<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended August 31, 1999 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
-------- --------
Commission file number: 0-23264
EMMIS COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1542018
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE EMMIS PLAZA
40 MONUMENT CIRCLE
SUITE 700
INDIANAPOLIS, INDIANA 46204
(Address of principal executive offices) (Zip Code)
(317) 266-0100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----------- -------------
The number of shares outstanding of each of the Registrant's classes of
common stock, as of September 24, 1999, was:
13,417,845 Shares of Class A Common Stock, $.01 Par Value
2,622,125 Shares of Class B Common Stock, $.01 Par Value
-1-
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.........................................................................4
Condensed Consolidated Statements of
Operations for the three and six months
ended August 31, 1998 and 1999.............................................................4
Condensed Consolidated Balance Sheets
at February 28, 1999 and August 31, 1999...................................................5
Condensed Consolidated Statements of Cash
Flows for the six months ended
August 31, 1998 and 1999...................................................................7
Notes to Condensed Consolidated
Financial Statements.......................................................................9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations.............................................................................24
PART II - OTHER INFORMATION
Item 1. Legal Proceedings...........................................................................30
Item 4. Submission of Matters to a Vote
of Security Holders.......................................................................30
Item 6. Exhibits and Reports on Form 8-K............................................................31
Signatures...........................................................................................32
</TABLE>
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<PAGE> 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Emmis Communications Corporation and Subsidiaries:
We have reviewed the accompanying condensed consolidated balance sheet of
Emmis Communications Corporation (an Indiana corporation) and Subsidiaries as of
August 31, 1999, and the related condensed consolidated statements of operations
for the three-month and six-month periods ended August 31, 1999 and 1998 and the
condensed consolidated statements of cash flows for the six-month periods ended
August 31, 1999 and 1998. These financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Emmis Communications Corporation
and Subsidiaries as of February 28, 1999 (not presented separately herein), and,
in our report dated April 30, 1999, we expressed an unqualified opinion on that
statement. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of February 28, 1999 is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
September 21, 1999.
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<PAGE> 4
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended August 31, Ended August 31,
(Unaudited) (Unaudited)
-------------------------- --------------------------
1998 1999 1998 1999
-------- -------- ---------- ---------
<S> <C> <C> <C> <C>
GROSS REVENUES $ 67,873 $ 95,233 $ 120,721 $ 180,154
LESS: AGENCY COMMISSIONS 9,999 13,704 18,228 26,273
-------- -------- --------- --------
NET REVENUES 57,874 81,529 102,493 153,881
Operating expenses 33,063 47,659 60,858 93,122
International business
development expenses 354 367 561 747
Corporate expenses 1,969 3,478 3,926 6,684
Time brokerage fees 95 - 2,220 -
Depreciation and amortization 6,505 10,336 9,912 20,045
Non-cash compensation 1,081 1,648 2,036 2,293
-------- -------- --------- --------
OPERATING INCOME 14,807 18,041 22,980 30,990
-------- -------- --------- --------
OTHER INCOME (EXPENSE):
Interest expense (7,121) (13,936) (12,629) (27,165)
Minority interest 868 466 1,875 1,525
Other income (expense), net 811 (55) 1,123 (293)
-------- -------- --------- --------
Total other income (expense) (5,442) (13,525) (9,631) (25,933)
-------- -------- --------- --------
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 9,365 4,516 13,349 5,057
PROVISION FOR INCOME TAXES 5,204 3,300 7,400 3,600
-------- -------- --------- --------
NET INCOME BEFORE EXTRAORDINARY
ITEM 4,161 1,216 5,949 1,457
-------- -------- --------- --------
EXTRAORDINARY ITEM, NET OF TAX 1,597 - 1,597 -
-------- -------- --------- --------
NET INCOME $ 2,564 $ 1,216 $ 4,352 $ 1,457
======== ======== ========= ========
Basic net income per share $ .17 $ .08 $ .33 $ .09
======== ======== ========= ========
Diluted net income per share $ .16 $ .07 $ .32 $ .09
======== ======== ========= ========
Weighted average common shares outstanding:
Basic 15,512,702 15,929,428 13,255,592 15,856,467
Diluted 15,888,107 16,438,098 13,662,310 16,305,944
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
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<PAGE> 5
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
February 28, August 31,
1999 1999
----------- -----------
(Note 1) (Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,117 $ 3,061
Accounts receivable, net 51,479 62,952
Deferred barter costs 3,128 6,862
Prepaid expenses and other 10,358 16,627
----------- -----------
Total current assets 71,082 89,502
Property and equipment, net 106,060 117,375
Intangible assets, net 802,307 820,789
Other assets, net 35,382 52,035
----------- -----------
Total assets $ 1,014,831 $ 1,079,701
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of other
long-term debt $ 835 $ 835
Accounts payable 15,635 19,731
Accrued salaries and commissions 4,545 4,730
Accrued interest 6,223 18,033
Deferred revenue 7,238 14,614
Current portion of TV program
rights payable 9,471 9,564
Income tax payable 12,057 7,130
Other 13,829 2,557
----------- -----------
Total current liabilities 69,833 77,194
CREDIT FACILITY AND SENIOR
SUBORDINATED NOTES 577,000 619,000
TV PROGRAM RIGHTS PAYABLE, NET OF
CURRENT PORTION 25,161 20,686
OTHER LONG-TERM DEBT, NET OF
CURRENT PORTION 18,805 17,588
OTHER NONCURRENT LIABILITIES 3,466 5,339
DEFERRED INCOME TAXES 85,017 94,845
---------- ----------
Total liabilities 779,282 834,652
---------- ----------
</TABLE>
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<PAGE> 6
COMMITMENTS AND CONTINGENCIES
<TABLE>
<S> <C> <C>
SHAREHOLDERS' EQUITY:
Class A common stock, $.01
par value; authorized 34,000,000
shares; issued and outstanding
13,190,207 shares at
February 28, 1999 and 13,371,821
shares at August 31, 1999 132 134
Class B common stock, $.01
par value; authorized 6,000,000
shares; issued and outstanding
2,582,265 shares at
February 28, 1999 and 2,622,125
shares at August 31, 1999 26 26
Additional paid-in capital 260,344 269,241
Accumulated deficit (24,305) (22,848)
Accumulated other comprehensive loss (648) (1,504)
---------- -----------
Total shareholders' equity 235,549 245,049
---------- ----------
Total liabilities and
shareholders' equity $ 1,014,831 $1,079,701
=========== ==========
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
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<PAGE> 7
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months
Ended August 31,
(Unaudited)
---------------------
1998 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,352 $ 1,457
Adjustments to reconcile net income
to net cash provided by operating
activities -
Extraordinary item 1,597 -
Depreciation and amortization 11,164 23,730
Provision for bad debts 153 955
Provision for deferred income taxes 2,017 5,570
Gain on sale of property and equipment (533) -
Non-cash compensation 2,036 2,293
Other (2,686) (876)
Changes in assets and liabilities-
Accounts receivable (15,510) (10,247)
Deferred barter costs (1,105) (3,734)
Prepaid expenses and other current assets 1,249 (6,046)
Other assets 2,466 (141)
Accounts payable and accrued liabilities (2,698) 15,331
Deferred revenue (1,159) 3,507
Other liabilities 10,336 (25,667)
--------- ---------
Net cash provided by operating
activities 11,679 6,132
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (16,503) (20,831)
Proceeds from sale of
property and equipment 607 -
Deposits on acquisitions and other (9,000) (17,500)
Acquisition of WQCD-FM (128,449) -
Acquisition of SF Broadcasting (287,293) -
Acquisition of Country Sampler - (18,454)
--------- ---------
Net cash used in investing activities (440,638) (56,785)
-------- ---------
</TABLE>
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<PAGE> 8
<TABLE>
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (396,525) (48,500)
Proceeds from long-term debt 655,652 90,500
Proceeds from issuance of Class A
common stock, net of transaction costs 182,640 -
Purchase of interest rate cap agreements
and other debt related costs (8,912) -
Proceeds from exercise of stock options 3,081 5,597
--------- --------
Net cash provided by financing activities 435,936 47,597
--------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 6,977 (3,056)
CASH AND CASH EQUIVALENTS:
Beginning of period 5,785 6,117
--------- --------
End of period $ 12,762 $ 3,061
========= ========
SUPPLEMENTAL DISCLOSURES:
Cash paid for-
Interest $ 10,971 $ 12,642
Income taxes 286 5,181
ACQUISITION OF WQCD-FM:
Fair value of assets acquired $ 203,813
Cash paid 128,449
---------
Liabilities assumed $ 75,364
=========
ACQUISITION OF SF BROADCASTING:
Fair value of asset acquired $ 338,790
Cash paid 287,293
Note payable 25,000
---------
Liabilities assumed $ 26,497
=========
ACQUISITION OF COUNTRY SAMPLER:
Fair value of assets acquired $ 25,608
Cash paid 18,454
--------
Liabilities assumed $ 7,154
========
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-8-
<PAGE> 9
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
August 31, 1999
(Unaudited)
Note 1. General
Pursuant to the rules and regulations of the Securities and Exchange
Commission, the condensed consolidated interim financial statements included
herein have been prepared, without audit, by Emmis Communications Corporation
and Subsidiaries ("Emmis" or the "Company"). As permitted under the applicable
rules and regulations of the Securities and Exchange Commission, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations; however, Emmis
believes that the disclosures are adequate to make the information presented not
misleading. The condensed consolidated financial statements included herein
should be read in conjunction with the consolidated financial statements and the
notes thereto included in the Company's Annual Report filed on Form 10-K for the
year ended February 28, 1999. On an interim basis, the Company defers major
advertising campaigns for which future benefits can be demonstrated. These costs
are amortized over the shorter of the estimated period benefited or the
remainder of the fiscal year.
In the opinion of the registrant, the accompanying condensed consolidated
interim financial statements contain all material adjustments (consisting only
of normal recurring adjustments), necessary to present fairly the consolidated
financial position of Emmis at August 31, 1999 and the results of its operations
for the three and six months ended August 31, 1998 and 1999 and its cash flows
for the six months ended August 31, 1998 and 1999.
The Company's results are subject to seasonal fluctuations. Therefore,
results shown on an interim basis are not necessarily indicative of results for
a full year.
Note 2. Significant Events
Country Sampler Acquisition
On April 1, 1999, the Company completed its acquisition of substantially
all of the assets of Country Sampler, Inc.( the "Country Sampler Acquisition")
for approximately $21.0 million plus assumed liabilities of approximately $4.7
million. The purchase price was payable $18.5 million in cash at closing, which
was financed through
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<PAGE> 10
additional borrowings under the Credit Facility, $2.0 million payable under a
contract with the principal shareholder through April 2003, and $.5 million
payable by October 1999. The acquisition was accounted for as a purchase. In the
preliminary purchase price allocation the excess of the purchase price over the
estimated fair value of identifiable assets was $17.7 million and is being
amortized over 15 years.
WKCF-TV: Orlando, FL
Effective June 3, 1999, the Company entered into a definitive agreement to
purchase substantially all of the assets of television station WKCF in Orlando,
Florida, for approximately $191.5 million in cash payable at closing, including
an escrow deposit of $12.5 million made in June 1999. This acquisition will be
accounted for as a purchase and will be financed through additional debt or
equity securities, depending on market conditions and other factors. Emmis
expects to close on this acquisition in its fiscal quarter ending November 30,
1999.
WKCF is an affiliate of the WB Television Network. As part of this
transaction, the Company has entered into an agreement with the WB Television
Network which (among other things) extends the existing network affiliation
agreement through December 2009.
St. Louis Acquisition
In June 1999, the Company entered into an agreement with a
former executive of Sinclair Broadcasting Group, Inc. ("Sinclair") to purchase
the right to acquire the assets of certain broadcast properties in St. Louis,
Missouri (the "St. Louis Acquisition"). The right allows the Company to
purchase, at fair market value, six radio stations (five FM and one AM) and one
ABC-affiliated television station from Sinclair.
Under FCC regulations, Emmis can own no more than five FM and three AM
stations in the St. Louis market. As Emmis already owns three FM stations in the
St. Louis market, concurrent with the consummation of the St. Louis Acquisition,
Emmis must divest three FM stations. Management intends to divest the stations
with the three weakest transmitting signals.
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<PAGE> 11
The Company and Sinclair are currently in the process of determining the
purchase price and other material terms of the acquisition in accordance with
the option agreement. In addition, the acquisition will be subject to approval
by both the Federal Communications Commission and the Department of Justice. The
St. Louis Acquisition will be accounted for as a purchase and will be financed
through additional debt or equity securities, depending on market conditions and
other factors.
Other
At August 31, 1999, five of the Company's six television stations were Fox
affiliates. In July 1999, the Fox Network entered into an agreement with its
affiliates which requires the affiliates to buy prime time spots from the
network. The Company's agreement with the Fox Network commenced on July 15, 1999
and terminates on June 30, 2002. As a result of this agreement, the Company
expects its broadcast cash flow will decrease by approximately $.6 million
annually.
On July 17, 1999, in accordance with the Company's Credit Facility, total
borrowing capacity under the Credit Facility decreased $100.0 million to $650.0
million.
Note 3. Pro Forma Acquisitions
Unaudited pro forma summary information is presented below for the three
and six months ended August 31, 1998 and 1999, assuming the June 1998 WQCD
Acquisition, the July 1998 SF Acquisition, the October 1998 Wabash Acquisition,
the April 1999 Country Sampler Acquisition, and the use of proceeds from the
June 1998 Equity Offering, the July 1998 Credit Facility, and the February 1999
Senior Subordinated Notes Offering all had occurred on the first day of the pro
forma periods presented below.
Preparation of the pro forma summary information was based upon assumptions
deemed appropriate by the Company. The pro forma summary information presented
below is not necessarily indicative of the results that actually would have
occurred if the transactions indicated above had been consummated at the
beginning of the periods presented, and is not intended to be a projection of
future results.
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<PAGE> 12
<TABLE>
<CAPTION>
Three Months Six Months
Ended August 31, Ended August 31,
(Pro Forma) (Historical) (Pro Forma)
------------------------ -----------------------
(Dollars in thousands, except per share data)
1998 1999 1998 1999
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues $ 71,617 $ 81,529 $ 138,918 $ 155,865
======== ======== ========= =========
Broadcast/publishing
cash flow $ 27,117 $ 33,870 $ 49,930 $ 61,336
======== ======== ========= =========
Net Income $ 580 $ 1,216 $ 19 $ 1,527
======== ======== ========= =========
Basic net income $ 0.04 $ 0.08 $ - $ 0.10
======== ======== ========= =========
Diluted net income $ 0.04 $ 0.07 $ - $ 0.09
======== ======== ========= =========
</TABLE>
Weighted average shares outstanding:
<TABLE>
<S> <C> <C> <C> <C>
Basic 15,662,702 15,929,428 15,630,592 15,856,467
========== ========== ========== ==========
Diluted 16,038,107 16,438,098 16,037,310 16,305,944
========== ========== ========== ==========
</TABLE>
Note 4. Basic and Diluted Net Income Per Share
Basic net income per share is computed by dividing net income available to
common shareholders by the weighted-average number of common shares outstanding
for the period. Diluted net income per share reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted. Potentially dilutive securities at August 31, 1998 and
1999 consisted solely of stock options. Thus, for the three and six months ended
August 31, 1998 and 1999, the difference between the weighted-average shares
outstanding used to compute basic and diluted EPS is attributable to dilution
caused by stock options.
Note 5. Comprehensive Income
Comprehensive income was comprised of the following for the three and six
months ended August 31, 1998 and 1999 (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended August 31, Ended August 31,
--------------------- ------------------------
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 2,564 $ 1,216 $ 4,352 $ 1,457
Translation adjustment (475) 119 (646) (856)
-------- -------- -------- --------
Total comprehensive
income $ 2,089 $ 1,335 $ 3,706 $ 601
======== ======== ======== ========
</TABLE>
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<PAGE> 13
Note 6. Segment Information
The Company's operations are aligned into three business segments: Radio,
Television and Publishing. These business segments are consistent with the
Company's management of these businesses and its financial reporting structure.
The Radio and Television segments derive revenue from the sale of
commercial broadcast inventory. The Publishing segment derives revenue from
subscriptions and the sale of print advertising inventory.
Corporate and Other represents the results of insignificant operations and
income and expense not allocated to reportable segments.
The Company's segments operate primarily in the United States with one
radio station located in Hungary. Total revenues of this radio station for the
three and six months ended August 31, 1999 were $2.1 million and $3.2 million,
respectively. Revenues during the three and six months ended August 31, 1998
were $0.6 million and $0.7 million, respectively. This station's total assets as
of August 31, 1998 and 1999 were $23.1 million and $19.5 million, respectively.
The Company evaluates performance of its operating entities based on
broadcast cash flow (BCF) and publishing cash flow (PCF). Management believes
that BCF and PCF are useful because they provide a meaningful comparison of
operating performance between companies in the industry and serve as an
indicator of the market value of a group of stations or publishing entities. BCF
and PCF are generally recognized by the broadcast and publishing industries as a
measure of performance and are used by analysts who report on the performance of
broadcasting and publishing groups. BCF and PCF do not take into account Emmis'
debt service requirements and other commitments and, accordingly, BCF and PCF
are not necessarily indicative of amounts that may be available for dividends,
reinvestment in Emmis' business or other discretionary uses.
BCF and PCF are not measures of liquidity or of performance in accordance
with generally accepted accounting principles, and should be viewed as a
supplement to and not a substitute for our results of operations presented on
the basis of generally accepted accounting principles. Moreover, BCF and PCF are
not standardized measures and may be calculated in a number of ways. Emmis
defines BCF and PCF as revenues net of agency commissions and operating
expenses. The primary source of broadcast advertising revenues is the sale of
advertising time to local and national advertisers. Publishing entities derive
revenue from subscriptions and sale of print advertising inventory. The most
significant broadcast operating expenses are employee salaries and commissions,
costs associated with programming, advertising and promotion, and station
general and administrative costs. Significant publishing operating expenses are
employee salaries and commissions, costs associated with producing a magazine,
and general and administrative costs.
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<PAGE> 14
The accounting policies as described in the summary of significant
accounting policies included in the Company's Annual Report filed on Form 10-K
are applied consistently across segments.
<TABLE>
<CAPTION>
THREE MONTHS ENDED CORPORATE
AUGUST 31, 1999 RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
- ---------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues $ 50,777 $ 16,992 $ 13,293 $ 467 $ 81,529
Operating expenses 23,731 11,731 11,871 326 47,659
-------- -------- -------- ----- --------
Broadcast/publishing
cash flow 27,046 5,261 1,422 141 33,870
International business
development expenses - - - 367 367
Corporate expenses - - - 3,478 3,478
Depreciation and
amortization 4,118 3,605 1,749 864 10,336
Non-cash compensation - - - 1,648 1,648
-------- -------- -------- ----- --------
Operating income (loss) $ 22,928 $ 1,656 $ (327) $(6,216) $ 18,041
======== ======== ======== ======== ==========
Total assets $468,079 $454,088 $ 68,327 $ 89,207 $1,079,701
======== ======== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED CORPORATE
AUGUST 31, 1999 RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
- ---------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues $ 92,742 $ 35,046 $ 25,210 $ 883 $ 153,881
Operating expenses 46,766 23,737 21,973 646 93,122
-------- -------- -------- ----- --------
Broadcast/publishing
cash flow 45,976 11,309 3,237 237 60,759
International business
development expenses - - - 747 747
Corporate expenses - - - 6,684 6,684
Depreciation and
amortization 8,129 6,985 3,263 1,668 20,045
Non-cash compensation - - - 2,293 2,293
-------- -------- -------- ----- --------
Operating income (loss) $ 37,847 $ 4,324 $ (26) $(11,155) $ 30,990
======== ======== ======== ======= ==========
Total assets $468,079 $454,088 $ 68,327 $ 89,207 $1,079,701
======== ======== ======== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED CORPORATE
AUGUST 31, 1998 RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
--------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues $ 42,328 $ 5,796 $ 9,418 $ 332 $ 57,874
Operating expenses 20,807 3,846 8,198 212 33,063
-------- -------- -------- ----- ----------
Broadcast/publishing
cash flow 21,521 1,950 1,220 120 24,811
International business
development expenses - - - 354 354
Corporate expenses - - - 1,969 1,969
Time brokerage fee 95 - - - 95
Depreciation and
amortization 3,579 1,332 1,555 39 6,505
Non-cash compensation - - - 1,081 1,081
-------- -------- --------- ----- -----------
Operating income (loss) $ 17,847 $ 618 $ (335) $ (3,323) $ 14,807
======== ======== ========= ======== ===========
Total assets $450,848 $345,949 $ 45,731 $ 68,299 $ 910,827
======== ======== ========= ======== ===========
</TABLE>
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<PAGE> 15
<TABLE>
<CAPTION>
SIX MONTHS ENDED CORPORATE
AUGUST 31, 1998 RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(Dollars in thousands)
Net revenues $ 77,757 $ 5,796 $ 18,258 $ 682 $ 102,493
Operating expenses 40,875 3,846 15,698 439 60,858
-------- -------- -------- -------- ---------
Broadcast/publishing
cash flow 36,882 1,950 2,560 243 41,635
International business
development expenses - - - 561 561
Corporate expenses - - - 3,926 3,926
Time brokerage fee 2,220 - - - 2,220
Depreciation and
amortization 5,955 1,332 2,560 65 9,912
Non-cash compensation - - - 2,036 2,036
-------- -------- -------- -------- ---------
Operating income (loss) $ 28,707 $ 618 $ - $ (6,345) $ 22,980
======== ======== ======== ======== =========
Total assets $450,848 $345,949 $ 45,731 $ 68,299 $ 910,827
======== ======== ======== ======== =========
</TABLE>
Note 7. Financial Information for Subsidiary Guarantors and Subsidiary
Non-Guarantor
Emmis conducts a significant portion of its business through subsidiaries.
The Senior Subordinated Notes are fully and unconditionally guaranteed, jointly
and severally, by certain direct and indirect subsidiaries (the "Subsidiary
Guarantors"). One of Emmis' subsidiaries does not guarantee the Senior
Subordinated Notes (the "Subsidiary Non-Guarantor"). The claims of creditors of
the Subsidiary Non-Guarantor have priority over the rights of Emmis to receive
dividends or distributions from such subsidiary.
Presented below is condensed consolidating financial information for the
Parent Company Only, the Subsidiary Guarantors and the Subsidiary Non-Guarantor
as of February 28, 1999 and August 31, 1999 and for the three and six months
ended August 31, 1998 and 1999.
The equity method has been used by Emmis with respect to investments in
subsidiaries. Separate financial statements for Subsidiary Guarantors are not
presented based on management's determination that they do not provide
additional information that is material to investors.
-15-
<PAGE> 16
Emmis Communications Corporation
Condensed Consolidating Balance Sheet
As of August 31, 1999
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
ELIMINATIONS
PARENT AND
COMPANY SUBSIDIARY SUBSIDIARY CONSOLIDATING
ONLY GUARANTORS NON-GUARANTOR ENTRIES CONSOLIDATED
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ - $ 2,516 $ 545 $ - $ 3,061
Accounts receivable, net - 61,751 1,201 - 62,952
Deferred barter costs - 6,862 - - 6,862
Prepaid expenses and other 3,420 10,974 2,233 - 16,627
----------- ----------- ----------- ----------- -----------
Total current assets 3,420 82,103 3,979 - 89,502
Property and equipment, net 39,137 77,431 807 - 117,375
Intangible assets, net 461 806,865 13,463 - 820,789
Investment in affiliates 903,744 - - (903,744) -
Other assets, net 48,313 7,032 1,205 (4,515) 52,035
----------- ----------- ----------- ----------- -----------
Total assets $ 995,075 $ 973,431 $ 19,454 $ (908,259) $ 1,079,701
=========== =========== =========== =========== ===========
CURRENT LIABILITIES:
Current portion of other
long-term debt $ 34 $ 17 $ 2,237 $ (1,453) $ 835
Accounts payable 6,691 12,589 451 - 19,731
Accrued salaries and
commissions 141 4,589 - - 4,730
Accrued interest 18,033 - - - 18,033
Deferred revenue - 14,614 - - 14,614
Current portion of TV program
rights payable - 9,564 - - 9,564
Income taxes payable 6,953 177 - - 7,130
Other 324 1,315 918 - 2,557
----------- ----------- ----------- ----------- -----------
Total current liabilities 32,176 42,865 3,606 (1,453) 77,194
CREDIT FACILITY AND SENIOR
SUBORDINATED NOTES 619,000 - - - 619,000
TV PROGRAM RIGHTS PAYABLE, NET
OF CURRENT PORTION - 20,686 - - 20,686
OTHER LONG-TERM DEBT, NET OF
CURRENT PORTION 43 791 19,816 (3,062) 17,588
OTHER NONCURRENT LIABILITIES 2,496 2,843 - - 5,339
DEFERRED INCOME TAXES 94,807 38 - - 94,845
----------- ----------- ----------- ----------- -----------
Total liabilities 748,522 67,223 23,422 (4,515) 834,652
=========== =========== =========== =========== ===========
Shareholders' Equity
Class A common stock 134 - - - 134
Class B common stock 26 - - - 26
Additional paid-in capital 269,241 - 4,393 (4,393) 269,241
Subsidiary investment - 658,143 2,388 (660,531) -
Retained earnings /
(accumulated deficit) (22,848) 248,065 (9,245) (238,820) (22,848)
Accumulated other
comprehensive loss - - (1,504) - (1,504)
----------- ----------- ----------- ----------- -----------
Total shareholders' equity 246,553 906,208 (3,968) (903,744) 245,049
----------- ----------- ----------- ----------- -----------
Total liabilities and
shareholders' equity $ 995,075 $ 973,431 $ 19,454 $ (908,259) $ 1,079,701
=========== =========== =========== =========== ===========
</TABLE>
-16-
<PAGE> 17
Emmis Communications Corporation
Condensed Consolidating Balance Sheet
As of February 28, 1999
(Note 1, dollars in thousands)
<TABLE>
<CAPTION>
ELIMINATIONS
PARENT AND
COMPANY SUBSIDIARY SUBSIDIARY CONSOLIDATING
ONLY GUARANTORS NON-GUARANTOR ENTRIES CONSOLIDATED
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,286 $ 3,146 $ 685 $ - $ 6,117
Accounts receivable, net - 50,436 1,043 - 51,479
Deferred barter costs - 3,128 - - 3,128
Prepaid expenses and other 5,720 4,566 72 - 10,358
----------- ----------- ----------- ----------- -----------
Total current assets 8,006 61,276 1,800 - 71,082
Property and equipment, net 33,769 71,342 949 - 106,060
Intangible assets, net 151 785,219 16,937 - 802,307
Investment in affiliates 856,701 - - (856,701) -
Other assets, net 31,866 7,648 702 (4,834) 35,382
----------- ----------- ----------- ----------- -----------
Total assets $ 930,493 $ 925,485 $ 20,388 $ (861,535) $ 1,014,831
=========== =========== =========== =========== ===========
CURRENT LIABILITIES:
Current portion of other
long-term debt $ 34 $ 16 $ 2,239 $ (1,454) $ 835
Accounts payable 7,527 7,739 369 - 15,635
Accrued salaries and
commissions 1,262 2,719 564 - 4,545
Accrued interest 6,222 1 - - 6,223
Deferred revenue - 7,238 - - 7,238
Current portion of TV program
rights payable - 9,471 - - 9,471
Income taxes payable 11,790 267 - - 12,057
Other 146 13,683 - - 13,829
----------- ----------- ----------- ----------- -----------
Total current liabilities 26,981 41,134 3,172 (1,454) 69,833
CREDIT FACILITY AND SENIOR
SUBORDINATED NOTES 577,000 - - - 577,000
TV PROGRAM RIGHTS PAYABLE, NET
OF CURRENT PORTION - 25,161 - - 25,161
OTHER LONG-TERM DEBT, NET OF
CURRENT PORTION 2,543 (45) 19,687 (3,380) 18,805
OTHER NONCURRENT LIABILITIES (4) 3,470 - - 3,466
DEFERRED INCOME TAXES 87,776 (2,759) - - 85,017
----------- ----------- ----------- ----------- -----------
Total liabilities 694,296 66,961 22,859 (4,834) 779,282
----------- ----------- ----------- ----------- -----------
Shareholders' Equity
Class A common stock 132 - - - 132
Class B common stock 26 - - - 26
Additional paid-in capital 260,344 - 4,297 (4,297) 260,344
Subsidiary investment - 637,223 - (637,223) -
Retained earnings /
(accumulated deficit) (24,305) 221,301 (6,120) (215,181) (24,305)
Accumulated other
comprehensive loss - - (648) - (648)
----------- ----------- ----------- ----------- -----------
Total shareholders' equity 236,197 858,524 (2,471) (856,701) 235,549
----------- ----------- ----------- ----------- -----------
Total liabilities and
shareholders' equity $ 930,493 $ 925,485 $ 20,388 $ (861,535) $ 1,014,831
=========== =========== =========== =========== ===========
</TABLE>
-17-
<PAGE> 18
Emmis Communications Corporation
Condensed Consolidating Statement of Operations
For the Three Months Ended August 31, 1999
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTOR ENTRIES CONSOLIDATED
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET REVENUES $ 467 $ 78,981 $ 2,081 $ - $ 81,529
Operating expenses 326 45,824 1,509 - 47,659
International business - 367 - - 367
development expenses
Corporate expenses 3,478 - - - 3,478
Depreciation and amortization 864 8,772 700 - 10,336
Non-cash compensation 1,236 412 - - 1,648
-------- -------- -------- -------- --------
OPERATING INCOME (5,437) 23,606 (128) - 18,041
-------- -------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense (13,627) 124 (626) 193 (13,936)
Other income (expense), net (1) 208 (69) 273 411
-------- -------- -------- -------- --------
Total other income (expense) (13,628) 332 (695) 466 (13,525)
-------- -------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES (19,065) 23,938 (823) 466 4,516
PROVISION (BENEFIT) FOR INCOME
TAXES (5,610) 8,857 53 - 3,300
-------- -------- -------- -------- --------
(13,455) 15,081 (876) 466 1,216
EQUITY IN EARNINGS (LOSS) OF
SUBSIDIARIES 14,671 - - (14,671) -
-------- -------- -------- -------- --------
NET INCOME (LOSS) $ 1,216 $ 15,081 $ (876) $(14,205) $ 1,216
======== ======== ======== ======== ========
</TABLE>
-18-
<PAGE> 19
Emmis Communications Corporation
Condensed Consolidating Statement of Operations
For the Six Months Ended August 31, 1999
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTOR ENTRIES CONSOLIDATED
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET REVENUES $ 883 $ 149,824 $ 3,174 $ - $ 153,881
Operating expenses 646 89,783 2,693 - 93,122
International business - 747 - - 747
development expenses
Corporate expenses 6,684 - - - 6,684
Depreciation and amortization 1,668 16,927 1,450 - 20,045
Non-cash compensation 1,720 573 - - 2,293
--------- --------- --------- --------- ---------
OPERATING INCOME (9,835) 41,794 (969) - 30,990
--------- --------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense (26,007) 265 (1,806) 383 (27,165)
Other income (expense), net 16 424 (350) 1,142 1,232
--------- --------- --------- --------- ---------
Total other income (expense) (25,991) 689 (2,156) 1,525 (25,933)
--------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (35,826) 42,483 (3,125) 1,525 5,057
PROVISION (BENEFIT) FOR INCOME
TAXES (12,119) 15,719 - - 3,600
--------- --------- --------- --------- ---------
(23,707) 26,764 (3,125) 1,525 1,457
EQUITY IN EARNINGS (LOSS) OF
SUBSIDIARIES 25,164 - - (25,164) -
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 1,457 $ 26,764 $ (3,125) $ (23,639) $ 1,457
========= ========= ========= ========= =========
</TABLE>
-19-
<PAGE> 20
Emmis Communications Corporation
Condensed Consolidating Statement of Operations
For the Three Months Ended August 31, 1998
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTOR ENTRIES CONSOLIDATED
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET REVENUES $ 332 $ 56,901 $ 641 $ - $ 57,874
Operating expenses 212 31,521 1,330 - 33,063
International business
development expenses - 354 - - 354
Corporate expenses 1,969 - - - 1,969
Time brokerage fees - 95 - - 95
Depreciation and amortization 37 5,628 840 - 6,505
Non-cash compensation 913 168 - - 1,081
-------- -------- -------- -------- --------
OPERATING INCOME (2,799) 19,135 (1,529) - 14,807
-------- -------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense (6,487) - (914) 280 (7,121)
Other income (expense), net 455 438 198 588 1,679
-------- -------- -------- -------- --------
Total other income (expense) (6,032) 438 (716) 868 (5,442)
-------- -------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (8,831) 19,573 (2,245) 868 9,365
PROVISION (BENEFIT) FOR INCOME TAXES (2,091) 7,242 53 - 5,204
-------- -------- -------- -------- --------
NET INCOME BEFORE EXTRAORDINARY
ITEM (6,740) 12,331 (2,298) 868 4,161
-------- -------- -------- -------- --------
EXTRAORDINARY ITEM, NET OF TAX (1,597) - - - (1,597)
EQUITY IN EARNINGS (LOSS) OF
SUBSIDIARIES 10,901 - - (10,901) -
-------- -------- -------- -------- --------
NET INCOME (LOSS) $ 2,564 $ 12,331 $ (2,298) $(10,033) $ 2,564
======== ======== ======== ======== ========
</TABLE>
-20-
<PAGE> 21
Emmis Communications Corporation
Condensed Consolidating Statement of Operations
For the Six Months Ended August 31, 1998
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTOR ENTRIES CONSOLIDATED
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET REVENUES $ 682 $ 101,135 $ 676 $ - $ 102,493
Operating expenses 439 58,552 1,867 - 60,858
International business - 561 - - 561
development expenses
Corporate expenses 3,926 - - - 3,926
Time brokerage fees - 2,220 - - 2,220
Depreciation and amortization 65 8,571 1,276 - 9,912
Non-cash compensation 1,629 407 - - 2,036
--------- --------- ---------- --------- ---------
OPERATING INCOME (5,377) 30,824 (2,467) - 22,980
--------- --------- ---------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense (11,270) (6) (1,913) 560 (12,629)
Other income (expense), net 473 1,264 (54) 1,315 2,998
--------- --------- ---------- --------- ---------
Total other income (expense) (10,797) 1,258 (1,967) 1,875 (9,631)
--------- --------- ---------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (16,174) 32,082 (4,434) 1,875 13,349
PROVISION (BENEFIT) FOR INCOME TAXES (4,470) 11,870 - - 7,400
--------- --------- ---------- --------- ---------
NET INCOME BEFORE EXTRAORDINARY
ITEM (11,704) 20,212 (4,434) 1,875 5,949
--------- --------- ---------- --------- ---------
EXTRAORDINARY ITEM, NET OF TAX (1,597) - - - (1,597)
EQUITY IN EARNINGS (LOSS) OF
SUBSIDIARIES 17,653 - - (17,653) -
--------- --------- ---------- --------- ---------
NET INCOME (LOSS) $ 4,352 $ 20,212 $ (4,434) $ (15,778) $ 4,352
========= ========= ========= ========= =========
</TABLE>
-21-
<PAGE> 22
Emmis Communications Corporation
Condensed Consolidating Statement of Cash Flows
For the Six Months Ended August 31, 1999
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTOR ENTRIES CONSOLIDATED
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 1,457 $ 26,764 $ (3,125) $(23,639) $ 1,457
Adjustments to reconcile net
income (loss) to net cash
provided (used) by operating
activities -
Depreciation and amortization 2,845 19,435 1,450 - 23,730
Provision for bad debts - 955 - - 955
Provision for
deferred income taxes 5,570 - - - 5,570
Non-cash compensation 1,720 573 - - 2,293
Equity in earnings of
subsidiaries (25,164) - - 25,164 -
Other 1,505 - (856) (1,525) (876)
Changes in assets and
liabilities -
Accounts receivable - (10,089) (158) - (10,247)
Deferred barter costs - (3,734) - - (3,734)
Prepaid expenses and other
current assets 2,300 (6,185) (2,161) - (6,046)
Other assets (1,649) 2,011 (503) - (141)
Accounts payable and accrued
liabilities 9,854 5,959 (482) - 15,331
Deferred revenue - 3,507 - - 3,507
Other liabilities (4,659) (22,055) 1,047 - (25,667)
-------- -------- ------- --------- --------
Net cash provided (used) by
operating activities (6,221) 17,141 (4,788) - 6,132
-------- -------- ------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment (7,007) (13,167) (657) - (20,831)
Deposits on acquisitions
and other (17,500) - - - (17,500)
Acquisition of Country Sampler - (18,454) - - (18,454)
-------- -------- ------- --------- --------
Net cash used in investing
activities (24,507) (31,621) (657) - (56,785)
-------- -------- ------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payments on long-term debt (48,500) - - - (48,500)
Proceeds from long-term debt 90,500 - - - 90,500
Intercompany transactions (19,155) 13,850 5,305 - -
Proceeds from exercise of stock
options 5,597 - - - 5,597
-------- -------- ------- --------- --------
Net cash provided by
financing activities 28,442 13,850 5,305 - 47,597
-------- -------- ------- --------- --------
DECREASE IN CASH AND
CASH EQUIVALENTS (2,286) (630) (140) - (3,056)
CASH AND CASH EQUIVALENTS:
Beginning of period 2,286 3,146 685 - 6,117
-------- -------- ------- --------- --------
End of period $ - $ 2,516 $ 545 $ - $ 3,061
======== ======== ======== ======== ========
</TABLE>
-22-
<PAGE> 23
Emmis Communications Corporation
Condensed Consolidating Statement of Cash Flows
For the Six Months Ended August 31, 1998
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTOR ENTRIES CONSOLIDATED
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 4,352 $ 20,212 $ (4,434) $ (15,778) $ 4,352
Adjustments to reconcile net
income (loss) to net cash
provided (used) by operating
activities -
Extraordinary item 1,597 - - - 1,597
Depreciation and amortization 669 9,219 1,276 - 11,164
Provision for bad debts - 153 - - 153
Provision for deferred income
taxes 2,017 - - - 2,017
Gain on Sale of property and
equipment - (533) - - (533)
Non-cash compensation 1,629 407 - - 2,036
Equity in earnings of
subsidiaries (17,653) - - 17,653 -
Other - - (811) (1,875) (2,686)
Changes in assets and
liabilities -
Accounts receivable 345 (16,791) 936 - (15,510)
Deferred barter costs - (1,105) - - (1,105)
Prepaid expenses and other
current assets (3,143) 4,585 (193) - 1,249
Other assets (289) 2,446 309 - 2,466
Accounts payable and accrued
liabilities (3,336) 871 (233) - (2,698)
Deferred revenue - (1,159) - - (1,159)
Other liabilities 7,834 1,624 878 - 10,336
-------- -------- ------- --------- --------
Net cash provided (used) by
operating activities (5,978) 19,929 (2,272) - 11,679
-------- -------- ------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment (13,217) (2,818) (468) - (16,503)
Deposit on acquisition (9,000) - - - (9,000)
Acquisition of WQCD-FM - (128,449) - - (128,449)
Acquisition of SF Broadcasting - (287,293) - - (287,293)
Other - 607 - - 607
-------- -------- ------- --------- --------
Net cash used by investing
activities (22,217) (417,953) (468) - (440,638)
-------- -------- ------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payments on long-term debt (396,525) - - - (396,525)
Proceeds from long-term debt 655,652 - - - 655,652
Purchase of interest rate cap
agreements and other debt
related costs (8,912) - - - (8,912)
Proceeds from issuance of
Class A common stock, net of
transaction costs 182,640 - - - 182,640
Proceeds from exercise of
stock options 3,081 - - - 3,081
Intercompany (401,564) 400,661 903 - -
-------- -------- ------- --------- --------
Net cash provided by
financing activities 34,372 400,661 903 - 435,936
-------- -------- ------- --------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 6,177 2,637 (1,837) - 6,977
CASH AND CASH EQUIVALENTS:
Beginning of period 623 243 4,919 - 5,785
-------- -------- ------- --------- --------
End of period $ 6,800 $ 2,880 $ 3,082 $ - $ 12,762
========= ========= ========= ========= =========
</TABLE>
-23-
<PAGE> 24
Note 8. Subsequent Events
In September 1999, the Company entered into employment agreements with two
executives that extend through February 28, 2001. The agreements specify base
salary and maximum annual cash bonuses as well as provide for stock and stock
option grants based on certain criteria.
Note 9. Reclassifications
Certain reclassifications have been made to the August 31, 1998 and
February 28, 1999 financial statements to be consistent with the August 31, 1999
presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Note: Certain statements in this report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such risks may include decreased advertising
expenditures, competitive nature of broadcasting, substantial leverage, Federal
regulation and future capital cost of digital conversion, among others.
GENERAL
The Company evaluates performance of its operating entities based on
broadcast cash flow (BCF) and publishing cash flow (PCF). Management believes
that BCF and PCF are useful because they provide a meaningful comparison of
operating performance between companies in the industry and serve as an
indicator of the market value of a group of stations or publishing entities. BCF
and PCF are generally recognized by the broadcast and publishing industries as a
measure of performance and are used by analysts who report on the performance of
broadcasting and publishing groups. BCF and PCF do not take into account Emmis'
debt service requirements and other commitments and, accordingly, BCF and PCF
are not necessarily indicative of amounts that may be available for dividends,
reinvestment in Emmis' business or other discretionary uses.
BCF and PCF are not measures of liquidity or of performance in accordance
with generally accepted accounting principles, and should be viewed as a
supplement to and not a substitute for our results of operations presented on
the basis of generally accepted accounting
-24-
<PAGE> 25
principles. Moreover, BCF and PCF are not standardized measures and may be
calculated in a number of ways. Emmis defines BCF and PCF as revenues net of
agency commissions and operating expenses. The primary source of broadcast
advertising revenues is the sale of advertising time to local and national
advertisers. Publishing entities derive revenue from subscriptions and sale of
print advertising inventory. The most significant broadcast operating expenses
are employee salaries and commissions, costs associated with programming,
advertising and promotion, and station general and administrative costs.
Significant publishing operating expenses are employee salaries and commissions,
costs associated with producing a magazine, and general and administrative
costs.
The Company's results are subject to seasonal fluctuations. Therefore,
results shown on a quarterly basis are not necessarily indicative of results for
a full year.
RESULTS OF OPERATIONS THREE AND SIX MONTHS ENDED AUGUST 31, 1999 COMPARED TO
AUGUST 31, 1998
Net revenues for the three months ended August 31, 1999 were $81.5 million
compared to $57.9 million for the same period of the prior year, an increase of
$23.6 million or 40.9%. Net revenues for the six months ended August 31, 1999
were $153.9 million compared to $102.5 million for the same period of the prior
year, an increase of $51.4 million or 50.1%. The increase in net revenues for
the three and six-month periods ended August 31, 1999 is primarily the result of
the SF and Wabash Acquisitions (the "TV Acquisitions")($11.8 million and $25.4
million, respectively) and Country Sampler Acquisition ($3.6 million and $5.6
million, respectively). Excluding these transactions, net revenues for the three
months ended August 31, 1999 would have increased $8.2 million or 15.7% and net
revenues for the six months ended August 31, 1999 would have increased $20.4
million or 21.1%. This increase is principally due to the ability to realize
higher advertising rates at certain 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.
Operating expenses for the three months ended August 31, 1999 were $47.7
million compared to $33.1 million for the same period of the prior year, an
increase of $14.6 million or 44.1%. Operating expenses for the six months ended
August 31, 1999 were $93.1 million compared to $60.9 million for the same period
of the prior year, an increase of $32.2 million or 53.0%. The increase in
operating expenses for the three and six-month periods ended August 31, 1999 is
primarily the result of the TV Acquisitions ($8.2 million and $17.5 million,
respectively) and Country Sampler Acquisition ($3.5 million and $4.7 million,
respectively). Excluding these transactions, operating expenses for the three
months ended August 31, 1999 would have increased $2.9 million or 10.2% and
operating expenses for the six months ended August 31, 1999 would have increased
$10.0 million or 17.7%. This increase is principally due to higher advertising
and promotional spending at
-25-
<PAGE> 26
certain of the Company's properties as well as an increase in sales related
costs.
Broadcast/publishing cash flow for the three months ended August 31, 1999
was $33.9 million compared to $24.8 million for the same period of the prior
year, an increase of $9.1 million or 36.5%. Broadcast/publishing cash flow for
the six months ended August 31, 1999 was $60.8 million compared to $41.6 million
for the same period of the prior year, an increase of $19.2 million or 45.9%.
The increase in broadcast/publishing cash flow for the three and six-month
periods ended August 31, 1999 is primarily the result of the TV Acquisitions
($3.6 million and $8.0 million, respectively) and Country Sampler Acquisition
($.2 million and $.8 million, respectively). Excluding these transactions,
broadcast/publishing cash flow for the three months ended August 31, 1999 would
have increased $5.3 million or 22.7% and broadcast/publishing cash flow for the
six months ended August 31, 1999 would have increased $10.4 million or 26.1%.
This increase is principally due to increased net revenues partially offset by
increased operating expenses as discussed above.
International business development expenses for the three months ended
August 31, 1999 and 1998 were $.4 million. International business development
expenses for the six months ended August 31, 1999 were $.7 million compared to
$.6 million for the same period of the prior year. These expenses reflect costs
associated with Emmis International Corporation. The purpose of this wholly
owned subsidiary is to identify, investigate and develop international broadcast
investments or other international business opportunities. Expenses consist
primarily of salaries, travel and various administrative costs.
Corporate expenses for the three months ended August 31, 1999 were $3.5
million compared to $2.0 million for the same period of the prior year, an
increase of $1.5 million or 76.6%. Corporate expenses for the six months ended
August 31, 1999 were $6.7 million compared to $3.9 million for the same period
of the prior year, an increase of $2.8 million or 70.2%. These increases are due
to an increase in the number of corporate employees in all departments as a
result of the growth of the Company.
EBITDA before certain adjustments is defined as broadcast/publishing cash
flow less corporate and international business development expenses. EBITDA
before certain adjustments for the three months ended August 31, 1999 was $30.0
million compared to $22.5 million for the same period of the prior year, an
increase of $7.5 million or 33.5%. EBITDA before certain adjustments for the six
months ended August 31, 1999 was $53.3 million compared to $37.1 million for the
same period of the prior year, an increase of $16.2 million or 43.6%. This
increase is principally due to an increase in broadcast/publishing cash flow
partially offset by an increase in corporate expenses.
Depreciation and amortization expense for the three months ended August 31,
1999 was $10.3 million compared to $6.5 million for the same period of the prior
year, an increase of $3.8 million or 58.9%.
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<PAGE> 27
Depreciation and amortization expense for the six months ended August 31, 1999
was $20.0 million compared to $9.9 million for the same period of the prior
year, an increase of $10.1 million or 102.2%. The increase in depreciation and
amortization expense for the three and six-month periods ended August 31, 1999
is primarily the result of the TV Acquisitions ($2.4 million and $5.1 million,
respectively), WQCD Acquisition ($.5 million and $1.8 million, respectively) and
Country Sampler Acquisition ($.6 million and $1.0 million, respectively).
Non-cash compensation expense for the three months ended August 31, 1999
was $1.6 million compared to $1.1 million for the same period of the prior year,
an increase of $.5 million or 52.5%. Non-cash compensation expense for the six
months ended August 31, 1999 was $2.3 million compared to $2.0 million for the
same period of the prior year, an increase of $.3 million or 12.6%. Non-cash
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 shares granted to certain executives under employment agreements
for which the fair market value of the shares at the date of grant was higher
than the fair market value of shares granted under previous employment
agreements.
Interest expense for the three months ended August 31, 1999 was $13.9
million compared to $7.1 million for the same period of the prior year, an
increase of $6.8 million or 95.7%. Interest expense for the six months ended
August 31, 1999 was $27.2 million compared to $12.6 million for the same period
of the prior year, an increase of $14.6 million or 115.1%. This increase
reflects higher outstanding debt due to the WQCD, SF, Wabash and Country Sampler
Acquisitions and an increase in interest rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash provided by operations
and availability under the Company's credit facility. At August 31, 1999, the
Company had cash and cash equivalents of $3.1 million and net working capital of
$12.3 million. At August 31, 1999 the Company had up to $331.0 million available
under its credit facility. The Company expects that cash flow from operating
activities will be sufficient to fund all debt service for debt existing at
August 31, 1999, working capital and capital expenditure requirements. In
addition, the Company also has access to public equity and debt markets.
Effective June 3, 1999, the Company entered into a definitive agreement to
purchase substantially all of the assets of television station WKCF in Orlando,
Florida, for approximately $191.5 million in cash payable at closing, including
an escrow deposit of $12.5 million made in June 1999. This acquisition will be
accounted for as a purchase and will be financed through additional debt or
equity securities, depending on market conditions and other factors. The FCC
approved the acquisition on September 27, 1999. The Company expects to close on
this acquisition in its fiscal quarter ending November 30, 1999.
-27-
<PAGE> 28
In June 1999, the Company entered into an agreement with a former executive
of Sinclair Broadcasting Group, Inc. ("Sinclair") to purchase his right to
acquire the assets of certain broadcast properties in St. Louis, Missouri (the
"St. Louis Acquisition"). The right allows the Company to purchase, at fair
market value, six radio stations (five FM and one AM) and one ABC-affiliated
television station from Sinclair. The Company and Sinclair are currently in the
process of determining the fair market value of the stations and the related
terms of a definitive purchase agreement. The St. Louis Acquisition will be
accounted for as a purchase and will be financed through additional debt or
equity securities, depending on market conditions and other factors.
The Company is in discussions regarding the potential acquisition of radio
broadcast properties in Argentina in two separate transactions and is pursuing
local minority-interest partners for these investments. The Company expects that
these acquisitions will have an aggregate purchase price of approximately $25
million and will be financed through additional debt or equity securities,
depending on market conditions and other factors.
The Company plans to file registration statements for a concurrent public
offering of the Company's Class A common stock and the issuance of Series A
cumulative convertible preferred stock. The net proceeds from the concurrent
offering are expected to be approximately $390 million based on current market
valuations. The Company intends to utilize the proceeds to fund the acquisition
of additional broadcast properties, acquisition related expenses and for general
corporate purposes. The Company intends to file these registration statements
during its fiscal quarter ended November 30, 1999.
At August 31, 1999, five of the Company's six television stations were Fox
affiliates. In July 1999, the Fox Network entered into an agreement with its
affiliates which requires the affiliates to buy prime time spots from the
network. The Company's agreement with the Fox Network commences on July 15, 1999
and terminates on June 30, 2002. As a result of this agreement, the Company
expects its broadcast cash flow will decrease by approximately $.6 million
annually.
Included in the Company's capital expenditures budget for the year ended
February 29, 2000 is approximately $16.3 million for the construction of new
operating facilities at KHON-TV in Hawaii. Capital expenditures incurred for the
six months ended August 31, 1999 were approximately $20.8 million, including
$14.5 million at KHON-TV.
As part of its business strategy, the Company continually evaluates
potential acquisitions of radio and television stations as well as publishing
properties. In connection with future acquisition opportunities, the Company may
incur additional debt or issue additional equity or debt securities depending on
market conditions and other factors.
YEAR 2000 COMPLIANCE
Emmis has completed its assessment phase of year 2000 compliance for
information technology, other equipment, including broadcast equipment, and
embedded technology. Certain technology and equipment is represented by its
vendors to be year 2000 compliant. Technology and equipment that is currently
not represented as year 2000 compliant will
-28-
<PAGE> 29
be upgraded or replaced, and tested prior to October 31, 1999. The ability of
third parties with whom the Company transacts business to adequately address
their year 2000 compliance issues is outside of the Company's control.
Therefore, there can be no assurance that the failure of such third parties to
adequately address their year 2000 compliance issues will not have a material
adverse effect on the Company's business, financial condition, cash flows and
results of operations.
Emmis has trained certain of its employees at each of its broadcast and
publishing properties regarding year 2000 issues and compliance and have made
them responsible for that property's year 2000 compliance. Emmis' information
systems department is currently auditing the year 2000 compliance of each
property. This audit includes:
(1) verifying that critical applications have been identified;
(2) testing of critical applications;
(3) ensuring that year 2000 compliance documentation exists;
(4) verifying that remediation is occurring as planned; and
(5) developing written contingency plans.
Steps 1 through 4 of the audit have been performed at substantially all of
the Company's broadcast and publishing properties. The audit should be complete
by October 31, 1999.
Emmis estimates that the cost of year 2000 remediation effort will be
approximately $1.0 million, which will be funded from current operations. Emmis
began tracking costs relating to year 2000 compliance in May 1999. As of August
31, 1999, these costs totaled $.5 million.
If certain broadcast equipment and information technology is not year 2000
compliant prior to January 1, 2000, the station or magazine using that equipment
and information technology might not be able to broadcast, publish or process
transactions. If this were to occur, Emmis could implement temporary solutions
or processes not involving the malfunctioning equipment. Contingency plans are
being documented in the event Emmis must implement such temporary solutions. If
Emmis implements temporary solutions and recognizes new issues, Emmis may adjust
the focus of the Company's efforts and costs to address its year 2000
compliance.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management monitors and evaluates changes in market conditions on a regular
basis. Based upon the most recent review, management has determined that there
have been no material developments affecting
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<PAGE> 30
market risk since the filing of the Company's Annual Report on Form 10-K for the
year ended February 28, 1999.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings arising in the ordinary
course of business. In the opinion of management of the Company, however, there
are no legal proceedings pending against the Company likely to have a material
adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of shareholders of the Company held on June 29, 1999,
the following matters received the following votes:
<TABLE>
<CAPTION>
MATTER DESCRIPTION VOTES FOR VOTES AGAINST ABSTAINING
- ------------------ --------- ------------- ----------
<S> <C> <C> <C>
Election of Directors:
Jeffrey H. Smulyan 36,741,019 - 73,189
Doyle L. Rose 36,740,900 - 73,308
Greg Nathanson 36,740,899 - 73,309
Gary L. Kaseff 36,740,901 - 73,307
Lawrence B. Sorrel 34,688,691 - 2,125,517
Frank V. Sica 36,699,501 - 114,707
Richard A. Leventhal* 11,364,641 - 73,387
Susan B. Bayh* 11,396,870 - 41,158
* Class A Director
Approval of 1999
Equity Incentive Plan 29,307,520 6,803,118 6,393
Approval of Appointment
of Auditors 36,812,723 824 661
</TABLE>
-30-
<PAGE> 31
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following exhibits are filed or incorporated by reference as a
part of this report:
3.1 Amended and Restated Articles of Incorporation of Emmis
Communications Corporation (Edgar version only)
3.2 Amended and Restated Bylaws of Emmis Communications Corporation
(Edgar version only)
10.1 Purchase Agreement dated June 3, 1999 by and between Press
Communications Corporation and the Company (Edgar version only)
10.2 Employment Agreement, effective March 1, 1999, between the
Company and Doyle L. Rose (Edgar version only)
10.3 Employment Agreement, effective March 1, 1999, between the
Company and Richard F. Cummings (Edgar version only)
15 Letter re: unaudited interim financial information
27 Financial data schedule (Edgar version only)
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the three months
ended August 31, 1999.
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<PAGE> 32
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EMMIS COMMUNICATIONS CORPORATION
Date: October 1, 1999 By: /s/ WALTER Z. BERGER
Walter Z. Berger
Executive Vice President
(Authorized Corporate
Officer), Chief Financial
Officer and Treasurer
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<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
EMMIS COMMUNICATIONS CORPORATION
(As amended through July 16, 1998)
The Amended and Restated Articles of Incorporation (the "Restated
Articles") of Emmis Communications Corporation, a corporation organized and
existing under the laws of the State of Indiana (the "Corporation"), are as
follows:
ARTICLE I
Corporate Name
The name of the Corporation is Emmis Communications Corporation.
ARTICLE II
Purposes
The purpose of the Corporation is to transact any or all lawful
business for which corporations may be incorporated under the Indiana Business
Corporation Law, as now or hereafter amended (the "Act"). The Corporation shall
have the same capacity to act as possessed by natural persons and shall have and
exercise all powers granted to business corporations formed under the Act and
permitted by the laws of the State of Indiana in force from time to time
hereafter, including, but not limited to, the general rights, privileges and
powers set out in the Act, the power to enter into and engage in partnerships
and joint ventures, and to act as agent. The Corporation shall have the power
and capacity to engage in all business activities, either directly or through
any person, firm, entity, trust, partnership or association.
<PAGE> 2
ARTICLE III
Definitions
As used herein, the following terms shall have the meanings indicated:
"Act" has the meaning defined in Article II.
"Affiliate of Smulyan" means (i) any person or entity that, directly or
indirectly, controls, is controlled by or is under common control with Smulyan,
(ii) any corporation or organization (other than the Corporation or a
majority-owned subsidiary of the Corporation) of which Smulyan is an officer or
partner or is, directly or indirectly, the beneficial owner of ten percent (10%)
or more of any class of voting securities, or in which Smulyan has a substantial
beneficial interest, (iii) a Qualified Voting Trust, (iv) any other trust or
estate in which Smulyan has a substantial beneficial interest or as to which
Smulyan serves as trustee or in a similar fiduciary capacity, or (v) any
relative or spouse of Smulyan, or any relative of such spouse, who has the same
residence as Smulyan.
"Alien" has the meaning defined in Article XI.
"Alien Ownership Restrictions" has the meaning defined in Article XI.
"Board of Directors" has the meaning defined in Section 7.2(a).
"Class A Directors" has the meaning defined in Section 7.4(b).
"Class A Shares" has the meaning defined in Section 6.1(a).
"Class B Shares" has the meaning defined in Section 6.1(b).
"Common Shares" has the meaning defined in Section 6.1(b).
"Communications Act" has the meaning defined in Article XI.
"Corporation" has the meaning defined in the introduction to these
Restated Articles.
"Effective Date" means the date and time at which the Restated Articles
become effective.
"Event of Automatic Conversion" means each of the automatic conversion
events described in Section 7.6(a) or Section 7.6(c).
"Existing Common Shares" has the meaning defined in Section 7.6(a).
<PAGE> 3
"Going Private Transaction" shall mean any transaction that is a "Rule
13e-3 Transaction," as such term is defined in Rule 13e-3(a)(3), 17 C.F.R. ss.
240.13e-3, as amended from time to time, promulgated under the Securities
Exchange Act of 1934, as amended; provided, however, that the term "affiliate"
as used in Rule 13e-3(a)(3)(i) shall be deemed to include an Affiliate of
Smulyan.
"Independent Director" shall have the meaning defined in Part III,
Section 5(c) of Schedule D to the By-Laws of the National Association of
Security Dealers, Inc., as the same may be amended from time to time.
"Preferred Stock" has the meaning defined in Section 6.1(c).
"Qualified Voting Trust" means any voting trust, voting agreement or
similar arrangement pursuant to which Smulyan generally controls the vote of the
Common Shares held by or subject to such trust, agreement or similar
arrangement, regardless of whether the beneficial owner reserves or is granted a
limited right to vote such Common Shares in certain circumstances. A good faith
determination by the Board of Directors as to whether a voting trust, voting
agreement or similar arrangement constitutes a Qualified Voting Trust shall be
conclusive and binding on all shareholders.
"Restated Articles" has the meaning defined in the introduction to
these Amended and Restated Articles of Incorporation of Emmis Broadcasting
Corporation.
"Smulyan" means and refers to Jeffrey H. Smulyan.
ARTICLE IV
Term of Existence
The period during which the Corporation shall continue is perpetual.
ARTICLE V
Registered Office and Registered Agent
The street address of the registered office of the Corporation is 950
North Meridian Street, Suite 1200, Indianapolis, Indiana 46204, and the name of
the registered agent at such office is Steven C. Crane.
<PAGE> 4
ARTICLE VI
Capital Structure
6.1. Authorized Shares. The total number of shares of all classes of
capital stock which the Corporation shall have authority to issue is fifty
million (50,000,000), consisting of the following:
(a) Thirty-four million (34,000,000) shares of Class A Common
Stock, par value $.01 per share (the "Class A Shares");
(b) Six million (6,000,000) shares of Class B Common Stock,
par value $.01 per share (the "Class B Shares" and together with the Class A
Shares, the "Common Shares"); and
(c) Ten million (10,000,000) shares of serial Preferred Stock,
par value $.01 per share (the "Preferred Stock").
6.2. Terms of Stock. The designations, preferences, powers,
qualifications and special or relative rights or privileges of the capital stock
of the Corporation shall be as set forth in Articles VII and VIII.
ARTICLE VII
Common Shares
7.1. Identical Rights. Except as otherwise provided in these Restated
Articles, all Common Shares shall be identical and shall entitle the holders
thereof to the same rights and privileges, including, but not limited to, the
right to share ratably in liquidation distributions after payment in full of
creditors and payment in full to any holders of Preferred Stock then outstanding
of any amount required to be paid under the terms of such Preferred Stock.
7.2. Dividends.
(a) General. When, as and if dividends are declared by the
Corporation's board of directors (the "Board of Directors"), whether payable in
cash, securities of the Corporation or other property, the holders of Common
Shares shall be entitled, in accordance with the number of Common Shares held by
each, to share equally in and to receive all such dividends, except that if
dividends are declared that are payable in Common Shares, such stock dividends
shall be payable at the same
<PAGE> 5
rate on each class of Common Shares and shall be payable only in Class A Shares
to holders of Class A Shares and in Class B Shares to holders of Class B Shares.
(b) Record Date. Dividends declared by the Board of Directors
shall be paid to the holders of record of the outstanding Common Shares as their
names shall appear on the stock register of the Corporation on the record date
fixed by the Board of Directors in advance of declaration and payment of each
dividend.
(c) Stock Dividends. Any Common Shares issued as a dividend
shall, when so issued, be duly authorized, validly issued, fully paid and
non-assessable. The Corporation shall not issue fractions of Common Shares on
payment of any such stock dividend but shall issue a whole number of shares to
such holder of Common Shares rounded up or down in the Corporation's sole
discretion to the nearest whole number, without compensation to the stockholder
whose fractional share has been rounded down or from any stockholder whose
fractional share has been rounded up.
7.3. Stock Splits. The Corporation shall not in any manner subdivide
(by stock split, reverse stock split, reclassification, stock dividend,
recapitalization or otherwise) or combine the outstanding shares of one class of
Common Shares unless the outstanding shares of all classes of Common Shares
shall be proportionately subdivided or combined, provided that this Section
shall not apply to the reclassification taking effect upon the filing of these
Restated Articles with the Secretary of State of Indiana.
7.4. Voting Rights.
(a) General. The holders of the Class A Shares and the Class B
Shares shall vote as a single class in all matters submitted to a vote of the
stockholders, with each Class A Share being entitled to one vote and each Class
B Share being entitled to ten votes, except (i) for the election of directors,
which shall be governed by Subsections (b) and (c) below, (ii) with respect to
any Going Private Transaction described in Subsection (e) below, which shall be
governed by such Subsection, and (iii) as otherwise provided by law.
(b) Class A Directors. In the election of directors, the
holders of Class A Shares shall be entitled by class vote, exclusive of all
other stockholders, to elect two of the Corporation's directors (the "Class A
Directors"), with each Class A Share entitled to one vote; provided, however,
that each Class A Director must be qualified at the time of his or her election
to be an Independent Director. Any vote by stockholders on the removal of a
Class A Director shall only be by the class vote of the holders of Class A
Shares.
(c) Other Directors. Except as provided in Subsection (b)
above, the holders of Class A Shares and Class B Shares, voting as a single
class, shall have the right to vote on the election or removal of all directors
of the Corporation (other than
<PAGE> 6
directors, if any, who may be elected by the holders of Preferred Stock), with
each Class A Share entitled to one vote and each Class B Share entitled to ten
votes.
(d) Class A Director Vacancies. In the event of the death,
removal or resignation of a Class A Director prior to expiration of the
director's term, the vacancy on the Board of Directors created thereby may be
filled by a majority of the directors then in office, although less than a
quorum; provided, however, that any person appointed to fill a vacancy created
by the death, removal or resignation of a Class A Director shall be an
Independent Director. A director elected in such manner to fill such a vacancy
shall hold office until the director's successor has been duly elected and
qualified at a meeting of holders of Class A Shares duly called for such
purpose.
(e) Going Private Transactions. With respect to any Going
Private Transaction between the Corporation and (i) Smulyan, (ii) any Affiliate
of Smulyan or (iii) any group of which Smulyan or any Affiliate of Smulyan is a
member, the holders of Class A Shares and Class B Shares shall vote as a single
class, with each Class A Share and Class B Share entitled to one vote.
7.5. Issuance of Common Shares. Each new issuance of Common Shares
after the Effective Date shall be an issuance of Class A Shares unless (i) the
Common Shares are issued to Smulyan or (ii) the Common Shares are issued or
subject to a Qualified Voting Trust. In each event described in clauses (i) or
(ii) above, each Common Share issued shall be a Class B Share.
7.6. Conversion.
(a) Automatic Conversion on Effective Date. Each share of the
Corporation's common stock issued and outstanding immediately prior to the
Effective Date (the "Existing Common Shares") that is owned of record as of the
Effective Date by Smulyan shall convert automatically and without the
requirement of any further action into one fully paid and non-assessable Class B
Share as of the Effective Date. Each of the Existing Common Shares not converted
in accordance with the previous sentence shall convert automatically and without
the requirement of any further action into one fully paid and non-assessable
Class A Share as of the Effective Date.
(b) Voluntary Conversion. Each Class B Share shall be
convertible, at the option of its holder, into one fully paid and non-assessable
Class A Share at any time.
(c) Automatic Conversion.
(i) Each Class B Share shall convert automatically into one
fully paid and non-assessable Class A Share upon the sale, gift or other
transfer of such share, voluntarily or involuntarily, to a person or entity
other than Smulyan or an Affiliate of Smulyan; provided, however, that the
pledge of a Class B Share pursuant to a bona
<PAGE> 7
fide pledge as security for indebtedness owed to the pledgee shall not
constitute a transfer for purposes of this Subsection (c) until such time as
either (A) such share is registered in the name of the pledgee, (B) the pledgee
acquires the right to vote such share and exercises such right, in which case
the automatic conversion into a Class A Share shall be deemed to occur
immediately prior to such vote, or (C) ownership of the pledged share is
transferred pursuant to enforcement of such pledge to a person or entity other
than Smulyan or an Affiliate of Smulyan.
(ii) All Class B Shares shall convert automatically into
fully paid and non-assessable Class A Shares (on the basis of one Class A Share
for each Class B Share) upon the earlier of (A) the death of Smulyan or (B)
Smulyan's ceasing to own at least 1,520,000 Common Shares, as adjusted from time
to time to account for any stock dividend in respect of the Common Shares or any
stock split or reverse stock split of Common Shares.
(d) Voluntary Conversion Procedure. At the time of a voluntary
conversion, the holder of Class B Shares shall deliver to the office of the
Corporation or any transfer agent for the Common Shares (i) the certificate or
certificates representing the Class B Shares to be converted, duly endorsed in
blank or accompanied by proper instruments of transfer, and (ii) written notice
to the Corporation stating that such holder elects to convert such share or
shares and stating the names and addresses in which each certificate for Class A
Shares issued upon such conversion is to be issued. Voluntary conversion shall
be deemed to have been effected at the close of business on the date when such
delivery is made to the Corporation of the shares to be converted, and the
person or entity exercising such voluntary conversion shall be deemed to be the
holder of record of the number of Class A Shares issuable upon such conversion
at such time. The Corporation shall promptly deliver certificates evidencing the
appropriate number of Class A Shares to such holder.
(e) Automatic Conversion Procedure. Upon the occurrence of the
Event of Automatic Conversion pursuant to Section 7.6(a), each certificate
previously representing Existing Common Shares that pursuant to Section 7.6(a)
are converted into Class A Shares shall automatically and without the
requirement of any further action represent the same number of Class A Shares.
Promptly upon the occurrence of (i) the Event of Automatic Conversion pursuant
to Section 7.6(a) with respect to those Existing Common Shares that are
converted automatically into Class B Shares, or (ii) an Event of Automatic
Conversion pursuant to Section 7.6(c), such that Class B Shares are converted
automatically into Class A Shares, the holder of such converted shares shall
surrender the certificate or certificates therefor, duly endorsed in blank or
accompanied by proper instruments of transfer, at the office of the Corporation
or of any transfer agent for the Common Shares and shall give written notice to
the Corporation, at such office (A) stating that the shares are being converted
pursuant to an Event of Automatic Conversion into Class B Shares or Class A
Shares as provided in Section 7.6(a) or (c), respectively, (B) specifying the
Event of Automatic Conversion (and, if the occurrence of such event is within
the control of the transferor, stating the
<PAGE> 8
transferor's intent to effect an Event of Automatic Conversion), (C) identifying
the number of Existing Common Shares or Class B Shares being converted, and (D)
setting out the name or names (with addresses) and denominations in which the
certificate or certificates shall be issued, and instructions for the delivery
thereof. Delivery of such notice together with the certificates representing the
converted shares shall obligate the Corporation to issue and deliver, and
thereupon the Corporation or its transfer agent shall promptly issue and
deliver, at such stated address to such holder or to the transferee of the
converted shares a certificate or certificates for the number and class of
Common Shares to which such holder or transferee is entitled, registered in the
name of such holder, the designee of such holder or transferee as specified in
such notice. Nothing contained in this Subsection (e) or elsewhere in these
Restated Articles shall be construed to permit or provide for (i) the transfer
of any Class B Shares to any person or entity other than Smulyan or an Affiliate
of Smulyan without the conversion of such Class B Shares into Class A Shares
upon such transfer or (ii) the issuance of Class B Shares to any person or
entity other than Smulyan or an Affiliate of Smulyan.
To the extent permitted by law, conversion pursuant to an
Event of Automatic Conversion shall be deemed to have been effected as of the
date and time at which the Event of Automatic Conversion occurs (such time being
the "Conversion Time"). The person or entity entitled to receive the Common
Shares issuable upon such conversion shall be treated for all purposes as the
record holder of such Common Shares at and as of the Conversion Time. The rights
as a holder of the converted shares shall cease and terminate at and as of the
Conversion Time, in each case without regard to any failure by the holder to
deliver the certificates or the notice required by this Subsection (e).
(f) Unconverted Shares; Notice Required. In the event of the
conversion of less than all of the Class B Shares evidenced by a certificate
surrendered to the Corporation in accordance with the procedures of Section
7.6(d) or (e), the Corporation shall execute and deliver to or upon the written
order of the holder of such certificate, without charge to such holder, a new
certificate evidencing the number of Class B Shares not converted. Class B
Shares shall not be transferred as Class B Shares on the books of the
Corporation unless the Corporation shall have received from the holder thereof
the written notice described herein.
(g) Reservation. The Corporation hereby reserves and shall at
all times reserve and keep available, out of its authorized and unissued Class A
Shares, for the purposes of effecting conversions, such number of duly
authorized Class A Shares as shall from time to time be sufficient to effect the
conversion of all outstanding Class B Shares. The Corporation covenants that all
the Class A Shares so issuable shall, when so issued, be duly and validly
issued, fully paid and non-assessable. Subject to Article XI, the Corporation
will take all such action as may be necessary to assure that all such Class A
Shares may be so issued without violation of any applicable law or regulation,
or of any requirements of any national securities exchange
<PAGE> 9
upon which the Class A Shares may be listed.
7.7. Consideration on Merger, Consolidation, etc. In any merger,
consolidation or business combination, the consideration to be received per
share by the holders of Class A Shares and Class B Shares must be identical for
each class of stock, except that in any such transaction in which shares of
common stock are to be distributed, such shares may differ as to voting rights
to the extent that the voting rights provided in these Restated Articles differ
between the Class A Shares and the Class B Shares.
ARTICLE VIII
Preferred Stock
8.1. Terms of Preferred Stock. The Preferred Stock may be issued from
time to time in one or more series. The Board of Directors of the Corporation
shall have authority to fix by resolution or resolutions the designations and
powers, preferences and relative participating, optional or other special rights
and qualifications, limitations or restrictions thereof, including, without
limitation, the voting rights, dividend rate, purchase or sinking funds,
provisions for redemption, conversion rights, redemption price and liquidation
preference, of any series of shares of Preferred Stock, to fix the number of
shares constituting any such series and to increase or decrease the number of
shares of any such series (but not below the number of shares thereof then
outstanding). In case the number of shares of any such series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution or resolutions originally
fixing the number of shares of such series.
8.2. Series A Convertible Exchangeable Redeemable Preferred Stock. The
Corporation shall have a series of Preferred Stock established pursuant to
Section 8.1 with the following powers, designation, preferences and relative,
participating, optional and other rights:
(a) Designation. The class shall consist of one hundred (100)
shares of Preferred Stock, designated as "Series A Convertible Exchangeable
Redeemable Preferred Stock" (hereinafter referred to as "Series A Preferred
Stock").
(b) Dividends.
(1) The holders of shares of Series A Preferred Stock
shall be entitled to receive, as a class, when and as declared by the Board of
Directors, a dividend of shares of Series A Preferred Stock equal to 7.3125% of
the then outstanding shares of Series A Preferred Stock, payable pro-rata to
holders of Series A Preferred Stock on the first day of January and July of each
year that any Series A Preferred Stock shall be outstanding, commencing January
1, 1992. At the option of
<PAGE> 10
the Corporation, the Corporation may pay the dividends provided for in this
subsection in the form of cash instead of in the form of Series A Preferred
Stock, or partly in cash and partly in stock. Any such payment in cash in lieu
of distribution of Series A Preferred Stock shall be made at the rate of One
Hundred Thousand Dollars ($100,000) per share of Series A Preferred Stock not
distributed.
(2) Dividends upon the Series A Convertible Preferred
Stock shall be cumulative and prior and in preference to any declaration or
payment of any dividend on the common stock of the Corporation. Before any
dividend on the common stock of the Corporation shall be declared or paid or set
apart for payment, the holders of shares of Series A Convertible Preferred Stock
shall be entitled to receive dividends, as prescribed in subparagraph (1) above,
for all dividend periods ending on or before the date on which any dividend on
any common stock is or is to be paid.
(3) In the event any shares of Series A Preferred Stock
are redeemed pursuant to subsection (d), converted into the Corporation's common
shares pursuant to subsection (e), or exchanged pursuant to subsection (f), and
thereafter shares of Series A Preferred Stock remain outstanding, the dividend
in subsection (b)(1) shall be reduced by multiplying the dividend immediately
prior to such event by a fraction of which the numerator is the number of shares
of Series A Preferred Stock outstanding immediately after such event and of
which the denominator is the number of shares of Series A Preferred Stock
outstanding immediately prior to such event.
(c) Voting. Except as required by law, the holders of Series A
Preferred Stock shall not have the right to vote on any matter as a result of
their ownership of Series A Preferred Stock.
(d) Redemption.
(1) Any shares of Series A Preferred Stock issued as
dividends pursuant to Section 6.03(b)(1), and up to 2.625 shares of Series A
Preferred Stock issued other than as dividends pursuant to Section 6.03(b)(1)
may be redeemed in whole or in part at the option of the Corporation by
resolution of its Board of Directors at any time at a price of One Hundred
Thousand Dollars ($100,000) per share plus an amount equivalent to the amount of
any dividends accrued thereon and remaining unpaid, whether declared or not, at
the date of redemption.
(2) Not less than thirty (30) nor more than sixty (60)
days previous to the date fixed for redemption by the Board of Directors, a
notice specifying the time and place thereof shall be given to the holders of
record of the Series A Preferred Stock to be redeemed by United States mail at
their respective addresses as the same shall appear on the books of the
Corporation; provided, however, that no failure to mail such notice, nor any
defect therein, nor in the mailing thereof, shall affect the validity of the
proceedings for the redemption of any of the Series A Preferred Stock to be
redeemed. Upon the redemption date the Corporation shall pay over the
<PAGE> 11
redemption price to the holders of the shares upon the endorsement and surrender
of the certificates for such shares by the holders of the Series A Preferred
Stock.
(3) On January 1, 1996 (the "Mandatory Redemption Date"),
the Corporation shall redeem all outstanding shares of Series A Preferred Stock
by paying therefor in cash One Hundred Thousand Dollars ($100,000) per share
plus an amount in cash equal to all dividends on the Series A Preferred Stock
accrued and unpaid, whether declared or not, to and including the Mandatory
Redemption Date (the "Redemption Price"). Upon the Redemption Date, the
Corporation shall pay over the Redemption Price to the holders of the Series A
Preferred Stock upon the endorsement and surrender of the certificates for such
shares by the holders of the Series A Preferred Stock.
(e) Conversion Into Common Shares.
(1) Conversion at Option of Corporation. The Corporation
shall have the right, at any time including the Mandatory Redemption Date, to
require all holders of Series A Preferred Stock to surrender such Series A
Preferred Stock for conversion, at the principal office of the Corporation, at
the Conversion Price as defined in and adjusted to the extent required under
subsection (e)(2), upon ten (10) days' prior written notice to the holders
thereof at the addresses appearing on the records of the Corporation; provided,
however, that (i) the Corporation's common stock (or other securities into
which, by reason of the operation of this subsection (e), the Series A Preferred
Stock is convertible) has been publicly traded on a national securities exchange
or the National Association of Securities Dealers, Inc. Automated Quotation
System or any similar quotation system (whether or not continuously) for a
period of 45 business days prior to such notice, (ii) the "Current Market Price"
(as defined in subsection (e)(5)(I)) per share of the Corporation's common stock
(or such other securities) as of the date of such notice shall exceed the
Conversion Price in effect on the last day of the 30 consecutive business day
period referred to in the definition of "Current Market Price" by the percentage
specified below (the "Conversion Premium") applicable on such date and (iii) the
Corporation shall not be in default under the terms of the Series A Preferred
Stock. The Conversion Premiums applicable during each of the calendar quarters
through the Mandatory Redemption Date are as follows:
<PAGE> 12
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1st Qtr. -- 161.58% 215.53% 283.50% 369.14%
2nd Qtr. -- 170.89 228.04 300.06 390.80%
3rd Qtr. 138.94% 187.00 247.55 323.85 419.99%
4th Qtr. 146.90 197.82 261.97 342.81 444.67%
</TABLE>
Notwithstanding the foregoing, the Corporation shall not have the right to
require conversion of the Series A Preferred Stock if during the 45 business day
period prior to notice pursuant to this subsection (e)(1) there shall have
occurred any event which, by reason of the operation of this subsection (e), has
caused an adjustment of the Conversion Price, unless the Corporation could have
required conversion of the Series A Preferred Stock immediately prior to such
event. The Corporation shall not have the right to require conversion of less
than all of the Series A Preferred Stock held by a particular holder.
(2) Conversion at Option of Holder. Any holder of Series
A Preferred Stock shall have the right, at any time including the Mandatory
Redemption Date, to convert his shares of Series A Preferred Stock into a number
of shares of common stock of the Corporation equal to (A) the number of shares
of Series A Preferred Stock so converted, times (B) a fraction equal to (i)
$100,000.00, divided by (ii) a conversion price of $4,246.70 or, in case
adjustment of such conversion price has taken place pursuant to the provisions
of subsection (e)(5), then divided by the conversion price as last adjusted
(such initial or adjusted conversion price being hereinafter referred to as the
"Conversion Price"), upon surrender of all certificates for the Series A
Preferred Stock so converted to the Corporation at the principal office of the
Corporation together with written notice of election to convert executed by the
holder (hereinafter referred to as the "Conversion Notice"), and specifying the
name or names in which the shares of common stock deliverable upon such
conversion shall be registered (subject to any applicable restrictions on
transfer, including without limitation those in subsection (h)), with the
addresses of the persons so named, and, if so required by the Corporation,
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Corporation duly executed by the holder or his attorney duly
authorized in writing; provided, however, that no holder of Series A Preferred
Shares shall have the right to convert less than all Series A Preferred Shares
held by such holder, and provided, further, that no holder of Series A Preferred
Stock may convert his shares unless all holders of Series A Preferred Stock
convert their shares at the same time. For convenience, the conversion of Series
A Preferred Stock into shares of common stock of the Corporation or, by reason
of the operation of this subsection (e), into any other shares of stock, other
securities, property or cash of the Corporation or any other corporation is
herein sometimes referred to as the conversion
<PAGE> 13
of Series A Preferred Stock.
(3) Delivery of Common Stock. As promptly as practicable
after the surrender of certificates for Series A Preferred Stock for conversion
pursuant to subsections (e)(1) or (e)(2), the Corporation shall deliver or cause
to be delivered at the office where such certificates are so surrendered to or
upon the written order of the holder thereof a certificate or certificates
representing the number of shares of common stock into which such Series A
Preferred Stock may be converted in accordance with the provisions of this
subsection (e), registered in such name or names as are duly specified in the
Conversion Notice. Subject to the following provisions of this subsection
(e)(3), such conversion shall be deemed to have been effected at the close of
business on the date when the certificates representing the Series A Preferred
Stock shall have been so surrendered for conversion, so that the rights of the
holder of such Series A Preferred Stock such shall cease at such time and the
person or persons duly named in the Conversion Notice shall be entitled to
receive shares of common stock at such time, and such conversion shall be
effected at the Conversion Price in effect at such time; provided, however, that
no such surrender on any date when the stock transfer books of the Corporation
shall be closed shall be effective to constitute the person or persons entitled
to receive the shares of common stock upon such conversion as the record holder
or holders of such shares of common stock on such date, but such surrender shall
be effective to constitute such person or persons as the record holder or
holders thereof for all purposes at the close of business on the next succeeding
day on which such stock transfer books are open and such conversion shall be
effected at the Conversion Price in effect at the close of business on such next
succeeding day.
In the event that a holder of Series A Preferred Stock should fail to
surrender his certificates for such stock within ten (10) days after written
notice by the Corporation pursuant to subsection (e)(1), such stock shall be
deemed to have been surrendered as of the tenth (10th) day following such notice
and all rights of the holder of the Series A Preferred Stock as such shall cease
and the holder shall be treated as a holder of the number of shares of common
stock to which such holder would be entitled.
If the last day for the exercise of the conversion right at the place
of surrender shall not be a business day, then the last day for the exercise of
such right at such place shall be the next succeeding business day.
(4) Dividend Adjustment. A holder of Series A Preferred
Stock shall receive a cash payment upon conversion of such Series A Preferred
Stock in respect of dividends accrued thereon and undistributed to the date of
conversion.
(5) Adjustment of Conversion Price. The Conversion Price
shall be subject to adjustments as follows:
<PAGE> 14
(A) In case the Corporation shall (i) pay or make a
dividend or other distribution on the outstanding shares of its
common stock in shares of its common stock, (ii) subdivide or
reclassify the outstanding shares of its common stock into a greater
number of shares, or (iii) combine or reclassify the outstanding
shares of its common stock into a smaller number of shares, the
Conversion Price in effect at the opening of business on the day
following the date fixed for the determination of shareholders
entitled to receive such dividend or other distribution or subject to
such subdivision, combination or reclassification shall be
proportionately adjusted so that a holder of Series A Preferred Stock
shall be entitled to receive, upon conversion thereof, the number of
shares of common stock which the holder would have owned at the
opening of business on the day following the date fixed for such
determination had such Series A Preferred Stock been converted
immediately prior to such time.
(B) In case the Corporation shall issue rights or
warrants to all holders of its common stock entitling them to
subscribe for or purchase shares of common stock at a price per share
less than the Current Market Price (as defined below) per share of
common stock on the date fixed for the determination of shareholders
entitled to receive such rights or warrants, the Conversion Price in
effect at the opening of business on the day following the date fixed
for such determination shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the
number of shares of common stock outstanding at the close of business
on the date fixed for such determination plus the number of shares of
common stock which the aggregate offering price of the total number
of shares of common stock so offered for subscription would purchase
at such Current Market Price per share, and of which the denominator
shall be the number of shares of common stock outstanding at the
close of business on the date fixed for such determination plus the
number of shares of common stock so offered for subscription or
purchase, such reduction of the Conversion Price to become effective
immediately after the opening of business on the day following the
date fixed for such determination.
(C) In case the Corporation shall, by dividend or
otherwise, distribute to all holders of its common stock (i) shares
of capital stock of any class other than its common stock, (ii)
evidences of its indebtedness or (iii) assets (excluding any rights
or warrants referred to in subparagraph (B) of this subsection
(e)(5), any cash dividend or distribution lawfully paid under the
laws of the state of incorporation of the Corporation, and any
dividend or distribution referred to in subsection (e)(5)(A)), the
Conversion Price shall be adjusted so that the same shall equal the
ratio determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the date fixed for the
determination of shareholders entitled to receive such distribution
by a fraction of which the numerator shall
<PAGE> 15
be the Current Market Price (as defined below) per share of common
stock on the date fixed for such determination less the fair market
value (as determined by the Board of Directors of the Corporation,
whose determination shall be conclusive and described in a Board
resolution certified by the Secretary of the Corporation and
delivered to the holders of the Series A Preferred Stock) of the
portion of the shares of capital stock or evidences of indebtedness
or assets so distributed applicable to one share of common stock, and
of which the denominator shall be such Current Market Price per share
of common stock, such adjustment to become effective immediately
prior to the opening of business on the day following the date fixed
for the determination of shareholders entitled to receive such
distribution.
(D) In case the Corporation shall issue any
securities convertible into or exchangeable for its common stock
(other than securities issued in transactions described in
subsections (e)(5)(B) and (e)(5)(C) above), so long as such
securities may be converted or exchanged within four years following
the issuance thereof, for a consideration per share of the
Corporation's common stock less than the Current Market Price per
share in effect immediately prior to the issuance of such securities,
the Conversion Price shall be adjusted immediately thereafter so that
it shall equal the ratio determined by multiplying the Conversion
Price in effect immediately prior thereto by a fraction, of which the
numerator shall be the number of shares of common stock outstanding
immediately prior to the issuance of such securities plus the number
of shares of common stock which the aggregate consideration received
for such securities would purchase at such Current Market Price per
share, and of which the denominator shall be the number of shares of
common stock outstanding immediately prior to such issuance plus the
maximum number of shares of common stock deliverable upon conversion
of or in exchange for such securities at the initial conversion or
exchange price or rate. Upon the termination of the right to convert
or exchange such securities, the Conversion Price shall forthwith be
readjusted to such Conversion Price as would have obtained had the
adjustments made upon the issuance of such convertible or
exchangeable securities been made upon the basis of the delivery of
only the number of shares of common stock actually delivered upon
conversion or exchange of such securities and upon the basis of the
consideration actually received by the Corporation for such
securities.
(E) In case of any reclassification of the
Corporation's common stock (including any reclassification upon a
consolidation or merger in which the Corporation is the continuing
corporation) into securities other than the Corporation's common
stock, the Series A Preferred Stock shall thereafter be convertible
into the kind and amount of shares of such securities receivable upon
such reclassification by a holder of the number of shares of common
stock into which such Series A Preferred Stock would be convertible
immediately prior to such reclassification.
<PAGE> 16
(F) In case the Corporation shall issue shares of
its common stock for a consideration per share less than 95 percent
of the Current Market Price per share of its common stock on the date
the Corporation fixes the offering price of such additional shares,
the Conversion Price shall be adjusted immediately thereafter so that
it shall equal the ratio determined by multiplying the Conversion
Price in effect immediately prior thereto by a fraction, of which the
numerator shall be the total number of shares of the Corporation's
common stock outstanding immediately prior to the issuance of such
additional shares plus the number of shares of common stock which the
aggregate consideration received for the issuance of such additional
shares would purchase at such Current Market Price per share of
common stock, and of which the denominator shall be the number of
shares of common stock outstanding immediately after the issuance of
such additional shares. There shall be no adjustment, however,
pursuant to this subparagraph (F) with respect to any shares of
common stock issued (i) in any of the transactions described in
subparagraph (A) above where there has been an adjustment, (ii) upon
conversion or exchange of securities convertible into or exchangeable
for common stock where there has been an adjustment, (iii) under
employee benefit plans adopted by the Corporation's Board of
Directors, or (iv) upon exercise of rights or warranties issued in a
bona fide public offering pursuant to a firm commitment underwriting,
but only if no adjustment is required pursuant to this subsection
(e)(5) with respect to the transaction giving rise to such rights.
(G) No adjustment of the Conversion Price pursuant
to this Subsection (e) shall be made in any instance where the
adjustment would be less than twenty-five cents ($.25) per share, but
any such adjustment that would otherwise be required to be made will
be taken into account in the computation of any subsequent
adjustment.
(H) For purposes of this subsection (e)(5), if the
Corporation receives consideration other than cash for any of its
securities, the value of such consideration is to be determined by
the Board of Directors of the Corporation in the exercise of its
reasonable business judgment and the basis for such valuation shall
be included in any certificate delivered by the Corporation pursuant
to subsection (e)(8) or (e)(9) hereof.
(I) For purposes of this subsection (e), the term
"Current Market Price" per share at any date shall be deemed to be
the average of the daily closing prices for 30 consecutive business
days commencing 45 business days before such date. The closing price
for each day shall be (i) the last reported sale price or, in case no
such reported sale takes place on such day, the average of the last
reported bid and asked prices, in either case on the principal
national securities exchange registered under
<PAGE> 17
the Securities Exchange Act of 1934 on which the Corporation's common
stock is admitted to trading or listed, or (ii) if not listed or
admitted to trading on any national securities exchange, the mean
between the closing high bid and low asked quotations of the
Corporation's common stock on the National Association of Securities
Dealers, Inc. Automated Quotation System, or any similar system of
automated dissemination of quotations of securities prices then in
common use, if so quoted, or (iii) if not so listed or admitted for
trading on such exchange and if not so quoted, the mean between the
high bid and low asked quotations for the Corporation's common stock
as reported by the National Quotation Bureau Incorporated or such
other nationally recognized quotation service selected by the
Corporation for that purpose (if said Bureau is not at the time
furnishing quotations), if at least two securities dealers have
inserted both bid and asked quotations for the Corporation's common
stock on at least 5 of the 10 trading days preceding such valuation
date. If none of the conditions set forth above is met, unless the
holder of the Series A Preferred Stock and the Corporation otherwise
agree, the closing price of the Corporation's common stock on any day
or the average of such closing prices for any period shall be the
fair market value of such common stock as determined by a member firm
of the New York Stock Exchange, Inc. mutually acceptable to the
holder of the Series A Preferred Stock and the Corporation.
(6) Provisions in Case of Consolidation, Merger or Sale
of Assets. In case of any consolidation or merger to which the Corporation is a
party (other than a consolidation or merger in which the Corporation is the
continuing corporation and in which no change is made in the provisions of the
outstanding common stock of the Corporation), or in case of any sale or transfer
of all or substantially all of the assets of the Corporation, the corporation
formed by such consolidation or the corporation resulting from such merger or
the corporation which shall have acquired such assets, as the case may be, shall
execute and deliver a supplemental agreement which will provide that the holders
of Series A Preferred Stock shall have the right during the period the Series A
Preferred Stock shall be convertible as specified in this subsection (e) to
convert shares of Series A Preferred Stock into the kind and amount of
securities, property or cash receivable upon such consolidation, merger, sale or
transfer by a holder of the number of shares of the Corporation's common stock
into which such shares of Series A Preferred Stock might have been converted
immediately prior to such consolidation, merger, sale or transfer. Such
supplemental agreement shall provide for adjustments which, for events
subsequent to the effective date of such supplemental agreement, shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
subsection (e). The above provisions of this subsection (e)(6) shall similarly
apply to successive consolidations, mergers, sales or transfers.
(7) Adjustment in the Event of Liquidation. In the event
that the Corporation shall make any distribution of at least 5 percent of its
total net assets upon or with respect to its common stock, as a liquidating or
partial liquidating dividend,
<PAGE> 18
or other than as a dividend lawfully payable under the laws of the state of
incorporation of the Corporation, each holder of the Series A Preferred Stock
shall, upon the exercise of his right to convert after the record date for such
distribution or, in the absence of a record date, after the date of such
distribution, receive, in addition to the shares into which his Series A
Preferred Stock is then convertible, the amount of such assets (or, at the
option of the Corporation, a sum equal to the value thereof at the time of
distribution as determined by the Board of Directors in its sole discretion)
which would have been distributed to such holder of the Series A Preferred Stock
if he had exercised his right to convert immediately prior to the record date
for such distribution or, in the absence of a record date, immediately prior to
the date of such distribution.
(8) Notice of Certain Corporate Action. In case the
Corporation shall intend to take any action which, pursuant to this subsection
(e), would result in an adjustment of the Conversion Price, then the Corporation
shall cause to be delivered to the holders of the Series A Preferred Stock, at
least 20 days prior to the date on which a record is to be taken for purposes of
such action, a notice setting forth the nature of such action, the record date
pertaining to such action and the Conversion Prices before and immediately
following such action.
(9) Notice of Adjustment of Conversion Price. Whenever
the Conversion Price is adjusted as provided in this subsection (e), the
Corporation shall prepare an officer's certificate executed by the Chief
Financial Officer of the Corporation and approved by the Corporation's
independent public accountants setting forth the adjusted Conversion Price and
showing in reasonable detail the facts upon which such adjustment is based, and
such officer's certificate shall be delivered to the holders of the Series A
Preferred Stock as soon as reasonably practicable.
(10) Corporation to Reserve Common Stock. Consistent with
its obligations under this Section 6.03 the Corporation shall at all times
reserve and keep available a sufficient number of shares of its common stock
which shall be delivered by the Corporation upon the conversion of the Series A
Preferred Stock as provided in this subsection (e).
(11) Taxes on Conversion The Corporation will pay any and
all stamp and similar taxes that may be payable in respect of the issue or
delivery of shares of its common stock upon conversion of the Series A Preferred
Stock pursuant to this subsection (e). The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of shares of its common stock in a name other than that
of the holder of the Series A Preferred Stock at the time of conversion and no
such issue or delivery shall take place until the holder in such case has paid
to the Corporation the amount of any such tax or has established to the
satisfaction of the Corporation that such tax has been paid.
(f) Exchange of Series A Preferred Stock. The Corporation
shall have the right, at any time including the Mandatory Redemption Date, to
require any
<PAGE> 19
holder of Series A Preferred Stock to surrender all of such Series A
Preferred Stock for exchange, at the principal office of the Corporation, into
junior subordinated notes (the "Exchange Notes") at an exchange ratio of
$100,000.00 in aggregate principal amount of Exchange Notes per share of Series
A Preferred Stock exchanged, upon ten (10) days' prior written notice to the
holder at the address appearing on the records of the Corporation. Any accrued
and unpaid dividends at the time of any such exchange shall be paid at the time
of the exchange. The Exchange Notes (i) shall mature on the Mandatory Redemption
Date, (ii) shall be subordinate to all other indebtedness of the Corporation,
(iii) shall bear a coupon rate of 14-5/8% per annum with interest payable
semi-annually on January 1 and July 1, and (iv) shall be convertible into the
Corporation's common stock to the same extent as, and have terms substantially
equivalent to those of, the Series A Preferred Stock.
(g) Priority in Event of Dissolution.
(1) Subject to the remaining provisions of this
subsection (g), the Series A Preferred Stock shall be preferred over the
Corporation's common stock as to the net assets of the Corporation, no matter
how or in what categories such net assets are reflected on its balance sheet.
(2) In event of any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, after due payment or provision for
payment of the debts or other liabilities of the Corporation as required by law,
the holders of the Series A Preferred Stock shall be entitled to receive out of
the net assets of the Corporation One Hundred Thousand Dollars ($100,000) cash
for each share, plus an amount equivalent to the amount of any dividends accrued
thereon and remaining unpaid at the date of such liquidation, dissolution or
winding up of the Corporation, before any distribution shall be made to the
holders of the common stock.
(3) If, upon any dissolution, liquidation, or winding up,
the net assets of the Corporation distributable among the holders of the Series
A Preferred Stock shall be insufficient to pay in full the preferential amounts
to which such holders are entitled, then such net assets, or the proceeds
thereof, shall be distributed among the holders of the Series A Preferred Stock
ratably in accordance with the sums which would be payable on such distribution
if all sums payable were discharged in full.
(h) Restrictions on Transfer. The transfer of any share of
Series A Preferred Stock, except to affiliates (as defined herein) shall be
conditioned upon the concurrent transfer of all outstanding shares of Series A
Preferred Stock to the same transferee, and the Series A Preferred Stock may
only be converted as provided in subsection (e) all at the same time. For
purposes of this subsection (h), and only for such purposes, an "affiliate" of
any person shall include any general partner, limited partner, direct or
indirect wholly-owned subsidiary or parent corporation of such person or any
affiliate of any of the foregoing.
8.3. Series B Preferred Stock. The Corporation shall have a series of
<PAGE> 20
Preferred Stock established pursuant to Section 8.1 with the following powers,
designation, preferences and relative, participating, optional and other
rights:
(a) Designation. The class shall consist of two hundred (200) shares of
Preferred Stock, designated as "Series B Preferred Stock" (hereinafter referred
to as "Series B Preferred Stock"). The stated amount of the Series B Preferred
Stock shall be One Hundred Thousand Dollars ($100,000) per share.
(b) Rank. The Series B Preferred Stock shall, with respect to dividend
rights and rights on liquidation, winding-up and dissolution, rank prior to the
common stock of the Corporation (all equity securities of the Corporation to
which the Series B Preferred Stock ranks prior, including the common stock of
the Corporation, are collectively referred to herein as the "Junior
Securities") and on a parity with the Series A Preferred Stock (as defined in
Section 8.2(a)) (all equity securities of the Corporation with which the Series
B Preferred Stock ranks on a parity, including the Series A Preferred Stock,
are collectively referred to herein as the "Parity Securities").
(c) Dividends.
(i) The holders of shares of Series B Preferred Stock shall be entitled
to receive, as a class, when and as declared by the Board of Directors, a
dividend of shares of Series B Preferred Stock at the annual rate of 4% of the
stated amount of the outstanding shares of Series B Preferred Stock from time
to time, payable pro rata to holders of Series B Preferred Stock in semi-annual
payments on the first day of June and December of each year (each, a "Dividend
Payment Date") that any Series B Preferred Stock shall be outstanding,
commencing December 1, 1993, provided that with respect to the first Dividend
Payment Date, the dividend payable on such date shall accrue from May 28, 1993.
At the option of the Corporation, the Corporation may pay any dividend which
may be paid in the form of Series B Preferred Stock in the form of cash
instead, or partly in cash and partly in stock. Any such payment in cash in
lieu of distribution of Series B Preferred Stock shall be made at the rate of
One Hundred Thousand Dollars ($100,000) per share of Series B Preferred Stock
not distributed.
(ii) Dividends upon the Series B Preferred Stock shall be cumulative and
prior and in preference to any declaration or payment of any dividend on any
Junior Security. Before any dividend on any such Junior Security shall be
declared or paid or set apart for payment, the holders of shares of Series B
Preferred Stock shall be entitled to receive dividends, as prescribed in
Subparagraph (i) above, for all dividend periods ending on or before the date
on which any dividend on any such Junior Security is or is to be paid.
(iii) No full dividend shall be declared by the Board of Directors or
paid or set apart for payment by the Corporation on any Parity Security for any
period unless the holders of shares of Series B Preferred Stock shall be
entitled to receive dividends, as prescribed in Subparagraph (i) above, for all
dividend periods ending on or before
<PAGE> 21
the date on which any dividends on any such Parity Security are or are to be
paid. If any dividends are not paid in full, in accordance with the above
sentence, upon the shares of the Series B Preferred Stock and any other Parity
Security, all dividends declared upon the shares of the Series B Preferred
Stock and any other Parity Security shall be declared pro rata so that the
amount of dividends declared per share of the Series B Preferred Stock and such
Parity Securities shall in all cases bear to each other the same ratio that
accrued dividends per share on the Series B Preferred Stock and such Parity
Securities bear to each other.
(iv) No full or partial dividend payable in the form of cash shall be
declared by the Board of Directors or paid or set apart for payment by the
Corporation on any Parity Security for any period unless, prior to or
concurrently with such declaration, payment or setting apart for payment, as
the case may be, all accrued and unpaid dividends on shares of the Series B
Preferred Stock which are due and payable shall have been paid or be paid in
cash and an amount of funds sufficient to pay in cash the dividends to be paid
on the shares of Series B Preferred Stock on the next following Dividend
Payment Date shall have been set apart by the Corporation for such purpose. If
any dividends payable in cash are not paid or set apart by the Corporation in
full in accordance with the above sentence upon the shares of the Series B
Preferred Stock and any other Parity Security, all dividends payable in cash
declared upon the shares of the Series B Preferred Stock and any other Parity
Security shall be declared pro rata so that the amount of dividends payable in
cash declared per share of the Series B Preferred Stock and such Parity
Securities shall in all cases bear to each other the same ratio that accrued
dividends per share on the Series B Preferred Stock and such Parity Securities
bear to each other.
(d) Voting.
(i) The holders of record of shares of Series B Preferred Stock shall not
be entitled to any voting rights except as hereinafter provided in this
Subsection (d) or as otherwise provided by law.
(ii) So long as any shares of Series B Preferred Stock are outstanding,
the Corporation shall not, without the affirmative vote or consent of the
holders of at least 66-2/3% of the shares of the Series B Preferred Stock then
outstanding, given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting called for the purpose, at which the
holders of Series B Preferred Stock shall vote separately as a class, (A) issue
any Parity Security (except for the issuance of shares of Series A Preferred
Stock as dividends on the outstanding shares of Series A Preferred Stock) or
any equity security of the Corporation which ranks senior to the Series B
Preferred Stock, whether with respect to dividends or upon liquidation,
dissolution, winding-up or otherwise, or any obligation or security convertible
into or evidencing the right to purchase any such equity security or (B) amend,
alter or repeal any of the provisions of the Corporation's Articles of
Incorporation by By-Laws so as to affect adversely the preferences, special
rights or powers of the Series B Preferred
<PAGE> 22
Stock.
(iii) In the event that the Company shall fail to declare or pay
dividends in cash or in shares of Series B Preferred Stock in accordance with
Subsection (c) hereof for any two dividend periods then, unless the Corporation
is prohibited by law from declaring or paying such dividends, at the option of
a majority of the holders of the Series B Preferred Stock, the number of
directors constituting the Board of Directors of the Corporation shall be
increased by one to permit the holders of the Series B Preferred Stock to elect
one member of the Board of Directors of the Corporation. The Corporation shall
not take any action or fail to take any action which would give rise to any
such prohibition. The holders of the Series B Preferred Stock, voting together
as a separate class, shall thereupon have the exclusive right to elect one of
the members of the Board of Directors immediately upon such failure to declare
and pay dividends, unless the Corporation is prohibited by law from declaring
or paying such dividends, and at every subsequent meeting at which the terms of
office of the directors so elected by the holders of the Series B Preferred
Stock expire.
(iv) The right of the holders of the Series B Preferred Stock voting
together as a separate class to elect a member of the Board of Directors of the
Corporation as aforesaid shall continue until such time as the failure to
declare or pay dividends as set forth in Subparagraph (iii) above shall no
longer exist, at which time the special right of the holders of the Series B
Preferred Stock so to vote as a class for the election of a director and the
term of office of the director elected by the holders of the Series B Preferred
Stock shall terminate and the directors elected by the holders of common stock
shall constitute the entire Board of Directors of the Corporation. At any time
after voting power to elect a director shall have become vested and be
continuing in the holders of the Series B Preferred Stock pursuant to
Subparagraph (iii) above, or if vacancies shall exist in the office of director
elected by the holders of the Series B Preferred Stock, a proper officer of the
Corporation may, and upon the written request of the holders of record of at
least 20% of the shares of Series B Preferred Stock then outstanding addressed
to the Secretary of the Corporation shall, call a special meeting of the
holders of the Series B Preferred Stock for the purposes of electing a
director. Any such meeting shall be held at the earliest practicable date at
the place for the holding of the annual meeting of stockholders. If such
meeting shall not be called by the proper officer of the Corporation within
twenty (20) days after personal service of said written request upon the
Secretary of the Corporation, or within twenty (20) days after mailing the same
within the United States by certified mail, addressed to the Secretary of the
Corporation at its principal executive offices, then the holders of record of
at least 20% of the outstanding shares of Series B Preferred Stock may
designate in writing one of their number to call such meeting at the expense of
the Corporation, and such meeting may be called by the person so designated
upon the notice required for the annual meetings of stockholders of the
Corporation and shall be held at the place for holding the annual meetings of
stockholders. Any holder of Series B Preferred Stock so designated shall have
access to the lists of stockholders to be called pursuant to the provisions
hereof.
<PAGE> 23
(v) At any meeting held for the purpose of electing a director at which
the holders of Series B Preferred Stock shall have the right, voting together
as a separate class, to elect a director as aforesaid, the presence in person
or by proxy of the holders of at least 33-1/3% of the outstanding shares of
Series B Preferred Stock shall be required to constitute a quorum of such
Series B Preferred Stock.
(vi) In any case in which the holders of Series B Preferred Stock shall
be entitled to vote pursuant to this Subsection (d) or pursuant to Indiana law,
each holder of Series B Preferred Stock shall be entitled to one vote for each
share of Series B Preferred Stock held.
(e) Mandatory Redemption.
(i) Unless sooner redeemed as provided herein, on June 1, 2001 (the
"Mandatory Redemption Date"), the Corporation shall redeem all outstanding
shares of Series B Preferred Stock by paying therefor in cash One Hundred
Thousand Dollars ($100,000) per share plus an amount in cash equal to all
dividends on the Series B Preferred Stock accrued and unpaid, whether declared
or not, to and including the Mandatory Redemption Date (the "Mandatory
Redemption Price"). On the Mandatory Redemption Date, the Corporation shall
pay the Mandatory Redemption Price to the holders of the Series B Preferred
Stock upon the endorsement and surrender of the certificates for such shares by
the holders of the Series B Preferred Stock.
(ii) If and so long as the Corporation shall be in default of its
mandatory redemption obligations pursuant to Subparagraph (i) above with
respect to the Series B Preferred Stock, the Corporation shall not (A) directly
or indirectly (1) purchase, (2) redeem or (3) satisfy any mandatory redemption,
sinking fund or other similar obligation in respect of (x) any Parity Security
or (y) any warrants, rights or options exercisable for or convertible into any
such Parity Security or (B) declare or pay any dividend or make any
distributions on, or, directly or indirectly, purchase, redeem or satisfy any
mandatory redemption, sinking fund or other similar obligation in respect of
(1) any Junior Security or (2) any warrants, rights or options exercisable for
or convertible into any of the Junior Securities.
(f) Optional Redemption by Holders of Series B Preferred Stock.
(i) Upon the occurrence of an Option Redemption Event (as such term is
defined in Subparagraph (v) below), the Corporation shall redeem all shares of
Series B Preferred Stock delivered to the Corporation in accordance with
Subparagraph (ii) below and shall pay to each holder of such shares an amount
in cash per share equal to the price determined in accordance with Subparagraph
(iv) below (the "Option Redemption Price") as of the date of the Option
Redemption Event.
(ii) At least thirty-five (35) days but not more than forty-five (45)
days prior to the occurrence of an Option Redemption Event the Corporation
shall deliver to
<PAGE> 24
each holder of Series B Preferred Stock a notice by first class mail stating
the date on which the Option Redemption Event will occur (the "Option
Redemption Date") and that each holder of Series B Preferred Stock may, at such
holder's option, require the Corporation to redeem, upon the occurrence of such
Option Redemption Event, all shares of Series B Preferred Stock delivered to
the Corporation by such holder prior to the Option Redemption Date specified in
such notice. Each holder of Series B Preferred Stock may elect to have the
Corporation redeem all or any portion of the shares of Series B Preferred Stock
held by such holder by delivering the certificate(s) of share(s) to be redeemed
to the Corporation at its principal executive offices.
(iii) If the Option Redemption Event shall be aborted or cancelled, the
Corporation shall (A) mail a notice by first class mail to each holder of
Series B Preferred Stock stating that the notice delivered pursuant to
Subparagraph (ii) above has been rescinded and (B) return the certificates of
Series B Preferred Stock delivered to the Corporation pursuant to Subparagraph
(ii) above to the respective holders thereof.
(iv) The Option Redemption Price per share as of the date of any
Redemption Event during any of the 12-month periods specified in the table
below shall equal the quotient of (x) the sum of (A) the amount set forth
opposite the applicable period under the heading "Redemption Price" plus (B)
the product of (1) a fraction the numerator of which is the number of calendar
days actually elapsed as of such date since the last day of the immediately
preceding period, or, with respect to the first such period, since May 28,
1993, and the denominator of which is 365 or 366, as the case may be, and (2)
the amount set forth under the heading "Yearly Increment" opposite the
applicable Redemption Price and (y) the number of shares of Series B Preferred
Stock outstanding on such date:
<TABLE>
<CAPTION>
Period (inclusive) Redemption Price Yearly Increment
<S> <C> <C>
6/1/93 to 5/31/94 $ 4,247,161 $ 668,928
6/1/94 to 5/31/95 $ 4,916,089 $ 774,284
6/1/95 to 5/31/96 $ 5,690,373 $ 896,233
6/1/96 to 5/31/97 $ 6,586,606 $1,037,391
6/1/97 to 5/31/98 $ 7,623,997 $1,200,780
6/1/98 to 5/31/99 $ 8,824,777 $1,389,901
6/1/99 to 5/31/00 $10,214,678 $1,608,813
6/1/00 to 5/31/01 $11,823,491 $1,862,200
</TABLE>
(v) As used in this Subsection (f), "Option Redemption Event" shall mean:
(A) the consummation of any consolidation or merger of the
Corporation with or into any other entity;
<PAGE> 25
(B) the consummation of any sale, transfer or other disposition of
all or substantially all of the assets or business of the Corporation to
any entity other than a wholly owned subsidiary of the Corporation;
(C) the Corporation shall, directly or indirectly, (1) purchase,
(2) redeem or (3) satisfy any mandatory redemption, sinking fund or
other similar obligation in respect of (x) any Junior Security or (y)
any warrants, rights or options exercisable for or convertible into any
of the Junior Securities; or
(D) The making of any Restricted Payment if at the time of such
Restricted Payment (1) a default or event of default with respect to the
Senior Subordinated Debentures shall have occurred and be continuing; or
(2) after giving effect to such Restricted Payment, the sum of the
aggregate amount expended by the Corporation after the Cut-Off Date for
all Restricted Payments (the amount so expended, if other than in cash,
to be determined by the Board of Directors, whose reasonable
determination shall be conclusive and evidenced by a resolution of the
Board of Directors) shall exceed the sum of (x) an amount equal to the
excess, if any, of the Cumulative Consolidated Cash Flow of the
Corporation and its Subsidiaries over 1.5 times the Cumulative
Consolidated Interest Expense of the Corporation and its Subsidiaries
plus (y) the net cash proceeds of, and the fair market value of
marketable securities (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a
resolution of the Board of Directors) received by the Corporation from,
the issuance or sale after the Cut-Off Date of its Capital Stock (other
than Redeemable Stock or Capital Stock of the Corporation issued to any
Subsidiary of the Corporation) or warrants for such Capital Stock, from
other equity contributions after the Cut-Off Date or from debt
securities of the Corporation issued after the Cut-Off Date by the
Corporation and converted into or exchanged for Capital Stock (other
than Redeemable Stock) of the Corporation or warrants for such Capital
Stock plus (z) Five Million Dollars ($5,000,000).
As used in this Clause (D), the following terms shall have the meanings
ascribed to them below:
"Affiliate": with respect to a Person, shall mean another Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such first Person. For purposes of this
definition, "control" (including with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as
applied to any Person, means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting
securities or by contract or otherwise.
"Capital Lease": shall mean any Indebtedness represented by a
lease
<PAGE> 26
obligation of a Person incurred with respect to real property or
equipment acquired or leased by such Person and used in its business
that is required to be recorded as a capital lease in accordance with
GAAP.
"Capital Stock": shall mean any and all shares, interests,
participations, rights or other equivalents (however designated) of
corporate stock of the Corporation.
"Consolidated Interest Expense": shall mean, for any period, the
aggregate interest expense of the Corporation and its Subsidiaries for
such period (including amortization of deferred debt issuance cost,
original issue discount and non-cash interest payments or accruals and
the interest component of Capital Leases), determined on a consolidated
basis in accordance with GAAP.
"Consolidated Net Income": shall mean, for any period, the net
income (or loss) of the Corporation and its Subsidiaries for such period
taken as a single accounting period determined on a consolidated basis
in accordance with GAAP, excluding the effect of extraordinary or
unusual gains or losses, gains or losses in respect of the sale, lease,
conveyance or other disposition of assets not in the ordinary course of
business and the cumulative effect of changes in accounting principles.
"Cumulative Consolidated Cash Flow": shall mean, for the period
beginning June 1, 1993 through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any
proposed Restricted Payment, the sum of (i) Consolidated Net Income,
(ii) provisions for taxes based on income, (iii) Consolidated Interest
Expense, (iv) other non-operating expenses, (v) depreciation expense,
(vi) amortization expense, (vii) the effect on Consolidated Net Income
of trade/barter transactions, (viii) non-cash compensation expense and
(ix) other non-cash items reducing Consolidated Net Income, minus
non-operating income, all as determined on a consolidated basis for the
Corporation and its Subsidiaries in accordance with GAAP.
"Cumulative Consolidated Interest Expense": shall mean, for the
period beginning June 1, 1993 through and including the end of the last
fiscal quarter (taken as one accounting period) preceding the date of
any proposed Restricted Payment, the aggregate interest expense of the
Corporation and its Subsidiaries for such period (including amortization
of deferred debt issuance cost, original issue discount and non-cash
payments or accruals and the interest component of Capital Leases),
determined on a consolidated basis in accordance with GAAP.
"Currency Agreement": shall mean any foreign exchange contract,
<PAGE> 27
currency swap agreement or other similar agreement or arrangement
designed to protect a Person or any of its Subsidiaries against
fluctuations in currency values.
"Cut-Off Date": shall mean May 28, 1993.
"GAAP": shall mean generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards
Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession,
consistently applied, which are applicable to the circumstances as of
the date of determination.
"Indebtedness": shall mean, without duplication, with respect to
any Person, any indebtedness, whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements with
respect thereto) or representing the balance deferred and unpaid of the
purchase price of any property (including pursuant to Capital Leases),
except any such balance that constitutes an accrued expense or trade
payable, if and to the extent any of the foregoing indebtedness would
appear as a liability upon a balance sheet of such Person prepared on a
consolidated basis in accordance with GAAP, and shall also include, to
the extent not otherwise included, the guaranty of items which would be
included within this definition and obligations in respect of Currency
Agreements and Interest Swap Obligations. Without limiting the
generality of the foregoing, "Indebtedness" shall include the Series B
Preferred Stock outstanding on the Cut-Off Date or subsequently issued
as a dividend in respect of such shares, or the obligation to redeem
such shares in accordance with the terms thereof in effect on the
Cut-Off Date; provided that "Indebtedness" shall in no event include the
Series A Preferred Stock outstanding on the Cut-Off Date or subsequently
issued as a dividend in respect of such shares, or the obligation to
redeem such shares in accordance with the terms thereof in effect on the
Cut-Off Date.
"Interest Swap Obligations": shall mean the obligations of any
Person pursuant to any interest rate swap agreement, interest rate
collar agreement or other similar agreement or arrangement designed to
protect such Person or any of its Subsidiaries against fluctuations in
interest rates.
"Person": shall mean an individual, corporation, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision
thereof.
"Redeemable Stock": shall mean stock of the Corporation that by
its
<PAGE> 28
terms or otherwise is required to be redeemed, or is redeemable at
the option of the holders thereof other than the Series A Preferred
Stock or the Series B Preferred Stock outstanding on the Cut-Off Date or
subsequently issued as a cumulative dividend in respect of shares of
such preferred stock in accordance with the terms of such preferred
stock in effect on the Cut-Off Date.
"Related Person": shall mean (i) any Affiliate of the Corporation,
(ii) any individual or entity who directly or indirectly holds 5% or
more of the Capital Stock of the Corporation, (iii) any relative of such
individual by blood, marriage or adoption not more remote than first
cousin and (iv) any officer or director of the Corporation; provided
that the term "Related Person" shall not include Nomura Securities
International, Inc., any Affiliate thereof or any employee of Nomura
Securities International, Inc. or any such Affiliate.
"Restricted Payment": shall mean (1) any declaration or payment of
any dividend or the making of any distribution on any Capital Stock or
to the holders of Capital Stock in respect of such stock (other than
dividends or distributions payable in the Corporation's common stock
(other than Redeemable Stock) or in shares of Capital Stock (other than
Redeemable Stock) of the same class held by such holders or in options,
warrants or other rights to purchase the Company's common stock (other
than Redeemable Stock) or such Capital Stock (other than Redeemable
Stock)), (2) any purchase, redemption or other acquisition or retirement
for value, or the purchase, redemption or other acquisition or
retirement for value, directly or indirectly, by a Subsidiary of the
Corporation, of any Capital Stock (other than in exchange for Capital
Stock (other than Redeemable Stock) or options, warrants or other rights
to purchase Capital Stock (other than Redeemable Stock)) or (3) the
incurrence, creation, assumption or existence of any guarantee of
Indebtedness of, or the making of any loan for advancement to, or other
investment, by the Corporation or by any of its Subsidiaries, in any
Related Person of the Corporation (other than a Subsidiary of the
Corporation) excluding any transaction with an officer or director of
the Corporation entered into in the ordinary course of business or
constituting reasonable compensation to or employee benefit arrangements
for such officer or director of the Corporation; provided that the
following shall not constitute Restricted Payments: (x) the payment of
any dividend within sixty (60) days of declaration thereof, if at such
date of declaration such payment would comply with the foregoing
provision; (y) the acquisition, redemption or retirement of Redeemable
Stock in exchange for Capital Stock that is not Redeemable Stock and is
not exchangeable for or convertible into Redeemable Stock or
Indebtedness of the Corporation or any of its Subsidiaries; or (z) the
redemption of the Series A Preferred Stock in accordance with the terms
thereof in effect on the Cut-Off Date.
"Senior Subordinated Debenture": shall mean the Corporation's 12%
<PAGE> 29
Senior Subordinated Notes due 2003 in an aggregate principal amount
of Fifty Million Dollars ($50,000,000) dated as of May 28, 1993.
"Subsidiary": shall mean any corporation, association or other
business entity of which more than 50% of the total voting power of
shares of Capital Stock or other ownership interests entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the
other Subsidiaries of that Person or a combination thereof.
(g) Optional Redemption by the Corporation.
(i) If the Corporation shall have delivered a notice to each of the
holders of Series B Preferred Stock pursuant to Subparagraph (ii) below, the
Corporation shall be entitled to redeem and shall redeem, upon the occurrence
of a Corporation Redemption Event (as such term is defined in Subparagraph (v)
below), all outstanding shares of Series B Preferred Stock at a price per share
equal to the price determined in accordance with Subparagraph (iv) below (the
"Corporation Redemption Price") and which Corporation Redemption Price shall be
payable to each holder of Series B Preferred Stock in cash.
(ii) The Corporation may elect, no later than thirty (30) days but no
earlier than forty-five (45) days prior to the occurrence of a Corporation
Redemption Event, to redeem all outstanding shares of Series B Preferred Stock
by delivering to each holder thereof a redemption notice by first class mail
stating the date on which such Corporation Redemption Event will occur and that
the Corporation shall redeem all outstanding shares of Series B Preferred Stock
on such date.
(iii) If the Corporation Redemption Event shall be aborted or cancelled,
the Corporation shall mail a notice by first class mail to each holder of
Series B Preferred Stock stating that the notice delivered pursuant to
Subparagraph (ii) above has been rescinded.
(iv) The Corporation Redemption Price per share as of the date of any
Corporation Redemption Event during any of the 12-month periods specified in
the table below shall equal the quotient of (x) the sum of (A) the amount set
forth opposite the applicable period under the heading "Redemption Price" plus
(B) the product of (1) a fraction the numerator of which is the number of
calendar days actually elapsed as of such date since the last day of the
immediately preceding period, or, with respect to the first such period, since
May 28, 1993, and the denominator of which is 365 or 366, as the case may be,
and (2) the amount set forth under the heading "Yearly Increment" opposite the
applicable Redemption Price and (y) the number of shares of Series B Preferred
Stock outstanding on such date:
<PAGE> 30
<TABLE>
<CAPTION>
Period (inclusive) Redemption Price Yearly Increment
<S> <C> <C>
6/1/93 to 5/31/94 $ 4,247,161 $ 668,928
6/1/94 to 5/31/95 $ 4,916,089 $ 774,284
6/1/95 to 5/31/96 $ 5,690,373 $ 896,233
6/1/96 to 5/31/97 $ 6,586,606 $1,037,391
6/1/97 to 5/31/98 $ 7,623,997 $1,200,780
6/1/98 to 5/31/99 $ 8,824,777 $1,389,901
6/1/99 to 5/31/00 $10,214,678 $1,608,813
6/1/00 to 5/31/01 $11,823,491 $1,862,200
</TABLE>
(v) As used in this Subsection (g), "Corporation Redemption Event" shall
mean:
(A) the consummation of any consolidation or merger of the
Corporation with or into any other entity and in connection with which
the holders of Series B Preferred Stock are entitled under the Indiana
Business Corporation Law to vote as a separate class and the Corporation
shall have failed to obtain the affirmative vote or consent of the
holders of at least 66-2/3% of the shares of Series B Preferred Stock
voting separately as a class; or
(B) the consummation of any sale, transfer or other disposition of
all or substantially all of the assets or business of the Corporation to
any entity other than a wholly owned subsidiary of the Corporation and
in connection with which the holders of Series B Preferred Stock are
entitled under the Indiana Business Corporation Law to vote as a
separate class and the Corporation shall have failed to obtain the
affirmative vote or consent of the holders of at least 66-2/3% of the
shares of Series B Preferred Stock voting separately as a class.
(h) Priority in Event of Dissolution.
(i) Subject to the remaining provisions of this Subsection (h), the
Series B Preferred Stock shall be preferred over the Junior Securities as to
the net assets of the Corporation, no matter how or in what categories such net
assets are reflected on its balance sheet.
(ii) In event of any voluntary or involuntary dissolution, liquidation,
winding-up of the Corporation, after due payment or provision for payment of
the debts or other liabilities of the Corporation as required by law, the
holders of the Series B Preferred Stock shall be entitled to receive out of the
net assets of the Corporation for each share an amount in cash equal to the
Series B Distribution Amount (as determined in accordance with Subparagraph
(iii) below).
<PAGE> 31
(iii) The Series B Distribution Amount per share as of the date of any
distribution made pursuant to Subparagraph (ii) above shall be equal to the
quotient of (A) Ten Million Dollars ($10,000,000) plus all dividends accrued,
whether paid or unpaid, from May 28, 1993 to such date at the rate set forth in
Subparagraph (i) of Subsection (c) above and (B) the number of shares of Series
B Preferred Stock outstanding on such date.
(iv) If, upon any dissolution, liquidation, or winding-up, the net assets
of the Corporation are insufficient to pay in full the preferential amounts
payable to the holders of outstanding shares of the Series B Preferred Stock
and any Parity Securities, then the holders of all such shares shall share
ratably in such distribution of assets in accordance with the amount which
would be payable on such distribution if the amounts to which the holders of
outstanding shares of Series B Preferred Stock and the holders of outstanding
shares of such Parity Securities are entitled were paid in full.
ARTICLE IX
Board of Directors
The number of directors constituting the Board of Directors as of the
Effective Date shall be nine (9). Thereafter, the number of directors shall be
fixed by the By-Laws of the Corporation.
ARTICLE X
Control Share Acquisitions
Chapter 42 of the Act (I.C. 23-1-42) shall not apply to control share
acquisitions of shares of capital stock of the Corporation.
ARTICLE XI
Alien Ownership
The following provisions are included in these Restated Articles for the
purpose of ensuring that control and management of the Corporation complies
with the Communications Act of 1934 and the rules, regulations and policies of
the Federal Communications Commission as amended from time to time
(collectively, the "Communications Act"):
<PAGE> 32
(a) The Corporation (i) shall not issue to or for the account of (A) a
person who is a citizen of a country other than the United States; (B) an
entity organized under the laws of a government other than the government of
the United States or any state, territory, or possession of the United States;
(C) a government other than the government of the United States or of any
state, territory, or possession of the United States; or (D) a representative
of, or an individual or entity controlled by, any of the foregoing (each person
or entity described in any of the foregoing clauses (A) through (D), an
"Alien") any share of capital stock of the Corporation if such issuance would
cause the total capital stock of the Corporation held or voted by Aliens to
exceed, in violation of the Communications Act, 25% of (1) the total capital
stock of the Corporation outstanding at any time or (2) the total voting power
of all shares of such capital stock outstanding and entitled to vote at any
time, and (ii) shall not permit the transfer on the books of the Corporation of
any capital stock to any Alien that would result in the total capital stock of
the Corporation held or voted by Aliens to exceed such 25% limits in violation
of the Communications Act.
(b) No Alien or Aliens, individually or collectively, shall be entitled to
vote or direct or control the vote of more than 25% of (i) the total capital
stock of the Corporation outstanding at any time or (ii) the total voting power
of all shares of capital stock of the Corporation outstanding and entitled to
vote at any time, if to do so would violate the Communications Act.
(c) No Alien shall be qualified to act as an officer of the Corporation
and no more than one-fourth of the total number of directors of the Corporation
at any time may be Aliens, in either case if such would violate the
Communications Act.
(d) The Board of Directors shall have all powers necessary to implement
the provisions of this Article and to ensure compliance with the alien
ownership restrictions (the "Alien Ownership Restrictions") of the
Communications Act, including, without limitation, the power to prohibit the
transfer of any shares of capital stock of the Corporation to any Alien and to
take or cause to be taken such action as it deems appropriate to implement such
prohibition. Without limiting the generality of the foregoing and
notwithstanding any other provision of these Restated Articles to the contrary,
any shares of capital stock of the Corporation (other than the Series A
Preferred Stock and the Series B Preferred Stock) determined by the Board of
Directors to be owned beneficially by an Alien or Aliens shall always be
subject to redemption by the Corporation by action of the Board of Directors to
the extent necessary in the judgment of the Board of Directors to comply with
the Alien Ownership Restrictions. The terms and conditions of such redemption
shall be as follows:
(i) The redemption price of the shares to be redeemed pursuant to this
Article shall be equal to the lower of (A) the fair market value of the shares
to be redeemed, as determined in good faith by the Board of Directors in good
faith, and (B) such Alien's purchase price of such shares;
<PAGE> 33
(ii) The redemption price of such shares may be paid in cash, securities
or any combination thereof;
(iii) If less than all the shares held by Aliens are to be redeemed, the
shares to be redeemed shall be selected in any manner determined by the Board
of Directors to be fair and equitable;
(iv) At least ten (10) days' written notice of the redemption date shall
be given to the record holders of the shares selected to be redeemed (unless
waived in writing by any such holder), provided that the redemption date may be
the date on which written notice shall be given to record holders if the cash
or securities necessary to effect the redemption shall have been deposited in
trust for the benefit of such record holders and subject to immediate
withdrawal by them upon surrender of the stock certificates for their shares to
be redeemed;
(v) From and after the redemption date, the shares to be redeemed shall
cease to be regarded as outstanding and any and all rights of the holders in
respect of the shares to be redeemed or attaching to such shares of whatever
nature (including, without limitation, any rights to vote or participate in
dividends declared on stock of the same class or series as such shares) shall
cease and terminate, and the holders thereof shall thereafter be entitled only
to receive the cash or securities payable upon redemption; and
(vi) Such other terms and conditions as the Board of Directors shall
determine.
For purposes of this Article, the determination of the beneficial ownership of
shares of capital stock of the Corporation shall be made pursuant to Rule
13d-3, 17 C.F.R. Section 240.13d-3, as amended from time to time, promulgated
under the Securities Exchange Act of 1934, as amended, or in such other manner
as determined in good faith by the Board of Directors to be fair and equitable.
ARTICLE XII
Indemnification
12.1. General. The Corporation shall, to the fullest extent to which it
is empowered to do so by the Act, or any other applicable laws, as from time to
time in effect, indemnify any person who was or is a party, or is threatened to
be made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal, by reason of the fact that such person is or was a
director or officer of the Corporation, or who, while serving as such a
director or officer of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another
<PAGE> 34
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, whether for profit or not, against expenses (including counsel
fees), judgments, settlements, penalties and fines (including excise taxes
assessed with respect to employee benefit plans) actually or reasonably
incurred by such person in accordance with such action, suit or proceeding, if
such person acted in good faith and in a manner he or she reasonably believed,
in the case of conduct in his or her official capacity, was in the best
interests of the Corporation, and in all other cases, was not opposed to the
best interests of the Corporation, and, with respect to any criminal action or
proceeding, such person either had reasonable cause to believe his or her
conduct was lawful or no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
meet the prescribed standard of conduct.
12.2. Authorization of Indemnification. To the extent that a director or
officer of the Corporation has been wholly successful, on the merits or
otherwise, in the defense of any action, suit or proceeding referred to in
Section 12.1, or in the defense of any claim, issue or matter therein, the
Corporation shall indemnify such person against expenses (including counsel
fees) actually and reasonably incurred by such person in connection therewith.
Any other indemnification under Section 12.1 (unless ordered by a court) shall
be made by the Corporation only as authorized in the specific case, upon a
determination that indemnification of the director or officer is permissible in
the circumstances because he or she has met the applicable standard of conduct.
Such determination shall be made (i) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not at the time parties to
such action, suit or proceeding; or (ii) if a quorum cannot be obtained under
clause (i), by a majority vote of a committee duly designated by the Board of
Directors (in which designation directors who are parties may participate),
consisting solely of two or more directors not at the time parties to such
action, suit or proceeding; or (iii) by special legal counsel (A) selected by
the Board of Directors or its committee in the manner prescribed in clauses (i)
or (ii), or (B) if a quorum of the Board of Directors cannot be obtained under
clause (i) and a committee cannot be designated under clause (ii), selected by
a majority vote of the full Board of Directors (in which selection directors
who are parties may participate); or (iv) by the stockholders, but shares owned
by or voted under the control of directors or officers who are at the time
parties to such action, suit or proceeding may not be voted on the
determination.
Authorization of indemnification and evaluation as to reasonableness of
expenses shall be made in the same manner as the determination that
indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under foregoing
clause (iii) to select counsel.
12.3. Good Faith. For purposes of any determination under Section 12.1,
a person shall be deemed to have acted in good faith and to have otherwise met
the
<PAGE> 35
applicable standard of conduct set forth in Section 12.1 if his or her action
is based on information, opinions, reports, or statements, including financial
statements and other financial data, if prepared or presented by (i) one or
more officers or employees of the Corporation or other enterprise whom he or
she reasonably believes to be reliable and competent in the matters presented;
(ii) legal counsel, public accountants, appraisers or other persons as to
matters he or she reasonably believes are within the person's professional or
expert competence; or (iii) a committee of the Board of Directors of the
Corporation or other enterprise of which the person is not a member if he or
she reasonably believes the committee merits confidence. The term "other
enterprise" as used in this Section 12.3 shall mean any other corporation or
any partnership, joint venture, trust, employee benefit plan or other
enterprise of which such person is or was serving at the request of the
Corporation as a director, partner, trustee, employee or agent. The provisions
of this Section 12.3 shall not be exclusive or limit in any way the
circumstances in which a person may be deemed to have met the applicable
standards of conduct set forth in Section 12.1.
12.4. Payment of Expenses in Advance. Expenses incurred in connection
with any civil or criminal action, suit or proceeding may be paid for or
reimbursed by the Corporation in advance of the final disposition of such
action, suit or proceeding, as authorized in the specific case in the same
manner described in Section 12.2, upon receipt of the director or officer's
written affirmation of his or her good faith belief that he or she has met the
standard of conduct described in Section 12.1 and upon receipt of a written
undertaking by or on behalf of the director or officer to repay such amount if
it shall ultimately be determined that he or she did not meet the standard of
conduct set forth in this Article XII, and a determination is made that the
facts then known to those making the determination would not preclude
indemnification under this Article XII.
12.5. Other Indemnitees. The Corporation may, by action of its Board of
Directors, indemnify employees and agents of the Corporation with the same
scope and effect and pursuant to the same procedures as provided in this
Article XII for directors and officers.
12.6. Provisions Not Exclusive. The indemnification provided by this
Article shall not be deemed exclusive of any other rights to which a person
seeking indemnification may be entitled under these Restated Articles of
Incorporation, the Corporation's By-Laws, any resolution of the Board of
Directors or stockholders, any other authorization, whenever adopted, after
notice, by a majority vote of all voting shares of the Corporation then
outstanding, or any contract, both as to action in his or her official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to serve in his or her official
capacity, and shall inure to the benefit of the heirs, executors and
administrators of such a person.
12.7. Vested Right to Indemnification. The right of any person to
indemnification under this Article shall vest at the time of occurrence or
performance of
<PAGE> 36
any event, act or omission giving rise to any action, suit or proceeding of the
nature referred to in Section 12.1 and, once vested, shall not later be
impaired as a result of any amendment, repeal, alteration or other modification
of any or all of these provisions. Notwithstanding the foregoing, the
indemnification afforded under this Article shall be applicable to all alleged
prior acts or omissions of any individual seeking indemnification hereunder,
regardless of the fact that such alleged acts or omissions may have occurred
prior to the adoption of this Article. To the extent such prior acts or
omissions cannot be deemed to be covered by this Article XII, the right of any
person to indemnification shall be governed by the indemnification provisions
in effect at the time of such prior acts or omissions.
12.8. Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or who is or was serving at the request of the Corporation as
a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against any liability asserted against or incurred by the
individual in that capacity or arising from the individual's status as a
director, officer, employee or agent, whether or not the Corporation would have
power to indemnify the individual against the same liability under this
Article.
12.9. Additional Definitions. For purposes of this Article:
(i) References to the "Corporation" shall include any domestic or foreign
predecessor entity of the Corporation in a merger or other transaction in which
the predecessor's existence ceased upon consummation of the transaction.
(ii) Serving an employee benefit plan at the request of the Corporation
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries. A person who acted in good faith and in a
manner he reasonably believed to be in the best interests of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in
a manner "not opposed to the best interest of the Corporation" referred to in
this Article.
(iii) The term "party" includes any individual who is or was a plaintiff,
defendant or respondent in any action, suit or proceeding, or who is threatened
to be made a named defendant or respondent in any action, suit or proceeding.
(iv) The term "official capacity," when used with respect to a director,
shall mean the office of director of the Corporation; and when used with
respect to an individual other than a director, shall mean the office in the
Corporation held by the officer or the employment or agency relationship
undertaken by the employee or agent on behalf of the Corporation. "Official
capacity" does not include service for any other foreign or domestic
corporation or any partnership, joint venture, trust, employee
<PAGE> 37
benefit plan, or other enterprise, whether for profit or not.
ARTICLE XIII
Severability
In the event that any Article or Section (or portion thereof) of these
Restated Articles shall be found to be invalid, prohibited or unenforceable for
any reason, the remaining provisions, or portion thereof, of these Restated
Articles shall be deemed to remain in full force and effect, and shall be
construed as if such invalid, prohibited or unenforceable provision had been
stricken herefrom or otherwise rendered inapplicable, it being the intent of
the Corporation and its stockholders that each such remaining provision (or
portion thereof) of these Restated Articles remain, to the fullest extent
permitted by law, applicable and enforceable as to all stockholders
notwithstanding any such findings.
9788
<PAGE> 1
Exhibit 3.2
AMENDED AND RESTATED
CODE OF BY-LAWS
OF
EMMIS COMMUNICATIONS CORPORATION
Effective March 1, 1994
(As Amended Through July 16, 1998)
ARTICLE I
Identification and Offices
Section 1.1. Name. The name of the Corporation is Emmis Communications
Corporation (hereinafter referred to as the "Corporation").
Section 1.2. Registered Office. The registered office and registered agent
of the Corporation is as provided and designated in the Corporation's Amended
and Restated Articles of Incorporation, as the same may be amended from time to
time (the "Articles"). The Board of Directors may, from time to time, change its
registered office or registered agent . On or before the day that any such
change is to become effective, a certificate of such change shall be filed with
the Secretary of State of the State of Indiana.
Section 1.3. Other Offices. The Corporation may establish and maintain such
other offices, within or without the State of Indiana, as are from time to time
authorized by the Board of Directors. The principal office of the Corporation is
950 North Meridian Street, Suite 1200, Indianapolis, Indiana 46204.
ARTICLE II
Meetings of Shareholders
<PAGE> 2
Section 2.1. Place of Meeting. All meetings of the shareholders of the
Corporation (the "Shareholders") shall be held at the principal office of the
Corporation in the State of Indiana or at such other place within or without the
State of Indiana as may be fixed from time to time by the Board of Directors,
the Chairman of the Board or the President.
Section 2.2. Annual Meeting. The annual meeting of the Shareholders shall
be held each year during the last five (5) business days of June for the purpose
of electing Directors and for the transaction of such other business as may
properly come before the annual meeting. If for any reason an annual meeting is
not held during the time period herein provided, such annual meeting maybe held
at any time thereafter, or the business to be transacted at such annual meeting
may be transacted at any special meeting of the Shareholders called for that
purpose.
Section 2.3. Special Meetings. Special meetings of all Shareholders or a
class of Shareholders for any purpose or purposes, unless otherwise prescribed
by law or the Articles, may be called by the Chairman of the Board, President,
the President or the Board of Directors. In addition, special meetings of all
Shareholders may be called by the holders of at least fifty percent (50%) of the
combined voting power of the outstanding shares upon delivery to the
Corporation's Secretary or Assistant Secretary of one or more written demands,
signed and dated, describing the purpose or purposes for which the special
meeting is to be held.
<PAGE> 3
Section 2.4. Notice of Meetings. Written notice of the place, date and hour
of each meeting of the Shareholders and, in the case of a special meeting, the
purpose or purposes for which such meeting is called, shall be mailed or
delivered, not less than ten (10) days nor more than sixty (60) days prior to
the meeting, to each Shareholder of record entitled to notice of such meeting.
If such notice is mailed, it shall be deemed to have been given to a Shareholder
when deposited in the United States mail, postage prepaid, addressed to the
Shareholder at his address as it appears on the records of Shareholders of the
Corporation. No notice shall be required to be given by mail or otherwise where
the meeting is an adjourned meeting and the date, time and place of the meeting
were announced at the time of adjournment.
Section 2.5. Waiver of Notice. Notice of any meeting may be waived in
writing by a Shareholder before or after the date and time stated in the notice.
Attendance by a Shareholder at a meeting in person or by proxy waives (i)
objection to lack of notice or defective notice of the meeting unless the
Shareholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting, and (ii) objection to consideration of a
particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the Shareholder objects to considering
the matter when it is presented.
Section 2.6. Quorum; Adjourned Meetings. Except as otherwise required by
law, the presence in person or by proxy of the holders of record of a majority
of the combined voting power of the outstanding shares entitled to vote at a
meeting of the Shareholders shall constitute a quorum for the transaction of
business at such meeting. In case a quorum shall not be present at a meeting,
those present may adjourn to such day as they shall, by majority vote, agree
upon, without notice
<PAGE> 4
other than announcement at the meeting of the date, time and place of the
adjourned meeting, unless the date of the adjourned meeting requires that the
Board of Directors fix a new record date therefor, in which case notice of the
adjourned meeting shall be given. At adjourned meetings at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as originally noticed. If a quorum is present, the Shareholder may
continue to transact business until adjournment notwithstanding the withdrawal
of enough Shareholders to leave less than a quorum.
Section 2.7. Voting. At each meeting of the Shareholders, every Shareholder
entitled to vote shall have the right to vote either in person or by proxy, but
no proxy shall be valid after eleven (11) months unless a longer period is
expressly provided in the appointment. Upon the demand of any Shareholder, the
vote upon any question before the meeting shall be by ballot. A plurality vote
of the voting power of the outstanding shares that are entitled to vote for the
election of a Director and that are represented in person or by proxy at any
meeting at which a quorum for such election is present, shall be sufficient to
elect the Director. On all other matters, the action or question shall be
decided by the vote of a majority of the combined voting power of the
outstanding shares represented in person or by proxy at the meeting at the time
of the vote, except as otherwise required by law, the Articles or these By-Laws.
Section 2.8. Closing of Books. The Board of Directors may fix a time, not
exceeding seventy (70) days preceding the date of any meeting of Shareholders,
as a record date for the determination of the Shareholders entitled to notice
of, and to vote at, such meeting, notwithstanding any transfer of shares on the
books of the Corporation after any record date so fixed. The Board of Directors
may close the books of the Corporation against the transfer of shares during the
whole or any part of such period. If the Board of Directors fails to fix a
record date for determination of the Shareholders entitled to notice of, and to
vote at, any meeting of Shareholders, the record date shall be the twentieth
(20th) day preceding the date of such meeting.
Section 2.9. Organization of Meetings. The Chairman of the Board, or in his
absence the President or any person appointed by the Chairman of the Board,
shall preside at and act as
<PAGE> 5
chairman of all meetings of the Shareholders; and the Secretary, or in his
absence any person appointed by the Chairman of the Board, shall act as
secretary of the meeting. The order of business and all other matters of
procedure at every meeting of the Shareholders may be determined by the
presiding officer.
Section 2.10. Shareholder List. The Secretary shall prepare before each
meeting a complete list of the Shareholders entitled to notice of such meeting,
arranged in alphabetical order by class of shares (and each series within a
class), and showing the address of, and the number of shares entitled to vote
held by, each Shareholder (the "Shareholder List"). Beginning five business days
before the meeting and continuing throughout the meeting, the Shareholder List
shall be on file at the Corporation's principal office or at a place identified
in the meeting notice in the city where the meeting will be held, and shall be
available for inspection by any Shareholder entitled to vote at the meeting. On
written demand, made in good faith and for a proper purpose and describing with
reasonable particularity the Shareholder's purpose, and if the Shareholder List
is directly connected with the Shareholder's purpose, a Shareholder (or such
Shareholder's agent or attorney authorized in writing) shall be entitled to
inspect and to copy the Shareholder List, during regular business hours and at
the Shareholder's expense, during the period the Shareholder List is available
for inspection. The original stock register or transfer book, or a duplicate
thereof kept in the State of Indiana, shall be the only evidence as to who are
the Shareholders entitled to examine the Shareholder List, or to notice of or to
vote at any meeting.
ARTICLE III
The Board of Directors
Section 3.1. General Powers. The business and affairs of the Corporation
shall be managed by or under the authority of its Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by law, the Articles or these By-Laws required to be exercised
or done by the Shareholders.
Section 3.2. Number, Qualification and Term of Office. The Corporation
shall have nine (9) directors (the "Directors") who need not be Shareholders.
Each of the Directors shall hold
<PAGE> 6
office until the annual meeting of Shareholders next held after such Director's
election and until such Director's successor shall have been elected and shall
qualify, or until the earlier death, resignation, removal, or disqualification
of such Director. The Chairman of the Board shall preside at each Board of
Directors meeting, and in his absence, the President or any person appointed by
the Chairman of the Board shall preside at the meeting.
Section 3.3. Annual Board Meeting. Unless otherwise determined by the Board
of Directors, the Board of Directors shall meet each year immediately after the
annual meeting of the Shareholders, at the place where such meeting of the
Shareholders has been held, for the purpose of organization, election of
officers and consideration of any other business that may properly be brought
before such annual meeting of the Board of Directors. No notice shall be
necessary for the holding of the annual meeting of the Board of Directors. If
the annual meeting of the Board of Directors is not held as above provided, the
election of officers may be held at any subsequent duly constituted meeting of
the Board of Directors.
Section 3.4. Regular Board Meetings. Regular meetings of the Board of
Directors may be held at stated times or from time to time, and at such place,
either within or outside the State of Indiana, as the Board of Directors may
determine, without call and without notice.
Section 3.5. Special Board Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board or the
President, at such place (within or outside the State of Indiana), date and hour
as specified in the respective notices of such meetings. Special meetings of the
Board of Directors may be called on twenty-four (24) hours notice if notice is
given to each Director personally or by telephone or telecopier, or on five (5)
days notice if notice is mailed to each Director.
Section 3.6. Waiver of Notice and Assent. A Director may waive notice of
any meeting of the Board of Directors before or after the date and time of the
meeting stated in the notice by a written waiver signed by the Director and
filed with the minutes or corporate records. A Director's attendance at or
participation in a meeting shall constitute a waiver of notice of such meeting
and assent to any corporate action taken at such meeting, unless (i) the
Director at the
<PAGE> 7
beginning of the meeting (or promptly upon his arrival) objects to the holding
the meeting of or transacting business at the meeting and does not thereafter
vote for or assent to action taken at the meeting; (ii) the Director's dissent
or abstention from the action taken is entered in the minutes of such meeting;
or (iii) the Director delivers written notice of his dissent or abstention to
the presiding office at such meeting before its adjournment or to the Secretary
immediately after its adjournment. The right of dissent or abstention is not
available to a Director who votes in favor of the action taken.
Section 3.7. Quorum. At all meetings of the Board of Directors, a majority
of the total authorized number of Directors shall constitute a quorum for the
transaction of any business, except (i) as provided in the Articles, (ii) for
the purpose of filling vacancies, a majority of Directors then in office shall
constitute a quorum, and (iii) a lesser number may adjourn a meeting from time
to time until a quorum is present. The act of a majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, except as otherwise provided by law, the Articles or these
By-Laws.
Section 3.8. Conference Communications. Any or all Directors may
participate in any meeting, or of any duly authorized committee of Directors, by
any means of communications through which the Directors may simultaneously hear
each other during such meeting. For the purposes of establishing a quorum and
taking any action at the meeting, such Directors participating pursuant to this
Section 3.8 shall be deemed present in person at the meeting, and the place of
the meeting shall be the place of origination of the conference communication.
Section 3.9. Vacancies; Newly Created Directorships. Any vacancy occurring
in the Board of Directors, including any vacancy resulting from an increase in
the number of Directors, may be filled by a majority vote of the Directors then
in office, although less than a quorum. A Director elected to fill a vacancy or
a newly created Directorship shall hold office until his successor has been
elected and qualified or until his earlier death, resignation or removal. Any
such vacancy or newly created Directorship may also be filled at any time by a
vote of the Shareholders entitled to vote on the election of the Director.
<PAGE> 8
Section 3.10. Removal. Any Director may be removed from office at any time,
with or without cause, by the affirmative vote of the holders of a majority of
the combined voting power of the shares entitled to vote for the election of
such Director, cast at a special meeting of such holders called for such
purpose. Removal of a Director by the Board of Directors shall require the
affirmative vote of the number of Directors constituting a majority of the total
authorized number of Directors.
Section 3.11. Committees. A resolution approved by the affirmative vote of
a majority of the Board of Directors may establish committees having the
authority of the Board of Directors in the management of the business of the
Corporation to the extent provided in the resolution and may appoint members of
the Board of Directors to serve of them. Committees are subject to the direction
and control of, and vacancies in the membership thereof shall be filled by, the
Board, except as otherwise provided by law. A majority of the members of a
committee present at a meeting is a quorum for the transaction of business,
unless a larger or smaller proportion or number is provided in a resolution
approved by the Board of Directors.
Section 3.12. Written Action. Any action required or permitted to be taken
at a meeting of the Board of Directors may be taken without a meeting if a
consent in writing setting forth the action so taken is signed by all members of
the Board of Directors, and such written consent is filed with the minutes of
the proceedings. Such action shall be effective on the date on which the last
signature is placed on such writing or writings or such earlier or later
effective date as is set forth therein.
Section 3.13. Resignations. Any Director may resign at any time by giving
written notice to the Secretary. Such resignation shall take effect at the time
of receipt of such notice or at any later time specified therein, and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 3.14. Compensation of Directors. By resolution of the Board, each
Director may be paid his expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a stated amount as Director or a fixed sum
for attendance at each meeting of the Board of
<PAGE> 9
Directors, or both. No such payment shall preclude a Director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed, pursuant to resolution by the
Board of Directors, like compensation for attending committee meetings.
ARTICLE IV
Officers
Section 4.1. Number. The officers of the Corporation shall be chosen by the
Board of Directors and shall include a Chairman of the Board, at least one
Executive Vice President, a Secretary, and a Treasurer. The Board of Directors
may also choose additional Vice Presidents, one or more Assistant Secretaries or
Assistant Treasurers, or such other officers as they may deem advisable. Any
number of offices may be held by the same person.
Section 4.2. Election, Term of Office and Qualifications. The Board of
Director shall elect the officers of the Corporation, each of whom shall have
the powers, rights, duties, responsibilities, and terms in office provided in
these By-Laws or in a resolution of the Board of Directors not inconsistent
herewith. Except for the Chairman of the Board, no officer need be a Director.
The President and all other officers, except the Chairman of the Board, who may
be Directors, shall continue to hold office until the election and qualification
of their successors, notwithstanding an earlier termination of the directorship.
Section 4.3. Removal and Vacancies. Any officer may be removed from his
office at any time, with or without cause, by majority vote of the entire Board
of Directors. Such removal, however, shall be without prejudice to the contract
rights of the person so removed. If there is a vacancy among the officers of the
Corporation by reason of death, resignation, or otherwise, such vacancy shall be
filled for the unexpired term by the Board of Directors
Section 4.4. The Chairman of the Board. The Chairman of the Board of
Directors shall be the chief executive officer of the Corporation. The Chairman
of the Board shall preside at all meetings of the Shareholders and Directors and
shall have such other duties as may be prescribed from time to time by the Board
of Directors. He may execute and deliver in the name of the
<PAGE> 10
Corporation, any deeds, mortgages, bonds, contracts or other instruments
pertaining to the business of the Corporation unless the authority to execute
and deliver is required by law to be exercised by another person or is delegated
by the Articles or these By-Laws or by the Board of Directors to some other
officer or agent of the Corporation.
Section 4.5. President. The President shall have general active management
of the business of the Corporation. In the absence of the Chairman of the Board,
he shall preside at all meetings of the Shareholders and Directors. He shall see
that all orders and resolutions of the Board of Directors are carried into
effect. He may execute and deliver, in the name of the Corporation, any deeds,
mortgages, bonds, contracts, or other instruments pertaining to the business of
the Corporation unless such authority to execute and deliver is required by law
to be exercised by another person or is delegated by the Articles or these
By-Laws or by the Board of Directors to some other officer or agent of the
Corporation. He shall maintain records of and, whenever necessary, certify all
proceedings of the Board of Directors and the Shareholders, and in general,
shall perform all duties usually incident to the office of the President. He
shall have such other duties as may be prescribed from time to time by the Board
of Directors.
Section 4.5.1. Radio Division President. The Radio Division President, if
one is elected, shall have general active management of all radio operations of
the Corporation. He may execute and deliver, in the name of the Corporation, any
deeds, mortgages, bonds, contracts, or other instruments pertaining to the
business of the Corporation unless the authority to execute and deliver is
required by law to be exercised by another person or is delegated by the
Articles or By-Laws or by the Board of Directors to some other officer or agent
of the Corporation. He shall have such other duties as may be prescribed from
time to time by the Board of Directors.
Section 4.5.2. International Division President. The International Division
President, if one is elected, shall have general active management of all
international operations of the Corporation. He may execute and deliver, in the
name of the Corporation, any deeds, mortgages, bonds, contracts, or other
instruments pertaining to the business of the Corporation unless the authority
to execute and deliver is required by law to be exercised by another person or
is
<PAGE> 11
delegated by the Articles or By-Laws or by the Board of Directors to some other
officer or agent of the Corporation. He shall have such other duties as may be
prescribed from time to time by the Board of Directors.
Section 4.5.3. Television Division President. The Television Division
President, if one is elected, shall have general active management of all
television operations of the Corporation. He may execute and deliver, in the
name of the Corporation, any deeds, mortgages, bonds, contracts, or other
instruments pertaining to the business of the Corporation unless the authority
to execute and deliver is required by law to be exercised by another person or
is delegated by the Articles or ByLaws or by the Board of Directors to some
other officer or agent of the Corporation. He shall have such other duties as
may be prescribed from time to time by the Board of Directors.
Section 4.6. Executive Vice President and other Vice Presidents. The
Executive Vice Presidents and any other Vice Presidents shall have such powers
and shall perform such duties specified in these By-Laws or prescribed by the
Board of Directors or the President. Any Executive Vice President may execute
and deliver, in the name of the Corporation, any deeds, mortgages, bonds,
contracts, or other instruments pertaining to the business of the Corporation
unless the authority to execute and deliver is required by law to be exercised
by another person or is delegated by the Articles or By-Laws or by the Board of
Directors to some other officer or agent of the Corporation.
Section 4.7. Secretary. The Secretary shall be the secretary of and shall
attend all meetings of the Shareholders and Board of Directors record all
proceedings of such meetings in the minute book of the Corporation. He shall
give proper notice of meetings of Shareholders and Directors. He shall perform
such other duties as may be prescribed from time to time by the Board of
Directors.
Section 4.8. Assistant Secretary. The Assistant Secretary, if any, or if
there shall be more then one, the Assistant Secretaries in the order determined
by the Board of Directors or the President, shall in the absence or disability
of the Secretary, perform such other duties and have such powers and duties as
the Board of Directors or the President may prescribed from time to
<PAGE> 12
time. An Assistant Secretary may, in the event or absence of the Secretary,
attest to the execution by the Corporation of all documents.
Section 4.9. Treasurer. The Treasurer shall maintain a correct and complete
record of account showing accurately at all times the financial condition of the
Corporation. The Treasurer shall be the legal custodian of all monies, notes,
securities and other valuables which may from time to time come into the
possession of the Corporation. The Treasurer shall immediately deposit all funds
of the Corporation coming into his hands in some reliable bank or other
depositary to be designated by the Board of Directors and shall keep such bank
account in the name of the Corporation and shall perform such other duties as
may be prescribed from time to time by the Board of Directors or the President.
Section 4.10. Assistant Treasurer. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors or the President, shall in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such powers and duties as the Board of
Directors or the President may prescribe from time to time.
Section 4.12. Delegation of Authority. In the case of the absence or
disability of the President, the Radio Division President, the Television
Division President, the Executive Vice Presidents and other Vice Presidents
shall succeed to the President's power and duties in the order designated by the
Board of Directors or the President. In the case of the absence of any officer
or for any other reason that the Board of Directors may deem sufficient, the
Board of Directors may delegate the powers or duties of such officer to any
other officer or to any Director, for the time being, provided a majority of the
entire Board concurs therein.
<PAGE> 13
ARTICLE V
Certificates of Stock
Section 5.1. Certificates of Stock. All shares of the Corporation shall be
certificated shares. Every holder of stock in the Corporation shall be entitled
to have a certificate signed by the Chairman of the Board, the President, or the
Executive Vice President and the Secretary or an Assistant Secretary, certifying
the number of shares owned by him in the Corporation. The certificates of stock
shall be number in the order of their issue. Each certificate shall set forth
the number and class of shares and series, if any, and shall state that the
Corporation will furnish information relating to the rights, preferences and
limitations of the class or series upon request.
Section 5.2. Issuance of Shares. The Board of Directors is authorized to
cause to be issued shares of the Corporation up to the full amount authorized by
the Articles in such amounts as determined by the Board of Directors and
permitted by law. If shares are issued for promissory notes or for promises to
render services in the future, the Corporation must comply with I.C.
23-1-53-2(b).
Section 5.3. Facsimile Signatures. Where a certificate is signed (i) by a
transfer agent or an assistant transfer agent, or (ii) by a transfer clerk
acting on behalf of the Corporation, and a registrar, the signature of the
Chairman of the Board, the President, the Vice President, Secretary or Assistant
Secretary may be a facsimile. In case any officer or officers who have signed or
whose facsimile signature or signatures have been used on any such certificate
or certificates shall cease to be such officer or officers of the Corporation,
such certificate or certificates may nevertheless be adopted by the Corporation
and be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures have been
used thereon had not ceased to be such officer or officers of the Corporation.
Section 5.4. Lost or Destroyed Certificates. Any Shareholder claiming a
certificate for shares to be lost, stolen or destroyed shall make an affidavit
of that fact in such form as the Board of Directors or President shall require
and shall, if the Board of Directors so requires, give the
<PAGE> 14
Corporation a bond of indemnity in a form, in an amount, and with one or more
sureties satisfactory to the Board of Directors, the Chairman of the Board or
the President, to indemnify the Corporation against any claim which may be made
against it on account of the reissue of such certificate, whereupon a new
certificate may be issued in the same tenor and for the same number of shares as
the one alleged to have been lost, stolen or destroyed.
Section 5.5. Transfers of Stock. Subject to the power of the Board of
Directors under Article XI of the Articles to provide certain transfers of stock
ownership to Aliens (as defined in the Articles), upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate for shares
fully endorsed or accompanies by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 5.6. Registered Shareholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
Section 5.7. Restrictions on Ownership, Voting and Transfer Right to
Redeem. Article XI of the Articles restricts the ownership, voting and transfer
of shares of capital stock of the Corporation to the extent necessary to prevent
ownership of such shares by Aliens from violating the Communications Act of
1934, as amended (the "Communications Act"), and the regulations of the Federal
Communications Commission (the "FCC Regulations"). In addition, Article XI of
the Articles entitles the Corporation to redeem shares of capital stock
determined by the Board of Directors to be owned beneficially by an Alien or
Aliens if such ownership violates the Communications Act or FCC Regulations.
Each certificate representing shares of capital stock of the Corporation shall
contain a legend referencing such restrictions and right to redeem set forth in
Article XI of the Articles.
<PAGE> 15
ARTICLE VI
General Provisions
Section 6.1. Dividends. Subject to applicable law and the Articles,
dividends upon the capital stock of the Corporation may be declared by the Board
of Directors at any regular or special meeting and may be paid in cash, in
property or in shares of the capital stock.
Section 6.2. Record Date. Subject to any provisions of the Articles, the
Board of Directors may fix a date not more than 120 days before the date fixed
for the payment of any dividend as the record date for the determination of the
Shareholders entitled to receive payment of the dividend, and, in such case,
only Shareholders of record on the date so fixed shall be entitled to receive
payment of such dividend notwithstanding any transfer of shares on the books of
the Corporation after the record date. The Board of Directors may close the
books of the Corporation against the transfer of shares during the whole or any
part of such period.
Section 6.3. Checks. All agreements, checks or demands for money or notes
of the Corporation shall be signed by such officer of officers or such other
person or persons as the Board of Directors may from time to time designate. If
no such designation is made, they may be signed by either the Chairman of the
Board, the President, the Executive Vice President, or Secretary, singly.
Section 6.4. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board and in the absence of such resolution, the
Corporation shall have a February 28/29 fiscal year.
Section 6.5. Seal. The Corporation shall have no corporate seal.
ARTICLE VII
Amendments
Section 7.01. Any amendment of these By-Laws shall require approval by the
number of Directors constituting a majority of the total authorized number of
Directors.
Section 7.2. Amendments to be Consistent with Applicable Law. Any amendment
of these By-Laws shall be consistent with the Articles and provisions of
applicable law then in effect,
<PAGE> 16
including without limitation, the Communications Act and the FCC Regulations.
ARTICLE VIII
Securities of Other Corporations
Unless otherwise ordered by the Board of Directors, the Chairman of the
Board or the President shall have full power and authority on behalf of the
Corporation to purchase, sell, transfer, encumber or vote any and all securities
of any other corporation owned by the Corporation, and may execute and deliver
such documents as may be necessary to effectuate such purchase, sale, transfer,
encumbrance or vote. The Board of Directors may, from time to time, confer like
powers upon any other person or persons.
ARTICLE IX
Business Combinations
Chapter 43 of the Indiana Business Corporations Law, as amended (IC
23-1-43), governing Business Combinations, shall be inapplicable to the
Corporation.
<PAGE> 1
EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
BETWEEN
PRESS COMMUNICATIONS, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
AS SELLER,
AND
EMMIS COMMUNICATIONS CORPORATION
AS BUYER
JUNE 3, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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RECITALS..........................................................................................................1
ARTICLE I - TERMINOLOGY..................................................................................1
1.1 Defined Terms..........................................................................1
1.2 Additional Defined Terms...............................................................3
ARTICLE II - PURCHASE AND SALE...........................................................................5
2.1 Sale Assets............................................................................5
(a) Tangible Personal Property....................................................5
(b) Real Property.................................................................5
(c) Permits.......................................................................5
(d) Station Agreements............................................................6
(e) Intellectual Property.........................................................6
(f) Records.......................................................................6
(g) Miscellaneous Assets..........................................................6
2.2 Excluded Assets........................................................................6
2.3 Assumption of Liabilities..............................................................7
2.4 Earnest Money..........................................................................8
2.5 Purchase Price.........................................................................8
2.6 Allocation of the Purchase Price.......................................................8
2.7 Adjustment of Purchase Price...........................................................9
2.8 Accounts Receivable...................................................................11
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER..................................................12
3.1 Organization, Good Standing and Requisite Power.......................................12
3.2 Authorization and Binding Effect of Documents.........................................12
3.3 Absence of Conflicts..................................................................12
3.4 Consents..............................................................................13
3.5 Sale Assets; Title....................................................................13
3.6 FCC Licenses..........................................................................13
3.7 Station Agreements....................................................................14
3.8 Tangible Personal Property............................................................16
3.9 Real Property.........................................................................17
3.10 Intellectual Property.................................................................17
3.11 Financial Statements..................................................................18
3.12 Absence of Certain Changes or Events..................................................19
3.13 Litigation............................................................................20
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3.14 Labor Matters.........................................................................20
3.15 Employee Benefit Plans................................................................21
3.16 Compliance with Law...................................................................22
3.17 Tax Returns and Payments..............................................................22
3.18 Environmental Matters.................................................................23
3.19 Broker's or Finder's Fees.............................................................24
3.20 Insurance.............................................................................24
3.21 Cable Television Transmission.........................................................24
3.22 Transactions with Affiliates..........................................................25
3.23 Florida Sales Tax.....................................................................25
3.24 Year 2000 Computer Compliance.........................................................25
3.25 Disclosure............................................................................25
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER....................................................25
4.1 Organization and Good Standing........................................................25
4.2 Authorization and Binding Effect of Documents.........................................26
4.3 Absence of Conflicts..................................................................26
4.4 Consents..............................................................................26
4.5 Broker's or Finder's Fees.............................................................26
4.6 Litigation............................................................................27
4.7 Buyer's Qualification.................................................................27
4.8 WARN Act..............................................................................27
ARTICLE V - OTHER COVENANTS.............................................................................27
5.1 Conduct of the Station's Business Prior to the Closing Date...........................27
5.2. Notification of Certain Matters.......................................................29
5.3 HSR Filing............................................................................29
5.4 FCC Filing; Related FCC Litigation....................................................29
5.5 Title; Additional Documents...........................................................30
5.6 Other Consents........................................................................31
5.7 Inspection and Access.................................................................31
5.8 Confidentiality.......................................................................31
5.9 Publicity.............................................................................32
5.10 Material Adverse Change...............................................................32
5.11 Reasonable Best Efforts...............................................................32
5.12 FCC Reports and Applications..........................................................32
5.13 Tax Returns and Payments..............................................................32
5.14 No Solicitation.......................................................................32
5.15 Certified Resolutions.................................................................33
5.16 Audited Financial Statements..........................................................33
5.17 Survey and Environmental Inspection...................................................33
</TABLE>
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5.18 Broker's Fee..........................................................................34
5.19 Covenants of Buyer pending Closing....................................................34
5.20 Cable Television Carriage.............................................................34
5.21 Digital Television Transmission.......................................................34
5.22 Programming Agreements................................................................35
ARTICLE VI - CONDITIONS PRECEDENT TO THE OBLIGATION OF
BUYER TO CLOSE........................................................................35
6.1 Accuracy of Representations and Warranties; Closing Certificate.......................35
6.2 Performance of Agreement..............................................................36
6.3 FCC Order.............................................................................36
6.4 HSR Act...............................................................................36
6.5 Opinions of Seller's Counsel..........................................................36
6.6 Required Consents.....................................................................37
6.7 Delivery of Closing Documents.........................................................37
6.8 No Adverse Proceedings................................................................37
6.9 No Material Adverse Change............................................................37
ARTICLE VII - CONDITIONS PRECEDENT TO THE OBLIGATION OF
SELLER TO CLOSE.......................................................................38
7.1 Accuracy of Representations and Warranties............................................38
7.2 Performance of Agreement..............................................................38
7.3 FCC Order.............................................................................38
7.4 HSR Act...............................................................................38
7.5 Opinion of Buyer's Counsel............................................................38
7.6 No Adverse Proceedings................................................................39
7.7 Delivery of Closing Documents.........................................................39
ARTICLE VIII - CLOSING..................................................................................39
8.1 Time and Place........................................................................39
8.2 Documents to be Delivered to Buyer by Seller..........................................39
8.3 Deliveries to Seller by Buyer.........................................................40
ARTICLE IX - INDEMNIFICATION............................................................................41
9.1 Survival..............................................................................41
9.2 Indemnification by Seller.............................................................41
9.3 Indemnification by Buyer..............................................................42
9.4 Administration of Indemnification.....................................................42
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ARTICLE X - TERMINATION................................................................................43
10.1 Right of Termination..................................................................43
10.2 Obligations Upon Termination..........................................................44
10.3 Termination Notice....................................................................45
ARTICLE XI - CONTROL OF STATION.........................................................................45
ARTICLE XII - EMPLOYMENT MATTERS........................................................................46
12.1 Transfer of Employees.................................................................46
12.2 Employee Benefit Plans................................................................47
12.3 Employment Agreements.................................................................47
ARTICLE XIII - MISCELLANEOUS............................................................................48
13.1 Further Actions.......................................................................48
13.2 Payment of Expenses...................................................................48
13.3 Specific Performance..................................................................48
13.4 Notices...............................................................................48
13.5 Entire Agreement......................................................................49
13.6 Binding Effect; Benefits..............................................................50
13.7 Assignment............................................................................50
13.8 Governing Law.........................................................................50
13.9 Amendments and Waivers................................................................50
13.10 Severability..........................................................................50
13.11 Headings..............................................................................51
13.12 Counterparts..........................................................................51
13.13 References............................................................................51
13.14 Schedules.............................................................................51
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<PAGE> 6
SCHEDULES:
Schedule 2.2 Excluded Assets
Schedule 3.3 Required Consents and Filings (Seller)
Schedule 3.5(a) Excluded Material Assets
Schedule 3.5(b) 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 3.11 Financial Statements
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 3.20 Insurance
Schedule 3.21 Cable Television Transmissions
Schedule 3.22 Transactions with Affiliates
Schedule 3.24 Year 2000
Schedule 4.3 Required Consent and Filings (Buyer)
Schedule 6.6 Required Consents
Schedule 12.1 Excluded Employees
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<PAGE> 7
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of June 3,
1999, between PRESS COMMUNICATIONS, LLC, a Delaware limited liability company
("Seller"), and EMMIS COMMUNICATIONS CORPORATION, an Indiana corporation
("Buyer").
RECITALS:
WHEREAS, Seller owns and operates television station WKCF-TV, Channel
18, Clermont, Florida (the "Station"); and
WHEREAS, Buyer desires to acquire substantially all the assets used or
useful in the business and operation of the Station, and Seller is willing to
convey such assets to Buyer.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller 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, directly or indirectly controls, is controlled by, or is
under common control with, the specified Person.
Appraisal Firm: BIA Consulting, Inc.
Code: The Internal Revenue Code of 1986, as amended.
Documents: This Agreement, all Exhibits and Schedules
hereto, and each other agreement, certificate or instrument delivered
in connection with this Agreement.
Earnest Money: As of a given date, the amount deposited as of
such date with the Escrow Agent under the Escrow Agreement, together
with the interest and other earnings thereon as of such date.
Escrow Agent: First Union National Bank, a national banking
association headquartered in Charlotte, North Carolina.
Escrow Agreement: The Escrow Agreement, dated as of the date
hereof, by and among Seller, Buyer and the Escrow Agent relating to the
deposit, holding, investment and disbursement of the Earnest Money.
FCC: Federal Communications Commission.
-1-
<PAGE> 8
FCC Order: The order or decision of the FCC (or its delegatee)
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 normally applicable 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.
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 filing of
or agreement to give any financing statement with respect to any assets
or property under the Uniform Commercial Code or comparable law of any
jurisdiction.
Loss: With respect to any person or entity, any and all costs,
obligations, liabilities, demands, claims, settlement payments, awards,
judgments, fines, penalties, damages and reasonable out-of-pocket
expenses, including court costs and reasonable attorney fees, whether
or not arising out of a third party claim.
Material Adverse Condition: A condition which would restrict,
limit, increase the cost or burden of or otherwise adversely affect or
impair, in each case in any material respect, the right of Buyer to the
ownership, use, control or operation of the Station or the proceeds
therefrom; provided, however, that (i) any condition which requires (A)
that Buyer or any of its subsidiaries file periodic reports with the
FCC regarding compliance with rules and policies of the FCC pertaining
to affirmative action and equal opportunity employment, or (B) that the
Station be operated in accordance with conditions similar to and not
more adverse than those contained in the present FCC Licenses issued
for operation of the Station, shall not be a Material Adverse
Condition, and (ii) the pendency of a petition for reconsideration,
application for review, notice of appeal or other pleading contesting
the issuance of the FCC Order shall not in any event constitute a
Material Adverse Condition.
Material Adverse Effect: A material adverse effect on the
assets, business, operations, financial condition or results of
operations of the Station.
Permitted Lien: (i) Any statutory Lien which secures a payment
not yet due that arises, and is customarily discharged, in the ordinary
course of Seller's business; (ii) Liens arising in connection with
equipment or maintenance financing or leasing under the terms of any
Station Agreement; and (iii) any other Liens or imperfections in
Seller's 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.
Person: Any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization,
other form of business or legal entity or governmental authority.
2
<PAGE> 9
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.
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).
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 Seller and the purchase by Buyer of the
Station 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.
1.2 ADDITIONAL DEFINED TERMS.
As used herein, the following terms shall have the meanings defined in
the section indicated below:
Acquisition Proposal Section 5.14
Act Section 3.6(b)
Adjustment Amount Section 2.7(a)
Agreement Introduction
Appraisal Report Section 2.6(a)
Arbitrating Firm Section 2.7(e)
Assumed Obligations Section 2.3(a)
Benefit Plans Section 3.15(a)
Buyer Introduction
Broker Section 3.19
Buyer's Loss Section 9.2(a)
Buyer's Trade Credit Section 2.7(b)
Cable Agreements Section 5.20
Carrying System Section 3.21
CERCLA Section 3.18(f)
Closing Section 8.1
Closing Date Section 8.1
Collection Period Section 2.8(b)
DTV Application Section 5.21
Employees Section 3.15(a)
ERISA Section 3.15(a)
Excluded Assets Section 2.2
FCC Licenses Section 3.6(a)
HSR Act Section 5.3
3
<PAGE> 10
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(a)
Leased Real Property Section 5.18
Mid-Range Section 2.7(e)
Multiemployer Plan Section 3.15(c)
New Programming Document Section 5.22
Pending FCC Litigation Section 5.4(b)
Pending Seller FCC Litigation Section 5.4(c)
Preliminary Adjustment Report Section 2.7(b)
Purchase Price Section 2.5(a)
Real Property Section 2.1(b)
Real Property Lease Section 3.9(c)
Related Persons Section 3.15(a)
Retained Receivables Section 2.8(a)
Sale Assets Section 2.1
Seller Introduction
Seller's Enforcement Costs Section 10.2(c)
Seller's Liquidated Damage Amount Section 10.2(c)
Seller's Loss Section 9.3(a)
Seller's Trade Credit Section 2.7(b)
Station Recitals
Station Agreements Section 2.1(d)
Survival Period Section 9.1
Tangible Personal Property Section 2.1(a)
Threshold Section 9.2(b)
Trade Agreements Section 3.7(a)
Transfer Objection Section 5.4(b)
Transferred Employees Section 12.1(a)
ARTICLE II
PURCHASE AND SALE
2.1 SALE ASSETS.
Upon and subject to the terms and conditions provided herein, on the
Closing Date, Seller will sell, transfer, assign and convey to Buyer, and Buyer
will purchase from Seller, all of Seller's right, title and interest in and to
all tangible and intangible assets (except Excluded Assets) principally used or
useful in the operation of the Station as now or previously 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 Seller and principally used in the operation of the
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 Seller between
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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 Seller (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 for use by the Station between the
date hereof and the Closing Date (the "Real Property").
(c) Permits. The FCC Licenses and all other governmental permits,
licenses and authorizations (and any renewals, extensions, amendments or
modifications thereof) now held by Seller or hereafter obtained by Seller
between the date hereof and the Closing Date, that are necessary for the
operation of the Station.
(d) Station Agreements. All rights of Seller in, to and under all
contracts, leases, agreements, commitments and other arrangements, and any
amendments or modifications, principally used or useful in the operation of the
Station as of the date hereof (including, but not limited to, those listed on
Schedule 3.7(b)) or made or entered into by Seller between the date hereof and
the Closing Date in compliance with this Agreement principally for use by the
Station (the "Station Agreements").
(e) Intellectual Property. All trade names, trademarks, service
marks, copyrights, patents, jingles, slogans, symbols, logos, the call letters
WKCF, inventions, and any other proprietary material, process, trade secret or
trade right principally used by Seller in the operation of the 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 Seller in connection with the operation of the 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 Seller shall
retain exclusive rights to, all right, title and interest whatsoever in or to
the name "Press Communications" or any derivations thereof or any signs, symbols
or logos bearing the name "Press Communications".
(f) Records. The originals or true and complete copies of all of the
books, records, accounts, files, logs, ledgers and journals pertaining to or
used in the operation of the Station, including, but not limited to, any of such
items stored on computer disks or tapes.
(g) Miscellaneous Assets. Any other tangible or intangible assets,
properties or rights of any kind or nature not otherwise described above in this
Section 2.1 and now or before Closing owned or used by Seller principally in
connection with the operation of the Station, including but not limited to all
goodwill of the Station.
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 deposit, marketable securities, cash deposits made by Seller to
secure contract obligations (except to the extent Seller receives a credit
therefor under Section 2.7), and all accounts receivable (other than non-cash
receivables under Trade Agreements) for services performed or for goods sold or
delivered by Seller prior to the Closing Date;
(b) All rights and claims of Seller whether mature, contingent or
otherwise, against third parties with respect to, or which are made under or
pursuant to, other Excluded Assets;
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(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;
(e) All claims of Seller with respect to any Tax refunds;
(f) All of Seller's rights under or pursuant to this Agreement or any
other rights in favor of Seller pursuant to the other Documents;
(g) All loan agreements and other instruments evidencing indebtedness
for borrowed money;
(h) 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;
(i) 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;
(j) Seller's minute books, ownership transfer records and other
entity records, and any records relating to Excluded Assets and to Liabilities
other than the Assumed Obligations;
(k) Assets of Seller which are not principally used or useful in the
operation or business of the Station, it being understood that Seller engages in
other businesses and activities, including other broadcasting business; and
(l) The assets listed on Schedule 2.2.
2.3 ASSUMPTION OF LIABILITIES.
(a) Buyer shall at Closing assume and agree to pay, discharge and
perform the following Liabilities of Seller and the Station (collectively, the
"Assumed Obligations"):
(i) All Liabilities arising under all Station 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 Seller upon or prior to Closing under
any Station Agreement).
(ii) Provided that Seller pays Buyer the amount, if any, owed
by Seller after Closing under Section 2.7, the Assumed Obligations
shall also include such other Liabilities of Seller and the Station to
the extent, and only to the extent, the amount thereof is included as a
credit to Buyer in calculating the Adjustment Amount as ultimately
determined pursuant to Section 2.7.
(b) Except for the Assumed Obligations, Buyer shall not assume or in
any manner be liable for any Liabilities of Seller of any kind or nature, all of
which Seller shall pay, discharge and perform when due.
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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 Twelve
Million Five Hundred Thousand Dollars ($12,500,000).
(b) The Escrow Agent shall hold the Earnest Money under the terms of
the Escrow Agreement in trust for the benefit of Seller and Buyer.
(c) If Closing does not occur, the Earnest Money shall be delivered
to Seller or returned to Buyer in accordance with Section 10.2, and if Closing
does occur, the Earnest Money shall be applied at Closing as provided in Section
2.5.
2.5 PURCHASE PRICE.
(a) The purchase price for the Sale Assets ("Purchase Price") shall
be One Hundred Ninety-One Million Five Hundred Thousand Dollars ($191,500,000),
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 Seller by wire
transfer of immediately available funds pursuant to joint written
instructions from Seller and Buyer.
(ii) The sum of (A) One Hundred Ninety-One Million Five
Hundred Thousand Dollars ($191,500,000) minus (B) the Earnest Money
shall be paid by Buyer to Seller on the Closing Date by wire transfer
of immediately available funds pursuant to written instructions from
Seller to Buyer.
(b) Seller shall furnish Buyer wire instructions at least two (2)
business days prior to the Closing Date.
2.6 ALLOCATION OF THE PURCHASE PRICE.
(a) Seller and Buyer shall use good faith efforts to agree upon,
prior to Closing, an allocation of the Purchase Price among the Sale Assets
which, if agreed upon 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 Seller and Buyer are unable to agree on such allocation within such sixty
(60) day period, Seller and Buyer agree to retain the Appraisal Firm to appraise
the classes of Sale Assets. The Appraisal Firm shall be instructed to perform an
appraisal of the classes of Sale Assets and to deliver a report to Seller and
Buyer as soon as reasonably practicable (the "Appraisal Report"). Buyer and
Seller shall each pay one-half of the fees, costs and expenses of the Appraisal
Firm regardless of whether Closing occurs.
(b) Buyer and Seller each agree to report the allocation determined
in accordance with Section 2.6(a) to the Internal Revenue Service in the form
required by Treasury Regulations Section 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) All operating income and operating expenses of the Station shall
be adjusted and allocated between Seller and Buyer, and an adjustment in the
Purchase Price shall be made as provided in this Section, to
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the extent necessary to reflect the principle that all such income and expenses
attributable to the operation of the Station on or before the date preceding the
Closing Date shall be for the account of Seller, and all such income and
expenses attributable to the operation of the Station on and after the Closing
Date shall be for the account of Buyer. The net amount by which the Purchase
Price is to be increased or decreased in accordance with this Section is herein
referred to as the "Adjustment Amount".
(b) Without limiting the generality of the foregoing:
(i) Seller shall receive a credit for the unapplied portion,
as of Closing, of the security deposits made by Seller under those
Station Agreements assumed by Buyer at Closing in accordance with
Section 2.3.
(ii) Buyer shall be given a credit ("Buyer's Trade Credit") in
the amount equal to the financial value (determined in accordance with
generally accepting accounting principles) of all time required to be
broadcast on the Station on or after the Closing Date under the Trade
Agreements, and Seller shall be given a credit ("Seller's Trade
Credit") for the financial value (determined in accordance with
generally accepted accounting principles) of the goods and services to
be received on or after the Closing Date under the Trade Agreements,
provided that Seller's Trade Credit shall in no event exceed Buyer's
Trade Credit;
(iii) Buyer shall be given a credit equal to the amount or
value of both cash and noncash consideration that Seller has not paid
or provided prior to the Closing Date for programming run by the
Station prior to the Closing Date.
(iv) with respect to each vacation or portion thereof earned
but not taken before the Closing Date by each Station employee hired by
Buyer, Buyer shall receive a credit equal to the compensation
equivalent thereof, including applicable payroll taxes.
(v) The credit given Seller for each prepaid expense shall not
exceed an amount commensurate with the benefit therefrom to be received
by Buyer after Closing.
(c) To the extent not inconsistent with the express provisions of
this Agreement, the allocations made pursuant to this Section shall be made in
accordance with generally accepted accounting principles.
(d) Three (3) business days prior to the Closing Date, Seller shall
provide Buyer with a statement setting forth a detailed computation of Seller's
reasonable and good faith estimate of the Adjustment Amount as of the Closing
Date (the "Preliminary Adjustment Report"). If the Adjustment Amount reflected
on the Preliminary Adjustment Report is a credit to Buyer, the Purchase Price
payable on the Closing Date shall be reduced by the amount of the preliminary
Adjustment Amount, and if the Adjustment Amount reflected on the Preliminary
Adjustment Report is a charge to Buyer, the Purchase Price payable on the
Closing Date shall be increased by the amount of such preliminary Adjustment
Amount. Thereafter, Seller and its auditors and Buyer and its auditors shall
have ninety (90) days after the Closing Date to review the Preliminary
Adjustment Report and the related books and records of Seller, and Buyer and
Seller will in good faith seek to reach agreement on the final Adjustment Amount
as of the Closing Date. If agreement is reached within ninety (90) days after
the Closing Date, then upon reaching such agreement, Seller shall pay to Buyer
or Buyer shall pay to Seller, as the case may be, an amount equal to the
difference between (i) the agreed Adjustment Amount and (ii) the preliminary
Adjustment Amount indicated in the Preliminary Adjustment Report. Any such
payment shall be
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made as provided in Section 2.7(g). If agreement is not reached within such
90-day period, then the dispute resolutions of Section 2.7(e) shall apply.
(e) If Seller and its auditors and Buyer and its auditors do not,
within the 90-day period specified in Section 2.7(d), reach an agreement on the
Adjustment Amount as of the Closing Date, then an independent accounting firm of
recognized national standing (the "Arbitrating Firm") selected by Seller and
Buyer shall resolve the disputed items. If Seller and Buyer do not agree on the
Arbitrating Firm within five (5) days, the Arbitrating Firm shall be a
nationally recognized accounting firm selected by lot (after excluding one firm
designated by Seller and one firm designated by Buyer). Buyer and Seller shall
each inform the Arbitrating Firm in writing as to their respective positions
concerning the Adjustment Amount as of the Closing Date, and each shall make
readily available to the Arbitrating Firm any books and records and work papers
relevant to the preparation of such firm's computation of the Adjustment Amount.
The Arbitrating Firm shall be instructed to complete its analysis within thirty
(30) days from the date of its engagement and upon completion to inform the
parties in writing of its own determination of the Adjustment Amount, the basis
for its determination, whether Buyer's or Seller's written position as to the
Adjustment Amount is closer to its own determination, and whether its own
determination of the Adjustment Amount is within a range that (i) equals twenty
percent (20%) of the absolute difference between the written positions of Buyer
and Seller as to the Adjustment Amount and (ii) has a midpoint equal to the
median of such written positions of Buyer and Seller (the "Mid-Range"). Any
determination by the Arbitrating Firm in accordance with this Section shall be
final and binding on the parties for purposes of this Section. Within five (5)
days after the Arbitrating Firm delivers to the parties its written
determination of the Adjustment Amount, Seller shall pay to Buyer, or Buyer
shall pay to Seller, as the case may be, an amount equal to the difference
between (i) the Adjustment Amount as determined by the Arbitrating Firm and (ii)
the preliminary Adjustment Amount indicated in the Preliminary Adjustment
Report. Any such payment shall be made as provided in Section 2.7(g).
(f) If the Arbitrating Firm determines that the written position of
Buyer concerning the Adjustment Amount is closer to its own determination,
Seller shall pay the fees and disbursements of the Arbitrating Firm in
connection with its analysis. If the Arbitrating Firm determines that the
written position of Seller concerning the Adjustment Amount is closer to its own
determination, Buyer shall pay the fees and disbursements of the Arbitrating
Firm in connection with its analysis. However, if the Arbitrating Firm's
determination of the Adjustment Amount is within the Mid-Range, Seller and Buyer
shall each pay one-half of the fees and disbursements of the Arbitrating Firm in
connection with its analysis.
(g) Any payments required under Section 2.7(d) or (e) shall be paid
by wire transfer in immediately available funds to the account of the payee at a
financial institution in the United States and shall for all purposes constitute
an adjustment to the Purchase Price.
2.8 ACCOUNTS RECEIVABLE.
(a) Within ten (10) days after the Closing Date, Seller shall furnish
to Buyer a true and complete list of Seller's accounts receivable (other than
non-cash receivables under Trade Agreements) arising from the operation of the
Station 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 Seller, use its
usual and customary procedures to collect the Retained Receivables as Seller's
agent for collection, provided that (i) Buyer shall not be required to commence
litigation, employ legal
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counsel or a collection agency or make any other extraordinary collection
efforts, and (ii) Buyer's obligation to act as Seller's agent in the collection
of the Retained Receivables shall terminate upon expiration of the Collection
Period. For the purpose of determining amounts collected by Buyer with respect
to the Retained Receivables, each payment by an account debtor shall be applied
to the older or oldest accounts receivable of such account debtor unless the
account debtor 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 (4) weeks during the Collection Period (and within
fifteen (15) days after the end of the Collection Period), Buyer shall deliver
to Seller a statement showing all collections of Retained Receivables made on
behalf of Seller since the last previous report and shall pay such collections
to Seller by check at the time such statement is delivered.
(d) Seller shall not engage in any collection efforts against account
debtors under the Retained Receivables during the Collection Period, other than
with respect to accounts receivable identified as in dispute as provided in
foregoing Section 2.8(b).
(e) Buyer shall not, without Seller's prior written consent,
compromise or settle for less than full value any of the Retained Receivables
unless Buyer pays Seller the full amount of any deficiency. Buyer shall be
entitled to purchase from Seller any Retained Receivable for the full amount
thereof at any time during or at the expiration of the Collection Period.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows;
3.1 ORGANIZATION, GOOD STANDING AND REQUISITE POWER.
Seller is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has all
requisite power to own, operate and lease its Sale Assets and carry on its
business. Seller is duly licensed, qualified to do business and in good standing
as a foreign limited liability company under the laws of the State of Florida.
3.2 AUTHORIZATION AND BINDING EFFECT OF DOCUMENTS.
Seller has all requisite 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 Seller and the consummation by Seller of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action (including all necessary member approvals, if any) on the part
of Seller. This Agreement has been, and each of the other Documents at or prior
to Closing will be, duly executed and delivered by Seller. This Agreement
constitutes (and each of the other Documents, when executed and delivered, will
constitute) the valid and binding obligation of Seller enforceable against
Seller in accordance with its terms.
3.3 ABSENCE OF CONFLICTS.
Except as set forth on Schedule 3.3, and except for necessary
clearances or approvals under the HSR Act or the Act, the execution, delivery
and performance by Seller of this Agreement and the other Documents, and
consummation by Seller of the transactions contemplated hereby and thereby, do
not and will not (i) conflict with
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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 obligation under, or (v)
result in the creation of any Lien upon the Sale Assets under, the provisions of
the organizational documents of Seller, any material indenture, mortgage, lease,
loan agreement or other material agreement or instrument to which Seller is
bound or affected, or any law, statute, rule, judgment, order or decree to which
Seller is subject.
3.4 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 Seller of this Agreement and the other Documents, and
consummation by Seller of the transactions contemplated hereby and thereby, do
not and will not require the authorization, consent, approval, exemption,
clearance or other action by or notice or declaration to, or filing with, any
court, any administrative or other governmental body, or any other third party.
3.5 SALE ASSETS; TITLE.
(a) 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
Station, with the exception of the Excluded Assets. Schedule 3.5(a) lists each
contract, agreement and other asset which is used in the operation of the
Station, or is material to the Sale Assets or the business, operations,
financial condition or results of operations of this Station, but which in each
case is an Excluded Asset by reason of Section 2.2(k).
(b) Seller has 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(b) which Seller 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) Seller 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 Station (the "FCC Licenses"), and any action of the FCC with respect to
each FCC License is a Final Action with the exception of the FCC Order. The
expiration date of the term of each FCC License is shown on Schedule 3.6.
(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 Station under the Communications
Act of 1934, as amended, and the rules, regulations and policies of the FCC
thereunder (collectively, the "Act"), and (ii) constitute all the licenses and
authorizations, including amendments and modifications thereto, issued by the
FCC to Seller for or in connection with the operation of the 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 material
respect the full operation of the Station as now conducted, 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
Station as currently operated.
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(d) The Station is being operated by Seller in all material respects
in accordance with the terms and conditions of the FCC Licenses and the Act,
including but not limited to those pertaining to RF emissions.
(e) No applications, complaints or proceedings are pending or, to the
knowledge of Seller, are threatened which 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 the Station or its operation, other than actions or proceedings
affecting the television broadcasting industry in general.
(f) Seller has complied in all material respects with all
requirements to file registrations, reports, applications and other documents
with the FCC with respect to the Station, and all such registrations, 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, Seller has no knowledge of matters (i) which
might reasonably be expected to result in the adverse modification, suspension
or revocation of or the refusal to renew any of the FCC Licenses or the
imposition of any fines or forfeitures by the FCC against Seller, or (ii) which
might reasonably be expected to result in the FCC's denial or delay of approval
of the assignment to Buyer of any FCC License or the imposition of any Material
Adverse Condition in connection with approval of the transfer to Buyer of any
FCC License.
(h) There are no unsatisfied or otherwise outstanding citations
issued by the FCC with respect to the Station or its operation.
(i) True, complete and accurate copies of all FCC Licenses have been
delivered by Seller to Buyer.
(j) Except for the FCC Licenses, there are no material licenses,
permits or authorizations from governmental or regulatory authorities required
for the lawful operation and conduct of the Station as previously and currently
operated by Seller.
3.7 STATION AGREEMENTS.
(a) Schedule 3.7(a) lists all agreements, contracts, understandings
and commitments (excluding, however, programming agreements) as of the date
indicated thereon for the sale of time on the 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 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 delivered to Buyer,
and each Trade Agreement entered into by Seller between the date of this
Agreement and Closing shall be promptly delivered to Buyer.
(b) Schedule 3.7(b) lists all the following types of agreements used
in or relating to the operation of the Station:
(i) Agreements for sale of broadcast time on the Station for
monetary consideration, 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;
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(iii) All sales agency or advertising representation contracts;
(iv) Each lease of any Sale Asset (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) All agreements requiring the Station to acquire goods or
services exclusively from a single supplier or provider, or prohibiting
the Station from providing certain goods or services to any Person
other than a specified Person;
(viii) All agreements that are not terminable by Seller or its
assignee on thirty or less days' notice without breach, penalty or
cancellation fee;
(ix) Any other agreement involving a commitment by any party
thereto with a fair market value of, or requiring any party thereto to
pay over the life of the contract, more than Twenty-Five Thousand
Dollars ($25,000); and
(x) Any other agreement that is material to the business,
operations, financial condition or results of operations of the
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, have
been delivered to Buyer. The Station Agreements that are not listed on Schedule
3.7(a) or 3.7(b) do not involve commitments by parties thereto with an aggregate
fair market value of more than Fifty Thousand Dollars ($50,000).
(c) Schedule 3.7(c) lists all of the contracts and agreements used in
or relating to the operation of the Station to which an Affiliate of 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, (i) each programming
agreement is valid, binding, in full force and effect, and enforceable in
accordance with its terms; (ii) neither Seller nor, to the knowledge of Seller,
any other party is in material default under, and no event has occurred which
(after the giving of notice or the lapse of time or both) would constitute a
material default under, any programming agreement; (iii) neither Seller nor any
Affiliate of Seller has granted or been granted any material waiver or
forbearance with respect to any programming agreement; (iv) Seller holds the
right to enforce and receive the benefits under each programming agreement, free
and clear of Liens (other than Permitted Liens) but subject to the terms and
provisions of each such agreement; (v) none of the rights of Seller or any
Affiliate of Seller under any programming agreement is subject to termination or
modification as a result of the consummation of the transactions contemplated by
this Agreement; and (vi) consent or approval by each party to any programming
agreement is required thereunder for the consummation of the transactions
contemplated hereby.
(e) With respect to the Station Agreements (other than programming
agreements) which are, individually or in the aggregate, material to the assets,
business, operations, financial condition or results of
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operations of the Station, except as set forth in the Schedules, (i) such
Station Agreements are valid, binding, in full force and effect, and enforceable
in accordance with its terms; (ii) neither Seller nor, to the knowledge of
Seller, any other party is in material default under, and no event has occurred
which (after the giving of notice or the lapse of time or both) would constitute
a material default under, any such Station Agreements; (iii) neither Seller nor
any Affiliate of Seller has granted or been granted any material waiver or
forbearance with respect to any such Station Agreements; (iv) Seller holds the
right to enforce and receive the benefits under all such Station Agreements,
free and clear of Liens (other than Permitted Liens) but subject to the terms
and provisions of each such agreement; (v) none of the rights of Seller or any
Affiliate of Seller under any such Station Agreements is subject to termination
or modification as a result of the consummation of the transactions contemplated
by this Agreement; and (vi) consent or approval by each party to any such
Station Agreements is required thereunder for the consummation of the
transactions contemplated hereby.
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 the Station as now operated.
(b) Except as specified on Schedule 3.8, the equipment constituting a
part of the Tangible Personal Property used in or necessary for the operation of
the Station as now operated by Seller has been properly maintained in all
material respects in accordance with the manufacturers' recommendations and
industry practices, is in a good state of repair and operating condition
(subject to ordinary wear and tear), and complies 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 correct
and complete list of all of the interests in real estate which Seller holds or
which are used to any material extent in the operation of the Station.
(b) Seller does not own any Real Property used in the operation of
the Station.
(c) A description of each lease (including all amendments,
modifications and supplements) under which Seller leases an interest in any of
the Real Property (each, a "Real Property Lease") and a description of the
leased Real Property, including but not limited to studio and office space and
each transmitter or antenna site (the "Leased Real Property"), are set forth on
Schedule 3.7(b). Except as set forth on such Schedule, 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,
have been delivered to Buyer.
(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; (ii) neither Seller nor, to the knowledge of Seller, any other party, is
in material default under any Real Property Lease; (iii) to the knowledge of
Seller, 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 Seller received
written notice alleging any such event has occurred; (iv) none of the rights of
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 for the consummation of the transactions
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contemplated hereby; and (vi) Seller has not 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 in all
material respects with applicable zoning and land use laws, ordinances and
regulations. Seller's improvements on the 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 constituting 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 Seller, Seller owns, free and clear of Liens,
all right and interest in, and right and authority to use in connection with the
conduct of the business of the Station as presently conducted, 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.
(b) There are no outstanding or, to the knowledge of Seller,
threatened judicial or adversary proceedings with respect to any of the
Intellectual Property.
(c) Seller has not granted to any other person or entity any license
or other right or interest in or to any of the Intellectual Property or to the
use thereof.
(d) Seller has no knowledge of any infringement or unlawful use of
any of the Intellectual Property.
(e) Seller has not violated any provisions of the Copyright Act of
1976, 17 U.S.C. ss.101, et seq., in any material respect. Seller has filed all
notices and statements of account and has made all payments that are required in
connection with the transmission by Seller of any television or other signals.
(f) Seller 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.
3.11 FINANCIAL STATEMENTS.
(a) Attached as Schedule 3.11 are:
(i) The audited balance sheets of Seller as of December 31,
1997 and December 31, 1998;
(ii) The audited statements of operations of Seller for the
years ended December 31, 1997 and December 31, 1998;
(iii) The unaudited balance sheet of Seller as of March 31, 1999
(the "Interim Balance Sheet"); and
(iv) The unaudited statement of operations of Seller for the
interim period ended March 31, 1999.
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All such statements (i) are in accordance in all material respects with the
books and records of the Station and (ii) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis and
fairly present the assets and liabilities of the Station as of the dates stated
and accurately reflect the results of operations of the Station for the periods
covered by the statements, with the exceptions that (A) statements of cash flows
are not included with the unaudited statements of operations, (B) federal income
tax, expense or benefit are not shown, (C) the unaudited statements do not
contain the disclosures required by generally accepted accounting principles in
notes accompanying financial statements, and (D) the interim statements are
subject to normal year-end adjustments.
(b) Seller has no debt, liability or obligation, secured or unsecured
(whether absolute, accrued, contingent or otherwise, and whether due or to
become due), of a nature required by generally accepted accounting principles to
be reflected in a balance sheet or disclosed in the notes thereto, except such
debts, liabilities and obligations which (i) are fully accrued or fully reserved
against in the Interim Balance Sheet or (ii) are incurred after the date of the
Interim Balance Sheet in the ordinary course of business consistent with past
practice and in an amount not material to the business, operations, financial
condition or results of operations of the Station.
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 had or is reasonably likely to have a
Material Adverse Effect.
(b) Neither Seller nor the Station has suffered any adverse change or
development which, individually or in the aggregate, has had or is reasonably
likely to have a Material Adverse Effect.
(c) Seller has not:
(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 consistent with past practices, or any Real Property Lease;
(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 consistent with past
practices;
(iv) entered into any agreement, commitment or other transaction
other than in the ordinary course of business consistent with past
practices;
(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;
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(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;
(vii) entered into any agreement (other than agreements that
will be terminated prior to Closing) with any Affiliate of Seller; or
(viii) operated its business other than in the ordinary course
consistent with past practices.
3.13 LITIGATION.
Except as described in Schedule 3.6 and Schedule 3.13, (i) there are no
actions, suits, claims, investigations or administrative, arbitration or, to the
knowledge of Seller, other proceedings pending or threatened against Seller
before or by any court, arbitration tribunal or governmental department or
agency, domestic or foreign, that relates to the Station or the Sale Assets;
(ii) neither Seller nor, to the knowledge of Seller, any of the officers or
employees of Seller, has been charged with, or to the knowledge of Seller 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 the Station or with
Seller; and (iii) neither Seller, any properties or assets of Seller nor, to the
knowledge of Seller, any officer or employee of Seller is a party to or bound by
any order, arbitration award, judgment or decree of any court, arbitration
tribunal or governmental department or agency, domestic or foreign, in respect
of any business practices, the acquisition of any property, or the conduct of
any business of Seller which, individually or in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect or materially impair the
ability of Seller to perform its obligations hereunder and consummate the
transactions contemplated hereby.
3.14 LABOR MATTERS.
(a) Except as listed on Schedule 3.14(a):
(i) To Seller's knowledge, no present or former employee or
independent contractor of the Station has a pending claim or charge
which has been asserted or threatened against Seller for (A) overtime
pay; (B) wages, salaries or profit sharing; (C) vacations, time off or
pay in lieu of vacation or time off; (D) any violation of any statute,
ordinance, contract or regulation relating to minimum wages, maximum
hours of work or the terms or conditions of employment; (E)
discrimination against employees on any basis; (F) unlawful or wrongful
employment or termination practices; (G) unlawful retirement,
termination or labor relations practices or breach of contract; or (H)
any violation of occupational safety or health standards.
(ii) There is not pending or, to the knowledge of Seller,
threatened against Seller any labor dispute, strike or work stoppage
that affects or interferes with the operation of the Station, and
Seller has no knowledge of any organizational effort currently being
made or threatened by or on behalf of any labor union with respect to
employees of the Station. There are no material unresolved unfair labor
charges against Seller, and Seller has not experienced any strike, work
stoppage or other similar significant labor difficulties within the
preceding twelve (12) months.
(b) Except as set forth on Schedule 3.7(b), (i) Seller is not a
signatory or a party to, or otherwise bound by, a collective bargaining
agreement which covers employees or former employees of the Station, (ii)
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Seller has not agreed to recognize any union or other collective bargaining unit
with respect to any employees of the Station, and (iii) no union or other
collective bargaining unit has been certified as representing any employees of
the 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 Seller principally in
connection with the operation of the Station (other than Mark D. Lass, Robert E.
McAllan, Alfred D. Colantoni, Jules L. Plangere, III, Richard T. Morena), 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
the Station has been delivered 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 the
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 Seller or by any other trade or business, whether or not incorporated, which
is or has been treated as a single employer together with Seller under Section
414 of the Code (such other trades and businesses referred to collectively as
the "Related Persons") or to which Seller or any Related Person is obligated to
contribute, including, but not limited to, "employee benefit plans" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), employment, retention, change of control, severance, stock
option or other equity based, bonus, incentive compensation, deferred
compensation, retirement, fringe benefit and welfare plans, policies, practices,
arrangements and agreements (collectively, the "Benefit Plans"), are disclosed
in Schedule 3.15. Except pursuant to a Benefit Plan disclosed in Schedule 3.15
or any agreements disclosed in Schedule 3.7(b), Seller has no fixed or
contingent liability or obligation to any of the Employees or to any person
whose services are or were provided as an independent contractor to Seller or
the Station.
(b) All Benefit Plans have been administered and are in compliance in
all material respects with applicable provisions, if any, of ERISA and the Code
and all other applicable law. Neither Seller nor 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, the Station or the Sale Assets.
(c) No Benefit Plan is a multiemployer plan within the meaning of
Section 3(37) or Section 4001(a)(3) of ERISA (a "Multiemployer Plan").
(d) Neither Seller nor any Related Person has, to Seller's 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 Seller
or one employer with Seller under Section 4001 of ERISA.
(e) All contributions required to have been made by Seller under the
terms of any Benefit Plan or applicable law have been timely made.
(f) Seller has no unfunded obligations (including projected
obligations) for retiree health and life benefits under any Benefit Plan other
than continuation coverage required by law.
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(g) Neither Seller nor any Related Person has incurred any material
liability under or pursuant to Title I or IV of ERISA or the penalty, excise tax
or joint and several liability provisions of the Code relating to employee
benefit plans and, to Seller's knowledge, no event or condition has occurred or
exists which would result in any such material liability to Seller.
3.16 COMPLIANCE WITH LAW.
Seller has operated and is operating the 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 except as noted at Schedule 3.13,
Seller has not received any notice of noncompliance pertaining to Seller's
operation of the Station that has not been cured.
3.17 TAX RETURNS AND PAYMENTS.
(a) Except as set forth in Schedule 3.17, Seller has accurately
prepared in all material respects and is not delinquent in the filing of any Tax
Returns required to be filed by Seller, including filings regarding employees,
sales, operations or assets. All Taxes due and payable pursuant thereto and all
other Taxes or assessments due and payable by Seller or chargeable as a Lien
upon its assets have been paid, except for any such Taxes that are being
contested in good faith for which adequate reserves have been made on Seller's
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 Seller, (ii) Seller has not received notice of any such
deficiency, delinquency or default, and (iii) to Seller's knowledge, no taxing
authority is now threatening to assert any such deficiency, delinquency or
default and, to Seller's knowledge, there is no reasonable basis for any such
assertion.
(c) No Tax is required to be withheld by Buyer pursuant to Section
1445 of the Code as a result of the transactions contemplated by this Agreement.
(d) Seller has withheld any Tax required to be withheld by 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 Seller.
3.18 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 3.18, Seller has obtained all
environmental, health and safety permits necessary for the operation of the
Station, all such permits are valid and in full force and effect, and Seller is
in compliance in all material respects with all terms and conditions of such
permits.
(b) Except as set forth on Schedule 3.18, there is no proceeding
pending or, to Seller's 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 the Station, and to
Seller's knowledge, there is no basis for any such proceeding.
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(c) Except as set forth on Schedule 3.18, Seller has operated and is
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 Seller
relating to environmental matters.
(d) Except as set forth on Schedule 3.18, 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, Seller does not own or use any electrical or other
equipment containing polychlorinated biphenyls.
(e) For the purposes of this Section 3.18, (i) "hazardous materials"
shall mean any waste, substance, materials, smoke, gas, emissions or particulate
matter designated as hazardous or toxic under any applicable environmental law,
and (ii) "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 the Station, Seller has 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, and no notice pursuant to Section 103(a) or (c) of the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C.A. ss.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, Seller has not received any
notice letter under CERCLA or any other written notice, and, to Seller's
knowledge, there is no investigation pending or threatened, to the effect that
Seller has 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 Seller's
knowledge does there exist any basis for such investigation.
3.19 BROKER'S OR FINDER'S FEES.
Except for H.B. LaRue, Media Brokers (the "Broker") who has acted on
behalf of both Buyer and Seller, no agent, broker, investment banker or other
person or firm acting on behalf of or under the authority of Seller or any
Affiliate of Seller is or will be entitled to any broker's or finder's fee or
any other commission or similar fee, directly or indirectly, in connection with
the transactions contemplated by this Agreement.
3.20 INSURANCE.
Schedule 3.20 lists and briefly describes each insurance policy
maintained by Seller with respect to the assets and business of the Station with
a claims history for the preceding four (4) years. All of such insurance
policies are in full force and effect, and Seller is not in default with respect
to its obligations under any such insurance policy and has not been denied
insurance coverage.
3.21 CABLE TELEVISION TRANSMISSION.
Schedule 3.21 lists (i) to the best of Seller's knowledge, each cable
television system on which the signal of the Station is currently being carried
(each, a "Carrying System"), (ii) the cable channel on which the Station is
currently carried on each Carrying System, and (iii) as to each Carrying System,
whether carriage of the signal of the Station is pursuant to a "must-carry"
election, a retransmission consent agreement, or otherwise. Except
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as set forth in Schedule 3.21, (i) the Station is carried on each Carrying
System pursuant to a valid and timely must-carry election or a valid and
enforceable retransmission consent agreement, as the case may be, (ii) Seller
has not agreed to reimburse any cable television system for any copyright
royalties in respect of carriage of the signal of the Station, (iii) no cable
system has advised Seller or the Station of any signal quality or copyright
indemnity or other prerequisite to cable carriage of the Station's signal, (iv)
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, and (v) there are no pending or decided requests to modify the
Station's Area of Dominant Influence as set forth in the Arbitron 1991-1992
Television ADI Market Guide.
3.22 TRANSACTIONS WITH AFFILIATES.
Except as described on Schedule 3.22, Seller has not been involved in
any business arrangement or relationship relating to the Station with any
Affiliate of Seller, and no Affiliate of Seller owns any property or right,
tangible or intangible, which is used in the operation of the Station or is
material to the Sale Assets or the business, operations, financial condition or
results of operations of the Station.
3.23 FLORIDA SALES TAX.
No past, present or future act or omission on the part of Seller shall
cause the sale of the Sale Assets (other than motor vehicles, if any) to Buyer
pursuant to this Agreement not to be exempt from the Florida personal property
sales tax.
3.24 YEAR 2000 COMPUTER COMPLIANCE.
Schedule 3.24 describes the actions taken by Seller to avoid
errors or failures in its computer systems and software in connection with the
year 2000.
3.25 DISCLOSURE.
To Seller's knowledge, neither this Agreement (including the Schedules)
nor any other Document furnished by Seller or on its behalf contains any untrue
statement of a material fact or omits to state a material fact necessary to make
any statement herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Indiana. Buyer has all requisite
corporate power to own, operate and lease its properties and carry on its
business as it is now being conducted and as the same will be conducted
following the Closing.
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4.2 AUTHORIZATION AND BINDING EFFECT OF DOCUMENTS.
Buyer has all requisite corporate power and authority to enter into
this Agreement and the other Documents and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
each of the other Documents by Buyer and the consummation by Buyer of the
transactions contemplated hereby and thereby 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 as set forth on Schedule 4.3 and except for any necessary
clearances or approvals under the HSR Act or the 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 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 as set forth on Schedule 4.3 and except for any necessary
clearances or approvals under the HSR Act or the 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.
Except for the Broker, who has acted on behalf of both Buyer and
Seller, no agent, broker, investment banker, or other person or firm acting on
behalf of Buyer or under its authority is or will be entitled to any broker's or
finder's fee or any other commission or similar fee, directly or indirectly,
from Buyer in connection with the transactions contemplated by this Agreement.
4.6 LITIGATION.
There are no legal, administrative, arbitration or other proceedings or
governmental investigations pending or, to the knowledge of Buyer, threatened
against Buyer that would give any third party the right to enjoin or delay the
transactions contemplated by this Agreement.
4.7 BUYER'S QUALIFICATION.
Buyer has no knowledge of matters which might reasonably be expected to
result in the FCC's denial or delay of approval of the transfer to Buyer of any
FCC License or the imposition of any Material Adverse Condition in connection
with approval of the transfer to Buyer of any FCC License.
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4.8 WARN ACT.
Buyer is not planning or contemplating, and has not made or taken, any
decisions or actions concerning the employees of the Station after the Closing
Date that would require the service of notice under the Worker Adjustment and
Retraining Act of 1988, as amended.
ARTICLE V
OTHER COVENANTS
5.1 CONDUCT OF THE STATION'S BUSINESS PRIOR TO THE CLOSING DATE.
Seller covenants and agrees with Buyer that from the date hereof
through the Closing Date, or the termination of this Agreement if earlier, and
only with respect to Station and none of Seller's other business activities,
unless Buyer otherwise consents in writing (which consent shall not be
unreasonably withheld, delayed or conditioned), Seller shall:
(a) Operate the Station in the ordinary course of business consistent
with past practices, 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 commercially reasonable efforts to preserve the
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 the Station consistent in all material
respects with the type and quantity of the Station's programming as of the date
hereof, and (iv) continuing the 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 the Station and otherwise conduct its business in all
material respects in accordance with the terms or conditions of FCC Licenses,
the Act, and all other rules, regulations, laws and orders of all governmental
authorities having jurisdiction over any aspect of the operation of the Station;
(c) Maintain Seller's books and records in accordance with generally
accepted accounting principles on a basis consistent with prior periods;
(d) Promptly notify Buyer in writing of any event or condition which,
with notice or the lapse of time or both, would constitute an event of material
default under any of the Station Agreements which are, individually or in the
aggregate, material to the Sale Assets or the business, operations, financial
condition or results of operations of the Station;
(e) Timely comply in all material respects with the Station
Agreements which are individually or in the aggregate, material to the Sale
Assets or the business, operations, financial condition or results of operations
of the 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 (i) are in the ordinary course of
business consistent with past practice and (ii) if material, are replaced by
similar assets of substantially equal or greater value or utility;
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(g) Not amend, enter into, renew or extend any Trade Agreement that
would cause the aggregate financial value (calculated at the Station's average
cash advertising rate) of all time required to be broadcast on the Station on or
after the Closing Date under Trade Agreements (including amendments, but
excluding trade of up to One Hundred Thousand Dollars ($100,000.00) under the
broadcast rights agreement Seller intends to enter into with the Orlando Magic)
entered into after the date of this Agreement to exceed Fifty Thousand Dollars
($50,000.00); any personal property lease that would cause the aggregate rent
required to be paid under personal property leases (including amendments)
entered into after the date of this Agreement to exceed Fifty Thousand Dollars
($50,000.00); studio or office lease; antenna lease; network affiliation
agreement; talent agreement; broadcast rights agreement with the Orlando Magic;
or any agreement described in Section 3.7(b)(vii);
(h) Subject to Section 5.22 regarding programming agreements, not
enter into, amend, renew or extend any other 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 practices;
(i) Maintain its technical equipment currently in use in good
operating condition and repair except for ordinary wear and tear;
(j) Not increase in any manner the compensation (including severance
pay or plans) or benefits of any employees, independent contractors, consultants
or commission agents of Seller or the Station, except in the ordinary course of
business consistent with past practice;
(k) Not introduce any material change with respect to the operation
of the Station including, without limitation, any material changes in the
percentages of types of programming broadcast by the Station or any other
material change in the Station's programming policies, except as required by
law;
(l) Not enter into any agreement relating to the Station (other than
agreements that will be terminated prior to Closing) with any Affiliate of
Seller;
(m) Not voluntarily enter into any collective bargaining agreement
applicable to any employees of the 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
the 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; and
(o) Consult with Buyer regarding the extension or modification prior
to Closing of current programming, the acquisition prior to Closing of new or
additional programming, and the terms and conditions of each such extension,
modification or acquisition.
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5.2. NOTIFICATION OF CERTAIN MATTERS.
Seller shall give prompt notice to Buyer, and Buyer shall give prompt
notice to Seller, 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 either of
them under this Agreement.
5.3 HSR FILING.
Within ten (10) business days after the execution of this Agreement,
Seller 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; RELATED FCC LITIGATION.
(a) As promptly as practicable following execution of this Agreement
and in no event more than ten (10) business days after the execution of this
Agreement, Seller and Buyer shall file all applications with the FCC necessary
to obtain the FCC Order, and shall cooperate in taking all commercially
reasonable action necessary and proper to promptly obtain the FCC Order without
a Material Adverse Condition. Although the FCC Order becoming a Final Action is
not a condition precedent to either party's obligation to close under this
Agreement, Seller and Buyer shall cooperate in taking all commercially
reasonable action necessary and proper to cause the FCC Order to become a Final
Action as soon as practicable, provided that commercially reasonable action
shall not include payment or providing of material consideration to settle with
an objecting party.
(b) Seller and Buyer acknowledge that for the FCC Order to become a
Final Action, it will be necessary to achieve final resolution of (i) each
objection or petition filed in opposition to the transfer of the FCC Licenses to
Buyer (each, a "Transfer Objection") and (ii) the currently pending proceedings
described on Schedule 3.6 relating to the renewal of the FCC Licenses and the
prior transfer of the FCC Licenses to Seller (the "Pending FCC Litigation").
Seller agrees to reimburse Buyer for the reasonable attorney fees incurred by
Buyer in connection with its participation in the defense of (i) each Transfer
Objection based upon or relating to the alleged misconduct or other act or
omission of Seller and (ii) the Pending FCC Litigation. Buyer agrees to
reimburse Seller for the reasonable attorney fees incurred by Seller in
connection with its participation in the defense of each Transfer Objection
based upon or relating to the alleged misconduct or other act or omission of
Buyer.
(c) Buyer agrees to participate as reasonably requested by Seller in
prosecuting to a final resolution the pending proceedings instituted by Seller
in opposition to the FCC's grant of authorizations for WRBW-TV (the "Pending
Seller FCC Litigation"), provided that Seller promptly reimburses Buyer for all
reasonable out-of-pocket expenses incurred by Buyer in connection with such
participation. Such out-of-pocket expenses will include reasonable attorney fees
but shall not include any portion of employee compensation allocable to the time
spent by any employee of Buyer in participating on Buyer's behalf in the Pending
Seller FCC Litigation as requested by Seller.
5.5 TITLE; ADDITIONAL DOCUMENTS.
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At the Closing, Seller shall transfer and convey to Buyer good and
marketable title to all of the Sale Assets free and clear of any Liens except
Permitted Liens. Seller shall execute or cause to be executed such documents, in
addition to those delivered at the Closing, as may be necessary to confirm in
Buyer such title to the Sale Assets and to carry out the purposes and intent of
this Agreement, which documents shall be in a form reasonably acceptable to
Buyer and Seller. 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, which documents shall be in a form
reasonably acceptable to Buyer and Seller.
5.6 OTHER CONSENTS.
Seller shall use its commercially reasonable efforts to obtain the
consents or waivers to the transactions contemplated by this Agreement required
under the Station Agreements, and Buyer shall cooperate as reasonably requested
by Seller in assisting Seller to obtain such consents. Neither Seller nor Buyer
shall be required to pay or grant any material consideration in order for Seller
to obtain any such consent or waiver except that Seller shall be required to
obtain releases of Liens (other than Permitted Liens) which encumber any of the
Sale Assets with Seller being permitted to use the proceeds delivered by Buyer
at Closing in order to obtain such releases. Buyer acknowledges that Seller's
failure to obtain any consent shall not be a breach of this Agreement provided
that Seller shall have used commercially reasonable efforts to obtain the
consent.
5.7 INSPECTION AND ACCESS.
Seller will, prior to the Closing Date, make available the assets,
books, accounting records, correspondence and files of Seller (to the extent
related to the operation of the Station) for examination by Buyer, its officers,
attorneys, accountants and agents, with the right to make copies of all or
portions of such books, records and files. 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 Station. Seller
will furnish to Buyer monthly unaudited financial statements of Seller prepared
in a manner consistent with the unaudited statements identified in Section 3.11,
and such additional financial, operating and other information regarding Seller
or the Station as Buyer may reasonably request. If Closing occurs, the books,
records and files that are not part of but relate to the Sale Assets shall be
preserved and maintained by Seller for five (5) years after the Closing, and the
books, records and files that are part of the Sale Assets shall be maintained
and preserved by Buyer for a period of five (5) years after the Closing. Each
such party shall give 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 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 Seller (or
its representatives) before or after the date hereof, in connection with the
transactions contemplated by this Agreement, shall be kept confidential by Buyer
and its representatives and shall not be used other than as contemplated by this
Agreement, except to the extent such information (i) was otherwise publicly
available when received, (ii) is or hereafter becomes lawfully obtainable from
third parties not related to Buyer or its Affiliates, (iii) is required to be
disclosed by law, judicial or other governmental rule or order, or the rules of
any stock exchange or (iv) to the extent such duty as to confidentiality is
waived in writing by Seller.
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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 Seller will promptly notify the other party of any event of
which Buyer or Seller, as the case may be, obtains knowledge which has had or
could reasonably be expected to have Material Adverse Effect.
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.
Seller shall file, on a current and timely basis and in all material
respects in a truthful and complete fashion until the Closing Date, all reports
and documents required to be filed with the FCC with respect to the Station. In
addition, Seller 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.
Seller will timely file with the appropriate governmental agencies all
Tax Returns required to be filed by Seller with respect to the Station prior to
Closing and timely pay all Taxes reflected on such Tax Returns as owing by
Seller.
5.14 NO SOLICITATION.
From the date hereof until the earlier of Closing or termination of
this Agreement, neither Seller nor any Affiliate of Seller shall directly or
indirectly (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 Seller or any material assets of the Station or any merger,
consolidation or other business combination with Seller (each an "Acquisition
Proposal"), or (b) otherwise knowingly assist or negotiate with any Person with
respect to an Acquisition Proposal. Seller shall promptly notify Buyer in
writing if an Acquisition Proposal is made in writing after the date of this
Agreement.
5.15 CERTIFIED RESOLUTIONS.
(a) Within fifteen (15) business days after the date hereof, Seller
shall furnish Buyer with certified resolutions of its managers and members
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.
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(b) Within fifteen (15) business days after the date hereof, Buyer
shall furnish Seller with certified resolutions of the board of directors of
Buyer evidencing the authorization and approval of the execution and delivery of
this Agreement and each of the other Documents and the consummation of the
transactions contemplated hereby and thereby.
5.16 AUDITED FINANCIAL STATEMENTS.
Seller recognizes that Buyer is a publicly reporting company and agrees
that Buyer shall be entitled at Buyer's expense to cause audited and unaudited
financial statements of the Station 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. 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. Furthermore, if all or a portion of the audited financial
statements of Sellers may be used for such purpose, Seller hereby consents to
Buyer's use of such financial statements for the purposes set forth in this
Section 5.16, and Seller agrees to use its commercially reasonable efforts to
obtain the consent of the independent accounting firm which opined as to such
financial statements.
5.17 SURVEY AND ENVIRONMENTAL INSPECTION.
At Buyer's expense, subject to obtaining the consent of any landlord of
Leased Real Property and Buyer providing such releases and indemnifications as
may be reasonably required by any such landlord to provide such consents, Buyer
shall have the right to cause a detailed survey and an environmental inspection
to be performed for each portion of the Leased Real Property. Buyer shall cause
the companies performing such work to deliver to Seller, contemporaneously with
the delivery to Buyer, a copy of each such survey or inspection report. Buyer
agrees to indemnify, defend and hold Seller and each owner and tenant of Lease
Real Property harmless from and against any liability, loss, costs ,damages,
and/or expenses (including reasonable attorneys' fees and expenses) incurred by
any of Seller, the owners or other tenants of Leased Real Property, as a result
of conducting the survey and/or environmental inspections of any portion of
Leased Real Property by Buyer, its agents, employees or independent contractors.
5.18 BROKER'S FEE.
If Closing occurs, each of Seller and Buyer agrees to pay Closing
one-half of the fee earned by Broker in connection with the transactions
contemplated by this Agreement, provided that Buyer shall in no event be
obligated to pay in excess of Nine Hundred Seventy-Five Thousand Dollars
($975,000) of such fee.
5.19 COVENANTS OF BUYER PENDING CLOSING.
Buyer covenants and agrees with Seller that from the date hereof
through the Closing Date or the date this Agreement is terminated, if earlier,
that Buyer shall (i) not take or agree to take any action that would materially
delay the consummation of the Closing as contemplated by this Agreement; and
(ii) respond promptly to any request of Seller in connection with any of the
activities described in Section 5.1.
5.20 CABLE TELEVISION CARRIAGE.
If the Closing has not occurred by October 1, 1999, Seller, in
consultation with Buyer, shall timely make must-carry elections or enter into
retransmission consent agreements (together with the must-carry elections, the
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"Cable Agreements") with all material Carrying Systems. Seller shall negotiate,
in consultation with Buyer, the terms and conditions of the Cable Agreements
which shall be commercially reasonable and include terms and conditions that are
usual and customary within the television broadcasting industry. In negotiating
the Cable Agreements, Seller shall also endeavor to provide for the Station to
be carried on channel 8 of each Carrying System and to have a channel of each
Carrying System allocated for future digital transmission of the Station's
signal.
5.21 DIGITAL TELEVISION TRANSMISSION.
If the Closing has not occurred by November 1, 1999, Seller, in
consultation with Buyer, shall timely file a digital television construction
permit application ("DTV Application") for the Station. Seller shall prosecute
the DTV Application with diligence and shall diligently oppose any objection to,
appeal from or petition to reconsider the grant of the DTV Application.
5.22 PROGRAMMING AGREEMENTS.
(a) Seller shall consult with Buyer regarding programming as
prescribed in Section 5.1(o) and shall furnish Buyer a copy of each document
setting forth the terms and conditions and otherwise governing each extension,
modification or acquisition of programming prior to Closing (each, a "New
Programming Document") promptly after the New Programming Document is available
to Seller. Buyer may object within its reasonable judgment to an extension,
modification or acquisition of programming or to the terms and conditions set
forth in the related New Programming Document by giving Seller written notice of
Buyer's objection within five (5) business days after receipt of the related New
Programming Document. If Buyer fails to so object, Buyer shall be deemed to have
granted approval (and Buyer may not subsequently object) with respect to the
extension, modification or acquisition of programming or the terms and
conditions set forth in the related New Programming Document.
(b) In the event Buyer objects in accordance with foregoing
Subsection (a) to an extension, modification or acquisition of programming or
the terms and conditions set forth in the related New Programming Document, the
New Programming Document shall be deemed to be an Excluded Asset that will not
be assigned to or assumed by Buyer, and Seller shall remain responsible after
Closing for all liabilities and obligations under the New Programming Document.
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 Seller contained in this
Agreement or in any other Document shall be true and correct 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 the Closing Date,
except for changes permitted hereunder.
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(b) Seller shall have delivered to Buyer on the Closing Date an
officer's certificate that the conditions specified in Sections 6.1(a), 6.2,
6.6, 6.9, and 7.6 are satisfied as of the Closing Date.
6.2 PERFORMANCE OF AGREEMENT.
Seller shall have performed in all material respects all of its
covenants, agreements and obligations required by this Agreement to be performed
or complied with by Seller prior to or up the Closing Date.
6.3 FCC ORDER.
(a) The FCC Order shall have been issued without any Material Adverse
Condition affecting Buyer and shall have become effective under the Act.
(b) Conditions which the FCC Order or any order, ruling or decree of
any judicial or administrative body specifies and requires to be satisfied prior
to transfer of the FCC Licenses to Buyer shall have been satisfied.
(c) All of the FCC Licenses shall be in full force and effect.
6.4 HSR ACT.
The waiting period (including any extensions) 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 SELLER'S COUNSEL.
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Buyer shall have received (a) the written opinion of Seller's counsel,
dated as of the Closing Date, that (i) Seller is a limited liability company
duly formed and in good standing under the laws of the State of Delaware and is
in good standing and duly qualified to do business under the laws of the State
of Florida, (ii) the execution, delivery and performance of the Agreement and
each of the other Documents have been duly authorized by all requisite action
(including any necessary member approval) on the part of Seller, and (iii) the
Agreement and other Documents have been duly and validly executed and delivered
by Seller and constitute valid and legally binding obligations enforceable
against Seller 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 Seller's FCC
counsel, dated as of the Closing Date, that (i) Seller holds the FCC Licenses,
which (A) are in full force and effect and constitute all of the licenses,
permits and authorizations required by the FCC for, or used in the operation of,
the Station as now operated; and (B) constitute all of the licenses and
authorizations issued by the FCC to Seller for, or in connection with, the
operation of the Station, (ii) all authorizations, approvals and consents of the
FCC required under the Act to permit the assignment of the FCC Licenses by
Seller to Buyer have been obtained, are in effect, and have not been reversed,
stayed, enjoined, set aside, annulled or suspended, and (iii) except as set
forth in Schedule 3.6, there is no FCC or judicial 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 or
any court of competent jurisdiction against Seller 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). Each opinion shall state that
Buyer's senior lenders are entitled to rely on the opinion, and may otherwise be
subject to customary qualifications and limitations.
6.6 REQUIRED CONSENTS.
(a) Subject to Section 6.6(b), Seller shall have obtained prior to
Closing the written consents or waivers to the transactions contemplated by this
Agreement, in form reasonably satisfactory to Buyer's counsel and without any
modification or condition which is materially adverse to Buyer or the Station,
which are required under (i) each Station Agreement for each transmitter,
antenna (including each satellite and translator transmitter) or office and
studio site under which Seller is a lessee, (ii) the network affiliation
agreement with WB Television Network Partners, LP, (iii) the programming
agreements identified on Schedule 6.6.
(b) In the event that prior to the sixtieth (60th) day after issuance
of the FCC Order, Seller shall not have obtained the written consent as
prescribed in Section 6.6(a) for the assignment to Buyer of the network
affiliation agreement with WB Television Network Partners, LP, Buyer shall be
entitled to terminate this Agreement by giving Seller written notice of such
termination on or before the seventy-fifth (75th) day after issuance of the FCC
Order.
6.7 DELIVERY OF CLOSING DOCUMENTS.
Seller shall have delivered or caused to be delivered to Buyer on the
Closing Date each of the documents to be delivered pursuant to Section 8.2.
6.8 NO ADVERSE PROCEEDINGS.
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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 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 the Station
since the date of the Interim Balance Sheet which has resulted in, or is
reasonably likely to result in, a Material Adverse Effect; provided, however,
that an adverse change in the revenue or ratings of the Station shall not
constitute for purposes of this Section a change or development which has, or is
reasonably likely to have, a Material Adverse Effect.
ARTICLE VII
CONDITIONS PRECEDENT TO THE
OBLIGATION OF SELLER TO CLOSE
The obligations of Seller 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 Seller
in writing:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects on the date hereof
and at the Closing Date with the same effect as though made at such time, except
for changes that are not materially adverse to Seller.
(b) Buyer shall have delivered to Seller on the Closing Date a
certificate that the conditions specified in Sections 7.1(a), 7.2 and 6.8 are
satisfied as of the Closing Date.
7.2 PERFORMANCE OF AGREEMENT.
Buyer shall have performed in all material respects all of its
covenants, agreements and obligations required by this Agreement and each of the
other Documents to be performed or complied with by it prior to or upon the
Closing Date.
7.3 FCC ORDER.
(a) The FCC Order shall have been issued and shall have become
effective under the Act.
(b) Conditions which the FCC Order or any order, ruling or decree of
any judicial or administrative body specifies and requires to be satisfied prior
to transfer of the FCC Licenses to Buyer shall have been satisfied.
7.4 HSR ACT.
The waiting period (including any extension) under the HSR Act
applicable to the sale and purchase of the Sale Assets pursuant to his Agreement
shall have expired or been terminated.
7.5 OPINION OF BUYER'S COUNSEL.
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Seller shall have received the written opinion of Buyer's counsel,
dated as of the Closing Date, that (i) Buyer is a corporation duly formed and in
good standing under the laws of the state 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 and (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 law effecting the enforcement of creditors' rights generally and general
principles of equity. The opinion of Buyer's counsel may be subject to customary
qualifications and limitations.
7.6 NO ADVERSE PROCEEDINGS.
Except as set forth in Schedule 3.6, 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 Seller 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 to be delivered pursuant to Section 8.3.
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 LLP, 135 North Pennsylvania Street, Suite 2700, Indianapolis, Indiana, at
10:00 o'clock A.M. on the fifth business day following satisfaction or waiver of
the conditions precedent hereunder to Closing (the "Closing Date").
8.2 DOCUMENTS TO BE DELIVERED TO BUYER BY SELLER.
At the Closing, Seller shall deliver to cause to be delivered to Buyer
the following, in each case in form and substance reasonably satisfactory to
Buyer:
(a) The opinions of Seller's counsel and FCC counsel, dated the
Closing Date, to the effect set forth in Section 6.5;
(b) Governmental certificates, dated as of a date as near as
reasonably practicable to the Closing Date, showing that Seller is duly
organized and in good standing as a limited liability company in the State of
Delaware and is qualified to do business and in good standing in the State of
Florida;
(c) A certificate of a duly authorized managing member of Seller
attesting as to the incumbency of each signatory of Seller who executes this
Agreement and any of the other Documents and to similar customary matters;
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(d) A bill of sale and other instruments of transfer and conveyance
transferring the Sale Assets to Buyer, in form reasonably acceptable to Buyer;
(e) The certificate described in Section 6.1(b);
(f) A written instruction of Seller to Escrow Agent instructing the
Escrow Agent to distribute the Earnest Money as prescribed in Section 2.4;
(g) The consents or waivers prescribed in Section 6.6; and
(h) Such additional information and materials as Buyer shall have
reasonably requested to evidence the satisfaction of the conditions to its
obligation to close hereunder, including without limitation, any documents
expressly required by this Agreement to be delivered by Seller at Closing.
8.3 DELIVERIES TO SELLER BY BUYER.
At the Closing, Buyer shall deliver or cause to be delivered to Seller
the following, in each case in form and substance reasonably satisfactory to
Seller:
(a) The Purchase Price in accordance with Section 2.5, as adjusted
under Section 2.7(d);
(b) The certificate described in Section 7.1(b);
(c) 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 Earnest Money as prescribed in Section 2.4;
(e) An agreement by Buyer assuming the Assumed Obligations; and
(f) Such additional information and materials as Seller shall have
reasonably requested to evidence the satisfaction of the conditions to its
obligation to close hereunder.
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ARTICLE IX
INDEMNIFICATION
9.1 SURVIVAL.
All representations, warranties, covenants and agreements in this
Agreement or any other Document shall survive the Closing regardless of any
investigation, inquiry or knowledge on the part of 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
Documents; 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 five (5) years after the Closing Date, and (iv) in the case of any
other representation or warranty, end two (2) years 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 SELLER.
(a) Subject to Section 9.2(b), Seller shall indemnify, defend, and
hold harmless Buyer and its officers, directors, employees, Affiliates,
successors and assigns from and against, and pay or reimburse each of them for
and with respect to, any Loss (each, a "Buyer's Loss") relating to, arising out
of or resulting from:
(i) Any breach by Seller of any of its representations,
warranties, covenants or agreements in this Agreement or any other Document; or
(ii) Any obligation, indebtedness or Liability of Seller
(other than the Assumed Obligations) regardless of whether disclosed to
Buyer and regardless of whether constituting a breach by Seller of any
representation, warranty, covenant or agreement hereunder or under any
other Document; or
(iii) Noncompliance by Seller with the provisions of the Bulk
Sales Act, if applicable, in connection with the transactions
contemplated by this Agreement.
(b) If Closing occurs, Seller shall not be obligated to indemnify
Buyer unless and until the aggregate amount of Buyer's Losses exceeds One
Hundred Fifty Thousand Dollars ($150,000) (the "Threshold"), in which case Buyer
shall then be entitled to indemnification of the entire amount of Buyer's
Losses, provided that any payment owed by Seller to Buyer for any Liability for
breach of Section 3.23 or pursuant to or under Section 2.7 or Section 9.2(a)(ii)
shall not be counted in determining whether the Threshold limitation is
satisfied, and Buyer shall have the right to recover any such Liability without
regard to such limitation.
9.3 INDEMNIFICATION BY BUYER.
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(a) Subject to Sections 9.3(b) and 10.2, Buyer shall indemnify and
hold harmless Seller and its officers, directors, members, employees, agents,
representatives, Affiliates, successors and assigns from and against, pay or
reimburse each of them for and with respect to any Loss (each, a "Seller's
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 the Station 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
Seller unless and until the aggregate amount of Seller's Losses exceeds the
Threshold, in which case Seller shall then be entitled to indemnification of the
entire amount of Seller's Losses, provided any payment owed by Buyer to Seller
for any Liability pursuant to or under Section 2.7 or Section 9.3(a)(ii) shall
not be counted in determining whether the Threshold limitation is satisfied, and
Seller shall have the right to recover any such Liability 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.
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(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
reasonably deems appropriate or settle the claim (after giving notice thereof to
the Indemnifying Party) on such terms as the Indemnified Party may deem
appropriate, and the Indemnified Party shall be entitled to periodic
reimbursement of defense expenses incurred and prompt indemnification from the
Indemnifying Party in accordance with this Article.
(d) Failure or delay by an Indemnified Party to give a reasonably
prompt notice of any claim (if given prior to expiration of 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 Station.
ARTICLE X
TERMINATION
10.1 RIGHT OF TERMINATION.
This Agreement may be terminated prior to Closing:
(a) By written agreement of Seller and Buyer; or
(b) By written notice from a party that is not then in material
breach of this Agreement if:
(i) The other party has continued in material breach of this
Agreement for twenty (20) days after written notice of such breach from
the terminating party is received by the other party; or
(ii) Closing does not occur within eighteen (18) months after
the date hereof.
(c) By Buyer as provided in Section 6.6(b).
Buyer agrees that in the event (i) the conditions precedent under Article VI
(excluding Section 6.7) have been satisfied, (ii) Seller is ready, willing and
able to satisfy the condition under Section 6.7, and (iii) Buyer nevertheless
fails or refuses to perform its obligation to close under this Agreement, Buyer
shall be in material breach of this Agreement.
10.2 OBLIGATIONS UPON TERMINATION.
(a) Upon termination of this Agreement, each party shall thereafter
remain liable for (i) breach of this Agreement prior to such termination and
(ii) payment and performance of the party's obligations under Sections 5.8, 5.9,
and 13.2 and under Article IX and this Article X, which in each case shall
survive termination of this Agreement; provided, however, that if 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).
(b) If this Agreement is terminated prior to Closing for any reason
other than by Seller pursuant to Section 10.1(b)(i) as a result of a material
breach by Buyer under this Agreement, Buyer shall be entitled to the return of
the Earnest Money, in which case Buyer and Seller 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.
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(c) If Closing shall not have occurred because of a material breach
by Buyer under this Agreement, Seller's sole remedy at law or in equity under
this Agreement shall be (i) the termination by Seller of this Agreement, and
(ii) the recovery from Buyer of (A) an amount equal to the Earnest Money (the
"Seller's Liquidated Damage Amount") and (B) Seller's reasonable attorneys' fees
and other costs of collection incurred by Seller in enforcing its right to
recover Seller's Liquidated Damage Amount (such fees and other costs herein
referred to as "Seller's Enforcement Costs"). In the event of such termination
by Seller, Seller shall be entitled to receive the Earnest Money in payment of
Seller's Liquidated Damage Amount, and Buyer and Seller shall cooperate in
taking such action as required under the Escrow Agreement to effect the Escrow
Agent's distribution of the Earnest Money to Seller. Seller shall also be
entitled to pursue any other remedy available to Seller at law or in equity to
recover the entire Seller's Liquidated Damage Amount and Seller's Enforcement
Costs, provided that the total monetary damages (including any amount received
from the Escrow Agent under the Escrow Agreement) to which Seller shall be
entitled shall not exceed the sum of Seller's Liquidated Damage Amount plus
Seller's Enforcement Costs. BUYER ACKNOWLEDGES AND AGREES THAT SELLER'S RECEIPT
OF SELLER'S LIQUIDATED DAMAGE AMOUNT SHALL CONSTITUTE PAYMENT OF LIQUIDATED
DAMAGES HEREUNDER AND NOT A PENALTY AND THAT SELLER'S LIQUIDATED DAMAGE AMOUNT
IS REASONABLE IN LIGHT OF THE SUBSTANTIAL BUT INDETERMINATE HARM ANTICIPATED TO
BE CAUSED BY BUYER'S MATERIAL BREACH OR DEFAULT UNDER THIS AGREEMENT, THE
DIFFICULTY OF PROOF OF LOSS AND DAMAGES, THE INCONVENIENCE AND NON-FEASIBILITY
OF OTHERWISE OBTAINING AN ADEQUATE REMEDY, AND THE VALUE OF THE TRANSACTIONS TO
BE CONSUMMATED HEREUNDER.
10.3 TERMINATION NOTICE.
Each notice given by a party pursuant to Section 10.1 to terminate this
Agreement shall specify the Subsection of Section 10.1 pursuant to which the
notice is given. If at the time a party gives a termination notice, the party is
entitled to give the notice pursuant to more than one Subsection of Section
10.1, the Subsection pursuant to which the notice is given and termination is
effected shall be deemed to be the Subsection specified in the notice provided
that the party giving the notice is at such time entitled to terminate this
Agreement pursuant to the specified Subsection.
ARTICLE XI
CONTROL OF STATION
Between the date of this Agreement and the Closing Date, Buyer shall
not control, manage or supervise the operation of the Station or the conduct of
its business, all of which shall remain the sole responsibility and under the
control of Seller, subject to Seller's compliance with this Agreement.
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ARTICLE XII
EMPLOYMENT MATTERS
12.1 TRANSFER OF EMPLOYEES.
(a) Seller and Buyer shall cooperate in arranging a presentation by
the Chairman of Buyer to Seller's employees promptly after the date of this
Agreement. The form and substance of the presentation shall be subject to the
approval of both Seller and Buyer, which shall not be unreasonably withheld. In
addition, at such time as Seller in its sole and absolute discretion shall
permit but in no event earlier than sixty (60) days before the projected Closing
Date, Buyer may interview employees of Seller who perform services principally
for the Station (excluding the employees identified on Schedule 12.1) for the
purpose of selecting those employees to whom Buyer desires to offer employment
effective immediately after Closing (such employees who are given and accept
such offers of employment are referred to herein as the "Transferred
Employees"). Seller agrees to cooperate fully with Buyer in connection with
Buyer's interviewing and offering to hire any such employees, and Seller shall
not take any action, directly or indirectly, to prevent any such employee from
becoming employed by Buyer from and after the Closing; provided, however, that
(i) all such offers of employment shall be expressly conditioned upon the
occurrence of Closing, and (ii) if this Agreement is terminated, Buyer shall
not, for a period of two years after such termination, employ or solicit the
employment of any person employed by Seller at the Station at any time during
the six-month period preceding such termination.
(b) Seller 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 of any
Station employee before, upon or after Closing, including, without limitation,
all severance or termination pay and all accrued vacation, salary, wages and
other compensation payments or benefits, if any, which arise or become payable
under any Benefit Plan as a result of or in connection with such termination,
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 shall pay, discharge and be solely responsible for all
liabilities, obligations, costs and expenses of Buyer 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 any such liabilities
are included as an Assumed Obligation pursuant to Section 2.3(a)(ii) in
determining the Adjustment Amount.
12.2 EMPLOYEE BENEFIT PLANS.
(a) Buyer shall not acquire any rights or interest in, or assume or
have any obligations or liabilities under, any of the Benefit Plans, and Seller
or the Benefit Plans, as applicable, will retain all assets and liabilities
under the Benefit Plans. Seller shall comply with the provisions of the
Continuation Coverage Under Group Health Plan of ERISA, Title I, Part 6, to the
extent applicable in connection with the transactions contemplated by this
Agreement.
(b) Solely for purposes of determining the eligibility of any
Transferred Employee not covered by the Assumed Plans to participate in, and for
purposes of determining the vesting of any amounts that may accrue to each such
Transferred Employee under, any pension or profit sharing plan of Buyer
applicable to persons
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employed at the Station after Closing, Buyer shall for each such plan of Buyer
take into account and give credit of one year for each two full years of service
of each such Transferred Employee with Seller immediately prior to the Closing,
to the extent such service is required to be taken into account under such
pension or profit sharing plan of Buyer. Buyer shall not be required to take
into account the length of service of any such Transferred Employee with Seller
for any other purpose in connection with such Transferred Employee's
participation in any pension or profit sharing plan of Buyer, including, without
limitation, the determination of the amount of benefits accrued to such
Transferred Employee thereunder.
(c) Solely for purposes of determining the eligibility of any
Transferred Employee not covered by the Assumed Plans to participate in the
group insurance plans of Buyer after Closing, Buyer shall take into account and
give credit for the period of service of each such Transferred Employee with
Seller immediately prior to Closing to the extent such service is required to be
taken into account under the comparable plan of Buyer, provided that Buyer shall
not be obligated to provide immediate coverage for pre-existing conditions.
Buyer shall, however, use reasonable efforts to provide immediate coverage for
pre-existing conditions with respect to each such Transferred Employee, provided
that such reasonable efforts shall not include the incurrence of material cost
or liability on the part of Buyer.
12.3 EMPLOYMENT AGREEMENTS.
Buyer acknowledges and agrees that Buyer's obligations under this
Article XII are in addition to and not in limitation of Buyer's obligation to
assume, as and to the extent prescribed in Section 2.3(a), the employment
agreements set forth in Schedule 3.7(b).
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 Seller and fifty percent (50%) by Buyer, provided
that any Transfer Taxes (including, but not limited to, any Florida documentary
stamp tax imposed as a result of Buyer's grant of a mortgage or security
interest with respect to any of the Sale Assets) shall be borne by Buyer. All
other Taxes shall be paid by the party primarily liable under applicable law to
pay such Tax.
(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.
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13.3 SPECIFIC PERFORMANCE.
Seller acknowledges that the Station is of a special, unique and
extraordinary character, and that damages alone are an inadequate remedy for a
breach of this Agreement by Seller. Accordingly, as an alternative to
termination of this Agreement under Section 10.1, Buyer shall be entitled, in
the event of Seller's breach, to enforcement of this Agreement (subject to
obtaining any required approval of the FCC or the Department of Justice) by a
decree of specific performance or injunctive relief requiring Seller to fulfill
its obligations under this Agreement. Such right of specific performance or
injunctive relief shall be in addition to, and not in lieu of, Buyer's right to
recover damages and to pursue any other remedies available to Buyer for Seller's
breach. In any action to specifically enforce Seller's obligation to close the
transactions contemplated by this Agreement, Seller shall waive the defense that
there is an adequate remedy at law or in equity and agrees that Buyer shall be
entitled to obtain specific performance of Seller's obligation to close without
being required to prove actual damages. As a condition to seeking specific
performance, Buyer shall not be required to tender the Purchase Price as
contemplated by Section 2.5 but shall be required to demonstrate that Buyer is
ready, willing and able to tender the Purchase Price as contemplated by such
Section.
13.4 NOTICES.
All notices, demands or other communications given hereunder shall be
in writing and shall be sufficiently given if delivered by courier (including
overnight delivery service) or sent by registered or certified mail, first
class, postage prepaid, addressed as follows:
(a) If to Buyer, to:
Emmis Communications Corporation
One Emmis Plaza
40 Monument Circle, Suite 700
Indianapolis, IN 46204
Attention: Jeffrey H. Smulyan, Chairman
Copy to:
Bose McKinney & Evans LLP
2700 First Indiana Plaza
135 North Pennsylvania Street
Indianapolis, IN 46204
Attention: David L. Wills
(b) If to Seller, to:
Press Communications, LLC
1350 Campus Parkway, Suite 106
Wall, NJ 07753
Attention: Alfred D. Colantoni
Copy to:
Witman, Stadtmauer & Michaels, P.A.
26 Columbia Turnpike
Florham Park, NJ 07932
Attention: Eric J. Michaels, Esq.
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or to such other address as a party may from time to time give notice to 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 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 d
irect 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 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 for performance of all of
Buyer's obligations under this Agreement, (iii) such assignment shall not
materially delay issuance of the FCC Order, and (iv) Buyer and the assignee
shall deliver such other documents and instruments as reasonably requested by
Seller, including appropriate certified resolutions of the boards of directors
of Buyer and the assignee.
13.8 GOVERNING LAW.
This Agreement shall in all respects be governed by and construed in
accordance with the laws of the State of 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.
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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.
Unless otherwise specified in this Agreement, each of the Schedules
referenced in this Agreement is attached to, and is incorporated by reference
into, this Agreement.
Executed as of the date first written above.
PRESS COMMUNICATIONS, LLC
By:_______________________________
Printed:__________________________
Its:______________________________
EMMIS COMMUNICATIONS CORPORATION
By:_______________________________
Printed:__________________________
Its:______________________________
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is effective as of March 1,
1999, by and between EMMIS COMMUNICATIONS CORPORATION, an Indiana corporation
(the "Employer"), and DOYLE L. ROSE, a California resident (the "Executive").
RECITALS
WHEREAS, Employer and its subsidiaries are engaged in the ownership and
operation of various radio and television stations, magazines, and related
operations (together, the "Emmis Group");
WHEREAS, Executive is presently employed by Employer pursuant to an
oral agreement entered into upon the expiration of Executive's prior employment
agreement on February 28, 1998;
WHEREAS, Employer desires to continue to employ Executive as an
executive pursuant to a written agreement, and Executive desires to be so
employed; and
WHEREAS, Employer and Executive agree to memorialize the terms of their
relationship herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, do hereby agree as follows:
1. EMPLOYMENT. Upon the terms and subject to the conditions of this
Agreement, Employer hereby employs Executive and Executive hereby accepts
employment by the Employer. This Agreement supersedes the March 1, 1995
Employment Agreement and any subsequent oral understandings, representations or
agreements between the parties.
2. TERM. The term of Executive's employment hereunder (the "Term")
shall commence on March 1, 1999 and continue until February 28, 2001, unless
terminated earlier in accordance with the provisions herein. As used herein, the
term "Contract Year" means the twelve (12) month period commencing on March 1,
1999 and on each anniversary thereof.
3. EXECUTIVE'S POSITION, DUTIES, AND AUTHORITY.
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3.1 POSITION. Employer shall employ Executive, and Executive
shall serve as an executive of Employer and of any successor by merger,
acquisition of substantially all of the assets or stock of Employer or
otherwise. Executive shall serve as Radio Division President of
Employer or in such other position or positions to which the Board of
Directors of Employer (the "Board") shall, with Executive's consent,
appoint Executive; provided, however, that in the case of any merger
involving Employer, acquisition of substantially all of the assets or
outstanding stock of Employer or any substantial and material change in
the business of Employer, the Board may change Executive's title or
duties without Executive's consent so long as Executive's duties are
not substantially diminished in importance.
3.2 DUTIES AND AUTHORITY. Executive shall have executive
duties, functions, authority and responsibilities commensurate with the
office or offices he from time to time holds with Employer. Subject to
any change pursuant to Section 3.1, Executive's duties, functions,
authority and responsibilities hereunder shall be substantially the
same as or greater than the duties, functions, authority and
responsibilities held by Executive immediately prior to the date
hereof.
3.3 EMMIS GROUP DIRECTORSHIPS AND OFFICES. If Executive is
elected as a director of Employer, Executive shall serve in such
position without additional remuneration other than the indemnification
provided for in Section 10 hereof. Executive shall also serve without
additional remuneration as a director and/or officer of one or more of
Employer's subsidiaries if appointed to such position by Employer.
4. FULL-TIME SERVICES. Executive's services hereunder shall be
performed on a full-time basis in a diligent and competent fashion to the best
of his abilities. Executive shall not undertake any outside employment or
outside business activities without the consent of the Board; provided, however,
that subject to satisfaction of his obligations under the preceding sentence,
Executive shall be allowed to (i) manage his personal, financial and legal
affairs and (ii) serve on civic or charitable boards or committees.
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5. LOCATION OF EMPLOYMENT. Unless Executive consents otherwise in
writing, the headquarters for performance of his services hereunder shall be the
offices designated by Employer in or near Los Angeles, California, and Executive
shall not be required to relocate his office outside the metropolitan area of
Los Angeles, California, subject to such reasonable travel as the performance of
Executive's duties in the business of the Emmis Group may require.
6. BASE COMPENSATION.
6.1 BASE SALARY. During each Contract Year hereunder, Employer
shall pay or cause to be paid to Executive a base salary per annum (the
"Base Salary") of Four Hundred Thirty Three Thousand Dollars
($433,000.00), payable in bi-weekly installments.
6.2 CAR ALLOWANCE. During the Term, Executive shall receive a car
allowance paid monthly in the same amount as received by Executive in
the month immediately prior to the effective date of this Agreement.
7. ADDITIONAL COMPENSATION.
7.1 SIGNING BONUS. Executive is entitled to a cash signing
bonus (the "Signing Bonus") in the amount of Three Hundred Thousand
Dollars ($300,000.00), payable in two (2) equal installments prior to
the execution of this Agreement. By signing below, Executive
acknowledges and confirms receipt of both installments of the Signing
Bonus.
7.2 CASH INCENTIVE COMPENSATION. Employer shall establish a
Target Bonus Plan ("TBP") pursuant to which it shall pay an annual cash
bonus to Executive with respect to a particular Contract Year if
Executive's performance justifies such a bonus. Executive shall be
entitled to receive an annual cash bonus up to a maximum of One Hundred
Fifty Thousand Dollars ($150,000.00) each Contract Year (the "Bonus")
in an amount to be determined by the Compensation Committee of the
Board of Directors (the "Compensation Committee") based on Executive's
performance during the Contract Year compared to performance criteria
established by the Compensation Committee from time to time. Employer
shall have the right to modify the TBP from time to time.
7.3 EQUITY-BASED INCENTIVE COMPENSATION.
(a) Executive has been granted options (the "Executive
Options") to acquire one hundred fifty thousand (150,000) shares of
Class A Common Stock of Employer at an exercise price per share equal
to $40.00 (subject to adjustment for stock splits and stock dividends)
pursuant to Employer's 1997 Equity Incentive Plan (the "Plan").
Executive Options for 25,000 shares were forfeited on February 28,
1999, for failure to meet relevant Broadcast Cash Flow Targets.
(b) The Executive Options shall be subject to further
forfeiture as follows (and shall not be exercisable until all risk of
forfeiture has expired):
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(1) Executive Options for 50,000 shares shall be
forfeited on each of February 29, 2000 and February
28, 2001, in each case if as of such date Executive
is not still an employee of Employer on such date or
has not performed under this Agreement.
(2) Executive Options for an additional 10,000 shares
shall be forfeited on each of February 29, 2000 and
February 28, 2001, in each case if as of such date
the Broadcast Cash Flow (as defined by Employer for
purposes of its financial reports under the
Securities Exchange Act of 1934, as amended) for
Employer's radio station properties, excluding any
radio station properties licensed outside the United
States, for the Contract Year concluding on such date
(the "Actual Annual Domestic Radio BCF") is not at
least 10.0% greater than the budgeted target
determined in advance by the Compensation Committee
(the "Annual Target BCF").
(3) Executive Options for an additional 7,500 shares
shall be forfeited on each of February 29, 2000 and
February 28, 2001, in each case if as of such date
the Actual Annual Domestic Radio BCF is not at least
5.0% greater than the Annual Target BCF.
(4) Executive Options for an additional 7,500 shares
shall be forfeited on each of February 29, 2000 and
February 28, 2001, in each case if as of such date
the Actual Annual Domestic Radio BCF is not at least
2.5% greater than the Annual Target BCF.
(c) The Annual Target BCF for the Contract Year ending
February 28, 2000 is $82,540,000. The Compensation Committee shall set
the Annual Target BCF for the following Contract Year prior to the
commencement of such Contract Year after consulting with Executive and
reviewing Employer's annual budgets for the Radio Division prepared for
such Contract Year.
(d) Each Executive Option (i) shall become first exercisable
on the thirtieth (30th) day following (A) the date of Executive's death
during the term of this Agreement or (B) May 30, 2001, if Executive has
either completed the entire two-year term of this Agreement and is
still an employee of Employer on February 28, 2001, or has become
disabled within the meaning of Section 14.2; (ii) shall have a term of
five (5) years following the date it becomes first exercisable (except
as otherwise provided in the Plan, including without limitation the
provisions of Section 18(b) thereof); (iii) shall not be exercisable if
Executive has not (A) completed the entire two-year term of this
Agreement and is not an employee of Employer on February 28, 2001, (B)
died during the term of
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this Agreement, or (C) become disabled within the meaning of Section
14.2; (iv) shall permit, at the election of Executive, payment of the
exercise price in any one or combination of (A) cash or (B) Class A
Common Stock of Employer owned by Executive valued on the business day
preceding the date of exercise at its Fair Market Value (as defined in
the Plan); (v) shall be evidenced by a written grant agreement executed
on behalf of Employer on the date of grant; and (vi) shall be
exercisable for Class A Common Stock, without restrictive legends on
the certificates therefor other than those appearing on the Class A
Common Stock generally.
7.4 PERFORMANCE-BASED COMPENSATION. It is the intent of
Employer and Executive that all compensation paid pursuant to Sections
7.2 and 7.3 of this Agreement will be performance-based compensation
which will qualify under Section 162(m) of the Internal Revenue Code of
1986, as amended, to be deducted by Employer, and all provisions in
Sections 7.2 and 7.3 will be construed to permit the compensation paid
thereunder to so qualify.
7.5 STOCK GRANT. If Executive completes the entire two-year
Term and is still an employee of Employer on February 28, 2001, or if
Executive dies during the Term, Executive will be entitled to a grant
of Fifteen Thousand Four Hundred (15,400) shares of Class A Common
Stock of Employer (the "Stock Grant"). Employer, at its option, may pay
the Stock Grant in Common Stock or in cash. If the Stock Grant is paid
in cash, such cash payment shall be an amount equal to the Fair Market
Value of the Stock Grant on the business day immediately preceding the
payment date.
8. EXPENSES. Employer shall pay or reimburse Executive for all
reasonable expenses actually incurred or paid by Executive during the term of
this Agreement in the performance of Executive's services hereunder upon
presentation of expense statements or vouchers or such other supporting
information as Employer may reasonably require of Executive.
9. VACATION AND OTHER BENEFITS. Executive shall be entitled to
twenty-five (25) business days of paid vacation per Contract Year (accruing at
the rate of 2-1/2 days per month for purposes of calculating payments on
termination of employment) which days shall not be cumulative. During the term
of this Agreement, Executive shall be eligible to participate in any pension or
profit-sharing plan or program of Employer now or hereafter existing in
accordance with and to the extent that he is eligible under the general
provisions thereof. Executive shall also be eligible to participate in any group
life insurance, hospitalization, medical, health and accident, disability or
similar plan or program of Employer, now or hereafter existing in accordance
with and to the extent that he is eligible under the general provisions thereof.
10. INDEMNIFICATION. Executive shall be entitled in connection with his
employment
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hereunder to the benefit of the indemnification provisions contained
in Employer's Amended and Restated Articles of Incorporation or By-Laws or any
corporate resolution, as the same may be amended from time to time (not
including any amendments or additions that limit or narrow, but including any
that add to or broaden, the protection afforded to Executive), to the fullest
extent permitted by applicable law. Employer shall in addition cause Executive
to be indemnified in accordance with Chapter 37 of the Indiana Business
Corporation Law, as the same may be amended from time to time, to the fullest
extent permitted by such chapter, to the extent required to make Executive whole
in connection with any loss, cost or expense indemnifiable thereunder. Executive
shall be insured under the Employer's Director's and Officer's Liability
Insurance Policy as in effect from time to time. Notwithstanding any other
provision of this Agreement to the contrary, any termination of Executive's
employment or of this Agreement shall have no effect on the continuing operation
of this Section 10.
11. CONFIDENTIAL INFORMATION.
11.1 NON-DISCLOSURE. Executive acknowledges that certain
information concerning the business of Employer is of a confidential
nature and that as a result of his employment with Employer, Executive
may have received or may hereafter receive confidential information
concerning the business of Employer or its subsidiaries which, if known
to competitors of Employer, would damage Employer, its subsidiaries or
their respective businesses. Executive agrees that during the term of
this Agreement and for a period of one (1) year from the termination of
this Agreement, by expiration or otherwise (such additional one (1)
year period, the "Applicable Period"), Executive will not divulge or
appropriate to his own use, or to the use of any third party (other
than Employer and its representatives or as directed in writing by
Employer), any information or knowledge concerning the business of
Employer or its subsidiaries which is not generally available to the
public other than through the activities of Executive. Executive
further agrees that upon termination of his employment for any reason,
Employee will surrender to Employer all documents, brochures, writings,
illustrations, price lists, marketing plans, budgets and other such
materials which he received from or developed on behalf of Employer
through his employment. Executive acknowledges that all such materials
are at all times property of Employer.
11.2 INJUNCTIVE RELIEF. Executive acknowledges that his breach of
Section 11.1 will cause irreparable injury and damage to Employer, the
exact amount of which will be difficult to ascertain, that the remedies
at law for any such breach would be inadequate, and that the provisions
of this Section 11 have been negotiated and written to prevent such
irreparable injury and damage. Accordingly, if Executive breaches
Section 11.1, then
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Employer shall be entitled to injunctive relief enforcing Section 11.1
to the extent reasonably necessary to protect Employer's legitimate
interests, without posting bond or other security. If Executive
violates Section 11.1 and Employer brings legal action for injunctive
or other relief, Employer shall not, as a result of the time involved
in obtaining such relief, be deprived of the benefit of the full period
of non-disclosure set forth herein. Accordingly, the obligations set
forth in Sections 11.1 shall be deemed to have the duration set forth
therein, computed from the date such relief is granted but reduced by
the time expired between the date the Applicable Period began to run
and the date of the first violation of the covenants by Executive.
12. NON-INTERFERENCE AND NON-COMPETITION.
12.1 NON-INTERFERENCE. During the term of this Agreement and for
the Applicable Period, Executive will not, directly or indirectly, take
any action (or permit any action to be taken by an entity with which he
is associated) which has the effect of interfering with (i) on-air
talent of Employer or its subsidiaries or (ii) any other employee of
Employer. Without limiting the generality of the foregoing, Executive
specifically agrees that during the term of this Agreement and for the
Applicable Period neither he nor any entity with which he is associated
shall hire or engage any on-air talent of Employer or any other
employee of Employer to provide services for any other business or
solicit them to cease their employment with Employer.
12.2 NON-COMPETITION (DURING EMPLOYMENT). During the term of this
Agreement, Executive will not, without the prior written approval of
the Board, engage directly or indirectly in, or become employed by,
serve as an agent or consultant to or become an officer, director,
partner, principal or shareholder of any corporation, partnership or
other entity which is engaged in the radio broadcasting business in any
ADI radio market in which any member of the Emmis Group owns, operates
or has an interest in (or has owned, operated or had an interest in)
any broadcasting station at such time or at any time during the
preceding two (2) years. As long as Executive does not engage in any
other activity prohibited by the immediately preceding sentence,
Executive's ownership of less than five percent (5%) of the issued and
outstanding stock of any corporation whose stock is traded on an
established securities market shall not constitute competition with
Employer for the purpose of this Section 12.2.
12.3 NON-COMPETITION (POST-EMPLOYMENT). During the Applicable
Period, Executive will not, without the prior written approval of the
Board, engage directly or indirectly in, or become employed by, serve
as an agent or consultant to or become an officer, director, partner,
principal or shareholder of any corporation, partnership or other
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entity which is engaged in the radio broadcasting business in any ADI
radio market in which any member of the Emmis Group owns, operates or
has an interest in (or has owned, operated or had an interest in) any
broadcasting station at such time or at any time during the preceding
two (2) years. As long as Executive does not engage in any other
activity prohibited by the immediately preceding sentence, Executive's
ownership of less than five percent (5%) of the issued and outstanding
stock of any corporation whose stock is traded on an established
securities market shall not constitute competition with Employer for
the purpose of this Section 12.3.
12.4 INJUNCTIVE RELIEF. Executive acknowledges and agrees that the
provisions of this Section 12 have been specifically negotiated and
carefully worded in recognition of the opportunities which will be
afforded to Executive by Employer by virtue of his continued
association with Employer, and the influence that Executive will have
over Employer's employees, customers and suppliers by virtue of
Executive's relationships with such persons. Executive further
acknowledges that his breach of Section 12.1, 12.2 or 12.3 will cause
irreparable injury and damage to Employer, the exact amount of which
will be difficult to ascertain, that the remedies at law for any such
breach would be inadequate, and that the provisions of this Section 12
have been negotiated and written to prevent such irreparable injury and
damage. Accordingly, if Executive breaches Section 12.1, Section 12.2
or Section 12.3, then Employer shall be entitled to injunctive relief
enforcing Section 12.1, 12.2 or 12.3, as the case may be, to the extent
reasonably necessary to protect Employer's legitimate interests,
without posting bond or other security. If Executive violates Section
12.1 or 12.3 and Employer brings legal action for injunctive or other
relief, Employer shall not, as a result of the time involved in
obtaining such relief, be deprived of the benefit of the full period of
non-interference or non-competition set forth herein. Accordingly, the
obligations set forth in Sections 12.1 and 12.3 shall be deemed to have
the duration set forth therein, computed from the date such relief is
granted but reduced by the time expired between the date the Applicable
Period began to run and the date of the first violation of the
covenants by Executive.
12.5 CONSTRUCTION. In the event that, despite the express agreement
herein of Employer and Executive, any provisions of this Section shall
be determined by any court or other tribunal of competent jurisdiction
to be unenforceable for any reason whatsoever, the parties agree that
this Section 12 shall be interpreted to extend only to the maximum
extent as to which it may be enforceable, and that the Section shall be
severable into its component parts, all as determined by such court or
tribunal.
13. TERMINATION OF AGREEMENT BY EMPLOYER FOR CAUSE.
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13.1 TERMINATION. Employer may, by action of the Board, terminate
Executive's employment hereunder for Cause (as defined in Section 13.3
below) in accordance with the terms and conditions of this Section.
Following a determination by the Board that Executive should be
terminated for Cause, Employer shall give written notice (the
"Preliminary Notice") to Executive specifying the grounds for such
termination, and Executive shall have ten (10) days after receipt of
the Preliminary Notice to respond. If following expiration of such ten
(10) day period the Board reaffirms its determination that Executive
should be terminated for Cause, such termination shall be effective
upon delivery by Employer to Executive of a final notice of termination
(the "Final Notice").
13.2 EFFECT OF TERMINATION. In the event of termination for Cause
as provided in Section 13.1 above:
(i) Executive shall have no further obligations or
liabilities hereunder except his obligations under Sections 11 and 12,
which shall survive such termination of this Agreement.
(ii) Employer shall have no further obligations or
liabilities hereunder, except that Employer shall, not later than two
(2) weeks after the termination date:
(A) Pay to Executive all unpaid Base Salary with
respect to any period ending on or before the termination date, plus
the compensation equivalent of all unused vacation days earned in the
then current Contract Year prior to the termination date; and
(B) Pay to Executive any Bonus which may have
been earned for a Contract Year ending on or prior to the termination
date pursuant to Section 7.2 but which is unpaid as of the termination
date.
13.3 DEFINITION OF CAUSE. As used herein, "Cause" means either
(i) action by Executive involving willful or repeated failure, neglect
or refusal to perform any material obligation under this Agreement (or
any duties assigned to Executive consistent with the terms of this
Agreement) at the time and in the manner set forth herein (or in such
assignment), and continuation of such breach after written notice and
the expiration of a thirty (30) day cure period (provided, however,
that it is not the parties' intention that Employer shall be required
to provide successive such notices to Executive, and in the event
Employer has provided Executive with a notice and opportunity to
cure pursuant to this clause, it may terminate this Agreement for a
subsequent breach similar or related to the breach for which notice was
previously given or for a continuing series or pattern of breaches
(whether or not similar or related) without providing notice or an
opportunity to
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cure pursuant to this clause, it may terminate this Agreement for a
subsequent breach similar or related to the breach for which notice was
previously given or for a continuing series or pattern of breaches
(whether or not similar or related) without providing notice or an
opportunity to cure); or (ii) Executive's commission of a felony
involving moral turpitude or Executive's action, knowing allowance of
actions, or omissions which are in violation of the Communications Act
of 1934, as amended, or the rules and regulations of the Federal
Communications Commission (the "FCC") or which otherwise jeopardize the
FCC licenses granted to Employer or its subsidiaries.
14. DISABILITY.
14.1 TERMINATION OF EMPLOYMENT. If Executive shall become Disabled
(as defined in Section 14.2), Employer shall continue to compensate
Executive under the terms of this Agreement without diminution and
otherwise without regard to such disability or nonperformance of
duties, until Executive has been disabled for a cumulative period of
six (6) months, at which time Executive's employment shall
automatically terminate on the last day of such six (6) month period.
The date that Executive's employment terminates pursuant to this
section is referred to herein as the "Disability Termination Date."
14.2 DISABILITY DEFINITION. Executive shall be deemed to have
become "Disabled" for purposes of this Agreement if, during the term of
this Agreement, because of ill health, physical or mental disability or
for other causes beyond his control he shall have been unable or
unwilling or shall have failed to perform his duties hereunder, as
determined by the written opinion of an independent medical physician
designated by Employer and reasonably acceptable to Executive.
14.3 OBLIGATIONS AFTER TERMINATION. Unless Employer exercises its
option under Section 14.6 below to reinstate Executive to his full
compensation, duties, functions, responsibilities and authority
hereunder for the then balance of the original term of this Agreement,
Executive shall have no further obligations or liabilities hereunder
after a Disability Termination Date except his obligations under
Sections 11 and 12 which shall survive. After a Disability Termination
Date, Employer shall have no further obligations or liabilities
hereunder except its obligations under Sections 10, 14.4, 14.5 and 14.6
below which shall survive.
14.4 PAYMENT OF UNPAID SALARY AFTER TERMINATION. Employer shall,
not later than two (2) weeks after a Disability Termination Date, pay
to Executive all unpaid Base Salary with respect to any period ending
on or before the Disability Termination Date, plus the compensation
equivalent of all unused vacation days earned in the then current
Contract Year prior to the Disability Termination Date.
14.5 POST-TERMINATION COMPENSATION. Following a Disability
Termination Date: (i) Employer shall pay to Executive in bi-weekly
payments during each Contract
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Year or partial Contract Year remaining under this Agreement an amount
equal to fifty percent (50%) of the Base Salary for such Contract Year
or partial Contract Year, and (ii) notwithstanding anything to the
contrary contained in Section 7, Executive shall be entitled to retain,
for the Contract Year in which the Disability Termination Date occurs,
fifty percent (50%) of the Executive Options Executive would have
otherwise been entitled to retain, after application of the forfeitures
described in Sections 7.3(b)(1) through (4), had Executive been
employed by Employer on the last day of the Contract Year in which the
Disability Termination Date occurs. Executive Options for 50,000 shares
shall be forfeited for the Contract Year subsequent to the Contract
Year in which the Disability Termination Date occurs. The benefits
required to be paid under this Section 14.5 (beginning with the Base
Salary amount) shall be reduced by the amount of any benefits payable
to Executive under any group or individual disability insurance plan or
policy, the premiums for which are paid by Employer.
14.6 REINSTATEMENT. If during the original term of this Agreement
and subsequent to a Disability Termination Date, Executive shall fully
recover from a disability, Employer shall have the right (exercisable
within sixty (60) days after written notice from Executive of such
recovery), but not the obligation, to reinstate Executive to employment
hereunder for the then balance of the original term of this Agreement.
In the event of such reinstatement, Employer shall pay Executive at his
full level of compensation hereunder and otherwise employ Executive in
accordance with the terms and provisions of this Agreement, and
Executive shall be considered to have performed under this Agreement
during the period between the Disability Termination Date and the date
of such reinstatement for purposes of Section 7.3 and any restricted
stock bonus awards or Executive Options granted thereunder.
15. DEATH OF EXECUTIVE.
15.1 TERMINATION OF AGREEMENT. This Agreement shall terminate upon
Executive's death. In the event of such termination, Employer shall
have no further obligations or liabilities hereunder (including, but
not limited to, any obligation to make payments under Section 14 for
any period after Executive's date of death) except its obligations
under Section 15.2 below which shall survive such termination.
15.2 COMPENSATION. Upon Executive's death, Employer shall, not
later than two (2) weeks after Executive's date of death:
(i) Pay to Executive's estate or designated beneficiary all
unpaid Base Salary with respect to any period ending on or before
Executive's date of death, plus the
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compensation equivalent of all unused vacation days earned in the then
current Contract Year prior to the termination date; and
(ii) Pay to Executive's estate or designated beneficiary the
Stock Grant to the extent required under Section 7.5.
15.3 NO REDUCTION. Amounts payable pursuant to this Section shall
not be reduced by the value of any benefits payable to the Executive's
estate or designated beneficiary under any life insurance plan or
policy.
15.4 DEATH AFTER TERMINATION. In the event Executive dies after
termination of this Agreement pursuant to Sections 13 or 14, all
amounts required to be paid by Employer prior to Executive's death in
connection with such termination that remain unpaid as of Executive's
date of death shall be paid to Executive's estate or designated
beneficiary.
16. NO MITIGATION REQUIRED. Executive shall not be required to
mitigate any damages suffered by him by reason of Employer's breach hereof. No
amounts payable to Executive by reason of the termination of his employment
hereunder shall be subject to reduction or offset, or otherwise diminished, by
reason of any other compensation received by Executive.
17. NOTICES. All notices, requests, consents and other communications,
required or permitted to be given hereunder, shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by prepaid
telegram, or mailed first-class, postage prepaid, by registered or certified
mail, as follows (or to such other or additional address as either party shall
designate by notice in writing to the other in accordance herewith):
(a) If to Employer: Emmis Communications Corporation
One Emmis Plaza, 7th Floor
40 Monument Circle
Indianapolis, Indiana 46204
Attn.: Board of Directors
(b) If to Executive, to him at his address on the personnel
records of Employer.
18. GENERAL.
18.1 GOVERNING LAW. Employer and Executive acknowledge that
Employer is based in Indiana and that Executive, while maintaining an
office in California at Executive's request, travels extensively
throughout the United States in the course of his duties for Employer.
This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Indiana. Employer and
Executive agree that any and all actions or suits in connection with,
arising out of or related to this
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Agreement or Executive's employment with Employer will be litigated
only in courts of record located in Marion County, Indiana, and
Employer and Executive each (i) consent and submit to the personal
jurisdiction of any state or federal court located within Marion
County, Indiana, (ii) waive any right to transfer or change the venue
of any such litigation to a court located outside Marion County,
Indiana and (iii) agree to service of process, to the extent permitted
by law, by registered or certified mail, return receipt requested,
addressed to such party's address as determined pursuant to Section 17
of this Agreement. Each of the agreements in this Section 18.1 is
irrevocable to the fullest extent permitted by applicable law.
18.2 CAPTIONS. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
18.3 ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject
matter hereof, and supersedes all prior agreements, arrangements and
understandings, written or oral, between the parties.
18.4 SUCCESSORS AND ASSIGNS. This Agreement, and Executive's
rights and obligations hereunder, may not be assigned by Executive,
except that Executive may designate pursuant to Section 18.6 one or
more beneficiaries to receive any amounts that would otherwise be
payable hereunder to Executive's estate.
18.5 AMENDMENTS; WAIVERS. This Agreement cannot be changed,
modified or amended, and no provision or requirement hereof may be
waived, without the consent in writing of Executive and Employer. The
failure of a party at any time or times to require performance of any
provision hereof shall in no manner affect the right of such party at a
later time to enforce such provision. No waiver by a party of the
breach of any term or covenant contained in this Agreement, whether by
conduct or otherwise, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such breach
or a waiver of the breach of any other term or covenant contained in
this Agreement.
18.6 BENEFICIARIES. Whenever this Agreement provides for any
payment to Executive's estate, such payment may be made instead to such
beneficiary or beneficiaries as Executive may have designated in a
writing filed with Employer. Executive shall have the right to revoke
any such designation and to redesignate a beneficiary or beneficiaries
by written notice to Employer (and to any applicable insurance
company).
18.7 SEVERABILITY. If any provision of this Agreement shall be
declared invalid or unenforceable, the remainder of this Agreement will
continue in full force and effect so far as the intent of the parties
can be carried out.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
EMMIS COMMUNICATIONS CORPORATION
By:
---------------------------------
Jeffrey H. Smulyan
Chairman of the Board and Chief
Executive Officer
"Employer"
--------------------------------
Doyle L. Rose
"Executive"
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is effective as of March 1,
1999, by and between EMMIS COMMUNICATIONS CORPORATION, an Indiana corporation
(the "Employer"), and RICHARD F. CUMMINGS, a California resident (the
"Executive").
RECITALS
WHEREAS, Employer and its subsidiaries are engaged in the ownership and
operation of various radio and television stations, magazines, and related
operations (together, the "Emmis Group");
WHEREAS, Executive is presently employed by Employer pursuant to an
oral agreement entered into upon the expiration of Executive's prior employment
agreement on February 28, 1998;
WHEREAS, Employer desires to continue to employ Executive as an
executive pursuant to a written agreement, and Executive desires to be so
employed; and
WHEREAS, Employer and Executive agree to memorialize the terms of their
relationship herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, do hereby agree as follows:
1. EMPLOYMENT. Upon the terms and subject to the conditions of this
Agreement, Employer hereby employs Executive and Executive hereby accepts
employment by the Employer. This Agreement supersedes the March 1, 1995
Employment Agreement and any subsequent oral understandings, representations or
agreements between the parties.
2. TERM. The term of Executive's employment hereunder (the "Term")
shall commence on March 1, 1999 and continue until February 28, 2001, unless
terminated earlier in accordance with the provisions herein. As used herein, the
term "Contract Year" means the twelve (12) month period commencing on March 1,
1999 and on each anniversary thereof.
3. EXECUTIVE'S POSITION, DUTIES, AND AUTHORITY.
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3.1 POSITION. Employer shall employ Executive, and Executive
shall serve as an executive of Employer and of any successor by merger,
acquisition of substantially all of the assets or stock of Employer or
otherwise. Executive shall serve as Executive Vice
President-Programming of Employer or in such other position or
positions to which the Board of Directors of Employer (the "Board")
shall, with Executive's consent, appoint Executive; provided, however,
that in the case of any merger involving Employer, acquisition of
substantially all of the assets or outstanding stock of Employer or any
substantial and material change in the business of Employer, the Board
may change Executive's title or duties without Executive's consent so
long as Executive's duties are not substantially diminished in
importance.
3.2 DUTIES AND AUTHORITY. Executive shall have executive
duties, functions, authority and responsibilities commensurate with the
office or offices he from time to time holds with Employer. Subject to
any change pursuant to Section 3.1, Executive's duties, functions,
authority and responsibilities hereunder shall be substantially the
same as or greater than the duties, functions, authority and
responsibilities held by Executive immediately prior to the date
hereof.
3.3 EMMIS GROUP DIRECTORSHIPS AND OFFICES. If Executive is
elected as a director of Employer, Executive shall serve in such
position without additional remuneration other than the indemnification
provided for in Section 10 hereof. Executive shall also serve without
additional remuneration as a director and/or officer of one or more of
Employer's subsidiaries if appointed to such position by Employer.
4. FULL-TIME SERVICES. Executive's services hereunder shall be
performed on a full-time basis in a diligent and competent fashion to the best
of his abilities. Executive shall not undertake any outside employment or
outside business activities without the consent of the Board; provided, however,
that subject to satisfaction of his obligations under the preceding sentence,
Executive shall be allowed to (i) manage his personal, financial and legal
affairs and (ii) serve on civic or charitable boards or committees.
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5. LOCATION OF EMPLOYMENT. Unless Executive consents otherwise in
writing, the headquarters for performance of his services hereunder shall be the
offices designated by Employer in or near Los Angeles, California, and Executive
shall not be required to relocate his office outside the metropolitan area of
Los Angeles, California, subject to such reasonable travel as the performance of
Executive's duties in the business of the Emmis Group may require.
6. BASE COMPENSATION.
6.1 BASE SALARY. During each Contract Year hereunder, Employer
shall pay or cause to be paid to Executive a base salary per annum (the
"Base Salary") of Four Hundred Thirty Three Thousand Dollars
($433,000.00), payable in bi-weekly installments.
6.2 CAR ALLOWANCE. During the Term, Executive shall receive a car
allowance paid monthly in the same amount as received by Executive in
the month immediately prior to the effective date of this Agreement.
7. ADDITIONAL COMPENSATION.
7.1 SIGNING BONUS. Executive is entitled to a cash signing
bonus (the "Signing Bonus") in the amount of Three Hundred Thousand
Dollars ($300,000.00), payable in two (2) equal installments prior to
the execution of this Agreement. By signing below, Executive
acknowledges and confirms receipt of both installments of the Signing
Bonus.
7.2 CASH INCENTIVE COMPENSATION. Employer shall establish a
Target Bonus Plan ("TBP") pursuant to which it shall pay an annual cash
bonus to Executive with respect to a particular Contract Year if
Executive's performance justifies such a bonus. Executive shall be
entitled to receive an annual cash bonus up to a maximum of One Hundred
Fifty Thousand Dollars ($150,000.00) each Contract Year (the "Bonus")
in an amount to be determined by the Compensation Committee of the
Board of Directors (the "Compensation Committee") based on Executive's
performance during the Contract Year compared to performance criteria
established by the Compensation Committee from time to time. Employer
shall have the right to modify the TBP from time to time.
7.3 EQUITY-BASED INCENTIVE COMPENSATION.
(a) Executive has been granted options (the "Executive
Options") to acquire one hundred fifty thousand (150,000) shares of
Class A Common Stock of Employer at an exercise price per share equal
to $40.00 (subject to adjustment for stock splits and stock dividends)
pursuant to Employer's 1997 Equity Incentive Plan (the "Plan").
Executive Options for 25,000 shares were forfeited on February 28,
1999, for failure to meet relevant Broadcast Cash Flow targets.
(b) The Executive Options shall be subject to further
forfeiture as follows (and shall not be exercisable until all risk of
forfeiture has expired):
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(1) Executive Options for 50,000 shares shall be
forfeited on each of February 29, 2000 and February
28, 2001, in each case if as of such date Executive
is not still an employee of Employer on such date or
has not performed under this Agreement.
(2) Executive Options for an additional 10,000 shares
shall be forfeited on each of February 29, 2000 and
February 28, 2001, in each case if as of such date
the Broadcast Cash Flow (as defined by Employer for
purposes of its financial reports under the
Securities Exchange Act of 1934, as amended) for
Employer's radio station properties, excluding any
radio station properties licensed outside the United
States, for the Contract Year concluding on such date
(the "Actual Annual Domestic Radio BCF") is not at
least 10.0% greater than the budgeted target
determined in advance by the Compensation Committee
(the "Annual Target BCF").
(3) Executive Options for an additional 7,500 shares
shall be forfeited on each of February 29, 2000 and
February 28, 2001, in each case if as of such date
the Actual Annual Domestic Radio BCF is not at least
5.0% greater than the Annual Target BCF.
(4) Executive Options for an additional 7,500 shares
shall be forfeited on each of February 29, 2000 and
February 28, 2001, in each case if as of such date
the Actual Annual Domestic Radio BCF is not at least
2.5% greater than the Annual Target BCF.
(c) The Annual Target BCF for the Contract Year ending
February 28, 2000 is $82,540,000. The Compensation Committee shall set
the Annual Target BCF for the following Contract Year prior to the
commencement of such Contract Year after consulting with Executive and
reviewing Employer's annual budgets for the Radio Division prepared for
such Contract Year.
(d) Each Executive Option (i) shall become first exercisable
on the thirtieth (30th) day following (A) the date of Executive's death
during the term of this Agreement or (B) May 30, 2001, if Executive has
either completed the entire two-year term of this Agreement and is
still an employee of Employer on February 28, 2001, or has become
disabled within the meaning of Section 14.2; (ii) shall have a term of
five (5) years following the date it becomes first exercisable (except
as otherwise provided in the Plan, including without limitation the
provisions of Section 18(b) thereof); (iii) shall not be exercisable if
Executive has not (A) completed the entire two-year term of this
Agreement and is not an employee of Employer on February 28, 2001, (B)
died during the term of
4
<PAGE> 5
this Agreement, or (C) become disabled within the meaning of Section
14.2; (iv) shall permit, at the election of Executive, payment of the
exercise price in any one or combination of (A) cash or (B) Class A
Common Stock of Employer owned by Executive valued on the business day
preceding the date of exercise at its Fair Market Value (as defined in
the Plan); (v) shall be evidenced by a written grant agreement executed
on behalf of Employer on the date of grant; and (vi) shall be
exercisable for Class A Common Stock, without restrictive legends on
the certificates therefor other than those appearing on the Class A
Common Stock generally.
7.4 PERFORMANCE-BASED COMPENSATION. It is the intent of
Employer and Executive that all compensation paid pursuant to Sections
7.2 and 7.3 of this Agreement will be performance-based compensation
which will qualify under Section 162(m) of the Internal Revenue Code of
1986, as amended, to be deducted by Employer, and all provisions in
Sections 7.2 and 7.3 will be construed to permit the compensation paid
thereunder to so qualify.
7.5 STOCK GRANT. If Executive completes the entire two-year
Term and is still an employee of Employer on February 28, 2001, or if
Executive dies during the Term, Executive will be entitled to a grant
of Fifteen Thousand Four Hundred (15,400) shares of Class A Common
Stock of Employer (the "Stock Grant"). Employer, at its option, may pay
the Stock Grant in Common Stock or in cash. If the Stock Grant is paid
in cash, such cash payment shall be an amount equal to the Fair Market
Value of the Stock Grant on the business day immediately preceding the
payment date.
8. EXPENSES. Employer shall pay or reimburse Executive for all
reasonable expenses actually incurred or paid by Executive during the term of
this Agreement in the performance of Executive's services hereunder upon
presentation of expense statements or vouchers or such other supporting
information as Employer may reasonably require of Executive.
9. VACATION AND OTHER BENEFITS. Executive shall entitled to
twenty-five (25) business days of paid vacation per Contract Year (accruing at
the rate of 2-1/2 days per month for purposes of calculating payments on
termination of employment) which days shall not be cumulative. During the term
of this Agreement, Executive shall be eligible to participate in any pension or
profit-sharing plan or program of Employer now or hereafter existing in
accordance with and to the extent that he is eligible under the general
provisions thereof. Executive shall also be eligible to participate in any group
life insurance, hospitalization, medical, health and accident, disability or
similar plan or program of Employer, now or hereafter existing in accordance
with and to the extent that he is eligible under the general provisions thereof.
10. INDEMNIFICATION. Executive shall be entitled in connection with his
employment
5
<PAGE> 6
hereunder to the benefit of the indemnification provisions contained
in Employer's Amended and Restated Articles of Incorporation or By-Laws or any
corporate resolution, as the same may be amended from time to time (not
including any amendments or additions that limit or narrow, but including any
that add to or broaden, the protection afforded to Executive), to the fullest
extent permitted by applicable law. Employer shall in addition cause Executive
to be indemnified in accordance with Chapter 37 of the Indiana Business
Corporation Law, as the same may be amended from time to time, to the fullest
extent permitted by such chapter, to the extent required to make Executive whole
in connection with any loss, cost or expense indemnifiable thereunder. Executive
shall be insured under the Employer's Director's and Officer's Liability
Insurance Policy as in effect from time to time. Notwithstanding any other
provision of this Agreement to the contrary, any termination of Executive's
employment or of this Agreement shall have no effect on the continuing operation
of this Section 10.
11. CONFIDENTIAL INFORMATION.
11.1 NON-DISCLOSURE. Executive acknowledges that certain
information concerning the business of Employer is of a confidential
nature and that as a result of his employment with Employer, Executive
may have received or may hereafter receive confidential information
concerning the business of Employer or its subsidiaries which, if known
to competitors of Employer, would damage Employer, its subsidiaries or
their respective businesses. Executive agrees that during the term of
this Agreement and for a period of one (1) year from the termination of
this Agreement, by expiration or otherwise (such additional one (1)
year period, the "Applicable Period"), Executive will not divulge or
appropriate to his own use, or to the use of any third party (other
than Employer and its representatives or as directed in writing by
Employer), any information or knowledge concerning the business of
Employer or its subsidiaries which is not generally available to the
public other than through the activities of Executive. Executive
further agrees that upon termination of his employment for any reason,
Employee will surrender to Employer all documents, brochures, writings,
illustrations, price lists, marketing plans, budgets and other such
materials which he received from or developed on behalf of Employer
through his employment. Executive acknowledges that all such materials
are at all times property of Employer.
11.2 INJUNCTIVE RELIEF. Executive acknowledges that his breach
of Section 11.1 will cause irreparable injury and damage to Employer,
the exact amount of which will be difficult to ascertain, that the
remedies at law for any such breach would be inadequate, and that the
provisions of this Section 11 have been negotiated and written to
prevent such irreparable injury and damage. Accordingly, if Executive
breaches Section 11.1, then
6
<PAGE> 7
Employer shall be entitled to injunctive relief enforcing Section 11.1
to the extent reasonably necessary to protect Employer's legitimate
interests, without posting bond or other security. If Executive
violates Section 11.1 and Employer brings legal action for injunctive
or other relief, Employer shall not, as a result of the time involved
in obtaining such relief, be deprived of the benefit of the full period
of non-disclosure set forth herein. Accordingly, the obligations set
forth in Sections 11.1 shall be deemed to have the duration set forth
therein, computed from the date such relief is granted but reduced by
the time expired between the date the Applicable Period began to run
and the date of the first violation of the covenants by Executive.
12. NON-INTERFERENCE AND NON-COMPETITION.
12.1 NON-INTERFERENCE. During the term of this Agreement and
for the Applicable Period, Executive will not, directly or indirectly,
take any action (or permit any action to be taken by an entity with
which he is associated) which has the effect of interfering with (i)
on-air talent of Employer or its subsidiaries or (ii) any other
employee of Employer. Without limiting the generality of the foregoing,
Executive specifically agrees that during the term of this Agreement
and for the Applicable Period neither he nor any entity with which he
is associated shall hire or engage any on-air talent of Employer or any
other employee of Employer to provide services for any other business
or solicit them to cease their employment with Employer.
12.2 NON-COMPETITION (DURING EMPLOYMENT). During the term of
this Agreement, Executive will not, without the prior written approval
of the Board, engage directly or indirectly in, or become employed by,
serve as an agent or consultant to or become an officer, director,
partner, principal or shareholder of any corporation, partnership or
other entity which is engaged in the radio broadcasting business in any
ADI radio market in which any member of the Emmis Group owns, operates
or has an interest in (or has owned, operated or had an interest in)
any broadcasting station at such time or at any time during the
preceding two (2) years. As long as Executive does not engage in any
other activity prohibited by the immediately preceding sentence,
Executive's ownership of less than five percent (5%) of the issued and
outstanding stock of any corporation whose stock is traded on an
established securities market shall not constitute competition with
Employer for the purpose of this Section 12.2.
12.3 NON-COMPETITION (POST-EMPLOYMENT). During the Applicable
Period, Executive will not, without the prior written approval of the
Board, engage directly or indirectly in, or become employed by, serve
as an agent or consultant to or become an officer, director, partner,
principal or shareholder of any corporation, partnership or other
7
<PAGE> 8
entity which is engaged in the radio broadcasting business in any ADI
radio market in which any member of the Emmis Group owns, operates or
has an interest in (or has owned, operated or had an interest in) any
broadcasting station at such time or at any time during the preceding
two (2) years. As long as Executive does not engage in any other
activity prohibited by the immediately preceding sentence, Executive's
ownership of less than five percent (5%) of the issued and outstanding
stock of any corporation whose stock is traded on an established
securities market shall not constitute competition with Employer for
the purpose of this Section 12.3.
12.4 INJUNCTIVE RELIEF. Executive acknowledges and agrees that
the provisions of this Section 12 have been specifically negotiated and
carefully worded in recognition of the opportunities which will be
afforded to Executive by Employer by virtue of his continued
association with Employer, and the influence that Executive will have
over Employer's employees, customers and suppliers by virtue of
Executive's relationships with such persons. Executive further
acknowledges that his breach of Section 12.1, 12.2 or 12.3 will cause
irreparable injury and damage to Employer, the exact amount of which
will be difficult to ascertain, that the remedies at law for any such
breach would be inadequate, and that the provisions of this Section 12
have been negotiated and written to prevent such irreparable injury and
damage. Accordingly, if Executive breaches Section 12.1, Section 12.2
or Section 12.3, then Employer shall be entitled to injunctive relief
enforcing Section 12.1, 12.2 or 12.3, as the case may be, to the extent
reasonably necessary to protect Employer's legitimate interests,
without posting bond or other security. If Executive violates Section
12.1 or 12.3 and Employer brings legal action for injunctive or other
relief, Employer shall not, as a result of the time involved in
obtaining such relief, be deprived of the benefit of the full period of
non-interference or non-competition set forth herein. Accordingly, the
obligations set forth in Sections 12.1 and 12.3 shall be deemed to have
the duration set forth therein, computed from the date such relief is
granted but reduced by the time expired between the date the Applicable
Period began to run and the date of the first violation of the
covenants by Executive.
12.6 CONSTRUCTION. In the event that, despite the express
agreement herein of Employer and Executive, any provisions of this
Section shall be determined by any court or other tribunal of competent
jurisdiction to be unenforceable for any reason whatsoever, the parties
agree that this Section 12 shall be interpreted to extend only to the
maximum extent as to which it may be enforceable, and that the Section
shall be severable into its component parts, all as determined by such
court or tribunal.
13. TERMINATION OF AGREEMENT BY EMPLOYER FOR CAUSE.
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<PAGE> 9
13.1 TERMINATION. Employer may, by action of the Board,
terminate Executive's employment hereunder for Cause (as defined in
Section 13.3 below) in accordance with the terms and conditions of this
Section. Following a determination by the Board that Executive should
be terminated for Cause, Employer shall give written notice (the
"Preliminary Notice") to Executive specifying the grounds for such
termination, and Executive shall have ten (10) days after receipt of
the Preliminary Notice to respond. If following expiration of such ten
(10) day period the Board reaffirms its determination that Executive
should be terminated for Cause, such termination shall be effective
upon delivery by Employer to Executive of a final notice of termination
(the "Final Notice").
13.2 EFFECT OF TERMINATION. In the event of termination for
Cause as provided in Section 13.1 above:
(i) Executive shall have no further obligations or
liabilities hereunder except his obligations under Sections 11 and 12,
which shall survive such termination of this Agreement.
(ii) Employer shall have no further obligations or
liabilities hereunder, except that Employer shall, not later than two
(2) weeks after the termination date:
(A) Pay to Executive all unpaid Base Salary with
respect to any period ending on or before the termination date, plus
the compensation equivalent of all unused vacation days earned in the
then current Contract Year prior to the termination date; and
(B) Pay to Executive any Bonus which may have been
earned for a Contract Year ending on or prior to the termination date
pursuant to Section 7.2 but which is unpaid as of the termination date.
13.3 DEFINITION OF CAUSE. As used herein, "Cause" means either
(i) action by Executive involving willful or repeated failure, neglect
or refusal to perform any material obligation under this Agreement (or
any duties assigned to Executive consistent with the terms of this
Agreement) at the time and in the manner set forth herein (or in such
assignment), and continuation of such breach after written notice and
the expiration of a thirty (30) day cure period (provided, however,
that it is not the parties' intention that Employer shall be required
to provide successive such notices to Executive, and in the event
Employer has provided Executive with a notice and opportunity to cure
pursuant to this clause, it may terminate this Agreement for a
subsequent breach similar or related to the breach for which notice was
previously given or for a continuing series or pattern of breaches
(whether or not similar or related) without providing notice or an
opportunity to
9
<PAGE> 10
cure); or (ii) Executive's commission of a felony involving moral
turpitude or Executive's action, knowing allowance of actions, or
omissions which are in violation of the Communications Act of 1934, as
amended, or the rules and regulations of the Federal Communications
Commission (the "FCC") or which otherwise jeopardize the FCC licenses
granted to Employer or its subsidiaries.
14. DISABILITY.
14.1 TERMINATION OF EMPLOYMENT. If Executive shall become
Disabled (as defined in Section 14.2), Employer shall continue to
compensate Executive under the terms of this Agreement without
diminution and otherwise without regard to such disability or
nonperformance of duties, until Executive has been disabled for a
cumulative period of six (6) months, at which time Executive's
employment shall automatically terminate on the last day of such six
(6) month period. The date that Executive's employment terminates
pursuant to this section is referred to herein as the "Disability
Termination Date."
14.2 DISABILITY DEFINITION. Executive shall be deemed to have
become "Disabled" for purposes of this Agreement if, during the term of
this Agreement, because of ill health, physical or mental disability or
for other causes beyond his control he shall have been unable or
unwilling or shall have failed to perform his duties hereunder, as
determined by the written opinion of an independent medical physician
designated by Employer and reasonably acceptable to Executive.
14.3 OBLIGATIONS AFTER TERMINATION. Unless Employer exercises
its option under Section 14.6 below to reinstate Executive to his full
compensation, duties, functions, responsibilities and authority
hereunder for the then balance of the original term of this Agreement,
Executive shall have no further obligations or liabilities hereunder
after a Disability Termination Date except his obligations under
Sections 11 and 12 which shall survive. After a Disability Termination
Date, Employer shall have no further obligations or liabilities
hereunder except its obligations under Sections 10, 14.4, 14.5 and 14.6
below which shall survive.
14.4 PAYMENT OF UNPAID SALARY AFTER TERMINATION. Employer
shall, not later than two (2) weeks after a Disability Termination
Date, pay to Executive all unpaid Base Salary with respect to any
period ending on or before the Disability Termination Date, plus the
compensation equivalent of all unused vacation days earned in the then
current Contract Year prior to the Disability Termination Date.
14.5 POST-TERMINATION COMPENSATION. Following a Disability
Termination Date: (i) Employer shall pay to Executive in bi-weekly
payments during each Contract
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<PAGE> 11
Year or partial Contract Year remaining under this Agreement an amount
equal to fifty percent (50%) of the Base Salary for such Contract Year
or partial Contract Year, and (ii) notwithstanding anything to the
contrary contained in Section 7, Executive shall be entitled to retain,
for the Contract Year in which the Disability Termination Date occurs,
fifty percent (50%) of the Executive Options Executive would have
otherwise been entitled to retain, after application of the forfeitures
described in Sections 7.3(b)(1) through (4), had Executive been
employed by Employer on the last day of the Contract Year in which the
Disability Termination Date occurs. Executive Options for 50,000 shares
shall be forfeited for the Contract Year subsequent to the Contract
Year in which the Disability Termination Date occurs. The benefits
required to be paid under this Section 14.5 (beginning with the Base
Salary amount) shall be reduced by the amount of any benefits payable
to Executive under any group or individual disability insurance plan or
policy, the premiums for which are paid by Employer.
14.7 REINSTATEMENT. If during the original term of this Agreement
and subsequent to a Disability Termination Date, Executive shall fully
recover from a disability, Employer shall have the right (exercisable
within sixty (60) days after written notice from Executive of such
recovery), but not the obligation, to reinstate Executive to employment
hereunder for the then balance of the original term of this Agreement.
In the event of such reinstatement, Employer shall pay Executive at his
full level of compensation hereunder and otherwise employ Executive in
accordance with the terms and provisions of this Agreement, and
Executive shall be considered to have performed under this Agreement
during the period between the Disability Termination Date and the date
of such reinstatement for purposes of Section 7.3 and any restricted
stock bonus awards or Executive Options granted thereunder.
15. DEATH OF EXECUTIVE.
15.1 TERMINATION OF AGREEMENT. This Agreement shall terminate
upon Executive's death. In the event of such termination, Employer
shall have no further obligations or liabilities hereunder (including,
but not limited to, any obligation to make payments under Section 14
for any period after Executive's date of death) except its obligations
under Section 15.2 below which shall survive such termination.
15.2 COMPENSATION. Upon Executive's death, Employer shall, not
later than two (2) weeks after Executive's date of death:
(i) Pay to Executive's estate or designated beneficiary
all unpaid Base Salary with respect to any period ending on or before
Executive's date of death, plus the
11
<PAGE> 12
compensation equivalent of all unused vacation days earned in the then
current Contract Year prior to the termination date; and
(ii) Pay to Executive's estate or designated beneficiary
the Stock Grant to the extent required under Section 7.5.
15.3 NO REDUCTION. Amounts payable pursuant to this Section
shall not be reduced by the value of any benefits payable to the
Executive's estate or designated beneficiary under any life insurance
plan or policy.
15.4 DEATH AFTER TERMINATION. In the event Executive dies
after termination of this Agreement pursuant to Sections 13 or 14, all
amounts required to be paid by Employer prior to Executive's death in
connection with such termination that remain unpaid as of Executive's
date of death shall be paid to Executive's estate or designated
beneficiary.
16. NO MITIGATION REQUIRED. Executive shall not berequired to mitigate
any damages suffered by him by reason of Employer's breach hereof. No amounts
payable to Executive by reason of the termination of his employment hereunder
shall be subject to reduction or offset, or otherwise diminished, by reason of
any other compensation received by Executive.
17. NOTICES. All notices, requests, consents and other communications,
required or permitted to be given hereunder, shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by prepaid
telegram, or mailed first-class, postage prepaid, by registered or certified
mail, as follows (or to such other or additional address as either party shall
designate by notice in writing to the other in accordance herewith):
(a) If to Employer:
Emmis Communications Corporation
One Emmis Plaza, 7th Floor
40 Monument Circle
Indianapolis, Indiana 46204
Attn.: Board of Directors
(b) If to Executive, to him at his address on the personnel
records of Employer.
18. GENERAL.
18.1 GOVERNING LAW. Employer and Executive acknowledge that
Employer is based in Indiana and that Executive, while maintaining an
office in California at Executive's request, travels extensively
throughout the United States in the course of his duties for Employer.
This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Indiana. Employer and
Executive agree that any and all actions or suits in connection with,
arising out of or related to this
12
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Agreement or Executive's employment with Employer will be litigated
only in courts of record located in Marion County, Indiana, and
Employer and Executive each (i) consent and submit to the personal
jurisdiction of any state or federal court located within Marion
County, Indiana, (ii) waive any right to transfer or change the venue
of any such litigation to a court located outside Marion County,
Indiana and (iii) agree to service of process, to the extent permitted
by law, by registered or certified mail, return receipt requested,
addressed to such party's address as determined pursuant to Section 17
of this Agreement. Each of the agreements in this Section 18.1 is
irrevocable to the fullest extent permitted by applicable law.
18.2 CAPTIONS. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
18.3 ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject
matter hereof, and supersedes all prior agreements, arrangements and
understandings, written or oral, between the parties.
18.4 SUCCESSORS AND ASSIGNS. This Agreement, and Executive's
rights and obligations hereunder, may not be assigned by Executive,
except that Executive may designate pursuant to Section 18.6 one or
more beneficiaries to receive any amounts that would otherwise be
payable hereunder to Executive's estate.
18.5 AMENDMENTS; WAIVERS. This Agreement cannot be changed,
modified or amended, and no provision or requirement hereof may be
waived, without the consent in writing of Executive and Employer. The
failure of a party at any time or times to require performance of any
provision hereof shall in no manner affect the right of such party at a
later time to enforce such provision. No waiver by a party of the
breach of any term or covenant contained in this Agreement, whether by
conduct or otherwise, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such breach
or a waiver of the breach of any other term or covenant contained in
this Agreement.
18.6 BENEFICIARIES. Whenever this Agreement provides for any
payment to Executive's estate, such payment may be made instead to such
beneficiary or beneficiaries as Executive may have designated in a
writing filed with Employer. Executive shall have the right to revoke
any such designation and to redesignate a beneficiary or beneficiaries
by written notice to Employer (and to any applicable insurance
company).
18.7 SEVERABILITY. If any provision of this Agreement shall be
declared invalid or unenforceable, the remainder of this Agreement will
continue in full force and effect so far as the intent of the parties
can be carried out.
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<PAGE> 14
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
EMMIS COMMUNICATIONS CORPORATION
By:
-----------------------------
Jeffrey H. Smulyan
Chairman of the Board and
Chief Executive Officer
"Employer"
-----------------------------
Richard F. Cummings
"Executive"
14
<PAGE> 1
EXHIBIT 15
October 1, 1999
Mr. Walter Z. Berger
Chief Financial Officer
Emmis Communications Corporation
One Emmis Plaza
40 Monument Circle Suite 700
Indianapolis, Indiana 46204
Dear Mr. Berger:
We are aware that Emmis Communications Corporation has incorporated by reference
in its Registration Statement Nos. 33-83890 and 333-14657 its Form 10-Q for the
three and six-months ended August 31, 1999, which includes our report dated
September 21, 1999, covering the unaudited interim financial information
contained therein. Pursuant to Regulation C of the Securities Act of 1933, that
report is not considered a part of the registration statement prepared or
certified by our firm or a report prepared or certified by our firm within the
meaning of Sections 7 and 11 of the Act.
Very truly yours,
/s/ ARTHUR ANDERSEN LLP
- ------------------------
ARTHUR ANDERSEN LLP
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<FISCAL-YEAR-END> FEB-28-2000 FEB-28-2000
<PERIOD-START> JUN-01-1999 MAR-01-1999
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