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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-K
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1998
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-23264
EMMIS BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA
(State or other jurisdiction of
incorporation or organization)
950 NORTH MERIDIAN STREET, SUITE 1200
INDIANAPOLIS, INDIANA
(Address of principal executive offices)
35-1542018
(I.R.S. Employer
Identification No.)
46204
(Zip Code)
317/266-0100
Registrant's Telephone Number
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Class A Common Stock, $.01 par value
Title of Class
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's Knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant (1) has filed all documents
and 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 aggregate market value of the voting stock held by non-affiliates of
the registrant, as of April 22, 1998, was approximately $420,963,138.
The number of shares outstanding of each of the registrant's classes of
common stock, as of April 22, 1998, was:
8,452,694 Class A Common Shares, $.01 par value
2,560,894 Class B Common Shares, $.01 par value
Documents Incorporated by Reference: See Page 2
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DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
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DOCUMENTS FORM 10-K REFERENCE
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<S> <C>
Proxy Statement Dated May 21, 1998 Part III
</TABLE>
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EMMIS BROADCASTING CORPORATION
FORM 10-K
TABLE OF CONTENTS
<TABLE>
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PAGE
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PART I...................................................... 4
Item 1. Business....................................... 4
Item 2. Properties..................................... 22
Item 3. Legal Proceedings.............................. 24
Item 4. Submission of Matters to a Vote of Security
Holders........................................ 24
PART II..................................................... 25
Item 5. Market for Registrant's Common Equity and
Related Shareholder Matters.................... 25
Item 6. Selected Financial Data........................ 26
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation... 26
Item 8. Financial Statements and Supplementary Data.... 32
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure......... 54
PART III.................................................... 55
Item 10. Directors and Executive Officers of the
Registrant.................................... 55
Item 11. Executive Compensation........................ 55
Item 12. Security Ownership of Certain Beneficial
Owners and Management......................... 55
Item 13. Certain Relationships and Related
Transactions.................................. 55
PART IV..................................................... 56
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K........................... 56
Signatures.................................................. 58
</TABLE>
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PART I
ITEM 1. BUSINESS.
GENERAL
Emmis Broadcasting Corporation (the "Company" or "Emmis") is a diversified
media company with radio broadcasting and magazine publishing operations and,
following the consummation of two pending acquisitions, television broadcasting
operations. In 1997 the Company ranked as the eighth largest radio broadcaster
in the United States based on total number of listeners and the ninth largest
radio broadcaster in the United States based on total revenue. The eleven FM
radio stations and two AM radio stations owned or operated by the Company in the
United States (collectively, the "Radio Stations") serve the nation's three
largest radio markets of New York City, Los Angeles and Chicago, as well as St.
Louis and Indianapolis. These markets accounted for approximately $1.7 billion
in radio advertising revenues in calendar year 1997 as reported in Duncan's
Radio Market Guide (1998 ed.). The Company has entered into agreements to
purchase six network-affiliated television stations (collectively, the
"Television Stations") located in New Orleans, Louisiana, Mobile, Alabama, Green
Bay, Wisconsin, and Honolulu, Hawaii (the "SF TV Stations"), and in Fort Myers,
Florida and Terre Haute, Indiana (the "Wabash Valley TV Stations"). All of the
Television Stations are VHF stations except the Fort Myers station, which is a
UHF station. The markets served by the Television Stations accounted for
approximately $360 million in television advertising revenue in calendar year
1997 as reported in BIA's Investing in Television Market Report (1998 ed.) (the
"1998 BIA Report"). The Company expects to complete the purchase of the
Television Stations in late 1998.
Through a combination of acquisitions and internal growth, the Company's
broadcast cash flow has grown from $15.3 million (when the Company owned five
radio stations) in fiscal 1993 to $81.4 million in fiscal 1998 (on a pro forma
basis after giving effect to the Acquisition Transactions, as defined below, and
the radio stations acquired by the Company during fiscal 1998). The Company has
successfully created top-performing radio stations that are ranked, in terms of
primary demographic target audience share, among the top ten stations in the New
York City, Los Angeles, Chicago, St. Louis and Indianapolis radio markets
according to the Winter 1998 Ratings (the "Winter 1998 Arbitron Survey")
published by The Arbitron Company ("Arbitron"). This success, along with awards
from organizations such as the National Association of Broadcasters and
Billboard and Rolling Stone magazines, has come primarily as a result of the
Company's ability to attract and retain an experienced team of broadcast
professionals who have focused on creating innovative programming and developing
effective marketing and advertising sales programs. In addition, the Company
believes that the location of its Radio Stations in large markets makes it
attractive to radio advertisers and that the diversity of its radio markets
reduces its dependence on any one economic sector or specific advertiser.
The Company's overall strategy is to acquire underdeveloped media
properties in desirable markets and then to create value for the Company's
shareholders by developing those properties to enhance their cash flow. The
Company has successfully implemented this strategy with radio broadcasting
stations and with city magazines. The Company believes that it will be able to
utilize its expertise in broadcast operations, programming and advertising sales
in applying this strategy to the Television Stations which, like the radio
stations previously acquired by the Company, are underdeveloped properties
located in desirable markets, which can benefit from innovative, research-based
programming and the Company's experienced management team. Each of the SF TV
Stations experienced ratings declines following a change in affiliation to the
Fox television network from affiliation with other networks. The Company
believes that the ratings and broadcast cash flow of the Television Stations can
be improved with a more market-focused, research-based programming approach and
other related strategies.
PENDING TRANSACTIONS
Effective March 30, 1998, the Company entered into a definitive agreement
to acquire the SF TV Stations, consisting of WVUE-TV, New Orleans, Louisiana;
WALA-TV, Mobile, Alabama; WLUK-TV, Green Bay, Wisconsin; and KHON-TV, Honolulu,
Hawaii, for approximately $307 million, with $257 million
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payable in cash at closing, $25 million payable at closing in either cash or
Class A Common Stock at the Company's option, and $25 million with interest at
8% per annum payable one year after closing in either cash or Class A Common
Stock at the Company's option (the "SF Acquisition"). The Company currently
anticipates that it will pay all of the purchase price in cash.
Effective March 20, 1998, the Company entered into a definitive agreement
to acquire the Wabash Valley TV Stations, consisting of WFTX-TV, Fort Myers,
Florida and WTHI-TV, Terre Haute, Indiana, as well as radio stations WTHI-FM,
WTHI-AM and WWVR-FM in Terre Haute, Indiana, for approximately $90 million in
cash (the "Wabash Valley Acquisition").
Upon consummation of the purchase of the Television Stations, the Company
plans to create a separate television division. The Company has signed a letter
of intent with Greg Nathanson, President of Programming and Development at
Twentieth Television, to manage the Company's television division.
On May 15, 1997, the Company entered into an agreement to acquire radio
station WQCD-FM in New York City (the "WQCD Acquisition" and, together with the
SF Acquisition and the Wabash Valley Acquisition, the "Acquisition
Transactions"). Starting in July 1997 and until the purchase of the station is
completed, the Company has operated and will continue to operate the station
pursuant to a time brokerage agreement under which the Company pays the current
owner a monthly fee of approximately $700,000. As a result, the operating
results of WQCD-FM are included in the Company's operating results beginning
July 1, 1997. Under the acquisition agreement, the current owner had the option
to require the Company to purchase the station, which it exercised in December
1997. The current WQCD-FM owner also exercised its right under the acquisition
agreement to require the Company to purchase certain TV stations that are to be
transferred by the Company to the current WQCD-FM owner in exchange for WQCD-FM.
The purchase price for the WQCD Acquisition will be approximately $141 million
after adjustments. The Company anticipates that it will complete the acquisition
in mid-1998. There can be no assurance, however, with respect to the timing or
completion of the WQCD Acquisition, which is subject to certain conditions,
including the concurrent acquisition and exchange of the TV stations specified
by the current WQCD-FM owner and obtaining the necessary regulatory approvals.
RADIO STATIONS
The following table sets forth certain information regarding the Radio
Stations operated by the Company and their broadcast markets:
<TABLE>
<CAPTION>
RANKING IN
STATION MARKET STATION PRIMARY PRIMARY
AND RANK BY AUDIENCE DEMOGRAPHIC DEMOGRAPHIC
MARKET REVENUE(1) SHARE(2) TARGET AGES FORMAT TARGET(3)
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Los Angeles.................. 1
KPWR-FM................. 4.0 12-24 Dance/Contemporary Hit 1
New York..................... 2
WQHT-FM................. 5.5 12-24 Dance/Contemporary Hit 1
WRKS-FM................. 4.2 25-54 Classic Soul/Smooth R&B 3
WQCD-FM(4).............. 3.2 25-54 Contemporary Jazz 6t
Chicago...................... 3
WKQX-FM................. 3.0 18-34 New Rock 4
St Louis..................... 18
KSHE-FM................. 5.0 18-34 Album Oriented Rock 4
WKKX-FM................. 4.2 18-34 Country 5
WALC-FM................. 2.9 18-44 Modern Adult Contemporary 7t
</TABLE>
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<TABLE>
<CAPTION>
RANKING IN
STATION MARKET STATION PRIMARY PRIMARY
AND RANK BY AUDIENCE DEMOGRAPHIC DEMOGRAPHIC
MARKET REVENUE(1) SHARE(2) TARGET AGES FORMAT TARGET(3)
------- ---------- -------- ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Indianapolis................. 30
WENS-FM................. 5.5 25-54 Adult Contemporary 4
WIBC-AM................. 8.5 35-64 News/Talk 3
WNAP-FM................. 4.7 25-54 Classic Rock 5
WTLC-FM................. 5.5 25-34 Urban Contemporary 2
WTLC-AM................. 1.2 25-54 Solid Gold Soul, Gospel 18
and Talk
</TABLE>
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(1) "Market Rank by Revenue" is the ranking of the market revenue size of the
principal radio market served by the station among all radio markets in the
United States. Market revenue and ranking figures are from Duncan's Radio
Market Guide (1998 ed.). The Company owns a 40% equity interest in the
publisher of Duncan's Radio Market Guide.
(2) "Station Audience Share" is from the Winter 1998 Arbitron Survey. The
generally accepted method of measuring the relative size of a radio
station's audience is by reference to total persons, age 12 and older,
Monday -- Sunday, 6 a.m. -- Midnight Average Quarter Hour ("AQH") shares as
published by Arbitron. Arbitron periodically samples radio listeners in
defined market areas, principally through the use of diaries returned by
selected listeners. A station's AQH share is a percentage computed by
dividing the average number of persons listening to a particular station for
at least five minutes during an average quarter hour in a given time period
by the average number of such persons for all stations in the market area.
Arbitron compiles ratings data for various demographic groups as well as for
total persons age 12 and older.
(3) "Ranking in Primary Demographic Target" is the ranking of the station among
all radio stations in its market and is based on the station's AQH share in
the primary demographic target according to the Winter 1998 Arbitron Survey.
A "t" indicates the station tied with another station for the stated
ranking.
(4) This station is currently being operated by the Company under a time
brokerage agreement pending its purchase by the Company.
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TELEVISION STATIONS
The following table sets forth certain information regarding the SF TV
Stations and the markets in which they operate:
<TABLE>
<CAPTION>
NUMBER OF STATION LICENSE
TELEVISION METROPOLITAN AFFILIATION/ HOUSEHOLDS DMA STATIONS STATION AUDIENCE EXPIRATION
STATION AREA SERVED CHANNEL IN DMA(1) RANK(1) IN MARKET(2) RANK(3) SHARE(4) DATE
- - ---------- ------------ ------------ ---------- ------- ------------ ------- -------- ----------
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WVUE-TV New Orleans, LA Fox/8 623,000 41 6 4 8 6/1/05
WALA-TV Mobile, AL-Pensacola, FL Fox/10 450,000 62 5 3 10 4/1/05
WLUK-TV(5) Green Bay, WI Fox/11 381,000 70 5 4 9 12/1/05
KHON-TV(5) Honolulu, HI Fox/2 380,000 71 6 2 15 2/1/99
</TABLE>
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(1) Estimated by the A. C. Nielsen Company ("Nielsen") as of January 1998.
Rankings are based on the relative size of a station's market among the 211
generally recognized Designated Market Areas ("DMAs"), as defined by
Nielsen.
(2) Represents the number of television stations ("Reportable Stations")
designated by Nielsen as "local" to the DMA, excluding public television
stations and stations which do not meet minimum Nielsen reporting standards
(i.e., a weekly cumulative audience of less than 2.5%) for reporting in the
Sunday through Saturday, 9:00 a.m. to midnight time period.
(3) Reflects the station's rank relative to other Reportable Stations based upon
the DMA rating as reported by Nielsen from 9:00 a.m. to midnight, Sunday
through Saturday during February 1998.
(4) Reflects an estimate of the share of DMA households viewing television
received by a local commercial station in comparison to other local
commercial stations in the market as measured from 9:00 a.m. to midnight,
Sunday through Saturday.
(5) As part of the SF Acquisition, the Company will also acquire KAII-TV and
KHAW-TV, which operate as satellite stations of KHON-TV and primarily
re-broadcast the signal of KHON-TV. The stations are considered one station
for FCC multiple ownership purposes. Low power television translators W40AN
and K55D2 retransmit stations WLUK-TV and KHON-TV, respectively.
The following table sets forth certain information regarding the Wabash
Valley TV Stations and the markets in which they operate:
<TABLE>
<CAPTION>
HOUSEHOLDS NUMBER OF STATION LICENSE
TELEVISION METROPOLITAN AFFILIATION/ IN DMA DMA STATIONS STATION AUDIENCE EXPIRATION
STATION AREA SERVED CHANNEL (1) BANK(1) IN MARKET(2) BANK(3) SHARE(4) DATE
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fort Myers,
WFTX-TV FL............. Fox/36 320,000 83 5 4 7 2/1/05
Terre Haute,
WTHI-TV IN............. CBS/10 157,000 140 3 1 29 8/1/05
</TABLE>
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(1) Estimated by Nielsen as of January 1998. Rankings are based on the relative
size of a station's market among the 211 generally recognized DMAs.
(2) Represents the number of television stations designated by Nielsen as
"local" to the DMA, excluding public television stations and stations which
do not meet minimum Nielsen reporting standards (i.e., a weekly cumulative
audience of less than 2.5%) for reporting in the Sunday through Saturday,
9:00 a.m. to midnight time period.
(3) Reflects the station's rank relative to other Reportable Stations based upon
the DMA rating as reported by Nielsen from 9:00 a.m. to midnight, Sunday
through Saturday during February 1998.
(4) Reflects an estimate of the share of DMA households viewing television
received by a local commercial station in comparison to other local
commercial stations in the market as measured from 9:00 a.m. to midnight,
Sunday through Saturday.
Wabash Valley Radio Stations. The three radio stations included in the
Wabash Valley Acquisition are WTHI-FM, WTHI-AM and WWVR-FM in Terre Haute,
Indiana. WTHI-FM currently operates in a Country format and was the number one
station in the Terre Haute market, according to the Fall 1997
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Ratings published by Arbitron (the "Fall 1997 Arbitron Survey"), which is the
most recent ratings information available for this market. WTHI-AM currently
operates in a Talk format and was tied for the number eight station overall in
the Terre Haute market according to the Fall 1997 Arbitron Survey. The combined
broadcast cash flow for WTHI-FM and WTHI-AM was approximately $555,000 in 1997.
WWVR-FM (which is now in the process of being acquired by the seller under the
Wabash Valley Acquisition agreement) currently operates in a Religious format
and was the number seven station overall in the Terre Haute market according to
the Fall 1997 Arbitron Survey. The Company does not expect WWVR-FM to have a
material effect on the Company's broadcast cash flow or net income in the near
term. The Company's ownership of these Terre Haute radio stations together with
television station WTHI-TV, will require a waiver of the FCC's multiple
ownership rules. The Company has applied for the waiver, but if not granted by
the FCC, the Company may be required to divest its ownership of one or more of
the Terre Haute radio stations. Terre Haute ranks 172nd by radio advertising
revenue according to Duncan's Radio Market Guide (1998 ed.).
BUSINESS STRATEGY
The Company is committed to maintaining its leadership positions in
broadcasting, enhancing the performance of its broadcast properties, and
distinguishing itself through the quality of its operations. The Company intends
to selectively grow through acquisition. The Company has a successful track
record of acquiring underperforming radio stations in attractive markets and
improving their ratings, revenues and broadcast cash flow by utilizing its
programming and marketing skills. The Company believes that its strategy of
acquiring underperforming radio broadcast properties and improving their
operational and financial performance is also applicable to television broadcast
properties.
RADIO BROADCASTING STRATEGY. The key components of the Company's radio
broadcasting strategy include the following:
Pursuit of Strategic Acquisitions. The Company believes that continued
consolidation in the broadcasting industry will result in attractive
acquisition opportunities as the number of potential buyers for radio
assets declines. The Company also expects additional stations to become
available as larger consolidators either sell broadcasting assets or are
not able to bid for properties due to in-market ownership limitations. The
Company will consider acquisitions of individual radio stations or groups
of radio stations in new markets where it expects that it can ultimately
achieve a leadership position. In addition, the Company intends to pursue
acquisitions of radio stations in those of its current markets where it
believes increases in broadcast cash flow are attainable. Generally, the
Company has targeted markets that feature both large revenue pools and a
relatively small number of stations with competitive signals, a combination
which allows the Company greater operating leverage to achieve high
margins. The Company believes that historically under-serviced markets,
such as the Indianapolis radio market, provide vehicles for the Company's
sustained future growth. In analyzing potential acquisitions in new
markets, the Company generally considers (i) the amount of money generated
through radio advertising each year in the relevant market and the growth
rate for this pool of revenue, (ii) the number of competitive stations in
the market, including whether there is a niche or whether one of the
competitors has a perceived vulnerability, (iii) whether the station
proposed to be acquired has a competitive signal, (iv) whether value can be
achieved through ownership of multiple stations in that market, and (v) the
minimum level of performance which can be expected from the station under
the Company's management.
Strategic Grouping of Stations. Emmis organizes its operations within each
market to optimize operational performance and best position the properties
within that market to establish and maintain leadership positions.
Management concentrates on providing a focused programming format tailored
to its advertisers and the audiences they seek. This focus has resulted in
Emmis operating more than one radio station in certain markets so that
complementary programming formats may be offered to advertisers. In other
markets, management considers various opportunities to increase the number
of radio stations owned, and will only acquire other radio stations if they
are deemed appropriate for Emmis and its goals in that market at that time.
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Innovative Programming. Historically, Emmis has been able to improve the
ratings, revenue and cash flow of its developing properties with increased
marketing and innovative programming. For example, in New York City Emmis
acquired WRKS-FM in 1994, the direct competitor of WQHT-FM, a station it
already owned. By changing the format of WRKS-FM to appeal to an older
demographic target and refocusing WQHT-FM to target the younger end of the
Contemporary Hit spectrum, the Company allowed the stations to complement
one another, captured a larger audience share and increased the combined
cash flow of the stations by approximately 133% over the three years ended
February 28, 1997. The Company expects its acquisition of WQCD-FM to round
out this group of stations in New York City by adding a third complementary
music format. The Company believes it can achieve similar success with its
television properties.
Focused Marketing Strategy. Emmis designs its local and national sales
efforts based on advertiser demand and the competitive formats within each
market. Since radio advertising revenues have generally grown at a more
rapid rate than total advertising sales, the Company has tailored its
programming in each market to appeal to specific demographic groups. For
example, in 1984 Emmis took over KPWR-FM in Los Angeles and changed its
format from adult contemporary to the nation's first Rhythmic Top 40's
station. This format appealed directly to the Latino population (the
fastest-growing segment of the population in Los Angeles) and made the
station an overnight success. KPWR-FM has been the number one station for
12 to 24 year old listeners for the past 10 years.
Entrepreneurial Management Approach. Each of the Company's stations is
managed by a team of experienced broadcasters who understand the musical
tastes, demographics and competitive opportunities of their particular
market. The Company uses an entrepreneurial management approach involving
decentralized station operations by local management which oversees and
controls station spending, long-range planning, company policies and
resource allocation at its individual station and is rewarded based on that
station's performance. In addition, the Company encourages its managers and
employees to own a stake in the Company, and over 79% of all full-time
employees own Emmis shares (or options to purchase shares), except for
full-time employees hired in connection with acquisitions since October
1997. The Company believes that this entrepreneurial management approach
has given Emmis a distinctive corporate culture, making it a highly
desirable employer in the broadcasting industry and significantly enhancing
the Company's ability to attract and retain experienced and highly
motivated employees and management.
TELEVISION BROADCASTING STRATEGY. The key components of the Company's
television broadcasting strategy include the following:
Pursuit of Strategic Acquisitions. The Company believes that attractive
acquisition opportunities are becoming increasingly available in the
television broadcasting industry, particularly in mid-sized markets. In
many cases, such television stations have suffered ratings and revenue
declines due to management inattention, improper programming strategies or
inadequate sales and marketing efforts. The Company intends to pursue
acquisitions of underperforming television stations which offer the
potential for significant improvement in ratings and broadcast cash flow
from more focused, research-based programming and application of the
Company's sales and marketing experience.
Programming Strategy. Emmis believes that innovative programming and
knowledge of local markets are the most important determinants of
individual station success. Familiarity with the local market is
particularly important to the Fox stations to be acquired by the Company
because of the significant programming flexibility resulting from
relatively low levels of network-originated programming. While major
networks may provide as much as 70% of the total programming aired by their
affiliated stations, Fox generally provides closer to 30%. Therefore, in
order to develop the Television Stations successfully, the Company has
identified television veteran Greg Nathanson to head its television
division. Mr. Nathanson has over 30 years of television broadcasting
experience and has had extensive independent programming experience as
President of Programming and Development for Twentieth Television and
President of Fox Television Stations. In addition, the Company expects to
conduct specific market research in order to effectively target the local
audience.
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Maximize Advertising Inventory Value. Emmis intends to develop
complementary programming and organize the programming schedule at its
television stations to maximize the value of its advertizing spot inventory
by scheduling complementary programming around its most successful
programs. For example, the Company intends to leverage the popularity of
football programming in a market such as Green Bay or New Orleans by
developing and scheduling football-related programming for which higher
advertising revenue can be obtained.
Entrepreneurial Management Approach. The Company intends to extend its
successful entrepreneurial management approach to its television stations
through decentralized station operations by experienced local managers at
each station who understand the programming tastes, demographics and
competitive opportunities of their particular market and will be rewarded
based on their station's performance. Senior management of the Company will
work closely with local station management to implement the Company's
programming and marketing strategies and help enhance each station's
ratings and broadcast cash flow. The Company will also encourage the
managers and employees of its television stations to own a stake in the
Company and will include them in its various option, share purchase and
other share ownership programs open to its employees generally.
COMMUNITY INVOLVEMENT
The Company believes that to be successful, it must be integrally involved
in the communities it serves. To that end, each of the Company's stations
participates in many community programs, fundraisers and activities that benefit
a wide variety of organizations. Charitable organizations that have been the
beneficiaries of the Company's marathons, walkathons, dance-a-thons, concerts,
fairs and festivals include, among others, The March of Dimes, American Cancer
Society, Riley Children's Hospital and research foundations seeking cures for
cystic fibrosis, leukemia and AIDS and helping to fight drug abuse.
In addition to its planned activities, the Company's stations take
leadership roles in community responses to natural disasters.
INDUSTRY INVOLVEMENT
The Company has an active leadership role in a wide range of industry
organizations. The Company's senior managers have served in various capacities
with industry associations, including as directors of the National Association
of Broadcasters, the Radio Advertising Bureau, the Radio Futures Committee and
the Arbitron Advisory Council and as founding members of the Radio Operators
Caucus. In addition, managers of the Company have been voted Radio President of
the Year and General Manager of the Year, and at various times the Company was
voted Most Respected Broadcaster in polls of radio industry chief executive
officers and managers.
ADVERTISING SALES
Virtually all of the revenue of a radio or television station is derived
from local, regional and national advertising. In the case of television
stations, additional revenue is sometimes derived from fees received from the
affiliated television networks in exchange for broadcasting network programming
and associated network advertising. Advertising rates charged by a station are a
function of the station's ability to attract audiences in the demographic groups
which advertisers wish to reach, and the number of stations competing in the
market area. A station's audience is reflected in rating service surveys of the
size of the audience tuned to the station and the time spent listening or
viewing.
The Company's stations derive their advertising revenue from local and
regional advertising in the marketplaces in which they operate, as well as from
the sale of national advertising. Local and most regional sales are made by a
station's sales staff. National sales are made by firms specializing in such
sales which are compensated on a commission-only basis. The Company believes
that the volume of national advertising revenue tends to adjust to shifts in a
station's audience share position more rapidly than does the volume of local and
regional advertising revenue.
The Company has led the industry in developing "vendor co-op" advertising
revenue (i.e., revenue from a manufacturer or distributor which is used to
promote its particular goods together with local retail outlets for
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those goods). Although this source of advertising revenue is common in the
newspaper and magazine industry, the Company was among the first radio
broadcasters to recognize, and take advantage of, the potential of vendor co-op
advertising. The Company's Revenue Development Systems division has established
a network of radio stations which share information about sources of vendor
co-op revenue. In addition, each of the Company's stations has a salesperson
devoted exclusively to the development of cooperative advertising. The Company
intends to expand this approach to the Television Stations.
In the broadcasting industry, stations often utilize trade (or barter)
agreements to exchange advertising time for goods or services (such as other
media advertising, travel or lodging), in lieu of cash. In order to preserve
most of its on-air inventory for cash advertising, the Company generally enters
into trade agreements only if the goods or services bartered to the Company will
be used in the Company's business. The Company has minimized its use of trade
agreements and in fiscal 1996, 1997 and 1998 sold approximately 95% of its
advertising time for cash. In addition, it is the Company's general policy not
to preempt advertising spots paid for in cash with advertising spots paid for in
trade.
RADIO NETWORKS
In addition to its other radio broadcasting operations, the Company owns
and operates two radio networks. Network Indiana provides news and other
programming to nearly 70 affiliated radio stations in Indiana. AgriAmerica
network provides farm news, weather information and market analysis to radio
stations across Indiana.
PUBLISHING OPERATIONS
The Company publishes four magazines which were acquired beginning in 1988.
Indianapolis Monthly. The Company has published Indianapolis Monthly
magazine since September 1988. Indianapolis Monthly covers local personalities,
homes and lifestyles and currently has a paid monthly circulation of
approximately 45,000. Despite a nationwide downturn in the city and regional
magazine business, Indianapolis Monthly continues to perform well. The Company
believes this is due to a large advertising base and a popular editorial focus.
Competition comes from other local publications, although Indianapolis Monthly
is now the only general interest magazine focusing on the Indianapolis area.
Atlanta. The Company acquired and began publishing Atlanta magazine on
August 1, 1993. Atlanta covers area personalities, issues and style and
currently has a paid monthly circulation of approximately 65,000. The magazine
was unprofitable for several years before it was acquired by the Company for a
nominal investment. Certain initiatives, including downsizing staff, increasing
sales efforts and repositioning editorial focus, have contributed to improving
profitability.
Cincinnati. The Company acquired Cincinnati magazine in October 1997.
Cincinnati magazine was founded by the Greater Cincinnati Chamber of Commerce in
1967 and under its most recent owner before the Company grew to a paid monthly
circulation of approximately 22,000. The Company has repositioned the editorial
product to an up-to-date city/regional magazine covering people and
entertainment in Cincinnati, has doubled the existing sales staff and is
marketing the newly designed magazine to the Cincinnati area.
Texas Monthly. The Company acquired Texas Monthly magazine in February
1998. The critically acclaimed magazine, which has received eight National
Magazine Awards, has a paid monthly circulation of approximately 300,000 and is
believed by the Company to be read by more than 2,436,000 people. It marked its
25th anniversary with the publication of the February 1998 issue, which set a
single issue advertising record. The Company plans to increase Texas Monthly's
operating efficiencies while leaving the highly regarded editorial product
intact.
COMPETITION
Radio and television broadcasting stations compete with the other
broadcasting stations in their respective market areas, as well as with other
advertising media such as newspapers, magazines, outdoor advertising, transit
advertising, compact discs, music videos, the internet and direct mail
marketing. Competition within the broadcasting industry occurs primarily in
individual market areas, so that a station in one market does not generally
compete with stations in other market areas. In each of its markets, the
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Company's stations face competition from other stations with substantial
financial resources, including stations targeting the same demographic groups.
In addition to management experience, factors which are material to competitive
position include the station's rank in its market, authorized power, assigned
frequency, audience characteristics, local program acceptance and the number and
characteristics of other stations in the market area. The Company attempts to
improve its competitive position with programming and promotional campaigns
aimed at the demographic groups targeted by its stations, and through sales
efforts designed to attract advertisers that have done little or no broadcast
advertising by emphasizing the effectiveness of radio and television advertising
in increasing the advertisers' revenues. Recent changes in the policies and
rules of the FCC permit increased joint ownership and joint operation of local
stations. Those stations taking advantage of these joint arrangements may in
certain circumstances have lower operating costs and may be able to offer
advertisers more attractive rates and services. Although the Company believes
that each of its stations can compete effectively in its market, there can be no
assurance that any of the Company's stations will be able to maintain or
increase its current audience ratings or advertising revenue market share.
Although the broadcasting industry is highly competitive, some barriers to
entry exist. The operation of a broadcasting station in the United States
requires a license from the FCC, and the number of stations that can operate in
a given market is limited by the availability of the frequencies that the FCC
will license in that market, as well as by the FCC's multiple ownership rules
regulating the number of stations that may be owned and controlled by a single
entity. The FCC's multiple ownership rules have changed significantly as a
result of the 1996 Act.
The broadcasting industry historically has grown in terms of total revenues
despite the introduction of new technology for the delivery of entertainment and
information, such as cable television, audio tapes and compact discs. The
Company believes that radio's portability in particular makes it less vulnerable
than other media to competition from new methods of distribution or other
technological advances. There can be no assurance, however, that the development
or introduction in the future of any new media technology will not have an
adverse effect on the radio or television broadcasting industry.
EMPLOYEES
As of February 28, 1998 the Company had approximately 663 full-time
employees and approximately 237 part-time employees. The Company's on-air
employees at its New York and Chicago radio stations, totaling approximately 62
persons, are covered by a union contract with the American Federation of
Television and Radio Artists. The Company considers relations with its employees
to be excellent.
FEDERAL REGULATION
Television and radio broadcasting are subject to the jurisdiction and
regulation of the Federal Communications Commission ("FCC") under the
Communications Act of 1934, as amended (the "Communications Act"). Television or
radio broadcasting is prohibited except in accordance with a license issued by
the FCC upon a finding that the public interest, convenience and necessity would
be served by the grant of such license. The FCC has the power to revoke licenses
for, among other things, false statements made in applications or willful or
repeated violations of the Communications Act or of FCC rules. In general, the
Communications Act provides that the FCC shall allocate television and radio
licenses in such manner as will provide a fair, efficient and equitable
distribution of service throughout the United States. The FCC determines the
location of stations, regulates the apparatus used by stations, and regulates
numerous other areas of television and radio broadcasting pursuant to rules,
regulations and policies adopted under authority of the Communications Act. The
Communications Act, among other things, prohibits the assignment of a broadcast
license or the transfer of control of a corporation holding a license without
the prior approval of the FCC. Under the Communications Act, the FCC also
regulates certain aspects of the operation of cable television systems and other
electronic media that compete with broadcast stations.
The Telecommunications Act of 1996 (the "1996 Act"), which amended the
Communications Act, significantly changed both the process for renewal of
broadcast station licenses and the broadcast ownership rules. Among other
things, the 1996 Act established a "two-step" renewal process that limits the
FCC's discretion to consider applications filed in competition with an
incumbent's renewal application. The 1996 Act
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also substantially liberalized broadcast ownership restructure by eliminating
the limits on the ownership of radio stations nationally, easing the national
restrictions on TV ownership, relaxing local radio ownership restrictions, and
requiring periodic review of other FCC broadcast ownership regulations,
including local television ownership restrictions. This new regulatory
flexibility has engendered aggressive local, regional, and national acquisition
campaigns. Removal of previous station ownership limitations on leading
incumbents (i.e., existing networks and major station groups) in many instances
has increased sharply the competition for and prices of attractive stations.
Other legislation has been introduced from time to time which would amend
the Communications Act in various respects, and the FCC from time to time
considers new regulations or amendments to its existing regulations. The Company
cannot predict whether any such legislation will be enacted or new or amended
FCC regulations adopted or what their effect would be on the Company.
The following is a brief summary of certain provisions of the
Communications Act and of specific FCC regulations and policies. Reference
should be made to the Communications Act, FCC rules and the public notices and
rulings of the FCC for further information concerning the nature and extent of
federal regulation of radio and television stations.
Grants and Renewals of Licenses. Radio and television stations operate
pursuant to broadcasting licenses that are ordinarily granted by the FCC for
maximum terms of eight years and are subject to renewal upon application to the
FCC. The Company's licenses currently have the following expiration dates, until
renewed:
<TABLE>
<S> <C>
WENS-FM (Indianapolis).................................... August 1, 2004
WKQX-FM (Chicago)......................................... December 1, 2004
KSHE-FM (St. Louis)....................................... February 1, 2005
KPWR-FM (Los Angeles)..................................... December 1, 1997*
WQHT-FM (New York)........................................ June 1, 1998*
WQCD-FM (New York)........................................ June 1, 1998*
WIBC-AM (Indianapolis).................................... August 1, 2004
WNAP-FM (Indianapolis).................................... August 1, 2004
WRKS-FM (New York)........................................ June 1, 1998*
WKKX-FM (St. Louis)....................................... December 1, 2004
WALC-FM (St. Louis)....................................... December 1, 2004
WTLC-AM (Indianapolis).................................... August 1, 2004
WTLC-FM (Indianapolis).................................... August 1, 2004
WTHI-AM (Terre Haute)..................................... August 1, 2004
WTHI-AM (Terre Haute)..................................... August 1, 2004
WWVR-FM (Terre Haute)..................................... August 1, 2004
WTHI-TV (Terre Haute)..................................... August 1, 2005
WFTX-TV(Fort Myers)....................................... February 1, 2005
WALA-TV (Mobile).......................................... April 1, 2005
WVUE-TV (New Orleans)..................................... June 1, 2005
WLUK-TV (Green Bay)....................................... December 1, 2005
KHON-TV (Honolulu)........................................ February 1, 1999
KAII-TV (Maui)............................................ February 1, 1999
KHAW-TV (Hawaii).......................................... February 1, 1999
</TABLE>
- - -------------------------
* The asterisk denotes a license renewal application pending at the FCC. The
Communications Act provides that a broadcast station license with a renewal
application pending remains in effect until the FCC acts on the renewal
application, notwithstanding the expiration of the stated term.
Under the Communications Act, at the time an application is filed for
renewal for a station license, parties in interest, which may include members of
the public in the station's service area, may apprise the FCC of the service the
station has provided during the preceding license term and petition the FCC to
deny the renewal. If such a petition to deny presents information from which the
FCC concludes (or if the FCC concludes on its own) that there is a "substantial
and material" question whether grant of the renewal application would be in the
public interest under applicable rules and policy, the FCC may conduct a hearing
on specified issues to determine whether renewal should be granted. A competing
application for authority to
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operate a station and replace the incumbent licensee may not be filed against a
renewal application or considered by the FCC in deciding whether to grant a
renewal application. The 1996 Act modified the license renewal process to
provide for the grant of a renewal application upon a finding by the FCC that
the licensee (i) has served the public interest, convenience and necessity; (ii)
has committed no serious violations of the Communications Act or the FCC's
rules; and (iii) has committed no other violations of the Communications Act or
the FCC's rules which would constitute a pattern of abuse. If the FCC cannot
make such a finding, it may deny a renewal application. Only after it has denied
the renewal application may the FCC accept other applications to operate the
station of the former licensee. Historically, the FCC has renewed most broadcast
licenses without a hearing even when petitions to deny have been filed against
broadcast license renewal applications.
On July 1, 1996, the National Rainbow Coalition and Operation Push filed
with the FCC a petition to deny renewal of the licenses of WENS-FM, WNAP-FM and
WIBC-AM for alleged deficiencies in minority hiring practices. The Company
opposed the petition. The Company and the petitioners subsequently entered into
an agreement as a result of which the petition was withdrawn. Notwithstanding
the withdrawal of the petition and pursuant to its long-time policy, the FCC
considered the allegations of the petition. In August 1997, the FCC renewed the
license for each station. The FCC determined that neither WENS-FM nor WNAP-FM
had violated its minority hiring practice rules. The FCC concluded that WIBC-AM
had not maintained complete minority hiring records, imposed a fine of $10,000,
and imposed certain annual reporting conditions. The Company has appealed the
imposition of the fine.
In response to recent legislation mandating the use of auctions to award
commercial broadcast authorizations, the FCC has initiated a rulemaking
proceeding to consider the use of competitive bidding procedures (auctions) to
award licenses or construction permits for new broadcast stations to the highest
bidder, and may also subject to auction certain other pending and future
applications by licensees to improve or otherwise modify their existing
facilities, where such applications would be mutually exclusive with other
licensees' applications. Pending the adoption of new auction rules, the FCC has
imposed a temporary freeze on the filing of applications for new facilities or
major modifications to existing facilities.
Station Classes. The FCC classifies each AM and FM station. An AM station
operates on either a clear channel, regional channel or local channel. A clear
channel is one on which AM stations are assigned to serve wide areas. AM
stations operating on clear channels are classified as follows: Class A
stations, which operate on an unlimited time basis and are designated to render
primary and secondary service over an extended area; Class B stations, which
operate on an unlimited time basis and are designed to render service only over
a primary service area; and Class D stations, which operate either during
daytime hours only, during limited times only or on an unlimited time basis with
low nighttime power. A regional channel is one on which Class B and Class D AM
stations may operate and serve primarily a principal center of population and
the rural areas contiguous to it. A local channel is one on which AM stations
operate on an unlimited time basis and serve primarily a community and the
immediately contiguous suburban and rural areas. Class C AM stations operate on
a local channel and are designed to render service only over a primary service
area that may be reduced as a consequence of interference.
The minimum and maximum facilities requirements for an FM station are
determined by its class. FM class designations depend upon the geographic zone
in which the transmitter of the FM station is located. In general, commercial FM
stations are classified as follows, in order of increasing power and antenna
height: Class A, B1, C3, B, C2, C1 and C.
Local Marketing Agreements. Over the past few years, a number of radio
stations, including certain of the Company's stations, have entered into what
commonly are referred to as "local marketing agreements" or "time brokerage
agreements" (together, "LMAs"). These agreements take various forms. Separately
owned and licensed stations may agree to function cooperatively in terms of
programming, advertising sales and other matters, subject to compliance with the
antitrust laws and the FCC's rules and policies, including the requirement that
the licensee of each station maintains independent control over the programming
and other operations of its own station.
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A radio station that brokers substantial time on another station in its
market or engages in an LMA with a radio station in the same market will be
considered to have an attributable ownership interest in the brokered station
for purposes of the FCC's ownership rules, discussed below. As a result, a radio
broadcast station may not enter into an LMA that allows it to program more than
15% of the broadcast time, on a weekly basis, on another local radio station
that it could not own under the FCC's local multiple ownership rules. Under
present rules, time brokerage arrangements among television broadcast stations
do not create additional attributable interests. FCC rules also prohibit a radio
broadcast licensee from simulcasting more than 25% of its programming on another
station in the same broadcast service (i.e., AM-AM or FM-FM) where the two
stations service substantially the same geographical area, and where the
licensee owns those stations or owns one and programs the other through an LMA
arrangement. The FCC does not consider LMAs to be contrary to the Communications
Act provided that the licensee of the station that is being substantially
programmed by another entity maintains complete responsibility for, and control
over, programming and operations of its broadcast station and assures compliance
with applicable FCC rules and policies.
Joint Sales Agreements. Another example of a cooperative agreement between
differently owned radio stations in the same market is a joint sales agreement
("JSA"), whereby one station sells advertising time in combination, both on
itself and on a station under separate ownership. In the past the FCC has
determined that issues concerning joint advertising sales should be left to
antitrust enforcement. Currently JSAs are not deemed by the FCC to be
attributable. However, the FCC has outstanding a notice of proposed rule making,
which, if adopted, could require the Company to terminate any JSA it might have
with a radio station with which the Company could not have an LMA.
Ownership Matters. The FCC regulates the common ownership of radio,
television, cable television, and daily newspaper properties. The FCC generally
applies these limitations to so-called "attributable interests" in these media
held by an individual, corporation, partnership or other entity. The holder of
an attributable interest is generally treated as if it owned the media property
in applying the ownership restrictions. In the case of corporations holding
broadcast licenses, the interests of officers, directors and those who, directly
or indirectly, have a right to vote five percent or more of the corporation's
stock are generally treated as attributable, as are positions of an officer or
director of a corporate parent of a licensee. The FCC treats all partnership
interests as attributable, except for those limited partnership interests that
are insulated from material involvement in the partnership under policies
specified by the FCC. Insurance companies, certain regulated investment
companies, and bank trust departments holding stock only for investment purposes
do not acquire attributable interests unless their ownership exceeds a ten
percent direct or indirect voting stock interest in a broadcast licensee, cable
television system or daily newspaper. The FCC's rules specify several exceptions
to the general principles for attribution. To assess whether a voting stock
interest in a direct or indirect parent corporation of a broadcast licensee is
attributable, the FCC uses a "multiplier" analysis in which non-controlling
voting stock interests are deemed proportionally reduced at each non-controlling
link in a multi-corporation ownership chain. The Company's Amended and Restated
Articles of Incorporation and Code of By-Laws authorize the Board of Directors
to prohibit any ownership, voting or transfer of its capital stock which would
cause the Company to violate the Communications Act or FCC regulations.
In cases where one person or entity (such as Jeffrey H. Smulyan in the case
of the Company) holds more than 50% of the combined voting power of the common
stock of a broadcasting company, a minority shareholder of the company generally
would not acquire an "attributable" interest in the company. However, any
attributable interest by any such substantial shareholder in another broadcast
station or other media in a market where such company owns, or seeks to acquire,
a station could still be subject to review by the FCC under its "cross-interest"
policy, discussed below, and could result in the company's being unable to
obtain from the FCC one or more authorizations needed to conduct its broadcast
business or being unable to obtain FCC consents for future acquisitions.
Furthermore, in the event that a majority shareholder of a company (such as Mr.
Smulyan in the case of the Company) were no longer to hold more than 50% of the
combined voting power of the common stock of the company, the interests of
minority shareholders which had theretofore been nonattributable could become
attributable, with the result that any other media interests independently held
by such shareholders would have to be considered together with the media
interests attributed to them by reason of their interest or position in such
company for purposes of determining
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compliance with FCC ownership rules. In the case of the Company, Mr. Smulyan's
level of voting control could decrease to or below 50% as a result of transfers
of Common Stock pursuant to agreement or conversion of the Class B Common Stock
into Class A Common Stock. In the event of any noncompliance, steps required to
achieve compliance could include divestitures by either the shareholder or the
affected company. Furthermore, other media interests of shareholders having or
acquiring an attributable interest in such a company could result in the
company's being unable to obtain from the FCC one or more authorizations needed
to conduct its broadcast station business or being unable to obtain FCC consents
for future acquisitions. Conversely, a company's media interests could operate
to restrict other media investments by shareholders having or acquiring an
interest in the Company.
In determining whether the Company is in compliance with the FCC multiple
ownership and cross-ownership limits, the FCC will consider both whether the
Company's own media holdings comport with the applicable ownership rules and
whether media interests independently held by the Company's officers, directors
and attributable stockholders would, combined with the interests of the Company
attributable to them, place any of them in violation of the FCC's ownership
rules. Accordingly, any attributable broadcast or other regulated media
interests independently held by the Company's officers and directors also may
limit the number of radio or television stations or other media properties the
Company may acquire or own.
The 1996 Act eliminated restrictions on the number of radio stations that
may be owned by one entity nationwide, and relaxed the ceilings for local radio
ownership. Under the 1996 Act, with limited exceptions, the number of radio
stations that may be owned by one entity in a given radio market is dependent on
the number of commercial stations in the "market" that includes the station. For
this purpose, the FCC defines "market" based upon the principal community
service contours of the stations to be commonly owned. As a result, determining
the number of radio broadcast stations in a "market" generally requires an
engineering analysis. If the market has 45 or more stations, one entity may own
not more than eight stations, of which not more than five may be in one service
(AM or FM); if the market has between 30 and 44 stations, one entity may not own
more than seven stations, of which not more than four may be in one service; if
the market has between 15 and 29 stations, a single entity may own not more than
six stations, of which not more than four may be in one service; and if the
market has fourteen or fewer stations, one entity may own not more than five
stations, of which not more than three may be in one service, except that in
such a market one entity may not own more than fifty percent of the stations in
the market. Each of the five markets in which the Company's Radio Stations are
located has at least 15 commercial radio stations.
For purposes of the local radio ownership rules, a radio broadcast licensee
also is considered to have an attributable interest in another radio broadcast
station in the same market if the first station provides the programming for
more than 15% of the broadcast time, on a weekly basis, of a second station. As
a result, if a combination of radio broadcast stations may not be commonly owned
under FCC rules, they may not enter into such programming arrangements. At
present, the FCC's one-to-a-market and cross-ownership rules do not apply to
LMAs, and LMA arrangements in television do not create attributable interests.
As part of its attribution rulemaking, however, the FCC has proposed to treat
LMA arrangements as creating attributable ownership interests under additional
rule provisions. If such a rule were adopted, the Company could not provide
programming to a radio station pursuant to an LMA if the Company or an
individual or an entity holding an attributable ownership interest in the
Company already owns a television station or a daily newspaper in the same
market.
The FCC's rules also impose limits on the number of television broadcast
stations that an entity may own nationally. No single entity or person may hold
attributable interests in television stations that, in the aggregate, would
serve more than 35% of the nation's television households. In addition, the FCC,
under its so-called "duopoly" rule for television prohibits a person or entity
from holding an attributable interest in televisions stations with overlapping
Grade B contours, a standard that prohibits ownership of more than one
television station in a local market. The Grade B contour is a predicted signal
strength contour that generally approximates the area within which a viewer can
receive off-the-air a signal adequate for normal viewing. The FCC is now
considering whether to change the rule, and the FCC has granted waivers
contingent on the outcome of the rulemaking proceeding to permit greater overlap
than the present rule otherwise would permit. The FCC's rules also provide for
waivers of the television duopoly rules in certain circumstances for so-called
"satellite" stations that rebroadcast a primary television station. In
connection with the consideration of the
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application for approval of the SF Acquisition, the FCC must make a specific
finding that continued operation of KAII-TV and KHAW-TV as satellite stations of
KHON-TV would serve the public interest. The Company believes that the FCC will
make such a finding. However, in the event that the FCC were not to make such a
finding, the Company's ability to obtain FCC approval to acquire KAII-TV could
be adversely affected because of signal overlap with KHON-TV.
The FCC's cross-ownership rules prohibit the common ownership of
attributable interests in certain combinations of media outlets serving the same
geographic area. Under these rules, a single entity may not have an attributable
interest in any of the following combinations, absent a waiver or other
exception: (i) both a radio station and a television station that serve
specified overlapping areas under the FCC's so-called "one-to-a-market" rule;
(ii) a daily newspaper and either a radio station or a television station that
serve specified overlapping areas; (iii) a television station and a cable
television system that serve specified overlapping areas. Although the 1996 Act
deleted the statutory prohibition on a single entity owning both a television
station and a cable television system in the same market, it did not require the
FCC to change its rule that imposes this restriction. In March 1998, the FCC
initiated a rulemaking proceeding to determine whether the cable
television/broadcast cross-ownership ban is necessary or should be eliminated.
The 1996 Act directed the FCC to apply a liberal waiver policy to permit common
ownership of a radio station and a television station in any of the nation's 50
largest television markets. Under current policy, the FCC will grant a permanent
waiver of the newspaper cross-ownership rule (whether involving radio or
television) only in those circumstances where the effects of applying the rule
would be "unduly harsh," i.e., the newspaper is unable to sell the commonly
owned station or the sale would be at an artificially depressed price, or the
local community could not support a separately-owned newspaper and broadcast
station. The FCC has pending a notice of inquiry requesting comment on possible
changes to its policy for waiving the rule including, among other possible
changes: (a) whether waivers should only be available in markets of a particular
size; (b) whether any weight should be given to a newspaper's or broadcast
station's economic presence or market penetration; and (c) whether there should
be limits on the number of broadcast stations or other media outlets that could
be co-owned with a newspaper in the same market. The Company has requested a
waiver of the one-to-a-market rule to permit its common ownership of WTHI-AM,
WTHI-FM, WWVR-FM and WTHI-TV. There is no guarantee that the FCC will waive its
rules to permit the Company's common ownership of these stations. If no waiver
is granted, the Company will be required to divest itself of the radio stations.
Cross-Interest Policy. Under its "cross-interest" policy, the FCC considers
certain "meaningful" relationships among competing media outlets in the same
market, even if the ownership rules do not specifically prohibit the
relationship. Under the cross-interest policy, the FCC in certain instances may
prohibit one party from acquiring an attributable interest in one media outlet
and a substantial non-attributable economic interest in another media outlet in
the same market. Under this policy, the FCC may consider significant equity
interests combined with an attributable interest in a media outlet in the same
market, joint ventures, and common key employees among competitors. The
cross-interest policy does not necessarily prohibit all of these interests, but
requires that the FCC consider whether, in a particular market, the "meaningful"
relationships between competitors could have a significant adverse effect upon
economic competition and program diversity. Heretofore, the FCC has not applied
its cross-interest policy to LMAs and JSAs between broadcast stations. In its
ongoing rulemaking proceeding concerning the attribution rules described below,
the FCC has sought comment on, among other things, (i) whether the
cross-interest policy should be applied only in smaller markets and (ii) whether
non-equity financial relationships such as debt, when combined with multiple
business interrelationships such as LMAs and JSAs, raise concerns under the
cross-interest policy.
Alien Ownership Restrictions. Under the Communications Act, no FCC license
may be held by a corporation of which more than one-fifth of its capital stock
is owned of record or voted by aliens or their representatives or by a foreign
government or representative thereof, or by any corporation organized under the
laws of a foreign country (collectively, "Non-U.S. Persons"). Furthermore, the
Communications Act provides that no FCC license may be granted to any
corporation directly or indirectly controlled by any other corporation of which
more than one-fourth of its capital stock is owned of record or voted by
Non-U.S. Persons if the FCC finds the public interest will be served by the
refusal of such license. The FCC has interpreted this provision to require an
affirmative public interest finding to permit the grant or holding of a
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license, and such a finding has been made only in limited circumstances. The
restrictions on alien ownership apply in modified form to other forms of
business organization, including partnerships. The Company's Amended and
Restated Articles of Incorporation and Code of By-Laws authorize the Board of
Directors to prohibit such ownership, voting or transfer of its capital stock as
would cause the Company to violate the Communications Act or FCC regulations.
Transfers of Control. The Communications Act prohibits the assignment of a
broadcast license or the transfer of control of a broadcast licensee without the
prior approval of the FCC. In determining whether to grant such approval, the
FCC considers a number of factors, including compliance with the various rules
limiting common ownership of media properties, the "character" of the licensee
and those persons holding "attributable" interests therein, and compliance with
the Communications Act's limitations on alien ownership as well as compliance
with other FCC policies.
A transfer of control of a corporation controlling a broadcast license may
occur in various ways. For example, a transfer of control occurs if an
individual stockholder gains or loses "affirmative" or "negative" control of
such corporation through issuance, redemption or conversion of stock.
"Affirmative" control would consist of control of more than 50% of such
corporation's outstanding voting power and "negative" control would consist of
control of exactly 50% of such voting power. To obtain the FCC's prior consent
to assign or transfer control of a broadcast license, appropriate applications
must be filed with the FCC. If the application involves a "substantial change"
in ownership or control, the application must be placed on public notice for a
period of 30 days during which petitions to deny the application may be filed by
interested parties, including members of the public. If the application does not
involve a "substantial change" in ownership or control, it is considered a "pro
forma" application and is not subject to the filing of petitions to deny. The
"pro forma" application is nevertheless subject to having informal objections
filed against it. If the FCC grants an assignment or transfer application,
interested parties have 30 days from public notice of the grant to seek
reconsideration of that grant. Generally, parties that do not file initial
petitions to deny or informal objections against the application face a high
hurdle in seeking reconsideration of the grant. When a grant is made by FCC's
staff acting under delegated authority the full Commission may set aside such
grant on its own motion for a period of forty days after public notice of the
grant. (FCC rules for computation of time may cause some more variation in the
actual time for action and response.) When passing on an assignment or transfer
application, the FCC is prohibited from considering whether the public interest
might be served by an assignment or transfer of the broadcast license to any
party other than the assignee or transferee specified in the application.
Under the 1996 Act, the FCC is required to review all of its broadcast
ownership rules every other year to determine whether the public interest
dictates that such rules be repealed or modified. The FCC recently initiated a
biennial review and is considering a number of changes to its rules, including
changes to the newspaper cross-ownership rule, the local radio ownership rules,
and certain prohibitions on television/cable cross-ownership, as mentioned
above. The Company cannot predict the outcome of these proceedings. The adoption
of more restrictive ownership limits could adversely affect the Company's
ability to make future acquisitions.
Programming and Operation. The Communications Act requires broadcasters to
serve the "public interest." Since the late 1970's, the FCC gradually has
relaxed or eliminated many of the more formalized procedures it developed to
promote the broadcast of certain types of programming responsive to the needs of
a station's community of license. Licensees continue, however, to be required to
present programming that is responsive to community problems, needs and
interests and to maintain certain records demonstrating such responsiveness.
Broadcast of obscene or indecent material is regulated by the FCC as well as by
state and federal law. Complaints from listeners concerning a station's
programming often will be considered by the FCC when it evaluates renewal
applications of a licensee, although such complaints may be filed at any time.
Stations also must pay regulatory and application fees and follow various rules
promulgated under the Communications Act that regulate, among other things,
political advertising, sponsorship identifications, the advertisement of
contests and lotteries, and technical operations, including limits on radio
frequency radiation. In addition, present FCC rules require licensees to develop
and implement affirmative action programs designed to promote equal employment
opportunities ("EEO"), and to submit reports to the FCC with
18
<PAGE> 19
respect to these matters on an annual basis and in connection with renewal
applications. The United States Court of Appeals for the District of Columbia
Circuit recently held that the FCC's equal employment opportunity policies
violate the Fifth Amendment. That decision, however, remains subject to appeal.
There are FCC rules and policies, and rules and policies of other federal
agencies, that regulate matters such as network-affiliate relations, the ability
of stations to obtain exclusive rights to air syndicated programming, cable
systems' carriage of syndicated and network programming on distant stations,
political advertising practices, application procedures and other areas
affecting the business or operations of broadcast stations. Rules adopted by the
FCC to implement the Children's Television Act of 1990 (the "Children's
Television Act") limit the permissible amount of commercial matter in children's
programs and requires each television station to present "educational and
informational" children's programming. The FCC's renewal processing guidelines
effectively require television stations to broadcast an average of three hours
per week of children's educational programming. In addition, the FCC has adopted
rules that require television stations to broadcast, over an 8 to 10 year
transition period which commenced on January 1, 1998, increasing amounts of
closed captioned programming. The closed captioning rules are currently under
reconsideration at the FCC.
Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary fines, the grant of "short"
(less than the maximum term) license renewal terms or, for particularly
egregious violations, the denial of a license renewal application or the
revocation of a license.
Digital Television. The FCC has adopted rules that will allow television
broadcasters to provide digital television ("DTV") to consumers. The proposed
DTV service is intended to provide higher technical quality of television
service and to facilitate to provision of other related digital services and
even multi-channel services through use of an over-the-air television channel.
In April, 1997, the FCC adopted a table of allotments for DTV that provided
eligible existing broadcasters with a second channel on which to provide DTV
service during a lengthy transition period.
On February 23, 1998, in response to numerous petitions for
reconsideration, the FCC affirmed, with some modifications, the FCC's April 1997
decisions. The FCC's DTV allotment plan is based on the use of a "core" DTV
spectrum between channels 2-51. Ultimately, the FCC plans to recover the
channels currently used for analog broadcasting and will decide at a later date
the use of the spectrum ultimately recovered. Uses of the DTV channels may
include multiple standard definition program channels, data transfer,
subscription video, interactive materials, and audio signals, so-called
"ancillary services," although broadcasters will be required to provide a free
digital video programming service that is at least comparable to today's analog
service. The FCC has recently instituted a rulemaking proceeding to determine a
formula for assessing fees for television broadcasters' use of DTV spectrum to
offer ancillary services (i.e., services other than free, over-the-air,
advertiser-supported television). The form and amount of these fees may have a
significant effect on the profitability of such services.
Broadcasters will not be required to air "high definition" programming or,
initially, to simulcast their analog programming on the digital channel.
Affiliates of ABC, CBS, NBC and Fox in the top 10 television markets will be
required to be on the air with a digital signal by May 1, 1999. Affiliates of
those networks in markets 11-30 will be required to be on the air with digital
signals by November 1, 1999, and the remaining commercial broadcasters will be
required to be on the air with digital signals by May 1, 2002. The cost of
conversion to DTV will be high and may require the Company to incur substantial
expenses for new equipment and other transition expenses. Furthermore, the
Company cannot predict the market response to DTV.
The FCC has stated that broadcasters will remain public trustees and that
it will issue a notice to determine the extent of broadcasters' future public
interest obligations. The Company cannot predict the final determination of the
FCC regarding broadcasters' future public interest obligations, nor can it judge
in advance what impact, if any, the implementation of these changes might have
on business.
Must-Carry Provisions. The mandatory signal carriage, or "must carry,"
provisions of the Cable Television Consumer Protection and Competition Act of
1992 ("1992 Cable Act") require cable operators to carry the signals of local
commercial and non-commercial television stations and certain low power
television
19
<PAGE> 20
stations within the same television market as the cable system. Systems with 12
or fewer usable activated channels and more than 300 subscribers must carry the
signals of at least three local commercial television stations. A cable system
with more than 12 usable activated channels, regardless of the number of
subscribers, must carry the signals of all local commercial television stations,
up to one-third of the aggregate number of usable activated channels of such a
system. The 1992 Cable Act also includes a retransmission consent provision that
prohibits cable operators and other multi-channel video programming distributors
("MVPDs") from carrying broadcast signals without obtaining the station's
consent in certain circumstances. The "must carry" and retransmission consent
provisions are related in that a local television broadcaster, on a cable
system-by-cable systems basis, must make a choice once every three years whether
to proceed under the "must carry" rules or to waive the right to mandatory but
uncompensated carriage and negotiate a grant of retransmission consent to permit
the cable system to carry the station's signal, in most cases in exchange for
some form of consideration from the cable operator. Cable systems and other
MVPDs must obtain retransmission consent to carry all distant commercial
stations other than "super stations" delivered via satellite.
On March 31, 1997, in a 5-4 decision, the U.S. Supreme Court upheld the
constitutionality of the must-carry provisions of the 1992 Cable Act. As a
result, the regulatory scheme promulgated by the FCC to implement the must-carry
provisions of the 1992 Cable Act will remain in effect. Whether and to what
extent such must-carry rights will extend to the new digital television signals
(see above) to be broadcast by licensed television stations (including those to
be owned by the Company following consummation of the Acquisition Transactions)
over the next several years is still a matter to be determined in a rulemaking
proceeding that the FCC may initiate later in 1998.
Political Broadcasting Requirements. During designated pre-election periods
- - -- 45 days before a primary election and 60 days before a general or special
election -- broadcast stations may not charge legally qualified candidates who
"use" station facilities more than the Lowest Unit Charge for the same class and
amount of time for the same time period as its most favored commercial
advertisers. In general, if a candidate's identifiable voice or picture appears
in a broadcast, the advertisement constitutes a "use," even if the candidate's
appearance is limited to giving the sponsorship identification announcement. The
FCC requires broadcasters to disclose to candidates complete, detailed
information about the rates, discounts and other programming information that
are offered to commercial advertisers. In addition, the FCC requires that radio
and television broadcasters allow candidates equal opportunity to purchase
broadcast time to respond to their election opponents and requires that federal
candidates be afforded "reasonable access" to broadcast time. A number of bills
have been introduced into the U.S. House of Representatives and the U.S. Senate
regarding political advertising. At least one of these bills would require
broadcast stations to provide free advertising time to political candidates. The
Company cannot predict whether Congress will pass such legislation and what, if
any, effect such legislation might have on the Company's broadcasting
operations.
Recent Developments and Proposed Changes. The FCC in March 1992 initiated
an inquiry and rulemaking proceeding in which it solicited comment on whether it
should alter its ownership attribution rules, and initiated a further rulemaking
proceeding in December 1994 to solicit additional public comment on amending
those rules. Among the issues being explored in the proceeding are: (a) whether
the FCC should raise the benchmarks for determining voting stock interests to be
"attributable" from 5% to 10% for those stockholders other than passive
institutional investors, and from 10% to 20% for passive institutional
investors; (b) whether to consider non-voting stock interests to be attributable
under the multiple ownership rules (at present such interests are not
attributable); (c) whether to consider generally attributable voting stock
interests which account for a minority of the issued and outstanding shares of
voting stock of a corporate licensee, where the majority of the corporation's
voting stock is held by a single stockholder; (d) whether to relax, for
attribution purposes, the FCC's insulation standards for business development
companies and other widely-held limited partnerships; (e) whether to adopt an
equity threshold for non-insulated limited partnerships below which a limited
partner would not be considered to have an attributable interest in the
partnership, regardless of that partner's non-insulation from day-to-day
management and operations of the media enterprises of the partnership; (f) how
to treat limited liability companies and other new business forms for purposes
of the FCC's attribution rules; (g) the impact of limited liability companies on
broadcast
20
<PAGE> 21
ownership opportunities for women and minorities; and (h) whether to adopt a new
attribution policy under which the FCC would scrutinize multiple
"cross-interests" or other significant business relationships, which are held in
combination among ostensibly arm's-length competing broadcasters in the same
market, to determine whether the combined interests, which individually would
not raise concerns as to potential diminution of competition and diversity of
viewpoints, would nonetheless raise such concerns in light of the totality of
the relationships among the parties (including, e.g., LMAs, JSAs, debt
relationships, holdings of non-attributable interests, or other relationships
among competing broadcasters in the same market).
In November 1996, the FCC issued a second further notice of proposed
rulemaking in which, in addition to the attribution proposals outlined above, it
requested comment on whether the FCC should modify its attribution rules by,
among other changes: (a) attributing ownership in situations where an entity (i)
holds a non-attributable equity or debt interest in a broadcast licensee that
exceeds a minimum threshold and (ii) either supplies programming to the licensee
or owns a daily newspaper, cable system or broadcast station in the same market
as the licensee ("Equity/Debt Plus Rule"); (b) the attribution of interests in
LMAs between television stations in the same market; and (c) the attribution of
interests in JSAs, under which a third party purchases the right to sell a
licensee's commercial time inventory, but the owner of the license continues to
program its station. With respect to application of the Equity/Debt Plus Rule,
if adopted, the Commission may grandfather equity/debt plus relationships that
were in existence as of December 15, 1994, or require parties to terminate such
relationships within a short period of time following the rule's adoption. The
Company cannot predict when or whether any of these attribution proposals will
ultimately be adopted by the FCC.
In April 1997, the FCC adopted rules authorizing delivery of digital audio
radio service on a nationwide basis by satellite ("satellite DARS" or "SDARS");
at the same time, the FCC requested comment on a proposal to permit SDARS to be
supplemented by terrestrial transmitters designed to fill "gaps" in satellite
coverage. The FCC has awarded two nationwide licenses for SDARS. It is
anticipated that SDARS, when implemented, will be capable of delivering multiple
channels of compact-disc quality sound which will be receivable through the use
of special receiving antennas. There is ongoing research exploring the
feasibility of additional delivery of digital audio broadcasting ("DAB") on a
local basis by terrestrial stations utilizing either existing broadcasting
frequencies or other frequencies.
In addition, the FCC has authorized an additional 100 kHz of bandwidth for
the AM band and has allotted frequencies in this new band to certain existing AM
station licensees that applied for migration to the expanded AM band prior to
the FCC's cut-off date, subject to the requirement that such licensees apply to
the FCC to implement operations on their expanded band frequencies. At the end
of a transition period, those licensees will be required to return to the FCC
either the license for their existing AM band station or the license for the
expanded AM band station. The delivery of information through the Internet also
could create a new form of competition.
In March, 1998, pursuant to various public proposals, the FCC sought
comment on whether it should institute a proceeding to establish a "microradio"
service. The service, as proposed, would consist of several classes of low power
radio stations licensed by the Commission, with licenses available to small
companies or individuals. The Company cannot predict at this time the outcome of
this proceeding, or what effect establishing a "microradio" service would have
on the Company's radio stations.
On March 13, 1998, the FCC approved a television programming rating system
developed by the television industry which will allow parents to "black-out"
programs that contain material they consider inappropriate for children. On
March 13, 1998, the FCC also adopted technical requirements for the
implementation of so-called "v-chip technology" which will enable parents to
program television sets so that certain programming will be inaccessible to
children.
The FCC has authorized the provision of video programming directly to home
subscribers through high-powered direct broadcast satellites ("DBS"). DBS
systems currently are capable of broadcasting as many as 175 channels of digital
television service directly to subscribers equipment with 18-inch receiving
dishes and decoders. Currently, several entities provide DBS service to
consumers throughout the country. Other DBS
21
<PAGE> 22
operators hold licenses, but have not yet commenced service. Generally, the
signals of local television broadcast stations are not carried on DBS systems.
The radio and television broadcasting industries historically have grown
despite the introduction of new technologies for the delivery of entertainment
and information, such as cable television, audio tapes and compact discs. A
growing population and greater availability of radios, particularly car and
portable radios, have contributed to this growth. There can be no assurance,
however, that the development or introduction in the future of any new media
technology will not have an adverse effect on the radio and television
broadcasting industries. The Company cannot predict what other matters might be
considered in the future by the FCC, nor can it assess in advance what impact,
if any, the implementation of any of these proposals or changes might have on
its business.
The Congress and the FCC have under consideration, and may in the future
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that could, directly or indirectly, affect the operation, ownership
and profitability of the Company's broadcast stations, result in the loss of
audience share and advertising revenues for the Company's broadcast stations and
affect the ability of the Company to acquire additional broadcast stations or
finance such acquisitions. Such matters include: proposals to impose spectrum
use or other fees on FCC licensees; the FCC's equal employment opportunity rules
and other matters relating to minority and female involvement in the
broadcasting industry; proposals to repeal or modify some or all of the FCC's
multiple ownership rules and/or policies; proposals to increase the benchmarks
or thresholds for attributing ownership interests in broadcast media; proposals
to change rules relating to political broadcasting, including the reinstatement
of the so-called "fairness doctrine"; technical and frequency allocation
matters; AM stereo broadcasting; proposals to permit expanded use of FM
translator stations; proposals to restrict or prohibit the advertising of beer,
wine, and other alcoholic beverages on radio; changes in the FCC's alien
ownership, cross-interest, multiple ownership and cross-ownership policies;
proposals to reimpose holding periods for licenses; changes to broadcast
technical requirements, including those relative to the implementation of DAB,
SDARS, and AM stereo broadcasting; proposals to permit expanded use of FM
translator stations; proposals to tighten safety guidelines relating to radio
frequency radiation exposure; proposals to limit the tax deductibility of
advertising expenses by advertisers; and proposals to auction the right to use
the radio broadcast spectrum to the highest bidder, instead of granting FCC
licenses and subsequent license renewals without such bidding.
The Company cannot predict whether any proposed changes will be adopted nor
can it predict what other matters might be considered in the future, nor can it
judge in advance what impact, if any, the implementation of any of these
proposals or changes might have on its business.
The foregoing is only a brief summary of certain provisions of the
Communications Act and of specific FCC regulations. Reference is made to the
Communications Act, FCC regulations and the public notices and rulings of the
FCC for further information concerning the nature and extent of federal
regulation of broadcast stations.
ITEM 2. PROPERTIES.
The following table sets forth information with respect to the Company's
offices and studios and its broadcast tower locations. Management believes that
the Company's properties are in good condition and are suitable for the
Company's operations.
<TABLE>
<CAPTION>
YEAR PLACED OWNED OR EXPIRATION DATE
PROPERTY IN SERVICE LEASED OF LEASE
-------- ----------- -------- ---------------
<S> <C> <C> <C>
WENS-FM/WNAP-FM/Corporate Headquarters............. 1990 Leased February 2000(1)(4)
Indianapolis Monthly
950 North Meridian Street
Indianapolis, Indiana
WENS-FM Tower...................................... 1985 Owned --
WNAP-FM Tower...................................... 1981 Owned --
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
YEAR PLACED OWNED OR EXPIRATION DATE
PROPERTY IN SERVICE LEASED OF LEASE
-------- ----------- -------- ---------------
<S> <C> <C> <C>
KSHE-FM............................................ 1986 Leased September 2007
700 St. Louis Union Station........................ 1984 Leased May 2000(1)
St. Louis, Missouri
KSHE-FM Tower
KPWR-FM............................................ 1988 Leased February 2003(2)
2600 West Olive
Burbank, California
KPWR-FM Tower...................................... 1993 Leased March 2003(3)
WQHT-FM/WRKS-FM/WQCD-FM............................ 1988 Leased June, 2012(2)
395 Hudson Street
New York, New York
WQHT-FM Tower...................................... 1988 Leased April 1996(5)
WRKS-FM Tower...................................... 1984 Leased November 2005
WQCD-FM Tower...................................... 1992 Leased May 2007
WKQX-FM............................................ 1988 Leased July 1999
Merchandise Mart Plaza
Chicago, Illinois
WKQX-FM Tower...................................... 1988 Leased September 1999(2)
Atlanta Magazine Office............................ 1997 Leased July 2003(2)
1360 Peachtree Street
Atlanta, Georgia
WIBC-AM............................................ 1983 Leased November 1998(1)
9292 North Meridian Street
Indianapolis, Indiana
WIBC-AM Tower...................................... 1966 Owned --
WKKX-FM/WALC-FM.................................... 1996 Leased September 2007
800 St. Louis Union Station
St. Louis, Missouri
WKKX-FM Tower...................................... 1989 Leased September 2009
WALC-FM Tower...................................... 1988 Owned --
WTLC-FM/WTLC-FM.................................... 1975 Owned --
2126 North Meridian Street
Indianapolis, Indiana
WTLC-FM Tower...................................... 1988 Leased December 2000
WTLC-AM Tower...................................... 1981 Leased May 2021
</TABLE>
- - -------------------------
(1) The lease provides for two renewal options of five years each following the
expiration date.
(2) The lease provides for one renewal option of five years following the
expiration date.
(3) The lease provides for one renewal option of ten years following the
expiration date. The Company also owns a tower site which it placed in
service in 1984 and currently uses as a back-up facility and on which it
leases space to other broadcasters.
(4) In August 1996, the Company announced its plan to build and own an office
building in downtown Indianapolis for its corporate office and its
Indianapolis operations. The project is expected to be completed in 1999.
(5) The lease expired in 1996 and the station is currently negotiating a new
long term lease at the same location. Payments are on a month to month
basis.
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<PAGE> 24
ITEM 3. LEGAL PROCEEDINGS.
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business, but the Company is not a party to any
lawsuit or proceeding which, in the opinion of management, is likely to have a
material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to shareholders during the Company's fourth
quarter.
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<PAGE> 25
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
The Company's Class A Common Stock is traded in the over-the-counter market
and is quoted on the National Association of Securities Dealers Automated
Quotation (NASDAQ) National Market System under the symbol EMMS.
The following table sets forth the high and low sale prices of the Class A
Common Stock for the periods indicated. No dividends were paid during any such
periods.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
------------- ---- ---
<S> <C> <C>
May 1996........................................... 46.75 35.00
August 1996........................................ 52.50 41.25
November 1996...................................... 53.50 31.75
February 1997...................................... 39.50 30.00
May 1997........................................... 39.25 33.75
August 1997........................................ 49.75 36.50
November 1997...................................... 47.88 43.25
February 1998...................................... 49.50 44.00
</TABLE>
At April 22, 1998, there were approximately 397 record holders of the Class
A Common Stock, and there was one holder of the Company's Class B Common Stock.
The Company intends to retain future earnings for use in its business and
does not anticipate paying any dividends on shares of its common stock in the
foreseeable future.
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<PAGE> 26
ITEM 6. SELECTED FINANCIAL DATA.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY (29) 28,
------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net broadcasting revenues............... $50,311 $66,815 $99,830 $103,292 $125,855
Broadcasting operating expenses......... 29,368 38,794 53,948 52,839 67,646
Publication and other revenue, net of
operating expenses.................... 657 593 896 834 1,204
International business development
expense............................... -- 313 1,264 1,164 999
Corporate expense....................... 2,766 3,700 4,419 5,929 6,846
Time brokerage fee...................... -- -- -- -- 5,667
Depreciation and amortization........... 2,812 3,827 5,677 5,481 7,536
Noncash compensation.................... 1,724 600 3,667 3,465 4,882
Operating income........................ 14,298 20,174 31,751 35,248 33,483
Interest expense........................ 13,588 7,849 13,540 9,633 13,772
Loss on donation of radio station....... -- -- -- -- 4,883
Other income (expense), net............. (367) (170) (303) 325 6
Income before income taxes and
extraordinary item.................... 343 12,155 17,908 25,940 14,884
Income (loss) before extraordinary
item.................................. (957) 7,627 10,308 15,440 8,984
Net income (loss)....................... (4,365) 7,627 10,308 15,440 8,984
Net income (loss) available to common
shareholders.......................... (5,853) 7,627 10,308 15,440 8,984
Basic net income per share.............. $0.72 $0.96 $1.41 $0.82
Weighted average common shares
outstanding........................... 10,557,328 10,690,677 10,942,996 10,903,333
OTHER DATA:
Broadcast cash flow..................... $20,943 $28,021 $45,882 $ 50,453 $ 58,209
Operating cash flow..................... 18,836 24,601 41,095 44,194 51,568
Capital expenditures.................... 659 1,081 1,396 7,559 16,991
FEBRUARY (29) 28,
------------------------------------------------------------
1994 1995 1996 1997 1998
-------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
BALANCE SHEET DATA:
Cash.................................... $ 1,607 $ 3,205 $ 1,218 $ 1,191 $ 5,785
Working capital......................... 6,210 10,088 14,761 15,463 23,083
Net intangible assets................... 30,751 139,729 135,830 131,743 234,558
Total assets............................ 57,849 183,441 176,566 189,716 333,388
Total debt.............................. 92,345 152,322 124,257 115,172 231,422
Redeemable preferred stock.............. 11,250 -- -- -- --
Shareholders' equity (deficit).......... (54,229) (2,661) 13,884 34,422 45,210
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
GENERAL
The performance of a broadcast group, such as Emmis, is customarily
measured by the ability of its stations to generate broadcast cash flow.
Broadcast cash flow is not a measure of liquidity or of performance calculated
in accordance with generally accepted accounting principles, and should be
viewed as a supplement to and not as a substitute for the Company's results of
operations presented on the basis of generally accepted accounting principles.
26
<PAGE> 27
The Company believes that broadcast cash flow is useful because it is
generally recognized by the broadcasting industry as a measure of performance
and is used by analysts who report on the performance of broadcasting companies.
Moreover, broadcast cash flow is not a standardized measure and may be
calculated in a number of ways. Emmis defines broadcast cash flow as advertising
revenues net of agency commissions and broadcast operating expenses. The primary
source of advertising revenues is the sale of advertising time to local and
national advertisers. The most significant broadcast operating expenses are
employee salaries and commissions, costs associated with programming,
advertising and promotion, and station general and administrative costs.
The Company's revenues are affected primarily by the advertising rates its
radio stations charge. These rates are in large part based on the stations'
ability to attract audiences in demographic groups targeted by their
advertisers, as measured principally on a quarterly basis by Arbitron Radio
Market Reports. Because audience ratings in a station's local market are
critical to the station's financial success, the Company's strategy is to use
market research and advertising and promotion to attract and retain listeners in
each station's chosen demographic target group.
In addition to the sale of advertising time for cash, radio stations
typically exchange advertising time for goods or services which can be used by
the station in its business operations. The Company generally confines the use
of such trade transactions to promotional items or services for which the
Company would otherwise have paid cash. In addition, it is the Company's general
policy not to pre-empt advertising spots paid for in cash with advertising spots
paid for in trade.
SIGNIFICANT EVENTS
Effective March 30, 1998, the Company entered into an agreement to purchase
substantially all of the assets of SF Broadcasting of Wisconsin, Inc. and SF
Multistations, Inc. and Subsidiaries (collectively the "SF Acquisition") for
approximately $307 million. The purchase price will be paid a portion in cash
($257 million), either issuance of shares of Emmis' Class A Common Stock or
cash, at Emmis' option ($25 million), and a promissory note ($25 million)
bearing interest at 8%, with principal and interest due on the first anniversary
of the closing date which, at Emmis' option, may be paid with an equivalent
amount of Emmis' Class A Common Stock. In accordance with the asset purchase
agreement, Emmis made a $25 million escrow payment. The SF Acquisition consists
of four Fox network affiliated television stations: WLUK-TV in Green Bay,
Wisconsin, WVUE-TV in New Orleans, Louisiana, WALA-TV in Mobile, Alabama, and
KHON-TV in Honolulu, Hawaii (including McHale Videofilm and satellite stations
KAII-TV, Wailuku, Hawaii, and KHAW-TV, Hilo, Hawaii).
Effective March 20, 1998, the Company entered into an agreement to purchase
the majority of the assets of Wabash Valley Broadcasting Corporation, (the
"Wabash Valley Acquisition") for approximately $90 million in cash. The
acquisition consists of WTHI-TV, a CBS network affiliated television station,
WTHI-FM and AM and WWVR-FM, radio stations located in the Terre Haute, Indiana
area, and WFTX-TV, a Fox network affiliated television station in Ft. Myers,
Florida.
The Wabash Valley and SF Acquisitions (collectively the "TV Acquisitions")
are awaiting approval by the FCC. The Company will account for the TV
Acquisitions under the purchase method of accounting.
On February 1, 1998, the Company acquired all of the outstanding capital
stock of Mediatex Communications Corporation for approximately $37.4 million in
cash (the "Mediatex Acquisition"). Mediatex Communications Corporation owns and
operates Texas Monthly, a regional magazine. The acquisition was accounted for
as a purchase and was financed through additional bank borrowings.
On November 1, 1997, the Company acquired substantially all of the net
assets of Cincinnati Magazine from CM Media, Inc. for approximately $2.0 million
in cash (the "Cincinnati Acquisition"). Emmis financed the acquisition through
additional bank borrowings. The acquisition was accounted for as a purchase.
On November 1, 1997, the Company completed its acquisition of substantially
all of the assets of WTLC-FM and AM in Indianapolis from Panache Broadcasting,
L.P. for approximately $15.3 million in cash (the
27
<PAGE> 28
"Indianapolis Acquisition"). Emmis financed the acquisition through additional
bank borrowings. The acquisition was accounted for as a purchase.
Emmis owns a 54% interest in a Hungarian subsidiary (Radio Hungaria Rt.,
d/b/a Slager Radio) which was formed in August 1997. In November 1997, Slager
Radio acquired a radio broadcasting license from the Hungarian government at a
cost of approximately $19.2 million, of which a cash payment of $7.3 million had
been made as of February 28, 1998. The broadcast license has an initial term of
seven years and is subject to renewal for an additional five years. Slager Radio
began broadcasting on February 16, 1998. Slager Radio's operating results
included in Emmis' results of operations for the year ended February 28, 1998
were not material.
On October 1, 1997, the Company acquired the assets of Network Indiana and
AgriAmerica from Wabash Valley Broadcasting Corporation for $.7 million in cash
(the "Network Acquisition"). Emmis financed the acquisition through additional
bank borrowings. The acquisition was accounted for as a purchase.
On May 15, 1997, the Company entered into an agreement to purchase radio
station WQCD-FM in New York City. The purchase price, after adjustments, is
expected to be approximately $141 million. As part of the transaction therewith,
the Company issued an irrevocable letter of credit, to the current owner,
totaling $50 million as security for the Company's obligation under this
agreement. The acquisition will be financed through additional bank borrowings
and will be accounted for as a purchase upon closing. The acquisition is
currently awaiting FCC approval. The TV Acquisitions and the acquisition of
WQCD-FM are herein referred to as the Pending Acquisitions.
In connection with the agreement to acquire WQCD-FM, the Company entered
into a time brokerage agreement which permitted Emmis to begin operating the
station effective July 1, 1997 (herein referred to as the "Operation of
WQCD-FM"). This agreement expires upon the closing of the sale of the station to
the Company. In consideration for the time brokerage agreement, the Company pays
a monthly fee of approximately $700,000. Operating results of WQCD-FM are
reflected in the consolidated statement of operations for the period from July
1, 1997 through February 28, 1998.
On March 31, 1997, Emmis completed its acquisition of substantially all of
the assets of radio stations WALC-FM (formerly WKBQ-FM), WALC-AM (formerly
WKBQ-AM) and WKKX-FM in St. Louis (the "St. Louis Acquisition") from Zimco, Inc.
for approximately $43.6 million in cash, plus an agreement to broadcast
approximately $1 million in trade spots, for Zimco, Inc., over a period of
years. The purchase price was financed through additional bank borrowings and
the acquisition was accounted for as a purchase. In February 1998, the Company
donated radio station WALC-AM in St. Louis to Northside Seventh Day Adventist
Church near St. Louis. The $4.8 million net book value of the station at the
time of donation was recognized as a loss on donation of radio station.
IMPACT OF THE YEAR 2000
Many computer systems experience problems handling dates beyond the year
1999. Therefore, some computer hardware and software will need to be modified
prior to the year 2000 to remain functional. The Company is assessing the
internal readiness of its computer systems and the readiness of third parties
which interact with the Company's systems. The Company plans to devote the
necessary resources to resolve all significant year 2000 issues in a timely
manner. Costs associated with the year 2000 assessment and correction of
problems noted are expensed as incurred. Based on management's current
assessment, it does not believe that the cost of such actions will have a
material effect on the Company's results of operations or financial condition.
RESULTS OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1998 COMPARED TO YEAR ENDED FEBRUARY 28, 1997. Net
broadcasting revenues for the year ended February 28, 1998 were $125.9 million
compared to $103.3 million for the same period of the prior year, an increase of
$22.6 million or 21.8%. This increase was principally due to the St. Louis
Acquisition, the Operation of WQCD-FM, and the ability to realize higher
advertising rates at the Company's
28
<PAGE> 29
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, net broadcasting revenues
would have increased $8.5 million or 6.7% for the year. For purposes herein, pro
forma information assumes the Mediatex, Indianapolis, and St. Louis Acquisitions
and the Operation of WQCD-FM were effective on the first day of the year ended
February 28, 1997.
Broadcasting operating expenses for the year ended February 28, 1998 were
$67.6 million compared to $52.8 million for the same period of the prior year,
an increase of $14.8 million or 28.0%. This increase was principally
attributable to the St. Louis Acquisition, the Operation of WQCD-FM and
increased promotional spending at the Company's broadcasting properties. On a
pro forma basis, broadcasting operating expenses would have increased $4.9
million or 7.2% for the year.
Broadcast cash flow for the year ended February 28, 1998 was $58.2 million
compared to $50.4 million for the same period of the prior year, an increase of
$7.8 million or 15.4%. This increase was due to increased net broadcasting
revenues partially offset by increased broadcasting operating expenses as
discussed above. On a pro forma basis, broadcast cash flow would have increased
$3.6 million or 6.2% for the year.
Corporate expenses for the year ended February 28, 1998 were $6.8 million
compared to $5.9 million for the same period of the prior year, an increase of
$.9 million or 15.5%. This increase was primarily due to increased travel
expenses and other expenses related to potential acquisitions that were not
finalized and increased professional fees.
Operating cash flow consists of operating income, excluding the time
brokerage fee, noncash compensation and depreciation and amortization. Operating
cash flow for the year ended February 28, 1998 was $51.6 million compared to
$44.2 million for the same period of the prior year, an increase of $7.4 million
or 16.7%. This increase was principally due to the increase in broadcast cash
flow partially offset by an increase in corporate expenses. On a pro forma
basis, operating cash flow would have increased $4.0 million or 7.5% for the
year.
Interest expense was $13.8 million for the year ended February 28, 1998
compared to $9.6 million for the same period of the prior year, an increase of
$4.2 million or 43.0%. This increase reflected higher outstanding debt due to
the St. Louis Acquisition and the write-off of deferred financing costs
associated with refinancing of the Company's bank debt, offset by voluntary
repayments made thereunder and a rate decrease associated with the refinancing.
On a pro forma basis, interest expense would have increased $.8 million or 4.6%
for the year.
Publication and other revenues net of operating expenses for the year ended
February 28, 1998 were $1.2 million compared to $.8 million for same period of
the prior year, an increase of $.4 million or 44.4%. This increase was due to
the Mediatex Acquisition and increased tower rental revenue offset by an
increase in operating expenses at Atlanta magazine. On a pro forma basis,
publication and other revenues would have increased $1.1 million or 43.2%.
Depreciation and amortization expense for the year ended February 28, 1998
was $7.5 million compared to $5.5 million for the same period of the prior year,
an increase of $2.0 million or 37.5%. This increase was primarily due to the
Mediatex, Indianapolis, and St. Louis Acquisitions. On a pro forma basis,
depreciation and amortization expense would have increased $.1 million or .9%.
Noncash compensation expense for year ended February 28, 1998 was $4.9
million compared to $3.5 million for the same period of the prior year, an
increase of $1.4 million or 40.9%. Noncash compensation includes compensation
expense associated with stock options granted, restricted common stock issued
under employment agreements and common stock contributed to the Company's Profit
Sharing Plan. This increase was due primarily to the increase in stock price
from the prior year.
Accounts receivable at February 28, 1998 were $32.1 million compared to
$20.8 million at February 28, 1997, an increase of $11.3 million or 54.2%. This
increase in accounts receivable was due primarily to the Mediatex, Cincinnati,
Indianapolis, Network, and St. Louis Acquisitions and Operation of WQCD-FM.
29
<PAGE> 30
YEAR ENDED FEBRUARY 28, 1997 COMPARED TO YEAR ENDED FEBRUARY 29, 1996. Net
broadcasting revenues for the year ended February 28, 1997 were $103.3 million
compared to $99.8 million for the same period of the prior year, an increase of
$3.5 million or 3.5%. This increase was due to higher advertising rates at the
Company's broadcasting properties.
Total broadcasting operating expenses for the year ended February 28, 1997
were $52.8 million compared to $53.9 million for the same period of the prior
year, a decrease of $1.1 million or 2.1%. This decrease was principally due to
decreased promotional spending at the Company's broadcasting properties.
Publication and other revenues net of operating expenses for the year ended
February 28, 1997 were $.8 million compared to $.9 million for same period of
the prior year, a decrease of $.1 million or 6.9%. This decrease was principally
a result of an increase in operating expenses at Atlanta magazine.
Corporate expenses for the year ended February 28, 1997 were $5.9 million
compared to $4.4 million for the same period of the prior year, an increase of
$1.5 million or 34.2%. This increase was primarily due to increased
compensation.
Depreciation and amortization expense for the year ended February 28, 1997
was $5.5 million compared to $5.7 million for the same period of the prior year,
a decrease of $.2 million or 3.5%. This decrease was due to fully depreciated
assets at the Company's broadcasting properties.
Noncash compensation expense for the year ended February 28, 1997 was $3.5
million compared to $3.7 million for the same period of the prior year, a
decrease of $.2 million or 5.5%. Noncash compensation includes compensation
expense associated with stock options granted, restricted common stock issued
under employment agreements and common stock contributed to the Company's Profit
Sharing Plan. This decrease was due primarily to the decrease in stock price
from a year ago.
Interest expense for the fiscal year ended February 28, 1997 was $9.6
million compared to $13.5 million for the same period of the prior year, a
decrease of $3.9 million or 28.9%. This decrease reflected lower outstanding
debt due to voluntary repayments made under the Company's credit facility.
Accounts receivable at February 28, 1997, were $20.8 million compared to
$19.2 million at February 29, 1996, an increase of $1.6 million or 8.7%. This
increase in accounts receivable was due primarily to increases in net
broadcasting revenues at the Company's broadcasting properties.
LIQUIDITY AND CAPITAL RESOURCES
On July 1, 1997, the Company entered into an amended and restated credit
facility comprised of a $250 million revolving credit facility, a $100 million
term note and a $150 million revolving credit facility/term note, a portion of
the proceeds of which were used to fund the Company's acquisitions and escrow
payments for Pending Acquisitions. The amended and restated credit facility is
available for general corporate purposes and acquisitions. In the fiscal year
ended February 28, 1998, the Company made voluntary payments of $24.3 million
under its credit facility. As of February 28, 1998, the Company had $235.0
million available for borrowing, under its credit facility. The Company is
negotiating and anticipates receiving a commitment from TD Securities (USA)
Inc., First Union Capital Markets and BankBoston, N.A. (together with any
additional lending institutions which may later provide a portion of the credit,
the "Lenders") for a $750 million credit facility (the "New Credit Facility"),
which may be increased up to $1.0 billion, with the consent of the Lenders. The
New Credit Facility consists of a $150 million senior secured 8-year revolving
credit facility, a $250 million senior secured 8-year amortizing term loan, a
$250 million 8.5-year amortizing term loan and a $100 million 8-year senior
secured acquisition revolving credit/term loan facility. The acquisition
facility commitment will terminate and convert to a term loan one year after
closing of the New Credit Facility. The New Credit Facility, which is expected
to close in mid-1998, will replace the Company's existing $500 million credit
facility and will be available for general corporate purposes and acquisitions.
Amounts borrowed under the New Credit Facility are expected to bear interest, at
the option of the Company, at a rate equal to the London Interbank Offered Rate
or a "base rate" equal to the higher of the Federal Funds rate or the prime
rate, plus a margin. The lenders' obligation to fund under the New Credit
Facility will be
30
<PAGE> 31
subject to various conditions, including completion of an equity offering,
completion of loan documentation acceptable to the lenders and other customary
conditions for similar lines of credit.
In the fiscal years ended February 1998, 1997 and 1996, the Company had
capital expenditures of $17.0 million, $7.6 million and $1.4 million,
respectively. These capital expenditures primarily consisted of progress
payments in connection with the Indianapolis office facility project discussed
below, leasehold improvements to office and studio facilities in connection with
the consolidation of its New York broadcast properties to a single location, and
broadcast equipment purchases and tower upgrades, respectively.
The Company expects that cash flow from operating activities and borrowings
available under its credit facility will be sufficient to fund all debt service
for debt existing at February 28, 1998, working capital, capital expenditure
requirements for the next year, and the acquisition of WQCD-FM. To complete the
TV Acquisitions, the Company will increase its bank borrowings or issue equity
or debt securities, depending on market conditions and other factors.
In August 1996, Emmis announced its plan to construct 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 $30
million, net of reimbursable construction costs of $2 million. This amount
reflects an increase over the original amount due to the Indianapolis and
Network Acquisitions, as well as an increase in overall staffing. 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 is funding this project through cash flow from operating activities
and bank borrowings.
INFLATION
The impact of inflation on the Company's operations has not been
significant to date. However, there can be no assurance that a high rate of
inflation in the future would not have an adverse effect on the Company's
operating results.
31
<PAGE> 32
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES:
We have audited the accompanying consolidated balance sheets of EMMIS
BROADCASTING CORPORATION (an Indiana corporation) and Subsidiaries as of
February 28, 1998 and 1997, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each of the three
years in the period ended February 28, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Emmis Broadcasting
Corporation and Subsidiaries as of February 28, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended February 28, 1998 in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
--------------------------------------
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
March 31, 1998.
32
<PAGE> 33
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 28,
----------------------
1997 1998
---- ----
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 1,191 $ 5,785
Accounts receivable, net of allowance for doubtful
accounts of $820 and $1,346 at February 28, 1997 and
1998, respectively..................................... 20,831 32,120
Prepaid expenses.......................................... 2,376 4,900
Income tax refunds receivable............................. 2,482 4,968
Other..................................................... 1,867 3,379
-------- --------
Total current assets................................. 28,747 51,152
-------- --------
PROPERTY AND EQUIPMENT:
Land and buildings........................................ 1,009 2,192
Leasehold improvements.................................... 5,509 8,188
Broadcasting equipment.................................... 14,356 18,800
Furniture and fixtures.................................... 7,154 12,144
Construction in progress.................................. 1,363 13,091
-------- --------
29,391 54,415
Less-Accumulated depreciation and amortization............ 16,400 20,969
-------- --------
Total property and equipment, net.................... 12,991 33,446
-------- --------
INTANGIBLE ASSETS:
Broadcast licenses........................................ 126,116 195,400
Trademarks and organization costs......................... 1,073 1,022
Excess of cost over fair value of net assets of purchased
businesses............................................. 20,371 53,297
Other intangibles......................................... 1,277 5,567
-------- --------
148,837 255,286
Less-Accumulated amortization............................. 17,094 20,728
-------- --------
Total intangible assets, net......................... 131,743 234,558
-------- --------
OTHER ASSETS:
Deferred debt issuance costs and cost of interest rate cap
agreements, net of accumulated amortization of $3,625
and $692 at February 28, 1997 and 1998, respectively... 1,541 3,806
Investments............................................... 5,470 5,114
Deposits and other........................................ 9,224 5,312
-------- --------
Total other assets, net.............................. 16,235 14,232
-------- --------
Total assets......................................... $189,716 $333,388
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
33
<PAGE> 34
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
<TABLE>
<CAPTION>
FEBRUARY 28,
----------------------
1997 1998
---- ----
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 2,868 $ 51
Book cash overdraft....................................... 1,942 --
Accounts payable.......................................... 3,687 13,140
Accrued salaries and commissions.......................... 1,561 2,893
Accrued interest.......................................... 174 2,421
Deferred revenue.......................................... 1,593 7,985
Other..................................................... 1,459 1,579
-------- --------
Total current liabilities............................ 13,284 28,069
-------- --------
LONG-TERM DEBT, NET OF CURRENT MATURITIES................... 112,304 231,371
OTHER NONCURRENT LIABILITIES................................ 436 604
MINORITY INTEREST........................................... -- 1,875
DEFERRED INCOME TAXES....................................... 29,270 26,259
-------- --------
Total liabilities.................................... 155,294 288,178
-------- --------
COMMITMENTS AND CONTINGENCIES (NOTE 8)
SHAREHOLDERS' EQUITY:
Class A common stock, $.01 par value; authorized
34,000,000 shares; issued and outstanding 8,410,956
shares and 8,430,660 shares at February 28, 1997 and
1998, respectively..................................... 84 84
Class B common stock, $.01 par value; authorized 6,000,000
shares; issued and outstanding 2,574,470 shares and
2,560,894 shares at February 28, 1997 and 1998,
respectively........................................... 26 26
Additional paid-in capital................................ 70,949 72,753
Accumulated deficit....................................... (36,637) (27,653)
-------- --------
Total shareholders' equity........................... 34,422 45,210
-------- --------
Total liabilities and shareholders' equity........... $189,716 $333,388
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
34
<PAGE> 35
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE-YEAR PERIOD ENDED
FEBRUARY (29)28,
---------------------------------
1996 1997 1998
---- ---- ----
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
GROSS BROADCASTING REVENUES................................. $117,562 $122,739 $149,406
LESS AGENCY COMMISSIONS..................................... 17,732 19,447 23,551
-------- -------- --------
NET BROADCASTING REVENUES................................... 99,830 103,292 125,855
Broadcasting operating expenses........................... 53,948 52,839 67,646
Publication and other revenue, net of operating
expenses............................................... 896 834 1,204
International business development expenses............... 1,264 1,164 999
Corporate expenses........................................ 4,419 5,929 6,846
Time brokerage fee........................................ -- -- 5,667
Depreciation and amortization............................. 5,677 5,481 7,536
Noncash compensation...................................... 3,667 3,465 4,882
-------- -------- --------
OPERATING INCOME............................................ 31,751 35,248 33,483
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense.......................................... (13,540) (9,633) (13,772)
Equity in loss of unconsolidated affiliate................ (3,111) -- --
Gain on sale of investment in Talk Radio U.K.............. 2,729 -- --
Loss on donation of radio station......................... -- -- (4,833)
Other income, net......................................... 79 325 6
-------- -------- --------
Total other income (expense)........................... (13,843) (9,308) (18,599)
-------- -------- --------
INCOME BEFORE INCOME TAXES.................................. 17,908 25,940 14,884
PROVISION FOR INCOME TAXES.................................. 7,600 10,500 5,900
-------- -------- --------
NET INCOME.................................................. $ 10,308 $ 15,440 $ 8,984
======== ======== ========
Basic net income per share................................ $.96 $1.41 $.82
======== ======== ========
Diluted net income per share.............................. $.93 $1.37 $.79
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
35
<PAGE> 36
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE-YEAR PERIOD ENDED FEBRUARY (29)28, 1998
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
-------------------- -------------------- ADDITIONAL CUMULATIVE TOTAL
SHARES SHARES PAID-IN ACCUMULATED TRANSLATION SHAREHOLDERS
OUTSTANDING AMOUNT OUTSTANDING AMOUNT CAPITAL DEFICIT ADJUSTMENTS EQUITY
----------- ------ ----------- ------ ---------- ----------- ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, FEBRUARY 28,
1995................... 7,997,692 $80 2,655,122 $27 $59,552 $(62,385) $65 $(2,661)
Issuance of Class A
Common Stock in
exchange for Class B
Common Stock......... 48,790 1 (48,790) (1) -- -- -- --
Exercise of stock
options and related
income tax
benefits............. 198,850 2 -- -- 2,633 -- -- 2,635
Compensation related to
granting of stock and
stock options........ -- -- -- -- 2,917 -- -- 2,917
Issuance of Class A
Common Stock to
profit sharing
plan................. 19,608 -- -- -- 750 -- -- 750
Translation
adjustments.......... -- -- -- -- -- -- (65) (65)
Net income............. -- -- -- -- -- 10,308 -- 10,308
--------- --- --------- --- ------- -------- --- -------
BALANCE, FEBRUARY 29,
1996................... 8,264,940 83 2,606,332 26 65,852 (52,077) -- 13,884
--------- --- --------- --- ------- -------- --- -------
Issuance of Class A
Common Stock in
exchange for Class B
Common Stock......... 31,862 -- (31,862) -- -- -- -- --
Exercise of stock
options and related
income tax
benefits............. 92,415 1 -- -- 1,632 -- -- 1,633
Compensation related to
granting of stock and
stock options........ -- -- -- -- 2,715 -- -- 2,715
Issuance of Class A
Common Stock to
profit sharing
plan................. 21,739 -- -- -- 750 -- -- 750
Net income............. -- -- -- -- -- 15,440 -- 15,440
--------- --- --------- --- ------- -------- --- -------
BALANCE, FEBRUARY 28,
1997................... 8,410,956 84 2,574,470 26 70,949 (36,637) -- 34,422
--------- --- --------- --- ------- -------- --- -------
Issuance of Class A
Common Stock in
exchange for Class B
Common Stock......... 13,576 -- (13,576) -- -- -- -- --
Exercise of stock
options and related
income tax
benefits............. 106,305 1 -- -- 2,966 -- -- 2,967
Compensation related to
granting of stock and
stock options........ -- -- -- -- 4,132 -- -- 4,132
Issuance of Class A
Common Stock to
profit sharing
plan................. 15,152 -- -- -- 750 -- -- 750
Issuance of Class A
Common Stock to
employees and
officers and related
income tax
benefits............. 79,115 1 -- -- 954 -- -- 955
Purchase of Class A
Common Stock......... (194,444) (2) -- -- (6,998) -- -- (7,000)
Net income............. -- -- -- -- -- 8,984 -- 8,984
--------- --- --------- --- ------- -------- --- -------
BALANCE, FEBRUARY 28,
1998................... 8,430,660 $84 2,560,894 $26 $72,753 $(27,653) $-- $45,210
========= === ========= === ======= ======== === =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
36
<PAGE> 37
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE-YEAR PERIOD ENDED
FEBRUARY (29)28,
-------------------------------------
1996 1997 1998
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................................... $10,308.. $ 15,440 $ 8,984
Adjustments to reconcile net income to net cash provided
by operating activities--
Depreciation and amortization of property and
equipment........................................... 1,636 1,639 2,580
Amortization of debt issuance costs and cost of
interest rate cap agreements........................ 1,742 1,071 2,183
Amortization of intangible assets..................... 4,041 3,842 4,956
Provision for bad debts............................... 834 726 802
Provision (benefit) for deferred income taxes......... 4,870 1,590 (1,824)
Gain on sale of TalkRadio UK.......................... (2,729) -- --
Compensation related to stock and stock options
granted............................................. 2,917 2,715 4,132
Contribution to profit sharing plan paid with common
stock............................................... 750 750 750
Equity in loss of unconsolidated affiliate............ 3,111 -- --
Loss on donation of radio station..................... -- -- 4,833
Other................................................. -- (195) 357
(Increase) decrease in certain current assets (net of
dispositions and acquisitions)--
Accounts receivable................................. (3,175) (2,385) (8,389)
Prepaid expenses and other current assets........... (751) (3,041) (4,760)
Increase (decrease) in certain current liabilities
(net of dispositions and acquisitions)--
Accounts payable and book cash overdraft............ (569) 2,757 5,560
Accrued salaries and commissions.................... 830 (1,999) 1,332
Accrued interest.................................... (1,272) (146) 2,247
Deferred revenue.................................... (349) 395 292
Other current liabilities........................... 390 26 116
(Increase) decrease in deposits and other assets...... (108) (898) (1,832)
Increase (decrease) in other noncurrent liabilities... 745 (925) 168
-------- -------- ---------
Net cash provided by operating activities........ 23,221 21,362 22,487
-------- -------- ---------
INVESTING ACTIVITIES:
Costs incurred for WRKS-FM Acquisition................... (131) -- --
Acquisition of WALC-FM, WKBQ-AM and WKKX-FM.............. -- (6,600) (36,964)
Acquisition of WTLC-FM and WTLC-AM....................... -- -- (15,336)
Acquisition of Texas Monthly............................. -- -- (37,389)
Acquisition of Cincinnati Magazine....................... -- -- (1,979)
Acquisition of Network Indiana and AgriAmerica........... -- -- (709)
Purchases of property and equipment...................... (1,396) (7,559) (16,991)
Initial payment for purchase of Hungarian broadcast
license............................................... -- -- (7,325)
Investment in and advances to TalkRadio UK............... (980) -- --
Net proceeds from disposition of investment in TalkRadio
UK.................................................... 2,729 -- --
Other.................................................... -- 240 --
-------- -------- ---------
Net cash provided (used) by investing
activities..................................... 222 (13,919) (116,693)
-------- -------- ---------
</TABLE>
37
<PAGE> 38
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE-YEAR PERIOD ENDED
FEBRUARY (29)28,
-------------------------------------
1996 1997 1998
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Proceeds of long-term debt............................... 29,518 19,000 288,378
Payments on long-term debt............................... (57,583) (28,102) (183,928)
Payment of loan fees..................................... -- -- (4,291)
Purchase of the Company's Class A Common Stock........... -- -- (7,000)
Proceeds from exercise of stock options and income tax
benefits of certain equity transactions............... 2,635 1,632 3,922
Other.................................................... -- -- 1,719
-------- -------- ---------
Net cash provided (used) by financing activities.... (25,430) (7,470) 98,800
-------- -------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........... (1,987) (27) 4,594
CASH AND CASH EQUIVALENTS:
Beginning of year........................................ 3,205 1,218 1,191
-------- -------- ---------
End of year.............................................. $ 1,218 $ 1,191 $ 5,785
======== ======== =========
SUPPLEMENTAL DISCLOSURES:
Cash paid for--
Interest.............................................. $ 13,112 $ 8,708 $ 9,655
Income taxes.......................................... 2,931 9,180 8,419
Noncash investing and financing transactions --
Fair value of assets acquired by incurring debt....... 17 17 32
ACQUISITION OF WALC-FM, WKBQ-AM AND WKKX-FM:
Fair value of assets acquired......................... -- -- $ 44,564
Cash paid............................................. -- -- 43,564
---------
Liabilities assumed................................... $ 1,000
ACQUISITION OF TEXAS MONTHLY:
Fair value of assets acquired......................... -- -- $ 45,421
Cash paid............................................. -- -- 37,389
---------
Liabilities assumed................................... $ 8,032
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
38
<PAGE> 39
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
Emmis Broadcasting Corporation owns and operates FM radio stations in Los
Angeles, New York City (2 stations owned and operated, 1 station operated),
Chicago, St. Louis (3 stations) and Indianapolis (3 stations), two AM radio
stations in Indianapolis, and a radio station which broadcasts in Hungary
(Slager Radio). Emmis Broadcasting Corporation also publishes Indianapolis
Monthly, Texas Monthly, Cincinnati Magazine, and Atlanta magazines, and engages
in certain businesses ancillary to its radio businesses, such as advertising,
program consulting and broadcast tower leasing.
B. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Emmis
Broadcasting Corporation and its majority owned Subsidiaries. Unless the content
otherwise requires, references to Emmis or the Company in these financial
statements mean Emmis Broadcasting Corporation and its Subsidiaries. All
significant intercompany balances and transactions have been eliminated.
C. REVENUE RECOGNITION
Broadcasting revenue is recognized as advertisements are aired. Publication
revenue is recognized in the month of issue.
D. PUBLICATION AND OTHER REVENUE, NET OF OPERATING EXPENSES
Publication revenue of $9,924,000, $10,428,000 and $14,776,000 for the
years ended February 1996, 1997 and 1998, respectively, is reflected net of
operating expenses in the consolidated statements of operations. Other revenues
of $703,000, $935,000 and $1,142,000 for the years ended February 1996, 1997 and
1998, respectively, are also reflected net of operating expenses in the
consolidated statements of operations.
E. INTERNATIONAL BUSINESS DEVELOPMENT EXPENSES
International business development expenses includes the cost of the
Company's efforts to identify, investigate and develop international broadcast
investments or other international business opportunities.
F. NONCASH COMPENSATION
Noncash compensation includes compensation expense associated with stock
options granted, restricted common stock issued under employment agreements and
common stock contributed to the Company's Profit Sharing Plan. The Company has
adopted the disclosure-only provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." Pro forma
disclosure of net income and earnings per share under SFAS No. 123 is presented
in Note 7.
G. CASH AND CASH EQUIVALENTS
Emmis considers time deposits, money market fund shares, and all highly
liquid debt instruments with original maturities of three months or less to be
cash equivalents.
H. PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation and amortization
are generally computed by the straight-line method over the estimated useful
lives of the related assets which are 31.5 years for buildings, not more than 32
years for leasehold improvements, 5 to 7 years for broadcasting equipment and 7
years for furniture and fixtures. Maintenance, repairs and minor renewals are
expensed; improvements are capitalized.
39
<PAGE> 40
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest is being capitalized in connection with the construction of the
Indianapolis office facility (Note 8). The capitalized interest is recorded as
part of the building cost, which is currently included in construction in
progress, and will be amortized over the building's estimated useful life. In
fiscal 1998 approximately $312,000 of interest was capitalized. No interest was
capitalized in fiscal 1997 and 1996. On a continuing basis, the Company reviews
the financial statement carrying value of property and equipment for impairment.
If events or changes in circumstances were to indicate that an asset carrying
value may not be recoverable, a write-down of the asset would be recorded
through a charge to operations.
I. INTANGIBLE ASSETS
Intangible assets are recorded at cost. Generally, broadcast licenses,
trademarks and the excess of cost over fair value of net assets of purchased
businesses are being amortized using the straight-line method over 40 years. The
cost of the broadcast license for Slager Radio (totaling approximately $20.8
million) is being amortized over the seven year initial term of the license. The
approximately $32.4 million of excess of cost over fair value of net assets
resulting from the purchase of Texas Monthly is being amortized over 15 years.
Other intangibles are amortized using the straight-line method over varying
periods, not in excess of 10 years.
On a continuing basis, the Company reviews the financial statement carrying
value of these assets for impairment. Specifically, this process includes a
comparison of the carrying amounts of the operating units to their estimated
fair values, an analysis of estimated future operating cash flows and an
evaluation as to whether an operating unit might be sold in the near future. If
this process were to result in the conclusion that the carrying value of an
intangible asset would not be recovered, a write-down of the operating unit's
assets would be recorded through a charge to operations.
J. INVESTMENTS
Emmis has a 50% ownership interest in a partnership in which the sole asset
is land on which a transmission tower is located. The other owner has voting
control of the partnership. This investment is reflected at cost of $5,114,000,
which approximates the equity method of accounting.
On November 7, 1995, Emmis sold its 24.5% interest in TalkRadio UK Limited
(TRUK) for approximately $3.0 million and recorded a gain on sale of
approximately $2.7 million.
K. DEPOSITS AND OTHER ASSETS
Deposits and other assets includes amounts due from officers, including
accrued interest, of $1,570,000 and $1,654,000 at February 28, 1997 and 1998,
respectively. Officer loans bear interest at the Company's borrowing rate of
approximately 6.625% and 6.60% at February 28, 1997 and 1998, respectively.
L. DEFERRED REVENUE AND BARTER TRANSACTIONS
Deferred revenue includes deferred magazine subscription revenue and
deferred barter revenue. Barter transactions are recorded at the estimated fair
value of the product or service received. Broadcast revenue from barter
transactions is recognized when commercials are broadcast. The appropriate
expense or asset is recognized when merchandise or services are used or
received.
M. INCOME TAXES
Income taxes are provided based on the liability method of accounting
pursuant to Statement of Financial Accounting Standards No. 109 (SFAS 109),
"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 sheets and the expected tax impact of carryforwards for tax
purposes.
40
<PAGE> 41
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
N. FOREIGN CURRENCY TRANSLATION
The functional currency of Slager Radio is the Hungarian forint. Slager
Radio's balance sheet has been translated from forints to the U.S. dollar using
the current exchange rate in effect at the balance sheet date. Slager Radio's
results of operations have been translated using an average exchange rate for
the period. The translation adjustment resulting from the conversion of Slager
Radio's financial statements was not significant for the year ended February 28,
1998.
The functional currency of TRUK is the pound sterling. The Company's
investment in and advances to TRUK have been translated from the pound sterling
to the U.S. dollar using current exchange rates in effect at the balance sheet
date. The Company's equity in the loss of TRUK has been translated using an
average exchange rate for the period. The applicable gains or losses, net of
deferred income taxes, resulting from the translation of the Company's
investment in and advances to TRUK is shown as cumulative translation
adjustments in shareholders' equity. As indicated above, Emmis sold its
investment in TRUK on November 7, 1995.
O. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
In February 1997, Statement of Financial Accounting Standards (SFAS) 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 was adopted by the Company effective March 1, 1997
and all prior period earnings per share (EPS) data have been restated. 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 like 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 (10,942,996 and 10,903,333 shares for the years ended
February 28, 1997 and 1998, respectively). 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. Weighted average
common equivalent shares outstanding for the period, considering the effect of
employee stock options, are 11,291,225 and 11,377,765 for the years ended
February 28, 1997 and 1998, respectively.
P. ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Q. ACCOUNTING PRONOUNCEMENTS
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued.
Under this statement, the Company will report in its financial statements, in
addition to net income, comprehensive income and its components which includes
foreign currency items. The statement must be adopted by the Company in fiscal
1999. Implementation of this disclosure standard will not affect the financial
position or results of operations. Management has not yet determined the manner
in which comprehensive income will be displayed.
In June 1997, SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," was issued. This statement, which must be adopted by the
Company for the year ended February 28, 1999, establishes standards for
reporting information about operating segments in annual and interim financial
statements. Operating segments are determined consistent with the way management
organizes and evaluates
41
<PAGE> 42
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
financial information internally for making decisions and assessing performance.
It also requires related disclosures about the source of revenues for each
segment, geographic areas, and major customers. Implementation of this
disclosure standard will not affect the Company's financial position or results
of operations. Management has not yet determined the manner in which segment
information will be displayed.
R. RECLASSIFICATIONS
Certain reclassifications have been made to the February 28, 1997 financial
statements to be consistent with the February 28, 1998 presentation.
2. COMMON STOCK
Emmis has authorized 34,000,000 shares of Class A Common Stock, par value
$.01 per share, and 6,000,000 shares of Class B Common Stock, par value $.01 per
share. The rights of these two classes are essentially identical except that
each share of Class B Common Stock has 10 votes with respect to substantially
all matters. Class B Common Stock is owned by the principal shareholder (Jeffrey
H. Smulyan). All shares of Class B Common Stock convert to Class A Common Stock
upon sale or other transfer to a party unaffiliated with the principal
shareholder. The financial statements presented reflect the establishment of the
two classes of stock.
In June 1997, Emmis acquired 194,444 shares of its common stock from Morgan
Stanley, Dean Witter, Discover and Co. at $36 per share. The aggregate purchase
price of $7.0 million is reflected as a decrease to additional paid in capital
in the accompanying financial statements and was financed through additional
borrowings under the Company's existing Credit Facility.
3. PREFERRED STOCK
Emmis has authorized 10,000,000 shares of preferred stock which may be
issued with such designations, preferences, limitations and relative rights as
Emmis' Board of Directors may authorize. As of February 28, 1997 and 1998, no
shares of preferred stock are issued and outstanding.
4. LONG-TERM DEBT
Long-term debt was comprised of the following at February 28, 1997 and 1998
(dollars in thousands):
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Credit Facility:
Revolving Credit Facility................................. $ 6,000 $115,000
Term Note................................................. 40,000 100,000
Revolving Credit Facility/Term Note....................... 69,000 --
License Obligation -- Hungary............................... -- 11,800
Bonds Payable............................................... -- 2,996
Notes Payable............................................... -- 1,448
Other....................................................... 172 178
-------- --------
Total debt.................................................. 115,172 231,422
Less Current Maturities................................... 2,868 51
-------- --------
$112,304 $231,371
======== ========
</TABLE>
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, related to unamortized deferred
debt issuance costs, which is recorded as interest expense in the accompanying
consolidated statement of operations. The amended and restated Credit Facility
matures on February 28, 2005
42
<PAGE> 43
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and is comprised of (1) a $250 million revolving credit facility which is
subject to certain adjustments as defined in the credit facility and includes an
additional commitment for $100 million which may be requested by Emmis prior to
May 31, 1999, (2) a $100 million term note and (3) a $150 million revolving
credit facility/term note.
The amended and restated Credit Facility provides for Letters of Credit to
be made available to the Company not to exceed $50 million. The aggregate amount
of outstanding Letters of Credit and amounts borrowed under the Revolving Credit
Facility cannot exceed the Revolving Credit Facility commitment. At February 28,
1998, a $50 million Letter of Credit was outstanding.
All outstanding amounts under the Credit Facility bear interest, at the
option of Emmis, at a rate equal to the Eurodollar Rate (5.375% and 5.625% at
February 28, 1997 and 1998, respectively) 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. The interest rate on borrowings
outstanding under the Credit Facility at February 28, 1997 and 1998 was
approximately 6.625% and 6.60%, respectively. 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 notional amount of the agreements required at
February 28, 1998 totaled $109 million. The agreements, which expire at various
dates ranging from April 2000 to February 2001, establish various ceilings
approximating 8% on the one-month LIBOR interest rate. The cost of these
agreements are being amortized over the lives of the agreements and the
amortization is included as a component of interest expense.
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 were 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 (29)28 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
43
<PAGE> 44
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 from 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.
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
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 Company was in compliance with these
covenants at February 28, 1997 and 1998. 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.
The License Obligation -- Hungary is payable, in Hungarian forints, by
Emmis' Hungarian subsidiary (see Note 5) to the Hungarian government in four
equal annual installments commencing November 2000. The license obligation of
$11.8 million, reflected net of unamortized discount of $1.7 million, is
non-interest bearing and thus has been discounted at an imputed rate of
approximately 3% to reflect the obligation at its fair value. In accordance with
the license purchase agreement, a Hungarian cost of living adjustment is
calculated annually and is payable, concurrent with the principal payments, on
the outstanding obligation. The cost of living adjustment is estimated each
reporting period and included in interest expense.
The Bonds and Notes Payable are payable by Emmis' Hungarian subsidiary to
the minority shareholders of the subsidiary. The Bonds are due on maturity at
November 2004 and bear interest at the Hungarian State Bill rate plus 3%
(approximately 23% at February 28, 1998). Interest is payable semiannually. The
Notes Payable and accrued interest are due on demand and bear interest at prime
plus 2% (approximately 10.5% at February 28, 1998).
5. ACQUISITIONS
On March 31, 1997, Emmis completed its acquisition of substantially all of
the assets of radio stations WALC-FM (formerly WKBQ-FM), WKBQ-AM and WKKX-FM in
St. Louis from Zimco, Inc. for approximately $43.6 million in cash, plus an
agreement to broadcast approximately $1.0 million in trade spots for Zimco,
Inc., over a period of years. In accordance with the asset purchase agreement,
Emmis made an escrow payment of $6.0 million and paid $600,000 in non-refundable
prepayments in December 1996. These payments are reflected in deposits and other
assets in the consolidated balance sheet as of February 28, 1997. Concurrent
with the signing of the asset purchase agreement, Emmis entered into a time
brokerage agreement which 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
commencing December 1, 1996. The purchase price was financed through additional
bank borrowings. The acquisition was accounted for as a purchase. In February
1998, the Company donated WKBQ-AM to a church. The $4.8 million net book value
of the station at the time of donation was reflected as a loss on donation of
radio station in the accompanying consolidated statement of operations.
On May 15, 1997, the Company entered into an agreement to purchase radio
station WQCD-FM in New York City. The purchase price, after adjustments, is
expected to be approximately $141 million. As part of the transaction therewith,
the Company issued an irrevocable letter of credit, to the current owner,
totaling $50 million as security for the Company's obligations under this
agreement. The acquisition will be financed
44
<PAGE> 45
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
through additional bank borrowings and will be accounted for as a purchase upon
closing. The acquisition is currently awaiting FCC approval.
In connection with the above agreement to acquire WQCD-FM, the Company
entered into a time brokerage agreement which permitted Emmis to begin operating
the station effective July 1, 1997. This agreement expires upon the closing of
the sale of the station to the Company. In consideration for the time brokerage
agreement, the Company pays a monthly fee of approximately $700,000. Operating
results of WQCD-FM are reflected in the consolidated statement of operations for
the period from July 1, 1997 through February 28, 1998.
On October 1, 1997, the Company acquired the assets of Network Indiana and
AgriAmerica from Wabash Valley Broadcast Corporation for $.7 million in cash.
Emmis financed the acquisition through additional bank borrowings. The
acquisition was accounted for as a purchase.
On November 1, 1997, the Company completed its acquisition of substantially
all of the assets of WTLC-FM and AM in Indianapolis from Panache Broadcasting,
L.P. for approximately $15.3 million in cash. Emmis financed the acquisition
through additional bank borrowings. The acquisition was accounted for as a
purchase.
On November 1, 1997, the Company acquired substantially all of the net
assets of Cincinnati Magazine from CM Media, Inc. for approximately $2.0 million
in cash. Emmis financed the acquisition through additional bank borrowings. The
acquisition was accounted for as a purchase.
Emmis owns a 54% interest in a Hungarian subsidiary (Radio Hungaria Rt.,
d/b/a Slager Radio) which was formed in August 1997. In November 1997, Slager
Radio acquired a radio broadcasting license from the Hungarian government at a
cost of approximately $19.2 million, of which a cash payment of $7.3 million had
been made as of February 28, 1998. The broadcast license has an initial term of
seven years and is subject to renewal for an additional five years. Slager Radio
began broadcasting on February 16, 1998. Slager Radio's operating results
included in Emmis' results of operations for the year ended February 28, 1998
were not material.
On February 1, 1998, the Company acquired all of the outstanding capital
stock of Mediatex Communications Corporation for approximately $37.4 million in
cash. Mediatex Communications Corporation owns and operates Texas Monthly, a
regional magazine. The acquisition was accounted for as a purchase and was
financed through additional bank borrowings.
6. PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
A pro forma condensed consolidated statement of operations is presented
below for the years ended February 28, 1997 and 1998, assuming the acquisitions
of WALC-FM, WKKX-FM, WTLC-FM and AM, and Texas Monthly and the operation of
WQCD-FM, under the Time Brokerage Agreement, all had occurred on the first day
of the year ended February 28, 1997. Pro forma results for the year ended
February 28, 1997, include pro forma adjustments for March through November,
actual revenues and operating expenses from December through February, operating
under the time brokerage agreement, and certain pro forma expense adjustments
for December through February for the acquisition of WALC-FM and WKKX-FM. In
addition, pro forma adjustments for March through February for the operation of
WQCD-FM under the time brokerage agreement, and the acquisition of WTLC-FM and
AM and Texas Monthly are included in pro forma results for fiscal 1997. Pro
forma results for the year ended February 28, 1998, include pro forma
adjustments for March and actual results for April through February for the
acquisition of WALC-FM and WKKX-FM, pro forma results for March through June and
actual results for July through February for the operation of WQCD-FM under the
time brokerage agreement, pro forma results for March through October and actual
results for November through February for the acquisition of WTLC- FM and AM,
and pro forma results for March through January and actual results for February
for the acquisition of Texas
45
<PAGE> 46
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Monthly. Pro forma results for Cincinnati Magazine, Network Indiana and
AgriAmerica have been excluded as they are not significant to the consolidated
operating results of the Company. 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 acquisitions
and pro forma time brokerage fees for the operation of WQCD-FM have been
included in the pro forma statements presented below (in thousands, except per
share data).
<TABLE>
<CAPTION>
PRO FORMA
----------------------
1997 1998
---- ----
<S> <C> <C>
NET BROADCASTING REVENUES............................... $126,112 $134,603
Broadcasting operating expenses....................... 67,792 72,646
Publication and other revenue, net of operating
expenses........................................... 2,637 3,776
International business development expenses........... 1,164 999
Corporate expenses.................................... 5,929 6,846
Depreciation and amortization......................... 11,164 11,267
Noncash compensation.................................. 3,465 4,882
Time brokerage agreement fees......................... 8,500 8,500
-------- --------
OPERATING INCOME........................................ 30,735 33,239
-------- --------
OTHER INCOME (EXPENSE):
Interest expense...................................... (16,713) (17,485)
Equity in loss of unconsolidated affiliates........... -- (357)
Loss on donation of radio station..................... -- (4,833)
Other income (expense), net........................... 333 459
-------- --------
Total other income (expense)..................... (16,380) (22,216)
-------- --------
INCOME BEFORE INCOME TAXES.............................. 14,355 11,023
PROVISION FOR INCOME TAXES.............................. 5,740 4,410
-------- --------
NET INCOME.............................................. $ 8,615 $ 6,613
======== ========
Basic net income per share............................ $0.79 $0.61
======== ========
Diluted net income per share.......................... $0.76 $0.58
======== ========
</TABLE>
The pro forma condensed consolidated statement of operations presented
above does 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 year presented, and is not intended to be a projection of future results
or trends.
7. EMPLOYEE BENEFIT PLANS
A. 1986 STOCK INCENTIVE PLAN AND 1992 NONQUALIFIED STOCK OPTION PLAN
These stock plans provide for incentive stock options, nonqualified stock
options and stock appreciation rights equivalent to 1,112,500 shares of common
stock. The options and stock appreciation rights are generally exercisable six
months after the date of grant and expire not more than 10 years from the date
the options or rights are granted. Stock appreciation rights provide for the
issuance of stock or the payment of cash equal to the appreciation in market
value of the allocated shares from the date of grant to the date of exercise.
When rights are issued with options, exercise of either the option or the right
results in the surrender of the other. As of February 28, 1997 and 1998, there
were no stock appreciation rights outstanding nor were there any stock
appreciation rights issued with options outstanding. Certain stock options
awarded remain outstanding as of February 28, 1997 and 1998.
46
<PAGE> 47
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
B. 1994 EQUITY INCENTIVE PLAN
Effective March 1, 1994, the shareholders of Emmis approved the 1994 Equity
Incentive Plan (the Plan). Under the Plan, awards equivalent to 1,000,000 shares
of common stock may be granted. The awards, which have certain restrictions, may
be for incentive stock options, nonqualified stock options, shares of restricted
stock, stock appreciation rights, performance units or limited stock
appreciation rights. Under this Plan, all awards are granted with an exercise
price equal to the fair market value of the stock except for shares of
restricted stock which may be granted with an exercise price at amounts greater
than or equal to the par value of the underlying stock. No more than 500,000
shares of Class B Common Stock are available for grant and issuance under the
Plan. As of February 28, 1997 and 1998, the only awards granted under this Plan
were for stock options and restricted shares of stock. Certain stock options
awarded remain outstanding as of February 28, 1997 and 1998. The stock options
under this Plan are generally exercisable one year after the date of grant and
expire not more than 10 years from the date of grant. The exercise price of
these options are at the fair market value of the stock on the grant date.
C. 1995 EQUITY INCENTIVE PLAN
Effective March 1, 1995, the shareholders of Emmis approved the 1995 Equity
Incentive Plan (the Plan). Under the Plan, awards equivalent to 650,000 shares
of common stock may be granted pursuant to employment agreements discussed in
Note 8.
D. NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Effective June 29, 1995, Emmis implemented a Non-Employee Director Stock
Option Plan. Under this Plan, each non-employee director, as of January 24,
1995, was granted an option to acquire 5,000 shares of the Company's Class A
Common Stock. Thereafter, upon election or appointment of any non-employee
director or upon a continuing director becoming a non-employee director, such
individual will also become eligible to receive a comparable option. In
addition, an equivalent option will be automatically granted on an annual basis
to each non-employee director. All awards are granted with an exercise price
equal to the fair market value of the stock on the date of grant. Under this
Plan, awards equivalent to 85,000 shares of Class A Common Stock are available
for grant at February 28, 1998.
E. 1997 EQUITY INCENTIVE PLAN
Effective March 1, 1997, the shareholders of Emmis approved the 1997 Equity
Incentive Plan (the 1997 Plan). Under the 1997 Plan, awards equivalent to
1,000,000 shares of common stock may be granted. The awards, which have certain
restrictions, may be for incentive stock options, nonqualified stock options,
shares of restricted stock, stock appreciation rights or performance units.
Under the 1997 Plan, all awards are granted with an exercise price equal to the
fair market value of the stock except for shares of restricted stock which may
be granted with an exercise price at amounts greater than or equal to the par
value of the underlying stock. No more than 500,000 shares of Class B Common
Stock are available for grant and issuance under the 1997 Plan. As of February
28, 1998, there were no awards granted under this Plan. The stock options under
this Plan are generally exercisable one year after the date of grant and expire
not more than 10 years from the date of grant.
F. OTHER DISCLOSURES RELATED TO STOCK OPTION AND EQUITY INCENTIVE PLANS
The Company has historically accounted for its Stock Option Plans in
accordance with APB Opinion No. 25 ("APB 25"), under which compensation expense
is recognized only to the extent the exercise price of the option is less than
the fair market value of the share of stock at the date of grant. During 1995,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, Accounting for Stock Based Compensation (SFAS
123), which considers the stock options as compensation expense to the
47
<PAGE> 48
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company, based on their fair value at the date of grant. Under this standard,
the Company has the option of accounting for employee stock option plans as it
currently does or under the new method. The Company has elected to continue to
use the APB 25 method for accounting, but has adopted the disclosure
requirements of SFAS 123. Accordingly, compensation expense reflected in noncash
compensation in the consolidated statements of operations related to the plans
summarized above was $2,917,000, $2,715,000 and $4,132,000 for the years ended
February 1996, 1997 and 1998, respectively. Had compensation expense related to
these plans been determined based on fair value at date of grant, the Company's
net income and earnings per share would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY (29)28,
----------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Net Income:
As Reported............................ $10,308,000 $15,440,000 $8,984,000
Pro Forma.............................. $ 8,845,000 $11,545,000 $6,871,000
Basic EPS:
As Reported............................ $.96 $1.41 $.82
Pro Forma.............................. $.83 $1.06 $.63
Diluted EPS:
As Reported............................ $.93 $1.37 $.79
Pro Forma.............................. $.80 $1.02 $.60
</TABLE>
Because the fair value method of accounting has not been applied to options
granted prior to March 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years. The fair value of
each option granted is estimated on the date of grant using the Black-Scholes
option pricing model utilizing the following weighted average assumptions:
<TABLE>
<CAPTION>
YEAR ENDED
FEBRUARY (29)28,
----------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Risk Free Interest Rate............................... 6.47% 6.39% 5.78%
Expected Life (Years)................................. 6.8 7.1 8.1
Expected Volatility................................... 39.70% 41.56% 38.65%
</TABLE>
Expected dividend yields were zero for fiscal 1996, 1997 and 1998.
A summary of the status of options at February 1996, 1997 and 1998 and the
related activity for the year is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at Beginning of
Year............................ 587,000 $ 9.37 893,888 $15.88 1,232,335 $23.42
Granted........................... 505,738 19.29 439,862 35.54 325,200 35.28
Exercised......................... (198,850) 6.63 (92,415) 10.01 (106,305) 21.09
Expired........................... -- -- (9,000) 33.96 (10,600) 42.47
Outstanding at End of Year........ 893,888 15.88 1,232,335 23.42 1,440,630 26.08
Exercisable at
End of Year....................... 517,900 11.99 737,223 16.71 1,155,430 22.14
Available for Grant............... 1,816,012 1,385,150 2,571,350
</TABLE>
48
<PAGE> 49
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During the years ended February 1996, 1997 and 1998 options were granted
with an exercise price equal to or less than fair market value of the stock on
the date of grant. A summary of the weighted average fair value and exercise
price of options granted during 1996, 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE FAIR EXERCISE FAIR EXERCISE FAIR
PRICE VALUE PRICE VALUE PRICE VALUE
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
OPTIONS GRANTED WITH AN EXERCISE
PRICE:
Equal to Fair Market Value of the
Stock on the Date of Grant.......... $14.81 $26.03 $24.46 $42.66 $22.85 $41.20
Less Than Fair Market Value of the
Stock on the Date of Grant.......... $16.55 $15.50 $24.30 $15.50 $40.48 $15.50
</TABLE>
During fiscal 1996 and 1997, 90,000 and 14,800 shares of nonvested stock
were granted at a weighted average grant date fair value of $17.36 and $37.20,
respectively, under employment agreements discussed in Note 8. No nonvested
stock was granted during fiscal 1998.
The following information relates to options outstanding and exercisable at
February 28, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- - -------------------------------------- ------------------------------------
WEIGHTED WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE AVERAGE
EXERCISE NUMBER OF EXERCISE REMAINING NUMBER OF EXERCISE
PRICES OPTIONS PRICE CONTRACT LIFE OPTIONS PRICE
-------- --------- -------- ------------- --------- --------
<S> <C> <C> <C> <C> <C>
$3.75 60,375 $ 3.75 4.2 years 60,375 $ 3.75
10.00-13.25 76,450 12.43 5.7 years 76,450 12.43
15.13-17.125 644,393 15.61 8.0 years 644,393 15.61
28.875-42.25 297,362 34.01 8.1 years 206,862 33.42
44.125-48.75 362,050 44.79 9.0 years 167,350 44.40
</TABLE>
In addition to the benefit plans noted above, Emmis has the following
employee benefit plans:
G. PROFIT SHARING PLAN
In December 1986, Emmis adopted a profit sharing plan that covers all
nonunion employees with one year of service. Contributions to the plan are at
the discretion of the Emmis Board of Directors. Contributions to the plan can be
made in the form of newly issued Emmis common stock or cash. Historically, all
contributions to the plan have been in the form of Emmis common stock.
Contributions reflected in noncash compensation in the consolidated statements
of operations were $750,000 for each of the years ended February 1996, 1997 and
1998.
H. 401(K) RETIREMENT SAVINGS PLAN
Emmis sponsors a Section 401(k) retirement savings plan which covers
substantially all nonunion employees age 18 years and older who have at least
one year of service. Employees may make pretax contributions to the plan up to
10% of their compensation, not to exceed the annual limit prescribed by the
Internal Revenue Service. Emmis may make discretionary matching contributions to
the plan in the form of shares of the Company's Class A Common Stock. Effective
March 1, 1996, Emmis began to match 50% of employee contributions up to $2,000.
Emmis' contributions to the plan totaled $129,000, $273,000 and $315,000 for the
years ended February 1996, 1997 and 1998, respectively.
49
<PAGE> 50
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
I. DEFINED CONTRIBUTION HEALTH AND RETIREMENT PLAN
Emmis contributes to a multi-employer defined contribution health and
retirement plan for employees who are members of a labor union. Amounts charged
to expense related to the multi-employer plan were approximately $276,000,
$297,000 and $342,000 for the years ended February 1996, 1997 and 1998,
respectively.
J. EMPLOYEE STOCK PURCHASE PLAN
Effective March 1, 1995, the Company implemented an employee stock purchase
plan which permits employees to purchase, via payroll deduction, shares of the
Company's Class A Common Stock, at fair market value, up to an amount not to
exceed 10% of an employee's annual gross pay.
8. COMMITMENTS AND CONTINGENCIES
A. OPERATING LEASES
Emmis leases certain office space, tower space, equipment and automobiles
under operating leases expiring at various dates through March 2013. Some of the
lease agreements contain renewal options and annual rental escalation clauses
(generally tied to the Consumer Price Index or increases in the lessor's
operating costs), as well as provisions for payment of utilities and maintenance
costs.
The future minimum rental payments (exclusive of future escalation costs)
required by noncancelable operating leases which have remaining terms in excess
of one year as of February 28, 1998, are as follows:
<TABLE>
<CAPTION>
PAYABLE IN YEAR
ENDING FEBRUARY PAYMENTS
--------------- --------
(IN THOUSANDS)
<S> <C>
1999.................................................. $ 3,139
2000.................................................. 2,710
2001.................................................. 2,085
2002.................................................. 1,961
2003.................................................. 2,024
Thereafter............................................ 11,618
-------
$23,537
=======
</TABLE>
Minimum payments have not been reduced by minimum sublease rentals of
approximately $740,000 due in the future under noncancelable subleases. As
further discussed in e. below, in 1999 Emmis intends to move its corporate
office and Indianapolis operations to an office building being constructed in
downtown Indianapolis. Included in future minimum rentals above is approximately
$752,000 to be paid through 2000 relating to office space currently being leased
in Indianapolis which will no longer be used after the move. At this time Emmis
management believes that sublease income will be adequate to offset any rental
expense associated with the existing lease.
Rent expense totaled $4,437,000, $3,025,000 and $4,512,000 for the years
ended February 1996, 1997 and 1998, respectively. Rent expense for the year
ended February 1996 includes a loss recognized in connection with a remaining
lease obligation related to leased property no longer used for operating
purposes. During the year ended February 1997, the Company settled the
aforementioned lease obligation which resulted in a reduction to rent expense.
Rent expense for the year ended February 1998 is net of sublease income of
approximately $86,000.
50
<PAGE> 51
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
B. BROADCAST AGREEMENTS
Emmis has entered into agreements to broadcast certain syndicated programs
and sporting events. Future payments related to these broadcast rights are
summarized as follows: Year ended February 1999 -- $1,584,000, 2000 --
$1,074,000, 2001 -- $1,100,000, 2002 -- $1,150,000, and 2003 -- $625,000.
Expense related to these broadcast rights totaled $1,260,000, $1,383,000 and
$1,400,000 for the years ended February 1996, 1997 and 1998.
C. LITIGATION
Emmis currently and from time to time is involved in litigation incidental
to the conduct of its business, but Emmis is not currently a party to any
lawsuit or proceeding which, in the opinion of management, is likely to have a
material adverse effect on the financial position or results of operations of
Emmis.
D. EMPLOYMENT AGREEMENTS
Effective March 1, 1994, Emmis entered into an employment agreement with
its Chief Executive Officer that continues through February 28, 1999 and
provides for an annual base salary as specified in the agreement and an annual
bonus. In addition, for each year Emmis meets specified financial targets, the
Chief Executive Officer will be granted an option to acquire 100,000 shares of
Class B Common Stock. The options will have a five-year term and an exercise
price of $15.50 per share. The Chief Executive Officer was granted an option to
acquire 100,000 shares of Class B Common Stock in accordance with the terms of
this agreement for each of the years ended February 1996 and 1997. It is
expected that an option to acquire 100,000 shares of Class B Common Stock will
also be granted, under this employment agreement, for the year ended February
1998. Upon the termination or disability of the Chief Executive Officer,
specified levels of compensation may continue for five years from the date of
termination or disability. Upon the death of the Chief Executive Officer, lump
sum payments are payable to his estate.
Effective March 1, 1995, Emmis entered into employment agreements with two
other executive officers of the Company that continued through February 28, 1998
and provided for an annual base salary and certain bonuses as specified in the
agreements. Each executive officer received 12,000 shares of the Company's Class
A Common Stock for each year of the employment agreements. The shares vested
upon completion of the agreements. In addition, each executive officer was
granted an option to acquire 25,000 shares of Class A Common Stock during each
year of the employment agreements. The options became exercisable at the end of
the term of the employment agreements and have an exercise price of $15.50 per
share.
Effective March 1, 1995 and 1996, Emmis entered into employment agreements
with two additional executives of the Company that continue through February 28,
1999 and provide for an annual base salary and certain other bonuses as
specified in the agreements. Subject to certain conditions, the executives will
receive, in total, 27,000 shares of the Company's Class A Common Stock. Of the
total shares to be received 2,000, were awarded as of February 28, 1997 with the
remaining 25,000 to be awarded upon completion of the term of the agreements. In
addition, subject to certain conditions, during the term of the agreements, the
executives will be granted options to acquire shares of Class A Common Stock,
with an exercise price equal to the fair market value at the date of grant. Each
option becomes exercisable one year from the date of grant. Options to purchase
up to 89,806 shares of Class A Common Stock may be granted over the term of the
agreements. Through February 28, 1998, options to purchase 65,806 shares have
been granted under the agreements.
Effective March 1, 1995, Emmis entered into employment agreements with
certain station managers that continued through February 28, 1997 and provided
for an annual base salary and certain bonuses as specified in the agreements.
Effective March 1, 1997 new employment agreements were entered into, with
similar provisions, which continue through February 28, 1999. Subject to certain
conditions, each station manager will receive a prescribed number of shares, not
to exceed 1,500 shares, of the Company's Class A Common Stock
51
<PAGE> 52
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
during each year of the employment agreements. Commencing with the initial
agreements through February 28, 1998, 10,050 shares have been granted under
these agreements.
E. CONSTRUCTION OF OFFICE BUILDING
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 $30
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, Network Indiana and AgriAmerica. 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.
9. INCOME TAXES
The provision for income taxes for the years ended February 1996, 1997 and
1998, consisted of the following:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................... $2,081 $ 7,535 $ 6,474
State..................................................... 649 1,375 1,250
------ ------- -------
2,730 8,910 7,724
------ ------- -------
Deferred:
Federal................................................... 4,572 1,328 (2,059)
State..................................................... 298 262 235
------ ------- -------
4,870 1,590 (1,824)
------ ------- -------
Provision for income taxes.................................. $7,600 $10,500 $ 5,900
====== ======= =======
</TABLE>
The provision for income taxes for the years ended February 1996, 1997 and
1998, differs from that computed at the Federal statutory corporate tax rate as
follows:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Computed income taxes at 35%.................... $6,268 $ 9,079 $5,209
State income tax................................ 616 1,064 965
Other........................................... 716 357 (274)
------ ------- ------
$7,600 $10,500 $5,900
====== ======= ======
</TABLE>
52
<PAGE> 53
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of deferred tax assets and deferred tax liabilities at
February 28, 1997 and 1998, are as follows:
<TABLE>
<CAPTION>
1997 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Capital loss carryforwards........................... $ 3,208 $ 2,914
Net operating loss carryforwards..................... -- 2,587
Compensation relating to stock options............... 2,435 3,543
Other................................................ 1,221 2,739
Valuation allowance.................................. (3,208) (2,914)
-------- --------
Total deferred tax assets......................... 3,656 8,869
-------- --------
Deferred tax liabilities:
Intangible assets.................................... (30,714) (33,166)
Other................................................ (2,212) (1,962)
-------- --------
Total deferred tax liabilities.................... (32,926) (35,128)
-------- --------
Net deferred tax liability........................ $(29,270) $(26,259)
======== ========
</TABLE>
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. A valuation allowance
has been provided for 100% of the capital loss carryforwards available as of
February 28, 1997 and 1998, since these loss carryforwards can only be utilized
to offset future capital gains with expiration of approximately $6,187,000 in
1999, $730,000 in 2001, and $368,000 in 2002. The expiration of net operating
loss carryforwards approximate $458,000 in 1999, $692,000 in 2000, $1,486,000 in
2003, $2,623,000 in 2004, $1,375,000 in 2005, and $758,000 in 2006.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments of Emmis is estimated below based
on the methods and assumptions discussed therein.
A. CASH AND CASH EQUIVALENTS
The carrying amounts approximate fair value because of the short maturity
of these instruments.
B. LONG-TERM DEBT
Based upon borrowing rates currently available to the Company for debt with
similar terms and the same remaining maturities, the fair value of long-term
debt approximated the carrying value at February 28, 1998.
C. INTEREST RATE CAP AGREEMENTS
The unamortized cost of interest rate cap agreements included in the
February 28, 1998 consolidated balance sheet totals $172,000. The carrying
amount of interest rate cap agreements approximate fair value given that the
majority of the interest rate caps were purchased in February 1998.
D. LETTER OF CREDIT
Fees paid for the Company's $50 million letter of credit approximate fair
value based on fees currently charged for similar arrangements.
53
<PAGE> 54
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. RELATED PARTY TRANSACTIONS
Two officers of Emmis are partners in a law firm which provides legal
services to Emmis. Legal fees billed by this law firm were approximately
$188,000, $296,000 and $512,000 for the years ended February 1996, 1997 and
1998, respectively.
Affiliates of Morgan Stanley, Dean Witter, Discover and Co. are
shareholders of Emmis. No fees were paid to Morgan Stanley, Dean Witter,
Discover & Co. and affiliates for the years ended February 1996, 1997 and 1998.
12. SUBSEQUENT EVENT -- ACQUISITION
Effective March 20, 1998, the Company entered into an agreement to purchase
the majority of the assets of Wabash Valley Broadcasting Corporation for
approximately $90 million in cash. The acquisition consists of WTHI-TV, a CBS
network affiliated television station, WTHI-FM and AM and WWVR-FM, radio
stations located in the Terre Haute, Indiana area, and WFTX-TV, a Fox network
affiliated television station in Ft. Myers, Florida.
Effective March 30, 1998, the Company entered into an agreement to purchase
substantially all of the assets of SF Broadcasting of Wisconsin, Inc. and SF
Multistations, Inc. and Subsidiaries (collectively "the SF Acquisition") for
approximately $307 million. The purchase price will be paid a portion in cash
($257 million), either issuance of shares of Emmis' Class A Common Stock or
cash, at Emmis' option ($25 million), and a promissory note ($25 million)
bearing interest at 8%, with principal and interest due on the first anniversary
of the closing date which, at Emmis' option, may be paid with an equivalent
amount of Emmis' Class A Common Stock. In accordance with the asset purchase
agreement, Emmis made a $25 million escrow payment. The SF Acquisition consists
of four Fox network affiliated television stations: WLUK-TV in Green Bay,
Wisconsin, WVUE-TV in New Orleans, Louisiana, WALA-TV in Mobile, Alabama, and
KHON-TV in Honolulu, Hawaii (including McHale Videofilm and satellite stations
KAII-TV, Wailuku, Hawaii, and KHAW-TV, Hilo, Hawaii).
These acquisitions are awaiting approval by the FCC. The Company will
account for these acquisitions under the purchase method of accounting.
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------- FULL
MAY 31 AUGUST 31 NOVEMBER 30 FEBRUARY 28 YEAR
------ --------- ----------- ----------- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Year ended February 28, 1997:
Net broadcasting revenues............... $25,350 $28,071 $27,520 $22,351 $103,292
Operating income........................ 8,286 12,342 10,080 4,540 35,248
Net income.............................. 3,505 6,040 4,655 1,240 15,440
Basic net income per share........... $0.32 $0.55 $0.43 $0.11 $1.41
Diluted net income per share......... $0.31 $0.53 $0.41 $0.11 $1.37
Year ended February 28, 1998:
Net broadcasting revenues............... $28,562 $33,889 $36,245 $27,159 $125,855
Operating income........................ 8,091 12,002 10,160 3,230 33,483
Net income (loss)....................... 3,368 4,672 4,079 (3,135) 8,984
Basic net income per share........... $0.31 $0.43 $0.38 $(0.29) $0.82
Diluted net income per share......... $0.30 $0.41 $0.36 $(0.29) $0.79
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
54
<PAGE> 55
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item with respect to directors of the
Company is incorporated by reference from the section entitled "Proposal No. 1:
Election of Directors" on pages 4 and 5 of the Company's 1998 Proxy Statement
and the section entitled "Compliance with Section 16(a) of the Securities
Exchange Act of 1934" on page of the Company's 1998 Proxy Statement.
Listed below is certain information about the executive officers of the
Company or its affiliates and who are not directors.
<TABLE>
<CAPTION>
AGE AT YEAR FIRST
NAME POSITION FEBRUARY 28, 1998 ELECTED OFFICER
---- -------- ----------------- ---------------
<S> <C> <C> <C>
Richard F. Cummings.................. Executive Vice President 46 1984
Programming
Howard L. Schrott.................... Executive Vice President, 43 1991
Treasurer and Chief Financial
Officer
Norman H. Gurwitz.................... Executive Vice President, 50 1987
Secretary and Corporate Counsel
</TABLE>
Set forth below is the principal occupation for the last five years of each
executive officer of the Company or its affiliates who is not also a director.
RICHARD F. CUMMINGS was the Program Director of WENS from 1981 to March
1984, when he became the National Program Director and a Vice President of the
Company. His title was changed to Executive Vice President -- Programming in
1988.
HOWARD L. SCHROTT became Vice President, Chief Financial Officer and
Treasurer of the Company in 1991. He became an Executive Vice President in 1995.
Prior to joining the Company, Mr. Schrott was a Vice President in the
Communications Lending Group at First Union National Bank, Charlotte, North
Carolina. From 1984 to 1989 Mr. Schrott served as Chief Operating and Executive
Officer for a group of radio stations. Mr. Schrott also spent two years
practicing law in Washington, D.C. and Indianapolis, Indiana, where he
concentrated on matters before the FCC and general business matters relating to
broadcasting and media.
NORMAN H. GURWITZ was elected Corporate Counsel for the Company in 1987 and
a Vice President in 1988. He was elected Secretary of the Company in 1989 and
became an Executive Vice President in 1995. Prior to 1987, he was a partner in
the Indianapolis law firm of Scott & Gurwitz.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference from the
section entitled "Executive Compensation" on pages 5 through 10 of the Company's
1998 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated by reference from the
section entitled "Voting Securities and Beneficial Owners" on pages 2 and 3 of
the Company's 1998 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated by reference from the
section entitled "Certain Transactions" on page 5 of the Company's 1998 Proxy
Statement.
55
<PAGE> 56
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Financial Statements
The financial statements filed as a part of this report are set forth under
Item 8.
Financial Statement Schedules
The following financial statement schedule is filed as a part of this
report:
Report of Independent Public Accountants on Financial Statement
Schedule
Schedule II Valuation and Qualifying Accounts and Reserves for the
fiscal years in the three year period ended February 28,
1998.
Reports on Form 8-K
The Company filed a report on Form 8-K on April 15, 1997, which was amended
on June 16, 1997, to report the acquisition of radio stations in St. Louis,
Missouri.
All other Schedules are omitted as the required information is inapplicable
or is presented in the financial statements or related notes.
Exhibits
The following exhibits are filed or incorporated by reference as a part of
this report:
Exhibits
The following exhibits are filed or incorporated by reference as a part of
this report:
<TABLE>
<C> <S>
3.1 Amended and Restated Articles of Incorporation of Emmis
Broadcasting Corporation, incorporated by reference from
Exhibit 3.3 to the Registration Statement, as amended (the
"Registration Statement") of the Company on Form S-1, file
no. 33-73218.*
3.2 Amended and Restated Bylaws of Emmis Broadcasting
Corporation, incorporated by reference from Exhibit 3.2 to
the Company's Annual Report on Form 10-K for the fiscal year
ended February 28, 1995 (the "1995 10-K").*
3.3 Form of stock certificate for Class A Common Stock,
incorporated by reference from Exhibit 3.5 to the
Registration Statement.*
10.1 Emmis Broadcasting Corporation 1986 Stock Incentive Plan, as
amended, incorporated by reference from Exhibit 10.1 to the
Registration Statement.*
10.2 Emmis Broadcasting Corporation 1992 Stock Option Plan,
incorporated by reference from Exhibit 10.3 to the
Registration Statement.*
10.3 Emmis Broadcasting Corporation Profit Sharing Plan,
incorporated by reference from Exhibit 10.4 to the
Registration Statement.*
10.4 Emmis Broadcasting Corporation 1994 Equity Incentive Plan,
incorporated by reference from Exhibit 10.5 to the
Registration Statement.*
10.5 Emmis Broadcasting Corporation 1997 Equity Incentive Plans.
10.6 Amended and Restated Revolving Credit and Term Loan
Agreement, incorporated by reference from Exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter
ended May 31, 1997.*
10.7 First, Second and Third Amendments, and Waiver, to Amended
and Restated Revolving Credit and Term Loan Agreement.
</TABLE>
56
<PAGE> 57
<TABLE>
<C> <S>
10.8 Form of Employment Agreement with Jeffrey H. Smulyan,
incorporated by reference from Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the fiscal year
ended February 28, 1994 (the "1994 10-K").*
10.9 Form of Registration Rights Agreement between Emmis
Broadcasting Corporation and Morgan Stanley Group Inc.,
incorporated by reference from Exhibit 10.17 to the
Registration Statement.*
10.10 The Emmis Broadcasting Corporation 1995 Non-Employee
Director Stock Option Plan incorporated by reference from
Exhibit 10.15 of the 1995 10-K.*
10.11 The Emmis Broadcasting Corporation 1995 Equity Incentive
Plan incorporated by reference from Exhibit 10.16 of the
1995 10-K.*
10.12 Employment Agreement with Howard L. Schrott, incorporated by
reference from Exhibit 10 to the Company's report on Form
10-Q for the quarter ended May 31, 1996.*
10.13 Asset Purchase Agreement dated October 31, 1997 between the
Company and Zimco, Inc. (with exhibits omitted in which the
Company agrees to file supplementally upon request),
incorporated by reference from Exhibit 2 to the Company's
report on Form 8-K filed April 15, 1997.*
10.14 Stock Purchase Agreement Among Emmis Broadcasting
Corporation, and Michael R. Levy, Dow Jones & Company, Inc.,
and Gregory Curtis, dated February 6, 1998.
10.15 Asset Purchase Agreement by and between Emmis Broadcasting
Corporation and Wabash Valley Broadcasting Corporation,
dated March 20, 1998.
10.16 Asset Purchase Agreement by and among SF Broadcasting of
Honolulu, Inc., SF Honolulu License Subsidiary, Inc., SF
Broadcasting of New Orleans, Inc., SF New Orleans License
Subsidiary, Inc., SF Broadcasting of Mobile, Inc., SF Mobile
License Subsidiary, Inc., SF Broadcasting of Green Bay,
Inc., SF Green Bay License Subsidiary, Inc. and Emmis
Broadcasting Corporation, dated March 30, 1998.
11 Schedules re: Calculation of per share and pro forma per
share net income (loss).
21 Subsidiaries of the Company.
23 Consent of Accountants.
24 Powers of Attorney.
27 Financial Data Schedule (EDGAR-filed version only)
99 Proxy Statement.**
</TABLE>
- - -------------------------
* Previously Submitted
** To be filed within 120 days of the end of the Company's fiscal year.
57
<PAGE> 58
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: May 7, 1998 By: /s/ HOWARD L. SCHROTT
------------------------------------
Howard L. Schrott
Executive Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
Date: May 7, 1998 JEFFREY H. SMULYAN* President, Chairman of the
--------------------------------------------- Board and Director (Principal
Jeffrey H. Smulyan Executive Officer)
Date: May 7, 1998 /s/ HOWARD L. SCHROTT Executive Vice President,
--------------------------------------------- Treasurer and Chief Financial
Howard L. Schrott Officer (Principal Financial
Officer)
Date: May 7, 1998 SUSAN B. BAYH* Director
---------------------------------------------
Susan B. Bayh
Date: May 7, 1998 GARY L. KASEFF* Director
---------------------------------------------
Gary L. Kaseff
Date: May 7, 1998 RICHARD A. LEVENTHAL* Director
---------------------------------------------
Richard A. Leventhal
Date: May 7, 1998 DOYLE L. ROSE* Radio Division President and
--------------------------------------------- Director
Doyle L. Rose
Date: May 7, 1998 LAWRENCE B. SORREL* Director
---------------------------------------------
Lawrence B. Sorrel
</TABLE>
*By: /s/ HOWARD L. SCHROTT
---------------------------
Howard L. Schrott
Attorney-in-Fact
58
<PAGE> 59
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of
Emmis Broadcasting Corporation and Subsidiaries:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of EMMIS BROADCASTING CORPORATION AND
SUBSIDIARIES included in Item 8, in this Form 10-K, and have issued our report
thereon dated March 31, 1998. Our audit was made for the purpose of forming an
opinion on the basic consolidated financial statements taken as a whole. The
schedule listed in Item 14 is the responsibility of the Company's management and
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic consolidated financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic consolidated financial statements taken
as a whole.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
March 31, 1998.
59
<PAGE> 60
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS IN THE THREE YEAR PERIOD ENDED FEBRUARY 28, 1998
<TABLE>
<CAPTION>
BALANCE
BALANCE AT AT END
BEGINNING OF
CLASSIFICATION OF YEAR PROVISION WRITE-OFFS OTHER YEAR
-------------- ---------- --------- ---------- ----- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS,
Year ended February 29, 1996.................. $620 $834 $(655) $ 0 $ 799
Year ended February 28, 1997.................. 799 726 (705)(1) 0 820
Year ended February 28, 1998.................. 820 802 (981) 705 1,346
</TABLE>
- - -------------------------
(1) Represents additions to the allowance for doubtful accounts associated with
certain acquisitions.
60
<PAGE> 1
EXHIBIT 10.5
EMMIS BROADCASTING CORPORATION
1997 EQUITY INCENTIVE PLAN
1. PURPOSE. The primary purposes of the Plan are to promote and align the
interests of employees of the Company and its shareholders, to reward
performance that enhances long term shareholder values, to increase employee
stock ownership and to improve the Company's ability to attract and retain a
team of outstanding employees and executives.
2. DEFINITIONS. As used in the Plan, terms defined parenthetically
immediately after their use have the respective meanings provided by such
definitions and the terms set forth below have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Affiliate" means, with respect to a specified person, a person that,
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified.
"Award" means options, shares of restricted stock, stock appreciation
rights or performance units granted under the Plan.
"Award Agreement" has the meaning specified in Section 4(b)(vi).
"Board" means the Board of Directors of the Company.
"Cause" means conviction of the Grantee of any felony or other crime
involving dishonesty, fraud or moral turpitude, or the Grantee's habitual
neglect of his duties.
"Change in Control" means any of the following: (i) any person or group
(other than a Subsidiary or any employee benefit plan (or any related trust) of
the Company or a Subsidiary) becomes after the Effective Date the beneficial
owner of 25% or more of either the then outstanding Stock or the combined voting
power of the then outstanding voting securities of the Company entitled to vote
in the election of directors, except that (A) no such person or group shall be
deemed to own beneficially any securities acquired directly from the Company
pursuant to a written agreement with the Company unless such person or group
subsequently becomes the beneficial owner of additional Stock or voting
securities of the Company other than pursuant to a written agreement with the
Company, and (B) no Change in Control shall be deemed to have occurred solely by
reason of any such acquisition by a corporation with respect to which, after
such acquisition, more than 60% of both the then outstanding common shares of
such corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote in the election of directors are
then beneficially owned, directly or indirectly, by the persons who were the
beneficial owners of the Stock and voting securities of the Company immediately
before such acquisition in substantially the same proportion as their ownership,
immediately before such acquisition, of the outstanding Stock and the combined
voting power of the then outstanding voting securities of the Company entitled
to vote in the election of directors; (ii) individuals who, as of the Effective
Date, constitute the Board (the "Incumbent Directors") cease for any reason to
constitute at least a majority of the Board; provided that any individual who
becomes a director after the Effective Date whose election, or nomination for
election by the Company's stockholders, was approved by a vote or written
consent of at least two-thirds of the directors then comprising the Incumbent
Directors shall be considered as though such individual were an Incumbent
Director, but excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the directors of the Company (as such terms
are used in Rule 14a-11 under the Exchange Act); or (iii) approval by the
stockholders of the Company of (A) a merger, reorganization or consolidation
with respect to which the individuals and entities who were the respective
beneficial owners of the Stock and voting securities of the Company immediately
before such merger, reorganization or consolidation do not, after such merger,
reorg1anization or consolidation, beneficially own, directly
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<PAGE> 2
or indirectly, more than 60% of, respectively, the then outstanding common
shares and the combined voting power of the then outstanding voting securities
entitled to vote in the election of directors of the corporation resulting from
such merger, reorganization or consolidation, (B) a liquidation or dissolution
of the Company or (C) the sale or other disposition of all or substantially all
of the assets of the Company. Notwithstanding the foregoing provisions of this
definition, a Change in Control of the Company shall be deemed not to have
occurred with respect to any Grantee, if such Grantee is, by written agreement
executed prior to such Change in Control, a participant on such Grantee's own
behalf in a transaction in which the persons (or their affiliates) with whom
such Grantee has the written agreement Acquire the Company (as defined below)
and, pursuant to the written agreement, the Grantee has an equity interest in
the resulting entity or a right to acquire such an equity interest.
For the purposes of this definition, "Acquire the Company" means the
acquisition of beneficial ownership by purchase, merger, or otherwise, of either
more than 50% of the Stock (such percentage to be computed in accordance with
Rule 13d-3(d)(1)(i) of the SEC under the Exchange Act) or substantially all of
the assets of the Company or its successors; "person" means such term as used in
Rule 13d-5 of the SEC under the Exchange Act; "beneficial owner" means such term
as defined in Rule 13d-3 of the SEC under the Exchange Act; and "group" means
such term as defined in Section 13(d) of the Exchange Act.
"Change in Control Value" means, with respect to a Change in Control,
the highest Fair Market Value of a share of Stock during the period beginning on
the 180th day before such Change in Control and ending on the day preceding the
exercise of an LSAR or, if greater, the highest price per share of Stock paid in
connection with such Change in Control.
"Class A Common Stock" means the Class A Common Stock of the Company,
par value $.01 per share.
"Class B Common Stock" means the Class B Common Stock of the Company,
par value $.01 per share.
"Code" means the Internal Revenue Code of 1986, as amended, and
regulations and rulings thereunder. References to a particular section of the
Code shall include references to successor provisions.
"Committee" means the Compensation Committee of the Board constituted
as provided in Section 4.
"Company" means Emmis Broadcasting Corporation, an Indiana corporation.
"Disability" means, with respect to the exercise of an incentive stock
option after Termination of Employment, a disability within the meaning of
Section 22(e)(3) of the Code, and for all other purposes, a mental or physical
condition which, in the opinion of the Committee, renders a Grantee unable or
incompetent to carry out the job responsibilities which such Grantee held or the
tasks to which such Grantee was assigned at the time disability was incurred,
and which is expected to be permanent or for an indefinite duration.
"Effective Date" means March 1, 1997.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
References to a particular section of, or rule under, the Exchange Act shall
include references to successor provisions.
"Fair Market Value" of any security of the Company or any other issuer
means, as of any applicable date: (i) if the security is listed for trading on
the New York Stock Exchange, the closing price, regular way, of the security as
reported on the New York Stock Exchange Composite Tape, or if no such reported
sale of the security shall have occurred on such date, on the next preceding
date on which there was such a reported sale, or (ii) if a security is not so
listed, but is listed on another national securities exchange or authorized for
quotation on the National Association of Securities Dealers, Inc.'s NASDAQ
National Market System ("NASDAQ/NMS"), the closing price, regular way, of the
security on such exchange or NASDAQ/NMS, as the case may be, or if no such
reported sale of the security shall have occurred on such date, on the next
preceding date on which there was such a reported sale, or (iii) if a security
A-2
<PAGE> 3
is not listed for trading on a national securities exchange or authorized for
quotation on NASDAQ/NMS, the average of the closing bid and asked prices as
reported by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), or, if no such prices shall have been so reported for such
date, on the next preceding date for which such prices were so reported, or (iv)
if the security is not listed for trading on a national securities exchange or
is not authorized for quotation on NASDAQ/NMS or NASDAQ, the fair market value
of the security as determined in good faith by the Committee.
"Grant Date" means the date of grant of an Award determined in
accordance with Section 6.
"Grantee" means an individual who has been granted an Award.
"Incentive Stock Option" means an Award under Section 7(b).
"including" means "including, without limitation."
"Measuring Period" has the meaning specified in Section 10(a)(i)(B).
"Option" means an Award under Section 7.
"Option Price" means the per share purchase price of (i) Stock subject
to an option or (ii) restricted stock subject to an option.
"Parent" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company, if at the time of the granting of
an Award under the Plan, each of such corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
"Performance Goals" has the meaning specified in Section 10(a)(i).
"Performance Percentage" has the meaning specified in Section 10(a)(i)
(C).
"Performance Units" means units established by the Committee for
purposes of granting an Award under Section 10.
"Plan" means the Emmis Broadcasting Corporation 1997 Equity Incentive
Plan.
"Prior Plans" means the Emmis Broadcasting Corporation 1986 Stock
Incentive Plan and the Emmis Broadcasting Corporation 1992 Stock Option Plan and
Emmis Broadcasting Corporation 1994 Equity Incentive Plan.
"Reload Option" has the meaning specified in Section 7(c).
"Restricted Stock" means Stock awarded pursuant to Section 8.
"SEC" means the Securities and Exchange Commission.
"Section 16 Person" means a person subject to potential liability under
Section 16(b) of the Exchange Act with respect to transactions involving equity
securities of the Company.
"Stock" means the Class A Common Stock and the Class B Common Stock.
"Stock Appreciation Rights" means Awards under Section 9.
A-3
<PAGE> 4
"Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of the
granting of an Award under the Plan, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
"10% Owner" means a person who owns stock (including stock treated as
owned under Section 424(d) of the Code) possessing more than 10% of the total
combined voting power of all classes of stock of the Company.
"Termination of Employment" occurs the first day an individual is for
any reason entitled to severance payments under the Company's or any
Subsidiary's personnel policies or is no longer employed by the Company or any
of its Subsidiaries, or, with respect to an individual who is an employee of a
corporation constituting a Subsidiary, the first day such corporation is no
longer a Subsidiary.
3. SCOPE OF THE PLAN.
(a) Number of Shares. Subject to Section 3(c), an aggregate of one million
(1,000,000) shares of Stock is hereby made available and is reserved for
delivery on account of the exercise of Awards and payment of benefits in
connection with Awards. Subject to the foregoing limit, shares of Stock held as
treasury shares may be used for or in connection with Awards. No more than five
hundred thousand (500,000) shares of Class B Common Stock shall be available for
grant and issuance under the Plan. Awards of or pertaining to shares of Class B
Common Stock may be granted only to Jeffrey H. Smulyan. Issuance of either Class
A Common Stock or Class B Common Stock as or pursuant to an Award shall reduce
the shares available for grant and issuance under the Plan.
(b) Limit on Awards. Subject to Section 3(a) as to the maximum number of
shares of Stock available for delivery in connection with Awards and Sections
3(c) and 27, the maximum number of Awards that may be granted to each Grantee in
each calendar year during any part of which the Plan is in effect shall be as
follows:
(i) With respect to Stock subject to Options, 500,000 shares;
(ii) With respect to Stock subject to Stock Appreciation Rights,
500,000 shares;
(iii)With respect to Restricted Stock (not issued in payment of an
Award of Performance Units), that number of shares of Stock whose
value equals the lesser of (A) 500% of such Grantee's base salary
for such year or (B) $2,000,000 (based on the Fair Market Value of
Stock on the date the award is granted, not the date the Award
vests or is paid);
(iv) With respect to Awards of Performance Units, that number of shares
of Stock whose value equals the lesser of (A) 500% of such
Grantee's base salary for such year or (B) $2,000,000 (based on
the Fair Market Value of Stock on the date the Award is granted,
not the date the Award is earned or paid).
(c) Re-Use of Shares. If and to the extent an Award shall expire or
terminate for any reason without having been exercised in full or shall be
forfeited, shares of Stock (including restricted stock) and stock appreciation
rights associated with such Award shall become available for other Awards. If a
Grantee pays all or part of the exercise price associated with an Award by the
transfer of Stock or the surrender (including by attestation) of all or part of
an Award (including the Award being exercised), such Stock will also be
available for grant under this Plan, without reducing the number of shares of
Stock available in any calendar year for grant of Awards.
4. ADMINISTRATION.
(a) General. The Plan shall be administered by the Compensation Committee
of the Board, which shall consist of persons who are, unless the Board
determines otherwise, "outside directors" within the meaning of Section 162(m)
of the Code and "non-employee directors" within the meaning of Rule 16b-3 (and
any successor regulation thereto) as
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<PAGE> 5
promulgated by the SEC under Section 16(b) of the Exchange Act, as such rule is
amended from time to time and as interpreted by the SEC. Notwithstanding the
requirements contained in the immediately preceding sentence, the Board may, in
its discretion, delegate to a committee or subcommittee of the Board that does
not meet the foregoing requirements any or all of the authority and
responsibility of the Committee with respect to Awards to employees who are not
Section 16 Persons or "covered employees" for purposes of Section 162(m) of the
Code at the time any such delegated authority or responsibility is exercised.
Such other committee or subcommittee may consist of two or more directors who
may, but need not, be officers or employees of the Company or of any of its
Subsidiaries. To the extent that the Board has delegated to such other committee
or subcommittee the authority and responsibility of the Committee pursuant to
the foregoing, all references to the Committee in the Plan shall be to such
other committee or subcommittee.
(b) Authority of the Committee. The Committee shall have full power and
final authority, in its discretion, but subject to the express provisions of the
Plan, as follows: (i) to select Grantees, (ii) to grant Awards, (iii) to
determine (A) when Awards may be granted, (B) whether or not specific Stock
Appreciation Rights shall be identified with a specific Option, specific shares
of Restricted Stock, or specific Performance Units and, if so, whether they
shall be exercisable cumulatively with, or alternatively to, such Option, shares
of Restricted Stock, or Performance Units, and (C) whether or not specific
Performance Units shall be identified with a specific Option, specific shares of
Restricted Stock, or specific Stock Appreciation Rights under the Plan or any
Prior Plan and, if so, whether they shall be exercisable cumulatively with, or
alternatively to, such Option, shares of Restricted Stock, or Stock Appreciation
Rights, (iv) to interpret the Plan and to make all determinations necessary or
advisable for the administration of the Plan, (v) to prescribe, amend, and
rescind rules relating to the Plan, including rules with respect to the
exercisability and nonforfeitability of Awards upon the Termination of
Employment of a Grantee, (vi) to determine the terms and provisions of the
written agreements by which all Awards shall be granted ("Award Agreements")
and, with the consent of the Grantee, to modify any such Award Agreement at any
time, (vii) to accelerate the exercisability of, and to accelerate or waive any
or all of the restrictions and conditions applicable to, any Award, (viii) to
make such adjustments or modifications to Awards to Grantees working outside the
United States as are necessary and advisable to fulfill the purposes of the
Plan, and (ix) to impose such additional conditions, restrictions, and
limitations upon the grant, exercise or retention of Awards as the Committee
may, before or concurrently with the grant thereof, deem appropriate, including
requiring simultaneous exercise of related identified Options, Stock
Appreciation Rights, and Performance Units and limiting the percentage of
Options, Stock Appreciation Rights, and Performance Units which may from time to
time be exercised by a Grantee.
(c) Determinations of the Committee; No Liability. The determination of the
Committee on all matters relating to the Plan or any Award Agreement shall be
conclusive and final. No member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Award.
5. ELIGIBILITY. Awards may be granted to any employee of the Company or any
of its Subsidiaries. In selecting the individuals to whom Awards may be granted,
as well as in determining the number of shares of Stock subject to and the other
terms and conditions applicable to each Award, the Committee shall take into
consideration such factors as it deems relevant in promoting the purposes of the
Plan.
6. GENERAL TERMS AND CONDITIONS OF GRANTS.
(a) Grant Date. The Grant Date of an Award shall be the date on which the
Committee grants the Award or such later date as specified in advance by the
Committee.
(b) Maximum Term. The term of each Award (subject to Section 7(b) and 7(c)
with respect to Incentive Stock Options and Reload Options, respectively) shall
be a period of not more than ten (10) years from the Grant Date, and shall be
subject to earlier termination as herein provided.
(c) Tandem Awards. A Grantee may, if otherwise eligible, be granted
additional Awards in any combination.
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<PAGE> 6
7. OPTIONS.
(a) Grant of Options and Option Price. No later than the Grant Date of any
Option, the Committee shall determine the Option Price of such Option. The
Option Price of any Option shall not be less than the Fair Market Value of the
Stock on the Grant Date.
(b) Grant of Incentive Stock Options. At the time of the grant of any
Option, the Committee may designate that such Option shall be made subject to
additional restrictions to permit it to qualify as an "incentive stock option"
under the requirements of Section 422 of the Code. Any Option designated as an
Incentive Stock Option: (i) shall have an Option Price of (A) not less than 100%
of the Fair Market Value of the Stock on the Grant Date or (B) in the case of a
10% Owner, not less than 110% of the Fair Market Value of the Stock on the Grant
Date; (ii) shall be for a period of not more than 10 years (five years, in the
case of a 10% Owner) from the Grant Date, and shall be subject to earlier
termination as provided herein or in the applicable Award Agreement; (iii) shall
not have an aggregate Fair Market Value of Stock (determined for each Incentive
Stock Option on its Grant Date) with respect to which Incentive Stock Options
are exercisable for the first time by such Grantee during any calendar year
(under the Plan and any other employee stock option plan of the Grantee's
employer or any parent or subsidiary thereof ("Other Plans")), determined in
accordance with the provisions of Section 422 of the Code, which exceeds
$100,000 (the "$100,000 Limit"); (iv) shall, if the aggregate Fair Market Value
of Stock (determined on the Grant Date) with respect to all Incentive Stock
Options previously granted under the Plan and any Other Plans ("Prior Grants")
and any Incentive Stock Options under such grant (the "Current Grant") which are
exercisable for the first time during any calendar year would exceed the
$100,000 Limit, be exercisable as follows: (A) the portion of the Current Grant
exercisable for the first time by the Grantee during any calendar year which
would, when added to any portions of any Prior Grants, be exercisable for the
first time by the Grantee during such calendar year with respect to stock which
would have an aggregate Fair Market Value (determined as of the respective Grant
Date for such Options) in excess of the $100,000 Limit shall, notwithstanding
the terms of the Current Grant, be exercisable for the first time by the Grantee
in the first subsequent calendar year or years in which it could be exercisable
for the first time by the Grantee when added to all Prior Grants without
exceeding the $100,000 Limit; and (B) if, viewed as of the date of the Current
Grant, any portion of a Current Grant could not be exercised under the
provisions of the immediately preceding sentence during any calendar year
commencing with the calendar year in which it is first exercisable through and
including the last calendar year in which it may by its terms be exercised, such
portion of the Current Grant shall not be an Incentive Stock Option, but shall
be exercisable as a separate Option at such date or dates as are provided in the
Current Grant; (v) shall be granted within 10 years after the earlier of the
date the Plan is adopted or the date the Plan is approved by the stockholders of
the Company; and (vi) shall require the Grantee to notify the Committee of any
disposition of any Stock issued pursuant to the exercise of the Incentive Stock
Option under the circumstances described in Section 421(b) of the Code (relating
to certain disqualifying dispositions), within 10 days of such disposition.
Notwithstanding the foregoing and Section 4(b)(vi), the Committee may,
without the consent of the Grantee, at any time before the exercise of an Option
(whether or not an Incentive Stock Option), take any action necessary to prevent
such option from being treated as an Incentive Stock Option.
(c) Grant of Reload Options. The Committee may from time to time, in its
discretion, adopt a policy, which policy shall not remain in effect for longer
than 12 months at a time, but which may be adopted for successive 12-month
periods, under which each Grantee who exercises while the policy is in effect an
Option for shares of Stock which have a Fair Market Value on the date of
exercise equal to not less than 100% (or such greater percentage set forth in
the policy) of the Option Price for such Options ("Exercised Options") and pays
the Option Price with shares of Stock, shall be granted, subject to Section 3,
additional Options ("Reload Options") in an amount equal to the sum ("Reload
Number") of the number of shares of Stock tendered to exercise the Exercised
Options plus, if so provided by the Committee, the number of shares of Stock, if
any, retained by the Company in connection with the exercise of the Exercised
Options to satisfy any federal, state or local tax withholding requirements. The
Committee may, in its discretion, provide that the Reload Option policy shall
not apply to Options which would expire within such period as the Committee
determines, in its discretion, from the effective date of the policy.
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<PAGE> 7
(d) Terms and Conditions for Reload Options. Reload Options shall be
subject to the following terms and conditions: (i) the Grant Date for each
Reload Option shall be the date of exercise of the Exercised Option to which it
relates; (ii) the Reload Option may be exercised at any time during the
unexpired term of the Exercised Option (subject to earlier termination thereof
as provided in the Plan and in the applicable Award Agreement); (iii) the terms
of the Reload Option shall be the same as the terms of the Exercised Option to
which it relates, except that (A) the Option Price shall be the Fair Market
Value of the Stock on the Grant Date of the Reload Option, and (B) no Reload
Option may be exercised within one year from the Grant Date thereof; and (iv)
each Reload Option shall by its terms be subject to the Company's receipt of
either an opinion of counsel for the Company or a "no-action" letter from the
staff of the SEC to the effect that the grant of such Reload Option would not
cause the Plan to fail to satisfy the requirements of Rule 16b-3 (or any
successor provision) under Section 16(b) of the Exchange Act.
(e) Exercise of Options. Subject to Sections 4(b)(viii), 7(g), 13 and 18
and such terms and conditions as the Committee may impose, each Option shall be
exercisable in one or more installments commencing not earlier than the first
anniversary of the Grant Date of such Option. Each Option shall be exercised by
delivery to the Company of written notice of intent to purchase a specific
number of shares of Stock subject to the Option. The Option Price of any shares
of Stock or shares of restricted stock as to which an Option shall be exercised
shall be paid in full at the time of the exercise. Payment may, at the election
of the Grantee, be made in any one or any combination of the following: (i)
cash; (ii) Stock valued at its Fair Market Value on the business day preceding
the date of exercise (including through an attestation procedure); (iii) with
the approval of the Committee, shares of restricted stock each valued at the
Fair Market Value of a share of Stock on the business day next preceding the
date of exercise; (iv) by waiver of compensation due or accrued to the Grantee
for services rendered; (v) with the consent of the Committee, by tender of
property; (vi) provided that a public market for the Stock exists: (A) through a
"same day sale" commitment from the Grantee and a broker-dealer that is a member
of the National Association of Securities Dealers (an "NASD Dealer") whereby the
Grantee irrevocably elects to exercise the Option and to sell a portion of the
Stock so purchased in order to pay for the Option, and whereby the NASD Dealer
irrevocably commits upon receipt of such Stock to forward the Option Price
directly to the Company; or (B) through a "margin" commitment from the Grantee
and an NASD Dealer whereby the Grantee irrevocably elects to exercise the Option
and to pledge the Stock so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the Option Price, and
whereby the NASD Dealer irrevocably commits upon receipt of such Stock to
forward the Option Price directly to the Company; or (C) through any other
procedure pursuant to which the Grantee delivers to the Company a properly
executed exercise notice and instructions to deliver the resulting Stock to a
stock broker that are intended to satisfy the provisions of Section 220. 3(e)(4)
of Regulation T issued by the Board of Governors of the Federal Reserve System
as in effect from time to time; (vii) in the discretion of the Committee and to
the extent permitted by law, in accordance with Section 14; or (viii) by the
surrender of all or part of the Option being exercised.
(f) Use of Restricted Stock to Pay Option Price. If restricted stock
("Tendered Restricted Stock") is used to pay the Option Price for Stock subject
to an Option, then a number of shares of Stock acquired on exercise of the
Option equal to the number of shares of Tendered Restricted Stock shall, unless
the Committee provides otherwise, be subject to the same restrictions as the
Tendered Restricted Stock, determined as of the date of exercise of the Option.
If the Option Price for restricted stock subject to an Option is paid with
Tendered Restricted Stock, and if the Committee determines that the restricted
stock acquired on exercise of the Option is subject to restrictions that cause
it to have a greater risk of forfeiture than the Tendered Restricted Stock, then
notwithstanding the preceding sentence, all the restricted stock acquired on
exercise of the Option shall, unless the Committee provides otherwise, be
subject to such restrictions.
(g) Special Rules for Section 16 Persons. Except as determined by the
Committee in its sole discretion, no Option identified with a Stock Appreciation
Right shall be exercisable by a Section 16 Person for six months from its Grant
Date. This limitation shall not apply if the Grantee dies or incurs a Disability
before the end of the six-month period.
(h) Provision Applicable to Certain Hardship Distributions. No Grantee
shall make any elective contribution or employee contribution (within the
meaning of Treasury Regulation Section 1.401(k)-1(d)(2)(iv)(B)(4)) (i.e.,
exercise an Option with cash or check) to the Plan during the 12-month period
after the Grantee's receipt of a deemed hardship
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distribution (within the meaning of Treasury Regulation Section
1.401(k)-1(d)(2)(iv)) from a plan of the Company (or a related party within the
provisions of Code Section 414(b), (c), (m) or (o)) containing a cash or
deferred arrangement under Section 401(k) of the Code. The preceding sentence
shall not apply if and to the extent that the Committee determines it is not
necessary to qualify any such plan as a cash or deferred arrangement under
Section 401(k) of the Code.
8. RESTRICTED STOCK.
(a) Grant of Shares of Restricted Stock. Before the grant of any shares of
Restricted Stock, the Committee shall determine, in its discretion: (i) the per
share purchase price of such shares (which, subject to clauses (A) and (B) of
this sentence, may be zero), and (ii) the restrictions applicable to such grant;
provided, however, that: (A) the per share purchase price of all such shares
(other than treasury shares) shall be greater than or equal to the par value of
the Stock; and (B) if such shares are to be granted to a Section 16 Person, the
per share purchase price of any such shares shall also be at least 50% of the
Fair Market Value of the Stock on the Grant Date unless such shares are granted
for no monetary consideration or with a purchase price per share equal to the
par value of the Stock, except that this clause (B) shall be inapplicable if the
Company obtains an opinion of counsel for the Company or a "no action" letter
from the staff of the SEC to the effect that such limitation is not necessary
for the Plan to comply with the requirements of Rule 16b-3 (or any successor
exemption) under the Exchange Act.
(b) Exercise. Payment of the purchase price (if greater than zero) for
shares of Restricted Stock shall be made in full by the Grantee before the
delivery of such shares and, in any event, no later than 10 days after the Grant
Date for such shares. Such payment may, at the election of the Grantee and
unless the Committee otherwise provides in the Award Agreement, be made in any
one or any combination of the following: (i) cash, (ii) Stock valued at its Fair
Market Value on the business day next preceding the date of payment, or (iii)
shares of Restricted Stock, each valued at the Fair Market Value of a share of
Stock on the business day next preceding the date of payment; provided that: (A)
the use of Stock or restricted stock in payment of such purchase price by a
Section 16 Person is subject to the prior receipt by the Company of either a
favorable opinion of counsel for the Company or a "no action" letter from the
staff of the SEC with respect to the exemption of such use of stock from
liability under Section 16(b) of the Exchange Act or the inapplicability of such
liability; (B) in the discretion of the Committee and to the extent permitted by
law, payment may also be made in accordance with Section 14; and (C) if the
purchase price for Restricted Stock ("New Restricted Stock") is paid with shares
of restricted stock ("Old Restricted Stock"), the restrictions applicable to the
New Restricted Stock shall be the same as if the Grantee had paid for the New
Restricted Stock in cash unless, in the judgment of the Committee, the Old
Restricted Stock was subject to a greater risk of forfeiture, in which case a
number of shares of New Restricted Stock equal to the number of shares of Old
Restricted Stock tendered in payment for New Restricted Stock shall, unless the
Committee provides otherwise, be subject to the same restrictions as the Old
Restricted Stock, determined immediately before such payment.
(c) Forfeiture. The Committee may, but need not, provide that all or any
portion of a Grantee's Award of Restricted Stock shall be forfeited: (i) upon
the Grantee's Termination of Employment within a specified time period after the
Grant Date, or (ii) if the Company or the Grantee does not achieve specified
performance goals within a specified time period after the Grant Date and before
the Grantee's Termination of Employment.
(d) Effect of Forfeiture. If a share of Restricted Stock is forfeited,
then: (i) the Grantee shall be deemed to have resold such share of restricted
stock to the Company at the lesser of (A) the purchase price paid by the Grantee
(such purchase price shall be deemed to be zero dollars ($0) if no purchase
price was paid) or (B) the Fair Market Value of a share of Stock on the date of
such forfeiture; (ii) the Company shall pay to the Grantee the amount determined
under clause (i) of this sentence as soon as is administratively practical; and
(iii) such share of Restricted Stock shall cease to be outstanding, and shall no
longer confer on the Grantee thereof any rights as a stockholder of the Company,
from and after the date of the Company's tender of the payment specified in
clause (ii) of this sentence, whether or not such tender is accepted by the
Grantee.
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(e) Certificates. Any share of Restricted Stock shall be held (together
with a stock power executed in blank by the Grantee) in escrow by the Secretary
of the Company until such shares become nonforfeitable or are forfeited and
shall bear an appropriate legend specifying that such share is non-transferable
and subject to the restrictions set forth in the Plan. If any shares of
Restricted Stock become nonforfeitable, the Company shall cause certificates for
such shares to be issued or reissued without such legend.
9. STOCK APPRECIATION RIGHTS.
(a) Grant of Stock Appreciation Rights. When granted, Stock Appreciation
Rights may, but need not, be identified with shares of Stock subject to a
specific Option, specific shares of Restricted Stock, or specific Performance
Units of the Grantee (including any Option, shares of Restricted Stock, or
Performance Units granted on or before the Grant Date of the Stock Appreciation
Rights) in a number equal to or different from the number of Stock Appreciation
Rights so granted. If Stock Appreciation Rights are identified with shares of
Stock subject to an Option, shares of Restricted Stock, or Performance Units,
then, unless otherwise provided in the applicable Award Agreement, the Grantee's
associated Stock Appreciation Rights shall terminate upon (i) the expiration,
termination, forfeiture, or cancellation of such Option, shares of Restricted
Stock, or Performance Units, (ii) the exercise of such Option or Performance
Units, or (iii) the nonforfeitability of such shares of Restricted Stock.
(b) Exercise of Stock Appreciation Rights. Subject to Section 4(b)(viii),
9(d), 13 and 18 and such terms and conditions as the Committee may impose, each
Stock Appreciation Right shall be exercisable not earlier than the first
anniversary of the Grant Date of such Stock Appreciation Right to the extent the
Option with which it is identified, if any, may be exercised, to the extent the
Restricted Stock with which it is identified, if any, is nonforfeitable, or to
the extent the Performance Unit with which it is identified, if any, may be
exercised, unless otherwise provided by the Committee. Stock Appreciation Rights
shall be exercised by delivery to the Company of written notice of intent to
exercise a specific number of Stock Appreciation Rights. Unless otherwise
provided in the applicable Award Agreement, the exercise of Stock Appreciation
Rights which are identified with shares subject to an Option, shares of
Restricted Stock, or Performance Units shall result in the cancellation or
forfeiture of such Option, shares of Restricted Stock, or Performance Units, as
the case may be, to the extent of such exercise.
(c) Benefit for Stock Appreciation Rights. The benefit for each Stock
Appreciation Right exercised shall be equal to the difference between: (i) the
Fair Market Value of a share of Stock on the date of such exercise and (ii) an
amount equal to: (A) for any Stock Appreciation Right identified with an Option,
the Option Price of such Option, unless the Committee in the grant of the Stock
Appreciation Right specified a higher amount, or (B) for any other Stock
Appreciation Right, the Fair Market Value of a share of Stock on the Grant Date
of such Stock Appreciation Right, unless the Committee in the grant of the Stock
Appreciation Right specified a higher amount; provided that the Committee, in
its discretion, may provide that the benefit for any Stock Appreciation Right
shall not exceed a stated percentage (which may exceed 100%) of the Fair Market
Value of a share of Stock on such Grant Date. The benefit upon the exercise of a
Stock Appreciation Right shall be payable in cash, except that the Committee,
with respect to any particular exercise, may, in its discretion, pay benefits
wholly or partly in Stock.
(d) Special Rules for Section 16 Persons. Except as determined by the
Committee in its sole discretion, no Stock Appreciation Right shall be
exercisable by a Section 16 Person for six months from its Grant Date. This
limitation shall not apply if the Grantee dies or incurs a Disability before the
end of the six-month period.
10. PERFORMANCE UNITS.
(a) Grant of Performance Units.
(i) Before the grant of any Performance Unit, the Committee shall: (A)
determine performance goals ("Performance Goals") applicable to such grant,
(B) designate a period, of not less than one year nor more than seven
years, for the measurement of the extent to which Performance Goals are
attained, which period may begin prior to the Grant Date (the "Measuring
Period"), and (C) assign a "Performance Percentage" to each level of
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attainment of Performance Goals during the Measuring Period, with the
percentage applicable to minimum attainment being zero percent (0%) and the
percentage applicable to maximum attainment to be determined by the
Committee from time to time.
(ii) In establishing Performance Goals, the Committee may consider such
performance factor or factors as it deems appropriate, including net
income, cash flow, growth in net income or cash flow, earnings per share,
growth of earnings per share, return on equity, or return on capital. The
Performance Goals may include minimum and optimum objectives or a single
set of objectives. The Committee may, at any time, in its discretion,
modify Performance Goals in order to facilitate their attainment for any
reason, including recognition of unusual or nonrecurring events affecting
the Company or a Subsidiary or changes in applicable laws, regulations or
accounting principles. If a Grantee is promoted, demoted or transferred to
a different business unit of the Company during a performance period, the
Committee may adjust or eliminate the Performance Goals as it deems
appropriate.
(iii) When granted, Performance Units may, but need not, be identified
with shares of Stock subject to a specific option, specific shares of
Restricted Stock, or specific Stock Appreciation Rights of the Grantee
granted under the Plan or any Prior Plan in a number equal to or different
from the number of the Performance Units so granted. If Performance Units
are identified with shares of Stock subject to an option, shares of
Restricted Stock, or Stock Appreciation Rights, then, unless otherwise
provided in the applicable Award Agreement, the Grantee's associated
Performance Units shall terminate upon (A) the expiration, termination,
forfeiture, or cancellation of such Option, shares of Restricted Stock, or
Stock Appreciation Rights, (B) the exercise of such Option or Stock
Appreciation Rights, or (C) the nonforfeitability of such shares of
Restricted Stock.
(iv) With respect to Awards of Performance Units that are intended to
qualify as "performance based" within the meaning of Code Section
162(m)(4)(C), the Committee shall (A) select the Grantees for such Awards,
(B) establish in writing the applicable Performance Goals and all related
terms no later than 90 days after the commencement of the period of service
to which the Performance Goals relate (or such earlier or later date as may
be the applicable deadline for compensation payable hereunder to qualify as
"performance based" within the meaning of Code Section 162(m)(4)(C)), and
(C) designate the Awards that are to qualify as "performance based" within
the meaning of Code Section 162(m)(4)(C).
(b) Exercise of Performance Units. Subject to Sections 13 and 18 and such
terms and conditions as the Committee may impose, if, with respect to any
Performance Unit, the minimum Performance Goals have been achieved during the
applicable Measuring Period, then such Performance Unit shall be exercisable
commencing on the later of (i) the first anniversary of the Grant Date or (ii)
the first day after the end of the applicable Measuring Period. Performance
Units shall be exercised by delivery to the Company of written notice of intent
to exercise a specific number of Performance Units; provided, however, that
Performance Units not identified with an Option, shares of Restricted Stock, or
Stock Appreciation Rights shall be deemed exercised on the date on which they
first become exercisable. After completion of the Measuring Period, the
Committee shall certify in writing the extent to which the Performance Goals and
other material terms applicable to such Award are attained. Unless and until the
Committee so certifies, the Award shall not be paid. Unless otherwise provided
for in the applicable Award Agreement, the exercise of Performance Units which
are identified with an Option, shares of Restricted Stock, or Stock Appreciation
Rights shall result in the cancellation or forfeiture of such Option, shares of
Restricted Stock, or Stock Appreciation Rights, as the case may be, to the
extent of such exercise.
(c) Benefit of Performance Unit. The benefit for each Performance Unit
exercised shall be an amount equal to the product of: (i) the Fair Market Value
of a share of Stock on the Grant Date of the Performance Unit multiplied by (ii)
the Performance Percentage attained during the Measuring Period for such
Performance Unit.
(d) Payment. The benefit upon the exercise of a Performance Unit shall be
payable as soon as is administratively practicable after the later of (i) the
date the Grantee exercises or is deemed to exercise such Performance Unit, or
(ii) the date (or dates in the event of installment payments) as provided in the
applicable Award Agreement. Such benefit shall be payable in cash, except that
the Committee, with respect to any particular exercise, may, in its discretion,
pay
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benefits wholly or partly in Stock. The number of shares of Stock payable in
lieu of cash shall be determined by valuing the Stock at its Fair Market Value
on the business day next preceding the date such benefit is to be paid.
(e) No Discretion. With respect to Awards of Performance Units that are
intended to qualify as "performance based" within the meaning of Code Section
162(m)(4)(C), the Committee has no discretion to increase the amount of the
Award due upon attainment of the applicable Performance Goals. No provision of
this Plan shall preclude the Committee from exercising negative discretion with
respect to any Award of Performance Units (i.e., to reduce or eliminate the
Award payable) within the meaning of Treasury Regulation Section
1.162-27(e)(2)(iii)(A).
(f) Forfeiture. In addition to any specific provisions on forfeiture
provided for in any Performance Unit Award Agreement, Performance Units will be
forfeited if the Grantee terminates employment (other than upon death,
disability or retirement) with the Company, a Subsidiary or an affiliate prior
to the completion of the Measuring Period; provided that the Committee shall
have the authority to provide for a partial or full payment of the Award that
would have been payable if the Grantee had continued employment for the entire
Measuring Period, which shall be paid at the same time as it would have been
paid if no such termination of employment occurred, but only if and to the
extent the exercise of such discretion by the Committee does not prevent any
Award from qualifying as "performance based" within the meaning of Code Section
162(m)(4)(C).
11. GRANTEE'S AGREEMENT TO SERVE. Each Grantee who is granted an Award
shall, by executing such Grantee's Award Agreement, agree that such Grantee will
remain in the employ of the Company or any of its Subsidiaries for at least one
year after the Grant Date. No obligation of the Company or any of its
Subsidiaries as to the length of any Grantee's employment shall be implied by
the terms of the Plan, any grant of an Award hereunder or any Award Agreement.
The Company and its Subsidiaries reserve the same rights to terminate employment
of any Grantee as existed before the Effective Date.
12. NON-TRANSFERABILITY. Except as permitted by the Committee in writing,
each Award (other than Restricted Stock) granted hereunder shall by its terms
not be assignable or transferable other than by will or the laws of descent and
distribution and may be exercised, during the Grantee's lifetime, only by the
Grantee. Each share of Restricted Stock shall be non-transferable until such
share becomes nonforfeitable.
13. EFFECTS OF A CHANGE IN CONTROL. The terms and provisions of this
Section 13 shall apply upon the occurrence of a Change in Control only if, prior
to the Change in Control, the Committee shall have determined that this Section
13 shall be applicable. The Committee shall give written notice to the Grantees
of such a determination and the date on which such determination is made. After
the occurrence of a Change in Control following the date on which such
determination is made, then:
(a) General. Subject to Sections 7(g), 9(d) and 18 but notwithstanding
Section 11 or any other provisions of the Plan: (i) all Options, Stock
Appreciation Rights, and Performance Units granted under the Plan shall
immediately be fully exercisable; and (ii) all shares of Restricted Stock shall
immediately be nonforfeitable and freely transferable.
(b) Benefit. The benefit, if any, payable with respect to any Performance
Unit for which the Measuring Period has not ended shall be equal to the product
of: (i) the Fair Market Value of a share of Stock on the Grant Date of the
Performance Unit multiplied successively by each of the following; (ii) a
fraction, the numerator of which is the number of months (including as a whole
month any partial month) that have elapsed since the beginning of such Measuring
Period until the date of such Change in Control, and the denominator of which is
the number of months (including as a whole month any partial month) in the
Measuring Period; and (iii) a percentage equal to the greater of (A) the target
percentage, if any, specified in the applicable Award Agreement, or (B) the
maximum percentage, if any, that would be earned under the terms of the
applicable Award Agreement assuming that such rate at which the performance
goals have been achieved as of the date of the Change in Control would continue
until the end of the Measuring Period.
14. LOANS AND GUARANTEES. The Committee may, in its discretion:
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(i) allow a Grantee to defer payment to the Company of all or any
portion of (i) the Option Price of an Option, (ii) the purchase price of a
share of Restricted Stock, or (iii) any taxes associated with a benefit
hereunder which is not a cash benefit at the time such benefit is so
taxable, or
(ii) cause the Company to guarantee a loan from a third party to the
Grantee, in an amount equal to all or any portion of such Option Price,
purchase price, or any related taxes. Any such payment deferral or
guarantee by the Company pursuant to this Section 14 shall be on a secured
or unsecured basis for such periods, at such interest rates, and on such
other terms and conditions as the Committee may determine. Notwithstanding
the foregoing, a Grantee shall not be entitled to defer the payment of such
Option Price, purchase price, or any related taxes unless the Grantee (i)
enters into a binding obligation to pay the deferred amount and (ii) pays
upon exercise of an Option or grant of shares of Restricted Stock, as the
case may be, an amount equal to or greater than the aggregate par value of
all shares of Stock or Restricted Stock (other than treasury shares) to be
then delivered. If the Committee has permitted a payment deferral or caused
the Company to guarantee a loan pursuant to this Section 14, then the
Committee may, in its discretion, require the immediate payment of such
deferred amount or the immediate release of such guarantee upon the
Grantee's Termination of Employment or upon the Grantee's sale or other
transfer of the Grantee's shares of Stock purchased pursuant to such
deferral or guarantee.
15. NOTIFICATION UNDER SECTION 83(B). If the Committee has not, on the
Grant Date or any later date, prohibited such Grantee from making the following
election, and a Grantee shall, in connection with the exercise of any Option, or
the grant of any share of Restricted Stock, make the election permitted under
Section 83(b) of the Code (i.e., an election to include in such Grantee's gross
income in the year of transfer the amounts specified in Section 83(b) of the
Code), such Grantee shall notify the Company of such election within 10 days of
filing notice of the election with the Internal Revenue Service, in addition to
any filing and notification required pursuant to regulations issued under the
authority of Section 83(b) of the Code.
16. MANDATORY WITHHOLDING TAXES.
(a) General. Whenever under the Plan, cash or shares of Stock are to be
delivered upon exercise or payment of an Award or upon a share of Restricted
Stock becoming nonforfeitable, or any other event with respect to rights and
benefits hereunder, the Company shall be entitled to require as a condition of
delivery (i) that the Grantee remit an amount sufficient to satisfy all federal,
state and local withholding tax requirements related thereto, (ii) the
withholding of such sums from compensation otherwise due to the Grantee or from
any shares of Stock due to the Grantee under the Plan, or (iii) any combination
of the foregoing.
(b) Incentive Stock Options. If any disqualifying disposition described in
Section 7(b)(vi) is made with respect to shares of Stock acquired under an
Incentive Stock Option granted pursuant to the Plan or any election described in
Section 15 is made, then the person making such disqualifying disposition or
election shall remit to the Company an amount sufficient to satisfy all federal,
state, and local withholding taxes thereby incurred; provided that, in lieu of
or in addition to the foregoing, the Company shall have the right to withhold
such sums from compensation otherwise due to the Grantee or from any shares of
Stock due to the Grantee under the Plan.
17. ELECTIVE SHARE WITHHOLDING.
(a) Election by Grantee. Subject to Section 17(b), a Grantee may elect the
withholding ("Share Withholding") by the Company of a portion of the shares of
Stock otherwise deliverable to such Grantee upon the exercise or payment of an
Award or upon a share of Restricted Stock's becoming nonforfeitable (each a
"Taxable Event") having a Fair Market Value equal to: (i) the minimum amount
necessary to satisfy required federal, state, or local withholding tax liability
attributable to the Taxable Event; or (ii) with the Committee's prior approval,
a greater amount, not to exceed the estimated total amount of such Grantee's tax
liability with respect to the Taxable Event.
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(b) Restrictions. Each Share Withholding election by a Grantee shall be
made in writing in a form acceptable to the Committee and shall be subject to
the following restrictions: (i) a Grantee's right to make such an election shall
be subject to the Committee's right to revoke such right at any time before the
Grantee's election if the Committee has reserved the right to do so in the Award
Agreement; (ii) if the Grantee is a Section 16 Person, such Grantee's election
shall be subject to the disapproval of the Committee at any time, whether or not
the Committee has reserved the right to do so; (iii) the Grantee's election must
be made before the date (the "Tax Date") on which the amount of tax to be
withheld is determined; (iv) the Grantee's election shall be irrevocable by the
Grantee; (v) unless waived by the Committee, a Section 16 Person may not elect
Share Withholding within six months after the grant of the related Option or
Stock Appreciation Rights (except if the Grantee dies or incurs a Disability
before the end of the six-month period); (vi) unless waived by the Committee, a
Section 16 Person must elect Share Withholding six months before the Tax Date;
and (vii) in the event that the Tax Date is deferred until six months after the
delivery of Stock under Section 83(b) of the Code, the Grantee shall receive the
full amount of Stock with respect to which the exercise occurs, but such Grantee
shall be unconditionally obligated to tender back to the Company the proper
number of shares of Stock on the Tax Date.
18. TERMINATION OF EMPLOYMENT.
(a) Restricted Stock. Except as otherwise provided by the Committee on or
after the Grant Date, a Grantee's shares of Restricted Stock that are
forfeitable shall be forfeited upon the Grantee's Termination of Employment.
(b) Other Awards. If the Grantee has a Termination of Employment for Cause,
any unexercised Option, Stock Appreciation Right, or Performance Unit shall
terminate upon the Grantee's Termination of Employment. If the Grantee has a
Termination of Employment for any reason other than Cause, then any unexercised
Option, Stock Appreciation Right, or Performance Unit, to the extent exercisable
on the date of the Grantee's Termination of Employment, may be exercised in
whole or in part, not later than the later of (A) the 90th day following the
Grantee's Termination of Employment or (B) the 30th day following the last day
for which the Grantee is entitled to severance payments under the Company's or
any Subsidiary's personnel policies, except that: (i) if the Grantee's
Termination of Employment is caused by the death of the Grantee, then any
unexercised Option, Stock Appreciation Right, or Performance Unit, to the extent
exercisable on the date of the Grantee's death, may be exercised, in whole or in
part, at any time within one year after the Grantee's death by the Grantee's
personal representative or by the person to whom the Option, Stock Appreciation
Right, or Performance Unit is transferred by will or the applicable laws of
descent and distribution; (ii) if the Grantee's Termination of Employment is as
a result of retirement, then any unexercised Option, Stock Appreciation Right,
or Performance Unit, to the extent exercisable at the date of such Termination
of Employment, may be exercised, in whole or in part, at any time within 90 days
after such Termination of Employment; provided that, if the Grantee dies after
such Termination of Employment and before the end of such 90-day period, such
Option, Stock Appreciation Right, or Performance Unit may be exercised by the
deceased Grantee's personal representative or by the person to whom the Option,
Stock Appreciation Right, or Performance Unit is transferred by will or the
applicable laws of descent and distribution within one year after the Grantee's
Termination of Employment; and (iii) if the Grantee's Termination of Employment
is on account of the Disability of the Grantee, then any unexercised Option,
Stock Appreciation Right, or Performance Unit, to the extent exercisable at the
date of such Termination of Employment, may be exercised, in whole or in part,
at any time within one year after the date of such Termination of Employment;
provided that, if the Grantee dies after such Termination of Employment and
before the end of such one-year period, such Option, Stock Appreciation Right,
or Performance Unit may be exercised by the deceased Grantee's personal
representative or by the person to whom the Option, Stock Appreciation Right, or
Performance Unit is transferred by will or the applicable laws of descent and
distribution within one year after the Grantee's Termination of Employment, or,
if later, within 180 days after the Grantee's death.
(c) Exceptions at the Discretion of the Committee. If the Grantee has a
Termination of Employment for any reason other than Cause, the Committee may
provide on or after the Grant Date (including after a Grantee's Termination of
Employment, but before the expiration of the term specified in the applicable
Award Agreement) for one or more of the following: (i) that any unexercised
Option, Stock Appreciation Right, or Performance Unit, to the extent exercisable
on the date of such Termination of Employment, may be exercised, in whole or in
part, at any time within a period specified by the Committee after the date of
such Termination of Employment; (ii) that any Option, Stock Appreciation
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Right, or Performance Unit which is not exercisable on or before the date of
such Termination of Employment (A) will continue to become exercisable, as if
such Termination of Employment had not occurred, after such date for a period
specified by the Committee and (B) to the extent such Option, Stock Appreciation
Right, or Performance Unit has become exercisable during such period, may be
exercised, in whole or in part, at or before the end of such period; (iii) that
any share of Restricted Stock that has not become nonforfeitable on or before
the date of such Termination of Employment may become nonforfeitable as if such
Termination of Employment had not occurred after such date for a period
specified by the Committee; or (iv) that if the Grantee dies after such
Termination of Employment and before the expiration of the period specified
under clause (i) or (ii) of this Section 18(c), such Option, Stock Appreciation
Right, or Performance Unit may be exercised by the deceased Grantee's personal
representative or by the person to whom the Option, Stock Appreciation Right, or
Performance Unit is transferred by will or the applicable laws of descent and
distribution within the specified period after the Grantee's Termination of
Employment, or, if later, within 180 days after the Grantee's death; provided
that if such rights are granted, the Committee may thereafter take actions to
limit such rights but only if such limitation is consented to by the Grantee.
(d) Maximum Extension. Notwithstanding the foregoing, no Award shall be
exercisable beyond the maximum term permitted under the original Award Agreement
unless the Committee explicitly extends such original term, in which case such
term shall not be extended beyond the maximum term permitted by the Plan.
19. SUBSTITUTED AWARDS. If the Committee cancels any Award (granted under
this Plan, the Prior Plans, or any plan of any entity acquired by the Company or
any of its Subsidiaries), and a new Award is substituted therefor, then the
Committee may, in its discretion, determine the terms and conditions of such new
Award and may, in its discretion, provide that the grant date of the canceled
Award shall be the date used to determine the earliest date or dates for
exercising the new substituted Award so that the Grantee may exercise the
substituted Award at the same time as if the Grantee had held the substituted
Award since the grant date of the canceled Award; provided that no award shall
be canceled without the consent of the Grantee if the terms and conditions of
the new Award to be substituted are not at least as favorable as the terms and
conditions of the award to be canceled; and further provided that no Section 16
Person may exercise a substituted Stock Appreciation Right or a substituted
Option identified with a Stock Appreciation Right within six months after the
grant date (calculated without reference to this Section 19) of such substituted
Stock Appreciation Right or Option, unless the Company shall have received an
opinion of counsel for the Company or "no action" letter from the staff of the
SEC to the effect that such limitation is not necessary in order to avoid
liability under Section 16(b) of the Exchange Act.
20. SECURITIES LAW MATTERS.
(a) Legend and Investment Representation. If the Committee deems necessary
to comply with the Securities Act of 1933, or any rules, regulations or other
requirements of the SEC or any stock exchange or automated quotation system, the
Committee may require a written investment intent representation by the Grantee
and may require that a restrictive legend be affixed to certificates for shares
of Stock, or that the Stock be subject to such stock transfer orders and other
restrictions as the Committee may deem necessary or advisable.
(b) Postponement by Committee. If based upon the opinion of counsel for the
Company, the Committee determines that the exercise or nonforfeitability of, or
delivery of benefits pursuant to, any Award would violate any applicable
provision of (i) federal or state securities law or (ii) the listing
requirements of any national securities exchange or the requirements of any
automated quotation system on which are listed or quoted any of the Company's
equity securities, then the Committee may postpone any such exercise,
nonforfeitability or delivery, as the case may be, but the Company shall use
reasonable and good faith efforts to cause such exercise, nonforfeitability or
delivery to comply with all such provisions at the earliest practicable date.
The Committee's authority under this Section 20(b) shall expire on the date of
the first Change in Control to which Section 13 applies.
(c) No Obligation to Register or List. The Company shall be under no
obligation to register the Stock with the SEC or to effect compliance with the
registration, qualification or listing requirements of any state securities
laws, stock exchange or automated quotation system, and the Company shall have
no liability for any inability or failure to do so.
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<PAGE> 15
(d) Waiver of Section 16 Restrictions. The Committee may waive compliance
with any provision of this Plan which is expressly applicable only to Section 16
Persons if the Committee determines that such compliance is not necessary to
avoid a violation of Section 16(b) of the Exchange Act.
21. FUNDING. Benefits payable under the Plan to any person shall be paid
directly by the Company. The Company shall not be required to fund, or otherwise
segregate assets to be used for payment of, benefits under the Plan.
22. NO EMPLOYMENT RIGHTS. Neither the establishment of the Plan, nor the
granting of any Award shall be construed to (i) give any Grantee the right to
remain employed by the Company or any of its Subsidiaries or to any benefits not
specifically provided by the Plan, or (ii) in any manner modify the right of the
Company or any of its Subsidiaries to modify, amend, or terminate any of its
employee benefit plans.
23. RIGHTS AS A STOCKHOLDER. A Grantee shall not, by reason of any Award
(other than Restricted Stock) have any right as a stockholder of the Company
with respect to the shares of Stock which may be deliverable upon exercise or
payment of such Award until such shares have been delivered to such Grantee.
Shares of Restricted Stock held by a Grantee or held in escrow by the Company or
by an agent of the Company shall confer on the Grantee all rights of a
stockholder of the Company, except as otherwise provided in the Plan. The
Committee, in its discretion, at the time of grant of Restricted Stock, may
permit or require the payment of cash dividends thereon to be deferred and, if
the Committee so determines, reinvested in additional Restricted Stock to the
extent shares are available under Section 3, or otherwise reinvested. Stock
dividends and deferred cash dividends issued with respect to Restricted Stock
shall be treated as additional shares of Restricted Stock that are subject to
the same restrictions and other terms as apply to the shares with respect to
which such dividends are issued. The Committee may, in its discretion, provide
for crediting to and payment of interest on deferred cash dividends.
24. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a Grantee's
Stock, the Committee may require the Grantee to deposit all certificates
representing such Stock, together with stock powers or other instruments of
transfer approved by the Committee, appropriately endorsed in blank, with the
Company or an agent designated by the Company to hold in escrow until such
restrictions have lapsed or terminated, and the Committee may cause a legend or
legends referencing such restrictions to be placed on the certificates. Any
Grantee who is permitted to execute a promissory note as partial or full
consideration for the purchase of Stock under the Plan shall be required to
pledge and deposit with the Company all or part of the Stock so purchased as
collateral to secure the payment of the Grantee's obligation to the Company
under the promissory note; provided, however, that the Committee may require or
accept other or additional forms of collateral to secure the payment of such
obligation and, in any event, the Company shall have full recourse against the
Grantee under the promissory note notwithstanding any pledge of the Grantee's
Stock or other collateral. In connection with any pledge of the Stock, the
Grantee shall be required to execute and deliver a written pledge agreement in
such form as the Committee shall from time to time approve. The Stock purchased
with the promissory note may be released from the pledge on a pro rata basis as
the promissory note is paid.
25. NATURE OF PAYMENTS. Any and all grants, payments of cash, or deliveries
of shares of Stock hereunder shall constitute special incentive payments to the
Grantee and shall not be taken into account in computing the amount of salary or
compensation of the Grantee for the purposes of determining any pension,
retirement, death or other benefits under (i) any pension, retirement,
profit-sharing, bonus, life insurance or other employee benefit plan of the
Company or any of its Subsidiaries, or (ii) any agreement between the Company or
any Subsidiary, on the one hand, and the Grantee, on the other hand, except as
such plan or agreement shall otherwise expressly provide.
26. NON-UNIFORM DETERMINATIONS. The Committee's determinations under the
Plan need not be uniform and may be made by the Committee selectively among
persons who receive, or are eligible to receive, Awards (whether or not such
persons are similarly situated). Without limiting the generality of the
foregoing, the Committee shall be entitled, among other things, to make
non-uniform and selective determinations and to enter into non-uniform and
selective Award Agreements as to (i) the identity of the Grantees, (ii) the
terms and provisions of Awards, and (iii) the treatment, under Section 18, of
Terminations of Employment. Notwithstanding the foregoing, the Committee's
interpretation of Plan provisions shall be uniform as to similarly situated
Grantees.
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<PAGE> 16
27. ADJUSTMENTS. The Committee shall make equitable adjustment of: (i) the
aggregate numbers of shares of Stock, shares of Restricted Stock and Stock
Appreciation Rights, available under Sections 3(a) and 3(b), (ii) the number of
shares of Stock or shares of Restricted Stock covered by an Award, (iii) the
Option Price, and (iv) the Fair Market Value of Stock to be used to determine
the amount of the benefit payable upon exercise of Stock Appreciation Rights or
Performance Units, to reflect a stock dividend, stock split, reverse stock
split, share combination, recapitalization, merger, consolidation, asset
spin-off, reorganization, or similar event of or by the Company.
28. ADOPTION AND SHAREHOLDER APPROVAL. The Plan shall be approved by the
shareholders of the Company (excluding holders of Stock issued pursuant to this
Plan), consistent with applicable laws, including but not limited to Section
162(m)(4)(C) (ii) of the Code, within 12 months before or after the Effective
Date. Upon the Effective Date, Awards may be granted pursuant to the Plan;
provided, however, that: (i) no Option may be exercised prior to initial
shareholder approval of the Plan; (ii) no Option granted pursuant to an increase
in the number of shares of Stock approved by the Board shall be exercised prior
to the time such increase has been approved by the shareholders of the Company;
and (iii) in the event that shareholder approval is not obtained within the time
period provided herein, all Awards granted hereunder shall be canceled, any
Stock issued pursuant to any Award shall be canceled and any purchase of Stock
hereunder shall be rescinded.
29. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the
Board, the submission of the Plan to the shareholders of the Company for
approval, nor any provision of the Plan shall be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including the granting of stock options
and bonuses otherwise than under the Plan, and such arrangements may be either
generally applicable or applicable only in specific cases.
30. AMENDMENT AND TERMINATION OF THE PLAN. Subject to any applicable
shareholder approval requirements of applicable law or the rules of any national
securities exchange or automated quotation service on which the Stock is listed
or quoted, the Plan may be amended by the Board at any time and in any respect,
including without limitation to qualify Awards hereunder as performance-based
compensation under Code Section 162(m)(4)(C) and to permit or facilitate
qualification of Options therefore or thereafter granted as Incentive Stock
Options under the Code; provided that, without shareholder approval, no
amendment shall (a) increase the aggregate number of shares which may be issued
as Incentive Stock Options under the Plan within the meaning of Proposed
Treasury Regulation Section 1.422A- 2(b)(3)(iv) or its successor, or (b) change
the material terms of a Performance Goal that were previously approved by
shareholders within the meaning of Treasury Regulation Section
1.162-27(e)(4)(vi) or a successor provision, unless the Board shall determine
that such approval is not necessary to avoid loss of a deduction under Section
162(m) of the Code, will not avoid such a loss of deduction or is not advisable.
The Plan may also be terminated at any time by the Board and shall terminate
automatically on the tenth anniversary of the Effective Date unless earlier
terminated by the Board. No amendment or termination of this Plan shall
adversely affect any Award granted prior to the date of such amendment or
termination without the written consent of the Grantee.
31. WEEKENDS AND HOLIDAYS. Unless this Section 31 prevents an Option from
qualifying as an Incentive Stock Option under Section 422 of the Code or
prevents an Award from qualifying as performance-based compensation under
Section 162(m) of the Code, if any day on which action under the Plan must be
taken falls on a Saturday, Sunday or legal holiday, such action may be taken on
the next succeeding day not a Saturday, Sunday or legal holiday.
32. FOREIGN GRANTEES. Without amending the Plan, Awards may be granted to
Grantees who are foreign nationals or employed outside the United States or
both, on such terms and conditions different from those specified in the Plan as
may, in the judgment of the Committee, be necessary or desirable to further the
purposes of the Plan.
33. INTERPRETATION UNDER SECTION 162(M). Any provision of the Plan to the
contrary notwithstanding, and except to the extent that the Committee determines
otherwise: (i) transactions with respect to persons whose remuneration is
subject to the provisions of Section 162(m) of the Code shall conform to the
requirements of Section 162(m)(4)(C) of the Code, and (ii) every position of the
Plan shall be administered, interpreted and construed to carry out (i) hereof.
Notwithstanding any provision of the Plan to the contrary, the Plan is intended
to give the Committee the authority to
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<PAGE> 17
grant Awards hereunder that qualify as performance-based compensation under Code
Section 162(m)(4)(C) and that do not so qualify. Every provision of the Plan
shall be administered, interpreted and construed to carry out such intention and
any provision that cannot be so administered, interpreted and construed shall to
that extent be disregarded; and any provision of the Plan that would prevent an
Award that the Committee intends to qualify as performance-based pay under Code
Section 162(m)(4)(C) from so qualifying shall be administered, interpreted and
construed to carry out such intent and any provision that cannot be so
administered, interpreted and construed shall to that extent be disregarded.
34. APPLICABLE LAW. The validity, construction, interpretation and
administration of the Plan and of any determinations or decisions made
thereunder, and the rights of all persons having or claiming to have any
interest therein or thereunder, shall be governed by, and determined exclusively
in accordance with, the laws of the State of Indiana, but without giving effect
to the principles of conflicts of laws thereof. Without limiting the generality
of the foregoing, the period within which any action arising under or in
connection with the Plan must be commenced shall be governed by the laws of the
State of Indiana, without giving effect to the principles of conflicts of laws
thereof, irrespective of the place where the act or omission complained of took
place and of the residence of any party to such action and irrespective of the
place where the action may be brought.
35. CONSTRUCTION. The use of the masculine gender shall also include within
its meaning the feminine. The use of the singular shall include within its
meaning the plural and vice versa.
A-17
<PAGE> 1
EXHIBIT 10.7
FIRST AMENDMENT TO
AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This FIRST AMENDMENT, dated as of February 6, 1998 (this "Amendment"), by
and among (a) Emmis Broadcasting Corporation, an Indiana corporation (the
"Borrower"), (b) BankBoston, N.A., Toronto Dominion (Texas), Inc., First Union
National Bank, Fleet Bank, N.A., Union Bank of California, N.A., The Bank of
New York, Mellon Bank, Barclays Bank PLC, Bank of America, Bank One, Indiana,
N.A., Bank of Montreal, Compagnie Financiere de CIC et de l'Union Europeenne,
Lehman Commercial Paper Inc., Cooperatieve Centrale Raiffeisen-Boerenleenbank
B.A., "Rabobank Nederland", New York Branch, SunTrust Bank, Central Florida,
N.A., Banque Nationale de Paris, Banque Paribas, Mercantile Bank National
Association, National City Bank of Indiana, Societe Generale, Toronto Dominion
(Texas), Inc., and Key Corporate Capital Inc. (collectively, the "Banks"), (c)
BankBoston, N.A., as managing agent for each of the Banks (in such capacity,
the "Managing Agent"), and (d) The Toronto-Dominion Bank and First Union
National Bank as documentation agents, and Fleet Bank, N.A., Union Bank of
California, N.A., Key Corporate Capital Inc., The Bank of New York, Mellon Bank
and Barclays Bank PLC as co-agents (collectively, together with the Managing
Agent, the "Agents").
WHEREAS, the Borrower, the Banks and the Agents are parties to that
certain Amended and Restated Revolving Credit and Term Loan Agreement, dated as
of July 1, 1997, as amended (as amended and in effect, the "Credit Agreement");
and
WHEREAS, the Borrower has requested and the Banks have agreed, subject to
the terms and conditions set forth herein, to modify certain provisions of the
Credit Agreement in connection with (i) the acquisition (the "TMI Acquisition")
by the Borrower of the capital stock of Mediatex Communications Corporation
("MCC"), which owns all of the capital stock of Texas Monthly, Inc. ("TMI") and
Mediatex Development Corporation, ("MDC"), (ii) the WTLC Acquisition and (iii)
the Corporate Restructure;
NOW, THEREFORE, the Borrower, the Banks and the Agents hereby covenant and
agree as follows:
Section 1. DEFINED TERMS. Capitalized terms which are used herein without
definition and which are defined in the Credit Agreement shall have the same
meanings herein as in the Credit Agreement.
Section 2. AMENDMENTS TO THE CREDIT AGREEMENT.
(a) The following definitions in Section 1.1 of the Credit Agreement are
hereby amended and restated in their entirety to read as follows:
"Adjusted Total Funded Debt. At any time of determination, the sum
of (a) Total Funded Debt, plus (b) (i) prior to the WQCD Closing Date, the
Net WQCD Acquisition Amount and (ii) after the WQCD Closing Date, $0."
<PAGE> 2
-2-
"Copyright Notice. Collectively, (i) the Amended and Restated
Memorandum of Grant of Security Interest in Copyrights dated as of July 1,
1997, as the same may be amended from time to time hereafter, made by the
Borrower in favor of the Managing Agent and (ii) the Memorandum of Grant
of Security Interest in Copyrights dated as of March 1, 1998, as the same
may be amended from time to time hereafter, made by Texas Monthly, Inc. in
favor of the Managing Agent, each in form and substance satisfactory to
the Banks and the Managing Agent."
"Guaranty. Collectively, (i) the Amended and Restated Guaranty,
dated as of July 1, 1997, as the same may be amended from time to time
hereafter, made by each of the Subsidiaries of the Borrower named therein
in favor of the Banks and the Managing Agent, (ii) the Subsidiary
Guaranty, dated as of March 1, 1998, made by each of the New WTLC
Subsidiaries, the New TMI Subsidiaries, the License Subsidiaries, and the
Partnership Subsidiaries in favor of the Banks and the Managing Agent,
pursuant to which each Subsidiary guaranties to the Banks and the Managing
Agent the irrevocable payment and performance in full of the Obligations,
in form and substance satisfactory to the Banks and the Managing Agent."
"License Subsidiaries. Collectively, Emmis License Corporation,
Emmis License Corporation of New York, Emmis FM License Corporation of St.
Louis, Emmis FM License Corporation of Chicago, KPWR License, Inc., Emmis
FM License Corporation of Indianapolis, Emmis FM Radio License Corporation
of Indianapolis, Emmis AM Radio License Corporation of Indianapolis, Emmis
Radio License Corporation of New York, Emmis 104.1 Radio License
Corporation of St. Louis, Emmis 106.5 FM License Corporation of St. Louis,
Emmis 105.7 FM Radio License Corporation of Indianapolis and Emmis 1310 AM
Radio License Corporation of Indianapolis, each an Indiana corporation and
after giving effect to the Corporate Restructure, each will become a
California corporation."
"Net WQCD Acquisition Amount. (a) (i) $141,000,000 at any time while
either (x) the Supplemental Agreement dated December 2, 1997 between
Tribune and the Borrower is in effect and Tribune's election thereunder is
not the subject of a revocation under Section 4 thereof and any condition
to the closing contemplated thereby which is not satisfied does not remain
unwaived by the parties thereto for more than 30 days or (y) Tribune has
exercised the option under the Option Agreement to require the Borrower to
complete the WQCD Acquisition pursuant to another tax-deferred like-kind
exchange and for so long as the Borrower and Tribune are actively pursuing
in good faith the exchange transaction contemplated by such exercise or
(ii) in any other case, $160,000,000, less (b) the sum of the Maximum
Drawing Amount under, and all Unpaid Reimbursement Obligations relating
to, all Letters of Credit issued for the benefit of Tribune to support the
Borrower's obligations under the WQCD Acquisition Documents."
"Operating Subsidiaries. Collectively, Emmis FM Broadcasting
Corporation of Indianapolis, Emmis FM Broadcasting Corporation of Chicago,
Emmis FM Broadcasting Corporation of St. Louis, Emmis Broadcasting
Corporation of New York, KPWR, Inc., Emmis FM Radio Corporation of
Indianapolis, Emmis AM Radio Corporation of Indianapolis, Emmis Holding
Corporation of New York, Emmis Radio Corporation of New York, Emmis 104.1
FM Radio Corporation of St. Louis, Emmis 106.5 FM Broadcasting Corporation
of St. Louis, Emmis International Corporation, Emmis 105.7 FM Radio
Corporation of Indianapolis, Emmis 1310 AM Radio Corporation of
Indianapolis and the New TMI Subsidiaries."
<PAGE> 3
-3-
"Pledge Agreements. Collectively, the Borrower Stock Pledge
Agreement, the Subsidiary Pledge Agreements and the Partnership Pledge
Agreements."
"Subsidiary Pledge Agreements. Collectively, (i) the Amended and
Restated Pledge Agreement, dated as of July 1, 1997, as the same may be
amended from time to time hereafter, among certain of the Subsidiaries of
the Borrower, on the one hand, and the Managing Agent, on the other hand,
(ii) the Subsidiary Pledge Agreement, dated as of March 1, 1998, among
Mediatex Communications Corporation, on the one hand, and the Managing
Agent, on the other hand, and (iii) the Subsidiary Pledge Agreement, dated
as of March 1, 1998, among Emmis License Corporation, on the one hand, and
the Managing Agent, on the other hand, each in form and substance
satisfactory to the Banks and the Managing Agent."
"Subsidiary Security Agreement. Collectively, (i) the Amended and
Restated Security Agreement dated as of July 1, 1997, as the same may be
amended from time to time hereafter, among the Subsidiaries of the
Borrower named therein, on the one hand, and the Managing Agent, on the
other hand, and (ii) the Subsidiary Security Agreement dated as of March
1, 1998 among the New WTLC Subsidiaries, the New TMI Subsidiaries, the
License Subsidiaries and the Partnership Subsidiaries on the one hand, and
the Managing Agent, on the other hand, each in form and substance
satisfactory to the Banks and the Managing Agent."
"Trademark Assignments. Collectively, (i) the Amended and Restated
Trademark Collateral Security and Pledge Agreement dated as of July 1,
1997, as the same may be amended from time to time hereafter, among the
Borrower and the Managing Agent, (ii) the Amended and Restated Trademark
Collateral Security and Pledge Agreement dated as of July 1, 1997, as the
same may be amended from time to time hereafter, among certain
Subsidiaries of the Borrower and the Managing Agent and (iii) the
Subsidiary Trademark Collateral Security and Pledge Agreement dated as of
March 1, 1998, as the same may be amended from time to time hereafter,
among Texas Monthly, Inc., Mediatex Communications Corporation and the
Managing Agent, each in form and substance satisfactory to the Banks and
the Managing Agent."
(b) Section 1.1 of the Credit Agreement is hereby amended by adding the
following new definitions in the proper alphabetical sequence thereof:
"New TMI Subsidiaries. Mediatex Communications Corporation, Texas
Monthly, Inc. and Mediatex Development Corporation."
"New WTLC Subsidiaries. Emmis 105.7 FM Radio Corporation of
Indianapolis, Emmis 105.7 FM Radio License Corporation of Indianapolis,
Emmis 1310 AM Radio Corporation of Indianapolis, and Emmis 1310 AM Radio
License Corporation of Indianapolis."
"Partnership Pledge Agreements. Collectively, (i) the Collateral
Assignment of Partnership Interests, dated as of March 1, 1998, as the
same may be amended from time to time hereafter, among the partners of the
Partnership Subsidiaries, on the one hand, and the Managing Agent, on the
other hand, and (ii) the Collateral Assignment of Partnership Interests,
dated as of March 1, 1998, as the same may be amended from time to time
hereafter, among Mediatex Development Corporation, on the one hand, and
the Managing Agent, on the other hand, each in form and substance
satisfactory to the Banks and the Managing Agent."
<PAGE> 4
-4-
"Partnership Subsidiaries. Collectively, Emmis Indiana Radio, L.P.
and Emmis Publishing, L.P."
(c) The Credit Agreement is hereby amended by replacing Schedules 1.1(b),
8.3(b), 8.3(c), 8.7, 8.19, 8.20, 8.21 and 8.22 thereto with Schedules 1.1(b),
8.3(b), 8.3(c), 8.7, 8.19, 8.20, 8.21 and 8.22 hereto.
Section 3. CONSENT. The Banks and the Managing Agent hereby consent to
the consummation by the Borrower of the Acquisition contemplated by the Stock
Purchase Agreement (the "Purchase Agreement"), among the Borrower, Michael R.
Levy, Dow Jones & Company, Inc., and Gregory Curtis, substantially in the form
of Exhibit A hereto with such changes thereto as are approved by the Managing
Agent (other than changes to the amount of the Purchase Price as defined
therein), provided, that, each of the conditions specified in Section 4 of this
Amendment shall have been satisfied with respect to such Acquisition.
Section 4. CONDITIONS TO EFFECTIVENESS. This Amendment shall become
effective upon the satisfaction of the following conditions precedent:
(a) the execution and delivery by the Borrower, the Managing Agent and the
Banks of this Amendment;
(b) receipt by the Managing Agent of a duly executed Subsidiary Guaranty,
Subsidiary Security Agreement (referenced in clause (ii) of such definition),
Subsidiary Pledge Agreement (referenced in clause (ii) of such definition),
Trademark Assignment (referenced in clause (iii) of such definition) and
Copyright Notice (referenced in clause (ii) of such definition) and a duly
executed amendment to the Borrower Stock Pledge Agreement, each in form and
substance satisfactory to the Managing Agent, as necessary to insure that the
Managing Agent has a pledge of 100% of the issued and outstanding stock of the
New TMI Subsidiaries, a first priority perfected security interest in all of
the assets of the New TMI Subsidiaries and that the New TMI Subsidiaries are
Guarantors under the Guaranty;
(c) receipt by the Managing Agent from each of the New TMI Subsidiaries of
a completed and fully executed Perfection Certificate;
(d) receipt by the Managing Agent of the results of UCC searches with
respect to the Collateral of each New TMI Subsidiary, indicating no liens other
than Permitted Liens;
(e) receipt by the Managing Agent of such UCC financing statements as
necessary to perfect the Managing Agent's security interest in the assets of
the New TMI Subsidiaries;
(f) each owner of equity interests in the New TMI Subsidiaries shall have
delivered to the Managing Agent the certificated securities to be pledged
pursuant to the applicable Pledge Agreement, together with stock powers
therefor duly executed in blank;
(g) all filings, recordings, deliveries of instruments and other actions
necessary or desirable in the opinion of the Managing Agent to perfect the
Managing Agent's security interest in the Collateral of the New TMI
Subsidiaries and the stock of the New TMI Subsidiaries shall have been duly
effected
<PAGE> 5
-5-
and the Managing Agent shall have received evidence thereof in form and
substance satisfactory to the Managing Agent;
(h) the Managing Agent shall have received such duly executed Mortgages
with respect to any Real Estate owned or leased by any of the New TMI
Subsidiaries as the Managing Agent may request, together with related title
insurance policies, collateral assignments in the form of the Collateral
Assignment of Leases and all necessary consents from each applicable landlord,
each in form and substance satisfactory to the Managing Agent;
(i) the Managing Agent shall have received copies of environmental reports
with respect to the Real Estate of the New TMI Subsidiaries;
(j) the Borrower shall have furnished to the Managing Agent a duly
executed certificate substantially in the form of Exhibit B hereto;
(k) the Managing Agent shall have received from each New TMI Subsidiary
(i) a certificate of the Secretary of State of each jurisdiction in which such
Subsidiary is incorporated or qualified to do business as to the legal
existence and good standing of such New TMI Subsidiary, (ii) its charter,
certified as of a recent date by the Secretary of State of its jurisdiction of
incorporation, (iii) its by-laws, certified by a duly authorized officer of
such New TMI Subsidiary as of the date hereof, (iv) the resolutions of the
Board of Directors of such New TMI Subsidiary authorizing the execution,
delivery and performance of the Security Documents to which it is to become a
party as required hereby, certified by a duly authorized officer of such New
TMI Subsidiary and (v) a certificate of an officer of such New TMI Subsidiary
as to the incumbency and signature of officers authorized to execute and
deliver the documents contemplated hereby;
(l) the Banks and the Managing Agent shall have received opinions from
counsel to the Borrower and its Subsidiaries and counsel to the Sellers under
the Purchase Agreement, each in form and substance satisfactory to the Banks
and the Managing Agent;
(m) the Managing Agent shall have received evidence satisfactory to it
that (i) all liens and encumbrances with respect to the properties and assets
of the New TMI Subsidiaries, other than Permitted Liens, have been discharged
in full and (ii) all outstanding Indebtedness of the New TMI Subsidiaries,
other than Indebtedness permitted by the Credit Agreement, has been paid in
full;
(n) the Managing Agent shall have received (i) evidence that the Borrower
has completed the TMI Acquisition in accordance with the terms of the Purchase
Agreement and (ii) certified copies of the Purchase Agreement and the other
acquisition documents executed in connection therewith; and
(o) the Managing Agent shall have received evidence that all conditions
precedent to the Corporate Restructure Closing Date have been satisfied and
performed in full as set forth in Section 15 of the Credit Agreement.
Section 5. AFFIRMATION OF THE BORROWER. The Borrower hereby affirms all
of its Obligations under the Credit Agreement and under each of the other Loan
Documents to which it is a party and hereby affirms its absolute and
unconditional promise to pay to the Banks the Loans and all other amounts due
under the Credit Agreement and the other Loan Documents. The Borrower hereby
represents, warrants and confirms that the Obligations are and remain secured
pursuant to the Security Documents.
<PAGE> 6
-6-
Section 6. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants to the Banks and the Managing Agent as follows:
(a) Representations and Warranties. Each of the representations and
warranties contained in Section 8 of the Credit Agreement were true and correct
in all material respects when made, and, after giving effect to this Amendment,
are true and correct on and as of the date hereof, except to the extent that
such representations and warranties relate specifically to a prior date.
(b) Enforceability. The execution and delivery by the Borrower of this
Amendment, and the performance by the Borrower of this Amendment and the Credit
Agreement, as amended hereby, are within the corporate authority of the
Borrower and have been duly authorized by all necessary corporate proceedings.
This Amendment and the Credit Agreement, as amended hereby, constitute valid
and legally binding obligations of the Borrower, enforceable against it in
accordance with their terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the
enforcement of creditors' rights in general.
(c) No Default. No Default or Event of Default has occurred and is
continuing, and no Default or Event of Default will result from the execution,
delivery and performance by the Borrower of this Amendment.
Section 7. NO OTHER AMENDMENTS, ETC. Except as expressly provided in this
Amendment, (a) all of the terms and conditions of the Credit Agreement and the
other Loan Documents remain unchanged, and (b) all of the terms and conditions
of the Credit Agreement, as amended hereby, and of the other Loan Documents are
hereby ratified and confirmed and remain in full force and effect. Nothing
herein shall be construed to be an amendment or a waiver of any requirements of
the Borrower or of any other Person under the Credit Agreement or any of the
other Loan Documents except as expressly set forth herein.
Section 8. EXECUTION IN COUNTERPARTS. This Amendment may be executed in
any number of counterparts and by each party on a separate counterpart, each of
which when so executed and delivered shall be an original, but all of which
together shall constitute one instrument. In proving this Amendment, it shall
not be necessary to produce or account for more than one such counterpart
signed by the party against whom enforcement is sought.
Section 9. MISCELLANEOUS. This Amendment shall be deemed to be a contract
under seal under the laws of The Commonwealth of Massachusetts and shall for
all purposes be construed in accordance with and governed by the laws of The
Commonwealth of Massachusetts. The captions in this Amendment are for
convenience of reference only and shall not define or limit the provisions
hereof. The Borrower agrees to pay to the Managing Agent, on demand by the
Managing Agent, all reasonable out-of-pocket costs and expenses incurred or
sustained by the Managing Agent in connection with the preparation of this
Amendment, including reasonable legal fees.
<PAGE> 7
-7-
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
BANKBOSTON, N.A.,
INDIVIDUALLY AND AS MANAGING AGENT
By:__________________________________
Title:
FIRST UNION NATIONAL BANK,
INDIVIDUALLY AND AS DOCUMENTATION AGENT
By:__________________________________
Title:
TORONTO DOMINION (TEXAS), INC.,
INDIVIDUALLY
By:__________________________________
Title:
THE TORONTO-DOMINION BANK,
AS DOCUMENTATION AGENT
By:__________________________________
Title:
FLEET BANK, N.A.,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
<PAGE> 8
-8-
UNION BANK OF CALIFORNIA, N.A.,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
KEY CORPORATE CAPITAL INC.,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
THE BANK OF NEW YORK,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
MELLON BANK,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
BARCLAYS BANK PLC,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
BANK OF AMERICA,
INDIVIDUALLY
By:__________________________________
Title:
<PAGE> 9
-9-
BANK ONE, INDIANA, N.A.,
INDIVIDUALLY
By:__________________________________
Title:
BANK OF MONTREAL,
INDIVIDUALLY
By:__________________________________
Title:
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE,
INDIVIDUALLY
By:__________________________________
Title:
By:__________________________________
Title:
LEHMAN COMMERCIAL PAPER INC.,
INDIVIDUALLY
By:__________________________________
Title:
SOCIETE GENERALE,
INDIVIDUALLY
By:__________________________________
Title:
<PAGE> 10
-10-
SUNTRUST BANK, CENTRAL
FLORIDA, N.A.,
INDIVIDUALLY
By:__________________________________
Title:
BANQUE NATIONALE DE PARIS,
INDIVIDUALLY
By:__________________________________
Title:
By:__________________________________
Title:
BANQUE PARIBAS,
INDIVIDUALLY
By:__________________________________
Title:
By:__________________________________
Title:
MERCANTILE BANK NATIONAL ASSOCIATION,
INDIVIDUALLY
By:__________________________________
Title:
NATIONAL CITY BANK OF INDIANA,
INDIVIDUALLY
By:__________________________________
Title:
<PAGE> 11
-11-
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND", NEW
YORK BRANCH,
INDIVIDUALLY
By:__________________________________
Title:
By:__________________________________
Title:
ACCEPTED
EMMIS BROADCASTING CORPORATION
By:
Title:
<PAGE> 12
-12-
Each of the undersigned Subsidiaries of the Borrower hereby (a) acknowledges
the foregoing Amendment and (b) ratifies and confirms all of its obligations
under the Guaranty and under each of the other Loan Documents to which it is a
party.
EMMIS FM BROADCASTING CORPORATION OF
INDIANAPOLIS
EMMIS FM BROADCASTING CORPORATION OF
CHICAGO
EMMIS FM BROADCASTING CORPORATION OF
ST. LOUIS
KPWR, INC.
EMMIS PUBLISHING CORPORATION
EMMIS BROADCASTING CORPORATION OF NEW
YORK
EMMIS MEADOWLANDS CORPORATION
EMMIS FM RADIO CORPORATION OF
INDIANAPOLIS
EMMIS AM RADIO CORPORATION OF
INDIANAPOLIS
EMMIS HOLDING CORPORATION OF NEW YORK
EMMIS RADIO CORPORATION OF NEW YORK
EMMIS 104.1 FM RADIO CORPORATION OF ST.
LOUIS
EMMIS 106.5 FM BROADCASTING CORPORATION
OF ST. LOUIS
EMMIS INTERNATIONAL BROADCASTING
CORPORATION
EMMIS DAR, INC.
EMMIS INTERNATIONAL CORPORATION
EMMIS 105.7 FM RADIO CORPORATION
OF INDIANAPOLIS
EMMIS 1310 AM RADIO CORPORATION
OF INDIANAPOLIS
MEDIATEX COMMUNICATIONS CORPORATION
TEXAS MONTHLY, INC.
MEDIATEX DEVELOPMENT CORPORATION
EMMIS INDIANA RADIO, L.P.
EMMIS PUBLISHING, L.P.
By:
Title: Executive Vice President
<PAGE> 13
-13-
EMMIS FM LICENSE CORPORATION OF
INDIANAPOLIS
EMMIS FM LICENSE CORPORATION OF CHICAGO
EMMIS LICENSE CORPORATION OF NEW YORK
EMMIS FM LICENSE CORPORATION OF ST. LOUIS
KPWR LICENSE, INC.
EMMIS FM RADIO LICENSE CORPORATION OF
INDIANAPOLIS
EMMIS AM RADIO LICENSE CORPORATION OF
INDIANAPOLIS
EMMIS RADIO LICENSE CORPORATION OF NEW
YORK
EMMIS 104.1 FM RADIO LICENSE CORPORATION
OF ST. LOUIS
EMMIS 106.5 FM LICENSE CORPORATION OF
ST. LOUIS
EMMIS 105.7 FM RADIO LICENSE CORPORATION
OF INDIANAPOLIS
EMMIS 1310 AM RADIO LICENSE CORPORATION
OF INDIANAPOLIS
EMMIS LICENSE CORPORATION
By:
Title: President
<PAGE> 14
SECOND AMENDMENT TO
AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This SECOND AMENDMENT, dated as of March 20, 1998 (this "Amendment"), by
and among (a) Emmis Broadcasting Corporation, an Indiana corporation (the
"Borrower"), (b) BankBoston, N.A., Toronto Dominion (Texas), Inc., First Union
National Bank, Fleet Bank, N.A., Union Bank of California, N.A., The Bank of
New York, Mellon Bank, Barclays Bank PLC, Bank of America, Bank One, Indiana,
N.A., Bank of Montreal, Compagnie Financiere de CIC et de l'Union Europeenne,
Lehman Commercial Paper Inc., Cooperatieve Centrale Raiffeisen-Boerenleenbank
B.A., "Rabobank Nederland", New York Branch, SunTrust Bank, Central Florida,
N.A., Banque Nationale de Paris, Banque Paribas, Mercantile Bank National
Association, National City Bank of Indiana, Societe Generale, Toronto Dominion
(Texas), Inc., and Key Corporate Capital Inc. (collectively, the "Banks"), (c)
BankBoston, N.A., as managing agent for each of the Banks (in such capacity,
the "Managing Agent"), and (d) The Toronto-Dominion Bank and First Union
National Bank as documentation agents, and Fleet Bank, N.A., Union Bank of
California, N.A., Key Corporate Capital Inc., The Bank of New York, Mellon Bank
and Barclays Bank PLC as co-agents (collectively, together with the Managing
Agent, the "Agents").
WHEREAS, the Borrower, the Banks and the Agents are parties to that
certain Amended and Restated Revolving Credit and Term Loan Agreement, dated as
of July 1, 1997, (as amended by that First Amendment dated as of February 6,
1998, the "Credit Agreement"); and
WHEREAS, the Borrower has requested and the Banks have agreed, subject to
the terms and conditions set forth herein, to modify certain provisions of the
Credit Agreement;
NOW, THEREFORE, the Borrower, the Banks and the Agents hereby covenant and
agree as follows:
Section 1. DEFINED TERMS. Capitalized terms which are used herein without
definition and which are defined in the Credit Agreement shall have the same
meanings herein as in the Credit Agreement.
Section 2. AMENDMENT TO THE CREDIT AGREEMENT. Section 8.17 of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:
"8.17 Use of Proceeds; Regulations U and X. The proceeds of the
Tranche A Loans shall be used for the purpose of (a) working capital and
general corporate purposes and (b) funding Permitted Acquisitions
including, without limitation, the WQCD Acquisition and the WTLC
Acquisition. The proceeds of the Tranche B Term
<PAGE> 15
-2-
Loan shall be used to fund the Refinancing Obligations and the transaction
costs incurred in connection therewith. The proceeds of the Tranche C
Loans and the Tranche C Term Loan shall be used for the purpose of (a)
funding or refinancing the purchase price paid for the acquisition of the
New TMI Subsidiaries pursuant to that certain Stock Purchase Agreement
among the Borrower, Michael R. Levy, Dow Jones & Company, Inc. and Gregory
Curtis, a copy of which is attached as Exhibit A to the First Amendment to
the Credit Agreement, (b) funding Permitted Acquisitions and (c) funding
up to $25,000,000 in the aggregate for deposits in connection with bids
made by the Borrower for the acquisition of broadcast properties,
provided, that, (x) to the extent that such amounts are returned to the
Borrower, the Borrower shall repay the outstanding Tranche C Loans in the
amount of such returned deposits and (y) the use of Tranche C Loans for
such purpose shall not be deemed to constitute consent by the Banks and
the Managing Agent to the acquisition for which such deposits will be
used. No portion of any Loan is to be used for the purpose of purchasing
or carrying any "margin security" or "margin stock" as such terms are used
in Regulations U and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R. Parts 221 and 224. No portion of any Loan is to be
used, and no portion of any Letter of Credit is to be obtained, for an
investment in any Subsidiary of the Borrower which is not a party to a
Guaranty."
Section 3. CONSENT. The Banks and the Managing Agent hereby consent to a
waiver of Section 4.7(a) of the Option Agreement to permit the WQCD Acquisition
to close after the grant by the FCC of the renewal of the FCC License for
WQCD-FM but prior to the date on which such grant becomes a Final Action (as
defined in the Option Agreement); provided that no petition or appeal is then
pending before the FCC which objects to such renewal.
Section 4. CONDITIONS TO EFFECTIVENESS. This Amendment shall become
effective upon the execution and delivery by the Borrower, the Managing Agent
and the Majority Banks of this Amendment.
Section 5. AFFIRMATION OF THE BORROWER. The Borrower hereby affirms all
of its Obligations under the Credit Agreement and under each of the other Loan
Documents to which it is a party and hereby affirms its absolute and
unconditional promise to pay to the Banks the Loans and all other amounts due
under the Credit Agreement and the other Loan Documents. The Borrower hereby
represents, warrants and confirms that the Obligations are and remain secured
pursuant to the Security Documents.
Section 6. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants to the Banks and the Managing Agent as follows:
(a) Representations and Warranties. Each of the representations and
warranties contained in Section 8 of the Credit Agreement were true and correct
in all material respects when made, and, after giving effect to this Amendment,
are true and correct on and as of the date hereof, except to the extent that
such representations and warranties relate specifically to a prior date.
<PAGE> 16
-3-
(b) Enforceability. The execution and delivery by the Borrower of this
Amendment, and the performance by the Borrower of this Amendment and the Credit
Agreement, as amended hereby, are within the corporate authority of the
Borrower and have been duly authorized by all necessary corporate proceedings.
This Amendment and the Credit Agreement, as amended hereby, constitute valid
and legally binding obligations of the Borrower, enforceable against it in
accordance with their terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the
enforcement of creditors' rights in general.
(c) No Default. No Default or Event of Default has occurred and is
continuing, and no Default or Event of Default will result from the execution,
delivery and performance by the Borrower of this Amendment.
Section 7. NO OTHER AMENDMENTS, ETC. Except as expressly provided in this
Amendment, (a) all of the terms and conditions of the Credit Agreement and the
other Loan Documents remain unchanged, and (b) all of the terms and conditions
of the Credit Agreement, as amended hereby, and of the other Loan Documents are
hereby ratified and confirmed and remain in full force and effect. Nothing
herein shall be construed to be an amendment or a waiver of any requirements of
the Borrower or of any other Person under the Credit Agreement or any of the
other Loan Documents except as expressly set forth herein.
Section 8. EXECUTION IN COUNTERPARTS. This Amendment may be executed in
any number of counterparts and by each party on a separate counterpart, each of
which when so executed and delivered shall be an original, but all of which
together shall constitute one instrument. In proving this Amendment, it shall
not be necessary to produce or account for more than one such counterpart
signed by the party against whom enforcement is sought.
Section 9. MISCELLANEOUS. This Amendment shall be deemed to be a contract
under seal under the laws of The Commonwealth of Massachusetts and shall for
all purposes be construed in accordance with and governed by the laws of The
Commonwealth of Massachusetts. The captions in this Amendment are for
convenience of reference only and shall not define or limit the provisions
hereof. The Borrower agrees to pay to the Managing Agent, on demand by the
Managing Agent, all reasonable out-of-pocket costs and expenses incurred or
sustained by the Managing Agent in connection with the preparation of this
Amendment, including reasonable legal fees.
<PAGE> 17
-4-
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
BANKBOSTON, N.A.,
INDIVIDUALLY AND AS MANAGING AGENT
By:__________________________________
Title:
FIRST UNION NATIONAL BANK,
INDIVIDUALLY AND AS DOCUMENTATION AGENT
By:__________________________________
Title:
TORONTO DOMINION (TEXAS), INC.,
INDIVIDUALLY
By:__________________________________
Title:
THE TORONTO-DOMINION BANK,
AS DOCUMENTATION AGENT
By:__________________________________
Title:
FLEET BANK, N.A.,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
<PAGE> 18
-5-
UNION BANK OF CALIFORNIA, N.A.,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
KEY CORPORATE CAPITAL INC.,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
THE BANK OF NEW YORK,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
MELLON BANK,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
BARCLAYS BANK PLC,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
BANK OF AMERICA,
INDIVIDUALLY
By:__________________________________
Title:
<PAGE> 19
-6-
BANK ONE, INDIANA, N.A.,
INDIVIDUALLY
By:__________________________________
Title:
BANK OF MONTREAL,
INDIVIDUALLY
By:__________________________________
Title:
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE,
INDIVIDUALLY
By:__________________________________
Title:
By:__________________________________
Title:
LEHMAN COMMERCIAL PAPER INC.,
INDIVIDUALLY
By:__________________________________
Title:
SOCIETE GENERALE,
INDIVIDUALLY
By:__________________________________
Title:
<PAGE> 20
-7-
SUNTRUST BANK, CENTRAL
FLORIDA, N.A.,
INDIVIDUALLY
By:__________________________________
Title:
BANQUE NATIONALE DE PARIS,
INDIVIDUALLY
By:__________________________________
Title:
By:__________________________________
Title:
BANQUE PARIBAS,
INDIVIDUALLY
By:__________________________________
Title:
By:__________________________________
Title:
MERCANTILE BANK NATIONAL ASSOCIATION,
INDIVIDUALLY
By:__________________________________
Title:
NATIONAL CITY BANK OF INDIANA,
INDIVIDUALLY
By:__________________________________
Title:
<PAGE> 21
-8-
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND", NEW
YORK BRANCH,
INDIVIDUALLY
By:__________________________________
Title:
By:__________________________________
Title:
ACCEPTED
EMMIS BROADCASTING CORPORATION
By:________________________________
Title:
<PAGE> 22
-9-
Each of the undersigned Subsidiaries of the Borrower hereby (a) acknowledges
the foregoing Amendment and (b) ratifies and confirms all of its obligations
under the Guaranty and under each of the other Loan Documents to which it is a
party.
EMMIS FM BROADCASTING CORPORATION OF
INDIANAPOLIS
EMMIS FM BROADCASTING CORPORATION OF
CHICAGO
EMMIS FM BROADCASTING CORPORATION OF
ST. LOUIS
KPWR, INC.
EMMIS PUBLISHING CORPORATION
EMMIS BROADCASTING CORPORATION OF NEW
YORK
EMMIS MEADOWLANDS CORPORATION
EMMIS FM RADIO CORPORATION OF
INDIANAPOLIS
EMMIS AM RADIO CORPORATION OF
INDIANAPOLIS
EMMIS HOLDING CORPORATION OF NEW YORK
EMMIS 104.1 FM RADIO CORPORATION OF ST.
LOUIS
EMMIS 106.5 FM BROADCASTING CORPORATION
OF ST. LOUIS
EMMIS INTERNATIONAL BROADCASTING
CORPORATION
EMMIS DAR, INC.
EMMIS INTERNATIONAL CORPORATION
EMMIS 105.7 FM RADIO CORPORATION
OF INDIANAPOLIS
EMMIS 1310 AM RADIO CORPORATION
OF INDIANAPOLIS
MEDIATEX COMMUNICATIONS CORPORATION
TEXAS MONTHLY, INC.
MEDIATEX DEVELOPMENT CORPORATION
EMMIS INDIANA RADIO, L.P.
EMMIS PUBLISHING, L.P.
By:_____________________________
Title: Executive Vice President
<PAGE> 23
-10-
EMMIS FM LICENSE CORPORATION OF
INDIANAPOLIS
EMMIS FM LICENSE CORPORATION OF CHICAGO
EMMIS LICENSE CORPORATION OF NEW YORK
EMMIS FM LICENSE CORPORATION OF ST. LOUIS
KPWR LICENSE, INC.
EMMIS FM RADIO LICENSE CORPORATION OF
INDIANAPOLIS
EMMIS AM RADIO LICENSE CORPORATION OF
INDIANAPOLIS
EMMIS RADIO LICENSE CORPORATION OF NEW
YORK
EMMIS 104.1 FM RADIO LICENSE CORPORATION
OF ST. LOUIS
EMMIS 106.5 FM LICENSE CORPORATION OF
ST. LOUIS
EMMIS 105.7 FM RADIO LICENSE CORPORATION
OF INDIANAPOLIS
EMMIS 1310 AM RADIO LICENSE CORPORATION
OF INDIANAPOLIS
EMMIS LICENSE CORPORATION
By:____________________________________
Title: President
<PAGE> 24
THIRD AMENDMENT TO
AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This THIRD AMENDMENT, dated as of March 27, 1998 (this "Amendment"), by
and among (a) Emmis Broadcasting Corporation, an Indiana corporation (the
"Borrower"), (b) BankBoston, N.A., Toronto Dominion (Texas), Inc., First Union
National Bank, Fleet Bank, N.A., Union Bank of California, N.A., The Bank of
New York, Mellon Bank, Barclays Bank PLC, Bank of America, Bank One, Indiana,
N.A., Bank of Montreal, Compagnie Financiere de CIC et de l'Union Europeenne,
Lehman Commercial Paper Inc., Cooperatieve Centrale Raiffeisen-Boerenleenbank
B.A., "Rabobank Nederland", New York Branch, SunTrust Bank, Central Florida,
N.A., Banque Nationale de Paris, Banque Paribas, Mercantile Bank National
Association, National City Bank of Indiana, Societe Generale, Toronto Dominion
(Texas), Inc., and Key Corporate Capital Inc. (collectively, the "Banks"), (c)
BankBoston, N.A., as managing agent for each of the Banks (in such capacity,
the "Managing Agent"), and (d) The Toronto-Dominion Bank and First Union
National Bank as documentation agents, and Fleet Bank, N.A., Union Bank of
California, N.A., Key Corporate Capital Inc., The Bank of New York, Mellon Bank
and Barclays Bank PLC as co-agents (collectively, together with the Managing
Agent, the "Agents").
WHEREAS, the Borrower, the Banks and the Agents are parties to that
certain Amended and Restated Revolving Credit and Term Loan Agreement, dated as
of July 1, 1997, (as amended by that First Amendment dated as of February 6,
1998 and that Second Amendment dated as of March 20, 1998, the "Credit
Agreement"); and
WHEREAS, the Borrower has requested and the Banks have agreed, subject to
the terms and conditions set forth herein, to modify certain provisions of the
Credit Agreement;
NOW, THEREFORE, the Borrower, the Banks and the Agents hereby covenant and
agree as follows:
Section 1. DEFINED TERMS. Capitalized terms which are used herein without
definition and which are defined in the Credit Agreement shall have the same
meanings herein as in the Credit Agreement.
Section 2. AMENDMENTS TO THE CREDIT AGREEMENT.
(a) Section 8.17 of the Credit Agreement as amended by that Second
Amendment dated as of March 20, 1998, is hereby amended by deleting the amount
"$25,000,000" in the twelfth line of such section and substituting
"$34,000,000" therefor.
<PAGE> 25
-2-
(b) Section 11.2 of the Credit Agreement is hereby amended and restated in
its entirety to read as follows:
"11.2 Total Leverage Ratio. The Borrower will not permit the Total
Leverage Ratio, determined as at the last day of any fiscal quarter ending on
any date or during any period described in the table set forth below, to exceed
the ratio set forth opposite such date or period in such table:
<TABLE>
<CAPTION>
Period Ratio
----------------------- ----------
<S> <C>
Closing Date to 2/27/98 7.00:1.00
2/28/98 6.50:1.00
3/1/98 to 8/31/98 7.00:1.00
9/1/98 to 2/27/99 6.50:1.00
2/28/99 to 2/28/00 6.00:1.00
2/29/00 to 2/27/01 5.50:1.00
2/28/01 to 2/27/02 5.00:1.00
2/28/02 and thereafter 4.50:1.00"
</TABLE>
Section 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall become
effective upon the execution and delivery by the Borrower, the Managing Agent
and the Majority Banks of this Amendment.
Section 4. AFFIRMATION OF THE BORROWER. The Borrower hereby affirms all
of its Obligations under the Credit Agreement and under each of the other Loan
Documents to which it is a party and hereby affirms its absolute and
unconditional promise to pay to the Banks the Loans and all other amounts due
under the Credit Agreement and the other Loan Documents. The Borrower hereby
represents, warrants and confirms that the Obligations are and remain secured
pursuant to the Security Documents.
Section 5. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants to the Banks and the Managing Agent as follows:
(a) Representations and Warranties. Each of the representations and
warranties contained in Section 8 of the Credit Agreement were true and correct
in all material respects when made, and, after giving effect to this Amendment,
are true and correct on and as of the date hereof, except to the extent that
such representations and warranties relate specifically to a prior date.
(b) Enforceability. The execution and delivery by the Borrower of this
Amendment, and the performance by the Borrower of this Amendment and the Credit
Agreement, as amended hereby, are within the corporate authority of the
Borrower and have been duly authorized by all necessary corporate proceedings.
This Amendment and the Credit Agreement, as amended hereby, constitute valid
and legally binding obligations of the Borrower, enforceable against it in
accordance with their terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the
enforcement of creditors' rights in general.
<PAGE> 26
-3-
(c) No Default. No Default or Event of Default has occurred and is
continuing, and no Default or Event of Default will result from the execution,
delivery and performance by the Borrower of this Amendment.
Section 6. NO OTHER AMENDMENTS, ETC. Except as expressly provided in this
Amendment, (a) all of the terms and conditions of the Credit Agreement and the
other Loan Documents remain unchanged, and (b) all of the terms and conditions
of the Credit Agreement, as amended hereby, and of the other Loan Documents are
hereby ratified and confirmed and remain in full force and effect. Nothing
herein shall be construed to be an amendment or a waiver of any requirements of
the Borrower or of any other Person under the Credit Agreement or any of the
other Loan Documents except as expressly set forth herein.
Section 7. EXECUTION IN COUNTERPARTS. This Amendment may be executed in
any number of counterparts and by each party on a separate counterpart, each of
which when so executed and delivered shall be an original, but all of which
together shall constitute one instrument. In proving this Amendment, it shall
not be necessary to produce or account for more than one such counterpart
signed by the party against whom enforcement is sought.
Section 8. MISCELLANEOUS. This Amendment shall be deemed to be a contract
under seal under the laws of The Commonwealth of Massachusetts and shall for
all purposes be construed in accordance with and governed by the laws of The
Commonwealth of Massachusetts. The captions in this Amendment are for
convenience of reference only and shall not define or limit the provisions
hereof. The Borrower agrees to pay to the Managing Agent, on demand by the
Managing Agent, all reasonable out-of-pocket costs and expenses incurred or
sustained by the Managing Agent in connection with the preparation of this
Amendment, including reasonable legal fees.
<PAGE> 27
-4-
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
BANKBOSTON, N.A.,
INDIVIDUALLY AND AS MANAGING AGENT
By:__________________________________
Title:
FIRST UNION NATIONAL BANK,
INDIVIDUALLY AND AS DOCUMENTATION AGENT
By:__________________________________
Title:
TORONTO DOMINION (TEXAS), INC.,
INDIVIDUALLY
By:__________________________________
Title:
THE TORONTO-DOMINION BANK,
AS DOCUMENTATION AGENT
By:__________________________________
Title:
FLEET BANK, N.A.,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
<PAGE> 28
-5-
UNION BANK OF CALIFORNIA, N.A.,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
KEY CORPORATE CAPITAL INC.,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
THE BANK OF NEW YORK,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
MELLON BANK,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
BARCLAYS BANK PLC,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
BANK OF AMERICA,
INDIVIDUALLY
By:__________________________________
Title:
<PAGE> 29
-6-
BANK ONE, INDIANA, N.A.,
INDIVIDUALLY
By:__________________________________
Title:
BANK OF MONTREAL,
INDIVIDUALLY
By:__________________________________
Title:
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE,
INDIVIDUALLY
By:__________________________________
Title:
By:__________________________________
Title:
LEHMAN COMMERCIAL PAPER INC.,
INDIVIDUALLY
By:__________________________________
Title:
SOCIETE GENERALE,
INDIVIDUALLY
By:__________________________________
Title:
<PAGE> 30
-7-
SUNTRUST BANK, CENTRAL
FLORIDA, N.A.,
INDIVIDUALLY
By:__________________________________
Title:
BANQUE NATIONALE DE PARIS,
INDIVIDUALLY
By:__________________________________
Title:
By:__________________________________
Title:
BANQUE PARIBAS,
INDIVIDUALLY
By:__________________________________
Title:
By:__________________________________
Title:
MERCANTILE BANK NATIONAL
ASSOCIATION,
INDIVIDUALLY
By:__________________________________
Title:
NATIONAL CITY BANK OF INDIANA,
INDIVIDUALLY
By:__________________________________
Title:
<PAGE> 31
-8-
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND", NEW
YORK BRANCH,
INDIVIDUALLY
By:__________________________________
Title:
By:__________________________________
Title:
ACCEPTED
EMMIS BROADCASTING CORPORATION
By:__________________________
Title:
<PAGE> 32
-9-
Each of the undersigned Subsidiaries of the Borrower hereby (a) acknowledges
the foregoing Amendment and (b) ratifies and confirms all of its obligations
under the Guaranty and under each of the other Loan Documents to which it is a
party.
EMMIS FM BROADCASTING CORPORATION OF
INDIANAPOLIS
EMMIS FM BROADCASTING CORPORATION OF
CHICAGO
EMMIS FM BROADCASTING CORPORATION OF
ST. LOUIS
KPWR, INC.
EMMIS PUBLISHING CORPORATION
EMMIS BROADCASTING CORPORATION OF NEW
YORK
EMMIS MEADOWLANDS CORPORATION
EMMIS FM RADIO CORPORATION OF
INDIANAPOLIS
EMMIS AM RADIO CORPORATION OF
INDIANAPOLIS
EMMIS HOLDING CORPORATION OF NEW YORK
EMMIS 104.1 FM RADIO CORPORATION OF ST.
LOUIS
EMMIS 106.5 FM BROADCASTING CORPORATION
OF ST. LOUIS
EMMIS INTERNATIONAL BROADCASTING
CORPORATION
EMMIS DAR, INC.
EMMIS INTERNATIONAL CORPORATION
EMMIS 105.7 FM RADIO CORPORATION
OF INDIANAPOLIS
EMMIS 1310 AM RADIO CORPORATION
OF INDIANAPOLIS
MEDIATEX COMMUNICATIONS CORPORATION
TEXAS MONTHLY, INC.
MEDIATEX DEVELOPMENT CORPORATION
EMMIS INDIANA RADIO, L.P.
EMMIS PUBLISHING, L.P.
By:_____________________________
Title: Executive Vice President
<PAGE> 33
-10-
EMMIS FM LICENSE CORPORATION OF
INDIANAPOLIS
EMMIS FM LICENSE CORPORATION OF CHICAGO
EMMIS LICENSE CORPORATION OF NEW YORK
EMMIS FM LICENSE CORPORATION OF ST. LOUIS
KPWR LICENSE, INC.
EMMIS FM RADIO LICENSE CORPORATION OF
INDIANAPOLIS
EMMIS AM RADIO LICENSE CORPORATION OF
INDIANAPOLIS
EMMIS RADIO LICENSE CORPORATION OF NEW
YORK
EMMIS 104.1 FM RADIO LICENSE CORPORATION
OF ST. LOUIS
EMMIS 106.5 FM LICENSE CORPORATION OF
ST. LOUIS
EMMIS 105.7 FM RADIO LICENSE CORPORATION
OF INDIANAPOLIS
EMMIS 1310 AM RADIO LICENSE CORPORATION
OF INDIANAPOLIS
EMMIS LICENSE CORPORATION
By:____________________________________
Title: President
<PAGE> 34
WAIVER OF
AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This WAIVER, dated as of October 10, 1997 (this "Amendment"), by and among
(a) Emmis Broadcasting Corporation, an Indiana corporation (the "Borrower"),
(b) BankBoston, N.A., Toronto Dominion (Texas), Inc., First Union National
Bank, Fleet Bank, N.A., Union Bank of California, N.A., The Bank of New York,
Mellon Bank, Barclays Bank PLC, Bank of America, Bank One, Indiana, N.A., Bank
of Montreal, Compagnie Financiere de CIC et de l'Union Europeenne, Lehman
Commercial Paper Inc., Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
"Rabobank Nederland", New York Branch, SunTrust Bank, Central Florida, N.A.,
Banque Nationale de Paris, Banque Paribas, Mercantile Bank National
Association, National City Bank of Indiana, Societe Generale, Toronto Dominion
(Texas), Inc., and Key Corporate Capital Inc. (collectively, the "Banks"), (c)
BankBoston, N.A., as managing agent for each of the Banks (in such capacity,
the "Managing Agent"), and (d) The Toronto-Dominion Bank and First Union
National Bank as documentation agents, and Fleet Bank, N.A., Union Bank of
California, N.A., Key Corporate Capital Inc., The Bank of New York, Mellon Bank
and Barclays Bank PLC as co-agents (collectively, together with the Managing
Agent, the "Agents").
WHEREAS, the Borrower, the Banks and the Agents are parties to that
certain Amended and Restated Revolving Credit and Term Loan Agreement, dated as
of July 1, 1997, as amended (as amended and in effect, the "Credit Agreement");
and
WHEREAS, the Borrower has requested and the Banks have agreed, subject to
the terms and conditions set forth herein, to waive certain provisions of the
Credit Agreement;
NOW, THEREFORE, the Borrower, the Banks and the Agents hereby covenant and
agree as follows:
Section 1. DEFINED TERMS. Capitalized terms which are used herein without
definition and which are defined in the Credit Agreement shall have the same
meanings herein as in the Credit Agreement.
Section 2. WAIVERS.
(a) The Banks and the Managing Agent hereby waive the provisions of
Section 10.3(m) of the Credit Agreement solely to the extent necessary to
permit Emmis International Corporation to make an Investment in the shares of
Radio Hungaria Co. Ltd., a company organized under the laws of Hungary ("Radio
Hungaria"), without the requirement that Radio Hungaria grant a security
interest in its assets and properties to the Managing Agent; provided
<PAGE> 35
-2-
that, Emmis International Corporation shall grant a security interest in such
shares of Radio Hungaria to be acquired by it to the Managing Agent under the
Subsidiary Pledge Agreement.
(b) The Banks and the Managing Agent hereby waive the provisions of
Section 10.5(e) of the Credit Agreement solely to the extent necessary to
permit the disposition by Emmis 1380 Radio License Corporation of St. Louis and
Emmis 1380 Radio Corporation of St. Louis of the Station WKBQ(AM) by the
donation of such Station to a not-for-profit organization.
Section 3. CONDITIONS TO EFFECTIVENESS. This Waiver shall become
effective upon the execution and delivery by the Borrower, the Managing Agent
and the Banks of this Waiver.
Section 4. AFFIRMATION OF THE BORROWER. The Borrower hereby affirms all
of its Obligations under the Credit Agreement and under each of the other Loan
Documents to which it is a party and hereby affirms its absolute and
unconditional promise to pay to the Banks the Loans and all other amounts due
under the Credit Agreement and the other Loan Documents. The Borrower hereby
represents, warrants and confirms that the Obligations are and remain secured
pursuant to the Security Documents.
Section 5. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants to the Banks and the Managing Agent as follows:
(a) Representations and Warranties. Each of the representations and
warranties contained in Section 8 of the Credit Agreement were true and correct
in all material respects when made, and, after giving effect to this Waiver,
are true and correct on and as of the date hereof, except to the extent that
such representations and warranties relate specifically to a prior date.
(b) Enforceability. The execution, delivery and performance by the
Borrower of this Waiver are within the corporate authority of the Borrower and
have been duly authorized by all necessary corporate proceedings. This Waiver
constitutes valid and legally binding obligations of the Borrower, enforceable
against it in accordance with their terms, except as limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
the enforcement of creditors' rights in general.
(c) No Default. No Default or Event of Default has occurred and is
continuing, and no Default or Event of Default will result from the execution,
delivery and performance by the Borrower of this Waiver.
Section 6. NO OTHER AMENDMENTS, ETC. Except as expressly provided in this
Waiver, (a) all of the terms and conditions of the Credit Agreement and the
other Loan Documents remain unchanged, and (b) all of the terms and conditions
of the Credit Agreement, as amended hereby, and of the other Loan Documents are
hereby ratified and confirmed and remain in full force and effect. Nothing
herein shall be construed to be an amendment or a waiver of any requirements of
the Borrower or of any other Person under the Credit Agreement or any of the
other Loan Documents except as expressly set forth herein.
<PAGE> 36
-3-
Section 7. EXECUTION IN COUNTERPARTS. This Waiver may be executed in any
number of counterparts and by each party on a separate counterpart, each of
which when so executed and delivered shall be an original, but all of which
together shall constitute one instrument. In proving this Waiver, it shall not
be necessary to produce or account for more than one such counterpart signed by
the party against whom enforcement is sought.
Section 8. MISCELLANEOUS. This Waiver shall be deemed to be a contract
under seal under the laws of The Commonwealth of Massachusetts and shall for
all purposes be construed in accordance with and governed by the laws of The
Commonwealth of Massachusetts. The captions in this Waiver are for convenience
of reference only and shall not define or limit the provisions hereof. The
Borrower agrees to pay to the Managing Agent, on demand by the Managing Agent,
all reasonable out-of-pocket costs and expenses incurred or sustained by the
Managing Agent in connection with the preparation of this Waiver, including
reasonable legal fees.
<PAGE> 37
-4-
IN WITNESS WHEREOF, the parties have executed this Waiver as of the date
first above written.
BANKBOSTON, N.A.,
INDIVIDUALLY AND AS MANAGING AGENT
By:__________________________________
Title:
FIRST UNION NATIONAL BANK,
INDIVIDUALLY AND AS DOCUMENTATION AGENT
By:__________________________________
Title:
TORONTO DOMINION (TEXAS), INC.,
INDIVIDUALLY
By:__________________________________
Title:
THE TORONTO-DOMINION BANK,
AS DOCUMENTATION AGENT
By:__________________________________
Title:
FLEET BANK, N.A.,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
<PAGE> 38
-5-
UNION BANK OF CALIFORNIA, N.A.,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
KEY CORPORATE CAPITAL INC.,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
THE BANK OF NEW YORK,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
MELLON BANK,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
BARCLAYS BANK PLC,
INDIVIDUALLY AND AS CO-AGENT
By:__________________________________
Title:
BANK OF AMERICA,
INDIVIDUALLY
By:__________________________________
Title:
<PAGE> 39
-6-
BANK ONE, INDIANA, N.A.,
INDIVIDUALLY
By:__________________________________
Title:
BANK OF MONTREAL,
INDIVIDUALLY
By:__________________________________
Title:
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE,
INDIVIDUALLY
By:__________________________________
Title:
By:__________________________________
Title:
LEHMAN COMMERCIAL PAPER INC.,
INDIVIDUALLY
By:__________________________________
Title:
SOCIETE GENERALE,
INDIVIDUALLY
By:__________________________________
Title:
<PAGE> 40
-7-
SUNTRUST BANK, CENTRAL
FLORIDA, N.A.,
INDIVIDUALLY
By:__________________________________
Title:
BANQUE NATIONALE DE PARIS,
INDIVIDUALLY
By:__________________________________
Title:
By:__________________________________
Title:
BANQUE PARIBAS,
INDIVIDUALLY
By:__________________________________
Title:
By:__________________________________
Title:
MERCANTILE BANK NATIONAL ASSOCIATION,
INDIVIDUALLY
By:__________________________________
Title:
NATIONAL CITY BANK OF INDIANA,
INDIVIDUALLY
By:__________________________________
Title:
<PAGE> 41
-8-
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND", NEW
YORK BRANCH,
INDIVIDUALLY
By:__________________________________
Title:
By:__________________________________
Title:
ACCEPTED
EMMIS BROADCASTING CORPORATION
By:__________________________
Title:
<PAGE> 42
-9-
Each of the undersigned Subsidiaries of the Borrower hereby (a) acknowledges
the foregoing Waiver and (b) ratifies and confirms all of its obligations under
the Guaranty and under each of the other Loan Documents to which it is a party.
EMMIS FM BROADCASTING CORPORATION OF
INDIANAPOLIS
EMMIS FM BROADCASTING CORPORATION OF
CHICAGO
EMMIS FM BROADCASTING CORPORATION OF
ST. LOUIS
KPWR, INC.
EMMIS PUBLISHING CORPORATION
EMMIS BROADCASTING CORPORATION OF NEW
YORK
EMMIS MEADOWLANDS CORPORATION
EMMIS FM LICENSE CORPORATION OF
INDIANAPOLIS
EMMIS FM LICENSE CORPORATION OF CHICAGO
EMMIS LICENSE CORPORATION OF NEW YORK
EMMIS FM LICENSE CORPORATION OF ST. LOUIS
KPWR LICENSE, INC.
EMMIS FM RADIO CORPORATION OF
INDIANAPOLIS
EMMIS AM RADIO CORPORATION OF
INDIANAPOLIS
EMMIS FM RADIO LICENSE CORPORATION OF
INDIANAPOLIS
EMMIS AM RADIO LICENSE CORPORATION OF
INDIANAPOLIS
EMMIS HOLDING CORPORATION OF NEW YORK
EMMIS RADIO CORPORATION OF NEW YORK
EMMIS RADIO LICENSE CORPORATION OF NEW
YORK
EMMIS 104.1 FM RADIO CORPORATION OF ST.
LOUIS
EMMIS 104.1 FM RADIO LICENSE CORPORATION
OF ST. LOUIS
EMMIS 106.5 FM BROADCASTING CORPORATION
OF ST. LOUIS
EMMIS INTERNATIONAL BROADCASTING
CORPORATION
EMMIS DAR, INC.
EMMIS 106.5 FM LICENSE CORPORATION OF ST.
LOUIS
EMMIS 1380 AM RADIO CORPORATION OF ST.
LOUIS
<PAGE> 43
-10-
EMMIS 1380 AM RADIO LICENSE CORPORATION
OF ST. LOUIS
EMMIS INTERNATIONAL CORPORATION
By:_________________________________
Title:
<PAGE> 1
EXHIBIT 10.14
STOCK PURCHASE AGREEMENT
AMONG
EMMIS BROADCASTING CORPORATION
AND
MICHAEL R. LEVY,
DOW JONES & COMPANY, INC., AND
GREGORY CURTIS
FEBRUARY 6, 1998
<PAGE> 2
STOCK PURCHASE AGREEMENT
AMONG
EMMIS BROADCASTING CORPORATION
AND
MICHAEL R. LEVY,
DOW JONES & COMPANY, INC., AND
GREGORY CURTIS
FEBRUARY 6, 1998
Table of Contents
Page No.
ARTICLE 1
PURCHASE AND SALE OF SHARES
1
1.1 PURCHASE AND SALE OF SHARES........................ 1
1.2 PURCHASE PRICE..................................... 1
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLERS.................. 5
2.1 ORGANIZATION AND STANDING; BUSINESS CONDUCTED...... 5
2.2 CAPITALIZATION..................................... 6
2.3 OWNERSHIP OF SHARES................................ 7
2.4 AUTHORITY.......................................... 7
2.5 FINANCIAL STATEMENTS............................... 8
2.6 ABSENCE OF UNDISCLOSED LIABILITIES................. 8
2.7 ABSENCE OF CERTAIN CHANGES......................... 9
2.8 TITLE TO ASSETS AND RELATED MATTERS................ 10
2.9 CIRCULATION........................................ 10
2.10 TAX................................................ 11
2.11 EMPLOYEES.......................................... 11
2.12 RELATIONSHIP WITH AFFILIATES....................... 12
2.13 BROKERAGE AND FINDERS' FEES........................ 12
2.14 JUDGMENTS.......................................... 12
2.15 LITIGATION......................................... 12
2.16 COMPLIANCE WITH LAWS............................... 13
2.17 POWERS OF ATTORNEY................................. 13
2.18 LICENSES AND RIGHTS................................ 13
2.19 CONTRACTS.......................................... 13
2.20 NO DEFAULTS........................................ 14
2.21 INTELLECTUAL PROPERTY.............................. 15
2.22 INSURANCE POLICIES................................. 15
2.23 NO CONFLICT........................................ 16
2.24 ENVIRONMENTAL MATTERS.............................. 16
2.25 EMPLOYEE PLANS..................................... 16
i.
<PAGE> 3
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER.............. 18
3.1 ORGANIZATION; QUALIFICATION................... 18
3.2 AUTHORITY OF BUYER............................ 18
3.3 INVESTMENT PURPOSE............................ 19
3.4 BROKERAGE AND FINDERS' FEE.................... 19
ARTICLE 4
COVENANTS............................................ 19
4.1 CONFIDENTIALITY............................... 19
4.2 NONCOMPETITION................................ 19
4.3 [INTENTIONALLY OMITTED.]...................... 20
4.4 TERMINATION OF SHAREHOLDER AGREEMENTS......... 20
4.5 MAINTENANCE OF INSURANCE...................... 21
4.6 BONUSES....................................... 21
ARTICLE 5
INDEMNIFICATION...................................... 21
5.1 INDEMNIFICATION BY BUYER...................... 21
5.2 INDEMNIFICATION BY SELLERS.................... 22
5.3 INDEMNITY PROCEDURE........................... 23
5.4 MEASURE OF DAMAGES............................ 25
5.5 WAIVER OF RIGHT TO CONTRIBUTION............... 25
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER......... 25
6.1 PERFORMANCE OF UNDERTAKINGS................... 25
6.2 REPRESENTATIONS AND WARRANTIES................ 25
6.3 CONSENTS...................................... 25
6.4 HART-SCOTT-RODINO............................. 25
6.5 NO MATERIAL ADVERSE CHANGE.................... 26
6.6 DOCUMENTS TO BE DELIVERED TO BUYER............ 26
6.7 SUITS......................................... 27
6.8 OFFICERS AND KEY EMPLOYEES.................... 27
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATION OF SELLERS........ 27
7.1 PERFORMANCE OF UNDERTAKINGS................... 27
7.2 REPRESENTATIONS AND WARRANTIES................ 27
7.3 CONSENTS...................................... 27
7.4 HART-SCOTT-RODINO............................. 27
7.5 DOCUMENTS TO BE DELIVERED TO SELLERS.......... 28
7.6 SUITS......................................... 28
7.7 INSURANCE ARRANGEMENTS........................ 28
7.8 ASSIGNMENT OF PERSONAL PROPERTY............... 29
ARTICLE 8
ii.
<PAGE> 4
CLOSING................................................ 29
ARTICLE 9
SURVIVAL............................................... 29
ARTICLE 10
REMEDIES............................................... 29
10.1 GENERAL........................................ 29
10.2 NO WAIVER...................................... 30
ARTICLE 11
MISCELLANEOUS.......................................... 30
11.1 ASSIGNMENT..................................... 30
11.2 EXPENSES....................................... 30
11.3 NOTICE......................................... 30
11.4 CAPTIONS....................................... 32
11.5 COOPERATION.................................... 32
11.6 SCHEDULES AND EXHIBITS......................... 32
11.7 COUNTERPARTS................................... 32
11.8 PUBLICITY...................................... 32
11.9 APPLICABLE LAW................................. 32
11.11 SEVERABILITY................................... 33
11.12 ENTIRE AGREEMENT............................... 33
Schedules
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1.1 2.2(a) 2.7 2.11 2.18 2.22 4.6
2.1(a) 2.2(b) 2.8 2.15 2.19 2.23 6.8
2.1(b) 2.3 2.10 2.16 2.20 2.24 7.7
2.1(c) 2.4 2.12 2.17 2.21 2.25 7.8
2.1(d) 2.6
</TABLE>
Exhibits
1.2(d)
6.6(c) -- Intentionally omitted
7.5(c) -- Intentionally omitted
iii.
<PAGE> 5
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement"), dated February 6, 1998, by
and among Michael R. Levy ("Levy"), Dow Jones & Company, Inc. ("Dow Jones"),
and Gregory Curtis ("Curtis") (each a "Seller", and collectively "Sellers"),
and Emmis Broadcasting Corporation, an Indiana corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Sellers own all of the issued and outstanding shares of stock of
Mediatex Communications Corporation, a Texas corporation ("MCC"); and
WHEREAS, MCC, through its wholly owned subsidiary, Texas Monthly, Inc., a
Texas corporation ("TMI"), is engaged in the business of publishing the
periodical Texas Monthly (the "Magazine") and operating related and ancillary
activities, including without limitation, producing and maintaining WWW Ranch,
a web site, all of which utilize intellectual property owned by TMI; is engaged
through its Publishing Partnership Division in the custom publishing business;
and is engaged through its Mediatex National Sales Division in national sales
activities for Texas Monthly and other publications (all such activities
collectively being hereinafter referred to as the "Business"); and
WHEREAS, Buyer desires to acquire, and Sellers desire to sell to Buyer,
all of the issued and outstanding shares of common stock, par value $.10 per
share, of MCC (the "Shares");
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements hereinafter contained, the parties hereto covenant and agree as
follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF SHARES. On the terms and subject to the
conditions set forth in this Agreement, on the Closing Date (as defined in
Article 8 hereof) each Seller will sell, assign, transfer and deliver to Buyer,
free and clear of all liens, pledges and encumbrances of any kind, nature and
description, and Buyer will purchase and accept from such Seller, the Shares
owned by such Seller as set forth on Schedule 1.1, and each Seller will deliver
to Buyer certificates for such Shares. Each such certificate shall be duly
endorsed, or accompanied by a duly executed stock power, for transfer to Buyer.
1.2 PURCHASE PRICE.
(a) The purchase price (the "Purchase Price") for the Shares shall equal
the sum of (i) $37,000,000.00 less the unpaid principal and accrued and unpaid
interest as of the Closing Date on any interest-bearing debt for borrowed money
(the "Closing Date Debt") of any Company (as hereinafter defined) including, but
not limited to, the unpaid principal
<PAGE> 6
and accrued and unpaid interest as of the Closing Date under the loans (the
"Bank Loan") payable by TMI and MCC to NationsBank of Texas, N.A., as confirmed
in writing at Closing by such bank (such difference hereinafter referred to as
the "Initial Purchase Price"), subject to adjustment as provided in Section
1.2(b)(iii) (as adjusted, the "Adjusted Initial Purchase Price") and subject to
further adjustment as provided in Section 1.2(b)(iv) (as further adjusted, the
"Adjusted Final Purchase Price").
(b) The Purchase Price shall be paid as follows:
(i) The Adjusted Initial Purchase Price shall be paid at Closing (as
hereinafter defined) in immediately available funds by wire transfer to such
bank accounts as shall be designated by Sellers, respectively, by notice to
Buyer. Three business days prior to the Closing Date, Sellers shall provide
Buyer with a reasonably detailed calculation of the estimated Closing Date Debt
as of the Closing Date.
(ii) All payments of the Purchase Price will be paid to Sellers (and any
rebate of the Purchase Price pursuant to Section 1.2(b)(iv) shall be paid by
Sellers) in proportion to their ownership of Shares as follows:
<TABLE>
<CAPTION>
Percentage
Number of Share
Shareholder of Shares Ownership
----------- --------- -----------
<S> <C> <C>
Michael R. Levy 89,966 67.5948%
Dow Jones &
Company, Inc. 41,689 31.3225%
Gregory Curtis 1,441 1.0827%
------- --------
133,096 100%
</TABLE>
(iii) The Initial Purchase Price shall be subject to adjustment as
provided in this Subsection (iii). Three business days prior to the Closing
Date, Sellers shall provide Buyer with a reasonably detailed statement (the
"Preliminary Working Capital Report") setting forth Sellers' reasonable and
good faith estimate of the Closing Date Current Assets, the Closing Date
Current Liabilities, and the Closing Date Working Capital. The Adjusted
Initial Purchase Price payable on the Closing Date shall be the Initial
Purchase Price reduced by the Closing Date Working Capital Deficit, if any, or
increased by the Closing Date Working Capital Surplus, if any, as shown on the
Preliminary Working Capital Report. As used in this Agreement, the following
terms shall have the meanings indicated:
(A) "Closing Date Accounts Receivable" shall mean all accounts receivable
of the Companies (as hereinafter defined) as of the close of business
immediately prior to the Closing Date that have arisen from operation of the
Business in the ordinary course consistent with past practices.
2
<PAGE> 7
(B) "Closing Date Current Assets" shall mean the sum, as of the close of
business immediately prior to the Closing Date, of (i) the Closing Date
Accounts Receivable, plus (ii) the prepaid expenses and future issue costs of
the Companies, plus (iii) cash on hand, plus (iv) circulation materials and
other inventories, all as determined in accordance with generally accepted
accounting principles applied on a basis consistent with prior years as
reflected in the Audited Financial Statements (as defined in Section 2.5)
("GAAP").
(C) "Closing Date Current Liabilities" shall mean all trade payables and
other items that would be included as current liabilities on a balance sheet of
any of the Companies as of the close of business immediately prior to the
Closing Date prepared in accordance with GAAP, excluding, however, (1) one-half
of bonuses payable to senior management of MCC and TMI, up to a maximum
exclusion of $45,000.00, and the payroll taxes relating to the excluded amount
of such bonuses, (2) one-half of MCC's legal fees incurred in connection with
the transactions contemplated by this Agreement up to a maximum exclusion of
$15,000.00, (3) all Closing Date Debt, and (4) any unearned subscription
revenue and related accrued expenses arising in the ordinary course of the
Business consistent with past practices ("Subscription Liabilities").
(D) "Closing Date Working Capital" shall mean the algebraic difference of
(i) the Closing Date Current Assets, minus (ii) the Closing Date Current
Liabilities.
(E) "Closing Date Working Capital Deficit" shall mean the amount, if any,
by which the Closing Date Working Capital is less than $2,743,125.
(F) "Closing Date Working Capital Surplus" shall mean the amount, if any,
by which the Closing Date Working Capital is greater than $2,893,125.
(G) Furthermore, "Closing Date Current Assets" shall not include the
$2,182,010 in cash (the "Capital Contribution") which Levy contributed to MCC
immediately prior to the Closing, such amount being calculated to equal the
Companies obligations to pay cash to employees (the "Plan Payments") (but not
the payroll taxes relating to such Plan Payments) pursuant to (i) the MCC Key
Employee Success Sharing Plan, (ii) the MCC Management Success Sharing Plan,
and (iii) the MCC Key Executive Employee Equity Participation Plan (together,
the "Plans"). Also, "Closing Date Current Liabilities" shall not include the
Plan Payments to the extent, and only to the extent, the Plan Payments do not
exceed the Capital Contribution. In addition, "Closing Date Current
Liabilities" shall not include the payroll taxes relating to the Plan Payments.
(iv) The Purchase Price shall be subject to adjustment as follows:
(A) Within sixty (60) days after the Closing Date, Buyer shall deliver to
Sellers a reasonably detailed statement setting forth Buyer's determination
(consistent with Exhibit 1.2(d)) of the Closing Date Current Assets, Closing
Date Current Liabilities, Closing Date Working Capital, Closing Date Debt, and
Closing Date Working Capital
3
<PAGE> 8
Surplus or Closing Date Working Capital Deficit (herein sometimes collectively
referred to as the "Closing Date Balance Sheet Amounts") and the Adjusted Final
Purchase Price, which shall be final and binding on the parties for purposes of
determining the Purchase Price unless within twenty-one days after receiving
Buyer's statement, any Seller objects to such determination by giving Buyer
written notice setting forth his or its determination (consistent with Exhibit
1.2(d)) of such Closing Date Balance Sheet Amounts, the Adjusted Final Purchase
Price and the basis for his or its determination. In the event of such an
objection and the failure of the parties within fifteen (15) days thereafter to
reach agreement on the Adjusted Final Purchase Price, then Buyer may select any
office in the United States of KPMG Peat Marwick LLP (the "Arbitrating
Accounting Firm") which shall make the final determination (consistent with
Exhibit 1.2(d)) of the Closing Date Balance Sheet Amounts and the Adjusted
Final Purchase Price. The determination of the Adjusted Final Purchase Price
by the Arbitrating Accounting Firm shall be final and binding upon the parties
for purposes of determining the Purchase Price. The fees of the Arbitrating
Accounting Firm shall be paid (1) by Buyer if the objecting Seller's
calculation of the Adjusted Final Purchase Price is closer to the Arbitrating
Accounting Firm's determination, (2) by the objecting Seller or Sellers if
Buyer's calculation of the Adjusted Final Purchase Price is closer to the
Arbitrating Accounting Firm's determination, and (3) otherwise 50% by the
objecting Seller or Sellers and 50% by Buyer. In the event the Adjusted Final
Purchase Price as finally determined under this Section 1.2(b)(iv)(A) exceeds
the Adjusted Initial Purchase Price as set forth in the Preliminary Working
Capital Report, the Purchase Price shall be increased by the amount of such
excess. In the event the Adjusted Final Purchase Price as finally determined
under this Section 1.2(b)(iv)(A) is less than the Adjusted Initial Purchase
Price as set forth in the Preliminary Working Capital Report, the Purchase
Price shall be reduced by the amount of such decrease.
(B) If the adjustments under this Subsection (iv) result in a net
reduction of the Purchase Price, Sellers shall rebate to Buyer a portion of the
Purchase Price equal to such reduction. If the adjustments under this
Subsection (iv) result in a net increase of the Purchase Price, Buyer shall pay
to Sellers an amount equal to such increase. Any payment due under this
Subsection (iv) shall be made not later than five (5) business days after the
final determination of the Closing Date Working Capital and the Closing Date
Debt pursuant to this Subsection (iv). Payment shall be made by wire transfer
to the bank account designated by the recipient of such payment. The Purchase
Price after such adjustments shall be the Adjusted Final Purchase Price.
(C) Sellers and Buyer agree to cooperate as reasonably requested by the
Arbitrating Accounting Firm in the determination of the Closing Date Working
Capital and the Closing Date Debt.
(c) Seventy-Four Thousand Dollars ($74,000.00) of the Purchase Price shall
be allocated to the noncompetition covenants in Section 4.2 (prorata among the
Sellers pursuant to the percentages set forth in Section 1.2(b)(ii)), and the
balance of the portion of the Purchase Price shall be allocated to the Shares.
Sellers and Buyer shall use such allocations for all reporting purposes in
connection with federal, state and local income
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taxes. Any adjustment provided in this Agreement to the Purchase Price shall
be deemed an adjustment to the portion of the Purchase Price allocated to the
Shares.
(d) An example of the calculation of the Adjusted Final Purchase Price is
attached as Exhibit 1.2(d).
(e) Notwithstanding anything contained herein to the contrary, the parties
agree and acknowledge that the Adjusted Initial Purchase Price, Adjusted Final
Purchase Price, and the calculations of the Purchase Price (and the components
thereof), have been and shall be calculated as of 11:59 P.M. on January 31,
1998 (the "Determination Time") for all purposes under the Agreement.
Furthermore, each of the Sellers represents and warrants that (i) the principal
amount of the Closing Date Debt as of the Determination Time is the same as the
amount as of the Closing Date, and (ii) the Companies have only incurred
liabilities since the Determination Time in the ordinary course of business
consistent with past practices.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller hereby represents and warrants to Buyer, as of the date
hereof, as follows:
2.1 ORGANIZATION AND STANDING; BUSINESS CONDUCTED.
(a) MCC is a corporation duly organized, validly existing and in good
standing under the laws of Texas, has full corporate power and authority to
carry on its business as and where now conducted and to own, operate and lease
its properties in the places where such properties are now owned, operated or
leased by it, which jurisdictions are set forth on Schedule 2.1(a), and is duly
qualified, licensed or otherwise authorized to do business and is in good
standing in each jurisdiction, domestic and foreign, in which the nature of the
business conducted by such corporation or the property owned, leased or
operated by it makes such qualification, licensing or other authorization
necessary, except where the failure to be so qualified, licensed or authorized
would not have a material adverse effect on the assets, operations, financial
condition, results of operations or business of MCC and the Subsidiaries (as
defined below) taken as a whole (a "Material Adverse Effect"), which
jurisdictions are set forth on Schedule 2.1(a).
(b) Except as set forth on Schedule 2.1(b), MCC has no subsidiaries or any
investments in any incorporated or unincorporated entities, other than TMI and
Mediatex Development Corporation (together, the "Subsidiaries"). Each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, has full corporate power and
authority to carry on its business as and where now conducted and to own,
operate and lease its properties in the places where such properties are now
owned, operated or leased by it, which jurisdictions are set forth on Schedule
2.1(b), and is duly qualified, licensed or otherwise authorized to do business
and is in good
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standing in each jurisdiction, domestic and foreign, in which the nature of the
business conducted by such corporation or the property owned, leased or
operated by it makes such qualification, licensing or other authorization
necessary, except where the failure to be so qualified, licensed or authorized
would not have a Material Adverse Effect, which jurisdictions are set forth on
Schedule 2.1(b).
(c) Except as set forth on Schedule 2.1(c), the business of MCC and the
Subsidiaries has been and is limited to the operation of the Business,
activities directly related thereto, and incidental activities that are not
material individually or in the aggregate.
(d) Accurate and complete copies of articles of incorporation and by-laws
(or their equivalent), including all amendments thereto and restatements
thereof, corporate minutes and the stock record book of MCC and of each
Subsidiary have been delivered to Buyer. Except as set forth on Schedule
2.1(d), all corporate action of the type which is customarily recorded in the
minutes of proceedings of the directors and shareholders of a corporation which
has previously been taken by shareholders of MCC and of each Subsidiary, by the
Board of Directors of MCC and of each Subsidiary or by any committee of any
such Board is properly and accurately recorded in all material respects in the
corporate minutes of MCC or the Subsidiary, as the case may be. Complete and
accurate records with respect to the issuance, transfer, redemption and
cancellation of shares of capital stock of MCC and each Subsidiary are
contained in their respective stock record books.
2.2 CAPITALIZATION.
(a) The authorized capital stock of MCC consists of 1,000,000 shares of
common stock, par value $.10 per share, of which one hundred thirty-three
thousand ninety-six (133,096) shares are issued and outstanding. All of the
Shares are duly authorized, validly issued, fully paid and non-assessable and
have not been issued in violation of preemptive or other rights or in violation
of applicable securities laws. The authorized capital stock and number of
shares of such stock outstanding of each Subsidiary is set forth on Schedule
2.2(a). All such outstanding shares of each Subsidiary are duly authorized,
validly issued, fully paid and non-assessable and have not been issued in
violation of preemptive or other rights or in violation of applicable
securities laws.
(b) Except as set forth on Schedule 2.2(b), neither MCC nor any Subsidiary
has any options, warrants or other rights outstanding for the purchase of, or
has any outstanding securities convertible into, any equity security of such
corporation. Neither MCC nor any Subsidiary has agreed to issue, purchase,
sell or transfer any of its securities.
2.3 OWNERSHIP OF SHARES. Such Seller owns and at the Closing will own of
record and beneficially all of his or its Shares specified on Schedule 1.1, and
transfer at Closing will vest in the Buyer good title to the Shares of such
Seller free and clear of any
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pledge, lien, claim, encumbrance, option or agreement, rights of dower or
community property subject to Buyer-created liens and resale restrictions under
securities laws. Except as set forth on Schedule 2.3, all outstanding shares
of each Subsidiary are owned beneficially and of record solely by MCC free and
clear of any pledge, lien, claim, encumbrance, option or agreement, rights of
dower or community property, subject to Buyer-created liens and resale
restrictions under securities laws.
2.4 AUTHORITY.
(a) This Agreement constitutes a valid and binding agreement of such
Seller, enforceable against him or it in accordance with its terms. Except for
violations, breaches and defaults for which waivers have been obtained and
which are set forth on Schedule 2.4, neither the execution, delivery nor
consummation of this Agreement by such Seller will, with the passage of time,
the giving of notice or otherwise, result in a violation or breach of, or
constitute a default under, any term or provision of any material indenture,
mortgage, deed of trust, lease, franchise, license, permit, instrument, order,
judgment, decree, statute, rule, regulation, ordinance, law, contract,
agreement or any other restriction to which MCC or any Subsidiary (each a
"Company", and together the "Companies") or such Seller is a party or to which
any of the Companies' or such Seller's assets are subject or bound; nor will it
result in the creation or imposition of any lien, mortgage, pledge, security
interest, encumbrance, claim or other charge of any kind ("Lien") upon any of
the assets of any Company or such Seller; nor will it result in any lawful
acceleration or termination of any loan agreement or other evidence of
indebtedness, security agreement or industrial revenue bond document to which
any Company or such Seller is a party or to which any Company's assets or the
assets of such Seller are subject.
(b) Except tor those approvals or consents that will have been obtained by
such Seller and the Companies prior to Closing or which are set forth on
Schedule 2.4, no approval or consent of any person, firm or other entity or
body, including any federal, state, local or foreign government department or
agency, is required to be obtained by any Company or such Seller for the
authorization of this Agreement or the consummation by such Seller of the
transactions herein contemplated (the "Transactions"), except for approvals or
consents under Contracts (as hereinafter defined) that are not material to the
Business.
2.5 FINANCIAL STATEMENTS. Sellers have provided or caused to be provided
to Buyer the Audited Consolidated Financial Statements of the Companies,
certified by KPMG Peat Marwick LLP, independent public accountants, consisting
of (i) consolidated balance sheets of the Companies as at July 31, 1997, 1996
and 1995 and the related consolidated statements of income, stockholders'
equity and cash flows for the years then ended (collectively, the "Audited
Financial Statements"), and the Unaudited Consolidated Financial Statements of
the Companies consisting of a consolidated balance sheet of the Companies as at
December 31, 1997 ("Current Date") and the related consolidated statements of
income, stockholders' equity and cash flows for the five (5) months then
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ended (collectively, the "Unaudited Financial Statements," and together with
the Audited Financial Statements, the "Financial Statements"). The Financial
Statements have been prepared in accordance with GAAP and fairly present in all
material respects the financial position of the Companies as of those dates and
the results of its operations and changes in its financial position for the
fiscal year or period then ended, except that the Unaudited Financial
Statements do not include changes in stockholders' equity or footnotes and are
subject to normal year end adjustments which in the aggregate are not material.
The Financial Statements include all adjustments required for a fair
presentation, except that the Unaudited Financial Statements do not include
changes in stockholders' equity or footnotes and are subject to normal year end
adjustments which in the aggregate are not material. The Companies make and
keep books, records and accounts that in reasonable detail accurately and
fairly reflect the transactions, acquisitions and dispositions of the assets of
the Companies in all material respects.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. Each of the Companies has no
debt, liability or obligation, secured or unsecured (whether absolute, accrued,
contingent, or otherwise, and whether due or to become due), including, but not
limited to, liabilities or obligations of a nature required by GAAP to be
reflected in a corporate balance sheet or disclosed in the notes thereto,
except (i) liabilities which are fully accrued or fully reserved against in the
Financial Statements, (ii) Subscription Liabilities incurred after the Current
Date, (iii) current liabilities incurred in the ordinary course of the Business
or in connection with this Agreement or the Transactions, all of which will be
satisfied in full prior to Closing or included (except to the extent otherwise
specifically provided in this Agreement) as Closing Date Current Liabilities,
(iv) the Bank Loan, (v) the Companies' obligations (other than for breach)
under the Contracts (as hereinafter defined), (vi) liabilities disclosed on
Schedule 2.6, and (vii) any other liability if, and only if, the liability does
not constitute a breach of any representation or warranty in this Article 2
that is qualified by materiality but would constitute a breach thereof if the
representation and warranty were not qualified by materiality.
2.7 ABSENCE OF CERTAIN CHANGES. Since the Current Date except as set
forth on Schedule 2.7, the Companies have actively conducted their businesses
in the ordinary and regular course and maintained their records and books of
account in reasonable detail which accurately and fairly reflect the
transactions of the Companies in all material respects. Since the Current
Date, there has not been, except as disclosed on Schedule 2.7:
(a) Any material adverse change in the nature of the business, the results
of operations, the assets, the financial condition, or the manner of conducting
the Business, other than changes in the ordinary course of business, none of
which has had or may reasonably be expected to have a Material Adverse Effect;
(b) Any material damage, destruction or casualty loss (whether or not
covered by insurance) adversely affecting the business, the results of
operations, the assets or the
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financial condition of any Company or its ability to carry on its operations
substantially as presently conducted;
(c) Any declaration, setting aside or payment of dividends or other
distributions in respect of the Shares;
(d) Any entering into of any employment agreement, or any increase in the
compensation payable, or to become payable, by the Companies to any of their
respective officers, employees or agents over the rates payable at the Current
Date, except for increases in the ordinary course of business in the
compensation payable to employees who are paid on any hourly basis;
(e) Any issuance of securities of any Company, including options, warrants
or other agreements evidencing or requiring such issuance;
(f) Any entering into, amendment or termination of, default by the
Companies or, to the best of the knowledge of such Seller, default by any other
party under, any material contract, agreement or license to which any Company
is a party;
(g) Any material labor dispute or collective labor negotiation involving
any Company;
(h) Any discharge or satisfaction of any lien, encumbrance, obligation or
liability (accrued, absolute, fixed or contingent) of any Company except in the
ordinary course of business or under the Bank Loan;
(i) Incurrence by any Company of any material obligation or liability
(accrued, absolute, fixed or contingent) except current liabilities incurred,
and obligations entered into, in the ordinary course of business and consistent
with prior practice;
(j) Institution of any severance, retirement, bonus, stock option, profit
sharing, pension plan or similar agreement or material changes made in any such
existing plans of any Company, other than severance or bonus arrangements with
employees of any Company entered into in the ordinary course of business
consistent with past practices;
(k) Any capital expenditure, or any commitment for a capital expenditure
entered into by any Company which was not outstanding as of the Current Date,
involving an amount of more than Twenty-Five Thousand Dollars ($25,000) in any
one instance or an aggregate of more than One Hundred Thousand Dollars
($100,000);
(l) Announcement or initiation of any general increase in compensation,
bonus, insurance or employee benefits involving employees of any Company; or
(m) Any amendment to the articles of incorporation or bylaws of any
Company.
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2.8 TITLE TO ASSETS AND RELATED MATTERS. Except for any lien for current
taxes not yet due or as disclosed on Schedule 2.8, one of the Companies owns,
free and clear of any liens, claims, charges, options, leases or other
encumbrances or security interests (purchase money or otherwise), (i) all of
the personal property reflected in the Unaudited Financial Statements as owned,
and (ii) all personal property acquired since the Current Date, other than
personal property which has been disposed of in the ordinary course of business
(it being understood that a disposition to any person of any asset, other than
inventory in the ordinary course of business, carried on the Companies' books
at more than Twenty-Five Thousand Dollars ($25,000) shall be deemed to be a
disposition other than in the ordinary course of business). All personal
property used by the Companies in the operation of the Business is either owned
by one of the Companies or leased under an agreement reflected on a Schedule
hereto. All such owned or leased personal property is of sufficient quantity
and type necessary to conduct the Business in all material respects in the
manner which it has been and is now operated, and all such material personal
property is in good operating condition and repair, ordinary wear and tear
excepted.
2.9 CIRCULATION. MCC has provided or caused to be provided to Buyer (i)
the audited circulation reports (the "White Sheets") of the Audit Bureau of
Circulations ("ABC") with respect to the Magazine for the twelve months ended
December 31, 1996 and December 31, 1995, respectively; and (ii) the unaudited
publisher's circulation statement (the "Pink Sheet") published by ABC with
respect to the Magazine for the six months ended June 30, 1997. Such White
Sheets and Pink Sheet fairly present the information shown thereon in all
material respects. The average paid circulation of the Magazine for the six
months ended June 30, 1997 was not less than ninety-eight percent (98%) of the
amount set forth in such Pink Sheet.
2.10 TAX.
(a) Except as set forth on Schedule 2.10, each Company has filed on a
timely basis all federal, state, local and foreign tax and duty returns and
reports of every nature required to be filed by it, which returns and reports
are true, correct and complete, and has paid all such taxes and duties shown as
due on such returns. Except as disclosed on Schedule 2.10, no Company has
received any notice that it is delinquent in the payment of any tax or
estimated tax payments, and has not required any extension of time within which
to file any tax return which has not since been filed. Except as set forth on
Schedule 2.10, no notices respecting asserted or assessed deficiencies for any
tax have been received by any Company. The income tax returns of the Companies
have never been audited by the Internal Revenue Service or the comparable
agency of a foreign country, state, or municipality, and except as set forth on
Schedule 2.10, no investigation of any Company by any tax agency or authority
is presently pending or to the knowledge of such Seller threatened, and none of
the Companies is a party to any action or proceeding by any governmental
authority for the assessment or collection of taxes, nor has any such event
been asserted or to the knowledge of such Seller threatened. No Company has
filed any consent of the type described under Section 341(f) of the Internal
Revenue Code of 1986, as amended, and applicable regulations promulgated
thereunder (the "Code"), or made
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any election or deemed election pursuant to Section 338 of the Code. Neither
such Seller nor any Company has extended or waived any statute of limitation
with respect to any tax.
(b) Provision for taxes has been adequately accrued on the Financial
Statements and on the books of the Companies for all periods as to which no
returns are due.
(c) For purposes of this Agreement, the term "tax" or "taxes" means all
income, gross receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll, employment, excise, stamp, premium, property, customs
duties, fees, assessments, foreign income and withholding taxes or other
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or other additional amounts imposed by any taxing authority,
domestic or foreign.
2.11 EMPLOYEES.
(a) Schedule 2.11 sets forth a true and complete list of (i) the names,
titles, salaries, currently accrued and unused vacation (including both the
number of days and dollar value), bonus arrangements and all other compensation
of all employees, consultants or independent contractors employed or retained
by any Company, and (ii) the termination pay or other severance benefits, if
any, payable to each such employee upon termination of employment. The
Contracts furnished to Buyer include true and complete copies of all such
written agreements, and Buyer has been furnished a written summary of the terms
of employment or retention for each employee, consultant or independent
contractor who is not employed or retained under a written agreement.
(b) There is no collective bargaining agreement applicable to any
employees of any Company, and to the best of such Seller's knowledge, there is
no organizational effort currently being made or threatened by or on behalf of
any labor union with respect to employees of any Company. There are no unfair
labor charges pending against any Company, and no Company has experienced any
significant labor difficulties within the preceding 24 months.
2.12 RELATIONSHIP WITH AFFILIATES.
(a) Such Seller (other than Dow Jones) does not possess, directly or
indirectly, any financial interest in, and is not a director, officer or
employee of, any corporation, partnership or other entity which is a supplier,
customer or competitor of any Company.
(b) Except as set forth on Schedule 2.12, there are no arrangements
between any Company and such Seller or an affiliate of such Seller pursuant to
which goods or services are provided to or by any Company other than the
services provided by Levy and Curtis as employees of the Companies.
2.13 BROKERAGE AND FINDERS' FEES. No Company or such Seller, nor any
officer, director, employee or agent of any Company or such Seller, has
incurred on behalf of any
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Company or such Seller any liability to any broker, finder or agent for any
brokerage fees, finders' fees or commissions with respect to the Transactions,
except that MCC has retained The Jordan, Edmiston Group, Inc. (the "Broker") to
act as broker and advisor to the Companies and Sellers in connection with the
Transactions. The Broker's fee shall be paid by Sellers at Closing and,
accordingly, will not be a Closing Date Current Liability.
2.14 JUDGMENTS. No Company is a party to or subject to any judgment,
order or decree entered in any action or proceeding brought by any federal,
state, municipal, foreign or other governmental department or agency or any
other party against a Company enjoining it in respect of, or the effect of
which is to limit, restrict, regulate or prohibit, any business practice or the
conduct of business in any area or the acquisition of any property.
2.15 LITIGATION. Except as set forth on Schedule 2.15, there are no
claims, actions, suits, demands or other proceedings or investigations, either
administrative or judicial, pending or, to such Seller's knowledge, threatened
against any Company or with respect to the Business or the Transactions. No
Company is charged with or, to such Seller's knowledge, threatened with, a
material charge or violation, or is under investigation with respect to a
possible material violation, of any material provision of any federal, state,
local or foreign law, statute, ordinance, administrative ruling, rule or
regulation relating to any aspect of the Business. Schedule 2.15 also sets
forth, with respect to the matters listed therein, those matters which are
fully or partially covered by insurance, and the amount, if any, of the claim
not so covered.
2.16 COMPLIANCE WITH LAWS. Except as set forth on Schedule 2.16, no
Company is in violation of or in default under: (i) any judgment, order or
decree of any court, or (ii) to such Seller's knowledge, any law, statute,
ordinance, rule or regulation of any federal, state, local or foreign
government or any department or agency of any of the foregoing (including,
without limitation, the Foreign Corrupt Practices Act and laws, regulations,
orders and restrictions applicable to zoning, pension, welfare or employee
benefit plans, wages and hours, equal employment, labor relations and
occupational health and safety), nor has it received any notice of
noncompliance, or of any investigation or review for possible violation of the
foregoing which would have a Material Adverse Effect. Except as set forth in
Schedule 2.16, there is no basis for any such action which would have a
Material Adverse Effect.
2.17 POWERS OF ATTORNEY. Except as set forth on Schedule 2.17 or
contained in the Contracts, no Company has any powers of attorney outstanding.
2.18 LICENSES AND RIGHTS. Except as set forth on Schedule 2.18, the
Companies possess all material franchises, licenses, permits and other
authorizations from federal, state, local, foreign and other governmental or
regulatory authorities that are necessary to permit the Companies to operate or
otherwise transact the Business at all locations and places where they have
operated or otherwise transacted business on or since the Current Date or are
presently operating or otherwise transacting business, and no Company is in
violation in any material respect of any of the same. As to any such permit,
license or
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authorization that is about to expire, a Company, as appropriate, has filed for
renewal of the same in a timely and proper manner. Such franchises, licenses,
permits and other authorizations are listed on Schedule 2.18.
2.19 CONTRACTS. Schedule 2.19 is a true and complete list of all written
and all material oral contracts, understandings, commitments, arrangements and
agreements (including all amendments thereto), unperformed in whole or in part,
to which any Company is a party (the "Contracts"), including but not limited
to:
(a) Contracts for the employment or compensation of any director, officer,
employee, registered representative or agent of any Company;
(b) Contracts relating to equipment purchases or construction;
(c) Collective bargaining agreements, bonus, incentive, pension, profit
sharing, hospitalization, life insurance, sickness and accident insurance,
deferred compensation, retirement, stock option or stock purchase plans or
similar plans providing employee benefits;
(d) Conditional sales contracts, leases of real or personal property and
contracts for the purchase or sale of real or personal property;
(e) Any contract or agreement for the furnishing of services or products
by any Company, except individual contracts made in the ordinary course of
business with scheduled payments of less than Twenty-Five Thousand Dollars
($25,000) in the aggregate;
(f) Contracts containing covenants limiting the freedom of any Company to
compete in any line of business or with any person,
(g) Any partnership or joint venture agreement or arrangement or any other
agreement involving a sharing of profits;
(h) Any lease of real or personal property;
(i) Any contract or agreement for the purchase of any materials, finished
products, supplies or services except individual purchase orders made in the
ordinary course of business with scheduled payments of less than Twenty-Five
Thousand Dollars ($25,000) in the aggregate;
(j) Any instrument or arrangement evidencing or securing indebtedness for
money borrowed or to be borrowed, whether directly or indirectly, by way of
purchase money obligation, guaranty, conditional sale, lease-purchase or
otherwise, or any contracts encumbering title to any properties, real or
personal; and
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(k) Distribution and sales representative agreements.
MCC has provided to Buyer a true and complete copy of each material written
Contract, and a true and complete written description of each material oral
Contract.
2.20 NO DEFAULTS. Except as set forth on Schedule 2.20, no material
breach or default under any Contract or any default (or event which with the
passage of time or the giving of notice or both would become a material default
or breach) exists in the performance of any obligation of any Company under the
terms of any Contract, and the consummation of the Transactions will not result
in such a breach or default nor result in the creation or imposition of any
Lien upon the Shares or any assets of any Company.
2.21 INTELLECTUAL PROPERTY.
(a) As used herein, "Intellectual Property" means all trade names,
trademarks, service marks, copyrights, patents, inventions, jingles, slogans,
symbols, logos and any other proprietary material, process, trade secret or
trade right used in the operation of the Business or otherwise owned or held by
any Company, and all registrations, applications and licenses for any of the
foregoing.
(b) Schedule 2.21 lists all Intellectual Property applied for, owned, used
or licensed (either as licensor or licensee) in connection with the operation
of the Business. Except as disclosed on Schedule 2.21:
(i) One of the Companies owns, free and clear of conflicting claims or
restrictions and without infringement on the rights of others, all right and
interest in, and right and authority to use in connection with the conduct of
the Business as presently conducted, all of the Intellectual Property listed on
Schedule 2.21 that is material to the conduct of the Business, and the rights
under all such Intellectual Property are in full force and effect.
(ii) There are no outstanding or, to the knowledge of such Seller,
threatened judicial or adversary proceedings to which any Company is a party
with respect to any of the Intellectual Property listed on Schedule 2.21.
(iii) No person or entity has been granted any license or other right or
interest in or to any of the Intellectual Property listed on Schedule 2.21 or
to the use thereof.
(iv) Such Seller has no knowledge of any infringement or unlawful use of
any of the Intellectual Property listed on Schedule 2.21.
(v) MCC has delivered to Buyer copies of all state and federal
registrations and other material documents, if any, establishing any of the
rights and properties constituting a part of the Intellectual Property.
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2.22 INSURANCE POLICIES. Schedule 2.22 lists the policies of theft, fire,
liability, workers' compensation and other forms of insurance held by any
Company, including the names of the insurers, the coverage limits and the
amount of the deductible. Schedule 2.22 also describes any self insurance
programs of any Company in effect. MCC has furnished to Buyer true and
complete copies of all such policies and descriptions of such self insurance
programs. Neither such Seller nor any Company has knowledge of any threat by
any insurance carriers to terminate any of the insurance policies now held by
any Company or materially increase any premiums in respect thereof, nor has any
Company failed to comply with any conditions contained in any of such policies
that would adversely affect any Company's rights under any such policies.
2.23 NO CONFLICT. Except as set forth on Schedule 2.23, neither such
Seller nor, to the knowledge of such Seller, any officer or director of any
Company has any interest in any property, real or personal, tangible or
intangible, including inventions, patents, copyrights, trademarks or trade
names, used in or pertaining to the Business.
2.24 ENVIRONMENTAL MATTERS. No environmental permits or licenses of any
Company are necessary to conduct its business as presently conducted or as
conducted during the last three (3) years. Except as set forth on Schedule
2.24, no Company has delivered any reports to any federal, state, local and
foreign environmental agencies for the past five (5) years regarding
environmental matters. No Company has received any notice of environmental
violations or has conducted, or currently operates, surface impoundments,
incinerators, Iandfills, tanks, waste piles or deep well injection systems for
the treatment, storage or disposal of hazardous or solid wastes. Except as
disclosed on Schedule 2.24, no Company has transported any hazardous wastes, or
entered into a contract or agreement, or otherwise arranged, for the
transportation of any such hazardous waste, for disposal or treatment at an
off-site treatment, storage or disposal facility. Neither such Seller nor any
Company is aware of any pending or threatened litigation by governmental
agencies or citizens groups concerning any alleged violation of environmental
laws or regulations by any Company. There are no claims or potential claims
resulting from any requirements, liabilities or claims, to remedy or cleanup or
resulting from the placement or discharge from any Company's facilities of
hazardous waste, solid wastes, wastewater or process water, whether required by
a statute, order or regulation of a governmental agency or a private claim.
2.25 EMPLOYEE PLANS. Except for the plans and arrangements listed and
described on Schedule 2.25 (individually a "Benefit Plan" and collectively the
"Benefit Plans"), no Company or any other member of the Controlled Group (as
defined below), maintains, sponsors or has an obligation or liability with
respect to any "employee benefit plan," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, and the applicable
regulations promulgated thereunder ("ERISA"), or any incentive, bonus or
severance plan or arrangement, employment contract, collective bargaining
agreement, deferred compensation, stock purchase or incentive agreement or
arrangement, or other employee benefit plan or arrangement. For purposes of
this
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Section 2.25, "Controlled Group" shall mean the Companies and any trade or
business, whether or not incorporated, which is currently treated together with
the Companies under Section 4001(b)(1) of ERISA or Sections 414(b), (c), (m) or
(o) of the Code. With respect to each Benefit Plans listed on Schedule 2.25,
true and complete copies of which have been provided to Buyer, except as set
forth on Schedule 2.25:
(a) There are no actions, suits or claims pending (other than routine
claims for benefits) or, to such Seller's knowledge, threatened against the
Benefit Plans, the assets of the Benefit Plans, any fiduciary of the Benefit
Plans, or any Company.
(b) The Benefit Plans, the fiduciaries and administrators of the Benefit
Plans, and the Controlled Group have at all times been in substantial
compliance with applicable requirements of ERISA, the Code, and any other
applicable law governing the Benefit Plans, and the Benefit Plans have at all
times been administered substantially in accordance with all such requirements
of law and in accordance with their respective terms to the extent consistent
with all such requirements of law.
(c) No Benefit Plan is a "multiemployer plan" as described in Section
3(37) of ERISA or Section 414(f) of the Code, or is subject to Title IV of
ERISA, or Part 3 of Subtitle B of Title 1 of ERISA.
(d) No trust associated with any of the Benefit Plans has earned any
"unrelated business taxable income" (as, such term is defined in Section 512 of
the Code and the regulations thereunder) or "unrelated debt financed income"
(as such term is defined in Section 514 of the Code and regulations
thereunder).
(e) If any of the Benefit Plans is an "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, (i) there is no trust associated with any
such Benefit Plan, (ii) any such Benefit Plan does not provide for
non-terminable or non-alterable medical benefits for employees, dependents or
retirees, and (iii) any such Benefit Plan does not provide any benefits for any
person upon or following retirement or termination of employment except as
otherwise required by Part 6 of Subtitle B of Title I of ERISA or Section 4980B
of the Code (herein collectively referred to as "COBRA"), and then only to the
extent the person pays for such benefit.
(f) Except as required by law or under the terms of the Benefit Plans, no
events or changes have occurred or are reasonably expected to occur with
respect to any of the Benefit Plans that would cause a material increase in the
cost of providing benefits under such Benefit Plan.
(g) Full payment has been made of all amounts which any Company is
required, under applicable law or under the Benefit Plans, to have paid as a
contribution or a benefit for the plan years of each of the Benefit Plans that
ended prior to the date hereof. All contributions required to be made to and
all other liability of any Company under the Benefit Plans for the periods
covered by the Financial Statements have been set forth on
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the appropriate Financial Statement in accordance with GAAP. Benefits under
the Benefit Plans are as provided in the documents governing the Benefit Plans
and, except as required by law or in accordance with the terms of the Benefit
Plans, have not been increased subsequent to the date as of which such
documents have been provided.
(h) The consummation of the Transactions will not (i) entitle any current
or former employee or officer of any Company to severance pay, unemployment
compensation or any other payment, (ii) accelerate the time of payment or
vesting under any of the Benefit Plans, (iii) increase the amount of
compensation due any such employee or officer, (iv) cause any Company to
transfer or set aside any assets to fund or otherwise provide for the benefits
under any of the Benefit Plans for any current or former employee, officer or
director, or (v) result in any non-exempt prohibited transaction described in
ERISA Section 406 or Code Section 4975.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
3.1 ORGANIZATION; QUALIFICATION. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Indiana,
has full corporate power and authority to carry on its business as and where
now conducted and to own, operate and lease its properties at and in the places
where such properties are now owned, operated or leased by it, and is duly
qualified, licensed or otherwise authorized to do business and is in good
standing in each jurisdiction, domestic and foreign, in which the nature of the
business conducted by it or the property owned, leased or operated by it makes
such qualification, licensing or other authorization necessary.
3.2 AUTHORITY OF BUYER.
(a) The execution and delivery of this Agreement by Buyer and the due
consummation of the Transactions will have been duly authorized by all
necessary corporate action as of the Closing Date, and this Agreement
constitutes a valid and binding agreement of Buyer enforceable against it in
accordance with its terms. The execution of this Agreement by Buyer is not
contrary to the articles of incorporation or bylaws of Buyer. Neither the
execution, delivery nor consummation of this Agreement by Buyer will, with the
passage of time, the giving of notice or otherwise, result in a violation or
breach of, or constitute a default under, any term or provision of any
indenture, mortgage, deed of trust, lease, franchise, license, permit,
instrument, order, judgment, decree, statute, rule, regulation, ordinance, law,
contract, agreement or any other restriction to which Buyer is a party or to
which Buyer or any of its assets are subject or bound, nor will it result in
the creation or imposition of any Lien upon any of its assets nor will it
result in an acceleration or termination of any loan agreement or other
evidence of indebtedness, security agreement or industrial revenue bond
document to which Buyer is a party or to which any of its assets are subject.
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(b) At the Closing Date, no further corporate action will be necessary on
the part of Buyer to make this Agreement valid and binding upon Buyer. No
other approval or consent of any person, firm or other entity or body is
required to be obtained by Buyer for the authorization of this Agreement or the
consummation by Buyer of the Transactions.
3.3 INVESTMENT PURPOSE. The Shares are being acquired for investment and
not with a view toward the resale or distribution thereof. Buyer understands
that the Shares may not be sold or transferred unless subsequently registered
under the Securities Act of 1933, as amended (the "Securities Act"), and any
applicable state securities laws, or unless exemptions from registration under
such laws are available. Buyer represents and warrants that the Companies have
made available to Buyer the opportunity to ask questions and to receive answers
concerning the Companies, the Shares and to otherwise conduct the due diligence
it sought to conduct in connection with an investment decision to purchase the
Shares.
3.4 BROKERAGE AND FINDERS' FEE. Buyer has not incurred any liability to
any Broker, finder or agent for any brokerage fees, finders' fees or
commissions with respect to the Transactions.
ARTICLE 4
COVENANTS
4.1 CONFIDENTIALITY. All information delivered to Buyer or otherwise
disclosed in writing as confidential by any Seller (or its or his
representatives) before or after the date hereof, in connection with the
Transactions, shall be kept confidential by Buyer, the other Sellers, and its
or his 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,
the other Sellers, or its or his affiliates, (iii) is required by law or the
rules of any stock exchange to be disclosed or (iv) to the extent such duty as
to confidentiality is waived in writing by or on behalf of the party from whom
the information is obtained.
4.2 NONCOMPETITION.
(a) Each Seller severally agrees that during the three-year period (in the
case of Levy) or the one-year period (in the case of Dow Jones and Curtis) from
and after the Closing Date, such Seller shall not, whether as an owner,
shareholder, partner, employee, consultant, advisor, independent contractor or
otherwise, directly or indirectly (except as an employee of any Company) engage
in the business of producing, publishing, distributing or selling a regional or
city magazine the content of which is generally centered on Texas or a city or
other area or location within Texas. The parties acknowledge and agree that
this provision does not apply to any of any Seller's other publications
(whether print or on-line), in their current formats, existing as of the date
hereof, even if such existing
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publications carry articles or publish issues from time to time pertaining to
events of interest covered in the Magazine.
(b) Each Seller severally acknowledges that the restrictions in the
foregoing Subsection (a) are reasonable in scope and duration and necessary to
protect, and to enable Buyer as the owner of the Business to receive the
anticipated benefits of, the goodwill of the Business.
(c) The restrictions under foregoing Subsection (a) shall be severable and
constitute a separate covenant with respect to each type of business. Each
Seller agrees that if in any judicial proceeding a court shall refuse to
enforce any of the separate covenants under foregoing Subsection (a), then such
unenforceable covenant shall be deemed eliminated from the provisions of this
Agreement for the purposes of such proceeding to the extent necessary to permit
the remaining separate covenants to be enforced in such proceeding.
(d) For a period of two years after the Closing Date, each Seller
severally agrees to hold in confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of law or the rules
of any stock exchange, all confidential documents and information concerning
Buyer or the Business, provided that the restrictions in this Subsection shall
not preclude the enforcement of any such Seller's rights under this Agreement.
(e) Each Seller severally acknowledges that Buyer and the Companies will
be irreparably harmed in the event of a breach or threatened breach by any of
them of the restrictions under this Section, that there would be no adequate
relief at law or in damages to compensate Buyer or the Companies for any such
breach, and that Buyer or the Companies shall be entitled to injunctive relief
requiring specific performance of this Section by such Seller in addition to
any other remedy that may be available at law or in equity.
(f) Each Seller severally acknowledges and agrees that the restrictions in
this Section shall be for the benefit of Buyer, the Companies and their
respective successors and assigns, and shall be enforceable by Buyer, the
Companies and their respective successors and assigns.
4.3 [INTENTIONALLY OMITTED.]
4.4 TERMINATION OF SHAREHOLDER AGREEMENTS. Sellers shall terminate or
cause to be terminated the following agreements and shall release and waive any
and all claims thereunder, effective upon the Closing: (i) the Shareholders'
Agreement dated October 7, 1987 among MCC, Levy, Curtis and Dow Jones, as
amended by the Amendment to Shareholders' Agreement dated March 29, 1996 and
(ii) the Stock Restriction Agreement dated October 7, 1987 among Curtis, Levy,
MCC and Dow Jones.
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4.5 MAINTENANCE OF INSURANCE. For a period of at least four (4) years
following the Closing, Buyer will cause MCC and TMI and their respective
successors and assigns to maintain liability insurance coverage including
coverage for libel and slander in such amounts and with such terms and
provisions as are reasonably prudent and generally customary for companies
engaged in the same business as MCC and TMI provided; however; that in no event
shall the amount of such coverage be less than thirty million and no/100
dollars $30,000,000.00 per occurrence and thirty million and no/100 dollars
$30,000,000.00 in the aggregate. During such period, Buyer shall include
Sellers as additional insureds under such insurance and provide to Sellers
evidence of such insurance as Sellers or any of them may reasonably request.
4.6 BONUSES. Buyer shall cause the Companies promptly after Closing to
pay bonuses in the amounts and to the employees specified on Schedule 4.6. The
parties agree that all of such bonuses shall constitute current liabilities of
the Companies as of the close of business immediately prior to Closing but that
a portion of such bonuses equal to the lesser of (i) $45,000.00 or (ii)
one-half of the full amount of such bonuses, shall be excluded from Closing
Date Current Liabilities.
ARTICLE 5
INDEMNIFICATION
5.1 INDEMNIFICATION BY BUYER. Buyer agrees promptly to indemnify and save
Sellers harmless from and against all costs, demands, expenses, losses, claims,
damages and liabilities, including without limitation reasonable attorney's
fees, arising out of, relating to or resulting from:
(a) Any inaccuracy in any representation or the breach of any warranty
made by Buyer in or pursuant to this Agreement or in any Closing document
delivered to Sellers pursuant to this Agreement or in any other document which
this Agreement recites as having been delivered by Buyer to Sellers, or
(b) Any failure by Buyer duly to perform or observe any term, provision,
covenant or agreement in this Agreement on the part of Buyer to be performed or
observed prior to or after the Closing, or
(c) Any liability or claim arising out of the conduct of the Business
after the Closing Date.
Buyer shall not be obligated to indemnify Sellers unless and until the
aggregate amount of such indemnification exceeds $500,000.00, in which case
Sellers shall then be entitled to indemnification of the entire amount of such
indemnification (i.e., from the first dollar), provided that any payment owed
by Buyer to Sellers under Section 1.2 shall not be
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counted in determining whether such $500,000.00 limitation is satisfied, and
Sellers shall have the right to recover any such payment without regard to any
such limitation.
5.2 INDEMNIFICATION BY SELLERS.
(a) Subject to Section 5.2(b), Sellers, jointly and severally, agree
promptly to indemnify and hold harmless Buyer and, after Closing, Companies
from and against all costs, demands, expenses, losses, claims, damages and
liabilities, including without limitation reasonable attorney fees
(collectively, "Buyer's Losses"), arising out of, relating to or resulting
from:
(i) Any inaccuracy in any representation or the breach of any warranty
made by any Seller in or pursuant to this Agreement, any Schedule hereto or
document attached to such Schedule or in any Closing document, or
(ii) Any failure by any Seller duly to perform or observe any term,
provision, covenant, agreement or condition in this Agreement on the part of
such Seller to be performed or observed prior to or after the Closing, or
(iii) The Stanley Lawsuit (as defined in Schedule 2.15) or the article
published in the Magazine which is the subject of the Stanley Lawsuit, to the
extent any Buyer's Losses arising out of, relating to or resulting from the
Stanley Lawsuit or such article are not recoverable by the Companies under
insurance policies maintained by the Companies prior to closing.
(b) Indemnification under Sections 5.2(a) is subject to the following
limitations:
(i) No Seller shall be obligated to indemnify Buyer unless and until
Buyer's Losses exceed $500,000.00, in which case Buyer shall then be entitled
to indemnification of the entire amount of Buyer's Losses (i.e., from the first
dollar), provided that any amount owed by any Seller to Buyer under Sections
1.2 and 5.2(a)(iii) and Buyer's Losses from a breach of Section 2.1(a), 2.2,
2.3 or 2.10 shall not be counted in determining whether such limitation is
satisfied, and Buyer shall have the right to recover any such payment without
regard to any such limitation.
(ii) The aggregate amount of all payments required to be made by any
Seller in satisfaction of claims for indemnification pursuant to Section 5.2(a)
shall not exceed such Seller's portion of the Purchase Price as set forth in
Section 1.2(b)(ii).
(iii) With respect to any Buyer's Loss, Buyer shall not be entitled to
recover from either Levy or Dow Jones in excess of such Seller's Pro Rata Share
(as defined below) of the Buyer's Loss until Buyer has obtained a judgment
against the other (the "Other Seller") for such Buyer's Loss and such judgment
remains undischarged, in whole or in part, for thirty (30) days after the day
it is entered, in which case Buyer shall, subject to the limitations set forth
in the foregoing Subsection (b)(ii), be entitled to recover the full
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amount of the Buyer's Loss without regard to the limitation in this Subsection
(b)(iii); provided that (A) the limitation in this Subsection (b)(iii) shall
not apply if the Other Seller is subject to voluntary or involuntary bankruptcy
or insolvency proceedings, has sold substantially all of its or his assets, or
has died or otherwise ceased to exist, and (B) any appeal from a judgment
against the Other Seller shall not abate or otherwise impair Buyer's right to
collect the entire amount of the Buyer's Loss without regard to the limitation
in this Subsection (b)(iii) subsequent to the thirtieth (30th) day after the
entry of such judgment. "Pro Rata Share" with respect to either Dow Jones or
Levy shall mean a fraction having a numerator equal to the ownership percentage
specified in Section 1.2(b) for such Seller and a denominator equal to
98.9173%.
(iv) Notwithstanding anything contained herein to the contrary, no Seller
shall be liable for any Buyer's Loss resulting from or relating to the breach
of any other Seller's representations and warranties under Section 2.3 or any
other Seller's covenants under Sections 4.1 and 4.2.
5.3 INDEMNITY PROCEDURE.
(a) Any party (an "Indemnified Party") seeking indemnification hereunder
from any other party hereto (an "Indemnifying Party") shall notify the
Indemnifying Party of any claim to be asserted under Section 5.1 or 5.2 against
the Indemnifying Party within thirty (30) days after the Indemnified Party
receives notice of or otherwise has actual knowledge of such claim ("Adverse
Claim"), and shall provide to the Indemnifying Party as soon as practicable
thereafter all information and documentation necessary to support and verify
the Adverse Claim being asserted, and the Indemnifying Party shall be given
access to all books and records in the possession or control of the Indemnified
Party which the Indemnifying Party reasonably determines to be related to such
Adverse Claim.
(b) Promptly after receipt by an Indemnified Party of notice of the
commencement by any third party of any action, suit or proceeding which might
result in the Indemnifying Party becoming obligated to indemnify or make any
other payment to the Indemnified Party under this Agreement, the Indemnified
Party shall notify the Indemnifying Party forthwith in writing of the
commencement thereof. The failure of the Indemnified Party to so notify the
Indemnifying Party shall not relieve the Indemnifying Party from any liability
which it may have on account of this indemnification or otherwise, except to
the extent that the Indemnifying Party is materially prejudiced thereby. The
Indemnifying Party shall have the right, within thirty (30) days after being so
notified, to assume the defense of such litigation or proceeding with counsel
reasonably satisfactory to the Indemnified Party in good faith and at the
Indemnifying Party's own expense; provided that unless and until the
Indemnifying Party shall assume such defense pursuant to this sentence, the
Indemnified Party shall have the right to conduct and control the defense of
such litigation and proceeding (including the settlement thereof) without the
Indemnifying Party's consent and shall be entitled to payment from the
Indemnifying Party of all reasonable costs of such defense (including
attorney's fees and expenses). If it is determined that the Indemnified Party
is not entitled to indemnification from the Indemnifying Party, then the
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amount of the costs of such defense advanced by the Indemnifying Party shall be
reimbursed by the Indemnified Party. In any such litigation or proceeding the
defense of which the Indemnifying Party shall have so assumed, the Indemnified
Party shall have the right to participate therein and retain its own counsel at
its own expense, unless (i) the Indemnifying Party and the Indemnified Party
shall have mutually agreed to the retention of the same counsel or (ii) the
named parties to any such litigation or proceeding (including impleaded
parties) include both the Indemnifying Party and the Indemnified Party, and
representation of such parties by the same counsel would be inappropriate due
to actual or potential differing interests between them; in either such case,
such separate counsel may be retained by the Indemnified Party at the expense
of the Indemnifying Party. The Indemnifying Party may elect to settle any
claim, action or proceeding defended by it without the written consent of the
Indemnified Party provided that such settlement is limited to payment of
monetary damages which are payable in full by the Indemnifying Party and the
Indemnified Party is fully discharged at the time of the settlement from any
liability with respect to the claim, action or proceeding. The Indemnifying
Party may not enter into any settlement that is not limited to payment of
monetary damages without the Indemnified Party's prior written consent which
will not be unreasonably withheld. Each Seller and Buyer severally covenant to
use all reasonable efforts to cooperate fully with respect to the defense of
any claim, action or proceeding covered by this Section 5.3.
(c) The parties acknowledge and agree that (i) the Stanley Lawsuit
constitutes an Adverse Claim with respect to which Buyer is deemed to have
given Sellers notice and related information and documentation in accordance
with Section 5.3(a), and (ii) the Sellers as the Indemnifying Party shall have
the right to assume the defense of the Stanley Lawsuit in accordance with
Section 5.3(b). Notwithstanding anything herein to the contrary, it is agreed
that (i) the Stanley Lawsuit shall not be settled by Buyer without the consent
of Sellers if the resulting settlement will exceed amounts that are recoverable
by the Companies under insurance policies maintained by the Companies prior to
Closing and (ii) Buyer shall not seek to change existing legal counsel handling
the Stanley Lawsuit without the consent of Sellers, which consent (under either
(i) or (ii)) shall not be unreasonably withheld. Furthermore, it is expressly
agreed that if the Sellers assume the defense of the Stanley Lawsuit, Buyer
will cause MCC to cooperate fully so that the cost of the defense of such
lawsuit (including attorneys' fees and expenses) can continue to be borne by
the Companies in accordance with the terms of the insurance policies maintained
by the Companies prior to the Closing, and shall only be borne by the Sellers
after all insurance available to the Companies for the payment of such costs is
exhausted.
5.4 MEASURE OF DAMAGES. The measure of damages to be awarded to any
Indemnified Party shall be the amount which would be required to place such
Indemnified Party in the position in which it or he would have been had the
event resulting in such indemnification not occurred, taking into account
receipt of insurance proceeds, related indemnity payments from unaffiliated
third parties and related tax benefits, if any.
5.5 WAIVER OF RIGHT TO CONTRIBUTION. Sellers hereby waive, effective as
of the Closing Date, any rights which Sellers may have against any Company in
connection with
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any contribution or indemnification for payments made after the Closing
pursuant to this Agreement or otherwise.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligation of Buyer to consummate the purchase of the Shares is
subject to the satisfaction of the following conditions at or prior to the
Closing Date, unless waived in writing by Buyer:
6.1 PERFORMANCE OF UNDERTAKINGS. Each of the acts and undertakings to be
performed by Sellers on or before the Closing Date pursuant to this Agreement
shall have been duly performed.
6.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Sellers contained in this Agreement or in any Schedule or Exhibit hereto or any
certificate delivered to Buyer that are qualified by materiality shall be true,
and all such representations and warranties that are not qualified by
materiality shall be true in all material respects, on and as of the Closing
Date with the same effect as though such representations and warranties had
been made on and as of such date, regardless of the date as of which the
information in this Agreement or any such Schedule, Exhibit or certificate is
given, except for changes permitted under the terms of this Agreement or
consented to in writing by Buyer.
6.3 CONSENTS. All necessary approvals or consents shall have been
obtained from any and all federal, state, local and foreign governmental
departments and agencies and all other commissions, boards, agencies and from
any other person, firm or entity whose approval or consent is necessary to the
consummation of the Transactions.
6.4 HART-SCOTT-RODINO. Any waiting periods applicable to the Transactions
under applicable U.S. and foreign antitrust or trade regulation laws and
regulations, including, without limitation, under the Hart-Scott-Rodino Act
("HSR"), shall have expired or been terminated.
6.5 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the Business, or the results of operations, assets or financial
condition of any Company between the Current Date and the Closing Date, other
than changes affecting the magazine publishing industry generally.
6.6 DOCUMENTS TO BE DELIVERED TO BUYER. Buyer shall have received all of
the following documents, satisfactory in form in the reasonable discretion of
Buyer and its counsel:
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(a) Certificates representing all of the Shares, with stock powers
covering the Shares endorsed in blank and in proper form for transfer, with all
requisite stock transfer tax stamps, if any, affixed to such certificates;
(b) The written resignations of all officers and directors of each Company
or documentation reasonably satisfactory to Buyer as to the removal, consistent
with law, of any non-resigning officer or director;
(c) The opinion of each of Levy's counsel, Dow Jones' counsel and MCC's
counsel, each dated the Closing Date, to the effect set forth in Exhibit
6.6(c);
(d) Governmental certificates, dated as of a date as near as practicable
to the Closing Date, showing that each Company is duly incorporated and in good
standing in the State of Texas and that MCC is qualified to do business and in
good standing in each jurisdiction listed on Schedule 2.1(a);
(e) A certificate of the Secretary (or Assistant Secretary) of each
Company attesting as to the Articles of Incorporation and Bylaws of such
Company;
(f) The stock certificates representing all of the outstanding capital
stock of the Subsidiaries issued in the name of MCC;
(g) The corporate minute books of each Company, including true and
complete copies of the Articles of Incorporation, the Bylaws and the minutes of
all meetings of directors and shareholders and written consents reflecting all
actions taken by the directors or shareholders without a meeting from the date
of incorporation to the Closing Date; and
(h) Such additional information and materials as Buyer shall have
reasonably requested to evidence the satisfaction of Sellers' obligations
hereunder.
6.7 SUITS. No suit, action or other proceeding shall be threatened or
pending before any court or governmental agency in which it is sought to
restrain or prohibit or to obtain damages or other relief in connection with
this Agreement or the consummation of the Transactions.
6.8 OFFICERS AND KEY EMPLOYEES. Buyer shall have entered into an
employment, consulting agreement or other arrangement with Levy and each of the
officers and key employees identified on Schedule 6.8 containing terms and
conditions acceptable to Buyer and Sellers including, without limitation, (a)
the length of such arrangement, (b) duties and responsibilities intended, (c)
positions, title and reporting responsibilities and (d) base compensation,
benefits and other compensation arrangements.
6.9 BANK LOAN. Buyer shall have received assurances satisfactory to Buyer
that immediately upon payment in full of the Bank Loan, all liens securing the
Bank Loan, including, without limitation, the pledge of the shares of TMI,
shall be released in full.
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ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATION OF SELLERS
The obligations of Sellers to sell the Shares is subject to satisfaction
of the following conditions at or prior to the Closing Date, unless waived by
each Seller:
7.1 PERFORMANCE OF UNDERTAKINGS. Each of the acts and undertakings to be
performed by Buyer on or before the Closing Date pursuant to this Agreement
shall have been duly performed.
7.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Buyer contained in this Agreement or in any certificate delivered to Sellers
shall be true in all material respects on and as of the Closing Date, with the
same effect as though such representations and warranties had been made on and
as of such date, except for changes permitted under the terms of this Agreement
or consented to in writing by Sellers.
7.3 CONSENTS. All necessary approvals, consents and releases shall have
been obtained from any and all federal, state, local and foreign governmental
departments and agencies and from all other commissions, boards, agencies and
from any other person, firm or entity whose approval, consent or release is
necessary to the consummation of the transactions contemplated by this
Agreement.
7.4 HART-SCOTT-RODINO. Any waiting periods applicable to the
Transactions under applicable U.S. and foreign antitrust or trade regulation
laws and regulations, including, without limitation, under the HSR, shall have
expired or been terminated.
7.5 DOCUMENTS TO BE DELIVERED TO SELLERS. Sellers shall have received the
following documents or confirmation of actions by Buyer, satisfactory in form
and substance in the reasonable discretion of each Seller and its or his
counsel:
(a) Payment of the Adjusted Initial Purchase Price;
(b) Copies of resolutions adopted by the Board of Directors of Buyer,
certified by its Secretary or an Assistant Secretary, authorizing the
execution, delivery and performance of this Agreement;
(c) The opinion of Buyer's counsel, dated the Closing Date, to the effect
set forth in Exhibit 7.5(c); and
(d) Such additional information and materials as Seller shall have
reasonably requested to evidence satisfaction of Buyer's obligations hereunder.
7.6 SUITS. No suit, action or other proceeding shall be threatened or
pending before any court or governmental agency in which it is sought to
restrain or prohibit or to
26
<PAGE> 31
obtain damages or other relief in connection with this Agreement or the
consummation of the Transactions.
7.7 INSURANCE ARRANGEMENTS.
(a) Levy and Buyer shall have entered into an agreement that provides for
(i) the release by MCC of any right to receive reimbursement for premium
payments made by MCC under the existing split-dollar life insurance arrangement
with Levy described on Schedule 7.7, and (ii) the release by Levy of any
obligation of MCC to make any further premium payments for such insurance.
(b) Curtis and Buyer shall have entered into an agreement that provides
for (i) the release by MCC of any right to receive reimbursement for premium
payments made by MCC under the existing split-dollar life insurance arrangement
with Curtis described on Schedule 7.7, and (ii) the release by Curtis of any
obligation of MCC to make any further premium payments for such insurance.
(c) Trustee of the Levy Children's Family Trusts ("Trustee") and Buyer
shall have entered into an agreement that provides for (i) the release by MCC
of any right to receive reimbursement for premium payments made by MCC under
the existing split-dollar life insurance arrangement with Trustee described on
Schedule 7.7, and (ii) the release by Trustee of any obligation of MCC to make
any further premium payments for such insurance.
7.8 ASSIGNMENT OF PERSONAL PROPERTY. Title to the assets set forth on
Schedule 7.8 shall have been transferred to the respective Sellers as set forth
on such Schedule 7.8.
7.9 OFFICERS AND KEY EMPLOYEES. The condition set forth on Schedule 6.8 shall
have been satisfied.
ARTICLE 8
CLOSING
The closing of the Transactions (the "Closing") shall take place at the
offices of Bose McKinney & Evans, 2700 First Indiana Plaza, 135 North
Pennsylvania Street, Indianapolis, Indiana 46204 on the date hereof.
ARTICLE 9
SURVIVAL
All representations, warranties, covenants and agreements contained in
this Agreement or in any other Closing document shall survive the Closing
regardless of any investigation, inquiry or knowledge on the part of any party
hereto, and the Closing shall
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<PAGE> 32
not constitute a waiver by any party of any breach thereof by any other party;
provided, however, that the period of survival shall (i) in the case of the
representations and warranties in Sections 2.1(a), 2.2, 2.3, 2.10 and Article
3, continue for the applicable statute of limitation, (ii) in the case of all
other representations and warranties, end eighteen (18) months after the
Closing Date, (iii) in the case of the indemnification covenant under Section
5.1 or 5.2 for breach of any representation or warranty, continue for the same
period as the representation or warranty, (iv) in the case of the covenants
under Section 4.2, continue for the period specified in such Section, (v) in
the case of the indemnification obligation under Section 5.2(a)(iii), continue
indefinitely, and (vi) in the case of all other covenants and agreements,
continue for the applicable statute of limitation (in each case, the "Survival
Period"). No claim may be brought under this Agreement or any other document
unless written notice of the claim is given on or prior to the last day of the
applicable Survival Period. In the event notice of a bona fide claim existing
at the time such notice is so given, the right to indemnification with respect
to the claim as set forth in Article 5 shall survive the applicable Survival
Period until the claim is finally resolved and any obligations with respect to
the claim are fully satisfied.
ARTICLE 10
REMEDIES
10.1 GENERAL. All rights, remedies or powers hereby conferred shall, to
the extent not prohibited by law, be deemed cumulative and not exclusive of any
other thereof, or of any other rights, remedies or powers available. No single
or partial exercise of any right, remedy or power by a party shall preclude
further exercise thereof.
10.2 NO WAIVER. No delay or omission to exercise any right, power or
remedy accruing to a party upon the occurrence of any breach of any warranty,
covenant or agreement contained in this Agreement shall impair any such right,
power or remedy or be construed to be a waiver of any such breach or any
acquiescence therein or to any similar breach thereafter occurring. No waiver
of any single breach shall be deemed to be a waiver of any thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of a party of any breach or any waiver of any provision or condition
of this Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing.
ARTICLE 11
MISCELLANEOUS
11.1 ASSIGNMENT. All covenants, agreements, representations and
warranties of the parties contained herein shall be binding upon and inure to
the benefit of Buyer and its successors and assigns and Sellers and their
respective successors, assigns, estates and personal representatives and the
Companies and their successors and assigns. This Agreement may not be assigned
by any party without the prior written consent of the other parties, except
that (i) Buyer may assign its rights or delegate its duties hereunder to any
direct or indirect wholly-owned subsidiary of Buyer, and (ii) any party may
assign its rights
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<PAGE> 33
under this Agreement as collateral security to any lender providing financing
to the party or any of its affiliates; provided that in the case of any
assignment, the assignor shall remain liable for performance of his or its
indemnity and other obligations under this Agreement.
11.2 EXPENSES. Buyer and each Seller will bear all of his or its own
respective expenses, and MCC will bear its expenses, including but not limited
to counsel and accountants' fees, in connection with this Agreement and the
Transactions. Any such expenses of MCC that are not paid in full as of the
Closing shall constitute current liabilities of the Companies as of January 31,
1998, but the lesser of (i) $15,000 or (ii) one-half (1/2) of such expenses
shall be excluded as Closing Date Current Liabilities.
11.3 NOTICE. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
(i) personally delivered, (ii) delivered by courier (including overnight
delivery service) or (iii) deposited in the United States mail, certified or
registered, return receipt requested, postage prepaid, in each case addressed
to the parties or their permitted assignees, at the following addresses (or at
such other address as to which notice shall be given in writing by either party
to the other) as follows:
(a) To Buyer:
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.
(b) To Sellers:
(i) Levy:
Michael R. Levy
Post Office Box 146
Austin, Texas 78767
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<PAGE> 34
Copy to:
W. Amon Burton, Jr., Esq.
1306 Guadalupe
Austin, Texas 78701
(ii) Dow Jones:
Dow Jones & Company, Inc.
200 Liberty Street
New York, New York 10281
Attention: Mr. Kevin Roche, Chief Financial Officer
Copy to:
Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas
New York, New York 10036-6710
Attention: John P. Schmitt, Esq.
(iii) Curtis:
Gregory Curtis
3602 River Road
Austin, Texas 78703
Copy to:
Akin, Gump, Strauss, Hauer & Feld, LLP
1900 Frost Bank Plaza
816 Congress Avenue
Austin, Texas 78701
Attention: Brandon C. Janes
11.4 CAPTIONS. Captions and Section headings used herein are for
convenience only and are not a part of this Agreement and shall not be used in
construing it.
11.5 COOPERATION. The parties agree to cooperate in the effectuation of
the Transactions and to execute any and all additional documents or to take
such additional action as shall be reasonably necessary or appropriate for such
purpose.
11.6 SCHEDULES AND EXHIBITS. All references to Schedules and Exhibits
herein shall include Schedules and Exhibits hereto or certified by and
delivered by the applicable parties prior to the execution and delivery of this
Agreement whether or not attached
30
<PAGE> 35
hereto. All Schedules, certificates and documents delivered pursuant to the
terms of this Agreement are made a part hereof.
11.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
11.8 PUBLICITY. No party shall issue or cause the publication of any
press release or other public announcement with respect to the transactions
contemplated by this Agreement without the consent of each of the other parties
(which consent shall not be unreasonably withheld) except as may be required by
law, rule or regulation, court process or any listing agreement with any
national securities exchange.
11.9 APPLICABLE LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Texas without regard to its principles
of conflicts of laws.
11.10 CONSENT TO JURISDICTION. EACH PARTY HERETO (I) AGREES THAT THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF INDIANA OR, IF
JURISDICTION OF THAT COURT IS NOT AVAILABLE, THE STATE COURTS OF THE STATE OF
INDIANA, SHALL HAVE EXCLUSIVE JURISDICTION OF ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT AND ANY ACTION FOR ENFORCEMENT OF ANY JUDGMENT
IN RESPECT THEREOF; (II) AGREES TO SUBMIT GENERALLY AND UNCONDITIONALLY TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF INDIANA OR, IF JURISDICTION OF THAT COURT IS NOT AVAILABLE, TO THE
EXCLUSIVE JURISDICTION OF THE STATE COURTS OF THE STATE OF INDIANA, FOR THE
PURPOSE OF ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND
ANY ACTION FOR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF; (III)
IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING IN
ANY MANNER PERMITTED BY THE RULES APPLICABLE TO SUCH COURT, INCLUDING SERVICE
OF PROCESS BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE
ADDRESS FOR SUCH PARTY NOTED HEREIN; AND (IV) IRREVOCABLY WAIVES ANY OBJECTION
WHICH SUCH PARTY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND IRREVOCABLY WAIVES AND
AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM;
PROVIDED THAT (A) A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING THAT IS NOT
FURTHER APPEALABLE SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER
JURISDICTION BY SUIT ON THE JUDGMENT, AND (B) ANY ACTION FOR SPECIFIC
PERFORMANCE OF OTHER INJUNCTIVE OR
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<PAGE> 36
EQUITABLE RELIEF MAY BE BROUGHT IN ANY OTHER COURT HAVING PERSONAL JURISDICTION
OVER THE DEFENDANT.
11.11 SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against its regulatory policy, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
11.12 ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits hereto) constitutes the entire agreement between the parties hereto
with respect to the subject hereof, and no amendment, alteration or
modification of this Agreement shall be valid unless in each instance such
amendment, alteration or modification is expressed in a written instrument duly
executed in the name of the party or parties making such amendment, alteration
or modification. There are no oral agreements between or among the parties
hereto.
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<PAGE> 37
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
BUYER:
EMMIS BROADCASTING CORPORATION
By:______________________________________________
Howard L. Schrott, Executive Vice President, Chief
Financial Officer and Treasurer
SELLERS:
__________________________________________________
MICHAEL R. LEVY
DOW JONES & COMPANY, INC.
By:_______________________________________________
Printed:__________________________________________
Title:____________________________________________
__________________________________________________
GREGORY CURTIS
_________________________________________________
TRACY CURTIS (wife of Gregory Curtis)
33
<PAGE> 1
EXHIBIT 10.15
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
EMMIS BROADCASTING CORPORATION
AND
WABASH VALLEY BROADCASTING CORPORATION
* * *
MARCH 20, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS 1
"Accounts Receivable" 1
"Affiliate" 1
"Assets" 1
"Assumed Contracts" 1
"Closing" 2
"Closing Date" 2
"Consents" 2
"Contracts" 2
"Early Termination Event" 2
"Escrow Agent" 2
"Escrow Agreement" 2
"Excluded Assets" 2
"FCC" 2
"FCC Consent" 2
"FCC Licenses" 2
"Final Deposit" 2
"GAAP" 2
"Initial Deposit" 3
"Intangibles" 3
"Licenses" 3
"Material Adverse Effect" 3
"Non-FCC Licenses" 3
"Permitted Liens" 3
"Purchase Price" 3
"Real Property" 3
"Tangible Personal Property" 3
SECTION 2. PURCHASE AND SALE OF ASSETS 4
2.1 Agreement to Sell and Buy 4
2.2 Excluded Assets 4
2.3 Purchase Price 5
2.4 Payment of Purchase Price 6
2.5 Assumption of Liabilities and Obligations 6
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER 7
3.1 Organization, Standing, and Authority 7
3.2 Authorization and Binding Obligation 7
3.3 Absence of Conflicting Agreements 7
</TABLE>
- i -
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
3.4 Title to and Condition of Real Property 8
3.5 Title to and Condition of Tangible Personal Property 8
3.6 Assumed Contracts 9
3.7 Consents 9
3.8 Intangibles 10
3.9 Insurance 10
3.10 Reports 10
3.11 Personnel 10
3.12 Taxes 11
3.13 Claims and Legal Actions 11
3.14 Environmental Matters 11
3.15 Compliance with Laws 12
3.16 Conduct of Business in Ordinary Course 12
3.17 Transactions with Affiliates 12
3.18 Broker 12
3.19 Governmental Licenses 12
3.20 Acquired Assets 13
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER 13
4.1 Organization, Standing, and Authority 13
4.2 Authorization and Binding Obligation 13
4.3 Absence of Conflicting Agreements 14
4.4 Broker 14
4.5 Buyer Qualifications 14
4.6 Financing 14
SECTION 5. OPERATIONS OF THE STATIONS PRIOR TO CLOSING 14
5.1 Generally 14
5.2 Compensation 15
5.3 Contracts 15
5.4 Disposition of Assets 15
5.5 Encumbrances 15
5.6 Access to Information 15
5.7 Maintenance of Assets 15
5.8 Insurance 16
5.9 Consents 16
5.10 Books and Records 16
5.11 Notification 16
5.12 Compliance with Laws 16
5.13 Collection of Accounts Receivable 16
5.14 Cure 16
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
5.15 Licenses 16
5.16 Audited Financial Statements 17
5.17 Schedules 17
SECTION 6. SPECIAL COVENANTS AND AGREEMENTS 17
6.1 HSR Act 17
6.2 Control of the Stations 17
6.3 Risk of Loss 17
6.4 Confidentiality 18
6.5 Cooperation 18
6.6 Access to Books and Records 18
6.7 Appraisal 18
6.8 Employment Matters 18
6.9 Accounts Receivable 19
6.10 FCC Consent 20
6.11 Buyer Conduct 20
6.12 Noncompetition Agreement 20
SECTION 7. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER AT CLOSING 21
7.1 Conditions to Obligations of Buyer 21
7.2 Conditions to Obligations of Seller 24
SECTION 8. CLOSING AND CLOSING DELIVERIES 24
8.1 Closing 24
8.2 Deliveries by Seller 25
8.3 Deliveries by Buyer 25
SECTION 9.TERMINATION 26
9.1 Termination by Seller 26
9.2 Termination by Buyer 26
9.3 Rights on Termination 27
9.4 Escrow Deposit 28
SECTION 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; CERTAIN REMEDIES 28
10.1 Representations, Warranties and Covenants 28
10.2 Indemnification by Seller 29
10.3 Indemnification by Buyer 29
10.4 Limitations 30
10.5 Procedure for Indemnification 30
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<CAPTION>
Page
<S> <C>
10.6 Specific Performance 31
10.7 Attorneys' Fees 31
10.8 Indemnification Fund 31
10.9 Bulk Transfer 32
SECTION 11. MISCELLANEOUS 32
11.1 Fees and Expenses 32
11.2 Notices 32
11.3 Benefit and Binding Effect 33
11.4 Assignment 33
11.5 Further Assurances 33
11.6 Governing Law 33
11.7 Headings 33
11.8 Gender and Number 34
11.9 Entire Agreement 34
11.10 Waiver of Compliance; Consents 34
11.11 Press Release 34
11.12 Counterparts 34
</TABLE>
- iv -
<PAGE> 6
LIST OF SCHEDULES
<TABLE>
<S> <C> <C>
Schedule 3.3 -- Consents
Schedule 3.4 -- Real Property
Schedule 3.5 -- Tangible Personal Property
Schedule 3.6(a) -- Contracts
Schedule 3.6(b) -- Trade Agreements
Schedule 3.8 -- Intangibles
Schedule 3.9 -- Insurance
Schedule 3.11 -- Employee Matters
Schedule 3.13 -- Litigation
Schedule 3.17 -- Transactions with Affiliates
Schedule 3.19 -- FCC Licenses
Schedule 4.3 -- Buyer Consents
Schedule 6.12 -- Noncompetition Agreement
Schedule 10.8 -- Indemnification Escrow Agreement
</TABLE>
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<PAGE> 7
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is dated as of the 20th day of March, 1998,
between Emmis Broadcasting Corporation, an Indiana corporation ("Buyer"), and
Wabash Valley Broadcasting Corporation, an Indiana corporation ("Seller").
R E C I T A L S
A. Seller is the licensee of radio and television stations WTHI (AM),
WTHI-FM and WTHI (TV), Terre Haute, Indiana, WWVR-FM, West Terre Haute, Indiana
(FCC license assignment application pending), and WFTX (TV), Cape Coral,
Florida (collectively, the "Stations") pursuant to authorizations issued by the
Federal Communications Commission ("FCC").
B. Seller desires to sell, and Buyer desires to buy, certain assets that
are used or useful in the business or operations of the Stations for the price
and on the terms and conditions set forth in this Agreement.
A G R E E M E N T S
In consideration of the above recitals and of the mutual agreements and
covenants contained in this Agreement, Buyer and Seller, intending to be bound
legally, agree as follows:
SECTION 1. DEFINITIONS
The following terms, as used in this Agreement, shall have the meanings
set forth in this Section:
"Accounts Receivable" means all accounts receivable of Seller arising out
of the operation of the Stations prior to the Closing Date.
"Affiliate" means, 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.
"Assets" means the assets to be sold, transferred, or otherwise conveyed
to Buyer under this Agreement, as specified in Section 2.1.
"Assumed Contracts" means (i) all Contracts listed in Schedule 3.6 that
are designated as Contracts that are to be assumed by Buyer on and after the
Closing Date, (ii) all Contracts that are not required to be listed on Schedule
3.6 by the express terms of Section 3.6, (iii) Contracts entered into by Seller
after the date hereof pursuant to Section 5.3 and (iv) any Contracts entered
into by Seller between the date of this Agreement and the Closing Date that
Buyer agrees in writing to assume.
<PAGE> 8
"Closing" means the consummation of the purchase and sale of the Assets
pursuant to this Agreement in accordance with the provisions of Section 8.
"Closing Date" means the date on which the Closing occurs, as determined
pursuant to Section 8.
"Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to transfer the Assets to Buyer
or otherwise to consummate the transactions contemplated by this Agreement.
"Contracts" means all contracts, leases, non-governmental licenses, and
other agreements (including leases for personal or real property and employment
agreements), written or oral, (including any amendments and other modifications
thereto) to which Seller is a party and which relate to or affect the Assets or
the business or operations of the Stations, and (i) which are in effect on the
date of this Agreement or (ii) which are entered into by Seller between the
date of this Agreement and the Closing Date, but excluding any of the foregoing
that are included in the Excluded Assets.
"Early Termination Event" has the meaning set forth in Section 9.2.
"Escrow Agent" means NBD Bank, N.A.
"Escrow Agreement" means the Deposit Escrow Agreement, of even date
herewith by and among Buyer, Seller and the Escrow Agent.
"Excluded Assets" has the meaning set forth in Section 2.2.
"FCC" means the Federal Communications Commission.
"FCC Consent" means action by the FCC granting its consent to the
assignment of the FCC Licenses to Buyer as contemplated by this Agreement,
provided that such action has not been reversed, stayed, enjoined, set aside,
annulled or suspended and 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.
"FCC Licenses" means all Licenses issued by the FCC to Seller in
connection with the business or operations of the Stations, including the right
to use the call letters "WWVR", "WFTX" or "WTHI".
"Final Deposit" has the meaning set forth in Section 9.4.
"GAAP" means generally accepted accounting principles, as in effect from
time to time, applied on a consistent basis.
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<PAGE> 9
"Initial Deposit" has the meaning set forth in Section 9.4.
"Intangibles" means all copyrights, trademarks, trade names, service
marks, service names, licenses, patents, permits, jingles, proprietary
information, technical information and data, machinery and equipment
warranties, and other similar intangible property rights and interests (and any
goodwill associated with any of the foregoing) applied for, issued to, or owned
by Seller or under which Seller is licensed or franchised and which are used or
useful in the business and operations of the Stations, together with any
additions thereto between the date of this Agreement and the Closing Date, but
excluding any of the foregoing that are included in the Excluded Assets.
"Licenses" means all licenses, permits, and other authorizations issued to
Seller by the FCC (including the right to use the call letters "WWVR" "WFTX"
and "WTHI"), the Federal Aviation Administration, or any other federal, state,
or local governmental authorities in connection with the conduct of the
business or operations of the Stations, together with any additions thereto
between the date of this Agreement and the Closing Date.
"Material Adverse Effect" means a material adverse effect on the Assets
taken as a whole or the businesses of the Stations, provided that the foregoing
shall not include any material adverse effect arising out of (i) factors
affecting the radio or television broadcasting industry generally, (ii) general
national, regional or local economic conditions, (iii) governmental or
legislative laws, rules or regulations affecting the radio or television
broadcasting industry generally, or (iv) actions taken by Buyer or its
affiliates.
"Non-FCC Licenses" means the Licenses issued by any governmental
authorities (other than the FCC) in connection with the business or operations
of the Stations.
"Permitted Liens" means liens for taxes and assessments not yet due and
payable, mechanics' and other statutory liens created in the ordinary course of
business that secure obligations not delinquent, restrictions, easements and
other encumbrances on the Real Property which do not adversely affect the use
or value of the Real Property.
"Purchase Price" means the purchase price specified in Section 2.3.
"Real Property" means all of Seller's real property and interests in real
property, leaseholds and subleaseholds, purchase options, easements, licenses,
rights to access, rights of way, all buildings and other improvements thereon,
and other real property interests which are used or useful in the business or
operations of the Stations, together with any additions thereto between the
date of this Agreement and the Closing Date, but excluding any of the foregoing
that are included in the Excluded Assets.
"Tangible Personal Property" means all of Seller's machinery, equipment,
tools, vehicles, furniture, leasehold improvements, office equipment, plant,
inventory, spare parts, and other tangible personal property which is used or
useful in the conduct of the business or operations of the Stations,
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<PAGE> 10
together with any additions thereto between the date of this Agreement and the
Closing Date, but excluding any of the foregoing that are included in the
Excluded Assets.
SECTION 2. PURCHASE AND SALE OF ASSETS
2.1 Agreement to Sell and Buy. Subject to the terms and conditions set
forth in this Agreement, Seller hereby agrees to sell, transfer, and deliver to
Buyer on the Closing Date, and Buyer agrees to purchase on the Closing Date, all
of Seller's rights, title and interest in and to the following Assets used or
useful in connection with the conduct of the business or operations of the
Stations, together with any additions thereto between the date of this Agreement
and the Closing Date, but excluding the assets described in Section 2.2, free
and clear of any claims, liabilities, security interests, mortgages, liens,
pledges, conditions, charges, or encumbrances of any nature whatsoever (except
for Permitted Liens):
(a) The Tangible Personal Property;
(b) The Real Property;
(c) The Assumed Contracts;
(d) The Intangibles and the goodwill of the Stations, if any;
(e) All of Seller's proprietary information, technical information and
data, machinery and equipment warranties, maps, computer discs and tapes,
plans, diagrams, blueprints, and schematics, relating to the business and
operation of the Stations;
(f) All books and records relating to the business or operations of the
Stations, other than those described in Section 2.2(b), including executed
copies of the Assumed Contracts;
(g) The Licenses; and
(h) All records required by the FCC to be kept by the Stations.
2.2 Excluded Assets. The Assets sold, transferred and delivered to Buyer
hereunder shall exclude the following assets (the "Excluded Assets"):
(a) Seller's cash on hand as of the Closing and all other cash in any
of Seller's bank or savings accounts; any insurance policies, letters of
credit, or other similar items and cash surrender value in regard thereto;
and any stocks, bonds, certificates of deposit and similar investments;
(b) All books and records that Seller is required by law to retain,
that pertain to Seller's organization or other internal matters and all tax
records;
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<PAGE> 11
(c) Any pension, profit-sharing, or employee benefit plans, and any
collective bargaining agreements;
(d) The Accounts Receivable;
(e) Claims of Seller against third parties with respect to matters
occurring prior to the Closing Date, except to the extent such claims relate to
the condition of the Assets on and after the Closing Date; and
(f) Prepaid expenses for which Seller does not receive a credit under
Section 2.3(b) hereof and deposits to the extent not reflected in the
adjustments made pursuant to Section 2.3(b) hereof.
2.3 Purchase Price.
(a) Purchase Price. The Purchase Price for the Assets shall be Ninety
Million Dollars ($90,000,000.00), adjusted as provided in Section 2.3(b)
below.
(b) Prorations. The Purchase Price shall be increased or decreased as
required to effectuate the proration of the revenues and expenses of the
Stations. All revenues and all expenses arising from the operation of the
Stations, excluding accrued sick leave days but including business and
non-governmental license fees, annual regulatory fees imposed by the FCC,
utility charges, real and personal property taxes and assessments levied
against the Assets, property and equipment rentals, applicable copyright or
other fees, sales and service charges, taxes (except for taxes arising from the
transfer of the Assets under this Agreement), programming fees and expenses,
employee compensation, including wages, commissions, vacation and personal days
accrued but unused for all employees of Seller who become employees of Buyer
and prepaid and deferred items, shall be prorated between Buyer and Seller in
accordance with GAAP and the principle that Seller shall be entitled to all
revenues and shall be responsible for all expenses, costs, and liabilities
allocable to the period prior to the Closing Date and Buyer shall be entitled
to all revenues and shall be responsible for all expenses, costs, and
obligations allocable to the period on and after the Closing Date.
Notwithstanding the preceding sentence, there shall be no adjustment for, and
Seller shall remain solely liable with respect to, any Contracts not included
in the Assumed Contracts and any other obligation or liability not being
assumed by Buyer in accordance with Section 2.5.
(c) Manner of Determining Adjustments.
(i) Any adjustments will, insofar as feasible, be determined and paid on
the Closing Date, with final settlement and payment by the appropriate party
occurring no later than ninety (90) days after the Closing Date or such other
date as the parties shall mutually agree upon. Seller shall prepare and
deliver to Buyer not later than five (5) days before the Closing Date a
preliminary settlement statement which shall set forth Seller's good faith
estimate of the prorations
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under Section 2.3(b). The preliminary settlement statement shall contain all
information reasonably necessary to determine the prorations under Section
2.3(b), including appropriate supporting documentation and such other
information as may be reasonably requested by Buyer, to the extent such
prorations can be determined or estimated as of the date of the preliminary
settlement statement and shall be certified by an officer (but without personal
liability of such officer) on behalf of Seller to be true and complete to
Seller's knowledge.
(ii) Not later than ninety (90) days after the Closing Date, Buyer shall
deliver to Seller a statement setting forth Buyer's determination of any
changes to the prorations made at the Closing. Buyer's statement (A) shall
contain all information reasonably necessary to determine the prorations to the
Purchase Price under Section 2.3(b), including appropriate supporting
documentation, and such other information as may be reasonably requested by
Seller, and (B) shall be certified by an officer (but without personal
liability to such officer) on behalf of Buyer to be true and complete to
Buyer's knowledge. Seller (and its authorized representatives) shall have the
right to visit the Stations during normal business hours to verify and review
such documentation upon providing reasonable notice to Buyer (such access not
to unreasonably interfere with the business or operations of the Stations). If
Seller disputes the prorations determined by Buyer, it shall deliver to Buyer
within fifteen (15) days after its receipt of Buyer's statement a statement
setting forth its determination of such prorations. If Seller notifies Buyer
of its acceptance of Buyer's statement, or if Seller fails to deliver its
statement within the fifteen (15) day period specified in the preceding
sentence, Buyer's determination of such adjustments and prorations shall be
conclusive and binding on the parties as of the last day of such fifteen (15)
day period.
(iii) Buyer and Seller shall use good faith efforts to resolve any dispute
involving the determination of the prorations in connection with the Closing.
If the parties are unable to resolve any dispute within fifteen days following
the delivery to Buyer of the statement described in the penultimate sentence of
Section 2.3(c)(ii), Buyer and Seller shall jointly designate a nationally
recognized firm of independent certified public accountants (the "Neutral
Auditors") to resolve such dispute. If the parties are unable to agree on the
designation of the Neutral Auditors, then a nationally recognized accounting
firm will be selected by lot from two names submitted by Seller and two names
submitted by Buyer, none of which shall be employed by Seller or Buyer or any
of their respective affiliates. The Neutral Auditors' resolution of the
dispute shall be made within sixty (60) days of their selection, shall be based
on presentations by Seller and Buyer and not by independent financial audit and
shall be final and binding on the parties. The Neutral Auditors' resolution of
the dispute may be enforced by any court of competent jurisdiction. Fees of
the Neutral Auditors shall be split equally between the parties.
2.4 Payment of Purchase Price. The Purchase Price, as adjusted under
Section 2.3(b) and less the amount of the Indemnity Fund to be paid as provided
in Section 10.8, shall be paid by Buyer to Seller at Closing by federal wire
transfer of same-day funds pursuant to wire instructions delivered by Seller to
Buyer at least two (2) days prior to the Closing Date.
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2.5 Assumption of Liabilities and Obligations. As of the Closing Date,
Buyer shall assume and undertake to pay, discharge, and perform all obligations
and liabilities (a) under the Licenses and Assumed Contracts insofar as such
obligations and liabilities arise on and after the Closing Date, (b) with
respect to which an adjustment to the Purchase Price is made in favor of Buyer
pursuant to Section 2.3(b), and (c) to any former employee of Seller who is
hired by Buyer insofar as such obligations and liabilities arise on and after
the Closing Date. Buyer shall not assume any other obligations or liabilities
of Seller, including (i) any obligations or liabilities under any Contract not
included in the Assumed Contracts, (ii) any obligations or liabilities under the
Assumed Contracts relating to the period prior to the Closing Date, (iii) any
claims or pending litigation or proceedings relating to the operation of the
Stations prior to the Closing, (iv) any obligations or liabilities arising under
capitalized leases or other financing agreements not assumed by Buyer, and (v)
any obligations or liabilities of Seller under any employee pension, retirement,
or other benefit plans or collective bargaining agreements, and all such
obligations and liabilities shall remain and be the obligations and liabilities
solely of Seller.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to the parties' agreement and acknowledgment that the Schedules
referred to in this Section 3 are to be delivered by Seller not later than ten
(10) business days after the date hereof, Seller represents and warrants to
Buyer as follows:
3.1 Organization, Standing, and Authority. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Indiana. Seller has full power and authority (i) to own, lease, and use the
Assets as now owned, leased, and used, (ii) to conduct the business and
operations of the Stations as now conducted, and (iii) subject to obtaining the
Consents set forth on Schedule 3.3 and any applicable requirement under the HSR
Act, to execute and deliver this Agreement and all of the other agreements and
documents contemplated hereby (the "Seller Ancillary Agreements") and to perform
and comply with all of the terms, covenants, and conditions to be performed and
complied with by Seller hereunder and thereunder.
3.2 Authorization and Binding Obligation. The execution, delivery, and
performance by Seller of this Agreement and the Seller Ancillary Agreements have
been duly authorized by all necessary corporate actions on the part of Seller
and its board of directors and shareholders. This Agreement has been duly
executed and delivered by Seller and constitutes the legal, valid, and binding
obligation of Seller and upon execution thereof, the Seller Ancillary Agreements
will be duly executed and delivered by Seller and will constitute the legal,
valid and binding obligations of Seller, in each case enforceable against it in
accordance with their respective terms, except as the enforceability of this
Agreement and the Seller Ancillary Agreements may be affected by bankruptcy,
insolvency, or similar laws affecting creditors' rights generally, and by
judicial discretion in the enforcement of equitable remedies.
3.3 Absence of Conflicting Agreements. Subject to obtaining the FCC
Consent, the other Consents listed on Schedule 3.3 and any applicable
requirements under the HSR Act, the execution,
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delivery, and performance of this Agreement and the Seller Ancillary Agreements
(with or without the giving of notice, the lapse of time, or both): (i) do not
require the consent of any third party, except for any such individual consent
the failure of which to obtain could not reasonably be expected to have a
Material Adverse Effect; (ii) will not conflict with any provision of the
organizational documents of Seller; (iii) will not conflict with, result in a
breach of, or constitute a default or an event creating rights of acceleration,
termination or cancellation under, any law, judgment, order, ordinance,
injunction, decree, rule, regulation, or ruling of any court or governmental
instrumentality applicable to Seller; and (iv) will not conflict with,
constitute grounds for termination of, result in a breach of, or constitute a
default under, any material agreement, instrument, license, or permit to which
Seller is a party or by which Seller or the Assets may be bound.
3.4 Title to and Condition of Real Property. Schedule 3.4 contains a
complete and accurate description in all material respects of all the Real
Property and Seller's interests therein. Together with the Excluded Assets, the
Real Property listed on Schedule 3.4 comprises all real property interests
necessary to conduct the business and operations of the Stations as now
conducted. With respect to each leasehold or subleasehold interest included in
the Real Property being conveyed under this Agreement, so long as Seller
fulfills its obligations under the lease therefor, Seller will have enforceable
rights under such lease in accordance with the terms and conditions thereof.
Except as disclosed on Schedule 3.4, all towers, guy anchors, and buildings and
other improvements included in the Assets are located entirely on the Real
Property listed in Schedule 3.4. Seller will deliver to Buyer true and complete
copies of all leases pertaining to the Real Property within ten (10) business
days after the date of execution of this Agreement. All Real Property
(including the improvements thereon) (i) is in good condition and repair in all
material respects consistent with its present use (ordinary wear and tear
excepted), (ii) is available for immediate use in the conduct of the business
and operations of the Stations, and (iii) complies in all material respects with
all applicable building or zoning codes and the regulations of any governmental
authority having jurisdiction. Seller has full legal and practical access to
the Real Property. Seller has no material Non-FCC Licenses.
3.5 Title to and Condition of Tangible Personal Property. Schedule 3.5
lists all material items of Tangible Personal Property. Together with the
Excluded Assets, the Tangible Personal Property listed on Schedule 3.5 comprises
all material items of tangible personal property necessary to conduct the
business and operations of the Stations as now conducted. Except as described
in Schedule 3.5, Seller owns and has good title to each item of Tangible
Personal Property, and none of the Tangible Personal Property owned by Seller is
subject to any security interest, mortgage, pledge, conditional sales agreement,
or other lien or encumbrance, except for Permitted Liens and liens set forth on
Schedule 3.5 hereto. Each item of Tangible Personal Property is available for
immediate use in the business and operations of the Stations and, except as set
forth on Schedule 3.5, is in good operating condition and repair, ordinary wear
and tear excepted. Except as set forth on Schedule 3.5, all items of
transmitting equipment included in the Tangible Personal Property (i) have been
maintained in all material respects in a manner consistent with generally
accepted standards of good engineering practice, and (ii) together with the
Excluded Assets, will permit the Stations and
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any auxiliary broadcast stations used in the operation of the Stations to
operate in all material respects in compliance with the terms of the FCC
Licenses, the rules and regulations of the FCC, and with all other applicable
federal, state, and local statutes, ordinances, rules, and regulations.
3.6 Assumed Contracts.
(a) Schedule 3.6(a) is a true and complete list of all Contracts except
(a) Contracts payable in cash for production services or for the sale of
advertising time broadcast on the Stations, (b) trade or barter advertising
agreements entered into in the ordinary course of business, (c) oral employment
Contracts terminable at will and (d) other Contracts with a duration of one
year or less and entered into in the ordinary course of business not involving
liabilities exceeding $1,000 per Contract per year or $25,000 per year in the
aggregate for all such Contracts. Seller will deliver to Buyer true and
complete copies of all written Contracts listed on Schedule 3.6(a) and true and
complete memoranda of all oral Contracts (including any amendments and other
modifications to such Contracts) within ten (10) business days after the date
of execution of this Agreement. Other than the Contracts listed on Schedule
3.6(a) or any other Schedule to this Agreement and the Contracts that are not
required to be listed on Schedule 3.6(a), Seller requires no contract, lease,
or other agreement to enable it to carry on its business as now conducted. All
of the Assumed Contracts (a) are in full force and effect and constitute valid
and binding obligations of Seller, (b) contain no provisions restricting
competition and (c) to the best knowledge of Seller, the other parties
thereto, and subject to obtaining the Consents listed on Schedule 3.3 to the
extent applicable to such Contracts, may be transferred to Buyer pursuant to
this Agreement and will be in full force and effect at the time of such
transfer except to the extent any such Assumed Contract is terminated or
expires in accordance with its terms prior to Closing. Seller has fulfilled
and performed in all material respects its obligations under each of the
Assumed Contracts and, to the best knowledge of Seller, no other party to the
Assumed Contracts is in material default or breach thereunder, and no event has
occurred and no condition exists which, with the passage of time or the giving
of notice or both, would constitute a material default or breach by Seller or,
to the best knowledge of Seller, by any such other party.
(b) Schedule 3.6(b) 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 the
date stated therein, 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 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 within ten (10) business
days after the date of execution of this Agreement and each Trade Agreement
hereafter entered into prior to Closing shall be promptly delivered to Buyer.
3.7 Consents. Except for any applicable requirements under the
HSR Act and subject to obtaining the FCC Consent and the other Consents
described in Schedule 3.3, no consent, approval, permit, or authorization of,
or declaration to or filing with, any governmental or regulatory authority,
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or any other third party is required to permit Seller (i) to consummate this
Agreement and the transactions contemplated hereby and (ii) to assign or
transfer the Assets to Buyer.
3.8 Intangibles. Schedule 3.8 is a true and complete list of all material
Intangibles, all of which are valid and in good standing and uncontested.
Seller will deliver to Buyer copies of all documents establishing or evidencing
all material Intangibles within ten (10) business days after the date of
execution of this Agreement. To the best knowledge of Seller, Seller is not
infringing upon or otherwise acting adversely to any trademarks, trade names,
service marks, service names, copyrights, patents, patent applications,
know-how, methods, or processes owned by any other person or persons, and there
is no claim or action pending, or to the knowledge of Seller threatened, with
respect thereto. Except as set forth in Schedule 3.8, Seller has not licensed
anyone to use any Intangible and Seller has no knowledge of the infringement by
any person of any Intangible. The Intangibles listed on Schedule 3.8, the FCC
Licenses and the Excluded Assets described in Section 2.2(f) comprise all
intangible property interests necessary to conduct the business and operations
of the Stations as now conducted.
3.9 Insurance. Schedule 3.9 sets forth all policies of insurance covering
the Assets and such policies are in full force and effect.
3.10 Reports. To the best of Seller's knowledge, all material returns,
reports, and statements required to be filed by Seller with respect to the
Stations with any governmental agency have been filed, and all reporting
requirements of any governmental authorities having jurisdiction over Seller and
the Stations have been complied with by Seller in all material respects. All of
such returns, reports, and statements are substantially complete and correct as
filed.
3.11 Personnel.
(a) Employees and Compensation. Schedule 3.11 contains a true and complete
list of all positions of employees of Seller who are employed at the Stations,
their job titles and current salary. Schedule 3.11 also contains a description
as of the date of this Agreement of all employee benefit plans or arrangements
applicable to the employees of the Stations. All employee benefits and welfare
plans or arrangements listed in Schedule 3.11 were established and have been
executed, managed and administered in all material respects in accordance with
the Internal Revenue Code of 1986, as amended and the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). Seller is not aware of the existence
of any governmental audit or examination of any of such plans or arrangements
nor is Seller liable for any arrears of wages (other than those arising as the
result of reasonable payroll practices) or any material taxes or penalties for
failure to comply with any of the foregoing.
(b) Labor Relations. Seller is not a party to or subject to any collective
bargaining agreements with respect to the Stations, except as described in
Schedule 3.6. Seller has no written contracts of employment with any employee
of the Stations, other than those listed in Schedule 3.6. Seller has complied
in all material respects with all laws, rules, and regulations relating to the
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employment of labor, including those related to wages, hours, collective
bargaining, occupational safety, discrimination, and the payment of social
security and other payroll related taxes and it has not received any written
notice alleging that it has failed to comply in any material respect with any
such laws, rules, or regulations. No labor union or other collective
bargaining unit represents or to Seller's knowledge, claims to represent any of
the employees of the Stations. To Seller's knowledge, there is no union
campaign being conducted to solicit cards from employees to authorize a union
to request a National Labor Relations Board certification election with respect
to any employees at the Stations.
3.12 Taxes. There are no proceedings pending pursuant to which
Seller is or could be made liable for any taxes, penalties, interest, or other
charges, the liability for which could extend to Buyer as transferee of the
Assets and, to the best knowledge of Seller, no event has occurred that could
impose on Buyer any transferee liability for any taxes, penalties, or interest
due or to become due from Seller.
3.13 Claims and Legal Actions. Except for any FCC rulemaking proceedings
generally affecting the broadcasting industry or as listed on Schedule 3.13
attached hereto, there is no claim, legal action, counterclaim, suit,
arbitration, governmental investigation or other legal, administrative, or tax
proceeding, nor any order, decree or judgment, in progress or pending, or to the
knowledge of Seller threatened, against or relating to Seller with respect to
its ownership or operation of the Stations or otherwise relating to the Assets
or the business or operations of the Stations which could reasonably be expected
to have a Material Adverse Effect.
3.14 Environmental Matters.
(a) Seller is in compliance with all laws, rules, and regulations of all
federal, state, and local governments (and all agencies thereof) concerning the
environment, except for any noncompliance which could not reasonably be
expected to have a Material Adverse Effect, and Seller has received no written
notice of a charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice having been filed or commenced against
Seller in connection with its ownership or operation of the Stations alleging
any failure to comply with any such law, rule, or regulation.
(b) To the best of Seller's knowledge, Seller has no liability relating to
its ownership or operation of the Stations that could reasonably be expected to
have a Material Adverse Effect under any law, rule, or regulation of any
federal, state, or local government (or agency thereof) concerning the release
or threatened release of hazardous substances, pollution or protection of the
environment.
(c) To the best of Seller's knowledge, in connection with its ownership or
operation of the Stations, Seller holds and is in compliance with all of the
terms and conditions of all permits, licenses, and other authorizations which
are required under, and is in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
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schedules, and timetables which are contained in, all federal, state, and local
laws, rules, and regulations relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes, except in each case for any noncompliance which could not
be reasonably expected to have a Material Adverse Effect.
3.15 Compliance with Laws. Seller is, in all material respects, in
compliance with all federal, state, and local laws, rules, regulations, and
ordinances applicable or relating to the ownership and operation of the
Stations. Neither the ownership or use of the properties of the Stations nor
the conduct of the business or operations of the Stations conflicts in any
material respect with the rights of any other person or entity.
3.16 Conduct of Business in Ordinary. Since December 28, 1997, Seller has
conducted the business and operations of the Stations in the ordinary course of
business consistent with past practices in all material respects and has not:
(a) Made any sale, assignment, lease, or other transfer of any of the
Stations' properties other than obsolete assets no longer used in the operation
of the Stations or other assets sold or disposed of in the normal and usual
course of business with suitable replacements being obtained therefor;
(b) Canceled any debts owed to or claims held by Seller with respect to
the Stations, except in the normal and usual course of business; or
(c) Suffered any material write-down of the value of any Assets or any
material write-off as uncollectible of any accounts receivable of the Stations.
3.17 Transactions with Affiliates. Except as described on Schedule 3.17,
Seller has not been involved in any business arrangement or relationship
relating to the Stations with any affiliate of Seller, and no affiliate of
Seller owns any property or right, tangible or intangible, which is used in the
business of the Stations. As used in this paragraph, "affiliate" has the
meaning set forth in Rule 12b-2 promulgated under the Securities Exchange Act of
1934.
3.18 Broker. Neither Seller nor any person acting on Seller's
behalf has incurred any liability for any finders' or brokers' fees or
commissions in connection with the transactions contemplated by this Agreement.
3.19 Governmental Licenses. Schedule 3.19 includes a true and complete
list of all of the Licenses issued by the FCC. Seller will deliver to Buyer true
and complete copies of the Licenses (including any amendments and other
modifications thereto) issued by the FCC within ten (10)
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business days after the date of execution of this Agreement. Except for the
FCC License for the operation of WWVR-FM, West Terre Haute, Indiana (the "WWVR
License") for which the assignment application is currently pending, all FCC
Licenses have been validly issued, and Seller is the authorized legal holder
thereof. Except for the WWVR License, the FCC Licenses listed on Schedule 3.19
comprise all of the licenses, permits, and other authorizations required from
the FCC for the lawful conduct of the business and operations of the Stations
in the manner and to the extent they are now conducted, except for any
auxiliary broadcast authorization the failure to obtain which could not
reasonably be expected to have a Material Adverse Effect. Except for the WWVR
License, none of the FCC Licenses is subject to any restriction or condition
that would limit in any material respect the operation of the Stations as now
operated. Except for the WWVR License, the FCC Licenses are in full force and
effect, and the conduct of the business and operations of the Stations is in
compliance therewith and no event has occurred or condition or state of facts
exists which constitutes or, after notice or lapse of time or both, would
constitute a breach or default under any such FCC Licenses, except for such
events, conditions or state of facts that could not reasonably be expected to
have a Material Adverse Effect. Seller has no reason to believe that any of the
FCC Licenses would not be renewed by the FCC and no written notice of
cancellation, of default or of any dispute concerning any FCC License, or of
any event, condition or state of facts as described in the preceding sentence,
has been received by Seller. Notwithstanding any provision in this Agreement
to the contrary, Seller makes no representation, warranty or covenant
whatsoever regarding any DTV allocation that Seller has received or may receive
in the future for the television Stations or the outcome of the FCC rulemaking
identified as In the Matter of Advanced Television Systems, MM Docket No.
87-268 and any related or subsequent FCC or court proceeding (the "ATV
Rulemaking"), except that Seller has not knowingly taken any action which could
reasonably be expected to materially adversely affect or jeopardize the
television Stations' respective DTV allocation.
3.20 Acquired Assets. The Assets constitute all of the assets necessary
for the continued operation and business of the Stations in the ordinary course
as substantially conducted on the date hereof.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 Organization, Standing, and Authority. Buyer is an Indiana corporation
duly organized, validly existing, and in good standing under the laws of the
State of Indiana and at Closing, Buyer will be duly qualified as a foreign
corporation and will be in good standing in the State of Florida. Buyer has all
requisite power and authority to execute and deliver this Agreement and all of
the other agreements documents and instruments contemplated hereby (the "Buyer
Ancillary Agreements"), and to perform and comply with all of the terms,
covenants, and conditions to be performed and complied with by Buyer hereunder
and thereunder.
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4.2 Authorization and Binding Obligation. The execution, delivery, and
performance by Buyer of this Agreement and the Buyer Ancillary Agreements have
been duly authorized by all necessary actions on the part of Buyer. This
Agreement has been duly executed and delivered by Buyer and constitutes the
legal, valid, and binding obligation of Buyer and, upon execution thereof, the
Buyer Ancillary Agreements will be duly executed and delivered by Buyer and will
constitute the legal, valid and binding obligations of Buyer, in each case
enforceable against Buyer in accordance with their respective terms, except as
the enforceability of this Agreement and the Buyer Ancillary Agreements may be
affected by bankruptcy, insolvency, or similar laws affecting creditors' rights
generally and by judicial discretion in the enforcement of equitable remedies.
4.3 Absence of Conflicting Agreements. Subject to obtaining the FCC Consent
and the other Consents listed on Schedule 4.3 and any applicable requirements
under the HSR Act, the execution, delivery, and performance by Buyer of this
Agreement and the Buyer Ancillary Agreements (with or without the giving of
notice, the lapse of time, or both): (i) do not require the consent of any
third party except for such consents the failure of which to obtain could not
reasonably be expected to have a material adverse effect on the performance by
Buyer of its obligations hereunder; (ii) will not conflict with the
organizational documents of Buyer; (iii) will not conflict with, result in a
breach of, or constitute a default under, any law, judgment, order, injunction,
decree, rule, regulation, or ruling of any court or governmental instrumentality
applicable to Buyer; or (iv) will not conflict with, constitute grounds for
termination of, result in a breach of, or constitute a default under, any
material agreement, instrument, license, or permit to which Buyer is a party or
by which Buyer may be bound, such that Buyer could not acquire or operate the
Assets.
4.4 Broker. Neither Buyer nor any person acting on Buyer's
behalf has incurred any liability for any finders' or brokers' fees or
commissions in connection with the transactions contemplated by this Agreement.
4.5 Buyer Qualifications. Buyer is, and as of the Closing will be,
legally, financially and otherwise qualified to perform its obligations
hereunder and to be the licensee of and to acquire, own and operate the Stations
under the Communications Act of 1934, as amended, and the rules, regulations and
policies of the FCC. Buyer knows of no fact that would disqualify Buyer as an
assignee of the FCC Licenses or as the owner and operator of the Stations. To
Buyer's knowledge, no waiver of any FCC rule or policy is required for the grant
of the FCC Consent.
4.6 Financing. Buyer will have available sufficient funds to enable it to
consummate the transactions contemplated hereby.
SECTION 5. OPERATIONS OF THE STATIONS PRIOR TO CLOSING
5.1 Generally. Seller agrees that, between the date of this Agreement and
the Closing Date, Seller shall operate the Stations only in the ordinary course
of business in accordance with their respective current practices and staffing
levels and shall maintain expenditures for marketing and promotion efforts in
amounts not less than the amounts so expended in the corresponding months
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of the previous year (except where such conduct would conflict with the
following covenants or with Seller's other obligations under this Agreement),
and in accordance with the other covenants in this Section 5.
5.2 Compensation. Seller shall not increase by more than three percent
(3%) the compensation, bonuses, or other benefits payable or to be payable to
any person employed in connection with the conduct of the business or operations
of the Stations, except as may be contractually required.
5.3 Contracts. Seller will not, without the prior written consent of
Buyer, which consent (except for consents relating to programming agreements)
shall not be unreasonably withheld, enter into any contract or commitment
relating to the Stations or the Assets, or amend any Assumed Contract or incur
any obligation that will be binding on Buyer after Closing, except that Seller
shall have the right to enter into or renew (i) contracts or commitments with
advertisers for production or the sale of advertising time on the Stations for
cash, (ii) trade or barter agreements entered into in the ordinary course of
business consistent with past practices, and (iii) other contracts or
commitments therefor having a duration of one year or less and not involving
liabilities in excess of $5,000 per year individually or $25,000 per year in the
aggregate. Prior to the Closing Date, Seller shall deliver to Buyer a list of
all Contracts entered into between the date of this Agreement and the Closing
Date in accordance with this Section 5.3, together with copies of such
Contracts.
5.4 Disposition of Assets. Seller shall not sell, assign, lease, or
otherwise transfer or dispose of any of the Assets, except where no longer used
or useful in the business or operations of the Stations or in connection with
the acquisition of replacement property of equivalent kind and value.
Notwithstanding the foregoing, the expiration by their terms of Contracts prior
to Closing shall not be deemed a violation of this Agreement.
5.5 Encumbrances. Seller shall not create or assume any claim, liability,
mortgage, lien, pledge, condition, charge, or encumbrance of any nature
whatsoever upon the Assets, except for (i) liens disclosed on Schedule 3.4 or
Schedule 3.5 which shall be removed on or prior to the Closing Date and (ii)
Permitted Liens.
5.6 Access to Information. Seller shall give Buyer and its authorized
representatives access, during normal business hours and with reasonable prior
notice, to the Assets and to all other books, records, Contracts, and documents
relating to the Stations for the purpose of audit and inspection, so long as
such audit and inspection does not unreasonably interfere with the business and
operations of the Stations.
5.7 Maintenance of Assets. Seller shall use commercially reasonable
efforts to maintain the Assets in good operating condition and repair (ordinary
wear and tear excepted). Seller shall maintain inventories of spare parts and
expendable supplies at levels consistent with past practices and shall use its
commercially reasonable efforts to preserve the goodwill of the suppliers,
contractors, licensors, employees, customers, distributors and others having
business relations with
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the Stations. If any loss, damage, impairment, confiscation, or condemnation
of or to any of the Assets occurs, Seller shall repair, replace, or restore the
Assets to their prior condition as represented in this Agreement as soon
thereafter as possible, and Seller shall use the proceeds of any claim under
any insurance policy solely to repair, replace, or restore any of the Assets
that are lost, damaged, impaired, or destroyed. Seller shall pay when due all
amounts it is obligated to pay pursuant to the Contracts and shall otherwise
comply with all of their obligations thereunder.
5.8 Insurance. Seller shall maintain the existing insurance policies on
the Stations and the Assets through the Closing Date.
5.9 Consents. Seller shall use commercially reasonable efforts to obtain
the Consents without any change in the terms or conditions of any Contract or
License that could be materially less advantageous to the Stations than those
pertaining under the Contract or License as in effect on the date of this
Agreement; provided, however, that Seller's failure to obtain any Consent shall
not constitute a breach of this Agreement so long as Seller shall have used
commercially reasonable efforts to obtain such Consent. Seller shall promptly
advise Buyer of any difficulties experienced in obtaining any of the Consents
and of any conditions proposed, considered, or requested for any of the
Consents. Buyer shall use commercially reasonable efforts to assist Seller in
obtaining the Consents, including, without limitation, executing such assumption
instruments and other documents as may be reasonably required in connection with
obtaining the Consents.
5.10 Books and Records. Seller shall maintain its books and records
relating to the Stations only in the ordinary course consistent with past
practices.
5.11 Notification. Seller shall promptly notify Buyer in writing of any
material change in any of the information contained in Seller's representations
and warranties contained in Section 3 of this Agreement.
5.12 Compliance with Laws. Seller shall comply in all material respects
with all laws, rules, and regulations applicable or relating to the ownership
and operation of the Stations.
5.13 Collection of Accounts Receivable. Seller shall collect the accounts
receivable of the Stations only in the ordinary course consistent with its past
practices.
5.14 Cure. For all purposes under this Agreement, the existence or
occurrence of any events or circumstances that constitutes or causes a breach of
a representation or warranty of Seller or Buyer under this Agreement (including,
without limitation, in the case of Seller, under the information disclosed in
the Schedules hereto) on the date such representation or warranty is made shall
be deemed not to constitute a breach of such representation or warranty if such
event or circumstance is cured on or before thirty (30) days after the receipt
by such party of written notice thereof from such other party.
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5.15 Licenses. Seller shall not cause or permit, by any act
or failure to act, any of the FCC Licenses to expire or to be revoked,
suspended, or modified in any materially adverse respect, or take any action
that could reasonably be expected to cause the FCC to institute proceedings for
the suspension, revocation, or materially adverse modification of any of the
FCC Licenses; provided, however, that in no event shall any action of the FCC
with respect of the ATV Rulemaking constitute a breach or default hereunder
unless Seller knowingly takes any action with respect thereto that at the time
of the taking of such action could reasonably be expected to materially
adversely affect the Stations.
5.16 Audited Financial Statements. Seller recognizes that Buyer is a
publicly reporting company and agrees that notwithstanding the restrictions in
Section 6.4, 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.
5.17 Schedules. Seller shall deliver to Buyer all of the
Schedules referred to in Section 3 not later than ten (10) business days after
the date hereof.
SECTION 6. SPECIAL COVENANTS AND AGREEMENTS
6.1 HSR Act. As soon as practicable after the execution hereof but in no
event later than twenty (20) business days after the execution hereof, each of
Buyer and Seller shall make the filings required by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Buyer and
Seller agree to (a) cooperate with each other in connection with all such HSR
Act filings, which cooperation shall include furnishing the other with any
information or documents that may be reasonably required in connection with such
filings; (b) promptly file, after any request by the Federal Trade Commission
("FTC") or Department of Justice ("DOJ") and after appropriate negotiation with
the FTC or DOJ of the scope of such request, any information or documents
requested by the FTC or DOJ; and (c) furnish each other with any correspondence
from or to, and notify each other of any other communications with, the FTC or
DOJ that relates to the transactions contemplated hereunder, and to the extent
practicable, to permit each other to participate in any conferences with the FTC
or DOJ. The transfer of the Assets hereunder is expressly conditioned upon the
waiting period relating to any such filings having duly expired or been
terminated by the appropriate government agencies without the enforcement of any
action by any such agencies to restrain or postpone the transactions
contemplated hereby.
6.2 Control of the Stations. Prior to Closing, Buyer shall not, directly
or indirectly, control, supervise, direct, or attempt to control, supervise, or
direct, the operations of the Stations;
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such operations, including complete control and supervision of all of the
Stations' respective programs, employees, and policies, shall be the sole
responsibility of Seller until the Closing.
6.3 Risk of Loss. The risk of any loss, damage,
impairment, confiscation, or condemnation of any of the Assets from any cause
whatsoever shall be borne by Seller at all times prior to the Closing.
6.4 Confidentiality. Except as necessary for the
consummation of the transaction contemplated by this Agreement, and except as
and to the extent required by law, each party will keep confidential any
information obtained from the other party in connection with the transactions
contemplated by this Agreement. If this Agreement is terminated, each party
will return to the other party all information obtained by such party from the
other party in connection with the transactions contemplated by this Agreement.
6.5 Cooperation. Buyer and Seller shall cooperate fully
with each other and their respective counsel and accountants in connection with
any actions required to be taken as part of their respective obligations under
this Agreement, and Buyer and Seller shall execute such other documents as may
be necessary and desirable to the implementation and consummation of this
Agreement, and otherwise use their commercially reasonable efforts to
consummate the transaction contemplated hereby and to fulfill their obligations
under this Agreement. Notwithstanding the foregoing, Buyer shall have no
obligation to agree to any material adverse change in any Assumed Contract or
FCC License to obtain a Consent required with respect thereto.
6.6 Access to Books and Records. Seller shall provide Buyer reasonable
access and the right to copy for a period of three years from the Closing Date
any books and records relating to the assets that are not included in the
Assets. Buyer shall provide Seller reasonable access and the right to copy for
a period of three years from the Closing Date any books and records relating to
the Assets.
6.7 Appraisal. Buyer and Seller agree to allocate the
Purchase Price for tax and recording purposes in accordance with an appraisal
to be completed as soon as practicable but in no event later than 90 days
following Closing. The appraisal shall be conducted by a party mutually
acceptable to Buyer and Seller. Buyer and Seller shall each pay one-half of
the cost of such appraisal.
6.8 Employment Matters.
(a) Immediately after the Closing, Buyer shall employ as employees at will
all individuals employed by Seller at the Stations immediately prior to the
Closing. Such employment by Buyer shall be subject to the terms, conditions
and policies of employment established by Buyer. Buyer shall not assume any
Seller employee benefit plans as listed on Schedule 3.11.
(b) For each employee of Seller who becomes an employee of Buyer (a "Hired
Employee"), Buyer shall provide to such employee credit for past service with
Seller in accordance
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with Buyer's policies and practices as in effect at such time. Buyer shall
offer health insurance and other benefits of the types and amounts as are
generally offered to employees of Buyer and its Affiliates engaged in
broadcasting activities as of the Closing Date.
(c) To the extent the Purchase Price is reduced pursuant to Section 2.3 in
respect thereof, Buyer shall grant Hired Employees credit for and shall assume
and be responsible for any liabilities with respect to vacation and personal
days accrued but unused by any Hired Employee as of the Closing Date.
(d) Within a reasonable period of time after the Closing Date, Buyer shall
accept a rollover of Hired Employees' account balances in Seller's 401(k) Plan.
6.9 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, which list
shall set forth for each Accounts 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 ninety (90) days after the Closing Date (the
"Collection Period"), Buyer will, without charge to Seller, use its usual and
customary procedures to collect the Accounts Receivable 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 Accounts Receivable shall terminate
upon expiration of the Collection Period. For the purpose of determining
amounts collected by Buyer with respect to the Accounts Receivable, each
payment by an account debtor shall be applied to the older or oldest accounts
receivable, whether Seller's or Buyer's, constituting a liability of such
account debtor unless the account debtor in writing identifies such an account
as being in dispute and directs that a particular payment be applied to a
specific newer account receivable.
(c) Every four 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 Accounts Receivable 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 Accounts Receivable 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 Accounts Receivable unless Buyer
pays Seller the full amount of
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any deficiency. Buyer shall be entitled to purchase from Seller any Accounts
Receivable for such amount as the parties may agree at any time during or at
the expiration of the Collection Period.
6.10 FCC Consent.
(a) The assignment of the FCC Licenses in connection with the purchase and
sale of the Assets pursuant to this Agreement shall be subject to the prior
consent and approval of the FCC.
(b) Seller and Buyer shall file within ten (10) business days after the
date hereof an appropriate application for the FCC Consent. The parties shall
prosecute the application with all reasonable diligence and otherwise use their
commercially reasonable efforts to obtain a grant of the application as
expeditiously as practicable. Buyer's portion of the applications for the FCC
Consents with respect to radio and television stations WTHI(AM), WTHI-FM and
WTHI(TV), Terre Haute, Indiana, and WWVR-FM, West Terre Haute, Indiana (the
"Terre Haute FCC Consents"), shall include a request for waiver of the FCC's
one-to-a-market rule (47 C.F.R. Section 73.3555(c)) to permit the common
ownership of such radio and television stations (the "Terre Haute
One-To-A-Market Waiver"). Notwithstanding any provision in this Agreement to
the contrary, Buyer's obligation to consummate the transactions contemplated by
this Agreement shall not be affected by the imposition of any condition in the
Terre Haute FCC Consents requiring divestiture of one or more of the
above-referenced Terre Haute radio stations in order to comply with current or
future FCC ownership rules. Should such divestiture be required, Buyer will
use its commercially reasonable efforts (i) to sell the necessary radio
station(s) and (ii) to cause the filing of an application for FCC consent to
the sale of the necessary radio station(s), each within the period specified by
the FCC. Further more, each party agrees to comply with any other condition
imposed on it by the FCC Consent, except that no party shall be required to
comply with a condition if (1) the condition was imposed on it as the result of
a circumstance the existence of which does not constitute a breach by the party
of any of its representations, warranties, or covenants under this Agreement,
and (2) compliance with the condition would have a material adverse effect upon
it. Buyer and Seller shall oppose any requests for reconsideration or judicial
review of the FCC Consent. If the Closing shall not have occurred for any
reason within the original effective period of the FCC Consent, and neither
party shall have terminated this Agreement under Section 9, the parties shall
jointly request an extension of the effective period of the FCC Consent. No
extension of the FCC Consent shall limit the exercise by either party of its
rights under Section 9.
6.11 Buyer Conduct Buyer shall take no action or fail
to take any action that would disqualify Buyer from being the licensee of the
Stations under the Communications Act of 1934, as amended, and the rules,
regulations and policies of the FCC or that would result in the imposition on
Buyer of any condition contained in the FCC Consent that need not be complied
with by or under Section 6.10.
6.12 Noncompetition Agreement As an
inducement to Buyer to consummate the transactions contemplated herein, at the
Closing, Seller shall execute and deliver to Buyer, and Buyer
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shall execute and deliver to Seller, a Noncompetition Agreement in the form of
Schedule 6.12 hereto (the "Noncompetition Agreement").
SECTION 7. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER AT CLOSING
7.1 Conditions to Obligations of Buyer. All obligations of Buyer at
the Closing are subject at Buyer's option
to the fulfillment prior to or at the Closing Date of each of the following
conditions:
(a) Representations and Warranties. All representations and warranties of
Seller contained in this Agreement (i) that are qualified as to materiality,
shall be true and complete and (ii) that are not qualified as to materiality,
shall be true and complete in all material respects, in each case at and as of
the Closing Date as though made at and as of that time except to the extent
that (i) any such representation or warranty is expressly stated only as of a
specified earlier date, in which case such representation or warranty shall be
true as of such earlier date and (ii) any changes are contemplated by this
Agreement.
(b) Covenants and Conditions. Seller shall have performed and complied in
all material respects with all covenants, agreements, and conditions required
by this Agreement to be performed or complied with by it prior to or on the
Closing Date.
(c) Consents. All Consents designated as "material" on Schedule 3.3 (the
"Material Consents") shall have been obtained and delivered to Buyer without
any material adverse change in the terms or conditions of any agreement or any
governmental license, permit, or other authorization.
(d) HSR Act; No Restraint. The waiting period under the HSR Act, if
applicable, shall have expired or been terminated without any unresolved action
by the DOJ or the FTC to prevent the Closing and there shall not be in effect
any preliminary or permanent injunction or other order, decree or ruling by a
court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, no statute, rule, regulation or
administrative order shall have been promulgated or enacted by a government
authority and there shall not be in effect any temporary restraining order of a
court of competent jurisdiction, which, in any case, materially restrains or
prohibits the transactions contemplated hereby.
(e) Deliveries. Seller shall have made or stand willing to make all the
deliveries to Buyer set forth in Section 8.2.
(f) FCC Consent. The FCC Consent shall have been granted without the
imposition on Buyer of any conditions that need not be complied with by Buyer
under Section 6.10 hereof and Seller shall have complied with any conditions
imposed on it by the FCC Consent.
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(g) Governmental Authorizations. Seller shall be the holder of the
Licenses issued by the FCC to the Stations and, other than as a result of any
decision or order issued by the FCC or any court in connection with the ATV
Rulemaking, there shall not have been any modification of such Licenses that
would have a Material Adverse Effect. No proceeding shall be pending the
effect of which could be to revoke, cancel, fail to renew, suspend, or modify
adversely in any material respect such Licenses.
(h) Title Insurance and Survey. 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. Furthermore:
(i) 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;
(ii) 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, the premium for which shall be paid by the Buyer, 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; and
(iii) If within sixty (60) days after the date hereof:
(a) 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 (h) and (h)(ii) with respect to such portion of the Owned
Real Property.
(b) 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
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foregoing Subsection (h)(i) with respect to such portion of the Owned Real
Property, and shall be deemed to have waived the condition precedent in
foregoing Subsection (h)(ii) to the extent satisfaction of such condition with
respect to such portion of the Owned Real Property would require such Survey.
(c) Buyer does not by written notice to Seller within ten (10) days of
receipt of the Title Commitment and Survey 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.
(i) 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 any Station (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's attorney 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's attorney 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 7.1(i).
(j) 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 corporation duly organized and validly existing 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 (including all necessary shareholder 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 Seller Ancillary
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
Assets are bound; and (b) the written opinion of the Seller's FCC counsel,
dated as of the Closing Date, that (i) Seller holds the FCC Licenses, each of
which is in effect, (ii) the FCC Licenses are not subject to any conditions
other than those shown upon their face and those imposed by generally
applicable rules and regulations of the FCC, (iii) the FCC has granted the FCC
Consent and the FCC Consent is not the subject of any petition for
reconsideration, application for review or other similar apparition, and (iv)
to the counsel's knowledge, there are no proceedings pending, or threatened by
or before the FCC affecting or relating to the Stations or the FCC Licenses.
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(k) Schedules. Seller shall have delivered to Buyer within ten (10)
business days after the date hereof all of the Schedules referred to in Section
3, and all such Schedules shall be acceptable in form and substance to Buyer
within its reasonable judgment; provided, however, that if Buyer fails to
provide Seller with written notice specifying in detail the manner in which any
such Schedule is unacceptable to Buyer within fifteen (15) business days after
the date hereof, Buyer shall be deemed to have waived the condition precedent
set forth in this Section 7.1(k).
7.2 Conditions to Obligations of Seller. All obligations of Seller
at the Closing are subject at Seller's
option to the fulfillment prior to or at the Closing Date of each of the
following conditions:
(a) Representations and Warranties. All representations and warranties of
Buyer contained in this Agreement (i) that are qualified as to materiality,
shall be true and complete and (ii) that are not qualified as to materiality,
shall be true and complete in all material respects, in each case at and as of
the Closing Date as though made at and as of that time, except to the extent
that (i) any such representation or warranty is expressly stated only as of a
specified earlier date, in which case such representation or warranty shall be
true as of such earlier date and (ii) any changes are contemplated by this
Agreement.
(b) Covenants and Conditions. Buyer shall have performed and complied in
all material respects with all covenants, agreements, and conditions required
by this Agreement to be performed or complied with by it prior to or on the
Closing Date.
(c) Deliveries. Buyer shall have made or stand willing to make all the
deliveries set forth in Section 8.3.
(d) HSR Act; No Restraint. The waiting period under the HSR Act, if
applicable, shall have expired or been terminated without any unresolved action
by the DOJ or the FTC to prevent the Closing and there shall not be in effect
any preliminary or permanent injunction or other order, decree or ruling by a
court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, no statute, rule, regulation or
administrative order shall have been promulgated or enacted by a government
authority and there shall not be in effect any temporary restraining order of a
court of competent jurisdiction, which, in any case, materially restrains or
prohibits the transactions contemplated hereby.
(e) FCC Consent. The FCC Consent shall have been granted without the
imposition on Seller of any conditions that need not be complied with by Seller
under Section 6.11 hereof and Buyer shall have complied with any conditions
imposed on it by the FCC Consent.
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SECTION 8. CLOSING AND CLOSING DELIVERIES
8.1 Closing.
(a) Closing Date. Subject to the satisfaction or, to the extent
permissible by law, waiver (by the party for whose benefit the Closing
condition is imposed) on the date scheduled for Closing, of the conditions
precedent set forth in Sections 7.1 and 7.2, as appropriate, the Closing shall
take place at 10:00 a.m. on a date, to be set by Buyer on at least five (5)
business days' written notice to Seller, that is (1) not earlier than the first
business day after the FCC Consent is granted and the condition of Closing set
forth in Sections 7.1(f) and 7.2(e) has been satisfied, and (2) not later than
fourteen (14) days following the date upon which the FCC Consent is granted and
the condition of Closing set forth in Sections 7.1(f) and 7.2(e) has been
satisfied. If Buyer fails to give notice of the Closing Date by the date which
is five (5) business days prior to the date set forth in clause (2) in the
preceding sentence, the Closing shall take place on the first business day
following the end of the fourteen (14) day period described in such clause.
(b) Closing Place. The Closing shall be held at a location agreed upon by
Buyer and Seller.
8.2 Deliveries by Seller. Prior to or on the Closing Date, Seller shall
deliver to Buyer the following, in form and substance reasonably satisfactory to
Buyer and its counsel:
(a) Transfer Documents. Duly executed special warranty deeds, bills of
sale, motor vehicle titles, assignments, and other transfer documents which
shall be sufficient to vest good and marketable title to the Assets in the name
of Buyer, free and clear of all mortgages, liens, restrictions, encumbrances,
claims, and obligations, except for Permitted Liens;
(b) Consents. An executed copy of any instrument evidencing receipt of
any Material Consents and to the extent obtained, any other Consents;
(c) Officer's Certificate. A certificate, dated as of the Closing Date,
executed by Seller, certifying compliance by Seller with the conditions set
forth in Sections 7.1(a) and (b);
(d) Contracts, Business Records, Etc. Copies of all Assumed Contracts,
Licenses, blueprints, schematics, working drawings, plans, projections,
engineering records, and all files and records used by Seller in connection
with its operations;
(e) Indemnification Escrow Agreement. The Indemnification Escrow
Agreement (as defined below) duly executed by Seller; and
(f) Noncompetition Agreement. The Noncompetition Agreement, duly executed
by Seller.
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8.3 Deliveries by Buyer. Prior to or on the Closing Date, Buyer shall
deliver to Seller the following, in form and substance reasonably satisfactory
to Seller and its counsel:
(a) Purchase Price. The Purchase Price, as adjusted pursuant to Section
2.3(b) and as reduced pursuant to Section 10.8;
(b) Assumption Agreements. Appropriate assumption agreements pursuant to
which Buyer shall assume and undertake to perform Seller's obligations under
the Assumed Contracts and the FCC Licenses as provided in Section 2.5;
(c) Officer's Certificate. A certificate, dated as of the Closing Date,
executed by Buyer, certifying compliance by Buyer with the conditions set forth
in Sections 7.2(a) and (b);
(d) Indemnification Escrow Agreement. The Indemnification Escrow
Agreement duly executed by Buyer; and
(e) Noncompetition Agreement. The Noncompetition Agreement, duly
executed by Buyer.
SECTION 9. TERMINATION
9.1 Termination by Seller. This Agreement may be terminated by Seller, if
Seller is not then in material default, upon written notice to Buyer, upon the
occurrence of any of the following:
(a) Conditions. If, on the date that would otherwise be the Closing Date,
Seller shall have notified Buyer in writing that one or more of the conditions
precedent to the obligations of Seller set forth in Section 7.2 of this
Agreement have not been satisfied by Buyer or waived in writing by Seller and
such condition or conditions shall not have been satisfied by Buyer or waived
in writing by Seller within five (5) days following such notice.
(b) Judgments. If, on the date that would otherwise be the Closing Date,
there is in effect any law, regulation, rule, judgment, decree, or order that
would prevent or make unlawful the Closing.
(c) Upset Date. If the Closing shall not have occurred by December 31,
1998.
(d) Breach. Without limiting Seller's rights under the other provisions
of this Section 9.1, if Buyer has failed to cure any material breach of any of
its representations, warranties or covenants under this Agreement within thirty
(30) days after Buyer received written notice thereof from Seller.
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<PAGE> 33
(e) Final Deposit. If no Early Termination Event has occurred and Buyer
fails to deliver the Final Deposit in immediately available funds to the
account or accounts designated by the Escrow Agent by 5:00 p.m. EST, on the
sixteenth business day following the date of execution of this Agreement. If
this Agreement is terminated by Seller pursuant to this Section 9.1(e), the
Initial Deposit, held by the Escrow Agent pursuant to the Escrow Agreement,
including any interest or other proceeds from the investment of such Initial
Deposit, shall be disbursed to or at the direction of Seller; provided however,
that the remedies provided under this Section 9.1(e) are cumulative and shall
not preclude Seller from seeking any other remedies existing at law, in equity
or otherwise.
9.2 Termination by Buyer. This Agreement may be terminated by Buyer, if
Buyer is not then in material default, upon written notice to Seller, upon the
occurrence of any of the following:
(a) Conditions. If, on the date that would otherwise be the Closing Date,
Buyer shall have notified Seller in writing that one or more of the conditions
precedent to the obligations of Buyer set forth in Section 7.1 of this
Agreement have not been satisfied by Seller or waived in writing by Buyer and
such condition or conditions shall not have been satisfied by Seller or waived
in writing by Buyer within five (5) days following such notice.
(b) Judgments. If, on the date that would otherwise be the Closing Date,
there is in effect any law, regulation, rule, judgment, decree, or order that
would prevent or make unlawful the Closing.
(c) Upset Date. If the Closing shall not have occurred by December 31,
1998.
(d) Damage. If any damage or destruction of the Assets or any other event
occurs that causes any of the Stations to cease broadcasting operations for a
period of seven (7) or more full, consecutive days (for the purpose of this
Section 9.2(d), a "full day" shall mean a consecutive 24-hour period).
(e) Breach. Without limiting Buyer's rights under the other provisions of
this Section 9.2, if Seller has failed to cure any material breach of any of
its representations, warranties or covenants under this Agreement within thirty
(30) days after Seller received written notice thereof from Buyer.
(f) Early Termination Event. If (i) Seller does not deliver all of the
Schedules referred to in Section 3 within the time period specified in Section
5.17, or (ii) the Schedules delivered by Seller to Buyer are not acceptable to
Buyer within its reasonable judgment, or (iii) Buyer discovers through its due
diligence investigation, including review of the Schedules to be furnished by
Seller (which when delivered in final form shall constitute a part of this
Agreement), that any representation and warranty of Seller contained in this
Agreement (A) that is qualified as to materiality is not true and complete, or
(B) that is not qualified as to materiality is not true and complete in all
material respects (each of clauses (i), (ii) and (iii), an "Early Termination
Event");
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<PAGE> 34
provided, however, that Buyer must deliver written notice to Seller of an Early
Termination Event within fifteen (15) business days of the date of this
Agreement. Notwithstanding any other provisions of this Agreement, if Buyer
terminates this Agreement pursuant to an Early Termination Event and timely
notice of such Early Termination Event is delivered to Seller, the Initial
Deposit held by the Escrow Agent pursuant to the Escrow Agreement, including
any interest or other proceeds from the investment of such Initial Deposit held
by the Escrow Agent, shall be disbursed to or at the direction of Buyer, and
Buyer shall have no other remedy for any damages suffered by Buyer by reason of
an Early Termination Event.
9.3 Rights on Termination. If this Agreement is terminated pursuant to
Section 9.1 or Section 9.2 and neither party is in material breach of this
Agreement, the parties hereto shall not have any further liability to each other
with respect to the purchase and sale of the Assets. Except as provided in
Section 9.1(e), if this Agreement is terminated by Seller due to Buyer's
material breach of this Agreement, then the payment to Seller of the sum
described in Section 9.4 below shall be liquidated damages and shall constitute
full payment and the exclusive remedy for any damages suffered by Seller by
reason of Buyer's material breach of this Agreement. Seller and Buyer agree in
advance that actual damages would be difficult to ascertain and that said sum is
a fair and equitable amount to reimburse Seller for damages sustained due to
Buyer's material breach of this Agreement.
9.4 Escrow Deposit. Buyer has deposited with the Escrow Agent the sum of
One Million Eight Hundred Thousand Dollars ($1,800,000.00), which sum equals two
percent (2%) of the Purchase Price (the "Initial Deposit"), in accordance with
the Escrow Agreement. On or before the sixteenth business day following the
date of execution of this Agreement, Buyer shall deposit with the Escrow Agent
the sum of Seven Million Two Hundred Thousand Dollars ($7,200,000.00), which
shall equal eight percent (8%) of the Purchase Price (the "Final Deposit",
together with the "Initial Deposit", the "Deposit"). All such funds deposited
with the Escrow Agent shall be held and disbursed in accordance with the terms
of the Escrow Agreement and the following provisions:
(a) At the Closing, all amounts held by the Escrow Agent pursuant to the
Escrow Agreement, including any interest or other proceeds from the investment
of funds held by the Escrow Agent, shall be disbursed to or at the direction of
Buyer.
(b) Unless otherwise provided in this Agreement, if this Agreement is
terminated pursuant to Section 9.1 or 9.2 and Buyer is not in material breach
of this Agreement, all amounts held by the Escrow Agent pursuant to the Escrow
Agreement, including any interest or other proceeds from the investment of
funds held by the Escrow Agent, shall be disbursed to or at the direction of
Buyer.
(c) If this Agreement is terminated by Seller due to Buyer's material
breach of this Agreement, then the entire amount of the Deposit shall be
disbursed by the Escrow Agent to or at the direction of Seller as liquidated
damages under Section 9.3 above, and any interest or other
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<PAGE> 35
proceeds from the investment of the Deposit shall be disbursed by the Escrow
Agent to or at the direction of Buyer.
SECTION 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION;
CERTAIN REMEDIES
10.1 Representations, Warranties and Covenants. All representations and
warranties contained in this Agreement shall be deemed continuing
representations and warranties and, shall survive (and not be affected in any
respect by) the closing and any investigation conducted by any party and any
information any party may receive, except for the representations and warranties
contained in Sections 3.1, 3.2, 3.5 (in the case of Section 3.5 to the extent of
the title representation only), 3.18, 4.1, 4.2 and 4.4 (each of which shall
survive indefinitely), for a period of two (2) years and any claim for a breach
of a representation or warranty must be brought prior to the expiration of such
two (2) year period. Any claim for indemnification in respect of a covenant or
agreement of Buyer or Seller hereunder to be performed before the Closing shall
be made prior to the date which is two (2) years from the Closing Date.
Notwithstanding anything in this Agreement to the contrary, the covenants and
agreements in this Agreement to be performed after the Closing shall survive the
Closing until fully performed.
10.2 Indemnification by Seller. Subject to Sections 10.1 and 10.4, Seller
hereby agrees to indemnify and hold Buyer harmless against and with respect to,
and shall reimburse Buyer for:
(a) Any and all costs, losses, liabilities, or damages resulting from any
inaccurate representation, breach of warranty, or nonfulfillment of any
covenant by Seller contained in this Agreement or in any certificate, document,
or instrument delivered to Buyer under this Agreement.
(b) Any and all obligations of Seller not assumed by Buyer pursuant to
this Agreement and the failure of Seller to perform any and all of such
obligations, including any obligation or liability arising at any time under
any Contract not included in the Assumed Contracts.
(c) Any and all losses, liabilities, or damages resulting from the
operation or ownership of the Stations prior to the Closing, including any
liabilities arising under the Assumed Contracts or the Licenses which relate to
events occurring prior the Closing Date.
(d) Any and all actions, suits, proceedings, claims, demands, assessments,
judgments, costs, and expenses, including reasonable legal fees and expenses,
incident to any of the foregoing or incurred in investigating or attempting to
avoid the same or to oppose the imposition thereof, or in enforcing this
indemnity.
10.3 Indemnification by Buyer. Subject to Sections 10.1 and 10.4, Buyer
hereby agrees to indemnify and hold Seller harmless against and with respect to,
and shall reimburse Seller for:
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<PAGE> 36
(a) Any and all costs, losses, liabilities, or damages resulting from any
inaccurate representation, breach of warranty, or nonfulfillment of any
covenant by Buyer contained in this Agreement or in any certificate, document,
or instrument delivered to Seller under this Agreement.
(b) Any and all obligations of Seller assumed by Buyer pursuant to this
Agreement and the failure of Buyer to perform any and all of such obligations.
(c) Any and all losses, liabilities or damages resulting from the
operation or ownership of the Stations on and after the Closing, including any
obligation or liability arising under the Licenses and the Assumed Contracts
which relate to events occurring after the Closing.
(d) Any and all actions, suits, proceedings, claims, demands, assessments,
judgments, costs and expenses, including reasonable legal fees and expenses,
incident to any of the foregoing or incurred in investigating or attempting to
avoid the same or to oppose the imposition thereof, or in enforcing this
indemnity.
10.4 Limitations. No indemnification shall be required to be made by any
party hereto until the aggregate amount of all indemnification claims against
such indemnifying party exceeds $50,000, provided that once such claims exceed
$50,000, such indemnifying party shall only be required to indemnify the other
party with respect to the portion of all claims which exceeds $50,000 in the
aggregate. The previous limitation shall not apply to the prorations to the
Purchase Price under Section 2.3. Notwithstanding anything to the contrary
contained herein, in no event shall Seller's obligations for indemnification
under this Agreement exceed in the aggregate the Purchase Price hereunder and
Buyer hereby waives and releases any recourse against Seller for indemnification
above the Purchase Price hereunder. Except as set forth in Section 10.6, the
indemnification provisions in this Section 10 set forth the exclusive remedies
of the parties hereto following the Closing for a breach of a representation,
warranty or covenant under this Agreement or any other claims relating to this
Agreement. There shall be no limitation as to amount or time with respect to
any breach of a representation or warranty set forth in Sections 3.1, 3.2, 3.5
(in the case of Section 3.5 to the extent of the title representation only),
3.18, 4.1, 4.2 and 4.4.
10.5 Procedure for Indemnification. The procedure for indemnification
shall be as follows:
(a) The party claiming indemnification (the "Claimant") shall promptly
give notice to the party from which indemnification is claimed (the
"Indemnifying Party") of any claim, whether between the parties or brought by a
third party, specifying in reasonable detail the factual basis for the claim.
If the claim relates to an action, suit, or proceeding filed by a third party
against Claimant, such notice shall be given by Claimant within five (5) days
after written notice of such action, suit, or proceeding was given to Claimant,
provided that any failure to give notice of such action, suit or proceeding
within such five (5) day period shall not relieve the Indemnifying Party of its
obligations hereunder except to the extent such failure shall have prejudiced
such party in the defense or resolution of any such claim.
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<PAGE> 37
(b) With respect to claims solely between the parties, following receipt
of notice from the Claimant of a claim, the Indemnifying Party shall have
thirty (30) days to make such investigation of the claim as the Indemnifying
Party deems necessary or desirable. For the purposes of such investigation,
the Claimant agrees to make available to the Indemnifying Party and/or its
authorized representatives the information relied upon by the Claimant to
substantiate the claim. If the Claimant and the Indemnifying Party agree at or
prior to the expiration of the thirty (30) day period (or any mutually agreed
upon extension thereof) to the validity and amount of such claim, the
Indemnifying Party shall immediately pay to the Claimant the amount of the
claim. If the Claimant and the Indemnifying Party do not agree within the
thirty (30) day period (or any mutually agreed upon extension thereof), the
Claimant may seek appropriate remedy at law or equity.
(c) With respect to any claim by a third party as to which the Claimant is
entitled to indemnification under this Agreement, the Indemnifying Party shall
have the right at its own expense, to participate in or assume control of the
defense of such claim, and the Claimant shall cooperate fully with the
Indemnifying Party, subject to reimbursement for actual out-of-pocket expenses
incurred by the Claimant as the result of a request by the Indemnifying Party.
If the Indemnifying Party elects to assume control of the defense of any
third-party claim, the Claimant shall have the right to participate in the
defense of such claim at its own expense. If the Indemnifying Party does not
elect to assume control or otherwise participate in the defense of any third
party claim, it shall be bound by the results obtained by the Claimant with
respect to such claim.
(d) If a claim, whether between the parties or by a third party, requires
immediate action, the parties will make every effort to reach a decision with
respect thereto as expeditiously as possible.
(e) The indemnification rights provided in Sections 10.2 and 10.3 shall
extend to the shareholders, directors, officers, members, employees, and
representatives of any Claimant although for the purpose of the procedures set
forth in this Section 10.5, any indemnification claims by such parties shall be
made by and through the Claimant.
10.6 Specific Performance. The parties recognize that if Seller breaches
this Agreement and refuses to perform under the provisions of this Agreement,
monetary damages alone would not be adequate to compensate Buyer for its injury.
Buyer shall therefore be entitled to obtain specific performance of the terms of
this Agreement. If any action is brought by Buyer to enforce this Agreement,
Seller shall waive the defense that there is an adequate remedy at law.
10.7 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.
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<PAGE> 38
10.8 Indemnification Fund. At the Closing, $2,000,000 of the Purchase
Price payable by Buyer to Seller under Section 2.3(a) (the "Indemnity Fund")
shall be deposited with the Escrow Agent. The Indemnity Fund shall be held in
accordance with the terms hereof and the terms of the Indemnification Escrow
Agreement in the form of Schedule 10.8 attached hereto (the "Indemnification
Escrow Agreement"). The Indemnity Fund shall be used as a source of funds to
satisfy indemnification claims by Buyer under this Section 10; provided,
however, that the Indemnity Fund shall not be the only source of funds to
satisfy indemnification claims by Buyer and Buyer shall have all of its rights
at law and in equity to enforce its indemnification rights under this Section
10. Upon final determination of a claim in favor of Buyer by a court of
competent jurisdiction or by mutual agreement of Buyer and Seller, Buyer shall
be entitled to the amount of such claim from the Indemnity Fund. Any claims by
Buyer against the Indemnity Fund must be made by Buyer before the date which is
twelve months after the Closing Date (the "Indemnity Termination Date"). On
the Indemnity Termination Date, the Escrow Agent shall disburse to Seller the
Indemnity Fund together with all interest earned thereon less the amount of any
claims made by Buyer against the Indemnity Fund prior to such date (the "Claim
Amount"). The Claim Amount shall be retained by the Escrow Agent in escrow
until the underlying claim or claims related thereto have been finally
determined by a court of competent jurisdiction or by mutual agreement of Buyer
and Seller. Buyer and Seller hereby agree to jointly direct the Escrow Agent to
disburse any portion of the Indemnity Fund to any party which is entitled
thereto pursuant to the terms hereof.
10.9 Bulk Transfer. Seller and Buyer hereby waive compliance with the
provisions of any applicable bulk sales law and no representations, warranty or
covenant contained in this Agreement shall be deemed to have been breached as a
result of such non-compliance.
SECTION 11. MISCELLANEOUS
11.1 Fees and Expenses. Buyer shall pay any federal, state, or local sales
or transfer tax, including Florida documentary stamp tax, arising in connection
with the conveyance of the Assets by Seller to Buyer pursuant to this Agreement
and any filing fees under the HSR Act. Buyer and Seller shall each pay one-half
of all filing fees required by the FCC in connection with the application for
the FCC Consent. Except as otherwise provided in this Agreement, each party
shall pay its own expenses incurred in connection with the authorization,
preparation, execution, and performance of this Agreement, including all fees
and expenses of counsel, accountants, agents, and representatives. Each party
shall be responsible for all fees or commissions payable to any finder, broker,
advisor, or similar person retained by or on behalf of such party.
11.2 Notices. All notices, demands, and requests required or permitted to
be given under the provisions of this Agreement shall be (a) in writing, (b)
delivered by personal delivery, or sent by commercial delivery service or
registered or certified mail, return receipt requested, (c) deemed to have been
given on the date of personal delivery or the date set forth in the records of
the delivery service or on the return receipt, and (d) addressed as follows:
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<PAGE> 39
<TABLE>
<S> <C>
If to Seller: Wabash Valley Broadcasting Corporation
4790 W. 16th Street
Indianapolis, IN 46222
Attention: Mr. John H. Newcomb
With a copy to: Ice Miller Donadio & Ryan
One American Square, Box 82001
Indianapolis, IN 46282-0002
Attention: Thomas H. Ristine, Esq.
If to Buyer: Emmis Broadcasting Corporation
950 North Meridian Street, Suite 1200
Indianapolis, IN 46204
Attention: Mr. Jeffrey H. Smulyan
With a copy to: Attention: Bose McKinney & Evans
2700 First Indiana Plaza
135 North Pennsylvania Street
Indianapolis, IN 46204
Attention: David L. Wills, Esq.
</TABLE>
or to any other or additional persons and addresses as the parties may from
time to time designate in a writing delivered in accordance with this Section
11.2.
11.3 Benefit and Binding Effect. 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.
11.4 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 satisfactory to Seller within its
reasonable judgment in which both Buyer and the assignee agree to be jointly
and severally liable
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<PAGE> 40
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.
11.5 Further Assurances. The parties shall take any actions and execute
any other documents that may be necessary or desirable for the implementation
and consummation of this Agreement, including, in the case of Seller, any
additional bills of sale, deeds, or other transfer documents that, in the
reasonable opinion of Buyer, may be necessary to ensure, complete, and evidence
the full and effective transfer of the Assets to Buyer pursuant to this
Agreement.
11.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED, AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INDIANA (WITHOUT REGARD TO
THE CHOICE OF LAW PROVISIONS THEREOF).
11.7 Headings. The headings in this Agreement are included for ease of
reference only and shall not control or affect the meaning or construction of
the provisions of this Agreement.
11.8 Gender and Number. Words used in this Agreement, regardless of the
gender and number specifically used, shall be deemed and construed to include
any other gender, masculine, feminine, or neuter, and any other number, singular
or plural, as the context requires.
11.9 Entire Agreement. This Agreement, the schedules, hereto, and all
documents, certificates, and other documents to be delivered by the parties
pursuant hereto, collectively represent the entire understanding and agreement
between Buyer and Seller with respect to the subject matter hereof. This
Agreement supersedes all prior negotiations between the parties and cannot be
amended, supplemented, or changed except by an agreement in writing that makes
specific reference to this Agreement and which is signed by the party against
which enforcement of any such amendment, supplement, or modification is sought.
11.10 Waiver of Compliance; Consents. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, agreement, or condition herein may be waived
by the party entitled to the benefits thereof only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, representation, warranty, covenant,
agreement, or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires
or permits consent by or on behalf of any party hereto, such consent shall be
given in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 11.10.
11.11 Press Release. Prior to, at or after the Closing, neither party
shall publish any press release, make any other public announcement or otherwise
communicate with any news media concerning this Agreement or the transactions
contemplated hereby without the prior written consent of the other party;
provided, however, that nothing contained herein shall prevent either party from
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<PAGE> 41
promptly making all filings with governmental authorities as may, in its
judgement, be required or advisable in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
11.12 Counterparts. This Agreement may be signed in
counterparts with the same effect as if the signature on each counterpart were
upon the same instrument.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the day and year first above written.
SELLER
WABASH VALLEY BROADCASTING
CORPORATION
By:_____________________________________
John H. Newcomb, Executive Vice President
BUYER
EMMIS BROADCASTING CORPORATION
By:______________________________________
Name:__________________________________
Title:_________________________________
- 36 -
<PAGE> 1
EXHIBIT 10.16
ASSET PURCHASE AGREEMENT
BY AND AMONG
SF BROADCASTING OF HONOLULU, INC.
SF HONOLULU LICENSE SUBSIDIARY, INC.
SF BROADCASTING OF NEW ORLEANS, INC.
SF NEW ORLEANS LICENSE SUBSIDIARY, INC.
SF BROADCASTING OF MOBILE, INC.
SF MOBILE LICENSE SUBSIDIARY, INC.
SF BROADCASTING OF GREEN BAY, INC.
SF GREEN BAY LICENSE SUBSIDIARY, INC.
AS SELLERS,
AND
EMMIS BROADCASTING CORPORATION
AS BUYER
MARCH 30, 1998
<PAGE> 2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of March 30,
1998, by and among SF BROADCASTING OF HONOLULU, INC., a Delaware corporation
("SF Honolulu"), SF HONOLULU LICENSE SUBSIDIARY, INC., a Delaware corporation
("Honolulu Licensee"), SF BROADCASTING OF NEW ORLEANS, INC., a Delaware
corporation ("SF New Orleans"), SF NEW ORLEANS LICENSE SUBSIDIARY, INC., a
Delaware corporation ("New Orleans Licensee"), SF BROADCASTING OF MOBILE, INC.,
a Delaware corporation ("SF Mobile"), SF MOBILE LICENSE SUBSIDIARY, INC., a
Delaware corporation ("Mobile Licensee"), SF BROADCASTING OF GREEN BAY, INC., a
Delaware corporation ("SF Green Bay") and SF GREEN BAY LICENSE SUBSIDIARY,
INC., a Delaware corporation ("Green Bay Licensee") (each of the foregoing
entities shall be referred to herein individually as a "Seller" and
collectively as "Sellers"), and EMMIS BROADCASTING CORPORATION, an Indiana
corporation ("Buyer").
RECITALS:
WHEREAS, SF Honolulu owns and operates television station KHON(TV),
Channel 2, Honolulu, Hawaii, together with satellite station KAII(TV) Wailuku,
Hawaii and satellite station KHAW(TV) Hilo, Hawaii, television translator
station K55DZ Lihue and Kauai, Hawaii, and McHale Videofilm (each of the
foregoing stations together with McHale Videofilm are collectively referred to
herein as the "Honolulu Station"); and Honolulu Licensee holds the licenses and
authorizations issued by the Federal Communications Commission (the "FCC") for
the operation of the Honolulu Station;
WHEREAS, SF Green Bay owns and operates television station WLUK(TV),
Channel 11, Green Bay, Wisconsin and television translator station W40AN
Escanaba, Michigan (the "Green Bay Station"); and Green Bay Licensee holds the
licenses and authorizations issued by the FCC for the operation of the Green
Bay Station;
WHEREAS, SF Mobile owns and operates television station WALA(TV), Channel
10, Mobile, Alabama (the "Mobile Station"); and Mobile Licensee holds the
licenses and authorizations issued by the FCC for the operation of the Mobile
Station;
WHEREAS, SF New Orleans owns and operates television station WVUE(TV),
Channel 8, New Orleans, Louisiana (the "New Orleans Station" and together with
the Mobile Station, the Green Bay Station and the Honolulu Station, the
"Stations"); and New Orleans Licensee holds the licenses and authorizations
issued by the FCC for the operation of the New Orleans Station;
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I TERMINOLOGY..................................................... 2
1.1 Defined Terms........................................................ 2
1.2 Additional Defined Terms............................................. 7
ARTICLE II PURCHASE AND SALE.............................................. 8
2.1 Sale Assets.......................................................... 8
2.2 Excluded Assets......................................................10
2.3 Assumption of Liabilities............................................11
2.4 Earnest Money........................................................11
2.5 Purchase Price.......................................................12
2.6 Allocation of the Purchase Price.....................................17
2.7 Adjustment of Purchase Price.........................................18
2.8 Accounts Receivable..................................................20
2.9 Seller Representative................................................21
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS.....................21
3.1 Organization, Good Standing and Corporate Power......................21
3.2 Authorization and Binding Effect of Documents........................21
3.3 Absence of Conflicts.................................................22
3.4 Consents.............................................................22
3.5 Sale Assets; Title...................................................22
3.6 FCC Licenses.........................................................22
3.7 Station Agreements...................................................24
3.8 Tangible Personal Property...........................................26
3.9 Real Property........................................................26
3.10 Intellectual Property................................................27
3.11 Financial Statements.................................................28
3.12 Absence of Certain Changes or Events.................................29
3.13 Litigation...........................................................30
3.14 Labor Matters........................................................30
3.15 Employee Benefit Plans...............................................31
3.16 Compliance with Law..................................................33
3.17 Tax Returns and Payments.............................................33
3.18 Environmental Matters................................................33
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
3.19 Broker's or Finder's Fees............................................35
3.20 Insurance............................................................35
3.21 Cable Television Transmission........................................35
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER........................35
4.1 Organization and Good Standing.......................................35
4.2 Authorization and Binding Effect of Documents........................35
4.3 Absence of Conflicts.................................................36
4.4 Consents.............................................................36
4.5 Broker's or Finder's Fees............................................36
4.6 Litigation...........................................................36
4.7 Buyer's Qualification................................................37
4.8 Adequacy of Financing................................................37
4.9 Capitalization; Buyer Stock..........................................37
4.10 SEC Filings; Financial Statements....................................38
4.11 Material Contracts...................................................38
4.12 WARN Act.............................................................39
4.13 No Outside Reliance..................................................39
ARTICLE V OTHER COVENANTS.................................................39
5.1 Conduct of the Stations' Business Prior to the Closing Date..........39
5.2 Notification of Certain Matters......................................41
5.3 HSR Filing...........................................................41
5.4 FCC Filing...........................................................42
5.5 Title; Additional Documents..........................................42
5.6 Other Consents.......................................................42
5.7 Inspection and Access................................................42
5.8 Confidentiality......................................................43
5.9 Publicity............................................................43
5.10 Material Adverse Change..............................................43
5.11 Reasonable Best Efforts..............................................43
5.12 FCC Reports and Applications.........................................44
5.13 Tax Returns and Payments.............................................44
5.14 No Solicitation......................................................44
5.15 Certified Resolutions................................................44
5.16 Audited Financial Statements.........................................45
5.17 Studio Relocation....................................................45
5.18 SEC Registration Statement...........................................45
5.19 Environmental Inspection.............................................45
</TABLE>
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<TABLE>
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5.20 Affiliate Guaranty...................................................46
ARTICLE VI CONDITIONS PRECEDENT TO THE
OBLIGATION OF BUYER TO CLOSE..............................................46
6.1 Accuracy of Representations and Warranties; Closing Certificate......46
6.2 Performance of Agreement.............................................46
6.3 FCC Orders...........................................................46
6.4 HSR Act..............................................................47
6.5 Opinions of Sellers' Counsel.........................................47
6.6 Required Consents....................................................48
6.7 Delivery of Closing Documents........................................49
6.8 No Adverse Proceedings...............................................49
6.9 No Material Adverse Change...........................................49
ARTICLE VII CONDITIONS PRECEDENT TO THE
OBLIGATION OF SELLERS TO CLOSE............................................49
7.1 Accuracy of Representations and Warranties...........................49
7.2 Performance of Agreements............................................50
7.3 FCC Orders...........................................................50
7.4 HSR Act..............................................................50
7.5 Opinion of Buyer's Counsel...........................................50
7.6 No Adverse Proceedings...............................................50
7.7 Delivery of Closing Documents........................................51
7.8 Effectiveness of Registration Statement..............................51
7.9 Listing of Shares....................................................51
ARTICLE VIII CLOSING......................................................51
8.1 Time and Place.......................................................51
8.2 Documents to be Delivered to Buyer by Sellers........................51
8.3 Deliveries to Sellers by Buye........................................52
ARTICLE IX INDEMNIFICATION................................................53
9.1 Survival.............................................................53
9.2 Indemnification by Sellers...........................................54
9.3 Indemnification by Buyer.............................................55
9.4 Administration of Indemnification....................................55
ARTICLE X TERMINATION; LIQUIDATED DAMAGES.................................57
10.1 Right of Termination.................................................57
10.2 Obligations Upon Termination.........................................57
</TABLE>
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10.3 Termination Notice..................................................58
ARTICLE XI CONTROL OF STATIONS............................................58
ARTICLE XII EMPLOYMENT MATTERS............................................58
12.1 Transfer of Employees...............................................58
12.2 Employee Benefit Plans..............................................59
12.3 Union Employees.....................................................60
12.4 Employment Agreements...............................................60
ARTICLE XIII MISCELLANEOUS................................................60
13.1 Further Actions.....................................................60
13.2 Payment of Expenses.................................................60
13.3 Specific Performance................................................61
13.4 Notices.............................................................61
13.5 Entire Agreement....................................................62
13.6 Binding Effect; Benefits............................................63
13.7 Assignment..........................................................63
13.8 Governing Law.......................................................63
13.9 Amendments and Waivers..............................................63
13.10 Severability........................................................64
13.11 Headings............................................................64
13.12 Counterparts........................................................64
13.13 References..........................................................64
13.14 Schedules and Exhibits..............................................64
13.15 Joint and Several Liability.........................................64
EXHIBITS:
- - ---------
Exhibit A Form of Promissory Note
Exhibit B Form of Stock Pledge Agreement
Exhibit C Form of Fox Affiliation Agreement
Exhibit D Form of Guaranty
SCHEDULES
Schedule 2.2(l) Additional Excluded Assets
Schedule 2.8 Retained Receivables
</TABLE>
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Schedule 3.1 Foreign Qualifications
Schedule 3.3 Required Consents and Filings
Schedule 3.5 Liens to be Released Prior to Closing
Schedule 3.6 FCC Licenses
Schedule 3.7(a) Trade Agreements
Schedule 3.7(b) Station Agreements
Schedule 3.7(c) Affiliate Agreements
Schedule 3.8 Tangible Personal Property
Schedule 3.9 Real Property Interests
Schedule 3.10 Intellectual Property
Schedule 3.12 Absence of Certain Changes or Events
Schedule 3.13 Litigation
Schedule 3.14(a) Employee Claims
Schedule 3.14(c) List of Employees
Schedule 3.15 Employee Benefit Plans
Schedule 3.17 Tax Returns and Payments
Schedule 3.18 Environmental Matters
Schedule 3.21 Cable Television Transmissions
Schedule 6.6 Required Consents
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WHEREAS, pursuant to a guaranty (the "Guaranty") to be given to Buyer on
the Closing Date by USA Broadcasting, Inc., a Delaware corporation and an
Affiliate of each of the Sellers ("USA Broadcasting"), USA Broadcasting will
guarantee to Buyer the prompt and complete performance of the obligations of
Sellers arising under this Agreement and the other Seller Documents; and
WHEREAS, Buyer desires to acquire substantially all the assets used or
useful in the business and operation of the Stations, and Sellers are willing
to convey such assets to Buyer.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Sellers and Buyer 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, another Person
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.
Appraisal Firm: Bond & Pecaro.
Assumed Plans: The Benefit Plans to which Sellers are required to
contribute pursuant to the collective bargaining agreements and labor
union contracts that are Station Agreements.
Code: The Internal Revenue Code of 1986, as amended.
Common Stock: The Class A Common Stock, $.01 par value per
share, of Buyer.
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<PAGE> 9
Documents: This Agreement, the Note, the Stock Pledge Agreement
and all Exhibits and Schedules hereto, and each other agreement,
certificate or instrument delivered pursuant to 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 thereon as of such date.
Escrow Agent: NBD Bank, N.A., a national banking association
headquartered in Indianapolis, Indiana.
Escrow Agreement: The Escrow Agreement, dated as of the date
hereof, by and among the Sellers, the Seller Representative, Buyer and
the Escrow Agent relating to the deposit, holding, investment and
disbursement of the Earnest Money.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Fair Market Value: The per share closing price of the Common
Stock on NASDAQ for the second trading day preceding the determination
date, as accurately reported in The Wall Street Journal.
FCC: Federal Communications Commission.
FCC Orders: The orders or decisions of the FCC granting its
consent to the transfer of all 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.
Fox Children's Network Payment Rights: Rights of the Sellers to
receive payments from or in connection with the Fox Children's
Network.
Green Bay Station: Television station WLUK(TV), Channel 11,
Green Bay, Wisconsin and television translator station W40AN Escanaba,
Michigan.
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Honolulu Station: Television station KHON(TV), Channel 2,
Honolulu, Hawaii, satellite station KAII(TV) Wailuku, Hawaii,
satellite station KHAW(TV) Hilo, Hawaii, television translator station
K55DZ Lihue and Kauai, Hawaii, and McHale Videofilm.
Liabilities: As to any Person, all debts, adverse claims,
liabilities and obligations, direct, indirect, absolute or contingent
of such Person, whether accrued, vested or otherwise, whether in
contract, tort, strict liability or otherwise and whether or not
actually reflected, or required by generally accepted accounting
principles to be reflected, in such Person's balance sheets or other
books and records.
Lien: Any mortgage, deed of trust, pledge, hypothecation, title
defect, right of first refusal, security or other adverse interest,
encumbrance, easement, restriction, claim, option, lien or charge of
any kind, whether voluntarily incurred or arising by operation of law
or otherwise, affecting any assets or property, including any
agreement to give or grant any of the foregoing, any conditional sale
or other title retention agreement, and the agreement by any Seller 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 FCC Condition: A condition imposed by the FCC
which would restrict, limit, increase the cost or burden of or
otherwise adversely affect or impair, in each case in any material
respect, the right of Buyer to the ownership, use, control or
operation of any Station; provided, however, that any condition
imposed by the FCC which requires (i) that Buyer or any of Buyer's
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 a Station be operated
in accordance with conditions similar to and not materially more
adverse than those contained in the present FCC Licenses shall not be
a Material Adverse FCC Condition.
Material Adverse Effect: A material adverse effect on the
assets, business, or operations of the Stations taken as a whole,
except for any such material adverse effect resulting from (a) general
economic
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conditions applicable to the television broadcast industry, (b)
circumstances that are not likely to recur and either have been
substantially remedied or that can be substantially remedied without
substantial cost or delay, or (c) Buyer's refusal to consent to any
new lease or purchase agreement in connection with relocation of the
Honolulu Station's office and studio as contemplated in Section 5.17.
Mobile Station: Television station WALA(TV), Channel 10, Mobile,
Alabama.
NASDAQ: The National Association of Securities Dealers'
Automated Quotation System/National Market.
New Orleans Station: Television station WVUE(TV), Channel 8, New
Orleans, Louisiana.
Parent Entities: SF Multistations, Inc. and SF Broadcasting of
Wisconsin, Inc., each a Delaware corporation and the owner of all of
the outstanding capital stock of certain of the Sellers.
Permitted Lien: (a) Any statutory Lien which secures a payment
not yet due that arises, and is customarily discharged, in the
ordinary course of Sellers' business; (b) any other Liens or
imperfections in Sellers' title to any Sale Assets or properties that,
individually and in the aggregate, are not material in character or
amount and are not reasonably expected to materially detract from the
value or materially interfere with the existing use of any of the Sale
Assets; (c) Liens arising in connection with equipment or maintenance
financing or leasing under the terms of the Station Agreements; (d)
Liens arising pursuant to the terms of leases on Real Property or
Leased Real Property which are subject to any lease or sublease to a
third party; (e) Liens for Taxes not yet due and payable or which are
being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on Sellers'
books in accordance with GAAP; and (f) Liens specified on the current
title insurance policies for the Owned Real Property provided by
Sellers to Buyer prior to the date hereof (except for Liens securing
indebtedness of Sellers for borrowed money).
Person: Any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization,
other form of business or legal entity or Governmental Authority.
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Proration Items: Any power and utility charges, business and
license fees (including retroactive adjustments thereof), sales and
service charges, commissions, special assessments, and rental payments
and personal and real estate Taxes and assessments with respect to the
Real Property, Taxes (except for Transfer Taxes arising from the
transfer of the Assets hereunder), deposits, rights and obligations
under Trade Agreements, accrued vacation, unused sick leave and other
similar prepaid and deferred items and any other operating expenses
incurred in the ordinary course of Sellers' business, and all
operating income and revenue of the Stations. The parties acknowledge
and agree that there shall be excluded from Proration Items the
severance pay relating to any employee of any Seller that is payable
under any severance plan or arrangement of any Seller (which severance
pay shall remain the obligation of Sellers).
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended.
Subsidiary: With respect to any Person, a corporation,
partnership, limited liability company, or other entity of which
shares of stock or other ownership interests having ordinary voting
power to elect a majority of the directors of such corporation, or
other Persons performing similar functions for such entity, are owned,
directly or indirectly, by such Person.
Stations: The New Orleans Station, the Mobile Station, the Green
Bay Station and the Honolulu Station.
Taxes: All federal, state, local and foreign taxes including,
without limitation, income, gains, transfer, 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).
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TBA: Any time brokerage agreement, local marketing arrangement,
joint sales agreement, joint operating agreement, limited management
agreement or other similar agreement or contract.
Transfer Taxes: All sales, use, conveyance, recording and other
similar transfer Taxes and fees applicable to, imposed upon or arising
out of the sale by Sellers and the purchase by Buyer of the Stations
whether now in effect or hereinafter adopted and regardless of which
party such Transfer Tax is imposed upon. Transfer Taxes shall in no
event include any net or gross income Taxes.
USA Broadcasting: USA Broadcasting, Inc., a Delaware corporation
and Affiliate of each of the Sellers.
1.2 ADDITIONAL DEFINED TERMS.
As used herein, the following terms shall have the meanings defined in the
section indicated below:
<TABLE>
<S> <C>
Acquisition Proposal Section 5.14
Act Section 3.6(b)
Adjustment Amount Section 2.7(a)
Appraisal Report Section 2.6(a)
Arbitrator Section 2.7(d)
Assumed Obligations Section 2.3(a)
Benefit Plans Section 3.15(a)
Buyer Material Contracts Section 4.13
Buyer SEC Reports Section 4.10
Buyer's Plan Section 12.1(f)
Cap Section 9.2(c)
Carrying System Section 3.21
Closing Section 8.1
Closing Date Section 8.1
Collection Period Section 2.8(b)
Deductible Section 9.2(b)
employee benefit plans Section 3.15(a)
employee pension benefit plans Section 12.1(c)
employee welfare benefit plans Section 12.1(c)
Employees Section 3.15(a)
ERISA Section 3.15(a)
Excluded Assets Section 2.2
FCC Arbitrator Section 6.3(b)
FCC Licenses Section 3.6(a)
</TABLE>
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<TABLE>
<S> <C>
Fox Network Agreements Section 8.2(i)
HSR Act Section 5.3
HSR Filing Section 5.3
Indemnified Party Section 9.4(a)
Indemnifying Party Section 9.4(a)
Intellectual Property Section 2.1(e)
Interim Balance Sheet Section 3.11(c)
Leased Real Property Section 5.18
Maturity Date Section 2.5(a)(iv)
Multiemployer Plan Section 3.15(c)
Note Section 2.5(a)(iv)
Owned Real Property Section 3.9(b)
Preliminary Adjustment Report Section 2.7(b)
Purchase Price Section 2.5(a)
Real Property Section 2.1(b)
Registration Statement Section 5.17
Related Persons Section 3.15(a)
Retained Receivables Section 2.8(a)
Sale Assets Section 2.1
Seller Representative Section 2.9
Sellers' Enforcement Costs Section 10.2(c)
Sellers' Liquidated Damage Amount Section 10.2(c)
Sellers' Plan Section 12.1(f)
Shares Section 2.5(c)
significant issue Section 6.3(b)
Station Agreements Section 2.1(d)
Stock Pledge Agreement Section 2.5(a)(iv)
Studio Relocation Section 5.16
Survival Period Section 9.1
Tangible Personal Property Section 2.1(a)
Trade Agreements Section 3.7(a)
Transferred Employees Section 12.1(a)
</TABLE>
ARTICLE II
PURCHASE AND SALE
2.1 SALE ASSETS.
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<PAGE> 15
Upon and subject to the terms and conditions provided herein, on the
Closing Date, Sellers will sell, transfer, assign and convey to Buyer, and
Buyer will purchase from Sellers, all of Sellers' right, title and interest in
and to all tangible and intangible assets (except Excluded Assets) used by each
Seller or useful by each Seller 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 transmitter, antenna and other
broadcast equipment, studio equipment, furniture, parts, artwork, computers and
office equipment, supplies, programming library and other tangible personal
property owned or leased by Sellers and used in the operation of any Station,
including but not limited to the items listed on Schedule 3.8, together with
such modifications, replacements, improvements and additional items, and
subject to such deletions therefrom, made or acquired by Sellers 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. All interests of Sellers (including, but not limited
to, leaseholds) in the real estate listed on Schedule 3.9 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 Sellers or hereafter obtained by Sellers
between the date hereof and the Closing Date, that are necessary for the
operation of the Stations.
(d) Fox Children's Network Payment Rights. All rights to payments made
after March 31, 1997 pursuant to the Fox Children's Network Payment Rights.
(e) Station Agreements. All rights of Sellers in, to and under all
contracts, leases, agreements, commitments and other arrangements, and any
amendments or modifications, used or useful in the operation of any Station as
of the date hereof (including, but not limited to, those listed on Schedule
3.7(b)) or made or entered into by any Seller between the date hereof and the
Closing Date in compliance with this Agreement (the "Station Agreements").
(f) Intellectual Property. All trade names, trademarks, service marks,
copyrights, patents, jingles, slogans, symbols, logos, the call letters
KHON(TV), KAII(TV), KAHW(TV), WLUK(TV), WALA(TV) and WVUE(TV), inventions, and
any other proprietary material, process, trade secret or trade right used by
any Seller in the operation of any Station, and all registrations, applications
and licenses for any of the foregoing, including, without limitation, those set
forth on Schedule 3.10; any additional such items acquired or used by any
Seller in connection with the operation of any
9
<PAGE> 16
Station between the date hereof and the Closing Date; and all goodwill
associated with any of the foregoing (collectively, the "Intellectual
Property"); provided, however, that the Intellectual Property shall not include
and Sellers shall retain exclusive rights to, all right, title and interest
whatsoever in or to the names "SF Broadcasting", "USA Networks", "Fox" or any
derivations thereof or any signs, symbols or logos bearing the names "SF
Broadcasting", "USA Networks" or "Fox".
(g) 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 any Station, including, but not limited to, any of
such items stored on computer disks or tapes.
(h) 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 Sellers 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, the Sale
Assets shall not include the following (the "Excluded Assets"):
(a) Any and all cash, bank deposits and other cash equivalents,
certificates of deposits, marketable securities, cash deposits made by Sellers
to secure contract obligations, and all accounts receivable (except in each
case to the extent Sellers receive a credit therefor under Section 2.7 and
except for rights to receive payments after the date hereof pursuant to the Fox
Children's Network Payment Rights);
(b) All rights and claims of any Seller whether mature, contingent or
otherwise, against third parties relating to the Assets or the Stations,
whether in tort, contract, or otherwise, to the extent arising during and
relating to any period prior to the Closing Date;
(c) All prepaid expenses (and rights arising therefrom or related thereto)
except to the extent taken into account in determining the Adjustment Amount
under Section 2.7;
(d) All Benefit Plans (other than the Assumed Plans);
(e) Any and all claims of any Seller with respect to any Tax refunds;
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<PAGE> 17
(f) All of each Seller's rights under or pursuant to this Agreement or any
other rights in favor of Sellers pursuant to the other Documents;
(g) All rights to payments made prior to the date hereof pursuant to the
Fox Children's Network Payment Rights;
(h) All loan agreements and other instruments evidencing indebtedness for
borrowed money;
(i) All contracts of insurance, all coverages and proceeds thereunder and
all rights in connection therewith, including, without limitation, rights
arising from any refunds due with respect to insurance premium payments to the
extent they relate to such insurance policies;
(j) 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;
(k) Sellers' corporate minute books, corporate seal, stock transfer
records and other corporate records and any records relating to Excluded Assets
and to liabilities other than the Assumed Obligations; and
(l) The assets listed and identified on Schedule 2.2(l).
2.3 ASSUMPTION OF LIABILITIES.
(a) Buyer shall at Closing assume and agree to pay, discharge, perform and
indemnify and hold Sellers harmless from and against the following Liabilities
of Sellers and the Stations (collectively, the "Assumed Obligations"):
(i) All Liabilities arising under all Station Agreements (including,
without limitation, all Trade Agreements) and the FCC Licenses assigned
and transferred to Buyer in accordance with this Agreement to the extent
such Liabilities arise during and relate to any period on or after the
Closing Date (excluding, however, any Liability arising from either (A)
the breach of any Station Agreement by reason of its assignment to Buyer
without a required consent or (B) any other breach or default by Sellers
upon or prior to Closing under any Station Agreement).
(ii) Provided that Sellers pay Buyer the amount, if any, owed by
Sellers after Closing under Section 2.7, the Assumed Obligations shall
also include such other Liabilities of Sellers and the Stations to the
extent, and only to the extent, the amount thereof is included as a
credit to
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Buyer in calculating the Adjustment Amount as ultimately determined
pursuant to Section 2.7.
(b) Except for the Assumed Obligations, Buyer shall not assume or in any
manner be liable for any Liabilities of Sellers of any kind or nature, all of
which Sellers 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 in immediately available funds the sum of Twenty-Five
Million Dollars ($25,000,000).
(b) The Escrow Agent shall hold the Earnest Money under the terms of the
Escrow Agreement in trust for the benefit of the parties hereto.
(c) If Closing does not occur, the Earnest Money shall be delivered to
Sellers 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.
(d) If Buyer provides evidence reasonably satisfactory to Sellers
demonstrating Buyer's ability to finance the purchase of the Sale Assets,
Sellers shall promptly cooperate with Buyer to cause the Escrow Agent to return
to Buyer Five Million Dollars ($5,000,000) of the Earnest Money.
2.5 PURCHASE PRICE.
(a) The purchase price for the Sale Assets ("Purchase Price") shall be
Three Hundred Seven Million Dollars ($307,000,000), subject to adjustment as
provided in Section 2.7, payable as follows:
(i) An amount equal to the Earnest Money shall be paid by the Escrow
Agent's disbursement of the Earnest Money to Sellers by wire transfer of
immediately available funds pursuant to joint written instructions from
Sellers and Buyer.
(ii) The sum of (A) Two Hundred Fifty-Seven Million Dollars
($257,000,000) minus (B) the Earnest Money shall be paid by Buyer to
Sellers on the Closing Date by wire transfer of immediately available
funds pursuant to the written instructions from Sellers to Buyer.
(iii) An additional Twenty-Five Million Dollars ($25,000,000) shall
be paid by Buyer to Sellers on the Closing Date by wire transfer of
immediately available funds pursuant to the written
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instructions from Sellers to Buyer, provided that Buyer may elect by
written notice received by Sellers at least ten (10) business days prior
to the Closing Date to pay such portion of the Purchase Price by the
issuance to Sellers on the Closing Date of the number of shares of Common
Stock equal to the quotient of Twenty-Five Million Dollars ($25,000,000)
divided by the Fair Market Value as of the Closing Date, with any
fractional share interest to be paid in cash based on the Fair Market
Value as of the Closing Date.
(iv) An additional Twenty-Five Million Dollars ($25,000,000) shall
be paid by Buyer's execution and delivery to the Seller Representative
(or the Seller Representative's designee) on the Closing Date of a
Promissory Note, in the form of Exhibit A (the "Note"), in the principal
amount of Twenty-Five Million Dollars ($25,000,000) due and payable,
together with interest at eight percent (8.0%) per annum, on the first
anniversary of the Closing Date (the "Maturity Date"). On four (4)
business days prior written notice to the holder of the Note, the
principal amount of the Note, together with all accrued and unpaid
interest, may be prepaid in whole at any time in cash or by wire transfer
of immediately available funds, without premium or penalty. The Note
shall be payable by wire transfer of immediately available funds,
provided that Buyer may elect by written notice received by Sellers at
least ten (10) business days prior to the payment date, to make payment
by issuance to the Seller Representative (or the Seller Representative's
designee) of the number of shares of Common Stock equal to the quotient
of the amount of the outstanding principal and accrued interest under the
Note as of the payment date, divided by the Fair Market Value as of the
payment date, with any fractional share interest to be paid in cash based
on the Fair Market Value as of the payment date. In order to secure the
obligations of Buyer under the Note, Buyer shall grant to Sellers at
Closing a first priority perfected security interest in Shares as more
particularly described in the Stock Pledge Agreement attached hereto as
Exhibit B (the "Stock Pledge Agreement").
(b) Sellers shall furnish Buyer wire instructions at least two (2)
business days prior to the Closing Date for payments to be made by Buyer to
Sellers on the Closing Date, and not later than three (3) business days after
Sellers' receipt of Buyer's written request with respect to prepayment of the
Note.
(c) All shares of Common Stock issuable in payment of the Purchase Price
or the Note, and all shares of Common Stock issuable as security for repayment
of the Note (collectively, the "Shares") shall, as of the Closing Date and at
all times thereafter until sold by Sellers, be (i) subject to Section 2.5(d),
freely tradeable,
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(ii) registered pursuant to a registration statement declared effective by the
SEC under the Securities Act on or prior to the Closing Date and (iii) included
for listing on NASDAQ.
(d) Buyer acknowledges that Sellers would have preferred that the Purchase
Price be paid entirely in cash at Closing. As an inducement to Sellers for
their agreement under Section 2.5(a)(iii) to permit Buyer at Buyer's election
to satisfy a Twenty-Five Million Dollar ($25,000,000.00) portion of the
Purchase Price by issuance of Shares on the Closing Date (the "Initial Payment
Shares"), Buyer and Sellers agree as follows:
(i) Unless the Seller Representative notifies the Buyer in writing
at or prior to Closing that the Sellers have elected to waive their
rights under this Section 2.5(d) (an "IPS Waiver Notice"), the sale of
the Initial Payment Shares shall be subject to the terms and conditions
of this Section 2.5(d). If the Seller Representative shall provide an
IPS Waiver Notice at or prior to Closing, then neither Sellers nor Buyer
shall have any rights or obligations under this Section 2.5(d) in respect
of any Initial Payment Shares.
(ii) Unless the Seller Representative shall have provided an IPS
Waiver Notice at or prior to Closing, Sellers shall not be entitled to
sell the Initial Payment Shares during the thirty (30) day period
following the Closing Date (the "IPS Lockup Period") except in accordance
with this Section 2.5(d)(ii). During the IPS Lockup Period, Buyer shall
be entitled to cause Sellers to sell in a commercially reasonable manner
such Initial Payment Shares to such buyers and for such prices as
directed by Buyer to the Seller Representative in writing at least two
(2) business days prior to the date of any such sale, provided that (A)
such sale (or sales) shall be for cash, shall close within the IPS Lockup
Period and all proceeds from such sale (or sales) shall be immediately
paid to the Sellers, and (B) Buyer shall pay Sellers in immediately
available funds on the first business day after expiration of the IPS
Lockup Period the sum of (i) the amount, if any, by which the product of
(A) Twenty-Five Million Dollars ($25,000,000) times (B) a fraction having
a numerator equal to the number of Initial Payment Shares sold during the
IPS Lockup Period in accordance with this Section 2.5(d)(ii) and a
denominator equal to the total number of Initial Payment Shares, exceeds
the amount equal to the aggregate cash proceeds received by Sellers from
such sale (or sales) after deduction for all trade costs, sale expenses
and block trade discounts, but without any deduction for brokerage
commissions, plus (ii) interest on the balance of the IPS Guaranteed
Amount outstanding from time to time calculated at a rate of eight
percent (8%) per annum
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from the Closing Date until the amount in Clause (i) is paid to Sellers,
provided that if no amount is payable to Sellers under foregoing Clause
(i), such interest shall be payable on the first business day after
expiration of the IPS Lockup Period. Upon Buyer's payment of the amounts
payable under foregoing Clauses (i) and (ii), no further interest shall
accrue or be payable upon any balance of the IPS Guaranteed Amount.
(iii) Any Initial Payment Shares that are subject to the IPS Lockup
Period but are not sold in accordance with Section 2.5(d)(ii) within the
IPS Lockup Period (the "Remaining IPS Payment Shares") may be sold by
Sellers after expiration of the IPS Lockup Period in any commercially
reasonable manner that Sellers desire. Upon expiration of the period
("Post-IPS Lockup Period") commencing immediately after the IPS Lockup
Period and ending upon the earlier of (A) the date on which all Remaining
IPS Payment Shares have been sold or (B) the first anniversary of the
Closing Date, Buyer shall pay to Sellers in immediately available funds
the amount, if any, by which the product of (A) Twenty-Five Million
Dollars ($25,000,000) times (B) a fraction having a numerator equal to
the number of Remaining IPS Payment Shares sold during the Post-IPS
Lockup Period and a denominator equal to the total number of Initial
Payment Shares, exceeds the amount equal to the aggregate cash proceeds
received by Sellers from such sale (or sales) after deduction for all
trade costs, sale expenses and block trade discounts, but without any
deduction for brokerage commissions; provided that Buyer's obligation to
make such payment shall be conditioned upon Sellers' submission to Buyer
of a reasonably detailed and certified statement setting forth, for each
sale of Remaining IPS Payment Shares during the Post-IPS Lockup Period,
the per share sale price, the manner of sale, and any related trade
costs, sale expenses, block trade discounts and brokerage commissions.
Sellers shall have no rights against Buyer under this Section 2.5(d) with
respect to any Remaining IPS Payment Shares that are not sold within the
Post-IPS Lockup Period.
(iv) As used in this Section 2.5(d), the term "IPS Guaranteed
Amount" shall mean, as of any date commencing on the Closing Date and
ending on the date immediately preceding the date on which the payments
required under Section 2.5(d)(ii) are made, the amount, if any, by which
(i) Twenty-Five Million Dollars ($25,000,000) exceeds as of such date
(ii) the aggregate cash proceeds received by Sellers as of such date from
any sale of Initial Payment Shares after deduction for all trade costs,
sale expenses and block trade discounts, but without any deduction for
brokerage commissions.
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(e) As an inducement to Sellers for their agreement to permit Buyer at
Buyer's election to pay the Note by issuance of Shares on the earlier of the
maturity date or a prepayment date (the "Subsequent Payment Shares"), Buyer and
Sellers agree as follows:
(i) Unless the holder of the Note (the "Holder") notifies the Buyer in
writing on or prior to the date on which the Note is paid in full by the
issuance of Shares, whether on the maturity date or a prepayment date (the
"Note Payment Date"), that the Holder has elected to waive its rights under
this Section 2.5(e) (an "SPS Waiver Notice"), the sale of the Subsequent
Payment Shares shall be subject to the terms and conditions of this Section
2.5(e). If the Holder shall provide an SPS Waiver Notice on or prior to the
Note Payment Date, then neither the Holder nor Buyer shall have any rights or
obligations under this Section 2.5(e) in respect of any Subsequent Payment
Shares.
(ii) Unless the Holder shall have provided an SPS Waiver Notice on or
prior to the Note Payment Date, the Holder shall not be entitled to sell the
Subsequent Payment Shares during the thirty (30) day period following the Note
Payment Date (the "SPS Lockup Period") except in accordance with this Section
2.5(e)(ii). During the SPS Lockup Period, Buyer shall be entitled to cause the
Holder to sell in a commercially reasonable manner such Subsequent Payment
Shares to such buyers and for such prices as directed by Buyer to the Holder
in writing at least two (2) business days prior to the date of any such sale,
provided that (A) such sale (or sales) shall be for cash, shall close within
the SPS Lockup Period and all proceeds from such sale (or sales) shall be
immediately paid to the Holder, and (B) Buyer shall pay the Holder in
immediately available funds on the first business day after expiration of the
SPS Lockup Period the sum of (i) the amount, if any, by which the product of
(A) Twenty-Five Million Dollars ($25,000,000), plus all accrued interest under
the Note as of the Note Payment Date (the "Payment Date Note Balance") times
(B) a fraction having a numerator equal to the number of Subsequent Payment
Shares sold during the SPS Lockup Period in accordance with this Section
2.5(e)(ii) and a denominator equal to the total number of Subsequent Payment
Shares, exceeds the amount equal to the aggregate cash proceeds received by the
Holder from such sale (or sales) after deduction for all trade costs, sale
expenses and block trade discounts, but without any
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deduction for brokerage commissions, plus (ii) interest on the balance of the
SPS Guaranteed Amount outstanding from time to time calculated at a rate of
eight percent (8%) per annum from the Note Payment Date until the amount in
Clause (i) is paid to the Holder, provided that if no amount is payable to the
Holder under foregoing Clause (i), such interest shall be payable on the first
business day after expiration of the SPS Lockup Period. Upon Buyer's payment
of the amounts payable under foregoing Clauses (i) and (ii), no further
interest shall accrue or be payable upon any balance of the SPS Guaranteed
Amount.
(iii) Any Subsequent Payment Shares that are subject to the SPS Lockup
Period but are not sold in accordance with Section 2.5(e)(ii) within the SPS
Lockup Period (the "Remaining SPS Payment Shares") may be sold by the Holder
after expiration of the SPS Lockup Period in any commercially reasonable manner
that the Holder desires. Upon expiration of the period ("Post-SPS Lockup
Period") commencing immediately after the SPS Lockup Period and ending upon the
earlier of (A) the date on which all Remaining SPS Payment Shares have been
sold or (B) the first anniversary of the Note Payment Date, Buyer shall pay to
the Holder in immediately available funds the amount, if any, by which the
product of (A) the Payment Date Note Balance times (B) a fraction having a
numerator equal to the number of Remaining SPS Payment Shares sold during the
Post-SPS Lockup Period and a denominator equal to the total number of
Subsequent Payment Shares, exceeds the amount equal to the aggregate cash
proceeds received by the Holder from such sale (or sales) after deduction for
all trade costs, sale expenses and block trade discounts, but without any
deduction for brokerage commissions; provided that Buyer's obligation to make
such payment shall be conditioned upon the Holder's submission to Buyer of a
reasonably detailed and certified statement setting forth, for each sale of
Remaining SPS Payment Shares during the Post-SPS Lockup Period, the per share
sale price, the manner of sale, and any related trade costs, sale expenses,
block trade discounts and brokerage commissions. The Holder shall have no
rights against Buyer under this Section 2.5(e) with respect to any Remaining
SPS Payment Shares that are not sold within the Post-SPS Lockup Period.
(iv) As used in this Section 2.5(e), the term "SPS Guaranteed Amount"
shall mean, as of any date commencing on
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the Note Payment Date and ending on the date immediately preceding the date on
which the payments required under Section 2.5(e)(ii) are made, the amount, if
any, by which (i) the Payment Date Note Balance exceeds as of such date (ii)
the aggregate cash proceeds received by the Holder as of such date from any
sale of SPS Payment Shares after deduction for all trade costs, sale expenses
and block trade discounts, but without any deduction for brokerage commissions.
2.6 ALLOCATION OF THE PURCHASE PRICE.
(a) Sellers 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 within sixty (60) days after the date hereof, will be incorporated
in a schedule to be executed by the parties prior to or at Closing. If Sellers
and Buyer are unable to agree on such allocation within such sixty (60) day
period, Sellers and Buyer agree to retain the Appraisal Firm to appraise the
classes of Sale Assets of each Station. The Appraisal Firm shall be instructed
to perform an appraisal of the classes of Sale Assets of each Station and to
deliver a report to Sellers and Buyer as soon as reasonably practicable (the
"Appraisal Report"). Buyer and Sellers shall each pay one-half of the fees,
costs and expenses of the Appraisal Firm whether or not the transactions
contemplated hereby are consummated.
(b) Buyer and Sellers each agree to report such allocation, whether agreed
upon or as provided for in the Appraisal Report, 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 after Closing 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) As used herein, "Adjustment Amount" means adjustments to the Purchase
Price customary in television and radio broadcast station transactions for
Proration Items to reflect that all Proration Items of such Stations shall be
apportioned between Buyer and Sellers in accordance with the principle that
Sellers shall receive the benefit of or credit for all revenues, refunds, the
portion of deposits and prepaid expenses allocable to the period from and after
the Closing Date, and shall be responsible for all expenses, costs
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and Liabilities, allocable to the conduct of the businesses or operations of
the Stations for the period prior to the Closing Date, and Buyer shall receive
the benefit of or credit for all revenues and refunds, and shall be responsible
for all expenses, costs and Liabilities, allocable to the conduct of the
businesses or operations of such Stations from and after the Closing Date;
provided, however, that there shall be no adjustment or proration for any
negative or positive net trade balance for the Stations (taken as a whole)
except to the extent that any such trade balance (whether positive or negative)
exceeds $50,000 for the Stations (taken as a whole); provided, further, that
with respect to programming agreements, only those payments due and payable
during the month in which the Closing occurs which relate to programming to be
broadcast during such month shall be prorated. All determinations of the
Adjustment Amount shall be made in accordance with generally accepted
accounting principles consistently applied for the period prior to the Closing
Date; provided that in determining the Adjustment Amount, Buyer shall be given
a credit equal to the total amount of payments received by Sellers during the
period from the date hereof to the Closing Date pursuant to the Fox Children's
Network Payment Rights.
(b) Three (3) business days prior to the Closing Date, Sellers shall
provide Buyer with a statement (the "Preliminary Adjustment Report") setting
forth Sellers' reasonable and good faith estimate of the Adjustment Amount.
The portion of the Purchase Price payable at Closing pursuant to Section
2.5(a)(ii) shall be reduced or increased by, as the case may be, the Adjustment
Amount.
(c) During the 120-day period after the Closing Date, Sellers, Buyer and
their respective accountants shall review the Preliminary Adjustment Report and
the books and records of Sellers related to the report, and Buyer and Sellers
will in good faith seek to reach agreement on the computation of the Adjustment
Amount. If agreement is reached within one hundred twenty (120) days after the
Closing Date, then upon reaching such agreement, Sellers shall pay to Buyer the
amount by which the agreed Adjustment Amount is less than, or Buyer shall pay
to Sellers the amount by which the agreed Adjustment Amount is greater than,
the Adjustment Amount indicated in the Preliminary Adjustment Report.
(d) If Sellers and Buyer fail to reach agreement on the Adjustment Amount
within one hundred twenty (120) days after the Closing Date, then the New York,
New York office of Price Waterhouse L.L.P. (the "Arbitrator") shall make the
determination. Sellers and Buyer shall each inform the Arbitrator in writing
of their respective determinations of the Adjustment Amount and each of its
components and shall make readily available to the Arbitrator any books,
records and work papers relevant to the Arbitrator's determination. The
Arbitrator shall be instructed to complete its determination within thirty (30)
days after the date of its engagement and upon completion to inform the parties
in writing of its determination of the Adjustment Amount, the basis for its
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determination, whether Buyer's or Sellers' written position as to the
Adjustment Amount is closer to its own determination, and whether its own
determination of the Adjustment Amount is within plus or minus ten percent
(10%) of the average of the written positions of Buyer and Sellers as to the
Adjustment Amount. The determination by the Arbitrator in accordance with this
section shall be final and binding on the parties for purposes of this section.
Within five (5) days after the Arbitrator's delivery to the parties of its
written determination of the Adjustment Amount, Sellers shall pay to Buyer the
amount by which the Adjusted Amount is determined by the Arbitrator is less
than, or Buyer shall pay to Sellers the amount by which the Adjustment Amount
determined by the Arbitrator is greater than, the Adjustment Amount indicated
in the Preliminary Adjustment Report.
(e) If the Arbitrator determines that the written position of Buyer as to
the Adjustment Amount is closer to its own determination, Sellers shall pay the
fees and disbursements of the Arbitrator. If the Arbitrator determines that
the written position of Sellers as to the Adjustment Amount is closer to its
own determination, Buyer shall pay the fees and disbursements of the
Arbitrator. However, if the Arbitrator's determination of the Adjustment
Amount is within plus or minus ten percent (10%) of the average of the written
positions of Buyer and Sellers, Sellers and Buyer shall each pay one-half of
the Arbitrator's fees and disbursements.
(f) Concurrently with any payment required under foregoing Subsection (c)
or (d), the payor shall pay the payee interest on the payment at eight percent
(8.0%) per annum from the Closing Date until the date on which the payment is
made.
2.8 ACCOUNTS RECEIVABLE.
(a) Within ten (10) days after the Closing Date, Sellers shall furnish to
Buyer a true and complete list of Sellers' accounts receivable (other than
non-cash receivables under Trade Agreements and unpaid amounts under the Fox
Children's Network Payment Rights) arising from the operation of the Stations
prior to the Closing Date in the ordinary course of business (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 Sellers, use its usual
and customary procedures to collect the Retained Receivables as Sellers' agent
for collection, provided that (i) Buyer shall not be required to commence
litigation, employ legal counsel or a collection agency or make any
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other extraordinary collection efforts, and (ii) Buyer's obligation to act as
Sellers' 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 in writing
identifies such an account as being in dispute and directs that a particular
payment be applied to a specific newer account receivable.
(c) Every four weeks during the Collection Period (and within fifteen (15)
days after the end of the Collection Period), Buyer shall deliver to Sellers a
statement showing all collections of Retained Receivables made on behalf of
Sellers since the last previous report and shall pay such collections to
Sellers by check at the time such statement is delivered.
(d) Sellers 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 Sellers' prior written consent, compromise or
settle for less than full value any of the Retained Receivables unless Buyer
pays Sellers the full amount of any deficiency. Buyer shall be entitled to
purchase from Sellers any Retained Receivable for such amount as the parties
may agree at any time during or at the expiration of the Collection Period.
(f) Buyer shall have no right to set-off any amounts collected for
Retained Receivables for any amounts owed to Buyer from Sellers, except that
Buyer shall be entitled to offset and retain from its collection of the
Retained Receivables certain amounts for capital expenditures and other items
as and to the extent set forth on Schedule 2.8.
2.9 SELLER REPRESENTATIVE.
Each of the Sellers hereby appoints SF Broadcasting of Honolulu, Inc. as
the seller representative (the "Seller Representative") and agrees that the
Seller Representative shall have the authority, on behalf of each of the
Sellers, to: (a) receive amounts payable to any of the Sellers (including the
Shares), and give discharge and provide receipts with respect thereto, (b)
execute and deliver any documents or agreements necessary or desirable in
connection with the transactions contemplated by the Agreement, (c) give and
receive notices, instructions and other communications under the Agreement; and
(d) take such
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other action with respect to the Agreement or any other Document as the Seller
Representative may deem necessary or appropriate. To further effect the
foregoing, each Seller upon request of the Seller Representative shall execute
a power of attorney designating the Seller Representative his attorney-in-fact
for the purposes set forth in this Section.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent and warrant to Buyer as follows:
3.1 ORGANIZATION, GOOD STANDING AND CORPORATE POWER.
Each Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has all requisite
corporate power to own, operate and lease its Sale Assets and carry on
its business. Each Seller is duly licensed, qualified to do business and
in good standing as a foreign corporation under the laws of the
jurisdiction(s) listed in Schedule 3.1.
3.2 AUTHORIZATION AND BINDING EFFECT OF DOCUMENTS.
Each Seller 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 Sellers and the consummation
by Sellers of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action (including all necessary
shareholder approvals, if any) on the part of Sellers. This Agreement has
been, and each of the other Documents at or prior to Closing will be, duly
executed and delivered by Sellers. This Agreement constitutes (and each of
the other Documents, when executed and delivered, will constitute) the
valid and binding obligation of Sellers enforceable against Sellers in
accordance with its terms.
3.3 ABSENCE OF CONFLICTS. Except as set forth on Schedule 3.3, the
execution, delivery and performance by Sellers of this Agreement and the
other Documents, and consummation by Sellers of the transactions
contemplated hereby and thereby, do not and will not (i) conflict with or
result in 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
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obligation under, or (v) result in the creation of any Lien upon the Sale
Assets under, the provisions of the articles or certificate of
incorporation or by-laws of Sellers, any material indenture, mortgage,
lease, loan agreement or other material agreement or instrument to which
Sellers are bound or affected, or any law, statute, rule, judgment, order
or decree to which Sellers are subject.
3.4 CONSENTS. Except as set forth on Schedule 3.3 and except for any
necessary clearances or approvals under the HSR Act or the Act, the
execution, delivery and performance by Sellers of this Agreement and the
other Documents, and consummation by Sellers 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, any administrative
or other governmental body, or any other third party.
3.5 SALE ASSETS; TITLE.
The Sale Assets constitute all of the assets, properties and rights of
every type and description, real, personal and mixed, tangible and
intangible, that are currently used in or material to the operation of the
Stations, with the exception of the Excluded Assets. Sellers have good
and marketable title to, or a valid lessee's or licensee's interest in,
all of the Sale Assets free and clear of all Liens except (i) Liens
described on Schedule 3.5 which Sellers shall cause to be released prior
to Closing and (ii) Permitted Liens.
3.6 FCC LICENSES.
Except as set forth on Schedule 3.6:
(a) One of the Sellers is the valid and legal holder of each of the
licenses, permits and authorizations of the FCC listed on Schedule 3.6 for the
operation of the Stations (the "FCC Licenses"). The expiration date of the term
of each FCC License is shown on Schedule 3.6.
(b) The FCC Licenses (i) are valid, subsisting and in full force and
effect, 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 such Seller for or in connection with the operation of such Station.
(c) Other than as set forth in the FCC Licenses, none of the FCC Licenses
is subject to any restriction or condition which limits in any
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material respect the full operation of the Stations as now conducted by
Sellers, and as of the Closing Date, none of the FCC Licenses shall be subject
to any restriction or condition which would limit in any material respect the
full operation of the Stations as they are currently operated.
(d) The Stations are being operated by Sellers in all material respects in
accordance with the terms and conditions of the FCC Licenses, the Act and the
rules and regulations of the FCC applicable to it, including but not limited to
those pertaining to RF emissions.
(e) Except as set forth in Schedule 3.6, no applications, complaints or
proceedings are pending or, to the knowledge of Sellers, are threatened 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 any Station or its operation,
other than actions or proceedings affecting the television broadcasting
industry in general.
(f) Sellers have complied in all material respects with all requirements
to file reports, applications and other documents with the FCC with respect to
the Stations, and all such reports, applications and documents are true,
correct and complete in all material respects.
(g) Other than actions or proceedings affecting the television
broadcasting industry in general, Sellers have 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 Sellers, or (ii)
which might reasonably be expected to result in the FCC's refusal to grant or
delay approval of the assignment to Buyer (assuming Buyer is qualified to hold
the FCC Licenses) of any FCC License or the imposition of any Material Adverse
FCC Condition in connection with approval of the transfer to Buyer of any FCC
License (other than with respect to the continuation of the satellite waiver in
Hawaii).
(h) There are not any unsatisfied or otherwise outstanding citations
issued by the FCC with respect to any Station or its operation.
(i) True, complete and accurate copies of all FCC Licenses have been
delivered by Sellers to Buyer's FCC counsel.
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(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 each Station by Sellers of the Stations as they
are currently being operated.
3.7 STATION AGREEMENTS.
(a) Schedule 3.7(a) lists in summary manner all agreements, contracts,
understandings and commitments as of the date indicated thereon for the sale of
time on a Station for other than monetary consideration ("Trade Agreements"),
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 estimated
financial value of the goods or services to be received by a 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, have been made available to Buyer.
(b) Schedule 3.7(b) lists all the following types of agreements used in or
relating to the operation of any Station:
(i) Agreements for sale of broadcast time on a Station for monetary
consideration as of March 24, 1998, other than such agreements entered into in
the ordinary course of business involving broadcast time of less than
Twenty-Five Thousand Dollars ($25,000);
(ii) All network affiliation agreements;
(iii) All sales agency or advertising representation contracts;
(iv) Each antenna, office and studio lease and any other lease of real
property (including a description of the property leased thereunder);
(v) All collective bargaining agreements, employment agreements and
agreements with independent contractors;
(vi) All programming agreements;
(vii) Any other agreement (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
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life of the contract, more than One Hundred Thousand Dollars ($100,000); and
(viii) Any other agreement that is material to the business, operations or
financial condition of any 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 made available to Buyer. The Station Agreements
(other than Trade Agreements) that are not listed on Schedule 3.7(b) do not
involve commitments by parties thereto with an aggregate fair market value of
more than One Hundred Thousand Dollars ($100,000) for any Station.
(c) Schedule 3.7(c) lists all of the contracts and agreements used in or
relating to the operation of any Station to which an Affiliate of any Seller is
a party. True and complete copies of those in writing have been delivered to
Buyer, and summaries of those that are oral are set forth on Schedule 3.7(c).
(d) 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 any Station are valid and in
full force and effect; (ii) no Seller or, to the knowledge of any 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
any Station; (iii) no Seller or any Affiliate of any Seller has granted or been
granted any material waiver or forbearance with respect to any Station
Agreements which are, individually or in the aggregate, material to the
business, operations or financial condition of any Station; (iv) Sellers hold
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 any Station, free and clear of Liens
(other than Permitted Liens) but subject to the terms and provisions of each
such agreement; (v) except as set forth on Schedule 3.3, none of the rights of
Sellers or any Affiliate of Sellers under Station Agreements which are,
individually or in the aggregate, material to the business, operations or
financial condition of any Station is subject to termination or modification as
a result of the consummation of the transactions contemplated by this
Agreement; and (vi) except as set forth on Schedule 3.3, 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 any Station is
required thereunder for the consummation of the transactions contemplated
hereby.
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(e) As of the date of this Agreement, Sellers have received less than Ten
Thousand Dollars ($10,000) in the aggregate during the preceding twelve (12)
months pursuant to the Fox Children's Network Payment Rights.
3.8 TANGIBLE PERSONAL PROPERTY.
(a) Schedule 3.8 lists, as of the date of this Agreement, all Tangible
Personal Property (other than Excluded Assets, office supplies and other
incidental items) material to the conduct of the business and operations of any
Station in the manner in which it is now operated and having a book value in
excess of Seven Thousand Five Hundred Dollars ($7,500).
(b) The equipment constituting a part of the Tangible Personal Property
used in or necessary for the operation of any Station in the manner in which it
is now operated by Sellers has been properly maintained prior to the date
hereof in all material respects in accordance with the manufacturers'
recommendations and industry practices as of the date hereof, is in a good
state of repair and operating condition (subject to ordinary wear and tear),
and complies as of the date hereof in all material respects with the Act and
other applicable laws, rules, regulations and ordinances.
3.9 REAL PROPERTY.
(a) The list of Real Property set forth on Schedule 3.9 is a true and
correct list of all of the interests in real estate which any Seller holds or
which are used to any material extent in the operation of any Station in the
manner in which it has been and is being operated by Sellers as of the date of
this Agreement.
(b) Sellers hold good and marketable fee simple title to each parcel of
Real Property listed in Schedule 3.9 as owned by a Seller (the "Owned Real
Property") free and clear of any Liens except (i) Liens described on Schedule
3.5 which Sellers shall cause to be released prior to Closing, and (ii)
Permitted Liens. To Sellers' knowledge, except as set forth on Schedule 3.9,
there is no pending, threatened or contemplated action to take by eminent
domain or to condemn any of the Real Property.
(c) Each lease (including all amendments, modifications and supplements
thereto) under which a Seller leases any interest in any of the Real Property,
including, but not limited to, any Station Agreement under which any Seller
uses a transmitter or antenna site (the "Leased Real Property") is described on
Schedule 3.7(b) (each, a "Real Property Lease"), and except as set forth on
such Schedule, such Seller holds good and marketable title to the lessee's
interest under each Real Property Lease free and clear of all Liens except
Permitted Liens. True and complete copies of all Real Property Leases,
including all amendments, modifications and supplements thereto, have been
delivered to Buyer.
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(d) Except as set forth on the Schedules hereto, (i) each Real Property
Lease is legal, valid, binding and enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity); (ii) no Seller nor,
to the knowledge of any Seller, any other party thereto, is in material breach
of or in material default under any Real Property Lease; (iii) to the knowledge
of Sellers, there has not occurred any event which, after the giving of notice
or the lapse of time or both, would constitute a material default under, or
result in the material breach of, any Real Property Lease, nor has any Seller
received written notice alleging or stating that any such event has occurred
unless such event has been cured; (iv) none of the rights of any Seller under
any Real Property Lease is subject to termination or modification as a result
of the consummation of the transactions contemplated by this Agreement; (v) no
consent or approval by any party to any Real Property Lease is required
thereunder for the consummation of the transactions contemplated hereby; and
(vi) no Seller has granted or been granted any material waiver or forbearance
with respect to any Real Property Lease.
(e) All improvements on the Real Property are in compliance with
applicable zoning and land use laws, ordinances and regulations in all respects
necessary to conduct the operation of the Stations operating thereon as
conducted by Sellers as of the date of this Agreement except for any instances
of any non-compliance which do not or will not in the aggregate have a Material
Adverse Effect. Each Seller's improvements on any Real Property are in good
working condition and repair (subject to ordinary wear and tear).
3.10 INTELLECTUAL PROPERTY.
Schedule 3.10 lists all trade names, trademarks, service marks, copyrights
and patents included in the Intellectual Property, including all registrations,
applications and licenses for any of the Intellectual Property. Except as
disclosed on Schedule 3.10:
(a) To the knowledge of Sellers, Sellers own, 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. To the
knowledge of Sellers, all of the Intellectual Property listed on Schedule 3.10,
and all of the rights and properties constituting a part of the Intellectual
Property, are in full force and effect as of the date of this Agreement;
(b) As of the date of this Agreement, there are no outstanding or, to the
knowledge of Sellers, threatened judicial or adversary proceedings with respect
to any of the Intellectual Property;
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(c) Sellers have 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;
(d) As of the date of this Agreement, Sellers have no knowledge of any
infringement or unlawful use of any of the Intellectual Property;
(e) As of the date of this Agreement, Sellers have not violated any
provisions of the Copyright Act of 1976, 17 U.S.C. Section 101, et. seq., in
any material respect. Sellers have filed all notices and statements of account
and have made all payments that are required in connection with the
transmission by Sellers of any television or other signals prior to the date of
this Agreement, except for failures to file or pay that would not have a
Material Adverse Effect; and
(f) Sellers have 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.
3.11 FINANCIAL STATEMENTS.
Sellers have delivered to Buyer:
(a) The audited balance sheets of the Parent Entities as of December 31,
1997 and 1996;
(b) The audited statements of operations of the Parent Entities for the
years ended December 31, 1997 and 1996;
(c) The unaudited balance sheet of each Station as of February 28, 1998
(the "Interim Balance Sheet"); and
(d) The unaudited statement of operations of each Station for the interim
period ended February 28, 1998.
All such statements (i) are in accordance in all material respects with the
books and records of the applicable Stations and (ii) have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis and fairly present in all material respects the assets and
liabilities of such Station(s) as of the dates stated and accurately reflect in
all material respects the results of operations of such Station(s) 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
shown, (C) such statements do not contain the disclosures required by
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generally accepted accounting principles in notes accompanying financial
statements, and (D) the interim statements are subject to normal year-end
adjustments.
3.12 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since the date of the Interim Balance Sheet, other than as described on
Schedule 3.12:
(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) No Seller or any 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) No Seller has:
(i) amended or terminated any Station Agreement set forth on Schedule
3.7(a), 3.7(b) or 3.7(c) except in the ordinary course of business;
(ii) mortgaged, pledged or subjected to any Lien, any of the Sale Assets,
except for Permitted Liens;
(iii) acquired or disposed of any Sale Assets 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;
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(vii) entered into any agreement (other than agreements that will be
terminated prior to Closing) with any Affiliate of any Seller; or
(viii) operated its business other than in the ordinary course.
3.13 LITIGATION.
Except as described in Schedule 3.13, as of the date hereof (a) there are no
actions, suits, claims, investigations or administrative, arbitration or other
proceedings pending or, to the knowledge of any Seller, threatened against any
Seller before or by any court, arbitration tribunal or governmental department
or agency, domestic or foreign, that relates to any Station or the Sale Assets;
(b) no Seller or, to the knowledge of any Seller, any of the officers or
employees of any 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 such officer's
or employee's employment at any Station or with any Seller; and (c) no Seller or
any properties or assets of any Seller or, to the knowledge of any Seller, any
officer or employee of any 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 any 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 any Seller to perform its obligations hereunder and consummate
the transactions contemplated hereby.
3.14 LABOR MATTERS.
(a) Except as listed on Schedule 3.14(a):
(i) To each Seller's knowledge, no present or former employee or
independent contractor of any Station has a pending claim or charge which has
been asserted or threatened against any 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.
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(ii) There is not pending or, to the knowledge of any Seller, threatened
against any Seller any labor dispute, strike or work stoppage that affects or
interferes with, or is likely to affect or interfere with, the operation of any
Station, and no Seller has knowledge of any organizational effort currently
being made or threatened by or on behalf of any labor union with respect to
employees of any Station. There are no material unresolved unfair labor
charges against any Seller. No Seller has experienced any strike, work
stoppage or other similar significant labor difficulties within the twelve (12)
months preceding the date hereof.
(b) Except as set forth on Schedule 3.7(b), (i) no Seller is a signatory
or a party to, or otherwise bound by, a collective bargaining agreement which
covers employees or former employees of any Station, (ii) no Seller has agreed
to recognize any union or other collective bargaining unit with respect to any
employees of any Station, and (iii) no union or other collective bargaining
unit has been certified as representing any employees of any Station.
(c) Schedule 3.14(c) sets forth a true and complete list, as of the date
set forth on such list, of all persons employed by any Seller or at any
Station, and states for each such employee the current level of compensation
payable to such employee, the termination pay or other severance benefits, if
any, that may be payable to such employee upon termination of employment, and
whether such employee is employed under a written contract. A true and
complete copy of any handbook, policy manual or similar written guidelines
furnished to employees of each Station has been made available to Buyer.
3.15 EMPLOYEE BENEFIT PLANS.
(a) All compensation or benefit plans, policies, practices, arrangements
and agreements covering any employee or former employee of any Seller or any
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 and are currently in effect, or to which contributions are being
made by any Seller or by any other trade or business, whether or not
incorporated, which is or has been treated as a single employer together with
any Seller under Section 414 of the Code (such other trades and businesses
referred to collectively as the "Related Persons") or to which any Seller or
any Related Person is 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
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(collectively, the "Benefit Plans"), are disclosed in Schedule 3.15. Except
pursuant to a Benefit Plan disclosed in Schedule 3.15 or any agreements
disclosed in Schedule 3.7(b), no Seller has 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 any Seller or any Station.
(b) All Benefit Plans (other than the Assumed Plans, with respect to which
this representation is limited to Sellers' knowledge) 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. No Seller or any
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 being imposed against Buyer, any Station or the Sale Assets.
(c) Other than the Assumed Plans, 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) No Seller or any Related Person has, to Sellers' knowledge, 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 any
Seller or one employer with any Seller under Section 4001 of ERISA.
(e) All contributions required to have been made by each Seller under the
terms of any Benefit Plan or applicable law have been timely made.
(f) No Seller has any unfunded obligations (including projected
obligations) for retiree health and life benefits under any Benefit Plan other
than continuation coverage required by law; provided, however, that this
representation shall be limited to Seller's knowledge to the extent it relates
to the Assumed Plans.
(g) No Seller or 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, to Sellers' knowledge, no event or condition has occurred or exists which
would result in any such material liability to any Seller.
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3.16 COMPLIANCE WITH LAW.
Each Seller has operated and is operating the applicable Station in all material
respects in compliance with the Act and all other federal, state and local 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 such Seller has not received any
notice of noncompliance pertaining to such Seller's operation of such Station
that has not been cured.
3.17 TAX RETURNS AND PAYMENTS.
(a) Except as set forth in Schedule 3.17, each Seller has accurately
prepared in all material respects and is not delinquent in the filing of any
Tax Returns required to be filed by such 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 such Seller or
chargeable as a Lien upon its assets have been paid, except for any such Taxes
that are being contested in good faith for which adequate reserves have been
made on Sellers' financial statements.
(b) Except as set forth in Schedule 3.17, (i) no outstanding unsatisfied
deficiency, delinquency or default for any Tax has been claimed or assessed
against any Seller, (ii) no Seller has received notice of any such deficiency,
delinquency or default, and (iii) to each Seller's knowledge, no taxing
authority is now threatening to assert any such deficiency, delinquency or
default and, to such Seller's knowledge, there is no reasonable basis for any
such assertion.
(c) No Tax is required to be withheld by Buyer pursuant to Section 1445 of
the Code as a result of the transactions contemplated by this Agreement.
(d) Each Seller has withheld any Tax required to be withheld by such
Seller 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 such
Seller.
3.18 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 3.18, Sellers have obtained all
environmental, health and safety permits necessary for the operation of the
Stations, all such permits are valid and in full force and effect, and Sellers
are in compliance in all material respects with all terms and conditions of
such permits.
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(b) Except as set forth on Schedule 3.18, there is no proceeding pending
or, to Sellers' knowledge, threatened which may result in the reversal,
rescission, termination, modification or suspension of any environmental or
health or safety permits necessary for the operation of any Station, and to
Sellers' knowledge there is no basis for any such proceeding.
(c) Except as set forth on Schedule 3.18, Sellers have operated and are
operating in all material respects in compliance with all federal, state, local
and other laws, statutes, ordinances and regulations, and licenses, permits,
exemptions, orders, writs, injunctions and decrees of any court, commission,
board, agency or other governmental instrumentality, applicable to Sellers and
relating to environmental matters.
(d) Except as set forth on Schedule 3.18, to Sellers' knowledge, there are
no conditions or circumstances associated with the Sale Assets which may give
rise to any material liability or material cost under applicable environmental
law. Except as listed on Schedule 3.18, Sellers do not own or use any
electrical or other equipment containing polychlorinated biphenyls.
(e) For the purposes of this Section 3.18, "hazardous materials" shall
mean any waste, substance, materials, smoke, gas, emissions or particulate
matter designated as hazardous or toxic under any applicable environmental law.
For purposes of this Section 3.18, "environmental law" shall mean any federal,
state, local or other laws, statutes, ordinances, regulations, licenses,
permits or any order, writ, injunction or decree of any court, commission,
board, agency or other instrumentality relating to the regulation of hazardous
materials.
(f) Except as set forth on Schedule 3.18, with respect to the operation of
any Station, Sellers have not filed or been required to file any notice under
any applicable law, rule, regulation, order, judgment, injunction, decree or
ruling reporting a release of a hazardous material into the environment that
has or reasonably can be expected to have a Material Adverse Effect, and no
notice pursuant to Section 103(a) or (c) of the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C.A. Section 9601, et seq.
("CERCLA") or any other applicable environmental law or regulation has been or
was required to be filed.
(g) Except as set forth on Schedule 3.18, Sellers have not received any
notice letter under CERCLA or any other written notice and there is no
investigation pending, or to Sellers' knowledge threatened, to the effect that
Sellers have or may have material liability for or as a result of the release
or threatened release of a hazardous material into the environment or for the
suspected unlawful presence of hazardous material thereon, nor to Sellers'
knowledge does there exist any basis for such investigation.
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3.19 BROKER'S OR FINDER'S FEES.
Except for R.P. Companies, Inc. the fees and charges of which will be paid by
Sellers simultaneously with Closing, no agent, broker, investment banker or
other person or firm acting on behalf of or under the authority of any Seller or
any Affiliate of any 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.
3.20 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 reasonable
commercial amounts.
3.21 CABLE TELEVISION TRANSMISSION.
To Sellers' knowledge, Schedule 3.21 lists each cable television system on which
the signal of any Station is currently being carried (each, a "Carrying
System"). To Sellers' knowledge, except as set forth in Schedule 3.21, (a) the
carriage of each Station on a listed Carrying System is pursuant to a valid and
enforceable retransmission consent agreement, (b) Sellers have not agreed to
reimburse any cable television system for any copyright royalties in respect of
carriage of the signal of any Station, (c) no cable system has advised any
Seller or any Station of any signal quality or copyright indemnity or other
prerequisite to cable carriage of any Station's signal, and (d) no cable system
has declined or threatened to decline such carriage or failed to respond to a
request for carriage or sought any form of relief from carriage from the FCC.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers 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.
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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 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 Buyer enforceable against Buyer in accordance with its terms.
4.3 ABSENCE OF CONFLICTS.
Except for obtaining the FCC Orders and any necessary clearances or approvals
under the HSR Act, 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
in any breach of any of the terms, conditions or provisions of, (ii) constitute
a default under, (iii) result in a violation of, or (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.
4.4 CONSENTS.
Except for obtaining the FCC Orders and any necessary clearances or approvals
under the HSR Act, 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.
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.
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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.
(a) Buyer is, and pending Closing will remain, legally, financially and
otherwise qualified under the Communications Act and all rules, regulations and
policies of the FCC to acquire and operate the Stations. Buyer has no
knowledge of matters 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 FCC Condition in connection with
approval of the transfer to Buyer of any FCC License. To Buyer's knowledge,
and except for FCC approval of Buyer's continued operation of KAII(TV) and
KAHW(TV) as satellite television stations, no waiver of any FCC rule or policy
is necessary to be obtained for the grant of the applications for the
assignment of the FCC Licenses to Buyer, nor will processing pursuant to any
exception or rule of general applicability be requested or required in
connection with the consummation of the transactions herein.
(b) As of the date hereof and through the later to occur of the HSR Filing
and the filing of the FCC Applications, neither Buyer nor any Affiliate of
Buyer (a) owns, controls or operates any television or radio station located in
any DMA in which a Station is located; (b) has any direct or indirect interest,
including, without limitation, any equity, debt, security or any other
financial interest, whether or not "attributable" (as defined in the rules and
regulations of the FCC), or management interest, in (i) any television or radio
station located in any DMA in which a Station is located, or (ii) any applicant
seeking to construct or acquire, by assignment of license or transfer of
control, any such television or radio station (an "Applicant"); or (c) is a
party to any TBA with a television or radio station located in any DMA in which
a Station is located, or with any Applicant. Buyer acknowledges and agrees
that the representations set forth in this Section 4.7(b) shall take into
account and include (a) the consummation of any proposed or pending acquisition
(as of the date hereof and through the later to occur of the HSR Filing and the
filing of the FCC Applications) of television or radio stations (including the
acquisition of the Stations) by Buyer or any Affiliate of Buyer or any
Applicant, and (b) any TBA or proposed or pending TBA (as of the date hereof
and through the later to occur of the HSR Filing and the filing of the FCC
Applications) to which Buyer or any Affiliate of Buyer is or may become a
party.
4.8 ADEQUACY OF FINANCING.
Buyer, as of the Closing, will have adequate funds to enable Buyer to consummate
the transactions contemplated hereby.
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4.9 CAPITALIZATION; BUYER STOCK.
All of the Shares issuable to the Seller Representative in accordance with this
Agreement (or pledged to the Seller Representative under the Stock Pledge
Agreement) will be duly authorized, validly issued, fully paid and
nonassessable, will be issued in compliance with applicable federal and state
securities laws and will be delivered free and clear of all Liens and may be
freely resold or transferred by the Seller Representative.
4.10 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Buyer has filed all forms, reports, statements and other documents
required to be filed with the SEC since December 1, 1997, and has heretofore
made available to Sellers, in the form filed with the SEC since such date,
together with any amendments thereto, its (i) Annual Reports on Form 10-K, (ii)
all Quarterly Reports on Form 10-Q, (iii) all proxy statements relating to
meetings of stockholders (whether annual or special), (iv) all reports on Form
8-K and (v) all other reports or registration statements filed by Buyer
(collectively, the "Buyer SEC Reports"). The Buyer SEC Reports (A) complied as
to form in all material respects with the requirements of the Exchange Act and
the Securities Act and (B) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(b) The audited consolidated financial statements and unaudited interim
financial statements of Buyer included in the Buyer SEC Reports comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto. The
financial statements, including all related notes and schedules, contained in
the Buyer SEC Reports (or incorporated by reference therein) present fairly in
all material respects the consolidated financial position of Buyer and its
subsidiaries as at the respective dates thereof and the consolidated results of
operations and cash flows of Buyer and its subsidiaries for the periods
indicated, in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods involved (except as may be noted
therein) and subject in the case of interim financial statements to normal
year-end adjustments.
(c) Since November 30, 1997, there has not been any change in the assets,
business or operations of Buyer, including any transaction, commitment,
dispute, damage, destruction or loss, whether or not covered by insurance, or
other event of any character (whether or not in the ordinary course of
business) individually or in the aggregate which has had, or is reasonably
likely to have, a material adverse effect on Buyer.
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4.11 MATERIAL CONTRACTS.
All agreements filed as exhibits to Buyer SEC Reports and each agreement
that would have been required to be filed as an exhibit to Buyer SEC Reports if
such agreement had been entered into prior to the date of filing any such Buyer
SEC Report (collectively, the "Buyer Material Contracts") are valid and in full
force and effect on the date hereof except to the extent they have previously
expired in accordance with their terms, and has not (and Buyer has no knowledge
that any party thereto has) violated any provision of, or committed or failed to
perform any act which with or without notice, lapse of time or both would
constitute a default under the provisions of, any Buyer Material Contract,
except for defaults which would not reasonably be expected to have a material
adverse effect on Buyer.
4.12 WARN ACT.
Buyer is not planning or contemplating, and has not made or taken, any
decisions or actions concerning the employees of the Stations after the Closing
Date that would require the service of notice under the Worker Adjustment and
Retraining Act of 1988, as amended.
4.13 NO OUTSIDE RELIANCE.
Buyer has not relied and is not relying on any statement, representation
or warranty other than those made in this Agreement, the Schedules hereto or
the certificates to be delivered to Buyer at the Closing pursuant to this
Agreement. Buyer is not relying on any projections or other predictions
contained or referred to in materials that have been or may hereafter be
provided to Buyer or any of its Affiliates, agents or representatives, and
Sellers make no representations or warranties with respect to any such
projections or other predictions.
ARTICLE V
OTHER COVENANTS
5.1 CONDUCT OF THE STATIONS' BUSINESS PRIOR TO THE CLOSING DATE.
Sellers covenant and agree with Buyer that from the date hereof through
the Closing Date, unless Buyer otherwise consents in writing (which consent
shall not be unreasonably withheld, delayed or conditioned), Sellers shall:
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(a) Operate each Station in the ordinary course of business, including (i)
incurring promotional expenses consistent with the amount currently budgeted,
(ii) making capital expenditures prior to the Closing Date as are necessary to
repair or replace Assets that are damaged or destroyed, (iii) using 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 to maintain programming for each
Station consistent in all material respects with the type and quantity of each
Station's programming as of the date hereof, and (iv) continuing 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;
(c) Maintain Sellers' 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 would, individually or in the
aggregate, have a Material Adverse Effect;
(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 any 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 are in the ordinary course of business consistent
with past practice;
(g) Not amend, enter into, renew or extend any antenna lease, programming
agreement, or network affiliation agreement; 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;
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(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 any Seller or Station, except in the ordinary course of
business consistent with past practice;
(j) Not introduce any material change with respect to the operation of any
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 any Seller;
(m) Not voluntarily enter into any collective bargaining agreement
applicable to any employees of any 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 any Station to provide that it shall be binding upon any "successor"
employer or such employees;
(n) Not take or agree to take any action that would materially delay the
consummation of the Closing as contemplated by this Agreement;
(o) Consult with Buyer regarding extension or modification of current
programming and acquisition of new or additional programming; and
(p) Use commercially reasonable efforts to effect the relocation of the
Honolulu Station's office and studio space in a manner that will not materially
interfere with the operation of the Honolulu Station, and consult with Buyer
regarding the material aspects of such relocation.
5.2 NOTIFICATION OF CERTAIN MATTERS.
Sellers shall give prompt notice to Buyer, and Buyer shall give prompt
notice to Sellers, of (a) 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 (b)
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.
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5.3 HSR FILING.
Within ten (10) business days after the execution of this Agreement,
Sellers and Buyer shall make the filings required to be made under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"), in
connection with the transactions contemplated by this Agreement (the "HSR
Filing").
5.4 FCC FILING.
As promptly as practicable following execution of this Agreement and in no
event more than five (5) business days after the execution of this Agreement,
Sellers 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 Orders without a Material Adverse FCC Condition and to cause
each of the FCC Orders to become a Final Action as soon as practicable.
5.5 TITLE; ADDITIONAL DOCUMENTS.
At the Closing, Sellers 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. Sellers 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, which documents shall be in a form reasonably acceptable to
Buyer and Sellers. Buyer shall execute or cause to be executed such documents,
in addition to those delivered at Closing as may be necessary to confirm Buyer's
assumption of the Assumed Obligations and issuance of the Shares free and clear
of all Liens, which documents shall be in a form reasonably acceptable to Buyer
and Sellers.
5.6 OTHER CONSENTS.
Sellers and Buyer shall each use their commercially reasonable efforts to
obtain the consents or waivers to the transactions contemplated by this
Agreement required under the Station Agreements; provided that neither Sellers
nor Buyer shall 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).
5.7 INSPECTION AND ACCESS.
Sellers will, prior to the Closing Date, make available the assets, books,
accounting records, correspondence and files of Sellers (to the extent related
to the operation of the Stations) for examination by Buyer, its officers,
attorneys, accountants
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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, Sellers 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. Sellers will
furnish to Buyer monthly unaudited financial statements of Seller prepared in a
manner consistent with the unaudited statements identified in Section 3.12.
Sellers will furnish to Buyer such additional financial and operating data and
other available information regarding Sellers 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 Sellers 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 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.
5.8 CONFIDENTIALITY.
Subject to Section 5.16, all information delivered or made available to
Buyer or Buyer's representatives or otherwise disclosed in writing by Sellers
(or their 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 (a) was otherwise
publicly available when received, (b) is or hereafter becomes lawfully
obtainable from third parties not related to Buyer or its Affiliates, (c) is
required to be disclosed to a governmental authority, (d) is required by law or
the rules of any stock exchange to be disclosed or (e) to the extent such duty
as to confidentiality is waived in writing by Sellers.
5.9 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 required by law or applicable
regulations.
5.10 MATERIAL ADVERSE CHANGE.
Buyer and Sellers will promptly notify the other party of any event of
which Buyer or Sellers, as the case may be, obtains knowledge which has had or
could reasonably be expected to have a Material Adverse Effect.
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5.11 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.
5.12 FCC REPORTS AND APPLICATIONS.
Sellers 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 Stations.
In addition, Sellers shall timely file all applications necessary for renewal of
any of the FCC Licenses, shall prosecute each such application with diligence,
shall in each case seek renewal for a full term, and shall diligently oppose any
objection to, appeal from or petition to reconsider the grant of any such
renewal application.
5.13 TAX RETURNS AND PAYMENTS.
Sellers will timely file with the appropriate governmental agencies all Tax
Returns required to be filed by Sellers with respect to the Stations prior to
Closing and timely pay all Taxes reflected on such Tax Returns as owing by
Sellers.
5.14 NO SOLICITATION.
From the date hereof until the earlier of Closing or termination of this
Agreement, no Seller or any Affiliate of any Seller shall directly or indirectly
(a) knowingly solicit or encourage submission of any proposal or offer from any
person relating specifically to the acquisition or purchase of any interest in
any Seller or any material assets of any Seller or any merger, consolidation or
other business combination with any Seller (each an "Acquisition Proposal"), or
(b) otherwise knowingly assist or negotiate with any person with respect to an
Acquisition Proposal. Sellers shall promptly notify Buyer in writing if an
Acquisition Proposal is made in writing after the date of this Agreement.
5.15 CERTIFIED RESOLUTIONS.
(a) Within fifteen (15) business days after the date hereof, Sellers shall
furnish Buyer with (i) certified resolutions of the board of directors of
Sellers and the Shareholders of Sellers 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, and (ii) certified resolutions of the board of directors of USA
Broadcasting evidencing the authorization and approval of the execution and
delivery of the Guaranty.
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(b) Within fifteen (15) business days after the date hereof, Buyer shall
furnish Sellers 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.
5.16 AUDITED FINANCIAL STATEMENTS.
Sellers recognize that Buyer is a publicly reporting company and agree that
Buyer shall be entitled at Buyer's expense to cause audited and unaudited
financial statements of the Stations to be prepared for such periods and filed
with the SEC, 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. Sellers agree 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. Furthermore, if all or a portion of the audited financial
statements of the Parent Entities may be used for such purpose, Sellers hereby
consent to Buyer's use of such financial statements for the purposes set forth
in this Section 5.16 and Sellers agree to use their commercially reasonable
efforts to obtain the consent of the independent accounting firm which opined as
to such financial statements.
5.17 STUDIO RELOCATION.
Provided Closing occurs, Buyer shall reimburse Sellers on the Closing Date
for all costs, fees, and expenses incurred (a) after the date hereof in
connection with Seller's relocation of the studio site for KHON-TV in Honolulu,
Hawaii and the purchase of a condominium for such studio site ("Studio
Relocation"), and (b) prior to the date hereof, in connection with the Studio
Relocation; provided, however, that any amounts reimbursed by Buyer pursuant to
this Clause (b) shall not exceed $75,000 in the aggregate.
5.18 SEC REGISTRATION STATEMENT.
Promptly following the execution and delivery of this Agreement, Seller
shall prepare and file with the SEC a registration statement registering the
Shares in accordance with the Securities Act (the "Registration Statement").
Seller shall take all actions reasonably necessary, including, without
limitation, responding timely to SEC comments and requests for additional
information, to have the Registration Statement declared effective as of the
Closing Date.
5.19 ENVIRONMENTAL INSPECTION.
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At Buyer's expense, Buyer shall have the right to cause an environmental
inspection to be performed by a reputable environmental engineering company of
each portion of the Owned Real Property and Leased Real Property. Buyer shall
cause the environmental consultant to deliver to Sellers a copy of each such
inspection report at the same time such report(s) are delivered to Buyer.
5.20 AFFILIATE GUARANTY.
On the Closing Date, Sellers shall cause USA Broadcasting to execute and
deliver the Guaranty in the form of Exhibit D.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATION
OF BUYER TO CLOSE
Buyer's obligation to close the acquisition of the Sale Assets pursuant to
the terms of 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 Sellers contained in this
Agreement or in any other Document shall be true and correct on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date (except for changes permitted
hereunder and except for representations and warranties that speak as of a
specific date or time other than the Closing Date (which need only be true and
correct in all material respects as of such date or time)), except to the extent
that the failure of such representations and warranties to be true and correct
shall not have had, or be reasonably expected to have, a Material Adverse
Effect.
(b) Sellers shall have delivered to Buyer on the Closing Date an officer's
certificate that the conditions specified in Sections 6.1(a), 6.2, 6.9, and 7.6
are satisfied as of the Closing Date.
6.2 PERFORMANCE OF AGREEMENT.
Sellers shall have performed all of their covenants, agreements and
obligations required by this Agreement to be performed or complied with by them
prior to or upon the Closing Date, except to the extent that the failure to
perform such covenants, agreements and obligations shall not have, when
considered together, had a Material Adverse Effect.
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6.3 FCC ORDERS.
(a) All of the FCC Orders shall have been issued without any Material
Adverse FCC Condition affecting Buyer; provided that if a petition to deny or
other third-party objection which raises any significant issue is filed with
the FCC prior to the date on which all of the FCC Orders are issued and become
effective, and such petition or objection is not withdrawn as of such date,
then Buyer's obligation to effect the Closing shall be subject to the further
condition that the FCC Orders shall each have become a Final Action (unless the
FCC Arbitrator pursuant to Section 6.3(b) determines there is no significant
issue or the parties otherwise agree). Furthermore, the FCC Orders shall
include authorization for Buyer to continue to operate KAII(TV) and KAHW(TV) as
satellite television stations.
(b) If within five (5) days after Buyer and Sellers acquire knowledge of
such a petition or objection, Buyer and Sellers do not agree on whether such
petition or objection raises a significant issue, then R. Clark Wadlow (the
"FCC Arbitrator") of the law firm of Sidley & Austin shall be engaged to
resolve such matter within five (5) business days. If Mr. Wadlow is unable or
unwilling to so serve, then the parties shall promptly designate and engage
another attorney who regularly practices communications law to serve as the FCC
Arbitrator. The FCC Arbitrator may adopt such procedures and policies in
reviewing and deciding this matter as the FCC Arbitrator desires in his sole
discretion. The FCC Arbitrator's decision shall be final and binding on Buyer
and Sellers, and Buyer and Sellers shall each bear one-half of the FCC
Arbitrator's fees and expenses. For purposes of this Agreement, the parties
acknowledge and agree that a "significant issue" is any issue which if resolved
in the favor of a petitioner or third-party objector is reasonably likely to
result in the FCC requiring the Buyer to divest any Station or operate any
Station subject to a Material Adverse FCC Condition.
(c) Conditions which the FCC Orders 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.
(d) All of the FCC Licenses shall be in full force and effect.
6.4 HSR ACT.
The waiting period (including any extension) under the HSR Act applicable
to the sale and purchase of the Sale Assets pursuant to this Agreement shall
have expired or been terminated.
6.5 OPINIONS OF SELLERS' COUNSEL.
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Buyer shall have received (a) the written opinion of Sellers' corporate
counsel, dated as of the Closing Date, that (i) each Seller is a corporation
duly formed and in good standing under the laws of the state in which such
Seller is incorporated, (ii) the execution, delivery and performance of the
Agreement and each of the other Documents have been duly authorized by all
requisite corporate action (including any necessary shareholder approval) on the
part of Sellers, and (iii) the Agreement and other Documents have been duly and
validly executed and delivered by Sellers and constitute valid and legally
binding obligations enforceable against Sellers 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 (b) the
written opinion of Sellers' FCC counsel, dated as of the Closing Date, that (i)
the Sellers hold the FCC Licenses, (ii) all authorizations, approvals and
consents of the FCC required under the Communications Act to permit the
assignment of the FCC Licenses by the Sellers to Buyer have been obtained, are
in effect, and have not been reversed, stayed, enjoined, set aside, annulled or
suspended, and (iii) there is no FCC order, judgment, decree, notice of apparent
liability or order of forfeiture outstanding, and to counsel's knowledge, no
action, suit, notice of apparent liability, order of forfeiture, investigation
or other proceeding pending, by or before the FCC against the Sellers that might
result in a revocation, cancellation, suspension, non-renewal, short-term
renewal or materially adverse modification of the FCC Licenses, except FCC
proceedings generally affecting the television industry (including but not
limited to the proceedings which will require modification of all television
licenses to accommodate the transition to digital television). An opinion
addressing the matters in foregoing Clause (a) but with respect to USA
Broadcasting and the Guaranty shall have also been received by Buyer from
counsel for USA Broadcasting. Each of such opinions shall be subject to
customary qualifications and limitations.
6.6 REQUIRED CONSENTS.
Sellers shall have been able to obtain through commercially reasonable
efforts, but without incurring substantial cost or expense, the written consents
or waivers to the transactions contemplated by this Agreement, in form
reasonably satisfactory to Buyer's counsel and without any condition materially
adverse to Buyer or the Stations, which are required under (i) each Station
Agreement for each transmitter or antenna (including each satellite and
translator transmitter) site where a Seller is a lessee and (ii) the programming
agreements identified for each Station on Schedule 6.6; provided, however, that
(A) obtaining such a consent with respect to one or more of such programming
agreements shall not be a condition precedent to Closing if Buyer and Sellers
agree upon a reduction in the Purchase Price to compensate Buyer for the
reduction, if any, in the fair market value of one or more of the Stations as a
result of the inability to obtain such a consent, and (B) if Buyer and Sellers
fail to agree prior to Closing on such a Purchase Price reduction, (1) Buyer
shall pay the Purchase Price at Closing without such a reduction, (2) the
parties shall promptly take all action necessary
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to cause the appropriate reduction, if any, to be determined by expedited
arbitration in accordance with the expedited arbitration rules of the American
Arbitration Association, and (3) promptly after such determination is made,
Sellers shall refund to Buyer in immediately available funds the amount of such
reduction, if any, together with interest from the Closing Date at eight percent
(8%) per annum. A further condition shall be that Buyer shall have been
furnished a written statement from the lessor under the lease of the Honolulu's
Station's main transmitter and antenna site that the term of such lease was
renewed as of January 2, 1998 for an additional ten (10) years.
6.7 DELIVERY OF CLOSING DOCUMENTS.
Sellers 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.
6.8 NO ADVERSE PROCEEDINGS.
No judgment or order shall have been rendered and remain in effect, and no
action or proceeding by any governmental entity shall be pending, against Buyer
that would restrain or make unlawful the purchase and sale of the Sale Assets as
contemplated by this Agreement.
6.9 NO MATERIAL ADVERSE CHANGE.
There shall have been no change or development affecting any Seller or any
Station since December 31, 1997 which has resulted in, or could reasonably be
expected to result in, a Material Adverse Effect; provided, however, that an
adverse change in the revenue or cash flow of any Station shall not constitute
for purposes of this Section a change or development which has, or could
reasonably be expected to have, a Material Adverse Effect unless the failure of
Sellers to perform in all material respects the covenants under Section 5.1
shall have caused such Material Adverse Effect.
ARTICLE VII
CONDITIONS PRECEDENT TO THE
OBLIGATION OF SELLERS TO CLOSE
The obligations of Sellers to close the sale of the Sale Assets pursuant to
the terms of this Agreement is subject to the satisfaction, on or prior to the
Closing Date, of each of the following conditions, unless waived by Sellers in
writing:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES.
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(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 Sellers.
(b) Buyer shall have delivered to Sellers on the Closing Date a
certificate that the conditions specified in Sections 7.1(a) and 7.2 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 ORDERS.
(a) All of the FCC Orders shall have been issued as to all Stations and
shall have become effective under the rules of the FCC and applicable law.
(b) Conditions which the FCC Orders 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 HSR ACT.
The waiting period (including any extension) under the HSR Act applicable
to the sale and purchase of the Sale Assets pursuant to this Agreement shall
have expired or been terminated.
7.5 OPINION OF BUYER'S COUNSEL.
Sellers 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 in which Buyer is incorporated, (ii) the
execution, delivery and performance of the Agreement and other Documents have
been duly authorized by all requisite corporate action (including any necessary
shareholder approval) 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, (iv) the Shares to be issued to the Sellers in accordance with terms
of this Agreement, when so issued, will be duly authorized, validly issued,
fully paid and non-assessable, and (v) the Stock Pledge Agreement creates in
favor of
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Sellers a perfected security interest in the Shares covered thereby. Each of
the opinions of Buyer's Counsel shall be subject to customary qualifications and
limitations.
7.6 NO ADVERSE PROCEEDINGS.
No judgment or order shall have been rendered and remain in effect, and no
action or proceeding by any governmental entity shall be pending, against
Sellers that would restrain or make unlawful the purchase and sale of the Sale
Assets as contemplated by this Agreement.
7.7 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.
7.8 EFFECTIVENESS OF REGISTRATION STATEMENT.
The Registration Statement shall have been declared effective by the SEC
under the Securities Act. No stop order suspending the effectiveness of such
registration statement shall have been issued by the SEC and no proceedings for
that purpose shall have been initiated or threatened by the SEC.
7.9 LISTING OF SHARES.
All Shares shall have been included for listing on NASDAQ upon official
notice of issuance.
ARTICLE VIII
CLOSING
8.1 TIME AND PLACE.
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 SELLERS.
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At the Closing, Sellers 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 Sellers' counsel and FCC counsel, dated the Closing
Date, to the effect set forth in Section 6.5;
(b) Governmental certificates, dated as of a date as near as reasonably
practicable to the Closing Date, showing that each Seller is duly incorporated
and in good standing in the state of its incorporation and is qualified to do
business and in good standing in the jurisdictions listed in Schedule 3.1;
(c) A certificate of the Secretary of each Seller attesting as to the
incumbency of each officer of such Seller 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, in
forms reasonably acceptable to Buyer and Sellers;
(e) A deed, in a form recordable in the applicable jurisdiction, 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 for Permitted
Liens and be substantially the same form as the deed that transferred title to
such Owned Real Property to Sellers; and such customary owner's or seller's
affidavit as are reasonably necessary to enable Buyer to obtain title insurance
with respect to the Owned Real Property without any standard preprinted
exception (except those standard preprinted exceptions which may be deleted by
delivery of a current certified ALTA/ACSM survey);
(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) The certificate described in Section 6.1(b);
(h) A written instruction of Sellers to Escrow Agent instructing the
Escrow Agent to distribute the Escrow Account at the direction of Sellers;
(i) Modified network affiliation agreements for each of the Stations with
Fox Broadcasting Company in the form and substance of Exhibit C ("Fox Network
Agreements"); and
(j) The Guaranty executed by USA Broadcasting as prescribed in Section
5.20.
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(k) 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, any documents expressly
required by this Agreement to be delivered by Sellers at Closing.
8.3 DELIVERIES TO SELLERS BY BUYER.
At the Closing, Buyer shall deliver or cause to be delivered to Sellers
the following, in each case in form and substance reasonably satisfactory to
Sellers:
(a) The Purchase Price (including all Shares issued at Closing) in
accordance with Section 2.5, as adjusted under Section 2.7(b);
(b) The certificate described in Section 7.1(b);
(c) A certificate of the Secretary of Buyer attesting as to the incumbency
of each officer of Buyer who executes this Agreement and any of the other
Documents and to similar customary matters;
(d) A written instruction of Buyer to Escrow Agent instructing the Escrow
Agent to distribute the Escrow Account at the direction of Sellers;
(e) An agreement by Buyer assuming the Assumed Obligations, in forms
reasonably acceptable to Buyer and Sellers.
(f) Fox Network Agreements, Stock Pledge Agreement and Note executed by
Buyer; and
(g) Such additional information and materials as Sellers shall have
reasonably requested to evidence the satisfaction of the conditions to their
obligations hereunder.
ARTICLE IX
INDEMNIFICATION
9.1 SURVIVAL.
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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 any party, and the Closing shall not be
deemed a waiver by any party of the representations, warranties, covenants or
agreements of any other party in this Agreement or any other Document; provided,
however, that the period of survival shall, (i) with respect to the
representations and warranties in Section 3.15 (Employee Benefit Plans), end for
each Benefit Plan upon expiration of the statute of limitations applicable to
the Benefit Plan, (ii) with respect to the representations and warranties
pertaining to Taxes under Section 3.17, end for each Tax upon expiration of the
statute of limitations applicable to the Tax, (iii) with respect to the
representations and warranties in Section 3.18 (Environmental Matters), end
three (3) years after the Closing Date, and (iv) in the case of any other
representation or warranty, end twelve (12) months after the Closing Date (in
each case, the "Survival Period"). No claim for breach of any representation or
warranty 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.
9.2 INDEMNIFICATION BY SELLERS.
(a) Subject to Section 9.2(b), Sellers shall, jointly and severally
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 Sellers of any of its representations, warranties,
covenants or agreements in this Agreement or any other Document; or
(ii) Any obligation, indebtedness or Liability of Sellers (other than the
Assumed Obligations) regardless of whether disclosed to Buyer and regardless of
whether constituting a breach by Sellers of any representation, warranty,
covenant or agreement hereunder or under any other Document; or
(iii) Noncompliance by Sellers with the provisions of the Bulk Sales Act,
if applicable, in connection with the transactions contemplated by this
Agreement.
(b) If Closing occurs, Sellers shall not be obligated to indemnify Buyer
unless and until the aggregate amount of Buyer's Losses exceeds Five Hundred
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<PAGE> 62
Thousand Dollars ($500,000) (the "Deductible"), in which case Buyer shall then
be entitled to indemnification of Buyer's Loss in excess of the Deductible,
provided that any payment owed by Sellers to Buyer for any Liability pursuant
to or under Section 2.7, Section 2.8(f), or Section 9.2(a)(ii), shall not be
counted in determining whether the Deductible 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 Sellers in satisfaction
of claims for indemnification pursuant to this Section 9.2 shall not exceed
Twenty Million Dollars ($20,000,000) (the "Cap"), provided that any payment
owed by Sellers to Buyer under Section 2.7 shall not be counted in determining
whether the Cap has been met.
(d) Notwithstanding any other provision of this Agreement to the contrary,
and except for remedies that Buyer may have for any fraud by the Sellers, Buyer
acknowledges and agrees that the maximum aggregate liability of the Sellers
(taken as a whole) pursuant to this Agreement to Buyer and any of its
Affiliates for any and all Losses shall not exceed the Cap, regardless of
whether Buyer seeks indemnification pursuant to this Article IX, regardless of
the form of action, whether in contract or tort, including negligence, and
regardless of whether or not the Sellers are notified of the possibility of
damages to Buyer.
9.3 INDEMNIFICATION BY BUYER.
(a) Subject to Sections 9.3(b) and 10.2, Buyer shall indemnify and hold
harmless Sellers and their 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; or
(iii) Buyer's operation of any of the Stations on or after the Closing
Date (except for any Loss relating to, arising out of or resulting from any
Excluded Asset) or Buyer's ownership of the Sale Assets.
(b) If Closing occurs, Buyer shall not be obligated to indemnify Sellers
unless and until the aggregate amount of Sellers' Losses exceeds the
Deductible, in which case Sellers shall then be entitled to indemnification of
Sellers' Losses in excess of the Deductible, provided any payment owed by Buyer
to Sellers for any Assumed
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Obligations or for any Liability pursuant to or under Section 2.7, Section 2.8,
Section 5.17, Section 9.3(a)(iii) or Sections 12.1(c) and (d) shall not be
counted in determining whether the Deductible limitation is satisfied, and
Sellers 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 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
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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 any 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 Sellers 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
is received by such other party; or
(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, provided,
however, that in the event Closing does not occur, the aggregate liability of
Buyer for breach or default under this Agreement shall be limited as provided
in Section 10.2(c).
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(b) If this Agreement is terminated prior to Closing for any reason other
than a material breach or default by Buyer under this Agreement, Buyer shall be
entitled to the return of the Earnest Money, and Buyer and Sellers shall
cooperate in taking such action as required under the Escrow Agreement to
effect the Escrow Agent's distribution of the Earnest Money to Buyer.
(c) If Closing shall not have occurred because of a material breach or
default by Buyer under this Agreement, Sellers' sole remedy at law or in equity
under this Agreement shall be (i) the termination by Sellers of this Agreement,
and (ii) the recovery from Buyer of (A) an amount equal to the Earnest Money
(the "Sellers' Liquidated Damage Amount") and (B) Sellers' reasonable
attorneys' fees and other costs of collection incurred by Sellers in enforcing
their right to recover Sellers' Liquidated Damage Amount (such fees and other
costs herein referred to as "Sellers' Enforcement Costs"). In the event of
such termination by Sellers, Sellers shall be entitled under the Escrow
Agreement (subject to Buyer's right to contest in good faith) to effect the
Escrow Agent's distribution to Sellers of the Earnest Money, and Sellers shall
be entitled to pursue any other remedy available to Sellers at law or in equity
to recover the entire Sellers' Liquidated Damage Amount and Sellers'
Enforcement Costs, provided that the total monetary damages (including any
amount received from the Escrow Agent under the Escrow Agreement) to which
Sellers shall be entitled shall not exceed the sum of Sellers' Liquidated
Damage Amount plus Sellers' Enforcement Costs. BUYER ACKNOWLEDGES AND AGREES
THAT SELLERS' RECEIPT OF SELLERS' LIQUIDATED DAMAGE AMOUNT SHALL CONSTITUTE
PAYMENT OF LIQUIDATED DAMAGES HEREUNDER AND NOT A PENALTY AND THAT SELLERS'
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.
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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 Sellers, subject to Sellers' compliance with this Agreement.
ARTICLE XII
EMPLOYMENT MATTERS
12.1 TRANSFER OF EMPLOYEES.
(a) Buyer shall offer employment (effective immediately after Closing) to
each of the employees of the Stations (including those on leave of absence,
whether short-term, long-term, family, maternity, disability, paid, unpaid or
other, but excluding the employees identified on Schedule 2.2(l) hereto), at a
comparable salary or wage rate (as the case may be), position and place of
employment as held by each such employee immediately prior to the Closing Date
and with the same employee benefits generally provided by Buyer to Buyer's
similarly situated employees (such employees who are given and accept such
offers of employment are referred to herein as the "Transferred Employees").
As of the Closing Date, Buyer shall provide Sellers with written notice of any
employees of the Stations who have not accepted Buyer's offer of employment.
Nothing in this Section 12.1(a) is intended to nor shall guarantee employment
for any Transferred Employee for any length of time after the Closing Date.
(b) Sellers shall pay, discharge and be solely responsible for all
liabilities, obligations, costs and expenses which arise or become payable
under any Benefit Plan as a result of, or in connection with, the termination
by any Seller of any Station employee 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 any
such liabilities are included as an Assumed Obligation pursuant to Section
2.3(a)(ii) in determining the Adjustment Amount.
(c) Buyer agrees, as between Buyer and Sellers, that Buyer shall pay any
Transferred Employee who is terminated by Buyer without cause during the six
month period after Closing the severance amount stated on Schedule 3.14(c) for
such Transferred Employee, as adjusted in accordance with the applicable
formula described
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on such Schedule to reflect the actual termination date if other than August
31, 1998. The foregoing agreement by Buyer, however, is not intended to be and
shall not constitute the assumption by Buyer of any obligation under any
severance policy, plan or arrangement of Sellers.
(d) Buyer 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 Buyer's employment of any Transferred Employees
upon Closing or Buyer's termination of any Transferred Employees after Closing,
including, without limitation, all severance or termination pay and all accrued
vacation, salary, wages and other compensation payments or benefits. Buyer
shall not, however, assume or be obligated to pay any benefits under any Benefit
Plans (including, but not limited to, any severance policy, plan or arrangement)
except to the extent arising under any Assumed Plan during and relating to any
period on or after the Closing Date.
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 Sellers or the
Benefit Plans, as applicable, will retain all assets and liabilities in respect
of Sellers' employees under the Benefit Plans. Sellers 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.
12.3 UNION EMPLOYEES.
Notwithstanding the above provisions of this Article XII, upon consummation
of the Closing hereunder, Buyer shall: (i) recognize the unions and labor
organizations which are parties to the collective bargaining agreements set
forth in Schedule 3.7(b); and (ii) offer employment to all active employees of
the Stations represented by any such union or labor organization; and (iii)
assume and be responsible for the liabilities and obligations of Sellers arising
under the collective bargaining agreements listed on Schedule 3.7(b), including,
without limitation, liabilities or obligations with respect to severance pay,
accrued vacation and other similar liabilities or obligations, but only to the
extent such liabilities and obligations are included as part of the Assumed
Obligations.
12.4 EMPLOYMENT AGREEMENTS.
Buyer acknowledges and agrees that Buyer's obligations pursuant to this
Article XII are in addition to, and not in limitation of, Buyer's obligation to
assume the employment agreements set forth in Schedule 3.7(b).
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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.
13.2 PAYMENT OF EXPENSES.
(a) The fees for the HSR Filing, the fees for filing the applications with
the FCC under Section 5.4, and all Transfer Taxes payable in connection with
consummation of the transactions contemplated by this Agreement, shall be paid
fifty percent (50%) by Sellers and fifty percent (50%) by Buyer. All other
Taxes shall be paid by the party primarily liable under applicable law to pay
such Tax. Notwithstanding anything to the contrary in this Agreement, all
mortgage recordation taxes and fees incurred in connection with the recording of
any mortgage or deed of trust by Buyer or any of its lenders shall be paid by
Buyer.
(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 the transactions
contemplated by this Agreement.
13.3 SPECIFIC PERFORMANCE.
Sellers acknowledge 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 Sellers. Accordingly, as an alternative to
termination of this Agreement under Section 10.1, Buyer shall be entitled, in
the event of Sellers' 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 Sellers to fulfill their 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 Sellers' breach. In any action to
specifically enforce Sellers' obligation to close the transactions contemplated
by this Agreement, Sellers 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 Sellers' 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
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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.
(b) if to Sellers, to:
USA Broadcasting, Inc.
52 West 57th Street, 38th Floor
New York, New York 10019
Attention: Julius Genachowski, Esq.
Copy to:
Hogan & Hartson L.L.P.
555 13th Street, N.W.
Washington, DC 20004
Attention: William S. Reyner, Jr., Esq.
and to:
Fox Inc.
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10201 West Pico Boulevard
Building 88 - Room 150
Los Angeles, California 90035
Attention: Paul F. Haggerty
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 a direct or
indirect wholly-owned subsidiary of Buyer, provided that (i) the representations
and warranties of Buyer hereunder shall be true and correct in all respects as
applied to the assignee, (ii) both Buyer and the assignee shall execute and
deliver to Sellers a written instrument in form and substance satisfactory to
Sellers within their 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, (iii) such assignment shall not materially
delay issuance of the FCC Orders, and (iv) Buyer and the assignee shall deliver
such other documents and instruments as reasonably requested by
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Sellers, including appropriate certified resolutions of the boards of directors
of Buyer and the assignee provided, however, under no circumstances may Buyer
assign any right or obligation hereunder to deliver the Shares or to repay the
Note.
13.8 GOVERNING LAW.
This Agreement shall in all respects be governed by and construed in
accordance with the laws of the State of New York 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 any
party on separate counterparts, each of which shall be an original, and 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.
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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 JOINT AND SEVERAL LIABILITY.
Sellers shall be jointly and severally liable for each representation,
warranty, covenant, agreement, liability or obligation of all or any one of the
Sellers under this Agreement or any other Document whether or not otherwise
indicated in this Agreement or any other Document.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Asset
Purchase Agreement to be executed as of the date first written above.
SF BROADCASTING OF HONOLULU, INC.
By: _____________________________________
Printed Name: ___________________________
Its: ____________________________________
SF HONOLULU LICENSE SUBSIDIARY, INC.
By: _____________________________________
Printed Name: ___________________________
Its: ____________________________________
SF BROADCASTING OF NEW ORLEANS, INC.
By: _____________________________________
Printed Name: ___________________________
Its: ____________________________________
SF NEW ORLEANS LICENSE SUBSIDIARY, INC.
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By: _____________________________________
Printed Name: ___________________________
Its: ____________________________________
SF BROADCASTING OF MOBILE, INC.
By: _____________________________________
Printed Name: ___________________________
Its: ____________________________________
SF MOBILE LICENSE SUBSIDIARY, INC.
By: _____________________________________
Printed Name: ___________________________
Its: ____________________________________
SF BROADCASTING OF GREEN BAY, INC.
By: _____________________________________
Printed Name: ___________________________
Its: ____________________________________
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SF GREEN BAY LICENSE SUBSIDIARY, INC.
By: _____________________________________
Printed Name: ___________________________
Its: ____________________________________
EMMIS BROADCASTING CORPORATION
By: _____________________________________
David L. Wills, Assistant Secretary
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EXHIBIT 11
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
SCHEDULE OF CALCULATION OF PER SHARE NET INCOME
<TABLE>
<CAPTION>
For the Three Months Ended For the Twelve Months Ended
February 28,1998 February 28, 1998
---------------- -----------------
Weighted Calculated Weighted Calculated
Net Average Per Net Average Per
Shares Share Income Shares Share Income
----------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding and net
income used in the
determination of basic net
income per share ($3,136,000) 10,888,522 ($0.29) $ 8,984,000 10,903,333 $ 0.82
Options (A) 474,432
Used in the determination of
diluted net income per share ($3,136,000) 10,888,522 ($0.29) $ 8,984,000 11,377,765 $ 0.79
(A) Excluded due to antidiluted effect.
<CAPTION>
For the Three Months Ended For the Twelve Months Ended
February 28,1997 February 28, 1997
---------------- -----------------
Weighted Calculated Weighted Calculated
Net Average Per Net Average Per
Shares Share Income Shares Share Income
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding and net
income used in the
determination of basic net
income per share $1,240,000 10,979,641 $0.11 $15,440,000 10,942,996 $ 1.41
Options 425,706 348,229
Used in the determination of
diluted net income per share $1,240,000 11,405,347 $0.11 $15,440,000 11,291,225 $ 1.37
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF EMMIS BROADCASTING CORPORATION
<TABLE>
<CAPTION>
Other Names
Jurisdiction of Under Which
Subsidiary Incorporation Business is Done
- - ---------- ------------- ----------------
<S> <C> <C>
Emmis FM Broadcasting
Corporation of Indianapolis Indiana --
Emmis FM Broadcasting
Corporation of St. Louis Indiana KSHE
KPWR, Inc. Indiana --
Emmis Broadcasting
Corporation of New York Indiana WQHT
Emmis FM Broadcasting
Corporation of Chicago Indiana WKQX
Emmis FM License
Corporation of Indianapolis California --
Emmis FM License
Corporation of St. Louis California --
KPWR License, Inc. California --
Emmis License
Corporation of New York California --
Emmis FM License
Corporation of Chicago California --
Emmis Meadowlands Corporation Indiana --
Emmis Publishing Corporation Indiana --
Emmis AM Radio Corporation of Indianapolis Indiana --
Emmis FM Radio Corporation of Indianapolis Indiana --
Emmis AM Radio License Corporation of
Indianapolis California --
Emmis FM Radio License Corporation of
Indianapolis California --
Emmis Holding Corporation of New York Delaware WRKS
Emmis Radio License Corporation of New York California --
Emmis Broadcasting Corporation Indiana --
Emmis 104.1 FM Radio Corporation
of St. Louis Indiana WALC
Emmis 104.1 FM Radio License Corporation
of St. Louis California --
Emmis 106.5 FM Broadcasting Corporation
of St. Louis Indiana WKKX
Emmis 106.5 FM License Corporation
of St. Louis California --
Emmis 1310 AM Radio Corporation of Indianapolis Indiana --
Emmis 1310 AM Radio License Corporation of
Indianapolis California --
Emmis 105.7 FM Radio Corporation of Indianapolis Indiana --
Emmis 105.7 FM License Corporation of
Indianapolis California --
Mediatex Communications Corporation Texas --
Mediatex Development Corporation Texas --
Texas Monthly, Inc. Texas --
Emmis License Corporation California --
Emmis International Broadcasting Corporation California --
Emmis DAR, Inc. Indiana --
Emmis Publishing, L.P. Indiana Indianapolis Monthly
Cincinnati Magazine
Atlanta Magazine
Emmis Indiana Radio, L.P. Indiana WENS
WIBC
WNAP
WTLC-FM
WTLC-AM
Emmis International Corporation Indiana --
Emmis 1380 AM Radio Corporation of St. Louis Indiana --
Duncan American Radio, LLC Indiana --
Radio Hungaria Co. Ltd. Hungary --
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K, into the Company's previously filed
Registration Statement File Numbers 333-83890 and 333-14657.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
May 5, 1998.
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below, hereby constitutes and appoints Jeffrey H. Smulyan, Howard L. Schrott and
Norman H. Gurwitz, or any of them, his attorneys-in-fact and agents, with full
power of substitution and resubstitution for him in any and all capacities, to
sign the annual report of Emmis Broadcasting Corporation on Form 10-K under the
Securities Exchange Act of 1934 for the fiscal year ended February 28, 1998, and
to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each of
such attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary in connection with such
matters and hereby ratifying and confirming all that each of such
attorneys-in-fact and agents or his substitute or substitutes may do or cause to
be done by virtue hereto.
Dated: May 1, 1998 /s/Lawrence B. Sorrel
-----------------------------
Lawrence B. Sorrel
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below, hereby constitutes and appoints Jeffrey H. Smulyan, Howard L. Schrott and
Norman H. Gurwitz, or any of them, his attorneys-in-fact and agents, with full
power of substitution and resubstitution for him in any and all capacities, to
sign the annual report of Emmis Broadcasting Corporation on Form 10-K under the
Securities Exchange Act of 1934 for the fiscal year ended February 28, 1998, and
to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each of
such attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary in connection with such
matters and hereby ratifying and confirming all that each of such
attorneys-in-fact and agents or his substitute or substitutes may do or cause to
be done by virtue hereto.
Dated: May 1, 1998 /s/Richard A. Leventhal
-----------------------------
Richard A. Leventhal
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below, hereby constitutes and appoints Jeffrey H. Smulyan, Howard L. Schrott and
Norman H. Gurwitz, or any of them, his attorneys-in-fact and agents, with full
power of substitution and resubstitution for him in any and all capacities, to
sign the annual report of Emmis Broadcasting Corporation on Form 10-K under the
Securities Exchange Act of 1934 for the fiscal year ended February 28, 1998, and
to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each of
such attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary in connection with such
matters and hereby ratifying and confirming all that each of such
attorneys-in-fact and agents or his substitute or substitutes may do or cause to
be done by virtue hereto.
Dated: May 1, 1998 /s/Doyle L.Rose
-----------------------------
Doyle L. Rose
<PAGE> 4
POWER OF ATTORNEY
KNOW BY THESE PRESENTS, that the person whose signature appears below,
hereby constitutes and appoints Jeffrey H. Smulyan, Howard L. Schrott and Norman
H. Gurwitz, or any of them, his or her attorneys-in-fact and agents, with full
power of substitution and resubstitution for him or her in any and all
capacities, to sign the annual report of Emmis Broadcasting Corporation on Form
10-K under the Securities Exchange Act of 1934 for the fiscal year ended
February 28, 1998, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto each of such attorneys-in-fact and agents full power and authority
to do and perform each and every act and thing requisite and necessary in
connection with such matters and hereby ratifying and confirming all that each
of such attorneys-in-fact and agents or his or her substitute or substitutes may
do or cause to be done by virtue hereto.
Dated: May 1, 1998 /s/Susan B. Bayh
-----------------------------
Susan B. Bayh
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below, hereby constitutes and appoints Jeffrey H. Smulyan, Howard L. Schrott and
Norman H. Gurwitz, or any of them, his attorneys-in-fact and agents, with full
power of substitution and resubstitution for him in any and all capacities, to
sign the annual report of Emmis Broadcasting Corporation on Form 10-K under the
Securities Exchange Act of 1934 for the fiscal year ended February 28, 1998, and
to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each of
such attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary in connection with such
matters and hereby ratifying and confirming all that each of such
attorneys-in-fact and agents or his substitute or substitutes may do or cause to
be done by virtue hereto.
Dated: May 1, 1998 /s/Gary L. Kaseff
-----------------------------
Gary L. Kaseff
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below, hereby constitutes and appoints Jeffrey H. Smulyan, Howard L. Schrott and
Norman H. Gurwitz, or any of them, his attorneys-in-fact and agents, with full
power of substitution and resubstitution for him in any and all capacities, to
sign the annual report of Emmis Broadcasting Corporation on Form 10-K under the
Securities Exchange Act of 1934 for the fiscal year ended February 28, 1998, and
to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each of
such attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary in connection with such
matters and hereby ratifying and confirming all that each of such
attorneys-in-fact and agents or his substitute or substitutes may do or cause to
be done by virtue hereto.
Dated: May 1, 1998 /s/Jeffrey H. Smulyan
-----------------------------
Jeffrey H. Smulyan
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000783005
<NAME> EMMIS BROADCASTING CORPORATION
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 5,785
<SECURITIES> 0
<RECEIVABLES> 33,466
<ALLOWANCES> 1,346
<INVENTORY> 0
<CURRENT-ASSETS> 51,152
<PP&E> 54,415
<DEPRECIATION> 20,969
<TOTAL-ASSETS> 333,388
<CURRENT-LIABILITIES> 28,069
<BONDS> 231,371
0
0
<COMMON> 110
<OTHER-SE> 45,210
<TOTAL-LIABILITY-AND-EQUITY> 333,388
<SALES> 149,406
<TOTAL-REVENUES> 149,406
<CGS> 23,551
<TOTAL-COSTS> 23,551
<OTHER-EXPENSES> 96,397
<LOSS-PROVISION> 802
<INTEREST-EXPENSE> 13,772
<INCOME-PRETAX> 14,884
<INCOME-TAX> 5,900
<INCOME-CONTINUING> 8,984
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,984
<EPS-PRIMARY> .82
<EPS-DILUTED> .79
</TABLE>
