As filed with the Securities and Exchange Commission on October 15, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended August 31, 1997 or
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ________ to ________
Commission file number: 0-23264
EMMIS BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1542018
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
950 NORTH MERIDIAN STREET
SUITE 1200
INDIANAPOLIS, INDIANA 46204
(Address of principal executive offices) (Zip Code)
(317) 266-0100
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
- ---------- -------------
The number of shares outstanding of each of the Registrant's classes of common
stock, as of October 10, 1997, was:
8,295,927 Shares of Class A Common Stock, $.01 Par Value
2,574,470 Shares of Class B Common Stock, $.01 Par Value
<PAGE>
<PAGE>
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . . . .4
Condensed Consolidated Balance Sheets
at August 31, 1997 and February 28, 1997 . . . . . . . .4
Condensed Consolidated Statements of
Operations for the three and six months
ended August 31, 1997 and 1996 . . . . . . . . . . . . .6
Condensed Consolidated Statements of Cash
Flows for the six months ended
August 31, 1997 and 1996. . . . . . . . . . . . . . . .8
Notes to Condensed Consolidated
Financial Statements. . . . . . . . . . . . . . . . . 10
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . 16
PART II - OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders . 19
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . 19
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Emmis Broadcasting Corporation and Subsidiaries:
We have reviewed the accompanying condensed consolidated balance sheet of
Emmis Broadcasting Corporation (an Indiana corporation) and Subsidiaries
as of August 31, 1997, and the related condensed consolidated statements of
operations for the three-month and six-month periods ended August 31, 1997
and 1996 and the condensed consolidated statement of cash flows for the six-
month periods ended August 31, 1997 and 1996. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Emmis Broadcasting Corporation
as of February 28, 1997 and the related consolidated statements of operations,
changes in shareholders' equity and cash flows for the year then ended (not
presented separately herein), and in our report dated April 2, 1997, we
expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of February 28, 1997 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has
been derived.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
September 24, 1997.
<PAGE>
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
February 28, August 31,
1997 1997
------- -------
(Note 1) (unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,191 $ 5,004
Accounts receivable, net 20,831 31,915
Current income tax receivable 2,482 -
Prepaid expenses and other 4,243 5,297
-------- --------
Total current assets 28,747 42,216
Property and equipment, net 12,991 18,469
Intangible assets, net 131,743 169,434
Other assets, net 16,235 13,116
-------- --------
Total assets $ 189,716 $ 243,235
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,868 $ 55
Book cash overdraft 1,942 -
Accounts payable 3,687 3,751
Income taxes payable - 2,598
Accrued salaries and commissions 1,561 2,551
Accrued interest 174 644
Deferred revenue 1,593 2,488
Other 1,459 1,637
------- -------
Total current liabilities 13,284 13,724
LONG-TERM DEBT, NET OF CURRENT MATURITIES 112,304 161,076
OTHER NONCURRENT LIABILITIES 436 635
DEFERRED INCOME TAXES 29,270 28,400
------- -------
Total liabilities 155,294 203,835
------- -------
SHAREHOLDERS' EQUITY:
Class A common stock, $.01 par value;
authorized 34,000,000 shares; issued
and outstanding 8,410,956 shares at
February 28, 1997 and 8,281,877 shares
at August 31, 1997 84 83
Class B common stock, $.01 par value;
authorized 6,000,000 shares; issued
and outstanding 2,574,470 shares at
February 28, 1997 and August 31, 1997 26 26
Additional paid-in capital 70,949 67,888
Accumulated deficit (36,637) (28,597)
------- -------
Total shareholders' equity 34,422 39,400
------- -------
Total liabilities and shareholders'
equity $ 189,716 $ 243,235
======= =======
</TABLE>
The accompanying notes to condensed consolidated financial
statements are an integral part of these balance sheets.
<PAGE>
<PAGE>
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
(Unaudited) (Unaudited)
---------------------- ------------------
1996 1997 1996 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
GROSS BROADCASTING REVENUES $ 33,485 $ 40,055 $ 63,433 $ 73,875
LESS: AGENCY COMMISSIONS 5,414 6,166 10,012 11,424
------- ------- ------- -------
NET BROADCASTING REVENUES 28,071 33,889 53,421 62,451
Broadcasting operating expenses 12,178 15,314 25,309 31,539
Publication and other revenue, net
of operating expenses 543 246 814 491
International business development
expenses 273 267 533 605
Corporate expenses 1,371 1,728 2,839 3,372
Depreciation and amortization 1,319 1,823 2,664 3,505
Noncash compensation 1,131 1,585 2,262 2,412
Time brokerage fee - 1,416 - 1,416
------- ------- ------- -------
OPERATING INCOME 12,342 12,002 20,628 20,093
------- ------- ------- -------
OTHER INCOME (EXPENSE):
Interest expense (2,517) (4,370) (5,019) (7,019)
Other income (expense), net 215 34 236 206
------- ------- ------- -------
Total Other Income (Expense) (2,302) (4,336) (4,783) (6,813)
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 10,040 7,666 15,845 13,280
PROVISION FOR INCOME TAXES 4,000 2,994 6,300 5,240
------- ------- ------- -------
NET INCOME $ 6,040 $ 4,672 $ 9,545 $ 8,040
======== ======= ======= =======
Net income per common and common
equivalent share $ .53 $ .41 $ .83 $ .70
======== ======= ======= =======
Net income per fully diluted
common share $ .53 $ .40 $ .83 $ .69
======== ======= ======= =======
Weighted average common shares outstanding:
Before full dilution 11,411,982 11,532,609 11,452,907 11,524,351
Assuming full dilution 11,447,458 11,608,030 11,512,736 11,627,649
</TABLE>
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
<PAGE>
<PAGE>
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended August 31,
(Unaudited)
-------------------
1996 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 9,545 $ 8,040
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization of
property and equipment 682 1,222
Amortization of debt issuance costs
and cost of interest rate cap agreements 720 1,694
Amortization of intangible assets 1,982 2,283
Benefit from deferred income taxes - (870)
Compensation related to stock options
granted 1,860 2,037
Contribution to profit sharing plan paid
with common stock 402 375
Gain on sale of 60% ownership in Duncan's American
Radio, Inc. (195) -
(Increase) decrease in certain current
assets -
Accounts receivable (7,536) (11,084)
Prepaid expenses and other (12) 1,428
Increase (decrease) in certain current
liabilities -
Accounts payable (1,294) 64
Accrued salaries and commissions (1,510) 990
Accrued interest (17) 470
Deferred revenue 314 (105)
Other 600 1,034
(Increase) decrease in other assets, net (69) (417)
----- -----
Net cash provided by operating
activities 5,472 7,161
----- -----
INVESTING ACTIVITIES:
Purchases of property and equipment (3,543) (2,031)
Aquisition of WALC-FM, WKBQ-AM, and WKKX-FM - (36,964)
Net proceeds from sale of 60% ownership interest
in Duncan's American Radio, Inc. 240 -
Escrow deposit related to the acquisition of
WTLC-FM and WTLC-AM - (750)
----- -------
Net cash used by investment
activities (3,303) (39,745)
------- -------
FINANCING ACTIVITIES:
Payments on long-term debt (3,041) (5,741)
Proceeds from Long-term debt - 51,700
Purchase of interest rate cap agreements and
other debt related costs - (4,086)
Purchase of the Company's Class A Common Stock - (7,000)
Proceeds from exercise of stock options and
related income tax benefits 581 1,524
------ ------
Net cash provided (used) by
financing activities (2,460) 36,397
------ ------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (291) 3,813
CASH AND CASH EQUIVALENTS:
Beginning of period 1,218 1,191
------ ------
End of period $927 $5,004
====== ======
SUPPLEMENTAL DISCLOSURES:
Cash paid for-
Interest $ 4,316 $ 4,855
Income taxes 4,053 595
ACQUISITION OF WALC-FM, WKBQ-AM AND WKKX-FM:
Fair value of assets acquired $ 44,642
Cash paid 43,642
------
Liabilities assumed $1,000
======
</TABLE>
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
<PAGE>
<PAGE>
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------
(Unaudited)
AUGUST 31, 1997
-------------
NOTE 1. GENERAL
--------
The condensed consolidated interim financial statements included herein have
been prepared by Emmis Broadcasting Corporation and Subsidiaries (Emmis or the
Company) without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations; however, Emmis believes that the disclosures are adequate to make
the information presented not misleading. The condensed consolidated financial
statements included herein should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended February 28, 1997.
In the opinion of the registrant, the accompanying interim financial
statements contain all material adjustments (consisting only of normal recurring
adjustments), necessary to present fairly the consolidated financial position of
Emmis at August 31, 1997 and the results of its operations for the six months
ended August 31, 1997 and 1996 and its cash flows for the six months ended
August 31, 1997 and 1996.
NOTE 2. PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
-------------
On March 31, 1997, Emmis completed its acquisition of substantially all of
the assets of radio stations WALC-FM, WKBQ-AM, and WKKX-FM in St. Louis from
Zimco, Inc. for approximately $43.1 million in cash plus an agreement to
broadcast approximately $1 million in trade spots for Zimco, Inc. over a period
of several years. Emmis financed the acquisition through additional borrowings
under its existing Credit Facility. The acquisition was accounted for as a
purchase.
Concurrent with the signing of the asset purchase agreement, Emmis entered
into a time brokerage agreement that permitted Emmis to operate the acquired
stations effective December 1, 1996 through the date of closing. Operating
results of these stations are reflected in the consolidated statements of
operations for the period March 1, 1997 through August 31, 1997.
<PAGE>
On May 15, 1997, the Company entered into an agreement involving radio
station WQCD-FM in New York City whereby the current owner of the station has
the option to require the Company to purchase the station at any date through
May 2000. The current owner may extend the option for an additional one-year
period. The Company has an option to acquire the radio station during the two
month period subsequent to the current owner's option. In connection therewith,
the Company has issued an irrevocable letter of credit totaling $50 million as
security to the current owner of the Company's obligations under this
agreement. The purchase price agreed to ranges from approximately $145 million
to $160 million based on certain events and conditions as specified in the
agreement.
In connection with the above agreement, the Company entered into a time
brokerage agreement which permitted it to begin operating the station effective
July 1, 1997. This agreement expires upon the purchase of the station by the
Company or by agreement by the parties to terminate. In consideration for the
time brokerage agreement, the Company will pay a monthly fee of approximately
$700,000. If the current owner elects to extend the option beyond May 2000, the
monthly fee to operate the station will be waived during the extension period.
Operating results of WQCD-FM are reflected in the condensed consolidated
statement of operations for the period from July 1, 1997 through August 31,
1997.
A pro forma condensed consolidated statement of operations is presented below
for the three and six months ended August 31, 1996, assuming the acquisition of
WALC-FM, WKBQ-AM and WKKX-FM and the operation of WQCD-FM, under the Time
Brokerage Agreement, all had occurred on the first day of the six month period
ended August 31, 1996. Pro forma results for the three and six month periods
ended August 31, 1997, include pro forma results for March and actual results
for April through August for the acquisition of WALC-FM, WKBQ-FM and WKKX-FM and
pro forma results for March through June and actual results for July and August
for the operation of WQCD-FM. Pro forma interest expense, depreciation of
property and equipment and amortization expense related to the intangibles
resulting from the allocation of the purchase price for the above acquisition
and pro forma time brokerage fees for the operation of WQCD-FM have been
included in the pro forma statements presented below.
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED
--------------------------------
STATEMENT OF OPERATIONS
----------------------
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
------------------ -----------------
1996 1997 1996 1997
---- ---- ---- ----
Pro forma Pro forma Pro forma Pro forma
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net broadcasting revenues $ 33,710 $ 35,849 $ 63,678 $ 69,224
Broadcasting operating expenses 15,419 16,389 32,031 35,011
Publication and other revenue,
net of operating expenses 543 246 814 491
International business development
expenses 273 267 533 605
Corporate expenses 1,371 1,728 2,839 3,372
Depreciation and amortization 1,720 1,823 3,466 3,638
Noncash compensation 1,131 1,585 2,262 2,412
Time Brokerage Fee 2,125 2,125 4,250 4,250
------ ------ ------ ------
Operating income 12,214 12,178 19,111 20,427
Interest expense (3,241) (4,370) (6,467) (7,198)
Other income (expense), net 217 34 241 206
------ ------ ------ ------
Income before income taxes 9,190 7,842 12,885 13,435
Provision for income taxes 3,680 3,140 5,150 5,370
------ ------ ------ ------
Net income $ 5,510 $ 4,702 $ 7,735 $ 8,065
====== ====== ====== ======
Net income per common and common
equivalent share $ .48 $ .41 $ .68 $ .70
====== ====== ====== ======
Net income per fully diluted common
share $ .48 $ .41 $ .67 $ .69
====== ====== ====== ======
Weighted average shares outstanding
Before full dilution 11,411,982 11,532,609 11,452,907 11,524,351
Assuming full dilution 11,447,458 11,608,030 11,512,736 11,627,649
</TABLE>
The pro forma condensed consolidated statements of operations presented above
do not purport to be indicative of the results that actually would have been
obtained if the indicated transactions had been effective at the beginning of
the three and six month periods ended August 31, 1996 and 1997, and is not
intended to be a projection of future results or trends.
<PAGE>
NOTE 3. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
-------------------------------------------------
Net income per common and common equivalent share is computed by dividing net
income by the weighted average number of common shares outstanding during the
period. Weighted average common shares outstanding assumes the exercise of
stock options when the effect would be dilutive.
Fully diluted net income per share assumes the fully dilutive effect of the
exercise of stock options.
NOTE 4. ACCOUNTING PRONOUNCEMENTS
-------------------------
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share", was issued. This new statement supersedes APB Opinion No.
15, "Earnings Per Share", and supersedes or amends other related accounting
pronouncements. SFAS No. 128 must be adopted by the Company in the fourth
quarter of fiscal 1998. All prior period earnings per share (EPS) data will be
restated when the new statement is adopted. SFAS No. 128 replaces the
presentation of primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures such as the Company's. Basic
EPS excludes dilution and is computed by dividing net income available to common
shareholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity.
Pro forma EPS, assuming the Company had adopted SFAS No. 128 as of March 1,
1996 is as follows:
<TABLE>
<CAPTION>
Six Month Period Ended August 31, 1996 1997
- ------------------------------- ---- ----
<S> <C> <C>
Weighted Average Common Shares 10,913,358 11,021,608
Weighted Average Common Shares
and Potential Common Shares 11,306,923 11,413,548
Net income per common share $ .87 $ .73
Net income per common share-
Assuming dilution $ .84 $ .70
</TABLE>
<PAGE>
NOTE 5. INCOME TAXES
------------
Under Statement of Financial Accounting Standards No. 109, the Company
recognizes income taxes under the liability method of accounting for income
taxes. The liability method measures the expected tax impact of future taxable
income or deductions resulting from differences in the tax and financial
reporting bases of assets and liabilities reflected in the consolidated balance
sheet and the expected tax impact of carryforwards for tax purposes.
Income tax expense is reported during interim periods on the basis of the
estimated annual effective tax rate for the taxable jurisdictions in which the
Company operates.
NOTE 6. ACQUISITIONS AND OTHER SIGNIFICANT EVENTS
----------------------------------------
On July 14, 1997, Emmis signed a definitive agreement to acquire
substantially all of the assets of radio stations WTLC-FM and AM in Indianapolis
from Panache Broadcasting, L.P. for approximately $15 million in cash. As part
of the transaction, Emmis made a $750,000 escrow payment which will be credited
against the purchase price at the closing date. The acquisition is subject to
various conditions, including regulatory approval. The acquisition will be
accounted for as a purchase. Emmis intends to finance the acquisition through
additional borrowings under the Company's amended and restated Credit Facility
dated July 1, 1997.
In June 1997, Emmis acquired 194,444 shares of its common stock from Morgan
Stanley at $36 per share. The aggregate purchase price of $7.0 million was
financed through additional borrowings under the Company's existing Credit
Facility.
On July 1, 1997, the Company entered into an amended and restated Credit
Facility. As a result of the early payoff of the refinanced debt, the Company
recorded a loss of approximately $ 1.3 million in the quarter ending August 31,
1997 related to unamortized deferred debt issuance costs which is recorded as
interest expense in the accompanying condensed consolidated statement of
operations. The amended and restated Credit Facility matures on February 28,
2005 and consists of the following:
Credit Facility Amount
- --------------- ------
Revolving Credit Facility Up to $250,000,000; subject
to certain adjustments as
defined in the Credit
Facility; An additional
commitment for $100,000,000
may be requested by Emmis
prior to May 31, 1999.
Term Note $100,000,000
Revolving Credit Facility/Term Note $150,000,000
The Credit Facility provides for Letters of Credit to be made available to
the Company not to exceed $50,000,000. The aggregate amount of outstanding
Letters of Credit and amounts borrowed under the Revolving Credit Facility
cannot exceed the Revolving Credit Facility commitment.
<PAGE>
All outstanding amounts under the Credit Facility bear interest, at the
option of Emmis, at a rate equal to the Eurodollar Rate or an alternative base
rate (as defined in the Credit Facility) plus a margin. The margin over the
Eurodollar Rate or the alternative base rate varies from time to time, depending
on Emmis' ratio of debt to earnings before interest, taxes, depreciation and
amortization (EBITDA), as defined in the agreement. Interest is due on a
calendar quarter basis under the alternative base rate and at least every three
months under the Eurodollar Rate.
The Credit Facility requires the Company to maintain interest rate protection
agreements through July 2000. The notional amount required varies based upon
Emmis' ratio of adjusted debt to EBITDA, as defined in the Credit Facility.
The aggregate amount of the Revolving Credit Facility reduces quarterly
beginning May 31, 2000. Amortization of the outstanding principal amount under
the Term Note and Revolving Credit Facility/Term Note is payable in quarterly
installments beginning May 31, 2000. The annual amortization and reduction
schedules as of February 28, 1998, assuming the entire $500 million Credit
Facility was outstanding prior to the scheduled amortization payments are as
follows:
SCHEDULED AMORTIZATION/REDUCTION OF
----------------------------------
CREDIT FACILITY AVAILABILITY
----------------------------
(In thousands)
<TABLE>
<CAPTION>
Revolving
Revolving Credit Facility/
Year ended Credit Facility Term Note Term Note
February 28(29) Amortization Amortization Amortization Total
- -------------- ------------- ------------ ------------ ------
<S> <C> <C> <C> <C>
2001 $ 37,500 $ 15,000 $15,000 $67,500
2002 50,000 20,000 22,500 92,500
2003 50,000 20,000 22,500 92,500
2004 50,000 20,000 37,500 107,500
2005 62,500 25,000 52,500 140,000
------- ------- ------- -------
Total $250,000 $100,000 $150,000 $500,000
======= ======= ======= =======
</TABLE>
Commencing with the fiscal year ending February 28, 2001 and continuing
through February 29, 2004, in addition to the scheduled amortization/reduction
of the Credit Facility, within 60 days after the end of each fiscal year, the
Credit Facility is permanently reduced by 50% of the Company's excess cash flow
if the ratio of adjusted debt (as defined in the Credit Facility) to EBITDA
exceeds 5 to 1. Excess cash flow is generally defined as EBITDA reduced by cash
taxes, capital expenditures, required debt service, increases in working capital
(net of cash or cash equivalents), the fixed fees paid under the WQCD-FM time
brokerage agreement, and $3,000,000. The net proceeds of any sale of certain
assets must also be used to permanently reduce borrowings under the Credit
Facility. If the ratio of adjusted debt to EBITDA is less than 5.5 to 1 and
certain other conditions are met, the Company will be permitted in certain
circumstances to reborrow the amount of the net proceeds within nine months
solely for the purpose of funding an acquisition.
<PAGE>
The Credit Facility contains various financial and operating covenants and
other restrictions with which Emmis must comply, including, among others,
restrictions on additional indebtedness, engaging in businesses other than radio
broadcasting and publishing, paying cash dividends, redeeming or repurchasing
capital stock of Emmis and use of borrowings, as well as requirements to
maintain certain financial ratios. The Credit Facility also prohibits Emmis,
under certain circumstances, from making acquisitions and disposing of certain
assets without the prior consent of the lenders, and provides that an event of
default will occur if Jeffrey H. Smulyan ceases to maintain (i) a significant
equity investment in Emmis (as specified in the Credit Facility), (ii) the
ability to elect a majority of Emmis' directors or (iii) control of a majority
of shareholder voting power. Substantially all of Emmis' assets, including the
stock of Emmis' subsidiaries, are pledged to secure the Credit Facility.
In August 1997, Emmis formed a wholly owned Hungarian subsidiary to acquire
a radio broadcasting license. In September 1997, Emmis sold a 46 percent
interest in this subsidiary to third parties. Also in September 1997, this
subsidiary submitted a bid in connection with a competitive bidding process, to
purchase a radio broadcasting license from the Hungarian government. This
subsidiary is included in the consolidated financial statements of Emmis.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The performance of a radio group, such as the Company, is customarily
measured by the ability of its stations to generate Broadcast Cash Flow and
Operating Cash Flow. Operating Cash Flow is defined as operating income before
depreciation, amortization and noncash compensation expenses and time brokerage
fees. Broadcast Cash Flow is defined as net broadcasting revenues less
broadcasting operating expenses. Although Broadcast Cash Flow and Operating
Cash Flow are not measures of performance calculated in accordance with
generally accepted accounting principles, and should be viewed as a supplement
to and not a substitute for the Company's results of operations presented on
the basis of generally accepted accounting principles, the Company believes
that Broadcast Cash Flow and Operating Cash Flow are useful because they are
generally recognized by the radio broadcasting industry as a measure of
performance and are used by analysts who report on the performance of broadcast
companies.
<PAGE>
RESULTS OF OPERATIONS
Net broadcasting revenues for the quarter ended August 31, 1997 were $33.9
million compared to $28.1 million for the same quarter of the prior year, an
increase of $5.8 million or 20.7%. This increase is principally due to the St.
Louis acquisition, the operation of WQCD-FM under a time brokerage agreement,
and the ability to realize higher advertising rates at the Company's
broadcasting properties, resulting from higher ratings at certain broadcasting
properties, as well as increases in general radio spending in the markets in
which the Company operates. On a pro forma basis, as defined in Note 2, net
broadcasting revenues would have increased $2.1 million or 6.3%. Pro forma
basis assumes the comparison between pro forma results for the quarters ended
August 31, 1997 and 1996.
Broadcasting operating expenses for the quarter ended August 31, 1997 were
$15.3 million compared to $12.2 million for the same quarter of the prior year,
an increase of $3.1 million or 25.8%. This increase is principally attributable
to the St. Louis acquisition, the operation of WQCD-FM under a time brokerage
agreement and increased promotional spending at the Company's broadcasting
properties. On a pro forma basis, broadcasting operating expenses would have
increased $1.0 million or 6.3%.
Broadcast Cash Flow for the fiscal quarter ended August 31, 1997 was $18.6
million compared to $15.9 million for the same quarter of the prior year, an
increase of $2.7 million or 16.9%. This increase is principally due to
increased net broadcasting revenues offset by increased broadcasting operating
expenses as discussed above. On a pro forma basis, broadcast cash flow would
have increased $1.2 million or 6.4%.
Corporate expenses for the quarter ended August 31, 1997 were $1.7 million
compared to $1.4 million for the same quarter of the prior year, an increase of
$0.3 million or 26.0%. This increase was primarily due to increased travel
expenses and other expenses related to potential acquisitions.
International business development expenses for the quarters ended August 31,
1997 and 1996 were $.3 million. These expenses reflect costs associated with
Emmis International Corporation. The purpose of this wholly owned subsidiary is
to identify, investigate and develop international broadcast investments or
other international business opportunities. Expenses consist primarily of
salaries, travel and various administrative costs.
Operating Cash Flow for the quarter ended August 31, 1997 was $16.8 million
compared to $14.8 million for the same quarter of the prior year, an increase of
$2.0 million or 13.8%. This increase is principally due to an increase in
broadcast cash flow offset by an increase in corporate expenses. On a pro forma
basis, operating cash flow would have increased $.5 million or 3.0%.
Interest expense was $4.4 million for the quarter ended August 31, 1997
compared to $2.5 million for the same quarter of the prior year, an increase of
$1.9 million or 73.6%. This increase includes $1.3 due to the write off of
deferred debt issuance costs in connection with entering into a new Credit
Facility and also reflects higher outstanding debt due to the St. Louis
acquisition offset by voluntary repayments made under the Company's Credit
Facility and a rate decrease under the new Credit Facility.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The increase in accounts receivable from February 28, 1997 to August 31,
1997 is due to the increase of net broadcasting revenues in the quarter ended
August 31, 1997 compared to the quarter ended February 28, 1997 including the
operation of WQCD-FM under the Time Brokerage Agreement.
In the fiscal quarter ended August 31, 1997, the Company made voluntary
payments of $3.7 million under its Credit Facility.
In August 1996, Emmis announced its plan to build an office building in
downtown Indianapolis for its corporate office and its Indianapolis operations.
The project is expected to be completed in 1999 for an estimated cost of $25
million, net of reimbursable construction costs of $2 million. This amount
reflects an increase over the original amount due to the acquisition of WTLC-FM,
WTLC-AM and Network Indiana. Certain factors such as additional studio costs
related to digital technology and historical landmark requirements may cause the
cost of this project to increase. The Company plans to fund this project
through additional borrowings under the Credit Facility.
In the fiscal quarter ended August 31, 1997, the Company had capital
expenditures of $1.1 million. These capital expenditures consist primarily of
progress payments in connection with the Indianapolis building project.
In June 1997, the Company acquired 194,444 shares of its common stock at $36
per share which was financed through additional borrowings. On July 14, 1997,
the Company signed a definitive agreement to acquire substantially all of the
assets of radio stations WTLC-FM and AM, for approximately $15 million. In
September 1997, a 54 percent owned affiliate submitted a bid to purchase a
Hungarian Radio Station. Both transactions will be financed through additional
borrowings. In July 1997, the Company amended and restated its existing Credit
Facility. These items are more fully discussed in Note 6 to the financial
statements.
The Company expects that cash flow from operating activities will be
sufficient to fund all debt service, working captial and capital expenditure
requirements. As part of its business strategy, the Company frequently
evaluates potential acquisitions of radio stations. In connection with future
acquisition opportunities, the Company may incur additional debt or issue
additional equity or debt securities depending on market conditions and other
factors.
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of the shareholders of the Company held on June 24,
1997, the following matters received the following votes:
<TABLE>
<CAPTION>
VOTES VOTES
MATTER DESCRIPTION FOR AGAINST ABSTAINING
------------------ ----- ------- ----------
<S> <C> <C> <C>
1. Election of Directors:
Jeffrey H. Smulyan . . . . 32,033,420 -- 130,800
Doyle L. Rose . . . . . . 32,033,420 -- 130,800
Gary L. Kaseff . . . . . . 32,033,420 -- 130,800
Lawrence B. Sorrel . . . . 30,698,854 -- 1,465,366
Susan B. Bayh* . . . . . . 6,292,620 -- 126,900
Richard A. Leventhal*. . . 6,288,720 -- 130,800
* Class A Director
2. Approval of the 1997 Equity
Incentive Plan . . . . . . . 27,434,294 4,202,346 19,250
3. Approval of Appointment of
Auditors . . . . . . . . . . 32,152,920 500 10,800
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits.
The following exhibits are filed or incorporated by reference as a part of
this report:
10 WTLC-FM and WTLC-AM Asset Purchase Agreement
11 Statements re: Calculations of per share net income (loss)
15 Letter re: unaudited interim financial information
27 Financial data schedule (Edgar version only)
Reports on Form 8-K
The Company filed Form 8-K on April 15, 1997, to report the closing under
the Asset Purchase Agreement dated as of October 31, 1996, by and between Zimco,
Inc. and Emmis Broadcasting Corporation, as amended by first and second
amendments to the Asset Purchase Agreement.
Additionally, the Company filed Form 8-K/A on June 16, 1997, to include the
financial statements of Zimco, Inc. as of December 31, 1996 and pro forma
financial information.
<PAGE>
SIGNATURES
-----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EMMIS BROADCASTING CORPORATION
Date: October 15, 1997 By: /s/ Howard L.Schrott
-------------------------
Howard L. Schrott
Vice President(Authorized
Corporate Officer), Chief
Financial Officer and
Treasurer
ASSET PURCHASE AGREEMENT
-------------------------
(WTLC-FM AND WTLC-AM, INDIANAPOLIS, INDIANA)
AGREEMENT (the "Agreement") dated as of July 14, 1997 by and between
PANACHE BROADCASTING, L.P., a Delaware limited partnership ("Seller"),
and EMMIS BROADCASTING CORPORATION, an Indiana corporation ("Buyer").
RECITALS:
---------
1. Seller owns and operates in Indianapolis, Indiana radio
stations WTLC-FM and WTLC-AM (the "Stations"), and holds the licenses and
authorizations issued by the Federal Communications Commission ("FCC")
for the operation of the Stations.
2. Buyer desires to acquire substantially all the assets used or
useful in the business and operation of each of the Stations, and Seller
is willing to convey such assets to Buyer.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, Seller and Buyer hereby agree as follows:
ARTICLE I
---------
TERMINOLOGY
-----------
1.1 Defined Terms. As used herein, the following terms shall have
the meanings indicated:
Affiliate: With respect to any specified person or entity, another
person or entity which, or a member of an immediate family which,
directly or indirectly controls, is controlled by, or is under common
control with, the specified person or entity.
Code: The Internal Revenue Code of 1986, as amended.
Documents: This Agreement and all Exhibits and Schedules hereto,
and each other agreement, certificate or instrument delivered pursuant
to or in connection with this Agreement.
Earnest Money: As of a given date, the amount deposited as of such
date with the Escrow Agent under the Escrow Agreement, together with the
interest and other earnings earned thereon as of such date while invested
by the Escrow Agent.
Escrow Agent: NBD Bank, N.A., a national banking association
headquartered in Indianapolis, Indiana.
<PAGE>
Escrow Agreement: The Escrow Agreement in the form attached as
Exhibit A which Seller, Buyer and the Escrow Agent have entered into
concurrently with the execution of this Agreement relating to the
deposit, holding, investment and disbursement of the Earnest Money.
FCC Order: An order or decision of the FCC granting its consent to
the transfer of the FCC Licenses to Buyer.
Final Action: An action of the FCC that has not been reversed,
stayed, enjoined, set aside, annulled or suspended; with respect to which
no timely petition for reconsideration or administrative or judicial
appeal or sua sponte action of the FCC with comparable effect is pending;
and as to which the time for filing any such petition or appeal
(administrative or judicial) or for the taking of any such sua sponte
action of the FCC has expired.
Lien: Any mortgage, deed of trust, pledge, hypothecation, title
defect, right of first refusal, security or other adverse interest,
encumbrance, claim, option, lien, lease or charge of any kind, whether
voluntarily incurred or arising by operation of law or otherwise,
affecting any assets or property, including any written or oral agreement
to give or grant any of the foregoing, any conditional sale or other
title retention agreement, and the filing of or agreement to give any
financing statement with respect to any assets or property under the
Uniform Commercial Code or comparable law of any jurisdiction.
Loss: With respect to any person or entity, any and all costs,
obligations, liabilities, demands, claims, settlement payments, awards,
judgments, fines, penalties, damages and reasonable out-of-pocket
expenses, including court costs and reasonable attorneys' fees, whether
or not arising out of a third party claim.
Material Adverse Condition: A condition which would restrict,
limit, increase the cost or burden of or otherwise adversely affect or
impair in any material respect the right of Buyer to the ownership, use,
control, enjoyment or operation of the Stations or the proceeds
therefrom; provided, however, that any condition which requires (i) that
Buyer or any of its subsidiaries file periodic reports with the FCC
regarding compliance with rules and policies of the FCC pertaining to
affirmative action and equal opportunity employment, or (ii) that the
Stations be operated in accordance with conditions similar to and not
more adverse than those contained in the present FCC Licenses issued for
operation of the Stations, shall not be a Material Adverse Condition.
Material Adverse Effect: A material adverse effect on the assets,
business, operations, financial condition or results of operations of (i)
the Stations taken as a whole or (ii) Seller.
Permitted Lien: Any statutory lien which secures a payment not yet
due that arises, and is customarily discharged, in the ordinary course
of Seller's business; or any other imperfections in Seller's title to any
of its assets or properties that, individually and in the aggregate, are
not material in character or amount and do not and could not reasonably
be expected to impair the value or interfere with the use of any of the
Sale Assets.
<PAGE>
Taxes: All federal, state, local and foreign taxes including,
without limitation, income, unemployment, withholding, payroll, social
security, real property, personal property, excise, sales, use and
franchise taxes, levies, assessments, imposts, duties, licenses and
registration fees and charges of any nature whatsoever, including
interest, penalties and additions with respect thereto and any interest
in respect of such additions or penalties.
Tax Return: Any return, filing, report, declaration, questionnaire
or other document required to be filed for any period with any taxing
authority (whether domestic or foreign) in connection with any Taxes
(whether or not payment is required to be made with respect to such
document).
Tower Sites: The real estate described on Schedule 1.1 including
the transmission towers, buildings and other improvements thereon and
easements appurtenant thereto.
1.2 Additional Defined Terms. As used herein, the following terms
shall have the meanings defined in the introduction, recitals or section
indicated below:
Acquisition Proposal Section 5.12
Act Section 3.7(b)
Adjustment Amount Section 2.7
Arbitrating Firm Section 2.7(e)
Assumed Obligations Section 2.3(a)
Benefit Plans Section 3.16(a)
Buyer's Trade Credit Section 2.7(b)(ii)
Closing Section 8.1
Closing Date Section 8.1
Collection Period Section 2.8(b)
Defendant Section 13.15
Employees Section 3.16(a)
ERISA Section 3.16(a)
Excluded Assets Section 2.2
FCC Recitals
FCC Licenses Section 3.7(a)
Indemnified Party Section 9.4(a)
Indemnifying Party Section 9.4(a)
Intellectual Property Section 2.1(e)
Interim Balance Sheet Section 3.12(a)(iii)
Leased Real Property Section 6.5
Mid-Range Section 2.7(e)
Multiemployer Plan Section 3.16(c)
Other Permitted Exceptions Section 6.4.1
Owned Real Property Section 6.4
Owners Section 3.2
Permitted Tax Lien Section 6.4.1
Preliminary Adjustment Report Section 2.7(d)
<PAGE>
Purchase Price Section 2.4
Real Property Section 2.1(b)
Related Persons Section 3.16(a)
Retained Receivables Section 2.8(a)
Sale Assets Section 2.1
Seller's Liquidated Damage Amount Section 10.2(b)
Seller's Enforcement Costs Section 10.2(b)
Seller's Trade Credit Section 2.7(b)(ii)
Standard Exceptions Section 6.4.1
Stations Recitals
Station Agreements Section 2.1(d)
Survey Section 6.4.2
Survival Period Section 9.1
Tangible Personal Property Section 2.1(a)
Title Commitment Section 6.4.1
Title Insurance Company Section 6.4.1
Trade Agreements Section 3.8(a)
ARTICLE II
-----------
PURCHASE AND SALE
-----------------
2.1 Sale Assets. Upon and subject to the terms and conditions
provided herein, on the Closing Date, Seller will sell, transfer, assign
and convey to Buyer, and Buyer will purchase from Seller, all of Seller's
right, title and interest, legal and equitable, in and to all tangible
and intangible assets (except Excluded Assets) used or useful in the
operation of the Stations as each has been and is now operated (the "Sale
Assets"), including the following:
(a) Tangible Personal Property. All equipment, parts,
supplies, music library, furniture, fixtures and other tangible personal
property owned or leased by Seller and used or useful in the operation
of the Stations, including but not limited to the items listed on
Schedule 3.9, together with such modifications, replacements,
improvements and additional items, and subject to such deletions
therefrom, made or acquired between the date hereof and the Closing Date
in accordance with the terms and provisions of this Agreement (the
"Tangible Personal Property").
(b) Real Property. The Tower Sites, and other interests
(including, but not limited to, leases and leasehold improvements) in
real estate listed on Schedule 3.10 and all fixtures and improvements
thereon, together with such additional improvements and interests in real
estate made or acquired between the date hereof and the Closing Date (the
"Real Property").
(c) Permits. The FCC Licenses and all other governmental
permits, licenses and authorizations (and any renewals, extensions,
amendments or modifications thereof) now held by Seller or hereafter
obtained by Seller between the date hereof and the Closing Date, to the
extent such other permits, licenses and authorizations pertain to or are
used in the operation of the Stations.
<PAGE>
(d) Station Agreements. All rights of Seller in, to and
under all contracts, leases, agreements, commitments and other
arrangements, and any amendments and modifications, listed in
Schedule 3.8(b) or made or entered into between the date hereof and the
Closing Date in compliance with this Agreement (the "Station
Agreements"). Station Agreements which the parties are deeming to be
"Material Contracts" are marked by an asterisk in Schedule 3.8(b).
(e) Intellectual Property. All trade names, trademarks,
service marks, copyrights, patents, jingles, slogans, symbols, logos, the
call letters "WTLC", inventions, and any other proprietary material,
process, trade secret or trade right used in the operation of the
Stations, and all registrations, applications and licenses for any of the
foregoing, including, without limitation, those set forth on Schedule
3.11; any additional such items acquired or used in connection with the
operation of the Stations between the date hereof and the Closing Date;
and all goodwill associated with any of the foregoing (the "Intellectual
Property"); provided, however, that the Intellectual Property shall not
include any rights, title or interest whatsoever in or to the name
"Panache" or any signs, symbols or logos bearing the name "Panache".
(f) Records. The originals or true and complete copies of
all of the books, records, accounts, files, logs, ledgers and journals
pertaining to or used in the operation of the Stations, including, but
not limited to, any of such items stored on computer disks or tapes.
(g) Miscellaneous Assets: Any other tangible or intangible
assets, properties or rights of any kind or nature not otherwise
described above in this Section 2.1 and now or hereafter owned or used
by Seller in connection with the operation of the Stations, including but
not limited to all goodwill of the Stations.
2.2 Excluded Assets. Notwithstanding any provision of this
Agreement to the contrary, Seller shall not transfer, convey or assign
to Buyer, but shall retain all of its right, title and interest in and
to, the following assets owned or held by it on the Closing Date (the
"Excluded Assets"):
(a) Any and all cash, bank deposits and other cash
equivalents, cash deposits to secure contract obligations (except to the
extent Seller receives a credit therefor under Section 2.7), and all
accounts receivable (other than non-cash receivables under Trade
Agreements) for services performed or provided or for goods sold and
delivered by Seller prior to the Closing Date;
(b) Any and all claims of Seller with respect to transactions
occurring or other matters arising prior to the Closing Date including,
without limitation, claims for tax refunds;
(c) All prepaid expenses except to the extent taken into
account in determining the Adjustment Amount under Section 2.7.
(d) All Benefit Plans and collective bargaining agreements;
(e) All employment agreements with the exception of those
written employment agreements listed on Schedule 3.8(b);
<PAGE>
(f) All policies of insurance owned by Seller;
(g) All tangible personal property disposed of or consumed
between the date hereof and the Closing Date in accordance with the terms
and provisions of this Agreement; and
(h) Seller's corporate records except to the extent such
records pertain to or are used in the operation of the Stations, in which
case Seller shall deliver true and accurate copies thereof to Buyer.
2.3 Assumption of Liabilities.
(a) At the Closing, Buyer shall assume and agree to perform,
without duplication, the following liabilities and obligations of Seller
(the "Assumed Obligations"):
(i) The obligations under the Trade Agreements to
provide advertising on the Stations on or after Closing Date.
(ii) Liabilities and obligations arising under all other
Station Agreements transferred to Buyer in accordance with this
Agreement to the extent such liabilities and obligations arise
during and relate to any period on or after the Closing Date.
(iii) Provided that Seller pays Buyer the amount,
if any, owed by Seller after Closing under Section 2.7, the Assumed
Obligations shall also include such other liabilities of Seller to
the extent, and only to the extent, the amount thereof is included
as a credit to Buyer in calculating the Adjustment Amount as
ultimately determined pursuant to Section 2.7.
(b) The Assumed Obligations shall in no event include any
liability or obligation arising (i) from the assignment to Buyer of any
Station Agreement in violation of its terms or (ii) from any other breach
or default by Seller upon or prior to Closing under any Station
Agreement.
(c) Except for the Assumed Obligations, Buyer shall not
assume or in any manner be liable for any duties, responsibilities,
obligations or liabilities of Seller of any kind or nature, whether
express or implied, known or unknown, contingent or absolute, all of
which Seller shall pay, discharge and perform when due.
2.4 Earnest Money.
(a) Concurrently with the execution of this Agreement, Buyer
has deposited with the Escrow Agent under the Escrow Agreement in
immediately available funds the sum of Seven Hundred Fifty Thousand
Dollars ($750,000).
(b) The Escrow Agent shall hold the Earnest Money, including
interest and other earnings thereon, under the terms of the Escrow
Agreement in trust for the benefit of the parties hereto.
<PAGE>
(c) If Closing does not occur, the Earnest Money shall be
delivered to Seller or returned to Buyer in accordance with Section 10.2,
and if Closing does occur, the Earnest Money shall be applied at Closing
as provided in Section 2.5.
2.5 Purchase Price. The purchase price ("Purchase Price") shall
equal Fourteen Million Nine Hundred Eighty Thousand Dollars
($14,980,000), subject to adjustment as provided in Section 2.7. The
Purchase Price shall be paid at Closing by (i) Seller and Buyer
cooperating in causing the Earnest Money to be disbursed to Seller on the
Closing Date, such disbursement being credited toward Buyer's payment of
the Purchase Price on the Closing Date, and (ii) Buyer paying to Seller
the remaining portion of the Purchase Price by wire transfer of
immediately available funds. Seller shall furnish Buyer wire
instructions at least three (3) business days prior to the Closing Date.
2.6 Allocation of the Purchase Price. Seller and Buyer shall use
good faith efforts to agree upon, prior to Closing, an allocation of the
Purchase Price among the Sale Assets which, if agreed upon, will be
incorporated in a schedule to be executed by the parties prior to or at
Closing. Buyer and Seller each agree to report such allocation, if
agreed upon, to the Internal Revenue Service in the form required by
Treasury Regulation 1.1060-IT and to use such allocation for all other
reporting purposes in connection with federal, state and local income
and, to the extent permitted under applicable law, franchise taxes.
2.7 Adjustment of Purchase Price.
(a) All operating income and operating expenses of the
Stations shall be adjusted and allocated between Seller and Buyer, and
an adjustment in the Purchase Price shall be made as provided in this
Section, to the extent necessary to reflect the principle that all such
income and expenses attributable to the operation of the Stations on or
before the date preceding the Closing Date shall be for the account of
Seller, and all such income and expenses attributable to the operation
of the Stations on and after the Closing Date shall be for the account
of Buyer. The net amount by which the Purchase Price is to be increased
or decreased in accordance with this Section is herein referred to as the
"Adjustment Amount".
(b) Without limiting the generality of the foregoing:
(i) Seller shall receive a credit for the unapplied
portion, as of Closing, of the security deposits made by Seller
under those Station Agreements assumed by Buyer at Closing in
accordance with Section 2.3.
(ii) Buyer shall be given a credit ("Buyer's Trade
Credit") in the amount equal to the financial value (determined in
accordance with generally accepted accounting principles
consistently applied) of all time required to be broadcast on the
Stations on or after the Closing Date under the Trade Agreements,
and Seller shall be given a credit ("Seller's Trade Credit") for the
financial value (determined in accordance with generally accepted
accounting principles consistently applied) of the goods and
services to be received on or after the Closing Date under the Trade
Agreements; provided that Seller's Trade Credit shall in no event
exceed Buyer's Trade Credit. To the extent Buyer's Trade Credit
exceeds Seller's Trade Credit (the "Trade Credit Excess"), and
provided that all Trade Agreements which include an obligation to
broadcast advertisements during particular time periods may be
preempted by the applicable Station, Buyer's Trade Credit shall be
reduced by the amount of the Trade Credit Excess on a dollar-for-dollar
basis, subject to a $50,000 cap on such adjustment.
<PAGE>
(iii) With respect to each vacation or portion
thereof earned but not taken before the Closing Date by each
Employee hired by Buyer, Buyer shall receive a credit equal to the
compensation equivalent thereof, including applicable payroll taxes.
(iv) The credit given Seller for each prepaid expense
shall not exceed an amount commensurate with the benefit therefrom
to be received by Buyer after Closing.
(c) To the extent not inconsistent with the express
provisions of this Agreement, the allocations made pursuant to this
Section 2.7 shall be made in accordance with generally accepted
accounting principles.
(d) Three (3) business days prior to the Closing Date, Seller
shall provide Buyer with a statement setting forth a detailed computation
of Seller's reasonable and good faith estimate of the Adjustment Amount
as of the Closing Date (the "Preliminary Adjustment Report"). The
Preliminary Adjustment Report shall include an itemization of all prepaid
expenses included in estimating the Adjustment Amount as of the Closing
Date. If the Adjustment Amount reflected on the Preliminary Adjustment
Report is a credit to Buyer, then the Purchase Price payable on the
Closing Date shall be reduced by the amount of the preliminary Adjustment
Amount, and if the Adjustment Amount reflected on the Preliminary
Adjustment Report is a charge to Buyer, then the Purchase Price payable
<PAGE>
on the Closing Date shall be increased by the amount of such preliminary
Adjustment Amount. Thereafter, Seller and its auditors and Buyer and its
auditors shall have ninety (90) days after the Closing Date to review the
Preliminary Adjustment Report and the related books and records of
Seller, and Buyer and Seller will in good faith seek to reach agreement
on the computation of the Adjustment Amount as of the Closing Date. If
agreement is reached within ninety (90) days after the Closing Date, then
upon reaching such agreement, Seller shall pay to Buyer or Buyer shall
pay to Seller, as the case may be, an amount equal to the difference
between (i) the agreed Adjustment Amount and (ii) the preliminary
Adjustment Amount indicated in the Preliminary Adjustment Report. Any
such payment shall be made as provided in Section 2.7(h). If agreement
is not reached within such 90-day period, then the dispute resolutions
of Section 2.7(e) shall apply.
(e) If Seller and its auditors and Buyer and its auditors do
not, within the 90-day period specified in Section 2.7(d), reach an
agreement on the Adjustment Amount as of the Closing Date, then an
independent accounting firm of recognized national standing (the
"Arbitrating Firm") selected by Seller and Buyer shall resolve the
disputed items. If Seller and Buyer are unable to agree on the
Arbitrating Firm, the Arbitrating Firm shall be a "big-six" accounting
firm selected by lot (after excluding one firm designated by Seller and
one firm designated by Buyer). Buyer and Seller shall each inform the
Arbitrating Firm in writing as to their respective positions concerning
the Adjustment Amount as of the Closing Date, and each shall make readily
available to the Arbitrating Firm any books and records and work papers
relevant to the preparation of such firm's computation of the Adjustment
Amount. Such firm shall be instructed to complete its analysis within
thirty (30) days from the date of its engagement and upon completion to
inform the parties in writing of its own determination of the Adjustment
Amount, the basis for its determination, whether Buyer's or Seller's
written position as to the Adjustment Amount is closer to its own
determination, and whether its own determination of the Adjustment Amount
is within a range that (i) equals twenty percent (20%) of the absolute
difference between the written positions of Buyer and Seller as to the
Adjustment Amount and (ii) has a midpoint equal to the median of such
written positions of Buyer and Seller (the "Mid-Range"). Any
determination by the Arbitrating Firm in accordance with this Section
shall be final and binding on the parties for purposes of this Section.
Within five (5) days after the Arbitrating Firm delivers to the parties
its written determination of the Adjustment Amount, Seller shall pay to
Buyer, or Buyer shall pay to Seller, as the case may be, an amount equal
to the difference between (i) the Adjustment Amount as determined by the
Arbitrating Firm and (ii) the preliminary Adjustment Amount indicated in
the Preliminary Adjustment Report. Any such payment shall be made as
provided in Section 2.7(h).
<PAGE>
(f) In the event that the Arbitrating Firm determines that
the written position of Buyer concerning the Adjustment Amount is closer
to its own determination, Seller shall bear and pay the fees and
disbursements of such firm in connection with its analysis. In the event
that such firm determines that the written position of Seller concerning
the Adjustment Amount is closer to its own determination, Buyer shall
bear and pay the fees and disbursements of such firm in connection with
its analysis. Notwithstanding the foregoing, in the event that the
Arbitrating Firm's determination of the Adjustment Amount is within the
Mid-Range, Seller and Buyer shall each pay one-half of the fees and
disbursements of such firm in connection with its analysis.
(g) Concurrently with the payment of any amount required to
be paid under foregoing Subsection (d) or (e), the payor shall pay the
payee interest thereon for the period from the Closing Date until the
date paid at a rate equal to two percentage points over the floating
annual rate of interest on commercial loans announced from time to time
by The First National Bank of Boston as its "base rate".
(h) Any payments required under foregoing Subsection (d), (e)
or (g) shall be paid by wire transfer in immediately available funds to
the account of the payee with a financial institution in the United
States and shall for all purposes be deemed an adjustment to the Purchase
Price.
2.8 Accounts Receivable.
(a) Within ten (10) days after the Closing Date, Seller shall
furnish to Buyer a true and complete list of Seller's accounts receivable
(other than non-cash receivables under Trade Agreements) arising from the
operation of the Stations prior to the Closing Date (the "Retained
Receivables"), which list shall set forth for each Retained Receivable
the name of the debtor, the date of the invoice, the amount of any
payments previously received on account and the balance due.
(b) For a period of one hundred twenty (120) days after the
Closing Date (the "Collection Period"), Buyer will, without charge to
<PAGE>
Seller, use its usual and customary procedures to collect the Retained
Receivables as Seller's agent for collection, provided that (i) Buyer
shall not be required to commence litigation, employ legal counsel or a
collection agency or make any other extraordinary collection efforts, and
(ii) Buyer's obligation to act as Seller's agent in the collection of the
Retained Receivables shall terminate upon expiration of the Collection
Period. For the purpose of determining amounts collected by Buyer with
respect to the Retained Receivables, each payment by an account debtor
shall be applied to the older or oldest accounts receivable of such
account debtor unless the account debtor identifies such an account in
writing as being in dispute and directs in writing that a particular
payment be applied to a specific newer account receivable.
(c) Every two weeks during the Collection Period (and within
fifteen (15) days after the end of the Collection Period), Buyer shall
deliver to Seller a statement showing all collections of Retained
Receivables made on behalf of Seller since the last previous report and
shall pay such collections to Seller by check at the time such statement
is delivered.
(d) Seller shall not engage in any collection efforts against
account debtors under the Retained Receivables during the Collection
Period, other than with respect to accounts receivable identified as in
dispute as provided in foregoing Subsection (b).
(e) Buyer shall not, without Seller's prior written consent,
compromise or settle for less than full value any of the Retained
Receivables unless Buyer pays Seller the full amount of any deficiency.
Buyer shall be entitled to purchase from Seller any Retained Receivable
for such amount as the parties may agree at any time during or at the
expiration of the Collection Period.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF SELLER
-----------------------------------------
Seller hereby represents and warrants to Buyer as follows:
3.1 Organization, Good Standing and Corporate Power. Seller is a
limited partnership duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has all requisite power to
own, operate and lease its properties and carry on its business. Seller
is duly licensed, qualified to do business and in good standing under the
laws of the State of Indiana.
3.2 Ownership. Seller is owned by Panache GP, Inc., the general
partner, Schwartz S Corp., a limited partner, and Panache Investor Corp.,
a limited partner. A copy of the diagram of the organizational structure
of Seller as reflected in the most recent FCC Form 323 Ownership Report
filed with the FCC on March 31, 1997 has been provided to Buyer. No
change in ownership of Buyer has occurred since the filing of such report
with the FCC.
3.3 Authorization and Binding Effect of Documents. Seller has all
requisite partnership power and authority to enter into this Agreement
and the other Documents and to consummate the transactions contemplated
by this Agreement. The execution and delivery of this Agreement and each
<PAGE>
of the other Documents by Seller and the consummation by Seller of the
transactions contemplated by this Agreement have been duly authorized by
all necessary partnership action on the part of Seller. This Agreement
has been, and each of the other Documents at or prior to Closing will be,
duly executed and delivered by Seller. This Agreement constitutes (and
each of the other Documents, when executed and delivered, will
constitute) the valid and binding obligation of Seller enforceable
against Seller in accordance with its terms.
3.4 Absence of Conflicts. Except as set forth on Schedule 3.4,
the execution, delivery and performance by Seller of this Agreement and
the other Documents, and consummation by Seller of the transactions
contemplated hereby and thereby, do not and will not (i) conflict with
or result from any breach of any of the terms, conditions or provisions
of, (ii) constitute a default under, (iii) result in a violation of,
(iv) give any third party the right to modify, terminate or accelerate
any obligation under, or (v) result in the creation of any Lien upon the
Sale Assets, under the provisions of the articles of partnership and
limited partnership agreement of Seller, any indenture, mortgage, lease,
loan agreement or other agreement or instrument to which Seller is bound
or affected, or any law, statute, rule, judgment, order or decree to
which Seller is subject.
3.5 Consents. Except as set forth on Schedule 3.4, the execution,
delivery and performance by Seller of this Agreement and the other
Documents, and consummation by Seller of the transactions contemplated
hereby and thereby, do not and will not require the authorization,
consent, approval, exemption, clearance or other action by or notice or
declaration to, or filing with, any court or administrative or other
governmental body, or the consent, waiver or approval of any other person
or entity.
3.6 Sale Assets; Title. The Sale Assets include all of the
assets, properties and rights of every type and description, real,
personal and mixed, tangible and intangible, that are used in or material
to the operation of the Stations in the manner in which they have been
and are now conducted, with the exception of the Excluded Assets. Other
than as noted in Schedule 3.6, which Liens will be removed prior to or
at Closing, Seller has good and marketable title to, or a valid lessee's
interest in, all of the Sale Assets free and clear of all Liens except
Permitted Liens.
3.7 FCC Licenses. Except as set forth on Schedule 3.7:
(a) Seller is the valid and legal holder of the licenses,
permits and authorizations of the FCC listed on Schedule 3.7 for the
operation of the Stations (the "FCC Licenses"), and any action of the FCC
with respect to such FCC Licenses is a Final Action with the exception
of the FCC Order. The expiration date of the term of each FCC License
is shown on Schedule 3.7.
<PAGE>
(b) The FCC Licenses (i) are valid, in good standing and in
full force and effect, are unimpaired by any act or omission of Seller,
and constitute all of the licenses, permits and authorizations used in
or required for the current operation of the Stations under the
Communications Act of 1934, as amended, and the rules, regulations and
policies under the FCC thereunder (collectively, the "Act"), and
(ii) constitute all the licenses and authorizations, including amendments
and modifications thereto, issued by the FCC to Seller for or in
connection with the operation of the Stations.
(c) None of the FCC Licenses is subject to any restriction
or condition which would limit in any respect the full operation of the
Stations as now conducted.
(d) Each Station is being operated in all material respects
in accordance with the terms and conditions of the FCC Licenses
applicable to it, the Act and the rules and regulations of the FCC,
including but not limited to those pertaining to RF emissions.
(e) No applications, complaints or proceedings are pending
or, to the knowledge of Seller, are threatened which relate to the
business or operation of either Station or which may result in the
revocation, modification, non-renewal or suspension of any of the FCC
Licenses, the denial of any pending applications, the issuance of any
cease and desist order or the imposition of any fines, forfeitures or
other administrative actions by the FCC with respect to either Station
or its operation, other than proceedings affecting the radio broadcasting
industry in general.
(f) Seller has complied in all material respects with all
requirements to file reports, applications and other documents with the
FCC with respect to each Station, and all such reports, applications and
documents are true, correct and complete in all material respects.
(g) Seller has no knowledge of matters (i) which might
reasonably be expected to result in the adverse modification, suspension
or revocation of or the refusal to renew any of the FCC Licenses or the
imposition of any fines or forfeitures by the FCC against Seller, or
(ii) which might reasonably be expected to result in the FCC's refusal
to grant or delay approval of the transfer to Buyer of any FCC License
or the imposition of any Material Adverse Condition in connection with
approval of the transfer to Buyer of any FCC License.
(h) There are not any unsatisfied or otherwise outstanding
citations issued by the FCC with respect to either Station or its
operation.
(i) True, complete and accurate copies of all FCC Licenses
have been delivered by Seller to Buyer.
(j) Except for the FCC Licenses, there are no material
licenses, permits or authorizations from governmental or regulatory
authorities required for the lawful operation and conduct of the Stations
in the manner in which they have been and are now conducted.
3.8 Station Agreements.
(a) Schedule 3.8(a) lists all agreements, contracts,
understandings and commitments as of the date indicated thereon for the
sale of time on the Stations for other than monetary consideration
("Trade Agreements") as of May 31, 1997, and sets forth the parties
thereto, the financial value of the time required to be provided from and
after the date of such Schedule and the financial value of the goods or
<PAGE>
services to be received by Seller from and after the date of such
Schedule. True and complete copies of all written Trade Agreements in
effect as of such date, including all amendments, modifications and
supplements thereto, will be delivered to Buyer on or prior to the
Closing Date and each Trade Agreement hereafter entered into prior to
Closing shall be promptly delivered to Buyer.
(b) Schedule 3.8(b) lists all the following types of Station
Agreements now in effect, whether written or oral:
(i) Agreements for sale of broadcast time on either
Station for monetary consideration (other than such agreements
entered into in the ordinary course of business involving broadcast
time of less than Ten Thousand Dollars ($10,000));
(ii) All network affiliation agreements;
(iii) All sales agency or advertising representation
contracts;
(iv) Each lease of any Sale Asset (including a
description of the Sale Asset leased thereunder);
(v) All employment agreements and agreements with
independent contractors;
(vi) All agreements to which an Affiliate of Seller is
a party or which relate to a station owned or business operated by
an Affiliate of Seller;
(vii) Each of the other Station Agreements (other
than Trade Agreements) involving a commitment by any party thereto
with a fair market value of, or requiring any party thereto to pay
over the life of the contract, more than Five Thousand Dollars
($5,000); and
(viii) Any other Station Agreement that is material
to the business, operations or financial condition of either
Station.
True and complete copies of all the foregoing Station Agreements that are
in writing, and true and accurate summaries of all the foregoing Station
Agreements that are oral, including all amendments, modifications and
supplements thereto, have been delivered to Buyer. The Station
Agreements (other than Trade Agreements) that are not listed on Schedule
3.8(b) do not involve commitments by parties thereto with an aggregate
fair market value of more than Fifty Thousand Dollars ($50,000).
(c) Except as set forth in the Schedules hereto, (i) all
Station Agreements which are, individually or in the aggregate, material
to the business, operations or financial condition of either Station are
valid and in full force and effect; (ii) neither Seller nor, to the
knowledge of Seller, any other party is in material default under, and
no event has occurred which (after the giving of notice or the lapse of
time or both) would constitute a material default under, any Station
Agreements which are, individually or in the aggregate, material to the
business, operations or financial condition of either Station;
(iii) neither Seller nor an Affiliate has granted or been granted any
material waiver or forebearance with respect to any Station Agreements
which are, individually or in the aggregate, material to the business,
<PAGE>
operations or financial condition of either Station; (iv) Seller holds
the right to enforce and receive the benefits under all the Station
Agreements which are, individually or in the aggregate, material to the
business, operations or financial condition of either Station, free and
clear of Liens (other than Permitted Liens) but subject to the terms and
provisions of each such agreement; (v) none of the rights of Seller or
an Affiliate under Station Agreements which are, individually or in the
aggregate, material to the business, operations or financial condition
of either Station is subject to termination or modification as a result
of the consummation of the transactions contemplated by this Agreement;
and (vi) no consent or approval by any party to Station Agreements which
are, individually or in the aggregate, material to the business,
operations or financial condition of either Station is required
thereunder for the consummation of the transactions contemplated hereby.
3.9 Tangible Personal Property. Except as set forth on
Schedule 3.9:
(a) Such Schedule lists all Tangible Personal Property (other
than office supplies and other incidental items) material to the conduct
of the business and operations of either Station in the manner in which
it has been and is now operated.
(b) The equipment constituting a part of the Tangible
Personal Property and used in or necessary for the operation of either
Station in the manner in which it is now and has been operated has been
properly maintained in accordance with the manufacturers' recommendations
and industry practices in all material respects, is in a good state of
repair and operating condition, and complies in all material respects
with the Act and other applicable laws, rules, regulations and
ordinances.
3.10 Real Property. The list of Real Property set forth on
Schedule 3.10 is a true and correct list of all of the interests in real
estate which Seller holds or which are used to any material extent in the
operation of either Station in the manner in which it has been and is now
operated.
3.11 Intellectual Property. Schedule 3.11 lists all of the
Intellectual Property, including all registrations, applications and
licenses for any of the Intellectual Property. Except as disclosed on
Schedule 3.11:
(a) To the knowledge of Seller, Seller owns, free and clear
of Liens, all right and interest in, and right and authority to use in
connection with the conduct of the business of the Stations as presently
conducted, all of the Intellectual Property listed on Schedule 3.11, and
all of the rights and properties constituting a part of the Intellectual
Property are in full force and effect;
(b) There are no outstanding or, to the knowledge of Seller,
threatened judicial or adversary proceedings with respect to any of the
Intellectual Property;
(c) Seller has not granted to any other person or entity any
license or other right or interest in or to any of the Intellectual
Property or to the use thereof;
<PAGE>
(d) Seller has no knowledge of any infringement or unlawful
use of any of the Intellectual Property;
(e) Seller has not violated any provisions of the Copyright
Act of 1976, 17 U.S.C. Sec. 101, et. seq., in any material respect. Seller
has filed all notices and statements of account and has made all payments
that are required in connection with the transmission by Seller of any
broadcast radio or other signals, except for failures to file or pay that
are not material in the aggregate; and
(f) Seller has delivered to Buyer copies of all state or
federal registrations and other material documents, if any, establishing
any of the rights and properties constituting a part of the Intellectual
Property.
3.12 Financial Statements.
(a) Seller has delivered to Buyer:
(i) The unaudited balance sheets of the Stations as of
December 31, 1996 and 1995;
(ii) The unaudited statements of income of the Stations
for the years ended December 31, 1996 and 1995;
(iii) The unaudited balance sheet of the Stations
as of March 31, 1997 (the "Interim Balance Sheet"); and
(iv) The unaudited statement of income of the Stations
for the interim period ended March 31, 1997.
All such statements (i) are in accordance with the books and records of
Seller and (ii) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis and fairly present
the assets and liabilities of Seller as of the dates stated and
accurately reflect the results of operations of Seller for the periods
covered by the statements, with the exceptions that (A) statements of
cash flows are not included, (B) federal income tax, expense or benefit
are not reflected therein, (C) such statements do not contain the
disclosures required by generally accepted accounting principles in notes
accompanying financial statements, and (D) the interim statements are
subject to normal year-end adjustments.
(b) Seller has no material debt, liability or obligation,
secured or unsecured (whether absolute, accrued, contingent or otherwise,
and whether due or to become due), of a nature required by generally
accepted accounting principles to be reflected in a corporate balance
sheet or disclosed in the notes thereto, except such debts, liabilities
and obligations which (i) are fully accrued or fully reserved against in
the Interim Balance Sheet, or (ii) are incurred after the date of the
Interim Balance Sheet in the ordinary course of business consistent with
past practices and in an amount not material to the business or financial
condition of Seller.
<PAGE>
(c)(i) Seller is not now, and after giving effect to the
transactions contemplated by this Agreement, Seller will not be insolvent
as such term is defined in the Bankruptcy Code of 1978, as amended; (ii)
after giving effect to the transactions contemplated by this Agreement,
the property remaining with Seller shall not constitute an unreasonably
small capital to conduct its current business or its business as proposed
to be conducted after consummation of the transactions contemplated
hereby; and (iii) Seller does not intend to incur, or believe that Seller
will incur, concurrently with or after consummation of the transactions
contemplated hereby, debts beyond Seller's ability to pay as debts
mature.
3.13 Absence of Certain Changes or Events. Since the date of the
Interim Balance Sheet, other than as described on Schedule 3.13:
(a) There has not been any damage, destruction or other
casualty loss with respect to the Sale Assets (whether or not covered by
insurance) which, individually or in the aggregate has, or could
reasonably be expected to have, a Material Adverse Effect.
(b) Neither Seller nor either Station has suffered any
adverse change or development which, individually or in the aggregate,
has had or could reasonably be expected to have a Material Adverse
Effect.
(c) Seller has not:
(i) amended or terminated any Station Agreement set
forth on Schedule 3.8(a), 3.8(b) or 3.8(c) except in the ordinary
course of business;
(ii) mortgaged, pledged or subjected to any Lien, any of
its properties or assets, tangible or intangible, except for
Permitted Liens;
(iii) acquired or disposed of any assets or
properties or entered into any agreement or other arrangement for
such acquisition or disposition, except in the ordinary course of
business;
(iv) entered into any agreement, commitment or other
transaction other than in the ordinary course of business;
(v) paid any bonus to any officer, director or employee
or granted to any officer, director or employee any other increase
in compensation in any form, except in the ordinary course of
business consistent with past practices;
(vi) adopted or amended any collective bargaining,
bonus, profit-sharing, compensation, stock option, pension,
retirement, deferred compensation, severance or other plan,
agreement, trust, fund or arrangement for the benefit of employees
(whether or not legally binding) or made any material changes in its
policies of employment;
<PAGE>
(vii) entered into any agreement (other than
agreements that will be terminated prior to Closing) with any
Affiliate of Seller; or
(viii) operated its business other than in the
ordinary course.
3.14 Litigation. Except as described in Schedule 3.14, (i) there
are no actions, suits, claims, investigations or administrative,
arbitration or other proceedings pending or, to the knowledge of Seller,
threatened against Seller before or by any court, arbitration tribunal
or governmental department or agency, domestic or foreign; (ii) neither
Seller nor, to the knowledge of Seller, any of the officers or employees
of Seller, has been charged with, or is under investigation with respect
to, any violation of any provision of any federal, state, foreign or
other applicable law or administrative regulation in respect of the
business of Seller; and (iii) neither Seller nor any properties or assets
of Seller nor, to the knowledge of Seller, any officer or employee of
Seller is a party to or bound by any order, arbitration award, judgment
or decree of any court, arbitration tribunal or governmental department
or agency, domestic or foreign, in respect of any business practices, the
acquisition of any property, or the conduct of any business, of Seller,
which, individually or in the aggregate, has or could reasonably be
expected to have, a Material Adverse Effect or materially impair the
ability of Seller to perform its obligations hereunder and consummate the
transactions contemplated hereby.
3.15 Labor Matters.
(a) Except as listed on Schedule 3.15(a):
(i) To Seller's knowledge, no present or former
employee (or independent contractor employed as an on-air talent or
producer) of either Station has a pending claim or charge which has
been asserted or threatened against Seller for (A) overtime pay;
(B) wages, salaries or profit sharing; (C) vacations, time off or
pay in lieu of vacation or time off; (D) any violation of any
statute, ordinance, contract or regulation relating to minimum
wages, maximum hours of work or the terms or conditions of
employment; (E) discrimination against employees on any basis;
(F) unlawful or wrongful employment or termination practices;
(G) unlawful retirement, termination or labor relations practices
or breach of contract; or (H) any violation of occupational safety
or health standards.
(ii) There is not pending or, to the knowledge of
Seller, threatened against Seller any labor dispute, strike or work
stoppage that affects or interferes with, or is likely to affect or
interfere with, the operation of either Station. Seller has no
knowledge of any organizational effort currently being made or
threatened by or on behalf of any labor union with respect to
employees of either Station. There are no unresolved unfair labor
charges against Seller. Seller has not experienced any strike, work
stoppage or other similar significant labor difficulties within the
past twelve (12) months.
(b) Seller is not a signatory or a party to, or otherwise
bound by, a collective bargaining agreement which covers employees or
former employees of Seller or who are involved in the operation of either
<PAGE>
Station, (ii) Seller has not agreed to recognize any union or other
collective bargaining unit with respect to any employees of either
Station, and (iii) no union or other collective bargaining unit has been
certified as representing any employees of either Station.
(c) Schedule 3.15(c) sets forth a true and complete list of
all persons employed by Seller or at either Station, and states for each
such employee (i) the compensation paid to such employee, (ii) whether
such employee is employed under a written contract, and (iii) the
policies applicable to the employee if not employed under a written
contract. A true and complete copy of each written employment agreement
and of any handbook, policy manual or similar written guidelines
furnished to employees of either Station has been delivered to Buyer.
3.16 Employee Benefit Plans.
(a) All compensation or benefit plans, policies, practices,
arrangements and agreements covering any employee or former employee of
Seller or either Station or the beneficiaries or dependents of such
employee or former employee (such employees, former employees,
beneficiaries and dependents herein referred to collectively as the
"Employees") which are or have been established or maintained or to which
contributions have been made by Seller or by any other trade or business,
whether or not incorporated, which is or has been treated as a single
employer together with the Seller under Section 414 of the Code (such
other trades and businesses referred to collectively as the "Related
Persons") or to which Seller or any Related Person is or has been
obligated to contribute, including, but not limited to, "employee benefit
plans" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), employment, retention,
change of control, severance, stock option or other equity based, bonus,
incentive compensation, deferred compensation, retirement, fringe benefit
and welfare plans, policies, practices, arrangements and agreements
(collectively, the "Benefit Plans") are disclosed in Schedule 3.16.
Except pursuant to a Benefit Plan disclosed in Schedule 3.16, Seller has
no fixed or contingent liability or obligation to any of the Employees
or to any person whose services are or were provided as an independent
contractor to Seller or either Station. True and complete copies of all
Benefit Plans, or written descriptions of Benefit Plans which are not in
writing, have been provided to Buyer, other than medical and other
similar welfare plans made generally available to all current Employees.
True and complete copies of the summary plan descriptions of all Benefit
Plans, to the extent subject to ERISA, have been provided to Buyer.
(b) All Benefit Plans have been administered and are in
compliance in all material respects with applicable provisions, if any,
of ERISA and the Code and all other applicable law. Neither Seller nor
a Related Person has engaged in a transaction with respect to any Benefit
Plan that could result in a material tax, penalty or other liability
under the Code or ERISA.
(c) No Benefit Plan is a Multiemployer plan within the
meaning of Section 3(37) or Section 4001(a)(3) of ERISA (a "Multiemployer
Plan").
(d) Neither Seller nor any Related Person has incurred or
expects to incur any material withdrawal liability with respect to a
Multiemployer Plan under Subtitle E of Title IV of ERISA regardless of
whether based on contributions by any entity which is considered a
predecessor of Seller or one employer with Seller under Section 4001 of
ERISA.
<PAGE>
(e) All contributions required to have been made by Seller
under the terms of any Benefit Plan or applicable law have been timely
made.
(f) Seller does not have any unfunded obligations (including
projected obligations) for retiree health and life benefits under any
Benefit Plan other than continuation coverage required by law.
(g) Neither Seller nor any Related Person has incurred any
material liability under or pursuant to Title I or IV of ERISA or the
penalty, excise tax or joint and several liability provisions of the Code
relating to employee benefit plans and no event or condition has occurred
or exists which would result in any such material liability to Seller.
3.17 Compliance with Law. Seller has operated and is operating in
all material respects in compliance with the Act and all other federal,
state, local or other laws, statutes, ordinances, regulations, licenses,
permits or exemptions therefrom and all applicable orders, writs,
injunctions and decrees of any court, commission, board, agency or other
instrumentality, and Seller has not received any notice of noncompliance
pertaining to Seller's operations that has not been cured.
3.18 Tax Returns and Payments.
(a) Seller has accurately prepared and is not delinquent in
the filing of any Tax Returns required to be filed by Seller, including
filings regarding employees, sales, operations or assets. All Taxes due
and payable pursuant thereto and all other Taxes or assessments due and
payable by Seller or chargeable as a Lien upon its assets have been paid.
(b) Except as set forth in Schedule 3.18, (i) no outstanding
unsatisfied deficiency, delinquency or default for any Tax has been
claimed, proposed or assessed against Seller, (ii) Seller has not
received notice of any such deficiency, delinquency or default, and
(iii) to Seller's knowledge, no taxing authority is now threatening to
assert any such deficiency, delinquency or default and, to Seller's
knowledge, there is no reasonable basis for any such assertion.
(c) No Tax is required to be withheld pursuant to Section
1445 of the Code as a result of the transactions contemplated by this
Agreement.
(d) Seller has withheld any Tax required to be withheld under
applicable law and regulations, and such withholdings have either been
paid to the proper governmental agency or set aside in accounts for such
purpose, or accrued, reserved against and entered upon the books of
Seller.
3.19 Environmental Matters.
(a) There are no conditions or circumstances associated with
the Sale Assets which may give rise to any material liability or cost
under applicable environmental law.
(b) Except as listed on Schedule 3.19(b), Seller does not own
or use any electrical or other equipment containing polychlorinated
biphenyls.
<PAGE>
3.20 Broker's or Finder's Fees. Except for Star Media Group, Inc.,
whose fee is the sole responsibility of Seller, no agent, broker,
investment banker or other person or firm acting on behalf of or under
the authority of Seller or any Affiliate of Seller is or will be entitled
to any broker's or finder's fee or any other commission or similar fee,
directly or indirectly, in connection with the transactions contemplated
by this Agreement.
3.21 Insurance. There is now in full force and effect with
reputable insurance companies fire and extended coverage insurance with
respect to all tangible Sale Assets and public liability and
broadcaster's liability insurance, all in reasonably commercial amounts.
3.22 Disclosure. To Seller's knowledge, no representation or
warranty by Seller in this Agreement or any other Document furnished by
Seller or on its behalf contains any untrue statement of a material fact,
or omits to state a material fact, necessary to make any statement
contained herein or therein not misleading.
ARTICLE IV
-----------
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller as follows:
4.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Indiana. Buyer has all requisite corporate power to own,
operate and lease its properties and carry on its business as it is now
being conducted and as the same will be conducted following the Closing.
4.2 Authorization and Binding Effect of Documents. Buyer has
all requisite corporate power and authority to enter into this Agreement
and the other Documents and to consummate the transactions contemplated
by this Agreement. The execution and delivery of this Agreement and each
of the other Documents by Buyer and the consummation by Buyer of the
transactions contemplated by this Agreement have been duly authorized by
all necessary corporate action (including all necessary shareholder
approvals) on the part of Buyer. This Agreement has been, and each of
the other Documents at or prior to Closing will be, duly executed and
delivered by Buyer. This Agreement constitutes (and each of the other
Documents, when executed and delivered, will constitute) the valid and
binding obligation of Seller enforceable against Buyer in accordance with
its terms.
4.3 Absence of Conflicts. Except for obtaining the FCC Order,
the execution, delivery and performance by Buyer of this Agreement and
the other Documents, and consummation by Buyer of the transactions
contemplated hereby and thereby, do not and will not (i) conflict with
or result from any breach of any of the terms, conditions or provisions
of, (ii) constitute a default under, (iii) result in a violation of,
(iv) give any third party the right to modify, terminate or accelerate
any obligation under, the provisions of the articles of incorporation or
by-laws of Buyer, any indenture, mortgage, lease, loan agreement or other
agreement or instrument to which Buyer is bound or affected, or any law,
statute, rule, judgment, order or decree to which Buyer is subject.
<PAGE>
4.4 Consents. Except for obtaining the FCC Order, the
execution, delivery and performance by Buyer of this Agreement and the
other Documents, and consummation by Buyer of the transactions
contemplated hereby and thereby, do not and will not require the
authorization, consent, approval, exemption, clearance or other action
by or notice or declaration to, or filing with, any court or
administrative or other governmental body, or the consent, waiver or
approval of any other person or entity.
4.5 Broker's or Finder's Fees. No agent, broker, investment
banker, or other person or firm acting on behalf of Buyer or under its
authority is or will be entitled to any broker's or finder's fee or any
other commission or similar fee, directly or indirectly, from Buyer in
connection with the transactions contemplated by this Agreement.
4.6 Litigation. There are no legal, administrative, arbitration
or other proceedings or governmental investigations pending or, to the
knowledge of Buyer, threatened against Buyer that would give any third
party the right to enjoin the transactions contemplated by this
Agreement.
4.7 Buyer's Qualification. There are no proceedings,
complaints, notices of forfeiture, claims, or investigations pending or,
to the knowledge of Buyer and its Affiliates, threatened against Buyer
or any of its Affiliates under the Communications Act which might
reasonably be expected to result in the FCC's refusal to grant or delay
approval of the transfer to Buyer or any permitted assignee of any FCC
License or the imposition of any Material Adverse Condition in connection
with approval of the transfer to Buyer of any FCC License.
ARTICLE V
---------
OTHER COVENANTS
---------------
5.1 Conduct of the Stations' Business Prior to the Closing Date.
Seller covenants and agrees with Buyer that from the date hereof through
the Closing Date, unless Buyer otherwise agrees in writing, which
agreement will be deemed given unless a written notice of objection is
received within three (3) business days of a written request by Seller,
Seller shall:
(a) Operate each Station in the ordinary course of
business, including (i) incurring promotional expenses consistent with
the amount currently budgeted, (ii) the use of reasonable commercial
efforts to preserve each Station's present business operations,
organization and goodwill and its relationships with customers,
employees, advertisers, suppliers and other contractors (including
independent contractors providing on-air or production services), and
(iii) the continuance of each Station's usual and customary policy with
respect to extending credit and collection of accounts receivable and the
maintenance of its facilities and equipment;
(b) Operate each Station and otherwise conduct its business
in all material respects in accordance with the terms or conditions of
the FCC Licenses, all applicable rules and regulations of the FCC, and
all other rules, regulations, laws and orders of all governmental
authorities having jurisdiction over any aspect of the operation of such
Station;
<PAGE>
(c) Maintain Seller's books and records in accordance with
generally accepted accounting principles on a basis consistent with prior
periods;
(d) Promptly notify Buyer in writing of any event or
condition which, with notice or the lapse of time or both, would
constitute an event of material default under any of the Station
Agreements which are, individually or in the aggregate, material to the
Sale Assets or the operations, financial condition or results of
operations of either Station;
(e) Timely comply in all material respects with the Station
Agreements which are, individually or in the aggregate, material to the
Sale Assets or the operations, financial condition or results of
operations of either Station;
(f) Not sell, lease, grant any rights in or to or otherwise
dispose of, or agree to sell, lease or otherwise dispose of, any of the
Sale Assets except for dispositions of assets that (A) are in the
ordinary course of business consistent with past practice and (B) if
material, are replaced by similar assets of substantially equal or
greater value and utility;
(g) Not amend or enter into any antenna lease; and not
enter into or amend any employment contracts or other Station Agreements
except on terms comparable to those of Station Agreements now in
existence and otherwise in the ordinary course of business consistent
with past practice;
(h) Maintain its technical equipment currently in use in
good operating condition and repair, except for ordinary wear and tear;
(i) Not increase in any manner the compensation (including
severance pay or plans) or benefits of any employees, independent
contractors, consultants or commission agents of Seller or the Stations,
except in the ordinary course of business consistent with past practice;
(j) Not introduce any material change with respect to the
operation of either Station including, without limitation, any material
changes in the percentages of types of programming broadcast by such
Station or any other material change in such Station's programming
policies, except as required by law;
(k) Not engage in any business other than the operation of
the Stations and business activities directly related thereto;
(l) Not enter into any agreement (other than agreements
that will be terminated prior to Closing) with any Affiliate of Seller;
(m) Not voluntarily enter into any collective bargaining
agreement applicable to any employees of either Station or otherwise
voluntarily recognize any union as the bargaining representative of any
such employees; and not enter into or amend any collective bargaining
agreement applicable to any employees of either Station to provide that
it shall be binding upon any "successor" employer or such employees; and
<PAGE>
(n) Not take or agree to take any action inconsistent with
consummation of the Closing as contemplated by this Agreement.
5.2 Notification of Certain Matters. Seller shall give prompt
notice to Buyer, and Buyer shall give prompt notice to Seller, of (i) the
occurrence, or failure to occur, of any event that would be likely to
cause any of their respective representations or warranties contained in
this Agreement to be untrue or inaccurate in any material respect at any
time from the date hereof to the Closing Date, and (ii) any failure on
their respective parts to comply with or satisfy, in any material
respect, any covenant, condition or agreement to be complied with or
satisfied by any of them under this Agreement.
5.3 FCC Filing. As promptly as practicable following the
execution of this Agreement, Seller and Buyer shall file all necessary
applications with the FCC and take all commercially reasonable actions
as shall be necessary and proper to obtain promptly the FCC Order without
a Material Adverse Condition. Seller and Buyer will equally share the
fees for filing such applications.
5.4 Title; Additional Documents. At the Closing, Seller shall
transfer and convey to Buyer good and marketable title to all of the Sale
Assets free and clear of any Liens except Permitted Liens. Seller shall
execute or cause to be executed such documents, in addition to those
delivered at the Closing, as may be necessary to confirm in Buyer such
title to the Sale Assets and to carry out the purposes and intent of this
Agreement.
5.5 Other Consents. Seller shall use its reasonable best
efforts to obtain the consents or waivers to the transactions
contemplated by this Agreement required under the Material Contracts;
provided that Seller shall not be required to make any financial
accommodation to a third party in order to obtain any such consent or
waiver (other than payment of any amount otherwise due such third party).
5.6 Inspection and Access. Seller will, prior to the Closing
Date, open the assets, books, accounting records, correspondence and
files of Seller (to the extent related to the operation of the Stations)
for examination by Buyer, its officers, attorneys, accountants and
agents, with the right to make copies of such books, records and files
or extracts therefrom. Such access will be available during normal
business hours, upon reasonable notice and in such manner as will not
unreasonably interfere with the conduct of the business of the Stations.
Furthermore, Seller will be required to provide such access only during
two (2) time periods, each of which will last no more than three (3)
consecutive business days. Seller will furnish to Buyer monthly
unaudited financial statements of Seller prepared in a manner consistent
with the unaudited statements identified in Section 3.12. Seller will
furnish to Buyer such additional financial and operating data and other
available information regarding Seller as Buyer may reasonably request.
Those books, records and files the possession of which is not being
transferred to Buyer pursuant to this Agreement which relate to the Sale
Assets shall be preserved and maintained by Seller for four (4) years
after the Closing and those books, records and files relating to the Sale
Assets the possession of which is being transferred to Buyer hereunder
shall be maintained and preserved by Buyer for a period of four (4) years
after the Closing. Each such party shall give to the other party and its
<PAGE>
authorized representatives, during normal business hours, such access to,
and the opportunity at the other party's expense to copy, such books and
records retained by it as may be reasonably requested by the other party.
5.7 Confidentiality. All information delivered to Buyer or
otherwise disclosed in writing as confidential by Seller (or its
representatives) before or after the date hereof, in connection with the
transactions contemplated by this Agreement, shall be kept confidential
by Buyer and its representatives and shall not be used other than as
contemplated by this Agreement, except to the extent that such
information (i) was otherwise publicly available or known by the
recipient when received, (ii) is or hereafter becomes lawfully obtainable
from third parties not related to Buyer or its Affiliates, (iii) is
necessary to disclose to a governmental authority, (iv) is required by
law or the rules of any stock exchange to be disclosed or (v) to the
extent such duty as to confidentiality is waived in writing by Seller.
5.8 Publicity. The parties agree that no public release or
announcement concerning the transactions contemplated hereby shall be
issued by any party without the prior written consent of the other party,
except as such release or announcement may be required by law or
applicable regulations, in which event the party so required will give
prior written notice to the other party.
5.9 Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, each party will use its reasonable best
efforts to take all action and to do all things necessary, proper or
advisable to satisfy any condition hereunder in its power to satisfy and
to consummate and make effective as soon as practicable the transactions
contemplated by this Agreement.
5.10 FCC Reports. Seller shall file, on a current and timely
basis and in all material respects in a truthful and complete fashion
until the Closing Date, all reports and documents required to be filed
with the FCC with respect to the Station.
5.11 Tax Returns and Payments. Seller will timely file with the
appropriate governmental agencies all Tax Returns required to be filed
by Seller and timely pay all Taxes owed by Seller that could result in
a lien on the Sale Assets.
5.12 No Solicitation. From the date hereof until the earlier of
Closing or termination of this Agreement, neither Seller nor any
Affiliate of Seller shall directly or indirectly (i) solicit or encourage
submission of any proposal or offer from any person relating to the
acquisition or purchase of any interest in Seller or any material assets
of Seller or any merger, consolidation or other business combination with
Seller (each an "Acquisition Proposal"), or (ii) otherwise assist or
participate in any effort or attempt by any person to make or effect an
Acquisition Proposal. Seller shall promptly notify Buyer in writing if
an Acquisition Proposal is made in writing after the date of this
Agreement.
5.13 Certified Resolutions.
(a) Within five (5) business days after the date hereof,
Seller shall furnish Buyer with certified resolutions of the partners of
Seller evidencing the authorization and approval of the execution and
<PAGE>
delivery of this Agreement and each of the other Documents and the
consummation of the transactions contemplated hereby and thereby.
(b) Within five (5) business days after the date hereof,
Buyer shall furnish Seller with certified resolutions of the Board of
Directors of Buyer evidencing the authorization and approval of the
execution and delivery of this Agreement and each of the other Documents
and the consummation of the transactions contemplated hereby and thereby.
5.14 Audited Financial Statements. Seller recognizes that Buyer
is a publicly reporting company and agrees that notwithstanding the
restrictions in Section 5.7, Buyer shall be entitled at its expense to
cause audited and unaudited financial statements of the Stations to be
prepared for such periods and filed with the Securities and Exchange
Commission, and included in a prospectus distributed to prospective
investors, as required by laws and regulations applicable to Buyer as a
publicly reporting company or registrant. Seller agrees to cooperate
with Buyer and the auditing accountants as reasonably requested by Buyer
in connection with the preparation and filing of such financial
statements, including providing a customary management representation
letter in the form prescribed by generally accepted auditing standards.
ARTICLE VI
-----------
CONDITIONS PRECEDENT TO THE
OBLIGATION OF BUYER TO CLOSE
---------------------------
Buyer's obligation to close the transaction contemplated by this
Agreement is subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions, unless waived by Buyer in
writing:
6.1 Accuracy of Representations and Warranties; Closing
Certificate.
(a) The representations and warranties of Seller contained
in this Agreement or in any other Document shall be true and correct in
all material respects on the date hereof, and at the Closing Date with
same effect as though made at such time except for changes permitted
hereunder.
(b) Seller shall have delivered to Buyer on the Closing
Date a certificate that the conditions specified in Sections 6.1(a), 6.2,
6.7, and 7.5 are satisfied as of the Closing Date.
6.2 Performance of Agreement. Seller shall have performed in
all material respects all of its covenants, agreements and obligations
required by this Agreement and each of the other Documents to be
performed or complied with by it prior to or upon the Closing Date.
6.3 FCC Order.
<PAGE>
(a) The FCC Order shall have been issued without any
Material Adverse Condition (other than one attributable to or arising out
of any action or inaction on the part of Buyer or its affiliates or the
ownership status or composition of properties of Buyer or its
affiliates).
(b) Conditions which the FCC Order or any order, ruling or
decree of any judicial or administrative body specifies and requires to
be satisfied prior to transfer of the FCC Licenses to Buyer shall have
been satisfied.
6.4 Title Insurance and Survey.
6.4.1 Buyer shall have obtained, at Buyer's expense, a
title commitment (the "Title Commitment") on the current ALTA form from
a title insurance company (the "Title Insurance Company") wherein the
Title Insurance Company shall agree to insure in Buyer fee simple title
to each parcel of Real Property owned by Seller (the "Owned Real
Property"). The exceptions to title specified in the Title Commitment
shall be limited to the preprinted or standard exceptions to title (the
"Standard Exceptions"), the lien for taxes not yet due and payable (the
"Permitted Tax Lien") and such other exceptions (the "Other Permitted
Exceptions") that will neither (1) materially impair Buyer's ability to
use the insured Owned Real Property in the operation of the Stations in
the manner in which it is now used, nor (2) constitute or evidence a
mortgage or other lien (other than a Permitted Tax Lien) against such
title, except mortgages or other liens that will be released at Closing
at Seller's expense.
6.4.2 Buyer shall have obtained, at Buyer's expense, a
current "as built" survey (each, a "Survey") of each portion of the Owned
Real Property. Each such Survey shall be prepared by a registered
surveyor, shall comply with current ALTA Minimum Standard Detail
Requirements, shall be accompanied by a certification sufficient for the
Title Insurance Company's deletion of the Standard Exceptions relating
to survey matters, and shall not disclose any matters which would
materially impair Buyer's ability to use any of the surveyed Owned Real
Property in the operation of the Stations in the manner in which it is
now used.
6.4.3 On the Closing Date, the Title Insurance Company
shall have unconditionally agreed in writing to issue pursuant to the
Title Commitment a final title policy as of the Closing Date insuring fee
simple title in Buyer to the Owned Real Property covered by the Title
Commitment, subject only to the Permitted Tax Lien and Other Permitted
Exceptions. On or before the Closing Date, Seller shall execute and
deliver to the Title Insurance Company an affidavit regarding mechanic's
liens sufficient to allow deletion of such liens as a Standard Exception
in the final title policy.
6.4.4 If within sixty (60) days after the date hereof:
6.4.4.1 A Title Commitment has not been obtained for
any portion of the Owned Real Property, Buyer shall be deemed to have
waived the conditions precedent in foregoing Subsections 6.4.1 and 6.4.3
with respect to such portion of the Owned Real Property.
<PAGE>
6.4.4.2 A Survey has not been obtained by Buyer for
any portion of the Owned Real Property, Buyer shall be deemed to have
waived the condition precedent in foregoing Subsection 6.4.2 with respect
to such portion of the Owned Real Property, and shall be deemed to have
waived the condition precedent in foregoing Subsection 6.4.3 to the
extent satisfaction of such condition with respect to such portion of the
Owned Real Property would require such Survey.
6.4.4.3 Buyer does not by written notice to Seller
specifically identify and object to a defect or exception to title to any
of the Owned Real Property, Buyer shall be deemed to have waived its
right to object to such defect or exception.
6.5 Environmental Inspection. At Buyer's expense, Buyer shall
have caused an environmental inspection to be performed by a reputable
environmental engineering company of each portion of the Owned Real
Property, and any real property leased by Seller and used in the
operation of either of the Stations (the "Leased Real Property"), and the
inspection report shall not disclose a reasonable basis for a
determination that any such portion of the Owned Real Property or the
Leased Real Property in its current condition would cause Buyer as the
owner or lessee thereof to incur a material liability under any
applicable environmental law, rule or regulation. Buyer shall cause the
environmental consultant to deliver to Seller a copy of each such
inspection report at the same time such report(s) are delivered to Buyer.
In the event that within sixty (60) days after the date hereof, Buyer
shall have failed to give Seller written notice specifying in detail the
manner in which any such report discloses a reasonable basis for a
determination that a portion of the Owned Real Property or the Leased
Real Property in its current condition would cause Buyer as the owner or
lessee thereof to incur a material liability under applicable
environmental laws, rules or regulations, Buyer shall be deemed to have
waived the condition precedent set forth in this Section 6.5.
6.6 Opinions of Seller's Counsel. Buyer shall have received
(a) the written opinion of Seller's counsel, dated as of the Closing
Date, that (i) Seller is a limited partnership duly formed and in good
standing under the laws of Delaware, (ii) the execution, delivery and
performance of the Agreement and each of the other Documents have been
duly authorized by all requisite partnership action (including all
necessary partner approval) on the part of Seller, (iii) the Agreement
and each of the other Documents have been duly and validly executed and
delivered by Seller, and (iv) the execution, delivery and performance by
Seller of this Agreement and the other Documents do not violate or
contravene, to counsel's knowledge, any judgment, order, or agreement to
which Seller is subject or a party or to which the Sale Assets are bound;
and (b) the written opinion of the Seller's FCC counsel, dated as of the
Closing Date, that (i) Seller validly holds the FCC Licenses, each of
which is in full force and effect, (ii) the FCC Licenses are not subject
to any conditions other than those shown upon their face, (iii) the FCC
has granted the FCC Order and the FCC Order is not being challenged, and
(iv) there are no proceedings pending or, to the counsel's knowledge,
threatened by or before the FCC affecting or relating to the Stations or
the FCC Licenses.
6.7 Other Consents. Seller shall have obtained in writing (in
form reasonably satisfactory to Buyer's counsel) and provided to Buyer
<PAGE>
on or before the Closing Date, without any condition materially adverse
to Buyer or the Station, the consents or waivers to the transactions
contemplated by this Agreement required under each Material Contract.
6.8 Delivery of Closing Documents. Seller shall have delivered
or caused to be delivered to Buyer on the Closing Date each of the
documents required to be delivered pursuant to Section 8.2.
6.9 No Adverse Proceedings. No judgment or order shall have
been rendered, and no action or proceeding shall be pending, against
Buyer that would restrain or make unlawful the purchase and sale of the
Sale Assets as contemplated by this Agreement.
6.10 No Material Adverse Change. There shall have been no change
nor development affecting the Seller or either Station after the date
hereof which has resulted in, or could reasonably be expected to result
in, a Material Adverse Condition other than changes or developments
arising from events or circumstances affecting the radio broadcasting
industry in general; provided, however, that neither a material adverse
change in the gross or net revenue or ratings of either Station nor the
loss of any employees before Closing shall constitute, for purposes of
this Section 6.10, a change or development which has, or could reasonably
be expected to have, a Material Adverse Effect, provided that Seller
performs in all material respects its covenants under Section 5.1.
ARTICLE VII
-----------
CONDITIONS PRECEDENT TO THE
OBLIGATION OF SELLER TO CLOSE
-----------------------------
The obligation of Seller to close the transaction contemplated by
this Agreement is subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions, unless waived by Seller in
writing:
7.1 Accuracy of Representations and Warranties.
(a) The representations and warranties of Buyer contained
in this Agreement shall be true and correct in all material respects on
the date hereof and at the Closing Date with the same effect as though
made at such time, except for changes that are not materially adverse to
Seller.
(b) Buyer shall have delivered to Seller on the Closing
Date a certificate that the conditions specified in Sections 7.1(a), 7.2,
and 6.9 are satisfied as of the Closing Date.
7.2 Performance of Agreements. Buyer shall have performed in
all material respects all of its covenants, agreements and obligations
required by this Agreement and each of the other Documents to be
performed or complied with by it prior to or upon the Closing Date.
7.3 FCC Order.
<PAGE>
(a) The FCC Order shall have been issued and shall have
become effective under the rules of the FCC and applicable law.
(b) Conditions which the FCC Order or any order, ruling or
decree of any judicial or administrative body specifies and requires to
be satisfied prior to transfer of the FCC Licenses to Buyer shall have
been satisfied.
7.4 Opinion of Buyer's Counsel. Seller shall have received the
written opinion of Buyer's counsel, dated as of the Closing Date, that
(i) Buyer is a corporation duly formed and in good standing under the
laws of the State of Indiana, (ii) the execution, delivery and
performance of the Agreement and each of the other Documents have been
duly authorized by all requisite corporate action on the part of Buyer,
(iii) the Agreement and each of the other Documents have been duly and
validly executed and delivered by Buyer and constitute valid and legally
binding obligations enforceable against Buyer in accordance with their
terms, subject to bankruptcy, insolvency and other laws affecting the
enforcement of creditors' rights generally and general principles of
equity, and (iv) the execution, delivery and performance by Buyer of this
Agreement and the other Documents do not violate or contravene, to
counsel's knowledge, any judgment, order or agreement to which Buyer is
subject or a party or to which Buyer's assets are bound.
7.5 No Adverse Proceedings. No judgment or order shall have
been rendered, and no action or proceeding shall be pending, against
Seller that would restrain or make unlawful the purchase and sale of the
Sale Assets as contemplated by this Agreement.
7.6 Delivery of Closing Documents. Buyer shall have delivered
or cause to be delivered to Seller on the Closing Date each of the
Documents required to be delivered pursuant to Section 8.3.
ARTICLE VIII
------------
CLOSING
-------
8.1 Time and Place.
(a) Closing of the purchase and sale of the Sale Assets
pursuant to this Agreement (the "Closing") shall take place at the
offices of Bose McKinney & Evans, 135 North Pennsylvania Street, Suite
2700, Indianapolis, Indiana, at 10:00 o'clock A.M. on the date (the
"Closing Date") that is the fifth business day following satisfaction or
waiver of the conditions precedent hereunder to Closing.
8.2 Documents to be Delivered to Buyer by Seller. At the
Closing, Seller shall deliver or cause to be delivered to Buyer the
following, in each case in form and substance reasonably satisfactory to
Buyer:
(a) The opinions of Seller's counsel and FCC counsel, dated
the Closing Date, to the effect set forth in Section 6.6;
<PAGE>
(b) Governmental certificates, dated as of a date as near
as practicable to the Closing Date, showing that Seller is duly formed
and in good standing in the State of Delaware and is qualified to do
business and in good standing under the laws of Indiana;
(c) A certificate of the Secretary (or Assistant Secretary)
of Seller's general partner attesting as to the incumbency of each
officer of Seller's general partner who executes this Agreement and any
of the other Documents and to similar customary matters;
(d) A bill of sale and other instruments of transfer and
conveyance transferring the Sale Assets (except the Owned Real Property)
to Buyer;
(e) A general warranty deed, in a form recordable in the
State of Indiana, for each parcel of the Owned Real Property, which deed
shall convey insurable, fee simple title for that parcel free and clear
of all Liens except the Permitted Tax Lien and the Other Permitted
Exceptions.
(f) A certificate of nonforeign status under Section 1445
of the Code, complying with the requirements of the Income Tax
Regulations promulgated pursuant to such section;
(g) An executed certificate in the form attached as Exhibit
B to the Escrow Agreement;
(h) The certificate described in Section 6.1(b); and
(i) Such additional information and materials as Buyer
shall have reasonably requested to evidence the satisfaction of the
conditions to its obligations hereunder, including without limitation,
evidence that all consents and approvals required as a condition to
Buyer's obligation to close hereunder have been obtained, and any other
documents expressly required by this Agreement to be delivered by Seller
at Closing.
8.3 Deliveries to Seller by Buyer. At the Closing, Buyer shall
deliver or cause to be delivered to Seller the following, in each case
in form and substance reasonably satisfactory to Seller:
(a) The Purchase Price in accordance with Section 2.5, as
adjusted under Section 2.7(d);
(b) The certificate described in Section 7.1(b);
(c) The opinion of Buyer's counsel, dated the Closing Date,
to the effect set forth in Section 7.4;
(d) An executed certificate in the form attached as Exhibit
B to the Escrow Agreement;
(e) An agreement by Buyer assuming the Assumed Obligations;
and
<PAGE>
(f) Such additional information and materials as Seller
shall have reasonably requested to evidence satisfaction of the
conditions to its obligations hereunder, and any other documents
expressly required by this Agreement to be delivered by Buyer at Closing.
ARTICLE IX
-----------
INDEMNIFICATION
---------------
9.1 Survival. All representations, warranties, covenants and
agreements in this Agreement or any other Document shall survive the
Closing regardless of any investigation, inquiry or knowledge on the part
of either party, and the Closing shall not be deemed a waiver by either
party of the representations, warranties, covenants or agreements of the
other party in this Agreement or any other Document; provided, however,
that the period of survival shall, (i) with respect to any Loss arising
from or related to a breach of the covenants and agreements in Section
5.6, end four (4) years after the Closing Date, (ii) with respect to any
Loss arising or related to a breach of the covenants in
Sections 9.2(a)(ii) and 9.3(a)(ii), continue indefinitely, and (iii) in
any other case, end eighteen (18) months after the Closing Date (in each
case, the "Survival Period"). No claim may be brought under this
Agreement or any other Document unless written notice describing in
reasonable detail the nature and basis of such claim is given on or prior
to the last day of the applicable Survival Period. In the event such
notice of a claim is so given, the right to indemnification with respect
to such claim shall survive the applicable Survival Period until the
claim is finally resolved and any obligations with respect to the claim
are fully satisfied. The rights to indemnification set forth in this
Article IX shall be exclusive of all other rights to monetary damages
that any party (or the party's successors or assigns) would otherwise
have by statute or common law in connection with the transactions
contemplated by this Agreement or any other Document.
9.2 Indemnification by Seller.
(a) Subject to Section 9.2(b), Seller shall indemnify,
defend, and hold harmless Buyer and its officers, directors, employees,
Affiliates, successors and assigns from and against, and pay or reimburse
each of them for and with respect to, any Loss relating to, arising out
of or resulting from:
(i) Any breach by Seller of any of its
representations, warranties, covenants or agreements in this
Agreement or any other Document; or
(ii) Any obligation, indebtedness or liability of
Seller (other than the Assumed Obligations) regardless of whether
disclosed to Buyer and regardless of whether constituting a breach
by Seller of any representation, warranty, covenant or agreement
hereunder or under any other Document; or
(iii) Noncompliance by Seller with the provisions
of the Bulk Sales Act, if applicable, in connection with the
transactions contemplated by this Agreement.
<PAGE>
(b) If Closing occurs, Seller shall not be obligated to
indemnify Buyer unless and until the aggregate amount of Buyer's Losses
exceeds Fifty Thousand Dollars ($50,000), in which case Buyer shall then
be entitled to indemnification of the entire amount of Buyer's Losses,
provided that any payment owed by Seller to Buyer under Section 2.7 shall
not be counted in determining whether such Fifty Thousand Dollar
($50,000) limitation is satisfied, and Buyer shall have the right to
recover any such payment without regard to such limitation.
(c) The aggregate amount of all payments made by Seller in
satisfaction of claims for indemnification pursuant to Section 9.2(a)
shall not exceed $14,980,000.00 (the "Cap"), provided that any payment
owed by Seller to Buyer under Section 2.7 shall not be counted in
determining whether the Cap has been met.
9.3 Indemnification by Buyer.
(a) Subject to Section 9.3(b), Buyer shall indemnify and
hold harmless Seller and its officers, directors, employees, agents,
representatives, Affiliates, successors and assigns from and against, and
pay or reimburse each of them for and with respect to any Loss relating
to, arising out of or resulting from:
(i) Any breach by Buyer of any of its
representations, warranties, covenants or agreements in this
Agreement or any other Document; or
(ii) The Assumed Obligations.
(b) If Closing occurs, Buyer shall not be obligated to
indemnify Seller unless and until the aggregate amount of Seller's Losses
exceeds Fifty Thousand Dollars ($50,000), in which case Seller shall then
be entitled to indemnification of the entire amount of Seller's Losses,
provided that the Assumed Obligations and any payment owed by Buyer to
Seller under Section 2.7 or Section 2.8 shall not be counted in
determining whether such Fifty Thousand Dollar ($50,000) limitation is
satisfied, and Seller shall have the right to recover any such payment
without regard to any such limitation.
9.4 Administration of Indemnification. For purposes of
administering the indemnification provisions set forth in Sections 9.2
and 9.3, the following procedure shall apply:
(a) Whenever a claim shall arise for indemnification under
this Article, the party entitled to indemnification (the "Indemnified
Party") shall reasonably promptly give written notice to the party from
whom indemnification is sought (the "Indemnifying Party") setting forth
in reasonable detail, to the extent then available, the facts concerning
the nature of such claim and the basis upon which the Indemnified Party
believes that it is entitled to indemnification hereunder.
(b) In the event of any claim for indemnification resulting
from or in connection with any claim by a third party, the Indemnifying
Party shall be entitled, at its sole expense, either (i) to participate
in defending against such claim or (ii) to assume the entire defense with
<PAGE>
counsel which is selected by it and which is reasonably satisfactory to
the Indemnified Party provided that (A) the Indemnifying Party agrees in
writing that it does not and will not contest its responsibility for
indemnifying the Indemnified Party in respect of such claim or proceeding
and (B) no settlement shall be made and no judgment consented to without
the prior written consent of the Indemnified Party which shall not be
unreasonably withheld (except that no such consent shall be required if
the claimant is entitled under the settlement to only monetary damages
actually paid by the Indemnifying Party). If, however, (i) the claim,
action, suit or proceeding would, if successful, result in the imposition
of damages for which the Indemnifying Party would not be solely
responsible, or (ii) representation of both parties by the same counsel
would otherwise be inappropriate due to actual or potential differing
interests between them, then the Indemnifying Party shall not be entitled
to assume the entire defense and each party shall be entitled to retain
counsel who shall cooperate with one another in defending against such
claim. In the case of Clause (i) of the preceding sentence, the
Indemnifying Party shall be obligated to bear only that portion of the
expense of the Indemnified Party's counsel that is in proportion to the
damages indemnifiable by the Indemnifying Party compared to the total
amount of the third-party claim against the Indemnified Party.
(c) If the Indemnifying Party does not choose to defend
against a claim by a third party, the Indemnified Party may defend in
such manner as it deems appropriate or settle the claim (after giving
notice thereof to the Indemnifying Party) on such terms as the
Indemnified Party may deem appropriate, and the Indemnified Party shall
be entitled to periodic reimbursement of defense expenses incurred and
prompt indemnification from the Indemnifying Party in accordance with
this Article.
(d) Failure or delay by an Indemnified Party to give a
reasonably prompt notice of any claim (if given prior to expiration of
the applicable Survival Period) shall not release, waive or otherwise
affect an Indemnifying Party's obligations with respect to the claim,
except to the extent that the Indemnifying Party can demonstrate actual
loss or prejudice as a result of such failure or delay. Buyer shall not
be deemed to have notice of any claim by reason of any knowledge acquired
on or prior to the Closing Date by an employee of the Stations.
ARTICLE X
---------
TERMINATION; LIQUIDATED DAMAGES
-------------------------------
10.1 Right of Termination. This Agreement may be terminated
prior to Closing:
(a) By written agreement of Seller and Buyer; or
(b) By written notice from a party that is not then in
material breach of this Agreement if:
(i) The other party has continued in material
breach of this Agreement for twenty (20) days after written notice
of such breach from the terminating party; or
<PAGE>
(ii) Closing does not occur within one year after
the date hereof.
10.2 Obligations Upon Termination.
(a) Upon termination of this Agreement, each party shall
thereafter remain liable for breach of this Agreement prior to such
termination and remain liable to pay and perform any obligation under
Article IX and this Article. If Closing shall not have occurred, (i) and
Seller has terminated this Agreement pursuant to Section 10.1(b)(i),
Seller shall be entitled to payment of the Earnest Money from the Escrow
Agent under the Escrow Agreement as payment of the aggregate liability
of Buyer for breach or default hereunder as provided in Section 10.2(b),
and (ii) in all other circumstances, Buyer shall be entitled to the
return of the Earnest Money from the Escrow Agent under the Escrow
Agreement.
(b) If Closing shall not have occurred, Seller's sole
remedy at law or in equity for any breach or default by Buyer described
in Section 10.1(b)(i) shall be (i) the termination by Seller of this
Agreement by giving of written notice to Buyer pursuant to Section
10.1(b)(i) and (ii) the recovery from Buyer of (A) an amount equal to the
Earnest Money (the "Seller's Liquidated Damage Amount") and (B) Seller's
reasonable attorneys' fees and other costs of collection incurred by
Seller in enforcing its right to recover Seller's Liquidated Damage
Amount (such fees and other costs herein referred to as "Seller's
Enforcement Costs"). In the event of such termination by Seller, Buyer
and Seller shall cooperate in taking such action as required under the
Escrow Agreement to effect Escrow Agent's distribution to Seller of the
Earnest Money, and Seller shall be entitled to pursue any other remedy
available to Seller at law or in equity to recover the entire Seller's
Liquidated Damage Amount and Seller's Enforcement Costs, provided that
the total monetary damages (including any amount received from the Escrow
Agent under the Escrow Agreement) to which Seller shall be entitled shall
not exceed the sum of Seller's Liquidated Damage Amount plus Seller's
Enforcement Costs. BUYER ACKNOWLEDGES AND AGREES THAT SELLER'S RECEIPT
OF SELLER'S LIQUIDATED DAMAGE AMOUNT SHALL CONSTITUTE PAYMENT OF
LIQUIDATED DAMAGES HEREUNDER AND NOT A PENALTY AND THAT SELLER'S
LIQUIDATED DAMAGE AMOUNT IS REASONABLE IN LIGHT OF THE SUBSTANTIAL BUT
INDETERMINATE HARM ANTICIPATED TO BE CAUSED BY BUYER'S MATERIAL BREACH
OR DEFAULT UNDER THIS AGREEMENT, THE DIFFICULTY OF PROOF OF LOSS AND
DAMAGES, THE INCONVENIENCE AND NON-FEASIBILITY OF OTHERWISE OBTAINING AN
ADEQUATE REMEDY, AND THE VALUE OF THE TRANSACTIONS TO BE CONSUMMATED
HEREUNDER.
10.3 Termination Notice. Each notice given by a party pursuant
to Section 10.1 to terminate this Agreement shall specify the Subsection
of Section 10.1 pursuant to which such notice is given. If at the time
a party gives a termination notice, such party is entitled to give such
notice pursuant to more than one Subsection of Section 10.1, the
Subsection pursuant to which such notice is given and termination is
effected shall be deemed to be the Subsection specified in such notice
provided that the party giving such notice is at such time entitled to
terminate this Agreement pursuant to the specified Subsection.
<PAGE>
ARTICLE XI
-----------
CONTROL OF STATIONS
-------------------
Between the date of this Agreement and the Closing Date, Buyer
shall not control, manage or supervise the operation of the Stations or
the conduct of their business, all of which shall remain the sole
responsibility and under the control of Seller, subject to Seller's
compliance with this Agreement.
ARTICLE XII
-----------
EMPLOYMENT MATTERS
------------------
12.1 Termination of Employees. Seller shall pay, discharge and
be solely responsible for all liabilities, obligations, costs and
expenses which arise or become payable as a result of or in connection
with Seller's termination of any of its employees before, upon or after
Closing, including, without limitation, all severance or termination pay
and all accrued vacation, salary, wages and other compensation payments
or benefits, if any, which arise or become payable as a result of or in
connection with such terminations, except to the extent included as a
credit to Buyer in determining the Adjustment Amount. Seller
acknowledges and agrees that Buyer shall not acquire any rights or
interest in, or assume or have any obligations or liabilities under, any
employment agreements or Benefit Plans between Seller and its employees,
except to the extent included as part of the Assumed Obligations.
12.2 Employee Benefit Plans. Buyer shall not acquire any rights
or interest in, or assume or have any obligations or liabilities under,
any of the Benefit Plans, and Seller or the Benefit Plans, as applicable,
will retain all assets and liabilities in respect of Seller's employees
under the Benefit Plans. Seller shall comply with the provisions of the
Continuation Coverage Under Group Health Plan of ERISA, Title I, Part 6,
to the extent applicable in connection with the transactions contemplated
by this Agreement.
ARTICLE XIII
------------
MISCELLANEOUS
--------------
13.1 Further Actions. From time to time before, at and after the
Closing, each party, at its expense and without further consideration,
will execute and deliver such documents as reasonably requested by the
other party in order more effectively to consummate the transactions
contemplated hereby.
<PAGE>
13.2 Payment of Expenses.
(a) All sales, use, stamp, transfer, grant and other
similar taxes payable in connection with consummation of the transactions
contemplated hereby shall be paid by one-half by Buyer and one-half by
Seller.
(b) Except as otherwise expressly provided in this
Agreement, each of the parties shall bear its own expenses, including the
fees of any attorneys and accountants engaged by such party, in
connection with this Agreement and the consummation of the transactions
contemplated herein.
13.3 Specific Performance. Seller acknowledges that each Station
is of a special, unique and extraordinary character, and that damages
alone are an inadequate remedy for a breach of this Agreement by Seller.
Accordingly, as an alternative to termination of this Agreement under
Section 10.1, Buyer shall be entitled in the event of Seller's breach to
enforcement of this Agreement (subject to obtaining any required approval
of the FCC) by a decree of specific performance or injunctive relief
requiring Seller to fulfill its obligations under this Agreement. Such
right of specific performance or injunctive relief shall be in addition
to, and not in lieu of, Buyer's right to recover damages and to pursue
any other remedies available to Buyer for Seller's breach. In any action
to specifically enforce Seller's obligation to close the transactions
contemplated by this Agreement, Seller shall waive the defense that there
is an adequate remedy at law or in equity and agrees that Buyer shall be
entitled to obtain specific performance of Seller's obligation to close
without being required to prove actual damages. As a condition to
seeking specific performance, Buyer shall not be required to tender the
Purchase Price as contemplated by Section 2.5 but shall be required to
demonstrate that Buyer is ready, willing and able to tender the Purchase
Price as contemplated by such Section.
13.4 Notices. All notices, demands or other communications given
hereunder shall be in writing and shall be sufficiently given if
delivered by courier (including overnight delivery service) or sent by
registered or certified mail, first class, postage prepaid, addressed as
follows:
(a) if to Buyer, to:
Emmis Broadcasting Corporation
950 North Meridian Street, Suite 1200
Indianapolis, Indiana 46204
Attention: Jeffrey H. Smulyan, Chairman
Copy to:
Bose McKinney & Evans
2700 First Indiana Plaza
Indianapolis, Indiana 46204
Attention: David L. Wills, Esq.
<PAGE>
(b) if to Seller, to:
Panache Broadcasting, L.P.
c/o Panache GP, Inc.
166 East Levering Mill Road, Suite 250
Bala Cynwyd, Pennsylvania 19004
Attention: Charles D. Schwartz, President
Copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D. C. 20004
Attention: Joe Sullivan, Esq.
or such other address as a party may from time to time notify the other
party in writing (as provided above). Any such notice, demand or
communication shall be deemed to have been given (i) if so mailed, as of
the close of the third business day following the date so mailed, and
(ii) if delivered by courier, on the date received.
13.5 Entire Agreement. This Agreement, the Schedules, Exhibits
and the other Documents constitute the entire agreement and understanding
between the parties with respect to the subject matter hereof and
supersede any prior negotiations, agreements, understandings or
arrangements between the parties hereto with respect to the subject
matter hereof.
13.6 Binding Effect; Benefits. Except as otherwise provided
herein, this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors or permitted assigns.
Except to the extent specified herein, nothing in this Agreement, express
or implied, shall confer on any person other than the parties hereto and
their respective successors or permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
13.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by either party
without the prior written consent of the other party, provided that:
(a) Either party may assign its rights under this Agreement
as collateral security to any lender providing financing to the party or
any of its Affiliates; and
(b) Buyer may assign all of its rights under this Agreement
to an Affiliate, provided that (i) the representations and warranties of
Buyer hereunder shall be true and correct in all material respects as
applied to the assignee, (ii) both Buyer and the assignee shall execute
and deliver to Seller a written instrument in form and substance
<PAGE>
satisfactory to Seller within its reasonable judgment in which both Buyer
and the assignee agree to be jointly and severally liable for performance
of all of Buyer's obligations under this Agreement, and (iii) Buyer and
the assignee shall deliver such other documents and instruments as
reasonably requested by Seller, including appropriate certified
resolutions of the boards of directors of Buyer and the assignee.
13.8 Governing Law. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of
Indiana without regard to its principles of conflicts of laws.
13.9 Amendments and Waivers. No term or provision of this
Agreement may be amended, waived, discharged or terminated orally but
only by an instrument in writing signed by the party against whom the
enforcement of such amendment, waiver, discharge or termination is
sought. Any waiver shall be effective only in accordance with its
express terms and conditions.
13.10 Severability. Any provision of this Agreement which is
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such unenforceability without invalidating
the remaining provisions hereof, and any such unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction. To the extent permitted by applicable law,
the parties hereto hereby waive any provision of law now or hereafter in
effect which renders any provision hereof unenforceable in any respect.
13.11 Headings. The captions in this Agreement are for
convenience of reference only and shall not define or limit any of the
terms or provisions hereof.
13.12 Counterparts. This Agreement may be executed in any number
of counterparts, and by either party on separate counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
13.13 References. All references in this Agreement to Articles
and Sections are to Articles and Sections contained in this Agreement
unless a different document is expressly specified.
13.14 Schedules and Exhibits. Unless otherwise specified herein,
each Schedule and Exhibit referred to in this Agreement is attached
hereto, and each such Schedule and Exhibit is hereby incorporated by
reference and made a part hereof as if fully set forth herein.
13.15 Attorneys' Fees. If either Seller or Buyer brings suit
against the other in connection with this Agreement and the party against
whom suit is brought (the "Defendant") is successful in denying
substantially all the relief sought by the claimant, then the Defendant
shall be entitled to recover from the claimant the reasonable attorneys'
fees and other costs and expenses incurred by the Defendant in connection
with such suit regardless of whether such suit is prosecuted to judgment.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first written above.
PANACHE BROADCASTING, L.P.
By: Panache GP, Inc.
By: ______________________________
Charles D. Schwartz, President
"Seller"
EMMIS BROADCASTING CORPORATION
By: ______________________________
Jeffrey H. Smulyan, Chairman
"Buyer"
EXHIBIT 11
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
SCHEDULE OF CALCULATION OF PER SHARE NET INCOME
-----------------------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
August 31, 1997 August 31, 1997
--------------- ---------------
Weighted Weighted
Net Average Per Net Average Per
Income Shares Share Income Shares Share
(Unaudited) (Unaudited)
-------- -------- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding and net income
used in the determination of basic
net income per share $ 4,672,000 11,025,158 $ .42 $ 8,040,000 11,036,836 $ .73
Options 507,451 487,515
----------- ---------- ----- ---------- ---------- -----
Used in the determination of
primary net income per share $ 4,672,000 11,532,609 $ .41 $ 8,040,000 11,524,351 $ .70
Options 75,421 103,298
----------- ---------- ----- ---------- ---------- -----
Used in the determination of
fully diluted net income per share $ 4,672,000 11,608,030 $ .40 $ 8,040,000 11,627,649 $ .69
=========== ========== ===== ========== ========== =====
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 11
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
SCHEDULE OF CALCULATION OF PER SHARE NET INCOME
-----------------------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
August 31, 1996 August 31, 1996
--------------- ---------------
Weighted Weighted
Net Average Per Net Average Per
Income Shares Share Income Shares Share
(Unaudited) (Unaudited)
-------- -------- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding and net income
used in the determination of basic
net income per share $ 6,040,000 10,888,234 $ .55 $ 9,545,000 10,948,277 $ .87
Options 523,748 504,630
----------- ---------- ----- ---------- ---------- -----
Used in the determination of
primary net income per share $ 6,040,000 11,411,982 $ .53 $ 9,545,000 11,452,907 $ .83
Options 35,476 59,829
----------- ---------- ----- ---------- ---------- -----
Used in the determination of
fully diluted net income per share $ 6,040,000 11,447,458 $ .53 $ 9,545,000 11,512,736 $ .83
=========== ========== ===== ========== ========== =====
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 11
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
SCHEDULE OF CALCULATION OF PRO FORMA PER SHARE NET INCOME
---------------------------------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
August 31, 1997 August 31, 1997
--------------- ---------------
Pro Forma Weighted Pro Forma Weighted
Net Average Per Net Average Per
Income Shares Share Income Shares Share
-------- -------- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding and net income
used in the determination of basic
net income per share $ 4,702,000 11,025,158 $ .43 $ 8,065,000 11,036,836 $ .73
Options 507,451 487,515
----------- ---------- ----- ---------- ---------- -----
Used in the determination of
primary net income per share $ 4,702,000 11,532,609 $ .41 $ 8,065,000 11,524,351 $ .70
Options 75,421 103,298
----------- ---------- ----- ---------- ---------- -----
Used in the determination of
fully diluted net income per share $ 4,702,000 11,608,030 $ .41 $ 8,065,000 11,627,649 $ .69
=========== ========== ===== =========== ========= =====
<PAGE>
<PAGE>
EXHIBIT 11
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
SCHEDULE OF CALCULATION OF PRO FORMA PER SHARE NET INCOME
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
August 31, 1996 August 31, 1996
--------------- ---------------
Pro Forma Weighted Pro Forma Weighted
Net Average Per Net Average Per
Income Shares Share Income Shares Share
-------- -------- ------ ------- -------- ------
<S> <C> <C> <C> <C>
Shares outstanding and net income
used in the determination of basic
net income per share $ 5,510,000 10,888,234 $ .51 $ 7,735,000 10,948,277 $ .71
Options 523,748 504,630
----------- ---------- ----- ---------- ---------- -----
Used in the determination of
primary net income per share $ 5,510,000 11,411,982 $ .48 $ 7,735,000 11,452,907 $ .68
Options 35,476 59,829
----------- ---------- ----- ---------- ---------- -----
Used in the determination of
fully diluted net income per share $ 5,510,000 11,447,458 $ .48 $ 7,735,000 11,512,736 $ .67
=========== ========== ===== ========== ========== =====
</TABLE>
October 15, 1997
Mr. Howard Schrott
Chief Financial Officer
Emmis Broadcasting Corporation
950 N. Meridian Street, Suite 1200
Indianapolis, Indiana 46204
Dear Mr. Schrott:
We are aware that Emmis Broadcasting Corporation has incorporated by
reference in its Registration Statement Nos. 333-83890 and 333-14657 its
Form 10-Q for the quarter ended August 31, 1997, which includes our report
dated September 24, 1997, covering the unaudited interim financial information
contained therein. Pursuant to Regulation C of the Securities Act of
1933, that report is not considered a part of the registration
statement prepared or certified by our firm or a report prepared or
certified by our firm within the meaning of Sections 7 and 11 of the
Act.
Very truly yours,
/s/ ARTHUR ANDERSEN LLP
- -----------------------
ARTHUR ANDERSEN LLP
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000783005
<NAME> EMMIS BROADCASTING CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> AUG-31-1997
<CASH> 5,004
<SECURITIES> 0
<RECEIVABLES> 33,264
<ALLOWANCES> 1,349
<INVENTORY> 0
<CURRENT-ASSETS> 42,216
<PP&E> 35,928
<DEPRECIATION> 17,459
<TOTAL-ASSETS> 243,235
<CURRENT-LIABILITIES> 13,724
<BONDS> 161,076
0
0
<COMMON> 109
<OTHER-SE> 39,291
<TOTAL-LIABILITY-AND-EQUITY> 243,235
<SALES> 40,055
<TOTAL-REVENUES> 40,055
<CGS> 6,166
<TOTAL-COSTS> 6,166
<OTHER-EXPENSES> 21,648
<LOSS-PROVISION> 205
<INTEREST-EXPENSE> 4,370
<INCOME-PRETAX> 7,666
<INCOME-TAX> 2,994
<INCOME-CONTINUING> 4,672
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,672
<EPS-PRIMARY> .41
<EPS-DILUTED> .40
</TABLE>
