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Item 1.01
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Entry into a Material Definitive Agreement.
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On
May 9, 2017, Saga Broadcasting, LLC, a wholly-owned subsidiary of Saga Communications, Inc. and a Delaware limited liability company
(“Saga Broadcasting”), Saga Quad States Communications, LLC, a wholly-owned subsidiary of Saga Communications, Inc.
and a Delaware limited liability company (“Saga Quad States,” and together with Saga Broadcasting, “Seller”),
and solely in its role as Guarantor under the Morgan Murphy Agreement (as defined below), Saga Communications, Inc., a Delaware
corporation (“Saga”), entered into an Asset Purchase Agreement (the “Morgan Murphy Agreement”) with Evening
Telegram Company d/b/a Morgan Murphy Media, a Wisconsin corporation (“Buyer”) to sell Seller’s television segment
for an aggregate purchase price of $66,621,421.59, subject to certain purchase price adjustments. The assets to be sold under the
Morgan Murphy Agreement include all of the assets of Seller related to the operation of the following television broadcast stations:
KAVU-TV in Victoria, Texas, KMOL-LD, KQZY-LP, KUNU-LP, KVTX-LP, KXTS-LD in Victoria, Texas, KVCT-TV in Victoria, Texas (“KVCT”),
KOAM-TV in Pittsburg, Kansas, and KFJX-TV in Pittsburg, Kansas (“KFJX”). The Morgan Murphy Agreement provides for $3,500,000.00
of the purchase price to be held in escrow pursuant to the terms of a Deposit Escrow Agreement entered into on May 9, 2017 by and
among Seller, Buyer and
First Business Trust & Investments
, as the escrow agent. Saga
expects the proposed transaction to close in the third quarter of fiscal year 2017, upon fulfillment of certain conditions precedent
to closing, including, without limitation, receipt of United States Federal Communications Commission (“FCC”) consent
to the assignment of the FCC licenses to be sold to Buyer, as contemplated by the Morgan Murphy Agreement.
The Morgan Murphy Agreement
contains representations and warranties of Seller and Buyer that are customary for this type of transaction, which survive for
eighteen months after the closing date of the transaction, except for certain fundamental representations and warranties, which
survive the closing date indefinitely. Certain of the representation and warranties in the Morgan Murphy Agreement are qualified
by disclosure schedules that may contain nonpublic information. These disclosure schedules and the exhibits to the Morgan Murphy
Agreement (which include forms of a bill of sale and assignment agreements) are not material under federal securities law. The
Morgan Murphy Agreement also contains customary covenants and agreements by and among the parties, as well as customary mutual
indemnification obligations.
Surtsey
Media, LLC, a Michigan limited liability company (“Surtsey”), holds the FCC licenses and certain other assets related
to the operation of KVCT and KFJX (the “Surtsey Assets”). As previously disclosed by Saga in prior securities filings,
Seller owns certain options to purchase substantially all of the assets of KVCT and KFJX from Surtsey (the “Options”),
which Options are freely assignable by Seller without Surtsey’s consent. Simultaneously with the execution of the Morgan
Murphy Agreement, Seller and
SagamoreHill Midwest, LLC, a Delaware limited liability company
(“Assignee”), entered into an agreement for the Assignment of Options, pursuant to which Seller assigned the Options
to Assignee.
On May 9, 2017, Saga
Quad States entered into an Asset Purchase Agreement (the “Apex Agreement”) with Apex Media Corporation, a South Carolina
corporation (“AMC”), Pearce Development, LLC f/k/a Apex Real Property, LLC, a South Carolina limited liability company
(“ARP” and together with AMC, “Sellers”), and, solely in his role as guarantor under the Apex Agreement,
G. Dean Pearce, to purchase for a price of $23,000,000.00 (subject to certain purchase price adjustments) plus the right to air
certain radio commercials, substantially all of the assets related to the operation of the following radio or translator stations:
WCKN(FM), Moncks Corner, South Carolina; WMXZ(FM), Isle of Palms, South Carolina; WXST(FM), Hollywood, South Carolina; WAVF(FM),
Hanahan, South Carolina; WSPO(AM), Charleston, South Carolina; W261DG, Charleston, South Carolina; W257BQ, Charleston, South Carolina;
WVSC(FM), Port Royal, South Carolina; WLHH(FM), Ridgeland, South Carolina; WALI(FM), Walterboro, South Carolina; W256CB, Beaufort,
South Carolina; and W293BZ, Hilton Head, South Carolina. Mr. Pearce is President of AMC and ARP, and currently serves on the Board
of Directors of Saga. Upon execution of the Apex Agreement and pursuant to an Escrow Agreement among Saga Quad States, Sellers,
and Smithwick & Belendiuk, P.C. and Putbrese, Hunsaker & Trent, PC, Saga Quad States paid a deposit in the amount of $1,150,000.00
to be applied toward the purchase price at the closing of the transaction (or otherwise disbursed under the terms of the Apex Agreement).
Saga expects this transaction to close in the third quarter of fiscal year 2017, simultaneously with the closing under the Morgan
Murphy Agreement, upon fulfillment of certain conditions precedent to closing, including, without limitation, receipt of FCC consent
to the assignment of the FCC licenses to be sold to Saga Quad States, as contemplated by the Apex Agreement.
The Apex Agreement
contains representations and warranties of Saga Quad States and Sellers that are customary for this type of transaction. Sellers’
representations and warranties survive for eighteen months after the closing date of the transaction, except for certain representations
and warranties related to financial statements and tax matters, which survive for six months following the expiration of the relevant
statute of limitations, and certain fundamental representations and warranties, which survive indefinitely. Saga Quad States’
representations and warranties survive indefinitely. Certain of the representation and warranties in the Apex Agreement are qualified
by disclosure schedules that may contain nonpublic information. These disclosure schedules and the exhibits to the Apex Agreement
are not material under federal securities law. The Apex Agreement also contains customary covenants and agreements by and among
the parties, as well as customary mutual indemnification obligations.
The preceding description
does not constitute a complete summary of the terms and conditions of the Morgan Murphy Agreement or the Apex Agreement. Reference
is made to the Morgan Murphy Agreement, the Apex Agreement, and the press release, attached hereto as Exhibits 10.1, 10.2, and
99.1, respectively, and incorporated herein by reference.