Note 8 - Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

8

.

Commitments and Contingencies

From time to time, we are or

may

become subject to legal proceedings and claims that arise in the normal course of our business. In our opinion, the amount of ultimate liability, if any, with respect to known actions, will

not

materially affect our financial position. However, the outcome of any

one

or more matters cannot be predicted with certainty, and the unfavorable resolution of any matter could have a material adverse effect on us.

Pending Acquisition – Sioux Falls

On

May 1, 2018,

we entered into an agreement to acquire KDLT-TV (NBC), a television station serving the Sioux Falls, South Dakota market (DMA

110

), for

$32.5

million. The transaction is subject to regulatory approvals and other customary closing conditions. We expect that this transaction will close in the

third

quarter of

2018,

using cash on hand.

Pending Merger with Raycom Media

On

June 

23,

2018,

we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with, among others, Raycom Media, Inc., a Delaware corporation (the “Raycom Merger”). Upon completion of the Raycom Merger, Raycom is expected to become a direct wholly owned subsidiary of Gray and, prior to any station divestitures due to market overlaps, we will own and/or operate

142

full-power television stations serving

92

markets. At that time, our station portfolio would reach approximately

24

 percent of U.S. television households through nearly

400

separate program streams including approximately

165

affiliates of the ABC/ NBC/CBS/FOX networks, and over

100

affiliates of CW, MyNetwork, and MeTV. These stations were ranked number-

one

in all day Nielsen ratings in

62

of the combined markets, and in

92%

of the combined markets were the number-

one

or number-

two

ranked television station. In addition to high quality television stations, we expect to acquire additional Raycom businesses that provide sports marketing, production and digital signage services, resulting in our becoming a more diversified media company.

The aggregate consideration consists of

11,500,000

shares of our common stock,

$2.85

 billion in cash (subject to certain adjustments as set forth in the Merger Agreement) and

650,000

shares of a new series of perpetual preferred stock of the Company, with a stated face value of

$1,000

per share (the “New Preferred Stock”).

We have agreed to file a registration statement, following the effective time of the Raycom Merger, covering the resale of the shares of the common stock issuable in the Raycom Merger. 

Shares of the New Preferred Stock will be issuable to holders of warrants to purchase shares of Raycom capital stock outstanding immediately prior to the effective time of the Merger. The New Preferred Stock will accrue dividends at

8%

per annum payable in cash or

8.5%

per annum payable in the form of additional New Preferred Stock, at the election of Gray. The holders of the New Preferred Stock will

not

be entitled to vote on any matter submitted to the stockholders of the Company for a vote, except as required by Georgia law. Upon a liquidation of the Company, holders of the New Preferred Stock will be entitled to receive a liquidation preference equal to

$1,000

per share plus all accrued and unpaid dividends.

Also on

June 23, 2018,

and in connection with our entry into the Merger Agreement, we entered into a financing commitment letter with Wells Fargo Bank, National Association, and a syndicate of other lenders, pursuant to which it has committed to provide the debt financing in the form of an incremental term loan facility in an aggregate principal amount of

$2.525

 billion for a portion of the purchase price to be paid to complete the Raycom Merger and the refinancing of certain existing indebtedness of Raycom. The commitment letter contains conditions to funding of the debt financing customary for commitments of this type. The incremental term loan will be secured on a pari passu basis with the other obligations of the Company and its subsidiaries under the

2017

Senior Credit Facility. Various economic terms of the debt financing are subject to change in the process of syndication.

The consummation of the Raycom Merger is subject to the satisfaction or waiver of certain customary conditions, including: (i) the receipt of approval from the Federal Communications Commission, (ii) the expiration or early termination of the waiting period applicable to the Raycom Merger under the Hart-Scott-Rodino Antitrust Improvements Act of

1976,

as amended, (iii) the absence of certain legal impediments to the consummation of the Raycom Merger, and (iv) the receipt of certain customary

third

-party consents. We believe that the Raycom Merger will be completed during the

fourth

quarter of

2018.

Either party

may

terminate the Raycom Merger if it is

not

consummated on or before

June 

30,

2019,

with an automatic extension to

September 

30,

2019

if necessary to obtain regulatory approval under the circumstances specified in the Merger Agreement.