UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of Report (Date of earliest event reported): June 25, 2008
EQUITY
MEDIA HOLDINGS CORPORATION
(Exact
Name of Registrant as Specified in Charter)
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Delaware
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000-51418
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20-2763411
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(State
or Other Jurisdiction
of
Incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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One
Shackleford Drive, Suite 400
Little
Rock, Arkansas
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72211
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (501) 219-2400
(Former
Name or Former Address, if Changed Since Last Report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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¨
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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General
Equity
Media Holdings Corporation (“Equity Media”) has closed an asset sale transaction
with Luken Communications, LLC, a group led by Equity Media’s largest
shareholder, Henry Luken III (the “Investors”). The Investors purchased Equity
Media’s Retro Television Network (RTN) subsidiary for $18.5 million. Equity
Media has the option to repurchase RTN at any time during the next six months.
Concurrently with the closing of the RTN sale, the Investors purchased for
$1.5
million warrants to purchase up to 8,050,000 shares of Equity Media for $1.10
per share. Equity Media also has entered into asset purchase agreements with
the
Investors for the sale by Equity Media of certain television stations. Equity
Media has received a $5.0 million prepayment on the stations sale from the
Investors. The stations sale will be consummated, and Equity Media will receive
the remaining payment of $12.5 million, upon receipt of FCC and certain other
approvals. Following consummation of the station sales, Equity Media will
continue to own and/or operate 100 stations in 35 markets representing 24.8%
of
U.S. television households based on Equity Media’s current stations roster.
The
transactions with the Investors were approved by a special committee of the
board of directors of Equity Media, which received an opinion from an
independent investment bank that the consideration being received in the
transactions was fair, from a financial point of view, for Equity Media’s
unaffiliated stockholders.
Equity
Media has used a portion of the current proceeds from the transactions to retire
a portion of its credit facilities in a principal amount of $17.5 million.
The
remaining current and future proceeds from the transactions will be used for
working capital and additional debt reduction and to fund operations as Equity
Media continues to explore ways to maximize shareholder value, including
pursuing strategic partnerships, potential further sales of assets, cost cutting
initiatives and additional financings. Equity Media has entered into an amended
engagement agreement with Thomas Weisel Partners with respect to these
efforts.
Equity
Media has also executed an amendment to its existing senior secured credit
facility.
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Item
1.01
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Entry
into a Material Definitive
Agreement.
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Stations
Sale
Equity
Media has entered into agreements with the Investors for the sale (“Stations
Sale”) of all of the assets used in the business and operations of television
stations in six markets, including licenses, construction permits and other
instruments of authorization (“Licenses”) issued by the Federal Communications
Commission (“FCC”) and certain other assets (collectively with the Licenses, the
“Station Assets”) for a total purchase price of $17.5 million (“Stations
Purchase Price”). The markets in which these stations operate
include:
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·
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Fort
Myers/Naples (Florida),
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·
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Minneapolis
(Minnesota),
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Oklahoma
City (Oklahoma), and
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Equity
Media has received $5.0 million as an initial payment on the Stations Purchase
Price from the Investors, which initial payment is nonrefundable except in
the
event Equity Media determines to sell the Station Assets to another party prior
to consummating the sale of same with the Investors and in certain other
circumstances. Equity Media will receive the remaining $12.5 million of the
Stations Purchase Price upon consummation of the Stations Sale with the
Investors. Consummation of the Stations Sale is subject to Univision’s right of
first refusal held on the Stations and customary Federal Communication
Commission approval.
Equity
Media has the right to terminate the agreements prior to consummation of the
sale, subject to certain provisions (including repayment of the $5.0 million
initial prepayment). In the event Equity Media secures an offer to sell the
Station Assets to a party other than the Investors for a purchase price of
less
than $22 million, the Investors shall have the right to match the terms of
such
offer and proceed to consummation under such terms. The Investors have the
right
to terminate the agreement if the Stations Sale has not been consummated within
18 months of the filing date of the FCC transfer applications.
In
addition to the Stations Purchase Price, if within the 12-month period following
the closing of the Stations Sale, the Investors sell the Stations, collectively
or individually, to an unaffiliated third party, for an amount in excess of
the
Stations Purchase Price, Equity Media will be entitled to 50% of such excess.
If, within the second 12-month period following the closing of the Station
Sale,
the Investors sell the Stations, collectively or individually, to an
unaffiliated third party, for an amount in excess of the Stations Purchase
Price, Equity Media will be entitled to 25% of such excess.
Subject
to Univision’s right of first refusal, Equity Media and the Investors have
agreed to prepare applications for assignment of the Licenses and to fully
prosecute the applications. Each party will bear its own costs, and the filing
fees will be split evenly. The closing of the Stations Sale will occur within
twenty business days after the grant of FCC consent becomes a final
order.
Amendment
to Credit Facility
Equity
Media has entered into a third amendment (“Third Amendment”) to its Third
Amended and Restated Credit Agreement (“Credit Agreement”). The Credit Agreement
had been previously amended on March 19, 2008, as reported by the Company in
its
Report on Form 8-K filed with the Securities and Exchange Commission on March
20, 2008, and on April 28, 2008, as reported by the Company in its Report on
Form 8-K filed with the Securities and Exchange Commission on April 30, 2008.
Under
the
terms of the Third Amendment, the lender group has agreed to forbear from
exercising certain of its rights and remedies with respect to existing defaults
and certain other defaults described in the Third Amendment through the earlier
of (a) December 23, 2008 and (b) the date of occurrence of events of default
or
certain other events. Notwithstanding the foregoing, the lenders may terminate
the forbearance on and after September 15, 2008 in their sole discretion. The
Third Amendment also provides for the lender group to make additional loans
to
the Company in an amount not to exceed $6.5 million, subject to certain
conditions in the Third Amendment and the Lenders’ sole discretion.
Equity
Media used a portion of the proceeds from the transactions with the Investors
to
pay down a portion of the Credit Facility. Following this pay down,
approximately $38.5 million remains outstanding under the Credit Facility.
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Item
2.01
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Completion
of Acquisition or Disposition of
Assets.
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Equity
Media received $18.5 million in cash for all of the outstanding shares of Retro
Programming Services, Inc. (“RTN”). RTN is a growing network with 73 affiliates
that currently covers 38% of U.S. television households. Equity Media has the
option (“RTN Option”) to repurchase RTN for $27.75 million plus an amount equal
to the capital and net operating expenditures (capped at $1.75 million in the
aggregate) invested by the Investors prior to the repurchase (together with
a
return on such expenditures at the rate of 12% per annum), which is exercisable
at any time through December 24, 2008. Under certain circumstances related
to
Equity Media’s failure to consummate the Stations Sale, the Investors will be
entitled to require Equity Media exercise the RTN Option. The Investors received
a license to utilize Equity Media’s Central Automated Satellite Hub (“CASH”)
delivery technology in operating RTN. Equity Media will maintain the RTN
operations center in Little Rock, Arkansas and create communications links
between any new operations center created by Luken Communications, LLC. These
operations centers will serve as backups to each other and the data required
to
operate each of the centers will be redundant.
As
part
of its engagement by Equity Media, Thomas Weisel Partners will explore strategic
alternatives, including potentially working with strategic partners, for the
repurchase of Retro Television Network during the option period and also will
assist in identifying additional sources to help finance additional digital
networks, similar to the RTN model, that Equity Media may develop using the
CASH
technology system. Management of Equity Media believes that the transaction
with
the Investors will allow for RTN to continue expanding affiliate relationships
and its national reach during the option period. Equity Media will work with
the
Investors to assist in the continued growth of RTN as Equity Media makes efforts
to realize on its current objective of repurchasing RTN.
In
addition to the $18.5 million that was received by Equity Media at closing
of
the RTN sale, if within the 12-month period following the closing of the RTN
sale, the Investors sell RTN to an unaffiliated third party, for an amount
in
excess of $18.5 million, Equity Media will be entitled to receive 50% of such
excess.
In
the
event the RTN Option is exercised by Equity Media prior to the consummation
of
the Stations Sale, a portion of the Option Price shall be applied (and retained
by Equity Media) as an additional prepayment of $12.5 million for the Stations
Purchase, subject to certain third-party consents.
Immediately
prior to the sale of RTN to the Investors, Equity Media entered into an
agreement (“New RTN Rights Agreement”) with Larry Morton, a director, and Neal
Ardman, consultant and co-founder of RTN and Retro Television Networks, LLC
(“Retro LLC”), a company affiliated with Messrs. Morton and Ardman, which
superseded in its entirety an agreement entered into with RTN and its affiliates
and Equity Media in December 2005 under which Retro LLC received certain rights
to receive 10% of net sales revenues of RTN and 20% of the purchase price upon
any sale of Retro LLC. Under the New RTN Rights Agreement, Retro LLC agreed,
among other things, that the sale of RTN by Equity Media to Luken Communications
would not trigger Retro LLC’s right to receive a portion of the purchase price
and that while RTN is owned by Luken Communications, Retro LLC would be entitled
only to 5% of pre-tax earnings. Retro LLC also agreed that any exercise of
the
RTN Option by Equity Media would not trigger Retro LLC’s right to receive a
portion of the purchase price. Upon an exercise of the RTN Option pursuant
to
which RTN is acquired by Equity Media or an affiliate thereof, Retro LLC would
have the right going forward to 10% of pre-tax earnings of RTN and 20% of any
sale proceeds (net of transaction costs).
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Item
3.02
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Unregistered
Sales of Equity
Securities.
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Equity
Media sold warrants to the Investors to purchase 8,050,000 shares of Equity
Media’s common stock at an exercise price of $1.10 per share, exercisable
through September 7, 2009 (the “Luken Warrants”). The purchase price for the
warrants was $1.5 million. In the event the Luken Warrants are exercised, the
Investors’ ownership stake would increase from approximately 20% ownership to
approximately 30% ownership. In connection with the amended engagement agreement
between Thomas Weisel Partners and Equity Media, Thomas Weisel Partners received
warrants to purchase up to 1,075,279 shares on the same terms as the Luken
Warrants, as well as a cash fee, in consideration of its assistance with the
transactions with the Investors.
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Item
5.02
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Departure
of Directors or Certain Officers; Election of Directors; Appointment
of
Certain Officers; Compensatory Arrangements of Certain
Officers.
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Concurrently
with the sale of RTN to the Investors, Equity Media entered into a separation
agreement with Larry Morton providing for Mr. Morton’s resignation as RTN’s
President
and Chief Executive Officer and for severance payments and benefits to be
provided to Mr. Morton in connection with such resignation and his
previously
announced departure from Equity Media as its
President
and Chief Executive Officer. Mr. Morton remains as a director of Equity Media.
Under the terms of the separation agreement:
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·
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Mr.
Morton receives payment of his current annual base salary through
the
payment of $26,667 per month in each of the 44 consecutive months
starting
with the current month;
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·
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A
single payment of $3,667 in lieu of any benefits Mr. Morton would
have
received if he had been able to participate in Equity Media’s retirement
and pension plans from the Execution Date through February 24,
2012.
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Continued
enrollment in Equity Media’s health plans through a prescribed
period.
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Mr.
Morton shall surrender and cancel all stock options previously granted
to
him that were unvested prior to the Execution
date.
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Monthly
payments beginning in June 2008 and continuing through February 2012
in
the amount of $2,013.36 in lieu of any provision of life, disability,
accidental death and dismemberment and/or other insurance
benefits.
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Mr.
Morton has entered into a thirty-six month consulting agreement with Equity
Media. In consideration of a $5,000 per month fee, Mr. Morton
shall:
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Assist
Equity Media in connection with repurchase of Retro Programming Services,
Inc. from Luken Communications;
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Assist
in development of RTN concept in conjunction with Luken
Communications.
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At
Equity Media’s direction, assist Equity Media with Federal Communications
Commission planning for current Equity Media
stations.
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Assist
Equity Media’s officers and employees in matters relating to Equity
Media’s business.
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Equity
Media also shall have a right of first refusal with respect to certain projects
that Mr. Morton may develop outside of his efforts under his consulting
agreement with Equity Media.
Concurrently
with the consummation of the sale of RTN to the Investors, Equity Media entered
into a thirty-six month consulting agreement with NIA Broadcasting, LLC, an
affiliate of Neal Ardman. In consideration of a $30,000 per month fee, NIA
Broadcasting, LLC shall:
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Oversee
engineering for Equity Media and RTN, including, at Equity Media’s
direction, build-out of network operating center for RTN in
Tennessee;
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Assist
in operation of Equity Media
stations;
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Assist
in advertising sales for Equity Media and RTN as directed by Equity
Media;
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Assist
in management of back-office systems
personnel;
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Assist
in the operation of the C.A.S.H.
System;
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Assist
Equity Media’s officers and employees in matters relating to Equity
Media’s business.
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In
consideration for NIA Broadcasting entering into this agreement and for other
arrangements with Equity Media, Equity Media paid it $175,000 upon execution
of
the consulting agreement and will pay it additional consideration of $43,750
per
month for each of the four monthly periods beginning July 1, 2008 with respect
to NIA Broadcasting's assistance in building out the backup RTN facilities.
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Item
9.01.
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Financial
Statements, Pro Forma Financial Information and
Exhibits
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10.1
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Form
of New RTN Rights Agreement by and among Messrs Morton and Ardman,
Equity
Media, CASH and Retro LLC, dated as of June 24,
2008*
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10.2
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Form
of Stock Purchase Agreement, dated as of June 24, 2008, by and among
Equity Media, CASH, RTN and Luken
Communications*
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10.3
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Form
of Warrant Purchase Agreement dated as of June 24, 2008, by and between
Equity Media and Luken
Communications*
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10.4
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Form
of Private Warrant issued under the Warrant Purchase
Agreement*
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10.5
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Form
of Separation Agreement by and between Mr. Morton and Equity
Media*
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10.6
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Form
of Consulting Agreement by and between Mr. Morton and Equity
Media*
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10.7
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Form
of Consulting Agreement by and between NIA Broadcasting and Equity
Media*
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10.8
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Form
of Asset Purchase Agreement by and between EBC Minneapolis, Inc.
and Luken
Communications (Minneapolis
Station)*
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10.9
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Form
of Asset Purchase Agreement by and between Woodward Broadcasting,
Inc. and
Luken Communications (Tulsa
Stations)*
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10.10
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Form
of Asset Purchase Agreement by and between EBC Southwest Florida,
Inc. and
Luken Communications (Ft. Meyers
Stations)*
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10.11
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Form
of Asset Purchase Agreement by and between Borger Broadcasting, Inc.
and
Luken Communications (Waco
Stations)*
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10.12
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Form
of Asset Purchase Agreement by and between Woodward Broadcasting,
Inc. and
Luken Communications (Oklahoma City
Stations)*
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10.13
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Form
of Asset Purchase Agreement by and between Borger Broadcasting, Inc.
and
Luken Communications (Amarillo
Stations)*
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10.14
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Form
of Third Amendment to Third Amended and Restated Credit Agreement
and
Forbearance Agreement*
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99.1
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Press
release, dated June 25, 2008, announcing transactions with Luken
Communications, LLC and other
transactions*
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__________________________
*
Filed
herewith.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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July
1,
2008
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EQUITY
MEDIA
HOLDINGS CORPORATION
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By:
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John
Oxendine
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Chief
Executive Officer
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