DEFM14A 1 nt10023211x1_defm14a.htm DEFM14A

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material under §240.14a-12
TRIBUNE PUBLISHING COMPANY
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
(1)
Title of each class of securities to which transaction applies:
 
 
 
 
(2)
Aggregate number of securities to which transaction applies:
 
 
 
 
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
 
 
 
(4)
Proposed maximum aggregate value of transaction:
 
 
 
 
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Total fee paid:
 
 
 
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
 
(1)
Amount previously paid:
 
 
 
 
(2)
Form, Schedule or Registration Statement No.:
 
 
 
 
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NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE MERGER; PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER AGREEMENT OR THE OTHER TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER; OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION IN THE ACCOMPANYING PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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April 20, 2021
Dear Stockholders of Tribune Publishing Company (the “Company”, “we”, “us”, or “our”):
We are pleased to invite you to, and notice is hereby given of, a Special Meeting of Stockholders (the “Special Meeting”). The Special Meeting will begin at 10:00 a.m. Central Time on May 21, 2021 and will be a “virtual meeting” of stockholders. In light of the ongoing coronavirus (“COVID-19”) pandemic, for the safety of our stockholders and in accordance with federal, state and local guidance limiting group gatherings, the Special Meeting will be held in a virtual meeting format only, and there will not be a physical meeting location. You will be able to access the stock list prepared in connection with the Special Meeting, attend and be deemed to be present at the Special Meeting as well as vote and submit your questions during the live webcast of the Special Meeting by visiting www.virtualshareholdermeeting.com/TPCO2021 and entering the 16-digit control number included on your Notice, on your proxy card or on the instructions that accompanied your proxy materials.
At the Special Meeting, you will be asked to:
1.
Consider and vote on a proposal (the “Merger Proposal”) to adopt the Agreement and Plan of Merger, dated as of February 16, 2021, as it may be amended from time to time (the “Merger Agreement”), by and among the Company, Tribune Enterprises, LLC (“Parent”) and Tribune Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”);
2.
Consider and vote on a proposal (the “Merger Compensation Proposal”) to approve, by non-binding, advisory vote, certain compensation arrangements for the Company’s named executive officers in connection with the Merger (defined below); and
3.
Consider and vote on a proposal (the “Adjournment Proposal”) to approve the adjournment of the Special Meeting from time to time, if necessary, to continue to solicit votes for the Merger Proposal.
A copy of the Merger Agreement is attached as Annex A to this proxy statement. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and a wholly owned subsidiary of Parent.
At the effective time of the Merger (the “Effective Time”), each share of common stock of the Company that is issued and outstanding immediately prior to the Effective Time (other than shares held by Parent, its subsidiaries and affiliates, and its and their respective directors and officers (collectively, “Alden Parties”) and certain other excluded shares) will be converted into the right to receive merger consideration of $17.25 per share of common stock of the Company in cash, without interest and less any required withholding taxes and, when so converted, will automatically be canceled and cease to exist, except for the right of the former holder thereof to receive the merger consideration.
The Special Committee (the “Special Committee”) of the board of directors of the Company (the “Board” or “Board of Directors”), consisting solely of independent directors of the Company who are neither affiliated with nor appointed by Parent or its affiliates, evaluated the Merger in consultation with the Company’s management and legal and financial advisors and recommended the Merger to the Board. The Special Committee unanimously recommended that the Board (i) determine that the terms of the Merger Agreement and the transactions contemplated by it, including the Merger, were fair to, and in the best interests of, the Company and the holders of shares of our common stock (other than shares held by Alden Parties and certain other excluded shares), (ii) determine that it was advisable and in the best interests of the Company and the holders of shares of our common stock (other than shares held by Alden Parties and certain other excluded shares) to enter into the Merger Agreement, and (iii) approve and authorize the Merger Agreement and the Merger. The Board (a) determined that the terms of the Merger Agreement and the transactions contemplated by it, including the Merger, are fair to, and in the best interests of, the Company and its unaffiliated stockholders, (b) determined that it is in the best interests of the Company and its stockholders and declared it advisable to enter into the Merger

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Agreement, (c) approved the execution and delivery by the Company of the Merger Agreement, the performance by the Company of its covenants and agreements contained in the Merger Agreement and the consummation of the Merger and the other transactions contemplated by the terms and subject to the conditions contained in the Merger Agreement and (d) resolved to recommend that the stockholders of the Company vote to approve the Merger Agreement, in each case on the terms and subject to the conditions set forth in the Merger Agreement.
Approval of the Merger Proposal requires the affirmative vote of (i) at least two-thirds of the shares of our common stock (other than shares “owned” by Parent or Merger Sub and their “affiliates” and “associates” (as each such term is defined in Section 203 of the Delaware General Corporation Law (the “DGCL”))) outstanding on such matter and (ii) a majority in voting power of the outstanding shares of common stock entitled to vote on such matter. The Merger Compensation Proposal is an advisory vote and the results will not be binding on the Board or the Company. Approval of the Merger Compensation Proposal requires the affirmative vote of at least a majority of the outstanding shares of common stock present virtually or represented by proxy at the Special Meeting. Approval of the Adjournment Proposal also requires the affirmative vote of at least a majority of the outstanding shares of common stock present virtually or represented by proxy at the Special Meeting.
Our Board recommends that you vote “FOR” the Merger Proposal, “FOR” the Merger Compensation Proposal and “FOR” the Adjournment Proposal.
We hope you can join us at the Special Meeting. Regardless of whether you plan to attend, please read the accompanying proxy statement and vote your shares promptly. You may vote over the Internet, as well as by telephone, or, if you requested to receive printed proxy materials, by mailing a proxy or voting instruction card.
Sincerely,


Philip G. Franklin
Terry Jimenez
Chair of the Board of Directors
Chief Executive Officer and Member of the Board of Directors
The accompanying proxy statement is dated April 20, 2021 and, together with the enclosed form of proxy, is first being mailed to the Company’s stockholders on or about April 20, 2021.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE MERGER; PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER AGREEMENT OR THE OTHER TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER; OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION IN THE ACCOMPANYING PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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TRIBUNE PUBLISHING COMPANY
560 W. Grand Avenue,
Chicago, Illinois 60654
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 2021
TO THE STOCKHOLDERS OF TRIBUNE PUBLISHING COMPANY:
On May 21, 2021, Tribune Publishing Company (the “Company”, “we,” “us,” or “our”) will hold our 2021 Special Meeting of Stockholders (the “Special Meeting”) as a “virtual meeting” of stockholders. The Special Meeting will begin at 10:00 a.m. Central Time.
At the Special Meeting, you will be asked to:
1.
Consider and vote on a proposal (the “Merger Proposal”) to adopt the Agreement and Plan of Merger, dated as of February 16, 2021, as it may be amended from time to time (the “Merger Agreement”), by and among the Company, Tribune Enterprises, LLC (“Parent”) and Tribune Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”);
2.
Consider and vote on a proposal (the “Merger Compensation Proposal”) to approve, by non-binding, advisory vote, certain compensation arrangements for the Company’s named executive officers in connection with the Merger (defined below); and
3.
Consider and vote on a proposal (the “Adjournment Proposal”) to approve the adjournment of the Special Meeting from time to time, if necessary, to continue to solicit votes for the Merger Proposal.
A copy of the Merger Agreement is attached as Annex A to this proxy statement. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and a wholly owned subsidiary of Parent.
You are entitled to vote at the Special Meeting and any adjournments or postponements of the Special Meeting if you were a stockholder of record at the close of business on April 15, 2021 (the “Record Date”). For ten days prior to the Special Meeting, a list of stockholders of record as of the Record Date will be available to stockholders for any purpose germane to the Special Meeting during ordinary business hours at our principal executive offices, 560 W. Grand Avenue, Chicago, Illinois, 60654. In addition, a list of the names of stockholders of record entitled to vote at the Special Meeting will be available during the entire time of the Special Meeting on the virtual special meeting website.
Regardless of whether you plan to attend, please read the accompanying Proxy Statement and vote your shares as promptly as possible in order to ensure your representation at the Special Meeting. You may vote over the Internet, as well as by telephone, or, if you requested to receive printed proxy materials, by mailing a proxy or voting instruction card. Even if you have given your proxy, you may still vote online if you attend the Special Meeting. If your shares are held through a broker, bank, or other holder of record and you wish to vote online at the Special Meeting, you must obtain a legal proxy issued in your name from your broker, bank, or other holder of record.
The Special Meeting will be virtual-only. Stockholders of record as of the Record Date are entitled to be deemed present virtually and vote at, participate in, submit questions in writing during, and access the stockholder list during, the Special Meeting, by visiting www.virtualshareholdermeeting.com/TPCO2021. To participate in the virtual-only Special Meeting, you will need the 16-digit control number included on your Notice, on your proxy card or on the instructions that accompanied your proxy materials.
By Order of the Board of Directors

Philip G. Franklin
Chair of the Board of Directors
Chicago, Illinois
April 20, 2021

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TRIBUNE PUBLISHING COMPANY
560 W. Grand Avenue,
Chicago, Illinois 60654
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
INTRODUCTION
This proxy statement is being furnished to the stockholders of Tribune Publishing Company, a Delaware corporation, (“we”, “our”, the “Company” or “Tribune”) in connection with the solicitation of proxies by our board of directors (the “Board” or “Board of Directors”), for use at a virtual special meeting of stockholders and at any adjournments or postponements thereof (the “Special Meeting”). Stockholders will be asked to:
1.
Consider and vote on a proposal (the “Merger Proposal”) to adopt the Agreement and Plan of Merger, dated as of February 16, 2021 as it may be amended from time to time (the “Merger Agreement”), by and among the Company, Tribune Enterprises, LLC (“Parent”) and Tribune Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”);
2.
Consider and vote on a proposal (the “Merger Compensation Proposal”) to approve, by non-binding, advisory vote, certain compensation arrangements for the Company’s named executive officers in connection with the Merger (defined below); and
3.
Consider and vote on a proposal (the “Adjournment Proposal”) to approve the adjournment of the Special Meeting, from time to time, if necessary, to continue to solicit votes for the Merger Proposal.
A copy of the Merger Agreement is attached as Annex A to this proxy statement. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and a wholly owned subsidiary of Parent.
PROXY SUMMARY
The following summary highlights selected information in this proxy statement and may not contain all the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes and the documents referred to in this proxy statement. Each item in this summary includes a page reference directing you to a more complete description of that topic. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find More Information” beginning on page 101 of this proxy statement.
Company Overview
Tribune Publishing Company, together with its subsidiaries, is a media company rooted in award-winning journalism. Headquartered in Chicago, Illinois, Tribune operates local media businesses in eight markets with titles including the Chicago Tribune, New York Daily News, The Baltimore Sun, Hartford Courant, South Florida’s Sun Sentinel, Orlando Sentinel, Virginia’s Daily Press and The Virginian-Pilot, and The Morning Call of Lehigh Valley, Pennsylvania. Tribune also operates Tribune Content Agency (“TCA”). Tribune’s major daily newspapers have served their respective communities with local, regional, national and international news and information for more than 150 years. The Hartford Courant is the nation’s oldest continuously published newspaper and celebrated its 256th anniversary in October 2020.
Proposal 1
MERGER PROPOSAL
For further information please see page 28.
Proposal 2
MERGER COMPENSATION PROPOSAL
For further information please see page 87.
Proposal 3
ADJOURNMENT PROPOSAL
For further information please see page 89.
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SUMMARY ABOUT THE SPECIAL MEETING (Page 23)
Time, Place and Purpose of the Special Meeting (Page 23)
This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by the Board for use at the Special Meeting, which will be held virtually, without a physical meeting location, on May 21, 2021 at 10:00 a.m. Central Time.
At the Special Meeting, holders of our common stock, $0.01 par value per share (the “common stock”), will be asked to approve each of the Merger Proposal, the Merger Compensation Proposal and the Adjournment Proposal.
Record Date and Quorum (Page 23)
You are entitled to receive notice of, and to vote at, the Special Meeting if you owned shares of our common stock at the close of business on April 15, 2021, which the Board has set as the record date for the Special Meeting (the “Record Date”). As of the Record Date, there were 36,951,571 shares of common stock outstanding. Each holder of our common stock is entitled to cast one vote per such share. The presence at the Special Meeting, virtually or represented by proxy, of the holders of a majority of the shares of the common stock issued and outstanding and entitled to vote at the Special Meeting, constitutes a quorum for the transaction of business at the Special Meeting. Abstentions are counted as present for the purpose of determining whether a quorum is present. Shares held of record by a bank, broker or other holder of record will not be counted as present at the Special Meeting for purposes of determining whether a quorum is present unless the broker, bank or other holder of record has been instructed to vote on at least one of the proposals presented in this proxy statement.
Vote Required (Page 24)
The vote required depends on each proposal.
Approval of the Merger Proposal requires the affirmative vote of (i) at least two-thirds of the shares of our common stock (other than shares “owned” by Parent or Merger Sub and their “affiliates” and “associates” (as each such term is defined in Section 203 of the Delaware General Corporation Law (the “DGCL”))) outstanding and (ii) a majority in voting power of the outstanding shares of common stock entitled to vote on such matter. With respect to the Merger Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions and broker non-votes will have the same effect as a vote “AGAINST” approval of the Merger Proposal.
Approval of the Merger Compensation Proposal requires the affirmative vote of at least a majority of the outstanding shares of common stock present virtually or represented by proxy at the Special Meeting. The Merger Compensation Proposal is an advisory vote and the results will not be binding on the Board or the Company. With respect to the Merger Compensation Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions will have the same effect as a vote “AGAINST” approval of the Merger Compensation Proposal. Broker non-votes will not have an effect on the Merger Compensation Proposal.
Approval of the Adjournment Proposal also requires the affirmative vote of at least a majority of the outstanding shares of common stock present virtually or represented by proxy at the Special Meeting. With respect to the Adjournment Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” If you abstain from voting on the Adjournment Proposal, the abstention will have the same effect as a vote “AGAINST” the Adjournment Proposal. Broker non-votes will not have an effect on the Adjournment Proposal.
As of the Record Date, the directors and executive officers of the Company beneficially owned and were entitled to vote, in the aggregate, 560,038 shares of our common stock (not including any shares of our common stock deliverable upon exercise or conversion of any Company Options or Company RSUs (each as defined in the section entitled “The Merger—Interests of Certain Persons in the Merger” beginning on page 64), representing approximately 1.5% of the outstanding voting power of our common stock. The directors and executive officers have informed the Company that they currently intend to vote all such shares of our common stock “FOR” approval of the Merger Proposal, “FOR” approval of the Merger Compensation Proposal and, if necessary,
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“FOR” approval of the Adjournment Proposal, with the exception of Terry Jimenez, the Chief Executive Officer of the Company and a member of the Board of Directors, who has informed the Company that he currently intends to vote “AGAINST” the approval of such proposals. See the sections entitled “Security Ownership of Certain Beneficial Owners, Directors, and Management” beginning on page 92.
As of the Record Date, members of the Purchaser Group (as defined in the section entitled “Special Factors—Merger Proposal—Purposes and Reasons of the Purchaser Group for the Merger” beginning on page 29) beneficially owned and had the right to vote 11,554,306 shares of common stock in the aggregate, which represents approximately 31.6% of the Company’s common stock entitled to vote at the special meeting. Pursuant to the Merger Agreement, Parent agreed to vote or cause to be voted all of its, its subsidiaries and its affiliates shares of the Company’s common stock in favor of the adoption of the Merger Agreement and the approval of the transactions contemplated thereby, including the Merger, so long as the Board has not changed or adversely modified its recommendation in favor of the Merger Agreement. Accordingly, members of the Purchaser Group have informed the Company that they currently intend to vote all shares of common stock held by such members “FOR” the Merger Proposal, “FOR” the Merger Compensation Proposal and “FOR” the Adjournment Proposal.
Proxies and Revocation (Page 25)
You can vote using any one of the methods described below.
Vote by Internet. Stockholders of record may submit proxies over the Internet by following the instructions on the Notice of Internet Availability of Proxy Materials or, if printed copies of the proxy materials were requested, the instructions on the printed proxy card. Most beneficial stockholders may vote by accessing the website specified on the voting instruction forms provided by their brokers, trustees, banks or other nominees. Please check your voting instruction form for Internet voting availability.
Vote by Telephone. Stockholders of record may submit proxies using any touch-tone telephone from within the United States by following the instructions on the Notice of Internet Availability of Proxy Materials or, if printed copies of the proxy materials were requested, the instructions on the printed proxy card. Most beneficial owners may vote using any touch-tone telephone from within the United States by calling the number specified on the voting instruction forms provided by their brokers, trustees, banks or other nominees. Please check your voting instruction form for telephone voting availability.
Vote by Mail.  You can vote by mail by completing, signing, and dating the proxy card or voting instruction form and returning it in the prepaid return envelope, if printed copies of the proxy materials were requested. If you are a stockholder of record and you return your signed proxy card but do not indicate your voting preferences, the persons named in the proxy card will vote the shares represented by that proxy as recommended by the Board of Directors. If you are a beneficial owner and you return your signed voting instruction form but do not indicate your voting preferences, please see “What are ‘broker non-votes’ and how do they affect the proposals?” regarding whether your broker, bank, or other holder of record may vote your uninstructed shares on a particular proposal.
Vote Online at the Special Meeting. As the Special Meeting is virtual-only, stockholders as of the Record Date can vote online during the Special Meeting by visiting www.virtualshareholdermeeting.com/TPCO2021 and following the instructions found on your proxy card. If you are a beneficial owner, you must obtain a legal proxy from your broker, bank, or other holder of record and virtually present it to the inspector of election with your ballot to be able to vote at the Special Meeting. Even if you plan to virtually attend the Special Meeting, we recommend that you also vote either by telephone, by Internet, or by mail so that your vote will be counted if you later decide not to attend.
The Company is incorporated under Delaware law, which specifically permits electronically transmitted proxies, provided that each such proxy contains or is submitted with information from which the inspector of election can determine that such proxy was authorized by the stockholder. The electronic voting procedures provided for the Special Meeting are designed to authenticate each stockholder by use of a control number to allow stockholders to vote their shares and to confirm that their instructions have been properly recorded.
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You have the right to revoke a proxy. If you are a stockholder of record, you can revoke your proxy before it is exercised by:
delivering a written notice of such revocation to our Corporate Secretary at 560 W. Grand Avenue, Chicago, Illinois 60654, 312-222-2102, which must be received by us before the Special Meeting;
timely delivering a valid, subsequent proxy by Internet, by telephone, or by mail; or
voting online at the Special Meeting.
If you are a beneficial owner, you may be able to submit new voting instructions by contacting your broker, bank, or other holder of record. You may also vote online at the Special Meeting if you obtain a legal proxy, as previously described.
Attendance at the Special Meeting will not cause your previously granted proxy to be revoked unless you vote online at the Special Meeting. All shares for which proxies have been properly completed and submitted and not revoked will be voted at the Special Meeting.
SUMMARY OF PROPOSAL 1—MERGER PROPOSAL
Your Board of Directors recommends a vote FOR the adoption of the Merger Agreement and transactions contemplated thereby.
Parties to the Merger (Page 28)
Tribune Publishing Company
Tribune is a media company rooted in award-winning journalism. Headquartered in Chicago, Illinois, Tribune operates local media businesses in eight markets with titles including the Chicago Tribune, New York Daily News, The Baltimore Sun, Hartford Courant, South Florida’s Sun Sentinel, Orlando Sentinel, Virginia’s Daily Press and The Virginian-Pilot, and The Morning Call of Lehigh Valley, Pennsylvania. Tribune also operates TCA. Tribune’s major daily newspapers have served their respective communities with local, regional, national and international news and information for more than 150 years. The Hartford Courant is the nation’s oldest continuously published newspaper and celebrated its 256th anniversary in October 2020.
Tribune’s unique and valuable content across its brands have earned a combined 65 Pulitzer Prizes and are committed to informing, inspiring and engaging local communities. Tribune’s brands create and distribute content across our media portfolio, offering integrated marketing, media, and business services to consumers and advertisers, including digital solutions and advertising opportunities.
Tribune Enterprises, LLC
Parent is a Delaware limited liability company that was formed on February 11, 2021, solely for the purpose of entering into the Merger Agreement and consummating the transactions contemplated by the Merger Agreement, including the Merger. Parent has not carried on any activities on or prior to the date of this proxy statement other than those related to its formation and as contemplated by or related to the Merger. Parent is owned by (i) Alden Global Opportunities Master Fund, L.P., a Cayman Islands limited partnership (“AGOMF”), (ii) Alden Global Value Recovery Master Fund, L.P, a Cayman Islands limited partnership (“AGVRMF” and, together with AGOMF, the “Alden Funds”), for both of which Alden Global Capital LLC, a Delaware limited liability company (“Alden Global Capital” and, together with the Alden Funds, “Alden”) is the investment manager and (iii) Turnpike Limited, a Cayman Islands exempted company (“Turnpike”).
Tribune Merger Sub, Inc.
Merger Sub is a Delaware corporation and wholly owned subsidiary of Parent and was formed by Parent on February 11, 2021, solely for the purpose of entering into the Merger Agreement and completing the transactions contemplated thereby. Merger Sub has not carried on any activities on or prior to the date of this proxy statement other than those related to its formation and as contemplated by or related to the Merger Agreement. Upon consummation of the Merger, the Merger Sub will merge with and into the Company, the separate corporate existence of Merger Sub will cease and the Company will continue as the surviving corporation and as a wholly owned subsidiary of Parent.
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The Merger (Page 35)
The Merger Agreement provides that Merger Sub will merge with and into the Company. Upon the filing of the certificate of merger with the Delaware Secretary of State, at which time the Merger shall become effective (the “Effective Time”), Merger Sub will cease to exist and the Company will continue as the surviving corporation following the Merger. As a result of the Merger, the Company will cease to be a publicly traded company and will become a wholly owned subsidiary of Parent. You will not own any shares of the capital stock of the surviving corporation.
Merger Consideration (Page 35)
In the Merger, each outstanding share of our common stock will automatically be converted into the right to receive an amount in cash equal to $17.25, without interest (the “Merger Consideration”), other than shares of our common stock (i) owned by (x) Parent or any of its affiliates or associates; or (y) the Company, as treasury stock, which shares in clauses (x) and (y) we refer to as “excluded shares”; and (ii) held by stockholders who have not voted in favor of the Merger and properly and validly perfected their statutory rights of appraisal in accordance with Section 262 of the Delaware General Corporation Law (the “DGCL”), which shares we refer to as “dissenting shares,” which shares will be canceled without payment of any consideration therefor and will cease to exist.
Reasons for the Merger; Recommendation of the Company’s Special Committee and Board (Page 46)
After careful consideration of various factors described in the section entitled “The Merger—Reasons for the Merger; Recommendation of the Company’s Special Committee and Board” beginning on page 46, the Special Committee and the Board have determined that the Merger and the other transactions contemplated by the Merger Agreement are fair to, and in the best interests of, the Company and the Company’s unaffiliated stockholders and approved and declared advisable the Merger Agreement and the Merger and the other transactions contemplated by the Merger Agreement. The Board has also resolved that the Merger Agreement be submitted for consideration by the stockholders of the Company at the Special Meeting and recommended that the stockholders of the Company vote to adopt the Merger Agreement. The Special Committee and the Board consulted with the Special Committee’s outside financial and legal advisors and senior management at various times and considered a number of factors that the Special Committee and the Board believe support such decision.
In considering the recommendation of the Board with respect to the Merger Proposal, you should be aware that our directors and executive officers have interests in the Merger that may be different from, or in addition to, yours. The Special Committee and the Board were aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Merger, and in recommending that the Merger Agreement be adopted by the stockholders of the Company. See “The Merger—Interests of Certain Persons in the Merger” beginning on page 64.
The Board recommends that you vote “FOR” approval of the Merger Proposal.
Purposes and Reasons of the Purchaser Group for the Merger (Page 29)
The “Purchaser Group” means (i) Parent, (ii) Merger Sub, (iii) the Alden Funds, (iv) AGOF Master GP, Ltd., a Cayman Islands exempted company (“AGOF”), (v) AGVRF Master GP, Ltd., a Cayman Islands exempted company (“AGVRF”), (vi) Turnpike, (vii) Alden Global Capital, which is the investment manager of the Alden Funds, (viii) Heath B. Freeman (“Mr. Freeman”), who is President and one of the founding members of Alden Global Capital, and (ix) Randall D. Smith (“Mr. Smith”), who is Chief of Investments and one of the founding members of Alden Global Capital. For the Purchaser Group, the purpose of the Merger is to enable Parent to acquire control of the Company, in a transaction in which the unaffiliated stockholders of the Company will be cashed out for $17.25 per share in cash, without interest, less any applicable withholding taxes. After the Merger, the Company’s common stock will no longer be publicly traded and Parent will solely bear the risks, and be entitled to the benefits, of ownership of the Company. Upon consummation of the Merger, the unaffiliated stockholders will immediately realize the value of their investment in the Company through their receipt of the Merger Consideration of $17.25 per share in cash (without interest), representing a premium of approximately 45% to the closing price of the Company’s common stock on NASDAQ on December 11, 2020, the last trading day prior to the Board receiving Alden Global Capital’s proposal to acquire the Company, a premium of
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approximately 35% to the closing price of the Company’s common stock on NASDAQ on December 30, 2020, the last trading day prior to public disclosure of Alden Global Capital’s proposal to acquire the Company, a 21% increase from Alden Global Capital’s initial proposal of $14.25 per share and a premium of approximately 8% to the closing price of the Company’s common stock on NASDAQ on February 12, 2021, the last trading day before the announcement that the Company, Parent and Merger Sub had entered into the Merger Agreement. In the course of reaching its decision to approve the Merger Agreement and the transactions contemplated thereby, including the Merger, the Purchaser Group considered a number of factors, which are described in “Special Factors—Purposes and Reasons of the Purchaser Group for the Merger” beginning on page 29.
Plans for the Company After the Merger (Page 30)
Immediately following the Merger, it is expected that the Company’s operations will be conducted in a manner consistent with how they are being currently conducted, except that it will cease to be a publicly traded company and will instead be a privately held subsidiary of Parent. Notwithstanding the foregoing, following the Merger, as part of the Purchaser Group’s long-term corporate goal of optimizing value, the Purchaser Group intends to conduct a review of the Company and its assets, capital allocation, corporate and capital structure, capitalization, operations, business, properties and policies to determine what changes, if any, may be desirable in light of the circumstances which then exist. In connection with this review, the Purchaser Group may consider a range of alternatives including acquisitions, strategic transactions, divestitures, balance sheet optimization, and changes in, or new, business lines. The Purchaser Group may also cause the Company to enter into one or more management service agreements with Alden Global Capital or its affiliates. Except as otherwise disclosed in this proxy statement (including in the Company’s filings with the SEC incorporated by reference into this proxy statement), as of the date hereof, no agreements, understandings or decisions have been reached and there is no assurance that the Purchaser Group will decide to undertake any such alternatives. Additionally, from time to time the Purchaser Group may decide to merge or reorganize its subsidiaries (including the Company) and other affiliated entities, for tax and/or corporate-related purposes. For more information, see “Special Factors—Plans for the Company After the Merger” beginning on page 30.
Position of the Purchaser Group as to Fairness of the Merger (Page 31)
The Purchaser Group believes that the Merger is substantively and procedurally fair to the Company’s unaffiliated stockholders. However, neither the Purchaser Group nor any of its respective affiliates has performed, or engaged a financial advisor to perform, any valuation or other analysis for purposes of assessing the fairness of the Merger to the Company and the Company’s unaffiliated stockholders. The belief of the Purchaser Group as to the procedural and substantive fairness of the Merger is based on the factors discussed in “Special Factors—Position of the Purchaser Group as to the Fairness of the Merger” beginning on page 31.
Opinion of Lazard Frères & Co. LLC (Page 52)
The Special Committee retained Lazard Frères & Co. LLC (“Lazard”), to act as its financial advisor in connection with the Merger. On February 15, 2021, at a meeting of the Special Committee held to evaluate the Merger, Lazard rendered its oral opinion to the Special Committee, subsequently confirmed in writing by delivery of Lazard’s written opinion dated as of the same date, that, as of such date, and based upon and subject to the assumptions, procedures, factors, qualifications and limitations set forth in Lazard’s written opinion, the consideration to be paid to holders of common stock, other than certain excluded holders, in the Merger was fair, from a financial point of view, to holders of common stock, other than certain excluded holders.
The full text of Lazard’s written opinion to the Special Committee, dated February 16, 2021, which sets forth the assumptions made, procedures followed, factors considered and qualifications and limitations on the review undertaken by Lazard in connection with its opinion, is attached to this proxy statement as Annex B. The summary of Lazard’s opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of the opinion. You are encouraged to read Lazard’s opinion, this section and the summary of Lazard’s opinion below carefully and in their entirety.
Lazard’s engagement and its opinion were for the benefit of the Special Committee (in its capacity as such) and Lazard’s opinion was rendered to the Special Committee in connection with its evaluation of the Merger and addressed only the fairness as of the date of the opinion, from a financial point of view, to holders of common stock (other than certain excluded shares) of the consideration to be paid to holders of common stock (other than
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certain excluded shares) in the Merger. Lazard’s opinion was not intended to and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act with respect to the Merger or any matter relating thereto.
Financing of the Merger (Page 62)
The obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition.
In connection with the financing of the Merger, the Alden Funds have entered into an equity commitment letter, dated as of February 16, 2021, with the Company (the “Equity Commitment Letter”), pursuant to which the Alden Funds have agreed to provide Parent with an aggregate equity commitment of $375,000,000 in cash, which will be available, together with cash of the Company on hand as of the closing of the Merger, to (i) fund the aggregate Merger Consideration payable to the Company’s stockholders, (ii) pay the fees, expenses and other amounts required to be paid to the Company by Parent in connection with the closing of the Merger and (iii) pay any other out-of-pocket costs of Parent arising in connection with the consummation of the Merger. The Company is a third-party beneficiary of the Equity Commitment Letter and has the right to specifically enforce the Alden Funds’ obligations thereunder, if the conditions to Parent’s obligations to consummate the Merger are satisfied or waived, and the Merger is consummated substantially simultaneously. Notwithstanding the Equity Commitment Letter, Parent has the right to seek to finance a portion or all of the $375,000,000 in cash with the proceeds from debt and/or equity financing from its affiliates or third parties.
Pursuant to the limited guarantee delivered by the Alden Funds in favor of the Company, dated as of February 16, 2021 (the “Limited Guarantee”), the Alden Funds have agreed to guarantee the payment of the obligations of Parent under the Merger Agreement to pay the liquidated damages amount of $50,000,000 (the “Liquidated Damages Amount”) if the Merger Agreement is terminated in certain circumstances, plus amounts in respect of certain reimbursement and indemnification obligations of Parent for certain costs, expenses or losses incurred or sustained by the Company, its subsidiaries and their respective representatives, as specified in the Merger Agreement. For more information, please see the section of this proxy statement captioned “The Merger—Financing of the Merger.”
Interests of Certain Persons in the Merger (Page 64)
In considering the recommendation of the Board that you vote to adopt the Merger Agreement, you should be aware that aside from their interests as Company stockholders, the Company’s directors and executive officers have interests in the Merger that may be different from, or in addition to, those of Company stockholders generally. These interests include:
Under the Merger Agreement, in connection with the closing of the Merger, (i) each option to purchase shares of common stock (each, a “Company Option”) that is outstanding immediately prior to the Effective Time, whether or not vested, will automatically become fully vested and canceled and converted into the right to receive an amount in cash, equal to the product of (x) the amount by which the Merger Consideration exceeds the applicable exercise price per share of common stock of such Company Option, and (y) the number of shares of common stock issuable in respect of such fully vested Company Option as of immediately prior to the Effective Time and, (ii) each restricted stock unit entitling the holder to delivery of shares of common stock, subject to satisfaction of vesting or other forfeiture conditions (each, a “Company RSU”) that is outstanding immediately prior to the Effective Time, whether or not vested, will automatically be canceled and converted into the right to receive an amount in cash, equal to the product of (x) the Merger Consideration and (y) common stock underlying such Company RSU (and then adding, if applicable, the value of any dividend-equivalent rights accrued with respect to such Company RSU as of the Effective Time).
Pursuant to Mr. Jimenez’s employment agreement, which was amended on February 15, 2021 to extend the term of the agreement, which would otherwise have expired on April 3, 2021, Mr. Jimenez is entitled to severance benefits in the event that his employment with the Company is terminated for any reason other than death, disability, or for “cause” or if he resigns for “good reason” (each as defined in his employment agreement).
Pursuant to Mr. Lavey’s employment agreement, Mr. Lavey is entitled to severance benefits in the event that his employment with the Company is terminated for any reason other than death, disability, or for “cause” or if he resigns for “good reason” (each as defined in his employment agreement).
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The Company’s directors and officers will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability insurance policies pursuant to the Merger Agreement (as described in the section entitled “The Merger Agreement—Indemnification; Directors’ and Officers’ Insurance” beginning on page 85).
Parent and Merger Sub are affiliates of the Alden Funds, which collectively own 31.6% of the issued and outstanding common stock of the Company. Additionally, pursuant to the Amended and Restated Cooperation Agreement, dated as of July 1, 2020, by and among the Company, the Alden Funds and Alden (the “A&R Cooperation Agreement”), each of Christopher Minnetian (“Mr. Minnetian”), Dana Goldsmith Needleman (“Ms. Needleman”) and Mr. Smith was appointed to the Board as a designee of the Alden Funds. Mr. Smith is one of the founding members of Alden Global Capital and serves as its Chief of Investments. Mr. Minnetian, Ms. Needleman and Mr. Smith did not attend or vote at the Board meeting held regarding the Merger and alternatives thereto.
Members of the Special Committee and the Board were aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Merger, and in recommending to our stockholders that the Merger Agreement be adopted. For additional information, see the sections entitled “The Merger—Background of the Merger” beginning on page 35 and “The Merger—Reasons for the Merger; Recommendation of the Company’s Special Committee and Board” beginning on page 46. These interests are described in more detail below, and certain of them are quantified in the narrative and in the section entitled “Proposal 2—Merger Compensation Proposal—Golden Parachute Compensation” beginning on page 87.
Material U.S. Federal Income Tax Consequences of the Merger (Page 65)
The exchange of shares of our common stock for cash pursuant to the Merger generally will be a taxable transaction to U.S. holders (as defined in “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” on page 65) for U.S. federal income tax purposes. Stockholders who are U.S. holders will generally recognize gain or loss in an amount equal to the difference, if any, between the amount of cash received with respect to such shares and their adjusted tax basis in their shares of our common stock. Under U.S. federal income tax law, U.S. holders may be subject to information reporting on cash received in the Merger. Backup withholding may also apply to the cash payments paid to a non-corporate U.S. holder pursuant to the Merger unless the U.S. holder or other payee provides a taxpayer identification number, certifies that such number is correct and otherwise complies with the backup withholding rules. You should read “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 65 for a more detailed discussion of the U.S. federal income tax consequences of the Merger. You should also consult your tax advisor for a complete analysis of the effect of the Merger on your federal, state and local and/or foreign taxes. If you are not a U.S. holder, the Merger will generally not result in tax to you under U.S. federal income tax laws unless you have certain connections to the United States, and the Company encourages you to seek tax advice regarding such matters.
Regulatory Approvals (Page 67)
Under the terms of the Merger Agreement, the Merger cannot be completed until the waiting period applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), has expired or been terminated.
The Company and Parent filed their respective HSR Act notifications with the United States Federal Trade Commission (the “FTC”) and the Antitrust Division of the United States Department of Justice (the “DOJ”) on March 2, 2021. The HSR waiting period expired on April 2, 2021.
The consummation of the Merger is not conditioned on any regulatory approvals in the United States or in any other jurisdiction, other than the expiration of the waiting period under the HSR Act, as described in the section entitled “The Merger—Regulatory Approvals” beginning on page 67.
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The Merger Agreement (Page 68)
Treatment of Common Stock and Equity Plan Awards (Page 69)
Common Stock. Each share of our common stock outstanding immediately prior to the Effective Time (other than shares held by Parent, Merger Sub and their affiliates and associates and certain other excluded shares and dissenting shares) will be converted into the right to receive $17.25 in cash, without interest.
Company Options. At the Effective Time, each Company Option that is outstanding immediately prior to the Effective Time, whether or not vested, will automatically be canceled and converted into the right to receive an amount in cash equal to the product of (i) the amount by which the Merger Consideration exceeds the applicable exercise price per share of such Company Option, and (ii) the number of shares of common stock issuable in respect of such fully vested Company Option as of immediately prior to the Effective Time.
Company Restricted Stock Units. At the Effective Time, each Company RSU that is outstanding immediately prior to the Effective Time, whether or not vested, will become fully vested and automatically be canceled and converted into the right to receive an amount in cash equal to the product of (i) the Merger Consideration, and (ii) the number of shares of common stock underlying such Company RSU (and then adding, if applicable, the value of any dividend-equivalent rights accrued with respect to such Company RSU as of the Effective Time).
Solicitation of Acquisition Proposals; Board Recommendation Changes (Page 76)
The Company has agreed that it and its subsidiaries will not, and they will use reasonable best efforts to cause their respective directors, officers, employees, investment bankers, attorneys, accountants or other advisors not to, directly or indirectly (i) solicit, knowingly facilitate or encourage the submission of any Acquisition Proposal (as defined in the section entitled “The Merger Agreement—Solicitation of Acquisition Proposals; Board Recommendation Changes” beginning on page 76), (ii) enter into or participate in any discussions or negotiations with, furnish any information relating to the Company or its subsidiaries or afford access to the business, properties, books or records of the Company and its subsidiaries or otherwise cooperate, assist or encourage any effort by any third party that is seeking to make, or has made, an Acquisition Proposal, (iii) permit or make an Adverse Recommendation Change (as defined in the section entitled “The Merger Agreement—Solicitation of Acquisition Proposals; Board Recommendation Changes” beginning on page 76) or (iv) enter into any agreement in principle, letter of intent, merger agreement, acquisition agreement or other commitment or agreement in respect of any proposal or offer providing for an Acquisition Proposal (other than a confidentiality agreement) or amending, modifying, redeeming, terminating or granting any waiver or release under the Company Rights Plan, except that the Company may amend, modify, grant any waiver or release under any standstill, confidentiality or similar agreement of the Company (but solely to the extent necessary to allow for a confidential and nonpublic Acquisition Proposal to be made to the Company or the Board), in each case if the Board determines in good faith, in consultation with its financial advisors and outside legal counsel, that the failure to do so would be reasonably likely to be inconsistent with the fiduciary duties of the Board, so long as the Company promptly notifies Parent within 24 hours of receipt of such waiver or release (including the identity of such counterparty).
Notwithstanding these restrictions, under certain circumstances, the Company may, prior to the receipt of the Company Stockholder Approval, (i) engage in negotiations or discussions with a third party that has made an unsolicited bona fide offer with respect to an Acquisition Proposal that did not result from a breach of the applicable provisions of the Merger Agreement, if the Board reasonably believes, after consultation with its outside advisors, based on information then available, that (x) such Acquisition Proposal constitutes, or would reasonably be expected to lead to, a Superior Proposal (as defined in the section entitled “The Merger Agreement—Solicitation of Acquisition Proposals; Board Recommendation Changes” beginning on page 76) and (y) failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties; and (ii) furnish to such third party nonpublic information relating to the Company pursuant to a confidentiality agreement no less favorable to the Company than the confidentiality agreement between the Company and Parent (and that, for the avoidance of doubt, includes a customary standstill provision). However, all such information provided to such third party must also be made available to Parent prior to or substantially concurrently with the time such information is provided to such third party.
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Notwithstanding the foregoing, under certain circumstances, the Board may, prior to receipt of the Company Stockholder Approval, (i) following receipt of a Superior Proposal that did not result, in whole or in part, from a breach of applicable provisions of the Merger Agreement, make an Adverse Recommendation Change or terminate the Merger Agreement in order to enter into a definitive agreement for such Superior Proposal, or (ii) make an Adverse Recommendation Change in response to an Intervening Event (as defined in the section entitled “The Merger Agreement—Solicitation of Acquisition Proposals; Board Recommendation Changes” beginning on page 76), in each case if and only if the Board determines in good faith, after consultation with its outside advisors, that the failure to take such action would be reasonably likely to be inconsistent with the directors’ fiduciary duties, and following notice and an opportunity for Parent to negotiate amendments to the terms of the Merger Agreement that would make such action by the Company unnecessary.
Conditions to the Merger (Page 83)
The respective obligations of the Company, Parent and Merger Sub to consummate the Merger are subject to the satisfaction (or, where permissible, waiver) of certain customary conditions, including receipt of the Company Stockholder Approval, expiration of the waiting period under the HSR Act, the absence of any court order prohibiting the Merger, the accuracy of the representations and warranties of the parties, compliance by the parties with their respective obligations under the Merger Agreement and the absence of a Company material adverse effect (as defined in the section entitled “The Merger Agreement—Representations and Warranties” beginning on page 70). The condition that the Company Stockholder Approval be obtained is not waivable by any party to the Merger Agreement. See “The Merger Agreement—Conditions to the Merger” beginning on page 83.
Termination (Page 84)
The Company and Parent may, by mutual written consent, terminate the Merger Agreement and abandon the Merger at any time prior to the Effective Time.
The Merger Agreement may also be terminated and the Merger abandoned at any time prior to the Effective Time as follows:
by either Parent or the Company, if:
the Merger has not been consummated on or before December 31, 2021 (the “End Date”);
any court has issued an order permanently restraining, enjoining or otherwise prohibiting the Merger and such order or other action is, or has become, final and non-appealable;
at the Special Meeting, including any adjournment or postponement thereof, the Company’s stockholders do not approve the Merger Proposal; or
there is an uncured breach by the other party of any representation, warranty or covenant that results in the failure of the related closing condition to be satisfied.
by the Company, if:
prior to the Company Stockholder Approval, the Board authorizes the Company to enter into a written agreement for a Superior Proposal, subject to the Company having first complied with certain matching rights and other obligations set forth in the Merger Agreement and paid the Termination Fee (as defined below); or
the Company has irrevocably confirmed to Parent that all of its conditions to the Merger, including the parties’ mutual conditions to the Merger, have been satisfied (other than those conditions that by their terms are to be satisfied at the closing of the Merger or have been waived by the Company), the Company is ready, willing and able to consummate the closing of the Merger and Parent and Merger Sub nonetheless fail to complete the closing of the Merger when required by the Merger Agreement.
by Parent, if:
prior to receipt of the Company Stockholder Approval, the Board makes an Adverse Recommendation Change; or
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the Company materially breaches its non-solicitation obligations and such breach results in an Acquisition Proposal.
Termination Fee (Page 84)
In certain circumstances, the Company may be required to pay Parent a one-time fee equal to $20,000,000 in cash (the “Termination Fee”) if the Merger Agreement is terminated. This termination fee would be payable in the following circumstances:
The Company terminates the Merger Agreement in order to enter into an agreement for a Superior Proposal;
Parent terminates the Merger Agreement if (i) prior to receipt of the Company Stockholder Approval, an Adverse Recommendation Change has occurred or (ii) the Company has materially breached its non-solicitation obligations and such breach has led to receipt of an Acquisition Proposal;
Either Parent or the Company terminates the Merger Agreement if (i) prior to receipt of the Company Stockholder Approval (x) the Merger has not been consummated by the End Date, (y) the Company’s stockholders do not approve Merger Agreement at the Special Meeting or (z) Parent terminates the Merger Agreement due to the Company’s uncured material breach of the Merger Agreement and (ii) prior to the termination of the Merger Agreement, an Acquisition Proposal is publicly announced prior to the Special Meeting and not withdrawn prior to the date of termination or prior to the date of the Special Meeting, and (iii) within 12 months after termination of the Merger Agreement, the Company enters into a definitive agreement in respect of, or the Board approves or recommends, an Acquisition Proposal, or an Acquisition Proposal is consummated (with the percentages set forth in the definition of such term in the Merger Agreement changed from 20% to 50%).
Liquidated Damages Amount (Page 85)
If the Merger Agreement is terminated by the Company (i) if Parent breaches any representation, warranty or covenant that results in the failure of the related closing condition to be satisfied, subject to a cure period in certain circumstances or (ii) if the conditions to Parent’s obligations to consummate the Merger are satisfied or waived, and Parent does not consummate the Merger when required by the Merger Agreement, then Parent will be obligated to pay to the Company the Liquidated Damages Amount. The Alden Funds have agreed to guarantee Parent’s obligation to pay the Liquidated Damages Amount to the Company and certain other specified payments to the Company pursuant to the Limited Guarantee, subject to the terms and obligations set forth therein. However, such amount will not be payable if at the time that the Company terminates the Merger Agreement, Parent could have terminated the Merger Agreement as a result of the Company’s breach of its non-solicitation obligations or of its representations, warranties or covenants.
Remedies (Page 85)
The parties agree that if the Merger Agreement is terminated and a Termination Fee becomes due and payable and is paid by the Company, the Termination Fee will be Parent’s and Merger Sub’s sole and exclusive remedy against the Company with respect to the Merger Agreement.
In addition, the parties agree that if the Merger Agreement is terminated and the Liquidated Damages Amount becomes due and payable and is paid by Parent, the Liquidated Damages Amount will be the Company’s sole and exclusive remedy against Parent and Merger Sub with respect to the Merger Agreement.
Otherwise, no termination of the Merger Agreement will relieve any party to the Merger Agreement of any liability or damages incurred or suffered by the other party resulting from willful breach of such party.
Prior to the termination of the Merger Agreement, the parties are also entitled to an injunction or injunctions to prevent a breach of the Merger Agreement, and to specifically enforce the performance of the terms and provisions of the Merger Agreement. There is no requirement to obtain, furnish or post any bond with or as a condition to obtaining such injunction or injunctions.
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SUMMARY OF PROPOSAL 2—MERGER COMPENSATION PROPOSAL
Your Board of Directors recommends a vote FOR the non-binding, advisory vote on the compensation of the Company’s named executive officers in connection with the Merger.
Golden Parachute Compensation (Page 87)
As required by Section 14A of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder (the “Exchange Act”) and the applicable rules of the Securities and Exchange Commission (the “SEC”) issued thereunder, the Company is required to submit a proposal to the Company’s stockholders for a non-binding advisory vote to approve the Merger-related compensation.
The compensation that the Company’s named executive officers may be entitled to receive from the Company in connection with the Merger is summarized and included under the heading “Proposal 2—Merger Compensation Proposal—Golden Parachute Compensation” beginning on page 87. That summary includes all compensation and benefits that may be paid or become payable to the Company’s named executive officers by the Company in connection with the Merger.
Merger Compensation Proposal (Page 88)
Pursuant to Section 14A of the Exchange Act and Rule 14a-21(c) thereunder, the Company is seeking a non-binding, advisory stockholder approval of the compensation of the Company’s named executive officers that is based on or otherwise relates to the Merger as disclosed above in this section. The proposal gives the Company’s stockholders the opportunity to express their views on the Merger-related compensation of the Company’s named executive officers.
Accordingly, the Company is asking Company stockholders to vote in favor of the adoption of the following resolution, on a non-binding, advisory basis:
“RESOLVED, that the compensation that will or may be paid or become payable to the Company’s named executive officers, in connection with the Merger, and the agreements or understandings pursuant to which such compensation will or may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K in ‘Proposal 2—Merger Compensation Proposal—Golden Parachute Compensation’ are hereby APPROVED.”
Vote Required and the Company Recommendation (Page 88)
The vote on this proposal is a vote separate and apart from the vote to adopt the Merger Agreement. Accordingly, you may vote not to approve this proposal on Merger-related named executive officer compensation and vote to adopt the Merger Agreement and vice versa. Because the vote is advisory in nature, it will not be binding on the Company, regardless of whether the Merger Agreement is adopted. Approval of the non-binding, advisory proposal with respect to the compensation that may be received by the Company’s named executive officers in connection with the Merger is not a condition to completion of the Merger, and failure to approve this advisory matter will have no effect on the vote to adopt the Merger Agreement. Because the Merger-related named executive officer compensation to be paid in connection with the Merger is based on contractual arrangements with the named executive officers, such compensation may be payable, regardless of the outcome of this advisory vote, if the Merger Agreement is adopted (subject only to the contractual conditions applicable thereto).
Approval, by non-binding advisory vote, of the Merger Compensation Proposal requires the affirmative vote of at least a majority of the outstanding shares of common stock present virtually or represented by proxy at the Special Meeting. Abstentions will have the same effect as a vote “AGAINST” approval of the Merger Compensation Proposal. Broker non-votes will not have an effect on the Merger Compensation Proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF THE COMPENSATION THAT MAY BE RECEIVED BY THE COMPANY’S NAMED EXECUTIVE OFFICERS IN CONNECTION WITH THE MERGER.
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SUMMARY OF PROPOSAL 3—ADJOURNMENT
Adjournment Proposal (Page 89)
Your Board of Directors recommends a vote FOR the proposal to enable the adjournment of the Special Meeting, from time to time, if necessary to continue to solicit votes for the Merger Proposal.
The vote on the Adjournment Proposal relates to the Merger Proposal and, if adopted, will allow the Company, if necessary, from time to time, to adjourn the Special Meeting in order to solicit additional proxies, including if there are not sufficient votes to approve the Merger Proposal in accordance with the requisite stockholder vote.
Notwithstanding the inclusion or approval of the Adjournment Proposal, whether or not a quorum is present at the Special Meeting, the chairperson of the Special Meeting may adjourn the Special Meeting to another place, if applicable, date or time, in accordance with the Company’s Amended and Restated By-Laws (the “By-Laws”), effective as of February 3, 2016.
SUMMARY OF OTHER ITEMS WITH RESPECT TO THE MERGER
Market Price of Common Stock and Dividend Information (Page 91)
The closing price of our common stock on NASDAQ, on February 12, 2021, the last trading day prior to the public announcement of the execution of the Merger Agreement, was $15.95 per share of common stock. If the Merger is completed, you will be entitled to receive $17.25 in cash, without interest, for each share of the common stock owned by you, representing a premium of approximately 45% to the closing price of the Company’s common stock on NASDAQ on December 11, 2020, the last trading day prior to the Board receiving Alden Global Capital’s proposal to acquire the Company, a premium of approximately 35% to the closing price of the Company’s common stock on NASDAQ on December 30, 2020, the last trading day prior to public disclosure of Alden Global Capital’s proposal to acquire the Company, a 21% increase from Alden Global Capital’s initial proposal of $14.25 per share and a premium of approximately 8% to the closing price of the Company’s common stock on NASDAQ on February 12, 2021, the last trading day before the announcement that the Company, Parent and Merger Sub had entered into the Merger Agreement.
On April 16, 2021, the most recent practicable date before this proxy statement was mailed to our stockholders, the closing price for our common stock on NASDAQ was $18.37 per share of common stock. You are encouraged to obtain current market quotations for our common stock in connection with voting your shares of common stock.
On February 19, 2020, the Board of Directors declared a cash dividend of $0.25 per share of common stock outstanding. The cash dividend totaling $9.1 million was paid on March 16, 2020, to stockholders of record as of March 2, 2020. On May 8, 2020, the Board suspended the Company’s quarterly cash dividend program until further notice given the unprecedented economic disruption caused by COVID-19. Additionally, under the terms of the Merger Agreement, the Company cannot declare, set aside or pay any dividend or make any other distribution in respect of our capital stock or other equity interests, without Parent’s written consent, prior to the termination of the Merger Agreement or the consummation of the Merger.
Appraisal Rights (Page 95)
If the Merger is completed, the Company’s stockholders who do not vote in favor of the adoption of the Merger Agreement are entitled to appraisal rights under Section 262 of the DGCL, but only if they fully comply with all of the applicable legal requirements of Section 262 of the DGCL, which are summarized in this proxy statement in the section entitled “Appraisal Rights” beginning on page 95 and set forth in their entirety in Section 262 of the DGCL (attached to this proxy statement as Annex C). This means that you may be entitled to have the fair value of your shares of our common stock determined by the Delaware Court of Chancery and to receive payment based on that valuation in lieu of the per share Merger Consideration if you follow exactly the procedures set forth in Section 262 of the DGCL. The ultimate amount you may receive in an appraisal proceeding may be less than, equal to or more than the amount you would have received under the Merger Agreement.
To exercise your appraisal rights, you must, among other things, submit a written demand for appraisal to the Company prior to receipt of the Company Stockholder Approval (and must not fail to perfect or effectively
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withdraw your demand or otherwise waive or lose your right to appraisal) and you must not vote (either virtually or by proxy) in favor of the adoption of the Merger Agreement. If you fail to follow exactly the procedures set forth in Section 262 of the DGCL, you will lose your appraisal rights. The requirements for exercising appraisal rights are further described in the section entitled “Appraisal Rights” beginning on page 95 and the text of the DGCL appraisal rights statute reproduced in its entirety as Annex C to this proxy statement. We encourage you to read these provisions carefully and in their entirety. If you hold your shares of our common stock through a bank, brokerage firm or other nominee and you wish to exercise your appraisal rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for appraisal by your bank, brokerage firm or other nominee. In view of the complexity of the DGCL relating to appraisal rights, stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors promptly. The discussion of appraisal rights in this proxy statement is not a full summary of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL, a copy of which is attached to this proxy statement as Annex C.
Delisting and Deregistration of Common Stock (Page 100)
If the Merger is completed, our common stock will be delisted from NASDAQ and deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC on account of our common stock.
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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are intended to briefly address some commonly asked questions regarding the Merger, the Merger Agreement, and the Special Meeting. These questions and answers may not address all questions that may be important to you as a Company stockholder. Please refer to the more detailed information contained elsewhere in this proxy statement, the Annexes to this proxy statement and the documents referred to in this proxy statement, which you should read carefully and in their entirety.
Questions About the Special Meeting
Where and when is the Special Meeting?
The Special Meeting will take place on May 21, 2021, beginning at 10:00 a.m. Central Time. The Special Meeting will be held in a virtual-only format at www.virtualshareholdermeeting.com/TPCO2021.
What information is included in this proxy statement?
The information in this proxy statement relates to the proposals to be voted on at the Special Meeting, the voting process and other information.
Who is entitled to vote?
Holders of our common stock at the close of business on the Record Date are entitled to receive the Notice of Special Meeting of Stockholders (the “Notice”) and vote at the Special Meeting. As of the Record Date, there were 36,951,571 shares of our common stock outstanding and entitled to vote.
How many votes do I have?
Each share of our common stock is entitled to one vote on each matter properly brought before the Special Meeting. For example, if you own 30 shares of common stock, you are entitled to 30 votes on each matter at the Special Meeting. Stockholders do not have cumulative voting rights.
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A. (the “Transfer Agent”), you are considered, with respect to those shares, the “stockholder of record.” As a stockholder of record, you may vote online at the Special Meeting or vote by proxy. Whether or not you plan to attend the Special Meeting, we urge you to vote over the Internet, by telephone or by filling out and returning a proxy card to ensure your vote is counted.
If your shares are held in a brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” of such shares. In this case, the Notice, proxy statement, Annual Report to Stockholders (including our Form 10-K for the year ended December 27, 2020 (the “Annual Report”)), and applicable voting instruction form should have been forwarded to you by your broker, bank, or other holder of record who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank, or other holder of record on how to vote your shares by using the voting instruction form provided by your broker, bank, or other holder of record.
What am I voting on?
We are asking you to vote on the following matters in connection with the Special Meeting:
Merger Proposal. Consider and vote on the Merger Proposal to adopt the Agreement and Plan of Merger, dated as of February 16, 2021 as it may be amended from time to time, by and among the Company, Tribune Enterprises, LLC and Tribune Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent.
Merger Compensation Proposal. Consider and vote on the Merger Compensation Proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company’s named executive officers in connection with the Merger (defined below).
Adjournment Proposal. Consider and vote on a proposal to approve the adjournment of the Special Meeting, from time to time, if necessary, to continue to solicit votes for the Merger Proposal.
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We will also consider any other business properly presented at the Special Meeting and any adjournment or postponement of the Special Meeting.
How do I vote?
You can vote using any one of the methods described below.
Vote by Internet. Stockholders of record may submit proxies over the Internet by following the instructions on the Notice of Internet Availability of Proxy Materials or, if printed copies of the proxy materials were requested, the instructions on the printed proxy card. Most beneficial stockholders may vote by accessing the website specified on the voting instruction forms provided by their brokers, trustees, banks or other nominees. Please check your voting instruction form for Internet voting availability.
Vote by Telephone. Stockholders of record may submit proxies using any touch-tone telephone from within the United States by following the instructions on the Notice of Internet Availability of Proxy Materials or, if printed copies of the proxy materials were requested, the instructions on the printed proxy card. Most beneficial owners may vote using any touch-tone telephone from within the United States by calling the number specified on the voting instruction forms provided by their brokers, trustees, banks or other nominees. Please check your voting instruction form for telephone voting availability.
Vote by Mail. You can vote by mail by completing, signing, and dating the proxy card or voting instruction form and returning it in the prepaid return envelope, if printed copies of the proxy materials were requested. If you are a stockholder of record and you return your signed proxy card but do not indicate your voting preferences, the persons named in the proxy card will vote the shares represented by that proxy as recommended by the Board of Directors. If you are a beneficial owner and you return your signed voting instruction form but do not indicate your voting preferences, please see “What are ‘broker non-votes’ and how do they affect the proposals?” regarding whether your broker, bank, or other holder of record may vote your uninstructed shares on a particular proposal.
Vote Online at the Special Meeting. As the Special Meeting is virtual-only, stockholders as of the Record Date can vote online during the Special Meeting by visiting www.virtualshareholdermeeting.com/TPCO2021 and following the instructions found on your proxy card. If you are a beneficial owner, you must obtain a legal proxy from your broker, bank, or other holder of record and virtually present it to the inspector of election with your ballot to be able to vote at the Special Meeting. Even if you plan to virtually attend the Special Meeting, we recommend that you also vote either by telephone, by Internet, or by mail so that your vote will be counted if you later decide not to attend.
The Company is incorporated under Delaware law, which specifically permits electronically transmitted proxies, provided that each such proxy contains or is submitted with information from which the inspector of election can determine that such proxy was authorized by the stockholder. The electronic voting procedures provided for the Special Meeting are designed to authenticate each stockholder by use of a control number to allow stockholders to vote their shares and to confirm that their instructions have been properly recorded.
How many copies of the proxy materials should I have received?
If you received more than one proxy card or voting instruction form, your shares are registered in more than one name or are registered in different accounts. In order to vote all of the shares you own, please sign and return all proxy cards or voting instruction forms, or vote each proxy card or voting instruction form by telephone or by Internet to ensure that all of your shares are voted.
What can I do if I change my mind after I vote?
If you are a stockholder of record, you can revoke your proxy before it is exercised by:
delivering a written notice of such revocation to our Corporate Secretary at 560 W. Grand Avenue, Chicago, Illinois 60654, 312-222-2102, which must be received by us before the Special Meeting;
timely delivering a valid, subsequent proxy by Internet, by telephone, or by mail; or
voting online at the Special Meeting.
If you are a beneficial owner, you may be able to submit new voting instructions by contacting your broker, bank, or other holder of record. You may also vote online at the Special Meeting if you obtain a legal proxy, as previously described.
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Attendance at the Special Meeting will not cause your previously granted proxy to be revoked unless you vote online at the Special Meeting. All shares for which proxies have been properly completed and submitted and not revoked will be voted at the Special Meeting.
Is there a list of stockholders entitled to vote at the Special Meeting?
A list of the names of our stockholders of record entitled to vote at the Special Meeting will be available for ten days prior to the Special Meeting for any purpose germane to the meeting, between the hours of 9:00 a.m. and 4:30 p.m. local time at our principal executive offices at 560 W. Grand Avenue, Chicago, Illinois 60654. The list will also be available during the entire time of the Special Meeting on the virtual Special Meeting website.
What constitutes a quorum at the Special Meeting?
The holders of a majority of the outstanding shares entitled to vote at the Special Meeting, present virtually or represented by proxy at the Special Meeting, are necessary to constitute a quorum to transact business. Abstentions are counted as virtually present and entitled to vote for purposes of determining a quorum. Shares held of record by a bank, broker or other holder of record will not be counted for purposes of determining the presence of a quorum unless the broker, banker or other holder of record has been instructed to vote on at least one of the proposals presented in this proxy statement.
What vote is necessary for action to be taken on proposals?
Shares represented by a valid proxy will be voted at the Special Meeting and, when instructions are given by the stockholder, will be voted in accordance with those instructions. If you are a stockholder of record and you return your proxy card but do not indicate your voting preferences, the persons named on the proxy card will vote the shares represented by that proxy as recommended by the Board of Directors. If you are a beneficial owner and you return your signed voting instruction form but do not indicate your voting preferences, please see “What are ‘broker non-votes’ and how do they affect the proposals?” regarding whether your broker, bank, or other holder of record may vote your uninstructed shares on a particular proposal.
Approval of the Merger Proposal requires the affirmative vote of (i) at least two-thirds of the shares of our common stock (other than shares “owned” by Parent or Merger Sub and their “affiliates” and “associates” (as each such term is defined in Section 203 of the DGCL)) outstanding and (ii) a majority in voting power of the outstanding shares of common stock entitled to vote on such matter. With respect to the Merger Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions and broker non-votes will have the same effect as a vote “AGAINST” approval of the Merger Proposal.
Approval of the Merger Compensation Proposal requires the affirmative vote of at least a majority of the outstanding shares of common stock present virtually or represented by proxy at the Special Meeting. With respect to the Merger Compensation Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions will have the same effect as a vote “AGAINST” approval of the Merger Compensation Proposal. Broker non-votes will not have an effect on the Merger Compensation Proposal.
Approval of the Adjournment Proposal also requires the affirmative vote of at least a majority of the outstanding shares of common stock present virtually or represented by proxy at the Special Meeting. With respect to the Adjournment Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” If you abstain from voting on the Adjournment Proposal, the abstention will have the same effect as a vote “AGAINST” the Adjournment Proposal. Broker non-votes will not have an effect on the Adjournment Proposal.
What are “broker non-votes” and how do they affect the proposals?
A “broker non-vote” with respect to a particular proposal is a share held by a broker, bank, or other holder of record that is present or represented by proxy at the Special Meeting, but with respect to which the broker, bank or other holder of record is not instructed by the beneficial owner of such share how to vote on a such proposal and the broker, bank or other holder of record does not have discretionary voting power for that particular proposal.
If you are a beneficial owner and you do not give instructions to your broker, bank, or other holder of record, such holder of record will be entitled to vote the shares with respect to “discretionary” items but will not be permitted to vote the shares with respect to items for which it does not have discretionary voting power (those shares are treated as “broker non-votes”). Because brokers, banks and other holders of record do not have
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discretionary voting authority with respect to any of the Merger Proposal, the Merger Compensation Proposal or the Adjournment Proposal, if you are a beneficial owner and do not give voting instructions to the broker, bank, or other holder of record with respect to one or more of such proposals, then your shares will not be present or represented by proxy at the Special Meeting. If you do not instruct your broker, bank or other holder of record to vote your shares, your shares will not be voted and the effect will be the same as a vote “AGAINST” approval of the Merger Proposal. However, a failure to instruct your broker, bank or other record holder to vote on the Adjournment Proposal, or, assuming a quorum is present, the Merger Compensation Proposal, will have no effect on the outcome of such proposals.
Who counts the votes?
Broadridge Financial Solutions, Inc. will count all votes and serve as the inspector of election. The inspector of election will separately count affirmative and negative votes, abstentions and broker non-votes.
Who will pay for the cost of this proxy solicitation?
We will bear the cost of soliciting proxies. Proxies may be solicited on our behalf by the Company’s directors, officers, or employees in person or by telephone, electronic transmission, and facsimile transmission. No additional compensation will be paid to directors, officers, or other employees for soliciting proxies. We furnish copies of solicitation materials to banks, brokerage houses, fiduciaries, and custodians holding in their names shares of our common stock beneficially owned by others to forward to such beneficial owners. We may reimburse persons representing beneficial owners of our common stock for their costs of forwarding solicitation materials to such beneficial owners.
When will Tribune announce the results of the voting?
We will report the voting results in a Current Report on Form 8-K filed within four business days after the end of the Special Meeting. If final voting results are unavailable at that time, we will file an amended Current Report on Form 8-K within four business days of the day the final results are available. The Current Report on Form 8-K, and any amendments, will be available at www.sec.gov and on our website at investor.tribpub.com.
What are the requirements for admission to the Special Meeting?
You are entitled to attend the Special Meeting if you were a Company stockholder as of the Record Date or you hold a valid proxy from such a Company stockholder for the Special Meeting. As the Special Meeting is virtual-only, stockholders of record as of the Record Date, and persons holding valid proxies from stockholders of record, are entitled to participate in and submit questions in writing during the Special Meeting by visiting www.virtualshareholdermeeting.com/TPCO2021. To participate in the online Special Meeting, you will need the 16-digit control number included on your Notice, on your proxy card or on the instructions that accompanied your proxy materials. Online check-in will begin at 9:45 a.m. Central Time. Please allow ample time for the online check-in procedures.
Why is the Special Meeting being held online?
We believe that moving to a virtual-only Special Meeting not only addresses current public health and travel safety concerns relating to the novel coronavirus (COVID-19), but also facilitates greater participation by providing easy access to the meeting and allowing stockholders to participate from any location around the world. All of our stockholders will now be able to participate in the Special Meeting online without prohibitive cost or inconvenience. All stockholders of record can submit questions in writing by visiting www.virtualshareholdermeeting.com/TPCO2021.
Questions About the Merger
What is the proposed Merger and what effects will it have on the Company?
The proposed Merger is the acquisition of the Company by Parent, through Merger Sub, pursuant to the terms and subject to the conditions of the Merger Agreement. If the Merger Proposal is approved by our stockholders and the other closing conditions under the Merger Agreement have been satisfied or waived, Merger Sub will merge with and into the Company, with the Company being the surviving corporation. As a result of the Merger, the Company will become a wholly owned subsidiary of Parent and will no longer be a publicly held corporation, and you will no longer
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be a holder of our common stock, and will no longer have any interest in our future earnings or growth. In addition, following the Merger, our common stock will be delisted from NASDAQ and deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC on account of our common stock.
What will I receive if the Merger is completed?
In connection with the Merger, each outstanding share of our common stock (other than shares held by Alden, certain other excluded shares and dissenting shares) will automatically be converted into the right to receive an amount in cash equal to $17.25, without interest.
How does the per share Merger Consideration compare to the market price of our common stock prior to announcement of the Merger?
The per share Merger Consideration of $17.25 per share of common stock represents a premium of 45% to the closing price of the Company’s common stock on NASDAQ on December 11, 2020, the last trading day prior to the Board receiving Alden Global Capital’s proposal to acquire the Company, a premium of approximately 35% to the closing price of the Company’s common stock on NASDAQ on December 30, 2020, the last trading day prior to public disclosure of Alden Global Capital’s proposal to acquire the Company, a 21% increase from Alden Global Capital’s initial proposal of $14.25 per share and a premium of approximately 8% to the closing price of the Company’s common stock on NASDAQ on February 12, 2021, the last trading day before the announcement that the Company, Parent and Merger Sub had entered into the Merger Agreement.
When do you expect the Merger to be completed?
We are working towards completing the Merger as soon as possible. Assuming timely receipt of required regulatory approvals and the satisfaction or waiver of other closing conditions, including approval by our stockholders of the Merger Proposal, we anticipate that the Merger will be completed in the second quarter of 2021.
What happens if the Merger is not completed?
If the Merger Proposal is not approved by the stockholders of the Company or if the Merger is not completed for any other reason, the stockholders of the Company will not receive any payment for their shares in connection with the Merger. Instead, the Company will remain an independent public company and our common stock will continue to be listed and traded on NASDAQ.
Additionally, if the Merger is not completed, the Merger Agreement will be terminated. Depending on the circumstances surrounding the termination, it is possible that the Company will be required to pay Parent a Termination Fee of $20,000,000, or that Parent will be required to pay the Company a Liquidated Damages Amount of $50,000,000.
What conditions must be satisfied to complete the Merger?
There are several conditions which must be satisfied (or, where permissible, waived) to complete the Merger, including obtaining the Company Stockholder Approval, obtaining regulatory approval, no governmental entity having instituted any order or restraint to prohibit the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement, there having been no Company material adverse effect (as defined in the section “The Merger Agreement—Representations and Warranties” beginning on page 70) and the accuracy of certain representations and warranties and compliance with covenants contained in the Merger Agreement. However, the condition that the Company Stockholder Approval be obtained is not waivable by any party to the Merger Agreement. You should read “The Merger Agreement—Conditions to the Merger” beginning on page 83 for a more detailed discussion of the conditions that must be satisfied to complete the Merger.
Is the Merger expected to be taxable to me?
Yes. The exchange of shares of our common stock for the per share Merger Consideration pursuant to the Merger will generally be a taxable transaction to U.S. holders (as defined under the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 65) for U.S. federal income tax purposes. If you are a U.S. holder, in connection with the Merger, you will generally recognize gain or loss in an amount equal to the difference, if any, between the amount of cash received with respect to your shares of our common stock and your adjusted tax basis in such shares. We encourage you to read the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 65
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for a more detailed discussion of the U.S. federal income tax consequences of the Merger. You should also consult your tax advisor regarding the particular tax consequences to you of the exchange of shares of common stock for cash pursuant to the Merger in light of your particular circumstances (including the application and effect of any state, local or foreign income and other tax laws). If you are not a U.S. holder, the Merger will generally not result in tax to you under U.S. federal income tax laws unless you have certain connections to the United States, and the Company encourages you to seek tax advice regarding such matters.
What vote is required for the Company’s stockholders to approve the Merger Proposal?
Approval of the Merger Proposal requires the affirmative vote of (i) at least two-thirds of the shares of our common stock (other than shares “owned” by Parent or Merger Sub and their “affiliates” and “associates” (as each such term is defined in Section 203 of the DGCL)) outstanding and (ii) a majority in voting power of the outstanding shares of common stock entitled to vote on such matter. With respect to the Merger Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions and broker non-votes will have the same effect as a vote “AGAINST” approval of the Merger Proposal.
Because the affirmative vote required to approve the Merger Proposal is based upon the total number of the shares of our common stock (other than shares held by Alden Parties and certain other excluded shares) outstanding and entitled to vote on the Merger Proposal, if you fail to submit a proxy or vote virtually at the Special Meeting, or abstain, or you do not provide your bank, brokerage firm or other nominee with instructions, as applicable, this will have the same effect as a vote “AGAINST” approval of the Merger Proposal. If your shares of our common stock are held in “street name” by your bank, brokerage firm or other nominee and you do not instruct the nominee how to vote your shares, the failure to instruct your nominee will have the same effect as a vote “AGAINST” the Merger Proposal.
Additionally, as of the Record Date, members of the Purchaser Group beneficially owned and had the right to vote 11,554,306 shares of common stock in the aggregate, which represents approximately 31.6% of the Company’s common stock entitled to vote at the Special Meeting. Pursuant to the Merger Agreement, Parent agreed to vote or cause to be voted all of its, its subsidiaries and its affiliates shares of the Company’s common stock in favor of the adoption of the Merger Agreement and the approval of the transactions contemplated thereby, including the Merger, so long as the Board has not changed or adversely modified its recommendation in favor of the Merger Agreement. Accordingly, members of the Purchaser Group have informed the Company that they currently intend to vote all shares of common stock held by such members “FOR” the Merger Proposal, “FOR” the Merger Compensation Proposal and “FOR” the Adjournment Proposal.
Why am I being asked to consider and vote on a proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company’s named executive officers in connection with the Merger?
Under SEC rules, we are required to seek a non-binding, advisory vote with respect to the compensation that may be paid or become payable to our named executive officers that is based on or otherwise relates to the Merger, commonly referred to as “golden parachute” compensation.
What will happen if the Company’s stockholders do not approve the Merger Compensation Proposal?
Approval of the compensation that may be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the Merger is not a condition to completion of the Merger. The vote is an advisory vote and will not be binding on the Company or the surviving corporation in the Merger. Because the Merger-related compensation to be paid to the named executive officers in connection with the Merger is based on contractual arrangements with the named executive officers, such compensation may be payable, regardless of the outcome of this advisory vote, if the Merger Agreement is adopted (subject only to the contractual obligations applicable thereto).
What vote of our stockholders is required to approve the Merger Compensation Proposal?
Approval of the Merger Compensation Proposal requires the affirmative vote of at least a majority of the outstanding shares of common stock present virtually or represented by proxy at the Special Meeting. The Merger Compensation Proposal is an advisory vote and the results will not be binding on the Board or the Company. With respect to the Merger Compensation Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions will have the same effect as a vote “AGAINST” approval of the Merger Compensation Proposal. Broker non-votes will not have an effect on the Merger Compensation Proposal.
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Because the affirmative vote required to approve the Merger Compensation Proposal is based upon the total number of the shares of our common stock present virtually or represented by proxy at the Special Meeting, if you abstain this will have the same effect as a vote “AGAINST” approval of the Merger Compensation Proposal. If your shares of our common stock are held in “street name” by your bank, brokerage firm or other nominee and you do not instruct the nominee how to vote your shares, the failure to instruct your nominee will have no effect on the Merger Compensation Proposal.
What vote of our stockholders is required to approve the Adjournment Proposal?
Approval of the Adjournment Proposal also requires the affirmative vote of at least a majority of the outstanding shares of common stock present virtually or represented by proxy at the Special Meeting. With respect to the Adjournment Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” If you abstain from voting on the Adjournment Proposal, the abstention will have the same effect as a vote “AGAINST” the Adjournment Proposal. Broker non-votes will not have an effect on the Adjournment Proposal.
Because the affirmative vote required to approve the Adjournment Proposal is based upon the total number of the shares of our common stock present virtually or represented by proxy at the Special Meeting, or if you abstain this will have the same effect as a vote “AGAINST” approval of the Adjournment Proposal. If you do not provide your bank, brokerage firm or other nominee with instructions or your shares of our common stock are held in “street name” by your bank, brokerage firm or other nominee and you do not instruct the nominee how to vote your shares, the failure to instruct your nominee will have no effect on the Adjournment Proposal.
Do any of the Company’s directors or officers have interests in the Merger that may differ from or be in addition to my interests as a stockholder?
In considering the recommendation of the Board with respect to the Merger Proposal, you should be aware that our directors and executive officers may have certain interests in the Merger that may be different from, or in addition to, the interests of our stockholders generally. The Board and the Special Committee were aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Merger, and in recommending that the Merger Agreement be adopted by the stockholders of the Company. See the sections entitled “The Merger—Interests of Certain Persons in the Merger” beginning on page 64 and “Proposal 2—Merger Compensation Proposal” beginning on page 88.
Should I send in my stock certificates now?
No. If the Merger Proposal is approved, you will be sent a letter of transmittal promptly, and in any event within three business days, after the completion of the Merger, describing how you may exchange your shares of our common stock for the per share Merger Consideration. If your shares of our common stock are held in “street name” through a bank, brokerage firm or other nominee, you should contact your bank, brokerage firm or other nominee for instructions as to how to effect the surrender of your “street name” shares of our common stock in exchange for the per share Merger Consideration. Please do NOT return your stock certificate(s) with your proxy.
Am I entitled to exercise appraisal rights under the DGCL instead of receiving the per share Merger Consideration for my shares of our common stock?
Stockholders who do not vote in favor of the adoption of the Merger Agreement are entitled to exercise appraisal rights under Section 262 of the DGCL in connection with the Merger if they take certain actions and meet certain conditions. For additional information, see “Appraisal Rights” beginning on page 95. For the full text of Section 262 of the DGCL, please see Annex C of this proxy statement. Because of the complexity of the DGCL relating to appraisal rights, if you wish to exercise your appraisal rights, we encourage you to seek the advice of legal counsel.
Who can help answer any other questions I might have?
If you have more questions about the Merger, the Special Meeting or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please contact MacKenzie Partners, our proxy solicitor, by calling toll-free at 800-322-2885 or collect at 212-929-5500, or via email at proxy@mackenziepartners.com.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement and the other documents referenced herein, including, without limitation, statements relating to the Merger, may constitute “forward-looking statements.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the consummation of the Merger and the anticipated benefits thereof. Forward-looking statements provide current expectations of future events and include any statement that does not directly relate to any historical or current fact. Words such as “anticipates,” “believes,” “expects,” “intends,” “plans,” “projects,” or other similar expressions may identify such forward-looking statements.
These and other forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those discussed in forward-looking statements, including, as a result of factors, risks and uncertainties over which we have no control. The inclusion of such statements should not be regarded as a representation that any plans, estimates or expectations will be achieved. You should not place undue reliance on such statements. Important factors, risks and uncertainties that could cause actual results to differ materially from such plans, estimates or expectations include, but are not limited to, the following: (i) conditions to the completion of the Merger, including stockholder approval of the Merger Proposal, may not be satisfied or the regulatory approvals required for the Merger may not be obtained, in each case, on the terms expected or on the anticipated schedule; (ii) the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement between the parties to the Merger or affect the ability of the parties to recognize the benefits of the Merger; (iii) the effect of COVID-19 and related governmental and economic responses; (iv) the effect of the announcement or pendency of the Merger on the Company’s business relationships, operating results and business generally; (v) risks that the Merger disrupts the Company’s current plans and operations and potential difficulties in the Company’s employee retention as a result of the Merger; (vi) risks related to diverting management’s attention from the Company’s ongoing business operations; (vii) potential litigation that may be instituted against the Company or its directors or officers related to the Merger or the Merger Agreement between the parties to the Merger and any adverse outcome of any such potential litigation; (viii) the amount of the costs, fees, expenses and other charges related to the Merger, including in the event of any unexpected delays; (ix) any adverse effects on the Company by other general industry, economic, business and/or competitive factors; (x) other risks to consummation of the Merger, including the risk that the Merger will not be consummated within the expected time period, or at all, which may affect the Company’s business and the price of the common stock; and (xi) such other factors as are set forth in the Company’s periodic public filings with the SEC, including, but not limited to, those described under the headings “Risk Factors” and “Forward-Looking Statements” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 27, 2020 and in its other filings made with the SEC from time to time, which are available via the SEC’s website at www.sec.gov. The consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on the Company’s financial condition, results of operations, credit rating or liquidity.
Forward-looking statements reflect the views and assumptions of management as of the date of this communication with respect to future events. The Company does not undertake, and hereby disclaims, any obligation, unless required to do so by applicable securities laws, to update any forward-looking statements as a result of new information, future events or other factors. The inclusion of any statement in this communication does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.
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THE SPECIAL MEETING
Date, Time and Place of the Special Meeting
This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by the Board for use at the Special Meeting, which will be held virtually, without a physical meeting location, on May 21, 2021 at 10:00 a.m. Central Time.
At the Special Meeting, holders of our common stock will be asked to approve each of the Merger Proposal, the Merger Compensation Proposal and the Adjournment Proposal.
Purpose of the Special Meeting
At the Special Meeting, holders of our common stock will be asked to consider and vote on the following:
the Merger Proposal;
the Merger Compensation Proposal; and
the Adjournment Proposal.
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE ABOVE PROPOSALS.
The Company’s stockholders must approve the Merger Proposal in order for the Merger to occur. If the Company’s stockholders fail to approve the Merger Proposal, the Merger will not occur. A copy of the Merger Agreement is attached as Annex A to this proxy statement, which we encourage you to read carefully and in its entirety.
The vote on each of the Merger Compensation Proposal and the Adjournment Proposal is a vote separate and apart from the vote on the Merger Proposal. Accordingly, a stockholder may vote to approve the Merger Proposal and vote not to adopt the Merger Compensation Proposal, and vice versa. Because the vote on the Merger Compensation Proposal is advisory in nature only, it will not be binding on the Company, Parent or the surviving corporation in the Merger. Accordingly, if the Merger Agreement is adopted by the Company’s stockholders and the Merger is completed, the Merger-related compensation may be paid to the Company’s named executive officers to the extent payable in accordance with the terms of their compensation agreements and arrangements even if the stockholders do not approve the Merger Compensation Proposal.
The vote on the Adjournment Proposal relates to the Merger Proposal and, if adopted, will allow the Company, if necessary, to adjourn the Special Meeting from time to time in order to solicit additional proxies, including if there are not sufficient votes to approve the Merger Proposal in accordance with the requisite Company Stockholder Approval.
Record Date and Quorum
The Board has fixed the close of business on April 15, 2021 as the Record Date for the determination of stockholders entitled to receive notice of, and to vote virtually at, the Special Meeting, and any adjournments or postponements thereof. Only holders of record of our common stock as of the Record Date are entitled to receive notice of, and to vote (virtually or by proxy) at, the Special Meeting and at any adjournment or postponement thereof.
As of the Record Date, there were 36,951,571 shares of common stock outstanding. Each holder of our common stock is entitled to cast one vote per such share on each matter properly brought before the Special Meeting for each share of our common stock that such holder owned as of the Record Date.
Under the By-Laws, the presence at the Special Meeting, virtually or represented by proxy, of the holders of a majority of the shares of the common stock issued and outstanding and entitled to vote at the Special Meeting, constitutes a quorum for the transaction of business at the Special Meeting. Once a share of common stock is represented at the Special Meeting, it will be counted for the purpose of determining a quorum at the Special Meeting. Shares of our common stock represented at the Special Meeting but not voted, including shares of our common stock for which proxies have been received but for which stockholders have abstained, will be treated as present at the Special Meeting for purposes of determining the presence or absence of a quorum for the transaction of all business. Shares held of record by a bank, broker or other holder of record will not be treated
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as present at the Special Meeting for purposes of determining the presence or absence of a quorum unless the broker, banker or other holder of record has been instructed to vote on at least one of the proposals presented in this proxy statement. Your vote is very important, regardless of the number of shares of our common stock you own. Because stockholders cannot take any action at the Special Meeting unless a majority of the shares of our common stock issued and outstanding and entitled to vote is represented, it is important that you attend the Special Meeting virtually or are represented by proxy at the Special Meeting.
In the event that a quorum is not present at the Special Meeting, we expect to adjourn or postpone the Special Meeting until we solicit enough proxies to obtain a quorum. The Company may also adjourn or postpone the Special Meeting with Parent’s reasonable consent, or to the extent reasonably necessary (i) to ensure that any legally required supplement or amendment to this proxy statement is provided to the holders of shares of common stock within a reasonable amount of time in advance of the Special Meeting, (ii) to allow reasonable additional time to solicit additional proxies necessary to obtain the Company Stockholder Approval, (iii) to ensure that there are sufficient shares of common stock represented (either virtually or by proxy) and voting to constitute a quorum necessary to conduct the business of the Special Meeting or (iv) otherwise where required to comply with applicable law (including fiduciary duties).
Attendance
Only stockholders who owned shares as of the Record Date, or their duly appointed proxies, and our guests may virtually attend the Special Meeting. To enter the meeting, you will need your assigned 16-digit control number. The 16-digit control number will be included in the Notice, or on your proxy card, voting instruction form or other applicable proxy notices. If you hold your shares in “street name” through a bank, brokerage firm or other nominee, your assigned 16-digit control number should be included with your voting instructions received from your bank, brokerage firm or other nominee. If your bank, brokerage firm or other nominee has not provided you with your assigned 16-digit control number, please contact them for instructions on how to attend the virtual Special Meeting.
Vote Required
The vote required depends on each proposal.
Merger Proposal. Approval of the Merger Proposal requires the affirmative vote of (i) at least two-thirds of the shares of our common stock (other than shares “owned” by Parent or Merger Sub and their “affiliates” and “associates” (as each such term is defined in Section 203 of the DGCL)) outstanding and (ii) a majority in voting power of the outstanding shares of common stock entitled to vote on such matter. With respect to the Merger Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” For purposes of the Merger Proposal, if you fail to submit a proxy or vote virtually at the Special Meeting, or abstain, or you do not provide your bank, brokerage firm or other nominee with instructions, as applicable, this will have the same effect as a vote “AGAINST” approval of the Merger Proposal. If your shares of our common stock are held in “street name” by your bank, brokerage firm or other nominee and you do not instruct the nominee how to vote your shares, the failure to instruct your nominee will have the same effect as a vote “AGAINST” the Merger Proposal.
Merger Compensation Proposal. Approval of the Merger Compensation Proposal requires the affirmative vote of at least a majority of the outstanding shares of common stock present virtually or represented by proxy at the Special Meeting. The Merger Compensation Proposal is an advisory vote and the results will not be binding on the Board or the Company. With respect to the Merger Compensation Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” For purposes of the Merger Compensation Proposal, if you abstain this will have the same effect as a vote “AGAINST” approval of the Merger Compensation Proposal. If your shares of our common stock are held in “street name” by your bank, brokerage firm or other nominee and you do not instruct the nominee how to vote your shares, the failure to instruct your nominee will not have an effect on the Merger Compensation Proposal.
Adjournment Proposal. Approval of the Adjournment Proposal requires the affirmative vote of at least a majority of the outstanding shares of common stock present virtually or represented by proxy at the Special Meeting. With respect to the Adjournment Proposal, you may vote “FOR,” “AGAINST” or
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“ABSTAIN.” If you abstain from voting on the Adjournment Proposal, the abstention will have the same effect as a vote “AGAINST” the Adjournment Proposal. Broker non-votes will not have an effect on the Adjournment Proposal. For purposes of the Adjournment Proposal, if you abstain this will have the same effect as a vote “AGAINST” approval of the Adjournment Proposal. If you do not provide your bank, brokerage firm or other nominee with instructions or your shares of our common stock are held in “street name” by your bank, brokerage firm or other nominee and you do not instruct the nominee how to vote your shares, the failure to instruct your nominee will not have an effect on the Adjournment Proposal.
If your shares of our common stock are registered directly in your name with our Transfer Agent, you are considered, with respect to those shares of our common stock, the stockholder of record. This proxy statement and proxy card have been sent directly to you by the Company. As the stockholder of record, you have the right to vote virtually at the Special Meeting or to grant your voting rights directly to the Company or to a third party by a proxy duly executed or transmitted in a manner in accordance with applicable law.
If your shares of our common stock are held in “street name” through a bank, brokerage firm or other nominee, you are considered the beneficial owner of those shares. In that case, this proxy statement has been forwarded to you by your bank, brokerage firm or other nominee who is considered, with respect to those shares of our common stock, the stockholder of record. As the beneficial owner, you have the right to direct your bank, brokerage firm or other nominee how to vote your shares by following their instructions for voting. Your bank, brokerage firm or other nominee should send you, as the beneficial owner, a package describing the procedure for voting your shares.
Banks, brokerage firms or other nominees who hold shares in “street name” for customers generally have the authority to vote on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokerage firms and other nominees are precluded from exercising their voting discretion with respect to approving non-routine matters, such as the Merger Proposal, the Merger Compensation Proposal and the Adjournment Proposal, and, as a result, absent specific instructions from the beneficial owner of such shares of our common stock, banks, brokerage firms or other nominees are not empowered to vote those shares of our common stock on those non-routine matters.
Proxies and Revocation
You can vote using any one of the methods described below.
Vote by Internet. Stockholders of record may submit proxies over the Internet by following the instructions on the Notice of Internet Availability of Proxy Materials or, if printed copies of the proxy materials were requested, the instructions on the printed proxy card. Most beneficial stockholders may vote by accessing the website specified on the voting instruction forms provided by their brokers, trustees, banks or other nominees. Please check your voting instruction form for Internet voting availability.
Vote by Telephone. Stockholders of record may submit proxies using any touch-tone telephone from within the United States by following the instructions on the Notice of Internet Availability of Proxy Materials or, if printed copies of the proxy materials were requested, the instructions on the printed proxy card. Most beneficial owners may vote using any touch-tone telephone from within the United States by calling the number specified on the voting instruction forms provided by their brokers, trustees, banks or other nominees. Please check your voting instruction form for telephonic voting availability.
Vote by Mail.  You can vote by mail by completing, signing, and dating the proxy card or voting instruction form and returning it in the prepaid return envelope, if printed copies of the proxy materials were requested. If you are a stockholder of record and you return your signed proxy card but do not indicate your voting preferences, the persons named in the proxy card will vote the shares represented by that proxy as recommended by the Board of Directors. If you are a beneficial owner and you return your signed voting instruction form but do not indicate your voting preferences, please see “What are ‘broker non-votes’ and how do they affect the proposals?” regarding whether your broker, bank, or other holder of record may vote your uninstructed shares on a particular proposal.
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Vote Online at the Special Meeting. As the Special Meeting is virtual-only, stockholders as of the Record Date can vote online during the Special Meeting by visiting www.virtualshareholdermeeting.com/TPCO2021 and following the instructions found on your proxy card. If you are a beneficial owner, you must obtain a legal proxy from your broker, bank, or other holder of record and virtually present it to the inspector of election with your ballot to be able to vote at the Special Meeting. Even if you plan to virtually attend the Special Meeting, we recommend that you also vote either by telephone, by Internet, or by mail so that your vote will be counted if you later decide not to attend.
The Company is incorporated under Delaware law, which specifically permits electronically transmitted proxies, provided that each such proxy contains or is submitted with information from which the inspector of election can determine that such proxy was authorized by the stockholder. The electronic voting procedures provided for the Special Meeting are designed to authenticate each stockholder by use of a control number to allow stockholders to vote their shares and to confirm that their instructions have been properly recorded.
You have the right to revoke a proxy. If you are a stockholder of record, you can revoke your proxy before it is exercised by:
delivering a written notice of such revocation to our Corporate Secretary at 560 W. Grand Avenue, Chicago, Illinois 60654, 312-222-2102, which must be received by us before the Special Meeting;
timely delivering a valid, subsequent proxy by Internet, by telephone, or by mail; or
voting online at the Special Meeting.
If you are a beneficial owner, you may be able to submit new voting instructions by contacting your broker, bank, or other holder of record. You may also vote online at the Special Meeting if you obtain a legal proxy, as previously described.
Attendance at the Special Meeting will not cause your previously granted proxy to be revoked unless you vote online at the Special Meeting. All shares for which proxies have been properly completed and submitted and not revoked will be voted at the Special Meeting.
Adjournments and Postponements
Although it is not currently expected, the Special Meeting may be adjourned or postponed. Any meeting of stockholders may be adjourned, by the chairperson of the meeting or by the vote of a majority of the shares of stock present virtually or represented by proxy, to reconvene at the same or some other place, provided that the Merger Agreement includes certain limitations on the Company’s ability to postpone or adjourn the Special Meeting. Under the Merger Agreement, the Company may only postpone or adjourn the Special Meeting to a later date (i) with Parent’s reasonable consent or (ii) to the extent reasonably necessary, (x) to ensure that any legally required supplement or amendment to this proxy statement is provided to the holders of shares of common stock within a reasonable amount of time in advance of the Special Meeting, (ii) to allow reasonable additional time to solicit additional proxies necessary to obtain the Company Stockholder Approval, (iii) to ensure that there are sufficient shares of common stock represented (either virtually or by proxy) and voting to constitute a quorum necessary to conduct the business of the Special Meeting or (iv) otherwise where required to comply with applicable law (including fiduciary duties).
If the Special Meeting is adjourned, we are not required to give notice of the time and place of the adjourned meeting if announced at the Special Meeting at which the adjournment is taken, unless the adjournment is for more than 30 days or the Board fixes a new record date for the Special Meeting. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting. All proxies will be voted in the same manner as they would have been voted at the original convening of the Special Meeting, except for any proxies that have been effectively revoked or withdrawn prior to the time the proxy is voted at the reconvened meeting.
Anticipated Date of Completion of the Merger
We are working towards completing the Merger as soon as possible. Assuming timely receipt of required regulatory approvals and the satisfaction or waiver of other closing conditions, including obtaining the Company Stockholder Approval, we anticipate that the Merger will be completed in the second quarter of 2021. If our
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stockholders vote to approve the Merger Proposal, the Merger will become effective as promptly as practicable following the satisfaction or waiver of the other conditions to the Merger, subject to the terms of the Merger Agreement. See “The Merger Agreement—Closing and Effective Time of the Merger” beginning on page 68.
Rights of Stockholders Who Seek Appraisal
If the Merger is completed, the Company’s stockholders who do not vote in favor of the adoption of the Merger Agreement are entitled to appraisal rights under Section 262 of the DGCL, but only if they fully comply with all of the applicable legal requirements of Section 262 of the DGCL, which are summarized in this proxy statement in the section entitled “Appraisal Rights” beginning on page 95 and set forth in their entirety in Section 262 of the DGCL (attached to this proxy statement as Annex C). This means that you may be entitled to have the fair value of your shares of our common stock determined by the Delaware Court of Chancery and to receive payment based on that valuation in lieu of the per share Merger Consideration if you follow exactly the procedures set forth in Section 262 of the DGCL. The ultimate amount you may receive in an appraisal proceeding may be less than, equal to or more than the amount you would have received under the Merger Agreement.
To exercise your appraisal rights, you must, among other things, submit a written demand for appraisal to the Company prior to the Company Stockholder Approval (and must not fail to perfect or effectively withdraw your demand or otherwise waive or lose your right to appraisal) and you must not vote (either virtually or by proxy) in favor of the adoption of the Merger Agreement. If you fail to follow exactly the procedures set forth in Section 262 of the DGCL, you will lose your appraisal rights. The requirements for exercising appraisal rights are further described in the section entitled “Appraisal Rights” beginning on page 95 and the text of the DGCL appraisal rights statute reproduced in its entirety as Annex C to this proxy statement. We encourage you to read these provisions carefully and in their entirety. If you hold your shares of our common stock through a bank, brokerage firm or other nominee and you wish to exercise your appraisal rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for appraisal by your bank, brokerage firm or other nominee. In view of the complexity of the law pertaining to appraisal rights under the DGCL, stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors promptly. The discussion of appraisal rights in this proxy statement is not a full summary of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL, a copy of which is attached to this proxy statement as Annex C.
Solicitation of Proxies; Payment of Solicitation Expenses
We will bear the costs of solicitation of proxies for the Special Meeting. In addition to solicitation by mail, directors, officers and our regular employees may solicit proxies from stockholders by telephone, personal interview or otherwise. These directors, officers and employees will not receive additional compensation, but may be reimbursed for out-of-pocket expenses in connection with this solicitation. In addition to solicitation by our directors, officers and employees, we have engaged MacKenzie Partners to assist in the solicitation of proxies and provide related advice and informational support, for a fee of approximately $25,000 and telephone charges. The Company has agreed to reimburse MacKenzie Partners for certain out-of-pocket fees and expenses and will also indemnify MacKenzie Partners, its subsidiaries and their respective directors, officers, employees and agents against certain claims, liabilities, losses, damages and expenses.
Questions and Additional Information
If you have more questions about the Merger, the Special Meeting or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please contact MacKenzie Partners, our proxy solicitor, by calling toll-free at 800-322-2885 or collect at 212-929-5500 or via email at proxy@mackenziepartners.com.
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PROPOSAL 1
PROPOSAL 1—MERGER PROPOSAL
Your Board of Directors recommends a vote FOR the adoption of the Merger Agreement and the transactions contemplated thereby.
Parties to the Merger
The Company
Tribune Publishing Company
560 W. Grand Avenue
Chicago, Illinois 60654
Telephone: (312) 222-9100
Tribune, formed as a Delaware corporation on November 21, 2013, is a media company rooted in award-winning journalism. Headquartered in Chicago, Illinois, Tribune operates local media businesses in eight markets with titles including the Chicago Tribune, New York Daily News, The Baltimore Sun, Hartford Courant, South Florida’s Sun Sentinel, Orlando Sentinel, Virginia’s Daily Press and The Virginian-Pilot, and The Morning Call of Lehigh Valley, Pennsylvania. Tribune also operates the Tribune Content Agency. Tribune’s major daily newspapers have served their respective communities with local, regional, national and international news and information for more than 150 years. The Hartford Courant is the nation’s oldest continuously published newspaper and celebrated its 256th anniversary in October 2020.
Tribune’s unique and valuable content across its brands have earned a combined 65 Pulitzer Prizes and are committed to informing, inspiring and engaging local communities. Tribune’s brands create and distribute content across our media portfolio, offering integrated marketing, media, and business services to consumers and advertisers, including digital solutions and advertising opportunities.
Parent
Tribune Enterprises, LLC
c/o Alden Global Capital LLC
777 South Flagler Drive
West Tower, Suite 800
West Palm Beach, FL 33401
Telephone: (212) 888-5500
Parent is a Delaware limited liability company formed by the Alden Funds on February 11, 2021, solely for the purpose of entering into the Merger Agreement and consummating the transactions contemplated by the Merger Agreement, including the Merger. Parent has not carried on any activities on or prior to the date of this proxy statement other than those related to its formation and as contemplated by or related to the Merger.
Merger Sub
Tribune Merger Sub, Inc.
c/o Alden Global Capital LLC
777 South Flagler Drive
West Tower, Suite 800
West Palm Beach, FL 33401
Telephone: (212) 888-5500
Merger Sub, a Delaware corporation and wholly owned subsidiary of Parent, was formed by Parent on February 11, 2021, solely for the purpose of entering into the Merger Agreement and completing the transactions contemplated thereby. Merger Sub has not carried on any activities on or prior to the date of this proxy statement other than those related to its formation and as contemplated by or related to the Merger Agreement. Upon consummation of the Merger, Merger Sub will merge with and into the Company, the separate corporate existence of the Merger Sub will cease and the Company will continue as the surviving corporation and as a wholly owned subsidiary of Parent.
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SPECIAL FACTORS
This section of the proxy statement describes certain material aspects of the proposed Merger. This section may not contain all of the information that is important to you. You should carefully read this entire proxy statement and the documents incorporated herein by reference, including the full text of the Merger Agreement, for a more complete understanding of the Merger. A copy of the Merger Agreement is attached as Annex A to this proxy statement. In addition, important business and financial information about the Company is included in or incorporated into this proxy statement by reference. See “Where You Can Find More Information” beginning on page 101.
Overview of Special Factors
The Merger is a “going-private” transaction under SEC rules and the Exchange Act. Accordingly, Rule 13e-3 and related rules under the Exchange Act require that the Company and Alden make certain disclosures regarding the Merger. This “Special Factors” section contains various information that you should read carefully. For example, the section entitled “—Plans for the Company After the Merger” explains the plans for the surviving entity after the completion of the Merger. The section entitled “—Purposes and Reasons of the Purchaser Group for the Merger” explains, among other things, Parent’s purposes for the Merger. The sections entitled “The Merger—Reasons for the Merger; Recommendation of the Company’s Special Committee and the Board” and “Special Factors—Position of the Purchaser Group as to the Fairness of the Merger” respectively explain why the Board, on the one hand, and the Purchaser Group, on the other hand, believe the Merger is fair and reasonable to, and in the best interests of, the Company and the Company’s unaffiliated stockholders. You are encouraged to carefully read this “Special Factors” section and this entire proxy statement, along with the documents incorporated herein by reference.
Purposes and Reasons of the Purchaser Group for the Merger
Under the SEC rules governing “going-private” transactions, each member of the Purchaser Group may be deemed to be an affiliate of the Company and, therefore, is required to express its purposes and reasons for the Merger to the Company’s unaffiliated stockholders, as defined in Rule 13e-3 under the Exchange Act. The members of the Purchaser Group are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act.
If the Merger is completed, the Company will become a wholly owned subsidiary of Parent, and the shares of the Company’s common stock will cease to be publicly traded. For the Purchaser Group, the purpose of the Merger is to enable Parent to acquire control of the Company, in a transaction in which all stockholders of the Company (including the unaffiliated stockholders of the Company) will be cashed out for $17.25 per share in cash, without interest, less any applicable withholding taxes. After the Merger, the Company’s common stock will no longer be publicly traded and Parent will solely bear the risks, and be entitled to the benefits, of ownership of the Company. Upon consummation of the Merger, the unaffiliated stockholders will immediately realize the value of their investment in the Company through their receipt of the Merger Consideration of $17.25 per share in cash (without interest), representing a premium of approximately 45% to the closing price of the Company’s common stock on NASDAQ on December 11, 2020, the last trading day prior to the Board receiving Alden Global Capital’s proposal to acquire the Company, a premium of approximately 35% to the closing price of the Company’s common stock on NASDAQ on December 30, 2020, the last trading day prior to public disclosure of Alden Global Capital’s proposal to acquire the Company, a 21% increase from Alden’s initial proposal of $14.25 per share and a premium of approximately 8% to the closing price of the Company’s common stock on NASDAQ on February 12, 2021, the last trading day before the announcement that the Company, Parent and Merger Sub had entered into the Merger Agreement.
Based on its industry experience, the Purchaser Group believes that it will be difficult for the Company to address its operational and strategic issues as a public company, and that the acquisition of the Company by Parent presents the best path forward for the Company’s stockholders, employees, business partners and customers. If the Merger is completed, the Purchaser Group believes that the Company will be better positioned to navigate the current economic environment.
If the Merger is completed, the Company will become a wholly owned subsidiary of Parent, and the shares of the Company’s common stock will cease to be publicly traded. The Purchaser Group believes that structuring the transaction in such manner is preferable to other alternative transaction structures because (i) it will enable Parent
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to directly acquire all of the outstanding shares of the Company’s common stock at the same time, (ii) it will allow the Company to cease to be a publicly registered and reporting company, and (iii) it represents an opportunity for the Company’s unaffiliated stockholders to immediately realize the value of their investment in the Company and pursue other investment opportunities. Although the Purchaser Group believes that there will be improvements associated with their investment in the Company, the Purchaser Group also realizes that there are also substantial risks (including the risks and uncertainties relating to the prospects of the Company) and that such opportunities may not ever be fully realized. Additionally, the Purchaser Group believes that the transaction structure will also provide a prompt and orderly transfer of ownership of the Company in a single step, without the necessity of financing separate purchases of the Company’s common stock in a tender offer and implementing a second-step Merger to acquire any shares of common stock not tendered in any such tender offer, and without incurring any additional transaction costs associated with such activities.
For these reasons, the Purchaser Group believes that private ownership is in the best interests of the Company and that the Merger is in the best interests of the Company’s unaffiliated stockholders.
Voting by Purchaser Group
At the close of business on the record date for the special meeting, members of the Purchaser Group beneficially owned and had the right to vote 11,554,306 shares of common stock in the aggregate, which represents approximately 31.6% of the Company’s common stock entitled to vote at the Special Meeting.
Members of the Purchaser Group have informed the Company that they currently intend to vote all shares of common stock held by such members “FOR” the Merger Proposal, “FOR” the Merger Compensation Proposal and “FOR” the Adjournment Proposal.
Plans for the Company After the Merger
After the Effective Time, the Company will become a wholly owned subsidiary of Parent. In connection the consummation of the Merger, the Company’s common stock will be delisted from NASDAQ and deregistered under Section 12 of the Exchange Act. As a result, the Company will no longer file reports with the SEC. It is estimated that the Company could save approximately $5.5 million per year as a result of no longer being a public company. Any cost saving realized by the Company as a result of no longer being subject to the reporting requirements of the U.S. federal securities laws will be realized solely by the surviving corporation and, indirectly as a sole stockholder of the surviving corporation, Parent, which is owned by the Alden Funds and Turnpike.
The Purchaser Group beneficially owns approximately 31.6% of the issued and outstanding shares of common stock of the Company. Following consummation of the Merger, the Purchaser Group will own 100% of the issued and outstanding shares of common stock of the Company and will have a corresponding interest in the Company’s net book value and net earnings or losses. The Company’s net book value, or total stockholders’ equity, was $301,402,000 as of December 27, 2020 and the net income (loss) attributable to the Company’s common stockholders for the fiscal year ended December 27, 2020 was approximately $(39,012,000).
The Purchaser Group’s beneficial interest in the Company’s net book value as of December 27, 2020 was approximately $95,243,032, equal to 31.6% of the Company’s net book value. If the Merger is completed, the Purchaser Group’s beneficial interest in the net book value of the Company will increase to $301,402,000, equal to 100% of the Company’s net book value (based on the Company’s net book value as of December 27, 2020).
The Purchaser Group’s beneficial interest in the Company’s net income (loss) attributable to the Company’s common stockholders for the fiscal year ended December 27, 2020 was $(12,327,792), equal to 31.6% of the Company’s net income (loss) attributable to the Company’s common stockholders. If the Merger is completed, the Purchaser Group’s beneficial interest in the Company’ net income (loss) attributable to the Company’s common stockholders will increase to $(39,012,000), equal to 100% of the Company’s net income (loss) attributable to the Company’s common stockholders (based upon the Company’s net income (loss) attributable to the Company’s common stockholders for the fiscal year ended December 27, 2020).
The Company has no significant net operating loss (“NOL”) carryforwards that will benefit the Purchaser Group. According to the Company, as of December 27, 2020, the Company had NOL carryforwards for federal income tax purposes of $0.9 million and no NOL carryforwards for state income tax purposes. According to the Company, the utilization of the Company’s NOL carryforwards currently are subject to limitation under
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Section 382 of the Code and may be further limited as a result of the consummation of the Merger. Based upon information provided by the Company, the consummation of the Merger is expected to constitute an “ownership change” with respect to the Company within the meaning of Section 382 of the Code, which would potentially impose an additional annual limitation on the amount of the Company’s pre-ownership change NOLs that can be utilized in post-ownership change periods. Such limitation is approximately equal to (x) the value of the stock of the Company immediately before the ownership change, multiplied by (y) the “long-term tax-exempt rate” in effect as of the ownership change. The impact of this ownership change, as well as any prior ownership changes, will also affect the amount and timing of benefits to the Purchaser Group. Subject to this limitation, the Company’s ability to use NOLs to offset income for tax purposes should inure to the benefit of the Purchaser Group.
After the Effective Time, the members of the board of directors of Merger Sub immediately prior to the Effective Time will become the directors of the surviving corporation, and the officers of Company immediately prior to the Effective Time will become officers of the surviving corporation, in each case until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be.
Except as described above or elsewhere in this proxy statement, the Purchaser Group has advised the Company that they do not have any current intentions, plans or proposal to cause the Company to engage in any of the following:
an extraordinary corporate transaction following the consummation of the Merger involving the Company’s corporate structure, business or management, such as a merger, reorganization or liquidation;
the purchase, sale or transfer of a material amount of assets of the Company or any of its subsidiaries; or
any other material changes to the Company’s corporate structure or business.
Notwithstanding the foregoing, as part of integration planning and following consummation of the Merger, as part of the Purchaser Group’s long-term corporate goal of optimizing value, the Purchaser Group intends to conduct a review of the Company and its assets, capital allocation, corporate and capital structure, capitalization, operations, business, properties and policies to determine what changes, if any, may be desirable following the Merger to enhance the business and operations of the Company. In connection with this review, the Purchaser Group may consider a range of alternatives including the types of transactions set forth above as well as other strategic transactions and other balance sheet optimization activities if the Purchaser Group decides that such transactions and other activities are in the best interest of the Company upon such review. The Purchaser Group may also cause the Company to enter into one or more management service agreements with Alden Global Capital or its affiliates. Except as otherwise disclosed in this proxy statement (including in the Company’s filings with the SEC incorporated by reference into this proxy statement), as of the date hereof, no agreements, understandings or decisions have been reached and there is no assurance that the Purchaser Group will decide to undertake any such alternatives. The Purchaser Group expressly reserves the right to make any changes to the Company operations after consummation of the Merger that they deem appropriate in light of such evaluation and review or in light of future developments.
Position of the Purchaser Group as to the Fairness of the Merger
Under the SEC rules governing “going-private” transactions, each member of the Purchaser Group may be deemed to be an affiliate of the Company and, therefore, is required to express its beliefs as to the substantive and procedural fairness of the Merger to the Company’s unaffiliated stockholders, as defined in Rule 13e-3 under the Exchange Act. The members of the Purchaser Group are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The views of the members of the Purchaser Group as to fairness of the proposed Merger should not be construed as a recommendation to any of the Company’s stockholders as to how you should vote on the Merger Proposal.
The Purchaser Group has interests in the Merger that may be different from, or in addition to, the interests of the Company’s unaffiliated stockholders, as further described under “The Merger—Interests of Certain Persons in the Merger”. In light of these different interests, and the fact that Mr. Minnetian, Ms. Needleman and Mr. Smith are members of the Board designated by Alden pursuant to the A&R Cooperation Agreement, the Board established
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the Special Committee consisting solely of independent and disinterested directors who are not affiliated with the Purchaser Group (other than their interests described under “The Merger—Interests of Certain Persons in the Merger” beginning on page 64) to negotiate with the Purchaser Group, with the assistance of independent legal and financial advisors. None of the members of the Purchaser Group nor Mr. Minnetian, Ms. Needleman or Mr. Smith participated in the deliberations of the Special Committee or the Board regarding, or received advice from the Company’s legal advisor or the Special Committee’s legal or financial advisors as to, the substantive or procedural fairness of the Merger to the Company’s unaffiliated stockholders. For these reasons, the members of the Purchaser Group do not believe that their interests in the Merger influenced the decision of the Special Committee or the Board with respect to the Merger Agreement or the Merger.
The unaffiliated stockholders were represented by the Special Committee, which negotiated the terms and conditions of the Merger Agreement, with the assistance of the Special Committee’s legal and financial advisors. The Purchaser Group has not performed, nor engaged a financial advisor to perform or prepare any report, opinion, appraisal, any valuation or other analysis for the purpose of assessing the fairness of the Merger or the Merger Consideration to the Purchaser Group, the Company or the unaffiliated stockholders of the Company.
Based on the Purchaser Group’s knowledge and analysis of available information regarding the Company, as well as discussions with members of the Company’s management regarding the Company and its business and the factors considered by, and the analysis and resulting conclusions of, the Board and the Special Committee described in the section entitled “The Merger—Reasons for the Merger; Recommendation of the Company’s Special Committee and Board” beginning on page 46, with which the Purchaser Group agrees and which the Purchaser Group has adopted, the Purchaser Group believes that the Merger is substantively and procedurally fair to the unaffiliated stockholders of the Company.
In connection with its determination, and in addition to the analysis and resulting conclusions of, the Board and the Special Committee described in the section entitled “The Merger—Reasons for the Merger; Recommendation of the Company’s Special Committee and Board” beginning on page 46 of this proxy statement, with which the Purchaser Group agrees and which the Purchaser Group has adopted, the Purchaser Group considered the following specific factors (not necessarily in order of relative importance):
each of Mr. Minnetian, Ms. Needleman and Mr. Smith, members of the Board, in order to avoid any potential conflicts of interest, did not attend or vote at any Board meeting held regarding the Merger and alternatives thereto;
the Merger consideration of $17.25 per share, without interest, to be paid solely in cash, provides immediate cash liquidity to the Company’s stockholders, thus eliminating any uncertainty in valuing the Merger consideration and represents a premium of approximately 45% to the closing price of the Company’s common stock on NASDAQ on December 11, 2020, the last trading day prior to the Board receiving Alden Global Capital’s proposal, a premium of approximately 35% to the closing price of the Company’s common stock on NASDAQ on December 30, 2020, the last trading day prior to public disclosure of Alden Global Capital’s proposal, a 21% increase from Alden’s initial offer of $14.25 per share and a premium of approximately 8% to the closing price of the Company’s common stock on NASDAQ on February 12, 2021, the last trading day before the announcement that the Company, Parent and Merger Sub had entered into the Merger Agreement;
the transaction was structured to include a non-waivable condition requiring the approval by holders of at least (x) 66 2/3% of the outstanding shares of common stock entitled to vote on such matters, other than those “owned” (as defined in Section 203(c)(9) of the DGCL) by Parent or Merger Sub and their affiliates and associates (each as defined in Section 203(c) of the DGCL) and (y) a majority in voting power of the outstanding shares of common stock entitled to vote on such matters.
the Purchaser Group committed in its initial offer letter dated December 14, 2020 that it would not use its position as a significant stockholder of the Company or ability to nominate directors of the Company (through both the A&R Cooperation Agreement and as stockholders) to coerce the other stockholders to vote in favor of the Merger;
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the Company’s stockholders who do not vote in favor of the Merger Agreement proposal and who comply with certain procedural requirements will be entitled, upon completion of the Merger, to exercise statutory appraisal rights under Delaware law, which allows stockholders to have the fair value of their shares determined and paid to them in cash;
the requirements or conditions to the Merger are customary in the Purchaser Group’s opinion, and the Merger is not conditioned on any financing being obtained by the Purchaser Group, thus increasing the likelihood that the Merger will be consummated and the Merger consideration will be paid to the stockholders;
the Board or Special Committee are permitted to withdraw or change its recommendation of the Merger or Merger Agreement, and to terminate the Merger Agreement in certain circumstances;
the Board established a Special Committee, consisting of unaffiliated and independent directors, to review, evaluate and negotiate the Purchaser Group’s offer, as well as potential alternatives thereto, and make a recommendation to the Board with respect to the Merger;
the Special Committee was deliberative in its process in analyzing, evaluating and negotiating the terms of the Purchaser Group’s offer and the Merger Agreement;
the Special Committee retained independent financial and legal advisors, each of which has extensive experience in transactions similar to the proposed Merger;
the Merger consideration and other terms and conditions of the Merger Agreement resulted from extensive negotiations between the Special Committee (and its advisors) and the Purchaser Group (and its advisors);
the Special Committee unanimously determined that the Merger Agreement and the Merger are fair to, advisable and in the best interests of, the Company and its stockholders, including the Company’s unaffiliated stockholders; and
the Special Committee had no obligation to recommend the adoption of the Merger Agreement proposal or any other transactions.
The Purchaser Group believes that the foregoing factors support its determination with respect to the fairness of the Merger to the unaffiliated stockholders of the Company.
The Company did not retain an unaffiliated representative acting solely on behalf of the Company’s unaffiliated stockholders for the purpose of negotiating the terms of the Merger or preparing a report covering the fairness of the Merger. However, the Board formed the Special Committee, which is comprised entirely of independent and disinterested directors, to consider and negotiate the terms and conditions of the Merger and to recommend to the Board whether to pursue the Merger and, if so, on what terms and conditions. Additionally, the Board explicitly empowered the Special Committee to retain, at the Company’s expense, independent legal counsel, financial advisors, and other professional advisors of the Special Committee’s choice. The Board directed the Company to pay all expenses incurred by the Special Committee and its members, including the fees and expenses of the independent professional advisors to the Special Committee. Although there was no third party that acted independently on behalf of the unaffiliated stockholders, the Purchaser Group believes that the Special Committee protected the interests of the unaffiliated stockholders by making a recommendation regarding the Merger to the Board that the Special Committee deemed fair to the unaffiliated stockholders. Therefore, the Purchaser Group believes that the Special Committee’s role in the negotiation of the Merger and its recommendation to the Board and the Board’s approval of the Merger (with the directors designated by Alden either not attending any meetings or recusing themselves from any deliberations and voting relating to the Merger) were sufficient to protect the interests of unaffiliated stockholders.
The Purchaser Group’s view as to the fairness of the Merger to unaffiliated stockholders is not a recommendation as to how any such stockholder should vote on the Merger Agreement. The foregoing discussion of the information and factors considered by the Purchaser is believed to include all material factors considered by the Purchaser Group. The Purchaser Group did not find it practicable to, nor did it, assign relative weights to the individual factors considered in reaching its conclusion as to the fairness of the Merger to such unaffiliated common stockholders. Rather, the Purchaser Group made the fairness determinations after consideration of all the foregoing factors as a whole.
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Fees and Expenses
Total fees and expenses incurred or to be incurred by the Company in connection with the Merger are estimated at this time to be as follows:
 
Amount to
Be Paid
Financial advisory fees and expenses
$11,000,000.00
Legal, accounting and other professional fees
$3,000,000.00
SEC filing fees
$49,303.63
Proxy solicitation, printing and mailing costs
$27,000.00
Transfer Agent and paying agent fees and expenses
$22,000.00
Total
​$14,098,303.63
Total fees and expenses incurred or to be incurred by Parent in connection with the Merger are estimated at this time to be as follows:
 
Amount to
Be Paid
Financial advisory fees and expenses
$5,000,000
Legal, accounting and other professional fees
$5,800,000
Total
$10,800,000
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THE MERGER
This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Annex A. You should read the entire Merger Agreement carefully and in its entirety as it is the legal document that governs the Merger.
Structure of the Merger
The Merger Agreement provides that Merger Sub will merge with and into the Company. The Company will be the surviving corporation in the Merger. As a result of the Merger, the Company will cease to be a publicly traded company and will become a wholly owned subsidiary of Parent. You will not own any shares of the capital stock of the surviving corporation.
Merger Consideration
In the Merger, each outstanding share of our common stock will automatically be converted into the right to receive the Merger Consideration, without interest, other than shares of our common stock (i) owned by (x) Parent, Merger Sub or any of their affiliates or associates; or (y) the Company as treasury stock, which shares in clauses (x) and (y) we refer to as “excluded shares”; and (ii) stockholders who have not voted in favor of the Merger and properly and validly perfected their statutory rights of appraisal in accordance with Section 262 of the DGCL, which shares we refer to as “dissenting shares,” which shares will be canceled without payment of any consideration therefor and will cease to exist.
Background of the Merger
From time to time, the Board, together with senior management of the Company, has reviewed and evaluated the Company’s business strategies, opportunities and challenges as part of its consideration and evaluation of the Company’s prospects and maximizing stockholder value. These reviews and evaluations focused on a diverse array of topics, including among others, internal growth strategies, potential divestitures, corporate restructurings, potential strategic partnerships and potential acquisitions by the Company. The Board also has periodically reviewed with senior management and external advisors the landscape of the newspaper industry and discussed the possibility of an acquisition of the Company by a strategic or financial buyer.
On May 3, 2018, Lazard was engaged by the Company to assist in the event of an unsolicited offer or a sale of the Company. During 2018, the Company had a series of discussions with various financial and strategic parties, but none of these discussions led to a transaction. At the time, there was much speculation in the press about potential Tribune transactions.
From January 2019 to April 2019, representatives of the Company engaged in a series of discussions with a third party (“Bidder A”) to discuss a potential business combination, including a potential acquisition of the Company by Bidder A. As part of this process, the Company and Bidder A entered into a mutual non-disclosure agreement with a standstill obligation, (which has since expired) and subsequently the parties conducted non-public due diligence and further discussions regarding the potential transaction, until Bidder A sent a letter to the Company on April 2019 indicating its desire to postpone the discussions until after its annual meeting on May 2019, after which substantive engagement between the parties did not resume.
In the fall of 2019, Alden Global Capital contacted the Company to discuss the possibility of an acquisition of the Company. Michael W. Ferro, Jr., the Company’s largest stockholder at the time, indicated to Alden that he would support an acquisition of the Company by Alden for a price of $13.00 per share in cash. Alden did not respond to this comment or follow up with the Company.
On November 15, 2019, the Alden Funds purchased an aggregate of 9,071,529 outstanding shares of the Company’s common stock from Mr. Ferro and two of Ferro’s companies, Merrick Media, LLC and Merrick Venture Management, LLC, for a price of $13.00 per share (the “Ferro Sale”). Such purchases were made without the prior approval of the Board under Section 203 of the DGCL.
On November 25, 2019, Alden filed a beneficial ownership report on Schedule 13D (a “Schedule 13D”), which disclosed that, as of such date, Alden held approximately 32.0% of the outstanding shares of the Company’s common stock as a result of the Ferro Sale and a series of open market purchases. The Schedule 13D also stated that Alden and certain of Alden’s representatives may have conversations with members of the Board and the
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Company’s management team regarding multiple topics, including, but not limited to, corporate governance, the composition of the Board, Board representation rights, general business operations and strategic alternatives to promote long-term value for the benefit of the Company’s stockholders.
On December 1, 2019, the Company, Alden Global Capital and the Alden Funds entered into a cooperation agreement (the “Cooperation Agreement”), pursuant to which each of the parties made certain commitments related to Alden’s ownership of the Company’s common stock, including customary standstill provisions, which, among other things, prohibited Alden from, without the Company’s prior written consent, soliciting proxies with respect to the voting of any securities of the Company, acquiring additional securities of the Company and making public proposals relating to the Company (the “Standstill Provisions”) and registration rights. In addition, the Cooperation Agreement provided the Alden Funds with the right to nominate two Board members. The Cooperation Agreement was publicly filed as an exhibit to the Company’s Current Report on Form 8-K filed on December 2, 2019.
On December 2, 2019, the Company announced the expansion of the Board from six to eight members, and the appointment of two Alden designees, Dana Goldsmith Needleman and Christopher Minnetian, to the Board.
In January, 2020, Alden contacted the Board to request a waiver of certain Standstill Provisions in order for Alden to pursue a purchase of Dr. Patrick Soon-Shiong’s and his affiliates’ 24% stake in the Company for a price equal to $13.50 per share (the “Soon-Shiong Proposal”).
On January 23, 2020, the Board met telephonically, with certain members of the Company’s senior management and its outside legal advisor, Kirkland & Ellis LLP (“K&E”), in attendance. Ms. Needleman and Mr. Minnetian had recused themselves from the meeting and all future Board meetings regarding a potential acquisition of the Company by Alden. The Board discussed the Soon-Shiong Proposal, including Alden’s request to waive certain Standstill Provisions. After discussion, the Board determined that the Soon-Shiong Proposal was not advisable or in the best interests of stockholders, and that the Board would approach Alden to discuss the possibility of Alden submitting a proposal to purchase all of the outstanding shares of the Company.
After such meeting, the Board communicated to Alden its decision to reject Alden’s request for a waiver of certain Standstill Provisions and that any acquisition proposal submitted by Alden must involve a purchase by Alden of all of the outstanding shares of the Company.
On February 6, 2020, Alden sent the Company a non-binding written proposal to acquire all of the outstanding shares of the Company not already owned by Alden (the “February 2020 Proposal”). The February 2020 Proposal provided that any acquisition proposal by Alden would be conditioned upon both (i) the Board forming a special committee of independent and disinterested directors to evaluate such potential transaction, and ultimately, approval of such proposal by the special committee, and (ii) the approval of two-thirds of the outstanding shares of the Company’s stock not owned by Alden (the approval standard required for such an acquisition under Section 203 of the DGCL).
On February 7, 2020, a third-party bidder submitted a letter of interest to the Company about a potential acquisition of the Company’s business, assets and properties related to The Baltimore Sun (“The Sun”). The Company entered into a confidentiality agreement with the bidder in May 2020, and thereafter the third-party sent a non-binding proposal of $25,000,000 for such potential acquisition. The parties agreed not to proceed due to the wide gap in valuation expectations between the parties.
Between February 6 and February 10, 2020, Randall D. Smith, Alden’s founder, spoke telephonically with Philip G. Franklin, the Chairman of the Board, and proposed a purchase price of $13.50 per share in cash, subject to the terms of the February 2020 Proposal and the completion of negotiation of definitive documentation.
On February 10, 2020, the Board met telephonically, with certain members of the Company’s management and representatives of Lazard and K&E in attendance. The Board discussed the terms of the February 2020 Proposal and its fiduciary duties in the context of a potential transaction with Alden, including certain considerations regarding Alden’s status as an affiliate of the Company. In addition, K&E described the role of a special committee of independent and disinterested directors. Ms. Needleman and Mr. Minnetian then recused themselves for the remainder of the meeting, during which the remaining directors assessed whether any conflicts existed among such directors and discussed the size and makeup of a special committee. David Dreier, a member of the Board, reported on certain interactions he had had with Alden’s principals unrelated to a potential transaction with the Company, and given these interactions, decided it was best if he not serve on the special committee
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although nothing came of the interactions. Mr. Dreier also recused himself from the remainder of the meeting. The remaining members of the Board unanimously approved the formation of a special committee to evaluate a potential transaction with Alden and potential alternatives thereto (the “Special Committee”) to consist of Mr. Franklin, Eddy W. Hartenstein, Richard A. Reck and Carol Crenshaw.
On February 13, 2020, the Special Committee met telephonically, with representatives from Lazard and K&E in attendance. With the aid of a written presentation distributed to the Special Committee in advance of the meeting, Lazard discussed the terms of the February 2020 Proposal, including the price.
On March 6, 2020, K&E and Alden’s outside legal advisor, Akin Gump Strauss Hauer & Feld LLP (“Akin Gump”), engaged in discussions regarding the terms of the February 2020 Proposal.
On March 12, 2020, Akin Gump sent a revised term sheet to K&E, and shortly thereafter the two advisors discussed the remaining open items.
On March 17, 2020, K&E informed the Company that Alden had decided to put discussions regarding the February 2020 Proposal on hold as a result of the COVID-19 pandemic.
Following negotiations prior to the expiration of the Cooperation Agreement, on July 1, 2020, the Company, Alden Global Capital and the Alden Funds entered into the A&R Cooperation Agreement, pursuant to which the parties agreed, among other things: (i) to increase the size of the Board by one director and appoint Mr. Smith to fill such vacancy, (ii) that the Company would nominate Ms. Needleman, Mr. Minnetian and Mr. Smith for election at the Company’s 2021 annual meeting of stockholders (the “2021 Annual Meeting”) and (iii) that Alden would remain subject to certain Standstill Provisions until their termination upon the occurrence of certain specified events.
On July 14, 2020 a third-party bidder submitted a non-binding proposal to the Company about a potential acquisition of the Company’s business, assets and properties related to The Hartford Courant. The Company responded to the bidder’s interest but the parties were unable to agree on a confidentiality agreement to engage in discussions.
Following the negotiation of the A&R Cooperation Agreement, on July 20, 2020, the Board unanimously approved the appointment of Davis Polk & Wardwell LLP (“Davis Polk”) to replace K&E as the Company’s outside legal advisor on various matters from time to time.
On July 27, 2020, the Board learned of discussions between Dr. Soon-Shiong and Mason Slaine, another existing stockholder who owned approximately 7.9% of the outstanding shares of the Company’s common stock at the time, regarding a potential purchase by Mr. Slaine of Dr. Soon-Shiong’s shares. These discussions did not lead to a transaction.
Later on July 27, 2020, the Board met telephonically, with members of the Company’s management, Davis Polk and Lazard in attendance. The Board discussed the possibility of obtaining approval for and implementing a shareholder rights plan to reduce the likelihood that a potential acquirer, such as Mr. Slaine, would seek to gain control of the Company through acquiring shares from an existing shareholder or through the open market without paying a premium for such control. In addition, the Board discussed how such acquisition, if completed, would have released Alden from its obligations under the Standstill Provisions, which was of particular concern at the time in light of the Company’s depressed stock price as a result of the COVID-19 pandemic. Following discussion, the Board unanimously approved the adoption of a shareholder rights plan with a one-year term to address the risk of such an action.
From late July 2020 through early December 2020, the Company and Alden engaged in periodic discussions regarding Company’s business strategies, management, capital allocation, opportunities and challenges, including potential uses of excess cash (including repurchases of shares, and potential amendments to the A&R Cooperation Agreement depending on Alden’s level of participation in any repurchase).
On December 11, 2020, Mr. Franklin and Mr. Smith had a telephone conversation, during which Mr. Smith informed Mr. Franklin that Stewart Bainum Jr. (“Mr. Bainum”) had expressed to Alden an interest in purchasing The Sun. Mr. Bainum had previously indicated his interest in The Sun to the Company, but Mr. Bainum and the Company had not reached agreement on terms. Mr. Smith mentioned to Mr. Franklin that Alden was considering the possibility of a transaction involving an acquisition of the Company by Alden and a sale of The Sun to Mr. Bainum.
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On December 14, 2020, Alden sent a non-binding written proposal to the Company to acquire all of the outstanding shares of the Company not already owned by Alden for a purchase price of $14.25 per share in cash (the “December 2020 Proposal”). The December 2020 Proposal provided that any potential acquisition of the Company by Alden would: (i) be conditioned upon the approval and recommendation of a special committee of independent Board members, as well as the approval of two-thirds of the outstanding shares of the Company not owned by Alden, (ii) be fully funded by Alden with cash on hand and therefore not require any third-party debt or equity financing and (iii) be subject to limited confirmatory due diligence. In addition, Alden stated in the December 2020 Proposal that it was not interested in selling its shares in the Company to any other party and confirmed that, while its proposal was not conditioned or dependent upon reaching any agreement with Mr. Bainum, Alden desired to explore the possibility of a sale of The Sun to Mr. Bainum.
On December 15, 2020, the Board (with Mr. Smith recusing himself) met telephonically, with Davis Polk in attendance, to discuss the formation of a new Special Committee to evaluate a potential strategic transaction involving Alden, potential alternative transactions and related matters. After discussion, and a determination of the independence of Mr. Franklin, Mr. Reck and Ms. Crenshaw, the Board unanimously approved the formation of the new Special Committee and the appointment of Mr. Franklin, Mr. Reck and Ms. Crenshaw as its members.
Shortly thereafter on the same day, Mr. Franklin spoke with Mr. Smith by telephone and informed Mr. Smith that the Board had established a Special Committee for purposes of evaluating the December 2020 Proposal.
On December 17, 2020, the Special Committee met telephonically, with Davis Polk in attendance upon the invitation of the Special Committee. Davis Polk advised the Special Committee on considerations for its selection of an independent legal advisor, including whether there were any actual or potential conflicts of interest that would impact the ability of Davis Polk to serve as legal advisor to the Special Committee. The Davis Polk representatives then left the meeting to allow the Special Committee to discuss its retention of legal advisors. After discussion, the Special Committee unanimously approved the engagement of Davis Polk as legal advisor to the Special Committee, upon its determination that Davis Polk did not present any actual or potential conflicts of interest and that it was advisable and in the best interests of the Company and its stockholders to retain Davis Polk as legal advisor to the Special Committee. At the invitation of the Special Committee, the representatives of Davis Polk rejoined the meeting and proposed a process for confirming the independence of each Special Committee member for purposes of serving on the Special Committee, including with respect to any actual or potential conflicts of interest, whereby Davis Polk would conduct separate interviews with each Special Committee member. Davis Polk completed such interviews in the days following such meeting, confirming the independence of each Special Committee member. In addition, at the meeting, Davis Polk discussed considerations for the Special Committee’s selection of an independent financial advisor and summarized the conflicts of interest disclosure provided by Lazard on December 17, 2020 at the direction of the Special Committee and distributed to the Special Committee in advance of the meeting. The Special Committee reviewed such disclosure and discussed the qualifications of Lazard to serve as its financial advisor. Following discussion, the Special Committee unanimously approved the engagement of Lazard as its financial advisor. Davis Polk then provided an overview of customary fees paid in connection with service on a special committee. After discussion, the Special Committee unanimously determined that the Chair of the Special Committee should receive a flat fee of $20,000 and that each of the other members should receive a flat fee of $10,000 for their service on the Special Committee, consistent with fees paid for service on other Board committees. With the aid of a written presentation distributed to the Special Committee in advance of the meeting, Davis Polk next led a discussion regarding the fiduciary duties of the Special Committee in connection with its consideration of a potential strategic transaction involving Alden and, if applicable, any alternative transaction, as well as any applicable SEC disclosure requirements, among other subjects. Lastly, the Special Committee discussed potential next steps with respect to the December 2020 Proposal, including certain implications of Section 203 of the DGCL.
On December 19, 2020, Akin Gump spoke telephonically with Davis Polk to discuss next steps regarding the December 2020 Proposal, including preparation of a confidentiality agreement between Alden and the Company. From December 19, 2020 to December 30, 2020, Davis Polk and Akin Gump engaged in discussions concerning certain terms of the December 2020 Proposal, including considerations regarding Alden’s potential discussions with Mr. Bainum related to the sale of The Sun under the Stockholder Rights Agreement, dated as of July 28, 2020, between the Company and its rights agent, Computershare Trust Company, N.A. (the “Rights Agreement”), among other things.
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On December 22, 2020, the Special Committee met telephonically, with Davis Polk and Lazard in attendance. With the aid of a written presentation distributed to the Special Committee in advance of the meeting, Lazard provided its preliminary analysis of the December 2020 Proposal, including a discussion of its terms, preliminary valuation work and an assessment of other potential bidders and the potential risks and benefits of approaching each. After discussion, the Special Committee determined that Mr. Franklin should provide an update to Mr. Smith that the Special Committee was in the process of reviewing the December 2020 Proposal with its advisors. After the Special Committee meeting, on the same day, Mr. Franklin communicated such message to Mr. Smith.
On December 23, 2020, at the direction of the Special Committee, Lazard met with Terry Jimenez, the Chief Executive Officer of the Company, to discuss various aspects of the Company, including its operations, financial performance, future business plans and its financial projections as part of Lazard’s analysis of the December 2020 Proposal and the value such proposal represented to the Company’s stockholders in light of potential cases of the Company’s future financial performance.
On December 30, 2020, Davis Polk sent an initial draft of the confidentiality agreement to Akin Gump. Between December 30, 2020 and January 5, 2021, the parties and their respective legal advisors exchanged drafts of the confidentiality agreement, and on January 5, 2021 the parties executed the confidentiality agreement.
Also on December 30, 2020, the Special Committee met telephonically with Mr. Jimenez, who joined for a portion of the meeting, as well as representatives of Davis Polk and Lazard. Lazard reviewed the 2021 Strategic Plan (as defined under “Certain Company Forecasts”), which had previously been approved by the Board and potential cases for the Company’s financial performance in 2022 and 2023 prepared by management or at the direction of the Special Committee. Mr. Jimenez then left the meeting. The Special Committee also discussed certain financial forecasts prepared by Alden and its affiliates and provided to the Company in August 2020 during the review of the Company’s strategy and business plan. As described in the section entitled “The Merger—Certain Company Forecasts”, the Special Committee did not consider these financial forecasts prepared by Alden and its affiliates to be reliable. Next Lazard presented certain valuation analyses and led the Special Committee through a discussion of potential next steps with Alden and other potential bidders. The Special Committee discussed various aspects of the December 2020 Proposal, including the timing of the Company’s update of its 2021 earnings guidance, including in light of the Company’s recent sale of its BestReviews business and the performance of the Company’s business in general, and Alden’s request to engage in discussions with Mr. Bainum regarding a potential sale of The Sun. Following discussion, the Special Committee approved Alden’s request to speak to Mr. Bainum subject to acceptable confidentiality agreements between the Company and each of Alden and Mr. Bainum. In addition, the Special Committee determined that Mr. Franklin should provide an update to Mr. Smith of the Special Committee’s continuing review, the timing of the Company’s updated earnings guidance and its approval of discussions between Alden and Mr. Bainum. After the Special Committee meeting, on the same day, Mr. Franklin communicated such message to Mr. Smith.
On December 31, 2020, Alden filed an amendment to its Schedule 13D publicly disclosing that Alden delivered the December 2020 Proposal to the Board on December 14, 2020. The written letter proposal delivered to the Board was attached as an exhibit to the amendment.
Later on December 31, 2020, the Company issued a press release announcing the formation of the Special Committee to consider the December 2020 Proposal and any alternative transactions, and the release of updated guidance with respect to its 2021 earnings.
On January 2, 2021, Davis Polk and Mr. Bainum’s legal counsel discussed a confidentiality agreement related to the potential acquisition of The Sun. Between January 2, 2021 and January 13, 2021, the parties and their respective legal advisors exchanged drafts of the confidentiality agreement, and on January 13, 2021 the parties executed the confidentiality agreement (the “Bainum Confidentiality Agreement”).
On January 5, 2021, Mr. Bainum delivered a letter to the Special Committee in which he indicated “If I cannot reach an agreement with Alden on a fair value for The Sun in conjunction with their bid for Tribune, I am willing to explore with the Special Committee purchasing all of the outstanding shares of Tribune at a reasonable price that will deliver fair value to all Tribune shareholders”. Such letter did not include a proposed price for the Company.
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On January 6, 2021, Akin Gump sent a preliminary diligence request list in connection with the December 2020 Proposal to Davis Polk.
On January 13, 2021, a third party bidder (“Bidder B”) submitted a non-binding written proposal for an acquisition of the Company at a price equal to $15.00 per share.
On January 14, 2021, the Special Committee met telephonically, with Lazard and Davis Polk in attendance. With the aid of a written presentation distributed to the Special Committee in advance of the meeting, Lazard provided an overview of the Company’s market price history, an update on discussions with potential bidders and certain stockholders and a summary of certain valuation analyses. Following discussion, the Special Committee determined that it was advisable and in the best interests of the Company’s stockholders to approach Alden with an $18.25 per share counter proposal.
On January 15, 2021, Lazard delivered the Company’s counter proposal of $18.25 per share to Alden’s financial advisor, Moelis & Company LLC (“Moelis”).
Between January 16 and February 2, 2021, the Company provided Alden with certain financial diligence materials.
On January 25, 2021, Lazard spoke to a third party bidder (“Bidder C”), who had contacted the Company in the past about a potential acquisition of certain of the Company’s business units, and renewed his inquiries following Alden’s amendment of its Schedule 13D on December 31, 2020. Lazard invited Bidder C to submit a proposal including a price in order to engage in any exploration of an acquisition of the Company’s business units. Bidder C did not at any time submit a proposal for any of the Company’s businesses prior to the proposal on March 10, 2021 described below.
On January 27, 2021, Bidder B submitted evidence of its equity financing for a proposed acquisition of the Company to Lazard. On February 3, 2021, Lazard had a call with one of Bidder B’s proposed equity financing sources, which confirmed that a portion of the proposed equity financing at $15 per share was not committed, and Party A intended to raise this portion of the money from high net worth individuals. Bidder B did not subsequently address these matters or submit a revised proposal.
Commencing on January 28 through February 16, 2021, representatives of the Company responded to various diligence requests from representatives of Alden.
On February 4, 2021, Moelis delivered a $16.00 per share proposal to Lazard.
On February 5, 2021, the Special Committee met telephonically, with Lazard and Davis Polk in attendance. With the aid of a written presentation distributed to the Special Committee in advance of the meeting, Lazard provided an update of the Company’s market price history, discussions with potential bidders, and certain valuation analyses. Lazard then summarized the terms of Alden’s proposal to acquire the Company at a price of $16.00 per share. Following discussion, including regarding potential counterproposals on price, the Special Committee determined that it was advisable and in the best interests of the Company’s stockholders to propose a counter of $17.75 per share.
Later on February 5, 2021, Lazard delivered a $17.75 per share proposal to Moelis. Lazard clarified that the transaction would not be contingent on a sale of The Sun or financing, and would be subject only to confirmatory diligence and negotiation of definitive documentation.
On February 6, 2021, Moelis delivered a $16.50 per share proposal to Lazard.
On February 7, 2021, Mr. Franklin and Mr. Smith spoke by telephone, during which Mr. Franklin told Mr. Smith that, while he did not believe a price of $16.50 per share would be supported by the Special Committee, a proposal between $17.25 and $17.50 may receive support from the Special Committee.
Later on February 7, 2021, Mr. Smith called Mr. Franklin and delivered a $17.00 per share proposal.
On February 8, 2021, the Special Committee met telephonically, with Lazard and Davis Polk in attendance. Lazard summarized the recent price negotiations followed by a discussion of potential next steps with respect to Alden’s counter proposal of $17.00 per share. Following discussion, the Special Committee determined that it was advisable and in the best interests of the Company’s stockholders to submit a counter proposal of $17.25 per share.
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Later on February 8, 2021, Mr. Franklin called Mr. Smith on the telephone and delivered the $17.25 per share proposal. Mr. Smith agreed to the Company’s $17.25 per share proposal, subject to the completion of confirmatory diligence and negotiation of definitive documentation. Shortly thereafter on the same day, representatives of Davis Polk and Akin Gump met telephonically to discuss a proposed timetable for the transaction, legal diligence requests and the timing for delivering an initial draft of the Merger Agreement.
On February 10, 2021, the Company opened a virtual data room to Alden and its advisors. The due diligence process continued through February 16, 2021. During this period, representatives of the Company, Alden and their respective advisors held several diligence calls to discuss certain diligence matters relating to the Company. The scope of due diligence conducted by Alden and its advisors, included, among other things, financial, operational, legal, compliance, environmental, intellectual property and information technology, labor and human resources, litigation, real property, tax and other due diligence matters.
On February 10, 2021, Davis Polk sent Akin Gump an initial draft of the Merger Agreement.
On February 11, 2021, Akin Gump sent Davis Polk an initial draft of (i) the Equity Commitment Letter and (ii) the Limited Guarantee. Over the following days, Akin Gump and Davis Polk exchanged revised drafts of the Equity Commitment Letter and the Limited Guarantee and negotiated the terms of such agreements, including the amount of the equity commitment and the scope of the guaranteed obligations.
On February 11, 2021, the Special Committee met telephonically, with the representatives of Lazard and Davis Polk in attendance. The Special Committee discussed the financial forecast cases prepared by the Company’s management and at the direction of the Special Committee. The Special Committee confirmed that Lazard was to use the Specified Case (as defined under “Certain Company Forecasts”) for purposes of their financial analyses in rendering a fairness opinion regarding the proposed Merger. The Special Committee also discussed the 2021 Strategic Plan Update, but as described under “Certain Company Forecasts”, did not consider these financial forecasts to be reliable. The Special Committee also discussed the treatment of the Rights Agreement in connection with the transaction, Section 203 of the DGCL (including the fact that Dr. Soon-Shiong’s vote in favor of the transaction would be required, based on his current ownership of the Company’s common stock, due to the requirement under Section 203 that holders of two-thirds of the outstanding shares not owned by Alden approve the transaction) and the status of negotiations of definitive documents with representatives of Alden.
On February 12, 2021, Akin Gump sent Davis Polk a revised draft of the Merger Agreement. From February 12, 2021 until the execution of the Merger Agreement on February 16, 2021, the parties and their respective legal advisors exchanged several drafts of, and engaged in numerous discussions and negotiations concerning the terms of, the Merger Agreement. Primary areas of discussion and negotiation included the Termination Fee payable by the Company, the triggers for payment thereof, Alden’s undertaking to obtain regulatory approval and the scope and terms of the interim operating restrictions on the Company.
On February 13, 2021, Lazard spoke to Bidder B to reiterate that there was a gap in its equity financing and to note that the proposed price of $15 per share was well below the current trading levels (any increase in price would expand the size of the equity financing gap). Bidder B did not subsequently submit a revised proposal.
On February 15, 2021, the Special Committee met telephonically, with the representatives of Lazard and Davis Polk in attendance. Lazard reviewed with the Special Committee its financial analyses of the proposed merger and delivered to the Special Committee an oral opinion, which was confirmed subsequently by written opinion to the effect that, as of the date of each such opinion, the consideration to be paid to holders of the Company’s common stock (other than (i) shares of the Company’s common stock held by Alden or any other Excluded Company Persons (as defined in the Merger Agreement) and (ii) shares of the Company’s common stock held by holders who are entitled to and properly demand an appraisal of their shares of Company Common Stock (such holders, collectively, “Excluded Holders”)) in the transaction ($17.25 per share payable in cash) is fair, from a financial point of view, to holders of the Company’s common stock (other than the Excluded Holders). Davis Polk presented an overview of the fiduciary duties of the members of the Special Committee and a summary of the terms and conditions of the Merger Agreement, the Equity Commitment Letter and the Limited Guarantee. Following discussion, the Special Committee thereafter unanimously recommended that the Board (i) determine that the Merger Agreement, the Limited Guarantee and the transactions contemplated thereby, including the Merger, are advisable and fair to, and in the best interests of, the Company and its unaffiliated stockholders,
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(ii) approve and declare advisable the Merger Agreement, the Limited Guarantee and the transactions contemplated thereby, including the Merger, (iii) resolve to recommend that the stockholders of the Company approve the adoption of the Merger Agreement and (iv) direct that the Merger Agreement be submitted to the stockholders of the Company for adoption.
At the same Special Committee meeting on February 15, 2021, the Special Committee also unanimously recommended that the Board (i) determine that an amendment to the Rights Agreement exempting the acquisition of the Company by Alden from the operation of the Rights Agreement and removing the “acting in concert” provisions of the Rights Agreement (the “Rights Agreement Amendment”) and the transactions contemplated thereby are advisable and fair to, and in the best interests of, the Company and its unaffiliated stockholders and (ii) approve and declared advisable the Rights Agreement Amendment and the transactions contemplated thereby.
On February 15, 2021, following the Special Committee meeting on such date, the Board (with Mr. Smith and Mr. Minnetian recusing themselves and Ms. Needleman not in attendance) met telephonically, with Terry Jimenez, Lazard and Davis Polk in attendance. Lazard reviewed with the Board its financial analyses of the proposed merger and delivered to the Board an oral opinion, which was confirmed subsequently by written opinion to the effect that, as of the date of each such opinion, the consideration to be paid to holders of the Company’s common stock (other than the Excluded Holders) in the transaction ($17.25 per share payable in cash) is fair, from a financial point of view, to holders of the Company’s common stock (other than the Excluded Holders). Davis Polk presented an overview of the fiduciary duties of the members of the Board and a summary of the terms and conditions of the Merger Agreement, the Equity Commitment Letter and the Limited Guarantee. Acting upon the unanimous recommendation of the Special Committee, the members of the Board in attendance at the meeting (i) determined that the Merger Agreement, the Limited Guarantee, the Rights Agreement Amendment and the transactions contemplated thereby, including the Merger, are advisable and fair to, and in the best interests of, the Company and its unaffiliated stockholders, (ii) approved and declared advisable the Merger Agreement, the Limited Guarantee, the Rights Agreement Amendment and the transactions contemplated thereby, including the Merger, (iii) resolved to recommend that the stockholders of the Company approve the adoption of the Merger Agreement and (iv) directed that the Merger Agreement be submitted to the stockholders of the Company for adoption. The Board approved such matters by a majority vote, with Mr. Jimenez dissenting on the basis of his belief that the price proposed by Alden was inadequate due to his greater optimism about the Company’s future financial performance, and therefore, when comparing Alden’s offer, he considered remaining as a standalone company to be in the best interests of the Company and its stockholders. The remaining Board members were aware of and considered Mr. Jimenez’s views, but voted as described above.
On February 16, 2021, after the end of trading on NASDAQ, the parties executed the Merger Agreement, the Equity Commitment Letter, the Limited Guarantee and the other ancillary documents related to the Merger. Concurrently with the execution of the Merger Agreement, (i) the Company executed the Rights Agreement Amendment and (ii) Alden entered into a non-binding written term sheet to sell The Sun to Charity.
On February 16, 2021, shortly after the execution of such agreements, the Company and Alden issued a joint press release announcing their execution of the Merger Agreement.
On February 17, 2021, the Company filed a Current Report on Form 8-K with the SEC disclosing its entry into the Merger Agreement, the Equity Commitment Letter, the Limited Guarantee, the Rights Agreement Amendment and certain related matters, including such joint press release.
Following the public announcement of the Merger Agreement, the Company received certain indications of interest from various parties in purchasing specific newspapers from the Company, including an offer from Bidder C received on March 10, 2021 to purchase The Morning Call Media Group for $30 to $40 million. The Company is restricted by the Merger Agreement from pursuing these indications of interest, and has referred all such inquiries to Alden.
On March 12, 2021, Mr. Bainum’s financial advisor sent Lazard a written request to engage with a number of parties in order to “advance the Bainum interests.” After discussing the situation with the Chairman of the Special Committee and Davis Polk, Lazard responded to Mr. Bainum’s financial advisor in writing on March 12, 2021 that the Special Committee did not intend to respond given certain restrictions in the Merger Agreement.
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Starting on March 14, 2021, numerous news sources reported that negotiations between Mr. Bainum and Alden regarding a sale of The Sun had broken down, and that Mr. Bainum was now exploring an offer to acquire the Company as a whole.
On March 16, 2021, Mr. Bainum sent the Special Committee a non-binding letter (the “March 16 Letter”) offering to acquire the Company for a price of $18.50 per share in cash, subject to securing the necessary financing and certain other conditions. The March 16 Letter stated that Mr. Bainum was prepared to commit $100,000,000 in required equity financing through Charity of the total $650,000,000 required financing, and sought a waiver of certain restrictions under the Bainum Confidentiality Agreement so that he would be able to discuss his offer with potential debt and equity financing sources in order to raise the remaining financing. In addition to securing the necessary financing, Mr. Bainum’s offer was conditioned on the satisfactory completion of due diligence and the negotiation of a definitive acquisition agreement, which the March 16 Letter stated that he believed could be completed within two weeks after full access to necessary information. The March 16 Letter indicated that Mr. Bainum’s pursuit and investigation of The Sun had recently led him to the conclusion that the Company could be purchased for a price greater than the price set forth in the Merger Agreement, and that Mr. Bainum believed there would be significant interest among financing sources in joining his effort. The March 16 Letter also alluded to a future for the Company and its newspapers potentially under a not-for-profit model. The March 16 Letter was sent by Mr. Bainum when he only had access to diligence materials relating to The Sun.
On March 16, 2021, after receipt of the March 16 Letter, and discussion of the circumstances with the Chairman of the Special Committee and Lazard, Davis Polk notified Alden of receipt of, and provided a copy of, the March 16 Letter, as required under the Merger Agreement.
On March 18, 2021, Davis Polk and Akin Gump discussed the March 16 Letter, and later in the day, the Special Committee met telephonically, with representatives of Lazard and Davis Polk in attendance, to discuss the March 16 Letter, including the news reports regarding Mr. Bainum’s interest in acquiring the Company, the update on the status of negotiations between Mr. Bainum and Alden regarding a sale of The Sun received from Akin Gump, and the Special Committee’s potential responses to the March 16 Letter.
On March 19, 2021, Davis Polk and Akin Gump discussed the March 16 Letter, and later in the day, the Special Committee met telephonically, with representatives of Lazard and Davis Polk in attendance, to discuss the March 16 Letter and the Special Committee’s response thereto. Following discussion, the Special Committee determined to grant a waiver of certain restrictions under the Bainum Confidentiality Agreement so that Mr. Bainum would be able to discuss his offer with specified potential debt and equity financing sources in order to raise the remaining required financing for his offer.
On March 20, 2021, Davis Polk sent a draft waiver (the “Bainum Waiver”) of such restrictions under the Bainum Confidentiality Agreement to Mr. Bainum’s outside legal advisor, Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”), and forwarded the draft waiver to Alden, as required by the Merger Agreement.
On March 20 and March 21, 2021, Davis Polk had separate discussions with Akin Gump and Skadden regarding the terms of the draft Bainum Waiver.
On March 22, 2021, Skadden sent a revised draft of the Bainum Waiver to Davis Polk, which Davis Polk forwarded to Alden, as required by the Merger Agreement.
Between March 24 and March 25, 2021, Davis Polk sent Skadden a further revised draft of and discussed the terms of the Bainum Waiver, notifying Akin Gump and Alden of such communications as required by the Merger Agreement, and on March 25, 2021, the Company and Mr. Bainum executed the Bainum Waiver.
On March 26, 2021, Skadden requested permission to add Hansjorg Wyss as a permitted financing source under the Bainum Waiver, and after discussion with the Chairman of the Special Committee and Lazard, Davis Polk notified Skadden of the Company’s agreement to the addition of Mr. Wyss. Throughout this and the following period, the Company continued to comply with its obligations under the Merger Agreement to notify Alden of communications from and discussions with Mr. Bainum and, later, Mr. Wyss.
On March 26, 2021, Mr. Bainum and Mr. Wyss sent letters to the Special Committee (the “March 26 Letters”) reiterating Mr. Bainum’s non-binding $18.50 per share offer, adding that Mr. Wyss had indicated interest in providing at least $100 million of equity financing and possibly additional loans, that Mr. Bainum did not believe
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any additional equity financing would be necessary, but that he continued to believe significant additional amounts would be available, and stating that Mr. Bainum had been working with Wells Fargo regarding potential debt financing. The March 26 Letters reiterated Mr. Bainum’s expectation that Mr. Bainum’s and Mr. Wyss’ diligence and negotiation of definitive agreements could be completed within two weeks after full access to necessary information. Later in the day on March 27, 2021, Davis Polk discussed the March 26 Letters and the status of negotiations between Mr. Bainum and Alden regarding a sale of The Sun with Akin Gump.
On March 28, 2021, the Special Committee met telephonically, with representatives of Lazard and Davis Polk in attendance, to discuss the March 26 Letters.
On March 30, 2021, Mr. Wyss sent Lazard an email reiterating his strong commitment to the potential acquisition of the Company, and appearing to indicate that Mr. Wyss would commit all additional required financing necessary to complete the transaction. After notifying the Chairman of the Special Committee, later in the day on March 30, 2021, as permitted by the Merger Agreement, Lazard and Davis Polk had a call with Mr. Bainum, Mr. Wyss and certain of their respective advisors to clarify the terms of Mr. Bainum’s and Mr. Wyss’ proposal. On that call, Mr. Wyss and Mr. Bainum confirmed their strong commitment to the potential acquisition of the Company, and reiterated that they would provide all necessary financing. They also clarified that, while their long-term plans for the Company and its newspapers may involve a not-for-profit model, their proposal for the acquisition would involve a more customary, private, for-profit acquisition vehicle, to simplify their proposed transaction structure for the Company’s benefit. Following the call, Skadden indicated that Mr. Bainum and Mr. Wyss intended to clarify the terms of their proposal in a subsequent letter.
On April 1, 2021, Newslight LLC (“Newslight”), a newly created entity jointly owned by Mr. Bainum and Mr. Wyss, sent the Special Committee a non-binding letter reiterating their offer to acquire the Company for a price of $18.50 per share in cash (the “Newslight Letter”). The Newslight Letter clarified that Mr. Bainum and Mr. Wyss’ proposal (the “Newslight Proposal”) was made through Newslight by the two of them alone, and no other parties or investors, and that if they admitted minority co-investors, the two of them would nevertheless retain control of decision-making through the closing of the transaction, and no minority investment would impact the timing of closing. The Newslight Letter clarified that the proposal was fully financed with equity commitments from Mr. Bainum (in the amount of $100,000,000) and Mr. Wyss (in the amount of $505,315,000), and, like Alden, Mr. Bainum and Mr. Wyss intended to finance a portion of the purchase price with the Company’s cash on hand. The Newslight Proposal assumed the use of $140,000,000 of Company cash, as compared with Alden’s assumed use of $100,000,000 of Company cash. While the Newslight Letter indicated that Newslight intended to arrange debt financing for the transaction, it made clear that debt financing would not be a condition to the closing of the transaction. The Newslight Letter also contained a detailed sources and uses for the transaction, and proposed to refine the assumptions set forth therein if and when Newslight was granted access to diligence, and indicated a willingness to increase the equity commitment amounts provided by Mr. Bainum and Mr. Wyss if necessary based on such refined assumptions. The Newslight Letter also proposed for the Company to pay the termination fee due to Alden upon termination of the Merger Agreement, if the Company eventually terminated the Merger Agreement to enter into a merger agreement with Newslight (the “Newslight Merger Agreement”).
On April 2, 2021, the Special Committee met telephonically, with representatives of Lazard and Davis Polk in attendance, to discuss the Newslight Proposal and the Special Committee’s response thereto. Following discussion, consistent with the Merger Agreement, the Special Committee determined that the Newslight Proposal would reasonably be expected to lead to a Superior Proposal as defined in the Merger Agreement, and that failing to engage in negotiations and discussions with Newslight regarding the proposal and to furnish diligence information to Newslight and its representatives would be reasonably likely to be inconsistent with its fiduciary duties. Accordingly, the Special Committee determined to engage in such negotiations and discussions and to furnish diligence information to Newslight and its representatives, subject to Newslight’s entry into a confidentiality agreement meeting the requirements of the Merger Agreement. After the meeting, on April 2, 2021, Davis Polk notified Skadden and Alden of the Special Committee’s determination, and sent Skadden a draft of a confidentiality agreement meeting such requirements.
Between April 2, 2021 and April 5, 2021, Davis Polk and Skadden, serving as outside counsel for Newslight, exchanged drafts of the confidentiality agreement, and on April 5, 2021, the parties executed the confidentiality agreement (the “Newslight Confidentiality Agreement”). Later in the day on April 5, 2021, the Company opened a virtual data room containing diligence information to Newslight and its representatives.
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On April 5, 2021, the Company issued a press release announcing receipt of the Newslight Proposal and the Special Committee’s determination with respect to the Newslight Proposal.
On April 6, 2021, the Special Committee met telephonically, with representatives of Lazard and Davis Polk in attendance, to discuss the Company’s actual financial performance for the first quarter of 2021, and the potential impact on the Company’s forecasted financial performance for fiscal year 2021.
From April 5 through April 11, 2021, Davis Polk had numerous communications with Akin Gump regarding various matters related to the transactions contemplated by the Merger Agreement, including negotiating confidentiality agreement joinders for Alden’s proposed debt financing sources, revisions to this proxy statement and the associated Schedule 13E-3 in light of comments received from the SEC and closing matters generally.
On April 9, 2021, Skadden sent a draft of the Newslight Merger Agreement and related transaction documents to Davis Polk, which Davis Polk forwarded to Alden, as required by the Merger Agreement.
On April 15, 2021, Davis Polk sent a revised draft of the Newslight Merger Agreement and related transaction documents to Skadden, which Davis Polk forwarded to Alden, as required by the Merger Agreement.
On April 17, 2021, following discussions between representatives of the Special Committee and Mr. Bainum on April 16, 2021, Mr. Bainum sent the Special Committee a letter (the “April 17 Letter”), which Davis Polk forwarded to Alden, as required by the Merger Agreement, in which Mr. Bainum communicated that Mr. Wyss has informed him that he was no longer interested in providing the level of equity commitment indicated in the Newslight Letter. The full text of the April 17 Letter is below:
Special Committee of The Board of Directors
Tribune Publishing Company
160 N. Stetson Avenue
Chicago, IL 60601
Care of Eric Medow, Lazard LLC
Ladies and Gentlemen:
As a follow up to the discussions between our respective advisers on April 16, 2021, I write to provide the Special Committee directly an update on the non-binding proposal by Newslight, LLC (“Newslight”) to acquire Tribune Publishing Company (“Tribune”). On April 16,2021, Hansjörg Wyss informed me that he is no longer interested in participating in a potential acquisition of Tribune at the level of equity commitment indicated in Newslight’s letter to the Special Committee, dated April 1, 2021. Mr. Wyss further communicated to me that he remains interested in assisting in a potential transaction to make it successful.
I remain committed to pursuing a potential acquisition of Tribune for $18.50 in cash per share, including providing through one or more of my affiliates $100 million of the required equity financing to complete such acquisition. My intention is to continue to have discussions with other potential equity financing sources as permitted under the confidentiality agreements between Tribune and Newslight and Drill Down, LLC, respectively (collectively the “Confidentiality Agreements”), as well as other potential equity financing sources who have contacted me on an unsolicited basis (subject to the Special Committee approving discussions with such other potential equity financing sources in accordance with the Confidentiality Agreements).
My advisers have substantially completed the necessary due diligence of Tribune and there remain only a few issues to be negotiated in the definitive transaction documentation. I remain confident that there is significant interest in joining this effort and expect the necessary arrangements among one or more additional equity financing sources can be completed expeditiously.
If you have any questions, please do not hesitate to contact me or my advisers.
Sincerely,
Stewart Bainum, Jr.
On April 18, 2021, the Special Committee met telephonically, with representatives of Lazard and Davis Polk in attendance, and reviewed, among other things, the April 17 Letter. Representatives of Davis Polk also reviewed for the directors the requirements of the Merger Agreement in responding to the April 17 Letter. Following
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discussion, the Special Committee unanimously determined that, in light of the April 17 Letter, the Newslight Proposal would no longer reasonably be expected to lead to a Superior Proposal (as defined in the Merger Agreement) and that accordingly the Company should terminate discussions and negotiations with, and access to diligence information for, Newslight and its principals in connection with the Newslight Proposal. After the meeting, on April 18, 2021, Davis Polk notified Skadden and Alden of the Special Committee’s determination, requested that Newslight destroy confidential information received under the Newslight Confidentiality Agreement and the Company closed the virtual data room containing diligence information regarding the Company and its businesses (other than The Sun) to Newslight and its principals.
Later in the day on April 18, 2021, Skadden sent Davis Polk a request for a consent under the Bainum Confidentiality Agreement to permit Mr. Bainum to speak with certain additional potential equity financing sources in connection with Mr. Bainum’s proposed acquisition of the Company. After discussion between the Chairman of the Special Committee, Lazard and Davis Polk, the Company executed the proposed consent and Davis Polk sent the executed consent to Skadden.
On April 19, 2021, the Company issued a press release announcing receipt of the April 17 Letter and the Special Committee’s determination with respect to the revised Newslight Proposal.
Reasons for the Merger; Recommendation of the Company’s Special Committee and Board
The Board recommends that you vote “FOR” approval of the Merger Proposal.
In evaluating the Merger Agreement and the Merger, the Special Committee and the Board consulted with the senior management of the Company, as well as representatives of Lazard and Davis Polk. In the course of making the determination on behalf of the Company that the Merger is fair to, and in the best interests of, the Company and its unaffiliated stockholders, approving and declaring the Merger Agreement and the Merger and recommending that the holders of common stock vote in favor of adopting the Merger Agreement, the Special Committee and the Board considered numerous factors, including the following material factors and benefits of the Merger:
the review of the Company’s business, current and projected financial condition, current earnings and earnings prospects, including in light of the increasing popularity of digital media and the shift in newspaper readership demographics, consumer habits and advertising expenditures from traditional print to digital media that may continue to adversely affect operating revenues and could require significant capital investments due to changes in technology, and also amidst declining revenues industry-wide;
the fact that the merger consideration represented a premium of approximately 45% to the closing price of the Company’s common stock on NASDAQ on December 11, 2020, the last trading day prior to the Board receiving Alden Global Capital’s proposal to acquire the Company, a premium of approximately 35% to the closing price of the Company’s common stock on NASDAQ on December 30, 2020, the last trading day prior to public disclosure of Alden Global Capital’s proposal to acquire the Company, a 21% increase from Alden Global Capital’s initial proposal of $14.25 per share and a premium of approximately 8% to the closing price of the Company’s common stock on NASDAQ on February 12, 2021, the last trading day before the announcement that the Company, Parent and Merger Sub had entered into the Merger Agreement;
the premiums above were especially high given the net cash on the balance sheet was 45%-50% of the undisturbed equity value (i.e., net cash was a significant portion of the undisturbed equity value which was priced at a 35-45% premium);
the improvement in the per share price offered by Alden, after negotiation with the Special Committee and its advisors, from $14.25 per share on December 14, 2020 to $16.00 per share of our common stock on February 4, 2021, $16.50 per share on February 6, 2021, $17.00 per share on February 7, 2021 and then finally, after multiple discussions, to $17.25 per share on February 8, 2021, which price the Special Committee believes was in the best interests of the Company and our unaffiliated stockholders and represented the highest per share consideration reasonably attainable at the time;
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the belief that other potential strategic alternatives, including continuing to execute its business plan and initiatives as a public company and possible business combinations with potential strategic or financial partners were unlikely to result in a more favorable outcome for the Company and its unaffiliated stockholders:
prior to the entry into the Merger Agreement, in considering the likelihood that any potential acquirors would engage in a transaction with the Company with a value and contractual terms and conditions superior to those contained in the Merger Agreement, the Special Committee and the Board considered the likelihood of other potential acquirers being interested in an acquisition. Such consideration included the fact that Parent’s initial offer was made public on December 31, 2020, and the fact that subsequent news reports on February 11, 2021 stated that the Company was in discussions with Parent, which provided notice and an opportunity for other interested parties to express interest in an acquisition prior to the entry into the Merger Agreement, but no inquiries from any other parties (except Bidder B) relating to a potential acquisition of the Company were received (i.e., the Company received only two alternative proposals to acquire the Company, and both lacked proof of sufficient funds to finance the proposals put forth). The Special Committee and the Board’s view was informed further by input and perspective from Company management and the Special Committee’s advisors, as well as discussions with Mr. Bainum, Bidder B and Bidder C. Ultimately, the Special Committee and the Board considered the likelihood of success in a sale process given that Alden had made it clear it would not support an alternative transaction, as well as the risk that Parent would terminate the discussions if the Special Committee attempted to conduct an alternative sale process. Based on these factors, among others, the Special Committee and the Board concluded that no other actionable acquisition transaction was currently available to the Company as (i) Mr. Bainum’s stated interest in his and his advisors’ communications with the Special Committee and its advisors had been, prior to such time, in acquiring The Sun rather than the Company as a whole and (ii) the indication of interest from Bidder B was subject to substantial risks and uncertainties and further exploration of such indication of interest or any other transaction was unlikely to result in the maximization of stockholder value. Bidder B, like Mr. Bainum, did not make a proposal with evidence of sufficient financing;
in considering Mr. Bainum’s proposal set forth in the April 17 Letter, the Special Committee considered the fact that the proposal is nonbinding, and subject to securing the necessary financing, and Mr. Bainum was only willing to provide a portion ($100,000,000) of the required financing for the acquisition (approximately $650,000,000 in total), and that the proposal was subject to the completion of due diligence and negotiation of definitive documentation. The Special Committee also considered the facts described above regarding Mr. Bainum’s previously stated interest being in acquiring The Sun, rather than the Company as a whole, and Mr. Wyss’ having informed Mr. Bainum that he was no longer interested in providing the level of equity commitment indicated in the Newslight Letter. Accordingly, as of the date of this proxy statement, there can be no assurance that Newslight or Mr. Bainum will make any further proposal, that the Special Committee will determine that any such proposal constitutes or would reasonably be expected to lead to a “Superior Proposal” as defined in the Merger Agreement or that a transaction with Newslight or Mr. Bainum will be approved or consummated on any particular terms or at all. The Special Committee also considered the fact that any transaction with Newslight or Mr. Bainum would likely not be capable of being completed as quickly as the Merger, due to the earlier start that Alden has had on the required stockholder approval process for the Merger, that the waiting period applicable to the Merger under the Hart-Scott-Rodino Act has already expired, and that any transaction with Newslight or Mr. Bainum would require more votes than the Merger by stockholders other than Alden, if, as Alden has indicated, Alden does not vote its shares of Company common stock in favor of any such transaction;
in considering the prospects of continuing as an independent company, the Special Committee and the Board considered the business, operations, management, financial condition, earnings and prospects of, and the risks and challenges facing, including (i) general trends in the newspaper industry, including declining newspaper buying and the migration to other available forms of
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media for news and (ii) the risks and uncertainties associated with maintaining the Company’s performance, including in light of the ability to invest in funds and resources in digital products, services or opportunities and the research and development costs in building, maintaining and evolving its technology infrastructure;
in addressing the structural shift to digital media, the Special Committee and the Board considered factors and uncertainties with respect to the Company’s ability to successfully transition from a print-focused media company to a digital platform media company, including its prospects for continuing to deliver editorial content on a wide variety of platforms and formats on social network sites such as Facebook, Apple News and Twitter, on smartphones, tablets and e-readers, on websites and blogs, in niche online publications and in email newsletters;
the Special Committee and the Board also considered the possibility of selling the Company in pieces. Ultimately, a number of considerations made this path both risky and unlikely to lead to higher values, including (i) tax costs related to the divestiture, (ii) large centralized functions which were not scalable as the operation shrunk, (iii) a limited number of strategic buyers with synergies and (iv) contractual liabilities remaining after a series of divestitures; and
based on the value, risk allocation, timing and other terms and conditions negotiated with Parent, the Board ultimately determined that the acquisition by Parent is more favorable to the Company’s unaffiliated stockholders than any other strategic alternative reasonably available to the Company, including continuing as an independent company or engaging in further discussions with Bidder B, Bidder C or any other party (other than Newslight) regarding a potential transaction;
the fact that the form of consideration payable to the Company’s stockholders is cash, which will provide the Company’s stockholders with certainty of value and immediate liquidity, while eliminating the market and long-term business risks related to the Company’s future growth prospects;
the fact that the Merger is not subject to a financing condition and that Parent has secured equity financing commitments that, together with a portion of the Company’s existing cash on hand, are sufficient to pay the amounts required to be paid under the Merger Agreement;
the financial presentation and opinion, dated February 16, 2021, of Lazard provided to the Special Committee as to the fairness, from a financial point of view and as of such date, of the per share Merger Consideration to be received by holders of common stock (other than the Excluded Holders (as defined under “The Merger—Background of the Merger”)) pursuant to the Merger Agreement, which opinion was based on and subject to the various assumptions made, procedures followed, factors considered and limitations and qualifications to the review undertaken by Lazard as further described in the section entitled “The Merger—Opinion of Lazard Frères & Co. LLC” beginning on page 52;
the Special Committee’s and the Board’s belief that, after extensive negotiations, the Company obtained the best terms and highest price that Parent is willing to pay for the Company;
the fact that the Special Committee’s legal and financial advisors were involved throughout the process and negotiations and updated the Special Committee directly and regularly, which provided the Special Committee with additional perspectives on the negotiations;
the Special Committee’s and the Board’s review of the structure of the Merger and the financial and other terms of the Merger Agreement, including, among others, the following specific terms of the Merger Agreement:
the limited and otherwise customary conditions to the parties’ obligations to complete the Merger;
the fact that Parent’s equity commitment includes an obligation for each of Alden Global Opportunities Master Fund, L.P. and Alden Global Value Recovery Master Fund, L.P. to pay to Parent their share of an amount that, together with a portion of the Company’s existing cash on hand, is sufficient for Parent to consummate the Merger and pay the fees and expenses of Parent and Merger Sub related to the transactions, subject to the terms and conditions set forth in the Equity Commitment Letter;
the scope of the representations, warranties and covenants being made by the Company and Parent;
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the requirement of Parent to pay the Company liquidated damages of $50,000,000 or 7.9% of the Company’s fully diluted equity value at the transaction value, if the Merger Agreement is terminated by the Company because of certain breaches by Parent or Merger Sub of the Merger Agreement or because Parent has not closed the Merger within two business days after the date the closing of the Merger should have occurred under the Merger Agreement;
the provision allowing the Board to change its recommendation and terminate the Merger Agreement prior to obtaining the Company Stockholder Approval in specified circumstances relating to a Superior Proposal, subject to Parent’s right to receive payment of the Termination Fee;
the provisions requiring the Company and Parent to use their respective reasonable best efforts to take or cause to be taken all actions, and do or cause to be done all things, necessary, proper or advisable on their respective parts under the Merger Agreement and applicable law to consummate and make effective the Merger and the other transactions contemplated by the Merger Agreement as promptly as practicable, including, among other things, obtaining required regulatory approvals for the Merger (including, if necessary in order to obtain such regulatory approvals, agreeing to divestitures of assets of the Company representing up to $40,000,000 in revenue in the fiscal year ended December 27, 2020);
the end date for satisfying the conditions to the Merger and the assessment and views of the Special Committee’s regulatory counsel of the likelihood of obtaining required regulatory approvals for a transaction with Parent prior to the end date; and
the other terms and conditions of the Merger Agreement, described in the section entitled “The Merger Agreement” beginning on page 68 of this proxy statement, which the Special Committee and the Board, after consulting with its legal counsel, considered to be reasonable and consistent with precedents it deemed relevant; and
the availability of rights under the DGCL to all holders of common stock who comply with all of the required procedures for perfecting appraisal rights under the DGCL to demand appraisal and receive payment of the fair value of their shares of common stock as determined by the Delaware Court of Chancery. See the section entitled “Appraisal Rights” beginning on page 95 for more information.
In the course of reaching its determinations and decisions and making the recommendations described above, the Special Committee and the Board also considered a number of factors relating to the procedural safeguards that the Special Committee and the Board both believe were and are present to ensure the fairness of the Merger and to permit the Special Committee to effectively represent the interests of the unaffiliated stockholders, which procedural safeguards the Board and the Special Committee each believed supported the Special Committee’s decision and provided assurance of the fairness of the Merger to such holders. These procedural safeguards, which are not intended to be exhaustive and are not necessarily listed in any relative order of importance, are discussed below:
that the Special Committee consists of three directors who are independent of the Company, Parent and any of its affiliates;
that the members of the Special Committee are disinterested with respect to the Merger;
that the Special Committee had exclusive authority to decide whether or not to proceed with the Merger, subject to the Board’s approval of the Merger Agreement as required by the DGCL;
that the Special Committee retained and was advised by its own legal and financial advisors;
that the Special Committee was empowered to, among other things: (i) review and evaluate the possible sale of the Company; (ii) identify, review and evaluate alternatives to the possible sale of the Company that may be available to the Company, including remaining as an independent company; (iii) if the Special Committee considers it is advisable or appropriate, negotiate the price, structure, form, terms and conditions of a sale of the Company or any alternative thereto and the form, terms and conditions of any definitive agreements in connection therewith; (iv) determine whether a sale of the Company or any alternative thereto is fair to, advisable and in the best interests of the Company and its unaffiliated
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stockholders; (v) engage, and obtain any necessary or desirable advice, assistance and opinions from financial advisors or other advisors, consultants and agents; and (vi) recommend to the full Board what action, if any, should be taken by the Company with respect to a sale of the Company or any alternative thereto;
that the Special Committee had no obligation to recommend any transaction, including a transaction with Parent, and that the Special Committee had the authority to reject any proposals made by Parent or any other person; and
that the Merger Agreement is subject to a “supermajority-of-the-minority” voting requirement, pursuant to which the consummation of the Merger is subject to a condition that the Merger Agreement will be approved and adopted by the affirmative vote of holders of two-thirds of the outstanding shares of the Company voting stock (other than shares “owned” by Parent or Merger Sub and their “affiliates” and “associates” (as each such term is defined in Section 203 of the DGCL)).
In reaching its determinations and recommendations described above, the Special Committee and the Board also considered the following potentially negative factors:
the fact that, on April 17, 2021, Mr. Bainum communicated to the Special Committee that he remained committed to pursuing a potential acquisition of the Company for $18.50 per share in cash, which is approximately 7% higher than the price per share which Alden has agreed to pay under the Merger Agreement, and with respect to which the Special Committee previously determined to waive certain restrictions under the Bainum Confidentiality Agreement to permit him to approach specified debt and equity financing sources about financing his offer, as well as the fact that, in the April 17 Letter, Mr. Bainum states that he intends to continue to have discussions with other potential equity financing sources as permitted under the Bainum Waiver, or as otherwise consented to by the Special Committee (and after the April 17 Letter, Mr. Bainum requested and received consent from the Special Committee to approach certain additional potential equity financing sources), that he remains confident that there is significant interest in joining his effort to acquire the Company at his proposed price, that he expects the necessary arrangements among one or more additional equity financing sources can be completed expeditiously, that he previously indicated that he believed all necessary due diligence and definitive documentation could be completed within two weeks, that he has substantially completed his necessary due diligence of the Company and that there remains “only a few issues” to be negotiated in the definitive transaction documentation for a Newslight Transaction;
the fact that, if the Merger is consummated, stockholders of the Company will receive the Merger consideration in cash and will no longer have the opportunity to participate in any future earnings or growth of the Company or the surviving company in the Merger, or benefit from any potential future appreciation in the value of the shares of common stock, including any value that could be achieved if the Company engages in future strategic or other transactions;
the potential negative effect of the public announcement and pendency of the Merger on the Company’s business and operations, stock price, relationships with third parties and employees and ability to attract key management and other personnel while the Merger is pending, as well as the potential adverse effects on the financial results of the Company;
the covenant in the Merger Agreement prohibiting the Company from soliciting other potential acquisition proposals, and restricting its ability to entertain potential acquisition proposals;
the fact that the Company would be obligated to pay a termination fee of $20,000,000 under certain circumstances, including the potential impact of such termination fee on the willingness of other potential acquirers to propose alternative transactions, although the Board believed the termination fee was reasonable and customary and would not preclude a serious and financially capable potential acquirer from submitting a proposal to acquire the Company following the announcement of the Merger;
the fact that under the terms of the Merger Agreement, the Company has agreed that it will carry on its business in the ordinary course consistent with past practice and, subject to specified exceptions, that
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the Company will not take a number of actions related to the conduct of its business without Parent’s prior written consent, and the possibility that these terms may limit the ability of the Company to pursue business opportunities that it would otherwise pursue;
the fact that Parent’s and Merger Sub’s obligation to consummate the Merger are subject to conditions, and the possibility that such conditions may not be satisfied, including as a result of events outside of the Company’s control, and the fact that, if the Merger is not consummated:
the Company’s directors, senior management and other employees will have expended extensive time and effort and will have experienced significant distractions from their work during the pendency of the Merger;
the Company may have abandoned or delayed certain projects and business opportunities;
the Company will have incurred significant transaction costs; and
the market’s perception of the Company’s prospects could be adversely affected;
the fact that if the Parent fails to complete the Merger as a result of a breach of the Merger Agreement, remedies may be limited under certain circumstances to a termination fee payable by Parent to the Company, which may be inadequate to compensate the Company for the damage caused, and, if available, any rights and remedies may be expensive and difficult to enforce through litigation, and the success of any action may be uncertain;
the fact that not all of the conditions to the completion of the Merger, including the receipt of necessary regulatory approvals, are within the parties’ control, and the fact that Patrick Soon-Shiong’s vote in favor of the transaction is required, based on his current ownership of the common stock, due to the requirement that holders of two-thirds of the outstanding shares (other than shares “owned” by Parent or Merger Sub and their “affiliates” and “associates” (as each such term is defined in Section 203 of the DGCL)) approve the Merger, and that any voting agreement from Dr. Soon-Shiong would have resulted in his vote not counting towards the required approval threshold due to the operation of Section 203 of the DGCL;
the fact that the receipt of the Merger consideration will generally be a taxable transaction to stockholders of the Company for U.S. federal income tax purposes;
the fact that certain of the Company’s executive officers and directors have financial interests in the Merger that may be different from or in addition to those of other stockholders, as more fully described in “The Merger—Interests of the Certain Persons in the Merger” beginning on page 64; and
the possibility that new sources of digital revenue may become available, including as a result of changes in law requiring payments to news providers for content posted on digital platforms.
In the course of reaching its decision to approve and declare advisable the Merger Agreement and the transactions contemplated thereby, including the Merger, the Special Committee and the Board did not consider the liquidation value of the Company, and did not believe it to be a relevant valuation methodology because the Special Committee and the Board considered the Company to be a viable, going concern, and considered determining a liquidation value to be impracticable given the significant execution risk involved in any breakup of the Company and that the Company will continue to operate its business following the Merger. The Special Committee and the Board also did not consider net book value as relevant valuation methodology because the Special Committee and the Board believed that net book value is not a material indicator of the value of the Company as a going concern because net book value does not take into account the prospects of the Company, market conditions, trends or business risks inherent in the industry in which the Company operates, but rather is indicative of historical costs. Further, the Special Committee and the Board were not aware of any firm offer for a merger, sale of all or a substantial part of the Company’s assets, or a purchase of a controlling amount of the Company securities having been received by the Company from any third party other than the proposals received from Parent and the other parties in connection with the transaction described in the section entitled “The Merger—Background of the Merger” beginning on page 35, in the two years preceding the signing of the Merger Agreement.
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The Special Committee and the Board did not seek to establish a pre-merger going concern value for the Company, and therefore no such value was considered by the Special Committee and the Board in making its fairness determination on behalf of the Company. Rather, the Special Committee and the Board believed that the financial analyses presented by Lazard, as more fully described below in the section entitled “The Merger—Opinion of Lazard Frères & Co. LLC” beginning on page 52, and which written opinion is attached in its entirety as Annex B hereto, on which the Special Committee and the Board relied, among other factors, in making its recommendation, were indicative of going concern values for the Company as it continues to operate its business.
The foregoing discussion of the factors considered by the Special Committee and the Board is not intended to be exhaustive, but rather includes the principal factors considered by the Special Committee and the Board. The Special Committee and the Board reached the conclusion to approve the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement in light of the various factors described above and other factors that the members of the Special Committee and the Board believed were appropriate. The Special Committee and the Board did not assign relative weights to the foregoing factors or determine that any factor was of particular importance. Rather, the Special Committee and the Board viewed its positions and recommendation as being based on the totality of information presented to and considered by it. In considering the factors discussed above, individual directors may have given different weights to different factors.
The explanation of the factors and reasoning set forth above contain forward-looking statements that should be read in conjunction with the section of this proxy statement entitled “Cautionary Statement Regarding Forward-Looking Statements” on page 22.
Opinion of Lazard Frères & Co. LLC
The Special Committee retained Lazard to provide it with financial advisory services and a fairness opinion in connection with the Merger. On February 15, 2021, at the meeting of the Special Committee held to evaluate the Merger, Lazard rendered its oral opinion to Special Committee, subsequently confirmed in writing by delivery of Lazard’s written opinion dated as of the same date, that, as of such date, and based upon and subject to the assumptions, procedures, factors, qualifications and limitations set forth in Lazard’s written opinion, the consideration to be paid to holders of common stock, other than excluded holders, in the Merger was fair, from a financial point of view, to holders of common stock, other than excluded holders. For purposes of this section, “excluded holders” means Parent, any of its affiliates or any Excluded Company Persons (as defined in the Merger Agreement) and holders of common stock who are entitled to and properly demand an appraisal of their shares of common stock.
The full text of Lazard’s written opinion to the Special Committee, dated February 16, 2021, which sets forth the assumptions made, procedures followed, factors considered and qualifications and limitations on the review undertaken by Lazard in connection with its opinion, is attached to this proxy statement as Annex B and is incorporated by reference herein in its entirety. The description of Lazard’s opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of the opinion. You are encouraged to read Lazard’s opinion and this section carefully and in their entirety.
Lazard’s engagement and its opinion were for the benefit of the Special Committee (in its capacity as such) and Lazard’s opinion was rendered to the Special Committee in connection with its evaluation of the Merger and addressed only the fairness as of the date of the opinion, from a financial point of view, to holders of common stock (other than the excluded holders) of the consideration to be paid to holders of common stock (other than the excluded holders) in the Merger. Lazard’s opinion was not intended to and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act with respect to the Merger or any matter relating thereto. Further, Lazard’s opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to us as of, the date of the opinion. The current volatility and disruption in the credit and financial markets relating to, among others, the COVID-19 pandemic, may or may not have an effect on the Company and Lazard did not express an opinion as to the effects of such volatility or such disruption on the Company. Lazard assumed no responsibility for updating or revising its opinion based on circumstances or events occurring after the date of the opinion. Lazard did not express any opinion as to the price at which shares of common stock may trade at any time subsequent to the announcement of the Merger. In addition, Lazard’s opinion did not address the relative merits of the Merger as
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compared to any other transaction or business strategy in which the Company might engage or the merits of the underlying decision by the Company to engage in the Merger.
In connection with its opinion, Lazard:
reviewed the financial terms and conditions of the Merger Agreement;
reviewed certain publicly available historical business and financial information relating to the Company;
reviewed various financial forecasts and other data provided to Lazard by the Company relating to the business of the Company, including a set of forecasts prepared by the management of Company at the request of the Special Committee consisting of a weighted average of 25% of Case A and 75% of Case B (the “Specified Case”) that is described in the section entitled “The Merger—Certain Company Forecasts” beginning on page 59;
held discussions with members of the senior management of the Company with respect to the business and prospects of Company;
reviewed public information with respect to certain other companies in lines of business Lazard believed to be generally relevant in evaluating the business of the Company;
reviewed the financial terms of certain business combinations involving companies in lines of business Lazard believed to be generally relevant in evaluating the business of the Company;
reviewed historical stock prices and trading volumes of common stock; and
conducted such other financial studies, analyses and investigations as Lazard deemed appropriate.
Lazard assumed and relied upon the accuracy and completeness of the foregoing information, without independent verification of such information. Lazard did not conduct any independent valuation or appraisal of any of the assets or liabilities (contingent or otherwise) of the Company or concerning the solvency or fair value of the Company, and Lazard was not furnished with any such valuation or appraisal. The Special Committee advised Lazard that, in the Special Committee’s judgment, the Specified Case best reflected the anticipated future financial performance of the Company; accordingly, at the direction of the Special Committee Lazard utilized and relied solely upon the Specified Case for purposes of its analyses in connection with its opinion. With respect to the Specified Case utilized in Lazard’s analyses, Lazard assumed, with the consent of the Special Committee, that the Specified Case was reasonably prepared on bases reflecting the best currently available estimates and judgments as to the future financial performance of the Company. Lazard further assumed no responsibility for and expressed no view as to any such forecasts or the assumptions on which they are based, including with respect to the potential effects of the COVID-19 pandemic on such forecasts or assumptions.
In rendering its opinion, Lazard assumed, with the consent of the Special Committee, that the Merger would be consummated on the terms described in the Merger Agreement, without any waiver or modification of any material terms or conditions. Lazard also assumed, with the consent of the Special Committee, that obtaining the necessary governmental, regulatory or third party approvals and consents for the Merger would not have an adverse effect on Company or the Merger. Lazard did not express any opinion as to any tax or other consequences that might result from the Merger, nor did Lazard’s opinion address any legal, tax, regulatory or accounting matters, as to which Lazard understood that the Company and the Special Committee had obtained such advice as it deemed necessary from qualified professionals. Lazard expressed no view or opinion as to any terms or other aspects (other than the merger consideration to the extent expressly specified in the opinion) of the Merger, including, without limitation, the form or structure of the Merger or any agreements or arrangements entered into in connection with, or contemplated by, the Merger. In addition, Lazard expressed no view or opinion as to the fairness of the amount or nature of, or any other aspects relating to, the compensation to any officers, directors or employees of any parties to the Merger, or class of such persons, relative to the merger consideration or otherwise.
In connection with rendering its opinion, Lazard performed certain financial analyses and reviews of certain information that Lazard deemed appropriate as summarized below under “The Merger—Summary of Lazard Financial Analyses,” and Lazard also performed certain additional financial analyses and reviews as summarized below under “The Merger—Other Analyses”. The summary of Lazard’s analyses and reviews provided below
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under “The Merger—Summary of Lazard Financial Analyses” and “The Merger—Other Analyses” is not a complete description of the analyses and reviews underlying Lazard’s opinion. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and review and the application of those methods to particular circumstances and, therefore, is not readily susceptible to partial analysis or summary description. Considering selected portions of these analyses and reviews or the summary contained in “The Merger—Summary of Lazard Financial Analyses” and “The Merger—Other Analyses”, without considering the analyses and reviews as a whole, could create an incomplete or misleading view of the analyses and reviews underlying Lazard’s opinion. In arriving at its opinion, Lazard considered the results of all of its analyses and reviews and did not attribute any particular weight to any particular analysis or review or application thereof considered by it; rather, Lazard made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses and reviews.
For purposes of its analyses and reviews, Lazard considered industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of the Company. No company, business or transaction used in Lazard’s analyses and reviews, as a comparison, is identical to the Company or the Merger, and an evaluation of the results of those analyses and reviews is not entirely mathematical. Rather, the analyses and reviews involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, businesses or transactions used in Lazard’s analyses and reviews. The estimates contained in Lazard’s analyses and reviews and the ranges of valuations resulting from any particular analysis or review are not necessarily indicative of actual results or values or predictive of future results or values, which may be significantly more or less favorable than those suggested by Lazard’s analyses and reviews. In addition, analyses and reviews relating to the value of companies, businesses or securities do not purport to be appraisals or to reflect the prices at which companies, businesses or securities actually may be sold. Accordingly, the estimates used in, and the results derived from, Lazard’s analyses and reviews are inherently subject to substantial uncertainty.
Lazard was instructed by the Special Committee to use the Specified Case as the basis for its analyses. For purposes of the analyses and reviews described below, as applicable, unless otherwise noted, (a) present value date means December 31, 2020 and (b) the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before February 12, 2021, and is not necessarily indicative of current market conditions.
Summary of Lazard Financial Analyses
The summary of the analyses and reviews provided below includes information presented in tabular format. In order to fully understand Lazard’s analyses and reviews, the tables must be read together with the full text of each summary. The tables alone do not constitute a complete description of Lazard’s analyses and reviews. Considering the data in the tables below without considering the full description of the analyses and reviews, including the methodologies and assumptions underlying the analyses and reviews, could create a misleading or incomplete view of Lazard’s analyses and reviews.
Selected Comparable Company Multiples Analysis
Lazard reviewed and analyzed certain financial information, valuation multiples and market trading data related to selected comparable publicly traded news media companies whose operations Lazard believed, based on its experience with companies in the news media industry and professional judgment, to be generally relevant in analyzing the Company’s operations for purposes of this analysis. Lazard compared such information of the selected comparable companies to the corresponding information for the Company.
The selected group of companies used in this analysis (the “Company comparable companies”), was as follows:
Gannett Co., Inc.
Lee Enterprises, Inc.
News Corporation
The New York Times Company
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Lazard selected the companies reviewed in this analysis because, among other things, the Company comparable companies operate businesses similar to the business of the Company. However, no selected company is identical to the Company. Accordingly, Lazard believes that purely quantitative analyses are not, in isolation, determinative in the context of the Merger and that qualitative judgments concerning differences between the business, financial and operating characteristics and prospects of the Company and the Company comparable companies that could affect the public trading values of each company also are relevant.
Lazard calculated and compared various financial multiples and ratios of each of the Company comparable companies, including, among other things, the ratio of each company’s enterprise value (“EV”), which Lazard calculated as the market capitalization of each company (based on each company’s closing share price as of February 12, 2021 and most recently publicly reported fully-diluted share count), plus debt, pension obligations, minority interest and preferred stock and less cash, cash equivalents and investments (each, as of February 12, 2021), to its calendar year 2019, last twelve-month period (“LTM”) and estimated 2020 and 2021 earnings before interest, taxes, depreciation and amortization (“EBITDA”), as adjusted for stock-based compensation (“Adjusted EBITDA”).
The EV and Adjusted EBITDA estimates for each of the Company comparable companies used by Lazard in its analysis were based on public filings, FactSet consensus estimates, publicly available Wall Street research and other publicly available information. The following table summarizes the results of this review:
 
EV / 2019
Adjusted
EBITDA
EV / LTM
Adjusted
EBITDA
EV / 2020E
Adjusted
EBITDA
EV / 2021E
Adjusted
EBITDA
Gannett Co., Inc.
4.4x
6.2x
6.1x
5.7x
Lee Enterprises, Inc.
4.1x
5.0x
5.5x
N/A
News Corporation
18.5x
17.4x
18.6x
16.0x
The New York Times Company
28.4x
28.2x
28.2x
26.0x
Lazard focused more on Gannett Co., Inc. and Lee Enterprises, Inc. given the differences between Tribune and The New York Times Company and News Corporation. The New York Times Company derives more of its revenue from subscriptions (versus Tribune) and more of that subscription revenue is digital. News Corporation has other non-newspaper businesses (e.g., digital real estate, video subscription and book publishing). As Lazard analyzed the comparable companies, it considered not just today’s trading levels, but also the historical multiple range (both Gannett Co., Inc. and Lee Enterprises, Inc. traded up significantly following December 30, 2020, the last full trading day prior to public disclosure of Alden Global Capital’s initial proposal.
Based on an analysis of the relevant metrics for each of the Company comparable companies, as well as its professional judgment and experience, Lazard applied an EV to Adjusted EBITDA multiple range of 3.0x to 5.0x to the Company’s estimated 2020 Adjusted EBITDA as provided to Lazard by the Company in the Specified Case (adjusting for $2,000,000 of pension expenses) of $69,000,000.
This analysis resulted in an implied price per share range for shares of common stock, as compared to the per share merger consideration, as set forth below.
Implied Price Per Share Range
Per Share Merger Consideration
$10.93 - $14.59
$17.25
Selected Precedent Transactions Multiples Analysis
Lazard reviewed and analyzed selected precedent merger and acquisition transactions involving companies in the news media industry it viewed, based on its experience and professional judgment, as generally relevant in analyzing the Company. In performing this analysis, Lazard reviewed certain financial information and transaction multiples relating to the companies involved in such selected transactions and compared such information to the corresponding information for the Company. Specifically, Lazard selected and reviewed 16 merger and acquisition transactions announced since December 2011 involving companies in the news media industry for which sufficient public information was available. This group of 16 merger and acquisition transactions excluded three transactions for global brands (i.e., The Washington Post, the Financial Times and the Los Angeles Times).
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To the extent publicly available, Lazard reviewed, among other things, the EV to EBITDA multiple of each of the target companies implied by the selected transactions by comparing the EV implied by the acquisition price to the relevant target company’s estimated EBITDA for the last 12 months before each transaction was announced. To the extent publicly available, Lazard also reviewed, among other things, the EV to revenue multiple of each of the target companies implied by the selected transactions by comparing the EV implied by the acquisition price to the relevant target company’s revenue during the last 12 months before each transaction was announced. Estimated EBITDA and revenue amounts for the target companies were based on public filings, FactSet consensus estimates, publicly available Wall Street research and other publicly available information. The following table summarizes the results of this review:
Announcement Date
Acquiror
Target
EV / LTM
EBITDA
EV / LTM
Revenue
December 2011
Berkshire Hathaway, Inc.
Omaha World-Herald
6.3x
N/A
December 2011
Halifax Media Holdings LLC
The New York Times Company
5.0x
0.6x
May 2012
Berkshire Hathaway, Inc.
Media General, Inc.
4.7x
0.4x
August 2013
John Henry
The Boston Globe
3.5x
0.2x
July 2014
The E.W. Scripps Company
Journal Communications
5.6x
1.2x
November 2014
New Media Investment Group Inc.
Halifax Media Group
4.6x
1.1x
February 2015
New Media Investment Group Inc.
Stephens Media, LLC
4.3x
0.7x
May 2015
Tribune Publishing Co.
U-T San Diego
N/A
N/A
October 2015
Gannett Co., Inc.
Journal Media Group, Inc.
5.5x
0.6x
December 2015
News + Media Capital Group LLC
Las Vegas Review-Journal
7.0x
N/A
November 2016
New Media Investment Group Inc.
Harris Enterprises, Inc.
4.0x
N/A
August 2017
New Media Investment Group Inc.
Morris Publishing Group, LLC
4.0x
N/A
August 2019
New Media Investment Group Inc.
Gannett Co., Inc.
5.5x
0.6x
November 2019
Alden Global Capital LLC
Tribune Publishing Co.
(Michael Ferro 25% Stake)
4.4x
0.4x
January 2020
Lee Enterprises, Inc.
BH Media Group
3.6x
0.4x
July 2020
Chatham Asset Management, LLC
The McClatchy Company
3.4x
0.5x
Based on an analysis of the relevant metrics for each of the transactions, as well as its professional judgment and experience, Lazard applied an EV to EBITDA multiple range of 3.5x to 5.5x to the Company’s estimated 2020 Adjusted EBITDA as provided to Lazard by the Company in the Specified Case (adjusting for $2,000,000 of pension expenses) of $69,000,000.
This analysis resulted in the following implied price per share ranges for shares of common stock, as compared to the per share merger consideration, as set forth below.
Implied Price Per Share Range
Per Share Merger Consideration
$11.85 - $15.50
$17.25
Discounted Cash Flow Analysis – Specified Case
Lazard performed a discounted cash flow analysis of the Company based on the Specified Case. A discounted cash flow analysis is a valuation methodology used to derive a valuation of a company by calculating the present value of its estimated future cash flows. “Future cash flows” refers to projected unlevered free cash flows of a company. “Present value” refers to the current value of future cash flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, capital structure, income taxes, expected returns and other appropriate factors. Lazard calculated the discounted cash flow value for the Company as the sum of the net present value of each of:
the estimated future cash flows that the Company is expected to generate for each of the fiscal years 2021 through 2023; and
the estimated value of the Company at the end of 2023, or the “terminal value”.
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The estimated future cash flows were derived from data provided by the Company in the Specified Case, as the Specified Case did not itself provide an explicit calculation of estimated unlevered free cash flows. The following table sets forth the estimated unlevered free cash flow for each of fiscal years 2021 through 2023, as used by Lazard for purposes of its discounted cash flow analysis.
Fiscal Year Ending December 31,
2021E
2022E
2023E
(in millions)
$49
$93(1)
$57
(1)
Includes net proceeds from the divestiture of certain real estate and IP assets.
For its discounted cash flow calculations, Lazard applied discount rates ranging from 9.0% to 11.0%. Such discount rates were based on Lazard’s judgment and analysis of the estimated range of the Company’s weighted average cost of capital. In calculating the estimated range of weighted average cost of capital for the Company, Lazard used a weighted-average of the estimated cost of equity capital and the after-tax cost of debt ranges, assuming a range of equity and debt levels in the capital structure. To calculate the estimated cost of equity capital, Lazard used the Capital Asset Pricing Model, which uses a “beta” metric based on the predicted unlevered beta for the Company (1.00 to 1.20), a risk-free rate of return (2.00% based on then-current prevailing yield on the 30-year U.S. Treasury debt) and a market risk premium (7.2%).
The terminal value of the Company was calculated applying various exit Adjusted EBITDA multiples ranging from 3.0x to 5.0x to the Company’s projected terminal year Adjusted EBITDA. The exit Adjusted EBITDA multiples were selected by Lazard using its professional judgment and expertise. The range of exit Adjusted EBITDA multiples was consistent with the historic and current EBITDA multiples calculated for the Company as well as the historic and current Adjusted EBITDA multiples of the Company comparable companies.
Lazard took the sum of the present value ranges for the Company’s future cash flows and terminal value to calculate a range of implied enterprise values, making adjustments for the present value of pension liabilities and adjusted expenses (such as restructuring charges) at the terminal value date. Lazard then subtracted the net debt of the Company and calculated a range of implied per share equity values for the common stock. Lazard reviewed the implied price per share range for shares of common stock as compared to the per share merger consideration as set forth below.
Implied Price Per Share Range
Per Share Merger Consideration
$15.10 - $19.27
$17.25
Other Analyses
The analyses and data described below were presented to the Special Committee for informational purposes only and did not provide the basis for, and were not otherwise material to, the rendering of Lazard’s opinion.
Discounted Cash Flow Analysis – Cases A, B and C
Utilizing each of Cases A, B and C, Lazard performed a discounted cash flow analysis to calculate a range of implied equity values for the Company using the same procedures and methodologies summarized above under “—Summary of Lazard Financial Analyses—Discounted Cash Flow Analysis – Specified Case.” From this analysis, Lazard estimated an implied price per share range for shares of common stock, as compared to the per share merger consideration as set forth below.
Implied Price Per Share Range
Per Share Merger
Consideration
Case A
Case B
Case C
$16.80 - $21.90
$14.52 - $18.38
$12.80 - $15.79
$17.25
The Special Committee advised Lazard that, in the Special Committee’s judgment, the Specified Case best reflected the anticipated future financial performance of the Company; accordingly, at the direction of the Special Committee, Lazard utilized and relied solely upon the Specified Case for purposes of its analyses in connection with its opinion. As a result, the discounted cash flow analyses utilizing Cases A, B and C did not provide the basis for, and were not material to, the rendering of Lazard’s opinion.
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Historic Tribune High/Low Trading Prices
Lazard reviewed the range of trading prices of shares of common stock for the 52 weeks ended on December 30, 2020, the last full trading day prior to public disclosure of Alden Global Capital’s initial proposal to acquire the Company. Lazard observed that, during such period, the closing share price of shares of common stock ranged from $5.50 per share to $13.23 per share, as compared to the merger consideration of $17.25 per share of common stock. The closing share prices of shares of common stock for the period from December 31, 2020 to February 12, 2021, the last full trading day before the execution of the Merger Agreement, ranged from $13.70 per share to $15.95 per share.
Research Analyst Price Targets
Lazard reviewed selected equity analyst price targets based on publicly available Wall Street equity research reports published (a) prior to December 30, 2020, the last full trading day prior to public disclosure of Alden Global Capital’s initial proposal to acquire the Company, which ranged from $15.00 to $17.50 per share of common stock, and (b) after December 30, 2020, which ranged from $16.00 to $20.75, in each case representing forward price targets (not discounted back). Lazard observed such range of price targets as compared to the merger consideration of $17.25 per share of common stock.
Miscellaneous
In connection with Lazard’s services as financial advisor to the Special Committee with respect to the Merger, the Company agreed to pay Lazard a fee of approximately $11,000,000, of which $1,500,000 became payable upon the rendering of Lazard’s opinion and the remainder is payable upon consummation of the Merger. The Special Committee has also agreed to reimburse Lazard for certain expenses incurred in connection with Lazard’s engagement and to indemnify Lazard and certain related persons under certain circumstances against various liabilities that may arise from or be related to Lazard’s engagement, including certain liabilities under United States federal securities laws.
Lazard has in the past provided certain investment banking services to the Company and a prior special committee of the Company’s Board of Directors, having provided advice with respect to a variety of matters, including potential sale transactions, for which Lazard received no fees during the past two years. Except as described in this proxy statement, the financial advisory business of Lazard has not otherwise received fees for providing services to the Company, Parent, or any entity known to be an affiliate of the Company or Parent in the two years immediately preceding the date of this proxy statement.
Lazard, as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, leveraged buyouts, and valuations for estate, corporate and other purposes. In addition, in the ordinary course, Lazard and its affiliates and employees may trade securities of the Company and certain affiliates of the Company or Parent for their own accounts and for the accounts of their customers, may at any time hold a long or short position in such securities, and may also trade and hold securities on behalf of the Company and certain affiliates of the Company or Parent. The issuance of Lazard’s opinion was approved by the opinion committee of Lazard.
Lazard is an internationally recognized investment banking firm providing a full range of financial advisory and other services. Lazard was selected to act as investment banker to the Special Committee because of its qualifications, expertise and reputation in investment banking and mergers and acquisitions generally and in the news media industry specifically, as well as its familiarity with the business of the Company.
The Special Committee and Parent determined that the Merger Consideration of $17.25 in cash per share of common stock to be paid to the holders of common stock (other than the excluded holders) in the Merger, through arm’s-length negotiations, and the Special Committee unanimously approved such consideration. Lazard did not recommend any specific consideration to the Special Committee or any other person or indicate that any given consideration constituted the only appropriate consideration for the Merger. Lazard’s opinion was one of many factors considered by the Special Committee, as discussed further in “The Merger—Reasons for the Merger; Recommendation of the Company’s Special Committee and Board” beginning on page 46.
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Certain Company Forecasts
The Company does not, as a matter of course, publicly disclose long-term financial projections as to future revenues, earnings or other results due to, among other reasons, the uncertainty, unpredictability and subjectivity of the underlying assumptions and estimates. However, in the ordinary course of business, the Company’s management prepares, solely for internal use, non-public, financial forecasts based on management’s estimate of the Company’s anticipated future operations.
A summary of certain projections prepared by the Company or at the direction of the Special Committee (the “Company Projections”) or by Alden and its affiliates (the “Alden Projections”, and together with the Company Projections, the “Projections”), respectively, is being included in this proxy statement not to influence the decision of our stockholders as to whether to vote for or against the Merger Proposal, but rather because these Projections were made available to the Special Committee, its advisors and, in some cases, Alden. The inclusion of this information should not be regarded as an indication that the Special Committee, its advisors or any other person considered, or now considers, any of the Projections to be material or to be a reliable prediction of actual future results, and none of the Projections should be relied upon as such. All of the Projections are subjective in many respects. While all of the Company Projections were prepared in good faith, there can be no assurance that any of the Company Projections will be realized or that actual results will not be significantly higher or lower than forecasted. All of the Projections cover multiple periods, and such information by its nature becomes subject to greater uncertainty with each successive period. As a result, the inclusion of the Projections in this proxy statement should not be relied on as necessarily predictive of actual future events.
None of the Projections were prepared with a view toward public disclosure or toward complying with generally accepted accounting principles (“GAAP”), the published guidelines of the SEC regarding projections or the use of non-GAAP measures, or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Neither the Company’s independent registered public accounting firm nor any other independent accountants have compiled, examined or performed any procedures with respect to any of the Projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by the Company may not be comparable to similarly titled amounts used by other companies. Financial measures provided to a financial advisor are excluded from the definition of non-GAAP financial measures and, therefore, are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure.
Additionally, although the Projections presented below are presented with numerical specificity, they are not facts. The Projections were based on numerous variables and assumptions that were deemed to be reasonable as of the date when the applicable Projections were finalized. Such assumptions are inherently uncertain, are subject to change and are often beyond the control of the Company. Important factors that may affect actual results and cause the Projections not to be achieved include, but are not limited to, risks and uncertainties relating to the Company’s business (including its ability to achieve strategic goals, objectives and targets and its ability to retain key employees), industry performance, the legal and regulatory environment, global political conditions, the financial markets, the newspaper industry, general business and economic conditions and other factors described or referenced in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 22. In addition, the Projections were based solely upon information available at the time of their preparation and do not reflect updated prospects for the Company’s business, changes in general business or economic conditions or any other transaction or event that has occurred or that may occur and that was not anticipated at the time such Projections were prepared, including, without limitation, the restrictions on the conduct of the Company’s business imposed by the terms of the Merger Agreement. The Company has not prepared revised forecasts in connection with the Merger to take into account these or any other variables that have changed since the date on which any such Projections were finalized. There can be no assurance that the Projections will be realized or that the Company’s future financial results will not materially vary from the Projections.
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Company Projections
2021 Strategic Plan
In December 2020, the Company management prepared its ordinary course strategic plan and certain unaudited financial forecasts relating to the Company on a stand-alone basis for fiscal year 2021 (the “2021 Strategic Plan”), which were reviewed and approved by the Board as part of its ordinary course annual strategic planning review. The 2021 Strategic Plan was also provided to Lazard for its review in connection with the Merger. In addition, the Special Committee reviewed and considered the 2021 Strategic Plan at the meetings of the Special Committee on December 30, 2020, February 11, 2021 and February 15, 2021.
The 2021 Strategic Plan reflects numerous assumptions and estimates that the Company made in good faith, including, without limitation:
a continuation of declining print revenue streams (print advertising, print subscriptions, print single copy sales and commercial print/delivery revenue) with 2021 versus 2020 declining at more than 12%;
a 16.7% increase in digital revenues (both digital advertising and digital subscriptions);
operating expenses assumed a full year benefit of a significant amount of cost reduction initiatives throughout 2020 as well as ongoing expense discipline; and
unlevered free cash flow assumed growth in Adjusted EBITDA, offset by income tax payments as well as lease buy-outs.
The following table presents a summary of the 2021 Strategic Plan:
 
Year Ending December 31,
2021
 
(dollar in millions rounded to
the nearest million)
Company revenue(1)
$695
Company adjusted EBITDA(2)
$107
Company unlevered free cash flow(3)
$49
(1)
Company revenue means the consolidated revenue of the Company and its subsidiaries.
(2)
Company Adjusted EBITDA means the earnings before interest, taxes, depreciation and amortization (but after stock-based compensation expense) adjusted for extraordinary expenses that are not reflective of the Company’s core operating results over time (such as restructuring costs (including the employee voluntary separation program and gain/losses on employee benefit plan terminations), impairment charges, litigation or dispute settlement charges or gain/loss on equity investments, premiums on stock buybacks and transaction related costs).
(3)
Company unlevered free cash flow means Adjusted EBITDA (i) less taxes, capital expenditures, pension contributions (net of taxes) and extraordinary expenses (such as restructuring charges), and (ii) plus any divestiture proceeds (net of taxes), changes in working capital and stock-based compensation (adjusted for unvested shares already in the fully diluted share count).
Updated 2021 Strategic Plan
In early April 2021, the Company management prepared an updated strategic plan and certain unaudited financial forecasts related to the Company on a stand-alone basis for the fiscal year 2021 (the “Updated 2021 Strategic Plan”), which reflected the Company’s actual financial performance for the first quarter of 2021 and updated cash balance schedule. The Special Committee reviewed and considered the Updated 2021 Strategic Plan at the meeting of the Special Committee on April 6, 2021, and the Updated 2021 Strategic Plan was provided to Alden and Newslight on April 15, 2021.
The Updated 2021 Strategic Plan reflects numerous assumptions and estimates that the Company made in good faith including, without limitation:
increased revenue driven by new commercial delivery agreement;
cost savings initiatives realized in the first quarter of 2021 continue throughout the rest of the year;
operating expense initiatives with recurring effects expected to be realized earlier than expected; and
unlevered free cash flow assumed growth in Adjusted EBITDA, offset by income tax payments as well as lease buy-outs.
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The following table presents a summary of the Updated 2021 Strategic Plan:
 
Year Ending December 31,
2021
 
(dollar in millions rounded to
the nearest million)
Company revenue(1)
$697
Company adjusted EBITDA(2)
$112
Company unlevered free cash flow(3)
$70
(1)
Company revenue means the consolidated revenue of the Company and its subsidiaries.
(2)
Company Adjusted EBITDA means the earnings before interest, taxes, depreciation and amortization (but after stock-based compensation expense) adjusted for extraordinary expenses that are not reflective of the Company’s core operating results over time (such as restructuring costs (including the employee voluntary separation program and gain/losses on employee benefit plan terminations), impairment charges, litigation or dispute settlement charges or gain/loss on equity investments, premiums on stock buybacks and transaction related costs).
(3)
Company unlevered free cash flow means Adjusted EBITDA (i) less taxes, capital expenditures, pension contributions (net of taxes) and extraordinary expenses (such as restructuring charges), and (ii) plus any divestiture proceeds (net of taxes), changes in working capital and stock-based compensation (adjusted for unvested shares already in the fully diluted share count).
Case Projections for 2022-2023
In December 2020, the Company management prepared certain unaudited financial forecasts and unaudited financial extrapolations for the Company’s fiscal years 2022 and 2023 using two scenarios for the Company referred to as “Case A” and “Case B”. Case A and Case B were provided by the Company to Lazard on December 23, 2020, at the direction of the Special Committee, for Lazard’s use and reliance in connection with certain of its preliminary financial analyses in connection with the Merger. At the direction of the Special Committee, “Case C” was prepared (it assumed that the margins in 2023 decline to Gannett levels), which Lazard used at the direction of the Special Committee for certain of its preliminary financial analyses in connection with the Merger. The Special Committee reviewed and considered Case A, Case B and Case C at the meetings of the Special Committee on December 30, 2020, February 11, 2021 and February 15, 2021.
At its meeting on February 11, 2021, in connection with the Special Committee’s ongoing consideration of the Merger, the Special Committee directed Lazard to use and rely on a specified case consisting of a weighted average of 25% of Case A and 75% of Case B (the “Specified Case” and, together with Case A, Case B and Case C, the “Case Projections”) for purposes of its financial analyses in connection with its fairness opinion. The Special Committee advised Lazard that, in the Special Committee’s judgment, the Specified Case best reflected the anticipated future financial performance of the Company. Accordingly, at the direction of the Special Committee, Lazard utilized and relied solely upon the 2021 Strategic Plan and the Specified Case for purposes of its financial analyses in connection with its opinion that is described in the section entitled “The Merger—Opinion of Lazard Frères & Co. LLC” beginning on page 52. The Special Committee reviewed and considered the Specified Case at the meetings of the Special Committee on February 11, 2021 and February 15, 2021.
Each of the Case Projections reflects certain forecasts related to the Company’s projected unlevered free cash flow, capex, revenue and EBITDA, among other things, that were based on numerous assumptions and estimates made in good faith. For purposes of preparing the Case Projections, it was assumed, among other things, that:
with respect to Case A, (i) total revenues continue to decline, including revenues generated from print advertising, print circulation, direct mail and print distribution, (ii) digital circulation more than doubles between 2020 and 2023 based on subscriber growth and better churn management, (iii) revenues generated from digital content agencies generally hold flat through 2023, and (iv) margins rise to 18.1% by 2023, driven primarily by distribution outsourcing and certain reductions in occupancy expense;
with respect to Case B, (i) 2022 revenues are 1.2% lower than those in Case A, with roughly half of such revenue reductions coming from advertising and the other revenue reductions from circulation and other revenues, (ii) 2023 revenues are 4.0% lower than those in Case A, with approximately 50% of such revenue reductions coming from advertising, particularly print advertising, and the remaining 50% split roughly evenly between circulation and other revenues, and (iii) margins decline to approximately 14.3% by 2023, consistent with comparable margin levels reported by certain of the Company’s competitors; and
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with respect to Case C, (i) 2022 and 2023 revenues equal those in Case B, and (ii) margins decline to 13.0% in 2022 and to 11.0% in 2023, respectively, based on comparable margin levels reported by certain of the Company’s competitors.
The following table presents a summary of the Case Projections:
 
Years Ending December 31,
 
Case A
Case B
Case C
Specified Case
 
2022
2023
2022
2023
2022
2023
2022
2023
 
(dollars in millions rounded to the nearest million)
Company revenue(1)
$653
$622
$645
$597
$645
$597
$647
$603
Company adjusted EBITDA(2)
$110
$113
$102
$85
$84
$66
$104
$92
Company unlevered free cash flow(3)(4)
$97
$71
$92
$53
$79
$38
$93
$57
(1)
Company revenue means the consolidated revenue of the Company and its subsidiaries.
(2)
Company Adjusted EBITDA means the earnings before interest, taxes, depreciation and amortization (but after stock-based compensation expense) adjusted for extraordinary expenses that are not reflective of the Company’s core operating results over time (such as restructuring costs (including the employee voluntary separation program and gain/losses on employee benefit plan terminations), impairment charges, litigation or dispute settlement charges or gain/loss on equity investments, premiums on stock buybacks and transaction related costs).
(3)
Company unlevered free cash flow means Adjusted EBITDA (i) less taxes, capital expenditures, pension contributions (net of taxes) and extraordinary expenses (such as restructuring charges), and (ii) plus any divestiture proceeds (net of taxes), changes in working capital and stock-based compensation (adjusted for unvested shares already in the fully diluted share count).
(4)
Includes net proceeds from the divestiture of certain real estate and IP assets.
Financing of the Merger
Equity Commitment Letter
The obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition.
We anticipate that the total amount of funds necessary to pay the aggregate Merger Consideration payable to the Company’s stockholders in connection with the Merger is approximately $454,000,000 in cash.
In connection with the financing of the Merger, the Alden Funds and the Company have entered into an Equity Commitment Letter, pursuant to which the Alden Funds have agreed to provide Parent with an aggregate equity commitment of $375,000,000 in cash, which will be available, together with cash of the Company on hand as of the closing of the Merger, (i) to fund the aggregate Merger Consideration payable to the Company’s stockholders, (ii) pay the fees, expenses and other amounts required to be paid to the Company by Parent in connection with the closing of the Merger and (iii) pay any other out-of-pocket costs of Parent arising in connection with the consummation of the Merger, in each case, subject to the terms and conditions provided in the Merger Agreement.
The Company is a third-party beneficiary of the Equity Commitment Letter and has the right to specifically enforce the Alden Funds’ obligations thereunder, if the conditions to Parent’s obligations to consummate the Merger are satisfied or waived, and the Merger is consummated substantially simultaneously. The Equity Commitment Letter may not be waived, amended or modified except by a written instrument signed by the Alden Funds, Parent and the Company.
Notwithstanding the Equity Commitment Letter, Parent has the right to seek to finance a portion or all of the $375,000,000 in cash with the proceeds from debt and/or equity financing from its affiliates or third parties.
Limited Guarantee
Pursuant to the Limited Guarantee, the Alden Funds have agreed to guarantee the due, punctual and complete payment of all of the liabilities and obligations of Parent under the Merger Agreement to: (i) pay the Liquidated Damages Amount to the Company if and when required to be paid by Parent in accordance with the Merger Agreement, (ii) reimburse the reasonable and documented out-of-pocket fees, costs and expenses incurred by the Company and its subsidiaries in connection with the cooperation of the Company and its subsidiaries with the potential arrangement of any potential debt financing and potential sale of the business, assets and properties of
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the Company and its subsidiaries related to The Baltimore Sun newspaper to Mr. Bainum and (iii) indemnify each of the Company, its subsidiaries and their respective representatives in connection with any losses, damages, claims, costs or expenses actually suffered or incurred by any of them in connection with the cooperation contemplated by clause (ii) (the obligations set forth in clauses (i)-(iii), the “Guaranteed Obligations”).
The Guaranteed Obligations of the Alden Funds under the Limited Guarantee are subject to an aggregate cap equal to $50,000,000, plus the reasonable and documented out-of-pocket costs, including reasonable attorney’s fees, incurred by the Company in the event that an Alden Fund fails to promptly pay or cause to be paid any amount properly due and payable pursuant to the Limited Guarantee, and in order to obtain such payment, the Company commences a suit, action or claim against one or both Alden Funds and is the prevailing party in such action.
Subject to specified exceptions, the Limited Guarantee will terminate upon the earliest of:
the closing of the Merger;
the payment of the Guaranteed Obligations;
the valid termination of the Merger Agreement in any circumstances other than pursuant to which an Alden Fund may be required to make payment of any Guaranteed Obligation;
the date that is 60 days after the termination of the Merger Agreement if the Merger Agreement is terminated in any of the circumstances pursuant to which any Alden Fund may be required pursuant to the terms and subject to the conditions of the Limited Guarantee to make a payment of the Guaranteed Obligations if (i) by such date the Company has delivered a written notice with respect to such Guaranteed Obligation during such 60-day period and (ii) the Company has commenced a legal proceeding during such 60-day period against the Alden Funds alleging that Parent is liable for payment of such Guaranteed Obligation, in which case the Limited Guarantee will survive solely with respect to amounts so alleged to be owing, subject to certain restrictions contained in the Limited Guarantee; and
termination of the Limited Guarantee by mutual written agreement among each of the Alden Funds and the Company.
Closing and Effective Time of the Merger
Assuming receipt of required regulatory approvals and timely satisfaction of other closing conditions, including the approval by our stockholders of the Merger Proposal, we currently expect the closing of the Merger to occur in the second quarter of 2021.
The Effective Time will occur upon a certificate of merger, in such appropriate form as is determined by the parties and in accordance with the DGCL, having been duly filed with and accepted by the Secretary of State of the State of Delaware (or at such later time as the Company and Parent may agree in writing and specified in the certificate of merger).
Payment of Merger Consideration and Surrender of Stock Certificates
Prior to the Effective Time, Parent will appoint an exchange agent for the purpose of exchanging for the Merger Consideration certificates representing shares of our common stock, which we refer to as “stock certificates”. Prior to the Effective Time, Parent will make available, or cause to be made available, the Merger Consideration to the exchange agent.
Promptly after the Effective Time, Parent will send, or will cause the exchange agent to send, to each holder of shares of our common stock immediately prior to the Effective Time a letter of transmittal and instructions for use in such exchange.
You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the exchange agent without a letter of transmittal.
After the Effective Time, there will be no further registration of transfers of shares of our common stock outstanding immediately prior to the Effective Time.
If any cash deposited with the exchange agent remains unclaimed for one year following the Effective Time, such cash will be delivered to Parent or, at the request of Parent, a subsidiary of Parent. Thereafter, holders of
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our common stock who have not exchanged their shares of the Merger Consideration will be entitled to look only to Parent as a general creditor for payment of the Merger Consideration with respect to such shares, without any interest.
If you have lost a stock certificate, or if it has been stolen or destroyed, then before you will be entitled to receive the Merger Consideration, you will be required to provide an affidavit of the loss, theft or destruction, reasonably acceptable to Parent, and, if required by Parent or the surviving corporation, post a bond in a reasonable amount as an indemnity against any claim that may be made against Parent or the surviving corporation with respect to such certificate. These procedures will be described in the letter of transmittal and related instructions that you will receive, which you should read carefully and in their entirety.
Interests of Certain Persons in the Merger
In considering the recommendation of the Board that you vote to adopt the Merger Agreement, you should be aware that aside from their interests as Company stockholders, the Company’s directors and executive officers have interests in the Merger that may be different from, or in addition to, those of Company stockholders generally. These interests include:
Under the Merger Agreement, in connection with the closing of the Merger, (i) each option to purchase shares of common stock (each, a “Company Option”) that is outstanding immediately prior to the Effective Time, whether or not vested, will automatically become fully vested and canceled and converted into the right to receive an amount in cash, equal to the product of (x) the amount by which the Merger Consideration exceeds the applicable exercise price per share of Company common stock subject to such Company Option, and (y) the number of shares of Company common stock issuable in respect of such fully vested Company Option as of immediately prior to the Effective Time and, (ii) each restricted stock unit entitling the holder to delivery of shares of common stock, subject to satisfaction of vesting or other forfeiture conditions (each, a “Company RSU”) that is outstanding immediately prior to the Effective Time, whether or not vested, will automatically be canceled and converted into the right to receive an amount in cash, equal to the product of (x) the Merger Consideration and (y) the number of shares of Company common stock underlying such Company RSU (and then adding, if applicable, the value of any dividend-equivalent rights accrued with respect to such Company RSU as of the Effective Time).
Pursuant to Mr. Jimenez’s employment agreement, which was amended on February 15, 2021 to extend the term of the agreement, which would otherwise expire on April 3, 2021, Mr. Jimenez is entitled to severance benefits in the event that his employment with the Company is terminated for any reason other than death, disability, for “cause” or if he resigns for “good reason” (each as defined in his employment agreement).
Pursuant to Mr. Lavey’s employment agreement, Mr. Lavey is entitled to severance benefits in the event that his employment with the Company is terminated for any reason other than death, disability, for “cause” or if he resigns for “good reason” (each as defined in his employment agreement).
The Company’s directors and officers will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability insurance policies pursuant to the Merger Agreement (as described in the section entitled “The Merger Agreement—Indemnification; Directors’ and Officers’ Insurance” beginning on page 85).
Parent and Merger Sub were formed by the Alden Funds and the Alden Funds collectively own 31.6% of the issued and outstanding common stock of the Company. Pursuant to the A&R Cooperation Agreement, each of Mr. Minnetian, Ms. Needleman and Mr. Smith was appointed to the Board. Mr. Smith is one of the founding members of Alden Global Capital and serves as its Chief of Investments. As a result of such interest in the Merger, Mr. Minnetian, Ms. Needleman and Mr. Smith did not attend or vote at the Board meeting held regarding the Merger and alternatives thereto.
Members of the Board were aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Merger, and in recommending to our stockholders that the Merger Agreement be adopted. For additional information, see the sections entitled “The Merger—Background of the Merger” beginning on page 35 and “The Merger—Reasons for the Merger; Recommendation of the Company’s Special Committee and Board” beginning on page 46. These interests are described in more detail below, and
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certain of them are quantified in the narrative and in the section entitled “Proposal 2—Merger Compensation Proposal—Golden Parachute Compensation” beginning on page 87.
Non-Employee Director Compensation
In accordance with the Merger Agreement, the Company may compensate its non-employee directors in the ordinary course of business consistent with past practice (including with respect to grants of equity-based awards for fiscal year 2021).
Further, the Company’s non-employee directors may elect to convert all or a portion of their annual cash retainers into Company RSUs. The Company’s non-employee directors may also elect to defer receipt of all or part of the restricted stock otherwise paid to them and any such conversion or deferral results in a deferred unit credited to a deferred stock account. Each deferred unit credited to such an account represents an unfunded obligation of the Company to issue a share of common stock on a future payment date.
The Special Committee consists of three independent members of the Board: Carol Crenshaw, Philip G. Franklin and Richard Reck. The Special Committee appointed Philip G. Franklin as the Chair of the Special Committee. In consideration of the expected time and effort required of the members of the Special Committee in connection with evaluating the potential merger or any related transaction, the Special Committee determined that each member of the Special Committee is entitled to receive compensation of $10,000, and that the Chair of the Special Committee is entitled to $20,000. The fees are not dependent on the closing of the Merger or on the Special Committee’s or the Board’s approval of, or recommendations with respect to, the Merger.
New Management Arrangements
As of the date of this proxy statement, except as set forth above, there are no other new employment, equity contribution or other agreements between any Company executive officer or director, on the one hand, and the Company or Parent, on the other hand.
Indemnification and Insurance
Pursuant to the terms of the Merger Agreement, the Company’s directors and officers will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability insurance policies. See the section entitled “The Merger Agreement—Indemnification; Directors’ and Officers’ Insurance” beginning on page 85 for a description of such ongoing indemnification and coverage obligations.
Material U.S. Federal Income Tax Consequences of the Merger
The following is a general discussion of the material U.S. federal income tax consequences of the Merger to U.S. holders (as defined below) of common stock whose shares are exchanged for cash pursuant to the Merger. This discussion does not address U.S. federal income tax consequences with respect to holders other than U.S. holders. If you are not a U.S. holder, the Merger will generally not result in tax to you under U.S. federal income tax laws unless you have certain connections to the United States, and the Company encourages you to seek tax advice regarding such matters.
This discussion is based on the provisions of the Internal Revenue Code of 1986 (the “IRC”), applicable U.S. Treasury Regulations promulgated thereunder, judicial opinions and administrative rulings and published positions of the Internal Revenue Service (the “IRS”), each as of the date hereof. These authorities are subject to change or differing interpretations, possibly on a retroactive basis, and any such change or interpretation could affect the accuracy of the statements and conclusions set forth in this discussion. This discussion is for general information purposes only and does not purport to be a complete analysis of all potential tax consequences. This discussion does not address any tax consequences arising under the Medicare contribution tax or state, local or foreign tax laws or U.S. federal tax laws other than those pertaining to the U.S. federal income tax. This discussion is not binding on the IRS or the courts and, therefore, could be subject to challenge, which could be sustained. No ruling is intended to be sought from the IRS with respect to the Merger.
For purposes of this discussion, the term “U.S. holder” means a beneficial owner of common stock that is for U.S. federal income tax purposes:
a citizen or individual resident of the United States;
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a corporation, or other entity classified as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;
a trust if (i) a court within the United States is able to exercise primary supervision over the trust’s administration, and one or more U.S. persons are authorized to control all substantial decisions of the trust or (ii) such trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or
an estate the income of which is subject to U.S. federal income tax regardless of its source.
This discussion applies only to U.S. holders of shares of common stock who hold such shares as capital assets within the meaning of Section 1221 of the IRC (generally, property held for investment). Further, this discussion does not purport to consider all aspects of U.S. federal income taxation that may be relevant to a U.S. holder in light of its particular circumstances, or that may apply to U.S. holders subject to special treatment under U.S. federal income tax laws (including, for example, insurance companies, dealers or brokers in securities or foreign currencies, traders in securities who elect the mark-to-market method of accounting, holders subject to the alternative minimum tax, U.S. holders that have a functional currency other than the U.S. dollar, tax-exempt organizations, governmental agencies or instrumentalities, tax-qualified retirement plans, banks and other financial institutions, mutual funds, certain former citizens or former long-term residents of the United States, partnerships (or other entities or arrangements treated as partnerships for U.S. federal income tax purposes), S corporations, or other pass-through entities or investors in such partnerships, S corporations or other pass-through entities, real estate investment trusts, regulated investment companies, U.S. holders who hold shares of common stock as part of a hedge, straddle, constructive sale, conversion or other integrated transaction, U.S. holders who will hold (actually or constructively) an equity interest in Parent immediately after the Merger, and U.S. holders who acquired their shares of common stock through the exercise of employee stock options or other compensation arrangements). This discussion also does not address the U.S. federal income tax consequences to holders of shares of common stock who exercise appraisal rights in connection with the Merger under the DGCL.
If a partnership (including for this purpose any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of common stock, the tax treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership. If you are, for U.S. federal income tax purposes, a partner in a partnership holding shares of common stock, you should consult your tax advisor.
This summary of material U.S. federal income tax consequences is for general information purposes only and is not tax advice. Holders of common stock are urged to consult their own tax advisors to determine the particular tax consequences to them of the Merger, including the applicability and effect of the alternative minimum tax, the unearned income Medicare contribution tax and any other U.S. federal, or state, local, foreign or other tax laws.
The receipt of cash by U.S. holders in exchange for shares of common stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, for U.S. federal income tax purposes, a U.S. holder who receives cash in exchange for shares of common stock pursuant to the Merger will recognize gain or loss in an amount equal to the difference, if any, between (i) the amount of cash received and (ii) the U.S. holder’s adjusted tax basis in its shares of common stock.
Any such gain or loss will be long-term capital gain or loss if a U.S. holder’s holding period in the shares of common stock surrendered in the Merger is greater than one year as of the date of the Merger. Long-term capital gains of certain non-corporate holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to limitations. If a U.S. holder acquired different blocks of common stock at different times or different prices, such U.S. holder must determine its adjusted tax basis and holding period separately with respect to each block of common stock.
Information Reporting and Backup Withholding
Payments made in exchange for shares of common stock pursuant to the Merger may be subject, under certain circumstances, to information reporting and backup withholding at the statutory rate. To avoid backup withholding, a non-corporate U.S. holder that does not otherwise establish an exemption should complete and return to the applicable withholding agent a properly completed and executed IRS Form W-9, certifying under
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penalties of perjury that such U.S. holder is a “United States person” (within the meaning of the IRC), that the taxpayer identification number provided is correct and that such U.S. holder is not subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against a holder’s U.S. federal income tax liability, if any, provided that such holder furnishes the required information to the IRS in a timely manner. U.S. holders are urged to consult their tax advisors as to the qualifications for exemption from backup withholding and the procedure for obtaining the exemption.
Regulatory Approvals
The Company, Parent and Merger Sub have agreed to cooperate with each other and use their respective reasonable best efforts to promptly take, and to assist and cooperate with the other parties in doing, all actions necessary, proper or advisable to consummate the Merger as soon as practicable. Parent and Company must take all actions reasonably necessary (subject to certain exceptions) to resolve any objections or actions instituted or threatened by any applicable antitrust, competition or trade practices-related governmental authority challenging the Merger and to obtain any consents, waivers, approvals, exemptions or orders advisable or required to be obtained from any governmental authority in respect of the transactions contemplated by the Merger Agreement (including filings pursuant to the HSR Act, and filings required by certain other governmental authorities relating to antitrust, competition, trade, pre-Merger notification or other regulatory matters).
HSR Approval
The completion of the Merger is subject to antitrust review in the United States. Under the HSR Act and the rules promulgated thereunder, the Merger cannot be completed until the parties to the Merger Agreement have given notification and furnished information to the FTC and the DOJ, and until the applicable waiting period has expired or has been terminated. The Company and Parent filed their respective HSR Act notifications with respect to the Merger with the FTC and the DOJ on March 2, 2021. The HSR Act waiting period with respect to the Merger expired on April 2, 2021.
At any time before or after consummation of the Merger, notwithstanding the termination of the waiting period under the HSR Act, the FTC or the DOJ, or any state, could take such action under antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the Merger or seeking divestiture of substantial assets of the Company or Parent or their respective subsidiaries. Private parties may also seek to take legal action under antitrust laws under certain circumstances.
Efforts to Obtain Regulatory Approvals
There can be no certainty that the regulatory approvals required to consummate the Merger will be obtained within the period of time contemplated by the Merger Agreement or that any such approvals would not be conditioned upon actions that are not required to be taken by the Company or Parent under the Merger Agreement, or that a regulatory challenge to the Merger will not be made. For a more detailed description of the parties’ obligations with respect to regulatory approvals related to the Merger, see “The Merger Agreement—Filings; Other Actions; Notification” beginning on page 79 of this proxy statement.
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THE MERGER AGREEMENT
This section describes the material terms of the Merger Agreement. The description of the Merger Agreement in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which is attached as Annex A and is incorporated by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about the Merger Agreement that is important to you. We encourage you to read the Merger Agreement carefully and in its entirety.
Explanatory Note Regarding the Merger Agreement
The Merger Agreement and this summary are included in this proxy statement to provide you with information regarding its material terms. Factual disclosures about the Company contained in this proxy statement or in the Company’s public reports filed with the SEC may supplement, update or modify the factual disclosures about the Company contained in the Merger Agreement. The representations, warranties and covenants made in the Merger Agreement by the Company, Parent and Merger Sub were made solely to the parties to, and solely for the purposes of, the Merger Agreement and as of specific dates and were qualified by and subject to important limitations agreed to by the Company, Parent and Merger Sub in connection with negotiating the terms of the Merger Agreement. In particular, in your review of the representations and warranties contained in the Merger Agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the Merger Agreement may have the right not to consummate the Merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the Merger Agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC and in some cases were qualified by matters set forth in the disclosure schedule delivered to Parent in connection with the Merger Agreement (the “Disclosure Schedule”), which disclosures are not reflected in the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the Merger Agreement. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts of the Company, Parent, Merger Sub or any of their respective subsidiaries or affiliates.
Effects of the Merger; Directors and Officers; Certificate of Incorporation; By-Laws
The Merger Agreement provides that Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation. As a result of the Merger, the Company will become a wholly owned subsidiary of Parent and, as such, the Company will cease to be a publicly traded company and the common stock of the Company will be delisted from NASDAQ and will be deregistered under the Exchange Act.
At the Effective Time, the parties will take all requisite actions so that from and after the Effective Time, until their respective successors are duly elected or appointed and qualified in accordance with applicable law, (i) the directors of Merger Sub as of immediately prior to the Effective Time shall serve as the directors of the surviving corporation and (ii) the officers of the Company as of immediately prior to the Effective Time shall be the officers of the surviving corporation.
At the Effective Time, the certificate of incorporation of the Company will be amended and restated in its entirety to read as set forth in the certificate of incorporation of Merger Sub as of immediately prior to the Effective Time, except that all references therein to the name of Merger Sub will be amended to instead refer to “Tribune Publishing Company”. The certificate of incorporation, as so amended and restated, will be the certificate of incorporation of the surviving corporation. At the Effective Time, the By-Laws will be amended and restated to read as set forth in the bylaws of Merger Sub in effect immediately prior to the Effective Time, except that all references therein to the name of Merger Sub will be amended to instead refer to “Tribune Publishing Company”. The bylaws, as so amended and restated, will be the bylaws of the surviving corporation.
Closing and Effective Time of the Merger
The closing of the Merger will take place within two business days following the date on which the last of the conditions to closing (described in the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page 83) has been satisfied or, to the extent permitted by applicable law or pursuant to the terms of
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the Merger Agreement, waived by the party or parties entitled to the benefit of such conditions (other than conditions that by their nature are to be satisfied at the closing of the Merger), or at such other place, at such other time or on such other date as Parent and the Company may mutually agree.
Assuming receipt of required regulatory approvals and timely satisfaction of other closing conditions, including the approval by our stockholders of the Merger Proposal, we currently expect the closing of the Merger to occur in the second quarter of 2021.
The Merger will become effective upon the filing and acceptance of a certificate of merger with the Secretary of State of the State of Delaware (or at such later time as may be agreed by the Company and Parent and specified in the certificate of merger).
Treatment of Common Stock and Equity Plan Awards
Each share of common stock issued and outstanding immediately prior to the Effective Time (other than (i) shares of common stock that are held in treasury of the Company or are owned by Excluded Company Person (as defined in the Merger Agreement) or a subsidiary of the Company and (ii) shares of common stock owned by Company stockholders who have neither voted in favor of the Merger nor consented thereto in writing and properly exercised and perfected appraisal rights under DGCL) will be converted into the Merger Consideration.
At or immediately prior to the Effective Time, each Company Option that is outstanding immediately prior to the Effective Time, whether or not exercisable or vested, will automatically be canceled and converted into the right to receive an amount in cash equal to the product of (i) the amount by which the Merger Consideration exceeds the applicable exercise price per share of common stock of such Company Option, and (ii) the number of shares of common stock issuable in respect of such fully vested Company Option as of immediately prior to the Effective Time. Payments in respect of Company Options will be made at or as soon as practicable after the Effective Time (and in no event later than five calendar days following the Effective Time), in accordance with the Company’s or the surviving corporation’s ordinary payroll practices, and will be subject to any applicable withholding taxes.
At or immediately prior to the Effective Time, each Company RSU that is outstanding immediately prior to the Effective Time, whether or not vested, will automatically be canceled and converted into the right to receive an amount in cash equal to the product of (i) the Merger Consideration, and (ii) the number of shares of common stock underlying such Company RSU (and then adding, if applicable, the value of any dividend-equivalent rights accrued with respect to such Company RSU as of the Effective Time). Payments in respect of Company RSUs will be made at or as soon as practicable after the Effective Time (and in no event later than five calendar days following the Effective Time), in accordance with the Company’s or the surviving corporation’s ordinary payroll practices, and will be subject to any applicable withholding taxes.
Surrender and Payment Procedures
Prior to the Effective Time, Parent will appoint an exchange agent for the purpose of exchanging for the Merger Consideration (i) stock certificates or (ii) the uncertificated shares. Prior to the Effective Time, Parent will make available, or cause to be made available, the aggregate Merger Consideration to the exchange agent to be paid in accordance with the Merger Agreement. In addition, at the closing of the Merger the Company will wire to the exchange agent an amount of cash to be specified by Parent (which amount shall not exceed the Company’s estimate of its unrestricted cash as of the date of the closing of the Merger), which will be used by the exchange agent to pay a portion of the Merger Consideration.
As promptly as practicable after the Effective Time (but no later than two business days after the Effective Time), Parent will send, or will cause the exchange agent to send, to each holder of shares of our common stock at the Effective Time a letter of transmittal and instructions (which will specify that the delivery will be effected and risk of loss and title will pass, only upon proper delivery of the stock certificates or the surrender of the uncertificated shares to the exchange agent) for use in such exchange.
Holders of our common stock will be entitled to receive the Merger Consideration upon (i) surrender of each of their stock certificates together with a properly completed letter of transmittal, in the case of certificated shares, or (ii) receipt of an agent’s message by the exchange agent (or other evidence, if any, of surrender reasonably requested by the exchange agent) with respect to the uncertificated shares. From the Effective Time until surrendered, each stock certificate and uncertificated share will represent only the right to receive the Merger Consideration.
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You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the exchange agent without a letter of transmittal.
If a holder of our shares would like any portion of the Merger Consideration to which such holder is entitled to be paid to a person other than the person in whose name the surrendered stock certificate or uncertificated share is registered, as a condition to such payment (i) either such stock certificate must be properly endorsed or otherwise in proper form for transfer or such uncertificated share must be properly surrendered and (ii) the person requesting such payment must pay to the exchange agent any transfer or other taxes required as a result of such payment or establish, to the satisfaction of the exchange agent, that any such transfer or other taxes have been paid or are not payable.
After the Effective Time, there will be no further registration of transfers of shares of our common stock.
If any portion of the Merger Consideration made available to the exchange agent remains unclaimed for one year following the Effective Time, such portion will be returned to Parent upon demand. Thereafter, holders of our common stock who have not exchanged their shares for the Merger Consideration in accordance with the Merger Agreement will be entitled to look only to Parent as a general creditor for payment of the Merger Consideration with respect to such shares, without any interest.
If you have lost a certificate, or if it has been stolen or destroyed, then before you will be entitled to receive the Merger Consideration, you will be required to provide an affidavit of the loss, theft or destruction, and, if required by the surviving corporation, post a bond in a reasonable amount, as may be directed by the surviving corporation, as an indemnity against any claim that may be made against the surviving corporation with respect to such certificate. These procedures will be described in the letter of transmittal and related instructions that you will receive, which you should read carefully and in their entirety.
Representations and Warranties
Representations and Warranties of the Company
We made customary representations and warranties in the Merger Agreement with respect to the Company and its subsidiaries that are subject, in many cases, to specified exceptions and qualifications contained in the Merger Agreement, in the Disclosure Schedule that the Company delivered to Parent in connection with the Merger Agreement or in certain reports filed with the SEC. These representations and warranties relate to, among other things:
our and our subsidiaries’ due organization, existence, good standing and corporate power and authority to carry on our and their businesses;
our corporate power and authority to execute the Merger Agreement, consummate the Merger, perform our obligations under the Merger Agreement and the enforceability of the Merger Agreement against us;
the absence of required filings, authorizations, registrations, permits, consents and approvals of governmental authorities and other third parties in connection with our execution, delivery and performance of the Merger Agreement, or the consummation of the transactions contemplated by the Merger Agreement;
the capitalization of the Company and its subsidiaries;
our SEC filings since January 1, 2019 and the financial statements included therein, and our disclosure controls and procedures and internal controls over financial reporting;
the proxy statement of the Company and Schedule 13E-3 filed with the SEC in connection with the Merger and the information contained therein;
our conduct of business in the ordinary course from September 27, 2020, and the absence of any circumstance, occurrence or development which has had or would reasonably be expected to have, a Company material adverse effect;
the absence of certain undisclosed liabilities or obligations;
since January 1, 2018, the Company’s and its subsidiaries’ compliance with applicable laws, and the possession by the Company and its subsidiaries of all licenses or other authorizations or approvals of a
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governmental authority necessary for the lawful conduct of the business of the Company and its subsidiaries, except for those the absence of which would not reasonably be likely to have a material adverse effect, in each case, to the Company’s knowledge;
since January 1, 2018 and to the Company’s knowledge, the compliance of the Company and its subsidiaries with the provisions of the U.S. Foreign Corrupt Practices Act of 1977, as amended (15 U.S.C. §§ 78dd1, et seq.), applicable sanctions authorities, and export controls, anti-trust or anti-money laundering laws;
the absence of certain legal proceedings, investigations and other proceedings pending or, to the Company’s knowledge, threatened against the Company or any of its subsidiaries;
matters relating to the owned real property and leased real property of the Company and its subsidiaries;
intellectual property matters relating to the Company and its subsidiaries;
tax matters relating to the Company and its subsidiaries;
matters relating to employee benefit plans of the Company and its subsidiaries;
labor matters relating to the Company and its subsidiaries;
environmental matters relating to the Company and its subsidiaries;
matters relating to material contracts of the Company and its subsidiaries, including material contracts between the Company and its subsidiaries, on the one hand, and any of affiliates of the Company or its subsidiaries, on the other hand;
matters relating to insurance policies of the Company and its subsidiaries;
the absence of any undisclosed brokerage or finder’s fees;
the fairness opinion of Lazard received in connection with the Merger;
corporate action taken to exempt the Merger Agreement and the transactions contemplated by the Merger Agreement (to the extent possible) from any anti-takeover statute or regulation in effect that applies or purports to apply to the transactions contemplated by the Merger Agreement; and
the absence of any other express or implied representation or warranty by the Company or any other person with respect to the Company or any of its affiliates.
Company Material Adverse Effect
Many of our representations and warranties are qualified by, among other things, exceptions relating to the absence of a “Company material adverse effect,” which means any change, event, occurrence, or effect that, individually or in the aggregate, (i) has, or would reasonably be expected to have, a material adverse effect on the business, assets, operations, results of operations or condition of the Company and its subsidiaries, taken as a whole or (ii) prevents the consummation by the Company of the transactions contemplated by the Merger Agreement. However, none of the following will constitute, nor will any of the following be taken into account in determining whether there has been, is, or would be, a Company material adverse effect:
(a)
any change or proposed change in the Generally Accepted Accounting Principles (“GAAP”) or interpretation thereof;
(b)
global, national or regional economic or political conditions (including changes in financial, credit, securities or currency markets (including changes in interest or exchange rates));
(c)
conditions affecting the industries in which the Company or any of its subsidiaries operate;
(d)
any change or proposed changes in applicable law or any interpretation of applicable law;
(e)
geopolitical conditions, the outbreak or escalation of hostilities, acts of war, sabotage, terrorism,
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cyberattacks, natural disasters, epidemics, pandemics or other widespread diseases (including COVID-19) and the governmental responses thereto (including any applicable law, directive, guideline or recommendation promulgated by any U.S. industry group or governmental authority in connection with or in response to COVID-19);
(f)
the execution, delivery and performance of the Merger Agreement or the announcement or consummation of the transactions contemplated by the Merger Agreement or the identity of or any facts or circumstances relating to Parent or any of its subsidiaries, including the impact on the relationships, contractual or otherwise, of the Company and any of its subsidiaries with customers, suppliers, service providers, employees, governmental authorities or any other persons resulting from any of the foregoing, and any stockholder or derivative litigation relating to the execution, delivery and performance of the Merger Agreement or the announcement or consummation of the transactions contemplated by the Merger Agreement (subject to certain exclusions);
(g)
any failure by the Company or any of its subsidiaries to meet any internal or published budgets, projections, forecasts or predictions of financial performance or integration synergies for any period (it being understood that any underlying facts giving rise or contributing to such failure that are not otherwise excluded from this definition may be taken into account in determining whether there has been a Company material adverse effect);
(h)
any actions taken (or omitted to be taken) at the express written request of Parent or Merger Sub;
(i)
changes in the price and/or trading volume of the shares of the common stock or any other securities of the Company on NASDAQ or any other market on which such securities are quoted for purchase and sale or changes in the credit ratings of the Company (it being understood that any underlying facts giving rise or contributing to such changes that are not otherwise excluded from this definition may be taken into account in determining whether there has been a Company material adverse effect); or
(j)
any actions taken (or omitted to be taken) by the Company or any of its subsidiaries that are required or expressly contemplated to be taken (or omitted to be taken) pursuant to the Merger Agreement.
The exclusions set forth in (a) through (e) above shall only be applicable to the extent they do not have a materially disproportionate impact on the Company and its subsidiaries, taken as a whole, relative to other entities operating in the same industries in which the Company or its subsidiaries operate.
Representations and Warranties of Parent
The Merger Agreement also contains customary representations and warranties made by Parent and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. The representations and warranties of Parent and Merger Sub relate to, among other things:
their due organization, existence, good standing and authority to carry on their businesses and that Merger Sub is a wholly owned subsidiary of Parent that was formed solely for the purpose of engaging in the transactions contemplated by the Merger Agreement;
their corporate power and authority to execute the Merger Agreement, consummate the Merger, perform their obligations under the Merger Agreement, and the enforceability of the Merger Agreement against them;
the absence of required filings, authorizations, registrations, permits and consents and approvals of governmental authorities or other third parties in connection with their execution, delivery and performance of the Merger Agreement, or the consummation of the transactions contemplated by the Merger Agreement;
the supply of information in writing by Parent for inclusion in the proxy statement and Schedule 13E-3 filed with the SEC in connection with the Merger and the information contained therein;
the absence of certain legal proceedings, investigations and other proceedings pending or threatened against Parent or any of its subsidiaries, except as would not, individually or in the aggregate, reasonably be likely to prevent, materially delay or materially impede the consummation of the Merger by Parent;
the absence of any undisclosed brokerage or finder’s fees;
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the absence of any knowledge of Parent of any facts or circumstances that would cause the representations and warranties of the Company to fail to be true and correct in all material respects, or which would otherwise reasonably be expected to materially impede or delay consummation of the transactions contemplated by the Merger Agreement;
matters related to the ownership by Parent, Merger Sub or its or their affiliates and associates of the common stock;
that Parent has all funds necessary to satisfy its obligations under the Merger Agreement, including payment of the Merger Consideration;
the solvency of Parent and Merger Sub at the Effective Time;
the absence of any contract between Parent or Merger Sub or any of their affiliates, on the one hand, and any member of the Company’s management or the Board, on the other hand, relating in any to the transactions contemplated by the Merger Agreement or the operations of the Company after the Effective Time;
the absence of any other express or implied representation or warranty by Parent, Merger Sub or any other person with respect to Parent, Merger Sub or any of their respective representatives or affiliates.
The representations and warranties in the Merger Agreement of each of the Company, Parent and Merger Sub will not survive the consummation of the Merger or the termination of the Merger Agreement pursuant to its terms.
Conduct of Our Business Pending the Merger
Until the earlier of the Effective Time or the termination of the Merger Agreement pursuant to its terms, the Company has agreed that, except as expressly (i) required or contemplated by the Merger Agreement, (ii) set forth in the Disclosure Schedule, (iii) consented to in writing by Parent or (iv) required by applicable law, it will, and that it will cause each of its subsidiaries to, use commercially reasonable efforts to (a) preserve substantially intact its present business organization, assets and properties and (b) preserve in all material respects its relationships with any customers, suppliers, vendors, payors, partners, governmental authorities, licensors, licensees and any other persons with which it has material business relations, in each case in the ordinary course of business. The Company may take actions in reasonable response to COVID-19 in the ordinary course of business as long as it provides Parent written notice of any such action that is material to the Company’s or its subsidiaries’ business within 24 hours thereof.
The Company has further agreed that, until the Effective Time, except as expressly (i) required or contemplated by the Merger Agreement, (ii) set forth in the Disclosure Schedule, (iii) consented to in writing by Parent, (iv) as required by applicable law or (v) in response to COVID-19 (as described above), the Company will not, and will cause its subsidiaries not to:
amend its organizational documents;
split, combine or reclassify any shares of its capital stock or declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock, except for dividends or other such distributions by any of its wholly owned subsidiaries;
redeem, repurchase or otherwise acquire or offer to redeem, repurchase, or otherwise acquire any securities of the Company or its subsidiaries, except as required by the terms of the Company Stock Plan with respect to any Company Options and Company RSUs, in each case, that are issued and outstanding as of or after the date of the Merger Agreement;
enter into any agreement with respect to the voting of any securities of the Company or its subsidiaries;
issue, grant, deliver or sell, or authorize the issuance, delivery or sale of, any shares of any securities of the Company or its subsidiaries, other than the issuance of any subsidiary securities to the Company or to any other subsidiary, or issuances of any shares with respect to any exercise of Company Options or the settlement of Company RSUs that are issued and outstanding as of or after the date of the Merger Agreement;
amend any term of any security of the Company or its subsidiaries, except as required by the terms of any employee benefit plan;
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acquire (by merger, consolidation, acquisition of stock or assets or otherwise), directly or indirectly, (i) any business or any division thereof or all or substantially all of the assets of, equity or voting securities in, any person or (ii) any material amount of assets, securities, properties, interests or businesses, other than acquisitions of inventory, equipment, supplies and materials in the ordinary course of business consistent with past practice;
sell, assign, transfer, convey, lease, license, abandon, allow to lapse or expire, subject to or, grant or suffer to exist any lien on, or otherwise dispose of any of its material assets, securities, properties, interests or businesses, other than the sale or licensing of goods and services (including licenses of intellectual property) to customers, suppliers, vendors, partners and other persons in the ordinary course of business;
make any material loans, advances or capital contributions to, or investments in, any other person, other than (i) loans or advances among the Company and its wholly owned subsidiaries and capital contributions to, or investments in, the Company’s wholly owned subsidiaries, (ii) advances of business expenses to employees in the ordinary course, (iii) accounts receivable from customers in the ordinary course of business and (iv) investments of cash in the ordinary course of business;
incur any indebtedness or guarantees thereof, other than (i) pursuant to any agreements in effect as of the date of the Merger Agreement, (ii) indebtedness incurred between the Company and any of its wholly owned subsidiaries or between any of such wholly owned subsidiaries or guarantees by the Company of indebtedness of any wholly owned subsidiary of the Company, (iii) any debt financing in respect of the merger consideration or (iv) any obligations under the Company’s existing contracts as of the date of the Merger Agreement to post additional cash collateral under any letters of credit existing as of the date of the Merger Agreement;
make any capital expenditures, other than (i) capital expenditures provided for in the approved budget set forth in the Disclosure Schedule or (ii) other capital expenditures not in excess of $100,000 in the aggregate;
settle any material litigation or claims, except for settlements of any workers’ compensation claim in the ordinary course of business for an amount not in excess of the amount accrued therefor in the Company’s most recent balance sheet, and which does not impose material equitable relief against the Company or any of its subsidiaries and would not be expected to limit or restrict the operation of the Company or its subsidiaries in any material respect; provided that the Company use its reasonable best efforts to provide Parent with prior notice of and consult with Parent regarding the proposed terms of any such settlement;
except as required under the terms of any employee benefit plan or any contract, (i) increase the compensation or benefits of any employee of the Company or any of its subsidiaries whose annual base compensation is $70,000 or more (each, a “Key Employee”), (ii) hire or terminate (except for cause) any Key Employee, (iii) enter into or amend any written employment agreement with any current or future employee, director or officer of the Company or any of its subsidiaries, (iv) partially or completely withdraw from any multiemployer plan, (v) establish any Company severance policy or benefits or (vi) modify any existing Company severance policy or severance benefits;
except as required under the terms of any employee benefit plan or any contract, grant or award any bonus or incentive compensation (including equity), retention, severance, tax gross-up, tax indemnity, or reimburse the taxes of any current or former Company Service Provider, except for severance payments and benefits to Company Employees following a qualifying termination of employment solely (i) to the extent required pursuant to an existing contractual obligation of the Company, (ii) as required by applicable law or (iii) pursuant to the terms of the Company’s broad-based severance policy in the ordinary course of business consistent with past practice;
change the Company’s methods of accounting, except as required by concurrent changes in GAAP or in Regulation S-X of the Exchange Act, as agreed to by its independent public accountants;
make, change or rescind any material tax election, change any annual tax accounting period, adopt or make any material change in its method of tax accounting, file any material tax return in a jurisdiction in which neither the Company nor its subsidiaries did not previously file, file any material amended tax
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returns or claims for material tax refunds, engage in any voluntary disclosure or similar process with a taxing authority with respect to a material tax, extend or waive the statute of limitations with respect to any material tax or enter into any material closing agreement, settle or compromise any material tax claim, audit or assessment, or surrender or settle any right to claim a material tax refund, offset or other material reduction in tax liability, in each case, other than in the ordinary course of business or as required by applicable law;
merge or consolidate with any other person or adopt or enter into a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization;
terminate, cancel or fail to renew any material insurance coverage maintained by the Company or any of its subsidiaries with respect to any material assets without replacing such coverage with a comparable amount of insurance coverage, unless (i) such coverage is not available on commercially reasonable terms or (ii) lesser coverage amounts are reasonably appropriate in light of changes to the Company’s and its subsidiaries’ business (including termination of leases in accordance with the terms of the Merger Agreement);
(i) enter into any material contract or any real property lease, (ii) except in the ordinary course of business, terminate or fail to renew any material contract or real property lease, other than any termination without material penalty to the Company or any its subsidiary, (iii) amend or modify any material contract or real property lease in any manner adverse to the Company and its subsidiaries in any material respect or which could prevent or materially delay the consummation of the Merger or the other transactions contemplated by the Merger Agreement or (iv) waive any material benefit or right under any material contract or real property lease;
enter into, amend or modify the terms of any contract with any person covered under Item 404 of Regulation S-K under the Securities Act or make any payment to any person covered under Item 404 of Regulation S-K under the Securities Act (other than payments, transactions or benefits pursuant to Employee Benefit Plans made available to Parent prior to the date of the Merger Agreement);
make any contributions to any employee benefit plan or multiemployer plan subject to Section 302 of ERISA and Section 412 of the Internal Revenue Code, except: (i) in the minimum amount necessary to satisfy the requirements of Section 302(a) of ERISA and Section 412(a) of the Internal Revenue Code, or (ii) in the minimum amounts required by the Company’s collective bargaining agreements or Section 515 of ERISA;
pay or settle any accounts payables in excess of $100,000, except payments when and as due, in accordance with any applicable contracts or the Company’s past practice;
enter into any contract with aggregate expenditures in excess of $500,000; or
agree, resolve or commit to take any action prohibited by the foregoing.
Nothing in the Merger Agreement will give Parent, directly or indirectly, the right to control or direct the Company’s or its subsidiaries’ operations prior to the Effective Time.
Conduct of Parent and Merger Sub Pending the Merger
Prior to the Effective Time, Parent shall not, and shall cause its subsidiaries not to, take any action or fail to take any action that is intended to, or would reasonably be expected to, individually or in the aggregate, prevent, materially delay or materially impede the ability of Parent and Merger Sub to consummate the Merger or the other transactions contemplated by the Merger Agreement. Parent shall take all action necessary to cause Merger Sub to perform its obligations under the Merger Agreement and to consummate the Merger on the terms and conditions set forth therein.
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Solicitation of Acquisition Proposals; Board Recommendation Changes
No Solicitation and Certain Exceptions
The Company has agreed that it and its subsidiaries will not, and they will use reasonable best efforts to cause their respective directors, officers, employees, investment bankers, attorneys, accountants or other advisors not to, directly or indirectly:
(i)
solicit, knowingly facilitate or encourage the submission of any Acquisition Proposal (as defined below), or the making of any inquiry or offer that would reasonably be expected to lead to an Acquisition Proposal;
(ii)
enter into or participate in any discussions or negotiations with, furnish any information relating to the Company or its subsidiaries or afford access to the business, properties, books or records of the Company and its subsidiaries or otherwise cooperate, assist or encourage any effort by any third party that is seeking to make, or has made, an Acquisition Proposal;
(iii)
permit or make an Adverse Recommendation Change (as defined below);
(iv)
enter into any agreement in principle, letter of intent, merger agreement, acquisition agreement or other commitment or agreement in respect of any proposal or offer providing for an Acquisition Proposal (other than a confidentiality agreement in accordance with the terms of the Merger Agreement); or
(v)
amend, modify, redeem, terminate or grant any waiver or release under the Company Rights Plan.
However, notwithstanding the foregoing, the Company may amend, modify, grant any waiver or release under any standstill, confidentiality or similar agreement of the Company (but solely to the extent necessary to allow for a confidential and nonpublic Acquisition Proposal to be made to the Company or the Board), in each case if the Board determines in good faith, in consultation with its financial advisors and outside legal counsel, that the failure to do so would be reasonably likely to be inconsistent with the fiduciary duties of the Board, so long as the Company notifies Parent within 24 hours of such waiver or release (including the identity of such counterparty).
Notwithstanding these restrictions, under certain circumstances, the Company may, prior to receipt of the Company Stockholder Approval, (i) engage in negotiations or discussions with a third party that has made an unsolicited bona fide offer with respect to an Acquisition Proposal that did not result from a breach of applicable provisions of the Merger Agreement, if the Board reasonably believes, after consultation with its outside advisors, based on information then available, that (x) such Acquisition Proposal constitutes, or would reasonably be expected to lead to, a Superior Proposal (as defined below) and (y) failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties; and (ii) furnish to such third party nonpublic information relating to the Company pursuant to a confidentiality agreement no less favorable to the Company than the confidentiality agreement between the Company and Parent (and that, for the avoidance of doubt, includes a customary standstill provision). However, all such information provided to such third party must also be made available to Parent prior to or substantially concurrently with the time such information is provided to such third party.
Notwithstanding the foregoing, under certain circumstances, the Board may, prior to receipt of the Company Stockholder Approval: (i) following receipt of a Superior Proposal that did not result, in whole or in part, from a breach of applicable provisions of the Merger Agreement, make an Adverse Recommendation Change or terminate the Merger Agreement in order to enter into a definitive agreement for such Superior Proposal, or (ii) make an Adverse Recommendation Change in response to an Intervening Event (as defined below), in each case if and only if the Board determines in good faith, after consultation with its outside advisors, that the failure to take such action would be reasonably likely to be inconsistent with the directors’ fiduciary duties. In the event of an Adverse Recommendation Change, the Company must comply with additional restrictions, which are further described in “—Change of Recommendation or Termination of Merger Agreement.”
Acquisition Proposal” means, other than the transactions contemplated by the Merger Agreement, any third party offer or proposal relating to (i) any acquisition or purchase, direct or indirect, of 20% or more of the consolidated assets of the Company and its subsidiaries or 20% or more of any class of equity or voting securities of the Company or any of its subsidiaries whose assets, individually or in the aggregate, constitute 20% or more of the consolidated assets of the Company, (ii) any tender offer (including a self-tender offer) or
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exchange offer that, if consummated, would result in such third party beneficially owning 20% or more of any class of equity or voting securities of the Company or any of its subsidiaries whose assets, individually or in the aggregate, constitute 20% or more of the consolidated assets of the Company or (iii) a merger, consolidation, share exchange, business combination, asset sale, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the Company or any of its subsidiaries pursuant to which any person or group (or the stockholders of any person) would own, directly or indirectly, 20% or more of the aggregate voting power of the Company after giving effect to the consummation of such transaction.
Adverse Recommendation Change” means, with respect to the Board (or any committee thereof), (i) withholding, withdrawing, amending, qualifying or modifying, or publicly proposing to withhold, withdraw, amend, qualify or modify, the Company Recommendation in a manner adverse to Parent or its affiliates, (ii) adopting, approving, endorsing, recommending or otherwise declaring advisable (or proposing to adopt, approve, endorse, recommend or otherwise declare advisable) an Acquisition Proposal, (iii) failing to publicly reaffirm the Company Recommendation within five business days after Parent so requests in writing or, if the Company Stockholder Meeting is scheduled to be held within five business days, within one business day, if possible, before the Special Meeting (provided that such written request by Parent may only be once in respect of each such Acquisition Proposal), (iv) making any recommendation in connection with a tender or exchange offer, other than a recommendation against such offer or a “stop, look and listen” communication by the Board to the Company’s stockholders pursuant to Rule 14d-9(f) promulgated under the Exchange Act (or a substantially similar communication), (v) failing to include the Company recommendation in this proxy statement or (vi) taking any action or make any public statement inconsistent with the Company Recommendation.
Company Recommendation” means the resolutions of the Board, where the Board (upon the unanimous recommendation of the Special Committee) has (i) determined that the Merger Agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of the Company and its stockholders, (ii) approved, adopted and declared advisable the Merger Agreement and the transactions contemplated thereby, (iii) directed that the adoption of the Merger Agreement and the approval of the Merger and the other transactions contemplated thereby be submitted to a vote at a meeting of the Company’s stockholders and (iv) resolved to recommend approval and adoption of the Merger Agreement and the other transactions contemplated thereby by the Company’s stockholders.
Company Stockholder Approval” means the adoption of the Merger Agreement and approval of the Merger and other transactions contemplated thereby by the affirmative vote, at a stockholders’ meeting duly called and held for such purpose, of holders of at least (x) 66 2/3% of the outstanding shares of common stock entitled to vote on such matters, other than those “owned” (as defined in Section 203(c)(9) of the DGCL) by Parent or Merger Sub and their affiliates and associates (each as defined in Section 203(c) of the DGCL) and (y) a majority in voting power of the outstanding shares of common stock entitled to vote on such matters.
Intervening Event” means any material event, fact, circumstance, development or occurrence that was not known or reasonably foreseeable, or the material consequences of which were not known or reasonably foreseeable, to the Board as of the date of the Merger Agreement and does not relate to an Acquisition Proposal, a Superior Proposal or any matter relating thereto or consequence thereof, which event or circumstance becomes known to or by the Board prior to receipt of the Company Stockholder Approval; provided that (i) in no event shall any action taken by the parties pursuant to the affirmative covenants related to the parties’ regulatory undertakings, or the consequences of any such action, constitute, be deemed to contribute to or otherwise be taken into account in determining whether there has been, an Intervening Event and (ii) in no event shall any event, fact, circumstance, development or occurrence that would fall within any of the exceptions to the definition of “Company material adverse effect” constitute, be deemed to contribute to or otherwise be taken into account in determining whether there has been a Intervening Event.
Superior Proposal” means a bona fide written Acquisition Proposal (but substituting “90%” for all references to “20%” in the definition of such term) on terms that the Board determines in good faith, after consultation with its outside legal counsel and financial advisors, are more favorable from a financial point of view to the Company’s stockholders than the Merger (taking into account all factors determined by the Board to be relevant with respect to such determination, including any revisions to the Merger Agreement made or proposed in writing by Parent prior to the time of such determination).
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Notification to Parent
The Company must promptly notify Parent (whether before or after the Company Stockholder Approval is obtained) promptly after receipt by the Company of an Acquisition Proposal, any request for nonpublic information relating to the Company or any of its subsidiaries or any request for access to the business, properties, assets, books or records of the Company or any of its subsidiaries by any third party that the Company reasonably believes is considering making, or has made, in connection with a potential Acquisition Proposal. The Company must keep Parent reasonably informed of the status and material terms and conditions of any Acquisition Proposal, including providing to Parent (within 24 hours after receipt) copies of all material correspondence and written materials (including any substantive correspondence and written materials related to financial terms) sent or provided to the Company or any of its subsidiaries in connection therewith.
Change of Recommendation or Termination of Merger Agreement
The Board may not make an Adverse Recommendation Change unless and until it has complied with the following requirements:
the Company must give Parent at least four business days’ prior written notice of its intent to make an Adverse Recommendation Change (the “Notice Period”), specifying, in reasonable detail, the reasons for such Adverse Recommendation Change and attaching a copy of any proposed agreements for the Superior Proposal, if applicable (provided that with respect to any amendment to the financial terms or other material terms of an Acquisition Proposal, such Notice Period will be extended by two business days and the Company will be required to deliver a new written notice to Parent in respect thereof);
during the Notice Period, the Company must negotiate with Parent and its representatives in good faith (to the extent that Parent desires to so negotiate) to make such adjustments to the terms and conditions of the Merger Agreement as would enable the Board to not effect an Adverse Recommendation Change or, in the case of a Superior Proposal, terminate the Merger Agreement; and
following the expiration of the Notice Period, the Board must determine in good faith, taking into account any amendments to the terms of the Merger Agreement proposed by Parent, that the failure to effect an Adverse Recommendation Change would be reasonably likely to be inconsistent with its fiduciary duties.
Stockholder Meeting
The Company is required to convene the Special Meeting as soon as reasonably practicable for the purpose of obtaining the Company Stockholder Approval. In the event that a quorum is not present at the Special Meeting, we expect to adjourn or postpone the Special Meeting until we solicit enough proxies to obtain a quorum. The Company may also adjourn or postpone the Special Meeting with Parent’s reasonable consent, or to the extent reasonably necessary (i) to ensure that any legally required supplement or amendment to this proxy statement is provided to stockholders within a reasonable amount of time in advance of the Special Meeting, (ii) to allow reasonable additional time to solicit additional proxies necessary to obtain the Company Stockholder Approval (as defined in “The Merger Agreement—Solicitation of Acquisition Proposals; Board Recommendation Changes” beginning on page 76), (iii) to ensure that there are sufficient shares of common stock represented (either virtually or by proxy) and voting to constitute a quorum necessary to conduct the business of the Special Meeting or (iv) otherwise where required to comply with applicable law (including fiduciary duties).
The Company has agreed that at the stockholder meeting, at which the Company Stockholder Approval is to be obtained, the Board will recommend adoption of the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement to the Company’s stockholders, subject to the Board’s rights to effect an Adverse Recommendation Change as discussed above under “The Merger Agreement—Solicitation of Acquisition Proposals; Board Recommendation Changes” beginning on page 76. In the event of an Adverse Recommendation Change for an Intervening Event, the Company will not have a termination right and, therefore, may still be required to hold the stockholder meeting and submit the Merger Agreement to the Company’s stockholders for adoption. Conversely, the Company may terminate the Merger Agreement to enter into an agreement with respect to the Superior Proposal, so long as the pays the Termination Fee prior thereto, as described below.
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Parent Voting Agreement
Parent has agreed to vote or cause to be voted all of its, its subsidiaries and its affiliates shares of the Company’s or its subsidiaries’ securities owned beneficially or of record, directly or indirectly, by Parent or any of its affiliates in favor of (i) the Merger Agreement and the transactions contemplated thereby, (ii) any proposal to adjourn any meeting of the stockholders if there are not sufficient votes to adopt the Merger Agreement or to constitute a quorum or (iii) any other matter necessary or advisable to consummate the transactions contemplated by the Merger Agreement. In the event that Parent fails to act in accordance with the foregoing, Parent has granted its proxy to the Company’s officers to vote such securities as set forth in the foregoing sentence at any time prior to the Effective Time.
Moreover, Parent has agreed that, prior to receipt of the Company Stockholder Approval, it will not, and will not permit any of its subsidiaries or affiliate to, directly or indirectly, (i) transfer (or enter into a contract to transfer) any of the Company’s or its subsidiaries’ securities owned beneficially or of record, directly or indirectly, by Parent or any of its affiliates, (ii) grant any proxies or powers of attorney with respect to such securities in respect of any matter addressed in the Merger Agreement, (iii) deposit such securities in a voting trust or grant any proxy or power of attorney with respect to such securities that is inconsistent with the Merger Agreement, or (iv) take any action that would limit or interfere with the performance of Parent’s obligations under the Merger Agreement.
Filings; Other Actions; Notification
The Company and Parent have agreed to cooperate with each other and use their respective reasonable best efforts to take or cause to be taken all actions, and do or cause to be done all things, reasonably necessary, proper or advisable under law to consummate and make effective the transactions contemplated by the Merger Agreement as soon as practicable, including:
preparing and filing all documentation to effect all necessary notices, reports and other filings (including filings under the HSR Act, and other required regulatory approvals specified in the Merger Agreement); and
obtaining and maintaining all consents, registrations, approvals, permits and authorizations necessary or advisable to be obtained from any third party and/or any governmental authority in order to consummate the transactions contemplated by the Merger Agreement.
In the event that any objections are asserted with respect to the transactions contemplated by the Merger Agreement (including the HSR Act) or if any legal action is instituted or threatened claiming that such transactions violate applicable law, the parties shall use their reasonable best efforts to resolve such objections. Parent shall direct and control the Parties’ efforts and strategy to resolve any such objections. In furtherance of the foregoing, Parent will be required to take certain divestiture actions with respect to the Company and its subsidiaries. However, Parent is not required to divest or take other actions required to obtain regulatory approvals that would materially impair the benefits to Parent of the transactions contemplated by the Merger Agreement, except that Parent is required to divest or take other actions required to obtain regulatory approvals with respect to businesses, assets or properties of the Company and its subsidiaries that accounted for up to $40,000,000 of revenue for the fiscal year ended on December 27, 2020. The parties have also agreed to oppose, fully and vigorously, (i) any legal action that is initiated or threatened to be initiated challenging the Merger Agreement or the consummation of the transactions contemplated thereby and (ii) any request for, the entry of, and seek to have vacated or terminated, any order that could restrain, prevent or delay the consummation of the transactions contemplated thereby, including by defending through litigation any action asserted by any person in any court or before any governmental authority, and vigorously pursuing all available avenues of administrative and judicial appeal.
The parties have agreed to: (i) promptly notify each other of any substantive communications received from any governmental authority and, subject to applicable law, permit the other party to review and proposed written communication thereto; (ii) not agree to participate in any substantive meeting or discussion with any governmental authority in respect of any filings, investigation or inquiry concerning any competition or antitrust matters in connection with the Merger Agreement or the transactions contemplated thereby without first consulting with the other parties and, to the extent permitted by such governmental authority, giving the other
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parties the opportunity to attend and participate thereat; and (iii) furnish the other parties with copies of all correspondence, filings, and communications between them and any governmental authority, with respect to any competition laws in connection with the Merger Agreement.
The Company and Parent are required to cooperate in determining whether any action by or in respect of, or filing with, any governmental authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by the Merger Agreement and in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers.
The Company and Parent filed their respective HSR Act notifications with respect to the Merger with the FTC and the DOJ on March 2, 2021. The HSR Act waiting period with respect to the Merger expired on April 2, 2021.
Stock Exchange Delisting
Prior to the Effective Time, the Company shall reasonably cooperate with Parent and use its reasonable best efforts to take all actions reasonably necessary, proper or advisable to enable the delisting of the Company’s common stock from NASDAQ and the deregistration of the Company’s common stock under the Exchange Act as promptly as practicable after the Effective Time.
Financing; Asset Dispositions
The Company and its subsidiaries shall use reasonable best efforts to provide reasonable and customary cooperation in connection with the arrangement of any debt financing to be entered into by Parent or the Company in connection with payment of the Merger Consideration (collectively, the “Debt Financing”), as reasonably requested in advance by Parent, including using reasonable best efforts to take the following actions:
assisting in preparation for and participation in marketing efforts with prospective lenders, investors and rating agencies;
assisting Parent in the preparation of offering documents, private placement memorandum and similar marketing documents and materials for rating agency presentations, if applicable;
furnishing Parent with any pertinent and customary information regarding the Company and its Subsidiaries as may be reasonably requested by Parent to the extent that such information is required in connection with obtaining the Debt Financing (subject to certain exclusions);
assisting Parent in connection with the preparation of pro forma financial information and financial statements (provided that neither the Company nor any of its subsidiaries or its officers, employees and/or representatives shall be responsible for information relating to the proposed debt and equity capitalization that is required for such pro forma financial information or statements (or for the actual preparation of pro forma financial statements));
executing and delivering as of (and subject to) the Closing, but not before, pledge and security documents and other definitive financing documents and certificates as may be reasonably requested by Parent, to the extent required by the terms of the Debt Financing;
taking corporate actions reasonably requested by Parent that are necessary or customary to permit the consummation of the Debt Financing, and to permit the proceeds thereof, if any (not needed for other purposes), to be made available at the closing of the Merger;
assisting Parent to obtain waivers, consents, estoppels and approvals from other parties to material licenses, leases, encumbrances and contracts relating to the Company and its subsidiaries and to arrange discussions among Parent, the providers of the Debt Financing and their respective representatives with other parties to material licenses, leases, encumbrances and contracts as of the closing of such Debt Financing; and
providing (at least three business days) prior to the closing documentation and other information about the Company and its subsidiaries to the extent actually required by the “know your customer” and anti-money laundering rules and regulations under the USA PATRIOT Act.
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Asset Dispositions
Subject to certain exceptions set forth in the Merger Agreement, the Company shall, and shall cause its subsidiaries to, use their reasonable best efforts to provide all cooperation in connection with certain restructurings or transfers of assets or liabilities of the Company and/or its subsidiaries, including the sale of The Sun to Charity (which may be effective and operative immediately prior to, and contingent upon, the Closing), in each case as may be reasonably requested by Parent. Without limiting the foregoing, Alden has advised the Special Committee that Alden and Mr. Bainum are no longer negotiating regarding a proposed sale of The Sun.
Expenses
Parent shall promptly, upon request by the Company, reimburse the Company for all reasonable and documented out-of-pocket costs and expenses incurred by the Company or any of its subsidiaries in connection with the cooperation of the Company and its subsidiaries described in “The Merger Agreement—Financing; Asset Dispositions” and shall indemnify and hold harmless the Company, its subsidiaries and their respective representatives from and against any and all losses, damages, claims, costs or expenses actually suffered or incurred by any of them of any type in connection with such cooperation (including the Debt Financing) and any information used in connection therewith (except as a result of their gross negligence, actual fraud, bad faith or willful misconduct).
Employee Benefits Matters
The parties have agreed that Parent or surviving corporation will provide to each employee, officer or director of the Company or its subsidiaries who continues to provide services to Parent, the surviving corporation or their respective subsidiaries at Effective Time (collectively, the “Continuing Employees”) an annual rate of salary or wages that is not substantially less favorable than the annual rate of salary or wages provided to each such Continuing Employee immediately prior to the Effective Time.
Further, Parent has agreed that Parent will, or will cause its affiliates to, use commercially reasonable efforts to:
waive all limitations as to any pre-existing condition or waiting periods in the surviving corporation’s applicable welfare plans with respect to participation and coverage requirements applicable to each Continuing Employee under any welfare plans that such employees may be eligible to participate in after the Effective Time; and
credit each Continuing Employee for any deductible, co-payment, offset or similar requirements made by Continuing Employees under any employee benefit plan of the Company or any of its Subsidiaries during the plan year for purposes of satisfying any applicable copayment, deductible, offset or similar requirements under the comparable plans of Parent, Merger Sub or any of their respective Subsidiaries.
Additionally, Parent has agreed that Parent will, or will cause the surviving corporation and any applicable Subsidiary to, give Continuing Employees full credit for each such Continuing Employee’s service with the Company and its subsidiaries for purposes of eligibility, vesting, accruals and determination of the level of benefits (other than benefit accrual under any qualified or non-qualified defined benefit pension arrangements) under any employee benefit and compensation plans or arrangements maintained by Parent, Merger Sub or their subsidiaries in which a Continuing Employee is eligible to participate in after the Effective Time, to the same extent recognized by the Company immediately prior to the closing of the Merger, to the same extent that such service was credited for purposes of any comparable employee benefit or compensation plan or arrangement immediately prior to the Effective Time. However, each employee of the Company or any of its subsidiaries who, as of immediately prior to the Effective Time, is covered by a collective bargaining agreement shall be provided with compensation, benefits and terms and conditions of employment consistent with the terms of such collective bargaining agreement.
If the Closing occurs before the date annual bonuses for 2021 are paid under any annual cash incentive compensation plan of the Company or its subsidiaries (a “2021 Bonus Plan”), Parent shall, or shall cause the surviving corporation and their respective subsidiaries to, (i) continue to operate such 2021 Bonus Plan in good faith, (ii) determine, in good faith, the amounts of annual bonuses for 2021 to be paid under the 2021 Bonus Plan (together, the “Earned Bonuses”) in a manner that is consistent in all material respects with the terms of the applicable 2021 Bonus Plan and (iii) pay Earned Bonuses in accordance with the terms of such 2021 Bonus Plan. Any employee of the Company or its subsidiaries who participates in a 2021 Bonus Plan and is terminated
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without “cause” on or after February 16, 2021 and on or prior to the Company’s 2021 fiscal year end shall be entitled to receive a pro rated portion of his or her target 2021 annual bonus, subject to the attainment of the target level of performance (as applicable).
Notwithstanding any of the foregoing, no current or former employee, director, officer or independent contractor is a third party beneficiary of Parent’s obligations set forth in the Merger Agreement with respect to employee benefit matters.
Public Announcements
Subject to certain exceptions described in the Merger Agreement, the Company and Parent shall consult with each other before issuing any press release or making a public statement with respect to the Merger Agreement or the transactions contemplated thereby. Notwithstanding the foregoing, after the issuance of any press release or the making of any public statement, either party may issue such additional publications or press releases and make such other customary announcements without consulting with any other party hereto so long as such additional publications, press releases and announcements do not disclose any non-public information regarding the transactions contemplated by the Merger Agreement beyond the scope of the disclosure included in the press release or public statement with respect to which the other party had been consulted.
Section 16 Matters
Prior to the Effective Time, each party shall take all such steps as may be required to cause any dispositions of shares of the Company’s common stock in connection with the transactions contemplated by the Merger Agreement (including derivative securities) by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company to be exempt under Rule 16b-3 promulgated under the Exchange Act.
Notices of Certain Events
Each of the Company and Parent shall promptly notify the other of any of the following, if such party has knowledge thereof: (a) any written notice or other written communication from any person alleging that the consent of such person is or may be required in connection with the transactions contemplated by the Merger Agreement; (b) any written notice or other written communication from any governmental authority in connection with the transactions contemplated by this Agreement; and (c) any legal action commenced or, to its knowledge, threatened in writing against, relating to or involving or otherwise affecting the Company, Parent or their respective subsidiaries, as the case may be, that relate to the consummation of the transactions contemplated by the Merger Agreement. However, a party’s good faith failure to comply with the foregoing obligation shall not provide any other party the right not to effect the transactions contemplated by the Merger Agreement unless otherwise expressly provided therein.
Stockholder Litigation
Except as otherwise described in “The Merger Agreement—Filings; Other Actions; Notification”, the Company shall control any stockholder litigation against the Company, any of its subsidiaries or any of their respective directors or executive officers relating to the Merger Agreement, the Merger or any of the other transactions contemplated by the Merger Agreement. The Company has agreed to (i) consult with Parent regularly and give Parent a reasonable opportunity to participate in the defense or settlement thereof and (ii) not settle or offer to settle any such litigation without the prior written consent of Parent (such consent not to be unreasonably withheld, conditioned or delayed).
Takeover Statutes
If any “control share acquisition,” “fair price,” “moratorium” or other anti-takeover or similar statute or regulation shall become applicable to the transactions contemplated by the Merger Agreement (other than Section 203 of the DGCL), each of the Company, Parent and Merger Sub and the respective members of their boards of directors shall, to the extent legally permitted, use reasonable best efforts to grant such approvals and to take such actions as are reasonably necessary so that such transactions may be consummated as promptly as practicable and so that the effects of any such statute or regulation on such transactions are eliminated or minimized.
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Conditions to the Merger
Mutual Conditions
The obligations of each of the Company, Parent and Merger Sub to consummate the Merger are subject to the satisfaction of the following conditions:
the receipt of the Company Stockholder Approval;
the absence of any court order (whether temporary, preliminary or permanent) prohibiting the consummation of the Merger; and
the expiration or early termination of the antitrust waiting period (and any extensions) under the HSR Act applicable to the consummation of the Merger.
Additional Conditions to the Obligations of Parent and Merger Sub
The obligations of Parent and Merger Sub to consummate the Merger are subject to the satisfaction of the following further conditions:
the Company must have performed in all material respects all obligations under the Merger Agreement required to be performed by it at or prior to the Effective Time;
(i) the representations and warranties of the Company relating to certain aspects of its organization, good standing, and qualifications, corporate authority and approval, the execution of the Merger Agreement not resulting in a breach or default under the organization documents of the Company or any of its subsidiaries, certain aspects of its and its subsidiaries’ capitalization, the inapplicability of certain takeover statutes and the absence of undisclosed brokerage or finders’ fees, must be true in all material respects, (ii) the representations and warranties of the Company relating to the capital structure of the Company and its subsidiaries and the absence of a Company material adverse effect must be true and correct except for de minimis inaccuracies and (iii) the remaining representations and warranties of the Company (without giving effect to any “materiality” qualifiers or qualifiers of similar import set forth therein) must be true and correct in all material respects, in each case, as of the date of the Merger Agreement and as of the date of the Closing as though made on and as of such date and time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct in all material respects as of such earlier date), and in the case of clause (iii) the failure of such representation and warranties to be true and correct has not had and is not reasonably likely to have a Company material adverse effect;
there shall have been no Company material adverse effect since the date of the Merger Agreement; and
Parent shall have received at the Effective Time a certificate signed on behalf of the Company by an authorized officer of the Company certifying that all of the above conditions have been satisfied.
Additional Conditions to the Obligations of the Company
The obligations of the Company to consummate the Merger are subject to the satisfaction of the following further conditions:
each of Parent and Merger Sub must have performed in all material respects all obligations under the Merger Agreement required to be performed by it at or prior to the Effective Time;
(i) the representations and warranties of Parent relating to certain aspects of its organization, good standing, and qualifications, corporate authority and approval, the execution of the Merger Agreement not resulting in a breach or default under the organization documents of Parent or any of its subsidiaries and the absence of undisclosed brokerage or finders’ fees, must be true in all material respects and (ii) the other representations and warranties of Parent (without giving effect to any “materiality” qualifiers or qualifiers of similar import set forth therein) shall be true and correct in all as of the date of the Merger Agreement and as of the date of the Closing as though made on and as of such date and time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct in all material respects as of such earlier date) and in the case of clause (ii) the failure of such representation and warranties to be true and correct has not had and is not reasonably likely to have a material adverse effect on Parent; and
the Company shall have received at the Effective Time a certificate signed by an authorized officer of Parent certifying that all of the above conditions have been satisfied.
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Frustration of Closing Conditions
None of Parent, Merger Sub or the Company may rely, either as a basis for not consummating the Merger or for terminating the Merger Agreement, on the failure of any condition set forth above, as the case may be, if such failure was caused by such party’s breach in any material respect of any provision of the Merger Agreement.
Termination
The Company and Parent may, by mutual written consent, terminate the Merger Agreement and abandon the Merger at any time prior to the Effective Time.
The Merger Agreement may also be terminated and the Merger abandoned at any time prior to the Effective Time as follows:
by either Parent or the Company, if:
the Merger has not been consummated on or before the End Date;
any court has issued an order permanently restraining, enjoining or otherwise prohibiting the Merger and such order or other action is, or has become, final and non-appealable;
at the Special Meeting, including any adjournment or postponement thereof, the Company’s stockholders do not approve the Merger Proposal; or
there is an uncured breach by the other party of any representation, warranty or covenant that results in the failure of the related closing condition to be satisfied.
by the Company, if:
prior to the Company Stockholder Approval, the Board authorizes the Company to enter into an agreement for a Superior Proposal, subject to the Company having first complied with certain matching rights and other obligations set forth in the Merger Agreement and paid the Termination Fee (as defined below); or
the Company has irrevocably confirmed to Parent that all of its conditions to the Merger, including the parties’ mutual conditions to the Merger, have been satisfied (other than those conditions that by their terms are to be satisfied at the closing of the Merger or have been waived by the Company), the Company is ready, willing and able to consummate the closing of the Merger and Parent and Merger Sub nonetheless fail to complete the Closing when required by the Merger Agreement.
by Parent, if:
prior to the Company Stockholder Approval, the Board makes an Adverse Recommendation Change; or
the Company materially breaches its non-solicitation obligations and such breach results in an Alternative Proposal.
Termination Fee
In certain circumstances, the Company may be required to pay Parent a one-time fee equal to $20,000,000 in cash (the “Termination Fee”) if the Merger Agreement is terminated. This termination fee will be payable by the Company if the Merger Agreement is terminated:
by the Company in order to enter into an agreement for a Superior Proposal;
by Parent if (i) prior to receipt of the Company Stockholder Approval, an Adverse Recommendation Change has occurred or (ii) the Company has materially breached its non-solicitation obligations and such breach has led to receipt of an Acquisition Proposal;
by either Parent or the Company if, (i) prior to receipt of the Company Stockholder Approval (x) the Merger has not been consummated by the End Date, (y) the Company’s stockholders do not approve Merger Agreement at the stockholder meeting or (z) Parent terminates as a result of an uncured breach by the Company of any representation, warranty or covenant that results in the failure of the related closing condition to be satisfied, (ii) an Acquisition Proposal is publicly announced and not withdrawn prior to the receipt of the Company Stockholder Approval and the termination of the Merger
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Agreement, and (iii) within 12 months after termination of the Merger Agreement, the Company enters into a definitive agreement in respect of, or the Board approves or recommends, an Acquisition Proposal, or an Acquisition Proposal is consummated (with the percentages set forth in the definition of such term in the Merger Agreement changed from 20% to 50%).
In the case of the first bullet above, the Company must pay Parent the Termination Fee immediately before and as a condition to such termination of the Merger Agreement.
In the case of the second bullet above, the Company must pay Parent the Termination Fee within two business days after such termination.
In the case of the third bullet above, the Company must pay Parent the Termination Fee concurrently with the earlier of the execution, approval, recommendation or consummation of such Acquisition Proposal described in clause (iii) of the third bullet.
Liquidated Damages Amount
If the Merger Agreement is terminated by the Company (i) if Parent breaches any representation, warranty or covenant that results in the failure of the related closing condition to be satisfied, subject to a cure period in certain circumstances or (ii) if the conditions to Parent’s obligations to consummate the Merger are satisfied or waived, and Parent does not consummate the Merger when required by the Merger Agreement, then Parent will be obligated to pay to the Company a one-time Liquidated Damages Amount equal to $50,000,000 in cash. The Alden Funds have agreed to guarantee Parent’s obligation to pay the Liquidated Damages Amount to the Company and certain other specified payments to the Company pursuant to the Limited Guarantee, subject to the terms and obligations set forth therein. However, such amount will not be payable if at the time that the Company terminates the Merger Agreement, Parent could have terminated the Merger Agreement as a result of the Company’s breach of its non-solicitation obligations or of its representations, warranties or covenants.
Remedies
The parties agree that if the Merger Agreement is terminated and the Termination Fee becomes due and payable and is paid by the Company, the Termination Fee will be Parent’s and Merger Sub’s sole and exclusive remedy against the Company with respect to the Merger Agreement.
In addition, the parties agree that if the Merger Agreement is terminated and the Liquidated Damages Amount becomes due and payable and is paid by Parent, the Liquidated Damages Amount will be the Company’s sole and exclusive remedy against Parent and Merger Sub with respect to the Merger Agreement.
Other than as described above, termination of the Merger Agreement will not relieve any party to the Merger Agreement of any liability or damages incurred or suffered by the other party resulting from willful breach of such party.
Prior to the termination of the Merger Agreement, the parties are also entitled to an injunction or injunctions to prevent a breach of the Merger Agreement, and to specifically enforce the performance of the terms and provisions of the Merger Agreement. The Company is entitled to specific performance of Parent’s financing obligations set forth in the Equity Commitment Letter and Parent’s and Merger Sub’s obligations to effect and consummate the Merger in the event that the Company has irrevocably confirmed to Parent that all of its conditions to the Merger, including the parties’ mutual conditions to the Merger, have been satisfied (other than those conditions that by their terms are to be satisfied at the closing of the Merger or have been waived by the Company), the Company is ready, willing and able to consummate the closing of the Merger and Parent and Merger Sub fail to complete the Closing when required by the Merger Agreement. There is no requirement to obtain, furnish or post any bond with or as a condition to obtaining such injunction or injunctions.
Indemnification; Directors’ and Officers’ Insurance
For six years after the Effective Time, Parent and the surviving corporation will indemnify and hold harmless the present and former officers, directors, employees, fiduciaries and agents of the Company and its subsidiaries (the “Indemnified Persons”) in respect of acts or omissions occurring at or prior to the Effective Time to the fullest extent permitted by the DGCL or any other applicable law or provided under the Company’s organizational documents.
For six years after the Effective Time, Parent and the surviving corporation will cause to be maintained in effect provisions in the surviving corporation’s certificate of incorporation and by-laws (or in such documents of any
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successor to the business of the surviving corporation) regarding elimination of liability of directors, indemnification of officers, directors, employees, fiduciaries and agents and advancement of expenses that are no less advantageous to the intended beneficiaries than the corresponding provisions in existence on the date of the Merger Agreement.
Prior to the Effective Time, the Company will obtain and fully pay the premium for the extension of (i) the directors’ and officers’ liability coverage of the Company’s existing directors’ and officers’ insurance policies and (ii) the Company’s existing fiduciary liability insurance policies from one or more insurance carriers with the same or better credit rating as the Company’s insurance carrier as of the date of the Merger Agreement with respect to directors’ and officers’ liability insurance and fiduciary liability insurance (collectively, “D&O Insurance”), in each case for a claims reporting or discovery period of at least six years from and after the Effective Time with respect to any claim in respect of acts or omissions occurring prior to the Effective Time that are, with respect to coverage and amount, no less favorable than those of the Company’s existing D&O Insurance. If the Company for any reason fails to obtain such “tail” insurance policies as of the Effective Time, for six years after the Effective Time, the surviving corporation will provide D&O Insurance in respect of acts or omissions occurring prior to the Effective Time covering the persons currently covered by the Company’s existing D&O Insurance. All such policies must have terms, conditions, coverage and amounts that are no less favorable in the aggregate to the insured directors and officers than the policies maintained by the Company as of the signing of the Merger Agreement. If the aggregate annual premium of the policies exceeds 300% of the per annum premium rate paid by the Company and its subsidiaries in its last full fiscal year as of the date of the Merger Agreement for such policies, the surviving corporation will be required to obtain D&O Insurance with the greatest coverage available, with respect to matters occurring prior to the Effective Time, for a cost not exceeding such amount.
If Parent, the surviving corporation or any of its successors or assigns (i) consolidates with or merges into any person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of Parent or the surviving corporation, as the case may be, shall assume the obligations set forth under the Merger Agreement.
The Indemnified Persons are third-party beneficiaries of the indemnification provisions of the Merger Agreement and have the right to enforce such provisions after the consummation of the Merger.
Amendments and Waivers
Prior to the Effective Time, any provision of the Merger Agreement may be amended or waived, if such amendment or waiver is in writing and is signed, in the case of an amendment, by each party or, in the case of a waiver, by each party against whom the waiver is to be effective. After the Company Stockholder Approval has been obtained, there will be no amendment or waiver that would require the further approval of the stockholders of the Company under the DGCL without such approval having first been obtained. Notwithstanding the foregoing, the condition requiring the Company Stockholder Approval is not waivable by any party.
Governing Law
The Merger Agreement is governed by the laws of the State of Delaware, without regard to the conflicts of law rules in other jurisdictions.
Rights Plan Amendment
On February 16, 2021, in connection with the transactions contemplated by the Merger Agreement, the Company entered into an Amendment No. 1 (the “Company Rights Plan Amendment”) to the Rights Agreement (the “Company Rights Plan”) dated as of July 28, 2020 by and between the Company and Computershare Trust Company, N.A., a federally chartered trust company. The Company Rights Plan Amendment provides, among other things, that (i) neither the approval, execution, delivery or performance of the Merger Agreement or the other contracts or instruments related thereto, nor the announcement or the consummation of the Merger, will (a) cause the Rights (as defined in the Company Rights Plan) to become exercisable, (b) cause Parent, Merger Sub or any of their Affiliates (as defined in the Company Rights Plan) or Associates (as defined in the Company Rights Plan) to become an Acquiring Person (as defined in the Company Rights Pan) or (c) give rise to a Stock Acquisition Date (as defined in the Company Rights Plan), Distribution Date (as defined in the Company Rights Plan) or Section 9(a)(ii) Event (as defined in the Company Rights Plan), (ii) the Company Rights will expire in their entirety, and the Company Rights Plan will terminate, immediately prior to the Effective Time (but only if the Effective Time occurs) without any consideration payable therefor or in respect thereof, and (iii) the “Acting in Concert” (as defined in the Company Rights Plan) provisions of the Company Rights Plan will be removed.
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PROPOSAL 2
PROPOSAL 2—MERGER COMPENSATION PROPOSAL
Your Board of Directors recommends a vote FOR the non-binding, advisory vote on the compensation of the Company’s named executive officers in connection with the Merger.
Golden Parachute Compensation
This section sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation of each of the Company’s named executive officers, that is based on or otherwise relates to the Merger and that will or may become payable to the named executive officers at the completion of the Merger or on a qualifying termination of employment upon or following the consummation of the Merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section we use such term to describe the Merger-related compensation payable to the Company’s named executive officers. The “golden parachute” compensation payable to these individuals is subject to a non-binding advisory vote of the Company’s stockholders.
The table below sets forth, for the purposes of this golden parachute disclosure, the amount of payments and benefits (on a pre-tax basis) that each of the Company’s named executive officers would receive based on the following: (i) the Effective Time occurs on July 1, 2021, (ii) each named executive officer experiences a qualifying termination of employment at such time, (iii) the named executive officer’s base salary rate and annual target bonus remain unchanged from those in effect as of the date of this filing, (iv) the Company Options and the Company RSUs outstanding and unvested as of July 1, 2021, taking into account any vesting that will occur prior to July 1, 2021 in accordance with their terms without regard to the Merger, (v) the price of a share of Company common stock on the completion of the Merger is $17.25, and (vi) each named executive officer has properly executed any required releases and complied with all requirements (including any applicable restrictive covenants) necessary in order to receive the payments and benefits. Some of the assumptions used in the table below are based upon information not currently available and, as a result, the actual amounts to be received by any of the individuals below may materially differ from the amounts set forth below.
Name