
Total income tax benefit |
|
$ |
(11,260 |
) |
|
$ |
(111,011 |
) |
|
$ |
(12,543 |
) |
|
|
|
|
|
|
|
|
|
|
F-25
Significant components of our deferred tax liabilities and assets are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Net book value of property and equipment |
|
$ |
16,800 |
|
|
$ |
17,469 |
|
Broadcast licenses, goodwill and other intangibles |
|
|
245,520 |
|
|
|
231,351 |
|
Unearned income |
|
|
|
|
|
|
62 |
|
Network compensation |
|
|
|
|
|
|
273 |
|
Restricted stock |
|
|
12 |
|
|
|
17 |
|
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
|
262,332 |
|
|
|
249,172 |
|
|
|
|
|
|
|
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Liability under supplemental retirement plan |
|
|
14 |
|
|
|
18 |
|
Liability for accrued vacation |
|
|
763 |
|
|
|
782 |
|
Allowance for doubtful accounts |
|
|
426 |
|
|
|
602 |
|
Liability under severance and purchase liabilities |
|
|
18 |
|
|
|
83 |
|
Liability under health and welfare plan |
|
|
675 |
|
|
|
608 |
|
Capital loss carryforwards |
|
|
264 |
|
|
|
261 |
|
Liability for pension plan |
|
|
5,434 |
|
|
|
7,307 |
|
Federal operating loss carryforwards |
|
|
99,853 |
|
|
|
77,172 |
|
State and local operating loss carryforwards |
|
|
13,931 |
|
|
|
11,540 |
|
Alternative minimum tax carryforwards |
|
|
890 |
|
|
|
890 |
|
Unearned income |
|
|
1,150 |
|
|
|
955 |
|
Network compensation |
|
|
1,162 |
|
|
|
1,366 |
|
Interest rate swap agreements |
|
|
2,474 |
|
|
|
9,598 |
|
Stock options |
|
|
693 |
|
|
|
507 |
|
Other |
|
|
440 |
|
|
|
247 |
|
|
|
|
|
|
|
|
Total deferred tax assets |
|
|
128,187 |
|
|
|
111,936 |
|
Valuation allowance for deferred tax assets |
|
|
(6,462 |
) |
|
|
(4,909 |
) |
|
|
|
|
|
|
|
Net deferred tax assets |
|
|
121,725 |
|
|
|
107,027 |
|
|
|
|
|
|
|
|
Deferred tax liabilities, net of deferred tax assets |
|
$ |
140,607 |
|
|
$ |
142,145 |
|
|
|
|
|
|
|
|
We have approximately $285.3 million in federal net operating loss carryforwards, and those
carryforwards expire during the years 2020 through 2029. Additionally, we have an aggregate of
approximately $328.6 million of various state net operating loss carryforwards. We are projecting
taxable income in the carryforward periods. Therefore, we believe that it is more likely than not
that the Federal net operating loss carryforwards will be fully utilized.
A valuation allowance has been provided for a portion of the state net operating loss
carryforwards. We believe that we will not meet the more likely than not threshold in certain
states due to the uncertainty of generating sufficient income prior to expiration. Therefore, the
state valuation allowance net of federal tax benefit at December 31, 2009 and 2008 was $6.2 million
and $4.6 million, respectively. As of December 31, 2009 and 2008, a full valuation allowance of
$264,000 and $261,000, respectively, has been provided for the capital loss carryforwards, as we
believe that we will not meet the more likely than not threshold due to the uncertainty of
generating sufficient capital gains in the carryforward period. Our total valuation allowance
provided for deferred tax assets increased $1.6 million for the year ended December 31, 2009 and
decreased $306,000 for the year ended December 31, 2008.
A reconciliation of income tax expense at the statutory federal income tax rate and income
taxes as reflected in the consolidated financial statements is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Statutory federal rate applied to loss before income
taxes |
|
$ |
(12,007 |
) |
|
$ |
(109,560 |
) |
|
$ |
(12,493 |
) |
State and local taxes, net of federal tax benefit |
|
|
(906 |
) |
|
|
(11,584 |
) |
|
|
(1,476 |
) |
Change in valuation allowance |
|
|
1,553 |
|
|
|
(306 |
) |
|
|
431 |
|
Reserve for uncertain tax positions |
|
|
(385 |
) |
|
|
525 |
|
|
|
1,006 |
|
Goodwill impairment |
|
|
|
|
|
|
9,301 |
|
|
|
|
|
Other items, net |
|
|
485 |
|
|
|
613 |
|
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
Income tax benefit as recorded |
|
$ |
(11,260 |
) |
|
$ |
(111,011 |
) |
|
$ |
(12,543 |
) |
|
|
|
|
|
|
|
|
|
|
Effective income tax rate |
|
|
32.8 |
% |
|
|
35.5 |
% |
|
|
35.1 |
% |
F-26
As of each year end, we are required to adjust our pension liability to an amount equal to the
funded status of our pension plans with a corresponding adjustment to other comprehensive income on
a net of tax basis. During 2009, we decreased our recorded non-current pension liability by $6.6
million and recognized other comprehensive income of $4.0 million, net of a $2.6 million tax
expense. During 2008, we increased our recorded non-current pension liability by $11.7 million and
recognized other comprehensive loss of $7.2 million, net of a $4.6 million tax benefit. During
2007, we decreased our recorded non-current pension liability by $222,000 and recognized other
comprehensive income of $136,000, net of an $86,000 income tax expense.
During 2009, we recognized a long term asset for the positive change in market value of our
interest rate swap agreements of $18.3 million, and recorded a gain on derivatives as other
comprehensive income of $11.2 million, net of a $7.1 million income tax expense. During 2008, we
recognized a long term liability for the negative market value of our interest rate swap agreements
of $7.0 million, and recorded a loss on derivatives as other comprehensive expense of $4.3 million,
net of a $2.7 million income tax benefit. During 2007, we recognized a long-term liability for the
negative market value of our interest rate swap agreements of $17.7 million, and recorded a loss on
derivatives as other comprehensive expense of $10.8 million, net of a $6.9 million income tax
benefit.
We made income tax payments (net of refunds) of $97,000 in 2009. We made income tax payments
(net of refunds) of $225,000 in 2008. We received a net income tax refund of $24,000 in 2007. At
December 31, 2009 and 2008, we had current income taxes payable of approximately $4.2 million and
$4.4 million, respectively.
On January 1, 2007, we adopted accounting provisions which require us to prescribe a
recognition threshold and measurement attribution for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. For benefits to be
recognized, a tax position must be more likely than not to be sustained upon examination by taxing
authorities.
As a result of the implementation of these requirements in 2007, we determined that no
material adjustment was required to our existing $2.9 million liability for unrecognized tax
benefits, including accrued interest and penalties. As of December 31, 2009 and 2008, we had
approximately $4.0 million and $4.4 million, respectively, of unrecognized tax benefits. All of
these unrecognized tax benefits would impact our effective tax rate if recognized. The liability
for unrecognized tax benefits is recorded net of any federal tax benefit that would result from
payment.
Also on January 1, 2007 and in conjunction with the adoption of this provision, we accrued
interest and penalties related to unrecognized tax benefits in income tax expense based on our
accounting policy election. As of December 31, 2009 and 2008, we had recorded a liability for
potential penalties and interest of approximately $1.2 million and $1.2 million, respectively,
related to uncertain tax positions.
The following table summarizes the activity related to our unrecognized tax benefits, net of
federal benefit, excluding interest and penalties for the years ended December 31, 2009, 2008 and
2007 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Balance at beginning of period |
|
$ |
3,227 |
|
|
$ |
2,949 |
|
|
$ |
2,231 |
|
Change resulting from positions taken in prior periods: |
|
|
|
|
|
|
|
|
|
|
|
|
Increase |
|
|
48 |
|
|
|
23 |
|
|
|
10 |
|
Decrease |
|
|
|
|
|
|
(153 |
) |
|
|
(31 |
) |
Increase resulting from positions taken in current
period |
|
|
|
|
|
|
744 |
|
|
|
926 |
|
Decrease as a result of settlements with taxing
authorities |
|
|
|
|
|
|
(51 |
) |
|
|
|
|
Reduction in benefit from lapse in statute of limitations |
|
|
(447 |
) |
|
|
(285 |
) |
|
|
(187 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
2,828 |
|
|
$ |
3,227 |
|
|
$ |
2,949 |
|
|
|
|
|
|
|
|
|
|
|
While it is difficult to calculate with any certainty, we estimate a decrease of $358,000,
exclusive of interest and penalties, will be recorded for uncertain tax positions over the next
twelve months resulting from expiring statutes of limitations for state tax issues.
We file income tax returns in the U.S. federal and multiple state jurisdictions. With few
exceptions, we are no longer subject to U.S. federal, or state and local tax examinations by tax
authorities for years prior to 2000. This extended open adjustment period is due to material
amounts of net operating loss carryforwards, which exist at the federal and multi-state
jurisdictions originating from the 2000, 2001, 2002 and 2003 tax years.
F-27
10. Retirement Plans
We sponsor and contribute to several types of retirement plans covering substantially all of
our full time employees. Our defined benefit pension plans include our active plan as well as two
frozen plans that we assumed when we acquired the related businesses. The Gray Television, Inc.
Capital Accumulation Plan (the Capital Accumulation Plan) is a defined contribution plan that is
intended to meet the requirements of section 401(k) of the Internal Revenue Code of 1986.
Gray Pension Plan
Our active defined benefit plan covers substantially all of our full-time employees.
Retirement benefits are based on years of service and the employees highest average compensation
for five consecutive years during the last ten years of employment. The funding policy is
consistent with the funding requirements of existing federal laws and regulations under the
Employee Retirement Income Security Act of 1974.
The measurement dates used to determine the benefit information for our active defined benefit
pension plan were December 31, 2009 and 2008, respectively. The following summarizes the active
plans funded status and amounts recognized in our consolidated balance sheets at December 31, 2009
and 2008, respectively (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Change in projected benefit obligation: |
|
|
|
|
|
|
|
|
Projected benefit obligation at beginning of year |
|
$ |
37,998 |
|
|
$ |
31,498 |
|
Service cost |
|
|
3,248 |
|
|
|
2,917 |
|
Interest cost |
|
|
2,189 |
|
|
|
1,925 |
|
Actuarial (gains) losses |
|
|
(3,201 |
) |
|
|
2,350 |
|
Benefits paid |
|
|
(717 |
) |
|
|
(692 |
) |
|
|
|
|
|
|
|
Projected benefit obligation at end of year |
|
$ |
39,517 |
|
|
$ |
37,998 |
|
|
|
|
|
|
|
|
Change in plan assets: |
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year |
|
$ |
20,901 |
|
|
$ |
25,267 |
|
Actual return on plan assets |
|
|
3,102 |
|
|
|
(6,387 |
) |
Company contributions |
|
|
3,430 |
|
|
|
2,713 |
|
Benefits paid |
|
|
(717 |
) |
|
|
(692 |
) |
|
|
|
|
|
|
|
Fair value of plan assets at end of year |
|
|
26,716 |
|
|
|
20,901 |
|
|
|
|
|
|
|
|
Funded status of plan |
|
$ |
(12,801 |
) |
|
$ |
(17,097 |
) |
|
|
|
|
|
|
|
Amounts recognized in our balance sheets consist of: |
|
|
|
|
|
|
|
|
Accrued benefit cost |
|
$ |
(4,721 |
) |
|
$ |
(3,094 |
) |
Accumulated other comprehensive income |
|
|
(8,080 |
) |
|
|
(14,003 |
) |
|
|
|
|
|
|
|
Net liability recognized |
|
$ |
(12,801 |
) |
|
$ |
(17,097 |
) |
|
|
|
|
|
|
|
The accumulated benefit obligation amounts for our active defined benefit pension were $33.5
million and $32.0 million at December 31, 2009 and 2008, respectively. The increase in the
accumulated benefit obligation is due primarily to increases in service costs and salaries and
decreases in the discount period till retirement for continuing employees, as well as discount rate
changes. The long-term rate of return on assets assumption was chosen from a best estimate range
based upon the anticipated long-term returns for asset categories in which the plan is invested.
The long-term rate of return may be viewed as the sum of (i) 3% inflation, (ii) 1% risk-free rate
of return and (iii) 3% risk premium. The estimated rate of increase in compensation levels is based
on historical compensation increases for our employees.
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2009 |
|
2008 |
Weighted-average assumptions used to determine net periodic benefit cost for our active plan: |
|
|
|
|
|
|
|
|
Discount rate |
|
|
5.79 |
% |
|
|
6.10 |
% |
Expected long-term rate of return on plan assets |
|
|
7.00 |
% |
|
|
7.00 |
% |
Estimated rate of increase in compensation levels |
|
|
5.00 |
% |
|
|
5.00 |
% |
F-28
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
2009 |
|
2008 |
Weighted-average assumptions used to determine benefit obligations: |
|
|
|
|
|
|
|
|
Discount rate |
|
|
6.27 |
% |
|
|
5.79 |
% |
Estimated rate of increase in compensation levels |
|
|
5.00 |
% |
|
|
5.00 |
% |
Pension expense is computed using the projected unit credit actuarial cost method. The net
periodic pension cost for our active plan includes the following components (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Components of net periodic pension cost: |
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
3,248 |
|
|
$ |
2,917 |
|
|
$ |
2,974 |
|
Interest cost |
|
|
2,189 |
|
|
|
1,925 |
|
|
|
1,667 |
|
Expected return on plan assets |
|
|
(1,558 |
) |
|
|
(1,763 |
) |
|
|
(1,590 |
) |
Recognized net actuarial loss |
|
|
1,176 |
|
|
|
98 |
|
|
|
155 |
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost |
|
$ |
5,055 |
|
|
$ |
3,177 |
|
|
$ |
3,206 |
|
|
|
|
|
|
|
|
|
|
|
For our active plan, the estimated future benefit payments for subsequent years are as follows
(in thousands):
|
|
|
|
|
Years |
|
Amount |
2010 |
|
$ |
1,028 |
|
2011 |
|
|
1,131 |
|
2012 |
|
|
1,360 |
|
2013 |
|
|
1,508 |
|
2014 |
|
|
1,617 |
|
2015-2019 |
|
|
11,032 |
|
The active plans weighted-average asset allocations by asset category are as follows:
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
2009 |
|
2008 |
Asset category: |
|
|
|
|
|
|
|
|
Insurance general account |
|
|
37 |
% |
|
|
40 |
% |
Cash management accounts |
|
|
3 |
% |
|
|
2 |
% |
Equity accounts |
|
|
54 |
% |
|
|
53 |
% |
Fixed income account |
|
|
6 |
% |
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
The investment objective is to achieve a consistent total rate of return (income,
appreciation, and reinvested funds) that will equal or exceed the actuarial assumption with
aversion to significant volatility. The following is the target asset allocation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Range |
Asset class: |
|
|
|
|
|
|
|
|
|
|
|
|
Large cap equities |
|
|
23 |
% |
|
to |
|
|
91 |
% |
Mid cap equities |
|
|
0 |
% |
|
to |
|
|
15 |
% |
Small cap equities |
|
|
0 |
% |
|
to |
|
|
16 |
% |
International equities |
|
|
5 |
% |
|
to |
|
|
25 |
% |
Fixed income |
|
|
0 |
% |
|
to |
|
|
30 |
% |
Cash |
|
|
0 |
% |
|
to |
|
|
20 |
% |
Our equity portfolio contains attractively priced securities of financially sound companies
necessary to build a diversified portfolio. Our fixed income portfolio contains obligations
generally rated A or better with no maturity restrictions and an actively managed duration. The
cash equivalents strategy uses securities of the highest credit quality.
Fair Value of Active Pension Plan Assets
We calculate the fair value of our active pension plans assets based upon the observable and
unobservable net asset value of its underlying investments. We utilize valuation techniques that
maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are
prioritized into a hierarchy that gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable
inputs that require assumptions to measure fair value (Level 3). The following table presents the
fair value of our active pension plans assets and classifies them by level within the fair value
hierarchy as of December 31, 2009 and 2008, respectively (in thousands):
F-29
Active Pension Plan Fair Value Measurements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Immediate participation guarantee contract |
|
$ |
|
|
|
$ |
9,925 |
|
|
$ |
|
|
|
$ |
9,925 |
|
Common and collective trust fund |
|
|
|
|
|
|
16,792 |
|
|
|
|
|
|
|
16,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
26,717 |
|
|
$ |
|
|
|
$ |
26,717 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008 |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Immediate participation guarantee contract |
|
$ |
|
|
|
$ |
8,399 |
|
|
$ |
|
|
|
$ |
8,399 |
|
Common and collective trust fund |
|
|
|
|
|
|
12,502 |
|
|
|
|
|
|
|
12,502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
20,901 |
|
|
$ |
|
|
|
$ |
20,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired Pension Plans
In 2002 and 1998, we acquired companies with two underfunded pension plans (the Acquired
Pension Plans). The Acquired Pension Plans were frozen by their prior plan sponsors and no new
participants can be added to the Acquired Pension Plans. Combined and as of January 1, 2009, the
acquired pension plans have 176 participants as compared to our active plan which has approximately
2,352 participants and is described above. As of December 31, 2009, the Acquired Pension Plans had
combined plan assets of $4.0 million and the combined projected benefit obligations of $5.1
million. As of December 31, 2008, the Acquired Pension Plans had combined plan assets of $3.9
million and combined projected benefit obligations of $5.6 million. The net liability for the two
Acquired Pension Plans is recorded as a liability in our financial statements as of December 31,
2009 and 2008.
Contributions
We expect to contribute a combined total of approximately $4.5 million to the active plan and
the Acquired Pension Plans during the year ending December 31, 2010.
Capital Accumulation Plan
The Capital Accumulation Plan provides additional retirement benefits for substantially all
employees. The Capital Accumulation Plan provides our employees with an investment option in our
common stock and Class A common stock. It also allows for our matching contribution to be made in
the form of our common stock. On December 9, 2008 and May 2, 2007, our Board of Directors increased
the number of shares reserved for the Capital Accumulation Plan by 2,000,000 and 1,000,000 shares
of our common stock, respectively. As of December 31, 2009, 1,642,849 shares were available for the
plan.
We match employee contributions to the Capital Accumulation Plan, and such contributions may
not exceed 6% of the employees gross pay. Our percentage match amount is declared by our Board of
Directors before the beginning of each plan year and is made by a contribution of our common stock.
Our percentage match was 50% during each of the years ended December 31, 2008 and 2007. As of
December 31, 2008, our Board of Directors temporarily suspended our matching contributions for the
majority of our employees. For the year ended December 31, 2009, our percentage match was 50% for
certain employees included in a collective bargaining unit at one of our stations and we did not
match contributions for the remainder of our employees. Our contributions vest, based upon each
employees number of years of service, over a period not to exceed five years.
In addition to the matching contributions, we made voluntary contributions in the years ended
December 31, 2008 and 2007 for active participants in the Capital Accumulation Plan. This voluntary
contribution was equal to 1% of each active participants earnings. Our matching and voluntary
contributions are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2009 |
|
2008 |
|
2007 |
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
Contributions to the Capital Accumulation Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matching contributions |
|
|
351 |
|
|
$ |
147 |
|
|
|
867 |
|
|
$ |
1,707 |
|
|
|
176 |
|
|
$ |
1,593 |
|
Voluntary contributions |
|
|
|
|
|
$ |
|
|
|
|
84 |
|
|
$ |
673 |
|
|
|
88 |
|
|
$ |
648 |
|
F-30
Employee Stock Purchase Plan
Effective June 30, 2009, we discontinued our Gray Television, Inc. Employee Stock Purchase
Plan (the Stock Purchase Plan). The Stock Purchase Plan was intended to qualify as an employee
stock purchase plan under Section 423 of the Internal Revenue Code and to provide eligible
employees with an opportunity to purchase our common stock through payroll deductions. Originally,
an aggregate of 500,000 shares of our common stock were reserved for issuance under the Stock
Purchase Plan and were available for purchase, subject to adjustment in the event of a stock split,
stock dividend or other similar change in our common stock or capital structure. In order to ensure
that our Stock Purchase Plan had adequate shares available for issuance through June 30, 2009, we
proposed and our shareholders approved at our annual 2009 shareholders meeting that an additional
600,000 shares of our common stock be reserved for issuance under our Stock Purchase Plan. As of
June 30, 2009 and before discontinuance of our Stock Purchase Plan, 480,510 shares were available
for issuance under this plan. The price per share at which shares of common stock were purchased
under the Stock Purchase Plan during any purchase period was 85% of the fair market value of the
common stock on the last day of the purchase period.
11. Commitments and Contingencies
We have various operating lease commitments for equipment, land and office space. We also have
commitments for various syndicated television programs and commitments for the purchase of
equipment.
Future minimum payments for these commitments are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syndicated |
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
Television |
|
|
|
|
Year |
|
Equipment |
|
|
Lease |
|
|
Programming |
|
|
Total |
|
2010 |
|
$ |
832 |
|
|
$ |
1,321 |
|
|
$ |
4,502 |
|
|
$ |
6,655 |
|
2011 |
|
|
|
|
|
|
1,102 |
|
|
|
11,431 |
|
|
|
12,533 |
|
2012 |
|
|
|
|
|
|
678 |
|
|
|
5,095 |
|
|
|
5,773 |
|
2013 |
|
|
|
|
|
|
653 |
|
|
|
962 |
|
|
|
1,615 |
|
2014 |
|
|
|
|
|
|
578 |
|
|
|
295 |
|
|
|
873 |
|
Thereafter |
|
|
|
|
|
|
3,787 |
|
|
|
19 |
|
|
|
3,806 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
832 |
|
|
$ |
8,119 |
|
|
$ |
22,304 |
|
|
$ |
31,255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amounts in the table above are estimates of commitments that are in addition to the
liabilities accrued for on our balance sheet as of December 31, 2009.
Leases
We have no material capital leases. Where leases include rent holidays, rent escalations, rent
concessions and leasehold improvement incentives, the value of these incentives are amortized over
the lease term including anticipated renewal periods. Leasehold improvements are depreciated over
the associated lease term including anticipated renewal periods. Rent expense resulting from
operating leases for the years ended December 31, 2009, 2008 and 2007 were $1.6 million, $1.6
million and $1.5 million, respectively.
Sports Marketing Agreements
On October 12, 2004, the University of Kentucky (UK) jointly awarded a sports marketing
agreement to a subsidiary of IMG Worldwide, Inc. (IMG) and us (the UK Agreement). The UK
Agreement commenced on April 16, 2005 and has an initial term of seven years with the option to
extend for three additional years.
On July 1, 2006, the terms between IMG and us concerning the UK Agreement were amended. The
amended agreement provides that we will share in profits in excess of certain amounts specified by
the agreement, if any, but not losses. The agreement also provides that we will separately retain
all local broadcast advertising revenue and pay all local broadcast expenses for activities under
the agreement. Under the amended agreement, IMG agreed to make all license fee payments to UK.
However, if IMG is unable to pay the license fee to UK, we will then pay the unpaid portion of the
license fee to UK. As of December 31, 2009, the aggregate license fees to be paid by IMG to UK over
the remaining portion of the full ten-year term (including optional three additional years) for the
agreement is approximately $45.4 million. If we make advances on behalf of IMG, IMG is required to
reimburse us for the amount paid within 60 days after the close of each contract year which ends on
June 30th. IMG has also agreed to pay interest on any advance at a rate equal to the prime rate.
During the years ended December 31, 2009 and 2008, we did not advance any amounts to UK on behalf
of IMG under this agreement. As of December 31, 2009, we do not consider the risk of
non-performance by IMG to be high.
F-31
Legal Proceedings and Claims
We are subject to legal proceedings and claims that arise in the normal course of our
business. In the opinion of management, the amount of ultimate liability, if any, with respect to
these actions, will not materially affect our financial position.
12. Goodwill and Intangible Assets
A summary of changes in our goodwill and other intangible assets, on a net basis, for the
years ended December 31, 2009 and 2008 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Balance at |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Balance at |
|
|
|
December 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2008 |
|
|
Adjustments |
|
|
Impairment |
|
|
Amortization |
|
|
2009 |
|
Goodwill |
|
$ |
170,522 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
170,522 |
|
Broadcast licenses |
|
|
818,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
818,981 |
|
Definite lived intangible assets |
|
|
1,893 |
|
|
|
|
|
|
|
|
|
|
|
(577 |
) |
|
|
1,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets net of accumulated amortization |
|
$ |
991,396 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(577 |
) |
|
$ |
990,819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Balance at |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Balance at |
|
|
|
December 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2007 |
|
|
Adjustments |
|
|
Impairment |
|
|
Amortization |
|
|
2008 |
|
Goodwill |
|
|
269,118 |
|
|
$ |
|
|
|
$ |
(98,596 |
) |
|
$ |
|
|
|
$ |
170,522 |
|
Broadcast licenses |
|
|
1,059,066 |
|
|
|
|
|
|
|
(240,085 |
) |
|
|
|
|
|
|
818,981 |
|
Definite lived intangible assets |
|
|
2,685 |
|
|
|
|
|
|
|
|
|
|
|
(792 |
) |
|
|
1,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets net of accumulated amortization |
|
$ |
1,330,869 |
|
|
$ |
|
|
|
$ |
(338,681 |
) |
|
$ |
(792 |
) |
|
$ |
991,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of changes in our goodwill, on a gross basis, for the years ended December 31, 2009
and 2008 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
|
|
|
As of |
|
|
|
December 31, |
|
|
|
|
|
|
December 31, |
|
|
|
2008 |
|
|
Impairment |
|
|
2009 |
|
Goodwill, gross |
|
$ |
269,118 |
|
|
$ |
|
|
|
$ |
269,118 |
|
Accumulated goodwill impairment |
|
|
(98,596 |
) |
|
|
|
|
|
|
(98,596 |
) |
|
|
|
|
|
|
|
|
|
|
Goodwill, net |
|
$ |
170,522 |
|
|
$ |
|
|
|
$ |
170,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
|
|
|
As of |
|
|
|
December 31, |
|
|
|
|
|
|
December 31, |
|
|
|
2007 |
|
|
Impairment |
|
|
2008 |
|
Goodwill, gross |
|
$ |
269,118 |
|
|
$ |
|
|
|
$ |
269,118 |
|
Accumulated goodwill impairment |
|
|
|
|
|
|
(98,596 |
) |
|
|
(98,596 |
) |
|
|
|
|
|
|
|
|
|
|
Goodwill, net |
|
$ |
269,118 |
|
|
$ |
(98,596 |
) |
|
$ |
170,522 |
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 and 2008, our intangible assets and related accumulated amortization
consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 |
|
|
As of December 31, 2008 |
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Gross |
|
|
Amortization |
|
|
Net |
|
|
Gross |
|
|
Amortization |
|
|
Net |
|
Intangible assets not currently
subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast licenses |
|
$ |
872,680 |
|
|
$ |
(53,699 |
) |
|
$ |
818,981 |
|
|
$ |
872,680 |
|
|
$ |
(53,699 |
) |
|
$ |
818,981 |
|
Goodwill |
|
|
170,522 |
|
|
|
|
|
|
|
170,522 |
|
|
|
170,522 |
|
|
|
|
|
|
|
170,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,043,202 |
|
|
$ |
(53,699 |
) |
|
$ |
989,503 |
|
|
$ |
1,043,202 |
|
|
$ |
(53,699 |
) |
|
$ |
989,503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network affiliation agreements |
|
$ |
1,264 |
|
|
$ |
(1,183 |
) |
|
$ |
81 |
|
|
$ |
1,264 |
|
|
$ |
(1,119 |
) |
|
$ |
145 |
|
Other definite lived intangible assets |
|
|
13,484 |
|
|
|
(12,249 |
) |
|
|
1,235 |
|
|
|
13,484 |
|
|
|
(11,736 |
) |
|
|
1,748 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,748 |
|
|
$ |
(13,432 |
) |
|
$ |
1,316 |
|
|
$ |
14,748 |
|
|
$ |
(12,855 |
) |
|
$ |
1,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangibles |
|
$ |
1,057,950 |
|
|
$ |
(67,131 |
) |
|
$ |
990,819 |
|
|
$ |
1,057,950 |
|
|
$ |
(66,554 |
) |
|
$ |
991,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for the years ended December 31, 2009, 2008 and 2007 was $0.6 million,
$0.8 million and $0.8 million, respectively. Based on the current amount of intangible assets
subject to amortization, we expect that amortization expense for the succeeding five years will be
as follows: 2010, $479,000; 2011, $125,000; 2012, $75,000; 2013, $50,000 and 2014, $38,000. As
acquisitions and dispositions occur in the future, actual amounts may vary from these estimates.
F-32
Impairment of goodwill and broadcast license
As of December 31, 2009, we tested our goodwill, broadcast licenses and other intangible asset
recorded values for potential impairment and concluded that the balances were reasonably stated. As
a result, we did not record an impairment expense for our goodwill, broadcast licenses or other
intangible assets during fiscal 2009.
As of December 31, 2008, we recorded a non-cash impairment expense of $338.7 million resulting
from a write-down of $98.6 million in the recorded value of our goodwill and a write-down of $240.1
million in the recorded value of our broadcast licenses. The write-down of our goodwill and
broadcast licenses related to seven stations and 23 stations, respectively. We tested our
unamortized intangible assets for impairment at December 31, 2008. As of the testing date, we
believed events had occurred and circumstances changed that more likely than not reduce the fair
value of our broadcast licenses and goodwill below their carrying amounts. These events, which
accelerated in the fourth quarter of 2008, included: (i) the continued decline of the price of our
common stock and Class A common stock; (ii) the decline in the current selling prices of television
stations; (iii) the decline in local and national advertising revenues excluding political
advertising revenue; and (iv) the decline in the operating profit margins of some of our stations.
We did not record a similar impairment expense in the prior year.
See Note 1. Description of Business and Summary of Significant Accounting Policies for
further discussion of our accounting policies regarding goodwill, broadcast licenses and other
intangible assets.
13. Selected Quarterly Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Quarters |
|
|
First |
|
Second |
|
Third |
Fourth |
|
|
(In thousands, except for per share data) |
Year Ended December 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues |
|
$ |
61,354 |
|
|
$ |
65,057 |
|
|
$ |
66,446 |
|
|
$ |
77,517 |
|
Operating income |
|
|
4,766 |
|
|
|
8,998 |
|
|
|
10,630 |
|
|
|
18,685 |
|
Loss on early extinguishment of debt |
|
|
(8,352 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(8,920 |
) |
|
|
(6,648 |
) |
|
|
(5,520 |
) |
|
|
(1,959 |
) |
Net loss available to common stockholders |
|
|
(12,970 |
) |
|
|
(10,699 |
) |
|
|
(9,988 |
) |
|
|
(6,509 |
) |
Basic net loss available to common stockholders per share |
|
$ |
(0.27 |
) |
|
$ |
(0.22 |
) |
|
$ |
(0.21 |
) |
|
$ |
(0.13 |
) |
Diluted net loss available to common stockholders per share |
|
$ |
(0.27 |
) |
|
$ |
(0.22 |
) |
|
$ |
(0.21 |
) |
|
$ |
(0.13 |
) |
Year Ended December 31, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues |
|
$ |
70,999 |
|
|
$ |
78,743 |
|
|
$ |
82,631 |
|
|
$ |
94,803 |
|
Impairment of goodwill and broadcast licenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
338,681 |
|
Operating income |
|
|
9,281 |
|
|
|
18,738 |
|
|
|
20,511 |
|
|
|
(307,425 |
) |
Net (loss) income |
|
|
(3,850 |
) |
|
|
3,215 |
|
|
|
4,644 |
|
|
|
(206,025 |
) |
Net (loss) income available to common stockholders |
|
|
(3,850 |
) |
|
|
3,090 |
|
|
|
1,477 |
|
|
|
(209,326 |
) |
Basic net (loss) income available to common stockholders per share |
|
$ |
(0.08 |
) |
|
$ |
0.06 |
|
|
$ |
0.03 |
|
|
$ |
(4.32 |
) |
Diluted net (loss) income available to common stockholders per share |
|
$ |
(0.08 |
) |
|
$ |
0.06 |
|
|
$ |
0.03 |
|
|
$ |
(4.32 |
) |
Because of the method used in calculating per share data, the quarterly per share data will
not necessarily add to the per share data as computed for the year.
14. Subsequent Event Long-term Debt Amendment
Effective as of March 31, 2010, we amended our existing senior credit facility to provide for,
among other things: (i) an increase in the maximum total net leverage ratio covenant under the
senior credit facility through March 30, 2011 and (ii) a potential issuance of capital stock and/or
senior or subordinated debt securities, which could include securities with a second lien security
interest (the Replacement Debt). This amendment to the senior credit facility also provides for a
reduction in the revolving loan commitment under the senior credit facility from $50.0 million to
$40.0 million.
From March 31, 2010 until the date we complete an offering of Replacement Debt resulting in
the repayment of not less than $200.0 million of our term loan outstanding under the senior credit
facility, (i) we are required to pay an annual incentive fee equal to 2.0%, which fee will be
eliminated upon the consummation of such offering and repayment, (ii) the annual facility fee will
remain at 3.0%, which fee will, following such repayment, be reduced to 1.25% per year, with a
potential for further reductions in future periods, and (iii) we will remain subject to a maximum
total net leverage ratio, which will, following such repayment, be replaced by a first lien
leverage test, as described in the following paragraph. In addition, from and after such repayment,
we will be required to comply with a minimum fixed charge coverage ratio of 0.90x to 1.0x.
F-33
Upon the completion of an offering of Replacement Debt that results in the repayment of not
less than $200.0 million of our term loan outstanding under the senior credit facility, we will,
from the date of such repayment, be subject to a maximum first lien leverage ratio covenant, which
will replace our current maximum total leverage ratio covenant. The covenant will range from 7.5x
to 6.5x, depending upon the amount of any such repayment.
The use of proceeds from any issuance of Replacement Debt will generally be limited to the
repayment of amounts outstanding under the term loan under the senior credit facility and, in
certain circumstances, to the repurchase of outstanding shares of our Series D Perpetual Preferred
Stock. We cannot provide any assurances that such a sale of Replacement Debt, or any repurchase of
such preferred stock, will be completed by us, or of the terms or timing thereof.
Beginning April 30, 2010 and thereafter, all interest and fees accrued under the senior credit
facility will be payable in cash upon their respective due dates, with no portion of such accrued
interest and fees being subject to deferral.
A summary of certain significant terms contained in our senior credit facility (i) before the
March 31, 2010 amendment, (ii) as so amended, and (iii) as amended and after giving affect to a
potential issuance of Replacement Debt and repayment of at least $200.0 million of term loans under
the senior credit facility, are summarized in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
As Amended and |
|
|
|
|
As Amended and |
|
After Giving Effect |
|
|
|
|
Prior to Potential |
|
to a Potential |
|
|
|
|
Issuance of |
|
Issuance of |
|
|
|
|
Replacement Debt |
|
Replacement Debt |
|
|
Prior to Amendment |
|
and Related |
|
and Related |
|
|
on March 31, |
|
Repayment of Term |
|
Repayment of Term |
Description |
|
2010 |
|
Loan |
|
Loan |
Annual interest rate on outstanding term loan balance |
|
LIBOR plus 3.50% |
|
Same |
|
Same |
|
|
or BASE plus 2.50% |
|
|
|
|
Annual interest rate on outstanding revolving loan balance |
|
LIBOR plus 3.50% |
|
Same |
|
Same |
|
|
or BASE plus 2.50% |
|
|
|
|
Annual facility fee rate |
|
3.00% with |
|
3.00% with |
|
1.25% with |
|
|
a potential for |
|
a potential for |
|
a potential for |
|
|
reduction in |
|
reduction in |
|
reduction in |
|
|
future periods. |
|
future periods. |
|
future periods. |
Annual incentive fee rate |
|
0.00% |
|
2.00% |
|
0.00% |
Annual commitment fee on undrawn revolving loan balance |
|
0.50% |
|
Same |
|
Same |
Revolving loan commitment |
|
$50 million |
|
$40 million |
|
$40 million |
Maximum total net leverage ratio at: |
|
|
|
|
|
|
March 31, 2010 through June 29, 2010 |
|
7.00x |
|
9.00x |
|
Replaced with |
June 30, 2010 through |
|
|
|
|
|
a first lien |
September 29, 2010 |
|
6.50x |
|
9.50x |
|
leverage test |
September 30, 2010 through |
|
|
|
|
|
|
March 30, 2011 |
|
6.50x |
|
9.75x |
|
as described above. |
March 31, 2011 and thereafter |
|
6.50x |
|
6.50x |
|
|
Minimum fixed charge coverage ratio |
|
None |
|
Same |
|
0.90x to 1.00x |
Maximum cash balance that can be deducted from total debt |
|
|
|
|
|
|
to calculate net debt in the total net leverage ratio (or
first lien leverage test, as applicable) |
|
$10.0 million |
|
Same |
|
$15.0 million |
In order to obtain this amendment, we incurred loan issuance costs of approximately $4.1
million, in addition to other legal and professional fees. We are currently evaluating the
accounting treatment of the loan issuance costs incurred and the related tax effects of the
transaction. As of December 31, 2009, we had a deferred loan cost balance of $1.6 million. If the
amendment constitutes a significant modification to the senior credit facility in the three-month
period ended March 31, 2010, we may be required to expense all or a portion of our deferred loan
cost balance. As of March 31, 2010, after giving effect to the amendment, we expect to be in
compliance with all covenants under the senior credit facility.
F-34
GRAY TELEVISION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Assets: |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
13,664 |
|
|
$ |
16,000 |
|
Trade accounts receivable, less allowance for doubtful accounts
of $847 and $1,092, respectively |
|
|
52,580 |
|
|
|
57,179 |
|
Current portion of program broadcast rights, net |
|
|
6,781 |
|
|
|
10,220 |
|
Deferred tax asset |
|
|
1,597 |
|
|
|
1,597 |
|
Prepaid and other current assets |
|
|
3,429 |
|
|
|
1,788 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
78,051 |
|
|
|
86,784 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
143,196 |
|
|
|
148,092 |
|
Deferred loan costs, net |
|
|
5,631 |
|
|
|
1,619 |
|
Broadcast licenses |
|
|
818,981 |
|
|
|
818,981 |
|
Goodwill |
|
|
170,522 |
|
|
|
170,522 |
|
Other intangible assets, net |
|
|
1,194 |
|
|
|
1,316 |
|
Investment in broadcasting company |
|
|
13,599 |
|
|
|
13,599 |
|
Other |
|
|
4,641 |
|
|
|
4,826 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,235,815 |
|
|
$ |
1,245,739 |
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
F-35
GRAY TELEVISION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Liabilities and stockholders equity: |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Trade accounts payable |
|
$ |
5,666 |
|
|
$ |
6,047 |
|
Employee compensation and benefits |
|
|
9,553 |
|
|
|
9,675 |
|
Accrued interest |
|
|
12,664 |
|
|
|
13,531 |
|
Other accrued expenses |
|
|
4,193 |
|
|
|
4,814 |
|
Interest rate hedge derivatives |
|
|
360 |
|
|
|
6,344 |
|
Federal and state income taxes |
|
|
4,371 |
|
|
|
4,206 |
|
Current portion of program broadcast obligations |
|
|
11,883 |
|
|
|
15,271 |
|
Acquisition related liabilities |
|
|
863 |
|
|
|
863 |
|
Deferred revenue |
|
|
6,255 |
|
|
|
6,241 |
|
Current portion of long-term debt |
|
|
8,080 |
|
|
|
8,080 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
63,888 |
|
|
|
75,072 |
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion |
|
|
781,709 |
|
|
|
783,729 |
|
Long-term accrued facility fee |
|
|
24,245 |
|
|
|
18,307 |
|
Program broadcast obligations, less current portion |
|
|
1,391 |
|
|
|
1,531 |
|
Deferred income taxes |
|
|
141,079 |
|
|
|
142,204 |
|
Long-term deferred revenue |
|
|
2,578 |
|
|
|
2,638 |
|
Long-term accrued dividends |
|
|
23,167 |
|
|
|
18,917 |
|
Accrued pension costs |
|
|
13,761 |
|
|
|
13,969 |
|
Other |
|
|
2,170 |
|
|
|
2,366 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,053,988 |
|
|
|
1,058,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, no par value; cumulative; redeemable;
designated 1.00 shares, issued and outstanding 1.00 shares
($100,000 aggregate liquidation value) |
|
|
93,687 |
|
|
|
93,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
Common stock, no par value; authorized 100,000 shares,
issued 47,534 shares and 47,530 shares, respectively |
|
|
453,987 |
|
|
|
453,824 |
|
Class A common stock, no par value; authorized 15,000 shares,
issued 7,332 shares |
|
|
15,321 |
|
|
|
15,321 |
|
Accumulated deficit |
|
|
(312,992 |
) |
|
|
(303,698 |
) |
Accumulated other comprehensive loss, net of income tax |
|
|
(5,663 |
) |
|
|
(9,314 |
) |
|
|
|
|
|
|
|
|
|
|
150,653 |
|
|
|
156,133 |
|
Treasury stock at cost, common stock, 4,655 shares |
|
|
(40,115 |
) |
|
|
(40,115 |
) |
Treasury stock at cost, Class A common stock, 1,579 shares |
|
|
(22,398 |
) |
|
|
(22,398 |
) |
|
|
|
|
|
|
|
Total stockholders equity |
|
|
88,140 |
|
|
|
93,620 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
1,235,815 |
|
|
$ |
1,245,739 |
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
F-36
GRAY TELEVISION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except for per share data)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Revenues (less agency commissions) |
|
$ |
70,482 |
|
|
$ |
61,354 |
|
Operating expenses before depreciation, amortization
and gain on disposal of assets, net: |
|
|
|
|
|
|
|
|
Broadcast |
|
|
47,567 |
|
|
|
45,654 |
|
Corporate and administrative |
|
|
2,922 |
|
|
|
4,046 |
|
Depreciation |
|
|
7,975 |
|
|
|
8,261 |
|
Amortization of intangible assets |
|
|
122 |
|
|
|
149 |
|
Gain on disposal of assets, net |
|
|
(44 |
) |
|
|
(1,522 |
) |
|
|
|
|
|
|
|
|
|
|
58,542 |
|
|
|
56,588 |
|
|
|
|
|
|
|
|
Operating income |
|
|
11,940 |
|
|
|
4,766 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
Miscellaneous income, net |
|
|
39 |
|
|
|
12 |
|
Interest expense |
|
|
(19,611 |
) |
|
|
(10,113 |
) |
Loss from early extinguishment of debt |
|
|
(349 |
) |
|
|
(8,352 |
) |
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(7,981 |
) |
|
|
(13,687 |
) |
Income tax benefit |
|
|
(3,238 |
) |
|
|
(4,767 |
) |
|
|
|
|
|
|
|
Net loss |
|
|
(4,743 |
) |
|
|
(8,920 |
) |
Preferred dividends (includes accretion of issuance cost
of $301 and $301, respectively) |
|
|
4,551 |
|
|
|
4,051 |
|
|
|
|
|
|
|
|
Net loss available to common stockholders |
|
$ |
(9,294 |
) |
|
$ |
(12,971 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted per share information: |
|
|
|
|
|
|
|
|
Net loss available to common stockholders |
|
$ |
(0.19 |
) |
|
$ |
(0.27 |
) |
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
48,565 |
|
|
|
48,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
F-37
GRAY TELEVISION, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (Unaudited)
(in thousands,
except for number of shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Class A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
Common |
|
|
Other |
|
|
|
|
|
|
Common Stock |
|
|
Common Stock |
|
|
Accumulated |
|
|
Treasury Stock |
|
|
Treasury Stock |
|
|
Comprehensive |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Deficit |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Loss |
|
|
Total |
|
Balance at December 31,
2009 |
|
|
7,331,574 |
|
|
$ |
15,321 |
|
|
|
47,529,502 |
|
|
$ |
453,824 |
|
|
$ |
(303,698 |
) |
|
|
(1,578,554 |
) |
|
$ |
(22,398 |
) |
|
|
(4,654,750 |
) |
|
$ |
(40,115 |
) |
|
$ |
(9,314 |
) |
|
$ |
93,620 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,743 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on derivatives, net
of
income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,651 |
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,092 |
) |
Preferred stock dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,551 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,551 |
) |
Issuance of common stock:
401(k) plan |
|
|
|
|
|
|
|
|
|
|
4,805 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8 |
|
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2010 |
|
|
7,331,574 |
|
|
$ |
15,321 |
|
|
|
47,534,307 |
|
|
$ |
453,987 |
|
|
$ |
(312,992 |
) |
|
|
(1,578,554 |
) |
|
$ |
(22,398 |
) |
|
|
(4,654,750 |
) |
|
$ |
(40,115 |
) |
|
$ |
(5,663 |
) |
|
$ |
88,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
F-38
GRAY TELEVISION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Operating activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(4,743 |
) |
|
$ |
(8,920 |
) |
Adjustments to reconcile net loss to net cash |
|
|
|
|
|
|
|
|
provided by (used in) operating activities |
|
|
|
|
|
|
|
|
Depreciation |
|
|
7,975 |
|
|
|
8,261 |
|
Amortization of intangible assets |
|
|
122 |
|
|
|
149 |
|
Amortization of deferred loan costs |
|
|
81 |
|
|
|
119 |
|
Amortization of restricted stock awards |
|
|
58 |
|
|
|
61 |
|
Amortization of stock option awards |
|
|
97 |
|
|
|
292 |
|
Write-off loan acquisition costs from early
extinguishment of debt |
|
|
349 |
|
|
|
8,352 |
|
Accrual of long-term facility fee |
|
|
5,938 |
|
|
|
|
|
Amortization of program broadcast rights |
|
|
3,853 |
|
|
|
3,770 |
|
Payments on program broadcast obligations |
|
|
(3,875 |
) |
|
|
(3,856 |
) |
Common stock contributed to 401(k) plan |
|
|
7 |
|
|
|
127 |
|
Deferred income taxes |
|
|
(3,458 |
) |
|
|
(4,718 |
) |
Gain on disposal of assets, net |
|
|
(44 |
) |
|
|
(1,522 |
) |
Pension expense net of contributions |
|
|
(205 |
) |
|
|
703 |
|
Other |
|
|
(64 |
) |
|
|
(107 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Receivables and other current assets |
|
|
3,084 |
|
|
|
5,082 |
|
Accounts payable and other current liabilities |
|
|
(1,322 |
) |
|
|
(3,730 |
) |
Accrued interest |
|
|
(867 |
) |
|
|
(5,359 |
) |
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
6,986 |
|
|
|
(1,296 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(2,888 |
) |
|
|
(5,183 |
) |
Proceeds from asset sales |
|
|
11 |
|
|
|
9 |
|
Equipment transactions related to spectrum reallocation, net |
|
|
(106 |
) |
|
|
(48 |
) |
Payments on acquisition related liabilities |
|
|
(162 |
) |
|
|
(177 |
) |
Other |
|
|
(40 |
) |
|
|
(70 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(3,185 |
) |
|
|
(5,469 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
Repayments of borrowings on long-term debt |
|
|
(2,020 |
) |
|
|
(2,021 |
) |
Deferred loan costs |
|
|
(4,117 |
) |
|
|
(7,006 |
) |
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(6,137 |
) |
|
|
(9,027 |
) |
|
|
|
|
|
|
|
Net decrease in cash |
|
|
(2,336 |
) |
|
|
(15,792 |
) |
Cash at beginning of period |
|
|
16,000 |
|
|
|
30,649 |
|
|
|
|
|
|
|
|
Cash at end of period |
|
$ |
13,664 |
|
|
$ |
14,857 |
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
F-39
GRAY TELEVISION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Basis of Presentation
The accompanying condensed consolidated balance sheet as of December 31, 2009, which was
derived from the audited financial statements as of December 31, 2009 of Gray Television, Inc.
(we, us, our, Gray or the Company) and our accompanying unaudited condensed consolidated
financial statements as of and for the period ended March 31, 2010 have been prepared in accordance
with accounting principles generally accepted in the United States of America (U.S. GAAP) for
interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, such financial statements do not include all of the information and footnotes required by U.S. GAAP
for complete financial statements. In our opinion, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair statement have been included. Our operations consist of
one reportable segment. For further information, refer to the consolidated financial statements and
footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2009
(the 2009 Form 10-K). Operating results for the three month period ended March 31, 2010 are not
necessarily indicative of the results that may be expected for any future interim period or for the
year ending December 31, 2010.
Seasonality
Broadcast advertising revenues are generally highest in the second and fourth quarters each
year, due in part to increases in advertising in the spring and in the period leading up to and
including the holiday season. In addition, broadcast advertising revenues are generally higher
during even numbered years due to increased spending by political candidates and special interest
groups in advance of upcoming elections, which spending typically is heaviest during the fourth
quarter of such years.
Earnings Per Share
We compute basic earnings per share by dividing net income by the weighted-average number of
common shares outstanding during the relevant period. The weighted-average number of common shares
outstanding does not include unvested restricted shares. These shares, although classified as
issued and outstanding, are considered contingently returnable until the restrictions lapse and are
not included in the basic earnings per share calculation until the shares are vested. Diluted
earnings per share is computed by including all potentially dilutive common shares issuable,
including restricted stock and stock options in the diluted weighted-average shares outstanding
calculation. The following table reconciles basic weighted-average shares outstanding to diluted
weighted-average shares outstanding for the three month periods ended March 31, 2010 and 2009 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding-basic |
|
|
48,565 |
|
|
|
48,489 |
|
Stock options and restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding-diluted |
|
|
48,565 |
|
|
|
48,489 |
|
|
|
|
|
|
|
|
|
|
F-40
1. Basis of Presentation (Continued)
Earnings Per Share (Continued)
For periods in which we reported losses, all potentially dilutive common shares are excluded
from the computation of diluted earnings per share, since their inclusion would be antidilutive.
Securities that could potentially dilute earnings per share in the future, but which were not
included in the calculation of diluted earnings per share because their inclusion would have been
antidilutive for the periods presented are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
Potentially dilutive common shares outstanding
at end of period: |
|
|
|
|
|
|
|
|
Employee stock options |
|
|
1,383 |
|
|
|
1,939 |
|
Unvested restricted stock |
|
|
66 |
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,449 |
|
|
|
2,039 |
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
Our accumulated other comprehensive loss balances as of March 31, 2010 and December 31, 2009
consist of adjustments to our derivative liability as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Accumulated balances of items included in accumulated
other comprehensive loss: |
|
|
|
|
|
|
|
|
Loss on derivatives, net of income tax |
|
$ |
(219 |
) |
|
$ |
(3,870 |
) |
Pension liability adjustments, net of income tax |
|
|
(5,444 |
) |
|
|
(5,444 |
) |
|
|
|
|
|
|
|
Accumulated other comprehensive loss |
|
$ |
(5,663 |
) |
|
$ |
(9,314 |
) |
|
|
|
|
|
|
|
F-41
1. Basis of Presentation (Continued)
Property and Equipment
Property and equipment are carried at cost. Depreciation is computed principally by the
straight-line method. Buildings, towers, improvements and equipment are generally depreciated over
estimated useful lives of approximately 35 years, 20 years, 10 years and 5 years, respectively.
Maintenance, repairs and minor replacements are charged to operations as incurred; and major
replacements and betterments are capitalized. The cost of any assets sold or retired and the
related accumulated depreciation are removed from the accounts at the time of disposition, and any
resulting profit or loss is reflected in income or expense for the period. The following table
lists components of property and equipment by major category (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Property and equipment: |
|
|
|
|
|
|
|
|
Land |
|
$ |
23,052 |
|
|
$ |
23,046 |
|
Buildings and improvements |
|
|
51,599 |
|
|
|
51,606 |
|
Equipment |
|
|
293,337 |
|
|
|
291,682 |
|
|
|
|
|
|
|
|
|
|
|
367,988 |
|
|
|
366,334 |
|
Accumulated depreciation |
|
|
(224,792 |
) |
|
|
(218,242 |
) |
|
|
|
|
|
|
|
Total property and equipment, net |
|
$ |
143,196 |
|
|
$ |
148,092 |
|
|
|
|
|
|
|
|
Recent Accounting Pronouncements
The following accounting pronouncements were recently issued by the Financial Accounting
Standards Board (FASB) and we consider them relevant to our operations and the preparation of our
financial reports.
In February 2010, the FASB issued FASB Accounting Standards Update 2010-09, Subsequent Events
(Topic 855): Amendments to Certain Recognition and Disclosure Requirements. Topic 855 removes the
requirement for a U.S. Securities and Exchange Commission (SEC) filer to disclose a date in both
issued and revised financial statements. Revised financial statements include financial statements
revised as a result of either correction of an error or retrospective application of U.S. GAAP.
This update was effective upon issuance for Gray. Our adoption of this update did not have a
significant impact upon our financial statements.
In January 2010, the FASB issued FASB Accounting Standards Update 2010-06, Fair Value
Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This
update provides amendments to Topic 820 that will provide for more robust disclosures about the (1)
different classes of assets and liabilities measured at fair value, (2) valuation techniques and
inputs used, (3) activity in Level 3 fair value measurements, and (4) transfers between Levels 1,
2, and 3. This update is effective for interim and annual reporting periods beginning after
December 15, 2009 and we adopted this update on January 1, 2010. Our adoption of this update did
not have a significant impact upon our financial statements.
F-42
2. Long-term Debt and Accrued Facility Fee
Long-term debt consists of our senior credit facility as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Long-term debt: |
|
|
|
|
|
|
|
|
Senior credit facility current portion |
|
$ |
8,080 |
|
|
$ |
8,080 |
|
Senior credit facility long-term portion |
|
|
781,709 |
|
|
|
783,729 |
|
|
|
|
|
|
|
|
Total long-term debt including current portion |
|
|
789,789 |
|
|
|
791,809 |
|
Long-term accrued facility fee |
|
|
24,245 |
|
|
|
18,307 |
|
|
|
|
|
|
|
|
Total long-term debt and accrued facility fee |
|
$ |
814,034 |
|
|
$ |
810,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing
availability under our senior credit facility |
|
$ |
40,000 |
|
|
$ |
31,681 |
|
|
|
|
|
|
|
|
|
|
Leverage ratio as defined in our senior credit
facility: |
|
|
|
|
|
|
|
|
Actual |
|
|
8.43 |
|
|
|
8.42 |
|
Maximum allowed |
|
|
9.00 |
|
|
|
8.75 |
|
Excluding accrued interest, the amounts outstanding under our senior credit facility as
of March 31, 2010 and December 31, 2009 consisted of our term loan and an accrued facility fee. The
revolving credit facility did not have an outstanding balance as of March 31, 2010 or December 31,
2009.
Amendment of Senior Credit Facility
Effective as of March 31, 2010, we amended our existing senior credit facility to provide for,
among other things: (i) an increase in the maximum total net leverage ratio covenant under the
senior credit facility through March 30, 2011 and (ii) a potential issuance of capital stock and/or
senior or subordinated debt securities, which could include securities with a second lien security
interest (the Replacement Debt). This amendment to the senior credit facility reduced the
revolving loan commitment under the senior credit facility from $50.0 million to $40.0 million.
Pursuant to this amendment, from March 31, 2010 until the date we completed an offering of
Replacement Debt resulting in the repayment of not less than $200.0 million of our term loan
outstanding under the senior credit facility, (i) we were required to pay an annual incentive fee
equal to 2.0%, which fee would be eliminated upon the consummation of such offering and repayment,
(ii) the annual facility fee remained at 3.0%, which fee, following such repayment, would be
reduced to 1.25% per year, with a potential for further reductions in future periods, and (iii) we
remained subject to a maximum total net leverage ratio, which ratio, following such repayment,
would be replaced by a first lien leverage test, as described in the following paragraph. In
addition, from and after such repayment, we would be required to comply with a minimum fixed charge
coverage ratio of 0.90x to 1.0x.
Upon the completion of an offering of Replacement Debt that results in the repayment of not
less than $200.0 million of our term loan outstanding under the senior credit facility, we are,
from the date of such repayment, subject to a maximum first lien leverage ratio covenant, which
replaces the current maximum total leverage ratio covenant. The covenant ranges from 7.5x to 6.5x,
depending upon the amount of any such repayment.
The use of proceeds from any issuance of Replacement Debt is generally limited to the
repayment of amounts outstanding under the term loan under the senior credit facility and, in
certain circumstances, to the repurchase of outstanding shares of our Series D Perpetual Preferred
Stock.
Beginning April 30, 2010 and thereafter, all interest and fees accrued under the senior credit
facility are payable in cash upon their respective due dates, with no portion of such accrued
interest and fees being subject to deferral.
F-43
2. Long-term Debt and Accrued Facility Fee (Continued)
Amendment of Senior Credit Facility (Continued)
A summary of certain significant terms contained in our senior credit facility (i) before the
March 31, 2010 amendment, (ii) as so amended, and (iii) as amended and after giving effect to a
potential issuance of Replacement Debt and repayment of at least $200.0 million of term loans under
the senior credit facility is as follows:
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As Amended and |
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As Amended and |
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Prior to the |
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After Giving Effect to |
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Issuance of |
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the Issuance of |
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Replacement |
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Replacement Debt |
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Debt and Related |
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and Related |
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Prior to Amendment |
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Repayment of |
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Repayment of |
Description |
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on March 31, 2010 |
|
Term Loan |
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Term Loan |
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|
Annual interest rate on outstanding |
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|
term loan balance |
|
LIBOR plus 3.50% |
|
Same |
|
Same |
|
|
or BASE plus 2.50% |
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|
Annual interest rate on outstanding |
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|
revolving loan balance |
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LIBOR plus 3.50% |
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Same |
|
Same |
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|
or BASE plus 2.50% |
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Annual facility fee rate |
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3.00% with |
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3.00% with |
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1.25% with |
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a potential for |
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a potential for |
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a potential for |
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reduction in |
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reduction in |
|
reduction in |
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|
future periods. |
|
future periods. |
|
future periods. |
Annual incentive fee rate |
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None |
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2.00 |
% |
|
None |
Annual commitment fee on undrawn |
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|
revolving loan balance |
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0.50 |
% |
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Same |
|
Same |
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|
Revolving loan commitment |
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$50 million |
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$40 million |
|
$40 million |
Maximum total net leverage ratio at: |
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March 31, 2010 through |
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June 29, 2010 |
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7.00x |
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9.00x |
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Replaced with |
June 30, 2010 through |
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a first lien |
September 29, 2010 |
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6.50x |
|
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9.50x |
|
|
leverage test |
September 30, 2010 through |
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|
|
as described above. |
March 30, 2011 |
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6.50x |
|
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9.75x |
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|
March 31, 2011 and thereafter |
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6.50x |
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6.50x |
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|
Minimum fixed charge coverage ratio |
|
None |
|
Same |
|
0.90x to 1.00x |
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum cash balance that can be
deducted from total debt to calculate
net debt in the total net leverage ratio
(or first lien leverage test, as
applicable) |
|
$10.0 million |
|
Same |
|
$15.0 million |
F-44
2. Long-term Debt and Accrued Facility Fee (Continued)
Amendment of Senior Credit Facility (Continued)
In order to obtain the March 31, 2010 amendment, we incurred loan issuance costs of
approximately $4.4 million, including legal and professional fees. We recorded a loss from early
extinguishment of debt of $0.3 million for the three month period ended March 31, 2010. As of
March 31, 2010, we had a deferred loan cost balance of $5.6 million and we were in compliance with
all covenants under the senior credit facility.
On April 29, 2010, we completed the issuance of $365 million of our 101/2% senior secured second
lien notes due 2015 (the Notes), which Notes met the definition of Replacement Debt. We used
the net proceeds from the sale of the Notes to, among other things, repay $300.0 million of
outstanding term loans under our senior credit facility. See Note 11. Subsequent Events.
3. Derivatives
Risk Management Objective of Using Derivatives
We are exposed to certain risks arising from business operations and economic conditions. We
attempt to manage our exposure to a wide variety of business and operational risks principally
through management of our core business activities. We attempt to manage economic risk, including
interest rate, liquidity, and credit risk, primarily by managing the amount, sources and duration
of our debt financing and the use of interest rate swap agreements. Specifically, we enter into
interest rate swap agreements to manage interest rate exposure with the following objectives:
|
|
|
managing current and forecasted interest rate risk while maintaining financial
flexibility and solvency; |
|
|
|
|
proactively managing our cost of capital to ensure that we can effectively manage
operations and execute our business strategy, thereby maintaining a competitive
advantage and enhancing shareholder value; and |
|
|
|
|
complying with applicable covenant requirements and restrictions. |
Cash Flow Hedges of Interest Rate Risk
In using interest rate derivatives, our objectives are to add stability to interest expense
and to manage our exposure to interest rate movements. To accomplish these objectives, we primarily
use interest rate swap agreements as part of our interest rate risk management strategy. Interest
rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a
counterparty in exchange for our making fixed-rate payments over the life of the applicable
agreement, without exchange of the underlying notional amount. Under the terms of our senior credit
facility, we were required to fix the interest rate on at least 50.0% of the outstanding balance
thereunder through March 19, 2010. From and after such date, we are no longer required to fix
interest rates on any amounts outstanding thereunder.
During 2007, we entered into three swap agreements to convert $465.0 million of our variable
rate debt under our senior credit facility to fixed rate debt. These interest rate swap agreements
expired on April 3, 2010, and they were our only derivatives as of March 31, 2010 and December 31,
2009. Upon entering into the swap agreements, we designated them as hedges of variability of our
variable rate interest payments attributable to changes in three month London Interbank Offered
Rate (LIBOR), the designated interest rate. Therefore, these interest rate swap agreements were,
prior to their respective expiration dates, considered cash flow hedges.
F-45
3. Derivatives (Continued)
Cash Flow Hedges of Interest Rate Risk (Continued)
Upon entering into a swap agreement, we document our hedging relationships and our risk
management objectives. Our swap agreements do not include written options. Our swap agreements are
intended solely to modify the payments for a recognized liability from a variable rate to a fixed
rate. Our swap agreements do not qualify for the short-cut method of accounting because the
variable rate debt being hedged is pre-payable.
Hedge effectiveness is evaluated at the end of each quarter. We compare the notional amount,
the variable interest rate and the settlement dates of the interest rate swap agreements to the
hedged portion of the debt. Historically, our swap agreements have been highly effective at hedging
our interest rate exposure, although no assurances can be provided that they will continue to be
effective for future periods.
During the period of each interest rate swap agreement, we recognize the swap agreements at
their fair value as an asset or liability on our balance sheet. The effective portion of the change
in the fair value of our interest rate swap agreements is recorded in accumulated other
comprehensive income (loss). The ineffective portion of the change in fair value of the derivatives
is recognized directly in earnings.
Amounts reported in accumulated other comprehensive income (loss) related to derivatives will
be reclassified to interest expense as the related interest payments are made on our variable rate
debt. We estimate that an additional $360,000 will be reclassified as an increase in interest
expense and a decrease in other comprehensive income (loss) between April 1, 2010 and April 3,
2010.
Under these swap agreements, we receive variable rate interest at the LIBOR and pay fixed
interest at an annual rate of 5.48%. The variable LIBOR is reset in three month periods under the
swap agreements. At our option, the variable LIBOR is reset in one month or three month periods for
the hedged portion of our variable rate debt.
The table below presents the fair value of our interest rate swap agreements as well as their
classification on our balance sheet as of March 31, 2010 and December 31, 2009. These interest
rate swap agreements are our only derivative financial instruments. We did not have any derivatives
classified as assets as of March 31, 2010 or December 31, 2009. The fair values of the derivative
instruments are estimated by obtaining quotations from the financial institutions that are
counterparties to the instruments. The fair values are estimates of the net amount that we would
have been required to pay on March 31, 2010 and December 31, 2009 if the agreements were
transferred to other parties or cancelled on such dates. Amounts in the following table are in
thousands.
Fair Values of Derivative Instruments
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2010 |
|
As of December 31, 2009 |
|
|
Balance Sheet |
|
Fair |
|
Balance Sheet |
|
Fair |
|
|
Location |
|
Value |
|
Location |
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as hedging
instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements |
|
Current liabilities |
|
$ |
360 |
|
|
Current liabilities |
|
$ |
6,344 |
|
F-46
3. Derivatives (Continued)
Cash Flow Hedges of Interest Rate Risk (Continued)
The following table presents the effect of our derivative financial instruments on our
consolidated statements of operations for the three months ended March 31, 2010 and 2009 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Hedging |
|
|
|
Relationships for the Three |
|
|
|
Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Interest rate swap agreements: |
|
|
|
|
|
|
|
|
Liability at beginning of period |
|
$ |
(6,344 |
) |
|
$ |
(24,611 |
) |
|
|
|
|
|
|
|
|
|
Effective portion of gains recognized in
other comprehensive loss |
|
|
12,093 |
|
|
|
5,777 |
|
|
|
|
|
|
|
|
|
|
Effective portion of losses recorded in accumulated other
comprehensive loss and reclassified into interest expense |
|
|
(6,109 |
) |
|
|
(1,617 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability at end of period |
|
$ |
(360 |
) |
|
$ |
(20,451 |
) |
|
|
|
|
|
|
|
For the three months ended March 31, 2010, we recorded income on derivatives as other
comprehensive income of $3.7 million, net of a $2.3 million income tax expense. For the three
months ended March 31, 2009, we recorded income on derivatives as other comprehensive income of
$2.5 million, net of a $1.6 million income tax benefit.
Credit-risk Related Contingent Features
We manage our counterparty risk by entering into derivative instruments with global financial
institutions that we believe present a low risk of credit loss resulting from nonperformance. As
of March 31, 2010 and December 31, 2009, we had not recorded a credit value adjustment related to
our interest rate swap agreements.
Our interest rate swap agreements incorporate the covenant provisions of our senior credit
facility. Failure to comply with the covenant provisions of the senior credit facility could
result in our being in default of our obligations under our interest rate swap agreements.
4. Fair Value Measurement
Fair value is the price that market participants would pay or receive to sell an asset or paid
to transfer a liability in an orderly transaction. Fair value is also considered the exit price. We
utilize market data or assumptions that market participants would use in pricing an asset or
liability, including assumptions about risk and the risks inherent in the inputs to the valuation
technique. These inputs can be readily observable, market corroborated or generally unobservable.
We utilize valuation techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs. These inputs are prioritized into a hierarchy that gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and
the lowest priority to unobservable inputs that require assumptions to measure fair value (Level
3).
F-47
4. Fair Value Measurement (Continued)
Recurring Fair Value Measurements
Financial assets and liabilities are classified in their entirety based on the lowest level of
input that is significant to the fair value measurement. Our assessment of the significance of a
particular input to the fair value measurement requires judgment and may affect the fair value of
assets and liabilities and their placement within the fair value hierarchy levels. The following
table sets forth our financial agreements, which were accounted for at fair value, by level within
the fair value hierarchy as of March 31, 2010 and December 31, 2009 (in thousands):
Recurring Fair Value Measurements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2010 |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements |
|
$ |
|
|
|
$ |
360 |
|
|
$ |
|
|
|
$ |
360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements |
|
$ |
|
|
|
$ |
6,344 |
|
|
$ |
|
|
|
$ |
6,344 |
|
Fair value of our interest rate swap agreements is based on estimates provided by the
counterparties. Valuation of these items does entail a significant amount of judgment.
Non-Recurring Fair Value Measurements
We have certain assets that are measured at fair value on a non-recurring basis and are
adjusted to fair value only when the carrying values exceed their fair values. Included in the
following table are the significant categories of assets measured at fair value on a non-recurring
basis as of March 31, 2010 and December 31, 2009 and any impairment charges recorded for those
assets in the three months ended March 31, 2010 and 2009 (in thousands).
Non-Recurring Fair Value Measurements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment Loss for the |
|
|
|
As of March 31, 2010 |
|
|
Three
Months Ended March 31, |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
2010 |
|
|
2009 |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
|
|
|
$ |
|
|
|
$ |
143,196 |
|
|
$ |
143,196 |
|
|
$ |
|
|
|
$ |
|
|
Program broadcast rights |
|
|
|
|
|
|
|
|
|
|
7,763 |
|
|
|
7,763 |
|
|
|
69 |
|
|
|
52 |
|
Investment in broadcasting
company |
|
|
|
|
|
|
|
|
|
|
13,599 |
|
|
|
13,599 |
|
|
|
|
|
|
|
|
|
Broadcast licenses |
|
|
|
|
|
|
|
|
|
|
818,981 |
|
|
|
818,981 |
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
170,522 |
|
|
|
170,522 |
|
|
|
|
|
|
|
|
|
Other intangible assets, net |
|
|
|
|
|
|
|
|
|
|
1,194 |
|
|
|
1,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
1,155,255 |
|
|
$ |
1,155,255 |
|
|
$ |
69 |
|
|
$ |
52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-48
4. Fair Value Measurement (Continued)
Non-Recurring Fair Value Measurements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
|
|
|
$ |
|
|
|
$ |
148,092 |
|
|
$ |
148,092 |
|
Program broadcast rights |
|
|
|
|
|
|
|
|
|
|
11,265 |
|
|
|
11,265 |
|
Investment in broadcasting
company |
|
|
|
|
|
|
|
|
|
|
13,599 |
|
|
|
13,599 |
|
Broadcast licenses |
|
|
|
|
|
|
|
|
|
|
818,981 |
|
|
|
818,981 |
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
170,522 |
|
|
|
170,522 |
|
Other intangible assets, net |
|
|
|
|
|
|
|
|
|
|
1,316 |
|
|
|
1,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
1,163,775 |
|
|
$ |
1,163,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of our property and equipment is estimated by our engineers. Fair value of
our program broadcast rights is based upon estimated future advertising revenue expected to be
generated by the programming. Fair value of our investment in broadcasting company is based upon
estimated future cash flows. Fair value of broadcast licenses, goodwill and other intangible
assets, net, are subjected to impairment testing. Our program broadcast rights impairment charges
were recorded as a broadcast operating expense in the respective periods.
Fair Value of Other Financial Instruments
The estimated fair value of other financial instruments is determined using the best available
market information and appropriate valuation methodologies. Interpreting market data to develop
fair value estimates involves considerable judgment. Accordingly, the estimates presented are not
necessarily indicative of the amounts that we could realize in a current market exchange, or the
value that ultimately will be realized upon maturity or disposition. The use of different market
assumptions may have a material effect on the estimated fair value amounts.
The carrying amounts of the following instruments approximate fair value, due to their short
term to maturity: (i) accounts receivable, (ii) prepaid and other current assets, (iii) accounts
payable, (iv) accrued employee compensation and benefits, (v) accrued interest, (vi) other accrued
expenses, (vii) dividends payable, (viii) acquisition-related liabilities and (ix) deferred
revenue.
The carrying amount of our long-term debt, including the current portion and long-term accrued
facility fee, was $814.0 million and $810.1 million, respectively, and the fair value was $786.6
million and $704.8 million, respectively as of March 31, 2010 and December 31, 2009. Fair value of
our long-term debt, including the current portion and long-term accrued facility fee, is based on
estimates provided by third party financial professionals as of March 31, 2010 and December 31,
2009.
5. Preferred Stock
As of March 31, 2010 and December 31, 2009, we had 1,000 shares of Series D Perpetual
Preferred Stock outstanding. The Series D Perpetual Preferred Stock has a liquidation value of
$100,000 per share, for a total liquidation value of $100.0 million as of March 31, 2010 and
December 31, 2009 and a recorded value of $93.7 million and $93.4 million as of March 31, 2010 and
December 31, 2009, respectively. The difference between the liquidation values and the recorded
values was the unaccreted portion of the original issuance discount and issuance
cost. Our accrued Series D Perpetual Preferred Stock dividend balances as of March 31, 2010
and December 31, 2009 were $23.2 million and $18.9 million, respectively.
F-49
5. Preferred Stock (Continued)
We have deferred the cash payment of dividends on our Series D Perpetual Preferred Stock since
October 1, 2008. When three consecutive cash dividend payments with respect to the Series D
Perpetual Preferred Stock remain unfunded, the dividend rate increases from 15.0% per annum to
17.0% per annum. Thus, our Series D Perpetual Preferred Stock dividend began accruing at 17.0% per
annum on July 16, 2009 and will accrue at that rate as long as at least three consecutive cash
dividend payments remain unfunded.
While any Series D Perpetual Preferred Stock dividend payments are in arrears, we are
prohibited from repurchasing, declaring and/or paying any cash dividend with respect to any equity
securities having liquidation preferences equivalent to or junior in ranking to the liquidation
preferences of the Series D Perpetual Preferred Stock, including our common stock and Class A
common stock. We can provide no assurances as to when any future cash payments will be made on any
accumulated and unpaid Series D Perpetual Preferred Stock dividends presently in arrears or that
become in arrears in the future.
On
April 29, 2010, we completed the repurchase of approximately $60.7 million in face amount,
and $14.9 million in accrued dividends, of our Series D Perpetual Preferred Stock in exchange for
$50.0 million in cash, using proceeds from the offering of Notes, and the issuance $8.5 million
shares of our common stock. See Note 11. Subsequent Events.
6. Retirement Plans
The following table provides the components of net periodic benefit cost for our pension plans
for the three- month periods ended March 31, 2010 and 2009, respectively (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
884 |
|
|
$ |
776 |
|
Interest cost |
|
|
640 |
|
|
|
550 |
|
Expected return on plan assets |
|
|
(478 |
) |
|
|
(501 |
) |
Loss amortization |
|
|
249 |
|
|
|
103 |
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
1,295 |
|
|
$ |
928 |
|
|
|
|
|
|
|
|
During the three months ended March 31, 2010, we contributed $1.5 million to our pension
plans. During the remainder of fiscal 2010, we expect to contribute an additional $2.5 million to
our pension plans.
7. Stock-based Compensation
We recognize compensation expense for stock-based payment awards made to our employees and
directors, including stock options and restricted shares under our 2007 Long-Term Incentive Plan
and our Directors Restricted Stock Plan. The following table provides our stock-based
compensation expense and related income tax benefit for the three month periods ended March 31,
2010 and 2009, respectively (in thousands).
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Stock-based compensation expense, gross |
|
$ |
155 |
|
|
$ |
353 |
|
Income tax benefit at our statutory rate associated
with stock-based compensation |
|
|
(60 |
) |
|
|
(124 |
) |
|
|
|
|
|
|
|
Stock-based compensation expense, net |
|
$ |
95 |
|
|
$ |
229 |
|
|
|
|
|
|
|
|
F-50
7. Stock-based Compensation (Continued)
Long-term Incentive Plan
During the three month periods ended March 31, 2010 and 2009, we did not grant any stock
options to our employees or directors. A summary of stock option activity related to our common
stock for the three month periods ended March 31, 2010 and 2009 is as follows (option amounts in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, 2010 |
|
March 31, 2009 |
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Average |
|
|
|
|
|
Average |
|
|
Options |
|
Exercise Price |
|
Options |
|
Exercise Price |
Common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options outstanding
beginning of period |
|
|
1,476 |
|
|
$ |
8.28 |
|
|
|
1,949 |
|
|
$ |
8.31 |
|
Options granted |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
Options exercised |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
Options expired |
|
|
(34 |
) |
|
$ |
12.78 |
|
|
|
(2 |
) |
|
$ |
12.41 |
|
Options forfeited |
|
|
(59 |
) |
|
$ |
11.38 |
|
|
|
(8 |
) |
|
$ |
7.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options outstanding
end of period |
|
|
1,383 |
|
|
$ |
8.04 |
|
|
|
1,939 |
|
|
$ |
8.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of period |
|
|
1,338 |
|
|
$ |
8.20 |
|
|
|
655 |
|
|
$ |
9.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average fair value of
options granted during the period |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
For the three month period ended March 31, 2010, we did not have any options outstanding
for our Class A common stock. As of March 31, 2010, options to acquire 10,000 shares of our
outstanding common stock had a per-share exercise price lower than
the per-share market price of
our common stock and, as of that date, those options had a combined intrinsic value of $2,000.
Directors Restricted Stock Plan
During the three month periods ended March 31, 2010 and 2009, we did not grant any shares of
restricted stock to our directors. The unearned compensation associated with prior grants of our
restricted common stock is being amortized as an expense over the vesting period of the restricted
common stock. The total amount of unearned compensation is equal to the market value of the shares
at the date of grant.
The following table summarizes our non-vested restricted shares during the three month period
ended March 31, 2010 (shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Number of |
|
Average |
|
|
Shares |
|
Fair Value |
Restricted Stock: |
|
|
|
|
|
|
|
|
Non-vested common restricted shares, December 31, 2009 |
|
|
66 |
|
|
$ |
6.64 |
|
Granted |
|
|
|
|
|
$ |
|
|
Vested |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Non-vested common restricted shares, March 31, 2010 |
|
|
66 |
|
|
$ |
6.64 |
|
|
|
|
|
|
|
|
|
|
F-51
8. Commitments and Contingencies
Legal Proceedings and Claims
We are subject to legal proceedings and claims that arise in the normal course of our
business. In our opinion, the amount of ultimate liability, if any, with respect to these actions,
will not materially affect our financial position.
Sports Marketing Agreement
On October 12, 2004, the University of Kentucky (UK) awarded a sports marketing agreement
jointly to us and IMG Worldwide, Inc. (IMG) (the UK Agreement). The UK Agreement
commenced on April 16, 2005 and has an initial term of seven years with the option to extend for
three additional years.
On July 1, 2006, the terms of the agreement between IMG and us were amended. As amended, the
UK Agreement provides that we will share in profits in excess of certain amounts specified by the
agreement, if any, but not losses. The agreement also provides that we will separately retain all
local broadcast advertising revenue and pay all local broadcast expenses for activities under the
agreement. Under the amended agreement, IMG agreed to make all license fee payments to UK. However,
if IMG is unable to pay the license fee to UK, we will then be required to pay the unpaid portion
of the license fee to UK. As of March 31, 2010, the aggregate license fee to be paid by IMG to UK
over the remaining portion of the full ten-year term (including the optional three year extension)
of the agreement is approximately $45.4 million. If we make advances on behalf of IMG, IMG is
required to reimburse us for the amount paid within 60 days after the close of each contract year,
which ends on June 30th. IMG has also agreed to pay interest on any advance at a rate equal to the
prime rate. During the three months ended March 31, 2010, we did not advance any amounts to UK on
behalf of IMG under this agreement. As of March 31, 2010, we do not consider the risk of
non-performance by IMG to be high.
9. Goodwill and Intangible Assets
Our intangible assets consist primarily of network affiliations and broadcast licenses. We
did not acquire any network affiliation agreements or broadcast
licenses and none of our network
affiliation agreements or broadcast licenses were renewed during the three month period ended March 31,
2010. Upon any renewal, we expense all related fees as incurred. There were no triggering events
that required a test of impairment of our intangible assets during the three month period ended
March 31, 2010. See Critical Accounting Policies included in the Managements Discussion and
Analysis of Financial Condition and Results of Operations section of this quarterly report.
10. Income Taxes
For the three month periods ended March 31, 2010 and 2009, our effective tax rates were 40.6%
and 34.8%, respectively. The effective tax rates differ from the statutory tax rate due to the
impact of the following items:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
Statutory federal income tax rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
State income taxes |
|
|
6.0 |
% |
|
|
0.9 |
% |
Reserve for uncertain tax positions |
|
|
(4.2 |
)% |
|
|
1.0 |
% |
Adjustments to valuation allowance of deferred tax assets |
|
|
2.2 |
% |
|
|
(1.6 |
)% |
Other |
|
|
1.6 |
% |
|
|
(0.5 |
)% |
|
|
|
|
|
|
|
Effective income tax rate |
|
|
40.6 |
% |
|
|
34.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit |
|
$ |
(3,238 |
) |
|
$ |
(4,767 |
) |
F-52
11. Subsequent Events
On April 29, 2010, we issued $365 million aggregate principal amount of Notes. The Notes were
priced at 98.085% of par, resulting in gross proceeds to the Company of $358.0 million. The Notes
mature on June 29, 2015. Interest accrues on the Notes from April 29, 2010, and interest is
payable semi-annually, on May 1 and November 1 of each year. The first interest payment date is
November 1, 2010. We may redeem some or all of the Notes at any time after November 1, 2012 at
specified redemption prices. We may also redeem up to 35% of the aggregate principal amount of the
Notes using the proceeds from certain equity offerings completed before November 1, 2012. In
addition, we may redeem some or all of the Notes at any time prior to November 1, 2012 at a price
equal to 100% of the principal amount thereof plus a make whole premium, and accrued and unpaid
interest. If we sell certain of our assets or experience specific kinds of changes of control, we
must offer to repurchase the Notes.
The Notes and the guarantees thereof are secured by a second priority lien on substantially
all of the assets owned by Gray and its subsidiary guarantors, including, among other things, all
present and future shares of capital stock, equipment, owned real property, leaseholds and
fixtures, in each case subject to certain exceptions and customary permitted liens (the Notes
Collateral). The Notes Collateral also secures obligations under our senior credit facility,
subject to certain exceptions and permitted liens.
On April 29, 2010, we used a portion of the net proceeds from the sale of Notes to repay
$300.0 million in principal amount of term loans outstanding under our senior credit facility, to
repay interest thereon and to repay certain fees due thereunder. As a result of the completion of
the offering of Notes and the related repayment of term loans, Gray is, from and after April 29,
2010, subject to and required to comply with the terms and conditions of its senior credit facility
as set out under the heading As Amended and After Giving Effect to the Issuance of Replacement
Debt and Related Repayment of the Term Loan in Note 2. Long-term Debt and Accrued Facility Fee in
these notes to condensed consolidated financial statements.
Also on April 29, 2010, we repurchased approximately $60.7 million in face amount of Series D
Perpetual Preferred Stock, and $14.9 million in accrued dividends thereon, in exchange for $50.0
million in cash, using net proceeds from the sale of Notes, and the issuance of 8.5 million shares
of common stock. As a result of the completion of this exchange, the liquidation value of
outstanding Series D Perpetual Preferred Stock was reduced to $39.3 million, and the accrued
dividends thereon were reduced to $9.6 million, each as of April 29, 2010.
F-53
(GRAY TELEVISION, INC. LOGO)
Gray Television, Inc.
Offer to Exchange up to $365,000,000
Aggregate Principal Amount of Newly
Issued 101/2% Senior Secured Second Lien Notes due 2015
For
a Like Principal Amount of Outstanding
Restricted 101/2% Senior Secured Second Lien Notes due 2015
Issued in April 2010
PROSPECTUS
, 2010
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Georgia Registrants
The Company and WVLT-TV, Inc. (together, the Georgia Registrants) are incorporated in
Georgia.
Section 14-2-851 of the Georgia Business Corporation Code (the GBCC) generally provides that
a corporation may indemnify a director (including a former director and including a director who is
or was serving at the corporations request as a director, officer, partner, trustee, employee or
agent of another foreign or domestic corporation, partnership, joint venture, trust, employee
benefit plan or other entity) against liability incurred: (i) in a civil proceeding (a) if, in the
case of conduct in such directors capacity as a director, the conduct was in good faith and
reasonably believed by such director to be in the best interests of the corporation, and (b) if, in
all other cases, the conduct was in good faith and was at least not opposed to the best interests
of the corporation; and (ii) in a criminal proceeding, if the director had no reasonable cause to
believe such conduct was unlawful. GBCC section 14-2-851(d) provides that a corporation may not
indemnify a director in connection with a proceeding by or in the right of the corporation, except
for reasonable expenses incurred in connection with the proceeding if it is determined that the
director has met the relevant standard of conduct under GBCC section 14-2-851, or in connection
with any proceeding with respect to conduct for which such director was adjudged liable on the
basis that personal benefit was improperly received by such director, whether or not involving
action in such directors capacity as a director.
GBCC section 14-2-852 generally provides for mandatory indemnification against reasonable
expenses incurred by a director who is wholly successful, on the merits or otherwise, in defending
an action to which the director was a party because he or she was a director of the corporation.
GBCC section 14-2-853 generally provides that a corporation may, under certain circumstances,
advance funds to pay for or reimburse the reasonable expenses incurred by a director who is a party
to a proceeding because he or she is a director of the corporation.
GBCC section 14-2-854 generally allows a court, upon application by a director, to order
indemnification and/or advancement of expenses if it determines that the director is entitled to
indemnification under the GBCC or it determines that indemnification is fair and reasonable even
if, among other things, the director has failed to meet the statutory standard of conduct provided
under GBCC section 14-2-851. However, the court may not order indemnification in excess of
reasonable expenses for liability to a corporation or for receipt of an improper benefit.
GBCC section 14-2-855 generally provides that a corporation may not indemnify a director under
GBCC section 14-2-851 unless authorized by GBCC section 14-2-851 and either (i) a committee of
disinterested directors, (ii) special legal counsel, or (iii) disinterested shareholders have
determined that indemnification is permitted in a specific proceeding because the director has met
the relevant standard of conduct.
GBCC section 14-2-856 generally permits a corporations articles of incorporation or bylaws or
a contract or a resolution approved or ratified by a corporations shareholders to authorize a
corporation to indemnify a director against claims to which the director was a party, including
claims by a corporation or in its right (e.g., shareholder derivative action). However, a
corporation may not indemnify the director for liability to the corporation or if the director is
subjected to injunctive relief in the corporations favor for (i) any misappropriation of the
corporations business opportunities, (ii) intentional misconduct or knowing violation of the law,
(iii) unlawful distributions or (iv) receipt of an improper benefit.
GBCC section 14-2-857 generally permits a corporation to indemnify an officer (including a
former officer and including an officer who is or was serving at our request as a director,
officer, partner, trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or other entity) to the same extent as a
director. A corporation may indemnify an officer who is not a director to a further extent by means
of the corporations articles of incorporation, bylaws, board resolutions, or by contract. However,
a corporation may not indemnify an officer for liability arising from conduct involving
misappropriation of the corporations business opportunity, intentional misconduct or knowing
violation of the law, unlawful
II-1
distributions, or receipt of an improper benefit. An officer who is not a director is also
entitled to mandatory indemnification and may apply for court-ordered indemnification.
GBCC section 14-2-858 generally permits a corporation to purchase and maintain insurance on
behalf of its directors and officers against liability incurred by them in their capacities or
arising out of their status as our directors and officers, regardless of whether the corporation
would have the power to indemnify or advance expenses to the director or officer for the same
liability under the GBCC.
Article 7 of the Companys Articles of Incorporation generally provides that the liability of
each director to the Corporation or its shareholders for monetary damages for breach of duty of
care or other duty as a director shall be eliminated or limited to the fullest extent permitted by
applicable law.
Article XIV of the Companys Bylaws generally provides for indemnification of and advancement
of expenses to directors and officers to the fullest extent permitted by applicable law. Article
XIV also provides that indemnification and advancement of expenses shall continue as to a person
who has ceased to be a director, trustee, officer, employee or agent and shall inure to the benefit
of the heirs, executors and administrators of such person.
Article VII of WVLT-TV, Inc.s Articles of Incorporation generally provide that director
liability shall be eliminated or limited to the full extent permitted by the GBCC.
Article XIV of WVLT-TV, Inc.s Bylaws generally provides for indemnification of directors and
officers under similar terms as the bylaws of the Company.
Delaware Registrant
Gray Television Group, Inc. (GTG) is incorporated in Delaware.
With respect to indemnification of officers and directors, DGCL section 145 provides that a
corporation will have power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Under this provision of the DGCL, the
termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, will not, of itself, create a presumption that the
person did not act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Furthermore, the DGCL provides that a corporation will have power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in its favor by reason
of the fact that he is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against expenses (including
attorneys fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, except that no indemnification
will be made in respect to any claim, issue or matter as to which such person will have been
adjudged to be liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the Court of Chancery or the court in which such
action or suit was brought will determine upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such court will deem proper.
Article IX of GTGs Certificate of Incorporation generally provides that the corporation shall
indemnify and advance expenses to the fullest extent provided by DGCL section 145 all individuals
that it shall have power to indemnify. GTGs certificate of incorporation further states that
indemnification and advancement of expenses shall not be exclusive of any other remedies that an
indemnified individual may have.
II-2
Article XI of GTGs Certificate of Incorporation generally provides that, to the fullest
extent permitted by the DGCL, no director shall be liable personally liable to the corporation or
its stockholders for monetary damages for a breach of fiduciary duty as a director.
Nevada Registrant
Gray Television Licensee, LLC (Gray Licensee) is organized in Nevada.
Section 86.411 of the Nevada Revised Statutes (NRS) generally allows a limited liability
company to indemnify any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (except an action by or in the right of the limited liability
company), by reason of being or having been a manager, member, employee or agent of the limited
liability company or serving or having served in certain capacities at the request of the limited
liability company. Indemnification may include attorneys fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person to be indemnified in connection with
the action, suit or proceeding.
NRS section 86.421 generally allows a limited liability company to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the limited liability company to procure a judgment in its
favor by reason of being or having been a manager, member, employee or agent of the limited
liability company or serving or having served in certain capacities at the request of the limited
liability company except that indemnification may not be made for any claim, issue or matter as to
which such a person has been finally adjudged by a court of competent jurisdiction to be liable to
the limited liability company or for amounts paid in settlement to the limited liability company,
unless and only to the extent that the court in which the action or suit was brought or other court
of competent jurisdiction determines upon application that, in view of all the circumstances, the
person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
However, to be entitled to indemnification, the person to be indemnified in either case must have
acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to
the best interests of the limited liability company and, with respect to any criminal action or
proceeding, such person must have had no reasonable cause to believe his or her conduct was
unlawful.
NRS section 86.431 generally provides that to the extent a manager, member, employee or agent
of a limited liability has been successful on the merits or otherwise in defense of any such
action, he or she must be indemnified by the limited liability company against expenses, including
attorneys fees actually and reasonably incurred in connection with the defense.
NRS section 86.441 generally allows a limited liability company, in its articles of
organization, operating agreement or other agreement, to provide for the payment of expenses
incurred by members or managers in defending any civil or criminal action, suit or proceeding as
they are incurred and in advance of the final disposition of the action, suit or proceeding, upon
receipt of an undertaking to repay the amount if it is ultimately determined by a court of
competent jurisdiction that the person is not entitled to indemnification by the company.
NRS section 86.461 generally allows a limited liability company to purchase and maintain
insurance or make other financial arrangements on behalf of the limited liability companys current
and former managers, members employees or agents, or any persons serving or who have served in
certain capacities at the request of the limited liability company, for any liability and expenses
incurred by them in their capacities as managers, members, employees or agents or arising out of
their status as such, whether or not the limited liability company has the authority to indemnify
him, her or them against such liability and expenses.
The Limited Liability Company Agreement of Gray Licensee generally provides that Gray Licensee
shall indemnify and advance expenses to shareholders, board members, and officers of the company to
the fullest extent permitted by law. The agreement further provides that no shareholder, board
member, or officer shall be indemnified against liability for intentional misconduct, knowing
violation of the law, or transaction in which the individual received an illegal personal benefit.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
The following exhibits are filed as part of this Form S-4:
|
|
|
3.1
|
|
Restated Articles of Incorporation of Gray Television, Inc. (incorporated by
reference to Exhibit 3.1 to our Annual Report on Form 10-K for the fiscal year ended
December 31, 2009)** |
II-3
|
|
|
3.2
|
|
Bylaws of Gray Television, Inc. (incorporated by reference to Exhibit 3.2 to our
Annual Report on Form 10-K for the fiscal year ended December 31, 2009)** |
|
|
|
3.3
|
|
Articles of Incorporation of WVLT-TV, Inc., as amended to date* |
|
|
|
3.4
|
|
Bylaws of WVLT-TV, Inc., as amended to date * |
|
|
|
3.5
|
|
Certificate of Incorporation of Gray Television Group, Inc., as amended to date * |
|
|
|
3.6
|
|
Bylaws of Gray Television Group, Inc., as amended to date * |
|
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3.7
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Articles of Organization of Gray Television Licensee, LLC* |
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3.8
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Limited Liability Company Agreement of Gray Television Licensee, LLC* |
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4.1
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Indenture, dated April 29, 2010, by and among Gray Television, Inc., the guarantors
signatory thereto and U.S. Bank National Association, as Trustee (incorporated by
reference to Exhibit 4.1 to our Current Report on Form 8-K filed April 30, 2010)** |
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4.2
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Registration Rights Agreement, dated April 29, 2010, by and among Gray Television,
Inc., the guarantors party thereto, Banc of America Securities LLC, Wells Fargo
Securities, LLC and Citadel Securities LLC (incorporated by reference to Exhibit 4.1 to
our Current Report on Form 8-K filed April 30, 2010)** |
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4.3
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Form of Exchange Note (included in Exhibit 4.1)** |
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5.1
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Opinion of Jones Day regarding validity* |
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5.2
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Opinion of Woodburn and Wedge regarding validity* |
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10.1
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2002 Long Term Incentive Plan (incorporated by reference to Appendix C to our
definitive Proxy Statement on Schedule 14A filed August 15, 2002)** |
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10.2
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Director Restricted Stock Plan (incorporated by reference to Exhibit 10.12 to our
Annual Report on Form 10-K for the fiscal year ended December 31, 2002)** |
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10.3
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Credit Agreement dated as of March 19, 2007 by and among Gray Television, Inc., as
Borrower; the Lenders Referred to Therein, as Lenders; Wachovia Bank, National
Association, as Administrative Agent for the Lenders; Bank of America, N. A., as
Syndication Agent; and Goldman Sachs Credit Partners L.P., Deutsche Bank Trust Company
Americas and Bank of Scotland, each as a Documentation Agent; Wachovia Capital Markets,
LLC, as Sole Lead Arranger; Wachovia Capital Markets, LLC, Banc of America Securities LLC
and Goldman Sachs Credit Partners L.P. as Joint Bookrunners (incorporated by reference to
Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31,
2007)** |
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10.4
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Collateral Agreement dated as of March 19, 2007 by and among Gray Television, Inc.
and certain of its Subsidiaries as Grantors, in favor of Wachovia Bank, National
Association, as Administrative Agent (incorporated by reference to Exhibit 10.2 to our
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007)** |
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10.5
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Guaranty Agreement dated as of March 19, 2007 by and among certain Subsidiaries of
Gray Television, Inc., as Guarantors, in favor of Wachovia Bank, National Association, as
Administrative Agent (incorporated by reference to Exhibit 10.3 to our Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 2007)** |
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10.6
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2007 Long Term Incentive Plan (incorporated by reference to Appendix A to our
definitive Proxy Statement on Schedule 14A filed April 3, 2007)** |
II-4
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10.7
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Consulting Agreement dated as of December 23, 2008, by and between Gray Television,
Inc. and J. Mack Robinson (incorporated by reference to Exhibit 10.9 to our Annual Report
on Form 10-K for the fiscal year ended December 31, 2008)** |
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10.8
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First Amendment to the Credit Agreement by and among Gray Television, Inc.; certain
subsidiaries thereof; the Lenders party thereto pursuant to an authorization; and Wachovia
Bank, National Association, as administrative agent, dated as of March 31, 2009
(incorporated by reference to Exhibit 10.10 to our Annual Report on Form 10-K for the
fiscal year ended December 31, 2008)** |
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10.9
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Second Amendment to the Credit Agreement by and among Gray Television, Inc., certain
subsidiaries thereof, the Lenders party thereto and Wells Fargo Bank, N.A.,
successor-by-merger to Wachovia Bank, National Association, as administrative agent, dated
as of March 31, 2010 (incorporated by reference to Exhibit 99.1 to our Current Report on
Form 8-K filed April 12, 2010)** |
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12.1
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Statement regarding computation of earnings to fixed charges* |
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21.1
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Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to our
Annual Report on Form 10-K for the fiscal year ended December 31, 2009)** |
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23.1
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Consent of Jones Day (included in Exhibit 5.1)* |
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23.2
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Consent of McGladrey & Pullen, LLP* |
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23.3
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Consent of Woodburn and Wedge (included in Exhibit 5.2)* |
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24.1
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Powers of Attorney for Gray Television, Inc. (included in the signature page attached hereto)* |
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24.2
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Powers of Attorney for WVLT-TV, Inc. (included in the signature page attached hereto)* |
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24.3
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Powers of Attorney for Gray Television Group, Inc. (included in the signature page attached hereto)* |
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24.4
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Powers of Attorney for Gray Television Licensee, LLC (included in the signature page attached hereto)* |
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25.1
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Statement of Eligibility of the Trustee* |
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99.1
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Form of Letter of Transmittal* |
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99.2
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Form of Notice of Guaranteed Delivery* |
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99.3
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Form of Letter to DTC Participants* |
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99.4
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Form of Letter to Clients* |
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* |
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Filed herewith. |
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** |
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Previously filed. |
(b) Financial Statement Schedules
The following financial statement schedule of Gray Television, Inc. and subsidiaries is
incorporated by reference to Item 15(a)(2) of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2009:
Schedule II Valuation and qualifying accounts.
All other schedules for which provisions are made in the applicable accounting regulation of
the Securities and Exchange Commission are not required or are inapplicable and therefore have been
omitted, or the required information has been incorporated by reference herein or disclosed in the
financial statements which form a part of this Registration Statement/Prospectus.
II-5
ITEM 22. UNDERTAKINGS.
The undersigned registrants hereby undertake:
(1) That for purposes of determining any liability under the Securities Act of 1933, each
filing of the registrants annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plans
annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(2) To deliver or cause to be delivered with the prospectus, to each person to whom the
prospectus is sent or given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or
Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information
required to be presented by Article 3 of Regulation S-X is not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by reference in the prospectus to provide
such interim financial information.
(3) That prior to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable registration form with respect
to reofferings by persons who may be deemed underwriters, in addition to the information called for
by the other items of the applicable form.
(4) That every prospectus: (i) that is filed pursuant to paragraph (3) immediately preceding,
or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such amendment is effective, and
that, for purposes of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant, pursuant to the
provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by any such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question of whether or not such indemnification is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such issue.
(6) To respond to requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
(7) To supply by means of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, the State of Georgia, on June 23, 2010.
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Gray Television, Inc.
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By: |
/s/ James C. Ryan
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Name: |
James C. Ryan |
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Title: |
Senior Vice President &
Chief Financial Officer |
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Each person whose signature to this Registration Statement appears below hereby appoints Hilton H. Howell, Jr. and James C. Ryan, and each of them, as his or her attorney-in-fact, with full power of
substitution and resubstitution, to execute in the name and on behalf of such person, individually
and in the capacity stated below, and to file all further amendments to this Registration
Statement, which amendments may make such further changes in and additions to this Registration
Statement as such attorney-in-fact may deem necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been
signed below for Gray Television, Inc. by the following persons in the capacities indicated and on
the dates indicated.
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Name |
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Title |
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/s/ Hilton H. Howell, Jr.
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Vice-Chairman and Chief Executive Officer
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(Hilton H. Howell, Jr.)
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(Principal Executive Officer) |
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Senior Vice President & Chief Financial Officer
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(James C. Ryan)
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(Principal Financial Officer) |
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/s/ Jackson S. Cowart, IV
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Chief Accounting Officer & Assistant Secretary
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(Jackson S. Cowart, IV)
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(Principal Accounting Officer) |
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/s/ William E. Mayher, III
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Chairman of the Board
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(William E. Mayher, III) |
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Director
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(J. Mack Robinson) |
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Director
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(Richard L. Boger) |
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Director
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(Ray M. Deaver) |
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Director
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(T. L. Elder) |
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Director
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(Zell B. Miller) |
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Name |
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Title |
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/s/ Howell W. Newton
(Howell W. Newton)
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Director
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Director
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(Hugh E. Norton) |
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/s/ Robert S. Prather, Jr.
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Director
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(Robert S. Prather, Jr.) |
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Director
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(Harriett J. Robinson) |
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/s/ Hilton
H. Howell, Jr.
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Director
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(Hilton
H. Howell, Jr.) |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, the State of Georgia, on June 23, 2010.
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WVLT-TV, Inc.
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By: |
/s/ James C. Ryan
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Name: |
James C. Ryan |
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Title: |
Vice President & Chief Financial Officer |
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Each person whose signature to this Registration Statement appears below hereby appoints Hilton H. Howell, Jr. and James C. Ryan, and each of them, as his or her attorney-in-fact, with full power of
substitution and resubstitution, to execute in the name and on behalf of such person, individually
and in the capacity stated below, and to file all further amendments to this Registration
Statement, which amendments may make such further changes in and additions to this Registration
Statement as such attorney-in-fact may deem necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been
signed below for WVLT-TV, Inc. by the following persons in the capacities indicated and on the
dates indicated.
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Name |
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Title |
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/s/ Hilton H. Howell, Jr.
(Hilton H. Howell, Jr.)
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Chairman of the Board (Principal
Executive Officer)
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Vice President & Chief Financial Officer
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(James C. Ryan)
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(Principal Financial Officer) |
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/s/ Jackson S. Cowart, IV
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Chief Accounting Officer &
Assistant Secretary
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(Jackson S. Cowart, IV)
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(Principal Accounting Officer) |
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/s/ Hilton H. Howell, Jr.
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Director
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(Hilton H. Howell, Jr.) |
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/s/ Robert S. Prather, Jr.
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Director
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(Robert S. Prather, Jr.) |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, the State of Georgia, on June 23, 2010.
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Gray Television Group, Inc.
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By: |
/s/ James C. Ryan
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Name: |
James C. Ryan |
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Title: |
Senior Vice President, Assistant Secretary & Treasurer |
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Each person whose signature to this Registration Statement appears below hereby appoints Hilton H. Howell, Jr. and James C. Ryan, and each of them, as his or her attorney-in-fact, with full power of
substitution and resubstitution, to execute in the name and on behalf of such person, individually
and in the capacity stated below, and to file all further amendments to this Registration
Statement, which amendments may make such further changes in and additions to this Registration
Statement as such attorney-in-fact may deem necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been
signed below for Gray Television Group, Inc. by the following persons in the capacities indicated
and on the dates indicated.
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Name |
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Title |
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/s/ Hilton H. Howell, Jr.
(Hilton H. Howell, Jr.)
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Chairman of the Board (Principal
Executive Officer)
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/s/ James C. Ryan
(James C. Ryan)
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Senior Vice President, Assistant
Secretary & Treasurer
(Principal Financial Officer)
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/s/ Jackson S. Cowart, IV
(Jackson S. Cowart, IV)
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Chief Accounting Officer & Assistant Secretary
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(Principal Accounting Officer) |
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/s/ Hilton H. Howell, Jr.
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Director
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(Hilton H. Howell, Jr.) |
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/s/ Robert S. Prather, Jr.
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Director
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(Robert S. Prather, Jr.) |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, the State of Georgia, on June 23, 2010.
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Gray Television Licensee, LLC
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By: |
/s/ James C. Ryan
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Name: |
James C. Ryan |
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Title: |
Treasurer |
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Each person whose signature to this Registration Statement appears below hereby appoints Hilton H. Howell, Jr. and James C. Ryan, and each of them, as his or her attorney-in-fact, with full power of
substitution and resubstitution, to execute in the name and on behalf of such person, individually
and in the capacity stated below, and to file all further amendments to this Registration
Statement, which amendments may make such further changes in and additions to this Registration
Statement as such attorney-in-fact may deem necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been
signed below for Gray Television Licensee, LLC by the following persons in the capacities indicated
and on the dates indicated.
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Name |
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Title |
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/s/ Hilton H. Howell, Jr.
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Chairman of the Board & President
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(Hilton H. Howell, Jr.)
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(Principal Executive Officer) |
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Treasurer
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(James C. Ryan)
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(Principal Financial Officer and Principal
Accounting Officer) |
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/s/ Hilton H. Howell, Jr.
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Director
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(Hilton H. Howell, Jr.) |
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Director
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(Robert Beizer) |
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Director
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(Kristine Eppes) |
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exv3w3
Exhibit 3.3
ARTICLES OF INCORPORATION
OF
WVLT-TV, INC.
I.
The name of the corporation is WVLT-TV, Inc.
II.
The corporation is a corporation for profit and is organized for the following purposes: to
acquire, own, lease, rent and operate television and radio broadcasting stations and community
cable television systems and other forms of communication services utilizing any and all kinds of
transmission facilities; to engage in related activities; to engage in any other lawful activities
or businesses which are authorized under the laws of the State of Georgia.
III.
The corporation shall have authority to issue not more than 1,000 shares of capital stock, all
of which shall be designated Common Stock. The shares of Common Stock shall have unlimited
voting rights and shall be entitled to receive all of the net assets of the corporation upon
liquidation or dissolution.
IV.
The initial registered office of the corporation is 229 Peachtree Street, N.E., Suite 2300,
Atlanta, Fulton County, Georgia, and the initial registered agent of the corporation at said
address is Neal H. Ray.
V.
The name and address of the incorporator is as follows:
Neal H. Ray
229 Peachtree Street, N.E.
Suite 2300
Atlanta, Georgia 30303
-1-
VI.
The mailing address of the initial principal office of the corporation is 229 Peachtree
Street, N.E., Suite 2300, Atlanta, Georgia 30303.
VII.
No director shall have any personal liability to the corporation or to its shareholders for
monetary damages for breach of duty of care or other duty as a director, by reason of any act or
omission occurring subsequent to the date when this provision becomes effective, except that this
provision shall not eliminate or limit the liability of a director for (a) any appropriation, in
violation of his duties, of any business opportunity of the corporation; (b) acts or omissions
which involve intentional misconduct or a knowing violation of law; (c) liabilities of a director
imposed by Section 14-2-832 of the Georgia Business Corporation Code; or (d) any transaction from
which the director derived an improper personal benefit. Any repeal or modification or the
provisions of this article by the shareholders of the corporation shall be prospective only, and
shall not adversely affect any limitation on the personal liability of a director of the
corporation with respect to any act or omission occurring prior to the effective date of such
repeal or modification. If the Georgia Business Corporation Code is hereafter amended to authorize
the further elimination or limitation of the liability of directors, then the liability of a
director of the corporation, in addition to the limitation on personal liability provided herein,
shall be limited to the fullest extent permitted by the Georgia Business Corporation Code as so
amended.
VIII.
IN WITNESS WHEREOF, the undersigned has executed these Articles of Incorporation on this
2nd day of July, 1996.
-2-
exv3w4
Exhibit 3.4
WVLT-TV, INC.
BYLAWS
ARTICLE I
OFFICES
The principal office of the corporation in the State of Georgia shall be located in the City
of Albany, County of Dougherty. The corporation may have such other offices, either within or
without the State of Georgia, as the Board of Directors may designate or as the business of the
corporation may require from time to time.
ARTICLE II
STOCKHOLDERS
Section 1. ANNUAL MEETING. Commencing in 1973, the annual meeting of stockholders shall be
held on the third Tuesday in November of each year at such hour as the Board of Directors may
determine, for the purpose of electing directors and for the transaction of such other business as
may come before the meeting, provided that the Board of Directors may designate some other date in
any particular year for the annual meeting. If the day fixed for the annual meeting shall be a
legal holiday in the State of Georgia, such meeting shall be held on the next succeeding business
day. If the election of directors shall not be held on the day designated for any annual meeting
of stockholders, or at any adjournment thereof, the Board of Directors shall cause the election to
be held at a special meeting of the stockholders as soon thereafter as conveniently may be.
Section 2. SPECIAL MEETINGS. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board, or by
the President, or by the Board of Directors, and shall be called by the President at the request of
the holders of not less than one-third of all outstanding shares of the corporation entitled to
vote at a meeting, such request shall state the purpose of purposes of the proposed meeting.
Section 3. PLACE OF MEETING. The Board of Directors may designate any place within the State
of Georgia as the place of meeting for any annual meeting or for any special meeting called by the
Board of Directors. If no designation is made, or if a special meeting be otherwise called, the
place of meeting shall be the principal office of the corporation in the State of Georgia.
Section 4. NOTICE OF MEETING. Written or printed notice stating the place, day and hour of
meeting, and in case of a special meeting, the purpose or purposes for which the meeting is called,
shall be delivered not less than ten nor more than sixty days before the date of the meeting,
either personally or by mail, by or at the direction of the President, or the Secretary, or the
officer or persons calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, the notice shall be deemed to be delivered when deposited in the United States
mail, addressed to the stockholder at his address as it appears on the stock transfer books
of the corporation, with postage thereon prepaid. Any stockholder may waive notice of any
meeting, whether before or after said meeting.
Section 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or stockholders entitled to receive payment of any dividend, or in order to make a
determination of stockholders for any other proper purpose, the Board of Directors of the
corporation may provide that the stock transfer books shall be closed for a stated period not to
exceed in any case, fifty days; provided notice of the closing of the stock transfer books is
published prior to the commencement of the stated period in the manner, form and within such time
limitations as now or hereafter may be required by law. If the stock transfer books shall be
closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days immediately preceding such meeting.
In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as
the record date for any such determination of stockholders, such date in any case to be not more
than fifty days, and, in case of a meeting of stockholders, not less than ten days prior to the
date on which the particular action, requiring such determination of stockholders, is to be taken;
provided notice is published prior to such date in the manner, form and within such time
limitations as now or hereafter may be required by law. If the stock transfer books are not closed
no record date is fixed for the determination of stockholders entitled to notice of or to vote at a
meeting of stockholders, or stockholders entitled to receive payment of a dividend, the date on
which notice of the meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record date for such
determination of stockholders. When a determination of stockholders entitled to vote at any
meeting of stockholders has been made as provided in this section, such determination shall apply
to any adjournment thereof, unless the Board of Directors, as provided in this section, fixes a new
stated period for closing of the stock transfer books or fixes a new record date for the adjourned
meeting.
Section 6. VOTING LISTS. The officer or agent having charge of the stock transfer books for
shares of the corporation shall make, at least ten days before each meeting of stockholders, a
complete list of the stockholders entitled to vote at such meeting, or any adjournment thereof:
arranged in alphabetical order, with the address of, and the number of shares held by each, which
list, for a period often days prior to such meeting, shall be kept on file at the principal office
of the corporation and shall be subject to inspection of any stockholder at any time during usual
business hours. Such list shall also be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any stockholder during the whole time of the meeting.
The original stock transfer books shall be prima facie evidence as to who are stockholders entitled
to examine such list or transfer books or to vote at any meeting of stockholders.
Section 7. QUORUM. A majority of the shares outstanding of the corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If less
than a majority of the outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally
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notified. The stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
Section 8. PROXIES. At all meetings of stockholders, a stockholder may vote by proxy executed
in writing by the stockholder or by his duly authorized attorney in fact. Such proxy shall be
filed with the Secretary of the corporation before or at the time of the meeting. No proxy shall
be valid after eleven months from the date of its execution, unless otherwise provided in the
proxy.
Section 9. VOTING OF SHARES. Each outstanding share entitled to vote shall be entitled to one
vote upon each matter submitted to a vote at a meeting of stockholders. All elections by
stockholders shall be by ballot unless waived by the unanimous consent of those stockholders
present in person or by proxy at any meeting. The vote on any questions, upon demand of a
stockholder present in person or by proxy, shall be by a stock vote and by ballot. The
stockholders shall have power by a majority vote at any meeting to remove any director or officer
from office.
Section 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the name of another
corporation may be voted by such officer, agent, or proxy as the bylaws of such corporation may
prescribe, or, in the absence of such provision, as the Board of Directors of such corporation may
determine.
Shares held by an administrator, executor, guardian, or conservator may be voted by him,
either in person or by proxy, without a transfer of such shares into his name. Shares standing in
the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him without a transfer of such shares into his name.
Shares standing in the name of receiver may be voted by such receiver, and shares held by or
under the control of a receiver may be voted by such receiver without the transfer thereof into his
name if authority so to do be contained in an appropriate order of the court by which such receiver
was appointed.
A stockholder whose shares are pledged shall be entitled to vote such shares until the shares
have been transferred into the name of the pledgee, and thereafter the pledge shall be entitled to
vote the shares so transferred.
Shares of its own stock belonging to the corporation or held by it in a fiduciary capacity
shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining
the total number of outstanding shares at any given time.
Section 11. INSPECTORS OF ELECTION. At each meeting of the stockholders, the polls shall be
opened and closed, the proxies and ballots shall be received and be taken in charge, and all
questions touching the qualification of voters and the validity of proxies and the acceptance or
rejection of votes, shall be decided by three inspectors. At the first meeting of the Board of
Directors held immediately after the annual meeting of stockholders, the Board of Directors shall
appoint three persons as Inspectors of Election, to serve until the close of the next annual
meeting and until their successors are chosen. In case of a failure to elect inspectors, or in
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case an inspector shall fail to attend or refuse or be unable to serve, the Board of Directors
may choose an inspector or inspectors to act at such meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the corporation shall be managed by
its Board of Directors.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of the corporation
shall be not less than one nor more than fifteen. Each director shall hold office until the next
annual meeting of stockholders and until his successor shall have been elected and qualified. A
majority of the directors shall be bona fide residents of the State of Georgia.
Section 3. REGULAR MEETINGS. A regular meeting of the Board of Directors shall be held
without other notice than this bylaw immediately after, and at the same place as, the annual
meeting of stockholders. The Board of Directors may provide, by resolution, the time and place
either within or without the State of Georgia, for the holding of additional regular meetings
without other notice than such resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or
at the request of the Chairman of the Board, the President, or any three directors. The person or
persons authorized to call special meetings of the Board of Directors may fix any place within the
State of Georgia as the place for holding any special meeting of the Board of Directors called by
them.
Section 5. NOTICE. Notice of any special meeting shall be given at least five days previously
thereto by written notice delivered personally or mailed to each director at his business address,
or by telegram. If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail so addressed, with postage thereon prepaid. If notice be given by telegram,
such notice shall be deemed to be delivered when the telegram is delivered to the telegraph
company. Any director may waive notice of any meeting. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the Board need be specified in the notice or waiver of notice of such
meeting.
Section 6. QUORUM. A majority of the Board of Directors for the time being in office shall
constitute a quorum for the transaction of business at any meeting of the Board of Directors, but
if less than such majority is present at a meeting, a majority of the directors present may adjourn
the meeting from time to time without further notice.
Section 7. MANNER OF ACTING. The act of the majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors.
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Section 8. VACANCIES. Any vacancy occurring in the Board of Directors may be filled by the
affirmative vote of a majority of the remaining directors though less than a quorum of the Board of
Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office. Any directorship to be filled by reason of an increase in the number of
directors shall be filled by election at an annual meeting or at a special meeting of the
stockholders called for that purpose.
Section 9. COMPENSATION OF DIRECTORS. By resolution of the Board of Directors, the directors
may be paid their expenses, if any, of attendance at each meeting of the Board of Directors, and
may be paid a fixed sum for attendance at each meeting of the Board of Directors. No such payment
shall preclude any director from serving the corporation in any other capacity and receiving
compensation therefor.
Section 10. PRESUMPTION OF ASSENT. A director of the corporation who is present at a meeting
of the Board of Directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless his dissent shall be entered in the minutes of the meeting
or unless he shall file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by registered mail to
the secretary of the corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
ARTICLE IV
COMMITTEES
Section 1. EXECUTIVE COMMITTEE. At their first meeting after the annual meeting of
stockholders, the Board of Directors shall elect an Executive Committee consisting of not less than
three nor more than five members of the Board, and shall designate its chairman. The Chairman of
the Board of Directors and the President shall be two of the members elected to the committee.
During the intervals between the meetings of the Board of Directors, the executive committee shall
possess and may exercise all the powers of the Board of Directors in the management and direction
of the affairs of the company in all cases in which specific directions shall not have been given
by the Board of Directors. All actions by the executive committee shall be reported to the Board
of Directors at its meeting next succeeding such action, and shall be subject to revision and
alteration by the Board; provided, that no rights of third parties shall be affected by any such
revision or alteration. Regular minutes of the proceedings of the executive committee shall be
kept in a book provided for that purpose. Vacancies in the executive committee shall be filled by
the Board of Directors. A majority of the committee shall be necessary to constitute a quorum, and
in every case the affirmative vote of a majority of the members present shall be necessary for the
passage of any resolution. The Executive Committee may act by the written resolution of a quorum
thereof although not formally convened; it shall fix its own rules of procedure, and shall meet as
provided by such rules or by resolution of the Board, and it shall also meet at the call of the
chairman or of any two members of the committee.
Section 2. MANAGEMENT PERSONNEL COMMITTEE. At the first meeting after the annual meeting of
the stockholders, the Board of Directors shall elect a management personnel committee consisting of
not less than three nor more than five members of the Board
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and shall designate its chairman. It shall be the duty of the management personnel committee
to make recommendations with respect to executive salaries, bonuses, and compensation, and it shall
be their further duty to serve as the nominating committee with respect to the principal officers
and other committees of the Board of Directors, as well as making nominations respecting membership
to the Board of Directors. Regular minutes of the proceedings of the management personnel
committee shall be kept in the book provided for that purpose. Vacancies in the management
personnel committee shall be filled by the Board of Directors. A majority of the members of the
committee shall constitute a quorum, and in every case the affirmative vote of a majority of the
members present shall be necessary for the passage of any resolution. The management personnel
committee may act by the written resolution of a quorum though they are not formally convened; it
shall fix its own rules of procedure and shall meet as provided by such rules, and it shall meet on
the call of the Chairman or any two (2) members of the committee.
Section 3. INTERPRETATION. In these bylaws, unless there is something in the context
inconsistent therewith, the term Board of Directors shall include and embrace the committees
herein provided for to the extent of their delegated authority.
ARTICLE V
OFFICERS
Section 1. NUMBER. The officers of the corporation shall be a Chairman of the Board of
Directors, a president, one or more vice presidents (the number thereof to be determined by the
Board of Directors), a secretary and a treasurer, each of whom shall be elected by the Board of
Directors. Such other officers and assistant officers as may be deemed necessary may be elected or
appointed by the Board of Directors. Any person may hold two or more offices, except that the
president may not also be the secretary of the corporation.
Section 2. ELECTION AND TERM OF OFFICE. The officers of the corporation to be elected by the
Board of Directors shall be elected annually by the Board of Directors at the first meeting of the
Board held after each annual meeting of the stockholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as conveniently may be. Each
officer shall hold office until his successor shall have been duly elected and qualified, or until
his death or until he shall resign or shall have been removed in the manner hereinafter provided.
Section 3. REMOVAL. Any officer or agent elected or appointed by the Board of Directors may
be removed by the Board of Directors whenever in its judgment the best interests of the corporation
would be served thereby.
Section 4. VACANCIES. A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of
the term.
Section 5. SALARIES. The salaries of the officers shall be fixed from time to time by the
Board of Directors and no officer shall be prevented from receiving such salary by reason of the
fact that he is also a director of the corporation.
6
Section 6. CHAIRMAN OF BOARD OF DIRECTORS. The Chairman of the Board shall be a director and
shall preside, when present, at all meetings of the stockholders and of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors from time to time.
The Board of Directors may appoint a Vice Chairman of the Board who shall perform such duties as
may be prescribed by the Board of Directors from time to time.
Section 7. PRESIDENT. The president shall be a director. He shall preside, in the absence of
the Chairman or Vice Chairman, at all meetings of the stockholders or the Board of Directors. He
may sign, with the secretary or any other proper officer of the corporation thereunto authorized by
the Board of Directors, certificates for shares of the corporation, any deeds, mortgages, bonds,
policies of insurance, contracts investment certificates, or other instruments which the Board of
Directors has authorized to be executed, except in cases where the signing and execution thereof
shall be expressly delegated by the Board of Directors or by these bylaws to some other officer or
agent of the corporation, or shall be required by law to be otherwise signed or executed; and in
general shall perform all duties incident to the office of president and such other duties as maybe
prescribed by the Board of Directors from time to time.
Section 8. VICE PRESIDENTS. In the absence of the President or in the event of his death or
inability or refusal to act, the Vice President (or in the event there be more than one vice
president, the vice presidents in the order designated at the time of their election) shall perform
the duties of the president, and when so acting, shall have all the powers of and be subject to all
the restrictions upon the president. Any vice president may sign, with the Secretary or an
assistant secretary certificates for shares of the corporation, and shall perform such other duties
as shall from time to time be assigned to him by the President or by the Board of Directors. All
vice presidents shall have such other duties as may be prescribed by the Board of Directors from
time to time. The Board of Directors may from time to time add to the title of Vice President
such additional descriptive prefix as may indicate his service, duty or duties.
Section 9. SECRETARY. The secretary shall:
(a) attend and keep the minutes of the stockholders meetings and of the Board of Directors
meetings in one or more books provided for that purpose;
(b) see that all notices are duly given in accordance with the provisions of these bylaws as
required by law;
(c) be custodian of the corporate records and of the seal of the corporation and see that the
seal of the corporation is affixed to all documents, the execution of which on behalf of the
corporation under its seal is duly authorized;
(d) keep a register of the post office address of each stockholder which shall be furnished to
the secretary by such stockholder;
(e) sign with the president, or a vice president, .certificates for shares of the corporation,
the issuance of which shall have been authorized by resolution of the Board of Directors;
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(f) have general charge of the stock transfer books of the corporation;
(g) in general perform all duties incident to the office of secretary and such other duties as
from time to time may be assigned to him by the president or by the Board of Directors.
Section 10. TREASURER. The treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors shall determine. He
shall:
(a) have charge and custody of and be responsible for all funds and securities of the
corporation; receive and give receipts for monies due and payable to the corporation from any
source whatsoever, and deposit all such monies in the name of the corporation in such banks, trust
companies, or other depositories as shall be selected in accordance with the provisions of Article
VI of these bylaws; and
(b) in general perform all the duties incident to the office of treasurer and such other
duties as from time to time may be assigned to him by the president or by the Board of Directors.
Section 11. CONTROLLER. The controller shall be the accounting officer of the corporation. He
shall keep adequate and correct accounts of the corporations business transactions, including the
accounts of its assets, liabilities, reserves, gains, losses, capital, surplus, and shares. It
shall be his duty, in conjunction with other proper officers, to enforce budget rules and
regulations and other measures and procedures whereby the business of the company shall be
conducted with the maximum of safety, efficiency, economy, and profit; and he shall see to it that
adequate internal audits are currently and accurately made. He shall, in general, perform all
duties incident to the office of controller and such other duties as from time to time may be
assigned to him by the President or by the Board of Directors.
Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant secretaries and
assistant treasures, in general, shall perform such duties as shall be assigned to them by the
secretary or the treasurer, respectively, or by the Board of Directors.
Section 13. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer, subject to the control of
the Board of Directors, shall be in general charge of the affairs of the corporation and in general
manage, supervise and control all of its business activities and without limitation on the
foregoing shall supervise all the public relations of the Company. Any officer or agent of the
corporation may be suspended and removed by the Chief Executive Officer, subject to ratification or
reinstatement by the Board of Directors, whenever in his judgment the best interest of the
corporation; would be served thereby.
The Board of Directors may designate by resolution either the Chairman of the Board, the Vice
Chairman of the Board (if one), or the President as the Chief Executive Officer, but in the absence
of such a resolution the President shall be the Chief Executive Officer.
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ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Board of Directors may authorize any officer or officers, agents or
agents, to enter into any contract or execute and deliver any instrument, including contracts or
policies of insurance, in the name of and on behalf of the corporation, and such authority may be
general or confined to specific instances.
Section 2. LOANS. No loans shall be contracted on behalf of the corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution of the Board of
Directors. Such authority may be general or confined to specific instances.
Section 3. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders for the payment of money,
notes or other evidences of indebtedness issued in the name of the corporation shall be signed by
such officer or officers, agent or agents of the corporation and in such manner as shall from time
to time be determined by resolution of the Board of Directors.
Section 4. DEPOSITS. All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust companies, or other
depositories as the Board of Directors may select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. CERTIFICATES FOR SHARES. Certificates representing shares of the corporation shall
be in such form as shall be determined by the Board of Directors. Such certificates shall be
signed by the president or vice president and by the secretary or an assistant secretary, but when
such certificate is signed by a transfer agent and a registrar the signatures of such president,
vice president, secretary or assistant secretary may be facsimiles. All certificates for shares
shall be consecutively numbered or otherwise identified. The name and address of the person to
whom the shares represented thereby are issued, with the number of shares and date of issue, shall
be entered on the transfer books of the corporation. All certificates surrendered to the
corporation for transfer shall be cancelled and no new certificates shall be issued until the
former certificate for a like number of shares shall have been surrendered and cancelled, except
that in case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon
such terms and indemnity to the corporation as the Board of Directors may prescribe.
Section 2. TRANSFER OF SHARES. Transfer of shares of the corporation shall be made only on
the stock transfer books of the corporation by the holder of record thereof or by his legal
representative, who shall furnish proper evidence of authority to transfer, or by his attorney
thereto authorized by power of attorney duly executed and filed with the secretary of the
corporation, and on surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation shall be deemed by the corporation to be
the owner thereof for all purposes.
Section 3. REGULATIONS. The Board of Directors shall have power and authority to make all
such rules and regulations as respectively they may deem expedient,
9
concerning the issue, transfer and registration of certificates for shares of the capital
stock of the company.
The Board of Directors may appoint one or more transfer agents or assistant transfer agents
and one or more registrars of transfer, and may require all stock certificates to bear the
signature of a transfer agent or assistant transfer agent and a registrar of transfer. The Board
of Directors may at any time terminate the appointment of any transfer agent or any assistant
transfer agent or any registrar of transfers.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of January of each year, and
end on the 31st day of December of the same year.
ARTICLE IX
DIVIDENDS
The Board of Directors may from time to time declare, and the corporation may pay, dividends
on its outstanding shares in the manner and upon the terms and conditions provided by law, its
charter, and these bylaws.
ARTICLE X
ANNUAL STATEMENT
The Board of Directors shall publish and submit to the stockholders, at or in advance of the
annual meeting of stockholders, a statement of the financial condition of the corporation, such
statement to show the income of the corporation during the previous fiscal year and such statement
to include a balance sheet showing the assets and liabilities of the corporation at the end of the
preceding fiscal year.
ARTICLE XI
SEAL
The Board of Directors shall provide a corporate seal which shall be circular in form and
shall have inscribed thereon the name of the corporation and the state of incorporation and the
words Corporate Seal.
ARTICLE XII
WAIVER OF NOTICE
Whenever any notice is required to be given to any stockholder or director of the corporation
under the provisions of these bylaws or under the provisions of the articles of incorporation, a
waiver thereof in writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of such notice.
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ARTICLE XIII
AMENDMENTS
These bylaws may be altered, amended, or repealed and new bylaws may be adopted by a majority
vote of the stockholders at any regular or special meeting of the stockholders.
ARTICLE XIV
INDEMNIFICATION
Section 1. AUTHORITY TO INDEMNIFY. The corporation shall indemnify or obligate itself to
indemnify an individual made a party to a proceeding because he or she is or was a director,
officer, employee or agent of the Corporation (or was serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership, joint venture, trust or
other enterprise) for reasonable expenses, judgments, fines, penalties and amounts paid in
settlement (including attorneys fees), incurred in connection with the proceeding of the
individual acted in the manner he or she believe in good faith to be in or not opposed to the best
interests of the Corporation and, in the case of any criminal proceeding, he or she had no
reasonable cause to believe his or her conduct was unlawful. The termination of a proceeding by a
judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent is
not, of itself, determinative that the director, officer, employee or agent did not meet the
standard of conduct set forth above. Indemnification permitted under this section in connection
with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred
in connection with the proceeding.
Section 2. MANDATORY INDEMNIFICATION. To the extent that a director, officer, employee or
agent of the Corporation has been successful, on the merits or otherwise, in the defense of any
proceeding to which he or she was a party, or in defense of any claim, issue or matter therein,
because he or she is or was a director, officer, employee or agent of the Corporation, the
Corporation shall indemnify the director, employee or agent against reasonable expenses incurred by
him or her in connection therewith.
Section 3. ADVANCE FOR EXPENSES. The Corporation shall pay for or reimburse the reasonable
expenses incurred by a director, officer, employee or agent of the Corporation who is a party to a
proceeding in advance of final disposition of the proceeding if (a) he or she furnishes the
Corporation written affirmation of his or her good faith belief that he or she has met the standard
of conduct set forth in Section 1 of this Article, and (b) he or she furnishes the Corporation a
written undertaking, executed personally or on his or her behalf, to repay any advances if it is
ultimately determined that he or she is not entitled to indemnification. The undertaking required
by this section must be an unlimited general obligation, but need not be secured and may be
accepted without reference to financial ability to make repayment.
Section 4. COURT-ORDERED INDEMNIFICATION AND ADVANCES FOR EXPENSES. A director, officer,
employee or agent of the Corporation who is a party to a proceeding may apply for indemnification
or advances for expenses to the court conducting the proceeding or to another court of competent
jurisdiction.
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Section 5. DETERMINATION OF INDEMNIFICATION. Except as provided in Section 2 and except as
may be ordered by the court, the Corporation may not indemnify a director, officer, employee or
agent under Section 1 unless authorized thereunder and a determination has been made in the
specific case that indemnification of the director, officer, employee or agent is permissible in
the circumstances because he or she has met the standard of conduct set forth in Section 1. The
determination shall be made:
(a) by the Board of Directors by majority vote of a quorum consisting of directors not at the
time parties to the proceeding;
(b) if a quorum cannot be obtained, by majority vote of a committee duly designated by the
Board of Directors (in which designation directors who are parties may participate), consisting
solely of two or more directors not at the time parties to the proceeding;
(c) by special legal counsel:
(i) selected by the Board of Directors or its committee in the manner prescribed in
paragraph (a) or (b) of this section; or
(ii) if a quorum of the Board of Directors cannot be obtained and committee cannot be
designated, selected by majority vote of the full Board of Directors (in which selection
directors who are parties may participate); or
(d) by the shareholders, but shares owned by or voted under the control of directors, who are
at the time parties to the proceeding, may not be voted on the determination.
Section 6. AUTHORIZATION OF INDEMNIFICATION. Authorization of indemnification or
determination of an obligation to indemnify and evaluation as to the reasonableness of expenses
shall be made in the same manner as the determination that indemnification is permissible, except
that if the determination is made by the special legal counsel, authorization of indemnification
and evaluation as to reasonableness of expenses shall be made by those entitled under subsection
(c) of Section 5 to select counsel.
Section 7. OTHER RIGHTS. The indemnification and advancement of expenses provided by or
granted pursuant to this Article XIV shall not be deemed exclusive of any other rights, in respect
of indemnification or otherwise, to which those seeking indemnification or advancement of expenses
may be entitled under any bylaw, resolution, agreement or contract either specifically or in
general terms approved by the affirmative vote of the holders of a majority of the share entitled
to vote thereon taken at a meeting the notice of which specified that such bylaw, resolution or
agreement would be placed before the stockholders, both as to action by a director, trustee,
officer, employee or agent in his or her official capacity and as to action in another capacity
while holding such office or position, except that no such other rights, in respect to
indemnification or otherwise, may be provided or granted to a director, trustee, officer, employee
or agent pursuant to this Section 7 by the Corporation for liability for (a) any appropriation, in
violation of his or her duties, of any business opportunity of the Corporation; (b) acts of
omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
(c) the types of liability set forth in Section 14-2-832 of the Georgia Business Corporation Code
dealing with illegal or unauthorized distributions of corporate assets, whether
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as dividends or in liquidation of the Corporation or otherwise; or (d) any transaction from
which the director derived an improper material tangible personal benefit.
Section 8. INSURANCE. The Corporation may purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee or agent of the Corporation or who, while a
director, officer, employee or agent of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise
against liability asserted against or incurred by him or her in that capacity or arising from his
or her status as a director, officer, employee or agent whether or not the Corporation would have
power to indemnify him or her against the same liability under this Article XIV.
Section 9. CONTINUATION OF EXPENSES. The indemnification and advancement of expenses provided
by or granted pursuant to this Article XIV shall continue as to a person who has ceased to be a
director, trustee, officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
Section 10. If applicable law is amended to authorize corporate action farther eliminating or
limiting the liability of directors, then the liability of each director of the Corporation shall
be eliminated or limited to the fullest extent permitted by applicable law, as amended. Neither
the amendment nor repeal of this Article XIV, nor the adoption of any provision of these Bylaws
inconsistent with this Article XIV, shall eliminate or reduce the effect of this Article XIV in
respect of any acts of omission occurring prior to such amendment, repeal or adoption of any
inconsistent provision.
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exv3w5
Exhibit 3.5
CERTIFICATE OF INCORPORATION
OF
GRAY TELEVISION GROUP, INC.
The undersigned, a natural person, for the purpose of organizing a corporation for conducting
the business and promoting the purposes hereinafter stated, under the provisions and subject to the
requirements of the laws of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware
Code and the acts amendatory thereof and supplemental thereto, and known, identified and referred
to as the General Corporation Law of the State of Delaware), hereby certifies that:
FIRST: The name of the corporation (hereinafter called the corporation) is Gray
Television Group, Inc.
SECOND: The address, including street, number, city, and county, of the registered
office of the corporation in the State of Delaware is 100 West Tenth Street, City of Wilmington,
County of New Castle, and the name of the registered agent of the corporation in the State of
Delaware at such address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted is:
To engage in any lawful act or activity for which
corporations nay be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of stock which the corporation shall have
authority to issue is 200 shares without par value, all of which are the same class and all of
which are the designated as common shares.
FIFTH: The name and the mailing address of the incorporator are as follows:
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Nancy Briasco
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Golenbock and Barell |
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645 Fifth Avenue |
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New York, New York 10022 |
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this corporation
and in creditors or any class of them and/or between this corporation and its stockholders or any
class of them, any court of equitable jurisdiction within the State of Delaware may, on the
application in a summary way of this corporation or of any creditor or stockholder thereof or an
the application of any receiver or receivers appointed for this corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of
any receiver or receivers appointed for this corporation under the provisions of Section 279 of
Title 8 of the Delaware Code order a meeting of the creditors, or class of creditors, and/or class
of the stockholders or class of stockholders of this corporation, as the case may be, to be
summoned in such manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the stockholder or class
of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and
to any reorganization of this corporation as consequence of such compromise or arrangement, the
said compromise or arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or class of creditors,
and/or on all the stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH: In furtherance and not in limitation of the powers conferred by statute, the
board of directors is expressly authorized to make, alter, or repeal the by-laws, and to adopt any
new by-law, of the corporation.
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NINTH: The Corporation shall, to the fullest extent permitted by Section 145 of the
General Corporation Law of the State of Delaware, as the same may be amended and supplemented, (i)
indemnify any and all persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to in or covered by said
section, and (ii) advance expenses to any and all said persons. The indemnification and
advancement of expenses provided for herein shall not be deemed exclusive of any other rights to
which those indemnified may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in their official capacities and as to
action in another capacity while holding such offices, and shall continue as to persons who have
ceased to be directors, officers, employees or agents and shall inure to the benefit of the heirs,
executors and administrators of such person.
TENTH: From time to time any of the provisions of this certificate of incorporation
may be amended, altered or repealed, and other provisions authorized by the laws of the State of
Delaware at the time in force may be added or inserted in the manner and at the time prescribed by
said laws, and all rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this Article TENTH.
ELEVENTH: Each holder of any of the shares of the capital stock of the corporation
shall be entitled to a preemptive right to purchase or subscribe for any unissued stock of any
class or any additional shares of any class to be issued by reason of any increase of the
authorized capital stock of the corporation of any class, or bonds, certificates of indebtedness,
debentures or other securities, convertible into stock of the corporation, or carrying any rights
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purchase stock of any class, whether said unissued stock shall be issued for cash, property,
or any other lawful consideration.
ELEVENTH: To the fullest extent permitted by the General Corporation Law of the State
of Delaware, as the same may be amended and supplemented, no director shall be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a
director.
Signed on January 18, 1979.
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STATE OF NEW YORK
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SS.:
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COUNTY OF NEW YORK
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BE IT REMEMBERED that, on January 18, 1979, before me, a Notary Public duly authorized by law
to take acknowledgement of deeds, personally came Nancy Briasco, the incorporator who duly executed
the foregoing certificate of incorporation before me and acknowledged the same to be her act and
deed, and that the fact therein stated are true.
GIVEN under my hand on January 18, 1979.
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/s/ Diana Schramm (Holtzman)
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Notary Public |
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exv3w6
Exhibit
3.6
BY-LAWS
OF
GRAY TELEVISION GROUP, INC.
(Formed under the laws of the State of Delaware)
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. A meeting of the shareholders shall be held annually for
the election of directors and the transaction of other business on such date in each year as may be
determined by the Board of Directors, but in no event later than one hundred eighty (180) days
following the end of the fiscal year of the Corporation.
Section 2. Special Meetings. Special meetings of the shareholders may be called by
the Board of Directors, the Chairman of the Board, the President or the holder of outstanding
shares of the Corporation entitled to vote at the meeting to be called or by the holder of a proxy
from any such holder of outstanding shares.
Section 3. Place of Meetings. Meetings of shareholders shall be held at such place,
within or without the State of Delaware, as may be fixed by the Board of Directors. If no place is
so fixed, such meetings shall be held at the office of the Corporation in the State of Delaware.
Section 4. Notice of Meetings. Notice of each meeting of shareholders shall be given
in writing and shall state the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called. Notice of a special meeting shall indicate that it is being issued by
or at the direction of the person or persons calling or requesting the meeting.
If, at any meeting, action is proposed to be taken which would, if taken, entitle objecting
shareholders to receive payment for their shares, the notice shall include a statement of that
purpose and to that effect.
A copy of the notice of each meeting shall be given, personally or by first class mail, not
less than 10 nor more than 60 days before the date of the meeting, to each shareholder entitled to
vote at such meeting. If mailed, such notice is given when deposited in the United States mail,
with postage thereon prepaid, directed to the shareholder at his address as it appears on the
record of shareholders, or, if he shall have filed with the Secretary of the Corporation a written
request that notices to him be mailed to some other address, then directed to him at such other
address.
When a meeting is adjourned to another time or place, it shall not be necessary to give any
notice of the adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the adjourned meeting any
business may be transacted that might have been transacted on the original date of the
meeting. However, if after the adjournment the Board of Directors fixes a new record date for the
adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record
on the new record date entitled to notice under the preceding paragraphs of this Section 4.
Section 5. Waiver of Notice. Notice of meeting need not be given to any shareholder
who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting.
The attendance of any shareholder at a meeting, in person or by proxy, without protesting prior to
the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of
notice by him.
Section 6. Inspectors of Election. The Board of Directors, in advance of any
shareholders meeting, may appoint one or more inspectors to act at the meeting or any adjournment
thereof. If inspectors are not so appointed, the person presiding at a shareholders meeting may,
and on the request of any shareholder entitled to vote thereat shall, appoint two inspectors. In
case any person appointed fails to appear or act, the vacancy may be filled by appointment made by
the Board in advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully
to execute the duties of inspector at such meeting with strict impartiality and according to the
best of his ability.
The inspectors shall determine the number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a quorum, and the validity and effect of
proxies, and shall receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the election or vote with
fairness to all shareholders. On request of the person presiding at the meeting or any shareholder
entitled to vote thereat, the inspectors shall make a report in writing of any challenge, question
or matter determined by them and execute a certificate of any fact found by them. Any report or
certificate made by them shall be prima facie evidence of the facts stated and of the vote as
certified by them.
Section 7. List of Shareholders at Meetings. A list of shareholders as of the record
date, certified by the Secretary or any Assistant Secretary or by a transfer agent, shall be
produced at any meeting of shareholders upon the request thereat or prior thereto of any
shareholder. If the right to vote at any meeting is challenged, the inspectors of election, or
person presiding thereat, shall require such list of shareholders to be produced as evidence of the
right of the persons challenged to vote at such meeting, and all persons who appear from such list
to be shareholders entitled to vote thereat may vote at such meeting.
Section 8. Qualification of Voters. Unless otherwise provided in the certificate of
incorporation, every shareholder of record shall be entitled at every meeting of shareholders to
one vote for every share standing in his name on the record of shareholders.
Treasury shares as of the record date and shares held as of the record date by another
domestic or foreign corporation of any type or kind, if a majority of the shares entitled to vote
in the election of directors of such other corporation is held as of the record date by the
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Corporation, shall not be shares entitled to vote or to be counted in determining the total number of
outstanding shares.
Shares held by an administrator, executor, guardian, conservator, committee, trustee or other
fiduciary, may be voted by him, either in person or by proxy, without transfer of such shares into
his name.
Shares standing in the name of another domestic or foreign corporation of any type or kind may
be voted by such officer, agent or proxy as the by-laws of such corporation may provide, of, in the
absence of such provision, as the board of directors of such corporation may determine.
A shareholder shall not sell his vote or issue a proxy to vote to any person for any sum of
money or anything of value except as permitted by law.
Section 9. Quorum of Shareholders. The holders of a majority of the shares entitled
to vote thereat shall constitute a quorum at a meeting of shareholders for the transaction of any
business, provided that when a specified item of business is required to be voted on by a class or
series, voting as a class, the holders of a majority of the shares of such class or series shall
constitute a quorum for the transaction of such specified item of business.
When a quorum is once present to organize a meeting, it is not broken by the subsequent
withdrawal of any shareholders.
The shareholders who are present in person or by proxy and who are entitled to vote may, by a
majority of votes cast, adjourn the meeting despite the absence of a quorum.
Section 10. Proxies. Every shareholder entitled to vote at a meeting of shareholders
or to express consent or dissent without a meeting may authorize another person or persons to act
for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact. No proxy shall be
valid after the expiration of 11 months from the date thereof unless otherwise provided in the
proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except as
otherwise provided by law.
The authority of the holder of a proxy to act shall not be revoked by the incompetence or
death of the shareholder who executed the proxy unless before the authority is exercised, written
notice of an adjudication of such incompetence or of such death is received by the Secretary or any
Assistant Secretary.
Section 11. Vote or Consent of Shareholders. Directors shall, except as otherwise
required by law, be elected by a plurality of the votes cast at a meeting of shareholders by the
holders of shares entitled to vote in the election.
Whenever any corporate action, other than the election of directors, is to be taken by vote of
the shareholders, it shall, except as otherwise required by law, be authorized by a majority of the
votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon.
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Whenever shareholders are required or permitted to take any action by vote, such action may be
taken without a meeting on written consent, setting forth the action so taken, signed by the
holders of all outstanding shares entitled to vote thereon. Written consent thus given by the
holders of all outstanding shares entitled to vote shall have the same effect as a unanimous vote
of shareholders.
Section 12. Fixing Record Date. For the purpose of determining the shareholders
entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the purpose of
determining shareholders entitled to receive payment of any dividend or the allotment of any
rights, or for the purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of shareholders. Such date shall not be more than 60
nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other
action.
When a determination of shareholders of record entitled to notice of or to vote at any meeting
of shareholders has been made as provided in this section, such determination shall apply to any
adjournment thereof, unless the Board of Directors fixes a new record date for the adjourned
meeting.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Power of Board and Qualification of Directors. The business of the
Corporation shall be managed by the Board of Directors. Each director shall be at least 18 years
of age.
Section 2. Number of Directors. The number of directors constituting the entire Board
of Directors shall be the number, not less than one nor more than 15, fixed from time to time by a
majority of the total number of directors which the Corporation would have, prior to any increase
or decrease, if there were no vacancies, provided, however, that no decrease shall shorten the term
of an incumbent director. Until otherwise fixed by the directors, the number of directors
constituting the entire Board shall be two.
Section 3. Election and Term of Directors. At each annual meeting of shareholders,
directors shall be elected to hold office until the next annual meeting and until their successors
have been elected and qualified or until his death, resignation or removal in the manner
hereinafter provided.
Section 4. Quorum of Directors and Action by the Board. A majority of the entire
Board of Directors shall constitute a quorum for the transaction of business, and, except where
otherwise provided by these by-laws, the vote of a majority of the directors present at a meeting
at the time of such vote, if a quorum is then present, shall be the act of the Board.
Any action required or permitted to be taken by the Board of Directors or any committee
thereof may be taken without a meeting if ail members of the Board or the committee consent in
writing to the adoption of a resolution authorizing the action. The resolution and the written
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consent thereto by the members of the Board or committee shall be filed with the minutes of
the proceedings of the Board or committee.
Section 5. Meetings of the Board. An annual meeting of the Board of Directors shall
be held in each year directly after the annual meeting of shareholders. Regular meetings of the
Board shall be held at such times as may be fixed by the Board. Special meetings of the Board may
be held at any time upon the call of the President or any two directors.
Meetings of the Board of Directors shall be held at such places as may be fixed by the Board
for annual and regular meetings and in the notice of meeting for special meetings. If no place is
so fixed, meetings of the Board shall be held at the office of the Corporation.
No notice need be given of annual or regular meetings of the Board of Directors. Notice of
each special meeting of the Board shall be given to each director either by mail not later than
noon, New York time, on the third day prior to the meeting or by telegram, written message or
orally to the director not later than noon, New York time, on the day prior to the meeting.
Notices are deemed to have been given: by mail, when deposited in the United States mail; by
telegram at the time of filing; and by messenger at the time of delivery. Notices by mail,
telegram or messenger shall be sent to each director at the address designated by him for that
purpose, or, if none has been so designated, at his last known residence or business address.
Notice of a meeting of the Board of Directors need not be given to any director who submits a
signed waiver of notice whether before or after the meeting, or who attends the meeting without
protesting, prior thereto or at its commencement, the lack of notice to him.
A notice, or waiver of notice, need not specify the purpose of any meeting of the Board of
Directors.
A majority of the directors present, whether or not a quorum is present, may adjourn any
meeting to another time and place. Notice of any adjournment of a meeting to another time or place
shall be given, in the manner described above, to the directors who were not present at the time of
the adjournment and, unless such time and place are announced at the meeting, to the other
directors.
Section 6. Resignations. Any director of the Corporation may resign at any time by
giving written notice to the Board of Directors or to the President or to the Secretary of the
Corporation. Such resignation shall take effect at the time specified therein; and unless
otherwise specified therein the acceptance of such resignation shall not be necessary to make it
effective.
Section 7. Removal of Directors. Any one or more of the directors may be removed for
cause by action of the Board of Directors. Any or all of the directors may be removed with or
without cause by vote of the shareholders.
Section 8. Newly Created Directorships and Vacancies. Newly created directorships
resulting from an increase in the number of directors and vacancies occurring in the Board of
Directors for any reason except the removal of directors by shareholders may be filled by vote of a
majority of the directors then in office, although less than a quorum exists.
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Vacancies occurring as a result of the removal of directors by shareholders shall be filled by
the shareholders. A director elected to fill a vacancy shall be elected to hold office for the
unexpired term of his predecessor.
Section 9. Executive and Other Committees of Directors. The Board of Directors, by
resolution adopted by a majority of the entire Board, may designate from among its members an
executive committee and other committees each consisting of three or more directors and each of
which, to the extent provided in the resolution, shall have all the authority of the Board, except
that no such committee shall have authority as to the following matters:
(1) The submission to shareholders of any action that needs shareholders approval;
(2) The filling of vacancies in the Board or in any committee;
(3) The fixing of compensation of the directors for serving on the Board or on any
committee;
(4) The amendment or repeal of the by-laws, or the adoption of new by-laws;
(5) The amendment or repeal of any resolution of the Board which, by its term, shall
not be so amendable or repealable; or
(6) The removal or indemnification of directors.
The Board of Directors may designate one or more directors as alternate members of any such
committee, who may replace any absent member or members at any meeting of such committee.
Unless a greater proportion is required by the resolution designating a committee, a majority
of the entire authorized number of members of such committee shall constitute a quorum for the
transaction of business, and the vote of a majority of the members present at a meeting at the time
of such vote, if a quorum is then present, shall be the act of such committee.
Each such committee shall serve at the pleasure of the Board of Directors.
Section 10. Compensation of Directors. The Board of Directors shall have authority to
fix the compensation of directors for services in any capacity.
ARTICLE III
OFFICERS
Section 1. Officers. The Board of Directors, as soon as may be practicable after the
annual election of directors, shall elect a President, one or more Vice-Presidents, a Secretary and
a Treasurer, and from time to time may elect or appoint such other officers as it may determine.
Any two or more offices may be held by the same person, except that the same person may not
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hold the offices of President and Secretary. The Board of Directors may also elect such
additional Vice-Presidents, one or more Assistant Secretaries and Assistant Treasurers.
Section 2. Other Officers. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by the Board.
Section 3. Compensation. The salaries of all officers and agents of the Corporation
shall be fixed by the Board of Directors.
Section 4. Term of Office and Removal. Each officer shall hold office for the term
for which he is elected or appointed, and until his successor has been elected or appointed and
qualified. Unless otherwise provided in the resolution of the Board of Directors electing or
appointing an officer, his term of office shall extend to and expire at the meeting of the Board
following the next annual meeting of shareholders. Any officer may be removed by the Board, with
or without cause, at any time. Removal of an officer without cause shall be without prejudice to
his contract rights, if any, and the election or appointment of an officer shall not of itself
create contract rights.
Section 5. Powers and Duties.
(a) President: The President shall be the chief executive officer of the Corporation,
shall have general and active management of the business of the Corporation and shall see that all
orders and resolutions of the Board of Directors are carried into effect. He shall also preside at
all meetings of the shareholders and the Board of Directors.
He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.
(b) Vice-Presidents: The Vice-Presidents, in the order designated by the Board of
Directors, or in the absence of any designation, then in the order of their election, during the
absence or disability of or refusal to act by the President shall perform the duties and exercise
the powers of the President, and shall perform such other duties as the Board of Directors shall
prescribe.
(c) Secretary and Assistant Secretaries: The Secretary shall attend all meetings of
the Board of Directors and all meetings of the shareholders and record all the proceedings of the
meetings of the Corporation and of the Board of Directors in a book to be kept for that purpose and
shall perform like duties for the standing committees when required. He shall give, or cause to be
given, notice of all meetings of the shareholders and special meetings of the Board of Directors,
and shall perform such other-duties as may be prescribed by the Board of Directors or President,
under whose supervision he shall be. He shall have custody of the corporate seal of the
Corporation and he, or an Assistant Secretary, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by his signature or by the
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signature of such Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the affixing by his signature.
The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order
determined by the Board of Directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Secretary or in the event of his inability or refusal
to act, perform the duties and exercise the powers of the Secretary and shall perform such other
duties and have such other powers as the Board of Directors may from time to time prescribe.
(d) Treasurer and Assistant Treasurers: The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories as may be designated
by the Board of Directors.
He shall disburse the funds of the Corporation as may be ordered by the Board of Directors,
taking proper vouchers for such disbursements, and shall render to the President and the Board of
Directors, at its regular meetings, or when the Board of Directors so require, an account of all
his transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, he shall give the Corporation a bond (which shall be
renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of his office and for the
restoration, retirement or removal from office, of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control belonging to the Corporation.
The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the
order determined by the Board of Directors (or if there be no such determination, then in the order
of their election), shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such
other duties and have such other powers as the Board of Directors may from time to time prescribe.
Section 6. Books to be Kept. The Corporation shall keep (a) correct and complete
books and records of account, (b) minutes of the proceedings of the shareholders, Board of
Directors and any committees of directors, and (c) a current list of the directors and officers and
their residence addresses; and the Corporation shall also keep at its office in the State of New
York or at the office of its transfer agent or registrar in the State of New York, if any, a record
containing the names and addresses of all shareholders, the number and class of shares held by each
and the dates when they respectively became the owners of record thereof.
The Board of Directors may determine whether and to what extent and at what times and places
and under what conditions and regulations any accounts, books, records or other documents of the
Corporation shall be open to inspection, and no creditor, security holder or other person shall
have any right to inspect any accounts, books, records or other documents of the Corporation except
as conferred by statute or as so authorized by the Board.
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Section 7. Checks, Notes, etc. All checks and drafts on, and withdrawals from the
Corporations accounts with banks or other financial institutions, and all bills of exchange, notes
and other instruments for the payment of money, drawn, made, indorsed, or accepted by the
Corporation, shall be signed on its behalf by the person or persons thereunto authorized by, or
pursuant to resolution of, the Board of Directors.
ARTICLE IV
FORMS OF CERTIFICATES AND LOSS AND TRANSFER OF SHARES
Section 1. Forms of Share Certificates. The shares of the Corporation shall be
represented by certificates, in such forms as the Board of Directors may prescribe, signed by the
President or a Vice-President and the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and may be sealed with the seal of the Corporation or a facsimile thereof.
The signatures of the officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the Corporation or its
employee. In case any officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at the date of issue.
Each certificate representing shares issued by the Corporation shall set forth upon the face
or back of the certificate, or shall state that the Corporation will furnish to any shareholder
upon request and without charge, a full statement of the designation, relative rights, preferences
and limitations of the shares of each class of shares, if more than one, authorized to be issued
and the designation, relative rights, preferences and limitations of each series of any class of
preferred shares authorized to be issued so far as the same have been fixed, and the authority of
the Board of Directors to designate and fix the relative rights, preferences and limitations of
ether series.
Each certificate representing shares shall state upon the face thereof:
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That the Corporation is formed under the laws of the State of Delaware; |
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The name of the person or persons to whom issued; and |
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(3) |
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The number and class of shares, and the designation of the series, if any, which
such certificate represents. |
Section 2. Transfers of Shares. Shares of the Corporation shall be transferable on
the record of shareholders upon presentment to the Corporation or a transfer agent of a certificate
or certificates representing the shares requested to be transferred, with proper indorsement on the
certificate or on a separate accompanying document, together with such evidence of the payment of
transfer taxes and compliance with other provisions of law as the Corporation or its transfer agent
may require.
Any pledgee of, or purchaser from an pledgee of, all of the outstanding capital stock of the
corporation shall be authorized to act as transfer agent of its shares and to make all appropriate
entries on its records as to ownership and transfer of shares.
9
Section 3. Lost, Stolen or Destroyed Share Certificates. No certificate for shares of
the Corporation shall be issued in place of any certificate alleged to have been lost, destroyed or
wrongfully taken, except, if and to the extent required by the Board of Directors, upon:
(1) Production of evidence of loss, destruction or wrongful taking;
(2) Delivery of a bond indemnifying the Corporation and its agents against any claim
that may be made against it or them on account of the alleged loss, destruction or wrongful
taking of the replaced certificate or the issuance of the new certificate;
(3) Payment of the expenses of the Corporation and its agents incurred in connection
with the issuance of the new certificate; and
(4) Compliance with such other reasonable requirements as may be imposed.
ARTICLE V
OTHER MATTERS
Section 1. Corporate Seal. The Board of Directors may adopt a corporate seal, alter
such seal at pleasure, and authorize it to be used by causing it or a facsimile to be affixed or
impressed or reproduced in any other manner.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be the 12 months
ending January 31, or such other period as may be fixed by the Board of Directors.
Section 3. Amendments. By-laws of the Corporation may be adopted, amended or repealed
by vote of the holders of the shares at the time entitled to vote in the election of any directors.
By-laws may also be adopted, amended or repealed by the Board of Directors, but any by-law adopted
by the Board may be amended or repealed by the shareholders entitled to vote thereon as hereinabove
provided.
If any by-law regulating an impending election of directors is adopted, amended or repealed
by the Board of Directors, there shall be set forth in the notice of the next meeting of
shareholders for the election of directors the by-law so adopted, amended or repealed, together
with a concise statement of the changes made.
10
exv3w7
Exhibit 3.7
ROSS MILLER
Secretary of State
208 North Carson Street
Carson City, Nevada 89701-4299
(775) 584 5708
Website: www.nvsos.gov
Articles of Organization Limited-Liability Company
(PURSUANT TO NRS CHAPTER 86)
Filed in the office of Document Number
20080831813-24
Ross Miller Secretary of State
State of Nevada
Filing Date and Time
12/24/2008 9:30 AM
Entity Number
E0777352008-1
UM BLACK MK ONLY-DO NOT HIGHLIGHT
USE ONLY
(must contain approved
Check box if a Series Limited-Liability Company
?
2. Registered Agent for Service
of Process:(check only one box)
Commercial Registered Agent:
Noncommercial Registered Agent OR Office or Position with Entity
(name and address below) (name and address below)
Entity Services (Nevada), LLC
Name of Noncommercial Registered Agent OR Name of Title or Office or Other Position with Entity
502 East John StreetCarson City
Street AddressCity
Mailing Address (If different from street address) City
89706
Nevada
Zip Code
3. Dissolution Date:(options)
latest data upon which the company is to dissolve (if existence is not
4. Management:
Company shall be managed by:
Manager(s) OR Member(s) (check only one box)
5. Name and Address of each Manager or Managing Member: (attach additional page if more than 3)
1) Robert A. Beizer
1750 K Street NW, Suite 1200
Street Address
2} Kristine W .Eppes
City
Washington, D.C. 20006.
State Zip Code
2215-B Renaissance Drive
Las Vegas
Street Address City State Zip Code
3) Hilton H. Howell, Jr. |
4370 Peachtree Road, N.E.
Atlanta
GA 30319
Street Address City State
Organizer: (attach Name Organizer Signature
additional page if more 600 Peachtree Street, N.E, Suite 5200 Atlanta GA 30306
7. Certificate of Acceptance of Appointment of Registered Agent:
I hereby accept appointment as Registered Agent for the above named Entity.
December 16,2008
Authorized Signature of Registered Agent or On Behalf of Registered Agent Entity
This form must be accompanied by appropriate fees.
Nevada Secretary of
NRS is DLLC Articles
Revised on 7-1-08 |
Attachment
to Articles of Organization of Gray Television Licensee, LLC
As required by N.R.S. 92A.205(4) to be disclosed in the Articles of Organization of Gray Television
Licensee, LLC (the Company), the Company shall be the
resulting entity in the conversion of Gray
Television Licensee, Inc., a Delaware corporation, and, as such, the existence of the Company does
not begin until 12:00 a.m., Eastern Time, on January 1, 2009, which is the effective time of said
conversion. This statement is attached to and made a part of these Articles of Organization of the
Company.
exv3w8
Exhibit 3.8
LIMITED LIABILITY COMPANY AGREEMENT
OF
GRAY TELEVISION LICENSEE, LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT (this Agreement) of Gray Television
Licensee, LLC, a Nevada limited liability company (the Company), is made and entered into
to be effective as of 12:00 a.m., January 1, 2009 (the Effective Time) between the
Company and Gray Television Group, Inc., a Delaware corporation, its sole member.
ARTICLE I.
DEFINITIONS
For purposes of this Agreement, the following terms shall have the following meanings:
1.1 Act. Chapter 86 (Limited-Liability Companies) of the Nevada Revised Statutes, as
amended from time to time.
1.2 Affiliate. Affiliate of an entity shall mean any other entity controlling,
controlled by, or under common control with such entity where control means the right to elect a
majority of the board of directors or other body controlling such entity.
1.3 Articles. The Articles of Organization of the Company filed with the Secretary of
State of Nevada, as amended from time to time by the Shareholder.
1.4 Shareholder. Gray Television Group, Inc. and any additional members of the
Company admitted pursuant to Article IX hereof.
ARTICLE II.
FORMATION
2.1 Formation. Effective as of the Effective Time, the Company was formed as a Nevada
limited liability company by delivery of the Articles to the Nevada Secretary of State in
accordance with the provisions of the Act.
2.2 Name. The name of the Company is Gray Television Licensee, LLC.
2.3 Term. The term of the Company shall commence on the date the Articles were filed
with the Secretary of State of Nevada and shall continue unless terminated or dissolved in
accordance with this Agreement.
2.4 Registered Office and Agent. The Companys registered office shall be at 502 East
John Street, Carson City, Nevada 89706. The name of its registered agent is Entity Services
(Nevada), LLC.
2.5 Principal Office. The principal office of the Company shall be located at 2215-B
Renaissance Drive, Las Vegas, Nevada 89119.
2.6 Changes to Offices and Agent. The Company may change its registered office,
registered agent and principal office from time to time with the approval of the Board.
2.7 Units; Shareholder Certificates. The limited liability company membership
interests of the Company shall be evidenced by units of ownership (Units), and Units held
by Shareholders in the Company may be evidenced by certificates (Certificates) as
approved by the Board and, in such event, the Board may establish reasonable procedures for the
delivery and reissuance of the Certificates in connection with the transfer of the underlying
Units, loss or destruction of Certificates and other eventualities. Among other matters, such
procedures may set forth required fees, indemnification documentation and signatures (including
guarantees thereof) to be obtained from parties requesting reissuance of Certificates. Such
procedures need not be incorporated into this Agreement, but a copy thereof shall be delivered to
all Shareholders. Each Certificate shall be stamped or imprinted with a legend as the Board shall
deem necessary or appropriate.
ARTICLE III.
PURPOSE OF THE COMPANY; NATURE OF BUSINESS
3.1 Purpose and Powers of the Company. The purpose of the Company is, and the Company
shall have the power and authority, to engage in and carry on any lawful business, purpose or
activity for which limited liability companies may be formed under the Act.
ARTICLE IV.
ACCOUNTING AND RECORDS
4.1 Accounting Period. The Companys accounting period and tax year shall be the
calendar year.
4.2 Records to be Maintained.
(a) The Company shall maintain the following records at its principal office:
(i) A copy of this Agreement and the Articles and all amendments thereto, and
executed copies of the powers of attorney, if any, pursuant to which this Agreement,
the Articles, or any amendments thereto have been executed;
(ii) Copies of such records as would enable the Shareholder to determine the
business and financial condition of the Company, the Shareholder, the date upon
which the Shareholder became a member of the Company, the Shareholders last known
mailing address, and the voting rights of the Shareholder, as applicable;
2
(iii) Any financial statements of the Company for the three most recent years;
and
(iv) True and full information regarding the amount of cash and other property
(including the value thereof) contributed by the Shareholder and what the
Shareholder agreed to contribute in the future.
(b) The Shareholder may, at the Shareholders own expense, inspect and copy any Company
record upon reasonable request during ordinary business hours.
ARTICLE V.
MANAGEMENT
5.1 Management of the Company.
(a) Board of Directors. All management of the Company shall be vested exclusively in
a Board of Directors (the Board), acting collectively in its capacity as the sole manager
of the Company, without the need for any consent or approval of the Shareholder or any other
Shareholder, and no Shareholder (in such capacity) shall have any right to participate in the
day-to-day management of the Company. The Shareholder hereby covenants and agrees that it will
comply in all respects with any contract or agreement approved by the Board as permitted under this
Agreement. The acts of the Board shall bind the Company.
(b) Composition of Board; Powers. The Board shall consist of three (3) Board members,
or such other number of Board members as determined from time to time by the majority vote of the
Board. The Board members as of the Effective Time are set forth on Exhibit A attached
hereto and incorporated herein by this reference. Subject to the terms of this Agreement, the
Board shall have the exclusive right, authority and power to control, direct, manage and administer
the business, affairs and operations of the Company and to do all things necessary to carry on the
business and purposes of the Company consistent with applicable law and this Agreement as the Board
determines in good faith to be appropriate or advisable. Except as restricted by this Agreement,
any member of the Board is hereby authorized by all Shareholders to execute and deliver on behalf
of the Company any and all documents, contracts, certificates, agreements and instruments, and to
take any action of any kind and to do anything and everything, that the Board deems necessary or
appropriate in order to carry out the business of the Company in accordance with the provisions of
this Agreement and applicable law. No person, firm, partnership, corporation or other entity shall
be required to inquire into said authority of the Board members, or any of them, to execute and
perform any document on behalf of the Company.
(c) Removal of Board Member. Any Board member may be removed at any time with or
without cause by the Shareholder. Upon the removal of a Board member or upon the earlier death,
resignation, retirement or disqualification thereof, a replacement Board member may immediately be
appointed by the Shareholder. At no time shall the Board consist of less than one (1) member.
3
(d) Required Vote; Board Meetings. Each Board member shall have one (1) vote, and the
vote of a majority of the Board members then in office shall be required for the Board to take any
action on behalf of the Company and, without such majority approval, no Board member, acting alone
in such capacity, or Shareholder shall (and no such person shall have any authority to) take any
action with respect thereto. Except as expressly provided in this Agreement, the Board members
shall not be entitled to act other than through the Board. An annual meeting of the Board may be
held each year. The Board may also schedule additional meetings to occur at regular intervals
throughout the year. Special meetings of the Board may be called by or at the request of any Board
member. A meeting of the Board shall be held on such date and at such time and place as shall be
set forth in the notice thereof. Unless waived thereby, the Company shall give written notice to
each Board member of each meeting of the Board stating the date, time and place of the meeting.
Such notice shall be given at least forty-eight (48) hours in advance by courier service, in person
or by electronic means or at least ten (10) days in advance by mail. Attendance by a Board member
at a meeting shall constitute waiver of notice of such meeting, except where a Board member attends
a meeting for the express purpose of objecting at the beginning of the meeting to the transaction
of business at the meeting. Any action required or permitted to be taken at any meeting of the
Board may be taken without a meeting upon written approval of not less than the number of votes
that would be necessary to authorize or take such action at a meeting of the Board. Such written
approval shall have the same force and effect as a meeting vote of the Board and shall be evidenced
by one or more written consents describing the action taken. Board members may participate in a
meeting of the Board by means of conference telephone or similar communication equipment by means
of which all persons participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
5.2 Officers.
(a) General Authority. The Company may have such officers (the Officers) as
may be appointed by the Board from time to time, each having such powers and duties as generally
pertain to their respective offices as well as such powers and duties as from time to time may be
conferred by the Board. Any number of offices may be held by the same person. The salaries, if
any, of all Officers of the Company shall be fixed by the Board. The Officers of the Company shall
hold office until their successors are chosen and qualified; provided, however, any
Officer appointed by the Board may be removed at any time by the Board with or without cause in the
Boards discretion. Any vacancy occurring in any office of the Company may be filled by the Board.
In addition, the Board may appoint, employ or otherwise cause the Company to contract with such
other persons or entities for the transaction of the business of the Company or the performance of
services for or on behalf of the Company as it shall determine in its discretion from time to time.
The Board may delegate to any Officer of the Company or to any such other person or entity such
authority to act on behalf of and to bind the Company. The Officers of the Company as of the
Effective Time are set forth on Exhibit B attached hereto and incorporated herein by this
reference.
(b) Bank Accounts. The Officers of the Company are authorized and directed to open
accounts with any bank as may be selected as depositories for the Company by the Board, and to
deposit therein funds of the Company, drafts, checks and notes of the Company, payments on
4
said accounts to be made in the corporate name. The Officers are authorized to execute and deliver
corporate resolutions on such forms as may be presented or required by any such bank, said forms to
be completed with such information as the executing Officers may deem to be in the best interest of
the Company. All such resolutions which may be required by banks selected by the Company dealing
with the designation of such banks as depositories are adopted as resolutions of the Board, and any
Officer of the Company may hereafter attest to and execute such bank resolutions and/or forms
without additional action of the Board.
5.3 Liability of Shareholder, Board Members and Officers. No Shareholder, Board
member or Officer shall be liable for the obligations of the Company. The failure of the Company
to observe any formalities or requirements relating to the exercise of its powers or management of
its business or affairs under this Agreement or the Act shall not be grounds for imposing personal
liability on the Shareholder, any Board member or any Officer for liabilities of the Company. The
Shareholders and each Board member and Officers liability shall be limited as set forth in the
Act and other applicable law.
5.4 Indemnification. To the fullest extent not prohibited by applicable law, the
Company shall indemnify the Shareholder and each Board member and Officer of the Company for all
costs and expenses (including attorneys fees and disbursements), losses, liabilities, and damages
paid or accrued by such Shareholder, Board member or Officer in connection with any act or omission
performed by such person in good faith on behalf of the Company. To the fullest extent not
prohibited by applicable law, expenses (including attorneys fees and disbursements) incurred by
any such Shareholder, Board member or Officer, in defending any claim, demand, action, suit or
proceeding may, from time to time, upon approval by the Shareholder, be advanced by the Company
prior to the final disposition of such claim, demand, action, suit or proceeding, subject to
recapture by the Company following a later determination that such Shareholder, Board member or
Officer was not entitled to indemnification hereunder. Notwithstanding the foregoing, no
Shareholder, Board member or Officer shall be indemnified against liability for any intentional
misconduct, any knowing violation of law or any transaction in which such Shareholder, Board member
or Officer receives a personal benefit in violation or breach of the Act or this Agreement.
ARTICLE VI.
SHAREHOLDER; CONTRIBUTIONS
6.1 Shareholder. The sole Shareholder of the Company is Gray Television Group, Inc.,
a Delaware corporation.
6.2 Capital Contributions.
(a) The Shareholder shall be deemed to have made a capital contribution to the Company
in the amount of $1,000.00.
(b) The above capital contribution is the only capital contribution required to be made
by the Shareholder. Unless the Shareholder otherwise agrees, the Shareholder shall not be
required to contribute any additional capital to the Company.
5
ARTICLE VII.
ALLOCATIONS AND DISTRIBUTIONS
7.1 Distributions. Except as provided in paragraph 7.2, the Company may make
distributions as determined by the Board from time to time in accordance with this Agreement.
7.2 Limitations on Distributions. No distribution shall be declared and paid unless,
after the distribution is made, the assets of the Company are in excess of all liabilities of the
Company. No distribution shall be made to the Shareholder if such distribution is prohibited by
the Act.
7.3 Distribution Upon Sale of Assets. Upon a sale of all, or substantially all, of
the assets of the Company, the net proceeds thereof shall be distributed to the Shareholder.
ARTICLE VIII.
MEMBERSHIP INTERESTS
8.1 Units. In exchange for its capital contribution in Section 6.2 above, the
Shareholder was issued by the Company 1,000 Units in the Company, which is one hundred percent
(100%) of the ownership interests in the Company.
8.2 Disposition. The Shareholders Units in the Company are transferable either
voluntarily or by operation of law. The Shareholder may dispose of all or a portion of the
Shareholders Units. Upon the transfer of the Shareholders Units, the transferee shall be
admitted as a Shareholder at the time the transfer is completed.
ARTICLE IX.
ADMISSION OF ADDITIONAL SHAREHOLDERS
9.1 Additional Shareholders. The Shareholder may admit additional member(s) to the
Company as Shareholders and determine the contributions to be made by, and Units issued to, such
additional Shareholder(s). The Company and the Shareholder acknowledge that this Agreement governs
the relationship between the Company, the Board and the Shareholder only. If the Shareholder
admits additional Shareholder(s), or if at any time the Company otherwise has more than one
Shareholder, the rights, obligations and duties of all of the Shareholders shall be set forth in an
amended and restated operating agreement of the Company executed at the time of admission of such
additional Shareholder(s) to the Company. Such amended and restated operating agreement shall
supersede and replace this Agreement in its entirety.
ARTICLE X.
DISSOLUTION AND WINDING UP
10.1 Dissolution. The Company shall be dissolved and its affairs wound up or shall be
terminated only upon the occurrence of any of the following events:
(a) the Shareholder elects to dissolve the Company;
6
(b) there are no Shareholders; or
(c) the entry of a decree of judicial dissolution under the Act.
10.2 Effect of Dissolution. Upon dissolution, the Company shall cease to carry on its
business, and its affairs shall be wound up in accordance with this Article X and the Act.
10.3 Winding Up, Liquidation and Distribution of Assets.
Upon the winding up of the Company, the Company property shall be distributed:
(a) first, to creditors, including the Shareholder if it is a creditor, to the extent
permitted by law, in satisfaction of Company liabilities; and
(b) second, to the Shareholder.
Any such distributions shall be in cash or property or partly in both, as determined by the
Board.
10.4 Articles of Dissolution. When all debts, liabilities and obligations have been
paid and discharged or adequate provisions have been made therefor and all of the remaining
property and assets have been distributed as provided in Section 10.3, Articles of Dissolution
shall be executed and filed with the Secretary of State of Nevada in accordance with the Act.
ARTICLE XI.
AMENDMENT
11.1 Amendment. This Agreement may be amended or modified from time to time only by a
written instrument signed by the Shareholder.
ARTICLE XII.
MISCELLANEOUS PROVISIONS
12.1 Entire Agreement. This Agreement represents the entire Agreement between the
Shareholder and the Company.
12.2 No Conflict of Interest. The Shareholder may have other business interests and
engage in other activities in addition to and exclusive from those relating to the Company.
Neither the Company nor any other Shareholder shall have any right by virtue of this Agreement in
or to any such interests or activities of the Shareholder or to the income or proceeds derived
therefrom. The Shareholder may transact business with the Company and, subject to applicable laws,
has the same rights and obligations with respect thereto as any other person. No transaction
between the Shareholder and the Company shall be voidable solely because the Shareholder has a
direct or indirect interest in the transaction if either the transaction is fair and
7
reasonable to the Company or the other Shareholders authorize, approve and/or ratify the
transaction in accordance with this Agreement or the Act.
12.3 Application of Nevada Law. This Agreement, the application and interpretation
hereof shall be governed exclusively by its terms and the laws of the State of Nevada and
specifically the Act.
12.4 Execution of Additional Instruments. The Shareholders hereby agree to execute
such other and further statements of interest and holdings, designations, powers of attorney and
other instruments necessary to comply with any laws, rules or regulations.
12.5 Construction. Whenever the singular form is used in this Agreement, and when
required by the context, the same shall include the plural and vice versa, and the masculine gender
shall include the feminine and neuter genders and vice versa.
12.6 Headings. The headings in this Agreement are inserted for convenience only and
are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this
Agreement or any provision hereof.
12.7 Waivers. The failure of any party to seek redress for violation of or to insist
upon the strict performance of any covenant or condition of this Agreement shall not prevent a
subsequent act, which would have originally constituted a violation, from having the effect of an
original violation.
12.8 Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same instrument. Any
signature page of any such counterpart, or any electronic facsimile thereof, may be attached or
appended to any other counterpart to complete a fully executed counterpart to this Agreement, and
any telecopy or other facsimile transmission of any signature shall be deemed an original and shall
bind such party.
12.9 Further Assurances. The Shareholders agree to cooperate, and to execute and
deliver in a timely fashion any and all additional documents necessary to effectuate the purposes
of the Company and this Agreement.
12.10 No Rights of Creditors or Third Parties Under Agreement. This Agreement is
entered into between the Company and the Shareholder for the exclusive benefit of the Company, the
Shareholder and their respective successors and assignees. This Agreement is expressly not
intended for the benefit of any creditor of the Company or any other person. Except and only to
the extent mandated by applicable statute, no such creditor or third party shall have any rights
under this Agreement or any agreement between the Company and the Shareholder with respect to any
contribution, any deficiency in the Shareholders capital account (which the Shareholder shall not
be obligated to restore), or otherwise.
12.11 Federal Income Tax Elections; Tax Status. All elections required or permitted
to be made by the Company under The Internal Revenue Code of 1986, as amended from time to
8
time, or any corresponding provisions of succeeding law, or the regulations of the United States
Department of Treasury promulgated thereunder shall be made by the Shareholder. As long as the
Shareholder is the only Shareholder of the Company, the Company shall be taxed as a division of the
Shareholder if the Shareholder is an entity other than an individual, trust, or estate and, if the
Shareholder is an individual, estate, or trust, then as a sole proprietorship or as directly owned
assets of the Shareholder. All provisions of the Articles and of this Agreement are to be
construed so as to preserve the tax status under those circumstances.
9
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the
Effective Time.
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Shareholder
GRAY TELEVISION GROUP, INC.,
a Delaware corporation
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By: |
/s/
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Name: |
Robert S. Prather, Jr. |
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Title: |
President |
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Company
GRAY TELEVISION LICENSEE, LLC,
a Nevada limited liability company
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By: |
Gray Television Group, Inc.,
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a Delaware corporation |
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Its: |
Sole Member |
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By: |
/s/
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Name: |
Robert S. Prather, Jr. |
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Title: |
President |
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10
exv5w1
Exhibit 5.1
[JONES DAY LETTERHEAD]
June 23, 2010
Gray Television, Inc.
4370 Peachtree Road, NE
Atlanta, Georgia 30319
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Re: |
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Registration Statement on Form S-4 Filed by Gray Television, Inc. Relating
to the Exchange Offer (as defined below) |
Ladies and Gentlemen:
We have acted as counsel for Gray Television, Inc., a Georgia corporation (the
Company), and the Subsidiary Guarantors (as defined below) in connection with the
Registration Statement on Form S-4 to which this opinion has been filed as an exhibit (the
Registration Statement). The Registration Statement relates to the proposed issuance and
exchange (the Exchange Offer) of up to $365,000,000 aggregate principal amount of 101/2%
Senior Secured Second Lien Notes due 2015 of the Company (the Exchange Notes) for an
equal principal amount of 101/2% Senior Secured Second Lien Notes due 2015 of the Company outstanding
on the date hereof (the Original Notes). The Original Notes have been, and the Exchange
Notes will be, issued pursuant to an Indenture, dated as of April 29, 2010 (as amended,
supplemented or otherwise modified, the Indenture), by and among the Company, the
companies listed on Exhibit A hereto (each, a Covered Guarantor and, together,
the Covered Guarantors), the company listed on Exhibit B hereto (the Other
Guarantor; the Other Guarantor and the Covered Guarantors are collectively referred to as the
Subsidiary Guarantors) and U.S. Bank National Association, as trustee (the
Trustee). The Original Notes are, and the Exchange Notes will be, guaranteed (each, a
Subsidiary Guarantee) on a joint and several basis by the Subsidiary Guarantors.
In connection with the opinions expressed herein, we have examined such documents, records and
matters of law as we have deemed relevant or necessary for purposes of such opinions.
Gray Television, Inc.
June 23, 2010
Page 2
Based on the foregoing, and subject to the further limitations, qualifications and assumptions
set forth herein, we are of the opinion that:
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1. |
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The Exchange Notes, when they are executed by the Company, authenticated by the
Trustee in accordance with the Indenture and issued and delivered in exchange for the
Original Notes in accordance with the terms of the Exchange Offer, will constitute
valid and binding obligations of the Company. |
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2. |
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The Subsidiary Guarantee of the Exchange Notes (each, an Exchange
Guarantee and together, the Exchange Guarantees) of each Covered
Guarantor, when it is issued and delivered in exchange for the Subsidiary Guarantee of
the Original Notes (together, the Original Guarantees) of that Covered
Guarantor in accordance with the terms of the Exchange Offer, will constitute a valid
and binding obligation of that Covered Guarantor. |
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3. |
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The Exchange Guarantee of the Other Guarantor, when it is issued and delivered in
exchange for the Original Guarantee of the Other Guarantor in accordance with the terms
of the Exchange Offer, will constitute a valid and binding obligation of the Other
Guarantor. |
The opinions set forth above are subject to the following limitations, qualifications and
assumptions:
For purposes of the opinions expressed herein, we have assumed that the Trustee has
authorized, executed and delivered the Indenture and that the Indenture is the valid, binding and
enforceable obligation of the Trustee.
The opinions expressed herein are limited by (i) bankruptcy, insolvency, reorganization,
fraudulent transfer and fraudulent conveyance, voidable preference, moratorium or other similar
laws, and related regulations and judicial doctrines from time to time in effect relating to or
affecting creditors rights and remedies generally, and (ii) general equitable principles and
public policy considerations, whether such principles and considerations are considered in a
proceeding at law or in equity.
The opinions expressed herein are limited to (i) the laws of the State of New York, (ii) the
laws of the State of Georgia and (iii) the General Corporation Law of the State of Delaware,
including applicable provisions of the Delaware Constitution and the reported judicial decisions
interpreting such laws, in each case as currently in effect, and we express no opinion or view
as to the effect of any other law of the State of Delaware or the laws of any other jurisdiction on
the opinions expressed herein.
We are not admitted or qualified to practice law in the state of Nevada. Therefore, in
rendering the opinion expressed in Paragraph 3 above, we have relied solely upon the opinion of
Gray Television, Inc.
June 23, 2010
Page 3
Woodburn and Wedge, a copy of which has been filed as Exhibit 5.2 to the Registration
Statement, with respect to matters governed by the laws of the State of Nevada.
We hereby consent to the reliance upon the opinions expressed herein by Woodburn and Wedge for
purposes of its opinions being delivered and filed as Exhibit 5.2 to the Registration Statement. We
also hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and
to the reference to Jones Day under the caption Legal Matters in the prospectus constituting a
part of such Registration Statement. In giving such consent, we do not thereby admit that we are
included in the category of persons whose consent is required under Section 7 of the Securities Act
of 1933 or the rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
|
|
|
|
|
|
Very truly yours,
|
|
|
/s/ Jones Day
|
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|
|
|
|
|
Exhibit A
|
|
|
|
|
Jurisdiction of |
Entity |
|
Incorporation |
|
|
|
WVLT-TV, Inc.
|
|
Georgia |
|
|
|
Gray Television Group, Inc.
|
|
Delaware |
Exhibit B
|
|
|
|
|
Jurisdiction of |
Entity |
|
Organization |
|
|
|
Gray Television Licensee, LLC
|
|
Nevada |
exv5w2
Exhibit 5.2
[WOODBURN AND WEDGE LETTERHEAD]
June 23, 2010
Gray Television, Inc.
4370 Peachtree Road, NE
Atlanta, Georgia 30319
|
|
|
Re: Registration Statement on Form S-4 filed by Gray Television, Inc. and the
Guarantors (as defined below) relating to the Exchange Offer (as defined below) for
all outstanding 101/2% Senior Secured Second Lien Notes due 2015 |
Ladies and Gentlemen:
We have acted as special Nevada counsel for Gray Television Licensee, LLC, a Nevada limited
liability company (the Nevada Subsidiary), in connection with the Registration Statement on Form
S-4 (the Registration Statement), which relates to the proposed issuance and exchange (the
Exchange Offer) of up to $365,000,000 aggregate principal amount of 101/2% Senior Secured Second
Lien Notes due 2015 (the Exchange Notes) of Gray Television, Inc., a Georgia corporation (the
Company), for an equal principal amount of 101/2% Senior Secured Second Lien Notes due 2015 of the
Company outstanding on the date hereof (the Outstanding Notes), and the guarantee of the Exchange
Notes by the Nevada Subsidiary and the other subsidiaries of the Company listed on Exhibit A hereto
(the Other Guarantors, and, together with the Nevada Subsidiary the Guarantors).
The Outstanding Notes have been, and the Exchange Notes will be, issued under the Indenture
dated as of April 29, 2010 (the Indenture) by and among the Company, as issuer, the Guarantors
and U.S. Bank National Association, as trustee (the Trustee). Except as otherwise defined herein,
terms used in this letter but not otherwise defined herein are used as defined in the Indenture.
With your permission, all assumptions and statements of reliance herein have been made without
any independent investigation or verification on our part except to the extent, if any,
Gray Television, Inc.
June 23, 2010
Page 2 of 5
otherwise expressly stated, and we express no opinion with respect to the subject matter or
accuracy of the assumptions or items upon which we have relied.
In connection with the opinions expressed herein, we have: (1) investigated such
questions of law, and (2) examined such documents and records of the Nevada Subsidiary, the
Officers Certificate, as defined below, and other documents, as we have deemed necessary or
appropriate for the purposes of this opinion. We have examined, among other documents, the
following:
1. A copy of the Indenture;
2. The guarantee of the Nevada Subsidiary, which terms are set forth in the Indenture (the
Guarantee);
3. The Officers Certificate of the Nevada Subsidiary delivered to us in connection with this
opinion letter, a copy of which is attached hereto as Exhibit B (the Officers Certificate); and
4. Copies of a certificate attached hereto as Exhibit C issued by the Secretary of State of
the State of Nevada, as to the existence and good standing of the Nevada Subsidiary as of the date
specified in the certificate (the Good Standing Certificate).
The documents referred to in the immediately preceding paragraphs numbered 1 and 2 above are
referred to herein collectively as the Documents.
In all such examinations, we have assumed the legal capacity of all natural persons executing
documents, the genuineness of all signatures, the authenticity of original and certified documents
and the conformity to original or certified copies of all copies submitted to us as conformed or
reproduction copies. As to various questions of fact relevant to the opinions expressed herein, we
have relied upon, and assume the accuracy of, representations and warranties contained in the
Documents and the Officers Certificate. We have not independently verified the accuracy and
completeness of the information contained in the Officers Certificate. In connection with the
opinion in paragraph 1 below, we have relied solely upon the Good Standing Certificate as to the
factual matters and legal conclusions set forth therein.
We have assumed that the Trustee has duly authorized, executed and delivered the Indenture and
that the Indenture is the valid, binding and enforceable obligation of the Trustee.
Based upon the foregoing, and subject to the limitations, qualifications and assumptions
set forth herein, we are of the opinion that:
(1) The Nevada Subsidiary has been duly organized and is validly existing and in good standing
as a limited liability company under the laws of the State of Nevada.
Gray Television, Inc.
June 23, 2010
Page 3 of 5
(2) As of the date of the Indenture, the Nevada Subsidiary had all requisite limited liability
company power and authority to enter into, and as of the date hereof the Nevada Subsidiary has the
limited liability company power and authority to perform its obligations under, the Indenture.
(3) The execution, delivery and performance of the Indenture and the Guarantee of the Exchange
Notes (the Exchange Guarantee) by the Nevada Subsidiary have been authorized by all necessary
limited liability company action of the Nevada Subsidiary.
(4) The Exchange Guarantee of the Nevada Subsidiary, when delivered in accordance with the
terms of the Exchange Offer in exchange for the Guarantee of the Outstanding Notes (the
Outstanding Guarantee) of the Nevada Subsidiary, will be validly issued by the Nevada Subsidiary
and will constitute valid and binding obligations of the Nevada Subsidiary.
The opinions set forth above are subject to the following qualifications:
(a) There not being any facts or circumstances relevant to such opinions not disclosed in
the representations made in or pursuant to the Documents and the Officers Certificate upon which
we have relied, as noted above.
(b) We do not assume any responsibility for the accuracy, completeness or fairness of any of
the statements contained in the Documents.
(c) We are qualified to practice law only in the State of Nevada, and our opinions expressed
herein are limited to the law of the State of Nevada. We specifically express no opinion on the law
of any other state within the United States or the law of any foreign country. We, further,
specifically express no opinion concerning the effect or applicability of the tax laws of the State
of Nevada or the United States of America, the Securities Act of 1933, the Securities Exchange Act
of 1934, other Federal securities laws and the securities laws of any state, including but not
limited to the State of Nevada. We specifically express no opinion concerning the effect of
applicability of the Bankruptcy Code as to the Company and the Guarantors. We specifically express
no opinion concerning the effect or applicability of any licenses or permits required by any
governmental authority. This opinion is limited to the matters expressly set forth herein, no
opinion is implied or may be inferred beyond the matters expressly set forth herein.
(d) We are qualified to practice law only in the State of Nevada. Therefore, in rendering the
opinion expressed in Paragraph 4 above, we have relied solely upon the opinion of Jones Day, a copy
of which has been filed as Exhibit 5.1 to the Registration Statement, with respect to matters
relating to the Company and the Guarantors governed by laws other than the laws of the State of
Nevada as set forth in such Exhibit 5.1.
The opinion is furnished by us as special Nevada counsel for the Nevada Subsidiary and is
rendered in connection with the transaction contemplated by the Documents and the Exchange Offer.
This opinion may be relied on only in connection with the Documents and the Exchange
Gray Television, Inc.
June 23, 2010
Page 4 of 5
Offer. We hereby consent to the reliance by Jones Day upon the opinions expressed herein for
purposes of any opinions being delivered by Jones Day filed as Exhibit 5.1 to the Registration
Statement. We also consent to the filing of this opinion as Exhibit 5.2 to the Registration
Statement and the filing of this consent shall not be deemed an admission that this firm is an
expert within the meaning of § 7 of the Securities Act of 1933 or related rules of the United
States Securities and Exchange Commission.
|
|
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|
|
Very truly yours,
/s/ WOODBURN AND WEDGE
|
|
|
|
|
|
|
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|
|
EXHIBIT A
OTHER GUARANTORS
|
|
|
NAME |
|
STATE OF INCORPORATION |
|
|
|
Gray Television Group, Inc. |
|
Delaware |
|
|
|
WVLT-TV, INC. |
|
Georgia |
exv12w1
Exhibit 12.1
GRAY TELEVISION, INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
|
|
|
|
Ended |
|
|
Year Ended December 31, |
|
|
|
March 31, 2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(dollars in thousands) |
|
Earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax (loss) income from continuing operations before adjustment for income or loss
from equity investees |
|
$ |
(7,981 |
) |
|
$ |
(34,307 |
) |
|
$ |
(313,027 |
) |
|
$ |
(35,694 |
) |
|
$ |
21,534 |
|
|
$ |
8,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed charges(1) |
|
|
27,366 |
|
|
|
95,157 |
|
|
|
64,746 |
|
|
|
70,186 |
|
|
|
73,277 |
|
|
|
57,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preference security dividend requirements(2) |
|
|
(7,714 |
) |
|
|
(25,551 |
) |
|
|
(10,143 |
) |
|
|
(2,502 |
) |
|
|
(6,013 |
) |
|
|
(10,269 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earnings (loss) as adjusted |
|
$ |
11,671 |
|
|
$ |
35,299 |
|
|
$ |
(258,424 |
) |
|
$ |
31,990 |
|
|
$ |
88,798 |
|
|
$ |
55,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed charges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expensed and capitalized(3) |
|
$ |
19,611 |
|
|
$ |
69,088 |
|
|
$ |
54,079 |
|
|
$ |
67,189 |
|
|
$ |
66,787 |
|
|
$ |
46,549 |
|
Estimate of interest within rental expense(4) |
|
|
41 |
|
|
|
518 |
|
|
|
524 |
|
|
|
495 |
|
|
|
477 |
|
|
|
834 |
|
Preference
security dividend requirements(2) |
|
|
7,714 |
|
|
|
25,551 |
|
|
|
10,143 |
|
|
|
2,502 |
|
|
|
6,013 |
|
|
|
10,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed charges |
|
$ |
27,366 |
|
|
$ |
95,157 |
|
|
$ |
64,746 |
|
|
$ |
70,186 |
|
|
$ |
73,277 |
|
|
$ |
57,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar amount of deficiency of earnings to cover fixed charges |
|
$ |
15,695 |
|
|
$ |
59,858 |
|
|
$ |
323,170 |
|
|
$ |
38,196 |
|
|
$ |
|
|
|
$ |
1,942 |
|
|
|
|
(1) |
|
See Fixed charges below for an itemization of components contained herein. |
|
(2) |
|
Preference security dividend requirements are computed by dividing the dollar amount of
dividends payable on the Companys outstanding preferred stock by (1 the effective tax rate
for the Companys continuing operations). |
|
(3) |
|
Includes amortization of premiums, discounts and capitalized expenses related to indebtedness. |
|
(4) |
|
Interest within rental expense is estimated at 33% of rental expense. |
exv23w2
Exhibit 23.2
Consent of Independent Registered Public Accounting Firm
We consent to the use in this Registration Statement (No. 333- ) on Form S-4 of Gray Television, Inc.
of our report dated April 6, 2010, relating to our audits of the consolidated financial statements and
internal control over financial reporting, appearing in the Prospectus, which is part of this Registration
Statement, and of our report dated April 6, 2010, relating to the financial statement schedules appearing
elsewhere in this Registration Statement.
We also
consent to the reference to our firm under the caption
Experts in such Prospectus.
/s/ McGladrey & Pullen, LLP
Ft. Lauderdale, Florida
June 23, 2010
exv25w1
Exhibit 25.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of
a Trustee Pursuant to Section 305(b)(2) o
U.S. BANK NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
31-0841368
(I.R.S. Employer Identification No.)
|
|
|
800 Nicollet Mall |
|
|
Minneapolis, Minnesota
|
|
55402 |
(Address of principal executive offices)
|
|
(Zip Code) |
Jack Ellerin
U.S. Bank National Association
1349 West Peachtree Street
Suite 1050
Atlanta, Georgia 30309
(404) 898-8830
(Name, address and telephone number of agent for service)
Gray Television, Inc.
(exact name of obligor as specified in its charter)
SEE TABLE OF ADDITIONAL OBLIGORS
|
|
|
Georgia
|
|
58-0285030 |
(State or other jurisdiction of incorporation or organization)
|
|
(I.RS. Employer Identification No.) |
|
|
|
4370 Peachtree Road, N.E. |
|
|
Atlanta, Georgia
|
|
30319 |
(Address of principal executive offices)
|
|
(Zip Code) |
10 1/2% Senior Secured Second Lien Notes due 2015
Guarantees of 10 1/2% Senior Secured Second Lien Notes due 2015
(Title of the indenture securities)
TABLE OF ADDITIONAL OBLIGORS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State or Other |
|
|
|
|
|
|
Jurisdiction of |
|
Primary Standard |
|
IRS Employer |
Exact Name of Registrant as Specified |
|
Incorporation or |
|
Industrial Classification |
|
Identification |
in its Charter(1) |
|
Organization |
|
Code Number |
|
Number |
|
WVLT-TV, Inc. |
|
Georgia |
|
|
4833 |
|
|
|
58-2256206 |
|
Gray Television Group, Inc. |
|
Delaware |
|
|
4833 |
|
|
|
13-2982954 |
|
Gray Television Licensee, LLC |
|
Nevada |
|
|
4833 |
|
|
|
51-0376603 |
|
|
|
|
(1) |
|
The address and telephone number of each of the additional obligors
is: 4370 Peachtree Road, NE, Atlanta, Georgia 30319; telephone (404)
504-9828. |
Item 1. |
|
General information. |
|
|
|
Furnish the following information as to the trustee: |
|
(a) |
|
Name and address of each examining or supervising authority to
which it is subject. |
|
|
|
|
Comptroller of the Currency Washington, D.C. |
|
|
|
|
Federal Deposit Insurance Company Washington, D.C. |
|
|
|
|
The Board of Governors of the Federal Reserve System Washington, D.C. |
|
|
(b) |
|
Whether it is authorized to exercise corporate trust powers. |
|
|
|
|
Yes. |
Item 2. |
|
Affiliations with Obligor. |
|
|
|
If the obligor is an affiliate of the trustee, describe each such affiliation. |
|
|
|
None. |
|
Items 3.14. |
|
Items 3 14 are not applicable because, to the best of the knowledge of U.S. Bank National Association (the
Trustee) the obligor is not in default under any indenture under which the Trustee acts as trustee. |
|
Item 15. |
|
Item 15 is not applicable because the Trustee is not a foreign trustee. |
|
Item 16. |
|
List of Exhibits. |
|
|
|
List below all exhibits filed as a part of this statement of eligibility; provided
that exhibits identified in parentheses are filed with the Commission and are
incorporated herein by reference as exhibits hereto pursuant to Rule 7a-29 under the
Trust Indenture Act of 1939, as amended, and 17 C.F.R. 229.10(d). |
|
1. |
|
A copy of the articles of association of the Trustee as now in effect.
(Exhibit 25.1 to Amendment No. 2 to Form S-4, Registration Number 333-128217,
filed by Revlon Consumer Products Corp.) |
|
|
2. |
|
A copy of the certificate of authority of the Trustee to commence
business, is contained in the articles of association referred to in Paragraph 1
above. |
|
|
3. |
|
A copy of the authorization of the Trustee to exercise corporate trust
powers. (Exhibit 25.1 to Form S-3ASR, Registration Number 333-155592, filed by
ONEOK, Inc.) |
|
4. |
|
A copy of the existing by-laws of the Trustee as now in effect. (Exhibit 4
to Exhibit 25.1 to Form S-3, Registration Number 333-160020, filed by The Phoenix
Companies, Inc.) |
|
|
5. |
|
A copy of each indenture referred to in Item 4, if the obligor is
in default. |
|
|
|
|
Not Applicable. |
|
|
6. |
|
The consent of the Trustee required by Section 321(b) of the Trust
Indenture Act of 1939, attached as Exhibit 6. |
|
|
7. |
|
A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining authority as
of the close of business on March 31, 2010, attached as Exhibit 7. |
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, U.S. BANK
NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the
United States of America, has duly caused this statement of eligibility and qualification to be
signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Atlanta,
State of Georgia, on the 23rd day of June, 2010.
|
|
|
|
|
|
U.S. BANK NATIONAL ASSOCIATION
|
|
|
By: |
/s/
Jack Ellerin |
|
|
|
Jack Ellerin |
|
|
|
Vice President |
|
Exhibit 6
CONSENT OF TRUSTEE
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the undersigned,
U.S. BANK NATIONAL ASSOCIATION, hereby consents that reports of examination of the undersigned by
Federal, State, Territorial or District Authorities may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Dated: June 23, 2010
|
|
|
|
|
|
U.S. BANK NATIONAL ASSOCIATION
|
|
|
By: |
/s/
Jack Ellerin |
|
|
|
Jack Ellerin |
|
|
|
Vice President |
|
Exhibit 7
REPORT OF CONDITION
U.S. Bank National Association
Statement of Financial Condition
As of March 31, 2010
(000s)
|
|
|
|
|
|
|
03/31/2010 |
|
ASSETS |
|
|
|
|
Cash and balances due from depository institutions |
|
$ |
8,396,049 |
|
Securities |
|
|
45,269,095 |
|
Federal funds sold and securities purchased under
agreements to resell |
|
|
3,774,651 |
|
Loans and lease financing receivables |
|
|
180,918,939 |
|
Trading assets |
|
|
1,093,896 |
|
Premises and fixed assets (including capitalized leases) |
|
|
2,220,060 |
|
Other real estate owned |
|
|
1,726,653 |
|
Investments in unconsolidated subsidiaries and
associated companies |
|
|
67,633 |
|
Intangible assets |
|
|
13,355,160 |
|
Other assets |
|
|
20,687,148 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
277,509,284 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
Deposits |
|
$ |
194,167,405 |
|
Federal funds purchased and securities sold under
agreements to repurchase |
|
|
9,849,249 |
|
Trading liabilities |
|
|
362,519 |
|
Other borrowed money |
|
|
31,906,386 |
|
Subordinated notes and debentures |
|
|
7,629,967 |
|
Other liabilities |
|
|
6,648,045 |
|
|
|
|
|
Total liabilities |
|
$ |
250,563,571 |
|
|
|
|
|
|
EQUITY CAPITAL |
|
|
|
|
Common stock |
|
$ |
18,200 |
|
Surplus |
|
|
12,642,020 |
|
Retained earnings |
|
|
12,673,897 |
|
Noncontrolling (minority) interests in consolidated
subsidiaries |
|
|
1,611,596 |
|
|
|
|
|
Total equity capital |
|
$ |
26,945,713 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity capital |
|
$ |
277,509,284 |
|
|
|
|
|
exv99w1
Exhibit 99.1
GRAY TELEVISION, INC.
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
Up to $365,000,000
Aggregate Principal Amount of Newly
Issued 101/2% Senior Secured Second Lien Notes due 2015
For
a Like Principal Amount of Outstanding
Restricted 101/2% Senior Secured Second Lien Notes due 2015
issued in April 2010
Deliver to:
U.S. BANK NATIONAL ASSOCIATION, EXCHANGE AGENT
THE EXCHANGE OFFER WILL EXPIRE AT 9:00 A.M., NEW YORK CITY TIME, ON , 2010, UNLESS EXTENDED
(THE EXPIRATION DATE). ORIGINAL NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME
PRIOR TO THE EXPIRATION DATE.
As set forth in the Prospectus, dated , 2010 (the Prospectus) and in this
corresponding Letter of Transmittal, this form or one substantially similar must be used to accept
the offer of Gray Television, Inc. (the Company) to exchange its 101/2% Senior Secured Second Lien
Notes due 2015 (the Exchange Notes), which will be issued in a transaction registered under the
Securities Act of 1933 (the Securities Act), for any and all of the Companys outstanding
restricted 101/2% Senior Secured Second Lien Notes due 2015 (the Original Notes).
Capitalized terms used but not defined in this Letter of Transmittal have the meanings assigned to
them in the Prospectus.
This form may be delivered by hand or transmitted by facsimile transmission, overnight courier
or mailed to the exchange agent as indicated below.
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By Registered or Certified Mail, Overnight |
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Courier or Hand Delivery:
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Facsimile Transmission Number:
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Confirm by Telephone or for Information: |
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U.S. Bank National Association
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(651) 495-8158
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(800) 934-6802 |
West Side Flats Operations Center
Attn:
Specialized Finance
60 Livingston Avenue
Mail StationEP-MN-WS2N
St. Paul MN 55107-2292
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Attention: Specialized Finance |
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Please describe your Original Notes below.
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DESCRIPTION OF ORIGINAL NOTES |
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Name(s) and |
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Aggregate |
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Address(es) of |
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Principal Amount of |
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Principal Amount |
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Type |
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Registered Holders(s) |
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Original Notes |
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of |
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of |
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(Please Complete, if |
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Certificate |
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Represented By |
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Original Notes |
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Note |
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Blank) |
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Number(s) |
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Certificate(s) |
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Tendered* |
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101/2% Senior Secured
Second Lien Notes due 2015 |
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Subtotal |
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Total |
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* You will be deemed to have tendered the entire principal amount of Original Notes of each series represented
in the column labeled Aggregate Principal Amount of Original Notes Represented by Certificate(s) unless you
indicate otherwise with respect to such series in the column labeled Principal Amount of Original Notes Tendered.
Original Notes may be tendered in whole or in part in denominations of $1,000 and integral multiples thereof,
provided that if any Original Notes are tendered for exchange in part, the untendered principal amount thereof must
be at least $2,000 or any integral multiple of $1,000 in excess thereof.
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If you need more space, list the certificate numbers and principal amount of Original Notes on
a separate schedule, sign the schedule and attach it to this Letter of Transmittal.
Your delivery of this Letter of Transmittal will not be valid unless you deliver it to one of
the addresses, or transmit it to the facsimile number, set forth above. Please carefully read this
entire document, including the instructions, before completing this Letter of Transmittal. DO NOT
DELIVER THIS LETTER OF TRANSMITTAL TO GRAY TELEVISION, INC.
By completing this Letter of Transmittal, you acknowledge that you have received our
Prospectus dated , 2010 and this Letter of Transmittal, which together constitute the
Exchange Offer. This Letter of Transmittal and the Prospectus have been delivered to you in
connection with the Companys offer to exchange New Notes for outstanding Original Notes.
The Company reserves the right, at any time or from time to time, to extend this Exchange
Offer at its discretion, in which event the Expiration Date will mean the latest date to which the
offer to exchange is extended.
This Letter of Transmittal is to be completed by a Holder (as defined below) of Original Notes
if:
(1) the Holder is delivering certificates for Original Notes with this document; or
(2) the tender of certificates for Original Notes will be made by book-entry transfer to the
account maintained by U.S. Bank National Association, the exchange agent, at The Depository Trust
Company (DTC) according to the procedures described in the Prospectus under the heading The
Exchange Offer Procedures for Tendering Original Notes. Please note that delivery of documents
required by this Letter of Transmittal to DTC does not constitute delivery to the exchange agent.
A Holder may also tender its Original Notes by means of DTCs Automated Tender Offer Program
(ATOP), subject to the terms and procedures of that system. If delivery is made through ATOP, the
Holder must transmit an agents message to the exchange agents account at DTC. The term agents
message means a message, transmitted to DTC and received by the exchange agent and forming a part
of a book-entry transfer, that states that DTC has received an express acknowledgement that the
Holder agrees to be bound by this Letter of Transmittal and that the Company may enforce this
Letter of Transmittal against the Holder.
You must tender your Original Notes according to the guaranteed delivery procedures described
in this document and the Prospectus if:
(1) your Original Notes are not immediately available;
(2) you cannot deliver your Original Notes, this Letter of Transmittal and all required
documents to the exchange agent on or before the Expiration Date; or
(3) you are unable to obtain confirmation of a book-entry tender of your Original Notes into
the exchange agents account at DTC on or before the Expiration Date.
More complete information about guaranteed delivery procedures is contained in the Prospectus
under the heading The Exchange Offer Procedures for Tendering Original Notes Guaranteed
Delivery Procedures. You should also read Instruction 1 to determine whether or not this section
applies to you.
As used in this Letter of Transmittal, the term Holder means (1) any person in whose name
Original Notes are registered on the books of the Company, (2) any other person who has obtained a
properly executed bond power from a registered holder or (3) any person in whose name Original
Notes are held of record by DTC who desires to deliver such notes by book-entry transfer at DTC. If
you are a Holder and decide to tender your Original Notes, you must complete this entire Letter of
Transmittal.
You must follow the instructions in this Letter of Transmittal please read this entire
document carefully. If you have questions or need help, or if you would like additional copies of
the Prospectus and this Letter of Transmittal, you should contact the exchange agent at its
telephone number or address set forth above.
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CHECK HERE IF YOU HAVE ENCLOSED ORIGINAL NOTES WITH THIS LETTER OF TRANSMITTAL. |
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CHECK HERE IF YOU WILL BE TENDERING ORIGINAL NOTES BY BOOK-ENTRY TRANSFER MADE TO THE EXCHANGE AGENTS ACCOUNT AT DTC. |
COMPLETE THE FOLLOWING ONLY IF YOU ARE AN ELIGIBLE INSTITUTION (THIS TERM IS DEFINED BELOW):
Name of Tendering Institution:
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CHECK HERE IF YOU ARE DELIVERING TENDERED ORIGINAL NOTES THROUGH A NOTICE OF GUARANTEED DELIVERY AND HAVE ENCLOSED THAT
NOTICE WITH THIS LETTER OF TRANSMITTAL. |
COMPLETE THE FOLLOWING ONLY IF YOU ARE AN ELIGIBLE INSTITUTION:
Name(s)
of Registered Holder(s) of Original Notes:
Date
of Execution of Notice of Guaranteed Delivery:
Window
Ticket Number (if available):
Name
of Institution that Guaranteed Delivery:
Account
Number (if delivered by book-entry transfer):
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SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
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SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6) |
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Complete this section ONLY if: (1) certificates
for untendered Original Notes are to be issued
in the name of someone other than you; (2)
certificates for Exchange Notes issued in
exchange for tendered and accepted Original
Notes are to be issued in the name of someone
other than you; or (3) Original Notes tendered
by book-entry transfer that are not exchanged
are to be returned by credit to an account
maintained at DTC other than the account
designated above
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Complete this section ONLY if certificates for
untendered Original Notes, or Exchange Notes
issued in exchange for tendered and accepted
Original Notes are to be sent to someone other
than you, or to you at an address other than the
address shown above. |
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Issue Certificate(s) to:
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Mail and deliver Certificate(s) to: |
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Name |
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(Please Print)
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(Please Print) |
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Address |
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(Include Zip Code)
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(Include Zip Code) |
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(Taxpayer Identification or Social Security Number)
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(Taxpayer Identification or Social Security Number) |
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o Credit unexchanged original notes
delivered by book-entry transfer to the DTC
account set forth below: |
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(DTC Account Number, if Applicable) |
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(PLEASE ALSO COMPLETE SUBSTITUTE FORM W-9)
Ladies and Gentlemen:
According to the terms and conditions of the Exchange Offer, I hereby tender to the Company
the principal amount of Original Notes indicated above. At the time these notes are accepted by the
Company and exchanged for the same principal amount of Exchange Notes, I will sell, assign, and
transfer to the Company all right, title and interest in and to the Original Notes I have tendered.
I am aware that the exchange agent also acts as the agent of the Company. By executing this
document, I irrevocably constitute and appoint the exchange agent as my agent and attorney-in-fact
for the tendered Original Notes with full power of substitution to:
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cause the Original Notes to be assigned, transferred and exchanged. |
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deliver certificates for the Original Notes, or transfer ownership of the Original Notes
on the account books maintained by DTC, to the Company and deliver all accompanying
evidences of transfer and authenticity to the Company; and |
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present the Original Notes for transfer on the books of the Company, receive all benefits
and exercise all rights of beneficial ownership of these Original Notes according to the
terms of the Exchange Offer. The power of attorney granted in this paragraph is irrevocable
and coupled with an interest. |
With respect to the Original Notes, I represent and warrant that I have full power and
authority to tender, exchange, assign and transfer the Original Notes that I am tendering and to
acquire Exchange Notes issuable upon the exchange of the tendered Original Notes. I represent and
warrant that the Company will acquire good and unencumbered title to such Original Notes, free and
clear of all liens, restrictions, other than restrictions on transfer, charges and encumbrances,
and that such Original Notes are not and will not be subject to any adverse claim at the time the
Company acquires them. I further represent that:
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any Exchange Notes I will acquire in exchange for the Original Notes I have tendered will
be acquired in the ordinary course of business; |
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I have not engaged in, do not intend to engage in, and have no arrangement or
understanding with any person to engage in, a distribution of any Exchange Notes issued to
me; |
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I am not an affiliate (as defined in Rule 405 under the Securities Act) of the Company
or its subsidiaries, or if I am an affiliate of the Company or its subsidiaries, I will
comply with the registration and prospectus delivery requirements of the Securities Act to
the extent applicable; |
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I am not a broker-dealer who purchased the Original Notes for resale pursuant to an
exemption under the Securities Act tendering Original Notes acquired directly from the
Company for my own account; and |
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I am not restricted by any law or policy of the SEC from trading the Exchange Notes
acquired in the Exchange Offer. |
I understand that the Exchange Offer is being made in reliance on interpretations contained in
letters issued to third parties by the staff of the Securities and Exchange Commission. These
letters provide that the Exchange Notes issued in exchange for the Original Notes in the Exchange
Offer may be offered for resale, resold, and otherwise transferred by a Holder of Exchange Notes,
unless that person is an affiliate of the Company within the meaning of Rule 405 under the
Securities Act, without compliance with the registration and prospectus delivery provisions of the
Securities Act. The Exchange Notes must be acquired in the ordinary course of the Holders business
and the Holder must not be engaging in, must not intend to engage in, and must not have any
arrangement or understanding with any person to participate in, a distribution of the Exchange
Notes.
If I am a broker-dealer that will receive Exchange Notes for my own account in exchange for
Original Notes that were acquired as a result of market-making activities or other trading
activities, I acknowledge that I will deliver a prospectus in connection with any resale of the
Exchange Notes. However, by this acknowledgment and by delivering a prospectus, I will not be
deemed to admit that I am an underwriter within the meaning of the Securities Act.
Upon request, I will execute and deliver any additional documents deemed by the exchange agent
or the Company to be necessary or desirable to complete the exchange, assignment and transfer of
the Original Notes I have tendered.
I understand that the Company will be deemed to have accepted validly tendered Original Notes
when the Company gives oral or written notice of acceptance to the exchange agent and such
acceptance will constitute performance in full by the Company of its obligations under the
registration rights agreement, except in the limited circumstances defined in such agreement.
If, for any reason, any tendered Original Notes are not accepted for exchange in the Exchange
Offer, certificates for those unaccepted Original Notes will be returned to me without charge at
the address shown below or at a different address if one is listed under Special Delivery
Instructions. Any unaccepted Original Notes which had been tendered by book-entry transfer will be
credited to an account at DTC as soon as reasonably possible after the Expiration Date.
All authority granted or agreed to be granted by this Letter of Transmittal will survive my
death, bankruptcy or incapacity, and every obligation under this Letter of Transmittal is binding
upon my heirs, legal representatives, successors, assigns, executors, administrators and trustees
in bankruptcy of the transferor.
I understand that tenders of Original Notes according to the procedures described in the
Prospectus under the heading The Exchange Offer Procedures for Tendering Original Notes and in
the instructions included in this document constitute a binding agreement between myself and the
Company subject to the terms and conditions of the Exchange Offer.
Unless I have described other instructions in this Letter of Transmittal under the section Special
Issuance Instructions, please issue the certificates representing Exchange Notes issued and
accepted in exchange for my tendered and accepted Original Notes in my name, and issue any
replacement certificates for Original Notes not tendered or not accepted for exchange in my name.
Similarly, unless I have instructed otherwise under the section Special Delivery Instructions,
please send the certificates representing the Exchange Notes issued in exchange for tendered and
accepted Original Notes and any certificates for Original Notes that were not tendered or not
accepted for exchange, as well as any accompanying documents, to me at the address shown below my
signature. If the Special Issuance Instructions and the Special Delivery Instructions are
completed, please issue the certificates representing the Exchange Notes issued in exchange for my
tendered and accepted Original Notes in the name(s) of, and/or return any Original Notes that were
not tendered or accepted for exchange and send such certificates to, the person(s) so indicated. I
understand that if the Company does not accept any of the tendered Original Notes for exchange, the
Company has no obligation to transfer any Original Notes from the name of the registered Holder(s)
according to my instructions in the Special Issuance Instructions and Special Delivery
Instructions sections of this document.
PLEASE SIGN HERE WHETHER OR NOT
ORIGINAL NOTES ARE BEING PHYSICALLY TENDERED HEREBY
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(Date) |
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Signature(s) of Registered Holder(s) or
Authorized Signatory
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(Date) |
Area Code
and Telephone
Number(s):
Tax
Identification or Social Security
Number(s):
The
above lines must be signed by the registered Holder(s) of Original Notes as their name(s) appear(s) on the certificate for the Original Notes or by person(s) authorized to become registered
Holders(s) by a properly completed bond power from the registered Holder(s). A copy of the
completed bond power must be delivered with this Letter of Transmittal. If any Original Notes
tendered through this Letter of Transmittal are held of record by two or more joint Holders, then
all such Holders must sign this Letter of Transmittal. If the signature is by trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, then such person must (1) state his or her full title below
and (2) unless waived by the Company, submit evidence satisfactory to the Company of such persons
authority to act on behalf of the Holder. See Instruction 4 for more information about completing
this Letter of Transmittal.
Signature(s) Guaranteed by an Eligible Institution, if required by Instruction 4:
Dated ____________________, 2010
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PAYERS NAME: U.S. Bank National Association |
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PAYEES NAME:
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PAYEES ADDRESS:
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SUBSTITUTE
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Part I: Taxpayer Identification Number |
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Part II: For Payees exempt from Backup
Withholding |
FORM W-9
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For Payees Exempt from backup
withholding, see the Guidelines below and complete as instructed therein. |
Department of the
Treasury
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Internal Revenue Service
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Social Security Number
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OR |
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Payers Request
for
Taxpayer
Identification Number
(TIN)
and Certification
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Exempt |
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Employer Identification Number |
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(If awaiting TIN write Applied For
and complete Parts III and IV) |
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Check appropriate box: |
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o Individual/Sole
Proprietor |
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o Corporation |
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o Partnership |
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o Limited
liability company: Enter tax classification (D = disregarded entity,
C = corporation, P = partnership) |
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o Other
(specify) |
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Part III: Certification |
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Under penalties of perjury, I certify that: |
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(1) The number shown on
this form is my correct TIN (or I am waiting for a number to be issued
to me), and |
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(2) I am not subject to
backup withholding because: (a) I am exempt from backup withholding,
(b) I have not been notified by the Internal Revenue Service (IRS) that
I am subject to backup withholding as a result of failure to report
all interest or dividends or (c) the IRS has notified me that I
am no longer subject to backup withholding, and |
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(3) I am a U.S. citizen
or other U.S. person (including a U.S. resident alien); a partnership,
corporation, company or association created or organized in the United
States or under the laws of the United States; an estate (other than
a foreign estate); or a domestic trust (as defined in Treasury regulations
section 301.7701-7). |
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Certification Instructions You must cross out item (2) above if
you have been notified by the IRS that you are currently subject to
backup withholding because you have failed to report all interest
and dividends on your tax return. However, if after being notified
by the IRS that you were subject to backup withholding you received
another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). |
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Signature of U.S. Person
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Date |
NOTE: |
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FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 28% OF ANY
PAYMENTS MADE TO YOU PURSUANT TO THE TENDER OFFERS. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
INFORMATION. |
YOU MUST COMPLETE THE FOLLOWING CERTIFICATION IF YOU WROTE APPLIED FOR IN
THE APPROPRIATE LINE IN PART I OF SUBSTITUTE FORM W-9
PART IV: CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a TIN has not been issued to me, and
either (a) I have mailed or delivered an application to receive a TIN to the
appropriate Internal Revenue Service Center or Social Security Administration
or (b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a TIN by the time of payment, 28% of all
reportable payments made to me pursuant to the Tender Offers will be withheld.
INSTRUCTIONS
PART OF THE TERMS AND CONDITIONS OF THE
EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND ORIGINAL NOTES. The tendered Original Notes or
a confirmation of book-entry delivery, as well as a properly completed and executed copy or
facsimile of this Letter of Transmittal or an agents message through ATOP and any other required
documents, must be received by the exchange agent at its address listed on the cover of this
document before 9:00 a.m., New York City time, on the Expiration Date. YOU ARE RESPONSIBLE FOR THE
DELIVERY OF THE ORIGINAL NOTES, THIS LETTER OF TRANSMITTAL AND ALL REQUIRED DOCUMENTS TO THE
EXCHANGE AGENT. EXCEPT UNDER THE LIMITED CIRCUMSTANCES DESCRIBED BELOW, THE DELIVERY OF THESE
DOCUMENTS WILL BE CONSIDERED TO HAVE BEEN MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE
EXCHANGE AGENT. WHILE THE METHOD OF DELIVERY IS AT YOUR RISK AND CHOICE, THE COMPANY RECOMMENDS
THAT YOU USE AN OVERNIGHT OR HAND DELIVERY SERVICE RATHER THAN REGULAR MAIL. YOU SHOULD SEND YOUR
DOCUMENTS WELL BEFORE THE EXPIRATION DATE TO ENSURE RECEIPT BY THE EXCHANGE AGENT. YOU MAY REQUEST
THAT YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE DELIVER YOUR ORIGINAL NOTES,
THIS LETTER OF TRANSMITTAL AND ALL REQUIRED DOCUMENTS TO THE EXCHANGE AGENT. DO NOT SEND YOUR
ORIGINAL NOTES TO THE COMPANY.
If you wish to tender your Original Notes, but:
(a) your Original Notes are not immediately available;
(b) you cannot deliver your Original Notes, this Letter of Transmittal and all required
documents to the exchange agent before the Expiration Date; or
(c) you are unable to complete the book-entry tender procedure before the Expiration Date,
you must tender your Original Notes according to the guaranteed delivery procedure. A summary of
this procedure follows, but you should read the section in the Prospectus titled The Exchange
Offer Procedures for Tendering Original Notes Guaranteed Delivery Procedures for more
complete information. As used in this Letter of Transmittal, an Eligible Institution is any
participant in a Recognized Signature Guarantee Medallion Program within the meaning of Rule
17Ad-15 of the Exchange Act.
For a tender made through the guaranteed delivery procedure to be valid, the exchange agent
must receive a properly completed and executed Notice of Guaranteed Delivery or a facsimile of that
notice before the Expiration Date. The Notice of Guaranteed Delivery must be delivered by an
Eligible Institution and must:
(a) state your name and address;
(b) list the certificate numbers and principal amounts of the Original Notes being tendered;
(c) state that tender of your Original Notes is being made through the Notice of Guaranteed
Delivery; and
(d) guarantee that this Letter of Transmittal, or a facsimile of it, the certificates
representing the Original Notes, or a confirmation of DTC book-entry transfer, and all other
required documents will be deposited with the exchange agent by the Eligible Institution within
three New York Stock Exchange trading days after the Expiration Date.
The exchange agent must receive your Original Notes certificates, or a confirmation of DTC
book entry, in proper form for transfer, this Letter of Transmittal and all required documents
within three New York Stock Exchange trading days after the Expiration Date or your tender will be
invalid and may not be accepted for exchange.
The Company has the sole right to decide any questions about the validity, form, eligibility,
time of receipt, acceptance or withdrawal of tendered Original Notes, and its decision will be
final and binding. The Companys
interpretation of the terms and conditions of the Exchange Offer, including the instructions
contained in this Letter of Transmittal and in the Prospectus, will be final and binding on all
parties.
The Company has the absolute right to reject any or all of the tendered Original Notes if:
(1) the Original Notes are not properly tendered; or
(2) in the opinion of counsel, the acceptance of those Original Notes would be unlawful.
The Company may also decide to waive any conditions of the Exchange Offer or any defects or
irregularities of tender of Original Notes and accept such Original Notes for exchange whether or
not similar defects or irregularities are waived in the case of other Holders. Any defect or
irregularity in the tender of Original Notes that is not waived by the Company must be cured within
the period of time set by the Company.
It is your responsibility to identify and cure any defect or irregularity in the tender of
your Original Notes. Your tender of Original Notes will not be considered to have been made until
any defect or irregularity is cured or waived. Neither the Company, the exchange agent nor any
other person is required to notify you that your tender was defective or irregular, and no one will
be liable for any failure to notify you of such a defect or irregularity in your tender of Original
Notes. As soon as reasonably possible after the Expiration Date, the exchange agent will return to
the Holder tendering any Original Notes that were invalidly tendered if the defect or irregularity
has not been cured or waived.
2. TENDER BY HOLDER. You must be a Holder of Original Notes in order to participate in the
Exchange Offer. If you are a beneficial holder of Original Notes who wishes to tender, but you are
not the registered Holder, you must arrange with the registered Holder to execute and deliver this
Letter of Transmittal on his, her or its behalf. Before completing and executing this Letter of
Transmittal and delivering the registered Holders Original Notes, you must either make appropriate
arrangements to register ownership of the Original Notes in your name or obtain a properly executed
bond power from the registered Holder. The transfer of registered ownership of Original Notes may
take a long period of time.
3. PARTIAL TENDERS. Tenders of Original Notes pursuant to the Exchange Offer will be accepted
only in principal amounts equal to $1,000 or integral multiples of $1,000. If you are tendering
less than the entire principal amount of Original Notes represented by a certificate, you should
fill in the principal amount you are tendering in the third column of the box entitled Description
of Original Notes. The entire principal amount of Original Notes listed on the certificate
delivered to the exchange agent will be deemed to have been tendered unless you fill in the
appropriate box. If the entire principal amount of all Original Notes is not tendered, a
certificate will be issued for the principal amount of those untendered Original Notes not
tendered.
Unless a different address is provided in the appropriate box on this Letter of Transmittal,
certificate(s) representing Exchange Notes issued in exchange for any tendered and accepted
Original Notes will be sent to the registered Holder at his or her registered address promptly
after the Original Notes are accepted for exchange. In the case of Original Notes tendered by
book-entry transfer, any untendered Original Notes and any Exchange Notes issued in exchange for
tendered and accepted Original Notes will be credited to accounts at DTC.
4. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
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If you are the registered Holder of the Original Notes tendered with this document and
are signing this Letter of Transmittal, your signature must match exactly with the name(s)
written on the face of the Original Notes. There can be no alteration, enlargement or change
in your signature in any manner. If certificates representing the Exchange Notes, or
certificates issued to replace any Original Notes you have not tendered, are to be issued to
you as the registered Holder, do not endorse any tendered Original Notes, and do not provide
a separate bond power. |
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If you are not the registered Holder, or if Exchange Note or any replacement Original
Note certificates will be issued to someone other than you, you must either properly endorse
the Original Notes you have tendered or |
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deliver with this Letter of Transmittal a properly completed separate bond power. Please note
that the signatures on any endorsement or bond power must be guaranteed by an Eligible
Institution. |
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If you are signing this Letter of Transmittal but are not the registered Holder(s) of any
Original Notes listed on this document under the heading Description of Original Notes,
the Original Notes tendered must be endorsed or accompanied by appropriate bond powers, in
each case signed in the name of the registered Holder(s) exactly as it appears on the
Original Notes. Please note that the signatures on any endorsement or bond power must be
guaranteed by an Eligible Institution. |
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If this Letter of Transmittal, any Original Notes tendered or any bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, that person must
indicate their title or capacity when signing. Unless waived by the Company, evidence
satisfactory to the Company of that persons authority to act must be submitted with this
Letter of Transmittal. Please note that the signatures on any endorsement or bond power must
be guaranteed by an Eligible Institution. |
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All signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless one of the following situations apply: |
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If this Letter of Transmittal is signed by the registered Holder(s) of the Original Notes
tendered with this Letter of Transmittal and such Holder(s) has not completed the box titled
Special Issuance Instructions or the box titled Special Delivery Instructions; or |
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If the Original Notes are tendered for the account of an Eligible Institution. |
5. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If different from the name and address of the
person signing this Letter of Transmittal, you should indicate, in the applicable box or boxes, the
name and address where Original Notes issued in replacement for any untendered or tendered but
unaccepted Original Notes should be issued or sent. If replacement Original Notes are to be issued
in a different name, you must indicate the taxpayer identification or social security number of the
person named.
6. TRANSFER TAXES. The Company will pay all transfer taxes, if any, applicable to the exchange
of Original Notes in the Exchange Offer. However, transfer taxes will be payable by you (or by the
tendering Holder if you are signing this letter on behalf of a tendering Holder) if:
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certificates representing Exchange Notes or notes issued to replace any Original Notes
not tendered or accepted for exchange are to be delivered to, or are to be registered or
issued in the name of, a person other than the registered Holder; |
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tendered Original Notes are registered in the name of any person other than the person
signing this Letter of Transmittal; or |
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a transfer tax is imposed for any reason other than the exchange of Original Notes
according to the Exchange Offer. If satisfactory evidence of the payment of those taxes or
an exemption from payment is not submitted with this Letter of Transmittal, the amount of
those transfer taxes will be billed directly to the tendering Holder. Until those transfer
taxes are paid, the Company will not be required to deliver any Exchange Notes required to
be delivered to, or at the direction of, such tendering Holder. |
Except as provided in this Instruction 6, it is not necessary for transfer tax stamps to be
attached to the Original Notes listed in this Letter of Transmittal.
7. FORM W-9. You must provide the exchange agent with a correct Taxpayer Identification Number
(TIN) for the Holder on the enclosed Form W-9. If the Holder is an individual, the TIN is his or
her social security number. If you do not provide the required information on the Form W-9, you may
be subject to 30% Federal income tax withholding on certain payments made to the Holders of
Exchange Notes. Certain Holders, such as corporations and certain foreign individuals, are not
subject to these backup withholding and reporting requirements. For additional information, please
read the enclosed Guidelines for Certification of TIN on Substitute Form W-9. To prove to the
exchange agent that a foreign individual qualifies as an exempt Holder, the foreign individual
must submit a Form W-8, signed under penalties of perjury, certifying as to that individuals
exempt status. You can obtain a Form W-8 from the exchange agent.
8. WAIVER OF CONDITIONS. The Company may choose, at any time and for any reason, to amend,
waive or modify certain of the conditions to the Exchange Offer. The conditions applicable to
tenders of Original Notes in the Exchange Offer are described in the Prospectus under the heading
The Exchange Offer Procedures for Tendering Original Notes.
9. MUTILATED, LOST, STOLEN OR DESTROYED ORIGINAL NOTES. If your Original Notes have been
mutilated, lost, stolen or destroyed, you should contact the exchange agent at the address listed
on the cover page of this document for further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. If you have questions, need assistance or would
like to receive additional copies of the Prospectus or this Letter of Transmittal, you should
contact the exchange agent at the address listed on the cover page of this document. You may also
contact your broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER Social
Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer
Identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table
below will help determine the number to give the Payer.
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Give NAME and SOCIAL |
For this type of account: |
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SECURITY number (SSN) of: |
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1.
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Individual
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The individual |
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2.
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Two or more individuals (joint account)
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The actual owner of
the account or, if
combined funds, the
first individual on
the account (1) |
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3.
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Custodian
account of a minor
(Uniform Gift to
Minors Act)
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The minor (2) |
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4.
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(a) The usual
revocable savings
trust (grantor is
also trustee)
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The grantor-trustee (1) |
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(b) So-called trust
account that is not
a legal or valid
trust under state
law
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The actual owner (1) |
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5.
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Sole
proprietorship or
single-owner LLC
not electing
corporate status
on
Form 8832
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The owner (3) |
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Give NAME and EMPLOYER |
For this type of account: |
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IDENTIFICATION number (EIN) of: |
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6.
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A valid trust, estate, or pension trust
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The legal entity (Do
not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated in
the account title.)
(4) |
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7.
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Corporation or LLC
electing corporate
status on Form 8832
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The corporation |
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8.
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Association, club, religious, charitable, educational or other
tax-exempt organization
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The organization |
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9.
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Partnership or
multi-member LLC not
electing corporate
status on Form 8832
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The partnership |
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10.
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A broker or registered nominee
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The broker or nominee |
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11.
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Account with the
Department of
Agriculture in the name
of a public entity (such
as State or local
government, school
district or prison) that
receives agricultural
program payments
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The public entity |
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(1) |
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List first and circle the name of the person whose number you furnish. If only one person
on a joint account has an SSN, that persons number must be furnished. |
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(2) |
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Circle the minors name and furnish the minors SSN. |
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(3) |
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You must show your individual name, but you may also enter your business or DBA name. You
may use either your SSN or EIN (if you have one). |
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(4) |
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List first and circle the name of the legal trust, estate, or pension trust. |
NOTE: |
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If no name is circled when there is more than one name, the number will be considered to be
that of the first name listed. |
Section references are to the Internal Revenue Code of 1986, as amended.
Obtaining a Number. If you do
not have a taxpayer identification
number or you do not know your
number, obtain Form SS-5,
Application for a Social Security
Card, from the local office of the
Social Security Administration, or
Form SS-4, Application for Employer
Identification Number, from the
Internal Revenue Service (the IRS)
and apply for a number.
Payees Exempt from Backup
Withholding. The following is a
list of payees exempt from backup
withholding. For interest and
dividends, all listed payees are
exempt except for those listed in
item (9). For broker transactions,
payees listed in (1) through (13)
are exempt. A person registered
under the Investment Advisers Act of
1940 who regularly acts as a broker
is also exempt. Payments subject to
reporting under sections 6041 and
6041A are generally exempt from
backup withholding only if made to
payees described in items (1)
through (7), except that the
following payments made to a
corporation and reportable on Form
1099-MISC are not exempt from backup
withholding or information
reporting: medical and health care
payments, attorneys fees and
payments for services paid by a
federal executive agency. Only
payees described in items (2)
through (6) are exempt from backup
withholding for barter exchange
transactions and patronage
dividends.
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(1) |
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A corporation. |
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(2) |
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An organization exempt from tax
under section 501(a), or an
individual retirement plan (IRA),
or a custodial account under
section 403(b)(7) if the account
satisfies the requirements of
section 401(f)(2) |
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The United States or any of its
agencies or instrumentalities. |
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(4) |
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A State, the District of
Columbia, a possession of the
United States, or any of their
political subdivisions or
instrumentalities. |
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(5) |
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A foreign government or any of
its political subdivisions,
agencies or instrumentalities. |
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(6) |
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An international organization
or any of its agencies or
instrumentalities. |
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(7) |
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A foreign central bank of issue. |
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(8) |
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A dealer in securities or
commodities required to register in
the United States, the District of
Columbia, or a possession of the
United States. |
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(9) |
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A futures commission merchant
registered with the Commodity
Futures Trading Commission. |
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(10) |
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A real estate investment trust. |
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(11) |
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An entity registered at all
times during the tax year under the
Investment Company Act of 1940. |
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(12) |
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A common trust fund operated by
a bank under section 584a. |
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(13) |
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A financial institution. |
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(14) |
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A middleman known in the
investment community as a nominee or
custodian. |
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(15) |
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A trust exempt from tax under
section 664 or described in section
4947. |
Exempt payees described above should file Substitute Form W-9 to
avoid possible erroneous backup withholding. FILE THIS FORM WITH THE
PAYER, FURNISH YOUR TIN, PLACE A CHECKMARK ON THE LINE NEXT TO
EXEMPT IN PART II, SIGN AND DATE THE FORM, AND RETURN IT TO THE
PAYER.
Payments of interest generally not subject to backup withholding
include the following:
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Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is
$600 or more and is paid in the course of the payers trade or
business and you have not provided your correct taxpayer
identification number to the payer. |
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Payments described in section 6049(b)(5) to nonresident
aliens. |
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Payments on tax-free covenant bonds under section 1451. |
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Payments made by certain foreign organizations. |
Payments that are not subject to information reporting are also not
subject to backup withholding. For details see sections 6041, 6041A,
6042, 6044, 6045, 6049, 6050A and 6050N, and the regulations under
such sections.
Privacy Act Notice. Section 6109 requires you to give your correct
taxpayer identification number to persons who must file information
returns with the IRS to report interest, dividends, and certain other
income paid to you, mortgage interest you paid, the acquisition or
abandonment of secured property, cancellation of debt, or
contributions you made to an IRA or Archer MSA. The IRS uses the
numbers for identification purposes and to help verify the accuracy
of your tax return. The IRS may also provide this information to the
Department of Justice for civil and criminal litigation, and to
cities, states, and the District of Columbia to carry out their tax
laws. The IRS also may disclose this information to other countries
under a tax treaty, or to federal and state agencies to enforce
federal non-tax criminal laws and to combat terrorism. You must
provide your taxpayer identification number whether or not you are
required to file a tax return. Payers must generally withhold 28% of
taxable interest, dividend, and certain other payments to a payee who
does not furnish a taxpayer identification number to a payer.
Certain penalties may also apply.
Penalties.
(1) Penalty for Failure to Furnish Taxpayer Identification Number.
If you fail to furnish your taxpayer identification number to a
requester, you are subject to a penalty of $50 for each such failure
unless your failure is due to reasonable cause and not to willful
neglect.
(2) Civil Penalty for False Information with Respect to Withholding.
If you make a false statement with no reasonable basis that results
in no backup withholding, you are subject to a $500 penalty.
(3) Criminal Penalty for Falsifying Information. Willfully
falsifying certifications or affirmations may subject you to criminal
penalties including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR
TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE
exv99w2
Exhibit 99.2
GRAY TELEVISION, INC.
NOTICE OF GUARANTEED DELIVERY
Relating to its Offer to Exchange
Up to $365,000,000
Aggregate Principal Amount of Newly
Issued 101/2% Senior Secured Second Lien Notes due 2015
For
a Like Principal Amount of Outstanding
Restricted 101/2% Senior Secured Second Lien Notes due 2015
issued in April 2010
THE EXCHANGE OFFER WILL EXPIRE AT 9:00 A.M., NEW YORK CITY TIME, ON , 2010, UNLESS
EXTENDED (THE EXPIRATION DATE). ORIGINAL NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT
ANY TIME PRIOR TO THE EXPIRATION DATE.
This Notice of Guaranteed Delivery relates to the offer of Gray Television, Inc. (the
Company) to exchange, upon the terms and subject to the conditions set forth in the Companys
prospectus, dated ,
2010 (the Prospectus) and in the corresponding letter of
transmittal (the Letter of Transmittal), its 101/2% Senior Secured Second Lien Notes due 2015 (the
Exchange Notes), which will be issued in a transaction registered under the Securities Act of
1933 (the Securities Act), for any and all of the Companys outstanding restricted 101/2% Senior
Secured Second Lien Notes due 2015 (the Original Notes).
If the Original Notes, the Letter of Transmittal or any other required documents cannot be
delivered to the exchange agent, or the procedure for book-entry transfer cannot be completed,
prior to 9:00 a.m., New York City time, on the Expiration Date (as defined in the Prospectus), then
this form may be delivered by hand or (in the case of an Eligible Institution) transmitted by
facsimile transmission, overnight courier or mailed to the exchange agent as indicated below.
Deliver to:
U.S. BANK NATIONAL ASSOCIATION
EXCHANGE AGENT
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By
Registered or Certified Mail, Overnight
Courier or Hand Delivery:
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Facsimile Transmission Number:
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Confirm by Telephone or for
Information: |
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U.S.
Bank National Association
West Side Flats Operations Center
Attn: Specialized Finance
60 Livingston Avenue
Mail StationEP-MN-WS2N
St. Paul MN 55107-2292
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(651) 495-8158
Attention: Specialized Finance
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(800) 934-6802 |
DELIVERY OF THIS NOTICE TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE,
OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the Letter of
Transmittal to be used to tender Original Notes is required to be guaranteed by an Eligible
Institution under the instructions thereto, such signature guarantee must appear in the applicable
space provided in the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject to the conditions
set forth in the Prospectus and the Letter of Transmittal (which together constitute the Exchange
Offer), receipt of which is hereby acknowledged, Original Notes pursuant to guaranteed delivery
procedures set forth in Instruction 1 of the Letter of Transmittal. The undersigned guarantees that
within three New York Stock Exchange trading days after the Expiration Date, the Original Notes, in
proper form for transfer, or book-entry confirmation, as the case may be, will be delivered
together with a properly completed and duly executed Letter of Transmittal and any other required
documents.
The undersigned understands that tenders of Original Notes will be accepted only in principal
amounts equal to $1,000 or integral multiples thereof. The undersigned understands that tenders of
Original Notes pursuant to the Exchange Offer may be withdrawn only in accordance with the
procedures set forth in The Exchange Offer Withdrawal Rights section of the Prospectus.
All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery
shall survive the death, incapacity or dissolution of the undersigned and every obligation of the
undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal
representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.
Complete this section if you are tendering Original Notes:
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Certificate No(s). for Original Notes (if available):
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Principal Amount of Original Notes Represented by
Certificates: |
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Principal Amount of Original Notes Tendered:
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Signature(s): |
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Dated:
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If your Original
Notes will be
delivered by
book-entry transfer
at The Depository
Trust Company,
Depository Account
No.: |
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This Notice of Guaranteed Delivery must be signed by the registered holder(s) of Original Notes
exactly as its (their) name(s) appear on certificates of Original Notes or on a security position
listing as the owner of Original Notes, or by person(s) authorized to become registered holder(s)
by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting
in a fiduciary or representative capacity, such person must provide the following information:
Please print name(s) and address(es)
Area Code and Telephone No.:
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States or an eligible guarantor institution within the meaning of
Rule 17Ad-15 under the Securities Exchange Act of 1934 (the Exchange Act), hereby:
(a) represents that the above named person(s) own(s) the Original Notes to be tendered; and
(b) guarantees that delivery to the exchange agent of certificates for the Original Notes
to be tendered, in proper form for transfer (or confirmation of the book-entry transfer of such
Original Notes into the exchange agents account at The Depository Trust Company, pursuant to
the procedures for book-entry transfer set forth in the Prospectus), with delivery of a properly
completed and duly executed (or manually signed facsimile) Letter of Transmittal with any
required signatures and any other required documents, will be received by the exchange agent at
its address set forth above within three New York Stock Exchange trading days after the
Expiration Date.
I HEREBY ACKNOWLEDGE THAT I MUST DELIVER THE LETTER OF TRANSMITTAL AND ORIGINAL NOTES TO BE
TENDERED TO THE EXCHANGE AGENT WITHIN THE TIME PERIOD SET FORTH AND THAT FAILURE TO DO SO COULD
RESULT IN FINANCIAL LOSS TO ME.
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Name of Firm
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Authorized Signature |
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Address
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Title |
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Name: |
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Zip Code
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(Please Type or Print) |
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Area Code and Telephone No.:
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Dated: |
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NOTE: |
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DO NOT SEND ORIGINAL NOTES WITH THIS FORM; ORIGINAL NOTES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE EXCHANGE AGENT WITHIN THREE NEW YORK STOCK
EXCHANGE TRADING DAYS AFTER THE EXPIRATION DATE. |
exv99w3
Exhibit 99.3
GRAY TELEVISION, INC.
LETTER TO
DEPOSITORY TRUST COMPANY PARTICIPANTS
Relating to its Offer to Exchange
Up to $365,000,000
Aggregate Principal Amount of Newly
Issued 101/2% Senior Secured Second Lien Notes due 2015
For
a Like Principal Amount of Outstanding
Restricted 101/2% Senior Secured Second Lien Notes due 2015
issued in April 2010
THE EXCHANGE OFFER WILL EXPIRE AT 9:00 A.M., NEW YORK CITY TIME, ON , 2010, UNLESS
EXTENDED (THE EXPIRATION DATE). ORIGINAL NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT
ANY TIME PRIOR TO THE EXPIRATION DATE.
To Depository Trust Company Participants:
We are enclosing herewith the material listed below relating to the offer by Gray Television,
Inc. (the Company) to exchange, upon the terms and subject to the conditions set forth in the
Prospectus and Letter of Transmittal enclosed herewith (which together constitute the Exchange
Offer), its 101/2% Senior Secured Second Lien Notes due 2015 (the Exchange Notes), which will be
issued in a transaction registered under the Securities Act of 1933 (the Securities Act), for any
and all of the Companys outstanding restricted 101/2% Senior Secured Second Lien Notes due 2015 (the
Original Notes).
Enclosed are copies of the following documents:
1. Prospectus, dated , 2010;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery; and
4. Letter to Clients that may be sent to your clients for whose account you hold Original
Notes in your name or in the name of your nominee, with space provided for obtaining such
clients instruction with regard to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the Exchange Offer will expire on
the Expiration Date unless extended.
The Exchange Offer is not conditioned upon any minimum number of Original Notes being
tendered.
Pursuant to the letter of transmittal, each holder of Original Notes will represent to the
Company that:
(i) any Exchange Notes that the holder will acquire in exchange for Original Notes will be
acquired in the ordinary course of business of the holder;
(ii) the holder has not engaged in, does not intend to engage in, and has no arrangement or
understanding with any person to engage in, a distribution of any Exchange Notes issued to the
holder;
(iii) the holder is not an affiliate (as defined in Rule 405 under the Securities Act) of
the Company or its subsidiaries, or if the holder is an affiliate of the Company or its
subsidiaries, the holder will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable;
(iv) the holder is not a broker-dealer who purchased the Original Notes for resale pursuant
to an exemption under the Securities Act tendering Original Notes acquired directly from the
Company for the holders own account; and
(v) the holder is not restricted by any law or policy of the SEC from trading the Exchange
Notes acquired in the Exchange Offer.
If the holder is a broker-dealer that will receive Exchange Notes for its own account in
exchange for Original Notes that were acquired as a result of market-making or other trading
activities, it will represent that the Original Notes were acquired as a result of market-making
activities or other trading activities, and it will acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of those Exchange
Notes. By acknowledging that it will deliver and by delivering a prospectus meeting the
requirements of the Securities Act in connection with any resale of those Exchange Notes, the
broker-dealer is not deemed to admit that it is an underwriter within the meaning of the
Securities Act.
The enclosed Letter to Clients contains an authorization by the beneficial owners of the
Original Notes for you to make the foregoing representations.
The Company will not pay any fee or commission to any broker or dealer to any other persons
(other than the Exchange Agent) in connection with the solicitation of tenders of Original Notes
pursuant to the Exchange Offer. The Company will pay or cause to be paid any transfer taxes payable
on the transfer of Original Notes to it, except as otherwise provided in Instruction 6 of the
enclosed letter of transmittal.
Additional copies of the enclosed material may be obtained from the undersigned.
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Very truly yours,
U.S. BANK NATIONAL ASSOCIATION
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exv99w4
Exhibit 99.4
GRAY TELEVISION, INC.
OFFER TO EXCHANGE
Up to $365,000,000
Aggregate Principal Amount of Newly
Issued 101/2% Senior Secured Second Lien Notes due 2015
For
a Like Principal Amount of Outstanding
Restricted 101/2% Senior Secured Second Lien Notes due 2015
issued in April 2010
THE EXCHANGE OFFER WILL EXPIRE AT 9:00 A.M., NEW YORK CITY TIME, ON , 2010, UNLESS
EXTENDED (THE EXPIRATION DATE). ORIGINAL NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT
ANY TIME PRIOR TO THE EXPIRATION DATE.
To Our Clients:
We are enclosing herewith a prospectus, dated , 2010, of Gray Television, Inc. (the
Company) and the accompanying letter of transmittal that together constitute the offer by the
Company (the Exchange Offer) to exchange, upon the terms and subject to the conditions therein,
its 101/2% Senior Secured Second Lien Notes due 2015 (the Exchange Notes), which will be issued in
a transaction registered under the Securities Act of 1933 (the Securities Act), for any and all
of the Companys outstanding restricted 101/2% Senior Secured Second Lien Notes due 2015 (the
Original Notes).
The Exchange Offer is not conditioned upon any minimum number of Original Notes being
tendered.
We are the holder of record of Original Notes held by us for your own account. A tender of
such Original Notes can be made only by us as the record holder and pursuant to your instructions.
The letter of transmittal is furnished to you for your information only and cannot be used by you
to tender Original Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of the Original Notes held
by us for your account pursuant to the terms and conditions of the Exchange Offer. We also request
that you confirm that we may, on your behalf, make the representations contained in the letter of
transmittal.
Pursuant to the letter of transmittal, each holder of Original Notes will represent to the
Company that:
(i) any Exchange Notes that the holder will acquire in exchange for Original Notes will be
acquired in the ordinary course of business of the holder;
(ii) the holder has not engaged in, does not intend to engage in, and has no arrangement or
understanding with any person to engage in, a distribution of any Exchange Notes issued to the
holder;
(iii) the holder is not an affiliate (as defined in Rule 405 under the Securities Act) of
the Company or its subsidiaries, or if the holder is an affiliate of the Company or its
subsidiaries, the holder will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable;
(iv) the holder is not a broker-dealer who purchased the Original Notes for resale pursuant
to an exemption under the Securities Act tendering Original Notes acquired directly from the
Company for the holders own account; and
(v) the holder is not restricted by any law or policy of the SEC from trading the Exchange
Notes acquired in the Exchange Offer.
If the holder is a broker-dealer that will receive Exchange Notes for its own account in
exchange for Original Notes that were acquired as a result of market-making or other trading
activities, it will represent that the Original Notes were acquired as a result of market-making
activities or other trading activities, and it will acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of those Exchange
Notes. By acknowledging that it will deliver and by delivering a prospectus meeting the
requirements of the Securities Act in connection with any resale of those Exchange Notes, the
broker-dealer is not deemed to admit that it is an underwriter within the meaning of the
Securities Act.
Please return your instructions to us in the enclosed envelope within ample time to permit us
to submit a tender on your behalf prior to the Expiration Date.
INSTRUCTION TO
BOOK-ENTRY TRANSFER PARTICIPANT
To Participant of DTC:
The undersigned hereby acknowledges receipt of the prospectus, dated
, 2010 (the
Prospectus) of Gray Television, Inc. (the Company), and the accompanying letter of transmittal
(the Letter of Transmittal), that together constitute the Companys offer (the Exchange Offer)
to exchange, upon the terms and subject to the conditions therein 101/2% Senior Secured Second Lien
Notes due 2015 (the Exchange Notes), which will be issued in a transaction registered under the
Securities Act of 1933 (the Securities Act), for any and all of the Companys outstanding
restricted 101/2% Senior Secured Second Lien Notes due 2015 (the Original Notes).
Capitalized terms used but not defined herein have the meanings assigned to them in the Prospectus.
This will instruct you, the DTC participant, as to the action to be taken by you relating to
the Exchange Offer with respect to the Original Notes held by you for the account of the
undersigned.
The aggregate face amount of the Original Notes held by you for the account of the undersigned
is (fill in amount):
$___ of the Original Notes.
With respect to the Exchange Offer, we hereby instruct you (check appropriate statement):
A. o TO TENDER the following Original Notes held by you for our account (insert
principal amount of Original Notes to be tendered in an integral multiple of $1,000):
$___ of the Original Notes, and not to tender other outstanding Original Notes, if any, held by
you for our account;
OR
B. o NOT TO TENDER any Original Notes held by you for our account.
If we instruct you to tender the Original Notes held by you for our account, it is understood
that you are authorized to make, on behalf of us (and, by signing below, we hereby make to you),
the representations contained in the Letter of Transmittal that are to be made with respect to us
as a beneficial owner, including, but not limited to, the representations that:
(i) any Exchange Notes that we will acquire in exchange for Original Notes will be acquired
in the ordinary course of our business;
(ii) we have not engaged in, do not intend to engage in, and have no arrangement or
understanding with any person to engage in, a distribution of any Exchange Notes issued to us;
(iii) we are not an affiliate (as defined in Rule 405 under the Securities Act) of the
Company or its subsidiaries, or if the holder is an affiliate of the Company or its subsidiaries,
the holder will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable;
(iv) we are not a broker-dealer who purchased the Original Notes for resale pursuant to an
exemption under the Securities Act tendering Original Notes acquired directly from the Company
for our own account; and
(v) we are not restricted by any law or policy of the SEC from trading the Exchange Notes
acquired in the exchange offer.
If we are a broker-dealer that will receive Exchange Notes for our own account in exchange for
Original Notes, we represent that the Original Notes were acquired as a result of market-making
activities or other trading activities,
and we acknowledge that we will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of those Exchange Notes. By acknowledging that we will
deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection
with any resale of such Exchange Notes, we are not deemed to admit that we are an underwriter
within the meaning of the Securities Act.
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Name of beneficial owner(s):
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Taxpayer Identification or Social Security Number:
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